Baltimore-based asset manager T. Rowe Price has emerged as the biggest winner in Charles Schwab’s quarterly reshuffle of funds on its Mutual Fund OneSource List.
T. Rowe’s funds were not eligible for inclusion on the list until April this year, when the asset manager’s funds became available on the overall Schwab Mutual Fund OneSource platform, which requires them to have no sales charge, 12b-1 fee or transaction fee.
As a result over 100 T. Rowe funds were made available on the platform, and in the first quarterly update of the Select List since then, 24 of these have made it onto Schwab’s buy list.
The Mutual Fund OneSource Select List is made up of 170 funds and used by Charles Schwab’s direct investors in addition to advisors who also have access to five other mutual fund lists and a separately managed accounts list.
The list is updated quarterly and the changes below are from the second quarter of the year to the third.
Changes to the list are largely based on quantitative analysis, using Schwab's internal manager ratings.
When a fund is removed from the list, it does not mean that Schwab’s investment advisory team deem it to be ‘a sell,’ but instead means it is no longer one of their top picks for new investment.
To find out more about how funds are picked for the list, read our profile with gatekeeper Michael Iachini.
In a note accompanying the updated list, the investment advisor team tipped technology, financials and healthcare stocks to continue to outperform while it said real estate, telecoms and utilities could be poised to underperform.
The team remained neutral on consumer staples and discretionary, as well as for the energy, industrials and materials sectors.
New entrants to the list this quarter include the $725.5 million T. Rowe Price Financials Services fund and the $1.3 billion USAA Science & Technology fund, replacing the likes of the $32.7 million Diamond Hill Financial Long Short fund and the $469.5 million Red Oak Technology funds.
The T. Rowe Price Financials Services fund has a 91.97% allocation to financials while the Diamond Hill Financial Long/Short fund has an 81.7% allocation to financials with a 17.4% allocation to real estate, a sector Schwab said could do poorly moving forward.
The $168.4 billion American Funds Growth Fund of America fund is the single largest fund added to the list.
Recent outperformance of international markets versus domestic has led to more European-focused funds being added to the list.
The T. Rowe Price European Stock fund has no allocation towards North America, yet 73.8% of the fund is weighted towards developed Europe. Whereas the American Funds International Growth and Income fund has an 8.3% allocation to North America and only a 33.7% allocation to developed Europe.
‘International developed markets outperformed domestic markets with the MSCI EAFE returning 6.1% in the second quarter,’ Schwab’s team said in the update.
‘Easing political risk in the eurozone aided European equities to deliver 7.1% for the quarter and 14.8% year to date.’
Greater European exposure could factor into why the T. Rowe Price European Stock fund returned 8% over the past three months in comparison to the American Funds International Growth and Income fund which returned 6.1% over the same period.
Here are all the ins and outs from Charles Schwab's reshuffle:
Schwab Mutual Fund One Source third quarter reshuffle
|LARGE CAP US STOCK FUNDS|
|American Funds Fundamental Invs||Parnassus Core Equity Investor|
|T. Rowe Price Blue Chip Growth||American Funds AMCAP F1|
|Jensen Quality Growth||Nicholas|
|T. Rowe Price Equity Income||Federated Strategic Value Dividend|
|American Funds Growth Fund of America|
|MID- AND SMALL-CAP U.S. STOCK FUNDS|
|AMG Managers Fairpointe Mid Cap||Victory Sycamore Established Value|
|T. Rowe Price Small-Cap Value||Wasatch Small Cap Value|
|Perritt MicroCap Opportunities Investor||TIAA-CREF Small-Cap Equity Retail|
|Thrivent Small Cap Stock||Wasatch Core Growth|
|Heartland Value Plus Investor||Perkins Small Cap Value|
|Columbia Small Cap Value Fund||Federated Clover Small Value|
|Delaware Small Cap Value|
|INTERNATIONAL STOCK FUNDS|
|Matthews Asia Growth Investor||JPMorgan Intrepid European A|
|T. Rowe Price European Stock||American Funds International Growth and Income|
|Janus Henderson Overseas||Manning & Napier International|
|T. Rowe Price Overseas Stock||Wells Fargo International Equity|
|T. Rowe Price Spectrum International||Henderson Global Equity Income|
|Franklin Mutual International||Federated Intl Strategic Val Div|
|Hartford Schroders Intl Multi-Cp Val||MFS International New Discovery|
|Harding Loevner Intl Small Coms Inv||Matthews Emerging Asia Investor|
|T. Rowe Price Japan|
|T. Rowe Price Latin America|
|T. Rowe Price New Asia|
|Cavanal Hill World Energy Investor||BP Capital TwinLine Energy|
|Oppenheimer SteelPath MLP Select 40 A||Advisory Research MLP & Energy Income|
|T. Rowe Price Financial Services||Diamond Hill Financial Long-Short|
|T. Rowe Price Real Assets||Red Oak Technology Select|
|First Eagle Gold|
|USAA Science & Technology|
|Gabelli Utilities AAA|
|TAXABLE BOND FUNDS|
|T. Rowe Price Emerging Markets Bond||RidgeWorth Seix Floating Rate Hi Inc|
|T. Rowe Price Ltd Dur Infl Focus Bd||Payden Emerging Markets Bond Adviser|
|T. Rowe Price GNMA||American Century Short Dur Inf PrBd|
|T. Rowe Price US Bond Enhanced Index||American Century Ginnie Mae|
|Eaton Vance Short Duration Gov Inc||RidgeWorth Seix Total Return Bond|
|Goldman Sachs Short Dur Govt||Putnam Short Duration Income|
|T. Rowe Price Ultra Short-Term Bond||AB Global Bond|
|Prudential Global Total Return|
|TAX-FREE BOND FUNDS|
|T. Rowe Price Summit Municipal Intm||American Funds Tax-Exempt Bond|
|Federated Shrt-Interm Dur Muni|
|ADDITIONAL FUND CATEGORIES|
|Thrivent Aggressive Allocation||JPMorgan Investor Growth|
|Schwab Target 2045 Fund||American Century One Choice 2030|
|T. Rowe Price Retirement 2020||American Century One Choice 2035|
|American Funds 2020 Trgt Date Retire||American Century One Choice 2040|
|T. Rowe Price Retirement 2025||Cohen & Steers Preferred Sec & Inc|
|American Funds 2025 Trgt Date Retire||Diamond Hill Research Opportunities|
|T. Rowe Price Retirement 2030|
|T. Rowe Price Retirement 2035|
|T. Rowe Price Retirement 2040|
|T. Rowe Price Retirement 2045|
|T. Rowe Price Retirement 2050|
|T. Rowe Price Retirement 2055|
|Lord Abbett Convertible|
|Natixis ASG Tactical US Market|
|Destra Flaherty & Crumrine Pref & Inc|