Active ETFs had another strong year in 2024, with new launches and growing AUM undergirding the category’s strength. At the start of 2025, we may see continued positivity for the category, with the active ETF TSPA offering an example. In just a few weeks, the strategy has pulled in just under a quarter billion in YTD Flows. That may speak to investors’ desire for a fundamentals-driven ETF for an uncertain market, with TSPA offering a potent example.
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The T. Rowe Price U.S. Equity Research ETF (TSPA ) launched in 2021. The ETF, which charges a 34 basis point fee, actively invests at least 80% of its assets in U.S. equities. Specifically, the active ETF analyze it’s holdings from the bottom up, leaning on T. Rowe Price’s fundamental research capabilities. With that approach, its managers, working with a team of analysts, look to outperform the S&P 500 Index. On a year-to-date basis, the fund has gathered $245 million, per ETF Database data.
The strategy’s freedom to actively over or underweight given relative to the benchmark S&P 500 can help it meet that goal. Over the last year ending December 31, TSPA returned 26.37% per T. Rowe Price data. That helped it beat its benchmark by 1.35% in that same time. According to YCharts data, the strategy has returned 2.6% YTD, with its price above its 50- and 200-day simple moving averages. That indicates it may be seeing some healthy overall momentum.
What might be driving the uptick in flows to start the year? That momentum may appeal, but at a deeper level, the fund’s focus on bottom-up, fundamentals-driven portfolio construction may offer a compelling solution to the current market. While major stocks continue to deliver overall, prices remain significantly elevated. At the same time, government policy looms as a potential source of risk and, in some cases, reward. The active ETF’s ability to hold out-of-benchmark stocks adds to its ability to go beyond the index.
An adaptable, active strategy that focuses on fundamentals can identify those companies that may merit a higher valuation. At the same time, the ability to adjust to events can help an active ETF like TSPA outperform more staid indexes. For those looking to add an active fund to their rosters, TSPA could be one to watch.
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