T. ROWE PRICE US STRUCTURED RESEARCH EQUITY: Stockpicker fund  outperforms S&P

T. ROWE PRICE US STRUCTURED RESEARCH EQUITY: Stockpicker fund  outperforms S&P
By: dailymail Posted On: October 01, 2024 View: 61

Investment fund T. Rowe Price US Structured Research Equity might have a rather unwieldy name, but investors looking for exposure to the US stock market shouldn't be put off. 

It's a £1.4billion fund that was launched 25 years ago and has weathered rather well.

Available to UK investors since December, the fund is run out of Baltimore by a company that has $1.5trillion (£1.1trillion) of assets under its wing. 

The investment strategy, as with many actively managed funds, is to outperform a specific stock market benchmark – in this case it's the Standard & Poor's 500, a barometer of the market fortunes of the US's 500 largest listed companies.

US-based: Available to UK investors since December, T. Rowe Price US Structured Research Equity is run out of Baltimore by a company that has $1.5 trillion of assets under its wing

Yet what makes it stand apart from the madding crowd is the investment process that sits under the fund's bonnet – there is no single manager responsible for running the portfolio.

Instead, 30 of the company's top analysts are given 'sleeves' of the fund's assets to manage, according to their specific sector specialism (for example, healthcare).

Their job is to pick the best stocks with the amount of money under their wing determined in part by the importance of their sector to the S&P500. In some of the big sectors, such as IT, there are multiple analysts.

Above these stock pickers sits a six-strong 'oversight' team whose role is to monitor performance and ensure they are abiding by the fund's risk-control rules.

All rather formulaic, but it works. Analysis of quarterly rolling one-year periods since the fund launched in 1999 indicates that it has outperformed the S&P500 85 per cent of the time.

Alexa Gagliardi is part of the oversight team. Her role, she says, is to scrutinise the portfolio daily – 'the eyes and ears' – ensuring everything is ship shape.

She adds: 'The idea is to deliver a fund that has the same look and feel as the S&P500 while offering investors the chance of a higher return.

'What has made the fund successful is our ability to pick up the nickels and dimes along the way from across the breadth of the stock market. We don't bet big on one stock.'

The fund currently has nearly 300 holdings, with the biggest positions being in big-branded tech stocks such as Apple, Microsoft and Nvidia. But these are broadly in line with their representation in the S&P500.

This is because the oversight team ensures no benchmark holding is more than 100 basis points larger or smaller than its contribution to the index.

So, for example, a 7.7 per cent fund stake in Apple compares to the company's 6.8 per cent index weighting.

Although most of the fund's stakes are in S&P500 companies, analysts are allowed to invest outside the index ('off benchmark'), but individual positions can represent no more than 0.5 per cent of the fund's assets.

Gagliardi says that 49 'off benchmark' stocks are currently held, comprising a mix of US and overseas companies.

These include US financial companies Renaissancere Holdings and Corebridge Financial – as well as AstraZeneca in the UK and Swiss pharma giant Novartis.

T. Rowe Price's success in managing assets on a 'US structured research strategy' basis is reflected in the $83 billion of clients' money in has now invested this way. 

It has also resulted in interest outside the US – hence the fund being made available in the UK and Gagliardi visiting Hong Kong and South Korea in recent days to market it.

'We see it as a better alternative to a fund that tracks the S&P500,' she says. Ongoing annual charges are 0.42 per cent.

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