Carry trades unwinding, unemployment data stress, or even rate-cut disappointment – whichever the cause, markets are selling and selling hard. Many key tech names that have helped lift the stock market have lost a notable portion of their gains this year to the sell-off. Whether the drop represents a short-term ripple or a deeper problem, it may remind investors of the merits of an active equity ETF in cases like these.
See more: This Active SMID-Cap ETF Doubled Its AUM in Just 6 Months
While the big tech index strategies have taken a beating, one active strategy has outperformed. The T. Rowe Price Capital Appreciation Equity ETF (TCAF ), nearing $2 billion, having launched just one year ago, has outperformed the SPDR S&P 500 ETF Trust (SPY ) over the last three months. The active equity ETF has also outperformed the flagship ETF over the last month, down just -0.85% to SPY’s -3.4%, per YCharts.
Not only is TCAF proving its chops against a key ETF like SPY, but also versus other active strategies. Per VettaFi data, TCAF has outperformed both its ETF Database Category and FactSet Segment averages, charging 31 bps. TCAF’s 6% return over the last three months beat the averages’ 2.8% and 3.6% returns, respectively.
TCAF's Active Equity ETF Approach
So what is it about the active equity ETF that’s helping it do so well amid that market turbulence? TCAF, managed by David Giroux, uses fundamental analysis to evaluate stocks. It assesses firms based on factors like experienced management, potential for risk-adjusted returns, and a track record of attractive valuations.
Perhaps most crucial, however, is the freedom with which active strategies can operate. Index funds are required to adhere to their index, with very little flexibility to adapt. Amid the significant volatility facing markets, those funds might struggle. An active equity ETF, by contrast, could adjust and be better positioned for further stress down the line.
For more news, information, and analysis, visit our Active ETF Channel.
