Small and mid-cap firms have gathered significant interest amid the Fed’s rate cut cycle. With multiple cuts already in the books, those firms have responded. The S&P SmallCap 600 Index, per YCharts, saw its performance spike following the Fed’s November cut. Investors may be looking for an active ETF to ride along with that performance, then with TMSL a potent option. The active SMID cap ETF has significantly outperformed its ETF Database Category and Factset Segment averages over the last year, standing out in the space.
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The T. Rowe Price Small-Mid Cap ETF (TMSL ) launched just over a year ago. Charging just 55 basis points (bps), the active fund has returned 31.8% over the last year, per T. Rowe Price data. That has outperformed its benchmark Russell 2500 index by 5.35% per data as of September 30th. The active SMID cap ETF, then, stands out among active SMID cap ETFs of a certain size. Per ETF Database analysis, the fund’s one-year return places it in the top five active performing SMID cap ETFFs with at least $250 million in AUM.
How does the strategy invest, then, and how might it benefit from rate cuts? TMSL can invest across both growth and value opportunities, selecting securities through active, bottom-up portfolio construction. The active SMID cap ETF assesses securities based on factors like profitability, stability, earnings quality, and more. It also evaluates opportunities via metrics like cash flow, book value, and sales.
Together, that makes the fund a potentially potent option for rate cuts. The companies it finds in both the small and mid-cap categories may just benefit from cheaper borrowing to unlock their full potential. With the flexibility of an active approach and the fundamental research capabilities of T. Rowe Price, TMSL can appeal as further rate cuts loom.
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