Research-driven investing at T. Rowe Price

For its portion of Vanguard Growth and Income Fund, T. Rowe Price will leverage insights from analysts associated with the firm’s U.S. Structured Research Equity Strategy. Can you provide an overview of this strategy, including its investment approach and the characteristics you typically look for when selecting investments?

Nogueira: The U.S. Structured Research Equity Strategy is an analyst-driven core active equity strategy.¹ The objective of the strategy is to outperform the S&P 500 Index in a risk-controlled manner.

Capital is allocated across analysts in proportion to the weight of their coverage areas in the S&P 500. Stock selection and overweight and underweight allocations are based on a stock’s attractiveness within explicit risk constraints. A portfolio oversight team monitors overall adherence to portfolio constraints and risk controls, in addition to sector, industry, style, and factor exposures.

The goal is for alpha generation to be largely isolated to industries within our analysts’ areas of expertise. Ultimately, the strategy aims to perform across a variety of market environments, regardless of the macroeconomic or factor backdrops.

Why do you believe that the strategy is appealing to long-term investors?

Nogueira: Long-term investors may be interested in this structure because it seeks to make stock selection, not a large macroeconomic, sector, or style bet, the primary source of excess return. The firm’s analysts bring differentiated views within their areas of expertise, while the portfolio is designed to remain diversified, stay broadly aligned with its benchmark, and maintain core U.S. equity exposure. The appeal is the possibility that stock-selection alpha potential may compound over time without the higher tracking error and volatility that often comes with more concentrated active strategies.

For Vanguard Explorer Fund and Vanguard Variable Insurance Fund - Small Company Growth Portfolio, T. Rowe Price will leverage its Integrated Equity Strategy. Can you talk about this strategy, including its investment approach and how it combines fundamental research with quantitative insights?

Corris: We believe that the combination of fundamental and quantitative research can lead to improved decision-making and investment outcomes. Fundamental research—the “inside view”—draws on deep, company-specific analysis, while quantitative research—the “outside view”—leverages broad patterns observed across thousands of companies and market environments. In other words, each captures different dimensions of stock opportunity.

Our research shows that, historically, stocks favored by both the fundamental and quantitative research processes have delivered stronger outcomes than stocks supported by only one of the signals. These intersectional stocks form the core of the portfolio.

Risk management is another integral part of the decision-making process. We seek to take risks in situations where we have sufficient differentiated information while limiting unintended exposure to sectors, factors, and macroeconomic themes. This allows the investment insights that we are most confident in to be the primary drivers of portfolio outcomes. We tie everything together with a disciplined, rules-based process to ensure we deliver a consistent and repeatable approach over full market cycles.

What advantages do you believe this integrated approach offers in finding opportunities and achieving consistent outcomes across different market environments?

Corris: The integrated approach seeks to improve outcomes in three primary ways.

First, it can improve opportunity identification. Fundamental research and quantitative research each evaluate companies through different lenses, allowing us to evaluate investment opportunities from multiple perspectives.

Second, it provides diversification across sources of alpha. The fundamental research and quantitative research platforms often add value at different points in the market cycle. Fundamental research typically emphasizes forward-looking considerations such as strategic positioning, secular change, and future earnings potential. Quantitative research typically emphasizes observable evidence such as growth, profitability, and earnings quality. Because these approaches rely on different sets of information, together they can provide a more balanced source of alpha across varying market environments.

Third, it emphasizes consistency through disciplined risk management. Our goal is to concentrate risk where we believe we have an informational advantage while limiting unintended exposure to macroeconomic, sector, and factor risks.