Making its debut on 09/20/2006, smart beta exchange traded fund Invesco RAFI US 1500 Small-Mid ETF (PRFZ) provides investors broad exposure to the Style Box - Small Cap Blend 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.
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.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by Invesco. It has amassed assets over $2.84 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the FTSE RAFI US 1500 Small-Mid Index.
The RAFI Fundamental Select US 1500 Index tracks the performance of small and medium-sized US companies, based on the four fundamental measures of size: book value, cash flow, sales and dividends.
Cost & Other Expenses
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.
Operating expenses on an annual basis are 0.34% for PRFZ, making it on par with most peer products in the space.
PRFZ's 12-month trailing dividend yield is 0.78%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
PRFZ's heaviest allocation is in the Healthcare sector, which is about 19.1% of the portfolio. Its Information Technology and Industrials round out the top three.
When you look at individual holdings, Ati Inc (ATI) accounts for about 0.49% of the fund's total assets, followed by Onto Innovation Inc (ONTO) and Roivant Sciences Ltd (ROIV).
The top 10 holdings account for about 4.06% of total assets under management.
Performance and Risk
So far this year, PRFZ has added roughly 20.73%, and is up roughly 24.19% in the last one year (as of 08/31/2026). During this past 52-week period, the fund has traded between $42.75 and $56.84.
The fund has a beta of 1.06 and standard deviation of 19.90% for the trailing three-year period, which makes PRFZ a medium risk choice in this particular space. With about 1506 holdings, it effectively diversifies company-specific risk .
Alternatives
Invesco RAFI US 1500 Small-Mid ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Morningstar Small-Cap ETF (VB) tracks CRSP US Small Cap Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. Vanguard Morningstar Small-Cap ETF has $81.4 billion in assets, iShares Core S&P Small-Cap ETF has $110.1 billion. VB has an expense ratio of 0.03% and IJR changes 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 RAFI US 1500 Small-Mid ETF (PRFZ): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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