A Big Year for Upgrades of T. Rowe Price Funds

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. T. Rowe Price has had the most upgrades of any fund family this year. I'm here with Russ Kinnel, he is our director of manager research, to look at some of the themes that have led to these upgrades.

Russ, thanks for joining me.

Russ Kinnel: Glad to be here.

Glaser: Let's take a look at T. Rowe. Over the last 12 months, they have had 10 upgrades, only three downgrades. When you look across these upgrades, what stands out to you as the reason that we are more excited about some of these strategies?

Kinnel: We are seeing an older generation of managers retire, and we are becoming more comfortable with the newer generation. I think T. Rowe has done a really good job of filling both its analyst and portfolio manager bench, so that when you see these transitions, generally, they work really nicely at T. Rowe, not just from a style consistency standpoint but from an execution standpoint. As we get to know these managers, we've been upgrading a lot of funds. We visit them every year. I think just really impressive effort across the board at T. Rowe.

Glaser: What are some of the strategies that we've upgraded?

Kinnel: We've upgraded T. Rowe QM Small Growth, which is a quant small growth fund that we've been covering for a while now, but just been gradually more and more impressed with how it's performed, so most recently moved it from Silver to Gold.

Glaser: Another upgrade to Gold was T. Rowe Price Blue Chip Growth. What's the story here?

Kinnel: Larry Puglia has been running the fund since '93. So, obviously, there's no big change there. But just as we've become more comfortable with the analysts supporting the fund, but also the fact that this fund without taking on excessive risks is one of the few large growth funds that's continued to beat the Russell 1000 Growth. Really impressive performance in up markets and down markets. Gradually, it just made a very strong case for Gold.

Glaser: On the negative side though, there have been some downgrades. T. Rowe Price New Income in particular is now Neutral. What gives you less confidence in this strategy?

Kinnel: Manager Dan Shackelford is set to retire in 2019, and there have also been some sector shifts going on at T. Rowe, sector team shifts on the fixed-income group, that give us pause and so we lowered that fund from Bronze to Neutral.

Glaser: Russ, thanks for the update on T. Rowe today.

Kinnel: You're welcome.

Glaser: For Morningstar, I'm Jeremy Glaser. Thanks for watching.