Investors poured a record amount of money into T. Rowe Price Group's mutual funds and other investments in the first quarter, helping the Baltimore money manager's profit grow 6 percent. Price's shares jumped nearly 12 percent on yesterday's earnings news.
The company said its net income in the three months that ended March 31 was $151.5 million, or 55 cents per diluted share, up from $142.9 million, or 51 cents per diluted share, in the corresponding period last year.
Still, Price was hurt by market volatility as its assets under management fell 5.4 percent to $378.6 billion in the three months that ended March 31, down from a record $400 billion in the fourth quarter. Stock market losses of $31.1 billion more than offset a record $9.7 billion in new client investments during the first quarter, the company said.
Investors put $3.7 billion into mutual funds and $6 billion into other investment portfolios, such as institutional and separately managed accounts.
"With so much pressure on the marketplace, on the equity and fixed-income side, and markets down as much as it has been, our assets under management [are] lower," James A.C. Kennedy, Price's chief executive, said yesterday in a phone call from Italy. But Price showed strength by garnering more client investment in the company's diversified products, Kennedy said.
"We had some pretty nice flows. Clients still like us and appreciate our work, and we've done a nice job for our clients over time," he said.
Analysts say Price's target-date retirement funds, which adjust to become more conservative as the investor ages, continue to be a strong selling point for investors in an uncertain economy. Net inflows into those funds totaled $2.8 billion in the quarter, accounting for three-quarters of the total new investment in mutual funds.
Retirement funds totaled $30.7 billion, or 13 percent of mutual fund assets under management, during the first quarter.
"Part of their whole philosophy and value proposition to customers is the long-term approach: 'We don't pay attention to the peaks and valleys [of the market] as much,'" said Andrew Richards, an equity analyst at Morningstar Inc. "Even outside of the retirement products, the type of investor approach is somebody who's not chasing last month's return."
Price's shares gained $6.36 to close at $60.24 yesterday.
Market woes in the first quarter hurt money managers across the industry. But Price maintained healthy growth in its retirement funds while increasing its hold on other investment accounts, particularly abroad, said D.J. Neiman, an associate analyst at William Blair & Co.
International investors account for nearly 10 percent of Price's assets under management, up from 7 percent a year ago, said Neiman, who does not own stock in the company.
"Every asset manager has been impacted by weaker global equity markets," said Neiman, who had expected earnings of 56 cents a share for Price. "But even in that environment, T. Rowe Price's results stand out ahead of the crowd."
Net revenue rose nearly 10 percent, to $559.1 million, from $508.4 million in the first quarter last year.
Operating expenses rose nearly 14 percent to $329 million but were $6.2 million lower in the first quarter than in last year's fourth quarter, reflecting the company's push to control expenses.
The company will reduce its planned spending on advertising and promotion for the rest of the year, for example.
Richards of Morningstar cautioned against cutting back on such spending too much because frequent advertising in the past year helped Price attract new clients.
Kennedy said the company will continue its efforts to develop its staff, technology and infrastructure.
"We have a strong balance sheet," Kennedy said. "so we have the luxury to continue to invest for the future."