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Is Invesco FTSE RAFI US 1000 ETF (PRF) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the Invesco FTSE RAFI US 1000 ETF (PRF - Free Report) is a smart beta exchange traded fund launched on 12/19/2005.
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.
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.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $5.55 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. PRF, before fees and expenses, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for PRF are 0.39%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.77%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 18.20% of the portfolio --while Healthcare and Information Technology round out the top three.
When you look at 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).
PRF's top 10 holdings account for about 17.42% of its total assets under management.
Performance and Risk
So far this year, PRF has lost about -8.54%, and is down about -1.30% in the last one year (as of 05/11/2022). During this past 52-week period, the fund has traded between $155.35 and $175.48.
PRF has a beta of 1.01 and standard deviation of 24.26% for the trailing three-year period, which makes the fund a medium risk choice in the 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 $52.45 billion in assets, Vanguard Value ETF has $96.34 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?
Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the Invesco FTSE RAFI US 1000 ETF (PRF - Free Report) is a smart beta exchange traded fund launched on 12/19/2005.
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.
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.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $5.55 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. PRF, before fees and expenses, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for PRF are 0.39%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.77%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 18.20% of the portfolio --while Healthcare and Information Technology round out the top three.
When you look at 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).
PRF's top 10 holdings account for about 17.42% of its total assets under management.
Performance and Risk
So far this year, PRF has lost about -8.54%, and is down about -1.30% in the last one year (as of 05/11/2022). During this past 52-week period, the fund has traded between $155.35 and $175.48.
PRF has a beta of 1.01 and standard deviation of 24.26% for the trailing three-year period, which makes the fund a medium risk choice in the 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 $52.45 billion in assets, Vanguard Value ETF has $96.34 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.