Entering 2025, one of the biggest market narratives investors faced was concentration risk. Despite tariffs coming and going with speed and stagflation a looming specter, concentration risk and the need for diversification continue to linger. Following recent rate cuts, one segment in particular may be poised to benefit in particular. An active small-cap ETF like TMSL, for example, can find the strongest candidates in the small and mid-cap space, leaning on fundamental research.
See more: Tariff News Pushing Portfolios Down? Add Active ETF Flexibility
The T. Rowe Price Small-Mid Cap ETF (TMSL) charges only 55 basis points (BPS) to actively invest in small and mid-cap equities. The active ETF will hit its three-year anniversary milestone next June, likely putting the growing ETF on even more investors’ radar.
Specifically, its managers take a bottom-up stock selection approach, assessing companies for fundamental metrics like profitability, stability, earnings quality, return on equity, book value and more. Together, that has helped the fund return 5.6% YTD, beating its Factset Segment average in that time. Which rising small- cap stocks, then, have been starring in the ETF’s portfolio?
Funds to Watch in TMSL
Rambus, Inc. (RMBS) stands out convincingly in the category and in TMSL’s portfolio. The semiconductor and internet protocol tools firm has returned 69.45% YTD for its investors according to YCharts data. RMBS displayed 30.33% quarterly, year-on-year revenue growth as of October 13th per YCharts, as well.
The active SMID-cap ETF also currently invests in MKS Instruments, Inc. (MKSI). MKSI, a manufacturing logistics and information tech company, has returned 17% YTD per YCharts. Finally, it also invests in InterDigital, Inc. (IDCC). The company focuses on AI technology as well as video, wireless, and related tech. IDCC has returned 77.2% YTD, providing significant outperformance compared to the S&P 500. The company’s 23.73 forward p/e ratio appeals, as well.
Together, those firms help capture some of the possible performance in the active SMID-cap ETF. Small-cap firms can benefit from cheaper borrowing, and with a fundamental research focus, investors can find durable opportunities. For those looking to add some active, TMSL may intrigue.
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