The T. Rowe Price Approach

Time-tested and disciplined

The T. Rowe Price Strategic Investing Approach

Investors experienced periods of high volatility during the past 20 years, with two strong U.S. bull markets giving way to two of the most brutal bear markets in recent memory: the collapse of the dot-com bubble in 2000 and the global financial crisis that began in 2007.

Throughout, T. Rowe Price remained committed to disciplined, active investment management. Our research shows that long-term U.S. equity clients have been rewarded.

17 of 18

funds had positive active success rates over rolling five-year periods

100%

of funds generated positive excess returns over rolling 10-year periods

T. Rowe Price Success Rates Over 20 Years

Analysis of 18 T. Rowe Price diversified active U.S. equity mutual funds over 20 years or their lifetime

Rolling periods 12/31/1997 through 12/31/2017

Percentage of funds with positive active success rates

Annualized, time-weighted excess returns, net of fees

Note that past performance data throughout this material are not reliable indicators of future performance. All funds are subject to market risk, including possible loss of principal. For more information on the T. Rowe Price funds used in this study, including fund performance, please visit troweprice.com/activeworks.

Outperformance Improved Over Time

An extensive study by T. Rowe Price shows that we excelled through the many market environments of the past two decades. A majority of our 18 diversified active U.S. equity mutual funds beat their benchmark across multiple time periods over 20 years or their lifetime.1

Opening Quote A notable 94% generated positive average excess returns over rolling five-year periods, and 89% over rolling 10-year periods... Closing Quote

Moreover, our outperformance tended to remain strong over time. Fifteen of the 18 funds had positive active success rates (see Box 1) over rolling three-year periods and 17 over five-year periods, while 16 were ahead over 10-year intervals.2 A notable 94% generated positive average excess returns over rolling five-year periods, and 89% over rolling 10-year periods, underlining that it frequently has been worth waiting for our strategic investing approach to pay off.

 

T. Rowe Price’s Large-Cap Funds Proved Worth

The study challenges the commonly held belief that it is not possible for active managers to add value in what is widely regarded as the world’s most efficient capital market. The majority of our U.S. large-cap funds beat their benchmark over all four of the time horizons examined.

Our Approach to Strategic Investing

We attribute our success primarily to careful stock selection and in-depth fundamental research, conducted by our long-tenured investment team.

We go out into the field to get the answers we need. That means that over 350 of our investment professionals see firsthand how the companies we’re investing in are performing today in order to make skilled judgments about how they’ll perform in the future.3

Experience has been a critical component of our success as well. Our skilled portfolio managers have deep experience—an average of 21 years in the industry and 16 years with T. Rowe Price.4

Opening Quote Our own study shows that skilled active management can help navigate challenging market conditions. Closing Quote

Independent academic research affirms our approach: Active equity managers, as a group, have been shown to have the skill to select stocks that outperform the broader market, before costs,5 while stable, longstanding active teams appear more likely to excel.6

Our own study shows that a skilled active management approach can help navigate challenging market conditions.

Look To the Long Term

The factors above will remain central to our approach.

We don’t wait for change, we seek to get ahead of change for our clients. Our people have the conviction to think independently but act collaboratively. This means we’re able to respond quickly to take advantage of short-term market fluctuations, or we can also choose to hold tight.

The study spanned the 20 years up to the end of December 2017 for older funds or since inception for newer ones and measured performance net of fees and trading costs. It covers 18 diversified active U.S. equity funds advised by T. Rowe Price, omitting 2 institutional funds that are clones of other funds to avoid double counting. Benchmarks included the S&P 500, Russell 1000 Growth, Russell 2000 Growth, Russell 1000 Value, Russell 2000 Value, Russell 2000, Russell Midcap Growth, and Russell Midcap Value Indexes. Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark of Russell Investment Group. Fund performance was measured against the designated benchmarks over rolling 12-month and 3-, 5-, and 10-year periods.

Active success rates are the percentage of times a fund outperformed its designated benchmark in a given period.

Investment staff as of 12/31/2017. Includes 104 portfolio managers, 24 associate portfolio managers, 148 investment analysts, 47 associate analysts, 10 multi-asset specialists, 3 specialty analysts, 2 strategists, and 17 senior managers.

As of 12/31/2017

Including research by Professor Mark Grinblatt of UCLA and Professor Sheridan Titman of the University of Texas. See: “The Persistence of Mutual Fund Performance,” Journal of Finance, Vol. 47, No. 5, December 1992.

According to research by Professor Joseph Golec of the University of Connecticut. See: “The Effects of Mutual Fund Manager Characteristics on Their Portfolio Performance, Risk and Fees,” Financial Services Review, Vol. 5, No. 2, 1996.

 

Important Information

Download a prospectus.

T. Rowe Price Investment Services, Inc., Distributor.

For more information on the T. Rowe Price funds used in this study, including fund performance, please visit troweprice.com/activeworks.

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