There are many things that excite me about the latest wave of ETFs. However, toward the top of the list is that asset managers are bringing their best and brightest from the mutual fund world into the ETF industry. They are doing so for good reason. ETFs continue to gain market share with advisors and actively managed products have made inroads in the last few years. One of these firms, T. Rowe Price helped to open the Nasdaq stock market this week in celebration of a recent fixed income launch. VettaFi was honored to be there to support their efforts.
Tapping Into Experienced Managers
T. Rowe Price has successfully leveraged its time-tested active management skills to grow in the ETF industry. In 2020, the firm launched its first batch of active ETFs, including the T. Rowe Price Growth Stock ETF (TGRW ). The $210 million ETF is run by the same portfolio manager, Joseph Fath, as a similarly named $48 billion mutual fund. He has managed the T. Rowe Price Growth Stock mutual fund since 2014.
The strategy seeks to own companies with strong earnings and cash flow growth, a lucrative niche, and the ability to expand during times of slower economic growth. Recent holdings include Apple, Amazon.com, Eli Lilly, Microsoft, and Nvidia.
An Equity Version of a Popular Mutual Fund
The T. Rowe Price Capital Appreciation Equity ETF (TCAF ) was launched in June 2023. The ETF is the firm’s largest, with $2.1 billion in assets. Unlike TGRW and some other funds launched in 2020, TCAF is not a replication of an existing mutual fund. TCAF is managed by David Giroux. He has run the T. Rowe Price Capital Appreciation mutual fund, which has $63 billion in assets, since 2006
The Capital Appreciation mutual fund is an asset allocation fund with approximately 60% in stocks, with the remainder in fixed income. In contrast, TCAF is a portfolio of stocks with appealing growth and value traits based on the expertise of Giroux and team. Those ETF holdings include Becton Dickinson, Danher, Fortive, and UnitedHealth Group.
T. Rowe Price’s First Muni Bond ETF
The firm currently offers 16 ETFs, six of which hold bonds and not stocks. The latest of these, the T. Rowe Price Intermediate Municipal Income ETF (TAXE ), launched in July 2024. Senior management at T. Rowe Price was at the Nasdaq in honor of TAXE. Like some of its siblings, TAXE is managed by an experienced team.
Charlie Hill and James Lynch have a combined 53 years of investment experience and also work together on mutual funds. These include the T. Rowe Price Summit Municipal Intermediate Fund, which has $5.3 billion in assets. The mutual fund recently had 40% in AA- and 30% in A-rated securities, respectively. Transportation and healthcare issuers were favored.
VettaFi is excited to see T. Rowe Price’s success as an ETF manager. They have a range of proven strategies now available in a format that advisors are embracing. We expect they will continue to leverage their active management expertise.
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