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SICAV

US Equity Fund

Formerly US Large-Cap Equity Fund

Style agnostic investing in larger US companies.

ISIN LU1319833791 Bloomberg TRUSLIE:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

9.88%
$619.4m

1YR Return
(View Total Returns)

Manager Tenure

10.36%
3yrs

Information Ratio
(3 Years)

Tracking Error
(3 Years)

-0.33
4.14%

Inception Date 08-Jul-2016

Performance figures calculated in EUR

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31-Oct-2019 - Jeff Rottinghaus, Portfolio Manager ,
U.S. economic data remains largely positive as consumers continue to benefit from record-low unemployment and rising wages. However, we remain cautious as market volatility will likely persist until there is more clarity in the ongoing U.S.-China trade conflict. We are concerned that global trade policy uncertainty may continue to dampen business capital spending and other growth efforts. That said, recent volatility has created compelling buying opportunities within more cyclical areas of the market and in higher-quality, traditionally defensive names.
Jeff Rottinghaus
Jeff Rottinghaus, Portfolio Manager

Jeff Rottinghaus is a portfolio manager in the U.S. Equity Division of T. Rowe Price. He is president of the US Large-Cap Core Equity and Growth & Income Strategies and chairman of the strategies' Investment Advisory Committees. In addition, he is a vice president and an Investment Advisory Committee member of the Dividend Growth and Capital Appreciation Strategies. Mr. Rottinghaus is a vice president of T. Rowe Price Group, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

U.S. stocks delivered mixed returns in the third quarter of 2019 amid heightened volatility as trade tensions between the U.S. and China continued to weigh on markets. Fears of a recession also intensified, as disappointing manufacturing data and an inversion of closely watched portions of the yield curve undermined investor sentiment. Conversely, investors were encouraged by monetary policy developments, as the Federal Reserve reduced short-term interest rates twice and other central banks around the world also took measures to sustain economic growth.

While U.S. economic data remains largely positive as consumers continue to benefit from record low unemployment and rising wages, we remain cautious as we expect market volatility will persist until there is more clarity into how the long-standing U.S.-China trade tensions will be resolved. We are concerned that global trade policy uncertainty may continue to dampen business capital spending and other growth-driving efforts. However, recent volatility has created compelling buying opportunities within more cyclical areas of the market and in higher-quality, traditionally defensive names.

Within the portfolio, we expect stock selection will be the primary driver of longer-term outperformance. We believe careful fundamental research will be necessary to find opportunities, and 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

  • 50 or fewer 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 Ih | EUR)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 10.36% 9.88% N/A 9.04%
Indicative Benchmark % 10.15% 11.25% N/A 10.03%
Excess Return % 0.21% -1.37% N/A -0.99%

Inception Date 08-Jul-2016

Indicative Benchmark: S&P 500 Index Net Hedged to EUR

Data as of  31-Oct-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 2.65% 9.22% N/A 8.87%
Indicative Benchmark % 0.27% 9.83% N/A 9.68%
Excess Return % 2.38% -0.61% N/A -0.81%

Inception Date 08-Jul-2016

Indicative Benchmark: S&P 500 Index Net Hedged to EUR

Data as of  30-Sep-2019

Performance figures calculated in EUR

Recent Performance

  Month to DateData as of 19-Nov-2019 Quarter to DateData as of 19-Nov-2019 Year to DateData as of 19-Nov-2019 1 MonthData as of 31-Oct-2019 3 MonthsData as of 31-Oct-2019
Fund % 3.08% 4.33% 21.94% 1.22% -0.82%
Indicative Benchmark % 2.72% 4.60% 22.63% 1.83% 1.46%
Excess Return % 0.36% -0.27% -0.69% -0.61% -2.28%

Inception Date 08-Jul-2016

Indicative Benchmark: S&P 500 Index Net Hedged to EUR

Indicative Benchmark: S&P 500 Index Net Hedged to EUR

Performance figures calculated in EUR

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.

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-Oct-2019 - Jeff Rottinghaus, Portfolio Manager ,
Major U.S. stock indices recorded solid gains in October, with some reaching new all-time highs in the final days of the month. Within the portfolio, the health care sector had the most negative impact on relative performance due to stock selection. Shares of diversified medical and industrial conglomerate Danaher traded down during the month as the company beat third-quarter profit and revenue expectations but provided a disappointing earnings outlook. Security selection in the materials sector also weighed on relative results. Shares of specialty chemical company DuPont de Nemours also underperformed. Within the consumer discretionary sector, security choices hurt performance. Shares of Yum! Brands, the parent company of Taco Bell, KFC, and Pizza Hut, declined after it reported lower-than-expected third-quarter earnings, driven by weakness in its Pizza Hut business. We believe Yum! Brands’ recent refranchising initiatives can lead to higher margins, a more stable cash flow stream, and increased capital being returned to shareholders. Conversely, our underweight allocation in energy, the worst-performing sector in the index, was the most notable contributor to relative performance. We see challenging supply/demand dynamics for the sector.

Holdings

Total
Holdings
64
Largest Holding Microsoft 4.37% Was (30-Jun-2019) 3.87%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 28.80% View Top 10 Holdings Monthly data as of 31-Oct-2019

Largest Top Contributor^

Microsoft
By 0.29%
% of fund 4.39%

Largest Top Detractor^

Amazon.com
By -1.67%
% of fund 3.54%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Wells Fargo (N)
1.37%
Was (30-Jun-2019) 0.00%

Top Sale

Northrop Grumman (E)
0.00%
Was (30-Jun-2019) 1.57%

Quarterly Data as of 30-Sep-2019

30-Sep-2019 - Jeff Rottinghaus, Portfolio Manager ,

Within the portfolio, our positioning is mainly driven by fundamental, stock-specific views. During the quarter, we took advantage of select buying opportunities, as we identified high-quality companies trading at compelling valuations. We also sold shares of certain holdings following their strong performance. 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.

Information Technology

The information technology sector represents our largest absolute weighting. Within the sector, we favor companies with durable business models that address large and growing markets, such as increasing demand for business technology solutions. Within the sector, our largest exposure is to the IT services industry, including Visa, Fiserv, and Fidelity National Information. We also hold sizable positions in Microsoft, Apple, and Cisco Systems.

  • We increased our holding in technology giant Apple as we believe the company will benefit from growth in iPhone sales as well as developments in its Apple TV+ streaming service. We also like Apple's significant stock repurchase efforts.
  • We eliminated our position in Corning, a worldwide leader in innovative materials science technology. While we believe the company will benefit from developing new applications from its leading scientific and manufacturing capabilities, we think it will continue to face headwinds from ongoing trade tensions.
  • We eliminated semiconductor manufacturer Texas Instruments on recent strength as markets reacted favorably to the somewhat surprising news that the company had resumed shipments of compliant products to Huawei, softening concerns of the potential negative impact stemming from U.S. restrictions on business with the Chinese technology giant.

Utilities

We think certain companies within the utilities sector feature durable earnings growth potential, strong dividend yields, and exposure to longer-term trends such as the proliferation of renewable energy. Our largest sector holdings are in NextEra Energy, which offers growth prospects as a leading provider of renewables amid rising market demand for clean-energy provision, and Sempra Energy, which has a strong history of capital allocation and cost-cutting and is levered to a variety of attractive long-cycle energy trends, including liquified natural gas.

  • We initiated a position in integrated utility Exelon on recent weakness as the company reported disappointing second-quarter earnings that missed estimates due to lower realized energy prices. We like Exelon's attractive dividend yield and management's efforts to rebalance earnings toward regulated sources.
  • We trimmed our position in American Water Works as shares of the regulated water and wastewater services company have outperformed recently on solid operational execution and investor preference for more defensive, less cyclical companies. We continue to like American Water Works for its leading industry position and durable, highly visible earnings growth outlook that is driven by the poor state of water infrastructure in the U.S.

Health Care

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

  • We initiated a position in AbbVie in the wake of its announced acquisition of Allergan, a deal that we believe provides the company with several new durable revenue streams. We have faith in AbbVie's experienced management team, and we used the market's negative reaction to the deal as a buying opportunity.
  • We initiated a position in Vertex Pharmaceuticals. We believe the company remains well positioned to sustain and expand its dominant leadership position in cystic fibrosis (CF) and is working on a number of other combinations that offer either improved efficacy over current treatments, or applicability to a wider cross section of CF patients. We also think Vertex Pharmaceutical's strong pipeline offers growth potential beyond CF.
  • We trimmed our position in diversified managed care company UnitedHealth Group ahead of the upcoming 2020 U.S. election cycle. While we believe UnitedHealth Group could benefit from longer-term tailwinds as patients obtain increased access to generics and cheaper drug alternatives through Medicare Advantage programs, we think the overhang of democratic proposals for a single-payer health care system could continue to weigh on managed care companies.

Financials

Financials remains one of our larger absolute sector weights, as we continue to seek to invest in high-quality companies that are well-capitalized, have strong industry positions, and have diversified revenue streams. Our largest industry weights are in banks, including JPMorgan Chase and PNC Financial Services Group, and in insurance, including American International Group and Willis Towers Watson.

  • We initiated a position in Wells Fargo as we are encouraged by the bank's increased focus on risk management and compliance and believe the hiring of a new CEO is a key step in the ongoing turnaround plan. We think Wells Fargo is attractively valued, has sound fundamentals, and has made progress in addressing past issues in its sales culture.
  • We eliminated our position in regional bank U.S. Bancorp. While we like the company's demonstrated credit discipline and solid return profile, we believe the stock is fairly valued. We also have some concerns about the bank's rising expenses and potential challenges in growing its fee income.

Sectors

Total
Sectors
11
Largest Sector Information Technology 20.20% Was (30-Sep-2019) 20.32%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark: S&P 500 Index

Top Contributor^

Financials
Net Contribution 0.25%
Sector
-0.01%
Selection 0.26%

Top Detractor^

Energy
Net Contribution -0.37%
Sector
0.18%
Selection
-0.55%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Health Care
By2.04%
Fund 16.07%
Indicative Benchmark 14.03%

Largest Underweight

Energy
By-2.76%
Fund 1.57%
Indicative Benchmark 4.32%

Monthly Data as of 31-Oct-2019

31-Oct-2019 - Jeff Rottinghaus, Portfolio Manager ,
We think certain companies within the utilities sector feature durable earnings growth potential, strong dividend yields, and exposure to longer-term trends such as the proliferation of renewable energy. Our largest sector holdings are in NextEra Energy and Sempra Energy. In our view, NextEra offers growth prospects as a leading provider of renewables amid rising market demand for clean-energy provision. Sempra Energy has a strong history of capital allocation and cost-cutting and is levered to a variety of attractive long-cycle energy trends, including liquified natural gas.

Team (As of 31-Aug-2019)

Jeff Rottinghaus

Jeff Rottinghaus is a portfolio manager in the U.S. Equity Division of T. Rowe Price. He is president of the US Large-Cap Core Equity and Growth & Income Strategies and chairman of the strategies' Investment Advisory Committees. In addition, he is a vice president and an Investment Advisory Committee member of the Dividend Growth and Capital Appreciation Strategies. Mr. Rottinghaus is a vice president of T. Rowe Price Group, Inc.

Mr. Rottinghaus has 18 years of investment experience, all of which have been with T. Rowe Price. Prior to joining the firm in 2001, he was a financial consultant with Ernst & Young. Mr. Rottinghaus is a former part owner of software consulting firm Kelly-Levey & Associates.

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

  • Fund manager
    since
    2016
  • Years at
    T. Rowe Price
    18
  • 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 Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $100 $100 5.00% 150 basis points 1.67%
Class I $2,500,000 $100,000 $0 0.00% 65 basis points 0.72%
Class Q $15,000 $100 $100 0.00% 65 basis points 0.82%

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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