Is Invesco RAFI US 1500 Small-Mid ETF (PRFZ) a Strong ETF Right Now?

The Invesco RAFI US 1500 Small-Mid ETF (PRFZ) was launched on 09/20/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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 managed by Invesco, and has been able to amass over $2.38 billion, which makes it one of the larger ETFs in the Style Box - Small Cap Blend. PRFZ, 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

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.34%, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.23%.

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.

Representing 18.6% 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, Applovin Corp (APP) accounts for about 0.49% of the fund's total assets, followed by Carpenter Technology Corp (CRS) and Carvana Co (CVNA).

The top 10 holdings account for about 3.73% of total assets under management.

Performance and Risk

The ETF has gained about 0.19% so far this year and it's up approximately 7.11% in the last one year (as of 08/05/2025). In the past 52-week period, it has traded between $33.13 and $45.39

PRFZ has a beta of 1.09 and standard deviation of 21.35% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1714 holdings, it effectively diversifies company-specific risk .

Alternatives

Invesco RAFI US 1500 Small-Mid 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.

Vanguard 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 Small-Cap ETF has $64.39 billion in assets, iShares Core S&P Small-Cap ETF has $80.07 billion. VB has an expense ratio of 0.05% 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

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This article originally published on Zacks Investment Research (zacks.com).

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