Is Invesco FTSE RAFI US 1000 ETF (PRF) a Strong ETF Right Now?
Making its debut on 12/19/2005, smart beta exchange traded fund Invesco FTSE RAFI US 1000 ETF (PRF) provides investors broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
Managed by Invesco, PRF has amassed assets over $5.56 billion, making it one of the larger ETFs in the Style Box - Large Cap Value. Before fees and expenses, PRF seeks to match the performance of the FTSE RAFI US 1000 Index.
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
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 this ETF are 0.39%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.50%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 19.60% of the portfolio. Industrials and Information Technology round out the top three.
Taking into account individual holdings, Apple Inc (AAPL) accounts for about 2.32% of the fund's total assets, followed by Exxon Mobil Corp (XOM) and Jpmorgan Chase & Co (JPM).
The top 10 holdings account for about 16.27% of total assets under management.
Performance and Risk
The ETF has added roughly 28.83% so far this year and it's up approximately 42.70% in the last one year (as of 10/25/2021). In the past 52-week period, it has traded between $112.02 and $167.38.
The fund has a beta of 1.07 and standard deviation of 24.08% for the trailing three-year period, which makes PRF a medium risk choice in this particular space. With about 1005 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1000 ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $56.66 billion in assets, Vanguard Value ETF has $87.52 billion. IWD has an expense ratio of 0.19% 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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Invesco FTSE RAFI US 1000 ETF (PRF): ETF Research Reports
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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