Investors increasingly look to the opportunities that actively managed strategies may provide in challenging market environments. Tim Coyne, head of ETFs at T. Rowe Price, recently appeared on CNBC’s Halftime Report with Bob Pisani, to discuss active management in current markets.
Actively managed strategies continue to carve out market share as investors look to firms like T. Rowe Price to actively navigate today’s markets. Pisani noted that over $1 trillion in AUM now sit in active ETFs, approximately one-tenth of the ETF industry’s AUM.
“We have seen significant growth in active management, including active ETFs, which I think has been a significant driver,” Coyne explained. “Markets in general have changed, and I think having that professionally managed portfolio is really beneficial to clients.”
The current market environment of pronounced volatility and uncertainty could prove particularly beneficial for actively managed strategies. The ability to be selective about stock exposures, excluding poor performers while including those with attractive prospects, could be advantageous as narratives evolve. “We’re seeing greater volatility, uncertainty across both the equity and fixed income markets,” said Coyne.
Broad Range of Strategies
T. Rowe Price is currently one of the largest active managers, with more than 1,300 investment professionals worldwide. The firm offers a broad range of strategies for investors that levies that experience and knowledge to build active strategies from the bottom up. This includes newer ETFs like the T. Rowe Price Capital Appreciation Premium Income ETF (TCAL ), with its focus on delivering monthly distributions from sources than than bonds.
Managed by David Giroux and team, TCAL combines a high-conviction portfolio with a focus on regular distributions that come from dividends as well as covered call premiums earned. It showcases the more traditional “stock picking” aspects of active management while adding the complexity of a covered call strategy.
Meanwhile, the T. Rowe Price US Equity Research ETF (TSPA ) is a pure-play core equity portfolio. It seeks to create a portfolio with characteristics similar to the S&P 500. However, the fund relies on its research team to determine specific stock weights as well as exclusions for the portfolio. Some stocks may carry an overweight compared to the index, while others are underweighted. Others are excluded entirely, based on their fundamentals. This creates a differentiated return potential from the passive index.
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Could now be the time to diversify abroad with an active international equity ETF? Active ETFs have become key parts of numerous portfolios in recent years. With both an accelerating number of active ETF launches and overall category AUM, the active fund type is now a serious consideration for many investors. With U.S. volatility rising, they could play a particularly strong role as a vehicle for equity diversification.
