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Is Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ) a Strong ETF Right Now?
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A smart beta exchange traded fund, the Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ - Free Report) debuted on 09/20/2006, and offers broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Invesco. PRFZ has been able to amass assets over $2.13 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. This particular fund seeks to match the performance of the FTSE RAFI US 1500 Small-Mid Index before fees and expenses.
The FTSE RAFI US 1500 Small-Mid Index is comprised of approximately 1,500 U.S. stocks. The FTSE US 1500 Small-Mid Index is designed to track the performance of small and medium-sized U.S. equity stocks selected based on the following four fundamental measures of firm size: book value, income, cash flow and dividends.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.39%.
The fund has a 12-month trailing dividend yield of 1.39%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
PRFZ's heaviest allocation is in the Industrials sector, which is about 17.40% of the portfolio. Its Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Super Micro Computer Inc (SMCI - Free Report) accounts for about 0.22% of total assets, followed by Coty Inc (COTY - Free Report) and Exact Sciences Corp (EXAS - Free Report) .
The top 10 holdings account for about 2.09% of total assets under management.
Performance and Risk
So far this year, PRFZ has gained about 12.80%, and was up about 16.47% in the last one year (as of 07/13/2023). During this past 52-week period, the fund has traded between $145.71 and $179.35.
The ETF has a beta of 1.18 and standard deviation of 22.47% for the trailing three-year period, making it a medium risk choice in the space. With about 1499 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1500 Small-Mid ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 ETF (IWM - Free Report) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $55.88 billion in assets, iShares Core S&P Small-Cap ETF has $70.52 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Blend.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ) a Strong ETF Right Now?
A smart beta exchange traded fund, the Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ - Free Report) debuted on 09/20/2006, and offers broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Invesco. PRFZ has been able to amass assets over $2.13 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. This particular fund seeks to match the performance of the FTSE RAFI US 1500 Small-Mid Index before fees and expenses.
The FTSE RAFI US 1500 Small-Mid Index is comprised of approximately 1,500 U.S. stocks. The FTSE US 1500 Small-Mid Index is designed to track the performance of small and medium-sized U.S. equity stocks selected based on the following four fundamental measures of firm size: book value, income, cash flow and dividends.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.39%.
The fund has a 12-month trailing dividend yield of 1.39%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
PRFZ's heaviest allocation is in the Industrials sector, which is about 17.40% of the portfolio. Its Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Super Micro Computer Inc (SMCI - Free Report) accounts for about 0.22% of total assets, followed by Coty Inc (COTY - Free Report) and Exact Sciences Corp (EXAS - Free Report) .
The top 10 holdings account for about 2.09% of total assets under management.
Performance and Risk
So far this year, PRFZ has gained about 12.80%, and was up about 16.47% in the last one year (as of 07/13/2023). During this past 52-week period, the fund has traded between $145.71 and $179.35.
The ETF has a beta of 1.18 and standard deviation of 22.47% for the trailing three-year period, making it a medium risk choice in the space. With about 1499 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1500 Small-Mid ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 ETF (IWM - Free Report) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $55.88 billion in assets, iShares Core S&P Small-Cap ETF has $70.52 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Blend.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.