Should Invesco RAFI US 1500 Small-Mid ETF (PRFZ) Be on Your Investing Radar?

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

The fund is sponsored by Invesco. It has amassed assets over $2.34 billion, making it one of the larger ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

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

It has a 12-month trailing dividend yield of 1.41%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 20% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Applovin Corp (APP) accounts for about 0.61% of total assets, followed by Palantir Technologies Inc (PLTR) and Carvana Co (CVNA).

The top 10 holdings account for about 4.31% of total assets under management.

Performance and Risk

PRFZ seeks to match the performance of the FTSE RAFI US 1500 Small-Mid Index before fees and expenses. 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.

The ETF has lost about -4.24% so far this year and was up about 2.10% in the last one year (as of 05/21/2025). In the past 52-week period, it has traded between $33.13 and $45.39.

The ETF has a beta of 1.10 and standard deviation of 22.02% for the trailing three-year period, making it a medium risk choice in the space. With about 1732 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco RAFI US 1500 Small-Mid ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, PRFZ is a sufficient option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 ETF (IWM) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $63.93 billion in assets, iShares Core S&P Small-Cap ETF has $78.51 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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

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