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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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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SICAV

US Smaller Companies Equity Fund

Seeks capital appreciation using both value and growth approaches.

ISIN LU0133096981 Bloomberg TRPSCEI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

24.06%
$3.6b

1YR Return
(View Total Returns)

Manager Tenure

40.40%
2yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.71
6.50%

Inception Date 28-Sep-2001

Performance figures calculated in USD

31-Oct-2021 - Curt Organt, Portfolio Manager,
While we are mindful there is significant uncertainty in the markets, our overall outlook for the U.S. economy in the year ahead remains positive. We take macro factors into consideration, but they do not drive portfolio construction; we maintain our focus on long-term investment outcomes.
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. Curt is a vice president and an Investment Advisory Committee member of the US Small-Cap Core Equity and US Diversified Small-Cap Value Equity Strategies. He is a vice president of T. Rowe Price Group, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

The macroeconomic environment has been volatile and there are many unknowns at this time. Washington remains at an impasse on most legislation and the Federal Reserve is set for turnover this year. Two regional Federal Reserve Presidents announced their resignations and Jerome Powell, and other Federal Reserve Governors, face potentially contentious renominations. We are keeping an eye on inflation, potential tax increases, and the supply chain as these factors will impact a continued economic recovery. With the tapering of household fiscal stimulus, we expect consumer spending to fall, which could impact names in the discretionary space that have performed very well over the last twelve months. While we take these macro factors into consideration, they do not drive portfolio construction and we maintain our focus on long-term investment outcomes while working closely with our talented team of investment professionals to identify the most attractive opportunities across the full range of the small-cap and mid-cap segments of the US equity market.

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.
  • Environmental, social and governance ("ESG") factors with particular focus on those considered most likely to have a material impact on the performance of the holdings or potential holdings in the funds’ portfolio are assessed. These ESG factors, which are incorporated into the investment process alongside financials, valuation, macro-economics and other factors, are components of the investment decision. Consequently, ESG factors are not the sole driver of an investment decision but are instead one of several important inputs considered during investment analysis.

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

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Annualised
Fund % 40.40% 24.06% 20.42% 17.01% 24.28%
Indicative Benchmark % 48.95% 17.93% 15.82% 13.76% 18.88%
Excess Return % -8.55% 6.13% 4.60% 3.25% 5.40%

Inception Date 28-Sep-2001

Manager Inception Date 31-Mar-2019

Indicative Benchmark: Russell 2500 Net 30% Index

Data as of 31-Oct-2021

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 37.14% 19.19% 18.67% 18.07%
Indicative Benchmark % 44.56% 11.99% 13.77% 14.78%
Excess Return % -7.42% 7.20% 4.90% 3.29%

Inception Date 28-Sep-2001

Indicative Benchmark: Russell 2500 Net 30% Index

Data as of 30-Sep-2021

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 01-Dec-2021 Quarter to DateData as of 01-Dec-2021 Year to DateData as of 01-Dec-2021 1 MonthData as of 31-Oct-2021 3 MonthsData as of 31-Oct-2021
Fund % -0.50% 0.29% 13.40% 4.29% 4.22%
Indicative Benchmark % -2.15% -1.68% 11.65% 4.89% 3.83%
Excess Return % 1.65% 1.97% 1.75% -0.60% 0.39%

Inception Date 28-Sep-2001

Indicative Benchmark: Russell 2500 Net 30% Index

Indicative Benchmark: Russell 2500 Net 30% Index

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.

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-Oct-2021 - Curt Organt, Portfolio Manager,
U.S. equities rebounded strongly from September’s losses, aided by favourable third-quarter corporate earnings reports. At the portfolio level, stock selection in financials weighed on relative returns. A provider of automotive financing products posted solid quarterly results, but shares declined, likely due to rising expenses. Similarly, shares of a virtual rent-to-own company pulled back despite a positive earnings report, perhaps due to investor concern regarding a more challenging regulatory environment. Utilities modestly detracted due primarily to stock choices. On the positive side, stock selection in health care contributed to relative results. An underweight position also proved helpful. Shares of a Medicaid managed care company regained ground as its investor day presentation shifted the focus toward positive long-term performance projections. Solid quarterly results at period-end and raised revenue guidance, boosted by a pending acquisition, further supported investor sentiment. A vendor in the biosimulation market also benefited from positive reaction toward a recent acquisition, along with solid quarterly results.

Holdings

Total
Holdings
185
Largest Holding Avery Dennison 1.60% Was (30-Jun-2021) 1.58%
Other View Full Holdings Quarterly data as of  30-Sep-2021
Top 10 Holdings 13.33% View Top 10 Holdings Monthly data as of  31-Oct-2021

Largest Top Contributor^

Western Alliance Bancorp
% of fund 1.29%

Largest Top Detractor^

PTC
% of fund 0.89%

^Absolute, percentages based on the difference between the total net assets of the two largest holdings of the fund.

Quarterly Data as of 30-Sep-2021

Top Purchase

Ardagh Metal Packaging (N)
0.39%
Was (30-Jun-2021) 0%

Top Sale

Sanderson Farms
0.54%
Was (30-Jun-2021) 1.34%

Quarterly Data as of 30-Sep-2021

30-Sep-2021 - Curt Organt, Portfolio Manager,

We do not make sector "bets," and sector weightings are formed as a residual of our bottom-up investment process. There were no major thematic changes to portfolio positioning in the quarter. We continued to invest in companies that we believe offer compelling long-term investment opportunities, and we trimmed exposure to names that performed strongly, were acquired, or offer limited upside, in our view. During the quarter, trading activity spanned the various sectors. We've highlighted some of the larger purchases and sales occurring within materials, industrials and business services, consumer discretionary, and information technology.

Materials

We found attractive opportunities to increase existing positions and initiate new ones. Within the sector, the portfolio's largest weights are in the chemicals, containers and packaging, and construction materials industries.

  • We added a position in beverage can manufacturer Ardagh Metal Packaging. We believe the company stands to benefit from its investments in capacity, the substantial volume of higher-margin specialty cans it produces, and overall global volume growth.
  • We increased our position in RPM, which manufactures and sells coatings and sealants to consumer and industrial markets. We like RPM's risk/reward profile and leading coatings brands that it sells to niche end markets. We believe that the firm benefits from an entrepreneurial culture and focus on investment discipline.
  • We added to leading containerboard producer Packaging Corporation of America. Over the long term, the paper and forest products industry stands to benefit from cyclical and secular tailwinds converging due to a steepening cost curve and an increasing interest in the incorporation of favorable ESG considerations.

Industrials and Business Services

The portfolio is overweight in the industrials and business services sector compared with the benchmark allocation due in particular to sizable positions in machinery, professional services, and road and rail. 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 added a position in Stericycle, the largest provider of regulated medical waste disposal. The company is in the midst of a strategic shift, streamlining its portfolio to prioritize the core high-quality medical waste and paper disposal assets while shoring up the balance sheet. We believe these actions will drive growth, improve earnings quality, and boost shareholder value.
  • We initiated a position in Hydrofarm Holdings, the second-largest manufacturer and distributor of Controlled Environment Agriculture equipment and supplies. The company is a beneficiary of the growing cannabis market. We believe Hydrofarm can generate earnings growth via end market expansion, mergers and acquisitions, and a mix shift to proprietary products. Recent acquisitions, including both distributors and nutrient and grow media manufacturers, should further the company's growth objectives.
  • Helios Technologies engages in the development and manufacture of motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, energy, recreational vehicles, marine, and health and wellness. It operates through the Hydraulics and Electronics segments.�We exited the portfolio's position following solid share price appreciation on valuation considerations.

Consumer Discretionary

We are underweight the benchmark allocation within the consumer discretionary sector, where our largest allocations are to the hotels, restaurants, and leisure; specialty retail; and diversified consumer services industries. Despite our underweight, we continue to believe the sector is ripe with select names that provide attractive business models and insulated growth opportunities. Coronavirus-related pressures on the sector have created compelling investment opportunities.

  • We exited our position in Planet Fitness, the country's biggest franchisor of low-cost gyms. We believe that risk/reward opportunities have moderated at current valuations.
  • We eliminated Magna International, the world's third-largest auto supplier, given our view that upside is currently limited following an acquisition that will dilute margins and postpone buybacks in the near term and may not prove accretive for some time.
  • We added a position in apparel designer Oxford Industries. The company's brands include Tommy Bahama, Lilly Pulitzer, and Southern Tide. We believe accelerating sales trends bode well for continued strength in performance despite some lingering supply chain disruption.

Information Technology

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. The portfolio has large allocations in the software; semiconductors; electronic equipment, instruments, and components; and IT services industries. 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 DoubleVerify Holdings, a provider of digital media measurement and analytics for advertisers. The emergence of brand safety as a top concern for any organization bodes well for the company, which already occupies a dominant position in an attractive, niche industry.
  • We eliminated our position in software-as-a-service leader Splunk following share price appreciation. Factors including improvements needed for the company's core cloud product, as noted recently by management, and uncertainty regarding the company's competitive positioning caused us to move on from the name.
  • We exited security software company Proofpoint; the company was recently acquired by a private-equity firm.

Sectors

Total
Sectors
11
Largest Sector Industrials & Business Services 21.71% Was (30-Sep-2021) 21.96%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2021

Indicative Benchmark: Russell 2500 Index

Top Contributor^

Information Technology
Net Contribution 1.39%
Sector
-0.01%
Selection 1.40%

Top Detractor^

Financials
Net Contribution -0.19%
Sector
-0.09%
Selection
-0.10%

^Relative

Quarterly Data as of 30-Sep-2021

Largest Overweight

Industrials & Business Services
By5.79%
Fund 21.71%
Indicative Benchmark 15.92%

Largest Underweight

Consumer Discretionary
By-4.98%
Fund 7.11%
Indicative Benchmark 12.09%

Monthly Data as of 31-Oct-2021

31-Oct-2021 - Curt Organt, Portfolio Manager,
Industrials and business services, information technology, health care, and financials remain dominant sectors in the portfolio. We continue to invest in select companies across various industries where we feel valuations may underestimate the sustainability of growth or turnaround potential. During the month, we boosted our positions within equity real estate investment trusts, airlines, containers and packaging, and consumer finance.

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% 160 basis points 1.68%
Class I $2,500,000 $100,000 $0 0.00% 95 basis points 0.99%
Class Q $1,000 $100 $100 0.00% 95 basis points 1.04%
Class S $10,000,000 $0 $0 0.00% 0 basis points 0.04%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.