April 15, 2011 / 9:42 PM / 9 years ago

T. Rowe's Ken Allen makes rare social media play

BOSTON (Reuters) - T. Rowe Price Group Inc’s (TROW.O) Ken Allen keeps a personal Facebook page and got a discount membership to the Baltimore zoo through Groupon.

But Allen is more than just a customer of the start-ups. He also bought stakes in both for the fund he manages, T. Rowe Price Science & Technology Fund (PRSCX.O), recent filings show.

In a telephone interview on Friday, Allen said the stakes reflect the good prospects for various private companies in the fund, which also include Twitter, and his goal of tracking potential investments across many tech sectors.

“The more ground you cover, the more likely you are to find the best opportunities,” Allen said.

The approach has paid off for Science & Technology since Allen took over at the start of 2009. The fund beat 71 percent of peers that year, 59 percent in 2010 and through March 31 had beaten 66 percent this year, according to Morningstar data.

Among Allen’s biggest changes since December, a disclosure on Friday shows he added more than 2 million shares of Microsoft Corp (MSFT.O) to the 9.12 million he owned in the Seattle software company at year end.

Microsoft shares have fallen 9 percent so far this year. Allen said that makes the company a good value, since earnings projections have risen dramatically and Microsoft’s enterprise business is strong.

“The stock is really low, way too low,” he said.

MANY WANT TO FRIEND FACEBOOK

Microsoft stock remained Allen’s biggest holding as of March 31, with shares worth $282 million, or 8.5 percent of the fund. The fund’s Facebook stake was a fraction of that, 471,651 shares worth a total of $11,791,275, or $25 each.

Still, the holdings in Facebook and other social media companies by Allen, and by other T. Rowe Price mutual funds, are drawing widespread attention. The stakes are almost the only way for ordinary investors to invest in the start-ups.

Interest in them is soaring. Professional social networking company LinkedIn has filed to raise up to $175 million in a highly-awaited IPO, for instance, and Groupon has probably chosen bankers to underwrite its own IPO.

Access to shares of the companies has been somewhat controversial, however. In January, Facebook raised $500 million from Goldman Sachs investors and Russia’s Digital Sky Technologies, which valued Facebook at $50 billion.

Because members of the public were not given access to the stock, the share sale drew complaints and Goldman Sachs limited the offering to foreign investors in response. At the time Facebook planned to raise other funds.

In all, a T. Rowe Price spokeswoman said, 19 company mutual funds disclosed stakes in Facebook on Friday for the first time, collectively worth $190.5 million. Other start-ups were also popular such as online review site Angie’s List and social media site Ning.

SCIENCE & TECHNOLOGY SNAPSHOT

With a total value of $3.3 billion, among the largest of all technology funds, Science & Technology provides a good snapshot of T. Rowe Price’s overall approach.

Along with Facebook, Allen’s fund held stakes in start-ups such as Groupon and Twitter, totaling 2.59 percent of the fund. Allen declined to give specifics such as if he bought the shares directly from the companies or from their employees. He also declined to discuss the start-ups strategy or outlooks.

But he made clear the social media companies have strong opportunities to capture revenue from online users.

“Google is a good model for many of these smaller companies,” he said.

Allen added the distinctions between personal and business usage of social media are blurring. He does not recall if he started using Facebook and Groupon as a consumer before or after he invested in them.

Does he send tweets on Twitter?

“I don’t yet,” he said. “I’m basically a passive follower at this point.”

Reporting by Ross Kerber; additional reporting by Jim Finkle; editing by Andre Grenon

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