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SICAV

US Smaller Companies Equity Fund

Seeks capital appreciation using both value and growth approaches.

ISIN LU1047868630 Bloomberg TRPIHEU:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

11.91%
$1.4b

1YR Return
(View Total Returns)

Manager Tenure

5.17%
<1yr

Information Ratio
(5 Years)

Tracking Error
(5 Years)

1.00
3.85%

Inception Date 31-Mar-2014

Performance figures calculated in EUR

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31-Aug-2019 - Curt Organt, Portfolio Manager ,
We seek to capitalise on opportunities across the broad range of the small- and mid-cap U.S. equity market. Overall, we remain modestly overweight high-quality companies that compound their earnings. We also look for select investments in “deeper-value” opportunities – those stocks that we believe are significantly undervalued – and hold a number of income-oriented dividend growth companies.
Curt J. Organt, CFA
Curt J. Organt, CFA, Portfolio Manager

Curt Organt is the portfolio manager of the US Smaller Companies Equity Strategy in the U.S. Equity Division of T. Rowe Price. Previously, he was an associate portfolio manager of the US Small-Cap Core Equity Strategy. Mr. Organt is a vice president and Investment Advisory Committee member of the Small-Cap Stock, Small-Cap Value, Global Industrials, and Small-Cap Growth II Strategies. Mr. Organt is a vice president of T. Rowe Price Group, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

U.S. equity markets continued their climb in the second quarter of 2019, albeit with a bumpier ride then was experienced in the first quarter, as all major indices were up in April, only to stumble in May and recover again in June. U.S. large-cap stocks led small- and mid-caps during the quarter, and while large-cap stocks still trail year-to-date, they handily lead their smaller peers over the trailing 12 months. Growth continues to run away from value, with the Russell 2500 Growth Index leading the Russell 2500 Value Index by 225bps in the second quarter and by 866bps in 2019. Industrials and business services, financials, and technology lead the Russell 2500 for the quarter, while energy and consumer staples were the largest detractors.

Headlines in the second quarter were dominated by U.S.-China trade negotiations, central banks, and escalating tensions in the Middle East. On the trade front, a deal between the U.S. and China seemed unlikely for much of the quarter as both sides walked away from the table and continued to turn up the pressure heading in the G-20 summit at the end of June. After conversations at the G-20 summit, Presidents Donald Trump and Xi Jinping announced that both sides will return to negotiations. In the meantime, the U.S. will put a hold on additional tariffs and roll back some restrictions on Huawei, while China agreed to purchase more U.S. farm goods. There is still plenty of work to be done before the U.S.-China trade conflict is resolved, and as such, uncertainty remains. Central banks continued their accommodative policies and have indicated that they will intervene as needed to maintain economic expansion. Though the impact on markets has been immaterial thus far, escalating tensions in the Middle East, specifically between Iran and the U.S., weigh on investors' minds.

Within the US Smaller Companies Equity portfolio, we seek to capitalize on opportunities across the broad range of the small-cap and mid-cap U.S. equity market. Within the portfolio, we have a collection of core holdings in high-quality companies we expect to compound value over time. We also look for select investments in "deeper value" opportunities; companies experiencing challenge or controversy of one sort or another, that we believe can be resolved in a reasonable period of time. We hold a number of income-oriented, dividend-growth companies, as well as a collection of high-growth investments in which we believe other investors do not yet fully appreciate the companies' long-term growth potential.�Overall, we remain modestly overweight the high-quality compounding companies within the strategy but have been finding opportunities in materials, health care providers and services, and road and rail.

Since the strategy's inception over 15 years ago, we have relied upon T. Rowe Price's team of fundamental research analysts to provide unique perspective and insight on the companies they follow. Going forward, we will continue to work closely with this talented team of investment professionals to identify the most attractive opportunities across the full range of the small-cap and mid-cap segment of the U.S. equity market and to selectively press our bets in them when we feel it warranted.

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 widely diversified portfolio of stocks from smaller capitalization companies in the United States.

Investment Approach

  • Focus on companies within the market cap range of the Russell 2500 Index at time of purchase.
  • Assess valuation using relevant sector/industry metrics — absolute and relative price to earnings, price to cash flow, and price to assets.
  • Integrate fundamental research by a dedicated Small-Cap research team to discover underfollowed companies possessing clear business plans, financial flexibility, and proven management teams.
  • Identification of a “value creation” catalyst is key.
  • Broadly diversify holdings to manage portfolio risk profile.
  • Employ a low turnover and patient trading strategy to promote full value realization.

Portfolio Construction

  • 200-250 securities
  • Position sizes typically range from 0.15% to 2.50%
  • Primary sector weights generally vary from 0.5X to 2.0X the Russell 2500 Index weights

Performance (Class Ih | EUR)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Fund % 5.17% 11.91% 10.06% 9.24% 6.27%
Indicative Benchmark % -7.73% 6.33% 6.19% 5.14% -0.28%
Excess Return % 12.90% 5.58% 3.87% 4.10% 6.55%

Inception Date 31-Mar-2014

Manager Inception Date 31-Mar-2019

Indicative Benchmark: Russell 2500 Index Net 30% Hedged to EUR

Data as of  30-Sep-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 5.17% 11.91% 10.06% 9.24%
Indicative Benchmark % -7.73% 6.33% 6.19% 5.14%
Excess Return % 12.90% 5.58% 3.87% 4.10%

Inception Date 31-Mar-2014

Indicative Benchmark: Russell 2500 Index Net 30% Hedged to EUR

Data as of  30-Sep-2019

Performance figures calculated in EUR

Recent Performance

  Month to DateData as of 07-Oct-2019 Quarter to DateData as of 07-Oct-2019 Year to DateData as of 07-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % -1.29% -1.29% 23.84% 0.12% 1.12%
Indicative Benchmark % -1.49% -1.49% 12.82% 1.50% -2.12%
Excess Return % 0.20% 0.20% 11.02% -1.38% 3.24%

Inception Date 31-Mar-2014

Indicative Benchmark: Russell 2500 Index Net 30% Hedged to EUR

Indicative Benchmark: Russell 2500 Index Net 30% 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-Aug-2019 - Curt Organt, Portfolio Manager ,
Major U.S. stocks declined in August as the deepening trade conflict with China and global growth concerns weighed on sentiment during the month. At the portfolio level, stock selection in industrials and business services, particularly within aerospace and defense, contributed the most to relative returns. Shares of BWX Technologies, Aerojet Rocketdyne Holdings, and Teledyne Technologies were all lifted by solid second-quarter results. Conversely, our underweight position in real estate, which was one of the better-performing sectors in the benchmark, held back relative returns. Stock selection within the sector was also negative. JBG SMITH Properties, a real estate investment trust headquartered in Chevy Chase, MD, lagged many industry peers during the period. However, we continue to favour the company for its strong management team, attractively-located real estate, and long-term growth potential. The development of an Amazon headquarters in northern Virginia provides an additional boost to the company's earnings growth profile.

Holdings

Total
Holdings
175
Largest Holding CoStar Group 2.18% Was (31-Mar-2019) 2.03%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 17.14% View Top 10 Holdings Monthly data as of 31-Aug-2019

Largest Top Contributor^

CoStar Group
By 0.52%
% of fund 2.19%

Largest Top Detractor^

JBG SMITH Properties
By -0.88%
% of fund 1.86%

^Absolute

Quarterly Data as of 30-Jun-2019

Top Purchase

CenterState Bank (N)
0.74%
Was (31-Mar-2019) 0.00%

Top Sale

SS&C Technologies Holdings
0.91%
Was (31-Mar-2019) 1.70%

Quarterly Data as of 30-Jun-2019

30-Jun-2019 - Curt Organt, Portfolio Manager ,

We do not make sector "bets," and sector weightings are formed as a residual of our bottom-up investment process. During the quarter, trading activity spanned the various sectors. We've highlighted some of the larger purchases and sales occurring within the information technology, financials, health care, and industrials and business services sectors.

Information Technology

Our information technology allocation is now significantly overweight relative to the benchmark, as a number of the disruptive companies that are on the right side of change are featured in the sector. We remain sanguine on the sector as a whole. We have large allocations in the software, IT services, semiconductors, and electronic equipment and instruments segments. We have been able to find many niche software providers that we believe have attractive growth opportunities and barriers to ward off their competition.

  • We added a position in Leidos Holdings, an IT services company with a core competency in cybersecurity. The company is a steady grower with a solid management team and stands to benefit from an increasing focus on cybersecurity in both the public and private sectors.
  • Shares of semiconductor company Marvell Technology Group were boosted by quarterly results that exceeded expectations as design win momentum and strategic acquisitions strengthened its competitive positioning in 5G. We trimmed our position into strength.
  • Paycom Software is a market leader in cloud-based payroll and human capital management solutions for midmarket customers. Shares rose following solid quarterly results driven by industry tailwinds and competitive strength resulting from Paycom's differentiated approach. We pared our position and took profits.

Financials

We are underweight the financials sector, which still represents one of the largest allocations within the portfolio and the benchmark. Our largest allocation is to the banks industry. Up until the 2016 carveout of real estate from the sector to create its own standalone sector, the segment reflected our largest allocation (albeit underweight the index). Our largest allocation is to the banks industry. We also maintain a sizable allocation, and overweight, to the insurance industry. Many financials firms have been troubled in recent years on fallout from the credit crisis and have suffered the results of deleveraging, whether it be from retail business or their own balance sheet. We see a favorable environment for many financials sector firms due to the prospect of a less onerous regulatory environment.

  • We increased our position in Pacific Premier Bancorp, a high-quality commercial bank capable of increasing profitability via organic growth and strategic mergers and acquisitions. The company would also be a beneficiary of a rising rate environment.
  • We added to the portfolio's position in CenterState Bank, a bank holding company with a strong community presence in Florida, Alabama, and Georgia, as we have a favorable view of the company's acquisition of National Commerce, which increases the company's footprint in high-growth markets.
  • We trimmed our position in Arthur J. Gallagher, a global leader in the highly attractive property and casualty insurance space, following strong performance. We continue to believe this to be a well-managed company capable of solid organic growth, which also stands to benefit from rising insurance pricing.

Health Care

In health care, we maintain a large, but in line, allocation relative to the benchmark. We have a sizable allocation to equipment and supplies, providers and services, and biotechnology names. The health care segment has been a sector of controversy over recent years amid reform legislation, attempts at repeal, and the uncertainty regarding its outcomes. We have focused on investments that we feel will benefit from the environment regardless of the end result by sticking to fundamentals and a diversified approach within biotechnology to mitigate risk.

  • We added to Amedisys, a health care services company operating through home health, hospice, and personal care divisions. As a high-quality, low-cost provider, the company is well positioned to gain share from competitors. Additionally, its strong balance sheet, high free cash flow generation, and extensive business development efforts should spur accretive mergers and acquisitions in a consolidating industry.
  • Shares of clinical-stage biopharmaceutical company SAGE Therapeutics advanced on successful results for a late-stage study of its therapy for postpartum depression and we trimmed our position into strength.
  • Shares of Teleflex, a manufacturer of hospital supplies and medical devices, have performed well, boosted in part by its acquisition of NeoTract. We pared our position and took profits.

Industrials and Business Services

In the industrials and business services sector, the portfolio is overweight compared with the benchmark allocation due in particular to sizable positions in machinery, aerospace and defense, and professional services. The sector tends to be cyclical, with strong surges during economic recovery. We have exposure to cyclical holdings to take advantage of economic recovery, but we also hold positions in more stalwart areas that allow steady and measured returns to provide a more balanced risk exposure.

  • We increased our position in Old Dominion Freight Line, the fourth-largest less-than-truckload company in the U.S. We believe it to be a well-managed, durable, long-term franchise.
  • Chart Industries manufactures equipment for the production, storage, and consumption of hydrocarbons and industrial gases. Chart is uniquely positioned to benefit from the expected increase in the uses of natural gas on a global basis. The industrial gas market has been showing signs of improvement, and recent strength in natural gas prices has provided further tailwinds. We pared our position and took profits.
  • We exited our position in WABCO Holdings, a supplier of components for commercial vehicles, as the company recently announced that it would be acquired by German automotive supplier ZF Friedrichshafen AG.

Sectors

Total
Sectors
11
Largest Sector Industrials & Business Services 19.81% Was (31-Aug-2019) 18.81%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: Russell 2500 Index

Top Contributor^

Information Technology
Net Contribution 0.81%
Sector
0.04%
Selection 0.77%

Top Detractor^

Real Estate
Net Contribution -0.37%
Sector
-0.26%
Selection
-0.10%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Industrials & Business Services
By4.60%
Fund 19.81%
Indicative Benchmark 15.22%

Largest Underweight

Real Estate
By-3.48%
Fund 7.27%
Indicative Benchmark 10.75%

Monthly Data as of 30-Sep-2019

31-Aug-2019 - Curt Organt, Portfolio Manager ,
Information technology, industrials and business services, financials, and health care remain the dominating sectors in the portfolio, all with greater than 10% of the equity allocation. We continue to invest in select companies across various industries where we feel valuations may underestimate the sustainability of their growth or turnaround potential. This included boosting positions within gas utilities, specialty retail, and commercial services and supplies.

Team (As of 31-Aug-2019)

Curt J. Organt, CFA

Curt Organt is the portfolio manager of the US Smaller Companies Equity Strategy in the U.S. Equity Division of T. Rowe Price. Previously, he was an associate portfolio manager of the US Small-Cap Core Equity Strategy. Mr. Organt is a vice president and Investment Advisory Committee member of the Small-Cap Stock, Small-Cap Value, Global Industrials, and Small-Cap Growth II Strategies. Mr. Organt is a vice president of T. Rowe Price Group, Inc.

Mr. Organt has 27 years of investment experience, 23 of which have been with T. Rowe Price. Prior to joining the firm in 1995, he was a financial analyst and a marketing analyst at DAP Products, Inc.

Mr. Organt earned a B.S. in finance and philosophy from La Salle University and an M.B.A. from Wake Forest University. He also has earned the Chartered Financial Analyst designation.

  • Fund manager
    since
    2019
  • Years at
    T. Rowe Price
    23
  • Years investment
    experience
    27
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% 160 basis points 1.71%
Class I $2,500,000 $100,000 $0 0.00% 95 basis points 1.01%
Class Q $15,000 $100 $100 0.00% 95 basis points 1.10%
Class S $10,000,000 $0 $0 0.00% 0 basis points 0.10%

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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