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How does the T. Rowe Price Funds SICAV – US Smaller Companies Equity fund invest?
Investment Funds

How does the T. Rowe Price Funds SICAV – US Smaller Companies Equity fund invest?

Explore the T. Rowe Price Funds SICAV – US Smaller Companies Equity, a Luxembourg-domiciled fund with a robust portfolio of small and medium-sized US equity stocks managed by seasoned professionals with over 80 years of collective experience.
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26 JAN, 2024

By Andrea Sepúlveda from LatamSelf

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The fund T. Rowe Price Funds SICAV - US Smaller Companies Equity (LU0133096981) is domiciled in Luxembourg and has a diversified portfolio of small and medium-sized US equity stocks.

T. Rowe Price is one of the world's largest independent investment firms, with over 80 years of experience and more than 1.5 trillion dollars under management. Regarding the investment team, Curt Organt and Matt Mahon are leading the strategy. Both professionals have 25 and 7 years at the firm, respectively; and they have a broad track record and knowledge of the US small caps market.

The team applies an active, diversified and flexible management strategy, which combines a selection of values based on fundamental analysis with a macroeconomic and sectoral vision. Its benchmark index is the Russell 2500 Net 30%.

The investment philosophy of T. Rowe Price Funds SICAV - US Smaller Companies Equity is based on seeking value creation opportunities in small-cap companies that have competitive advantages, sustainable growth, good management and attractive valuation. When we say that their strategy is active, we mean that for them the index is a reference that is used only for comparative purposes. In addition, the fund seeks to maintain a balanced exposure between the styles of growth and value.

As of December 31, 2023, the fund had over 2.8 Bn USD in assets under management.

Evolution of the T. Rowe Price Funds SICAV - US Smaller Companies Equity fund

Source: Factsheet of T. Rowe Price Funds SICAV - US Smaller Companies Equity as of 31/12/2023.

The fund's results have been positive and consistent over different time horizons, standing out within its category and against its benchmark. This is very important for institutional investors, for whom consistency and track record are among the first variables to consider.

In the last 3 years, the fund has achieved an annualized return of 4.64%, compared to 3.82% of its index. In the last 5 years, the annualized return has been 15.22%, compared to 11.20% of its index.

Source: T. Rowe Price Funds SICAV - US Smaller Companies Equity Class I USD website as of 31/12/2023.

Looking at the risk ratios of the T. Rowe Price Funds SICAV - US Smaller Companies Equity, it can be seen that these also show the good management of the fund and adequate diversification. In the last 5 years, the fund has had a volatility of 20.07%, lower than the Russell 2500 Net 30% benchmark index which had 23.04%. The Sharpe ratio, which measures risk-adjusted return, has been 0.66, higher than its index (0.40); which is not surprising given its lower volatility.

As for the 5-year Alpha, it is very positive, which means that the investment team has been able to add value over its benchmark index, so it does well when selecting the companies in which it invests.

In relation to the market Beta, this in 5 years is less than 1, which indicates that it is a fund that bets differently or follows the market to a lesser extent. That is, it has a slightly lower systemic risk than the benchmark index, being a more defensive, although very active, strategy than the general market.

Other indicators of the T. Rowe Price Funds SICAV - US Smaller Companies Equity fund

Source: Factsheet of T. Rowe Price Funds SICAV - US Smaller Companies Equity as of 31/12/2023.

Here you can see again how active this strategy is, as in terms of sectors, its bets are of a significant conviction. These results can be due to the combination between the selection of companies under the fundamental analysis that characterizes T. Rowe Price and, also, the macroeconomic analysis carried out by the team that leads them to underweight or overweight a sector at a given time.

Conclusions

Advantages of T. Rowe Price Funds SICAV - US Smaller Companies Equity

  • Effective and consistent strategy.
  • Experienced management and investment team.
  • Institutional investment fund with a good track record.

Disadvantages of T. Rowe Price Funds SICAV - US Smaller Companies Equity

  • It is not usually a core strategy in portfolios, but it is worth having exposure to small and mid cap US with this fund.

In summary, T. Rowe Price Funds SICAV - US Smaller Companies Equity is an equity fund that invests in small-cap companies in the United States, belongs to a major American manager with its feet firmly in the market in which this strategy invests and has an experienced team, which applies an effective strategy reflected in its results at different time horizons.

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