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.
Throughout, T. Rowe Price remained committed to a disciplined strategic investing approach. Our research shows that our long-term U.S. equity clients have been rewarded.
18 of 18
strategies had positive active success rates over rolling 5- and 10-year periods
of strategies generated positive average excess returns over rolling 5- and 10-year periods
T. Rowe Price success rates over 20 years
Analysis of 18 T. Rowe Price institutional diversified active U.S. equity strategies over 20 years or their lifetime
Rolling periods 12/31/1997 through 12/31/2017
Percentage of strategies that had positive active success rates
Average annualized, time-weighted excess returns, net of fees
Sources: T. Rowe Price, Russell, and Standard & Poor’s; data analysis by T. Rowe Price.
Note that past performance data throughout this material is not a reliable indicator of future performance. The returns and strategy performance data above were sourced from the study "U.S. Equities: Long-Term Benefits of the T. Rowe Price Strategic Investing Approach," March 2018. For more information, please visit troweprice.com/approach.
Outperformance improved over time
A rigorous study by T. Rowe Price shows that we excelled through the many market environments of the past two decades. A majority of our 18 institutional diversified active U.S. equity strategies beat their benchmarks across multiple time periods over 20 years or their lifetime.1
Moreover, our outperformance tended to remain strong over time. Seventeen of the 18 strategies had positive active success rates (see Box 1) over rolling three-year periods and 18 over five-year periods, while 18 strategies also were ahead over 10-year intervals.2 A notable 100% generated positive average excess returns over rolling 3-, 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 strategies beat their benchmarks over all relevant time periods. Again, a long-term mind-set was rewarded as excess returns for our large-cap and mid-cap managers 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 over 350 of our investment professionals see firsthand how the companies we’re investing in are performing today in order to make skilled judgments about how we think they’ll perform in the future.3
Experience has been a critical component of our success as well. Our skilled portfolio managers have deep experience—an average of 21 years in the industry (double the industry average) and 16 years with T. Rowe Price, as of December 31, 2017.
Independent academic research supports our approach: Active equity managers, as a group, have been shown to have the skill to select stocks that outperform the broader market, before costs,4 while stable, longstanding management teams appear more likely to excel.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.
1The study spanned the 20 years up to the end of December 2017 for older strategies, or since inception for newer ones, and measured performance net of fees and trading costs. It covered 18 of the 29 institutional diversified active U.S. equity strategies currently offered by T. Rowe Price. In instances where a portfolio manager managed multiple strategies in a particular sub-asset class style (e.g., U.S. small-cap growth), we included only the strategy with the most assets under management to avoid double counting. Benchmarks included the S&P 500, Russell 1000 Growth, Russell 2000 Growth, Russell 1000 Value, Russell 2000 Value, Russell 2500, Russell 2000, Russell Midcap Growth, and Russell Midcap Value Indexes. Strategy performance was measured against the designated benchmarks over rolling 1-, 3-, 5-, and 10-year periods.
2Active success rates are the percentage of times a strategy outperformed its designated benchmark in a given period.
3T. Rowe Price professional staff as of December 31, 2017.
4Includes research by Professor Mark Grinblatt of UCLA and Professor Sheridan Titman of the University of Texas. See: “The Persistence of Mutual Fund Performance,” Journal of Finance, Vol. 47, No. 5, December 1992.
5According to research by Professor Joseph Golec of the University of Connecticut. See: “The Effects of Mutual Fund Manager Characteristics on Their Portfolio Performance, Risk and Fees,” Financial Services Review, Vol. 5, No. 2, 1996.
This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and 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 written 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.
Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell indexes. Russell® is a trademark of Russell Investment Group.
USA—Issued in the USA by T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore, MD, 21202, which is regulated by the U.S. Securities and Exchange Commission. For Institutional Investors only.
T. ROWE PRICE, INVEST WITH CONFIDENCE and the Bighorn Sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc. All rights reserved.