Is Invesco RAFI US 1500 Small-Mid ETF (PRFZ) a strong ETF right now?

The Invesco RAFI US 1500 Small-Mid ETF (PRFZ - Free Report) 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?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

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.

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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund sponsor and index

The fund is managed by Invesco, and has been able to amass over $2.6 billion, which makes 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 and other expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

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

It has a 12-month trailing dividend yield of 1.08%.

Sector exposure and top holdings

ETFs offer 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.

For PRFZ, it has heaviest allocation in the Industrials sector --about 18.2% of the portfolio --while Financials and Information Technology round out the top three.

When you look at individual holdings, Applovin Corp (APP) accounts for about 0.75% of the fund's total assets, followed by Opendoor Technologies Inc (OPEN) and Commscope Holding Co Inc (COMM).

PRFZ's top 10 holdings account for about 4.77% of its total assets under management.

Performance and risk

So far this year, PRFZ return is roughly 11.02%, and it's up approximately 13.73% in the last one year (as of 10/06/2025). During this past 52-week period, the fund has traded between $33.13 and $46.33.

The ETF has a beta of 1.11 and standard deviation of 20.89% for the trailing three-year period, making it a medium risk choice in the space. With about 1693 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 $70.95 billion in assets, iShares Core S&P Small-Cap ETF has $86.95 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.

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