Wall Street is finally starting to move beyond the dominance of the “Magnificent Seven.” But even in a broad market rotation investors may want to find a way to pick the right exposure. John Davi, CEO at Astoria Portfolio Advisors, thinks his firm has found a way to do just that. The Astoria US Equal Weight Quality Kings ETF (ROE) , which launched in 2023, is up 17.6% year to date through Tuesday’s close, according to FactSet. By comparison, the Invesco S & P 500 Equal Weight ETF (RSP) and iShares MSCI USA Equal Weighted ETF (EUSA) are up 9.7% and 10.1%, respectively. ROE is also holding its own during the market rotation, up 4.6% and on a five-day winning streak. ROE YTD mountain This equal weighted ETF is outperforming some of its rivals in 2024. Astoria works with financial advisors to help build client portfolios. Davi said they were looking for ways to shift away from megacap stocks but felt that popular funds like RSP and EUSA weren’t giving them what they wanted. “We started using RSP, but then we just couldn’t get comfortable with the value tilt. So we said ‘okay, let’s build a better mousetrap,'” Davi said. One specific strategy change is that the ROE is designed to mirror the sector exposure of the S & P 500 , even if the individual stocks are equal weighted. The RSP, on the other hand, is effectively underweight technology. The ROE is also a quantitative-based active fund that holds 100 stocks, as opposed to holding every name in the S & P 500. The Astoria fund’s candidate pool includes U.S. stocks that meet size and liquidity minimums, which are then ranked based on metrics for quality and valuation. The top stocks in each sector based on those rankings are included to the fund, which is rebalanced quarterly. The fund does include some members of the Magnificent Seven, but at a level well below their typical index weights. There is no one specific metric that determines inclusion, with the focus being instead on a blend of factors that can vary by sector. “There are slightly differing combinations of quality metrics that best define each sector. If you think about it, the balance sheet for a technology looks very different from a balance sheet of an energy company,” Astoria analyst Frank Tedesco said. The Astoria fund is underperforming some other funds that focus on quality, like the iShares MSCI USA Quality Factor ETF (QUAL) . However, that fund is not equal weighted and has much larger exposure to Nvidia . The ROE has grown at a time when the market was dominated by just a handful of stocks — mostly Big Tech names. The top 10 stocks in the S & P accounted for 77% of the S & P 500’s gains in the first half, according to Strategas ETF strategist Todd Sohn, and made up more than a third of the index from a weighting basis. The strong start for the fund does not mean that investors should shift all their money into ROE. Davi said that he sees the ROE “complementary” product, potentially accounting for a third of equity exposure. To be sure, the fund is still less than a year old and has relatively small AUM and daily trading volume. The fund will need more years and different market environments to prove its long-term worth. The Astoria fund also has a higher expense ratio than some of its rivals at 0.49%.
