The ETF three-year milestone is more than just an opportunity for firms to tout their funds or celebrate years of work. That marker has material consequences for current and future investors in a fund, opening up those strategies to new flows. VettaFi sat down with T. Rowe Price lead portfolio manager Jodi Love to discuss that three-year milestone for four ETFs she manages.
Key Takeaways:
- Four major active ETFs at T. Rowe Price hit their important three-year milestones last month.
- All four share a manager in Jodi Love, who spoke about the changing use cases for those funds and their continued growth.
- The longevity of the ETFs speaks to the way in which fundamentally driven, active ETFs can appeal.
T. Rowe Price Unlocks New Opportunities
That quad includes TGRT, TVAL, TMSL, and TOUS, which all launched back in June 2023. The T. Rowe Price Growth ETF (TGRT ), T. Rowe Price Value ETF (TVAL ), the T. Rowe Price Small-Mid Cap ETF (TMSL ), and the T. Rowe Price International Equity ETF (TOUS ) all hit that important three-year milestone last month.
“Crossing the three-year mark across {the} four ETFs that I’m the lead PM on is definitely a meaningful milestone,” she said. “It moves us out of the new product bucket and into the universe where allocators and clients can judge us on real world decisions through multiple market environments.”
“It opens a lot more doors, a lot more platforms, models and databases that require three-year track records,” she added. “So it really does expand the opportunity set for where these funds can live in client portfolios. It does not change how we run them day to day.”
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The group of funds have all performed well over the last one- and three-year periods. Their performances have been led by TMSL, which has returned 31.8% over the last 12-month period, according to ETF Database data.
Consistent Strategies & Evolving Use Cases
Asked about how the funds’ approaches may have changed since their launch, Love explained that her process remains focused on fundamentals. The team has learned, however, about the ways in which the funds can be used.
“What I would say has evolved is our understanding of the use cases at the margin. Advisors are using these funds both as core building blocks, but also as precise tilts,” she said. She pointed to TMSL as a dedicated SMID sleeve for some. Some use it as a tool to balance away from megacap concentration without taking a big factor bet, as well.
“On the broader franchise scale, we expect the ETFs to slot into more strategic model portfolios,” she explained. “That has definitely happened, but we feel that this milestone will accelerate that and we’re also seeing some more tactical usage.”
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Spotlight on the T. Rowe Price Small-Mid Cap ETF (TMSL)
TMSL receives the most attention from clients right now, she said. She explained that, having spent most of her career in the SMID-cap space, she believes it’s a category where active management can thrive.
“TMSL is designed as a core SMID building block: diversified, bottom up, with clear but controlled tilts towards quality and sensible valuation,” she said. “So it’s a very intuitive entry point for most portfolios.”
“Improving SMID fundamentals…plays directly into what {TMSL} is built to do, which is to find underfollowed businesses where we think we have an edge, where earnings power over the next three to five years is underappreciated,” she added.
Looking ahead, TMSL, as well as TVAL, TGRT, and TOUS may now benefit from those three-year track records. The firm, Love said, will continue to rely on its fundamental research. She emphasized that active ETFs are more than just mutual funds in disguise, but “genuinely active research-driven portfolios with intentional tilts.”
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