While mega-cap growth names have led in returns in 2024, investors may want to consider getting exposure with a multifactor ETF.
The “Magnificent Seven” collectively doubled in value in 2023, leaving many investors concerned over high valuations. Notably, a sell-off in any one of these seven names could bring considerable volatility to the market.
As investors look out for high valuations and overexposure to mega-cap growth names, the Invesco Russell 1000 Dynamic Multifactor ETF (OMFL ) may be a compelling offering.
“Many index-based ETFs have climbed higher in 2024 on the strength of a handful of mega-cap growth stocks,” said Todd Rosenbluth, head of research at VettaFi. “However, OMFL provides a strong index alternative to those seeking to leverage factors like value and quality.”
Invesco’s multifactor ETF shifts from risk-off to risk-on factor exposure and vice versa based on the market environment. This unique strategy could be particularly attractive in the current environment.
Invesco’s large-cap dynamic multifactor ETF has $7.9 billion in assets under management. It has seen $2.2 billion in net inflows year to date. In 2023, the fund garnered $2.5 billion in net flows.
How OMFL Works as an Alternative to the Mega-Cap Growth ETF
OMFL tracks the Russell 1000 Invesco Dynamic Multifactor Index. This benchmark includes large-caps in the Russell 1000. Economic cycles and market conditions determine the weighting of the constituents. These can reflect expansion, slowdown, contraction, or recovery, according to Invesco.
The methodology assigns index constituents a multifactor score from one of five investment styles: value, momentum, quality, low volatility, and size. Invesco reconstitutes and rebalances both the fund and index based on economic indicator signal changes. This may happen as frequently as monthly.
Other multifactor ETFs in Invesco’s suite of ETFs include the Invesco Russell 2000 Dynamic Multifactor ETF (OMFS ) and the Invesco International Developed Dynamic Multifactor ETF (IMFL ).
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