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In the exchange traded funds industry, fun facts are always abound. Fun as in “interesting” and “true.” Consider these two nuggets. October was the best month on record for ETF inflows and through 10 months of 2025, Vanguard exceeded its ETF inflows tally from all of 2024.
Actively managed ETFs, particularly fixed income funds, are contributing mightily to this year’s avalanche of ETF flows and have been for some time. That’s been the case for several years now as a batch of previously beloved actively managed mutual funds convert to the ETF wrapper, but advisors should note the active ETF renaissance isn’t all about fixed income.
There are some equity-based products in this space worth considering, including the T. Rowe Price Capital Appreciation Equity ETF (TCAF). Managed by David Giroux, TCAF is an impressive active ETF growth story in its own right. It’s home to $6.1 billion in assets under management after coming to market about two and a half years ago.
That’s proof branding and pedigree – Giroux is a two-time winner of Morningstar’s U.S. Allocation Manager of the Year award – matter and that those traits can help upstart active ETFs rapidly gain traction with advisors and investors.
Tale of the TCAF Tape
TCAF is a large-cap blend fund that endeavors to beat the S&P 500, which is no easy task, but the possibility is there because Giroux and team lean into growth and technology stocks – the very corners of the domestic equity market that have outperformed broader benchmarks in recent years.
“The team begins by identifying companies without major long-term flaws, like poor management teams or unstable business models,” observes Morningstar analyst Jason Kephart. “It then focuses on those with reasonable valuations and strong potential for earnings growth and risk-adjusted results. This approach has typically led to a tilt toward growth stocks, thanks to their better financial health, with a consistent overweighting in the technology sector.”
Still, TCAF has some avenues for playing defense, including a 10.30% weight to utilities, which is more than quadruple the category average. The fund’s exposure to that sector is notable for reasons beyond income and reduced volatility. Given the substantial power demands of artificial intelligence (AI) hyper-scalers, some utilities are clear non-tech plays on the AI build-out.
However, advisors shouldn’t expect a high dividend yield with TCAF owing to the aforementioned favoring of growth stocks, many of which or low-yield names or not dividend payers at all, but the fund has avenues for making up the lack of equity income to investors.
“To maximize aftertax returns for shareholders, the managers will trade less frequently here than they do in the multi-asset mutual fund, focusing on a broader set of long-term holdings,” adds Kephart. “The ETF’s dividend yield should also stay lower than the S&P 500’s to minimize taxable income, but that shouldn’t significantly affect the process.”
TCAF Has Heritage
Like many funds in the active ETF arena, TCAF is related to an established open-end mutual fund – the T. Rowe Price Capital Appreciation (PRWCX).
It’s not guaranteed that TCAF will sport identical or better performance than its mutual fund counterpart, but the DNA could prove meaningful to advisors and long-term investors, particularly when the ETF’s 0.31% annual fee is factored in.
“From his start as sole lead manager in 2007 through June 2025, T. Rowe Price Capital Appreciation landed in the top decile of the moderate-allocation category for the trailing three-, five-, 10-, and 15-year periods,” concludes Kephart. “It has yet to finish in the bottom half of the category in a single calendar year and has regularly trounced a blended benchmark of 60% S&P 500 and 40% Bloomberg US Aggregate Bond Index.”
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