A look at investing with T. Rowe Price

In the depths of the Great Depression, Thomas Rowe Price, Jr. bet on his own ingenuity and the American economy by founding T. Rowe Price (TROW), a financial services holding company based in Baltimore, Maryland. 

With a degree in chemistry, Price headed for Wall Street during the 1920’s and, according to Investopedia, gradually developed “his own unique investment strategy that helped him and many others achieve superior returns.” His alchemy was simple. First, employ “proprietary research for his investment picks.”  Second, throw out the standard old practice of charging a commission on securities investments and, instead, charge a fee on assets under management. As the customer thrived, so would T. Rowe Price.

And, so they did.  As of September 30, 2011, the company was managing nearly $454 billion in assets.

This success is the fruit of Mr. Price’s “disciplined investment approach.” At its cores, which endures to this day, is a “long term focus, proprietary research and prudent risk management,” according to T.Rowe Price’s “History”.

T.  Rowe Price provides investment advisory services in its sponsored mutual funds and other investment portfolios to individuals and institutional investors in the US, Europe, Middle East, Africa and the Asia Pacific. The company “operates its investment advisory business through its subsidiary companies, primarily T. Rowe Price Associates, Inc. and T. Rowe Price International Ltd, formerly T. Rowe Price Global Investment Services Limited” and “manages a range of United States and international stock, blended asset, bond, and money market mutual funds and other investment portfolios of individual and institutional investors.” In early 2010, the company, according to Reuters, “completed the acquisition of 26% interest in UTI Asset Management Company” and by year’s end had “completed an international reorganization where all of the Company’s international operations were consolidated under T. Rowe Price International Ltd.”

As of January 2012, when this article was written, Reuters rated T. Rowe price a “buy” because of its solid approach and corresponding growth.

T. Rowe Price’s main pure asset management competitors, both in the United States and globally, include: 

* Alliance Bernstein (AB), still trying to “regain its magic touch,” according to Business Week, after clients pulled out $126 billion from its funds in 2009 and 2010.

* BlackRock (BLK), the world’s biggest money manager with $3.5 trillion in client assets, albeit it has had to lay off executives lately, according to Reuters.

* Franklin Resources (BEN), having $734 billion under management, is rated about as strong a buy as T. Rowe Price, according to  Reuters. 

* Affiliated Managers (AMG), managing about $280 billion in assets, and rated a relatively strong buy, according to Reuters.

* Cohen & Steers (CNS.N), rated about as strong a buy as T. Rowe Price, according to Reuters. 

* Janus Capital (JNS.N), rated a weaker buy than T. Rowe Price, according to Reuters. 

* Nuveen Investments (JNC), rated #66 in Forbes’ 100 top mid-cap funds.

* Waddell & Reed (WDR), rated about as strong a buy as T. Rowe Price, according to Reuters. 

T. Rowe Price’s one area of weakness is it lags behind many of its competitors internationally, with only 7 percent of its assets under management derived from foreign clients. This soft spot is explained by its joint venture with UK-based Robert Fleming until 2000 that forbade T. Rowe Price from selling its investment products internationally.  Since then, its international clientele has grown, albeit not quickly enough. Expected growth in this sector will give potential investors a big clue about the company’s future competitiveness and attractiveness as an investment.