Baltimore-based T Rowe Price is launching a new Luxembourg-domiciled fund focused on the severely distressed European small and mid cap sector.

In the past two years, with risk aversion at extreme levels, the average manager in the European small and mid cap sector has lost 54.67 per cent - outstripping the 43.45 per cent average loss in the European equity sector.

"We are launching this strategy at a time of heightened pessimism for the economy and earnings and near record aversion to risk," said Justin Thomson, the manager of the new T Rowe Price Funds SICAV – European Smaller Companies Equity Fund. Mr Thomson thinks these falls and the negativity on the sector make it an appealing time to launch such a fund.

"This creates opportunities. With our team of dedicated small/mid-cap analysts we are well placed to exploit these opportunities," he adds.

The firm will use a research-driven, bottom-up approach to running the new fund. Mr Thomson will be assisted in his task by three analysts dedicated to European small and mid cap stocks.

At 30 September 2008 the T Rowe Price group of companies had combined assets under management totalling €245.6 billion ($345 billion).  Based in Baltimore, in the US state of Maryland, the group has offices in Amsterdam, Copenhagen, London, Luxembourg, Stockholm, Sydney and Tokyo.