A smart beta exchange traded fund, the Invesco S&P MidCap 400 Pure Growth ETF (
RFG Quick Quote RFG - Free Report) debuted on 03/01/2006, and offers broad exposure to the Style Box - Mid Cap Growth category of the market. What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Invesco. RFG has been able to amass assets over $257.34 million, making it one of the average sized ETFs in the Style Box - Mid Cap Growth. Before fees and expenses, RFG seeks to match the performance of the S&P MidCap 400 Pure Growth Index.
The S&P MidCap 400 Pure Growth Index measures the performance of securities that exhibit strong growth characteristics in the S&P MidCap 400 Index.
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 0.35%.
It's 12-month trailing dividend yield comes in at 0.37%.
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 19.60% of the portfolio. Consumer Discretionary and Healthcare round out the top three.
Taking into account individual holdings, Shockwave Medical Inc (
SWAV Quick Quote SWAV - Free Report) accounts for about 5.72% of the fund's total assets, followed by Slm Corp ( SLM Quick Quote SLM - Free Report) and Navient Corp ( NAVI Quick Quote NAVI - Free Report) .
Its top 10 holdings account for approximately 26.94% of RFG's total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P MidCap 400 Pure Growth ETF has lost about -22.12% so far, and is down about -22.48% over the last 12 months (as of 09/07/2022). RFG has traded between $159.15 and $245.79 in this past 52-week period.
The ETF has a beta of 1.17 and standard deviation of 30.51% for the trailing three-year period, making it a medium risk choice in the space. With about 91 holdings, it effectively diversifies company-specific risk.
Invesco S&P MidCap 400 Pure Growth ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard MidCap Growth ETF (
VOT Quick Quote VOT - Free Report) tracks CRSP U.S. Mid Cap Growth Index and the iShares Russell MidCap Growth ETF ( IWP Quick Quote IWP - Free Report) tracks Russell MidCap Growth Index. Vanguard MidCap Growth ETF has $9.55 billion in assets, iShares Russell MidCap Growth ETF has $11.82 billion. VOT has an expense ratio of 0.07% and IWP charges 0.23%.
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 - Mid Cap Growth.
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.