This year’s market environment remains a favorable one for active ETFs, with approximately 40% of flows funneling into the strategies year-to-date. As investors increasingly look beyond benchmark constraints for opportunity, T. Rowe Price’s ETF suite is worth consideration. The firm combines research, experience, and affordability in its actively managed strategies.
Active ETFs recently crossed a watershed moment, Katie Greifeld, reporter and anchor at Bloomberg News, noted recently. Non-passive ETFs now making up approximately 51% of the total U.S.-listed ETF market (4,300), according to Bloomberg Intelligence data. That’s more than twice 2020 levels, when active ETFs represented just 23% of the number of ETFs in the market.
The growing popularity of active strategies is unsurprising, given market performance in the last five years. Rapid changes driven by major global events, an increase in volatility, periods of stock and bond correlations, and an evolving macro environment of elevated interest rates created market dynamics not experienced in over a decade.
Active strategies generally prove popular during periods of uncertainty and in challenging market environments. The discerning approach to portfolio construction is often a boon as trends change, while flexibility can help keep portfolios current. However, active investments historically have carried hefty price tags, with high management fees cutting into return potential.
Affordable, Active Bond ETF Strategies
T. Rowe Price, an active manager with more than 1,000 investment professionals globally, offers an expanding suite of actively managed ETFs. The firm’s recent launch of 3 sector ETFs brings the actively managed suite to 22 ETFs. In a sea of active ETF launches, T. Rowe Price’s affordability combined with its expertise, help to set the firm apart.
On the bond side, the firm offers a number of competitively priced ETFs across a range of core bond exposures.
- The T. Rowe Price QM U.S. Bond ETF (TAGG ) seeks to outperform the Bloomberg US Aggregate Bond Index. It also offers a portfolio of differentiated individual as well as sector weights compared to the Agg while retaining a similar risk profile. TAGG has a management fee of 0.08%.
- The T. Rowe Price Ultra Short-Term Bond ETF (TBUX) seeks high levels of income. The strategy invests in a diversified portfolio primarily of investment-grade, short-term securities with a targeted maturity profile of 1.5 years or less. TBUX carries an expense ratio of 0.17%.
- The T. Rowe Price Intermediate Municipal Income ETF (TAXE) offers high income exempt from federal income taxes. The strategy invests mostly in municipal bonds with an average effective maturity of four to 12 years. TAXE has a management fee of 0.24%.
Competitively Priced, Active Equity ETFs
For equity investors, active ETFs appear well-positioned for ongoing volatility and uncertainty. Given murky outlooks for the second half, the adaptability and fundamental research active strategies from firms like T. Rowe Price provide for investors could be advantageous.
- The T. Rowe Capital Appreciation Equity ETF (TCAF ) offers core equity exposures, primarily within large-caps. The managers use fundamental analysis of individual companies to construct the portfolio from the bottom-up. TCAF takes a GARP (growth at reasonable price) investment approach to large-caps. The fund carries an expense ratio of 0.31%.
- Value investors don’t want to miss the T. Rowe Price Value ETF (TVAL ). The fund seeks long-term capital growth through its investment in undervalued companies. The portfolio is constructed from the bottom-up while taking macro trends into account. It consists of companies the fund managers believe are underpriced but demonstrate notable potential for capital appreciation. TVAL has a management fee of 0.33%.
- The T. Rowe Price U.S. Equity Research ETF (TSPA ) seeks to outperform the S&P 500 while retaining its characteristics. Constructed using research from dedicated equity analysts, individual and industry sector weights may differ from the benchmark.
- Meanwhile the T. Rowe Price Capital Appreciation Premium Income ETF (TCAL) seeks to deliver monthly income from sources beyond bonds. The fund has a high-conviction equity portfolio as well as a covered call strategy. TCAL generates income from dividends as well as covered call premiums. Both TSPA and TCAL have management fees of 0.34%.
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