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From filing to launch could be a few months. These look to be straightforward active and TRANSPARENT ETFs, so nothing controversial about tricky ways to be nontransparent or semi-transparent.
Looks like it'lll be cheaper than PRWCX and disclose holdings daily*, compared to the longer timeframe of PRWCX. Definitely worth keeping an eye on if you want access to Giroux!
* as compared to being an almost-but-not-quite 'clone' of the fund it's emulating, like some of its other ETFs.
Yes, thanks for sharing yogi. A cousin maybe but certainly not a clone, PRWCX being an allocation fund and this ETF sounding like a straight-up equity fund.
Just a question to think about, is Giroux's magic with PRWCX his stock picking ability or is it his knack and ability to choose between different security layers in an allocation fund at the right time; (convertible securities, corporate and government debt, foreign securities, and futures and options - from the funds strategy page). I would think his main skill is the latter. The ETF to be special will need good stock picking ability like any other managed equity fund.
Regarding Giroux's ability to pick stocks, the following was part of the recent annual report dated 12/31/2022.
"In addition, our equities outperformed the S&P500 by 167 basis points (-16.44% versus -18.11%) in 2022. Over the last 3-, 5-, and10-year periods, our equities outperformed the S&P500 by an average of 267, 368, and 405 basis points annualized, respectively. While our equities have substantially outperformed the market, our equities have also been less risky (from a beta perspective) than the market."
@hank. that's the one thing about the fund that makes me nervous. I'm hoping that traders don't screw up the fund. What can Giroux do to protect against that?
I can’t begin to imagine being able to trade in and out of a clone of PRWCX at will. Never felt it was managed for that type of use.
Hank, excellent question, and one I'm sure TRP has considered as well (I hope!). Come to think of it, I wonder if there has been any serious studies about how the ETF versions of OEFs have fared given their more-easily-traded nature in terms of performance.
Look at Fido experience that has active ETF cousins for several of its famous funds (stock & bond). So, FMAG (ER 0.59%), the ETF cousin of storied FMAGX (note ticker similarity), has only $42 million since 2/2/21 inception.
Most of the ETF trading is among traders without involving the ETF. Only when there are significant AUM changes, the authorized participants step in with the creation/redemption mechanism. Of course, there are tax advantages with ETFs - no/low CG annual distributions.
I can’t begin to imagine being able to trade in and out of a clone of PRWCX at will. Never felt it was managed for that type of use.
No where does it say this is a clone of PRWCX. Actually, it suggests it is Giroux's attempt at an equity (stock) ETF. 80% minimum equities. No mention of alternative investments, like fixed income.
@MikeM - Fair point. Perhaps it’s just coincidence that the name TRP selected for the new offering is: ”Capital Appreciation Equity ETF” and that David Giroux will manage it. Personally, for long time core equity holdings I prefer good actively managed mutual funds with a stable investor base. That said, I’ve used a couple different actively managed bond etfs and the ability of investors to move in and out didn’t seem to hurt their performance much. And I use one equity index etf - but rarely trade it.
Hope this goes well for TRP and their investor base. ISTM Price has experienced heavy outflows in recent years.
I agree that the magic sauce is the non-equity allocation of PRWCX. Giroux manages to move in and out of bank loan bonds, treasury, and cash as he see opportunities arise. It is truly remarkable to see how the fund performs through the ups and downs a a full market cycle.
Hope this new asset flow does not impact the overall strategy for his existing investors in PCWCX. Think this ETF may stabilize money flow situation at T. Rowe Price, now that the company has divided into two separate entities. Perhaps TCAF would have smaller CG distribution.
If the lower-priced ETF indeed is the same as PRWCX, is there any reason not to switch into that from the OEF in a taxable account? I.E., perhaps better tax treatment?
If the ETF would pay out quarterly, that would be more attractive to me in terms of reinvesting back into the fund. I hate that PRWCX only pays out annually.
Tough to say if that is going to be a clone. The equity part of PCWCX may be replicated in this ETF among the larger positions. I tend to say that will not be a clone. The risk profile is a total unknown at this point and we are speculating as if they are identical.
Tax efficiency may be an advantage. I believe new investors may simply want to gain access to Giruox’s talent that could not in the past with PCWCX being closed.
Listing all positions daily poses undue risk of front-running the manager’s intent to build new positions, thus it harms the existing shareholders. That is why the OEF holdings are disclosed at least 3-6 months later.
Listing all positions daily poses undue risk of front-running the manager’s intent to build new positions, thus it harms the existing shareholders. That is why the OEF holdings are disclosed at least 3-6 months later.
That's my exact concern here. Does daily transparency diminish the long-term impact of Giroux' 'magic' with PRWCX? I guess we'll have to wait and see how the fund is comprised before making any firm assessments on how it compares to PRWCX.
There are some other value-oriented ETFs that are also transparent (w/daily disclosures). Thinking is that this category has been unpopular for a long time and the dangers of frontrunning may be small. The filing indicated only annual distributions for TCAF, but those may be more frequent.
@Sven Giroux updates his top 10 holdings monthly usually within a week of the beginning of the month. I check this frequently to see what he is doing. His biggest increase this past month was in UNH, which I found interesting. For the new ETF I really hope he doesn’t provide these updates on a daily basis. It doesn’t seem like it would be in the shareholder interest.
I don't think money flows in and out will be much of an issue with a Large Cap ETF. If there are large redemptions, the sponsor just sells a basket of the positions. The ETF does not have to keep cash available just for redemptions.
Daily disclosure will make it harder to build positions at lower prices, however, if lots of people start large positions in his picks
Per the annual report his equity performance is pretty good!
Wonder if PRWCX will hold some or all of its equity positions in TCAF. This would allow PRWCX to merely tweak the income side of it's fund. Also, if PRWCX reopens, PRWCX could simply buy TCAF for the equity allocation.
I assume some fund manager own ETF Fund(s) within their mutual fund.
Separately, VGHCX and VHT (Vanguard's Health Care ETF) do appear to have composition difference worth noting. Maybe this will be the case with TCAL and PRWCX.
The accounting on PRWCX has to be clean. It is not a fund-of-fund as it spells out in the prospectus.
VGHCX is an active managed fund runs by Wellington and VHT is passively managed ETF runs by Vanguard Quantitative Group. They may share some stocks but their weightings and mandates are different. Their performance and risk profile are not identical.
Another case, FPA Crescent is an allocation fund with a great record. The same team also runs a new global equity ETF, FPAG. They share some stocks in the top 10 holdings, but FPAG is more volatile along with oversea stocks and small % of emerging market. I much prefer the Crescent fund.
@Mike W, going to ETFs has their trade off. Running active managed mutual funds is a highly competitive business on the stock picking and tactical moves in fast changing environment. That is their edge against their competitors. Smaller cap funds working with thinly traded stocks are particularly susceptible to being front-run by someone else to bid up the stock price while they are building up the position, or vice versa.
By the time the managers talk openly about their portfolio, they have already bought enough for the new positions and made sizable changes/exiting certain stocks probably months afterward.
We will see how Giruox runs this ETF, but I think it will be mostly stocks and little exposure to bond allocation. Thus it will not be a clone fund.
Steve Romick manages both FPACX and SOR Source Capital a closed end fund with a very similar portfolio Until 2021 or so they were almost identical. FPACX has done better since.
Never quite understood why SOR is out there, but you can buy it for free at Schwab, although the mutual fund will cost you $50
I bought FPACX awhile back at Fidelity and added more thru their automatic investment feature for $5 per purchase. You pick the date and the $ amount, quite convenient. You can sell transaction-fee funds for free at Fidelity. As far as I know, only Fidelity offers this inexpensive automatic investing. Learned this here from @msf, many thanks.
Never quite understood why SOR is out there, but you can buy it for free at Schwab, although the mutual fund will cost you $50
Strangely enough at TD Ameritrade, FPACX is NTF. I own it in my TDA Roth IRA. I wonder if when the Schwab-TDA marriage completes in a month or 2 if it will still have a TF through Schwab. I'm sure there are other funds in that contradicting area.
Currently, TRP ETF's have not garnered much in AUM. Blue Chip Growth and Dividend Growth each have +$300M and Equity Income +$100M. Otherwise, mainly $20M or so per fund.
Comments
Looks like it'lll be cheaper than PRWCX and disclose holdings daily*, compared to the longer timeframe of PRWCX. Definitely worth keeping an eye on if you want access to Giroux!
* as compared to being an almost-but-not-quite 'clone' of the fund it's emulating, like some of its other ETFs.
Just a question to think about, is Giroux's magic with PRWCX his stock picking ability or is it his knack and ability to choose between different security layers in an allocation fund at the right time; (convertible securities, corporate and government debt, foreign securities, and futures and options - from the funds strategy page). I would think his main skill is the latter. The ETF to be special will need good stock picking ability like any other managed equity fund.
In any case I can't wait to see how it does.
"In addition, our equities outperformed the S&P500 by 167 basis points (-16.44% versus -18.11%) in 2022. Over the last 3-, 5-, and10-year periods, our equities outperformed the S&P500 by an average of 267, 368, and 405 basis points annualized, respectively. While our equities have substantially outperformed the market, our equities have also been less risky (from a beta perspective) than the market."
Most of the ETF trading is among traders without involving the ETF. Only when there are significant AUM changes, the authorized participants step in with the creation/redemption mechanism. Of course, there are tax advantages with ETFs - no/low CG annual distributions.
Hope this goes well for TRP and their investor base. ISTM Price has experienced heavy outflows in recent years.
Hope this new asset flow does not impact the overall strategy for his existing investors in PCWCX. Think this ETF may stabilize money flow situation at T. Rowe Price, now that the company has divided into two separate entities. Perhaps TCAF would have smaller CG distribution.
If the ETF would pay out quarterly, that would be more attractive to me in terms of reinvesting back into the fund. I hate that PRWCX only pays out annually.
Tax efficiency may be an advantage. I believe new investors may simply want to gain access to Giruox’s talent that could not in the past with PCWCX being closed.
Listing all positions daily poses undue risk of front-running the manager’s intent to build new positions, thus it harms the existing shareholders. That is why the OEF holdings are disclosed at least 3-6 months later.
The filing indicated only annual distributions for TCAF, but those may be more frequent.
Daily disclosure will make it harder to build positions at lower prices, however, if lots of people start large positions in his picks
Per the annual report his equity performance is pretty good!
I assume some fund manager own ETF Fund(s) within their mutual fund.
Separately, VGHCX and VHT (Vanguard's Health Care ETF) do appear to have composition difference worth noting. Maybe this will be the case with TCAL and PRWCX.
VGHCX is an active managed fund runs by Wellington and VHT is passively managed ETF runs by Vanguard Quantitative Group. They may share some stocks but their weightings and mandates are different. Their performance and risk profile are not identical.
Another case, FPA Crescent is an allocation fund with a great record. The same team also runs a new global equity ETF, FPAG. They share some stocks in the top 10 holdings, but FPAG is more volatile along with oversea stocks and small % of emerging market. I much prefer the Crescent fund.
@Mike W, going to ETFs has their trade off. Running active managed mutual funds is a highly competitive business on the stock picking and tactical moves in fast changing environment. That is their edge against their competitors. Smaller cap funds working with thinly traded stocks are particularly susceptible to being front-run by someone else to bid up the stock price while they are building up the position, or vice versa.
By the time the managers talk openly about their portfolio, they have already bought enough for the new positions and made sizable changes/exiting certain stocks probably months afterward.
We will see how Giruox runs this ETF, but I think it will be mostly stocks and little exposure to bond allocation. Thus it will not be a clone fund.
Until 2021 or so they were almost identical. FPACX has done better since.
Never quite understood why SOR is out there, but you can buy it for free at Schwab, although the mutual fund will cost you $50
They need all the fee income they can get.
TCAF could be a winner for them?