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An Upgrade to Gold for This Small-Cap Fund

Linda Abu Mushrefova

Linda Abu Mushrefova: For investors seeking small-cap exposure, T. Rowe Price QM US Small Cap Growth Equity is an excellent option. The fund was recently upgraded from a Morningstar Analyst Rating of Silver to Gold. 

The team uses a quantitative approach to navigate their small-cap growth universe. Their model evaluates and ranks names based on valuation, profitability, and momentum. They place the least emphasis on momentum, which results in relatively low turnover, which is somewhat atypical for a quant strategy but a positive for investors. Finally, the model's output ranks names according to relative attractiveness, and the team uses this information to construct a well-diversified portfolio.

Sudhir Nanda has been the lead manager on this strategy since October 2006 and is also the head of the quantitative equity team at T. Rowe Price. He is supported by a team of nine quant analysts, one portfolio specialist, and a five-person dedicated IT team that helps to maintain and support the models that drive this strategy. Together, they have delivered attractive returns to investors. It has managed to deliver above-average returns with below-average risk relative to peers.

Finally, this fund is priced attractively relative to peers. Overall, its rigorous process, experienced team, and low price tag contribute to our confidence in this fund's ability to continue to reward investors over the long term.