T. Rowe Price rolls out ‘Active Core’ ETFs with fee relief to jump-start investor interest

A timely launch and a clear marketing hook

T. Rowe Price (TROW) has introduced two new exchange-traded funds — the Active Core U.S. Equity ETF and the Active Core International Equity ETF — and is waiving fees through January 2027 to get attention. That fee holiday is the immediate headline for investors: it makes the new ETFs look cheap on day one and gives advisers a reason to test them in client portfolios without a cost hit.

For investors, the real news is not just the waiver but the product design. T. Rowe Price is pitching these ETFs as core building blocks: broad market exposure with a light active overlay. The combination promises many of the benefits investors want — index-like diversification and some active management to try to add value or trim risk. Because the funds arrive at a time when active ETFs are gaining traction, the waiver is a deliberate incentive to drive early flows and platform listings.

Fund design — a broad core plus an active sleeve

Both funds are structured as ETFs and are explicitly labeled “Active Core.” That signals the basic idea: give investors broad market coverage as the backbone, then allow T. Rowe Price portfolio managers to make limited, deliberate bets around that base.

The U.S. fund covers the domestic equity market with a core approach; the international fund targets developed-market equities outside the U.S. Expect the managers to use an index-like baseline for sector and country weightings, then layer on active positions meant to modestly tilt performance. Because T. Rowe Price has long offered active mutual funds, the ETF wrappers are likely to reuse existing research teams and stock-selection models.

As ETFs, the funds will use creation and redemption mechanisms that help keep trading costs lower for long-term holders and improve tax efficiency compared with traditional mutual funds. At launch the firms typically disclose seed assets and initial listings; investors should watch for ticker symbols, early trading volume and any seed capital that signals distributor support.

Fee schedule and the waiver through January 2027

The sponsor has announced a fee waiver that removes management fees for the life of the promotion through January 2027. That step is designed to make the ETFs’ headline expenses more competitive versus both active mutual funds and ultra-cheap passive ETFs. The waiver is covered by the sponsor, not by investors — but it is temporary.

Once the waiver ends, fees will reappear. How they compare to incumbents will determine whether inflows continue. The waiver will make the funds look very cheap initially and should help secure distribution on advisory platforms and broker-dealers, where fee comparisons matter for platform inclusion.

How the ‘active core’ approach will be put into practice

The practical aim is modest active risk. These aren’t high-conviction concentrated bets; they are intended to keep tracking error low while offering managers room to express views. That means the funds will likely stay close to their benchmarks most of the time, with occasional sector, factor or country tilts that reflect the firm’s fundamental and quantitative work.

Implementation will mix stock selection and portfolio construction tools. Expect managers to lean on fundamental research to pick stocks and on portfolio constraints to limit deviations from the core benchmark. That approach should help control turnover and tax events, though active sleeves do add some trading relative to a pure index fund. For investors who care about tax efficiency, the ETF vehicle helps, but active trading can still raise realized gains compared with a static index holding.

Who these ETFs are meant for and how they could move flows

The primary audience is advisers and investors who want a single ETF to serve as a stable core holding with a modest active edge. That includes financial advisers building model portfolios, wealth platforms looking to replace higher-cost active mutual funds, and defined contribution plan sponsors searching for an actively managed ETF to offer alongside passive options.

The fee waiver is a flow driver: advisers are more willing to put a new product into client accounts when it starts out fee-free. If the funds deliver steady, incremental outperformance or smoother ride relative to passive peers, they could attract sizable assets from active mutual funds and even some index ETFs. But success depends on distribution — platform access, wholesaler support and ETF listings on major exchanges.

How the new funds stack up against competitors

Competition is stiff. Big passive providers and existing active ETF sponsors already own the core ETF shelf. BlackRock (BLK) and State Street (STT), along with Vanguard, dominate core indexing and have deep price advantages. On the active side, several managers have launched “core-plus” or low-active-risk ETFs that target a similar investor. The waiver helps T. Rowe Price get noticed, but long-term success will depend on net performance after the waiver ends and how the firm prices the ETFs thereafter.

AUM ramp scenarios vary: with strong platform support and positive early performance, millions to several billion dollars of assets are attainable over a few years. Without distribution wins, flows could be slow despite the temporary cost edge.

Risks, liquidity and what investors should track next

Investors should keep a few things in mind. First, fee-waiver risk: when the waiver ends, higher ongoing fees could change the funds’ competitiveness. Second, tracking error risk: these ETFs take active bets, so results will diverge from pure benchmarks; that can be good or bad depending on manager skill and market conditions.

Operationally, early trading can be thin and bid/ask spreads wider at launch, so large trades may be costlier at first. Watch for creation/redemption activity, sponsor disclosures about active sleeve limits, turnover and realized capital gains. Finally, distribution is a practical risk: the funds need placement on advisory platforms and in model portfolios to attract steady flows.

Bottom line: T. Rowe Price’s new Active Core ETFs are a sensible, timely product for advisers who want dependable core exposure with a light active tilt. The fee waiver through January 2027 makes trying the funds easier, but their lasting appeal will depend on measured outperformance, post-waiver fee levels and how widely platforms embrace them.

Sources

• prnewswire.com