Invesco Introduces First Fundamental Pure Style ETFs

June 16, 2011 ( - In a recent press release, Invesco PowerShares Capital Management LLC announced the release of its suite of nine PowerShares Fundamental Pure Style exchange-traded funds (ETFs).  

The new funds, which are based on methodology from the Research Affiliates Fundamental Index (RAFI) Fundamental US Style Index Series, have begun trading on the NYSE Arca. Their names and tickers are listed below:






PowerShares Fundamental Pure
Large Value Portfolio (PXLV)

PowerShares Fundamental Pure
Large Core Portfolio (PXLC)

PowerShares Fundamental Pure
Large Growth Portfolio (PXLG)


PowerShares Fundamental Pure
Mid Value Portfolio (PXMV)

PowerShares Fundamental Pure
Mid Core Portfolio (PXMC)

PowerShares Fundamental Pure
Mid Growth Portfolio (PXMG)


PowerShares Fundamental Pure
Small Value Portfolio (PXSV)

PowerShares Fundamental Pure
Small Core Portfolio (PXSC)

PowerShares Fundamental Pure
Small Growth Portfolio (PXSG)

According to the release, the PowerShares Fundamental Pure Style ETFs are designed to address the structural performance drag caused by market cap-weighting, which over time tends to overweight overvalued stocks and underweight undervalued stocks. The RAFI methodology uses four measures of economic size rather than market capitalization to weight each position; by selecting and weighting by economic size rather than market-cap, these funds effectively break the link between market price and index weight.

“We are very pleased to be expanding our partnership with Research Affiliates to offer investors the first suite of fundamentals-weighted style box ETFs,” said Ben Fulton, Invesco PowerShares managing director of global ETFs. “We believe the application of the Fundamental Index methodology to style box investing offers advisors and investors a compelling new tool to manage portfolios with the potential to produce improved risk-adjusted returns compared to cap-weighted benchmarks.” 


According to the news release, the indexes are constructed from the 2,500 largest U.S. listed companies, based on four fundamental measures of firm size: latest available book value, cash flow averaged over the prior five years, sales averaged over the prior five years, and total dividend distributions averaged over the prior five years.

The release claimed that a composite fundamental weight is calculated for each firm by equally weighting the four fundamental measures. For companies that have never paid dividends, that measure will be excluded from the average.

Each company is then classified as “large,” “mid,” or “small” and “growth,” “core,” or “value” in the following manner:

  1. Stocks are segregated into three size groups: “large,” “mid,” and “small.” Companies are divided amongst these groups based on their fundamental weight. Securities that have a substantially different fundamental weight relative to their market-cap weight are excluded.
  2. Once classified into the three size groups, RAFI methodology uses fundamental measures of growth and value to give each company a style score. Based on this style score, companies are classified as “growth,” “core,” or “value.” 
  3. Stocks within each sub-index are weighted by their composite fundamental weight. 

Each index in the RAFI Fundamental US Style Index Series is reconstituted and rebalanced annually on the third Friday of March.