Is T. Rowe Price Tax-Efficient Equity (PREFX) a Strong Mutual Fund Pick Right Now?

On the lookout for a Large Cap Growth fund? Starting with T. Rowe Price Tax-Efficient Equity (PREFX) is one possibility. PREFX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

PREFX is part of the Large Cap Growth section, and this segment boasts an array of other possible options. Large Cap Growth mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. Companies are usually considered to be large-cap if their market capitalization is over $10 billion.

History of Fund/Manager

PREFX finds itself in the T. Rowe Price family, based out of Baltimore, MD. T. Rowe Price Tax-Efficient Equity made its debut in December of 2000, and since then, PREFX has accumulated about $422.85 million in assets, per the most up-to-date date available. The fund's current manager, Donald J. Peters, has been in charge of the fund since December of 2000.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 9.83%, and is in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 19.41%, 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. Compared to the category average of 13.77%, the standard deviation of PREFX over the past three years is 15.5%. The fund's standard deviation over the past 5 years is 18.54% compared to the category average of 16.23%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PREFX has a 5-year beta of 1.14, which means it is likely to be more volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. PREFX's 5-year performance has produced a negative alpha of -3.47, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, PREFX is a no load fund. It has an expense ratio of 0.82% compared to the category average of 0.93%. PREFX is actually cheaper than its peers when you consider factors like cost.

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

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

Bottom Line

Overall, T. Rowe Price Tax-Efficient Equity ( PREFX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, T. Rowe Price Tax-Efficient Equity ( PREFX ) looks like a good potential choice for investors right now.

This could just be the start of your research on PREFX in the Large Cap Growth category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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