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T. Rowe Price Group: Plans for the ETF Market

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Mutual funds versus ETFs

The mutual fund industry has grown over the past few decades to more than $30 trillion, having received sizeable capital since the early 1980s. Offerings are now available for various asset classes across regions. Meanwhile, the long-term growth rate of the industry has decreased since the peak 1990–2007 period. At the same time, exchange-traded funds have expanded to become a $3 trillion market in the span of a decade.

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The ETF industry has grown rapidly due to the cost-efficient and convenient way it allows investors to put their money in equity, fixed income, currencies, and commodities.

The major players in the industry are BlackRock (BLK), State Street (STT), and Vanguard. Together, they manage approximately 70% of all the ETFs worldwide and more than 80% of all US-originated ETFs. Combined, these companies make up 2.54% of the Financial Select Sector SPDR Fund (XLF).

T. Rowe’s active ETFs

Historically, T. Rowe Price Group (TROW) has focused predominantly on mutual funds offerings and active fund management. Today, the company is focusing on differentiating its product offerings in the ETF market by offering actively managed ETFs.

T. Rowe Price Group won the U.S. Securities and Exchange Commission’s approval to issue actively managed exchange-traded funds in 2013. The company decided not to launch ETFs that match existing mutual fund offerings. Instead, it’s planning to launch ETFs that map the equity and debt stocks in the US.

The company’s competitors, including Federated Investors (FII), Legg Mason (LM), and Northern Trust (NTS) have also received approval to launch active ETFs.

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