Active Hedged Equity ETF Breaks From Traditional Approach

Core Insights - T. Rowe Price Asset Management has launched a new hedged equity ETF, THEQ, which differs from traditional hedged equity ETFs by focusing on an actively managed stock fund rather than passive index exposure [1][2] Investment Strategy - THEQ typically invests at least 80% of its net assets in equities, primarily in the T. Rowe Price U.S. Equity Research ETF (TSPA), which employs a team of industry-focused analysts for stock selection [2][3] - The fund aims to capture 70% to 80% of market upside while limiting volatility to 60% of the market's [3] Hedging Approach - Unlike buffered ETFs that cap upside potential and rely on a single hedging source, THEQ utilizes a derivatives hedging strategy designed to mitigate tail risk through multiple tools [4][5] - The strategy includes equity index futures, U.S. Treasury futures, and equity index put options, with Treasury futures providing diversifying exposure to interest rates during market downturns [5] Fund Performance and Metrics - THEQ was launched in March 2025, has a net expense ratio of 0.46%, and has attracted $11.3 million in net flows over the past three months, yielding a 3.1% return [6] - TSPA, the core equity holding of THEQ, manages $2.17 billion in assets, charges 0.34%, and has seen inflows of $780.1 million over the past year with an 18.4% return [7]