T Rowe Price to establish additional US entity to sustain investment performance for clients

T Rowe Price Group is to establish T Rowe Price Investment Management, Inc (TRPIM), as a separate US-based SEC-registered investment adviser. 

TRPIM will have its own investment platform and veteran leadership, with more than 100 associates, including at least 85 investment professionals.

The firm intends to move the US Capital Appreciation, US Mid-Cap Growth Equity, US Small-Cap Core Equity, US Small-Cap Value Equity, US Smaller Companies Equity, and US High Yield Bond Strategies into TRPIM. There are no planned portfolio manager changes associated with this transition and no change is expected in the day-today management of client assets. Pending all approvals, the transition of these strategies from T Rowe Price Associates, Inc. (TRPA), to TRPIM is expected to take place in the second quarter of 2022. As of 30 September, 2020, the six strategies represented USD167 billion in assets under management.

Over time, having two distinct investment platforms with independent research teams will allow the firm to generate new capacity while retaining its scale benefits and positioning the investment teams for continued success on behalf of clients. Aligning the strategies in this way will give the firm’s US equity strategies increased flexibility to own more of certain holdings and maximise investment capacity for both TRPIM and TRPA, while maintaining the firm’s investment culture at both entities.

There will be no impact to the structure or approach of the firm’s target date portfolios or other multi-asset products.

To support the build out of the research platforms, the firm has been on an accelerated pace of analyst hiring for the last two years and has been integrating these investors into their respective teams. While the majority of hiring has taken place, the firm plans additional hires over the next year. Average portfolio manager and analyst tenure for TRPIM and TRPA is expected to be similar.

As with TRPA, dedicated trading, quantitative expertise, responsible investing, and corporate governance resources will complement TRPIM’s fundamental research efforts. Leveraging the firm’s scale, both entities will share corporate functions, including investment operations, client service and operations, technology, risk management, human resources, and legal.

Stephon Jackson, currently associate head of US Equity and a 13-year veteran of T Rowe Price’s Equity Division, will become head of TRPIM and will join the T Rowe Price Group, Inc, Management Committee, as of 1 January, 2021. The directors of research for TRPIM will be Steven Krichbaum and Thomas Watson, both of whom joined the firm in 2007 and are currently directors of equity research, North America. Tammy Wiggs, who also joined the firm in 2007 and is currently an equity trader, will be head of equity trading for TRPIM. Ric Weible, who has been with the firm for 18 years and is currently director of operations for the US Equity Division, will become director of operations and business management for TRPIM.

The portfolio managers moving to TRPIM are seasoned investors and strong investment thought leaders and include Brian Berghuis (US Mid-Cap Growth Equity Strategy) and David Giroux (US Capital Appreciation Strategy). Mr. Giroux will also serve as the CIO for TRPIM. The other portfolio managers include 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). Together, these six portfolio managers average 25 years of investment experience and 24 years at T Rowe Price.

The firm does not expect the transition to be deemed a change of control or management of TRPA, nor does the firm expect any changes to fees or services provided to the funds and client accounts.

William J. Stromberg, President and CEO, T Rowe Price, says: “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.

“We recognise 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. A cross-functional team has been hard at work putting everything in place to ensure a smooth transition.”

Rob Sharps, Head of Investments and Group CIO, T Rowe Price, says: “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. 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 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.”

Eric Veiel, Co-head of Global Equity and Head of US Equity, T Rowe Price Associates, adds: “It is a testament to our culture that our team has worked so selflessly to do what is best for all our clients. 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.

“We have taken a very thoughtful and deliberate approach to deciding which strategies are shifting to the new platform and which are staying within TRPA and have focused on ensuring each has a strong platform. The portfolio managers, directors of research, analysts, and other investment professionals within TRPA are well positioned to continue executing the strategic investing approach that is the foundation of how we seek to deliver investment excellence to our clients.”

Stephon Jackson, Head of T Rowe Price Investment Management, says: “T Rowe Price has deep experience building and managing strong-performing investment platforms and a history of successfully incorporating business changes that best serve our clients. Leadership and the investment team are confident that TRPIM has the right mix of investment professionals to continue delivering the investment excellence that is the bedrock of our culture.

“Equity and fixed income collaboration has been a foundation of our investment success. Having these particular strategies together within T Rowe Price Investment Management will enable the equity teams to leverage the high yield team’s fixed income insights, provide the US High Yield Bond Strategy’s team with new access to equity insights and improved corporate access, and retain the US Capital Appreciation Strategy’s ability to tap fixed income trading, which is an important aspect of its investment approach. In addition, bringing a mix of equity strategies that span large-, mid-, and small-cap, as well as growth, core, and value styles, will maximise TRPIM’s ability to generate insights.”