Research Affiliates Deletions ETF (NIXT)

Overview

The Research Affiliates Deletions ETF (PKW) focuses on U.S. companies that have been removed from major indices, potentially offering value opportunities based on their exclusion. The ETF aims to capture returns from companies undervalued due to index rebalancing effects, focusing on those whose stock price may be depressed due to forced selling by index-tracking funds. It employs a fundamental, value-oriented approach.

Reputation and Reliability

Invesco is a well-established ETF issuer with a strong track record and a wide range of investment products.

Management Expertise

Invesco has a dedicated team of investment professionals with extensive experience in managing ETFs and employing factor-based investment strategies.

Goal

To provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the RAFIu00ae Fundamental U.S. Index.

Investment Approach and Strategy

Strategy: The ETF tracks the RAFIu00ae Fundamental U.S. Index, which selects and weights companies based on fundamental factors such as sales, cash flow, book value, and dividends, instead of market capitalization.

Composition The ETF holds stocks of U.S. companies removed from major indices.

Market Share: PKW's market share in the strategic beta ETF segment is relatively small compared to broader market-cap weighted funds.

Total Net Assets (AUM): 222281716.44

Key Competitors

• SPDR Portfolio S&P 500 Value ETF (SPYV)
• iShares Russell 1000 Value ETF (IWD)
• Vanguard Value ETF (VTV)

Competitive Landscape

The competitive landscape is dominated by large, broad-based value ETFs. PKW's unique focus on deletions offers a differentiated approach, but may limit its appeal compared to more diversified value strategies. A disadvantage is the concentrated bet on deletions, while an advantage is the potential for outperformance from mispriced stocks post-deletion.

Historical Performance: Historical performance data should be obtained from official fund documentation and reputable financial data providers to present returns over various time periods. Due to constraints, specific numerical data is not populated here, it is essential to check recent data.

Benchmark Comparison: Performance compared to the RAFIu00ae Fundamental U.S. Index should be analyzed to assess tracking effectiveness. The Index data is required to present numerical benchmark comparison.

Expense Ratio: 0.39

Average Trading Volume

The average trading volume indicates the ease with which shares can be bought or sold, with higher volume generally signifying better liquidity.

Bid-Ask Spread

The bid-ask spread represents the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept, reflecting the cost of trading.

Market Environment Factors

Economic indicators, sector performance, and overall market sentiment influence the performance of PKW, particularly affecting value stocks and companies undergoing restructuring or adjustment after index removal.

Growth Trajectory

The ETF's growth depends on the effectiveness of its strategy in capturing value from deleted stocks and investor appetite for alternative value strategies.

Competitive Edge

PKW's competitive edge lies in its unique focus on companies deleted from major indices, an area often overlooked by traditional value strategies. This niche focus enables it to potentially capitalize on market inefficiencies created by forced selling. The fundamental weighting scheme aims to avoid the biases of market-cap weighted indices, and identify undervalued companies. While risky, the approach differentiates it from other value ETFs.

Volatility

Historical volatility should be assessed using standard deviation or beta to understand the fund's price fluctuations relative to the market.

Market Risk

Market risk includes factors such as economic downturns, sector-specific challenges, and company-specific issues affecting the deleted stocks held by the ETF.

Ideal Investor Profile

The ideal investor is a value-oriented investor seeking differentiated exposure to U.S. equities, with a higher risk tolerance and a long-term investment horizon.

Market Risk

PKW is best suited for long-term investors seeking potentially higher returns through a unique, albeit riskier, value strategy, rather than active traders or passive index followers.

The Research Affiliates Deletions ETF (PKW) offers a niche value strategy targeting U.S. companies removed from major indices. The ETF's returns are designed to reflect the RAFIu00ae Fundamental U.S. Index. While the ETFu2019s expense ratio is 0.39%, its focused approach differentiates it from broader value ETFs, leading to the potential for outperformance based on mispricing effects. However, the ETFu2019s concentrated strategy and dependence on specific market dynamics result in potentially higher risks for its investors.

Data Sources:

• Invesco Official Website
• FactSet
• Morningstar

Disclaimers:

This analysis is for informational purposes only and does not constitute investment advice. Investors should conduct their own research before making any investment decisions. Past performance is not indicative of future results.