If you're interested in broad exposure to the Large Cap Value segment of the US equity market, look no further than the Invesco FTSE RAFI US 1000 ETF (PRF), a passively managed exchange traded fund launched on 12/19/2005.
The fund is sponsored by Invesco. It has amassed assets over $6.52 billion, making it one of the larger ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Large cap companies typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
Carrying lower than average price-to-earnings and price-to-book ratios, value stocks also have lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.
Costs
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.
Annual operating expenses for this ETF are 0.39%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.84%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 20.40% of the portfolio. Information Technology and Healthcare round out the top three.
Looking at individual holdings, Berkshire Hathaway Inc (BRK/B) accounts for about 2.93% of total assets, followed by Apple Inc (AAPL) and Microsoft Corp (MSFT).
The top 10 holdings account for about 19.26% of total assets under management.
Performance and Risk
PRF seeks to match the performance of the FTSE RAFI US 1000 Index before fees and expenses. 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.
The ETF has added about 15.88% so far this year and it's up approximately 17.21% in the last one year (as of 12/29/2023). In the past 52-week period, it has traded between $29.89 and $35.31.
The ETF has a beta of 1 and standard deviation of 16.12% for the trailing three-year period, making it a medium risk choice in the space. With about 1012 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1000 ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, PRF is a great option for investors seeking exposure to the Style Box - Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $55.46 billion in assets, Vanguard Value ETF has $105.62 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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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Free: See Our Top Stock and 4 Runners Up >>Invesco FTSE RAFI US 1000 ETF (PRF): ETF Research Reports
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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