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

 The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and an underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. 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

News Corp

TechnipFMC

MKS Instruments

Textron

Select Medical Holdings

Corpay Inc.

Tidewater

Stanley Black & Decker

Celsius Holdings

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 Small-Mid Cap ETF earns a High Process Pillar rating. 

The largest 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 strengthens the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their respectable 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% contributes to the process as well.

 This strategy targets deeper value plays than its peers’ average in the Mid-Cap Blend Morningstar Category. But in terms of size exposure, it is similar to the average. Looking at additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided holding companies that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. In this month, the strategy also had more exposure to the Volatility 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, on a year-over-year basis, 15% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

T. Rowe Price Small-Mid Cap ETF earns an Above Average People Pillar rating. Donald J. Peters, the longest-tenured manager on the strategy, provides strong guidance, bringing forward over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they manage is 3.8 stars, demonstrating above-average risk-adjusted performance. The team boasts an experienced corps of listed portfolio managers, with three others supporting Donald J. Peters. Together, they average 16 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 Small-Mid Cap ETF

TMSL is an actively managed fund that invests in US small- and mid-cap companies with either growth or value characteristics. Holdings are based on several factors and bottom-up stock selection.

In a growing landscape of active ETFs, investors may be searching for strategies that stand out. The active SMIDcap ETF TMSL may be one such candidate.

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On this episode of the “ETF of the Week” podcast, VettaFi's Head of Research Todd Rosenbluth discussed the T. Rowe Price Small-Mid Cap ETF (TMSL) with Chuck Jaffe of “Money Life.

VIDEO: ETF of the Week: T. Rowe Price Small-Mid Cap ETF (TMSL)

VettaFi's Head of Research Todd Rosenbluth discussed the T Rowe Price Small-Mid Cap ETF (TMSL) on this week's “ETF of the Week” podcast with Chuck Jaffe of “Money Life.” For more news, information, and strategy, visit the Active ETF Channel.

ETF of the Week: T. Rowe Price Small-Mid Cap ETF (TMSL)

T Rowe Price Capital Appreciation Equity ETF

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News for T.Rowe Price Small-Mid Cap ETF ETF (TMSL)