Active management has long been seen as a cornerstone of the asset management world, especially as the industry has evolved over the years. One fund, the T. Rowe Price Capital Appreciation Fund (PRWCX), stands out for its remarkable performance, having outperformed its Morningstar peer group average for 17 consecutive years. This enduring success fosters interest among investors eager to navigate the complex world of active management.
According to T. Rowe Price’s own analysis, this fund employs an active multi-asset investment approach, utilizing at least 50% of its total assets for stock investments and the remaining 50% within fixed income securities, which can include mortgage-backed and asset-backed securities, as well as bank loans. At times, the fund can allocate up to 25% of its assets to foreign securities; historically, though, it has concentrated on domestic holdings.
Performance figures speak for themselves: the fund boasts an annualized return of 10.5% over the past decade, as indicated by T. Rowe Price data from December 31. With gross fees set at just 73 basis points (bps), the fund also reported a 1.92% yield on the SEC standardized yield as of January 31.
For investors interested in another opportunity, the T. Rowe Price Capital Appreciation Equity ETF (TCAF) managed by the same team led by noted manager David Giroux, offers attractive alternatives. With its lower fee of 31 bps, it invests primarily in quality U.S. large-cap stocks but retains the flexibility to include firms of other capitalization levels. This ETF has demonstrated its viability with impressive returns of 20.9% over the one-year period ending December 31.
With interest surrounding Giroux’s management style, the increased assets under management indicate TCAF’s rising popularity among those seeking a strong, fundamentally-driven active fund, particularly for the year 2025.
Shifting focus, the investment climate for the early part of 2025 presents unique challenges, as explored by Alex Matcham, head of UK wholesale at M&G Investments. Speaking with Katrina Lloyd, he emphasizes the rising significance of tackling portfolio concentration risks, particularly following trends driven by so-called 'Magnificent Seven' tech giants. “It is quite challenging for people running money right now,” Matcham states, as the US now presides over roughly 70% of the MSCI World index, compelling investors to reconsider their relative positioning.
This quest for diversification sees investors and wealth managers exploring options beyond the dominant tech companies, also opening doors to potential opportunities elsewhere. Matcham points to this situation as prompting discussions among asset and wealth managers about strategies to rebuild concentric portfolios.
M&G’s proactive strategy is poised to address these challenges, as they seek to maintain responsiveness to market fluctuations and investor demands, especially as the equity bull market transforms. One avenue has been recruiting top talent, as illustrated by M&G’s recent poach from Standard Life, aiming to shore up their distribution capabilities and reinforce client relationships amid the changing investment terrain.
The current pursuit of active investment methodologies and diversification strategies highlights the industry's adaptability, as firms strive to navigate and outperform within competitive environments. Investors would do well to stay informed and engaged, as the conversations around active management strategy continue to evolve significantly within financial circles.