As active ETFs have continued to proliferate, more and more investors are turning to the category to refresh portfolios. That may be driving extra interest in active ETFs amid a volatile and uncertain first few months of 2025.
In fixed income, specifically, an influx of flows has spiked the AUM of several ETFs, including TAGG. The fund, which focuses on a wide variety of fixed income securities, has seen its AUM triple since the start of the year.
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The T. Rowe Price QM U.S. Bond ETF (TAGG ) launched back in 2021. Charging just 8 basis points, the strategy actively invests in U.S.-dollar-denominated bonds with a wide array of maturities. Specifically, the strategy invests in intermediate- to long-term maturities debt, including investment-grade corporate and government debt, mortgage- and asset-backed securities, agency obligations, and more. In essence, TAGG is an active answer to address possible shortfalls of the passive-only U.S. aggregate bond index.
That approach has helped TAGG return 1.7% over the last year as of December 31. Its real output, however, has appeared in its yield. The active ETF’s 30-day SEC standardized yield sat at 4.7% as of January 31.
Together, that has helped the fund reach $312 million in AUM per YCharts data as of March 3. TAGG, which started the year at around $102 million, has added more than $200 million in AUM YTD.
TAGG’s inflows join another T. Rowe Price ETF, (TOTR ), in picking up significant flows to start 2025. That attention could be owed to uncertainty, which puts a premium on active investing in bonds. Not only does active management help amid rising volatility in rate markets, but it also offers a fundamental advantage over passive investing. Where passive funds often struggle to replicate their bond indexes, active ETF funds can adjust for bonds called early, defaults, and others.
As interest in active fixed income investing grows, more funds could join TAGG and TOTR in adding significant AUM.
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