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 – Free Report) is a smart beta exchange traded fund launched on 12/03/2010.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
The fund is managed by Invesco, and has been able to amass over $567.05 million, which makes it one of the average sized ETFs in the Style Box – Mid Cap Blend. GRPM, before fees and expenses, seeks to match the performance of the S&P MIDCAP 400 GARP INDEX .
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
For ETF investors, expense ratios are an important factor when considering a fund’s return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.35% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.95%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 26.30% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Industrials and Energy round out the top three.
Taking into account individual holdings, Lantheus Holdings Inc accounts for about 3.06% of the fund’s total assets, followed by Roivant Sciences Ltd (ROIV – Free Report) and Aaon Inc (AAON – Free Report) .
Its top 10 holdings account for approximately 25.04% of GRPM’s total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P MidCap 400 GARP ETF has gained about 0% so far, and is up about 15.69% over the last 12 months (as of 01/01/2025). GRPM has traded between $95.44 and $126.41 in this past 52-week period.
The ETF has a beta of 1.20 and standard deviation of 19.03% for the trailing three-year period. With about 60 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P MidCap 400 GARP ETF is a reasonable option for investors seeking to outperform the Style Box – Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Mid-Cap ETF (VO – Free Report) tracks CRSP US Mid Cap Index and the iShares Core S&P Mid-Cap ETF (IJH – Free Report) tracks S&P MidCap 400 Index. Vanguard Mid-Cap ETF has $71.37 billion in assets, iShares Core S&P Mid-Cap ETF has $94.75 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box – Mid Cap Blend.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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