March 2022 / INVESTMENT APPROACH
T. Rowe Price's Strategic Investing Approach Has Benefited Our Results
Discipline that has brought long‑term rewards.
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. The coronavirus pandemic that slammed global markets in early 2020 added another high-volatility event.
T. Rowe Price success rates over 20 years
Analysis of 18 composites within our institutional diversified active U.S. equity strategies over 20 years
Rolling periods December 31, 2001, through December 31, 2021
Throughout, T. Rowe Price remained committed to a disciplined strategic investing approach. Our research shows that our long‑term U.S. equity clients generally have been rewarded.
Performance Remained Strong Over Time
A rigorous study by T. Rowe Price shows that we were able to deliver performance through the many market environments of the past two decades. Of the 18 composites within the institutional diversified active U.S. equity strategies included in the study, 89% outperformed over a majority of rolling five-year periods and 94% outperformed over rolling 10-year periods.1
Moreover, our performance tended to remain strong over time. Fourteen of the 18 composites had positive active success rates over rolling three- and five‑year periods, while 17 of 18 composites were ahead over rolling 10‑year intervals. 2
A notable 94% generated positive average excess returns over rolling 5- and 10‑year periods, underlining the value of our strategic investing approach.
T. Rowe Price’s Large‑Cap Strategies 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 composites beat their benchmarks over all relevant time periods. Again, a long‑term mindset was rewarded as average active success rates for our large-, mid-, and small-cap managers all increased over time.
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 prior to the pandemic, over 530 of our investment professionals saw firsthand how the companies we invested in were performing, in order to make skilled judgments about how they thought they’d perform in the future. During the pandemic, these research activities are being conducted virtually.3
Experience has been a critical component of our success as well. Our skilled portfolio managers have deep experience—an average of 22 years in the industry and 16 years with T. Rowe Price, as of December 31, 2021.
Independent academic research supports our approach: Active equity managers, as a group, have been able to trade profitably, before costs, in part because they are able to forecast earnings‑related fundamentals.4
While stable, long‑tenured management teams tend to hold less risky portfolios.5
Our own study shows that skilled management can help navigate challenging market conditions.
Look to the Long Term
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.
Active Success Rates
The active success rate records the percentage of times a composite beat its designated benchmark, net of fees and trading costs, over a specified time period (say, 10 years). Think of this as a measure of how often a client might look at his or her regular performance reports and find that a composite has outperformed for that time period.
We’ve defined a positive active success rate as a composite beating the performance of its designated benchmark in more than half of the periods measured.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.
General Equity Risks
Capital risk—the value of your investment will vary and is not guaranteed. It will be affected by changes in the exchange rate between the base currency of the portfolio and the currency in which you subscribed, if different.
ESG and Sustainability risk—may result in a material negative impact on the value of an investment and performance of the portfolio.
Equity risk—in general, equities involve higher risks than bonds or money market instruments.
Geographic concentration risk—to the extent that a portfolio invests a large portion of its assets in a particular geographic area, its performance will be more strongly affected by events within that area.
Hedging risk—a portfolio’s attempts to reduce or eliminate certain risks through hedging may not work as intended.
Investment portfolio risk—investing in portfolios involves certain risks an investor would not face if investing in markets directly.
Management risk—the investment manager or its designees may at times find their obligations to a portfolio to be in conflict with their obligations to other investment portfolios they manage (although in such cases, all portfolios will be dealt with equitably).
Operational risk—operational failures could lead to disruptions of portfolio operations or financial losses.
This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.
The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.
Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass.
The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.
The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.
It is not intended for distribution to retail investors in any jurisdiction.
Canada – Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc.’s investment management services are only available to Accredited Investors as defined under National Instrument 45-106. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services.
© 2022 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the Bighorn Sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.