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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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
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
PRFZ is managed by Invesco, and this fund has amassed over $2.77 billion, which makes it one of the larger ETFs in the Style Box - Small Cap Blend. This particular fund, 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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.39%.
PRFZ's 12-month trailing dividend yield is 1.33%.
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.
PRFZ's heaviest allocation is in the Industrials sector, which is about 19.60% of the portfolio. Its Financials and Information Technology round out the top three.
When you look at individual holdings, Super Micro Computer Inc (SMCI - Free Report) accounts for about 0.56% of the fund's total assets, followed by Vertiv Holdings Co (VRT - Free Report) and Carvana Co (CVNA - Free Report) .
The top 10 holdings account for about 4% of total assets under management.
Performance and Risk
The ETF has added about 0.76% so far this year and is up about 21.59% in the last one year (as of 03/20/2024). In the past 52-week period, it has traded between $30.38 and $38.54.
The ETF has a beta of 1.18 and standard deviation of 21.66% for the trailing three-year period, making it a medium risk choice in the space. With about 1449 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 $61.88 billion in assets, iShares Core S&P Small-Cap ETF has $77.09 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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
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
PRFZ is managed by Invesco, and this fund has amassed over $2.77 billion, which makes it one of the larger ETFs in the Style Box - Small Cap Blend. This particular fund, 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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.39%.
PRFZ's 12-month trailing dividend yield is 1.33%.
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.
PRFZ's heaviest allocation is in the Industrials sector, which is about 19.60% of the portfolio. Its Financials and Information Technology round out the top three.
When you look at individual holdings, Super Micro Computer Inc (SMCI - Free Report) accounts for about 0.56% of the fund's total assets, followed by Vertiv Holdings Co (VRT - Free Report) and Carvana Co (CVNA - Free Report) .
The top 10 holdings account for about 4% of total assets under management.
Performance and Risk
The ETF has added about 0.76% so far this year and is up about 21.59% in the last one year (as of 03/20/2024). In the past 52-week period, it has traded between $30.38 and $38.54.
The ETF has a beta of 1.18 and standard deviation of 21.66% for the trailing three-year period, making it a medium risk choice in the space. With about 1449 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 $61.88 billion in assets, iShares Core S&P Small-Cap ETF has $77.09 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.