The active ETF landscape has evolved dramatically over the last six years. Few asset managers illustrate this shift better than T. Rowe Price. The firm’s active ETF lineup recently crossed the $30 billion asset mark. Advisors are increasingly comfortable looking beyond traditional market-cap-weighted equity benchmarks.
Key Takeaways:
- T. Rowe Price has grown its active ETF roster past the $30 billion asset mark, demonstrating strong advisor adoption.
- The firm’s lineup has expanded from simple mutual fund extensions in 2020 to 34 active products. The offerings span equities, fixed income, and digital assets.
- Core strategies like the nearly $1 billion T. Rowe Price Value ETF (TVAL) has high active share, taking deliberate, research-driven positions.
Finding meaningful signals through market noise sits at the core of this ETF growth. Executives Tim Coyne, Head of ETFs, and Jodi Love, Portfolio Manager, recently met with TMX VettaFi in New York. They helped unveil a cool exhibit called “Signals From the Noise”. Specifically, this was an artistic interactive display utilizing live market data to visualize how active managers navigate complex markets.
Scaling T. Rowe Price’s Active ETFs Across Asset Classes
“In 2020, ETFs were an extension of our mutual fund business. The first products that we launched were based off of existing mutual funds,” explained Coyne in an exclusive interview. “Since then, we’ve built out 34 products across U.S. equity, international equity, fixed income, and cryptocurrency. We are focusing on core, good standalone products that fit well into model portfolios.”
Unlike active ETFs that rely heavily on quantitative screening, T. Rowe Price leans into extensive human capital. In particular, the firm deploys a deep global network of fundamental analysts digging into balance sheets across regions and sectors.
“What differentiates T. Rowe Price is the bottom-up fundamental, global research platform,” Coyne added. “What we have is very difficult to replicate by any other firm.”
Love manages four fundamental active equity ETF strategies. As such, she viewed the name of the NYC exhibit extracting signals from market noise as the core of daily stock selection. “It is a perfect metaphor. I might be buying stocks when others are selling. We’re all interpreting the data differently,” she explained.
Differentiating TVAL ETF Through Bottom-Up Research
That fundamental engine is on full display in the $980 million T. Rowe Price Value ETF (TVAL), managed by Love. TVAL is an actively managed U.S. equity fund that selects high-conviction value stocks based on fundamental bottom-up research. Rather than hugging passive benchmark weights, TVAL carries over 75% active share.
The TVAL approach leans on deep analyst coverage to evaluate financial results and competitive advantages. As a result, the team has taken higher-conviction positions in sectors like healthcare, industrials, and energy.
Love manages four fundamental equity ETFs that recently crossed its three year anniversary. TVAL outperformed Russell 1000 Value ETFs on a three-year annualized basis as of July 21.
How Do Active ETFs like TOUS Navigating Geopolitics
A similar research-driven framework applies overseas through the $1.5 billion T. Rowe Price International Equity ETF (TOUS). In TOUS, Love and her team leverage on-the-ground analyst insights to capitalize on geopolitical shifts that passive indexes often miss.
“We’ve been overweight aerospace and defense internationally since Trump was reelected,” Love explained. “The ‘America First’ approach and pulling back from some international alliances created opportunity.” In addition, energy was a key tactical allocation according to Love. She highlighted the efforts of a London-based analyst who correctly anticipated global supply constraints.
Through strategies like TVAL and TOUS, T. Rowe Price demonstrates the value that active management can provide. For T Rowe Price it is about leveraging global research to capture mispriced opportunities. Crossing $30 billion in ETF assets is a clear testament to how strongly their bottom-up approach has resonated with investors.
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