Invesco has announced it is launching a new exchange-traded fund (ETF) that tracks the performance of the S&P 500 Equal Weight index.

The firm stated that the ETF was the first swap-based equal weight ETF in the world and will seek to provide structural advantages through its multi-counterparty swaps-based model.

The index followed by the Invesco S&P 500 Equal Weight Swap UCITS ETF is constructed from the parent S&P 500 index by including the same constituent securities, but equally weighting them at each rebalancing date rather than weighting companies by their market capitalisation.

Invesco said that demand for equal weight strategies had been increasing since mega-cap valuations “began looking stretched”, with concentration in the largest holdings at multi-decade highs and investors wanting a more balanced exposure.

This was most evident in US-exposed equities, where $10bn of net flows into S&P 500 Equal Weight ETFs since July 2024 has more than doubled their assets under management.

Furthermore, concentration remains at historically high levels, with the 10 largest stocks accounting for 37 per cent of the S&P 500 index in terms of market capitalisation.

Invesco’s new ETF will track the performance of the S&P 500 Equal Weight index through swap-based replication, and will hold a basket of quality equities and seek to deliver the index performance through swap contracts with large financial institutions.

These swap counterparties will pay the ETF the return of the index, minus a fee, in exchange for the return of the basket of equities held by the ETF.

“We are excited to kick off the new year with an ETF that combines two of Invesco’s largest and most well-established areas of expertise,” stated Invesco head of EMEA and APAC ETFs, Gary Buxton.

“Globally, we are a market leader in equal-weight equity exposures, an area of rapid growth where we saw European demand really accelerate in 2024, and we are now delivering it via the robust and highly efficient swap-based structure we created more than 15 years ago.

“We have the largest swap-based ETF in the world, and investors can now benefit from the same proven advantages for their S&P 500 Equal Weight exposure.”

S&P Dow Jones Indices global head of equities, Fiona Boal, added: “S&P Dow Jones Indices is pleased to continue collaborating with Invesco on their Equal Weight product suite.

“Investor interest in applying an equal-weight methodology to broad-market, large-cap equity indices, such as the S&P 500, continues to grow. This approach to large-cap U.S. equities is particularly compelling in the current market environment.”

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