T. Rowe Price funds rank near top consistently


April 14, 1991|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

NEW YORK — New York--How good are the dozens of mutual funds peddled by Baltimore-based T. Rowe Price?

Pretty good. That's the conclusion of four years worth of evaluations by Kanon Bloch Carre & Co., a Boston-based investment advisory firm that surveys mutual funds as an offshoot of its own business placing wealthy investors' money in selected no-load funds.

While Price has never been in first place, it hovers near the leaders and has never been even close to the bottom. "A small group of funds, about 10 out of 300, are consistently in or near the top 10, and T. Rowe Price is one of them," D. Tyler Jenks, Kanon Bloch Carre's head of research, said.

Because the Kanon Bloch Carre study uses results for one, three, five and 10 years, with the most emphasis on the longest period, ratings tend to be relatively stable. Price's rankings, in six-month intervals beginning in December of 1987, have moved from 17th to fourth to eight to seventh to 11th.

Unlike many of the other top-performing fund groups, which tend to specialize in either stocks or bonds, Mr. Jenks said, Price was unusually balanced, "approaching superior performance right across the investment spectrum from stocks to bonds to international."

Despite the good numbers, Price rarely draws accolades for investment savvy. That, suggested Kurt Brouwer, president of Brouwer and Janachowski, a San Francisco investment advisory firm specializing in mutual funds, is because it lacks a fund such as Magellan at Fidelity, or Windsor at Vanguard -- funds that have topped the charts for years.

"They don't have any of the stellar, stellar funds that will vault a fund family into the public consciousness," Mr. Brouwer said.

Indeed, Price's best known investment vehicle is likely to be the New Horizon's Fund, which typically moves about the same pace as the over-the-counter market, which did poorly during the mid-to-late 1980s but has surged recently.

While choosing a mutual fund company because of just one fund may sound strange, it is the time-honored method. The performance of individual funds are reported quarterly, and the parent tends to bask, or drown, in the results. Typically, it does a bit of both. Any large mutual fund organization with a diversity of specialized funds will typically have at least one offering at the high or low end of the performance lists, though more pertinent results may be lost in the broad middle.

As usual, the ability of the major companies to register on the fringe was the case in the most recent quarterly rankings.

Price's science and technology fund scored near the very top of the benchmark survey by Lipper Analytical Services, as did many other technology funds.

Price managed to avoid the cellar, but only because it lacked a precious metals fund, the source of almost all the disasters.

Fidelity, which has a fund focused on almost every conceivable niche, could boost about having the No. 5 fund, its "selected medical," as well as the ones ranked 1,844 (eighth worst), invested in German currency, and 12th worst, invested in gold.

When they advertise, mutual fund companies feature the latest quarter's lead funds, and they defend the practice by arguing that investors tend to ignore other tactics. Because response rates to ads are closely tracked, that's probably true.

But individual funds may become an increasingly irrelevant methodology for people, even if it's how they continue to invest. Rarely does the winner in one quarter repeat. Indeed, Mr. Jenks contends, the opposite is more likely to be true.

Equally important, even the smallest saver has apparently begun to diversify, making the performance of just one fund less meaningful.

Nationwide, Mr. Jenks reckons that the average mutual fund investor has more than two accounts. That squares with Price's own internal figures.

Since mutual fund companies are compensated by fees based on money under management, they have become increasingly active in creating products and expanding their offerings to keep investors in-house. Price, for instance, introduced its first fund in 1950, its second a decade later, and third after another nine years. Recently, the pace has quickened. This year alone, Price has introduced two funds, and it now has 38. Fidelity has more than 100.

Consequently, the general performance of a mutual fund company may be the single most important factor an investor should examine. But it is not the only one that matters. Major mutual fund companies have added numerous other services that have little to do with performance but seem to matter to investors. Checking on money-market accounts, telephone shifting between funds, and comprehensive statements are all key marketing tools.

Mr. Brouwer, in fact, gives Price his highest grade for shareholder communications. "Their reports are clear, timely, don't really kid around, and call things the way they are," Mr. Brouwer said. "A lot of mutual fund companies aren't particularly good at that."

Ironically, the most important issue of all, for many investors, may actually have nothing to do with performance but rather involves who is trying to sell it.

Currently, no-load funds like Price's (funds sold directly, with no commission), have just a little more than a third of the mutual fund business. A far bigger share is held by funds sold through brokers.

The returns from these funds, suggests the Kanon Bloch Carre study, are no better than the no-load funds. In many cases, returns are worse -- and, given the upfront commission, likely far worse.

"One thing this study shows," Mr. Jenks said, is that an adept sales force "has a lot of power to overcome performance."

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.