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Is Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ) a Strong ETF Right Now?
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A smart beta exchange traded fund, the Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ - Free Report) debuted on 09/20/2006, and offers broad exposure to the Style Box - Small Cap Blend 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
Managed by Invesco, PRFZ has amassed assets over $2.11 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. Before fees and expenses, PRFZ 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.
It's 12-month trailing dividend yield comes in at 1.19%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
PRFZ's heaviest allocation is in the Industrials sector, which is about 19.30% of the portfolio. Its Financials and Consumer Discretionary round out the top three.
When you look at individual holdings, Scorpio Tankers Inc (STNG - Free Report) accounts for about 0.60% of the fund's total assets, followed by Consol Energy Inc (CEIX - Free Report) and Super Micro Computer Inc (SMCI - Free Report) .
PRFZ's top 10 holdings account for about 3.08% of its total assets under management.
Performance and Risk
The ETF return is roughly 11.20% so far this year and is down about -2.09% in the last one year (as of 03/06/2023). In the past 52-week period, it has traded between $145.71 and $187.88.
PRFZ has a beta of 1.18 and standard deviation of 30.44% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1447 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 $54.63 billion in assets, iShares Core S&P Small-Cap ETF has $72.18 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?
A smart beta exchange traded fund, the Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ - Free Report) debuted on 09/20/2006, and offers broad exposure to the Style Box - Small Cap Blend 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
Managed by Invesco, PRFZ has amassed assets over $2.11 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. Before fees and expenses, PRFZ 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.
It's 12-month trailing dividend yield comes in at 1.19%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
PRFZ's heaviest allocation is in the Industrials sector, which is about 19.30% of the portfolio. Its Financials and Consumer Discretionary round out the top three.
When you look at individual holdings, Scorpio Tankers Inc (STNG - Free Report) accounts for about 0.60% of the fund's total assets, followed by Consol Energy Inc (CEIX - Free Report) and Super Micro Computer Inc (SMCI - Free Report) .
PRFZ's top 10 holdings account for about 3.08% of its total assets under management.
Performance and Risk
The ETF return is roughly 11.20% so far this year and is down about -2.09% in the last one year (as of 03/06/2023). In the past 52-week period, it has traded between $145.71 and $187.88.
PRFZ has a beta of 1.18 and standard deviation of 30.44% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1447 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 $54.63 billion in assets, iShares Core S&P Small-Cap ETF has $72.18 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.