Has This Manager’s Star Fallen?

Key Morningstar Metrics for T. Rowe Price Capital Appreciation Equity ETF

• Morningstar Medalist Rating
  : Gold
• Process Pillar
  : Above Average
• People Pillar
  : High
• Parent Pillar
  : Above Average

For most of the past 15 years, it felt like David Giroux had a cheat code to investing success, but since T. Rowe Price Capital Appreciation Equity ETF TCAF launched in June 2023, it’s as if the game has patched him out. Performance over the exchange-traded fund’s first three years has fallen short of expectations. Even so, investors would be wise to stick with this strategy as Giroux and his team navigate their first extended period of underperformance, because the solid leadership and strong underlying approach remain intact.

That approach is the same one that’s driven Giroux’s long-term success elsewhere: He aims to find companies that can increase earnings faster than the broader large-cap US market while trading at lower price/earnings multiples than the market’s priciest stocks. It’s the playbook that helped produce long-term top-tier results in T. Rowe Price Capital Appreciation PRWCX, which Giroux has led since 2007.

The discipline to avoid chasing expensive stocks has kept the team from making big bets on stocks like Nvidia NVDA, one of the biggest beneficiaries of the artificial intelligence boom. That same discipline has also meant sticking with long-term favorites like Microsoft MSFT, which has lagged amid concerns that companies will increasingly build their own AI applications rather than buy Microsoft’s. Indeed, stock selection within the technology sector has been the biggest detractor over the ETF’s lifespan, a reversal from 2009 through 2023, when tech selection was a strength for the team.

The team has been evolving the portfolio in response to fast-moving trends around AI. Technology exposure has been trimmed over the past year to a 7-percentage-point overweighting from an 8-percentage-point overweighting as of June 30, 2026, as the team looks for new sources of return that are less sensitive to swings in AI sentiment. Still, the team isn’t avoiding AI altogether; it recently added a small position in privately held Anthropic.

A bigger shift has been toward small- and mid-cap biotechnology stocks that could be attractive takeover targets. The ETF’s biotech allocation has grown to 6%, up from less than 2% a year ago, and two of its biotech picks have already been acquired or announced as acquisition targets, lending some early credibility to the bet. Good managers evolve their processes over time to adapt to changing markets, but it’s also important to make sure they don’t stray too far from their core strengths. The biotech positioning is something worth monitoring for signs the team has a durable advantage in the sector. That’s a question of execution, though, not of design.

By design, Giroux’s process has generally resulted in a stock portfolio that’s slightly less risky than the overall market, and that’s shown up during down markets. Over its three-year track record, it’s only captured 96% of the Morningstar US Large-Mid Cap Market Index’s downside. That may be of small solace to investors in July 2026, but it’s a sign that parts of the process are still delivering the results we’d expect even if the upside has been more elusive recently.

T. Rowe Price Capital Appreciation Equity ETF: Performance Highlights

No strategy works in every market, and for the first time in a long while, Giroux’s stock-picking approach is falling behind. T. Rowe Price Capital Appreciation Equity ETF hit its three-year track record in June 2026, and the relative results are underwhelming: 17.7% annualized returns, trailing both the large-blend Morningstar Category average (18.5%) and, more notably, the Morningstar US Large-Mid Cap Market Index (20.8%). The team’s flagship fund T. Rowe Price Capital Appreciation also had its worst three-year stretch of relative performance versus the moderate-allocation category, although it edged past the category average by about 0.30 percentage points annualized.

The team’s long-term success has hinged on finding companies with reasonable valuations and higher earnings growth than the broader US stock market. That’s proved harder over the past three years, as artificial intelligence has quickly created new winners and losers. Longtime overweighting Microsoft, for example, has borne the brunt of market concerns over slowing software growth and ramped-up capital expenditures. The stock’s 4% annualized return over the same three-year period trailed the index by more than 16 percentage points.

Stock selection in the technology sector has been the biggest detractor from returns over the period, but there have also been some missteps in healthcare where the team’s thesis has failed to play out so far, like Becton Dickinson BDX, which has lost about 9% annualized since the ETF’s inception.

Still, three years is a short time, and although the ETF has trailed its benchmark and peers, its absolute results have been solid. Underperformance stretches like this are close to inevitable for any active manager over a long enough career in as competitive a category as large blend.