After T. Rowe Price executives recapped last year's highlights at Tuesday's annual meeting, a shareholder raised concerns about the loss of a top money manager, competition from exchange-traded funds and an Obama Administration tax proposal that could dampen Price's retirement business.
President and CEO James A. C. Kennedy said that Kris Jenner, the former manager of T. Rowe Price Health Sciences Fund, left "millions" in deferred compensation on the table by leaving the company in February. Jenner and two Price analysts who left with him plan to launch a hedge fund in Baltimore with a similar investment strategy to the Health Sciences Fund.
Kennedy said the Baltimore-based money manager has considered adding non-compete agreements so employees wouldn't leave and take co-workers or clients with them, but decided it preferred to have its workers serve freely.
Edward Bernard, Price's vice chairman, fielded the question about competition from exchange-traded funds, most of which passively mimic an index. He said passive ETFs have largely replaced passive mutual funds and haven't been a threat to the business of active managers.
Price received approval from regulators last year to launch active exchange-traded funds, whose managers can hand-pick securities. It's unclear when Price would launch them.
"We may at some point. We don't currently have active plans to do it," Bernard said in an interview afterward. One of Price's concerns is that ETFs have greater transparency of their holdings, which can be a drawback for managers who don't want competitors to see their investment ideas, he said. Any Price ETF would not mimic an existing mutual fund, he added.
Price has few clients with large enough retirement accounts to be hit by President Barack Obama's proposal to limit the amount socked away in tax-advantaged retirement accounts to $3 million. Still, Price Chairman Brian Rogers called the policy "insane," because it takes away an incentive for workers to save, especially at a time when the future of pensions and Social Security are in question.
During the meeting, shareholders approved the company's executive compensation and reelected a slate of directors.
At the end of March, Price employed 5,408, an increase of 178 over the previous year. Kennedy noted after the meeting that Price has about 300 open positions and expects to fill most of them this year.
The company also announced a quarterly dividend of 38 cents per share, payable on June 27. Its stock rose $1.30 to close Tuesday at $76.29 a share.