A sound investment process and strong management team underpin T. Rowe Price Value ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest 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 an overweight 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 management team's considerable industry experience earns it a High People Pillar rating. The strategy's parent organization earns the firm a High Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Exxon Mobil

Wells Fargo

QUALCOMM

Elevance Health Inc

Chubb

Walmart

Hartford Financial Services Group

Bank of America

Southern Company

JPMorgan Chase & Co

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

The leading factor in 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 noteworthy 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% supports the rating as well.

 This strategy prefers smaller market-cap companies compared with the average fund in its peer group, the Large Value Morningstar Category.  But in terms of investment style, it is on par with peers. Looking at additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. 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 exposure tends to pay off when markets are hot and to be costly when they are not. Nevertheless, the fund's Volatility exposure was in line with peers in the latest month. 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, 9% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

T. Rowe Price Value ETF earns a High People Pillar rating. The main contributor to the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average ten-year Morningstar Rating of 3.6 stars. A low cost, with fees that rank in its category's least expensive quintile, also strengthens the rating. A higher expense ratio reduces net returns, so low costs give this team an advantage. Management team experience, which averages 14 years at this fund, supports the rating as well.


None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

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 Value ETF

TVAL is an actively managed fund of attractively valued US large-capitalization companies having the potential for stock price appreciation as perceived by the fund adviser. The portfolio is built using fundamental research and bottom-up stock selection.

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