T. Rowe Price is leveraging three decades of private equity experience to give active ETF investors access to companies at the core of artificial intelligence, including OpenAI, Anthropic, and Databricks, according to Christopher Murphy, head of ETF specialists at the firm.
In an interview at the Exchange conference in Las Vegas, Murphy said the T. Rowe Price Technology ETF (TTEQ) may be the only ETF holding both Databricks and Anthropic. The firm’s ability to participate in late-stage funding rounds and include those positions in ETF portfolios represents a differentiator for active management in the ETF market.
The firm holds the private companies alongside public semiconductor makers like Nvidia Corp. (NVDA) and Taiwan Semiconductor Manufacturing Co. (TSM), cloud providers like Amazon.com, Inc. (AMZN), and international names like Alibaba Group Holding (BABA) and Shopify Inc. (SHOP), according to Murphy.
Access to private companies like OpenAI illustrates how active strategies can offer exposure that passive index funds cannot replicate. That differentiation is becoming increasingly valuable as active ETFs move beyond satellite positions and into the core of advisor portfolios.
Active ETFs Enter Multi-Manager Models
T. Rowe Price partnered with Goldman Sachs Group Inc. (GS) to create multi-manager, risk-based model portfolios on Morgan Stanley’s (MS) unified managed account platform. The collaboration addresses advisor demand for a “best-of-breed approach” rather than relying on a single manager, according to Murphy.
“Active management has always been in an advisor allocator’s playbook. They just have been underserved in active ETFs,” Murphy said. “ETFs have become the vehicle of choice for portfolios, and therefore with more active ETFs, it was a matter of time before we started to see them show up in model portfolios.”
Model portfolios have become commoditized in recent years, making it difficult for providers to differentiate themselves, according to Murphy. Including active strategies like TTEQ instead of passive technology exposure offers a way to stand out while potentially adding alpha through security selection.
The firm is also making it easier for advisors to adopt active strategies by eliminating cost as a barrier. The T. Rowe Price Active Core U.S. Equity ETF (TACU) and the T. Rowe Price Active Core International Equity ETF (TACN) carry 0% expense ratios for the first 13 months through January 30, 2027. Murphy said the fee waiver reduces friction associated with swapping from passive to active ETFs.
Income Demand
Beyond core equity, the firm is addressing demand for income in portfolios. The T. Rowe Price Capital Appreciation Premium Income ETF (TCAL) writes covered calls on individual low-volatility stocks rather than an index. Murphy said the strategy harvests higher premiums from idiosyncratic risk while providing improved stability though a lower volatility portfolio while also generating high income — which is an important mix of features to many income-focused investors.
The income theme extends to fixed income, where Murphy argued the Bloomberg U.S. Aggregate Bond Index concentrates risk inefficiently. He said 75% of credit risk comes from just 25% of the index in the investment-grade corporate sleeve, while government debt makes up more than 70% of the benchmark.
Better returns have come from sectors outside the aggregate index over the past three to five years, according to Murphy. The T. Rowe Price Total Return ETF (TOTR) and the T. Rowe Price Multi-Sector Income ETF (TMSF) access those plus sectors where performance has been stronger.
Originally published on ETF Trends
For more news, information, and strategy, visit ETF Trends.
For more news, information, and strategy, visit the Active ETF Content Hub.
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Read more commentaries by VettaFi
