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 our disciplined strategic investing approach. Our research shows that long-term U.S. equity clients have been rewarded.
16 of 18
funds had positive active success rates over rolling five-year periods
of funds had 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 lifetimes
Rolling periods 12/31/1999 through 12/31/2019
Percentage of funds with positive active success rates
Annualized, time-weighted excess returns, net of fees
Sources: T. Rowe Price, Russell, and Standard & Poor’s; data analysis by T. Rowe Price. Frank Russell Company (“Russell”) is the source and owner of the Russell Index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of this material or for any inaccuracy in T. Rowe Price Associates’ presentation thereof. The S&P 500 Index is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”), and has been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). T. Rowe Price’s product is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.
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 click here.
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 vast majority of 18 of our diversified active U.S. equity mutual funds beat their benchmarks across multiple time periods over 20 years or their lifetimes.1
Moreover, our outperformance tended to remain strong over time. Sixteen of the 18 funds had positive active success rates (see Active Success Rates sidebar) over rolling 3-, 5-, and 10-year periods. 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. Ten out of 11 of our U.S. large-cap funds included in the study had positive excess returns, on average, over all four of the time horizons examined.
Our Strategic Investing Approach
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 430 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 23 years in the industry and 18 years with T. Rowe Price. 4
Independent academic research affirms our approach: Active equity managers, as a group, have been able to trade profitably, before costs, in part because they’ve been able to forecast earnings‑related fundamentals. 5 Stable, long‑tenured management teams tend to hold less risky portfolios. 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.
1The study spanned the 20 years up to the end of December 2019 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. Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price Associates’ presentation thereof. Fund performance was measured against the designated benchmarks over rolling 12-month and 3-, 5-, and 10-year periods.
2Active success rates are the percentage of times a fund outperformed its designated benchmark in a given period.
3Investment staff as of 12/31/2019. Includes 106 portfolio managers, 26 associate portfolio managers, 172 investment analysts, 42 associate analysts, 15 multi-asset specialists, 15 specialty analysts, 4 economists, 32 traders, and 22 senior managers.
4As of 12/31/2019.
5See “Can Mutual Fund Managers Pick Stocks? Evidence from Their Trades Prior to Earnings Announcements,” Journal of Financial and Quantitative Analysis, Vol. 45, Issue 5, October 2010.
6See “The effect of management team characteristics on risk-taking and style extremity of mutual fund portfolios,” Review of Financial Economics, Vol. 21, Issue 3, September 2012.
T. Rowe Price Investment Services, Inc., Distributor.
For additional information on the complete analysis, click here.