Invesco FTSE RAFI Dev Mkts ex-US S/M ETF earns a Morningstar Medalist Rating of Negative with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in yield exposure and an overweight in volatility exposure compared with category peers. Low yield exposure is attributed to holding fewer stocks with high dividend or buyback yields -- instead, typically holding companies with a stronger focus on growth opposed to returning capital. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Pan American Silver

WisdomTree Emerging Markets Local Debt Fund

IAMGOLD

Centerspace REIT

Global X CleanTech ETF

Baytex Energy

Flowserve

Ritchie Bros. Auctioneers

Antero Midstream Partners

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Invesco FTSE RAFI Dev Mkts ex-US S/M ETF earns a Below Average Process Pillar rating. 

The process is strengthened by tracking an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. However, the rating is weakened by the parent firm's five-year risk-adjusted success ratio of 42%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup. Unremarkable risk-adjusted performance also holds the rating back. This can be seen in the fund's five-year alpha calculated relative to the category average, which suggests that the process has struggled over that period.

 This strategy leans toward smaller, higher-growth companies compared with its average peer in the Foreign Small/Mid Value Morningstar Category. Examining additional factor exposure, this strategy has consistently had less exposure to yield compared with its Morningstar Category peers during recent years. This is demonstrated by the portfolio's low exposure to dividends or buybacks. While companies with high yields provide consistent income payments, they may cut payouts if their earnings decline. In the latest month, the strategy was also less exposed to the Yield factor compared with Morningstar Category peers. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. In the most recent month, however, the fund's Volatility exposure was in line with the Morningstar Category average. In addition, this strategy has had a bias away from momentum stocks during these years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. In recent months, the strategy also had less Momentum factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in real estate by 6.7 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and energy, underweight the average by 5.3 and 2.7 percentage points of assets, respectively. The strategy owns 1,500 securities and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 2.7% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category average's 13.6%. And finally, in terms of portfolio turnover, on a year-over-year basis, 31% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

Invesco’s equity team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are four managers listed on the fund: Michael Jeanette, Peter Hubbard, Tony Seisser, Pratik Doshi. The team is well equipped, with an average of 12 years of portfolio management experience. Together, they manage a total of 144 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate. This group has been working together for a while and has been successful in retaining talent compared to peers, with no departures in the last five years.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

Invesco succeeds in a number of areas but also has its share of subpar offerings, along with many others that land somewhere in the middle. A mid-2023 change of CEO, from longtime chief Marty Flanagan to veteran Invesco executive Andrew Schlossberg, is noteworthy, and several other executives retired or departed in 2023. Portfolio-manager shuffles aimed at bolstering poor performers, which began under Flanagan, have continued under Schlossberg, who told Morningstar his most important aim is bolstering “investment quality.” However, major changes of direction or approach are unlikely. The firm retains a Morningstar Parent rating of Average. 
Invesco’s international-equity teams in Texas and New York remain solid. However, the extensive U.S.-equity lineup needs improvement. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive. The firm’s exchange-traded fund lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 37% of Invesco’s assets under management. Invesco has not been averse to trying new types of strategies, and it was among the firms that immediately launched a spot bitcoin ETF after SEC approval in early 2024.
The picture outside the United States is mixed. Fund performance has been subpar in Asia, and while the picture has brightened in the United Kingdom and Europe, that region still can’t be considered a strength.

Average

Parent

Invesco FTSE RAFI Developed Markets ex-US Small-Mid ETF

PDN tracks a fundamentally-weighted index of small- and mid-cap stocks from developed countries outside the US that are screened based on fundamental metrics.

Big 5 Sporting Goods

Bank of Hawaii

Cal-Maine Foods

Bancolombia

Devon Energy

Energy Transfer LP Unit

Ford Motor Company

First Interstate BancSystem

Dorian LPG

Bank of N.T. Butterfield & Son

Owl Rock Capital Corp

Petroleo Brasileiro

Piedmont Office Realty Trust

Pacific Premier Bancorp

Pioneer Natural Resources

RMR Group

Truist Financial

TORM

“Value ranking, looks at the price of a stock relative to intrinsic firm value. Graham Value Stocks match the criteria. Benjamin Graham followed. “—YCharts Value Screener. 66 May Value large caps and Graham formula-derived results reflect established value-stock detection-criteria. Of those, 52 met the dogcatcher-ideal of dividends from $1K invested, exceeding single-share-stock-prices.

52 Ideal May Value Buys From Ben Graham

Roundhill Deep Value

iShares MSCI EAFE Value ETF

Invesco S&P 500 Pure Value ETF

Invesco S&P SmallCap 600 Pure Value ETF

Invesco S&P 500 Value with Momentum ETF

iShares US Small Cap Value Factor ETF

American Century STOXX U.S. Quality Value ETF

Invesco S&P SmallCap Value with Momentum ETF

After growth's long ascendancy, value shares are getting their day in the sun. To determine which have the best prospects, check for factors including liquidity, quality, size, and momentum.

Not All Value ETFs Are Created Equal. Here's How to Choose a Winner.

International small- and mid-cap stocks (SMID) are often overlooked, but this asset class offers plenty of potential. Investors can get in on the action with the Invesco FTSE RAFI Developed Markets ex-U.S. Small-Mid ETF (NYSEARCA: PDN).

The Investing Sweet Spot? Straddle Small- and Mid-Caps with ‘PDN'

Exchange traded fund investors may be missing out on an opportunity in the small- and mid-cap international equity market segment. “While US investors recognize the potential growth and diversification benefits US SMIDs offer – with 13.3% of their portfolios in them – they seem to have overlooked international SMIDs.

Don't Forget About International Small- and Mid-Cap ETFs

News for Invesco FTSE RAFI Developed Markets ex-US Small-Mid ETF ETF (PDN)