The Invesco RAFI Strategic US ETF (IUS) seeks to track the RAFI Strategic US Index, which measures the performance of U.S. stocks selected and weighted based on fundamental factors like sales, cash flow, dividends, and book value rather than market capitalization. This strategic beta equity ETF provides exposure to U.S. companies using Research Affiliates' fundamental indexing methodology.
How It Works
IUS uses a fundamentally-weighted approach that selects and weights U.S. stocks based on four fundamental metrics: sales, cash flow, dividends, and book value, combined equally to create composite fundamental scores. Companies with higher fundamental strength receive larger allocations regardless of market cap. The fund rebalances annually to maintain alignment with fundamental valuations. This active indexing strategy typically results in a value tilt compared to cap-weighted benchmarks, with holdings concentrated among fundamentally strong companies across all market capitalizations.
Key Features
- Zero expense ratio makes this one of the lowest-cost strategic beta ETFs available, eliminating annual fees entirely
- Fundamental weighting methodology historically outperforms cap-weighted indexes during value-favorable market cycles and economic recoveries
- Recently launched fund with limited performance history but backed by Research Affiliates' proven fundamental indexing research since 2005
Risks
- This ETF can lose value when growth stocks significantly outperform value stocks, as fundamental weighting typically creates a value bias that underperforms during growth rallies
- Limited track record since 2018 inception means performance during various market cycles remains unproven, creating uncertainty about real-world results
- Broad U.S. equity exposure means the fund will decline during market downturns, potentially losing 25-35% in severe bear markets like traditional equity ETFs
Who Should Own This
Best suited for strategic investors with 5+ year time horizons seeking alternatives to market-cap weighting as a core equity holding (20-40% of equity allocation). Medium-to-high risk tolerance required due to equity volatility and potential style rotation risks. Appeals to value-oriented investors who believe fundamental metrics better reflect company worth than market prices.