Invesco FTSE RAFI US 1000 UCITS ETF

Issuer: Invesco

Asset Class: Equity

TER: 39bps

Trading Currency: GBX

Pays Income: False

Listing Date: 21 Nov 2007

Ticker: PSRF

ISIN: IE00B23D8S39

This fund provides exposure to the 1,000 largest US equities, but instead of using traditional market-capitalisation weighting, it employs a fundamental indexing methodology. The strategy selects and weights companies based on four fundamental factors: book value, cash flow, sales, and dividends. This approach aims to break the link between a stock's price and its weight in the portfolio, thereby avoiding the potential pitfalls of market-cap weighting, such as over-concentration in overvalued stocks and under-exposure to undervalued ones. By focusing on the economic size and financial health of companies, the portfolio seeks to capture a more intrinsic measure of a company's value.

Investing in this product offers a 'smart beta' alternative to traditional US large-cap equity trackers. The fundamental weighting aims to provide a more robust and potentially higher-performing portfolio over the long term by systematically tilting towards companies that appear undervalued on these core metrics. This can be particularly appealing for investors who believe that market prices can sometimes disconnect from a company's underlying fundamentals. The strategy provides diversified exposure across the US equity market while incorporating a value-oriented discipline. It is suitable for investors seeking core US equity exposure with a rules-based approach that aims to enhance returns compared to standard market-cap-weighted indices.

This holding can serve as a core component of a diversified investment portfolio, replacing or complementing traditional market-cap-weighted US equity allocations. Its focus on fundamental value makes it a strategic long-term holding. Investors could use it to gain broad exposure to the US economy through a lens that emphasizes financial stability and intrinsic worth rather than market sentiment. Given its foundation in a rules-based, non-market-cap index, it may also offer diversification benefits when combined with other equity strategies, potentially smoothing returns over different market cycles.