https://www.sec.gov/ix?doc=/Archives/edgar/data/1038469/000174177323000158/c497.htmT. Rowe Price QM U.S. Small-Cap Growth Equity Fund
Supplement to Prospectus and Summary Prospectus dated May 1, 2022
Effective April 5, 2023, the fund’s name will change from the T. Rowe Price QM U.S. Small-Cap Growth Equity Fund to the T. Rowe Price Integrated U.S. Small-Cap Growth Equity Fund. All references throughout the prospectus and summary prospectus to the QM U.S. Small-Cap Growth Equity Fund are replaced by reference to the Integrated U.S. Small-Cap Growth Equity Fund.
In connection with this change, effective April 5, 2023, the third and fourth paragraphs under “Principal Investment Strategies” on page 2 will be replaced with the following:
The fund’s integrated approach to investing combines fundamental analysis and quantitative models to identify stocks that could be included in the portfolio. Stocks are selected based on a variety of metrics such as a company’s valuation, profitability, stability, earnings quality, management capital allocation actions, and indicators of near-term appreciation potential.
As part of the stock selection process, the adviser focuses primarily on companies that, in the adviser’s opinion, are capable of achieving and sustaining above-average, long-term earnings growth.
At times, the fund may have a significant portion of its assets invested in the same economic sector.
In addition, effective April 5, 2023, the third and fourth paragraphs under “Principal Investment Strategies” on page 10 of the prospectus will be replaced with the following:
The fund’s integrated approach to investing combines fundamental analysis and quantitative models to identify stocks that could be included in the portfolio. The fund draws on the adviser’s experience in small-cap investing and takes into account both its quantitative and fundamental research capabilities. The portfolio is typically constructed in a “bottom up” manner, an approach that focuses more on evaluations of individual stocks than on analyses of overall economic trends and market cycles. Stocks are selected based on a variety of metrics such as a company’s valuation, profitability, stability, earnings quality, management capital allocation actions, and indicators of near-term appreciation potential.
As part of the stock selection process, the adviser focuses primarily on companies that, in the adviser’s opinion, are capable of achieving and sustaining above-average, long-term earnings growth. The adviser employs various growth metrics, such as a company’s historical and forecasted sales and earnings growth rates.
At times, the fund may have a significant portion of its assets invested in the same economic sector.
The date of this supplement is February 3, 2023.
F120-041 2/3/23
Comments
T. Rowe Price launched its series of quantitative management (QM) funds about 8 years ago (April 2016) but changed them to use an "integrated" strategy (combining fundamental analysis and quant models) a year ago (April 2023).
April 2016 QM series announcement
My impression of the QM series is that they were respectable (often 4*) funds offered at a reasonable price, at least compared to actively managed funds. In the 16 months since this change (really too soon to judge) the funds seem to have continued their solid performance. PRDSX remains in the top quartile (barely); TQSMX has moved into top quintile, TQGEX is in top third (a little better than past years), TQMVX had somewhat poorer performance, though generally top third starting in 2021.
What T. Rowe Price is doing may be similar to how MFS's "blended research" funds work. MFS describes its process (in phrases as fuzzy as TRP's) as combining a fundamental research stock score and a quant score into a single score, then optimizing (read: reweighting) the overall portfolio to roughly track the reference index. Unlike MFS, T. Rowe Price seems to be giving the final portfolio a bit more slack and focusing more on individual issue selection.
(See, e.g. MUEAX summary prospectus)
Ultimately, figuring out what these funds are doing is like reading tea leaves. Given that TRP seemed to do okay with its QM funds and if anything a little better after adding back the "human touch", its "integrated" funds may be worth a closer look. Not as barn burners, but as solid and reasonably priced actively (or pseudo-actively) managed funds.
As a lurker here - The number and specificity of funds available at TRP and elsewhere is mind-numbing. They all speak to the importance of buying and holding for “the long term”. Most restrict “trading” of their OEFs. Yet, who would buy such a narrowly focused fund without a view to “trading”?
Possibly relevant - How many different funds does a reasonably well diversified investor need?
One good ALLOCATION fund might be all that's necessary? But if one does meet with some measure of success in investing, diversification is the order of the day. But don't go chasing the newest "New and Improved" fad.
Must funds are diversified, so they can be held at much higher levels. May be limit the sector funds to 5-10%.
I would be comfortable holding 25-75% in a fund.
Diversified Funds https://ybbpersonalfinance.proboards.com/thread/307/diversified-nondiversified-funds