New QM Equity Funds Launched by T. Rowe Price

Three new funds launched by T. Rowe Price employ the firm’s quantitative management style designed for long-term investors seeking capital growth through the use of systematic, data-driven stock-selection models.

The new funds are known as the T. Rowe Price QM U.S. Value Equity Fund; the T. Rowe Price QM U.S. Small & Mid-Cap Core Equity Fund, and the T. Rowe Price QM Global Equity Fund. In addition, the company has renamed the T. Rowe Price Diversified Small-Cap Growth Fund as the T. Rowe Price QM U.S. Small-Cap Growth Equity Fund to better reflect its quantitative management style. All four funds are a part of the new T. Rowe Price Quantitative Management (QM) series and are available in Investor Class, Advisor Class, and I Class shares.

Designed for long-term investors, the proprietary investment models analyze “a multitude of fundamental metrics drawn primarily from company financial statements.”

Further explaining the funds’ strategy, T. Rowe Price says its quantitative investment approach is based on identifying stocks that are outperformers over multiple market cycles in most global markets. These tend to be stocks that are undervalued relative to industry peers and the broader universe. There is also a preference for companies that earn high returns on capital employed and those with high earnings quality, in part because these companies often experience more moderate declines in down markets.

“Because of this value-oriented preference, it is possible that T. Rowe Price’s QM strategies could underperform in periods when valuation and quality characteristics are not rewarded by the market,” the firm warns.

Looking at the three new funds individually, T. Rowe highlights the following features.

• T. Rowe Price QM U.S. Value Equity Fund Details: The fund will invest at least 80% of its net assets in equity securities of U.S. companies, and up to 10% in foreign stocks. While multiple metrics are employed in stock selection, the investment approach can be expected to have a strong value tilt relative to the Russell 1000 Value Index benchmark. The fund will hold approximately 125–135 stocks. The net expense ratio is capped at 0.69% for the Investor Class shares, 0.94% for the Advisor Class, and 0.54% for I Class shares (with a 0.05% operating expense cap).

• T. Rowe Price QM U.S. Small & Mid-Cap Core Equity Fund Details: The fund will invest at least 80% of its net assets in equity securities of U.S. companies, and up to 10% of its assets in foreign stocks.  The investment approach favors stocks featuring a combination of relatively inexpensive valuations, strong profitability, evidence of prudent capital allocation, and price trends that indicate positive market recognition. The fund will hold approximately 350 stocks benchmarked to the Russell 2500 Index. The fund will be well diversified, with a maximum size of any position expected to be lower than 1%. The net expense ratio is capped at 0.84% for the Investor Class shares, 1.09% for the Advisor Class, and 0.69% for I Class shares (with a 0.05% operating expense cap).

• T. Rowe Price QM Global Equity Fund Details: The fund will invest at least 40% of its net assets in companies outside the U.S. and up to 20% in emerging market countries. The investment approach favors stocks featuring a combination of relatively inexpensive valuations, strong profitability, evidence of prudent capital allocation, and price trends that indicate positive market recognition. The fund will hold approximately 350 to 375 stocks benchmarked to the Morgan Stanley Capital International All Country World Index (MSCI ACWI). The net expense ratio is capped at 0.74% for the Investor Class shares, 0.99% for the Advisor Class, and 0.59% for I Class shares (with a 0.05% operating expense cap).