Active ETFs have become much more popular in recent years, adding significant AUM amid numerous new launches. That may be drawing investors to consider the wrapper, but what type of active ETF makes the most sense right now? It’s hard to ignore the case for an active SMIDcap ETF as the market begins to broaden amid rising uncertainty. The T. Rowe Price Small-Mid Cap ETF (TMSL ) could be a candidate to fill that role.
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TMSL charges a 55 basis point fee to actively invest in small- and mid-cap firms across both growth and value styles. Specifically, its active managers engage in bottom-up portfolio construction, assessing companies for metrics like profitability, stability, earnings quality, and more. Its managers also consider book value, sales, cash flow, and price to earnings in assessing potential investments.
Together, that has helped TMSL average an 18.4% annualized return since its inception in June 2023, according to the T. Rowe Price website. Having recently entered oversold territory, the ETF’s price point could prove attractive.
What kind of firms, then, does the strategy target? For example, the strategy invests in firms like Tenet Healthcare Corporation (THC). THC has returned 23.15% over one year, according to YCharts. The healthcare services group, based in Dallas, includes hospitals and ambulatory surgery centers.
Next, TMSL also invests in Corpay, Inc. (CPAY), a corporate payments company. Its modern payment solutions suite has helped it return 15.2% over the last year, per YCharts. The firm currently offers a 24.78 P/E ratio.
Finally, the fund also invests in bioinformatics firm Natera, Inc. (NTRA), which has returned 61% over one year, according to YCharts. That comes with a 41.2% revenue growth metric over the last five years.
Taken together, TMSL provides exposure to some up-and-comers. Concentration risk, tariffs, and more are seeing significant uncertainty for investors, many of whom are still significantly exposed to large-caps. Leaning on T. Rowe Price’s fundamental research capabilities, TMSL may help make a strong case for this actively managed SMIDcap ETF.
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