T. Rowe Price has announced the addition of a fifth actively managed fixed income ETF – the T. Rowe Price Floating Rate ETF (Ticker: TFLR). The new ETF follows last month’s launch of T. Rowe Price U.S. High Yield ETF (Ticker: THYF) and brings the firm’s total roster of active ETFs to 10.
The Floating Rate strategy is constructed similarly to the mutual fund, T. Rowe Price Floating Rate Fund (Ticker: PRFRX), investing primarily in floating-rate loans and other floating rate debt securities. The firm writes that the strategy uses a disciplined approach to credit selection, featuring rigorous proprietary research and strict risk control. It is managed by Paul Massaro, head of the Global High Yield team and portfolio manager of the Floating Rate strategy since its 2008 inception. He has 22 years of investment industry experience, including 19 years at T. Rowe Price.
The T. Rowe Price Floating Rate ETF (Ticker: TFLR)
• Seeks high current income and, secondly, capital appreciation. The portfolio manager aims to achieve these objectives by investing primarily in BB and B rated loans, which he believes is likely to keep volatility at below- market rates over time.
• Broadly diversified across 200-300 issuers.
• Net expense ratio is 0.61 per cent.
The T. Rowe Price active ETF roster now consists of five equity ETFs and five fixed income ETFs. The firm’s newest ETFs are based on active fixed income strategies that represent some of the largest and fast-growing ETF categories. They offer the alpha generation potential of the firm’s time-tested fixed income strategies with the tax-efficient, convenient, and cost-effective benefits of the ETF vehicle, the firm says.
Paul Massaro, CFA, Head of Global High Yield, Portfolio Manager, says: “Floating rate bank loans hold a unique position across the broad fixed income landscape given their combination of a floating rate coupon and elevated placement in a company’s capital structure – an important risk management attribute. Historically, bank loans have provided a partial hedge against rising rates as well as low return correlations with other asset classes, making them a solid portfolio diversifier. Bolstered by our close cooperative working relationship with T. Rowe Price’s equity research group and investment-grade credit analysts, we believe this new ETF can serve as a quality actively managed fixed income building block to client solutions.”
Tim Coyne, Head of Exchange-Traded Funds, says: “Since the debut of T. Rowe Price’s first active ETFs two years ago, we’ve continued to add to our ETF capabilities and deliver investment choices that complement our other product offerings to meet investors’ evolving needs. Today’s launch of Floating Rate ETF and the introduction last month of U.S. High Yield ETF represent the latest manifestations of our commitment to building a robust active ETF business. These are compelling strategies managed with T. Rowe Price’s characteristic disciplined, research-intensive approach, and we believe they will meet with growing demand from discerning fixed income investors.”