Smart-beta, fundamental index-based ETFs, though, are not constricted to value stocks nor do they ignore growth stocks. The fund tracks a type of actively managed style that bolsters positions that become cheap and pares back positions as they become expensive.
“This contra-trading approach (buying on weakness and selling on strength) may help the fund more effectively profit from potential market mispricing than cap-weighted value funds,” Bryan said.
While PRF’s can capture reversion associated with the value effect and potentially generate greater returns, the ETF also experiences greater volatility than the Russell 1000 index.
“This is a suitable core holding for long-term investors who can stomach a little extra volatility to profit from potential market mispricings, or a value risk premium,” Bryan said. [How to Utilize Smart-Beta ETFs in Your Portfolio]
For more information on smart-beta ETFs, visit our indexing category.
Max Chen contributed to this article.