A sound investment process and strong management team underpin T. Rowe Price Growth ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in quality exposure and an underweight in volatility exposure compared with category peers. High quality exposure is attributed to stocks with low financial leverage and strong returns on equity. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm a High Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. T. Rowe Price Growth ETF earns a High Process Pillar rating. 

The main contributor to the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.6 stars. The parent firm's five-year risk-adjusted success ratio of 60% also influences the rating. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their relatively high success ratio suggests that the firm does well for investors and that this fund may benefit from that. The firm's five-year retention rate of 86% reinforces the process as well.

 This strategy owns more growth stocks than its peers in the Large Growth Morningstar Category. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio. Analyzing additional factors, this strategy has consistently favored high-quality stocks, including those with low financial leverage and solid returns on equity, compared with Morningstar Category peers during recent years. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. In recent months, the strategy was more exposed to the Quality factor compared with its Morningstar Category peers as well. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. In addition, this strategy has taken on exposure to high-momentum stocks in these years. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak. In this month, the strategy also had more exposure to the Momentum factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 In terms of portfolio turnover, looking at year-over-year movements, 5% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

T. Rowe Price Growth ETF earns an Above Average People Pillar rating. Donald J. Peters, the longest-tenured manager on the strategy, provides strong guidance, offering over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.8 stars, indicating that their risk-adjusted returns outperformed the category average. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 14 years of listed portfolio management experience.  None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Above Average

People

T. Rowe Price remains an adaptable, trustworthy steward of capital, earning a High Parent rating. A $1.4 trillion asset base gives this time-tested firm a scale and presence few can match, but its heft has made it tougher for its equity strategies to build up positions in small- and mid-cap stocks without pushing against firm-level ownership limitations. To address this challenge, the firm split into two distinct research entities in March 2022. Six strategies, including five capacity-constrained equity strategies, moved to the new division, T. Rowe Price Investment Management, while the rest of the firm now exists as T. Rowe Price Associates. From 2019 to 2021, the firm bolstered its topnotch equity analyst team with new hires to fortify each division's research resources and ensure an orderly transition.

T. Rowe Price added to its array of offerings by acquiring alternative credit specialist Oak Hill Advisors in 2021. T. Rowe has seldom grown inorganically, but the move expanded its capabilities and helped diversify its asset base. Equities remain T. Rowe's strength. It would like to grow its fixed-income business, though that segment remains a step behind peers; it only recently hired dedicated risk personnel in that area.

While the shift to passive investing continues to challenge active managers, T. Rowe Price's impressive bench of investment talent, prudent corporate management, and relatively low fees continue to give it an advantage.

Parent

T. Rowe Price Growth ETF

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