Investors, by now, have a hefty allocation to tech firms in the bustling world of AI investing. The firms that entered the year as the “Magnificent Seven” have perhaps been reduced to six or even five names. However, they still play a big role in many portfolios. While most investors would be loath to drop their core large-cap exposure, investing in smaller companies could play a bigger portfolio role going forward. That’s where a strategy like the T. Rowe Price Small-Mid Cap ETF (TMSL ) comes in.
See more: After a Strong First Half, Where to Next for Active Blue Chip ETF TCHP?
TMSL actively invests in SMIDcap names. According to its ETF Database holdings analysis, tech services constitute its second-largest holding. A blend approach allows the the flexibility to invest in small- and mid-cap stocks across both growth and value. The active ETF evaluates firms based on profitability, stability, earnings outlook, and more.
If we focus on the tech holdings, an active view, and close bottom-up scrutiny could help TMSL identify some up-and-coming or lesser-known tech firms. Given how overvalued the leading tech names are going into potential rate cuts, which tend to favor small companies, that could boost portfolios. So, what kind of tech firms does the strategy currently invest in?
TMSL holds names like MKS Instruments (MKSI), which provides information tech largely for semiconductor manufacturers. MKSI has returned 15.9% over the last year, per YCharts. Semiconductors, of course, benefit from the growing AI environment, but MKSI’s services aren’t solely focused on semiconductors, providing some helpful diversification. The active ETF TMSL weighs the firm at 1.19%, per ETF Database.
Given how expensive the tech space is right now, cheaper borrowing could ease the operating and growth environment for smaller tech firms. Charging only 55 basis points, the strategy has returned 20.3% since inception. That puts it well above its benchmark of 11.7%. For those looking to augment their core holdings with small- and mid-caps, active ETF TMSL could appeal.
For more news, information, and analysis, visit our Active ETF Channel.
