Making its debut on 11/08/2017, smart beta exchange traded fund Invesco Russell 2000 Dynamic Multifactor ETF (OMFS) provides investors broad exposure to the Style Box - Small Cap Blend category of the market.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.
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.
The fund is managed by Invesco, and has been able to amass over $239.4 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, OMFS seeks to match the performance of the RUSSELL 2000 INVESCO DYNAMIC MLTIFCTR ID.
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.
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.39%.
It's 12-month trailing dividend yield comes in at 1.30%.
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 28.1% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Information Technology round out the top three.
When you look at individual holdings, Sprouts Farmers Market Inc (SFM) accounts for about 3.44% of the fund's total assets, followed by Commvault Systems Inc (CVLT) and Exlservice Holdings Inc (EXLS).
Its top 10 holdings account for approximately 14.19% of OMFS's total assets under management.
Year-to-date, the Invesco Russell 2000 Dynamic Multifactor ETF return is roughly 2.13% so far, and is up about 8.98% over the last 12 months (as of 07/16/2025). OMFS has traded between $33.88 and $43.90 in this past 52-week period.
The fund has a beta of 1.05 and standard deviation of 21.10% for the trailing three-year period. With about 649 holdings, it effectively diversifies company-specific risk .
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 $65.75 billion in assets, iShares Core S&P Small-Cap ETF has $80.9 billion. IWM has an expense ratio of 0.19% 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
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This article originally published on Zacks Investment Research (zacks.com).
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