Core Insights - The active ETF market experienced a split in strategy in 2025, with discretionary equity funds gaining 3.3% market share while systematic equity funds lost 1.1% [1] - Discretionary equity saw significant organic asset growth of 68.8%, contributing to the overall active ETF market reaching $476 billion across 953 launches in 2025 [3] Discretionary Equity Performance - The T. Rowe Price Capital Appreciation Equity ETF (TCAF) attracted $2.59 billion in one-year flows and achieved a 14.3% return, underscoring the appeal of discretionary equity [2] - TCAF focuses on high-quality U.S. large-cap companies with above-average growth potential and has a competitive expense ratio of 0.31%, managing $6.34 billion since its launch in June 2023 [2] Discretionary Fixed Income Performance - Discretionary fixed income led all categories with $136.9 billion in trailing 12-month flows through December 31 [4] - The T. Rowe Price QM U.S. Bond ETF (TAGG) captured $1.42 billion of those flows while delivering a 7.57% return and managing $1.54 billion in assets, with an expense ratio of only 0.08% [4] New ETF Launches - In response to the decline in systematic equity's market share, T. Rowe Price launched two active ETFs in early December that blend discretionary research with systematic implementation [5] - The T. Rowe Price Active Core U.S. Equity ETF (TACU) and the T. Rowe Price Active Core International Equity ETF (TACN) are waiving fees through January 30, 2027, resulting in net expense ratios of zero during this period [5] Investment Strategy - TACU holds 550–650 U.S. large-cap stocks with a 0.14% expense ratio, while TACN holds 400–500 international stocks with a 0.20% expense ratio after the fee waivers expire [6] - Both new equity ETFs aim to maintain low index tracking error while utilizing a blend of fundamental and quantitative research, targeting cost-conscious investors [7]