Manager spotlight

David Giroux, Portfolio Manger
David Giroux, Portfolio Manager of the T. Rowe Price Capital Appreciation Fund (PRWCX)

Gaining an Edge Across Asset Classes

David Giroux, portfolio manager of the T. Rowe Price Capital Appreciation Fund (PRWCX), uses a flexible approach to asset allocation to find value in the market.

The Capital Appreciation Fund aims to offer equity-like returns with less price volatility than the overall market by investing in a range of stocks, convertible bonds, debt, and cash. While diversification across asset classes is important, within equities he favors a fairly concentrated portfolio of fewer than 70 stocks. "We have a lot of leeway to go where we see value," Giroux explains. "But we typically seek out the most compelling 65 to 70 investments within the mid- and large-cap universe. That means having confidence in the process and a willingness to take chances and be wrong once in a while."

The Confidence to be Different

Giroux decided on a career in finance during his junior year at Hillsdale College in Michigan, where he and a friend applied for a grant to start an investment partnership. To prepare, he read some 50 investing books, including Benjamin Graham's and David Dodd's classic Security Analysis. Giroux didn't win the grant, but he did land a job at T. Rowe Price as an associate analyst right after graduation in 1988. Less than two years later he was made a full analyst covering industrials. By 2006, he was named portfolio manager of the Capital Appreciation Fund.

Giroux finds investment opportunities with help from an experienced team of U.S.-based analysts. An executive committee—made up of one analyst per sector, traders, and research associates—meets monthly to help guide his investment decisions across 10 asset classes to find the best balance of risk and reward. "What makes investing so interesting is that everybody does it a little bit differently," Giroux says. "There are inefficiencies in the market that create opportunities for those who are willing to walk into uncertainty. It's how you gain an edge."

A Responsibility to Investors

Those opportunities often come in the form of companies undergoing some stress or short-term challenge: a firm that just missed earnings, made an unpopular acquisition, or was in a sector that has fallen out of favor. The fund also may invest in large firms currently undervalued in the U.S. but growing in emerging markets—or solid, cyclical industrials with earnings lowered by the recession yet likely to rebound.

The Capital Appreciation Fund has had only two years of negative returns since its inception on June 30, 1986. And Lipper ranked the fund #1 among the 20 funds in its portfolio category, based on cumulative total return for the since-inception period ended March 31, 2012.* Of course, past performance cannot guarantee future results.

Giroux attributes the Capital Appreciation Fund's success to its flexible strategy and the strength of the T. Rowe Price research team, which helps generate ideas and highlight opportunities in the marketplace. "We can create significant risk-adjusted returns over time," he remarks. "And we can go where we see opportunity to create value for our shareholders."


The fund returned 8.05%, 5.17%, and 8.00% for the 1-, 5-, and 10-year periods, respectively, as of 3/31/12. Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the T. Rowe Price Capital Appreciation Fund's (PRWCX) most recent month-end performance and up-to-date standardized returns, please click here. Figures include changes in principal value, reinvested dividends, and capital gain distributions.

Because of the fund's fixed income holdings or cash position, it may not keep pace in a rapidly rising market. The fund's value orientation carries the risk that the market will not recognize a security's intrinsic worth for an unexpectedly long time or that a stock judged to be undervalued is actually appropriately priced.

* Lipper ranked the fund 29 of 567 mixed-asset target allocation growth funds for the 1-year period, 21 of 465 for the 5-year period, and 2 of 237 for the 10-year period ended 3/31/12. The Lipper category consists of all share classes; each share class is counted separately. Source for Lipper data: Lipper Inc.

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