EXCLUSIVE: Tema ETF Tackles Mag 7 Concentration Risk With New S&P 500 Historical Weighting Strategy

Tema ETF, known for its active thematic investment strategies, has unveiled a novel approach to traditional indexing. On Tuesday, in collaboration with S&P Global Inc., the firm introduced the Tema S&P 500 Historical Weight ETF DSPY, a new ETF product designed to tackle unprecedented index concentration risk.

S&P 500 Overconcentration Raises Red Flags, Equal Weight ETF Falls Short As Fix

"Today's S&P 500 concentration is at an all-time high," said Maurits Pot, founder of Tema, in an exclusive interview with Benzinga.

The S&P 500 is increasingly dominated by a handful of tech giants — the so-called Magnificent Seven — which include Microsoft Corp. MSFT, Apple Inc. AAPL, NVIDIA Corp. NVDA, Alphabet Inc. GOOG GOOGL, Amazon Inc. AMZN, Meta Platforms Inc. META and Tesla, Inc. TSLA.

These seven companies alone make up nearly 30% of the entire index. The top 10 stocks account for 36%, leaving the rest of the 490 companies with diminishing influence.

In comparison, the equal-weight S&P 500 ETF, such as the Invesco Equal Weight S&P 500 ETF RSP gives each stock the same weight — about 0.2% — which effectively erases large-cap dominance but also deviates significantly from the actual index composition.

"If I go equal weight, I actually have very little exposure to the S&P 500," Pot said. "Fundamentally, it’s a different product."

The DSPY Innovation: A Historical Index Weighting

Tema S&P 500 Historical Weight ETF mirrors the S&P 500 in every way — same companies, same sector exposures, same rebalance frequency — except for one critical difference: how each stock is weighted.

Instead of using the current market cap, the new product assigns each company the average historical weight of its index position (1 through 500) based on 35 years of data since 1989.

For instance, Apple Inc., now the largest stock in the S&P 500 with a nearly 7% weight, is reweighted to about 3.9% — the average weight of the dominant S&P 500 company over the past 35 years.

"What we've built is the S&P 500 with historical weightings," Pot said. "This reduces concentration risk while preserving the index’s integrity."

Repeat this for all 500 positions, and you get a smoothed-out S&P 500 — one that reflects the index's long-term structure without overexposure to today’s top tech names.

By using historical weight averages, the ETF maintains the structural DNA of the cap-weighted S&P 500 index while diluting short-term dominance.

Unlike equal-weight ETFs that assign every stock the same arbitrary 0.2% weight, DSPY preserves the natural hierarchy of the S&P 500, offering investors a more reliable and historically grounded representation of the U.S. large-cap market.

Comparing DSPY, S&P 500, Equal-Weight ETF

Metric	S&P 500	Equal Weight (RSP)	DSPY ETF
Top 3 Stocks Weight (%)	19.84%	0.60%	9.32%
Top 10 Stocks Weight (%)	36.01%	2.21%	21.28%
% Index Held by Top 50 Stocks	77.14%	26.22%	71.78%
Largest Sector Weight	Tech (30.42%)	Industrials (15.65%)	Tech (23.32%)
Index Coverage Similarity	100%	47%	85%
Rebalance Frequency	Quarterly	Quarterly	Quarterly
Apple Inc. Weight (%)	6.78%	0.20%	3.96%
Microsoft Corp. (%)	6.08%	0.20%	3.06%
Amazon.com Inc. (%)	5.98%	0.20%	2.30%
NVIDIA Corp. (%)	3.92%	0.20%	2.11%
Alphabet Inc. (%)	3.64%	0.20%	1.95%