Portfolio manager Joe Fath loves to get his hands dirty restoring old sports cars. Restoring T. Rowe Price’s oldest mutual fund to its former glory required a different approach: Embracing new tech
.a blue Chicago Cubs pullover and sunglasses to avoid the rushing wind and glare of the road, money manager Joseph Fath spins his 1957 red-and-white Corvette around a corner. “Wait until we get this baby out onto the highway,” he says. As the convertible’s engine roars, a passing trucker honks his approval.
For the fund’s founder, the companies of the future included IBM and National Cash Register. For Fath, it means companies like Amazon, Microsoft, Google parent Alphabet and Rivian. “We identify companies that can really be on the right side of change, ideally catching them at the early part of their growth,” he says.
The Vanguard fund is cheaper. Its ETF share class is priced at 0.04% of assets annually in fees; retail shares of the T. Rowe fund cost 0.64% a year. Fath’s formidable task: to persuade his shareholders to keep paying 16 times as much as they would at Vanguard for a collection of growth stocks. What does he have to offer?
T. Rowe Price Growth can invest up to 15% of assets in privately traded companies. Vanguard’s index fund can own none. After graduating from the University of Illinois at Urbana-Champaign in 1993, Fath did stints at accounting and gaming firms. One semester into Wharton Business School at the University of Pennsylvania in 1999, Fath heard from an old accounting-firm friend who was working on an idea for an education technology startup.
Roughly half of Growth Stock Fund companies are secular growers or innovative disruptors. Another 15% to 25% are cyclical growers, such as financials and industrials, which can sometimes see double-digit growth, Fath says, though that tends to be fleeting.