2024 was a strong year for active ETFs, with exciting new launches joining the fray and the category’s AUM rising. Actively managed ETFs figure to play an even bigger role in 2025, too. Getting the most out of active ETFs next year may require taking a closer look at this year’s successful active funds like those at T. Rowe Price. With that in mind, here are three takeaways to consider from a top active ETF suite.
Massive Demand for Fundamentals-Driven Approaches to Large-Caps
Investors have benefited significantly from large-caps this year, particularly in tech. Of course, with that growth and success has come concentration risk, as the S&P 500 has relied overwhelmingly on tech for its performance. Given that large-caps will likely remain a big part of portfolios, investors then have to determine how best to get that exposure.
The T. Rowe Price Capital Appreciation Equity ETF (TCAF ) applies fundamental analysis to pursue U.S. large-caps, leaning on a growth at a reasonable price (or GARP) mandate. Its emphasis on fundamentals in that frothy large-cap world may offer one explanation for the vast demand it received. The fund launched in June 2023 and has since gathered over $3 billion in AUM. It has returned 36.35% over the last year, per T. Rowe Price investments data, placing it firmly in the upper tier of the shop’s active ETFs.
Active ETFs Offer a Powerful Growth Investing Tool
Given the tech push referred to above, it makes some degree of sense that growthier offerings would succeed. Active growth ETFs stood out in terms of performance, with strategies like the T. Rowe Price Blue Chip Growth ETF (TCHP ), the T. Rowe Price Growth ETF (TGRT ), and the T, Rowe Price Growth Stock ETF (TGRW ) returning 46%, 44.1%, and 39.4% respectively, over the last year.
Each of those strategies scrutinizes growth offerings for notable factors — whether it’s earnings, seasoned management, dividend growth, or capacity to grow during tough market conditions. Their active flexibility and ability to closely scrutinize firms with those factors have helped them outperform more basic indexes.
Dividends Can Be a Differentiator
Dividends don’t just offer current income — valuable as that is. They also offer investors helpful data for a firm’s internal outlook. That may underscore the flows gained by a strategy like the T. Rowe Price Dividend Growth ETF (TDVG ). The active ETF invests in large and midcap firms with above-average growth in earnings “and” a history of growing dividends. Those factors balance each other out to some degree, filtering out dividend payers who may not meet other important standards. The strategy has returned 29.2% over one year.
Looking ahead to the new year, active management can continue to play a role. With tentative positivity a key theme, active ETFs can get the most out of growth while offering important flexibility.
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