T. Rowe Price Group, Inc.’s assets under management fell amid a fourth quarter that reintroduced volatility to equity markets.
The money manager’s assets under management fell $121.5 billion to $962.3 billion during a quarter that saw significant swings in the equity markets, capping a year of renewed volatility after about a decade of steady growth.
T. Rowe did a good job of managing the volatility and outperforming its peers, William J. Stromberg, the firm’s president and CEO, said.
“Our goal is to do better than the competition and passive (managers) in up and down markets,” he said. “Doing relative to benchmarks or other performers is important, and we think it was an important quarter in that perspective.”
For the most part, the stock market has risen for the past decade as the economy recovered from the recession of 2007-2008. With that rise, active money managers, like T. Rowe, could be obscured from more passive managers that index their funds to the stock market.
But in times of volatility, like the stock market saw last December, T. Rowe believes it has an advantage.
“I would say that a hallmark of T. Rowe price for decades has been our willingness to invest to strengthen our market position in tough market environments,” Stromberg said.
The firm continued to do that last year, including growing its investment professional staff by 7 percent to more than 600 people, Stromberg said.
Because the company’s product is in many ways the stock market, the hit to assets under management for the fourth quarter could be expected, said Karyl Leggio, a professor of finance at Loyola University Maryland’s Sellinger School of Business.
“Really, they outperformed the market,” she said. “If you look at it holistically, it was a tough volatile quarter for equity markets and they did very well.”
While the firm took a hit from the volatility for the quarter, its entire 2018 was still strong.
For the fourth quarter, T. Rowe’s net operating income grew 2.1 percent to $542.3 million from the same quarter last year. For the year, its net operating income grew 12 percent to nearly $2.4 billion.
The firm’s earnings per share also grew relative to last year’s fourth quarter, up 2.9 percent to $1.41. For the year, earnings per share were up 21.8 percent to $7.27.
While the firm’s share price was down 4 percent Wednesday, Leggio noted that it was within a 5 percent decline, generally indicating that investors did not think the firm’s quarterly report was poor. If it was, the stock price would have seen a greater decline, she said.
“They outperformed the same quarter last year, so that’s always a good sign,” Leggio said. “In general, I thought it was a very good quarter for them.”
The volatility may continue to be a part of business for T. Rowe and other money managers.
T. Rowe is planning for “fairly conservative” returns this year, Stromberg said.
The recent partial government shutdown may also take a negative effect into the year.
“(The shutdown) has a big impact on the psyche of the American workers, American consumers and American investors,” Stromberg said.
Correction: A previous version of this story said T. Rowe increased its professional staff 7 percent. It increased its investment professional staff 7 percent.