A sound investment process and strong management team underpin Invesco S&P SmallCap Industrials ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in quality exposure and volatility exposure compared with category peers. A high quality exposure means holding stocks that are consistently profitable, growing, and have solid balance sheets. 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

Mueller Industries

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Air Lease

AAON

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Moog, Inc. - Ordinary Shares - Class A

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 S&P SmallCap Industrials ETF earns a High Process Pillar rating. The predominant contributor to the rating is the fund's excellent long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the process was successful over that period. This fund tracks an index, which also increases its process rating. Historical data, like Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the investment results (before fees and expenses) of the S&P SmallCap 600® Capped Industrials Index.  The fund generally will invest at least 90% of its total assets in the securities that comprise the index. Strictly in accordance with its guidelines and mandated procedures, S&P Dow Jones Indices, LLC compiles, maintains and calculates the index, which is designed to measure the performance of securities of small-capitalization U.S. companies in the industrials sector, and as defined by the Global Industry Classification Standard. 

 The portfolio is overweight in consumer cyclical by 5.2 percentage points in terms of assets compared with the category average, and its basic materials allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and financial services, with industrials underweighting the average portfolio by 6.1 percentage points of assets and financial services similar to the average. The portfolio is positioned across 95 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 25.1% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 68.8%. And finally, in terms of portfolio turnover, on a year-over-year basis, 21% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

Invesco S&P SmallCap Industrials ETF's strong equity team drives the strategy's Above Average People Pillar rating. There are four managers listed on the fund: Peter Hubbard, Tony Seisser, Michael Jeanette, Pratik Doshi. The team is well equipped, with an average of 12 years of portfolio management experience. Together, they manage a total of 145 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 had relatively low management turnover, providing a stable environment and continuity for the strategies. 

 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 S&P SmallCap Industrials ETF

PSCI tracks a cap-weighted index of industrial stocks selected from the S&P SmallCap 600.

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