With markets continuing to be volatile amidst the Russian invasion of Ukraine, record-high inflation, and the Federal Reserve planning to raise interest rates this month, investors are seeing the appeal of active management. Chris Murphy, vice president, senior ETF specialist at T. Rowe Price, recently told ETF Trends that “there’s a strong case for active management strategies now, given what we’re seeing in terms of volatility and the divergence of leadership within equity markets.”
Recently, investors have been turning to the T. Rowe Price Blue Chip Growth ETF (TCHP) and the T. Rowe Price Equity Income ETF (TEQI). The two semi-transparent active ETFs saw a massive spike in inflows on March 1, with TCHP bringing in roughly $18 million on that day, and TEQI taking in nearly $3 million.
TCHP seeks to provide long-term capital growth by investing “at least 80% of assets in the common stocks of large and medium-sized blue-chip companies,” and “focuses on companies with leading market positions, seasoned management, and strong financial fundamentals,” according to T. Rowe Price.
TCHP portfolio manager Paul Greene recently wrote in a white paper that the fund’s investment strategy is to discern the durable from the temporary, and remains focused on buying and holding the special companies that T. Rowe believes can compound in value over time.
“The rapid innovation and disruption occurring across industries, coupled with a market that is digesting dislocations stemming from the coronavirus pandemic and a flood of central bank liquidity, mean that differentiating between volatility and actual business risk is more critical than ever for growth investors with a longer time horizon,” wrote Greene.
TEQI, meanwhile, seeks a high level of dividend income and long-term capital growth by investing “at least 80% of its net assets in common stocks, with an emphasis on large-capitalization stocks that have a strong track record of paying dividends or that are believed to be undervalued.”
Murphy said that TEQI “is a good way” for advisors “to rotate away from growth strategies into more value-oriented strategies.”
TEQI typically includes a broadly diversified portfolio of between 100 and 125 names within the U.S. large‑cap universe trading below T. Rowe Price’s assessment of intrinsic value without excessive exposure to any one stock, industry, or sector. Risk is managed through diversification and rigorous fundamental research at the individual company level.
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