Following a big leap forward in 2024, active ETFs may be poised to repay investor faith in 2025. Risks loom over last year’s returns, with political and economic factors giving pause to attentive investors. Active ETFs’ adaptability and focus on fundamentals can help, especially in strategies that look to get the most out of active investing. More than simply adapting to events or toggling weights here and there, active investment in high-conviction ideas can play a key role in that uncertainty.
See more: Can Active Growth Investing Stand Out Again in 2025?
The T. Rowe Price U.S. Equity Research ETF (TSPA ) is an example of a fund that heavily relies on fundamental research to drive portfolio construction. For a relatively low active fee of only 34 basis points, TSPA relies on its team of analysts to identify stocks within their sectors of expertise. The ETF is flexible enough to invest in small—and mid-cap firms as well as large-cap names primarily from the S&P 500 Index, but with some non-index names as well.
Active Investing & Fundamental Research: A 2025 Case
The ETF, then, relies on the firm’s fundamental research capabilities to focus on the key factors driving an individual company’s outlook. Rather than being swayed by the index’s weighting, TSPA over- and under-weights names based on the fundamental analysis. TSPA looks to that tight analysis.
Such an approach could prove useful as markets continue to rely mainly on what worked in 2024 to start 2025. While megacap tech continues to drive markets, its dominance may also pose a concentration risk for countless investors’ portfolios.
Those firms could be vulnerable to tariffs to a degree that other areas, like biotech or financials, might not be. What’s more, without a clear signal for where markets may go next, sticking to fundamentals could identify firms poised to ride a lagging rate cut swing or a deregulatory swoon.
TSPA has returned 26.4% over the last year, per T. Rowe Price data. That beat the S&P 500 Index by around 1.3% even after fees. Looking ahead, it could be poised to adapt and adjust where the index can’t. This gets the most out of active fundamental research.
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