The Invesco Russell 1000 Dynamic Multifactor ETF (OMFL) is a passively managed exchange-traded fund (ETF) launched on November 8, 2017. It aims to provide broad exposure to the large-cap growth segment of the US equity market. With over $5.28 billion in assets under management, OMFL is a significant player in this category.
Why Large Cap Growth?
Companies classified as large-cap typically have a market capitalization exceeding $10 billion. These companies tend to be established with predictable cash flows and demonstrate lower volatility compared to their mid-cap and small-cap counterparts. Growth stocks, on the other hand, are characterized by faster growth rates than the broader market, higher valuations, and robust sales and earnings growth rates. However, it’s important to remember that growth stocks often exhibit higher levels of volatility. While they often outperform in strong bull markets, their performance tends to falter in other market conditions.
Cost and Performance
Expense ratios are crucial for ETF returns, as lower expenses can lead to better long-term performance. OMFL boasts an annual operating expense of 0.29%, placing it in line with most competitors in the space. Its 12-month trailing dividend yield sits at 1.57%.
OMFL seeks to track the performance of the RUSSELL 1000 INVESCO DYNAMIC MLTIFCTR ID index before fees and expenses. This index uses a rules-based methodology to select equities from the Russell 1000 Index, representing the 1,000 largest US companies. The ETF has recorded a gain of approximately 0.46% year-to-date and has risen by around 5.06% in the past year (as of September 4, 2024). Over the past 52 weeks, it has traded within a range of $43.21 to $55.23. OMFL has a beta of 1.01 and a standard deviation of 17.55% over the trailing three-year period, demonstrating its level of risk. With approximately 249 holdings, it effectively diversifies company-specific risks.
Sector Exposure and Top Holdings
While ETFs offer diversification, it’s essential to examine their underlying holdings. OMFL is transparent about its portfolio, disclosing its holdings daily. The Information Technology sector receives the largest allocation, representing about 26.30% of the portfolio. Financials and Healthcare round out the top three. Among individual holdings, Berkshire Hathaway Inc. holds the largest weight, accounting for approximately 5.30% of total assets. Costco Wholesale Corp (COST) and Meta Platforms Inc. follow closely behind. The top 10 holdings account for about 41.11% of total assets under management.
Alternatives and Bottom Line
Invesco Russell 1000 Dynamic Multifactor ETF carries a Zacks ETF Rank of 3 (Hold), based on expected asset class return, expense ratio, momentum, and other factors. For investors seeking exposure to the large-cap growth segment, OMFL offers a suitable option. However, alternative ETFs in this space are worth considering. The Vanguard Growth ETF (VUG), with $131.14 billion in assets, and the Invesco QQQ (QQQ), boasting $279.37 billion, provide similar exposures. VUG has an expense ratio of 0.04%, while QQQ charges 0.20%.
Passively managed ETFs like OMFL have become increasingly popular among retail and institutional investors, offering low costs, transparency, flexibility, and tax efficiency. They are especially valuable tools for long-term investors.
