Baltimore-based money management firm T. Rowe Price reported 2014 earnings of $1.2 billion, up 17 percent over the year before, but the company's president cautioned that investors should temper their expectations for the market this year.
Assets managed by Price were $746.8 billion for the end of 2014, up nearly 8 percent over the year before but partially offset by cash outflows of $8.1 billion from investment portfolios other than its mutual funds. Cash flows in and out of its funds were up $3.7 billion for the year but down $5.1 billion for the fourth quarter of 2014.
James A.C. Kennedy, Price's president and CEO, called the company's performance "outstanding," though he noted the cash flows were "erratic." He said he was pleased with the performance of the firm's mutual funds, of which 73 percent outperformed averages for 2014 and 80 percent outperformed averages for a five-year period.
"These are pretty phenomenal numbers and they remain strong," Kennedy said.
Some cash outflows were the result of institutional investors' reallocating their funds, he said. "We continue to win and our business pipeline continues to be strong but the redemptions continue to pick up institutionally."
For the quarter ended Dec. 31, earnings were up about 10 percent to $315.9 million, or $1.18 a share. Assets under management increased about 2 percent from the end of the third quarter. The cash outflows for the quarter disappointed analysts.
"It's really not what you historically expect out of this really champion growth-stock manager," said Jonathan Casteleyn, an analyst with investment research firm Hedgeye. There may not be "much they can do" about institutional pension funds' starting to reallocate their money away from stocks, he said, "but it is depressing their ability to generate new inflows."
"These results were pretty soft, it's a little disappointing," Casteleyn said. "But we're talking about the best-run company in the group, so if there's a way to fix it, I'm sure they will."
Price's shares fell 3.3 percent Wednesday to $79.23 each as the broader market declined.
The company continued to hire, with the number of employees up 3.8 percent to 5,870 from the fourth quarter of 2013. Kennedy said the company also planned to spend more on advertising in 2015, potentially around 5 percent.
"The retail investor has become more interested again in investing in the last few years so we've been stepping up our advertising again," Kennedy said.
Abroad, Kennedy said, he was cautiously optimistic that markets in Europe and Japan would improve performance this year, since some countries were stimulating their economies.
But he predicted the strong domestic market growth of the last few years may taper off this year.
"We're in the sixth year of a bull market, we've had three years in a row where the S&P 500 has been up more than 10 percent, so valuations are full," he said. "People should be more subdued in terms of their performance expectations."