A sound investment process and strong management team underpin Invesco FTSE RAFI Emerging Markets ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in quality exposure and an overweight in yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. 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

Nuvn PA Mun Val Shs of Benef Interest

Seaspan

Fisker

Stewart Information Services

JPMorgan BetaBuilders Canada ETF

ReneSola

Gold Fields Ltd.

Vail Resorts

Premier Financial

Asbury Automotive Group

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 Emerging Markets ETF earns an Above Average Process Pillar rating. 

The leading factor in the rating is that this fund tracks 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. Excellent risk-adjusted performance also strengthens the process. This can be seen in the fund's 10-year alpha calculated relative to the category average, which suggests that the managers have shown skill in their allocation of risk. 

 This strategy, over time, has consistently held more undervalued companies, compared with peers in the Diversified Emerging Mkts Morningstar Category. But in terms of market capitalization, it is on par with peers. Examining additional factor exposure, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. The managers have also tended to overweight yield during recent years, shown by the portfolio's high exposure to dividends or buybacks. Higher-yield stocks can provide dependable income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. In addition, this strategy has an underweight bias to the volatility factor, meaning investing in stocks that have a lower standard deviation of returns. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. In recent months, the strategy also had less Volatility 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 energy and financial services relative to the category average by 9.8 and 7.9 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 9.2 and 4.4 percentage points of assets, respectively. The portfolio is composed of 430 holdings and is similarly diversified as peers, with 24.4% of portfolio assets concentrated within the top 10 holdings. And finally, in terms of portfolio turnover, looking at year-over-year movements, 21% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above 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.

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 Emerging Markets ETF

PXH tracks an index of emerging market companies selected and weighted based on a fundamental methodology.

A smart beta exchange traded fund, the Invesco FTSE RAFI Emerging Markets ETF (PXH) debuted on 09/27/2007, and offers broad exposure to the Broad Emerging Market ETFs category of the market.

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