With 25 years of experience, Timothy Coyne has had a front-row seat in the evolution of the ETF industry, and he sees tremendous growth opportunities for active ETFs at T. Rowe Price Group.
Coyne, the global head of ETFs, has been there every step of the way for T. Rowe, having arrived at the Baltimore-based asset manager in October 2019 after spending 13 years at State Street Global Advisors, where he was senior managing director, global head of capital markets after also serving as managing director, ETF institutional sales and global capital markets and vice president, ETF capital markets.
Active ETFs are extremely popular now. In January, active ETFs hauled in a record $43 billion of inflows, shattering the prior monthly record of $34 billion, which occurred in November, according to Morningstar. Moreover, some 510 new active ETFs were launched in 2024 across the industry, up from 352 in the prior year.
Since initially launching its ETF business in August 2020, T. Rowe Price Group now boasts a suite of 17 active ETFs, made up of 11 equity and six fixed-income ETFs, with net assets totaling about $10.4 billion.
By comparison, the largest ETF issuer, BlackRock, has about $3.3 trillion in ETF assets. In addition, T Rowe Price’s ETFs carry an average expense ratio of 0.42%. According to the latest data from Morningstar Inc., the average fee for a U.S.-domiciled actively managed ETF is currently 0.40%.
Just last October, T. Rowe Price rolled out its first thematic ETF product, the $25.6 million T. Rowe Price Technology ETF, which trades under the symbol TTEQ. “We have seen significant growth in terms of the number of new (active ETF) products that have come to market over the last several of years,” he said. “When we launched our ETF business, it was a major focus for the firm and we developed it for the long term.”
T. Rowe Price has plans to introduce some additional ETFs this year.
“We are looking to expand more broadly across equity, international equity, fixed-income exposures,” he said. “And we are looking at other asset classes, which may include the possibility of considering other more innovative products like digital assets or other areas of focus.”
All of T. Rowe Price’s ETFs are actively managed and the company has no plans to launch any passive funds, he said. Coyne also noted that not one of T. Rowe Price’s ETFs are converted from existing mutual funds and it’s unlikely they will seek to convert any mutual funds into ETFs in the near term.
"We have evaluated the potential to convert mutual funds to ETFs. However, based on our current client composition in our mutual funds, including significant retirement assets, conversions are not something we are looking to pursue at this time," Coyne stated.
The main advantage of active ETFs vs. indexed ETFs is that an active manager can more quickly respond to market developments and employ greater flexibility with stock selection, he said, while index ETFs are moored to the securities in a given index.
ETFs in general attract investors for a number of reasons, Coyne said.
“ETFs are more tax-efficient and typically have lower fees than mutual fund peers,” he said. “ETFs also have continuous pricing, are easy to use, and provide investors (with) greater control around pricing when entering or existing a position versus having to wait for an end of day price.”
Broadly speaking, Coyne said he has seen interest in active ETFs among institutional investors across all asset classes.
Despite the fact that more and more asset managers have recently entered the ETF marketplace, including Lazard Asset Management and Cohen & Steers, Coyne thinks there is “a long way to go,” especially for actively managed ETFs as product offerings.
“This segment (active ETFs) of the market is still in its infancy and so I think we will see a greater number of investment managers coming to market with active ETFs,” he said. “Because active ETFs are so new to the market, they currently represent a small percentage of AUM in many equity and fixed-income categories relative to passive ETFs and mutual funds; however, awareness, adoption and AUM levels for active ETFs are quickly growing, making them a more prominent part of investors’ portfolios across the industry.”
Coyne concedes that while there are significant growth opportunities for active ETFs, as more players enter the field, competition will intensify. As a result, new entrants will likely look very closely at fee levels from a competitive standpoint.
“At T. Rowe Price, we feel that our ETFs are priced competitively and offer a distinct value proposition for our clients,” he noted.
T. Rowe Price had a total of about $1.65 trillion in AUM as of Jan. 31.
