Making its debut on 09/27/2007, smart beta exchange traded fund Invesco RAFI Emerging Markets ETF (PXH) provides investors broad exposure to the Broad Emerging Market ETFs 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by Invesco, PXH has amassed assets over $1.17 billion, making it one of the larger ETFs in the Broad Emerging Market ETFs. PXH, before fees and expenses, seeks to match the performance of the FTSE RAFI Emerging Markets Index.
The FTSE RAFI Emerging Index is designed to track the performance of the emerging market stocks with the highest ranking cumulative score, selected from the constituents of the FTSE Emerging Large/Mid Cap Index.
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.49%.
It has a 12-month trailing dividend yield of 4.77%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Alibaba Group Holding Ltd accounts for about 6.46% of the fund's total assets, followed by Taiwan Semiconductor Manufacturing Co Ltd and Tencent Holdings Ltd.
Its top 10 holdings account for approximately 32.41% of PXH's total assets under management.
Performance and Risk
The ETF has lost about -0.88% so far this year and was up about 8.20% in the last one year (as of 04/07/2025). In the past 52-week period, it has traded between $18.97 and $23.20.
The ETF has a beta of 0.56 and standard deviation of 17.80% for the trailing three-year period, making it a medium risk choice in the space. With about 413 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco RAFI Emerging Markets ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index. Vanguard FTSE Emerging Markets ETF has $76.57 billion in assets, iShares Core MSCI Emerging Markets ETF has $77.69 billion. VWO has an expense ratio of 0.07% and IEMG charges 0.09%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.
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 Emerging Markets ETF (PXH): ETF Research Reports iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports Vanguard FTSE Emerging Markets ETF (VWO): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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