Many investors likely recognize by now the brightened outlook that rate cuts have provided for SMID-cap and midcap equities. That’s been borne out by some recent upswings for those categories.
The Russell 2500 Index, which tracks the 2,500 smallest firms in the Russell 3000 Index, for example, rose almost 3% over the last month after middling returns so far this year. However, SMID-caps offer more than just that recent spike, with one SMID-cap ETF specifically standing out as an example of a long-term SMID-cap case.
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The T. Rowe Price Small-Mid Cap ETF (TMSL ) has both a rate cut case and a longer-term case to benefit portfolios, too. As a category, SMID-caps benefit from cuts, yes, with cheaper borrowing disproportionately beneficial to smaller firms. At the same time, SMID-caps can also help investors diversify away from the handful of large-cap names posing concentration risk to portfolios.
That ability to combine upside with diversification makes SMID-caps and mid-caps so appealing. Many investors are likely facing a significant weight toward just a handful of firms. A SMID-cap ETF, especially an active one like TMSL, can provide a potent addition to a core set of holdings. By leaning on T. Rowe Price’s research capabilities, TMSL can take that SMID-cap case and push it even further, potentially identifying opportunities in smaller firms more frequently than a passive SMID-cap fund.
TMSL charges just a 55 basis point fee for its approach. Having launched a little more than a year ago, it has already reached $211 million in AUM. Since inception, the ETF has returned 20.3% on an average annual returns basis, per T. Rowe Price data. That has outperformed its benchmark’s 11.7% return in that time. This active SMID-cap ETF can stand out for those looking at more than just a rate-cuts play.
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