Equity Capabilities

Equity investments involve buying shares of a company which represent partial ownership in that company. These shares are also known as stocks and can be bought and sold on a stock exchange.  

Stocks can be either individually owned or through an investment product, like the ones offered by T. Rowe Price, that include multiple stocks with the aim of achieving a specific investment objective. 

Active equity strategies are managed by portfolio managers who aim to outperform a specific benchmark over time. They seek to achieve higher returns than the benchmark or achieve a specific investment objective by identifying undervalued stocks or market trends through deep research, analysis and tactical decisions. 

Passive equity strategies aim to replicate the performance of a specific market index (e.g. S&P 500 Index). Their focus is to match the benchmark’s returns and not outperform it. Fees associated with passive investment products can result in lower than benchmark performance. 

Investment managers employ two types of management style: active and passive.

• Active management uses research and analysis to select stocks with the goal of outperforming a specific benchmark (e.g. S&P 500 Index) or achieving a specific investment objective
• Passive managers aim to replicate the performance of a specific market index and stocks within the index 

Equity managers also focus their investing across different attributes:

• Geography: Focus on individual country, region, multiple countries or regions and world (e.g. US, Europe, Emerging Markets, Global)
• Market Cap: Focus on different company sizes (e.g. large cap, mid-cap, small cap) 
• Style: Focus on company business characteristics (e.g. growth, value, core)
• Sector/Industry: Focus on a specific type of business (e.g. technology, energy, media)

Returns: The main benefit of investing in equities is the potential for returns on the capital invested. This can take the form of:

• capital growth as the investment may increase in value over time
• dividend income, as companies may distribute some profits to their shareholders as regular income payments 

Inflation Hedge: Equities have tended to outperform inflation over the long term, which in turn helps investors to preserve and increase purchasing power.

Liquidity: Investors can typically buy and sell equities quickly, giving them flexibility and control over their investments. Stocks are sold at their current market price, which could be higher or lower than original purchase price. 

Diversification: Ownership in multiple parts of the equity market can help diversify an investment portfolio through investment across geographies, company sizes, company characteristics and sector/industries. 

Market Risk: Market changes can result in the whole equity market taking a downturn, which can drag down the value of individual stocks.

Volatility Risk: Prices of stocks have the potential to go up and down, fluctuating significantly in short periods.

Business Risk: Internal business factors such as management decisions or operational issues may result in poor financial performance.   

Liquidity Risk: Market changes can prevent investors from being able to buy or sell stocks quickly enough to prevent or minimize loss. 

Interest Rate Risk: Changes in interest rates can affect the value of equities, particularly those of companies with high levels of debt.

Inflation Risk: Over time inflation has the potential to erode the purchasing power of returns from equity investments.

Currency Risk: When in investing in stock in other countries, changes in currency exchange rates can impact the value of equity investments. 

Regulatory Risk: Changes in laws or regulations can impact the operations and profitability of companies.

Event Risk: Unforeseen events such as natural disasters, geopolitical events, or pandemics can affect market conditions and equity values.

Concentration Risk: Investing in an individual stock, sector, or geographic area makes it more vulnerable to adverse events affecting that specific investment.

We have an ‘always on’ approach to equity investing. The financial markets are constantly changing, so our process, people, and culture are built to evolve with them.

Our broad range of equity products is informed by a holistic view of the investable universe and run by experts who apply their knowledge and experience, while working closely with our global investment teams to analyze and refine their ideas. Through this collaborative process, we can distill a wealth of information into actionable insights and transform them into investable ideas.

By always staying alive to the shifting market landscape, we believe we have the best chance to achieve success and select investments that help our clients meet their long-term investment objectives.

We have built an equity investment ecosystem to move with the constantly changing financial markets. We differentiate ourselves and seek consistently strong long-term performance for our clients through:

1. Our Process: Our power to process a world of living information gives us the potential to collect more pieces of the investment puzzle and the knowledge that comes with them.
2. Our People: Our associates’ collective ability to discern signal from noise and understand what matters most propels actionable insights that can come from anywhere.
3. Our Culture: Our belief in being better together gives us the potential to sharpen insights and make strong investment ideas even stronger.

In a dynamic and changing world, we believe that equity investing needs to continuously evolve and adapt. At T. Rowe Price, we've developed an equity investment ecosystem that we describe as ‘always on’. 

Our extensive research resources support ongoing data collection and analysis, where innovation combines with specialized expertise. A culture of collaboration across industries, regions and market capitalization fosters an ongoing exchange of information and the refinement of insights.¹

Our teams are always questioning and analyzing these new discoveries to convert them into investable ideas, which we apply to portfolios designed to meet the evolving needs of our clients.  

We offer a wide range of industry and sector-focused investments but do not limit ourselves to a single area of expertise. 

Our investment team contains one of the world’s largest buy-side equity research engines, seeking out greater knowledge and a holistic view of the investable universe. Our research across market caps, industries, local markets, and capital structures gives us an in-depth understanding of how companies and economies operate.

This allows us to offer a broad range of equity investment products. 

We offer investments focused on different market capitalizations, without specializing in any one size. 

Our investment team contains one of the world’s largest buy-side equity research engines, seeking out greater knowledge and a holistic view of the investable universe. Our research across market caps, industries, local markets, and capital structures underpins our deep understanding of how companies and economies operate.

This allows us to offer a broad range of equity investment products.

We have built one of the world’s largest buy-side equity research engines to seek greater knowledge and garner a holistic view of the investable universe. This gives us the ability to offer a broad range of equity investment products across multiple geographies. 

T. Rowe Price currently invests in 100+ countries.

Actively managed equity portfolios handle market volatility through the expertise of their portfolio managers who strive to make strategic investment decisions that can adapt to changing market conditions. These managers actively select stocks and adjust portfolio allocations with an aim to mitigate risks and capitalize on opportunities as they arise. 

Their goal is to outperform the market or achieve specific investment objectives, even during volatile periods. Actively managed portfolios can also offer more tailored diversification and risk management strategies compared to passive portfolios, which may help in navigating volatile markets.

However, it's always important to note that while active management aims to mitigate volatility, it does not guarantee protection against market losses.

The portfolio management team at T. Rowe Price handles the day-to-day management and ongoing oversight of investment products, supported by an Investment Advisory Committee and investment analysts. 

• Portfolio Management Team: Directly manages portfolios, making final decisions on security selection and portfolio management.
• Investment Advisory Committee: Comprises senior equity professionals, reviewing and recommending potential investment ideas, providing a collaborative "sounding board" for portfolio managers.
• Investment Analysts: Offer specialized insights and analysis on specific companies, sectors or regions, aiding in strategic allocation and risk management.

Investor’s goals, risk tolerance and investment philosophy should be considered when evaluating active and passive investment strategies.

We believe there is greater potential for outperformance in an active equity strategy because managers aim to beat the market or achieve a specific investment objective. They are able to actively adjust portfolios based on market conditions, economic shifts or geopolitical events which can mitigate risk during downturns.

Active strategies give investors more flexibility to align with their risk tolerance and goals. These advantages also come with additional investment risk. Active investing involves manager risk and higher costs, as well as market timing and concentration risks, which can lead to underperformance if decisions or sector bets are incorrect. Furthermore, active portfolios may experience tracking error and style drift, causing deviations from their benchmark.

We have integrated ESG analysis into our equity investment approach, so portfolio managers can assess how companies or issuers are positioned to navigate key environmental, social and governance concerns.²

T. Rowe Price also supports portfolio managers with ESG resources, including a dedicated Responsible Investing team and proprietary research tools like the Responsible Investing Indicator Models (RIIM).³ ESG integration is reinforced through accessible research and performance reviews, ensuring this information is taken into consideration during the investment process (where applicable).