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Is Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ) a Strong ETF Right Now?
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Launched on 09/20/2006, the Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small Cap Blend category of the market.
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.
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.
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.
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
PRFZ is managed by Invesco, and this fund has amassed over $2.64 billion, which makes it one of the larger ETFs in the Style Box - Small Cap Blend. PRFZ, 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
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.
Annual operating expenses for PRFZ 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 1.40%.
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 Financials sector, which is about 20.60% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Applovin Corp (APP - Free Report) accounts for about 0.72% of total assets, followed by Brinker International Inc (EAT - Free Report) and Carvana Co (CVNA - Free Report) .
Its top 10 holdings account for approximately 4.3% of PRFZ's total assets under management.
Performance and Risk
The ETF has added roughly 3.63% and was up about 18.21% so far this year and in the past one year (as of 01/31/2025), respectively. PRFZ has traded between $35.98 and $45.39 during this last 52-week period.
The fund has a beta of 1.19 and standard deviation of 21.52% for the trailing three-year period, which makes PRFZ a medium risk choice in this particular space. With about 1446 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 $74.41 billion in assets, iShares Core S&P Small-Cap ETF has $89.87 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?
Launched on 09/20/2006, the Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small Cap Blend category of the market.
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.
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.
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.
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
PRFZ is managed by Invesco, and this fund has amassed over $2.64 billion, which makes it one of the larger ETFs in the Style Box - Small Cap Blend. PRFZ, 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
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.
Annual operating expenses for PRFZ 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 1.40%.
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 Financials sector, which is about 20.60% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Applovin Corp (APP - Free Report) accounts for about 0.72% of total assets, followed by Brinker International Inc (EAT - Free Report) and Carvana Co (CVNA - Free Report) .
Its top 10 holdings account for approximately 4.3% of PRFZ's total assets under management.
Performance and Risk
The ETF has added roughly 3.63% and was up about 18.21% so far this year and in the past one year (as of 01/31/2025), respectively. PRFZ has traded between $35.98 and $45.39 during this last 52-week period.
The fund has a beta of 1.19 and standard deviation of 21.52% for the trailing three-year period, which makes PRFZ a medium risk choice in this particular space. With about 1446 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 $74.41 billion in assets, iShares Core S&P Small-Cap ETF has $89.87 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.