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Making its debut on 03/01/2006, smart beta exchange traded fund Invesco S&P SmallCap 600 Pure Value ETF (RZV) provides investors broad exposure to the Style Box - Small Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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
The fund is sponsored by Invesco. It has amassed assets over $284.86 million, making it one of the average sized ETFs in the Style Box - Small Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the S&P SmallCap 600 Pure Value Index.
The S&P SmallCap 600 Pure Value Index measures the performance of securities that exhibit strong value characteristics in the S&P SmallCap 600 Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.35% for RZV, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.98%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For RZV, it has heaviest allocation in the Consumer Discretionary sector --about 20.40% of the portfolio --while Financials and Industrials round out the top three.
Taking into account individual holdings, Olympic Steel Inc (ZEUS) accounts for about 1.77% of the fund's total assets, followed by Suncoke Energy Inc (SXC) and Kelly Services Inc (KELYA).