Active investing is drawing growing interest as investors look to spread their money beyond a handful of mega-cap technology stocks. Strategies that blend data-driven models with managers’ judgment calls are gaining ground over purely passive approaches. Smart beta ETFs, which some describe as “quasi-active,” pulled in about $37 billion during 2025, according to insights from Nate Geraci, president of NovaDius Wealth Management and co-founder of The ETF Store.
These funds follow factor-based rules without manager input, but have not really held the public’s attention in recent years, despite representing over $1 trillion in assets. The bigger story today may be the increasing popularity of rules-based active strategies. These use similar analytical frameworks to smart-beta funds while still giving portfolio managers the freedom to adjust when markets get choppy or to find additional sources of return.
According to Geraci, the S&P 500 has returned roughly 90% over the past three years. Most of those gains coming from a small group of mega-cap tech names. T. Rowe Price strategists noted in their 2026 Global Market Outlook report that equity’s “good ponds” are “no longer confined to U.S. technology” and “now encompass a wider range of sectors.”
The Flexibility Factor
The main point of differentiation between rules-based actively managed strategies and smart beta strategies comes down to when and how a fund can change its holdings. Smart beta funds track factors like value or momentum using fixed rules and rebalance on set dates. Active quantitative funds rely on the same kinds of data but let managers shift positions when they see problems or opportunities, not just when the calendar says to.
T. Rowe Price announced in December the launch of two active ETFs that employ this approach. The T. Rowe Price Active Core U.S. Equity ETF (TACU) and the T. Rowe Price Active Core International Equity ETF (TACN) hold far more positions than typical active funds. TACU carries 550-650 holdings while TACN holds 400-500 positions.
Those portfolios look closer to index funds in size. But according to the firm, managers combine quantitative research with fundamental analysis to select securities. This lets them maintain low tracking error against benchmarks while still making active bets when they spot opportunities.
According to Tim Coyne, the firm’s global head of exchange-traded funds, the products “uniquely blend the benefits of passive index portfolios with fully active strategies.”
This integrated dual approach approach differs from inflexible quantitative-only strategies that rely solely on data models. It also differs from pure fundamental approaches that lean heavily on analyst research. The funds combine both methods, according to the firm, using quantitative screens to identify opportunities that managers then evaluate and weight based on their outlook.
Geraci predicted that inflows to smart beta and quantitative strategies will continue to grow in 2026. He noted that the line between smart beta and quantitative active management has become increasingly blurred. Whether those flows ultimately go to passive smart beta products or active quantitative strategies may depend on how much investors value manager discretion and the potential for outperformance.
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