Low-Cost Active ETFs Post Higher Success RatesLow-cost active ETFs succeeded at nearly double the rate of their expensive counterparts over the past decade, according to Morningstar's year-end 2025 Active/Passive Barometer [report], underscoring how fees remain the primary hurdle for active managers attempting to outpace index funds.The research found that 31% of active funds in the cheapest quintile of their categories beat their average passive peer over 10 years. This is compared with just 17% for the pr ...

Active Bond ETFs Rising: This Fund up Quarter Billion YTDActive ETFs are one of the most exciting investment areas in recent years, driving much of overall ETF product launches. Part of that growth owes to increased use and demand for active bond ETFs, bringing active management to fixed income. 2026 has proven no exception, with active bond ETFs like TAGG seeing some serious inflows.See more: [Stars are Aligning for Energy Stocks: How Active Can Help]That may be due to continued uncertainty in the bond mar ...

Core Insights - T. Rowe Price has two leading ETFs in early 2026, with the T. Rowe Price Natural Resources ETF (TURF) showing a year-to-date return of 16.1% and the T. Rowe Price QM U.S. Bond ETF (TAGG) attracting $233.08 million in net inflows [1] Group 1: Performance Highlights - TURF leads T. Rowe Price ETFs in performance with a return of 16.1% year-to-date as of February 10 [1] - TAGG has attracted $233.08 million in net inflows, making it the top fund in terms of flows for the firm [1] Group 2: Investment Strategies - TURF focuses on upstream natural resource companies involved in exploring, extracting, and developing commodities across various sectors, aiming to capitalize on commodity cycles [1] - TAGG employs a "core plus" approach to outperform the Bloomberg U.S. Aggregate Bond Index, utilizing quantitative models and fundamental credit research [1] Group 3: Fund Characteristics - TURF, launched in June 2025, has an expense ratio of 0.44% and a fund size of $19.2 million [1] - TAGG, initiated in September 2021, has a fund size of $1.77 billion and a competitive expense ratio of 0.08% [1]

Core Insights - Active bond ETFs are positioned to address the challenges posed by global financial uncertainty and geopolitical conflicts, providing a flexible investment option for investors [1] - The T. Rowe Price QM U.S. Bond ETF (TAGG) has seen significant net inflows, totaling over $250 million in the last month, indicating strong investor interest [1] - TAGG aims to outperform the Bloomberg U.S. Aggregate Bond Index while maintaining similar exposure and portfolio characteristics, utilizing both fundamental analysis and quantitative research [1] Active Bond ETFs - Active bond ETFs have gained popularity since the ETF rule changes in 2019, offering advantages over passive index-based ETFs and mutual funds [1] - These ETFs provide tax efficiency, adaptability, and the ability to quickly replace bonds that are called early or face default, unlike passive funds [1] - TAGG has grown to over $1.7 billion in assets under management (AUM) and has outperformed its category average over the past year [1]

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]

Core Insights - Bond ETFs, particularly active bond ETFs, have seen significant inflows in 2025, indicating strong investor interest and momentum [1][2] - The T. Rowe Price QM U.S. Bond ETF (TAGG) has attracted $1.4 billion in net inflows since January 1, bringing its total AUM to over $1.5 billion [2] - TAGG has delivered a year-to-date return of 6.8%, outperforming its category average, and offers a yield to maturity of 4.5% as of September 30 [2] Investment Strategy - TAGG focuses on investment-grade bonds and aims to outperform the Bloomberg U.S. Aggregate Bond index by leveraging T. Rowe Price's fundamental research and quantitative tools [3] - The fund is designed to invest in a variety of securities, including mortgage and asset-backed securities, to enhance its performance [3] Future Outlook - As investors approach 2026, TAGG's active management strategy is positioned to outperform passive bond funds, especially in a challenging economic environment characterized by potential Fed rate cuts and persistent inflation [4] - TAGG is suggested as a strategic addition to long-term bond portfolios, rather than just a tactical adjustment, due to its low-cost structure and consistent performance goals [4]

Core Viewpoint - The Federal Reserve's recent interest rate cut of 25 basis points is expected to positively impact investor portfolios and market outlooks, emphasizing the importance of active investing strategies to navigate the resulting economic shifts [1]. Group 1: Impact on Equities - The Fed's rate cut is likely to benefit small-cap tech and biotech firms that rely on borrowing for future growth, as lower borrowing costs can enhance their equity performance [1]. - Active investing strategies are positioned to identify and capitalize on these opportunities more effectively than passive funds, which may lack the adaptability and fundamental research focus [1]. Group 2: Impact on Fixed Income - In the fixed income sector, active investing is highlighted as having a significant advantage over passive strategies, particularly in maintaining bond allocations amid changing market conditions [2]. - Active managers can utilize fundamental research to pinpoint standout bonds as the yield curve shifts, allowing for better performance in a rate-cut environment [2]. Group 3: Active ETFs - Active ETFs, such as the T. Rowe Price Capital Appreciation Equity ETF (TCAF) and the T. Rowe Price QM U.S. Bond ETF (TAGG), provide tax-efficient and transparent investment vehicles for those seeking active management solutions [3]. - The recent Fed rate cut presents opportunities for active investing, reinforcing the value of these investment tools [3].

Core Insights - The T. Rowe Price QM U.S. Bond ETF (TAGG) has seen significant growth, increasing from $1.2 billion to approximately $1.4 billion in assets over the past year, indicating strong investor interest in low-cost, actively managed fixed income ETFs [2][4] - TAGG has slightly outperformed the Bloomberg Aggregate Bond Index over the past year and since its inception, making it a favorable option for investors seeking active fixed income management [2][4] - T. Rowe Price is increasingly focusing on the ETF market, having launched several products in recent years, which reflects its commitment to becoming a significant player in the ETF space [3][4] Fund Performance and Characteristics - TAGG has an expense ratio of eight basis points, making it a cost-effective choice for active management compared to traditional mutual funds [4][5] - The fund has received a three-star rating from Morningstar, placing it in the middle of its peer group, which suggests consistent performance without extreme volatility [5][6] - The fund's strategy involves sector differences within the bond market, being underweighted in treasuries and overweighted in other investment-grade bonds, aligning with its active management approach [4][5] Market Context and Strategy - The current environment of expected rate cuts by the Federal Reserve makes TAGG a strategic choice for investors looking for core bond exposure rather than a tactical play [5][6] - Active management is particularly appealing during periods of volatility in the bond market, as it provides investors with professional navigation through interest rate changes and yield curve movements [5][6] - TAGG is positioned as a complement to passive strategies, offering a steady and consistent performance for cost-conscious investors [6][7]

Core Viewpoint - The Federal Reserve's potential decision to cut interest rates presents an opportunity for investors to reassess their fixed income allocations, emphasizing the advantages of active investing over passive bond index strategies [1][2]. Group 1: Active vs. Passive Investing - Active investing is positioned as a superior strategy in the current fixed income landscape, allowing investors to better navigate changes in interest rates and bond market dynamics [2][5]. - Passive bond index strategies may struggle to maintain their allocations effectively, particularly when bonds are called early, leading to potential underperformance [2][3]. Group 2: Performance Insights - Active managers can leverage fundamental research and insights to outperform bond index performance, especially in high-yield segments where deeper scrutiny of issuers is crucial [3][4]. - T. Rowe Price's active bond ETF, TAGG, has demonstrated a performance advantage, outpacing the Bloomberg Aggregate Bond Index by over 30 basis points on average over the last three years, after accounting for fees [4]. Group 3: Long-term Benefits - In the long term, active investing strategies can enhance bond portfolio performance, making them appealing for investors looking to adapt to changing interest rates or seeking better returns from debt [5].