Is Invesco FTSE RAFI US 1000 ETF (PRF) a Strong ETF Right Now?
Smart Beta ETF report for PRF
The Invesco FTSE RAFI US 1000 ETF (PRF) was launched on 12/19/2005, and is a smart beta exchange traded fund designed to offer 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.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by Invesco. PRF has been able to amass assets over $5.85 billion, making it one of the larger ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund 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
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.
Annual operating expenses for PRF are 0.39%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.56%.
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.
Representing 19.20% of the portfolio, the fund has heaviest allocation to the Financials sector; Information Technology and Healthcare round out the top three.
Taking into account individual holdings, Apple Inc (AAPL) accounts for about 2.36% of the fund's total assets, followed by Microsoft Corp (MSFT) and Jpmorgan Chase & Co (JPM).
Its top 10 holdings account for approximately 16.86% of PRF's total assets under management.
Performance and Risk
So far this year, PRF has gained about 0.16%, and is up about 32.33% in the last one year (as of 01/06/2022). During this past 52-week period, the fund has traded between $137.11 and $174.98.
The ETF has a beta of 1.06 and standard deviation of 23.61% for the trailing three-year period, making it a medium risk choice in the space. With about 1001 holdings, it effectively diversifies company-specific risk.
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 $59.81 billion in assets, Vanguard Value ETF has $93.14 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.
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
Microsoft Corporation (MSFT): Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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