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By Christine Benz and Russel Kinnel | 05-27-2015 03:00 PM

Navigating Winds of Change at T. Rowe

The fund firm has seen both long-planned and surprise manager departures recently and is likely to see more change in the years ahead, says Morningstar's Russ Kinnel.

Christine Benz: Hi, I'm Christine Benz for For a firm that has historically had very stable management, T. Rowe Price has recently seen a fair number of manager changes. Russ Kinnel recently wrote about that topic in Morningstar FundInvestor, and he is here with me today to talk about that topic.

Russ, thank you so much for being here.

Russel Kinnel: Good to be here.

Benz: Russ, let's take a look back and discuss some of the big manager changes that have affected T. Rowe Price over the past few years. Some of them have been very planned with a long lead time, and some of them have been more abrupt. Let's start with the abrupt changes--the people who have quit over the past few years.

Kinnel: We've seen people like Kris Jenner, on [T. Rowe Price Health Sciences (PRHSX)], and Joe Milano, on the New America Growth Fund (PRWAX), quit. Those are real surprises because they are kind of mid-career and because T. Rowe managers tend to stick around for most of their career. Also, it meant the transition was a little more jarring, a little more rapid than we're used to. We've grown accustomed to those long lead times where the change is announced 18 months or two years in advance. So, those are a little jarring.

Benz: Let's discuss some of the planned retirements. One of the biggies is happening at T. Rowe Price Equity Income (PRFDX) with Brian Rogers stepping down, but there have been some others as well. Let's talk about those.

Kinnel: That's right. Brian Rogers is set to step down from equity income in October of this year. That's another good example of one of those changes with a long lead time. Preston Athey stepped down last year from T. Rowe Price Small-Cap Value (PRSVX)--not a manager but the CEO. James Kennedy is going to step down next year as well.

Benz: You noticed that some of these planned retirements took place, as retirements commonly do, when these folks were in their early to maybe mid-60s. You took a look forward at some funds where managers have very long tenures--and that's something that we like to see--but when you look forward, within the next few years, maybe out to 2018, you see that potentially some of these folks are hitting that time in their lives when they might start thinking about retirement. Let's talk about some of those funds with those veteran managers.

Kinnel: That's right. Interestingly, there are four managers who will hit the age of 60 in 2018. So, as you say, certainly you wouldn't expect them to all retire on the same day, but it does mean that down the road we're going to see some retirements of some good managers. Brian Berghuis, who runs the Mid-Cap Growth fund (RPMGX); Greg McCrickard, who runs the Small-Cap fund (OTCFX); Shackelford, who runs the New Income fund (PRCIX); and Mark Vaselkiv, who runs the High-Yield fund (PRHYX). They're all very good managers running medalist funds, but I think it's worth understanding that those managers are getting closer to retirement age.

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