Are investors feeling the heat from election drama? Not only is the election looming over markets, but so too is geopolitical risk. Perhaps most important, however, is not those outside factors but trends in the market itself. Rate cuts may have provided a big shot in the arm to existing trends in tech and megacaps, but concentration risk still looms. Indeed, those growthier areas like tech have contributed significantly this year, but if an area like AI were to disappoint, an active value fund could stand out.
See more: VettaFi Fixed Income Symposium Asks, Why Turn to Active ETFs?
Amid those outside macro events, concentration risk has remained an important obstacle. Just a handful of names have contributed significantly to investor holdings. Many of those names focus on tech. At the same time, however, even diversifying into smaller tech names may fail to provide sufficient coverage. Relying on rate cuts to boost smaller, growthier names may fail to include some more durable value names found in an active value ETF.
The T. Rowe Price Value ETF (TVAL ) presents an appealing case therein. TVAL charges only a 33 basis points for its approach. The active value ETF looks for long-term capital growth, mostly via large-cap names meeting value metrics. Those include a fundamental research screen looking at metrics like undervalued assets, restructuring opportunities, and more. TVAL has returned 29.4% over one year, per T. Rowe Price data.
The fund’s active, bottom-up stock selection could help it navigate that uncertainty in the market and inside events. It could identify some appealing opportunities compared to passive value ETFs and any growth funds. Value firms, especially those with appealing cash flow, may be well-positioned to push ahead amid further rate cuts. Even without rate cuts, higher-quality value companies can continue to buck the market.
For more news, information, and analysis, visit our Active ETF Channel.
