2 ETFs Built on T. Rowe Price Active Research Benefits

T. Rowe Price's actively managed ETFs, TSPA and TIER, are gaining investor interest by offering benchmark-aware strategies with potential alpha from active research. TSPA, which tracks the S&P 500, has notably delivered an 11.13% annualized return since its 2021 inception, outperforming the S&P 500's 10.44% over the same period, while TIER targets the MSCI ACWI ex USA. With competitive expense ratios of 0.34% for TSPA and 0.38% for TIER, these funds leverage T. Rowe Price's fundamental research to provide familiar risk profiles and serve as compelling complements to existing passive equity exposures.

Analysis

T. Rowe Price is gaining traction in the active ETF space by offering benchmark-aware strategies that combine the familiarity of index investing with the potential for alpha from fundamental research. The T. Rowe Price U.S. Equity Research ETF (TSPA) has demonstrated the efficacy of this model, delivering a net annualized average return of 11.13% since its 2021 inception, outperforming the S&P 500's 10.44% over the identical period. The strategy for both TSPA and the recently launched T. Rowe Price International Equity Research ETF (TIER) is to remain sector-neutral and maintain risk profiles similar to their respective benchmarks—the S&P 500 and the MSCI ACWI ex USA Index—while utilizing T. Rowe Price's dedicated analyst teams for individual stock selection. This approach results in a low tracking error, positioning the ETFs as compelling complements to core passive holdings rather than wholesale replacements. With competitive expense ratios of 0.34% for TSPA and 0.38% for TIER, these funds provide an accessible entry point to active management for investors.

Key Decisions for Investors

• Investors seeking to potentially outperform the S&P 500 with minimal tracking error should evaluate TSPA, given its documented post-fee outperformance since inception.
• Consider using these ETFs as satellite holdings to supplement a core passive portfolio, thereby introducing an element of active, research-driven stock selection without significantly altering the portfolio's overall risk characteristics.
• For diversification into non-U.S. equities, the newly launched TIER applies the same active, benchmark-aware methodology to international developed and emerging markets, offering a potential alpha-generating vehicle for global exposure.
• The competitive expense ratios of 0.34% for TSPA and 0.38% for TIER make them a cost-effective consideration for investors looking to access active management capabilities.