Ann Arbor-based Exponential ETFs, an exchange-traded fund provider, today announced the launch of the Reverse Cap Weighted U.S. ETF (CBOE: RVRS), a product that offers exposure to the S&P 500 stocks weighted by the inverse of their relative market capitalization.
The strategy brings the weighted average market capitalization of the index down from $162 billion to $16 billion, while using the same stocks.
The RVRS portfolio is weighted based on proprietary methodology, and the rules-based, passive fund tracks the Reverse Cap Weighted U.S. Large Cap Index comprised of all 500 publicly traded companies in the S&P 500.
However, while most cap-weighted funds skew their portfolio weightings in favor of larger companies, RVRS offers investors exposure to the same U.S. large-cap equities, but over weights the smaller companies of the S&P 500, which have historically performed better. The ETF has an expense ratio of .29 percent and trades on the CBOE Exchange.
“Market capitalization weighting exposes investors to a concentrated portfolio and an extreme bias toward mega-capitalization companies, which can result in returns being left on the table,” says Phil Bak, Exponential ETFs’ CEO. “With RVRS, we’re solving this problem and providing a tool for investors to balance out their exposure within their large cap U.S. allocation.”
RVRS follows the firm’s recent successes including the American Customer Satisfaction Core Alpha ETF, which has amassed $40.8 million in assets under management as of September. It was named the Innovation of the Year at the 2017 Fund Action Awards.
“Exponential ETFs is dedicated to providing quality instruments that allow investors to express their market outlook,” says Kevin Quigg, Exponential ETFs chief strategist. “RVRS seeks to accomplish this by opening up a previously inaccessible market factor (size) within a space (U.S. large capitalization) that dominates most investors’ equity exposure.”