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SICAV

US Equity Fund

Formerly US Large-Cap Equity Fund

Style agnostic investing in larger US companies.

ISIN LU1438969518 WKN A2ANJK

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

7.07%
$671.0m

1YR Return
(View Total Returns)

Manager Tenure

6.72%
4yrs

Information Ratio
(3 Years)

Tracking Error
(3 Years)

-0.60
4.87%

Inception Date 30-Jun-2016

Performance figures calculated in EUR

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31-May-2020 - Jeff Rottinghaus, Portfolio Manager ,
We are experiencing a truly unique market environment, as the global coronavirus pandemic is causing massive disruption to the global economy. While the near-term outlook is highly uncertain, we are encouraged to see swift and significant monetary and fiscal action taken by central banks in order to avoid a worst-case scenario. With a long-term investment focus, and a strategy that focuses on buying high-quality companies at attractive valuations, we think our portfolio is well positioned.
Jeff Rottinghaus
Jeff Rottinghaus, Portfolio Manager

Jeff Rottinghaus is a portfolio manager in the U.S. Equity Division. He is president of the US Large-Cap Core Equity Strategy and chairman of its Investment Advisory Committee. In addition, he is a vice president and an Investment Advisory Committee member of the US Quantitative U.S. and US Dividend Growth Strategies. Jeff also is a vice president of T. Rowe Price Group, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

U.S. equity markets declined significantly during the first quarter. Despite a strong start to the year, by late February, concerns over the spread of the coronavirus had begun to sour investor sentiment. Social distancing measures put in place in response to the domestic spread of the coronavirus led to cratering economic activity. Meanwhile, a Saudi-Russian oil market share battle acted as a supply shock to oil, causing crude prices to plummet. Subsequently, the U.S. Federal Reserve enacted an emergency monetary policy regime in an attempt to address liquidity concerns and stimulate economic growth.

We are experiencing a truly unique market environment as a result of a global pandemic that has caused massive disruption to economies around the world. The scope of its impact on economic growth and corporate earnings will largely be driven by the duration of the crisis; however, we are encouraged to see swift and significant monetary and fiscal actions to avoid a worst-case scenario. With a focus on the longer term, and buying high-quality companies at attractive valuations, we think the portfolio is well positioned to deliver strong risk-adjusted returns.

Going forward, we will continue to search for investment opportunities in select areas of the market, utilizing our bottom-up stock selection approach. As always, we rely on our global research team of industry specialists to uncover fundamentally sound companies and remain committed to providing quality risk-adjusted returns over the long term.

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.

Investment Approach

  • Carefully constructed portfolio of the portfolio manager’s highest conviction investment ideas supported by our deep pool of U.S. equity analysts.
  • Core style targeting attractive opportunities across the investable universe irrespective of growth or value style.
  • Investment process that:
    • leverages the stock selection capabilities of our global research team;
    • emphasizes fundamental bottom-up stock selection;
    • is combined with an in-depth valuation assessment;
    • has rigorous portfolio construction.
  • Active risk management process integrated throughout our analysis.
  • Focused Large-Cap approach with stock selection the primary source of value added.
  • High conviction portfolio takes meaningful bets based on rigorous proprietary research.

Portfolio Construction

  • Roughly 50-60 securities.
  • Invest in high conviction ideas over a two-year time horizon.
  • Typical position size range: +/- 4% relative to the benchmark.
  • Sector weights: Generally limited to +/- 10% relative to the benchmark.
  • Expected tracking error: targeting 400 basis points.
  • Expected active share: targeting 70% or greater.

Performance (Class A | EUR)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 6.72% 7.07% N/A 8.93%
Indicative Benchmark % 12.37% 9.98% N/A 11.48%
Excess Return % -5.65% -2.91% N/A -2.55%

Inception Date 30-Jun-2016

Indicative Benchmark: S&P 500 Net 30% Withholding Tax

Data as of  31-May-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % -5.42% 2.13% N/A 5.86%
Indicative Benchmark % -5.37% 3.59% N/A 7.56%
Excess Return % -0.05% -1.46% N/A -1.70%

Inception Date 30-Jun-2016

Indicative Benchmark: S&P 500 Net 30% Withholding Tax

Data as of  31-Mar-2020

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 02-Jul-2020 Quarter to DateData as of 02-Jul-2020 Year to DateData as of 02-Jul-2020 1 MonthData as of 31-May-2020 3 MonthsData as of 31-May-2020
Fund % 2.87% 2.87% -4.27% 1.38% 1.38%
Indicative Benchmark % 1.00% 1.00% -2.46% 3.09% 2.14%
Excess Return % 1.87% 1.87% -1.81% -1.71% -0.76%

Inception Date 30-Jun-2016

Indicative Benchmark: S&P 500 Net 30% Withholding Tax

Indicative Benchmark: S&P 500 Net 30% Withholding Tax

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-May-2020 - Jeff Rottinghaus, Portfolio Manager ,
U.S. equities rose sharply during May, continuing their rebound from steep losses in March. Within the portfolio, consumer discretionary had the most negative impact on relative performance due to stock selection. Shares of online retailer Amazon.com declined after the company reported mixed results from its most recent quarter. We think Amazon’s e-commerce and cloud computing businesses both still have substantial growth runways. We also like that the company continues to reinvest profits into other business segments like devices and video. Within information technology, stock selection weighed on relative returns. Financial technology provider Fiserv posted positive returns but underperformed sector peers. We believe that Fiserv is well positioned to enjoy a multiyear period of above-average organic growth as the penetration rate of mobile banking continues to increase. Conversely, stock selection in the financials sector had the largest positive impact on relative performance. Property and casualty insurance broker Willis Towers Watson performed well as the stock continued to rebound off its March lows. We like the company’s highly recurring revenue model and strong management team and believe that its recently announced deal to merge with Aon makes strategic sense.

Holdings

Total
Holdings
66
Largest Holding Microsoft 6.01% Was (31-Dec-2019) 4.59%
Other View Full Holdings Quarterly data as of 31-Mar-2020
Top 10 Holdings 33.07% View Top 10 Holdings Monthly data as of 31-May-2020

Largest Top Contributor^

Amazon.com
By 3.14%
% of fund 5.06%

Largest Top Detractor^

GE
By -0.09%
% of fund 1.83%

^Absolute

Quarterly Data as of 31-Mar-2020

Top Purchase

Qualcomm (N)
1.30%
Was (31-Dec-2019) 0.00%

Top Sale

Wells Fargo (E)
0.00%
Was (31-Dec-2019) 1.33%

Quarterly Data as of 31-Mar-2020

31-Mar-2020 - Jeff Rottinghaus, Portfolio Manager ,

Within the portfolio, our positioning is mainly driven by fundamental, stock-specific views. During the quarter, we added gradually to cyclicality in high-quality names with strong balance sheets that we think have very attractive reward/risk profiles over the intermediate to longer term. Conversely, we trimmed names where we did not have complete confidence in their balance sheets or where we found better reward/risk ideas. We will continue to look for high-quality companies that have opportunities to increase their market share or have barriers to entry around their business that will allow them to grow organically in a variety of market environments.

Materials

The cyclical industries within the materials sector have faced challenges due to lower commodity prices and industrial output. Our focus is on owning companies with leading industry positions as well as those that are undertaking initiatives to create additional shareholder value. Our largest sector positions are Linde, Air Products & Chemicals, and PPG Industries.

  • We initiated a position in PPG Industries, a top player across its end markets and geographies in the attractive coatings industry. We believe PPG is a high-quality company with a strong management team, good balance sheet, best-in-class efficiency metrics and consistent returns on invested capital. Recovery in the company's large China business should also benefit future growth.
  • We initiated a position in pulp and paper company International Paper on cyclical weakness as low old corrugated container prices, depressed operating rates, elevated inventories, and weak demand growth have provided an attractive risk/reward profile. We think the company operates in an industry with favorable long-term fundamentals driven by consolidation, forward integration, and an elevated capital-incentive curve. Current cyclical weakness in the form of low OCC prices, depressed operating rates, elevated inventories, and weak demand growth combine to provide an attractive risk-reward in the stock Current cyclical weakness in the form of low OCC prices, depressed operating rates, elevated inventories, and weak demand growth combine to provide an attractive risk-reward in the stock

Health Care

The health care sector continues to play a significant role in the portfolio, as we believe certain industries offer compelling, relatively stable growth potential that can perform well over the long term in multiple economic scenarios. The sector also has a strong secular tailwind from an aging population. We favor companies that offer relatively stable growth potential and/or that are well positioned to take advantage of long-term trends such as highly innovative product offerings. Our largest industry weight is in health care equipment and supplies, including Danaher and Medtronic. We also maintain a sizable position in pharmaceuticals, including Johnson & Johnson and Pfizer.

  • We initiated a position in managed care company UnitedHealth Group, as the downturn in equities resulted in shares trading at compelling prices. We believe UnitedHealth Group is a well-diversified company that should see accelerated earnings growth over the long term as a result of improving Medicare performance, continued growth in its Medicaid business, its exit from insurance exchanges, and disruption among peers due to deal-related distractions.
  • We initiated a position in Elanco Animal Health, which provides products and services designed to enhance the health of animals and pets. We bought shares around the company's recent equity financing, which we believe should be accretive to earnings. Longer term, we expect the stock to benefit from the dissipation of several overhangs and headwinds.

Communication Services

The communication services sector comprises a wide range of media and entertainment and telecommunication services companies. The sector is our largest underweight position relative to the S&P 500 Index, as we are most underweight the media and entertainment industries. Our largest sector holdings are in Alphabet and Verizon Communications.

  • We eliminated our position in communications and digital entertainment services provider AT&T. In recent periods, shares appreciated amid improved performance from the company's business wireline segment. Investors also reacted positively to news of activist activity in the stock, which they hoped could prompt management to sell off AT&T's non-core assets. However, we are concerned about the increasingly competitive U.S. mobile carrier landscape. Additionally, we are not confident that activist involvement will materially improve AT&T's risk/reward profile.
  • We trimmed our position in media conglomerate Walt Disney as the stock has held its value relatively well in recent periods. While we acknowledge that the coronavirus outbreak poses a particular threat to the company's Parks and Resorts segment in the near term, we continue to believe the segment is an underappreciated longer-term growth story with durable pricing power. We also remain optimistic that the Disney+ streaming service will enable the company to leverage its diverse collection of assets and will continue to drive the share price higher.

Financials

Financials remains one of our larger absolute sector weights, as we continue to seek to invest in high-quality companies that have strong balance sheets, strong industry positions, and diversified revenue streams, as we are mindful of the adverse impact of lower interest rates on bank lending margins. Our largest industry weights are in capital markets, including Morgan Stanley and CME Group, and in insurance, including Marsh & McLennan and Willis Towers Watson.

  • We initiated a position in CME Group, the world's largest derivatives exchange by market capitalization and volume. We believe the company benefits from a monopoly-like business with improved dividend visibility and is well positioned for long-duration growth as market controversy remains higher than in the recent past and company-specific initiatives accelerate over the next few years.
  • We eliminated our position in banking company Wells Fargo in favor of more attractive opportunities within the financials sector as pessimism from the recent fake account scandal and related ongoing issues have lessened our conviction in the stock's future growth potential.

Sectors

Total
Sectors
11
Largest Sector Information Technology 24.04% Was (30-Apr-2020) 23.46%
Other View complete Sector Diversification

Monthly Data as of 31-May-2020

Indicative Benchmark: S&P 500 Index

Top Contributor^

Energy
Net Contribution 0.56%
Sector
0.90%
Selection -0.33%

Top Detractor^

Information Technology
Net Contribution -0.68%
Sector
-0.24%
Selection
-0.44%

^Relative

Quarterly Data as of 31-Mar-2020

Largest Overweight

Utilities
By1.92%
Fund 5.16%
Indicative Benchmark 3.24%

Largest Underweight

Communication Services
By-3.03%
Fund 7.94%
Indicative Benchmark 10.97%

Monthly Data as of 31-May-2020

31-May-2020 - Jeff Rottinghaus, Portfolio Manager ,
Financials remains one of our larger absolute sector positions, as we continue to seek to invest in high-quality companies that have strong balance sheets, solid industry positions, and diversified revenue streams, as we are mindful of the adverse impact of lower interest rates on bank lending margins. Our largest industry positions are in capital markets, including Morgan Stanley and CME Group, and in insurance, including Marsh & McLennan and Willis Towers Watson.

Team (As of 02-Jul-2020)

Jeff Rottinghaus

Jeff Rottinghaus is a portfolio manager in the U.S. Equity Division. He is president of the US Large-Cap Core Equity Strategy and chairman of its Investment Advisory Committee. In addition, he is a vice president and an Investment Advisory Committee member of the US Quantitative U.S. and US Dividend Growth Strategies. Jeff also is a vice president of T. Rowe Price Group, Inc.

Jeff’s investment experience began in 2001 when he joined T. Rowe Price, beginning in the U.S. Equity Division. Prior to this, Jeff was employed by Ernst & Young as a financial consultant. Jeff also was part owner of software consulting firm Kelly Levey & Associates.

Jeff earned a B.S. in business administration from Bowling Green State University and an M.B.A. in finance from the University of Pennsylvania, The Wharton School. He is a certified public accountant.

  • Fund manager
    since
    2016
  • Years at
    T. Rowe Price
    19
  • Years investment
    experience
    20
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 1.62%
Class I $2,500,000 $100,000 $0 0.00% 65 basis points 0.70%
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.

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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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