T. Rowe Price Reports Growth in ETFs and Plans Expansion

T. Rowe Price has released its second-quarter earnings, showcasing strong investment performance and notable expansion in its Exchange-Traded Funds (ETF) business. The company reported $1.57 trillion in assets under management, despite experiencing net outflows of $3.7 billion. Notably, two-thirds of T. Rowe Price’s funds exceeded their peer group one-year medians. The ETF segment saw significant growth, increasing to $5.3 billion in assets under management from $1.2 billion the previous year. The firm is also dedicated to diversifying its ETF offerings, having launched its first interval fund among other key initiatives.

Key Highlights:

• T. Rowe Price’s assets under management reached $1.57 trillion, with net outflows totaling $3.7 billion.
• Two-thirds of the company’s funds outperformed their peer group one-year medians.
• The ETF business surged to $5.3 billion in assets, compared to $1.2 billion last year.
• Plans include expanding ETF product offerings and investment strategies.
• Significant inflows were observed in target date funds, especially retirement date and blended offerings.
• Year-to-date, $2.4 billion in inflows for ETFs, with a robust sales pipeline and rising gross sales.
• T. Rowe Price has launched 16 ETF strategies, targeting both clone and fully transparent strategies.

Company Outlook:

• The firm will continue to expand its ETF offerings.
• Opportunities are being explored in multi-asset retirement date funds, international markets, fixed income, and alternatives.
• Emphasis on partnerships with large wealth platforms in the U.S. remains strong.
• Fee compression is anticipated to persist but growth in alternatives may provide a counterbalance.

Bearish Observations:

• The company faced $3.7 billion in net outflows.
• Fee rates may experience quarterly fluctuations due to asset class mix and client adjustments.
• Continued fee compression is expected over time.

Bullish Observations:

• The ETF segment is thriving, with substantial inflows and robust interest in active ETFs.
• T. Rowe Price’s investment performance remains strong, with a majority of funds outperforming.
• The sales pipeline and gross sales are improving across various channels and regions.

Q&A Highlights:

• CEO Rob Sharps and CFO Jen Dardis discussed the sales pipeline, net outflows, and strategic focus, expressing optimism about reducing redemption pressure in previously underperforming areas.
• The company is considering partnerships and acquisitions, favoring its controlled strategies.

In summary, T. Rowe Price is capitalizing on the growth of its ETF sector and strategically expanding its product offerings. Despite navigating industry-wide challenges like fee compression, the company maintains a positive outlook concerning its sales pipeline and ETF market penetration. With a focus on partnerships and controlled strategies, T. Rowe Price is poised for sustained growth and deeper market engagement.