Is Invesco FTSE RAFI Developed Markets ex-U.S. ETF (PXF) a Strong ETF Right Now?

The Invesco FTSE RAFI Developed Markets ex-U.S. ETF (PXF) was launched on 06/25/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Developed World ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Invesco. It has amassed assets over $1.32 billion, making it one of the larger ETFs in the Broad Developed World ETFs. PXF seeks to match the performance of the FTSE RAFI Developed ex-U.S. Index before fees and expenses.

The FTSE RAFI Developed ex U.S. 1000 Index is designed to track the performance of the largest developed market equities, excluding the US, selected based on the following four fundamental measures of firm size: book value, cash flow, sales and dividends.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.45% for this ETF, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 3.45%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Shell Plc (SHEL) accounts for about 2.89% of the fund's total assets, followed by Bp Plc (BP/) and Totalenergies Se (TTE).

Its top 10 holdings account for approximately 4.72% of PXF's total assets under management.

Performance and Risk

Year-to-date, the Invesco FTSE RAFI Developed Markets ex-U.S. ETF has gained about 3.76% so far, and was up about 1.99% over the last 12 months (as of 03/14/2023). PXF has traded between $35.01 and $46.98 in this past 52-week period.

The fund has a beta of 0.90 and standard deviation of 22.56% for the trailing three-year period, which makes PXF a medium risk choice in this particular space. With about 1048 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco FTSE RAFI Developed Markets ex-U.S. ETF is not a suitable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.

Vanguard Total International Stock ETF (VXUS) tracks FTSE Global All Cap ex US Index and the Vanguard FTSE Developed Markets ETF (VEA) tracks FTSE Developed All Cap ex US Index. Vanguard Total International Stock ETF has $52.24 billion in assets, Vanguard FTSE Developed Markets ETF has $104.40 billion. VXUS has an expense ratio of 0.07% and VEA charges 0.05%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Invesco FTSE RAFI Developed Markets ex-U.S. ETF (PXF): ETF Research Reports

Vanguard FTSE Developed Markets ETF (VEA): ETF Research Reports

Vanguard Total International Stock ETF (VXUS): ETF Research Reports

TotalEnergies SE Sponsored ADR (TTE) : Free Stock Analysis Report

Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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