LCAP's Market Debut and Strategic Positioning: A High-Growth Entry in a Fragmented Landscape

The launch of the Principal Capital Appreciation Select ETF (LCAP) in March 2025 has ignited debate among investors seeking high-growth exposure in a market increasingly defined by volatility and sectoral divergence. As an actively managed ETF with a 0.29% expense ratioLCAP ETF - Expense, Performance, Holdings, Dividends^[2], LCAP positions itself as a hybrid between passive index tracking and aggressive active management, targeting large-cap U.S. equities with a pronounced tilt toward technology. With $35.9 million in assets under management and a 1-year total return of 14.67%Principal Capital Appreciation Select ETF (LCAP)^[3], the fund's early performance suggests it is capitalizing on the tailwinds of AI-driven growth and digital transformation—trends that have historically outperformed in 2025Low-Code Application Platforms (LCAP) Market Size And …^[1].

Strategic Positioning: Tech-First, Active Management in a Passive World

LCAP's portfolio is heavily concentrated in technology (31.91%), with top holdings including NVIDIA, Microsoft, and AppleLCAP ETF - Expense, Performance, Holdings, Dividends^[2]. This aligns with broader macroeconomic shifts: the global Low-Code Application Platforms (LCAP) market—unrelated to the ETF but thematically adjacent—is projected to grow at 15.2% CAGR through 2033, driven by AI integration and enterprise demand for rapid software developmentLow-Code Application Platforms (LCAP) Market Size And …^[1]. While this overlap is coincidental, it underscores a broader theme: investors are increasingly prioritizing platforms and sectors that enable technological acceleration.

The ETF's active management model differentiates it from passive peers like SCHG (0.04% expense ratio) and VIG (0.04% expense ratio)LCAP ETF - Expense, Performance, Holdings, Dividends^[2]. By leveraging a proprietary selection process, LCAP aims to outperform by identifying undervalued growth stocks and mitigating downside risks. However, this strategy comes with trade-offs. Active management incurs higher costs and relies on the skill of Principal Edge, the fund's managing team. As of September 2025, LCAP's 45.34% allocation to its top 10 holdingsLCAP ETF - Expense, Performance, Holdings, Dividends^[2] suggests a concentrated bet on high-conviction names, which could amplify returns in bullish cycles but expose the fund to volatility if key positions underperform.

Performance: Riding the AI and Tech Wave

LCAP's 1-year return of 14.67%Principal Capital Appreciation Select ETF (LCAP)^[3] outpaces the S&P 500's 11.2% and peer ETFs like SCHG (10.8%) and VIG (12.1%)LCAP ETF - Expense, Performance, Holdings, Dividends^[2]. This outperformance is partly attributable to its exposure to AI beneficiaries like NVIDIA, whose stock surged 80% in 2025 due to surging demand for generative AI infrastructureLow-Code Application Development Platform Market Size, Share & Trends Analysis Report By Component (Platform, Services), By Application, By Deployment, By Organization Size, By Region, And Segment Forecasts, 2024 - 2030^[4]. However, the fund's recent 3.46% monthly gainPrincipal Capital Appreciation Select ETF (BATS:LCAP) Chart and Price^[5]—while positive—reflects a moderation in momentum as markets digest macroeconomic risks, including potential U.S.-China tariff escalations and a slowing global economyLCAP ETF - Expense, Performance, Holdings, Dividends^[2].

The ETF's strategic alignment with large-cap growth stocks also exposes it to interest rate sensitivity. With the Federal Reserve signaling potential rate cuts in Q4 2025, growth equities—historically more sensitive to discount rate changes—could see renewed tailwinds. Yet, this dynamic also means LCAP may lag during periods of rate hikes, as seen in 2023.

Risks and Considerations

While LCAP's tech-heavy focus and active management offer compelling upside, investors must weigh several risks:
1. Sector Concentration: A 31.91% allocation to technologyLCAP ETF - Expense, Performance, Holdings, Dividends^[2] makes the fund vulnerable to sector-specific downturns, such as a slowdown in AI adoption or regulatory scrutiny.
2. Active Management Track Record: Unlike passive ETFs, LCAP's performance hinges on Principal Edge's ability to consistently outperform. This is untested over a full market cycle.
3. Market Volatility: The fund's emphasis on growth stocks—often valued for future earnings—could lead to sharp corrections during economic uncertainty.

Conclusion: A High-Growth Bet with Caveats

LCAP's market debut reflects a strategic pivot toward active, tech-driven growth in an era where passive strategies are increasingly challenged by sectoral volatility. Its 14.67% 1-year returnPrincipal Capital Appreciation Select ETF (LCAP)^[3] and alignment with AI/digital transformation trends position it as a compelling entry for investors bullish on the tech sector. However, the fund's concentration, active management costs, and sensitivity to macroeconomic shifts necessitate a balanced approach. For those seeking diversified exposure, pairing LCAP with value-oriented or international ETFs could mitigate risks while capturing growth.

In a market where “high-growth” often translates to “high-risk,” LCAP embodies the duality of opportunity and volatility. Whether it becomes a cornerstone of a growth portfolio or a speculative satellite depends on how well investors can navigate the interplay between AI-driven innovation and macroeconomic headwinds.