Launched on 06/23/2005, the Invesco Dynamic Leisure and Entertainment ETF (PEJ) is a smart beta exchange traded fund offering broad exposure to the Consumer Discretionary ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors–think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting–not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Invesco. PEJ has been able to amass assets over $1.05 billion, making it one of the largest ETFs in the Consumer Discretionary ETFs. PEJ seeks to match the performance of the Dynamic Leisure & Entertainment Intellidex Index before fees and expenses.
The Dynamic Leisure & Entertainment Intellidex Index is comprised of stocks of U.S. leisure and entertainment companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.
Cost & Other Expenses
When considering an ETF’s total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for PEJ are 0.55%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.65%.
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.
PEJ’s heaviest allocation is in the Consumer Discretionary sector, which is about 52.40% of the portfolio. Its Telecom and Consumer Staples round out the top three.
When you look at individual holdings, Sysco Corp (SYY) accounts for about 5.55% of the fund’s total assets, followed by Liberty Media Corp-Liberty Formula One (FWONA) and Live Nation Entertainment Inc (LYV).
The top 10 holdings account for about 46.78% of total assets under management.
Performance and Risk
The ETF has lost about -20.43% so far this year and is down about -20.91% in the last one year (as of 07/28/2022). In the past 52-week period, it has traded between $35.63 and $53.27.
The fund has a beta of 1.31 and standard deviation of 35.43% for the trailing three-year period, which makes PEJ a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Invesco Dynamic Leisure and Entertainment ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Global X Video Games & Esports ETF (HERO) tracks SOLACTIVE VIDEO GAMES & ESPORTS INDEX and the VanEck Video Gaming and eSports ETF (ESPO) tracks MVIS GLOBAL VIDEO GAMING AND ESPORTS IND. Global X Video Games & Esports ETF has $198.75 million in assets, VanEck Video Gaming and eSports ETF has $329.34 million. HERO has an expense ratio of 0.50% and ESPO charges 0.55%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary ETFs.
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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Invesco Dynamic Leisure and Entertainment ETF (PEJ): ETF Research Reports
Sysco Corporation (SYY): Free Stock Analysis Report
Global X Video Games & Esports ETF (HERO): ETF Research Reports
Live Nation Entertainment, Inc. (LYV): Free Stock Analysis Report
Liberty Media Corporation (FWONA): Free Stock Analysis Report
VanEck Video Gaming and eSports ETF (ESPO): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.