Looking to change up your game plan for rate cuts? Months and months have gone by with investors reading Fed tea leaves. Finally, at Jackson Hole last week, Fed Chair Jerome Powell announced the “time has come” for cuts. While the pace of those cuts may not be totally clear, investors finally have a pretty clear signal that rates will drop. With that said, investors looking to make a move on that data may want to look out for a particular active ETF.
See more: Active ETFs to Hit $4 Trillion AUM by 2030? What You Need to Know
That active ETF, TCAF, has seen a meteoric rise since launching just over a year ago. TCAF, the T. Rowe Price Capital Appreciation Equity ETF, launched in June 2023. Managed by David Giroux, the strategy charges 31 basis points (bps) for its approach. The active ETF has gathered more than $2 billion in AUM in a little more than one year. It has gathered almost half a billion in flows in just the last three months, alone, on net.
The strategy uses fundamental analysis to identify large-cap firms with high-quality stocks and the potential for above-average growth. It makes some significant calls with just 100 firms in its portfolio. Giroux and the team aim for capital appreciation in assessing firms. That approach has helped the strategy perform, returning 24.75% since launching last June, per T. Rowe Price data.
Why TCAF, then, for rate cuts? TCAF leans into some of active investing’s best attributes. Its flexibility within its broad goal of capital appreciation lets it adjust to rate cuts as needed. What’s more, its fundamental analysis, leaning on T. Rowe Price’s research capabilities, can help it get ahead of even other active funds. What’s more, active ETFs like TCAF lean on managerial expertise, with Giroux a standout example therein.
Rate cuts may already be priced in, but even should that be the case, the impact is yet to be fully understood. While passive ETFs can simply track the S&P 500 and see where things go, an active ETF like TCAF could offer an opportunity to outperform simple indexes when rates do drop.
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