Active investing has taken the ETF landscape by storm, with many strategies launching and gaining significant flows. Perhaps few have underlined this moment for active strategies as much as the active ETF, TCAF.
The T. Rowe Price Capital Appreciation Equity ETF (TCAF) has added more than half a billion dollars in YTD inflows. Despite only launching midway through last year, it has continued to show significant performance and flows milestones.
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Specifically, TCAF has added $547 million from January 1 to April 3, per VettaFi data. That has helped it surpass $1 billion in less than a year, sitting around $1.3 billion at the time of writing. So, what may be contributing to the active ETF’s rampant flows?
TCAF follows a stock selection approach that is similar to the equity portion of the multi-asset mutual fund, the T. Rowe Price Capital Appreciation Fund (PRWCX). The ETF and the popular mutual fund are both run by award-winning manager David Giroux. The approach is to look for high-quality stocks by analyzing factors like market position, valuations, and overall potential for risk-adjusted returns.
That approach has helped the ETF return 8.6% YTD, outperforming its FactSet Segment and ETF Database Category averages. Looking for firms with such scrutiny can help a strategy like TCAF separate the wheat from the chaff, so to speak.
Where broad, passive market tracking funds must follow the market’s moves, an active ETF like TCAF can adapt more quickly. For example, with the “Magnificent Seven” seeing some divergence in performance within its ranks, the market narrative may be shifting. That could benefit an active, adaptable strategy with a long-term view like TCAF. Although TCAF holds some exposure to well-known large tech stocks, the ETF also has the ability to adjust its weights or even pivot away if the market environment shifts. For investors looking for a longer-term active allocation, TCAF, with its flows momentum, may appeal.
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