On August 5, 2020, T. Rowe Price launched ETF versions of four of its largest actively-managed domestic equity funds.
Those are:
T. Rowe Price Blue Chip Growth ETF (TCHP)
- The strategy targets mid- to large-cap, blue-chip companies that have the potential for above-average earnings growth and are well established. About 90% US stocks.
- The strategy is managed by Larry Puglia, who has run it for 26 years.
- The mutual fund version of the same name (TRBCX) is a five-star fund with a Silver analyst rating from Morningstar. It has $92 billion in assets.
- The net expense ratio for the ETF is 0.57%, lower than the 0.69% charged by the fund.
T. Rowe Price Dividend Growth ETF (TDVG)
- The strategy invests in dividend-paying companies expected to increase their dividends over time. About 90% US stocks, pretty much all large and mega-cap.
- Managed by Thomas Huber, who has been portfolio manager of T. Rowe Price Dividend Growth Fund since 2000.
- The mutual fund version of the same name (PRDGX) is a five-star fund with a Silver analyst rating from Morningstar. It has $16 billion in assets.
- The net expense ratio for the ETF is 0.50%, lower than the 0.62% charged by the fund.
T. Rowe Price Equity Income ETF (TEQI)
- The strategy invests in undervalued, large cap stocks that have a record of paying reliable dividends. About 90% US stocks and 8% international stocks.
- Managed by John Linehan, who has served as portfolio manager of the fund for four years but has managed the institutional Large Cap Value Fund for 20 years and has 21 years at T. Rowe Price.
- The mutual fund version of the same name (PRFDX) is a three-star fund with a Silver analyst rating from Morningstar. It has $16 billion in assets.
- The net expense ratio for the ETF is 0.54%, lower than the 0.64% charged by the fund.
T. Rowe Price Growth Stock ETF (TGRW)
- The strategy is to invest in companies that have some combination of superior growth in earnings and cash flow, the ability to sustain earnings momentum even during economic slowdowns, occupation of a lucrative niche in the economy, and ability to expand even during times of slow economic growth. This is a sort of mega-cap fund with about 90% US stocks, 10% international stocks.
- Managed by Joseph Fath, who has been portfolio manager of T. Rowe Price Growth Stock Fund for six years.
- The mutual fund version of the same name (PRGFX) is a four-star fund with a Silver analyst rating from Morningstar. It has $69 billion in assets. I’m always amazed that guys that I’ve never heard of – even at firms where I’ve got substantial investments – are successfully managing such huge sums.
- The net expense ratio for the ETF is 0.52%, lower than the 0.65% charged by the fund.
Bottom line
ETFs have a series of structural advantages that allow them to offer the same services at a lower cost, with potentially lower tax bills, than identically-managed mutual funds. In addition, there is no minimum initial investment required to open a new account which makes these funds particularly relevant to younger, smaller, and newer investors.
If you are already invested in the underlying funds, switching might incur an unpleasant short-term tax hit. Otherwise, these are marginally more attractive ways to tap into core holdings with a really solid, risk-conscious firm.
