Invesco FTSE RAFI U.S. 1000 ETF and Invesco FTSE RAFI U.S. Index ETF take contrarian approaches by fundamentally weighting their portfolio holdings and following a strict rebalancing schedule. Their demonstrated ability to excel when valuations mean-revert, broad reach, and low turnover make them attractive options. All share classes earn Morningstar Medalist Ratings of Silver.

The FTSE RAFI US 1000 Index that underpins these strategies weights constituents by their fundamentals, breaking the link between stocks’ prices and portfolio weights. When the index rebalances each year, it effectively doubles down on stocks whose prices declined relative to their fundamentals and trims exposure to those on the rise. This buy-low tack positions the funds to capitalize on mean-reversion in stock valuations. However, they can extend too much rope to floundering firms and prematurely cut ties with winners. 

Leaning into stocks that look cheap pushes these funds into value territory, but they mine the full value-growth spectrum for opportunities. The funds boosted stakes in highflyers Amazon and Alphabet at its March 2023 rebalance, for example, after both firms sank further than most over the prior 12 months. This broad scope is attractive compared to value- or growth-only strategies that mechanically exclude half the market. Balanced performance should keep these funds growing regardless of whether value or growth is in favor.

The funds’ breadth extends across securities and sectors, too. The top 10 holdings accounted for 18% of the portfolios as of April 2023, and no sector exceeded financials’ 19% portfolio weight. 

Abrupt bursts of outperformance have punctuated otherwise steady performance since the first iterations of this strategy debuted in the mid-2000s. That is intentional. The funds are built to benefit from distinct periods of mean reversion, like in the aftermath of the global financial crisis. So, while the funds may look lethargic at times, they can break out with short runs that compensate for the quieter periods.

Analyst Rating

A well-diversified contrarian fund.

Analyst

Ryan Jackson

Exxon Mobil

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Microsoft

Apple

JPMorgan Chase & Co

Amazon

Verizon

Chevron

Bank of America

Wells Fargo

A penchant for beaten-down stocks positions these funds to capitalize when stock valuations mean-revert, and their broad scope should aid performance when they don’t. They earn Above Average Process Pillar ratings. 

The FTSE RAFI US 1000 Index selects the 1,000 largest constituents from the FTSE US All Cap Index, as measured by their fundamental size. It calculates fundamental size by taking the ratio of each stock’s book value (as of the rebalance date) and sales, cash flow, and dividends (averaged over the trailing five years) to the aggregate values of each of those metrics. The index uses five-year averages to limit turnover and smooth out short-term fluctuations. FTSE combines these four metrics into one composite value to determine stocks’ fundamental size—their weight in the index. If stocks do not distribute dividends, their fundamental size is the average of the other three metrics. The index rebalances annually each March. 

These funds effectively limit turnover. Stock weights can shift from one rebalance to the next, but the index’s 1,000-holding remit and five-year measurement lookback mean its constituents rarely change. Annual turnover within the U.S.-domiciled fund has hovered around 10% over the past five years, inviting few transaction costs that bite into returns. 

Invesco FTSE RAFI US ETF, the Canadian-domiciled version of this strategy, invests in the U.S.-domiciled Invesco FTSE RAFI U.S. 1000 ETF and uses forward contracts to hedge the currency risk.

Above Average

Process

Invesco’s equity index management teams in Europe and the United States oversee these strategies. They boast a wealth of experience and strong supporting infrastructure, including analysts, traders, and technology platforms, supporting an Above Average People Rating. 

Invesco’s U.S.-based team runs the U.S.- and Canada-domiciled funds. Peter Hubbard leads the outfit. He has been with Invesco since 2005 and a portfolio manager since 2007. Michael Jeanette leads the equity index team under Hubbard and has been a portfolio manager at Invesco since 2008. Tony Seisser and Pratik Doshi joined the team in 2013 and 2018, respectively. These leaders oversee a broader team of experienced portfolio managers, who assist with the portfolio’s day-to-day operations.

The European-domiciled funds are managed by a London-based team. Raphael Stern is the senior portfolio manager for the EMEA region and oversees the management of UCITS-based ETFs at Invesco. He was the first ETF portfolio manager for Invesco EMEA. As a portfolio manager, he manages the fixed-income range of UCITS funds.

Globally, the team consists of 27 portfolio managers. As a standard industry practice, the funds are managed on a team basis. This is to ensure that portfolio managers’ absences and departures have a minimal impact on the day-to-day running of the fund.

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 US 1000 ETF

PRF tracks an index of 1,000 of the largest US companies that are selected and weighted using fundamental metrics.

Launched on 12/19/2005, the Invesco FTSE RAFI US 1000 ETF (PRF) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.

Is Invesco FTSE RAFI US 1000 ETF (PRF) a Strong ETF Right Now?

Invesco FTSE RAFI US 1000 ETF is a fundamentally weighted ETF that selects stocks based on book value, cash flow, sales, and dividends. The PRF ETF offers a unique investment portfolio that avoids concentration in mega-cap stocks and has a bias towards large-cap stocks with a value tilt. PRF has outperformed value-focused funds but has lagged behind market-cap-weighted ETFs, making it a potential consideration for investors.

PRF: Absolutely A Fund To Consider

Launched on 12/19/2005, the Invesco FTSE RAFI US 1000 ETF (PRF) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Value segment of the US equity market.

Should Invesco FTSE RAFI US 1000 ETF (PRF) Be on Your Investing Radar?

Invesco FTSE RAFI US 1000 ETF invests in about 1000 large companies based on an original metric of company size. It is better diversified across sectors and holdings than the Russell 1000 Index. The PRF ETF shows attractive valuation and quality, but neither past performance nor trading intensity justify its higher fee relative to peers.

PRF: Value And Quality Are Attractive, Performance And Fee Are Not

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The Invesco FTSE RAFI US 1000 ETF is the first fundamentally weighted ETF, but its performance is mixed. PRF outperforms value stocks but has a value-tilt that hinders its overall performance. The ETF is expected to continue outperforming the value ETF IWD but may struggle to outperform traditional ETFs like IWB in the future.

PRF: Outperforming Value ETFs, But Behind Traditional ETFs

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PRF selects 1,000 large-cap U.S. companies based on four factors: dividends, free cash flow, sales, and book value. Fees are 0.39% and the ETF has $6 billion in assets. The portfolio is solid and well-diversified. However, there are cheaper alternatives with better long-term track records like the Schwab Fundamental U.S. Large Company Index ETF.

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PRF selects and weights 1,000 large-cap U.S. companies based on total cash dividends, free cash flow, total sales, and book equity value. Its long-term track record is impressive, outperforming SPY with less reliance on mega-cap stocks.

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PRF: Solid Smart Beta Fund, But There Are Cheaper Alternatives

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For the Invesco FTSE RAFI US 1000 ETF, we found that the implied analyst target price for the ETF based upon its underlying holdings is $129.45 per unit.

The Math Shows The Invesco FTSE RAFI US 1000 ETF Can Go To $129

For the Invesco FTSE RAFI US 1000 ETF, we found that the implied analyst target price for the ETF based upon its underlying holdings is $129.59 per unit.

Analysts Predict 14% Upside For The Holdings Of The Invesco FTSE RAFI US 1000 ETF

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For the Invesco FTSE RAFI US 1000 ETF, we found that the implied analyst target price for the ETF based upon its underlying holdings is $129.11 per unit.

Implied Invesco FTSE RAFI US 1000 ETF Analyst Target Price: $129

For the Invesco FTSE RAFI US 1000 ETF, we found that the implied analyst target price for the ETF based upon its underlying holdings is $127.13 per unit.

News for Invesco FTSE RAFI US 1000 ETF ETF (PRF)