T. Rowe Price Group (TROW) provides investment products directly to consumers, outperforming peers in this industry through the combination of performance and product strategy and the quick-paced response to client demand, says Lucas Montgomery, Research Analyst at Sanford C. Bernstein & Co., LLC.
“You don’t see a lot of persistence in performance among active managers, again which is indicative of the level of competition in that market. But there are some firms that do it very well. T. Rowe Price is one that has done it very well for a long period of time. They are live by the sword, die by the sword. They sell direct to retail customers that could be described as very performance-sensitive and therefore very fee-sensitive,” Montgomery said.
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T. Rowe‘s funds have a better performance than the average fund. Montgomery says funds can be seen as a combination of portfolio performance and distribution rights, and he says that in cases with managers with good distribution the portfolio mediocrity can sometimes be overlook.
“If you look across T. Rowe‘s platform, relative to the total number of funds they sell they have a fairly high proportion of four- and five-star funds as defined by Morningstar, so better-than-average performance platform. But that’s not the only competitive advantage one can have, and it’s very difficult to do,” Montgomery said.
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