The T. Rowe Price Equity Income ETF (TEQI) has seen strong inflows in recent months as advisors and investors look to insulate themselves from rising rates and move more towards value-oriented strategies.
Data from ETF Database show that TEQI has brought in $14.25 million in inflows for the three months ended Feb. 21 and $16.4 million for the six months ended Feb. 21.
“Performance is strong, and advisors are looking to rotate away from growth strategies into more value-oriented strategies, and [TEQI] is a good way to do that,” said Chris Murphy, vice president, senior ETF specialist at T. Rowe Price.
Launched in August 2020, TEQI, a semi-transparent exchange traded fund, 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,” according to T. Rowe Price.
The fund 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.
TEQI can enhance return potential over time through reinvesting and compounding, and the dividends have historically helped reduce fund volatility. Additionally, TEQI can deliver this actively managed strategy with an expense ratio of only 0.54%.
The ETF typically focuses on value stocks with above-average yields. Low-interest rates are usually seen as beneficial to high-dividend names.
And while inflation may be hurting the broader market, it also indicates that stocks paying high dividends can perform well. Dividend growth historically tops inflation. And many passive funds are one or the other: dedicated to payout growth or above-average dividends.
“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,” Murphy added.
For more on active strategies, visit our Active ETFs Channel.
