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Is Invesco FTSE RAFI US 1500 SmallMid ETF (PRFZ) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - Small Cap Blend category of the market, the Invesco FTSE RAFI US 1500 SmallMid ETF (PRFZ - Free Report) is a smart beta exchange traded fund launched on 09/20/2006.
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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $1.85 billion, this makes it one of the larger ETFs in the Style Box - Small Cap Blend. PRFZ is managed by Invesco. PRFZ, before fees and expenses, seeks to match the performance of the FTSE RAFI US 1500 Small-Mid Index.
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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.39%, making it on par with most peer products in the space.
PRFZ's 12-month trailing dividend yield is 1.11%.
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.
This ETF has heaviest allocation in the Financials sector - about 19.40% of the portfolio. Industrials and Information Technology round out the top three.
When you look at individual holdings, Continental Resources Inc/ok accounts for about 0.52% of the fund's total assets, followed by Centennial Resource Development Inc/de and Matador Resources Co (MTDR - Free Report) .
Its top 10 holdings account for approximately 3.89% of PRFZ's total assets under management.
Performance and Risk
The ETF has lost about -10.27% so far this year and is down about -2.03% in the last one year (as of 04/25/2022). In the past 52-week period, it has traded between $172.02 and $201.01.
PRFZ has a beta of 1.20 and standard deviation of 28.62% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1438 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1500 SmallMid 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 SmallCap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $56.58 billion in assets, iShares Core S&P SmallCap ETF has $68.75 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 SmallMid ETF (PRFZ) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - Small Cap Blend category of the market, the Invesco FTSE RAFI US 1500 SmallMid ETF (PRFZ - Free Report) is a smart beta exchange traded fund launched on 09/20/2006.
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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $1.85 billion, this makes it one of the larger ETFs in the Style Box - Small Cap Blend. PRFZ is managed by Invesco. PRFZ, before fees and expenses, seeks to match the performance of the FTSE RAFI US 1500 Small-Mid Index.
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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.39%, making it on par with most peer products in the space.
PRFZ's 12-month trailing dividend yield is 1.11%.
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.
This ETF has heaviest allocation in the Financials sector - about 19.40% of the portfolio. Industrials and Information Technology round out the top three.
When you look at individual holdings, Continental Resources Inc/ok accounts for about 0.52% of the fund's total assets, followed by Centennial Resource Development Inc/de and Matador Resources Co (MTDR - Free Report) .
Its top 10 holdings account for approximately 3.89% of PRFZ's total assets under management.
Performance and Risk
The ETF has lost about -10.27% so far this year and is down about -2.03% in the last one year (as of 04/25/2022). In the past 52-week period, it has traded between $172.02 and $201.01.
PRFZ has a beta of 1.20 and standard deviation of 28.62% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1438 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1500 SmallMid 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 SmallCap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $56.58 billion in assets, iShares Core S&P SmallCap ETF has $68.75 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.