With an investment philosophy that prioritizes competitive advantages, disciplined capital allocation, and high-conviction portfolio management, the Principal Focused Blue Chip ETF aims to provide resilient growth. This approach aligns management interests with shareholder value, making this ETF a compelling choice for advisors and clients seeking sustainable, long-term performance in their portfolios.
The world of large-cap funds is often crowded and, frankly, homogeneous. But the Principal Focused Blue Chip ETF (ticker: BCHP) seeks to break the mold by concentrating on what the Principal Aligned investment team calls “owner-operator” companies.
BCHP is an exchange-traded fund (ETF) built around a philosophy that resonates deeply with advisors and clients who prioritize strong, entrepreneurial-driven returns. In a recent interview with The Wealth Advisor’s Scott Martin, Hans Vander Plaats, Managing Director and Client Portfolio Manager with Prinicipal Aligned, discussed how BCHP’s focus on owner-operator businesses provides a compelling pathway to resilient growth. Vander Plaats highlights that companies led by owner-operators, regardless of size, benefit from a decentralized structure and thoughtful capital allocation—qualities that directly impact long-term performance.
“Even when it gets to be a really large cap company, the same benefits that an owner-operator provides—whether maybe it’s a financial advisor who’s an owner-operator or their client who is the owner of their business—are clearly there. And the impact they have on those businesses is significant,” Vander Plaats explains. The alignment of incentives is what sets BCHP apart, as it seeks out companies with a unique operational framework that prioritizes autonomy at all levels of business.
Owner-Operators as Differentiators
BCHP’s investment strategy is rooted in the belief that companies led by owners or founder-operators are often better positioned for long-term success. Vander Plaats notes that these leaders—whether they are founders, co-founders, or even the second or third generation of leadership—bring an unparalleled passion and commitment to their roles. “It’s just different. It’s not a nine-to-five; it’s not another step on a career track for them. This is what they love,” he asserts.
This commitment often manifests in an organizational culture that prioritizes sustainable growth, innovation, and customer satisfaction. By investing in such companies, BCHP aims to align its portfolio with organizations where leaders are fully invested in their outcomes, thus driving shareholder value over time.
Vander Plaats added that an owner-operator structure can foster an “entrepreneurial spirit” in larger companies without adding layers of bureaucracy, which can weigh down decision-making and flexibility.
Decentralized Structures and Local Decision-Making
The unique structure of owner-operator companies often allows for a decentralized approach to management, which is another key aspect of BCHP’s investment strategy. Vander Plaats emphasizes that these companies tend to empower local decision-makers.
“They don’t have a ton of people proportionally at headquarters; they want people closer to clients or customers. They want to try to get decisions made there,” he explains. This operational model enables quicker decision-making and fosters a customer-centric focus, as local leaders are better positioned to understand and respond to client needs.
An illustrative example from BCHP’s portfolio is TransDigm, a long-term holding that exemplifies this decentralized philosophy. Vander Plaats elaborates, “They allow their teams to run as independent businesses . . . with the proper oversight and drive and accountability from the top to follow the TransDigm playbook.” This model not only enhances agility but also encourages innovation and accountability at every level of the organization.
Capital Efficiency: A Hallmark of Owner-Operator Companies
BCHP’s focus on capital efficiency is another critical component of its investment thesis. Owner-operators typically exhibit a disciplined approach to capital allocation, viewing available capital as a valuable resource that can be used to drive growth and enhance shareholder value. Vander Plaats explains, “Your opportunity set or your options for what to do with capital don’t change that much. You can make acquisitions, you can buy back stock, you could pay out a dividend, you can invest in the growth of your own company.”
This strategic thinking aligns with the principles outlined in a book Vander Plaats admires, The Outsiders by Will Thorndike, which emphasizes the importance of rational capital allocation. BCHP seeks companies that not only have decentralized organizations but also practice “radically rational capital allocation”—a fundamental characteristic that Thorndike identifies as enhancing long-term value creation.
High-Conviction Portfolio Management
BCHP adopts a high-conviction approach to portfolio management, which reflects its confidence in each holding. With about 20 stocks in its concentrated portfolio, BCHP embodies a commitment to quality over quantity. Vander Plaats notes that many clients prefer “best ideas portfolios for today,” and this concentrated strategy caters directly to that demand. “We thought this would be the right kind of vehicle given the types of clients who are interested,” he explains.
This focus on a limited number of high-quality companies allows BCHP to conduct in-depth research and maintain a strong understanding of its holdings. The ETF aims to avoid the pitfalls of over-diversification, which can dilute potential returns and hinder the fund’s ability to capitalize on the best investment opportunities.
Delivering Growth in the Large-Cap Space
As the demand for active ETFs grows, BCHP offers investors a compelling alternative in the large-cap space. Its strategy emphasizes quality and alignment, moving beyond merely tracking an index to deliver superior performance.
The team’s confidence in BCHP is rooted in their disciplined investment approach, rigorous research, and commitment to aligning management interests with those of shareholders.
BCHP’s performance will ultimately be judged by its ability to deliver returns that exceed those of its benchmarks. The focus on owner-operator companies, decentralized structures, and capital efficiency positions the fund well in an increasingly competitive environment. As the market landscape continues to evolve, BCHP’s differentiated approach may well resonate with investors seeking not only growth but also alignment and accountability in their investment choices.
A Compelling Option for Client Portfolios
With its strategic approach to investing in the large-cap space, the Principal BCHP ETF can be a valuable addition for investors seeking long-term growth across market cycles. For advisors navigating today’s market, BCHP offers a unique, highly active approach focused on owner-operators.
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Additional Resources
- Contact Principal Asset Management
- Principal Focused Blue Chip ETF (BCHP) Fact Sheet
- BCHP Summary Prospectus
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Disclosures
Carefully consider a fund’s objectives, risks, charges, and expenses. For a prospectus, or summary prospectus if available, containing this and other information, visit www.PrincipalAM.com or call sales support at 800-787-1621. Please read it carefully before investing.
ALPS Distributors, Inc. is the distributor of the Principal ETFs. ALPS Distributors, Inc. and the Principal Funds are not affiliated.
Investing involves risk, including possible loss of principal.
Past performance is no guarantee of future returns.
Unlike typical ETFs, there are no indices that the Principal Focused Blue Chip ETF attempts to track or replicate. Thus, the ability of the Fund to achieve its objectives will depend on the effectiveness of the portfolio manager.
This ETF is different from traditional ETFs.
Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment. For example: You may have to pay more money to trade the ETF’s shares. This ETF will provide less information to traders, who tend to charge more for trades when they have less information.
The price you pay to buy ETF shares on an exchange may not match the value of the ETF’s portfolio. The same is true when you sell shares. These price differences may be greater for this ETF compared to other ETFs because it provides less information to traders.
These additional risks may be even greater in bad or uncertain market conditions.
The ETF will publish on its website each day a “Tracking Basket” designed to help trading in shares of the ETF. While the Tracking Basket includes some of the ETF’s holdings, it is not the ETF’s actual portfolio.
The differences between this ETF and other ETFs may also have advantages. By keeping certain information about the ETF secret, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF’s performance. If other traders are able to copy or predict the ETF’s investment strategy, however, this may hurt the ETF’s performance. For additional information regarding the unique attributes and risks of this ETF, see the additional risk discussion at the end of this material and the Principal Risks section of the prospectus.
Asset allocation and diversification do not ensure a profit or protect against a loss.
Investing in ETFs involves risk, including possible loss of principal. ETFs are subject to risk similar to those of stocks, including those regarding shortselling and margin account maintenance. Investor shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Ordinary brokerage commissions apply.
Equity investments involve greater risk, including heightened volatility, than fixed income investments.
The fund is non-diversified, so it may invest a high percentage of its assets in the securities of a small number of issuers and is more likely than diversified funds to be significantly affected by a specific security’s poor performance. This Fund is new and has limited operating history. ETFs can be tax efficient in that they are exchange-traded and redeem creation units from authorized participants by using redemptions in kind, which are not taxable transactions for the Fund. However, capital gains are still possible in an ETF, and if you reinvest the earnings of the ETF, you may owe taxes on your funds even if you didn’t sell any shares, potentially reducing your returns.
Principal Aligned is an affiliate of Principal Global Investors.
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