UK Investment Conference 2024

• We are clearly past the peak in capital expenditure spending on artificial intelligence (AI). While the initial infrastructure cycle for AI may be peaking, we are, however, only just beginning to see the potential benefits of AI in other areas. 
  

• The other seismic shift of recent years has been in health care innovation, specifically the development of artificial incretins (GLP‑1s). We feel much more optimistic in the short term for this area as the benefits of these drugs keep expanding. 
  

• We believe we are in the early days of these disruptive technology innovations. At this time, both innovations look to benefit the incumbent, but we are constantly testing whether there could be disruption to the incumbents. Active management will be important to participate and navigate potentially extreme outcomes in the market.
  

• Building a portfolio that invests in technology and health care is important, but exposure here must be balanced with other areas such as energy, financials, industrials, and even consumer staples. These sectors have historically offered defensive qualities and steady growth that could potentially provide a buffer against potential market volatility.
  

• A broad investment mandate allows us to utilise our firm’s global research platform to build a portfolio of the best ideas spanning market capitalisations and styles, with the flexibility to take advantage of opportunities presented by the market and the nimbleness to adjust to changing market conditions.
  

• Our durable, consistent investment framework—known as the Four Pillars—scores current and potential portfolio holdings on quality, expectations, trajectory (better or worse), and valuation. This allows for a pragmatic, repeatable approach to building a portfolio of high-conviction ideas as opportunities across themes, sectors and individual stocks present themselves.
  

• This framework serves as a North Star for positioning, particularly in moments of macroeconomic uncertainty and allows us to be agile in repositioning the portfolio if required. Often, we do so by staying factor-neutral and generating alpha through stock selection, and adhering to our framework provides flexibility to differentiate the portfolio in a highly-concentrated US equity market led by well-known tech giants. 
  

• The narrative around artificial intelligence (AI), strong corporate earnings, and monetary policy, which is leaning in a more dovish direction, are the main factors shaping the current environment for large-cap growth equities.
  

• The AI investing conversation is moving beyond the “picks and shovels” providers and on to the “application owners” as investors’ focus shifts to monetisation. We are at the point in the cycle where companies and customers need to see tangible benefits coming from AI adoption. 
  

• The “Magnificent Seven” continue to exert a significant effect on the market. Historically, narrow market leadership is not abnormal but in this instance, the magnitude and duration of the narrow leadership has been unusual. However, after adjusting for this small cohort of companies, large-cap valuations remain well priced. 
  

• The US Large-Cap Growth Equity Strategy is finding compelling growth opportunities outside of the “Magnificent Seven”, and is well-positioned for an environment characterised by broader market leadership.
  

• Global Select is a core strategy with a mandate that balances both growth and value areas of the market, while also managing macro and factor risk. Stock selection is intended to be the main driver of performance. 
  

• The strength of our portfolio is based on our construction and philosophy: having a high-conviction, concentrated portfolio of 30–45 names; using the full power of T. Rowe Price’s global, fundamental research capabilities. 

• We search for companies with what we think are clear reasons why they can win; viewing stocks through a lens of three “buckets” rather than the growth-value binary. These buckets consist of companies that we view as (1) steady, durable growers, (2) disruptors, and (3) cyclicals/turnarounds. 
  

• With a higher degree of political and macro uncertainty today, having a balanced portfolio and one that doesn’t try to predict the future, but can neutralise macro variables and instead focus on fundamentals, will be more important in our opinion. 
  

• Investors may be looking for new sources for income with central bank rate cuts on the horizon. The global fixed income landscape offers ample opportunities for active asset managers who can allocate across sectors, countries, and currencies.
  

• The Diversified Income Bond Fund is a “go-anywhere” bond strategy that invests flexibly across the global fixed income universe with an aim to diversify opportunities for attractive income and total returns matched with a carefully managed risk profile.
  

• With its unbiased and holistic approach to portfolio positioning, the fund has fared well versus peers since inception while maintaining an investment-grade average credit quality through diverse market environments.
  

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