ETF Trends caught up Tim Coyne, Head of Exchange-Traded Funds at T. Rowe Price, to discuss the asset manager entering the ETF industry with the debut of four active ETFs on the New York Stock Exchange last week.
The ETFs, which will be actively managed by T. Rowe Price portfolio managers, include the Blue Chip Growth ETF (TCHP), the Dividend Growth ETF (TDVG), the Equity Income ETF (TEQI), and the Growth Stock ETF (TGRW).
Read more about the launch here.
What does entering the ETF industry mean to T. Rowe Price?
Tim Coyne: Launching our first ETFs is a major milestone for T. Rowe Price. ETFs are popular among multiple investor types for their trading, tax efficiency, and relatively low-cost structure. We have explored offering our investment strategies in an ETF but wanted to do so in a way that didn’t compromise our established strategic investing approach and protects our existing shareholders. Recent SEC approvals allow us to do just that and bring a new way to access T. Rowe Price investment capabilities.
You’ve chosen four flagship strategies with strong track records as mutual funds. Do you expect investors to transfer INTO the ETFs?
Tim Coyne: We believe mutual funds will remain a key investment vehicle for many investors, however, there are others who prefer the ETF format. T. Rowe Price has a large, diverse client base and the launch of our ETFs will provide more choice for the varied needs of our clients. Some clients may move into our ETFs, particularly in taxable accounts, however, ultimately it is primarily about the fit of a particular investment strategy with the clients’ objectives.
So far, many active equity managers have opted for fully transparent structures, and are quite vocal about the portfolios they run. Should we be expecting to hear more from your star portfolio managers now that they’re running ETFs as well?
Tim Coyne: ETFs are an integral part of the future of T. Rowe Price and we expect clients will hear from experts all over the firm around the potential benefits of T. Rowe Price active management paired with the benefits of the ETF vehicle.
For advisors who have clients in the Mutual Fund strategies, will they have a fiduciary obligation to move into the more tax efficient ETF structures for their clients?
Tim Coyne: There are many other considerations beyond tax efficiency and we believe that a financial advisor should take into account all the features of a vehicle to ensure they meet a particular clients’ objectives.
We haven’t seen an semi-transparent active equity strategy really catch on with investors yet. What will give T. Rowe the edge?
Tim Coyne: In our view, the biggest differentiator for T. Rowe Price is that our ETFs will be managed using the firm’s actively managed strategic investing process, which is informed by the research and insights of our investment professionals around the globe. In challenging times, many investors will have the need or desire to pursue investment returns beyond those of an index-based ETF. Our new T. Rowe Price ETFs will provide the possibility for increased returns while still benefiting from the features of an ETF.
For more information, visit https://www.troweprice.com/financial-intermediary/us/en/investments/etfs.html.