Designed to provide broad exposure to the Style Box – Mid Cap Blend category of the market, the Invesco S&P MidCap 400 GARP ETF (GRPM) is a smart beta exchange traded fund launched on 12/03/2010.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies–popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
Managed by Invesco, GRPM has amassed assets over $477.98 million, making it one of the average sized ETFs in the Style Box – Mid Cap Blend. GRPM seeks to match the performance of the S&P MIDCAP 400 GARP INDEX before fees and expenses.
The S&P MidCap 400 GARP Index seeks to track companies with consistent fundamental growth, reasonable valuation, solid financial strength, and strong earning power.
Cost & Other Expenses
When considering an ETF’s total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for GRPM are 0.35%, which makes it on par with most peer products in the space.
It’s 12-month trailing dividend yield comes in at 0.72%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it’s still important for investors to research a fund’s holdings.
GRPM’s heaviest allocation is in the Financials sector, which is about 33.2% of the portfolio. Its Consumer Discretionary and Healthcare round out the top three.
When you look at individual holdings, Lantheus Holdings Inc (LNTH) accounts for about 4.32% of the fund’s total assets, followed by Carpenter Technology Corp (CRS) and Sterling Infrastructure Inc (STRL).
