Active ETFs have contributed significantly to this year’s record ETF launch pace. That makes some sense, given not only the success of active ETFs but also the growing interest in allocating to the ETFs in general. However, just because many active ETFs have launched doesn’t mean they come out hot out of the blocks. That underlines the significance when a fund actually does get off to a hot start, as with the active growth ETF, TGRT.
Having just launched in June this year, the T. Rowe Price Growth ETF (TGRT) has performed pretty well, per VettaFi data. The ETF has returned 6.5% and 6.2% over the last three months and one month, respectively. That outperformed its ETF Database Category average and FactSet Segment average over both time frames. The strategy charges only 38 basis points (bps) for its active growth ETF approach.
See more: “How Active Investing Can Ride End to Fed Hikes”
So, how does the strategy invest, and what has contributed to that strong start? The strategy looks for long-term capital growth via a portfolio of large-cap stocks. That focus on large caps doesn’t come from a market-cap restriction per se but a de facto allocation. Using fundamental research and bottom-up stock selection, it looks for firms with durable earnings and above-average rates of cash flow growth. The investment thesis being that when a company increases its earnings faster than both inflation and the overall economy, the market will eventually reward it with a higher stock price.
TGRT has seen its AUM rise more than $40 million over the last three months, primarily due to fund flows. The ETF invests in some of the big tech names that have kept the S&P 500 so resilient. It also holds firms like Intuit (INTU), which, while well known, are not as commonly found as those mega-cap tech names.
Active strategies have spiked this year in part as an option to adapt to uncertainty. With inflation cooling, there’s a possibility that hikes may be over, and even cuts may be on the horizon. An ETF that takes an active growth approach could appeal in such a scenario, with TGRT one to watch.
For more news, information, and analysis, visit the Active ETF Channel.