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Thursday, November 19, 2020

T. Rowe Price's $167B-AUM New Unit

Reported by Lauren Corradi

A publicly traded mutual fund giant is creating a new unit.

Stephon "Steph" Jackson
T. Rowe Price Group, Inc.
T. Rowe Price Investment Management, Inc.
Baltimore-based T. Rowe Price [profile] is establishing T. Rowe Price Investment Management, in a continued effort to generate strong investment results for clients. TRPIM will serve as a separate U.S.-based SEC-registered investment advisor, with its own investment platform and veteran leadership. More than 100 associates, including at least 85 investment professionals, will serve at TRPIM.

T. Rowe Price intends to move over US Capital Appreciation, US Mid-Cap Group Equity, US Small-Cap Core Equity, US Small-Cap Value Equity, and US High Yield Bond Strategies into TRPIM. As of September 30, 2020, these six strategies represented $167 billion in AUM.

Assuming all pending approvals are passed, the transition to TRPIM is expected to take place in Q2 2022.

Current associate head of the U.S. Equity and a 13-year veteran of T. Rowe Price's Equity Division, Steph Jackson, will become the head of TRPIM and will join T. Rowe Price Group Management Committee as of January 1, 2021. Steven Krichbaum and Thomas Watson will serve as the directors of research for TRPIM. Equity trader Tammy Wiggs will serve as head of equity trading for TRPIM. And Ric Weible, director of operations for the U.S. Equity Division, will become director of operations and business management for TRPIM.

Portfolio managers moving to TRPIM include: Brian Berghuis (US Mid-Cap Growth Equity Strategy), David Giroux (US Capital Appreciation Strategy), Frank Alonso (US Small-Cap Core Equity Strategy), Kevin Loome (US High Yield Bond Strategy), Curt Organt (US Smaller Companies Equity Strategy), and David Wagner (US Small-Cap Value Equity Strategy).

"Having two strong, yet separate, research platforms will enable us to continue delivering excellent investment performance for our clients. Leadership from Steph, Steven, Tom, Tammy, and Ric, combined with that of several long-tenured and seasoned portfolio managers and analysts with excellent investment track records, will ensure that the T. Rowe Price investment process; culture; and long-term, client-first orientation will be as foundational to T. Rowe Price Investment Management as it is for T. Rowe Price Associates," stated Bill Stromberg, president and CEO of T. Rowe Price.

Indeed, T. Rowe-watching analyst Craig Siegenthaler of Credit Suisse anticipates that the move "will improve the firm's capacity."

"The relief in capacity constraints should drive better flows from funds that the firm was going to need to close over the next five years," Siegenthaler writes.

"We recognize that this is a change for our clients, and in keeping with our custom of carefully communicating major investment and leadership shifts well in advance, we'll take the next 18 months to fine-tune and execute our operating plans while working with our clients to help them prepare for the changes," Stromberg continued. "A cross-functional team has been hard at work putting everything in place to ensure a smooth transition."

The goal of creating two distinct investment platforms with independent research teams is to allow the firm to generate new capacity while retaining its scale benefits and positioning the investment teams for continued success on behalf of clients.

"Managing capacity to support performance is in our DNA and has long been a hallmark of our investment process and our fiduciary responsibility to our clients," stated Rob Sharps, head of investment and group CIO at T. Rowe Price. "This additional step will ensure that over time our portfolio managers can continue to select the right securities, in the right amounts, at the right time, while also adhering to risk management and regulatory guidelines, with the goal of delivering superior investment performance for clients."

"Making this move now while further building out our research teams and capabilities across investment platforms will also protect and enhance our ability to attract and retain top investment talent," Sharps continued. "We are ensuring a balance of experience and strong performance history across both platforms and close collaboration has already been taking place within each investment team."

The alignment of the strategies are designed to give the firm's U.S. equity strategies greater flexibility to own more holdings and maximize investment capacity for both TRPIM and TRPA.

The two entities will share corporate functions, including investment operations, client service and operations, technology, risk management, and human resources, with focused research complemented by efforts in dedicated training, quantitative expertise, responsible investing, and corporate governance resources.

There are no changes expected for planned portfolio managers nor for the day-to-day management of clients. Further, there will be no impact to the structure or approach of the firmís target date portfolios or other multi-asset products.

In order to support the formation of the research platforms, T. Rowe Price has been accelerating the pace of analyst hiring for the past two years, and plans to continue to do so over the next year.

"It is a testament to our culture that our team has worked so selflessly to do what is best for all our clients," stated Jackson. "By building TRPIM with seasoned TRPA veterans and then adding experienced lateral hires to both entities, we are developing two world-class investment organizations steeped in our culture of investment excellence, collegiality and collaboration, trust and mutual respect, and with a long-term time horizon."

"It is a testament to our culture that our team has worked so selflessly to do what is best for all our clients," stated Eric Veiel, co-head of global equity and head of U.S. equity at T. Rowe Price. "By building TRPIM with seasoned TRPA veterans and then adding experienced lateral hires to both entities, we are developing two world-class investment organizations steeped in our culture of investment excellence, collegiality and collaboration, trust and mutual respect, and with a long-term time horizon." 

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