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Should Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ) Be on Your Investing Radar?
Zacks
The Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ) was launched on 09/20/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Blend segment of the US equity market.
The fund is sponsored by Invesco. It has amassed assets over $2.72 billion, making it one of the larger ETFs attempting to match the Small Cap Blend segment of the US equity market.
Why Small Cap Blend
There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.
Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.
Costs
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 counterparts, other things remaining the same.
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 1.11%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 21% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Carvana Co (CVNA) accounts for about 0.43% of total assets, followed by Commscope Holding Co Inc (COMM) and Carpenter Technology Corp (CRS).
The top 10 holdings account for about 3.32% of total assets under management.
Performance and Risk
PRFZ seeks to match the performance of the FTSE RAFI US 1500 Small-Mid Index before fees and expenses. The FTSE RAFI US 1500 Small-Mid Index is comprised of approximately 1,500 U.S. stocks. The FTSE US 1500 Small-Mid Index is designed to track the performance of small and medium-sized U.S. equity stocks selected based on the following four fundamental measures of firm size: book value, income, cash flow and dividends.
The ETF has added roughly 19.22% so far this year and was up about 41.15% in the last one year (as of 11/13/2024). In the past 52-week period, it has traded between $32.97 and $44.94.
The ETF has a beta of 1.17 and standard deviation of 21.86% for the trailing three-year period, making it a medium risk choice in the space. With about 1466 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco FTSE RAFI US 1500 Small-Mid ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, PRFZ is a sufficient option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 ETF (IWM) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $78.01 billion in assets, iShares Core S&P Small-Cap ETF has $92.30 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.
Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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.
Zacks Investment Research
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