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

The Invesco RAFI US 1500 Small-Mid ETF (PRFZ), a smart beta ETF with $2.32 billion in assets, seeks to match the FTSE RAFI US 1500 Small-Mid Index, focusing on small and medium-sized U.S. companies based on book value, cash flow, sales, and dividends; its annual operating expenses are 0.34% with a 1.42% trailing dividend yield. Sector allocation is heaviest in Financials at 19.60%, and the ETF has returned 4.95% over the past year as of June 5, 2025, but is down -4.89% YTD; alternatives like IWM and IJR offer potentially cheaper and lower-risk exposure to the small-cap blend segment.

Analysis

The Invesco RAFI US 1500 Small-Mid ETF (PRFZ) is a smart beta fund with $2.32 billion in assets under management, offering exposure to U.S. small and mid-cap equities selected based on four fundamental measures: book value, cash flow, sales, and dividends, tracking the FTSE RAFI US 1500 Small-Mid Index. With annual operating expenses of 0.34% and a 12-month trailing dividend yield of 1.42%, its cost structure is comparable to peers. The portfolio is most heavily weighted towards the Financials sector, comprising 19.60% of its holdings, followed by Industrials and Information Technology. Diversification is significant, with approximately 1732 holdings, and the top 10 holdings account for only 4.31% of total assets; notable individual holdings include Applovin Corp (0.61%), Palantir Technologies Inc, and Carvana Co. As of June 5, 2025, PRFZ has demonstrated mixed performance, with a 4.95% gain over the past year but a -4.89% loss year-to-date, trading within a 52-week range of $33.13 to $45.39. Its risk profile is characterized by a beta of 1.09 and a three-year standard deviation of 21.94%, categorizing it as a medium-risk option within its peer group. Alternative ETFs in the small-cap blend space, such as the iShares Russell 2000 ETF (IWM) and iShares Core S&P Small-Cap ETF (IJR), offer substantially larger AUM ($63.94 billion and $77.65 billion, respectively) and lower expense ratios (0.19% for IWM and 0.06% for IJR), providing more traditional market-cap weighted exposure.

Key Decisions for Investors

• Investors seeking fundamentally-weighted exposure to the U.S. small-mid cap segment may consider PRFZ, but should note its recent year-to-date underperformance of -4.89% against a positive 4.95% one-year return.