Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors, your investment process and the make-up of the investment team?
The T. Rowe Price Funds OEIC - Responsible UK Equity Fund is a bottom-up strategy, which is largely benchmark agnostic. We can explore all areas of the market, from FTSE constituents to AIM. Like everything we do at T. Rowe Price, we are focused on the client first and we are confident we can generate positive investment returns in this market over the long term.
When we look at the UK market, we are seeking to unearth businesses we call ‘durable compounders'. In the UK, there continues to be a focus on so-called old-world versus new-world companies. However, as this strategy is new to the market, we have no emotional bias towards any individual company. As mentioned, the framework we apply simply seeks to identify companies displaying an attractive return profile and sustainable cash generation. Interestingly, this takes us across most sectors - in what are generally described as old-world capital-intensive companies and new-world asset light companies.
In managing the fund, Portfolio Manager Mitchell Todd makes use of T. Rowe Price's deep analyst resources as well as drawing on his own experience.
How are you positioning your portfolio to prepare for the global recovery from the Covid-19 pandemic?
We launched this fund in January 2021, just as the global economy was entering into its recovery phase, and we factored this into the initial portfolio composition. However, this is a bottom-up and largely benchmark agnostic strategy so the overriding macro environment is not a primary consideration. In the UK, there continues to be a focus on so-called old-world versus new-world companies. However, as this strategy is new to the market, we have no emotional bias towards any individual company. The framework we apply simply seeks to identify companies displaying an attractive return profile and sustainable cash generation. Interestingly, this takes us across most sectors - in what are generally described as old-world capital-intensive companies and new-world asset light companies.
We currently have about 50 or so names in the portfolio, with large overweight positions in the consumer discretionary, industrials and healthcare sectors. On the flipside, we have no direct energy exposure and very little materials, while we are underweight consumer staples.
Can you identify a couple of key investment opportunities for your fund you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level.
Our ambition is to minimise turnover in this strategy and are aiming to keep it in the 10-20% range. We have excluded about 10% of the FTSE All-Share Index - which spans areas such as gambling, weapons and mining companies exposed to thermal coal.
Mitchell Todd's belief for the last 20 years has been relatively simple - the market often underappreciates the sustainability of returns and misprices the potential to compound value over the long term. Therefore, much of our fundamental analysis is to try to identify businesses capable of sustaining attractive returns on capital and cash flow growth - alongside other responsibility and sustainability drivers.
Objective: To increase the value of its shares through both growth in the value of, and income from, its investments.
Risks: the following risks are materially relevant to the fund (refer to the prospectus for further details):
Sector concentration risk - the performance of a fund that invests a large portion of its assets in a particular economic sector (or, for bond funds, a particular market segment), will be more strongly affected by events affecting that sector or segment of the fixed income market.
Small and mid-cap risk - stocks of small and mid-size companies can be more volatile than stocks of larger companies.
General Portfolio Risks
Capital risk - the value of your investment will vary and is not guaranteed. It will be affected by changes in the exchange rate between the base currency of the portfolio and the currency in which you subscribed, if different.
Equity risk - in general, equities involve higher risks than bonds or money market instruments.
Geographic concentration risk - to the extent that a portfolio invests a large portion of its assets in a particular geographic area, its performance will be more strongly affected by events within that area.
Hedging risk - a portfolio's attempts to reduce or eliminate certain risks through hedging may not work as intended.
Investment fund risk - investing in portfolios involves certain risks an investor would not face if investing in markets directly.
Management risk - the investment manager or its designees may at times find their obligations to a portfolio to be in conflict with their obligations to other investment portfolios they manage (although in such cases, all portfolios will be dealt with equitably).
Operational risk -operational failures could lead to disruptions of portfolio operations or financial losses.
The Funds are sub-funds of the T. Rowe Price Funds OEIC, an investment company with variable capital incorporated in England and Wales which is registered with the UK Financial Conduct Authority and which qualifies as an undertaking for collective investment in transferable securities ("UCITS"). Full details of the objectives, investment policies and risks are located in the prospectus which is available with the key investor information documents in English, together with the articles of incorporation and the annual and semi-annual reports (together "Fund Documents"). Any decision to invest should be made on the basis of the Fund Documents which are available free of charge from the local representative, local information/paying agent or from authorised distributors and via www.troweprice.com'
This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. 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.
The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.
Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.
The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.
UK—This material is issued and approved by T. Rowe Price International Ltd, 60 Queen Victoria Street, London, EC4N 4TZ which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.
© 2021 T. Rowe Price. All rights reserved.