T. Rowe Price's TMED makes the case for active sector ETFs
A 44-basis-point fee and a bottom-up, global mandate are beating the S&P health-care benchmark by wide margins.
TMED, the T. Rowe Price Health Care ETF, is an argument for active management inside a sector fund. The fund charges 44 basis points and holds between 100 and 150 health-care stocks from around the world. It has returned about 19% so far this year. Its 12-month return is 49.1%, according to ETF Database data. The S&P Health Care Select Sector Index is up 8% year to date. Over the same 12 months, the index has gained 28.2%, T. Rowe Price says. ETF Trends reported the comparison.
TMED's process is deliberately broad. A bottom-up approach blends growth and value analysis across pharmaceuticals, biotech, and health-care services. Most of the fund sits inside the MSCI GICS health-care sector. The ETF wrapper adds transparency, flexibility, and tax efficiency — the same qualities that made sector funds a default vehicle. But the active remit separates this fund from the passive crowd. Many passive sector ETFs hold small, specialized indexes that can be volatile; broader passive baskets absorb the swings of the whole group. A manager with a mandate to range across the sector can skip the weakest companies and follow the strongest ideas where they lead.
TMED is becoming a useful test case for active sector ETFs. Its performance suggests a manager working company by company can beat the sector index without tying the fund to a narrow theme. The fund also arrives as active strategies gather momentum. ETF Daily's coverage has tracked $272.5 billion in active stock-fund inflows this year. Goldman Sachs has agreed to acquire NEOS, the $30 billion options-income issuer. In a portfolio, these funds are best treated as satellites, not cores — a way to express a sector view while handing stock selection to a manager.
Competitors face a process problem, not a packaging problem. Any issuer can put a health-care label on an active wrapper. The hard part is the research conviction that lets a manager range across a broad sector and still beat the index. TMED's numbers offer a template — and a target.