Invesco FTSE RAFI Emerging Markets ETF

Issuer: Invesco

Asset Class: Equity

TER: 49bps

Trading Currency: GBX

Pays Income: False

Listing Date: 21 Nov 2007

Ticker: PSRM

ISIN: IE00B23D9570

This investment vehicle offers exposure to a broad basket of publicly traded companies across various emerging market countries. It departs from traditional market-cap weighting by employing a 'smart beta' strategy. The underlying index selects and weights companies based on four fundamental factors: sales, cash flow, book value, and dividends. This methodology aims to provide a more intrinsic valuation of companies, potentially avoiding the concentration risks associated with market capitalization-weighted indices, where a few large companies can dominate performance. The fund is physically replicated, meaning it directly holds the underlying securities of the index it tracks.

This fund is suitable for investors seeking long-term growth and diversification through exposure to emerging economies, which often exhibit higher growth potential than developed markets, albeit with higher risk. The fundamental indexing approach may appeal to those who believe that market prices can deviate from a company's true economic size and that a fundamentally weighted portfolio can offer better risk-adjusted returns over the long run. By de-emphasizing price momentum, the strategy systematically rebalances into undervalued companies and out of overvalued ones.

As with any equity investment, this fund is subject to market risk, and its value can fluctuate. Investing in emerging markets carries specific risks, including political instability, currency volatility, and less developed regulatory environments. While the fundamental indexing strategy aims to mitigate certain risks associated with market-cap weighting, it does not eliminate them and may underperform traditional indices during periods when large, popular stocks are driving market returns. The fund is accumulating, meaning any dividends from the underlying holdings are reinvested back into the fund rather than being distributed to shareholders. This is often preferred for long-term capital growth strategies.