FEATURE

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LEVERAGING THE FIRM'S RESOURCES
Effectively leveraging the firm's talent to its fullest extent is a core element of the research process at T. Rowe Price—an effort supported by several key features of the firm's structure and culture. The firm created an internal information system that gives every manager or analyst in the firm instant access to every research product created across all global regions.

Current and past stock ratings and research reports are stored in a central research database that enables analysts in different regions to share and cross-check their findings. For example, a Baltimore-based utilities analyst can quickly review what a colleague in Singapore has written about a Chinese coal company. Research findings are also discussed on a daily international research conference call and at weekly calls covering the major equity styles (such as value and growth) and the major geographic regions. Several industry teams—including real estate and metals and mining—also schedule regular calls that provide support for other fund teams pursuing opportunities in those sectors.

"The sector funds are excellent platforms for analysts covering the same industries to share ideas across regions," says Baig. "Often these experts, including the managers, will travel together and go to industry conferences together, and we definitely encourage that."

How T. Rowe Price
Manages Risk

While international equity and bond markets offer attractive opportunities, they may also present risks that include currency fluctuations, political instability, and higher short-term price volatility. That's why T. Rowe Price incorporates risk management into every step of the investment process.

The most important tool for managing risk is diversification. "The smart approach to risk is to diversify it, not avoid it," says Justin Thomson, portfolio manager of the T. Rowe Price International Discovery Fund (PRIDX), which focuses on small-cap stocks. "There's no question individual global stocks can be risky, but combining different types of risks in a carefully constructed portfolio is a sensible way to manage them."

SPREADING INVESTMENTS, LIMITING RISK
Risk management for the majority of T. Rowe Price funds typically involves avoiding excessive concentration in any one sector, region, or company. Portfolio managers limit how much they overweight or underweight sectors relative to their benchmarksand they avoid holding an overly large percentage of any one company. Effective risk management also looks at the broader factors that can drive volatility. Global bond managers, for example, typically calibrate their exposures to interest rate, credit, and currency risk.

T. Rowe Price managers work closely with the firm's quantitative analysts, who have the statistical tools to measure and monitor factor exposures at the portfolio, sector, and individual security level. Issues such as counterparty riskthe possibility that one or more parties in a contract may default on its obligationand the use of futures and other derivatives are supervised by committees of senior investment professionals and corporate officers. Steven Huber, portfolio manager of T. Rowe Price's core and global multi-sector bond portfolios, sums up the firm's approach: "By actively adjusting our exposures to these varied factors, we think we can enhance return and potentially offset some of the higher volatility historically associated with more concentrated portfolios."

BUILDING A DIVERSIFIED AND TALENTED TEAM
Any research program is only as good as the people who staff it, one reason the firm puts a heavy emphasis on recruitment and retention policies. Cultural diversity and local knowledge are both valued, but the primary focus of building a high-quality research operation is finding talented investment professionals. "We want to hire the best people, period," Baig says. "But to do that you have to look far and wide—across the entire spectrum in terms of backgrounds and nationalities. My colleague in the office next to me is an Italian. Two doors down is an Austrian. Down the hall is an American, a Malaysian, a Spaniard, an Argentinian, an Estonian, and a Russian. So we have quite a combination of country and sector expertise."

Research is at the heart of T. Rowe Price's approach to investing, and the firm has dedicated substantial resources to develop and improve its global research platform. The firm believes that the ideas and insights this program generates give its analysts and managers a clear competitive edge, potentially enabling them to spot trends that are not yet fully apparent to the markets—a critical advantage in the detection of both opportunities
and risks.

Diversification cannot assure a profit or protect against loss in a declining market.

1 An early start to saving may help you afford future college costs.
2 Stuart Ritter, CFP®, a senior financial planner with T. Rowe Price, explains that the amount you save toward retirement can have a dramatic impact on your retirement.
3 Don Peters, portfolio manager of the
T. Rowe Price Tax-Efficient Equity
Fund, discusses his strategies to minimize capital gains and maximize after-tax returns.
4 A Diversified Blend of Growth and Value.
5 Depending on the plan you choose, you and your employees can enjoy tax-advantaged savings, plus a broad range of investment choices.
6 Saving for college can help you meet the costs of higher education. And don’t overlook the important contribution grandparents can make.
7 T. Rowe Price FuturePathSM helps you see the impact of key decisions as you approach retirement.
8College Savings Plan receives Morningstar's highest rating; T. Rowe Price outperforms; Connections explores big trends.
9Powerful and innovative technology is set to become a bigger part of our lives—including robotics, genomic advances, and seamless device connectivity.
10The new tax laws exempt millions of middle-class taxpayers from the AMT. What steps can help you manage and minimize your exposure to the tax?
11How the fundamental benefits of creating an estate plan far outweigh the challenges of setting one up.
11A clear understanding of your portfolio's exposure to risk may allow you to maintain an appropriate long-term strategy.
11Compounding can generate wealth.