Principal Capital Appreciation Select ETF (LCAP)

The Principal Capital Appreciation Select ETF (ticker LCAP) is an actively managed exchange-traded fund that invests in a carefully selected group of large-capitalization US equities, with the aim of generating long-term capital appreciation for shareholders.

What does the fund hold?

LCAP maintains a focused portfolio of between 40 and 60 large-cap US companies chosen through Principal’s in-house equity research process. Rather than tracking an index, the fund’s portfolio managers use fundamental analysis—studying company balance sheets, competitive position, management quality, and growth prospects—to identify stocks they believe offer superior total return potential over a three to five-year horizon. Holdings span sectors but tend to emphasize businesses with sustainable competitive advantages and the capacity to grow earnings.

The fund is not a pure value play nor a pure growth play; it is a balanced approach to capital appreciation that may hold quality companies in traditional sectors alongside emerging opportunities in technology or healthcare. The portfolio typically has some overlap with major indices like the S&P 500, but the active managers are not constrained to match the index weights—a conviction holding might be significantly overweighted or underweighted relative to its benchmark.

How does Principal manage it?

Principal Global Investors, the asset management division of Principal Financial Group, runs the fund using a core team of portfolio managers and equity analysts. The managers hold regular meetings to discuss new stock ideas, review existing holdings, and rebalance as opportunities emerge or theses change. The fund’s charter gives it flexibility to hold up to 20 percent in cash or equivalents when the managers see few attractive buying opportunities, though historically it has remained largely invested.

Because it is an ETF rather than a mutual fund, LCAP trades on exchange at real-time prices throughout the day, and creation-redemption mechanics mean the fund’s structure can handle large inflows and outflows efficiently. The active management approach comes at a cost—the expense ratio is higher than a passive large-cap index fund—but the intent is for the stock-picking to justify the fee through outperformance.

Who should consider owning it?

LCAP appeals to investors who believe in active management and want large-cap exposure but prefer the intraday trading and potential tax efficiency of an ETF wrapper. Taxable account investors appreciate that active managers can sometimes time sales for tax loss harvesting or other tax-aware strategies more flexibly than index funds. The focused portfolio of 40 to 60 stocks means higher conviction than a fund holding 500 companies—each position represents a meaningful bet on the managers’ judgment.

The risks are familiar to active management: the portfolio managers may underperform their benchmark over a given period due to stock-picking misses, sector bets, or simply market sentiment. Concentration risk applies: if the top five holdings perform poorly, the fund underperforms more sharply than a diversified index would. There is also the perpetual question of whether active management fees can be justified by outperformance net of costs—historically, many active funds lag their indices over long periods.

How to research LCAP

Start with Principal’s fund website and prospectus, which show the complete current holdings, the portfolio managers’ tenure, and performance versus the Russell 1000 or S&P 500. Look at the fund’s one-year, three-year, and five-year returns net of fees and compare them to a low-cost large-cap index ETF. Check the turnover ratio—how often the managers buy and sell—to get a sense of trading activity and potential tax drag. Read Principal’s quarterly reports, which often include a manager commentary explaining the investment thesis and recent positioning changes. And look at the top 10 holdings to understand what the managers are most confident about; if you disagree with those bets, the fund may not suit your philosophy.