Active ETFs are continuing to grow their share of ETF and active assets this year, contributing significantly to the growth of ETFs overall. Active strategies offer some real synergies with the ETF wrapper, but not all active ETFs are the same. Indeed, even in such a relatively young space, there are standouts. One active SMID-cap ETF, specifically, has taken a big leap forward over the last six months with its AUM.
See more: Active ETFs to Hit $4 Trillion AUM by 2030? What You Need to Know
The T. Rowe Price Small-Mid Cap ETF (TMSL), per data from ETF Database, has seen its AUM rise to more than $150 million. The active SMID-cap ETF launched in June last year and has seen its AUM grow by $80 million on the net over the last six months. The strategy owes that AUM growth largely to flows, adding $67 million in that time.
What about the ETF is driving that attention? An active approach could appeal especially to TMSL’s small and mid-cap focus. The ETF charges only 55 basis points (bps) to apply deeply researched fundamental analysis to smaller names. Unlike passive indexes, which tend to just own everything in a category, the TMSL team considers quality factors like profitability, stability, earnings quality, and more.
What’s more, the strategy’s emphasis on those smaller firms could position it well for rate cuts. Smaller firms could benefit disproportionately from rate cuts compared to expensive large-cap names. Many smaller firms face a tougher time with borrowing than those larger names, so lower rates could provide a boost.
By leaning on T. Rowe Price’s research capabilities, TMSL can identify undervalued names that could then benefit from rate cuts. Per T. Rowe Price data, TMSL has returned 20.3% since inception, outperforming its benchmark’s 11.7% return. With the strategy taking a big leap in AUM, it may be worth revisiting for investors looking for an active mid-cap ETF.
For more news, information, and analysis, visit the Active ETF Channel.
