T. Rowe Price Capital Appreciation Fund (PRWCX)
Ticker Symbol:
Fund Status:
Open to new Retail investors  /  Open to subsequent Retail investments
Fund Management
Fund Manager
  • David R. Giroux
  • Managed Fund Since: 07/01/2006
  • Joined Firm On 06/22/1998*
  • B.A., CFA, Hillsdale College

*Firm refers to T. Rowe Price Associates and Affiliates
Quarterly Commentaries
as of 03/31/2014

U.S. equities advanced in the first quarter, with value stocks outperforming growth. Shares tumbled in January as the Federal Reserve started to taper its monthly asset purchases and as emerging markets assets declined in anticipation of reduced global liquidity. Stocks rebounded strongly in February, however, amid stabilization in emerging markets and mostly favorable U.S. corporate earnings. Equities struggled somewhat in March due to Russia's controversial annexation of Ukraine's Crimean peninsula. Domestic investment-grade bonds generated good returns as long-term interest rates declined, but high yield issues outperformed as investors continued to favor securities with a yield advantage. Leveraged loans produced mild gains.

The Capital Appreciation Fund returned 2.84% in the quarter compared with 1.81% for the S&P 500 Index and 1.82% for the Lipper Mixed-Asset Target Allocation Growth Funds Index. For the 12 months ended March 31, 2014, the fund returned 16.97% versus 21.86% for the S&P 500 Index and 14.96% for the Lipper Mixed-Asset Target Allocation Growth Funds Index. The fund's average annual total returns were 16.97%, 18.63%, and 8.97% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2014. The fund's expense ratio was 0.73% as of its fiscal year ended December 31, 2012.

For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.

Benchmark Definitions

We increased cash reserves during the quarter by trimming equity and fixed income allocations on strength. We feel that equities are less attractive because valuations have become relatively expensive versus historical averages. Overall, we continue to focus on high-quality companies with defensive characteristics, such as low earnings volatility and high free cash flow generation. In fixed income, we are not finding many reasonable risk/reward opportunities. We trimmed exposure to leveraged loans-most new issues are covenant-lite loans with fewer investor protections-and mortgages, while increasing positions in U.S. Treasuries and select investment-grade corporate bonds. We have also added to the portfolio's high yield positions, primarily in the highest-quality tiers of the high yield universe.

We are continuing to focus a little more on capital preservation and a little less on capital appreciation. This is based on our perception that most of the markets in which we invest (equities, high yield bonds, investment-grade debt, and leveraged loans) are now overvalued on a historical context, investor sentiment and expectations are high, and downside risk is elevated given valuations. It remains difficult to find good risk-adjusted return ideas in these markets.

See Glossary for additional details on all data elements.