Key Morningstar Metrics for Invesco RAFI U.S. Index ETF PXU.F
- : SilverMorningstar Medalist Rating
- : Above AverageProcess Pillar
- : Above AveragePeople Pillar
- : AverageParent Pillar
Invesco RAFI US 1000 ETF and Invesco RAFI US ETF offer a contrarian strategy that breaks the connection between price and weight.
The exchange-traded fund tracks the RAFI Fundamental Select US 1000 Index, which uses book value plus intangibles, adjusted cash flow, adjusted sales, and dividends plus buybacks to rank each stock by fundamental value. After scoring nearly 3,000 US stocks, it includes just the top 1,000 by fundamental value rank. It weights constituents by fundamental size rather than by market cap, creating a systematic buy-low, sell-high discipline as prices move away from fundamentals.
The strategy uses trailing five-year averages for most of its fundamental measures, which adds stability to the portfolio and helps limit unnecessary turnover. This also makes the strategy less reactive to short-term news. Its emphasis on fundamentals keeps the portfolio firmly in value territory while allowing it to own some growth stocks.
The fund holds mainstay large-value names like Berkshire Hathaway and JPMorgan Chase alongside higher-growth stocks like Apple, Microsoft, and Meta Platforms when their fundamentals appear attractive. This flexibility gives the fund an edge over peers that completely exclude growth stocks, especially when fundamentally strong technology stocks lead the market, as we’ve experienced in the past few years.
That added growth exposure has greatly benefited the fund, beating the large-value Morningstar Category average by 2.55 percentage points annualized from its December 2005 inception through May 2026. Risk-adjusted returns were also stronger, with a Sharpe ratio of 0.59 compared with the category average of 0.48 over the same period.
The fund’s edge has been especially clear during recovery periods following economic downturns. It returned more than 41% in 2009, beating the category average by over 17 percentage points, and gained more than 31% in 2021 following the coronavirus-driven drawdown, compared with the category average of 26.08%. While the strategy requires patience when fundamentals fall out of favor, its disciplined contrarian approach has rewarded investors over the long run.
Invesco RAFI U.S. Index ETF: Performance Highlights
The US-domiciled ETF has an impressive track record. Its 10.71% annualized return beat the large-value category average by 2.55 percentage points from its December 2005 launch through May 2026.
Including growth stocks in the portfolio has allowed the fund to capitalize on much of the tech boom that has dominated market returns in recent years. However, including these stocks also comes with greater volatility and downside risk. For example, the fund lagged the category average by 1.69 percentage points in 2022. Granted, superior long-term returns and risk-adjusted returns show that the benefits from including high growth stocks with strong fundamentals have largely outweighed the negatives. The fund’s Sharpe ratio of 0.59 beat the category average of 0.48 from its 2005 inception through May 2026.
Although the fund outperformed across most market environments, its true edge comes in the recovery period following economic downturns. Following the global financial crisis, the strategy returned over 41% in 2009, over 17% higher than the category average. In 2021, following the coronavirus-driven drawdown, the strategy returned over 31% compared with the category average of 26.08%.
