Invesco Powershares’ first smart beta ETF reaches 10th anniversary

Dec 11th, 2015 | By | Category: ETF and Index News

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Invesco PowerShares, a leading global provider of exchange-traded funds, today joined Research Affiliates, a pioneer in smart beta strategies, to ring the New York Stock Exchange opening bell to recognise the 10th anniversary of the PowerShares FTSE RAFI US 1000 Portfolio ETF (PRF), the first fundamental index strategy ETF.

Invesco Powershares' first smart beta ETF reaches 10th anniversary

The FTSE RAFI US 1000 Portfolio ETF from Invesco Powershares can be considered one of the first smart beta ETFs.

The ETF can be considered one of the precursors to the smart beta movement we see in full swing today. “We launched PRF nearly ten years ago on 19 December 2005, which we believe was a turning point in providing individual investors broad access to strategies now termed smart beta,” said Dan Draper, Managing Director and Head of Invesco PowerShares. “Today, PRF seeks to offer investors the potential to outperform a cap-weighted benchmark using a transparent, broadly diversified, low-cost strategy.”

The ETF seeks to track the fundamentally-weighted FTSE RAFI US 1000 Index, an index based on a strategy from Research Affiliates that has been implemented by FTSE Russell. “Fundamental Indices weights companies based on their economic scale in the macroeconomy – not security prices, which are moved by the fads, bubbles, crashes and the shifting expectations of the market,” said Rob Arnott, Founder and Chairman of Research Affiliates.

“The launch of PRF a decade ago was pivotal in the adoption of Fundamental Index strategies, now used on over $100bn of assets worldwide, as well as setting the stage for the smart beta revolution. PRF’s success speaks to the tremendous relationship we’ve had with PowerShares over the years. We intend to continue to collaborate and to continue to drive innovation in smart beta with them for many years to come.”

The FTSE RAFI US 1000 Index offers broad exposure to US large- and mid-cap stocks. The index is designed to track the performance of the largest US equities based on four measures of fundamental size  – the five-year averages of sales, cash flow, and dividends, as well as the most recent year ending book value. As a result the index sets out to mitigate potential shortcomings of traditional indices by ignoring market emotion, and instead, seeks to systematically buy low and sell high through an annual rebalancing process.

“Looking ahead, continued education will be key to further adoption of these strategies,” said Draper. “We expect that as more investors recognise the benefits of smart beta strategies and, particularly, strategies that focus on factors and alternative weighting methodologies, interest in the category will continue to grow.”

Through smart beta, investors have access to an expanded toolbox of approaches that can deliver exposure to low volatility, momentum, value and quality factors. Smart beta is among the fastest-growing segments of asset management. In the coming years, single- and multi-factor strategies may continue to experience strong growth and widespread investor adoption.

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