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T. Rowe Price’s quarterly numbers once again reflect market declines

Jen Dardis, T. Rowe Price’s chief financial officer and treasurer. (Submitted photo)

Following similar declines in Q1, T. Rowe Price’s assets under management and revenues dipped once again this quarter, which the Baltimore-based firm’s top executives attributed to the state of global equity markets. 

T. Rowe ended the quarter with $1.31 trillion in assets under management, a 19.3% decrease from the end of Q2 last year, as well as a decrease from Q1. Its net revenues also dropped to $1.51 billion this quarter, in comparison with $1.93 billion last year, a 21.6% decrease year-over-year.

The firm’s adjusted non-GAAP diluted earnings per common share dropped to $1.79, well behind its earnings of $3.31 per share last year and lagging the Zacks Consensus Estimate of $2.24.  

The asset management company remained strong throughout most of the pandemic, rising out of the economic downturn in spring 2020 — which then-T. Rowe CEO and President Bill Stromberg called “the shortest recession we’ve had” — relatively quickly. But the first half of 2022 has proven challenging, with revenues and assets under management dropping two quarters in a row.  

“Global equity markets suffered their biggest quarterly decline since the start of the pandemic, as fears grew that central banks would tip the global economy into recession in their fight against the highest inflation in four decades,” T. Rowe CEO and President Rob Sharps said in a news release. He cited moves like the Federal Reserve aggressively raising official short-term interest rates and the European Central Bank announcing a planned rate increase as contributing to these fears. 

In an interview with The Daily Record, Jen Dardis, chief financial officer and treasurer for the company, echoed Sharps’ sentiments, saying that, in the short term, T. Rowe’s assets under management are largely driven by the state of the market, which has struggled throughout 2022.  

It’s difficult to know when the market — and, by extension, T. Rowe — will begin to improve once again. It will depend on whether the nation actually goes into a recession, as some economists are predicting. 

The firm had net client outflows of $14.7 billion this quarter. But, like last quarter, the firm’s fixed-income and alternative products produced inflows of $3.2 billion and $1.7 billion, respectively, the latter of which was an increase from Q1.

While T. Rowe still has significant assets in equities, diversifying its assets has been a priority for the company.  

“It’s been a long-term strategic objective to be able to drive more growth,” Dardis said. T. Rowe’s recent acquisition of Oak Hill Advisors, L.P., an alternative credit manager, was part of that strategy, for example. 

However, there were $2.1 billion of outflows in multi-asset, which had been a source of inflows last quarter, though the firm said that this was due to one client’s decision to reallocate out of a non-target date multi-asset product. 

“We expect net outflows to persist until we see a more constructive equity environment, improved performance in certain strategies, less overall market volatility, and more traction from strategic growth investment,” Sharps said in the news release. 

Even though the firm faced some challenges this quarter, Dardis reported that the company’s return to the office has gone well. After plans to return to in-person work were offset by the surge of the omicron variant of COVID-19 in early 2022, associates were finally able to begin moving to hybrid work schedules in February and March. Associates work from home two days each week and in-office the remaining three, allowing for employees to rebuild their relationships with their teams, she said.