Key Highlights

  • T Rowe Price reported $6.5 billion in net outflows for the quarter ending June 30, its 21st consecutive quarter of redemptions.
  • Chief executive Rob Sharps said it will take "a couple of years" to return the firm to positive net flows.
  • Just 33% of T Rowe's Equity Assets outperformed the Morningstar median over the past 12 months, down from 48% over three years.
  • The firm has launched 34 active ETFs to date, which pulled in $4.4 billion in net inflows during the second quarter.

Firm Faces Continued Pressure From Passive Competition

T Rowe Price, the $1.9 trillion asset management firm, reported net outflows of $6.5 billion for the quarter ending June 30, marking its 21st consecutive quarter of redemptions, though the figure represented a moderation from the two prior quarters. Chief executive Rob Sharps said it will take "a couple of years" for the firm to return to positive overall net flows, citing a persistent structural shift among investors from active management toward passive, ETF-driven, and alternative Investment products. The firm's active equity business, which has been the primary source of industry-wide outflows, comprises roughly half of T Rowe's total assets under management, a higher proportion than most competitors.

Investment Performance Has Weighed on Results

Just 33% of T Rowe's equity assets under management outperformed the Morningstar median over the past 12 months, down from 48% over three years, contributing to the sustained outflows. T Rowe shares have roughly halved over the past five years and have gained just over 2% over the past 12 months, compared with a nearly 21% rise for the S&P 500 over the same period. Sharps acknowledged that the firm's investment performance has been "either less good or more uneven" in some areas in recent periods.

Firm Pursues Growth Through ETFs and Alternative Investments

T Rowe has launched 34 active ETFs to date, including a crypto-focused fund last month, with the ETF Business pulling in $4.4 billion in net inflows during the second quarter. The firm is also pursuing growth in fixed income and alternative investments through a Partnership with Goldman Sachs announced last September, under which the two firms jointly market private investment products to retail and Wealth Management clients, and Goldman has invested up to $1 billion in T Rowe through open-market share purchases. Sharps said the firm remains open to acquisitions across ETFs, fixed income, and alternatives to accelerate its return to growth, while stating that a full take-private transaction is not currently viewed as realistic given the Leverage that would be required.