3 New ETFs That Stand Out From the Pack

Nearly 3,300 ETFs were listed in the U.S. at the end of July 2023—over half of which hit the market since 2018. But for investors, more isn’t always better. The constant flurry of product launches makes it hard to separate the promising from the problematic. Today, I’ll spotlight three new ETFs whose recent launches stood out from the pack.

3 Interesting New ETFs

1. T. Rowe Price Capital Appreciation TCAF
2. BlackRock Flexible Income ETF BINC
3. Schwab U.S. HIGH Yield Bond ETF SCYB

T. Rowe Price Capital Appreciation ETF, ticker: TCAF, presents a rare opportunity for investors to access one of the fund industry’s best managers. This actively managed ETF is helmed by David Giroux, a two-time Morningstar Allocation Manager of the Year. He has compiled an excellent track record on T. Rowe Price Capital Appreciation, this fund’s open-end predecessor, since he took the reins there in 2006. That fund closed to new investors in 2014, but this ETF offers a second chance to invest alongside Giroux.

TCAF is cut from the same cloth as its open-end sibling’s stock sleeve. Giroux selects firms from a distilled list of S&P 500 companies, favoring those that balance attractive valuations with encouraging risk-adjusted return profiles. The resulting 100-stock portfolio straddles the large-blend and large-growth Morningstar Categories, though its orientation is subject to change. Compared to the open-end version, this fund targets longer holding periods and a lower dividend yield to enhance tax efficiency.

TCAF is not a carbon copy of the open-end fund from which it descends, but Giroux’s illustrious track record should put this ETF on investors’ radar.

Next up is BlackRock Flexible Income ETF, which launched in May 2023 under the ticker BINC.

Just like TCAF, the argument for this strategy is one for the star manager that runs it. Manning this fund is Rick Rieder, who won Morningstar’s Outstanding Portfolio Manager award in 2022. Rieder’s command of minute details and research-intensive, risk-conscious approach have translated into strong long-term results for open-end funds BlackRock Strategic Income Opportunities and BlackRock Total Return.

BINC is distinct from the mutual funds that Rieder runs. Here, he targets fixed-income sectors that are hard for most ETFs to access, like high-yield corporate credit, emerging-markets debt, and securitized assets. Though these market segments invite more credit risk—about 45% of the portfolio was parked in sub-investment-grade bonds as of July 2023—they should offer handsome yield in return.

Investors should expect BINC to experience larger price swings than an investment-grade core bond holding. But with a competitive 0.40% annual fee, this new ETF is a cost-efficient way to invest with Rieder and his stellar team.

The first two ETFs on my list are plays on their managers, but today’s final ETF is a passive strategy that stands out for its price. Schwab U.S. High Yield Bond ETF, ticker SCYB, hit the market in July 2023 with a 0.10% fee, making it one of the cheapest bond funds on the market.

SCYB tracks the ICE BofA US Cash Pay High Yield Constrained Index, a basket of U.S.-dollar-denominated junk bonds that are currently in a coupon-paying period. Qualifying bonds must have more than 18 months until maturity, a fixed coupon schedule, and at least $250 million in outstanding value. Bonds that make the cut are weighted by their market value.

Low liquidity makes it difficult to index the high-yield market, so SCYB may face hurdles that its active counterparts can sidestep more easily. But its paper-thin expense ratio gives it a much wider margin for error than nearly all of its peers. For true passive investing believers that focus on cost, this may be worth a look.

Watch “3 Great ETFs Having a Bad Year” for more from Ryan Jackson.