Looking Under the Hood of RCD

RCD, which has $375 million in assets under management, took in $64 million in August inflows, offsetting outflows seen earlier in the year, with the fund now seeing $18 million in year-to-date inflows as of the end of August, according to VettaFi.

RCD offers exposure to the consumer discretionary sector of the domestic economy, making it one option available to investors implementing sector rotation strategies or looking to tilt exposure towards a high beta industry, perhaps in anticipation of a bull market, according to VettaFi.

RCD is based on the S&P 500 Equal Weight Consumer Discretionary Index, which equally weights stocks in the consumer discretionary sector of the S&P 500. RCD invests at least 90% of its total assets in common stocks that comprise the index. Every security is given an equal weight at each quarterly rebalance. 

The fund charged a 40 basis point expense ratio and comprises 60 holdings. 

Current holdings as of September 9 include Etsy (ETSY), Tesla Inc. (TSLA), Amazon.com, Inc. (AMZN), Ford Motor Company (F), TJX Companies Inc. (TJX), Las Vegas Sands Corp. (LVS), Ross Stores, Inc. (ROST), Norwegian Cruise Line Holdings Ltd. (NCLH), Target Corporation (TGT), and Starbucks Corporation (SBUX), according to VettaFi.

RCD is linked to an equal-weighted index, meaning that component companies receive approximately equal allocations. That results in exposure that is considerably more balanced than that of alternative offerings, and also means this strategy leans toward smaller, more undervalued companies than its average category peer. 

Investors often opt for an equal-weighted fund to remove size bias from a portfolio.

An equal-weight strategy can provide diversification benefits and reduce concentration risk by weighting each constituent company equally so that a small group of companies does not have an outsized impact on the index. 

For more news, information, and strategy, visit our Portfolio Strategies Channel.