Active ETFs are all the rage right now, even outpacing equity ETF flows last month across equities and fixed income, respectively. Amid that growing interest in active ETFs, certain performers have stood out, even in a complicated market. Where many other ETFs and funds have either produced middling returns or have outright dipped, others have actually produced red hot returns. The active natural resources ETF TURF is a key example.
Key Takeaways:
- With three months in the books, natural resources ETF TURF has been a standout in the active equity ETF space.
- That may relate to geopolitical events, but its fundamental approach bears mentioning.
- It could be poised for further performance this year.
TURF, the T Rowe Price Natural Resources ETF, has returned 21.6% YTD. Charging only 44 basis points, the strategy actively invests in companies linked to natural resources, assessed based on fundamental research. Specifically, it looks to those firms upstream of mineral, agriculture, and, crucially, energy products.
It looks at holdings already available in the MSCI GICS natural resources sector, applying bottom-up analysis. Together, it ends up with 60–80 stocks offering a concentration take on the segment, helping it produce those strong returns. Looking at ETF Database data, when removing active ETFs that employ leverage or inverse strategies and those under $100 million in AUM, the fund sits in the top-five performing active ETFs based on YTD returns.
What, then, might its outlook be for the rest of the year? The global economic landscape has certainly changed since January 1. While energy prices have risen, potentially to the benefit of some commodity producers, other segments like agriculture may suffer from rising fertilizer costs in addition to energy spikes.
See more: Active ETFs Again Set AUM Record in February
That’s where its active approach comes in. While it focuses on a smaller target list of potential investments, its active approach, emphasis on fundamental research, and adaptability make it a potential solution for uncertain times. The fund’s largest weighted names right now, according to ETF Database data, include energy names. However, that could change if other segments start to stand out. Energy prices will likely remain a strong consideration this year, however, making TURF a fund to watch.
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