Baltimore money manager T. Rowe Price reported on Tuesday a nearly 10 percent increase in third-quarter profit, but clients withdrew more money than they put into mutual funds and other investments for the first time in nearly three years.
Price missed Wall Street expectations by three cents, prompting shares to lose $4.91, or 8.8 percent. The stock closed Tuesday at $51.08.
Net income for the three months ended Sept. 30 was $185.5 million, compared with $169.1 million in the corresponding period last year. On a per-share basis, Price posted 71 cents per share in the third quarter, up from 64 cents a year earlier.
But market uncertainty made a significant dent in Price's company-managed assets, which fell to $453.5 billion at the end of September from a record-high $520.9 billion in June.
Depreciation in the stock market led to the $67.4 billion decline, while the company saw investors take out more money than they put in for the first time since the fourth quarter of 2008. Price reported $2.6 billion in net client redemptions for the June-to-September quarter.
Price has been one of a few money managers that have consistently seen inflows of new client money despite market upheaval in the past several years.
"It's unusual for us to have net outflows," Price Chief Executive Officer James A.C. Kennedy said in an interview.
Just under half of the net $2.6 billion in outflows came from an institutional client, which took money out of equity assets to reduce risk amid market uncertainty, Kennedy said.
Investors removed a net $200 million from Price's mutual funds. But target-date retirement portfolios, which become more conservative as investors age, continued to attract clients, bringing in a net $1.4 billion during the quarter.
"We're pretty confident that the basic fundamentals in terms of flows is still positive," Kennedy said. "Our performance numbers are still quite good for our clients."
Revenue for the third quarter rose to $679.4 million, up 16 percent from $586.1 million a year ago.
Operating expenses increased by $60 million from a year ago, to $384.2 million, largely due to salaries, benefits and temporary staffing.
The company employed 5,249 workers at the end of September, up 197 from the end of last year. Kennedy said the firm was hiring "very selectively."
Kennedy said investors would continue to see volatility, given the sovereign debt crisis in Europe and a lack of progress on deficit issues in Washington.
"A combination of those two means slower growth," he said.Copyright © 2015, The Baltimore Sun