Interesting article in Financial Times about TRP’s loss of investors. I’m one of the long term investors who’ve been bailing out. Although I still invest in TRP funds, I transferred our Roth IRAs from there to Fidelity a couple years ago. Convenience was a big factor because now all of our investments are with Fidelity. However, it was also due to a growing lack of confidence in TRP. A lot of my investments are in allocation funds, and I’m not pleased with TRP’s offerings, aside from PRWCX, which has been closed to new investors for a while. My wife and I have invested with TRP for more than 25 years, with more than $200K in our Roth IRAs, and they still wouldn’t let us invest in PRWCX.
So we invested heavily in TRPBX, which has been a major disappointment. It was considered a top moderate allocation fund when we started using it, but performance has steadily declined— which is ironic because PRWCX has been so successful. Much of the problem seems to be their asset allocation, with heavy stakes in foreign and emerging markets. Although the fund’s volatility is not bad on a day-to-day basis, it has been hurt by the high foreign allocations in down and up markets. TRP also started investing about 10% of its assets in hedge funds, which from my view hasn’t helped performance a bit.
We still own several TRP stock funds that have performed well, through the Fidelity funds network. However, we’ve ditched their bond and allocation funds. The Fidelity funds that replaced them have all had better performance. We’ll probably drop some of our remaining TRP funds if they don’t improve soon. At one time, I considered using TRP for all of our investments, but we decided to use Fidelity as well — and my Fidelity investments as a whole have greatly outperformed my TRP holdings.
https://www.ft.com/content/7cdd7cd9-f465-48ae-af18-aa8201f8fab8
Comments
Nice write-up @Tarwheel. I’d been a happy camper with TRP since the mid to late 90s. Kept anywhere from 40-60% of my retirement funds there over more than 25 years with the rest spread around different fund houses. I left about 3 years ago after noticing their phone based client support had become abysmal to the point where i began to worry about (unwanted) paper statements ending up in someone else’s mailbox. Repeated calls didn’t help. Couldn’t stop the unwanted sporadic and unpredictable statement mailings. And when I finally moved out, they screwed up the transfer to Fidelity royally.
Their fixed income funds lagged up until the late 90s when a very talented woman took over. For a few years, under her leadership they got a lot better. Not sure when she moved on. ISTM she left sometime after 2000 to take a government position in Washington DC. Fixed income fell back to mediocre not long after.
The Giroux affectionados here love the guy and everything he touches - with good reason. Maybe they’ll discover a way to clone him and put the
clownsclones in charge of everything. But I agree with you that their allocation funds ain’t what they once were. Likely it’s the fixed income component that’s causing the lackluster performance. I do own a slug of TRRIX (a 40/60 fund). ISTM it lost 10-12% in 2022. Worst showing I can ever remember (umm … other than 2008). It keeps most of its fixed income component in their New Income Fund (PRCIX) and most of the remainder in a short-immediate term TIPs fund. The former has always been a bit of a dog.The world turns over every 24 hours. I’m sure the move to ETFs is hurting their bottom line and maybe (a guess) causing either some talent drain or cut-backs in research. Just guesses. BTW - their offerings have multiplied at least 5X since I joined them in the mid-90s. Not sure that kind of shotgun approach is in their best interest. But definitely got problems in
River CityBaltimore.RPGAX (Global Allocation, now 10 yrs old IIRC) also has like 10-15% exposure in a black-box. To my knowledge they never really explained what *exactly* Blackrock was managing/investing in for the fund. But wow ... I didn't know their Spectrum funds also had a PE component, too!
I agree w/Hank that their fund offerings are kind of 'meh' and definitely have proliferated over the years -- frankly I'd think they should consolidate/close some of them if for no other reason than to make their offerings list less cluttered with a lot of me-too funds that invest similarly to each other.
I only hold PRWCX but am keeping its income-oriented cousin (forgot the symbol) on watch as a possible holding down the road. I'll also track TCAF out of curiosity, but don't really have a need for it in my portfolios.
They have some State-specific munis which don't impress. Most of the other bond funds don't impress, either. Surely, a big pile of people are into their Retirement glide-path funds via 401k or 403b. There are just SO MANY funds. A person could get lost in them all. Remember when Matthews was doing that? And look what happened at Matthews. Quite the mess.
TRPBX is a global allocation (60/40) fund, with about 1/3 of stocks and 1/3 of bonds invested outside the US. For comparison, Vanguard's VSMGX is a global allocation (60/40) fund that's as vanilla as one can get, comprised of Total Stock, Total Bond, Total Int'l Stock, Total Int'l Bond. The bonds are 1/3 foreign, the stocks are 2/5 foreign.
These two funds have run neck and neck since the beginning of 2020. See PortfolioVisualizer. 3.83% annualized for TRP, 3.87% for Vanguard.
It's difficult to classify these funds. M* lumps them in with domestic moderate allocation funds, and they both rate three stars on that scale. As Tarwheel observed, foreign holdings have underperformed. If compared strictly among global allocation funds, these funds would likely have garnered more stars.
Lipper calls TRPBX a mixed asset target allocation moderate fund, while calling VSMGX a mixed asset target allocation growth fund. So it's not surprising that Lipper rates TRPBX a 4 (out of 5) for total return while rating VSMGX only a 1.
The point is that these funds are doing what they said they would do and are performing as expected given what they invest in. If a global allocation fund with dynamic allocations is of more interest than a fund with static allocations, TRP offers RPGAX. PortfolioVisualizer shows that it has done a bit better than the other funds since 2020.
M* calls RPGAX fund a global allocation fund, while Lipper calls it flexible portfolio fund. It is competitive with CIBFX and MDLOX. M* calls both of those global allocation funds; Lipper calls MDLOX a flexible portfolio fund but calls CIBFX a global equity income fund.
Regarding TRRIX, some of the same comments apply. Long term, it has paced VSCGX, Vanguard's 40/60 global allocation (index based) fund. Since the beginning of 2020, it has surpassed VSCGX by a full percentage point (3.18% vs 2.11% annualized).
I agree that it is unfortunately burdened with PRCIX. That's a risk with in-house funds of funds (one that Vanguard circumvents by using underlying index funds). FWIW, TRRIX has somewhat more invested in TRPZX than in PRCIX (TRRIX fact sheet). Though those are the two elephants in the fixed income room.
Lipper loves TRRIX - 5's across the board (except for tax efficiency), since Lipper considers it a Target Now fund. The Vanguard fund is in Lipper's doghouse, since Lipper considers it a Target Allocation Moderate fund.
A few differences I’ve noticed between TRP and Fidelity. If a Fidelity fund performs poorly, they replace or change the management team. If a Fidelity fund performs well, they generally don’t close it to their investors (although they have done so for limited time periods). Most Fidelity funds have the flexibility to invest in foreign assets, but they generally don’t load up on them unless the fund is clearly designated as global or international. FLPSX is the rare exception but it has continued to perform well despite holding a lot of foreign stocks.
I pay a lot of attention to Lipper’s ratings. BTW - M* gives TRRIX a “silver” (2nd highest) rating which ain’t too shabby either. I like TRRIX too - or wouldn’t have 10% of portfolio devoted to it. Hard to beat the .49% ER for a pretty diverse basket of managed funds.
That said… No way should that fund have fell over 13% in 2022. Especially - @msf will recall - that over the decades (far back as before the turn of the century) one commonly lauded aspect of TRP was their skill at allocating among different assets. They always seemed to have an edge in that one area. I’ve heard it here on this board over the years and that conformed to my own view until recently. Lose that edge and a good part of the reason for investing with them is gone.
BYW - It appears they’ve recently added a bit of their Dynamic Income fund to the TRRIX fixed income mix. That fund uses bond shorts to hedge against rising rates. We’ll see how it all works out.
I don't know when that was, but the 2019 prospectus, in describing the fund's benchmark, says: 30% of stock invested abroad or at least used to benchmark. (18%/60% stock allocation = 30%)
If it’s a global allocation fund, then why did they create RPGAX?
Why not? As hank observed: their offerings have multiplied at least 5X since I joined them in the mid-90s. Not sure that kind of shotgun approach is in their best interest. Also, it has a larger allocation to foreign equity (40% vs. 30% for TRPBX). Apparently enough for M* to place it in its global allocation category.
If a Fidelity fund performs well, they generally don’t close it to their investors
Certainly good performance attracts dollars, though it is the size of AUM itself that drives a fund to close. The theory is that a fund can manage only so much money and stay true to its style of investing. Then it hits "diseconomies of scale".
There's research that bears this out if the family doesn't create clones. Cloning is one way a family manipulates closures to pull in more money. Another way is pre-announce a closure and wait too long to close.
For example: https://www.morningstar.com/articles/136400/fund-times-vanguard-energy-reopens-and-expands-team
Curiously, TRP reopened PRIDX (9/1/23) not much after Fidelity reopened FSCOX (1/14/23). The former was closed 4/2/18. Still tracking down the latter's closing date.
Foreign vs. domestic in 2022: VFUS (VTIAX) lost 15.99% (NAV) while VTI (VTSAX) lost 19.50% (NAV) https://partners.wsj.com/principal/recalibrating-risk-2023/the-resurgence-of-international-equities/
RPGAX was one of my favorite funds when I invested directly with TRP. But haven’t owned or looked at it since. ISTM its performance was decent from inception on to about 2020 when I departed. I liked the idea of allocating approximately 10% to the Blackstone hedge fund. But that’s just me - always looking for a way to hedge the downside or step to a different drummer. True - the Blackstone holding was hard to justify on an expense basis. And it generally detracted from performance over those years. Still - I’m always looking for hedges - and that was the purpose.
You are correct that TRPBX slightly outperformed FBALX by about 1.1% in 2022.
However, over the following time periods, FBALX outperformed TRPBX annualized by this much:
1 year, 6.7%
3 years, 4.1%
5 years, 4.2%
10 years, 2.2%
Put another way, $10,000 invested in FBALX ten years ago would be worth $23,262, compared to $17,743 with TRPBX. Since I had considerably more money invested in both funds over the past 10 years, the value of my FBALX holdings have increased by tens of thousands of dollars more than TRPBX — particularly since I’ve owned both funds for more than 20 years (until selling TRPBX earlier this year.)
Anyway, it’s my fault for sticking with TRP allocation funds for so long. They have underperformed
for a while, but I’m a patient buy-and-hold investor and kept expecting things to change. They did, but unfortunately for the worse.
Looking at the calendar year percentile rankings, one could say that it's not so much that TRPBX got worse as that it tended to be okay but not great. Or as rforno put it, "kind of 'meh'".
The fund had two bad years, 2021 and 2022 (and FBALX had an even worse record in 2022). These weigh heavily on its three year performance and five year performance. Those two years aside, its yearly performances were typically top third, just.
Even going back to your first decade with these funds (2003-2012), TRPBX barely outpaced FBALX, 8.23% to 8.21%.
I suspect that the fraction of equity that's invested abroad hasn't shifted much in decades. A fund may be permitted to make major allocation changes without ever taking advantage of that freedom. Not worth going back past 2017, though, because earlier annual reports don't seem to contain that information.
Sept 2023 (M*): 32% foreign (19.01%/59.60%)
May 2022 (annual report): 36% foreign (21%/59%)
May 2021 (annual report): 34% foreign (20%/59%)
May 2020 (annual report): 34% foreign (21%/62%)
May 2019 (annual report): 35% foreign (20%/57%)
May 2018 (annual report): 36% foreign (21%/58%)
The 2017 annual report notes that T. Rowe Price made several changes to what were then called the Personal Strategy Funds.
“My sense is we are approaching the end of the more intense period of outflows,” chief executive Rob Sharps said in an interview with the Financial Times. “In certain, very visible, aspects it was a very disappointing year. In particular, the flow picture and the business that we lost.”The active equity house has faced strong headwinds since early 2022, when poor performance in some of T Rowe’s largest growth equity strategies sent investors running for the exits.
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As a subscriber to the FT I’m underwhelmed by the breadth and depth of its stories. Plan to cancel before it renews. Not a bad article. Superficial coverage ISTM. Chief Executive Sharpe and outside observers may not fully grasp the depth of the problem. No mention of investors disgruntled by poor service. And I wonder if they fully appreciate the mounting competitive pressures. To a lesser extent they are afflicted by the same phenomenon that has dinged banks - the ability and willingness of investors to shift funds from one institution to another with relative ease and speed using modern technology.
I was a bit surprised Franklin is the other house mentioned as hemorrhaging money. Albeit, I’m not too familiar with them. But a few of their ETFs have garnered my attention. They seem at least to be experimenting with some new approaches. Some, like LVHI have done well and receive high marks at M*.