Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- T. Rowe Price Group Inc (TROW, Financial) reported a 3.9% increase in assets under management, reaching $1.63 trillion by the end of the third quarter.
- The company's adjusted earnings per share rose by over 18% from the previous year, driven by higher average AUM and a lower effective tax rate.
- T. Rowe Price Group Inc (TROW) is expanding its ETF franchise, with positive net inflows and top quartile performance in several ETF categories.
- The company launched innovative retirement solutions, including Personalized Retirement Manager and Managed Lifetime Income, enhancing its leadership in the retirement sector.
- T. Rowe Price Group Inc (TROW) achieved a record quarter of capital raising in its alternatives segment, with significant commitments in private credit.
Negative Points
- The company experienced $12.2 billion in net outflows during the third quarter, with expectations of further increases in the fourth quarter due to seasonal trends and a large sub-advised variable annuity termination.
- Despite improvements, T. Rowe Price Group Inc (TROW) continues to face challenges with net outflows in its US equity products, particularly in growth strategies.
- The company's effective fee rate declined as assets shifted into lower fee vehicles and asset classes.
- Performance in the third quarter was negatively impacted by underlying stock selection and an overweight towards US equities.
- The variable annuity business, which has been experiencing net outflows for several years, is not expected to change meaningfully, impacting overall growth.
Q & A Highlights
Q: Rob, could you provide your perspective on organic growth, especially considering the VA sub-advisory outflows?
A: Robert Sharps, CEO: Outside of the VA mandate, we're seeing consistent seasonal patterns with redemption pressure in Q4. Excluding the VA loss, 2024 outflows would be less than half of 2023 levels, indicating progress. For 2025, we expect further improvement towards positive flows, driven by performance improvements in active equities and growth in retirement date funds, alternatives, ETFs, and SMAs.
Q: Can you update us on your views of the retirement market and the new lifetime managed payout product?
A: Robert Sharps, CEO: We have momentum across our retirement offerings, including a strong pipeline for our target date funds. The new products, Personalized Retirement Manager and Managed Lifetime Income, are initially launched on our recordkeeping system. They offer customized strategies and guaranteed payouts, respectively. We plan to extend these to other platforms as we build scale.
Q: How is T. Rowe Price positioned for opportunities in private credit and fixed income, particularly in insurance?
A: Robert Sharps, CEO: We see opportunities across our fixed income business, including private credit, to offer attractive risk-adjusted yields to insurance investors. OHA had a record quarter of capital raising, with significant commitments in private credit, indicating potential for accelerated flows into 2025.
Q: Can you provide context on the institutional backlog and sales cycle?
A: Robert Sharps, CEO: Our weighted pipeline increased quarter-over-quarter, despite a sizable termination. This reflects broad-based opportunities across asset classes, including active equity, fixed income, and retirement date funds. The pipeline is risk-weighted and spans over a year.
Q: How is the ETF franchise expanding customer reach, and what are the distribution costs compared to mutual funds?
A: Robert Sharps, CEO: The ETF franchise reaches new buyers, including ETF-exclusive advisers, and offers strategies not available in mutual funds. While there is some cannibalization, a substantial portion of ETF business is incremental. Distribution costs are similar to mutual funds, with some platform-specific variations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
