T. Rowe Price Investment Management saw its active ETF asset base nearly double over the past year, as investors poured money into funds focused on stock and bond selection rather than passive index tracking, according to Todd Rosenbluth, head of research at VettaFi.
The growth reflects a split in the ETF market between what Rosenbluth calls “sharp objects,” or risky single-stock and leveraged products, and strategic active funds run by experienced portfolio managers. While headlines focus on speculative trading, the bigger money is moving to firms with research teams and risk management, Rosenbluth said Wednesday on Bloomberg Intelligence’s “Inside Active” podcast.
“I don’t have confidence in my ability to be able to use such sharp objects,” Rosenbluth said. He said he prefers either strategic approaches or picking active managers with full-time teams and research resources to handle security selection.
Strategic Active ETFs Gain Ground
Active ETFs now make up roughly 11% to 12% of total ETF assets, up from much lower levels three to five years ago, Rosenbluth noted. The category still has “a lot of room for growth,” with projections reaching the “higher teens” percentage within five years.
The flows came as investors showed more interest in funds that pick securities rather than track indexes or amplify single-stock moves, he said. One example of that trend comes from T. Rowe Price.
The T. Rowe Price Capital Appreciation Equity ETF (TCAF ) represents the strategic alternative. Launched in June 2023, the fund has grown to more than $6.3 billion in assets by using fundamental research to build a portfolio of roughly 100 companies, according to T. Rowe Price. Led by award-winning portfolio manager David Giroux, the ETF focuses on capital allocation quality and long-term potential, a contrast to the daily volatility of leveraged products.
Looking at how these funds are deployed, Rosenbluth said advisors use active ETFs differently depending on the product. Some deploy options-based strategies for income, while strategic stock-picking funds like TCAF aim to outperform through security selection rather than leverage.
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