Launched on 09/27/2007, the Invesco FTSE RAFI Emerging Markets ETF (PXH) is a smart beta exchange traded fund offering broad exposure to the Broad Emerging Market 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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility / momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by Invesco, PXH has amassed assets over $ 1.47 billion, making it one of the largest ETFs in the Broad Emerging Market ETFs. PXH seeks to match the performance of the FTSE RAFI Emerging Markets Index before fees and expenses.
The FTSE RAFI Emerging Index is designed to track the performance of the emerging market stocks with the highest ranking cumulative score, selected from the constituents of the FTSE Emerging Large / Mid Cap Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.50% for this ETF, which makes it on par with most peer products in the space.
PXH’s 12-month trailing dividend yield is 5.39%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Taiwan Semiconductor Manufacturing Co Ltd accounts for about 4% of the fund’s total assets, followed by China Construction Bank Corp. and Hon Hai Precision Industry Co Ltd.
PXH’s top 10 holdings account for about 24.66% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco FTSE RAFI Emerging Markets ETF has lost about -11.57% so far, and is down about -10.28% over the last 12 months (as of 04/26/2022). PXH has traded between $ 19.31 and $ 24.30 in this past 52-week period.
The fund has a beta of 0.81 and a standard deviation of 23.82% for the trailing three-year period, which makes PXH a medium risk choice in this particular space. With about 396 holdings, it effectively diversifies company-specific risk.
Invesco FTSE RAFI Emerging Markets ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs market segment. Instead, there are other ETFs in the space which investors should consider.
IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $ 69.35 billion in assets, Vanguard FTSE Emerging Markets ETF has $ 72.66 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.08%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.
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 Emerging Markets ETF (PXH): ETF Research Reports
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
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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.