Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the Invesco FTSE RAFI US 1000 ETF (PRF) is a smart beta exchange traded fund launched on 12/19/2005.
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.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.
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
PRF is managed by Invesco, and this fund has amassed over $7.56 billion, which makes 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.39% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.69%.
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.
For PRF, it has heaviest allocation in the Financials sector --about 22.40% of the portfolio --while Information Technology and Healthcare round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 2.41% of total assets, followed by Berkshire Hathaway Inc (BRK/B) and Jpmorgan Chase & Co (JPM).
Its top 10 holdings account for approximately 17.83% of PRF's total assets under management.
Performance and Risk
Year-to-date, the Invesco FTSE RAFI US 1000 ETF has added about 19.80% so far, and is up about 21.56% over the last 12 months (as of 12/17/2024). PRF has traded between $34.56 and $42.90 in this past 52-week period.
The ETF has a beta of 0.98 and standard deviation of 15.40% for the trailing three-year period, making it a medium risk choice in the space. With about 1004 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.
Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $65.04 billion in assets, Vanguard Value ETF has $130.26 billion. SCHD has an expense ratio of 0.06% 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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Get it free >>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
Vanguard Value ETF (VTV): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports
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