Markets are watching to see whether active strategies can replicate their huge 2023. Actively managed strategies picked up significant funds relative to their smaller AUMs. One strategy that stood out last year and could continue actives’ successful campaign in 2024 may be active ETF TCAF. The fund crossed several AUM thresholds last year and has now surpassed $700 million early in the new year.
TCAF, the T. Rowe Price Capital Appreciation Equity ETF, reached $709 million in AUM as of January 16th. The active ETF has gained $133 million in AUM over the last month per VettaFi data, with flows playing a bigger role than price influence. The strategy added $120 million in flows in that time, displaying continued momentum.
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TCAF, which shares its management with the T. Rowe Price Capital Appreciation Fund (PRWCX) in the form of veteran manager David Giroux, also shares much of the mutual fund’s strategy. While not an exact copy, both do look to capital appreciation. The mutual fund managed by Giroux is a multi-asset stock/bond portfolio, whereas TCAF is a pure equity strategy. However, the stock selection process does have some similarities across both the mutual fund and the ETF.
Giroux and team look for higher-quality stocks of U.S. large-cap firms that display signs of above-average potential for capital growth. They favor other factors, too, like market position and a track record for attractive valuations, as well as strong management. Taken together, the ETF portfolio ends up holding about 100 U.S. firms. This comes from applying an overall “growth at a reasonable price” (GARP) philosophy.
Charging only 31 basis points (bps), TCAF has returned 8.8% over the last three months and outperformed the S&P 500 benchmark since its mid-year inception through year-end, per VettaFi. The strategy’s approach has led it to hold big tech names, of course, and some other strong firms that have gone under the radar. Taken together, TCAF has become one of the market’s fastest-growing active ETFs and may be a solid option for equity investors looking to the rest of 2024.
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