T. Rowe Price launched its fifth actively managed fixed income exchange traded fund, the T. Rowe Price Floating Rate ETF (TFLR ), which is available to the public beginning today on NYSE Arca. The ETF’s strategy is constructed similarly to the mutual fund, the T. Rowe Price Floating Rate Fund (PRFRX), investing primarily in floating-rate loans and other floating-rate debt securities.
TFLR seeks high current income and, secondly, capital appreciation by investing primarily in BB- and B-rated loans, which the fund’s portfolio manager believes are likely to keep volatility at below-market rates over time. It is broadly diversified across 200–300 issuers.
The strategy uses a disciplined approach to credit selection, featuring research and risk control. Paul Massaro, head of the global high yield team and portfolio manager of the floating-rate strategy, manages the fund.
“Floating rate bank loans hold a unique position across the broad fixed income landscape given their combination of a floating rate coupon and elevated placement in a company’s capital structure – an important risk management attribute,” Massaro said in a news release. “Historically, bank loans have provided a partial hedge against rising rates as well as low return correlations with other asset classes, making them a solid portfolio diversifier.”
Tim Coyne, head of exchange traded funds at T. Rowe Price, added: “Since the debut of T. Rowe Price’s first active ETFs two years ago, we’ve continued to add to our ETF capabilities and deliver investment choices that complement our other product offerings to meet investors’ evolving needs. Today’s launch of Floating Rate ETF and the introduction last month of U.S. High Yield ETF represent the latest manifestations of our commitment to building a robust active ETF business.”
“Given the rising rate environment, advisors have sought out fixed income strategies that can provide income without undue risk. It is great to see T. Rowe Price further expand its active ETF lineup with a timely product,” said Todd Rosenbluth, head of research at VettaFi.
TFLR carries an expense ratio of 0.61%.
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