Active ETFs gain ground as core portfolio options

T. Rowe Price has launched two active core ETFs that are currently operating under fee waivers. The T. Rowe Price Active Core U.S. Equity ETF (TACU) and the Active Core International Equity ETF (TACN) carry zero basis point fees through January 2027. After the waiver ends, TACU will charge 14 basis points and TACN will charge 20 basis points.

New active ETF launches and inflows have increased in recent years. Fund firms are bringing lower-cost, actively managed strategies into the ETF structure. Several newly launched active ETFs aim to keep tracking error low while applying stock-picking approaches that combine fundamental analysis and quantitative models.

Active ETFs construct portfolios directly rather than following market-cap weights. That approach lets managers increase or reduce exposure to individual companies as outlooks change. TACU and TACN are described by their sponsor as active core strategies that target broad equity exposure while managing portfolio composition.

Concentration in market-cap-weighted indexes has left some passive allocations heavily exposed to a small set of large technology companies. Names such as Nvidia, Microsoft and Amazon have accounted for a large share of index gains in recent years. The international focus of TACN provides exposure outside the U.S. market and can alter the balance of technology-heavy domestic allocations.

The ETF wrapper offers operational features that differ from traditional mutual funds. ETFs trade intraday on exchanges, which allows investors to buy and sell throughout the trading day. The in-kind creation and redemption mechanism used by many ETFs can improve tax efficiency relative to mutual funds in certain circumstances.

Some active ETFs have attracted meaningful assets since launch, and fee competition among managers has pushed some active expense ratios lower. Fund sponsors position active core ETFs as alternatives to broad passive core funds by offering research-driven selection inside the ETF structure. The fee waiver timeline and stated expense ratios for TACU and TACN are disclosed in their prospectuses.