Is Invesco FTSE RAFI US 1500 SmallMid ETF (PRFZ) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box – Small Cap Blend category of the market, the Invesco FTSE RAFI US 1500 SmallMid ETF (PRFZ) is a smart beta exchange traded fund launched on 09/20/2006.
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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
Because the fund has amassed over $1.80 billion, this makes it one of the larger ETFs in the Style Box – Small Cap Blend. PRFZ is managed by Invesco. Before fees and expenses, this particular fund 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%.
It’s 12-month trailing dividend yield comes in at 1.16%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Financials sector – about 19.90% of the portfolio. Industrials and Information Technology round out the top three.
Taking into account individual holdings, Amc Entertainment Holdings Inc (AMC) accounts for about 0.41% of the fund’s total assets, followed by Herc Holdings Inc (HRI) and Continental Resources Inc/ok (CLR).
PRFZ’s top 10 holdings account for about 3.39% of its total assets under management.
Performance and Risk
The ETF has added roughly 22.59% so far this year and it’s up approximately 21.91% in the last one year (as of 12/21/2021). In the past 52-week period, it has traded between $149.19 and $201.01.
The ETF has a beta of 1.22 and standard deviation of 28.36% for the trailing three-year period, making it a medium risk choice in the space. With about 1459 holdings, it effectively diversifies company-specific risk.
Invesco FTSE RAFI US 1500 SmallMid 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) tracks Russell 2000 Index and the iShares Core S&P SmallCap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $65.58 billion in assets, iShares Core S&P SmallCap ETF has $71.57 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.
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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Invesco FTSE RAFI US 1500 SmallMid ETF (PRFZ): ETF Research Reports
Continental Resources, Inc. (CLR) : Free Stock Analysis Report
iShares Russell 2000 ETF (IWM): ETF Research Reports
AMC Entertainment Holdings, Inc. (AMC) : Free Stock Analysis Report
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
Herc Holdings Inc. (HRI) : Free Stock Analysis Report
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