How the THOR Equal Weight Low Volatility Index Works

A traditional low volatility index does one thing. It ranks stocks by how much they have moved, keeps the calm ones, and stays fully invested in them.

The THOR Equal Weight Low Volatility Index starts from two different decisions. It works in sectors rather than single stocks and holds them in equal weight. And it is allowed to own none of them.

Those two decisions produce an index that behaves differently from a low volatility screen, and the difference has nothing to do with which stocks look calm.

The universe

The universe is the sectors of the S&P 500, held through the sector funds.

Materials, energy, financials, industrials, technology, health care, utilities, consumer discretionary, real estate and consumer staples. Ten of the eleven sectors. Communication services is left out.

When every sector is on, each one holds ten percent. Not ten percent of a capitalisation weighted sleeve, and not ten percent scaled by sector size. Ten percent, flat.

What flat weighting actually changes

In a capitalisation weighted index, a handful of very large companies drive most of the movement. A low volatility screen run over that index still inherits a great deal of that concentration, because the screen chooses among the same names and the largest of them remain the largest.

Equal weight across sectors gives energy the same say as technology. Utilities count as much as the largest software companies. The index stops being a bet on the biggest names in the market and becomes a bet on breadth.

That is a real change in exposure rather than a cosmetic one. Breadth and concentration behave differently in a drawdown, and they behave differently in a recovery.

Ten signals, not one

Each of the ten sectors then carries its own risk signal, from the same process described in Signal Processing, Applied to Markets.

On means conditions support owning that sector. Off means they do not. Ten independent readings on ten separate series, with nothing sitting above them holding a view about what the year looks like. The sectors do not have to agree with each other and frequently do not.

The cascade, and then the ceiling

When a sector turns off, it is sold and its weight is spread across the sectors that are still on.

The index stays fully invested that whole way down, owning fewer things in larger size as the count falls.

Then the weight hits a ceiling, and the ceiling is what converts a sector rotation into a risk control. No position goes above twenty percent. Once five sectors are on at twenty percent each, there is nowhere left to put the money, so every additional sector that turns off raises a twenty percent tranche into cash alternatives.

The cash position is not a decision, it is what is left over once the ceiling stops the redistribution from going anywhere else.

A worked example: late 2024 into 2025

Notice what that sequence actually was. Not a call. Not a moment where somebody decided the market had topped. Nine separate sector signals turning off one at a time across sixteen weeks, each one adding a little cash, with the cash position arriving as arithmetic rather than as a judgement. The index was already sixty percent in cash alternatives before the last two sectors turned.

Coming back works the same way. Technology turned on 9 April 2025. Consumer discretionary and materials on the 24th. Real estate on 1 May, industrials on the 2nd, financials and energy on the 12th. Each one pulls a tranche back out of cash and into the sector, and the weights step back down from twenty percent toward the flat ten as more sectors come on.

Against a traditional low volatility index

Put the two side by side and the difference is not the stock screen, it is the two decisions underneath it.

Equal weight across sectors rather than concentration in the largest names. And the ability to hold cash alternatives, where a fully invested low volatility index has to stay in its sectors the whole way down, because staying invested is what its rules require.

Neither construction is universally better. A fully invested low volatility index does what it says it will do and never has to be right about a turn. This one can step aside, and in exchange it has to accept the cost of the turns it gets wrong.

The rules, in one place

This is a published index with written rules, calculated by an independent index provider. Ten sectors. A flat starting weight of ten percent. A twenty percent ceiling on any position. A cash ladder that follows from the ceiling rather than from anybody’s opinion.

THOR Low Volatility is the fund that tracks the index.

Educational content only. This is not investment advice and it is not a recommendation regarding any security. Index construction is described here in general terms and simplified for explanation. Signal dates reflect historical signal states of the strategy the index is built on. They are not the holdings of any fund and not a measure of performance. Investing involves risk, including possible loss of principal.

Past performance does not guarantee future results.