Is T. Rowe Price QM US Small Cap Growth Equity (PRDSX) a Strong Mutual Fund Pick Right Now?

Having trouble finding a Small Cap Growth fund? T. Rowe Price QM US Small Cap Growth Equity (PRDSX) is a potential starting point. PRDSX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

PRDSX is part of the Small Cap Growth category, and this segment boasts an array of many other possible options. Small Cap Growth mutual funds usually focus their portfolios on stocks with large growth opportunities and a market cap of under $2 billion. These portfolios tend to feature small companies in up-and-coming industries and markets.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of PRDSX. T. Rowe Price QM US Small Cap Growth Equity debuted in January of 1998. Since then, PRDSX has accumulated assets of about $3.61 billion, according to the most recently available information. The fund is currently managed by Prashant Jeyaganesh who has been in charge of the fund since May of 2024.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. PRDSX has a 5-year annualized total return of 6.45%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 13.08%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of PRDSX over the past three years is 16.17% compared to the category average of 13.98%. Looking at the past 5 years, the fund's standard deviation is 17.86% compared to the category average of 15.23%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 1.05, so investors should note that it is hypothetically more volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. Over the past 5 years, the fund has a negative alpha of -7.62. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.

As of the last filing date, the mutual fund has 86.52% of its assets in stocks, which have an average market capitalization of $8.32 billion. The fund has the heaviest exposure to the following market sectors:

• Technology
• Industrial Cyclical
• Health

With turnover at about 40.2%, this fund is making fewer trades than comparable funds.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PRDSX is a no load fund and it has an expense ratio of 0.81%.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

This puts this fund from T. Rowe Price in the top 20% of all mutual funds we have a rank on right now. As a result, this is likely an excellent choice for investors seeking an option in the Small Cap Growth category.

For additional information on this product, or to compare it to other mutual funds in the Small Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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