3 Great Stock ETFs Run by Exceptional Managers

Key Concepts

• ETFs (Exchange-Traded Funds): Investment funds traded on stock exchanges, offering transparency and efficiency.
• Active ETFs: ETFs managed by portfolio managers who actively select securities, as opposed to passively tracking an index.
• Mutual Funds: Investment funds that pool money from many investors to invest in securities like stocks, bonds, and money market instruments.
• Morningstar Outstanding Portfolio Manager Award: An award recognizing exceptional performance and skill in portfolio management.
• Growth Stocks: Stocks of companies expected to grow at an above-average rate compared to other stocks.
• Value Stocks: Stocks that appear to be trading for less than their intrinsic or fundamental value.
• Large Blend Category: A mutual fund or ETF category that invests in large-capitalization stocks and blends both growth and value investment styles.
• Large Cap Stocks: Stocks of companies with large market capitalizations, generally considered to be more stable.
• Emerging Markets: Countries with developing economies that are in the process of rapid growth and industrialization.
• Developed Markets: Countries with mature economies that have advanced infrastructure and high levels of industrialization.
• Basis Points (bps): A unit of measure equal to one-hundredth of a percentage point (0.01%).
• Liquidity: The ease with which an asset can be bought or sold in the market without affecting its price.
• Capacity: The amount of assets a fund can manage effectively without compromising its investment strategy.
• Risk-Adjusted Returns: A measure of the return on an investment relative to the amount of risk taken to achieve that return.

The Rise of Active ETFs and Star Managers

Mutual fund managers initially avoided ETFs due to the requirement for daily portfolio disclosures, which revealed their management strategies. However, in recent years, there has been a significant shift, with star managers increasingly embracing ETFs. This trend is attributed to either growing comfort with transparency or a capitulation to investor demand for ETFs. The data supports this shift: active ETFs have attracted approximately $900 billion in new investor capital, while active mutual funds have experienced over $2.3 trillion in outflows over the past five years. This indicates that active ETFs are a permanent fixture in the investment landscape, and prominent managers are actively participating.

ETF Picks Featuring Award-Winning Managers

The video highlights three equity ETFs that combine the structural advantages of ETFs (efficiency and transparency) with the expertise of highly regarded portfolio managers, each a past recipient of Morningstar's Outstanding Portfolio Manager Award.

1. T. Rowe Price Capital Appreciation Equity ETF (TCAF)

• Manager: David Jaru, a three-time winner of Morningstar's Allocation Manager of the Year award for his successful capital appreciation fund.
• Strategy: TCAF essentially isolates the equity component of T. Rowe Price's popular capital appreciation fund, employing the same stock-picking methodology.
• Process:
  1. Identify companies without major long-term flaws: This includes avoiding those with poor management teams or unstable business models.
  2. Focus on reasonable valuations: Companies must be trading at attractive price points relative to their fundamentals.
  3. Prioritize strong potential for earnings growth and risk-adjusted results: The selection emphasizes companies likely to increase earnings and deliver favorable returns for the risk taken.
• Portfolio Tilt: This approach typically leads to an overweighting in growth stocks due to their stronger financial health and a consistent tilt towards the technology sector.
• Performance: Since its launch in June 2023, TCAF has outperformed its average large blend category peer by 60 basis points through August of the current year.
• Fees: A low expense ratio of 31 basis points enhances its long-term investment prospects.

2. Oakmark US Large Cap ETF (OKM)

• Manager: A talented team from Harris Associates, the advisor to the Oakmark Fund family, led by veteran value investor Bill Nigran.
• Strategy: This ETF draws upon key features from two of Harris Associates' prominent offerings.
• Portfolio Construction:
  • The portfolio is a subset of holdings from the Oakmark US mutual fund, where Nigran has a 25-year track record of identifying undervalued stocks that appreciate over time.
  • While Oakmark typically holds 45-60 stocks, OKM is expected to have a more concentrated portfolio of 30-40 holdings, similar to Oakmark Select (which usually has 20-25 holdings).
  • Unlike its mutual fund counterparts, OKM focuses exclusively on larger-cap stocks, as indicated by its name. This focus is beneficial for liquidity and fund capacity.
• Performance: From its launch in December 2024 through August 2025, OKM has outperformed the Russell 1000 Value Index by nearly 5 percentage points. While the track record is short, it aligns with the assessment of Nigran and his team's process.

3. Capital Group New Geography Equity ETF (CGNG)

• Manager: The same 11-person team of industry veterans that manages the successful American Funds New World Mutual Fund, employing a multi-manager approach.
• Strategy: This ETF mirrors the strategy of the American Funds New World Mutual Fund, characterized by a flexible, risk-averse approach.
• Investment Scope:
  • In addition to investing in companies from emerging markets, the managers can allocate a portion of the portfolio to developed market firms that derive at least one-fifth of their revenues from emerging economies.
  • This flexibility allows for a less volatile portfolio compared to typical peers and provides a broader opportunity set than most dedicated emerging market strategies.
• Holdings Example: The top 10 holdings include US technology giant Microsoft and European aerospace multinational Airbus, alongside more traditional emerging market companies like Tencent Holdings.
• Performance: From its launch in June 2024 through August 2025, CGNG has edged out its average category peer.
• Outlook: The veteran management team and its distinctive approach to emerging markets are expected to enable CGNG to continue to stand out.

Conclusion

The landscape of investment management is evolving, with active ETFs emerging as a significant vehicle for both investors and seasoned portfolio managers. The three ETFs highlighted—TCAF, OKM, and CGNG—demonstrate how established managers are leveraging the ETF structure to deliver their proven investment strategies. These funds offer a blend of transparency, efficiency, and the expertise of award-winning managers, catering to investor preferences for active management within the accessible ETF format. The success of these active ETFs, as evidenced by their performance and asset flows, suggests they will continue to be a dominant force in the market.