The T. Rowe Price Approach

Target Date Strategies

The Benefits of the T. Rowe Price Strategic Investing Approach

Executive Summary

  • T. Rowe Price examined 11 of our U.S. Retirement Funds (RFs) with at least 10-year records to quantify the value added by our strategic investing approach.
  • All 11 funds outperformed their respective benchmarks in at least 85% of rolling five-year periods and every rolling 10-year period since inception, net of fees.
  • T. Rowe Price seeks to add value for clients at multiple levels, including glide-path design, long-term diversification, and our strategic investing approach.
  • We believe our strategic investing approach―including tactical allocation and active management of the underlying strategies―can enhance retirement outcomes.

Tactical asset allocation: The performance contribution from tactical allocation was positive in every 10-year rolling period for every fund since inception (i.e., a 100% active success rate). Active success rates also were overwhelmingly positive across five-year rolling periods (averaging 99%). Value added was positive and relatively consistent across all time frames.

Active Success Rates and Value Added by Tactical Allocation

Fund Inceptions Through December 31, 2017

Sources: Bloomberg Barclays, MSCI, Russell, and T. Rowe Price; data analysis by T. Rowe Price.

Security selection: Excess returns also were positive in every 10-year rolling period for every RF since inception and strongly positive (averaging 85%) across five-year rolling periods. Excess returns were positive across all time frames for all funds.

Active Success Rates and Value Added by Security Selection

Fund Inceptions Through December 31, 2017

Sources: Bloomberg Barclays, Credit Suisse, J.P. Morgan, MSCI, Russell, Standard & Poor’s, and T. Rowe Price; data analysis by T. Rowe Price.

Total Implementation: Active success rates were positive in every 10-year rolling period for every RF and averaged 88% across five-year rolling time periods for all RFs. Annualized excess returns were consistently positive across all time frames for all funds.

Active Success Rates and Value Added by Total Implementation

Fund Inceptions Through December 31, 2017

Sources: Bloomberg Barclays, MSCI, Russell, and T. Rowe Price; data analysis by T. Rowe Price.

Our Approach to Strategic Investing

T. Rowe Price’s target date process seeks to improve outcomes for our clients at multiple levels—via glide-path design, long-term diversification, tactical asset allocation, and our strategic investing approach. We believe the value added by our target date implementation can meaningfully enhance retirement outcomes for investors.

Bottom-up fundamental research is at the core of how we manage the underlying strategies in our target date funds. That means that over 350 of our investment professionals go beyond the numbers by visiting senior corporate executives in their offices, touring their companies, and checking reality on the ground with suppliers and customers.This enables them to ask the right questions to get a deeper understanding of where a company stands and where they think it could go in the future.

Our target date managers, backed by our committee of asset allocation experts from across multi-asset, equity, and fixed income, seek to get ahead of change by identifying attractive near-term asset valuations and using prudent tactical allocation adjustments to take advantage of potential opportunities.

Experience has been a critical component of our success as well. Our skilled portfolio managers have deep experience—an average of 21 years in the industry and 16 years with T. Rowe Price.Significantly, many of our analysts go on to become portfolio managers, which we believe creates a strong foundation on behalf of our clients.

Read the Study

1Investment staff as of 12/31/2017. Includes 104 portfolio managers, 24 associate portfolio managers, 148 investment analysts, 47 associate analysts, 10 multi-asset specialists, 3 specialty analysts, 2 strategists, and 17 senior managers.

2As of 12/31/2017.

Important Information

Download a prospectus

The principal value of the Retirement Funds is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire (assumed to be age 65) and likely stop making new investments in the fund. If an investor plans to retire significantly earlier or later than age 65, the funds may not be an appropriate investment even if the investor is retiring on or near the target date. The fundsʼ allocations among a broad range of underlying T. Rowe Price stock and bond funds will change over time. The funds emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation with the need for income as retirement approaches, and focus on supporting an income stream over a long-term postretirement withdrawal horizon. The funds are not designed for a lump-sum redemption at the target date and do not guarantee a particular level of income. The funds maintain a substantial allocation to equities both prior to and after the target date, which can result in greater volatility over shorter time horizons.

The views contained herein are as of March 2018 and may have changed since then.

MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark of Russell Investment Group.

Note: Bloomberg Index Services Ltd. Copyright 2018, Bloomberg Index Services Ltd. Used with permission.

Price Perspectives are provided for informational and educational purposes only and are not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. This Price Perspective provides opinions and commentary that do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance cannot guarantee future results.

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