Designed to provide broad exposure to the Style Box - Small Cap Blend category of the market, the Invesco Russell 2000 Dynamic Multifactor ETF (OMFS) is a smart beta exchange traded fund launched on 11/08/2017.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
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.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $290.26 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Blend. OMFS is managed by Invesco. OMFS seeks to match the performance of the RUSSELL 2000 INVESCO DYNAMIC MLTIFCTR ID before fees and expenses.
The Russell 2000 Invesco Dynamic Multifactor Index is constructed using a rules-based methodology by selecting equity securities from the Russell 2000 Index, which measures the performance of 2,000 small-capitalization companies in the United States.
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 OMFS are 0.39%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.60%.
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 OMFS, it has heaviest allocation in the Financials sector --about 24.50% of the portfolio --while Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Telephone And Data Systems Inc (TDS) accounts for about 0.95% of the fund's total assets, followed by Hibbett Inc (HIBB) and Tutor Perini Corp (TPC).
OMFS's top 10 holdings account for about 6.78% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco Russell 2000 Dynamic Multifactor ETF has lost about -6.90% so far, and it's up approximately 0.40% over the last 12 months (as of 07/05/2024). OMFS has traded between $31.78 and $39.65 in this past 52-week period.
OMFS has a beta of 1.11 and standard deviation of 21.78% for the trailing three-year period. With about 692 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Russell 2000 Dynamic Multifactor 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 Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $58.89 billion in assets, iShares Core S&P Small-Cap ETF has $77.15 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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Invesco Russell 2000 Dynamic Multifactor ETF (OMFS): ETF Research Reports
Telephone and Data Systems, Inc. (TDS) : Free Stock Analysis Report
Hibbett, Inc. (HIBB) : Free Stock Analysis Report
Tutor Perini Corporation (TPC) : Free Stock Analysis Report
iShares Russell 2000 ETF (IWM): ETF Research Reports
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
