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Is Invesco FTSE RAFI US 1000 ETF (PRF) a Strong ETF Right Now?
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A smart beta exchange traded fund, the Invesco FTSE RAFI US 1000 ETF (PRF - Free Report) debuted on 12/19/2005, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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
PRF is managed by Invesco, and this fund has amassed over $5.88 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. This particular fund seeks to match the performance of the FTSE RAFI US 1000 Index before fees and expenses.
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.
Operating expenses on an annual basis are 0.39% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.05%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 19.20% of the portfolio, the fund has heaviest allocation to the Financials sector; Information Technology and Healthcare round out the top three.
When you look at individual holdings, Berkshire Hathaway Inc (BRK/B) accounts for about 2.65% of the fund's total assets, followed by Apple Inc (AAPL - Free Report) and Microsoft Corp (MSFT - Free Report) .
PRF's top 10 holdings account for about 17.87% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco FTSE RAFI US 1000 ETF has added about 1.51% so far, and is up roughly 2.95% over the last 12 months (as of 05/23/2023). PRF has traded between $138.77 and $165.35 in this past 52-week period.
PRF has a beta of 1 and standard deviation of 18.09% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1013 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1000 ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
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 $49.26 billion in assets, Vanguard Value ETF has $100.05 billion. IWD has an expense ratio of 0.18% 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?
A smart beta exchange traded fund, the Invesco FTSE RAFI US 1000 ETF (PRF - Free Report) debuted on 12/19/2005, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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
PRF is managed by Invesco, and this fund has amassed over $5.88 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. This particular fund seeks to match the performance of the FTSE RAFI US 1000 Index before fees and expenses.
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.
Operating expenses on an annual basis are 0.39% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.05%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 19.20% of the portfolio, the fund has heaviest allocation to the Financials sector; Information Technology and Healthcare round out the top three.
When you look at individual holdings, Berkshire Hathaway Inc (BRK/B) accounts for about 2.65% of the fund's total assets, followed by Apple Inc (AAPL - Free Report) and Microsoft Corp (MSFT - Free Report) .
PRF's top 10 holdings account for about 17.87% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco FTSE RAFI US 1000 ETF has added about 1.51% so far, and is up roughly 2.95% over the last 12 months (as of 05/23/2023). PRF has traded between $138.77 and $165.35 in this past 52-week period.
PRF has a beta of 1 and standard deviation of 18.09% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1013 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1000 ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
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 $49.26 billion in assets, Vanguard Value ETF has $100.05 billion. IWD has an expense ratio of 0.18% 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.