Having launched just months ago, the active ETF TCAF is on the precipice of $300 million in AUM. The T. Rowe Price Capital Appreciation Equity ETF (TCAF ), which had already surpassed $200 million in September, sat just $6 million away from its next threshold to start November. With active strategies having a strong year in 2023, it may be worth taking a closer look at TCAF itself and what aspect of the strategy is attracting such significant flows.
The all-equity TCAF joins its sibling, the T. Rowe Price Capital Appreciation Fund (PRWCX), a popular multi-asset mutual fund with a long track record. Both strategies also benefit from the experienced management of David Giroux, who has run PRWCX for the last 16 years. Over the last ten years, PRWCX finished in the top quartile of its mixed-asset peer group in eight of those years.
So, how does TCAF invest, then? The ETF actively invests in higher-quality large-cap U.S. stocks with above-average potential for “capital” growth. TCAF employs fundamental analysis in doing so, looking for experienced management, a favorable market position, and a record of attractive valuations. It typically holds about 100 U.S. equities and has already been outpacing the S&P 500 with its early performance.
The active fund charges just 31 basis points for its approach. It has seen its AUM rise $52 million over the last month on net, per VettaFi. It’s added nearly $70 million in net flows over the last month.
2023: Year of the Active ETF?
In looking to build long-term capital appreciation, the active ETF leans on growth and value styles as needed. That active flexibility stands out as just one example of the broader advantage of active investing that can quickly adapt to the market.
Active ETFs have been a key contributor to ETF launches nearing a record in 2023. Active strategies have, in turn, seen significant flows as a category despite their relatively small AUM compared to other fund types. In a market environment driven by risk-focused narratives surrounding inflation, rate hikes, and a possible recession, an active ETF like TCAF could appeal.
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