Gleichgewichtung

What Is Gleichgewichtung?

Gleichgewichtung, or equal weighting, is a portfolio construction strategy where each component asset or security in a Portfolio is allocated the same proportional weight, regardless of its size, price, or Marktkapitalisierung. This approach falls under Portfoliotheorie and aims to provide balanced exposure across all constituents. Unlike market-capitalization-weighted indices, where larger companies naturally hold more sway, Gleichgewichtung gives smaller companies an equal opportunity to influence the portfolio's overall Rendite and Anlagerisiko. This can lead to increased Diversifikation benefits by reducing the concentration risk inherent in portfolios heavily skewed towards a few large holdings²³. The Federal Reserve Bank of San Francisco has noted the general benefits of portfolio diversification in reducing risk²¹, ²².

History and Origin

While the concept of spreading investments evenly might seem intuitive, the formal application and popularization of Gleichgewichtung in broader indices are more recent phenomena compared to market-capitalization weighting. Historically, market-cap weighting became the predominant industry standard for index investing because it was a "buy-and-hold" strategy that minimized trading costs, which were significantly higher before the advent of modern computing and lower brokerage commissions²⁰.

However, as early as the 1990s, major index providers began offering equal-weight versions of certain indices, and in the past decade, the range of such indices and associated investable vehicles like Exchange Traded Fund (ETF)s expanded significantly. This made Gleichgewichtung a more viable and practical approach for investors seeking alternatives to traditional market-cap-weighted strategies¹⁹.

Key Takeaways

• Gleichgewichtung assigns an identical percentage weight to each holding in a portfolio or index.
• This strategy reduces concentration risk, as no single asset dominates the portfolio's performance.
• It often results in a greater implicit allocation to smaller- and mid-cap companies compared to market-capitalization-weighted approaches.
• Gleichgewichtung typically requires regular Rebalancing to maintain equal proportions as asset prices fluctuate.
• The approach can offer enhanced diversification, potentially leading to different risk-return characteristics.

Formula and Calculation

The formula for calculating the weight of each asset in an equal-weighted portfolio is straightforward. If a portfolio consists of (N) assets, each asset is assigned a weight of (1/N).

For a portfolio with (N) assets:

Where:

• (\text{Gewichtung}_{\text{Asset } i}) = The target weight of a single asset (i) in the portfolio.
• (N) = The total number of assets in the Portfolio.

For example, in a portfolio of 100 Aktien, each stock would be allocated a 1% weight. This simple calculation underscores the transparency of the Gleichgewichtung method.

Interpreting the Gleichgewichtung

Interpreting Gleichgewichtung involves understanding its implications for portfolio exposure and risk. When a portfolio is equally weighted, it means that the performance of every single component, whether it's a giant corporation or a smaller firm, has an identical impact on the overall portfolio's returns. This contrasts sharply with traditional indices where a few mega-cap companies can disproportionately drive performance. For instance, in an equally weighted S&P 500 index, each of the 500 companies, regardless of its size, would represent approximately 0.2% of the index at rebalancing¹⁸.

This weighting scheme inherently provides a stronger tilt towards smaller and mid-sized companies within a given universe, as it allocates more capital to them than a market-capitalization-weighted approach would. Consequently, investors using Gleichgewichtung strategies are effectively making a larger bet on the collective performance of the broader market rather than on the continued dominance of a few large firms. This can influence the portfolio's Beta and overall Volatilität.

Hypothetical Example

Consider a hypothetical investment portfolio comprising three distinct assets: Company A, Company B, and Company C.

Initially, an investor allocates funds equally among them.

• Initial Investment: 30,000 EUR
• Company A: 10,000 EUR
• Company B: 10,000 EUR
• Company C: 10,000 EUR

After one quarter, the values of these investments change:

• Company A: Value increases to 12,000 EUR
• Company B: Value remains at 10,000 EUR
• Company C: Value decreases to 8,000 EUR

The total portfolio value is now 30,000 EUR (12,000 + 10,000 + 8,000). To maintain Gleichgewichtung, the portfolio must be rebalanced.

1. Calculate the new target weight for each asset: Since there are 3 assets, each should ideally represent 1/3 of the total portfolio value.
   Total Portfolio Value = 30,000 EUR
   Target Value per Asset = 30,000 EUR / 3 = 10,000 EUR

2. Adjust holdings to meet target weights:

   • Company A: Current value is 12,000 EUR, target is 10,000 EUR. The investor needs to sell 2,000 EUR worth of Company A shares.
   • Company B: Current value is 10,000 EUR, target is 10,000 EUR. No change is needed.
   • Company C: Current value is 8,000 EUR, target is 10,000 EUR. The investor needs to buy 2,000 EUR worth of Company C shares.

This rebalancing process ensures that each asset once again holds an equal proportional weight, adhering to the Gleichgewichtung strategy. Such adjustments are critical for maintaining the intended Asset-Allokation and managing the portfolio's exposure to individual assets.

Practical Applications

Gleichgewichtung is employed in various financial products and investment strategies, offering investors a distinct alternative to traditional market-capitalization-weighted approaches.

• Equal-Weight Indices and ETFs: The most common application of Gleichgewichtung is in the creation of equal-weighted indices, such as the S&P 500 Equal Weight Index. This index includes the same constituents as the S&P 500 but allocates a fixed weight to each company, typically 0.2%. ¹⁶, ¹⁷Indexfonds and ETFs that track these indices allow investors to gain exposure to this strategy. ¹⁵These products automatically perform the necessary rebalancing to maintain equal weights, effectively implementing a form of Passives Management.
• Sector-Specific Equal Weighting: Some providers offer equal-weighted ETFs for specific sectors (e.g., technology, industrials, healthcare), which can help investors diversify within a sector and reduce the dominance of the largest companies.
• Active Portfolio Management: While inherently a passive strategy when applied to broad indices, principles of Gleichgewichtung can also inform Aktives Management. Fund managers might use an equal-weight approach for a portion of their holdings or as a baseline for security selection, particularly when seeking to mitigate the influence of large-cap stocks.
• Value-Oriented Investing: Because Gleichgewichtung involves selling assets that have performed well and buying those that have underperformed to restore equal weights, it inherently introduces a "value tilt." This means it tends to buy low and sell high, a characteristic often associated with value investing.
  ¹⁴* Mitigating Concentration Risk: Equal-weight indices can be used to address concerns about high concentration in market-cap-weighted indices, where a few mega-cap stocks might dominate the overall performance. ¹², ¹³This can be particularly relevant in periods where market returns are driven by a narrow set of companies.
  ¹¹
  According to Reuters, equal-weight ETFs aim to outpace the broader market by diversifying exposure and reducing the impact of large, potentially overvalued, companies.

Limitations and Criticisms

While Gleichgewichtung offers distinct advantages, it also comes with certain limitations and criticisms that investors should consider:

• Higher Turnover and Costs: To maintain equal weights, an equally weighted portfolio requires frequent Rebalancing (typically quarterly). This means selling assets that have increased in value and buying those that have decreased. This regular activity can lead to higher transaction costs (brokerage fees, bid-ask spreads) and potentially higher tax implications from capital gains compared to a buy-and-hold market-capitalization-weighted portfolio.
  ⁹, ¹⁰* Implicit Small-Cap Bias: By allocating the same weight to all companies regardless of size, Gleichgewichtung inherently overweights smaller companies relative to their market capitalization. This small-cap bias can lead to higher Volatilität and may not align with all investors' risk profiles. Wh⁷, ⁸ile smaller companies can offer higher growth potential, they also tend to be more volatile.
• Underperformance in Strong Large-Cap Led Markets: In periods where large-cap growth stocks significantly outperform the rest of the market, equally weighted portfolios may lag behind their market-capitalization-weighted counterparts. The strong performance of a few "mega-cap" companies can lead to the underperformance of equal-weight strategies.
• ⁵, ⁶ Liquidity Concerns: The greater allocation to smaller companies in an equally weighted portfolio can sometimes lead to investments in less liquid stocks. This might pose challenges for large institutional investors attempting to implement the strategy without significantly impacting market prices.
• ⁴ No Explicit Factor Tilt (Beyond Size/Value): While it introduces a value tilt and a small-cap bias, Gleichgewichtung does not explicitly target other investment factors (e.g., momentum, quality) that some investors might seek. Research Affiliates highlights that while equal weighting is simple and diversified, it has higher turnover and less liquid stocks compared to fundamentally weighted indices and can be prone to selecting overpriced stocks.

#³# Gleichgewichtung vs. Marktkapitalisierungsgewichtung

The fundamental difference between Gleichgewichtung (equal weighting) and Marktkapitalisierungsgewichtung (market capitalization weighting) lies in how component assets within a Portfolio or index are weighted.

Confusion often arises because both methods are used to construct broad market indices. However, their underlying philosophies and resulting portfolio characteristics are quite distinct. While market-capitalization weighting reflects the actual market size and consensus valuation of companies, Gleichgewichtung aims to provide a purer form of Diversifikation by ensuring all components contribute equally to the portfolio's characteristics.

FAQs

What is the main advantage of Gleichgewichtung?

The primary advantage of Gleichgewichtung is enhanced Diversifikation by reducing the concentration risk inherent in market-capitalization-weighted portfolios. It ensures that no single asset or a few large assets disproportionately influence the portfolio's performance, providing a more balanced exposure across all holdings.

Does Gleichgewichtung outperform Marktkapitalisierungsgewichtung?

Historically, the S&P 500 Equal Weight Index has, at times, demonstrated periods of outperformance compared to its market-capitalization-weighted counterpart, especially over longer time frames, though this is not consistent and depends on market cycles. Th¹, ²e performance differential can be attributed to the equal-weight's implicit tilt towards smaller and value-oriented companies and its rebalancing mechanism, which involves selling winners and buying laggards. However, it can also underperform in periods dominated by strong performance from mega-cap stocks.

How often do equal-weighted portfolios need rebalancing?

Equal-weighted portfolios typically require regular Rebalancing, often quarterly. This frequency is necessary to restore the equal proportions of each asset, as price fluctuations will naturally cause some assets to grow larger and others smaller in the portfolio. This ensures adherence to the Gleichgewichtung strategy.

Is Gleichgewichtung suitable for all investors?

Gleichgewichtung may not be suitable for all investors. Its higher turnover and implicit small-cap bias can lead to increased costs and potentially higher Volatilität compared to market-capitalization-weighted strategies. Investors should consider their individual risk tolerance, investment horizon, and cost sensitivity before adopting an equal-weight approach for their Portfolio.