Bloomberg News

T. Rowe Price Misses Estimates as Investors Withdraw Money

October 25, 2011

(Adds CEO’s comment in third paragraph, earnings details from sixth.)

Oct. 25 (Bloomberg) -- T. Rowe Price Group Inc., the asset manager that has posted a profit every quarter since going public in 1986, missed analysts’ estimates after investors withdrew money for the first time in almost three years.

Net income climbed 9.6 percent to $184.6 million, or 71 cents a share, from $168.4 million, or 64 cents, a year earlier, the Baltimore-based company said today in a statement. The average estimate of 18 analysts surveyed by Bloomberg was for profit of 74 cents a share.

Investors pulled $2.6 billion, the first client withdrawals since the fourth quarter of 2008, and market losses reduced assets by another $64.8 billion to $454 billion. Continued deposits to retirement-oriented products, which Chief Executive Officer James Kennedy has steadily built, failed to offset redemptions by institutional clients.

“When equity markets are getting hit, we will get hit more because we are more heavily equity weighted,” Kennedy said today in an interview.

T. Rowe Price has about 79 percent of assets invested in equities. Global stocks, as measured by the the MSCI AC World Index, fell 8 percent in the year ended Sept. 30, and declined 7 percent this year through yesterday.

Compared with a year earlier, assets rose 3.1 percent to $454 billion after rising to a record high $521 billion at the end of the second quarter. That helped revenue increase 16 percent to $679 million. Expenses climbed 19 percent to $384 million.

Target-Date Funds

Clients withdrew $200 million from T. Rowe Price’s mutual funds. Target-date retirement funds, which automatically shift to more conservative investments as a client ages, attracted $1.2 billion.

T. Rowe is the third-largest U.S. manager of target-date retirement funds. Vanguard Group Inc. of Valley Forge, Pennsylvania, and Boston’s Fidelity Investments are the largest U.S. providers.

A single institutional client withdrew about $1.3 billion from an equity investment in the quarter, Kennedy said.

BlackRock Inc., the world’s biggest money manager, said Oct. 19 that third-quarter profit climbed 8 percent to $595 million even as investors withdrew $10.2 billion from the New York-based company. Janus Capital Group Inc., based in Denver, said Oct. 20 that net income fell 16 percent to $27.4 million while recording its ninth straight quarter of redemptions as investors withdrew $2.3 billion.

Results were announced before the start of regular U.S. trading. T. Rowe Price fell 13 percent this year through yesterday, compared with the 20 percent decline of Standard & Poor’s 19-member index of asset managers and custody banks.

--Editors: Steven Crabill, Larry Edelman

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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