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Is Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ) a Strong ETF Right Now?
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The Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ - Free Report) was launched on 09/20/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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 sponsored by Invesco. It has amassed assets over $2.04 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. PRFZ 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.39%.
PRFZ's 12-month trailing dividend yield is 1.54%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 18.60% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Information Technology round out the top three.
When you look at individual holdings, Super Micro Computer Inc (SMCI - Free Report) accounts for about 0.59% of the fund's total assets, followed by Vertiv Holdings Co (VRT - Free Report) and Applovin Corp (APP - Free Report) .
The top 10 holdings account for about 3.65% of total assets under management.
Performance and Risk
So far this year, PRFZ return is roughly 6.70%, and it's up approximately 1.70% in the last one year (as of 11/15/2023). During this past 52-week period, the fund has traded between $30.38 and $36.83.
The ETF has a beta of 1.19 and standard deviation of 22.03% for the trailing three-year period, making it a medium risk choice in the space. With about 1468 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1500 Small-Mid ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
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 $52.38 billion in assets, iShares Core S&P Small-Cap ETF has $67.94 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?
The Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ - Free Report) was launched on 09/20/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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 sponsored by Invesco. It has amassed assets over $2.04 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. PRFZ 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.39%.
PRFZ's 12-month trailing dividend yield is 1.54%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 18.60% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Information Technology round out the top three.
When you look at individual holdings, Super Micro Computer Inc (SMCI - Free Report) accounts for about 0.59% of the fund's total assets, followed by Vertiv Holdings Co (VRT - Free Report) and Applovin Corp (APP - Free Report) .
The top 10 holdings account for about 3.65% of total assets under management.
Performance and Risk
So far this year, PRFZ return is roughly 6.70%, and it's up approximately 1.70% in the last one year (as of 11/15/2023). During this past 52-week period, the fund has traded between $30.38 and $36.83.
The ETF has a beta of 1.19 and standard deviation of 22.03% for the trailing three-year period, making it a medium risk choice in the space. With about 1468 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1500 Small-Mid ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
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 $52.38 billion in assets, iShares Core S&P Small-Cap ETF has $67.94 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.