Chuck Jaffe: One fund, one point for today. The expert to talk about it. Welcome to the ETF of the Week!

Yes, this is the ETF of the Week, where we examine trending, new, newsworthy, unique, and intriguing exchange-traded funds with Todd Rosenbluth. He’s the Head of Research at VettaFi. And if you go to VettaFi.com, the firm’s website, you will find all the tools you need to make yourself a savvier, smarter investor in ETFs.

Todd Rosenbluth, great to chat with you again!

Todd Rosenbluth: It’s great to be back, Chuck.

Chuck Jaffe: Your ETF of the Week is…

Todd Rosenbluth: The T. Rowe Price Capital Appreciation Equity ETF TCAF.

Chuck Jaffe: TCAF, the T. Rowe Price Capital Appreciation Equity ETF. Now, I will point out I am a big fan, although I don’t own this ETF. It’s based on the T. Rowe Price Capital Appreciation Fund, one of the best mutual funds of all time, and one of the biggest holdings and longest-standing holdings — longest tenured holdings — in my own portfolio. So, I’m really curious why you’re making this all-time classic, which is relatively new in the ETF wrapper, your ETF of the Week now?

Todd Rosenbluth: So, let’s talk about what it is and what it isn’t. And then, I’m sure we’ll dive deeper into it. But TCAF is a roughly two-year-old ETF that’s already gathered over $5 billion. It’s the equity — or the stocks that David Giroux, whom you mentioned, and the team are favoring within that broadly diversified multi-asset fund. So this is just stocks.

This isn’t stocks and bonds. It’s mostly the same ideas, the same investment process from the stock selection standpoint. But this is not an ETF share class of the preexisting mutual fund. It’s its own entity. And what it is is a strong performing entity. So TCAF has performed relatively well. When I last looked this year, it was outperforming the S& P 500 index again, with 5-plus billion dollars for a new ETF.

We’ve talked about a couple of the T. Rowe Price active ETFs. They have a strong heritage within the active world, primarily in the mutual fund world. But they’ve been having a lot of success in the ETF space. And this is their leading product.

Chuck Jaffe: It is T. Rowe Price Capital Appreciation. Frankly, also their leading mutual fund, if you’re just looking at classic funds. So, let’s talk about a couple of things. Because yes, you’re going to get a lower expense ratio. The expense ratio on TCAF is about 30-31 basis points, as opposed to 70 basis points for the classic mutual fund. As you pointed out, you’re only getting the equity.

But that raises an interesting issue. Because David Giroux, the portfolio manager, was just named Outstanding Portfolio Manager for the Allocation category by Morningstar in 2025. Now, it’s the third time that he has been a Morningstar Manager of the Year. He won it in 2012 and 2017. But one of the things that they noted is that David, with the mutual fund version of this fund, which is PRWCX, set a record for fund managers because he just last year completed his 17th consecutive year of being above average. So, in other words, he has beaten the average fund. He’s typically been in the top third of all of his funds. That is what he expects to do. I mean, that’s a bare minimum. He’s told me in the past that he would be very disappointed if he did not do that.

Well, funny thing, because when you go to TCAF. The fund came out in 2023. 2024 was its first full calendar year. Guess what? In its Morningstar category, it finished in the bottom half. It finished in the 60th percentile. Now it’s in the top 20% this year, and it certainly has got the track record. But, does that tell you anything about like, hey, we look at something and we try to make sense of the numbers, but it’s a little bit how do you cut the pie that determines, you know, how we wind up saying, oh, this guy’s good, and this guy’s maybe not so good, right?

Todd Rosenbluth: Well, I think his long-term track record shows he and the team around him are excellent at doing share security selection. If you’re going to believe in active management, and this is, of course, an actively managed ETF that we’re talking about, TCAF, you have to have confidence in the manager and you have to have confidence in the firm.

I think that the longer-term track record that David Giroux has established at T. Rowe Price and that T. Rowe Price has established within the active space sets the tone. I don’t think you should judge a fund based on its one-year performance. I did note that it was outperforming this year as a fact. You’re right, I think in the Morningstar category, if you say it, I believe you because I’m not looking at the data right now where it landed.

I think if you want growth at a reasonable price — an active manager in the ETF wrapper — that TCAF is a great example for it. And to me, this means I might get the name wrong or fail to give a good example. But this is a well-known chef who’s had a string of higher-end restaurants than I was offering, like a burger shop.

High-quality burgers. Same standards, same version, same ingredients, or a version of those that’s tied to it. It’s different. Is it the right thing for you? If you’re looking for an actively managed U.S. equity-focused ETF? Then yes. If you’re looking for a multi-asset strategy? That’s not what this is.

Chuck Jaffe: It’s interesting to me, because as much as I have talked to David Giroux. And in fact, I expect to have him as a guest on Money Life again in the not-too-distant future. So, I may have to ask him this question. I do wonder at times when we take a fund like — you and I’ve talked plenty of times about — you take an index fund and you make a few changes and suddenly it’s not the same index fund.

And, you know, if you look at the classic fund, again, one of my largest holdings, it’s only about 55% equity. It’s 30+% fixed income. It’s almost 10% cash right now the last time I checked. So here he is being picked as a great allocation manager. Now, he’s obviously a great stock picker. He’s got decades of experience showing that. At the same time, do you want a manager like this in an adjusted format?

If you’re saying, “Wait, hold it, I only want part of your picks?” Why do you take a great fund manager and not just say, Here he is — Take him as he is?

Todd Rosenbluth: Well, it doesn’t exist as a multi-asset strategy within the ETF wrapper. It exists in the equity sleeve of it. It’s this. I looked at the holdings. Obviously, there’s not a one-for-one because for the ETF, the holdings are disclosed on a daily basis. So I’m looking right now at July 29th holdings, as you and I are talking right now. That obviously is different from a mutual fund standpoint.

What I see is stock picking. So there are some well-known stocks. Microsoft, Nvidia, Amazon, and Apple are among the larger holdings. But Roper Technologies — PTC is another holding. CenterPoint Energy. My eyes are trying to capture all of them as I look here. So, this is not just what you’d find within the S&P 500 from a weighting standpoint.

These are the stocks that the team at T. Rowe Price, which David leads, shines a spotlight on and favors. And they’ve done a great job in sorting through that universe. I think if you believe in active management, you want to have a proven manager. He’s a proven manager.

Chuck Jaffe: No question about that. I do find it interesting that under no circumstances would you ever say, hey, this is one of those cases where — as you point out, they do not have the one for one version of T. Rowe Price Capital Appreciation as an ETF. But you wouldn’t look at it from a strategy standpoint and say, “Yeah, okay, hold the classic fund or what have you?”

It’s always got to be the ETF?

Todd Rosenbluth: Well, first of all, this is the ETF of the Week!

Chuck Jaffe: Yeah, you could not have made that fund the ETF of the Week! I get it. But it is still that idea of do I own the manager in his — the form that’s made him the full reputation, or in half of the reputation?

Todd Rosenbluth: So this is an ETF version of the strategy. I think that obviously there are allocation decisions that are made. But I think that there’s — I’m sure there’s a lot of work that goes into the non-equity part of the portfolio. But they do a very good job of picking stocks. I believe in it. And you highlighted it earlier.

31 basis points is quite low for a core security selection active ETF, or active equity ETF. So, T. Rowe Price has brought its scale to the table as offering an advantage. Would I pay you less money for a version of the strategy? I might, and I think many investors $5.2-5.3 billion of investors agree.

Chuck Jaffe: No, it’s a great point. And I will also note that, you know, as you look at it, as you point out, a core strategy. So, let’s talk just a little bit about where this fits, because one of the things I could really see with this fund, and I was thinking about it when they first came out with this fund, was that this, for somebody who was like, my core is an index fund, but I want to add some active this is that “I’ll be half core with index and I’ll be half core active”, with one of the best active managers of all time picking stocks.

Like, that intuitively was what I was thinking TCAF would be used for. Is that what you’re thinking it should be used for? Like, who should be in this fund?

Todd Rosenbluth: So, that use case is a great example of it. For someone who wants to pair their large-cap exposure with an index and an active-based approach. There are many people who still believe in active management, and they want to work with an established active manager in the ETF format.

I think for some advisors, some investors, this is their — they’ve replaced the S&P 500-based index product. They’re paying a little bit more to get exposure to securities selection. This is an ETF that is well-diversified across sectors and stocks. You’re getting what you might from an index or some of the things you like from an index-based approach, but with an active manager.

So, before you came to me on it last week, we talked about an index fund. Next week, we might speak of an index fund. We’re going to rotate through these things with the various use cases.

Chuck Jaffe: Absolutely, and totally worth doing that because it exposes us to different ideas. This, of course — like we’ve said — a tremendous mutual fund manager. Active track record, better than almost all out there. And this is a way to get the equity picks and add that to your portfolio. It’s TCAF. T. Rowe Price Capital Appreciation Equity. It’s the ETF of the Week from Todd Rosenbluth at VettaFi, Todd, really fun. Talk to you again next week!

Todd Rosenbluth: It’s great seeing you, Chuck!

Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. I’m Chuck Jaffe. I’d love it if you check out my hour-long weekday podcast by going to MoneyLifeShow.com, or by searching for it wherever you find your favorite podcasts.

Now, if you’re looking for information on your favorite ETFs or maybe ETFs you hear about that could become your favorite ETFs, go to VettaFi.com, where they’ve got a full suite of tools that will help you make yourself a more informed, better-adjusted, better-served investor in exchange-traded funds. They’re on X at @Vetta_Fi. Todd Rosenbluth, their Head of Research, my guest here, he’s on X too, at @ToddRosenbluth.

The ETF of the Week is here for you every Thursday. Make sure you don’t miss an episode by following along on your favorite podcast app, and we’ll be back with another ETF for you to consider next week. Until then, happy investing, everybody!