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T. Rowe Price
About 220 T. Rowe Price Group associates will soon start working for BNY Mellon as part of a new agreement with the Wall Street banking corporation. T. Rowe associates in London and Hong Kong will move to existing BNY Mellon offices in those cities. The transition will take place in August. (The Daily Record/Maximilian Franz)

T. Rowe downplays tech investments

Firm’s first-quarter earnings increase by 26 percent

T. Rowe Price Group Inc., along with other money managers, has earned plenty of publicity recently for investing in private technology companies, which traditionally has been the role of venture capitalists, not mutual-fund firms.

But T. Rowe executives assured a group of shareholders at the firm’s annual meeting Thursday that those investments are a very small part of the firm’s overall strategy, suggesting the publicity has exaggerated their significance.

Baltimore-based T. Rowe — which, in an earnings statement released early Thursday, reported first-quarter net income of $304.3 million — bought stakes in Facebook and Twitter before the Internet behemoths went public.

More recently, T. Rowe reportedly invested in startups that are high-profile in the tech world but lesser-known in the mainstream, such as Airbnb Inc., a site that connects travelers with nontraditional lodging options. The firm was part of a group of investors that finished a deal last week to put $450 million into Airbnb, according to the Wall Street Journal.

Brian Rogers, T. Rowe’s board chairman and chief investment officer, said Thursday that such investments have “generally been pretty successful for us,” and that they comprise a small percentage of the assets in the fund that is doing the investing.

“We think [this kind of investment] is an appropriate thing to do in small degree in the right fund,” Rogers said in response to a shareholder’s question during the meeting.

Executives said T. Rowe has always invested in emerging growth companies and that its heightened interest in private startups over the past few years is a reflection of a shift in how companies come to market.

“If you go back [a few] decades ago, those companies would have gone public earlier in their existence,” said CEO James A.C. Kennedy. “They’re holding onto being private longer now. So if we want to find growth, we have to tip-toe into the private markets and invest in the companies that are creating innovation.”

T. Rowe’s net income during the first quarter of this year was almost 26 percent higher than the first quarter of 2013, and its earnings-per-share of $1.12 beat analysts’ estimates on average.

Net revenue for the first quarter was $954.6 million, a 17 percent increase from the comparable period last year, largely due to higher advisory fee revenue.

Assets under management increased to $711.4 billion as of March 31. The company experienced net inflows from investors of $8.8 billion, primarily in the firm’s target-date retirement funds and trusts.

Operating expenses were $62.4 million higher this quarter than in the first quarter of last year, totaling $505.5 million. The increase was due to increased executive compensation and bonuses, a 5 percent increase in staff, and expenses associated with opening two new buildings at the firm’s Owings Mills campus as well as renovations to other facilities.