DoubleLine Paper Proposes Two Ways to Broaden S&P 500 Exposure
The paper outlines sector-valuation and equal-weight strategies as complements to cap-weighted exposure, citing concentration in technology and the index’s largest companies.
Key takeaways
- The paper says information technology accounts for nearly 40% of the S&P 500’s market cap.
- DoubleLine outlines a sector strategy and an equal-weight strategy as complements to cap-weighted exposure.
A new DoubleLine paper proposes two strategies to complement S&P 500 exposure, citing the index’s concentration in information technology and its largest companies. The authors say the sector accounts for nearly 40% of the index’s market cap, while its 10 largest companies make up more than 40%.
One approach, based on the Shiller Barclays CAPE U.S. Sector Total Return Index, allocates to relatively inexpensive sectors with positive momentum and rebalances monthly. The other follows the Barclays Fortune 500 Equal Weighted Total Return Index, selecting companies by revenue and giving them equal weights.
The paper’s authors, DoubleLine Portfolio Manager Eric Dhall and Asset Allocation Strategist Ryan Kimmel, say these strategies are complements, not replacements, for cap-weighted exposure. They describe CAPE as a way to diversify valuation risk and the Fortune 500 strategy as a way to diversify single-company concentration risk.
This article was produced with the help of AI technology. Source: Yahoo Finance
