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SICAV

US Large-Cap Value Equity Fund

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

ISIN LU1028172226 Bloomberg TRUSCQG:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

10.61%
$749.7m

1YR Return
(View Total Returns)

Manager Tenure

9.11%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.03
4.17%

Inception Date 31-Jan-2014

Performance figures calculated in GBP

Other Literature

30-Sep-2019 - Heather McPherson, Portfolio Manager,
We recognise that, late in the business cycle, U.S. equity valuations are elevated. In particular, investors have shown a preference for more defensive areas of the market, making it harder to find attractive entry points in several sectors. We are also aware that geopolitical uncertainties continue to disproportionately affect certain assets. Given these challenging market conditions, we remain committed to finding companies with strong fundamentals and compelling risk/reward profiles that have been discounted due to idiosyncratic challenges.
John D.  Linehan
John D. Linehan, Co-Portfolio Manager

John D. Linehan is the portfolio manager for the Equity Income Strategy and co-portfolio manager of the US Large-Cap Value Strategy. 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 is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

 

Strategy

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 % 9.11% 10.61% 12.92% 13.84%
Indicative Benchmark % 9.20% 10.55% 13.03% 13.86%
Excess Return % -0.09% 0.06% -0.11% -0.02%

Inception Date 31-Jan-2014

Indicative Benchmark: Russell 1000 Value Net 30% Index

Data as of  30-Sep-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 9.11% 10.61% 12.92% 13.84%
Indicative Benchmark % 9.20% 10.55% 13.03% 13.86%
Excess Return % -0.09% 0.06% -0.11% -0.02%

Inception Date 31-Jan-2014

Indicative Benchmark: Russell 1000 Value Net 30% Index

Data as of  30-Sep-2019

Performance figures calculated in GBP

Recent Performance

  Month to DateData as of 17-Oct-2019 Quarter to DateData as of 17-Oct-2019 Year to DateData as of 17-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % -4.61% -4.61% 17.08% 2.56% 5.47%
Indicative Benchmark % -4.21% -4.21% 15.95% 2.29% 4.47%
Excess Return % -0.40% -0.40% 1.13% 0.27% 1.00%

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 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.

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.

30-Sep-2019 - Heather McPherson, Portfolio Manager,
Major U.S. stock indices advanced in September, as some conciliatory trade-related gestures from U.S. and Chinese officials helped ease tensions. While the trade dispute remained at centre stage, monetary policy expectations were also a major driver of market sentiment. During the month, the U.S. Federal Reserve reduced short-term interest rates, while other major central banks around the world took measures to stimulate economic growth. Within the portfolio, the information technology (IT) sector had the most negative impact due to stock selection. Microsoft finished slightly higher but trailed its sector peers as investors worried about a potential pullback in light of the stock’s recent run. Stock choices in the consumer staples sector, notably Tyson Foods, also hampered relative returns. Conversely, the health care sector was the leading contributor to relative results due to our favourable choice of securities. Perrigo’s acquisition of the over-the-counter rights to the Prevacid brand, formerly owned by GlaxoSmithKline, caused share prices to rise. The industrials and business services sector provided further support to relative performance due to stock choices, particularly GE.

Holdings

Total
Holdings
84
Largest Holding Wells Fargo 3.70% Was (30-Jun-2019) 3.35%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 27.02% View Top 10 Holdings Monthly data as of 30-Sep-2019

Largest Top Contributor^

Wells Fargo
By 0.27%
% of fund 3.73%

Largest Top Detractor^

Total
By -0.56%
% of fund 2.53%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Edison International (N)
0.86%
Was (30-Jun-2019) 0.00%

Top Sale

Merck
0.58%
Was (30-Jun-2019) 1.47%

Quarterly Data as of 30-Sep-2019

30-Jun-2019 - Heather McPherson, Portfolio Manager,

During the period, we sold shares of several companies following notable stock price appreciation. We also identified opportunities to buy shares of attractively valued businesses that we believe are well positioned for improved performance.

Industrials and Business Services

Within the industrials and business services sector, we invest in companies that reach many different end markets and have solid business models and/or an ability to generate strong cash flows.

  • In recent periods, global multi-industrial company United Technologies has benefited from lower corporate tax rates and robust demand for commercial aerospace products. In light of the recent price appreciation and future execution risk amid escalating trade tensions, we sold shares in favor of other sector names that we believe offer more compelling risk/reward profiles.
  • We sold shares of Johnson Controls International, a maker of equipment and building controls. Shares have performed well in recent periods as Johnson Controls International has taken steps to consolidate its operations; the company's sale of its Power Solutions business closed ahead of schedule. While we remain positive on the Johnson Controls International's high-quality, diversified end markets, we have some concerns about the company's fundamentals relative to peers.
  • We purchased shares of GE at compelling valuations, as the company's heavy debt load continued to turn off investors. We recognize that GE still faces several challenges, including secular headwinds in its power business and uncertainty regarding cash flows. However, we see value in the company's aerospace division and are optimistic about the efforts of new CEO Larry Culp to strengthen the company's balance sheet and improve operations.

Financials

Within financials, we favor attractively valued, fundamentally sound investments that we believe are well equipped to outperform amid a late-cycle macroeconomic backdrop. While we are concerned that compressed lending margins and slowing global growth could negatively impact returns within the sector, we identified select buying opportunities during the quarter.

  • We bought shares of global insurance carrier American International Group. Share prices have rallied in recent periods due primarily to improvement within the company's general insurance segment, which benefited from an ongoing overhaul of the firm's underwriting culture. We are encouraged by the company's recent operational improvements and strong first-quarter results. Even after the recent share price appreciation, we see the company as undervalued relative to industry peers. Moreover, we believe the company offers downside protection through its strong balance sheet, solid dividend yield, and robust recurring earnings.
  • We purchased shares of Wells Fargo. Shares have underperformed in recent periods on fears of company mismanagement and a broader global economic slowdown. While we acknowledge that Wells Fargo still faces numerous regulatory headwinds, we believe that the bank has good long-term upside and has made progress in addressing past issues in its sales culture. We used the recent share price decline as an opportunity to add to our position.

Information Technology

We generally view the information technology sector as cyclical, with many companies operating at different stages within their industry's specific cycle. During the period, we found opportunities to sell certain sector names on strength.

  • Multinational technology firm Cisco Systems has benefited from broad-based revenue growth and maintained healthy free cash flow in recent periods, and we took the recent share price appreciation as an opportunity to sell shares on strength. However, we continue to like Cisco Systems because it has made progress in its shift toward a recurring software and subscription-based business model. We also like management's plans to return additional capital to shareholders.
  • We bought shares of IT services firm Cognizant Technology Solutions on weakness. Share prices dropped precipitously during the quarter as the company experienced margin compression driven by a slowdown in revenue growth within its financial services and health care segments. Longer term, we believe Cognizant Technology Solutions remains well positioned to outgrow its industry peers. In our view, the company's above-average dividend yield and the new CEO's ground-up rebuild reaffirms management's focus on long-term value creation and improved accountability.

Health Care

In health care, we continue to see attractive valuations for select life science and medical device companies, given their strong earnings growth potential from new products; innovation; and, in some cases, realized benefits from consolidation. However, we are mindful of the near-term risks associated with potential drug-pricing reform and single-payer health care initiatives.

  • We sold shares of Merck on strength. In recent periods, the global pharmaceutical company has benefited from strong sales growth and from outpacing competitors in the development of an immuno-oncology treatment for lung cancer. While we recognize the potential for heightened competition and stricter industrywide regulations, we continue to like Merck for its durable growth profile and innovative product portfolio.

Sectors

Total
Sectors
11
Largest Sector Financials 22.78% Was (31-Aug-2019) 22.18%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: Russell 1000 Value Index

Top Contributor^

Health Care
Net Contribution 0.66%
Sector
-0.06%
Selection 0.72%

Top Detractor^

Real Estate
Net Contribution -0.27%
Sector
-0.23%
Selection
-0.04%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Information Technology
By4.09%
Fund 10.11%
Indicative Benchmark 6.02%

Largest Underweight

Consumer Discretionary
By-3.60%
Fund 2.49%
Indicative Benchmark 6.09%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Heather McPherson, Portfolio Manager,
Our focus in the utilities sector is on companies that deliver durable cash flows and higher dividend yields with relatively modest downside risk. We prefer to invest in a combination of regulated utilities and integrated utilities that offer stable cash flows from the regulated portion of their business and earnings growth potential from the deregulated portion. In September, we took advantage of share price strength and sold certain sector names. We also identified opportunities to buy shares of select companies that we believe are attractively valued relative to peers.

Team (As of 31-Aug-2019)

John D.  Linehan

John D. Linehan is the portfolio manager for the Equity Income Strategy and co-portfolio manager of the US Large-Cap Value Strategy. 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 is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Mr. Linehan has 30 years of investment experience, 21 of which have been at T. Rowe Price. From February 2009 to June 2014, Mr. Linehan was head of U.S. Equity and chairman of the U.S. Equity Steering Committee. From April 2003 to December 2009, he was the portfolio manager of the US Value Strategy. He started at the firm in 1998 as an equity analyst, covering the paper and forest products and airline industries. Prior to joining T. Rowe Price, between 1990 and 1996, he 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. Mr. Linehan began his investment career in 1987 at Bankers Trust NY Corporation, where he was an associate in mortgage-backed securities trading.

Mr. Linehan 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. Mr. Linehan also has earned the Chartered Financial Analyst designation.

  • Fund manager
    since
    2014
  • Years at
    T. Rowe Price
    21
  • Years investment
    experience
    30
Mark S.  Finn

Mark Finn is the portfolio manager of the US Value Equity Strategy and is also co-portfolio manager of the US Large-Cap Value Equity Strategy. Mr. Finn is a vice president of T. Rowe Price Group, Inc.

Mr. Finn has 21 years of investment experience, all of which have been with T. Rowe Price. From 2005 to 2009, Mr. Finn was an equity research analyst specializing in electric power generation, utilities, and coal. Prior to this, he was an analyst in T. Rowe Price's Fixed Income Division, where he also covered utilities and power generation. From 1998 to 2001, Mr. Finn worked with the T. Rowe Price Recovery Strategy team, where he evaluated financially distressed companies. Mr. Finn began his career with T. Rowe Price in 1990 in the Finance Division, where he served as controller of T. Rowe Price Investment Services, Inc., and as the principal accounting officer for the T. Rowe Price realty income strategies. Prior to joining the firm, he had five years of auditing experience with Price Waterhouse LLP, where he worked on engagements for both public and private companies.

Mr. Finn earned a B.S. from the University of Delaware and has earned the Chartered Financial Analyst designation. He is also a certified public accountant.

  • Fund manager
    since
    2014
  • Years at
    T. Rowe Price
    28
  • Years investment
    experience
    21
Heather K. McPherson

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

Ms. McPherson has 19 years of investment experience, 17 of which have been with T. Rowe Price. Prior to joining the firm in 2002, she worked as a summer intern in 2001 at Salomon Smith Barney, covering the storage area networking industry. Prior to this, she was a vice president of finance and administration for Putnam Lovell Securities, Inc.

Ms. McPherson 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
    17
  • Years investment
    experience
    19
William D. Nolan

William D. Nolan 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. Nolan supports T. Rowe Price's large-cap value strategies, focusing on the US Large-Cap Equity Income and US Value Equity Strategies. He is a vice president of T. Rowe Price Associates, Inc.

Mr. Nolan has 26 years of investment experience. Before joining the firm, he was most recently a managing director of institutional equity sales for Wachovia Corporation where he also served as director of institutional research marketing. Prior to this, Mr. Nolan was director of equity institutional sales for Alex Brown and was the Washington, D.C., branch manager in the National Accounts Division of IBM.

Mr. Nolan earned a B.S. in social and behavioral sciences from Johns Hopkins University.

  • Years at
    T. Rowe Price
    10
  • Years investment
    experience
    28
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
    4
  • Years investment
    experience
    24

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 1.61%
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 0.03%
Class Q $15,000 $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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