By Hanah Cho, The Baltimore Sun
6:52 PM EDT, April 24, 2012
T. Rowe Price investors plowed a record $12.4 billion into mutual funds and other investments as the Baltimore money manager reported a small increase in quarterly profit, the company reported Tuesday.
The firm's net income increased slightly for the first three months of 2012. It earned $197.5 million, or 75 cents per share, compared with $194.6 million, or 72 cents per share, in the year-earlier period.
Price's earnings fell short of analysts' expectations of 77 cents per share, according to Bloomberg. Still, shares in T. Rowe Price Group Inc. rose 94 cents to close at $61.95 each in Nasdaq trading Tuesday.
Besides attracting more client investments, the firm saw its total assets under management swell to a record $554.8 billion thanks to the market recovery, which added gains of $52. 9 billion.
"It just shows that if you perform for your clients, decade in and decade out, over time they'll trust you with more money," said James A.C. Kennedy, Price's chief executive officer, who noted that the company managed $5 billion in assets when he started there in 1978.
Kennedy said new investments from institutional clients were particularly strong in the quarter, helping achieve the record $12.4 billion in net inflows, or new client investments minus withdrawals.
In comparison, the company reported $14 billion in new client money for all of 2011.
Kennedy cautioned, however, that investment activity from institutional clients can be "lumpy," meaning that some quarters are stronger than others.
Price's target-date retirement funds, which become more conservative as investors age, also set a record, bringing in $4.2 billion in the quarter. All told, the company has $78.8 billion in target-date funds and trusts.
Sales rose in the first quarter but were offset by higher costs. Revenue increased by nearly 7 percent, to $728.7 million, up from $682.4 million in the corresponding period last year.
Operating expenses rose to $412.5 million from $370.9 million a year earlier. The rise was due primarily to higher compensation and costs related to additional hiring. The company's workforce increased by nearly 3 percent from last year's first quarter, to 5,230 employees.
While Price benefited from a strong market in the first quarter, Kennedy said the company was not "fooling" itself in thinking that the performance would be repeated "quarter in and quarter out."
Investors were more confident in the first three months of the year, he said, but questions remain about the European debt crisis, uncertainty over the U.S. budget and slowing growth in China.
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