Brian C. Rogers, Price's chairman and chief investment… (Baltimore Sun photo by Algerina…)
T. Rowe Price portfolio manager David R. Giroux has spent more than a quarter of his life working at the Baltimore company and plans to spend many more years there.
Giroux joined Price as an associate analyst after graduating from college in 1998. Now 35, he still doesn't see himself anywhere else.
"Everyone says the grass is greener on the other side, but I don't think that's true here," said Giroux, who manages the company's $11 billion Capital Appreciation Fund, a mutual fund known for its conservative approach. "My last professional job will be T. Rowe Price and my last professional job will probably be running the Capital Appreciation strategy. At least that's my desire."
The culture at Price has long stood out in contrast to more freewheeling Wall Street firms, where competitors seek to lure the best analysts and money managers, creating a constant churn. Price ranked first among 30 of the largest mutual fund companies when tenure and retention were considered in addition to investment performance and other factors, according to a study last year by industry tracker Morningstar.
Now, as Price marks its silver anniversary as a public company, industry analysts say that culture will be tested as it expands here and internationally. While Price has established a strong base of long-tenured employees, many of whom have spent their entire careers there, that model is hardly common in today's workplace, where the average worker sticks around for only 4.4 years.
Price has experienced some growing pains after assuming full control of a joint venture with a U.K.-based investment company a decade ago. Morningstar senior fund analyst Katie Rushkewicz said some of those struggles stemmed from outside hires and less experienced managers from the overseas venture overseeing global funds. Those kinds of issues can "take a while to play out," she said.
And back home in Baltimore, Price executives acknowledge a generational shift could mean more turnover.
"It will be interesting to see in the next decade if that pattern continues because, over the decade, we old folks will move out and there will be the next generation coming up and the generation behind them," said Brian Rogers, Price's chairman and chief investment officer, who joined the firm in 1982 and has been at the helm of T. Rowe Price Equity Income Fund since its inception in 1985.
Executives attribute the company's ability to fare better than many competitors, even during the recession that hammered Wall Street, to its deep and experienced talent. While Price and crosstown competitor Legg Mason Inc., which has struggled with clients withdrawing money from its funds, both have laid off employees in recent years, Price has shifted into hiring mode again as business picked up.
Price posted net revenue and net income last year that surpassed peaks in 2007 — when the recession began — and a record $482 billion in assets under management, a key industry measure.
"If you have people with gray hair, then you have more teachers, more mentors," said Chief Executive Officer James A.C. Kennedy, rattling off names of fund managers who have been at Price more than two decades.
It's important to be have "repeatable" results, he added. "It's repeatable if you have people with wisdom, passing on that wisdom to the next generation, and that's why it's important to focus on our people in order to perform for our clients."
Price's 83 managers have spent on average 14 years at the firm, according to the company, which highlights that measurement in marketing materials to clients and prospective investors. Among the seven-member management committee, which includes Kennedy and Rogers, the average tenure is 20 years.
Russ Wermers, an associate professor of finance at the University of Maryland's Robert H. Smith School of Business, and a colleague studied the relationship between performance and governance structure of U.S. equity funds during an 18-year period ending in 2002. The research found that more experienced managers of larger mutual funds perform better.
But experienced managers of smaller funds trail their benchmarks, the researchers concluded. They found that independent directors on fund boards are crucial for firing seasoned yet poorly performing managers because client outflows are not enough to pressure management to do so.
About 90 percent of Price's funds have beaten their peer categories during the past five years through 2010, according to Morningstar.
Russel Kinnel, Morningstar's director of mutual fund research, cautioned that manager tenure alone is "not very helpful in predicting fund performance." The number of years a manager has overseen one particular fund is not the same as overall investment experience. Plus, there's a danger of manager entrenchment, he said.