Invesco has announced the launch of the first UCITS ETF to track the performance of the MSCI Europe Equal Weighted Index.

The launch marks an expansion of Invesco’s alternatively weighted ETF product range, and follows the introduction of the first ETF in Europe for exposure to the MSCI World Equal Weighted Index in September 2024.

Invesco said that equal weight strategies started growing in popularity when mega-cap valuations “began looking stretched”, with concentration in the largest holdings at multi-decade highs.

The firm felt this demand had widened from investors looking to reduce concentration risk in their US equity exposure to now thinking about an equal weight approach for other core exposures.

The Invesco MSCI Europe Equal Weight UCITS ETF will follow an index that includes the same constituents as the parent MSCI Europe index but that equally weights each company at each quarterly rebalance, rather than weighting companies according to market capitalisation.

Furthermore, the Invesco ETF will use a physical replication approach to track the index.

“We continually look for exposures that offer investors new opportunities, whether that’s helping them reduce risk to a certain asset class or gain access to new indices, or both as in this case,” stated Invesco head of EMEA and APAC ETFs, Gary Buxton.

“This latest launch further expands our global market leadership in equal-weight ETFs, a relatively simple, common sense investment strategy that investors have been increasingly turning to over the past year to gain a more balanced approach to broad equity exposure.”

Invesco head of EMEA ETF equity product management, Chris Mellor, added: “An equally weighted approach has several compelling characteristics. It reduces concentration risk, which hit a 20-year high last year in Europe; offers a more balanced exposure both geographically and in terms of sectors; and increases exposure to the smaller companies in the index.

“Smaller companies have driven higher growth over the long term, although will underperform larger companies over some shorter time periods.

“An equal weight approach also automates a process of ‘buying low, selling high’ at regular intervals, which can be a common-sense approach to equity investing.”

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