SICAV

US Large-Cap Value Equity Fund

Invest in large US companies with hidden value and potential overlooked by the market majority.

ISIN LU1028172226 Valoren 23626807

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

1.00%
$639.5m

1YR Return
(View Total Returns)

Manager Tenure

-11.56%
6yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.04
4.89%

Inception Date 31-Jan-2014

Performance figures calculated in GBP

Other Literature

31-Aug-2020 - Heather McPherson, Portfolio Manager,
We continue to believe the market will be driven by news headlines until there is more clarity on the impacts of the coronavirus and how it may affect economic behaviour moving forward. Earnings guidance will be of little value for the next several quarters, so we see opportunities by extending our time horizon to identify investment candidates that look attractive under a “normalised” environment.
John D.  Linehan, CFA
John D. Linehan, CFA, Co-Portfolio Manager

John D. Linehan is the portfolio manager for the U.S. Large Cap Equity Income Strategy and co-portfolio manager for the US Large-Cap Value Equity Strategy in the U.S. Equity Division. In addition, he is the chief investment officer of Equity and a member of the firm's U.S. Equity Steering and Equity Brokerage and Trading Control Committees. He also is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

While our outlook for the direction of the market is uncertain, we are more confident that volatility will continue until there is a medical solution to the pandemic. Market behavior has been increasingly concentrated, and because of this concentration, headline market indexes mask the sizable weakness of companies exposed to cyclical and secular concerns. Throughout the year, valuation has not been an important consideration for investors, and market leadership is unchanged, as investors continue to bid up secular winners despite a rebound off oversold lows in cyclical sectors during the second quarter. Economic activity has improved but has likely been partially propped up by fiscal policy and could be impacted by the continued spread of the coronavirus.

Despite the challenges in this environment, we believe it will ultimately favor stock pickers. The size of this uncertainty has caused investors to shrink their time horizons. We therefore believe our long time horizon will be a benefit as we seek to identify companies that look attractive under a "normalized" environment. We have used year-to-date volatility to go name by name through the portfolio and reconsider our thesis on each holding.

From here, we will continue to look for opportunities to lean into cyclicality when valuations are compelling while also keeping a balanced portfolio, adding to more defensive names when the market grows concerned about their durability. Given the uncertainty of the current environment, one area we will not waver on is balance sheet strength. Despite the low visibility, we believe the market will become more discriminate as time goes on, and our valuation discipline and long-term time horizon will ultimately be rewarded.

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a diversified portfolio of stocks from large capitalization companies in the United States that are selling at discounted valuations relative to their historical average and/or the average of their industries.

Investment Approach

  • Focus on relative value relationships to opportunistically identify attractively valued companies.
  • Fundamental research is key to uncovering companies with potential for stock price mean reversion.
  • Integrate qualitative inputs to assess potential for improved investor perception.
  • Verify relative valuation anomalies through quantitative analysis.
  • Balance valuation analysis and qualitative overlay.

Portfolio Construction

  • Typically 70-80 stock portfolio
  • Individual positions typically are below 3%, but higher conviction ideas can range to 5%
  • Sector weights will typically vary from 0.5X to 2.0X of primary value sectors of the Russell 1000 Value Index
  • Reserves will range from 0% to 2%

Performance (Class Q | GBP)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % -11.56% 1.00% 9.51% 9.31%
Indicative Benchmark % -9.01% 2.39% 9.72% 9.84%
Excess Return % -2.55% -1.39% -0.21% -0.53%

Inception Date 31-Jan-2014

Indicative Benchmark: Russell 1000 Value Net 30% Index

Data as of  31-Aug-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % -10.27% 0.88% 8.16% 9.35%
Indicative Benchmark % -6.86% 2.75% 8.98% 10.16%
Excess Return % -3.41% -1.87% -0.82% -0.81%

Inception Date 31-Jan-2014

Indicative Benchmark: Russell 1000 Value Net 30% Index

Data as of  30-Jun-2020

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 18-Sep-2020 Quarter to DateData as of 18-Sep-2020 Year to DateData as of 18-Sep-2020 1 MonthData as of 31-Aug-2020 3 MonthsData as of 31-Aug-2020
Fund % 1.22% 2.59% -11.57% 2.63% 1.93%
Indicative Benchmark % 1.87% 1.63% -9.14% 2.01% -0.90%
Excess Return % -0.65% 0.96% -2.43% 0.62% 2.83%

Inception Date 31-Jan-2014

Indicative Benchmark: Russell 1000 Value Net 30% Index

Indicative Benchmark: Russell 1000 Value Net 30% Index

Performance figures calculated in USD

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.

Index returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 June 2019, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly.

31-Aug-2020 - Heather McPherson, Portfolio Manager,
U.S. equities produced strong gains in August, continuing their recovery from their lows in March. During the month, investors seemed to largely shrug off concerns about the economic impact of the July 31 expiration of extended unemployment benefits. Better-than-expected economic and corporate earnings reports also provided a favourable backdrop for stocks, as did U.S. Federal Reserve Chair Jerome Powell announcing late in the month that the central bank will allow inflation to run above its 2% target to make up for past shortfalls. Within the portfolio, financials had the most negative impact on relative results due to our security choices. Shares of American International Group fell—investors exhibited caution in the face of an uncertain near-term operating environment caused by the coronavirus pandemic. Security selection within the health care sector also hurt. Conversely, the information technology sector led relative results due to stock selection. Shares of Qualcomm performed well. Recently, the company reported earnings from its most recent quarter that beat expectations and announced a long-term global patent license agreement with Chinese communications giant Huawei Technologies. Stock choices and an underweight allocation to the real estate sector boosted relative performance further.

Holdings

Total
Holdings
87
Largest Holding Morgan Stanley 3.17% Was (31-Mar-2020) 2.45%
Other View Full Holdings Quarterly data as of 30-Jun-2020
Top 10 Holdings 25.79% View Top 10 Holdings Monthly data as of 31-Aug-2020

Largest Top Contributor^

Morgan Stanley
By 0.36%
% of fund 3.18%

Largest Top Detractor^

Southern Company
By -0.66%
% of fund 3.05%

^Absolute

Quarterly Data as of 30-Jun-2020

Top Purchase

Morgan Stanley
3.17%
Was (31-Mar-2020) 2.45%

Top Sale

JPMorgan Chase
1.82%
Was (31-Mar-2020) 2.63%

Quarterly Data as of 30-Jun-2020

30-Jun-2020 - Heather McPherson, Portfolio Manager,

We used the year-to-date volatility to go name by name through the portfolio and reconsider our thesis on each holding. We also sold several names on relative strength that saw their share prices appreciate during the market rebound.

Financials

The financials sector represents a significant absolute weighting in the portfolio. We tend to prefer defensively positioned names with solid balance sheets and diversified revenue streams, as we are mindful of the adverse impact of lower interest rates on bank lending margins and potential weakening of the credit cycle.

  • We sold shares of JPMorgan Chase. The global bank has above-average balance sheet strength and diversified business lines that are highly levered to consumers. However, we believe the stock is trading at a relative valuation premium, and we are wary that the market is underappreciating the earnings and credit headwinds the business may face.
  • We bought shares of Bank of America due to its attractive relative valuation. Although we acknowledge risks remain as we work through the coronavirus pandemic, we continue to like management's efforts to improve the bank's cost structure and risk characteristics. We also value Bank of America's strong, domestic-focused retail deposit base.

Consumer Discretionary

The sector is composed of a diverse group of industries, including retailers, diversified consumer services, auto manufacturers, and hotel and restaurant operators. We are cautious on several industries within the sector that we believe are exposed to short- and long-term headwinds, such as the coronavirus pandemic and the shift from brick-and-mortar shopping to e-commerce.

  • We bought shares of TJX at an attractive relative valuation. We are encouraged by early signs of solid consumer demand following the partial reopening of TJX stores in May. We believe the off-price retail space stands to benefit from the eventual resumption of U.S. economic activity following the coronavirus pandemic. Additionally, we believe TJX has the balance sheet strength that may be required in this uncertain operating environment.

Health Care

We have a varied view of the sector, considering the myriad challenges and opportunities health care companies face, including potential drug pricing reform, mergers and acquisitions, and an aging U.S. population.

  • We sold shares of medical device maker Medtronic. While we remain positive on the company given its defensive earnings growth profile and diverse end markets, we are wary about the near-term impact of the coronavirus pandemic on the medical device space.
  • We sold shares of Johnson & Johnson, one of the largest and most diverse health care companies in the world. We are cautious about the company's high COVID-19 exposure relative to peers. A significant impact to the devices business is expected over the near term as hospitals may take longer than anticipated to pass peak coronavirus admissions and repurpose facilities back toward elective procedures.

Communication Services

The communication services sector contains several types of companies, including media and entertainment businesses and telecommunication services names. Our main industry exposure is to the entertainment and media industries, where we hold companies that produce or distribute must-see content and typically generate strong cash flow. We also hold positions in the diversified telecommunication services industry, where we generally prefer high-quality companies that have solid balance sheets, stable cash flow growth, and high dividend payout ratios.

  • Verizon Communications features a leading U.S. wireless network. The stock has held up relatively well amid the coronavirus pandemic due to investor expectations of resilient demand for wireless services. However, we believe the business faces threats from rising competitive intensity in the wireless space, and we utilized relative strength to reduce our position size.

Sectors

Total
Sectors
11
Largest Sector Financials 19.53% Was (31-Jul-2020) 19.90%
Other View complete Sector Diversification

Monthly Data as of 31-Aug-2020

Indicative Benchmark: Russell 1000 Value Index

Top Contributor^

Financials
Net Contribution 1.45%
Sector
-0.02%
Selection 1.47%

Top Detractor^

Energy
Net Contribution -1.12%
Sector
0.35%
Selection
-1.47%

^Relative

Quarterly Data as of 30-Jun-2020

Largest Overweight

Energy
By2.56%
Fund 7.12%
Indicative Benchmark 4.56%

Largest Underweight

Consumer Discretionary
By-4.78%
Fund 2.69%
Indicative Benchmark 7.47%

Monthly Data as of 31-Aug-2020

31-Aug-2020 - Heather McPherson, Portfolio Manager,
The utilities sector contains several companies that deliver durable cash flows and higher dividend yields. Despite the sector’s poor relative performance during the coronavirus pandemic, we are attracted to the durability of utility earnings, and we believe efforts to modernise the U.S. electric grid while shifting more power production to renewables offers a multiyear rate-base growth opportunity. In August, we sold shares of select firms on reduced risk/reward following share price appreciation. We also bought shares of certain names we like at affordable valuations.

Team (As of 05-Aug-2020)

John D.  Linehan, CFA

John D. Linehan is the portfolio manager for the U.S. Large Cap Equity Income Strategy and co-portfolio manager for the US Large-Cap Value Equity Strategy in the U.S. Equity Division. In addition, he is the chief investment officer of Equity and a member of the firm's U.S. Equity Steering and Equity Brokerage and Trading Control Committees. He also is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

John’s investment experience began in 1987, and he has been with T. Rowe Price since 1998, beginning as an investment analyst, covering paper and forest products and the airline industry, in the U.S. Equity Division. From 2003 to 2009, he was the portfolio manager of the US Value Strategy, and from 2009 to 2014, he was head of U.S. Equity and chairman of the U.S. Equity Steering Committee. Prior to T. Rowe Price, John was an executive in the oil trading and consulting industry, first as vice president and managing director for Delaney Petroleum, then as vice president and managing director for E.T. Petroleum. He also was an associate in mortgage-backed securities trading at Banker Trust NY.

John earned a B.A. in economics from Amherst College and an M.B.A. from Stanford Graduate School of Business, where he was a Henry Ford II Scholar, an Arjay Miller Scholar, and the winner of the Alexander A. Robichek Award in finance. John also has earned the Chartered Financial Analyst® designation.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Fund manager
    since
    2014
  • Years at
    T. Rowe Price
    22
  • Years investment
    experience
    31
Mark S.  Finn, CFA, CPA

?Mark Finn is the portfolio manager of the US Large-Cap Value Equity Strategy, which includes the Value Fund, and co-portfolio manager of the Large-Cap Value Fund in the U.S. Equity Division. He is chairman of the Investment Advisory Committee of the U.S. Large Cap Value Equity Strategy. Mark is also a vice president and an Investment Advisory Committee member of the US Large-Cap Equity Income, Global Natural Resources Equity, US Quantitative U.S., US Quantitative Large, US Mid-Cap Value Equity, and Retirement Strategies.

Mark’s investment experience began in 1998, and he has been with T. Rowe Price since 1990, beginning as controller of Investment Services in the Finance department. After that, he was principal accounting officer for the firm’s realty income strategies and an equity research analyst. Prior to T. Rowe Price, Mark was employed by Price Waterhouse LLP as an auditor, working on engagements for both public and private companies.  

Mark earned a B.S. in accounting from the University of Delaware. He also has earned the Chartered Financial Analyst® designation.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Fund manager
    since
    2014
  • Years at
    T. Rowe Price
    29
  • Years investment
    experience
    22
Heather K. McPherson

Heather McPherson is a co-portfolio manager for the US Large-Cap Value Equity Strategy and an associate portfolio manager for the US Large-Cap Equity Income Strategy in the U.S. Equity Division. Heather is a member of the firm's U.S. Equity Steering Committee and is a vice president and an Investment Advisory Committee member of the US Large-Cap Equity Income, US Large-Cap Core Equity, US Quantitative Large, Global Natural Resources Equity, US Mid-Cap Value Equity, and US Large-Cap Value Equity Strategies. She is a trustee of the T. Rowe Price Foundation. Heather also is a vice president of T. Rowe Price Group, Inc. 

Heather’s investment experience began in 2001, and she has been with T. Rowe Price since 2002, beginning in the U.S. Equity Division. Prior to this, Heather was employed by Salomon Smith Barney as a summer intern, covering the storage area networking industry. Heather also was employed by Putnam Lovell Securities, Inc., as a vice president of finance and administration.

Heather earned a B.S. in managerial economics from the University of California, Davis, and an M.B.A. from Duke University, The Fuqua School of Business.

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    18
  • Years investment
    experience
    20
Caleb N. Fritz, CFA

Caleb Fritz is a portfolio specialist in the U.S. Equity Division of T. Rowe Price. He acts as a proxy for equity portfolio managers with institutional clients, consultants, and prospects. Mr. Fritz supports T. Rowe Price's large-cap value strategies. He is a vice president of T. Rowe Price Group, Inc.

Mr. Fritz has 19 years of investment experience, 12 of which have been with T. Rowe Price. Prior to his current position, he was a lead portfolio analyst providing analytical support to investment, client service, and marketing staff for the firm's large-cap value and health sciences portfolios. Prior to joining the firm in 2007, Mr. Fritz served as an associate analyst for Legg Mason Capital Management, covering the health care sector.

Mr. Fritz earned a B.A. and an M.A. from the University of South Florida, and he also has earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    12
  • Years investment
    experience
    19
Eric Papesh

Eric Papesh is a portfolio specialist in the U.S. Equity Division of T. Rowe Price. He is based in London and serves as a proxy for equity portfolio managers with institutional clients, consultants and prospects. Mr. Papesh supports T. Rowe Price's US Smaller Companies Equity and US Large-Cap Equity Strategies offered in the Europe, Middle East and Africa (EMEA) and Asia-Pacific (APAC) regions. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Papesh has 22 years of financial services experience, two of which have been with T. Rowe Price. Before joining the firm in 2014, he was a senior research analyst with Russell Investments, where he focused on US equity investment strategies.

Mr. Papesh earned a B.A. in business administration and an M.B.A. from the University of Washington. He has also earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    5
  • Years investment
    experience
    25

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $1,000 $100 $100 5.00% 150 basis points 1.61%
Class I $2,500,000 $100,000 $0 0.00% 65 basis points 0.70%
Class J $10,000,000 $0 $0 0.00% 0 basis points 0.02%
Class Q $1,000 $100 $100 0.00% 65 basis points 0.77%

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

Download

Latest Date Range
Audience for the document: Share Class: Language of the document:
Download Cancel

Download

Share Class: Language of the document:
Download Cancel
Sign in to manage subscriptions for products, insights and email updates.
Continue with sign in?
To complete sign in and be redirected to your registered country, please select continue. Select cancel to remain on the current site.
Continue Cancel
Once registered, you'll be able to start subscribing.

Change Details

If you need to change your email address please contact us.
Subscriptions
OK
You are ready to start subscribing.
Get started by going to our products or insights section to follow what you're interested in.

Products Insights

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

Other Literature

You have successfully subscribed.

Notify me by email when
regular data and commentary is available
exceptional commentary is available
new articles become available

Thank you for your continued interest