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

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

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Invesco. It has amassed assets over $2.64 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. Before fees and expenses, PRFZ 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 PRFZ are 0.34%, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.06%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

PRFZ's heaviest allocation is in the Industrials sector, which is about 17.6% of the portfolio. Its Healthcare and Financials round out the top three.

When you look at individual holdings, Opendoor Technologies Inc (OPEN) accounts for about 0.94% of the fund's total assets, followed by Applovin Corp (APP) and Ionis Pharmaceuticals Inc (IONS).

The top 10 holdings account for about 4.51% of total assets under management.

Performance and Risk

So far this year, PRFZ has added about 12.72%, and was up about 5.21% in the last one year (as of 12/08/2025). During this past 52-week period, the fund has traded between $33.13 and $46.73.

PRFZ has a beta of 1.08 and standard deviation of 20.45% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1680 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.

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 $72.35 billion in assets, iShares Core S&P Small-Cap ETF has $88.69 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

Bottom Line

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

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