T. Rowe Price T. Rowe Price Trusty Logo

SICAV

US Aggregate Bond Fund

Seeks to extract return from a broad spectrum of US debt securities.

ISIN LU1278043622 Valoren 29500996

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

1.60%
$465.5m

1YR Return
(View Total Returns)

Manager Tenure

9.15%
4yrs

Inception Date 28-Aug-2015

Performance figures calculated in GBP

Other Literature

31-Oct-2019 - Brian J. Brennan, Portfolio Manager,
We are becoming increasingly optimistic as global growth appears to be bottoming in the fourth quarter. Financial conditions are also supportive. There are the beginnings of a turn in the manufacturing new orders and inventory cycle, and global policy, both monetary and fiscal, is becoming increasingly accommodative. The durability and duration of the improvement remains uncertain and late-cycle valuations give us pause, but global markets may experience an additional boost in the coming months.
Brian Brennan
Brian Brennan, Portfolio Manager

Brian Brennan is a portfolio manager in the Fixed Income Division at T. Rowe Price. Mr. Brennan has lead portfolio management responsibilities for the US Treasury, US Core Plus Bond, and Stable Value Strategies. He also is a member of the portfolio strategy team for T. Rowe Price's core and core plus mandates. Mr. Brennan is a vice president of T. Rowe Price Group, Inc., T. Rowe Price Associates, Inc., T. Rowe Price International Ltd, and T. Rowe Price Trust Company.

Click for Manager Outlook
 

Strategy

Manager's Outlook

Our outlook remains cautious as economic growth appears to be at an inflection point with the market unsure if manufacturing will rebound from recent weakness or if consumer resiliency will buckle and begin a real downturn in the economy. Continued trade tensions are likely to add to market uncertainty.

After overtightening policy with four rate hikes and a balance sheet runoff in 2018, the Fed has worked recently to respond to slowing growth by cutting policy rates in July and September. However, we believe that the Fed may have more work to do, such as another rate cut in 2019 and a re-expansion of the balance sheet, to be viewed by the market as responding sufficiently. Whether the Fed's easing moves will turn out to be a proactive "insurance" measure that supports investment sentiment or the start of a larger cutting cycle remains an open question. With near-term recession risks rising, the Fed may still have a small window of opportunity to react forcefully to convince the market of its commitment to extending the cycle, but that would also need to be coupled with major trade war concessions from the Trump administration.

We see Treasury yields remaining range-bound in the near term as the strong rally lost momentum, but a significant sell-off appears unlikely in the current environment. Inflation data have picked up, but the Fed's reluctant tone has weighed on inflation expectations. Tariffs could temporarily boost consumer prices but will also suppress growth, and inflation tends to follow growth. A sustainable increase in inflation expectations would require a resuscitation of growth prospects, which are currently lackluster.

With credit sector valuations still toward the tighter end of historical ranges, risks appear skewed to the downside. Although there will likely be tactical opportunities if volatility picks up, risk levels in the portfolio should remain below average until growth shows signs of reaccelerating or valuations meaningfully improve.

We remain focused on maximizing income on a volatility-adjusted basis. We continue to favor corporate bonds on the shorter end of the yield curve, with the exception of some longer-dated bonds in which our credit analysts see value. Although valuations are rich, short-term securitized credit sectors remain a defensive source of yield given relatively healthy consumer and housing fundamentals. Emerging markets debt remains attractive from a cyclical perspective, as growth in many countries remains relatively strong and lower U.S. rates should relieve pressure on emerging markets currencies. However, in challenging market environments, we continue to believe security selection is an important source of return and diversification.

Investment Objective

To maximise the value of its shares through both growth in the value of, and income from, its investments. The fund invests mainly in a diversified portfolio of US bonds.

Investment Approach

  • Focused primarily on investment-grade, U.S. fixed income securities.
  • Integrate proprietary credit and capital market research to identify market inefficiencies.
  • Add value primarily through sector rotation, individual security selection, and term structure position.
  • Exploit market inefficiencies through opportunistic trading conducted by specialist teams.
  • Seek to exceed benchmark return by at least 50 basis points annually over a 3 to 5 year period.

Portfolio Construction

  • Duration is managed within +/- 20% of benchmark
  • Sector exposure will typically range +/- 25% of the benchmark
  • Average credit quality of the portfolio is AA- or better
  • Tracking Error should range between 0.5% to 1.0% in most market environments

Performance (Class Qh | GBP)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 9.15% 1.60% N/A 2.26%
Indicative Benchmark % 9.56% 1.82% N/A 2.47%
Excess Return % -0.41% -0.22% N/A -0.21%

Inception Date 28-Aug-2015

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond GBP Hedged Index

Data as of  31-Oct-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 8.08% 1.21% N/A 2.29%
Indicative Benchmark % 8.35% 1.47% N/A 2.48%
Excess Return % -0.27% -0.26% N/A -0.19%

Inception Date 28-Aug-2015

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond GBP Hedged Index

Data as of  30-Sep-2019

Performance figures calculated in GBP

Recent Performance

  Month to DateData as of 18-Nov-2019 Quarter to DateData as of 18-Nov-2019 Year to DateData as of 18-Nov-2019 1 MonthData as of 31-Oct-2019 3 MonthsData as of 31-Oct-2019
Fund % -0.27% -0.18% 7.25% 0.09% 1.86%
Indicative Benchmark % -0.42% -0.26% 6.84% 0.16% 1.94%
Excess Return % 0.15% 0.08% 0.41% -0.07% -0.08%

Inception Date 28-Aug-2015

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond GBP Hedged Index

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond GBP Hedged Index

Performance figures calculated in GBP

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. 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. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

31-Oct-2019 - Brian J. Brennan, Portfolio Manager,
The fund (I share class) underperformed its benchmark in October driven mainly by security selection while sector allocation and interest rate management produced positive results. Our out-of-benchmark exposure to dollar-denominated South African sovereign debt in the government-related sector held back performance. The government’s bailout of its large public utility and disappointing budgetary policy statement broadly weighed on sentiment. Somewhat defensive positioning within investment-grade corporates also dragged as risk appetites strengthened. Still, the portfolio’s overweight in investment-grade corporate bonds contributed as the sector outperformed in October. Underweighting U.S. Treasuries also helped as Treasuries posted some of the lowest returns in the aggregate index. Our incrementally short duration posture mildly contributed, and curve positioning was added slightly. Our underweight position toward the long end helped as the curve steepened.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 7.07% Was (30-Sep-2019) 6.57%
Other View Top 10 Issuers

Monthly data as of 31-Oct-2019

Holdings

Total
Holdings
1001
Largest Holding U.S. Treasury Bonds 3.11% Was (30-Jun-2019) 0.36%
Top 10 Holdings 14.51%
Other View Full Holdings Quarterly data as of 30-Sep-2019

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating BBB US Treasury
By % 12.54% -22.30%
Fund 25.44% 17.66%
Indicative Benchmark 12.90% 39.96%

Average Credit Quality

AA

Monthly Data as of 31-Oct-2019
Indicative Benchmark:  Bloomberg Barclays U.S. Aggregate Bond Index

Sources for Credit Quality Diversification: Moody's Investors Service and Standard & Poor's (S&P) split ratings (i.e. BB/B and B/CCC) are assigned when the Moody's and S&P ratings differ. Short-Term holdings are not rated.

Maturity View maturity analysis

  Largest Overweight Largest Underweight
Maturity 7-10 Years 1-3 Years
By % 6.69% -8.24%
Fund 16.03% 15.98%
Indicative Benchmark 9.34% 24.21%

Weighted Average Maturity

8.61 Years

Monthly Data as of 31-Oct-2019
Indicative Benchmark:  Bloomberg Barclays U.S. Aggregate Bond Index

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration 5-7 Years 1-3 Years
By % 6.88% -12.17%
Fund 17.97% 25.39%
Indicative Benchmark 11.09% 37.56%

Weighted Average Duration

5.79 Years

Monthly Data as of 31-Oct-2019
Indicative Benchmark:  Bloomberg Barclays U.S. Aggregate Bond Index

30-Sep-2019 - Brian J. Brennan, Portfolio Manager,

We recently moved to a more neutral duration posture as the rally in rates found a near-term bottom in early September. Economic data remains soft, and the Fed's policy response remains incomplete. But the market's expectations are lower, and there are some glimmers of hope in leading economic indicators. As such, we see relatively balanced upside and downside risks for rates. Along the curve, we continue to favor a steepening bias as the Fed gets closer to an appropriate policy response.

Added to agency MBS

Sector allocations were generally unchanged, but we rotated some assets out of U.S. Treasuries and into agency MBS. MBS spreads widened near the end of August, and we believe they offered compelling value and a good source of high-quality yield for the portfolio.

Sectors

Total
Sectors
7
Largest Sector Corporate 31.46% Was (30-Sep-2019) 30.52%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index

Largest Overweight

ABS
By6.81%
Fund 7.26%
Indicative Benchmark 0.46%

Largest Underweight

U.S. Treasury
By-22.30%
Fund 17.66%
Indicative Benchmark 39.96%

Monthly Data as of 31-Oct-2019

31-Oct-2019 - Brian J. Brennan, Portfolio Manager,
As our outlook has turned more optimistic, we added incrementally to our risk exposure by rotating assets into investment-grade corporate bonds and out of U.S. Treasuries. Additionally, our positioning within corporates has become less defensive as we added to some longer-dated credits.

Countries

Total
Countries
29
Largest Country United States 86.00% Was (30-Sep-2019) 85.10%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index

Largest Overweight

China
By1.52%
Fund 1.69%
Indicative Benchmark 0.17%

Largest Underweight

United States
By-5.71%
Fund 86.00%
Indicative Benchmark 91.71%

Monthly Data as of 31-Oct-2019

Team (As of 31-Aug-2019)

Brian Brennan

Brian Brennan is a portfolio manager in the Fixed Income Division at T. Rowe Price. Mr. Brennan has lead portfolio management responsibilities for the US Treasury, US Core Plus Bond, and Stable Value Strategies. He also is a member of the portfolio strategy team for T. Rowe Price's core and core plus mandates. Mr. Brennan is a vice president of T. Rowe Price Group, Inc., T. Rowe Price Associates, Inc., T. Rowe Price International Ltd, and T. Rowe Price Trust Company.

Mr. Brennan has 33 years of investment experience, 19 of which have been at T. Rowe Price. Prior to joining T. Rowe Price in 2000, he was a fixed income manager with Howard Hughes Medical Institute, responsible for Treasury, emerging, nondollar, and derivative strategies for core plus. Mr. Brennan began his career at CIGNA Investments, Inc., as a portfolio analyst for immunized and indexed fixed income accounts.

Mr. Brennan earned a B.S. in economics and computer sciences and an M.A. in economics from Trinity College in Hartford, Connecticut. He also earned the Chartered Financial Analyst (CFA) designation and is a former president and treasurer of the Baltimore CFA Society.

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    19
  • Years investment
    experience
    33

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class I $2,500,000 $100,000 $0 0.00% 40 basis points 0.48%
Class Jd $10,000,000 $0 $0 0.00% 0 basis points 0.04%
Class Sd $10,000,000 $0 $0 0.00% 0 basis points 0.10%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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