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TRP news release. What does all of this MEAN? Dated 19 Nov 2020
Looks like they want to create seperately managed account-type services based around some of their strategies. Other reporting makes it sound like these advisors will continue to advise/run their mutual funds despite being in this new organization. (I also own large amounts of PRWCX and am curious!)
"...They will occupy separate spaces and not share investment resources or research with each other." Is this the dumbest shit EVER? ... Edited to add: They are doing too well. Management wants to create an open door to own more of their own funds, so I read in @rforno's link. And I read the M* article. What we DO have going forward is David Giroux, anyhow. PRWCX , although closed to new investors..... is pretty hefty already in terms of AUM. Currently $43.2B. That represents a lot of growth from WITHIN. A billion here, a billion there..... you know what they say.... I note that my PRDSX is not included. I like that one a lot, too. ..... I'd love to read David Snowball's reaction to this development.
The M* link essentially echos Price’s point of view, quoting management extensively. Expect there will be some better critical analysis from various sources soon.
The only question that pops into my mind (as a direct investor) is what happens if I need to transfer money after the change between PRWCX and TRBUX (as one example)? Is that going to necessitate an IRA custodial transfer involving added time and effort?
Price seems to promote competition within which can produce better results, albeit with conflict. TMSRX, as I understand it, has 5 different managers - each in charge of a separate sub-set of the fund’s multi investment approach. I’ve long wondered whether that might or may promote friction within.
I received email yesterday from TRP about this but had been too occupied to take a close look at this (or much of anything else). Structurally, it looks like the parent company, T. Rowe Price Group (TROW) is "merely" splitting its investment management subsidiary T. Rowe Price Associates into two separate RIAs. The operations of the funds themselves should not be affected, except insofar as some of them will now be contracting with T. Rowe Price Investment Management instead of T. Rowe Price Associates for fund management services.
It's not unusual for fund companies to have separate teams including managers and analysts to oversee different groups of funds (see, e.g. Baird). Still, the "Chinese wall" that TRP is establishing seems different.
I HAVEN'T CALLED TRP. What does it mean to move a strategy? Are they moving the funds, or are they setting up a similar fund with the same Strategies. If there just moving the fund that doesn't theoretically allow for additional capacity for new investors or additional funds for investors. If they are moving the funds why didn't say the funds will be moving ...?
It’s a fascinating bit of news. I haven’t a clue. I know from my Oppenheimer years that some of their mutual funds were managed by “subsidiaries” - often in the Cayman Islands. A fee was paid by the fund to the subsidiary for managing the fund. I always assumed this created perhaps some kind of firewall to limit Oppenheimer’s liability, along with cost benefits. What TRP is doing sounds different.
TRP hasn’t stumbled much in the past, so I’ll ascede to their having good intentions. While size has benefits of scale, they may be sensing that management of such a large organization is becoming a bit unwieldy, The bigger the organization the easier it is for laggards to take cover and avoid being weeded out.
Worst case (which I don’t expect) would be inability to effect simple exchanges between funds in the two groups. Geez - with separate accounts at 4 houses now and separate Roths and Traditional IRAs at TRP, I’ve had tons of practice shifting money around. Lots of work-arounds. Having a stash of cash at each designee is quite helpful, as is having similarity oriented funds at 2 fiduciaries - to a limited degree.
I haven’t called. Not too concerned. It would be nice however if they could explain it in simple terms in a Bloomberg interview or something akin to that. As far as PRWCX goes, without checking, it has to be one of their largest funds in terms of AUM. Makes perfect sense to move it to the new management complex. I did read that Giroux will also be bumped up to the senior management ranks there as part of the reorganization.
From a fund perspective, nothing is changing. People are overthinking this.
Say you own some fund in a fund family. The manager of that successful fund decides to go off on his own and form his own management company. But the fund really liked this manager, so it contracts his new company to continue managing it. Same fund, same fund family, same day-to-day management. From the investor perspecitve nothing's changed.
But the fund manager is now calling on resources of his new company for analysis and recommendations for investments, instead of using the resources of the old fund family. That's the general idea here, though the new management company, like the old one, is owned by T. Rowe Price.
Here's the link to TRP's analyst call from November 19, it explains everything pretty clearly, the call is 42 minutes long. They are addressing capacity constraints that this new entity can help alleviate, most of the funds transferring to the new investment advisor are constrained to investors. The new investment advisor also allows for additional advancement opportunities for staff.
I bet that's one of their priorities, but do you think they'd actually and explicitly SAY so??? I'm 10 minutes into the call, and so far, it's cosmetic word-salad.
.....(But there already is a PRHYX clone in existence. I forget the ticker.) ********************* From the call: "...30% of AUM are in closed funds......"
So it surely sounds as if they really do want to better exploit (for example) the investing genius of the likes of Giroux, who is Manager of PRWCX. And he will be head honcho of the new TRPIM.
The most important take away here is to note the date of the change. The proof is in the pudding. The clock resets in my book. Talk is cheap. Past performance does not guarantee future results etc etc etc.
Comments
More @ https://www.bizjournals.com/baltimore/news/2020/11/19/t-rowe-price-to-launch-new-investment-subsidiary.html
I guess they wish to compete against themselves.
The only question that pops into my mind (as a direct investor) is what happens if I need to transfer money after the change between PRWCX and TRBUX (as one example)? Is that going to necessitate an IRA custodial transfer involving added time and effort?
Price seems to promote competition within which can produce better results, albeit with conflict. TMSRX, as I understand it, has 5 different managers - each in charge of a separate sub-set of the fund’s multi investment approach. I’ve long wondered whether that might or may promote friction within.
Note: Changes would take effect in 2022.
It's not unusual for fund companies to have separate teams including managers and analysts to oversee different groups of funds (see, e.g. Baird). Still, the "Chinese wall" that TRP is establishing seems different.
The closest structure that comes to my mind is the separate facility Janus set up for Bill Gross. And we all know how well that went. Though Gross was strapped for resources: "Indeed, he [was] starting with just a handful of associates supporting him." I expect the new T. Rowe Price firm to be on better footing.
https://www.bizjournals.com/baltimore/news/2020/11/19/t-rowe-price-to-launch-new-investment-subsidiary.html
TRP hasn’t stumbled much in the past, so I’ll ascede to their having good intentions. While size has benefits of scale, they may be sensing that management of such a large organization is becoming a bit unwieldy, The bigger the organization the easier it is for laggards to take cover and avoid being weeded out.
Worst case (which I don’t expect) would be inability to effect simple exchanges between funds in the two groups. Geez - with separate accounts at 4 houses now and separate Roths and Traditional IRAs at TRP, I’ve had tons of practice shifting money around. Lots of work-arounds. Having a stash of cash at each designee is quite helpful, as is having similarity oriented funds at 2 fiduciaries - to a limited degree.
I haven’t called. Not too concerned. It would be nice however if they could explain it in simple terms in a Bloomberg interview or something akin to that. As far as PRWCX goes, without checking, it has to be one of their largest funds in terms of AUM. Makes perfect sense to move it to the new management complex. I did read that Giroux will also be bumped up to the senior management ranks there as part of the reorganization.
Say you own some fund in a fund family. The manager of that successful fund decides to go off on his own and form his own management company. But the fund really liked this manager, so it contracts his new company to continue managing it. Same fund, same fund family, same day-to-day management. From the investor perspecitve nothing's changed.
But the fund manager is now calling on resources of his new company for analysis and recommendations for investments, instead of using the resources of the old fund family. That's the general idea here, though the new management company, like the old one, is owned by T. Rowe Price.
https://edge.media-server.com/mmc/p/h8dm9bxn/lan/en/
I'm 10 minutes into the call, and so far, it's cosmetic word-salad.
.....(But there already is a PRHYX clone in existence. I forget the ticker.)
*********************
From the call: "...30% of AUM are in closed funds......"
So it surely sounds as if they really do want to better exploit (for example) the investing genius of the likes of Giroux, who is Manager of PRWCX. And he will be head honcho of the new TRPIM.