October 2023 IssueLong scroll reading

T. Rowe Price Capital Appreciation PRWCX vs TCAF

By Charles Lynn Bolin

I was asked recently what I thought of T. Rowe Price Capital Appreciation (PRWCX) compared to T. Rowe Price Capital Appreciation Equity ETF (TCAF), which has gained $235 million in assets under management since its June 2023 launch. TCAF is one of two new T Rowe Price offerings that play off the unparalleled success of the PRWCX, which is closed to new investors. The other new entrant, the T. Rowe Price Capital Appreciation and Income Fund, has not yet debuted.

The most striking similarities are the name and the fact that they are both managed by David R. Giroux, who has an outstanding record. From here, the similarity fades. PRWCX is a moderate to growth-oriented mixed-asset fund, while TCAF is a predominantly domestic equity fund. There are differences in how the equity sleeve of PRWCX compares to TCAF, which are explored in this article.

Let’s start with a review of PRWCX before diving into the infant TCAF.


T Rowe Price Capital Appreciation (PRWCX) is classified by Lipper in the Mixed-Asset “Growth” Category and Morningstar as a “Moderate” category. Its current allocation is about 62% equities, but the fund has a lot of flexibility to adjust to market conditions.

The list of best-performing mixed-asset target allocation growth funds over the past ten years is small. To select the five funds in Table #1, I used the Top Quintile of the MFO Rating for 3, 5, and 10 years for funds available at Fidelity. Dodge & Cox Balanced (DODBX) has a transaction fee, and PRWCX has been closed to new investors since 2014.

T Rowe Price Capital Appreciation (PRWCX) is the standout performer. It is the category’s only Great Owl, which means it is the only growth allocation fund to generate consistently top-tier risk-adjusted returns over all trailing periods. To be clear, it is The One out of 250 such funds. It has been in existence for 37 years and has been managed by David R. Giroux for the past eighteen years. As a result of its performance, it has grown to $53 billion in assets under management. For the past ten years, Allspring Diversified Capital Builder (EKBAX) has had similar high overall performance but with more risk. I like that PRWCX has a stock allocation of 62%, which is moderate compared to EKBAX, with 84%.

Table #1: Best Performing Mixed-Asset Growth Funds – Ten Years

Source: Created by the Author Using the MFO Premium Multi-search Tool

Figure #1: Best Performing Mixed-Asset Growth Funds

Source: Created by the Author Using the MFO Premium Multi-search Tool

My colleague David Snowball offered a complementary analysis of the fund in his August 2023 article on the impending launch of T. Rowe Price Capital Appreciation and Income. His take: “You care [about the new fund] because T. Rowe Price Capital Appreciation is (a) utterly unmatched and (b) closed tight.”


The strategy of the T. Rowe Price Capital Appreciation Fund (PRWCX) is

The fund normally invests at least 50% of its total assets in stocks and the remaining assets are generally invested in corporate and government debt (including mortgage- and asset-backed securities), convertible securities, and bank loans (which represent an interest in amounts owed by a borrower to a syndicate of lenders) in keeping with the fund’s objective. The fund may also invest up to 25% of its total assets in foreign securities.

The fund’s investments in stocks generally fall into one of two categories: the larger category comprises long-term core holdings whose prices when purchased are considered low in terms of company assets, earnings, or other factors; the smaller category comprises opportunistic investments whose prices we expect to rise in the short term but not necessarily over the long term. There are no limits on the market capitalization of the issuers of the stocks in which the fund invests. Since we attempt to prevent losses as well as achieve gains, we typically use a value approach in selecting investments. Our in-house research team seeks to identify companies that seem undervalued by various measures, such as price/book value, and may be temporarily out of favor but have good prospects for capital appreciation. We may establish relatively large positions in companies we find particularly attractive.

We work as hard to reduce risk as to maximize gains and may seek to realize gains rather than lose them in market declines. In addition, we search for attractive risk/reward values among all types of securities. The portion of the fund’s investment in a particular type of security, such as common stocks, results largely from case-by-case investment decisions, and the size of the fund’s cash reserves may reflect the portfolio manager’s ability to find companies that meet valuation criteria rather than his market outlook.

The fund may purchase bonds, convertible securities, and bank loans for their income or other features or to gain additional exposure to a company. Maturity and quality are not necessarily major considerations and there are no limits on the maturities or credit ratings of the debt instruments in which the fund invests. The fund may invest up to 30% of its total assets in below investment-grade corporate bonds (also known as “junk bonds”) and other debt instruments that are rated below investment grade…

PRWCX equity is currently 95% domestic. It is overweight Technology and Healthcare. Thirty percent of its fixed income is in Bank Loans.

Morningstar gives PRWCX a Five Star Rating with a Gold Analyst Rating. The Portfolio Manager is David R. Giroux (CFA), and Ira Carnahan (CFA) is a Portfolio Specialist working on the Capital Appreciation Fund.

According to Morningstar:

David Giroux rose to the management ranks on this strategy in mid-2006 after joining T. Rowe Price in 1998 as an analyst covering the industrials sector. Initially a comanager, he quickly took a lead role on the portfolio by early 2007 and became the sole manager in June of that year…

Giroux delivers a high-conviction basket of roughly 40-50 stocks that range between 56% and 72% of the fund’s assets. He’ll shift the exposures meaningfully when he identifies mispricing, like scaling equity exposure when drawdowns bring valuations to a more attractive level.

From T. Rowe Price:

David Giroux is a portfolio manager for the Capital Appreciation Strategy, including the Capital Appreciation Fund and Capital Appreciation Equity ETF, at T. Rowe Price Investment Management. He also is head of Investment Strategy and chief investment officer for T. Rowe Price Investment Management. David is the president, chairman, and a member of the Capital Appreciation Investment Advisory Committee and a member of the Capital Appreciation Equity ETF Investment Advisory Committee. He is a member of the T. Rowe Price Investment Management ESG Committee and the T. Rowe Price Investment Management Investment Steering Committee.

The Fact Sheet for PRWCX is available here, and the Prospectus is here.


T. Rowe Price Capital Appreciation Equity ETF (TCAF) has an inception date of June 2023; Morningstar does not give it a Star Rating but gives it an Analyst Rating of Gold. It has attracted $235 million in assets to date. Like PRWCX, TCAF is overweight in Technology and Healthcare.

The Fact Sheet for TCAF is available here, and the Prospectus is here. The Principal Investment Strategies of TFAC differ somewhat from PRWXC:

The fund normally invests at least 80% of its net assets (including any borrowings for investment purposes) in equity securities. The fund takes a core approach to stock selection, which means both growth and value styles of investing are utilized. The fund may purchase the stocks of companies of any size, but typically focuses on large U.S. companies. The portfolio is typically constructed in a “bottom up” manner, an approach that focuses more on evaluations of individual stocks than on analysis of overall economic trends and market cycles.

In selecting stocks, the adviser typically seeks out companies with one or more of the following characteristics:

  • experienced and capable management;
  • strong risk-adjusted return potential;
  • leading or improving market position or proprietary advantages; and/or
  • attractive valuation relative to a company’s peers or its own historical norm.

The fund seeks to maintain approximately 100 securities in the portfolio.

Sector allocations are largely the result of the fund’s focus on stock selection. The fund may at times, invest significantly in certain sectors, including the information technology and healthcare sectors.

The fund is “nondiversified,” meaning it may invest a greater portion of its assets in a single issuer and own more of the issuer’s voting securities than is permissible for a “diversified” fund.

This Morningstar video, 3 New ETFs That Stand Out From the Pack, describes how TFAC differs from the equity portion of PRWCX, including longer holding periods and lower dividend yields to enhance tax efficiency. In addition, TFAC will hold own approximately one hundred stocks that the Team believes will deliver higher risk-adjusted returns.

Figure #2: Comparison Selected Actively Managed Large Cap Core ETFs – Two Months

Source: Created by the Author Using the MFO Premium Multi-search Tool

The histogram in Figure #3 shows the performance of all actively managed equity ETFs with at least $100 million in assets under management. TCAF resides in the largest bin with two month returns of 1.65% to 2.0%.

Figure #3: Histogram of Actively Managed Large Cap Core ETFs

Source: Created by the Author Using the MFO Premium Multi-search Tool

Closing Thoughts

With the combination of economic slowdown, high fixed income yields, strikes by the United Auto Workers, government shutdown, and seasonal fluctuations, I continue to be conservative. I have dry powder for opportunities that may arise. I like actively managed ETFs. Below are the five that I track plus S&P 500 (SPY) and PRWCX over the past two months, which are too short to get meaningful performance comparisons but may reflect relative volatility.

Figure #4: Author’s Short List of Actively Managed Equity ETFs (Plus SPY & PRWCX)

Source: Created by the Author Using the MFO Premium Multi-search Tool

I wrote One of a Kind: American Century Avantis All Equity Markets ETF (AVGE) and Fidelity Actively Managed New Millennium ETF (FMIL) describing why I like these funds. I own a small starter position in AVGE. As a result of writing this article, I am also interested in buying TCAF during dips.

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About Charles Lynn Bolin

Lynn Bolin retired in June 2022 and is immensely enjoying the more relaxed lifestyle. He spends his extra time with family, studying the economy and investing, at the gym, exploring the parks, and tasting the culinary pleasures at the local restaurants and Farmer’s Markets. After spending over thirteen years working internationally, he is enjoying exploring nature closer to home. Lynn graduated with an Engineering degree from New Mexico Tech and an MBA from Eastern New Mexico University. He worked as a Technical Services Manager over engineering and other functions. He enjoys building investing models in his spare time and writes articles for Seeking Alpha.