Making its debut on 09/27/2007, smart beta exchange traded fund Invesco RAFI Emerging Markets ETF (PXH) provides investors broad exposure to the Broad Emerging Market ETFs 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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 $1.95 billion, making it one of the larger ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, seeks to match the performance of the FTSE RAFI Emerging Markets Index.
The RAFI Fundamental Select Emerging Markets 350 Index tracks the performance of the largest emerging market equities, selected based on the following four fundamental measures of firm size: book value, cash flow, sales and dividends.
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.
Annual operating expenses for PXH are 0.47%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 3.54%.
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.
When you look at individual holdings, Taiwan Semiconductor Manufacturing Co Ltdaccounts for about 6.4% of the fund's total assets, followed by Petroleo Brasileiro Sa - Petrobras (PETR4) and Alibaba Group Holding Ltd.
The top 10 holdings account for about 29.3% of total assets under management.
Performance and Risk
Year-to-date, the Invesco RAFI Emerging Markets ETF return is roughly 11.06% so far, and it's up approximately 41.68% over the last 12 months (as of 04/23/2026). PXH has traded between $21.28 $28.90 in this past 52-week period.
PXH has a beta of 0.55 and standard deviation of 17.17% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 395 holdings, it effectively diversifies company-specific risk .
Alternatives
Invesco RAFI Emerging Markets ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Emerging Markets Stock Index Fund ETF Shares (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index. Vanguard Emerging Markets Stock Index Fund ETF Shares has $119.51 billion in assets, iShares Core MSCI Emerging Markets ETF has $151.17 billion. VWO has an expense ratio of 0.06% and IEMG changes 0.09%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs
Bottom Line
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Invesco RAFI Emerging Markets ETF (PXH): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).