S&P 500 2,441.20 17.28
Gold$1,224.80 $5.30
Nasdaq 6,253.81 61.92
Crude Oil $60,490.00      $-1570.00
A Blend of Ideas
T. Rowe Price Small Cap Stock Fund
Interview with: Greg McCrickard

Author: Alexander Vantchev
Last Update: , :
Besting the Russell 2000 index, while staying within the small-cap universe is the goal of Greg McCrickardís Small Cap Stock portfolio. Building and maintaining a blend of 250 names across the value and growth categories takes a blend of research and valuation methods, fueled by ideas from T. Rowe Priceís sizeable analytical force.

T. Rowe Price Small Cap Stock Fund

Q: What kind of risk controls do you put in place in terms of when things go against you?

A: In broad terms, we canít be more than 20% in any one industry, which we probably are not even close to. We would not have a single position at more than 5% based upon original cost in the portfolio. So, those are all risk-reduction types of things. Since it is a retail mutual fund, we tend to have a cash position which ranges between 8% and 9%, and that is where it has been most of the eleven years. If we decide we donít like things, we wonít let it go to 15%. Those are things that we donít do.

Q: Sometimes in the month of May or June, Russell does the rebalancing. Do you follow afterwards the same process?

A: No, because it would be very disruptive. They basically change out about 30% of their portfolio a year. So we try to look at it and say where on average does the Russell 2000 position on the cap-size basis. Most of the time it is about $2 billion to $2.5 billion or less at the upper end of the cap range. We look at what was the range of the Russell 2000 at December 31 for the previous three years, which gives us a rolling average of what the Russell 2000 universe size looks like and that is how we monitor it for the SEC name test, as you need 80% of your names in small cap stocks. We look at what the small-cap market looked like on average over the last couple of years and use that as a basis. We would look at the greater of where is the range today or the three-year average. Otherwise, you put needless volatility in trying to skinny down once a year, get it to a $1.5 billion which is where it is very briefly on about June 30, but generally it spreads out by a few hundred million pretty quick and generally it is something over $2 billion a few months down. Similarly, the range of the S&P 600 goes up to about $3 billion as well. So we are comfortable within the range of that.

  1  2

  More: Mutual Funds Archive

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc