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Is Invesco FTSE RAFI US 1000 ETF (PRF) a Strong ETF Right Now?
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Making its debut on 12/19/2005, smart beta exchange traded fund Invesco FTSE RAFI US 1000 ETF (PRF - Free Report) provides investors broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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 managed by Invesco, and has been able to amass over $5.68 billion, which makes it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, PRF seeks to match the performance of the FTSE RAFI US 1000 Index.
The FTSE RAFI US 1000 Index is designed to track the performance of the largest U.S. equities, selected based on the following four fundamental measures of firm size: book value, income, sales and dividends. U.S. equities are then weighted by each of these four fundamental measures.An overall weight is calculated for each firm by equally-weighting each fundamental measure.
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.
Annual operating expenses for this ETF are 0.39%, making it on par with most peer products in the space.
PRF's 12-month trailing dividend yield is 2%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PRF, it has heaviest allocation in the Financials sector --about 18.40% of the portfolio --while Healthcare and Information Technology round out the top three.
Taking into account individual holdings, Apple Inc (AAPL - Free Report) accounts for about 2.58% of the fund's total assets, followed by Exxon Mobil Corp (XOM - Free Report) and Berkshire Hathaway Inc (BRK/B).
The top 10 holdings account for about 17.42% of total assets under management.
Performance and Risk
Year-to-date, the Invesco FTSE RAFI US 1000 ETF has lost about -12% so far, and is down about -3.22% over the last 12 months (as of 07/11/2022). PRF has traded between $145.08 and $175.48 in this past 52-week period.
The fund has a beta of 1.01 and standard deviation of 24.71% for the trailing three-year period, which makes PRF a medium risk choice in this particular space. With about 991 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1000 ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $51.70 billion in assets, Vanguard Value ETF has $94.39 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
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 - Large Cap Value.
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 1000 ETF (PRF) a Strong ETF Right Now?
Making its debut on 12/19/2005, smart beta exchange traded fund Invesco FTSE RAFI US 1000 ETF (PRF - Free Report) provides investors broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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 managed by Invesco, and has been able to amass over $5.68 billion, which makes it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, PRF seeks to match the performance of the FTSE RAFI US 1000 Index.
The FTSE RAFI US 1000 Index is designed to track the performance of the largest U.S. equities, selected based on the following four fundamental measures of firm size: book value, income, sales and dividends. U.S. equities are then weighted by each of these four fundamental measures.An overall weight is calculated for each firm by equally-weighting each fundamental measure.
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.
Annual operating expenses for this ETF are 0.39%, making it on par with most peer products in the space.
PRF's 12-month trailing dividend yield is 2%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PRF, it has heaviest allocation in the Financials sector --about 18.40% of the portfolio --while Healthcare and Information Technology round out the top three.
Taking into account individual holdings, Apple Inc (AAPL - Free Report) accounts for about 2.58% of the fund's total assets, followed by Exxon Mobil Corp (XOM - Free Report) and Berkshire Hathaway Inc (BRK/B).
The top 10 holdings account for about 17.42% of total assets under management.
Performance and Risk
Year-to-date, the Invesco FTSE RAFI US 1000 ETF has lost about -12% so far, and is down about -3.22% over the last 12 months (as of 07/11/2022). PRF has traded between $145.08 and $175.48 in this past 52-week period.
The fund has a beta of 1.01 and standard deviation of 24.71% for the trailing three-year period, which makes PRF a medium risk choice in this particular space. With about 991 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1000 ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $51.70 billion in assets, Vanguard Value ETF has $94.39 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
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 - Large Cap Value.
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.