Deep Dive: Questions raised over equal-weighted ETFs' efficiency

Offer broader diversification

As the popularity of equal weighted ETFs hits a boom period, driven by widespread macro-induced volatility, experts have warned that they are not the totally ideal product to protect clients from stomach dropping events.

The trade war-induced losses and questions regarding overconcentration of seven mega-cap tech stocks in the US have caused investors to search elsewhere for solutions to maintain exposure to key markets while hedging risk.  Defence ETFs growing in demand in Europe As a result, over the past 12-18 months, the popularity of equal-weighted ETFs has surged, with "investors seeking broader diversification and reduced concentration risk, especially in US equity markets", according to Terry McGivern, senior research analyst at AJ Bell Investments.  Indeed inflows into strategies that empl...