The operator, Mona, introduces the T. Rowe Price Fourth Quarter 2023 Earnings Conference Call and explains the format of the call. Linsley Carruth, the Director of Investor Relations, thanks the participants for joining and introduces the speakers: CEO and President Rob Sharps, CFO Jen Dardis, and Head of Global Investments Eric Veiel. The call will last approximately 45 minutes and will be followed by a Q&A session. The speakers may make forward-looking statements and reference non-GAAP financial measures. Eric Veiel was recently named Head of Global Investments.

In 2023, the investment organization at T. Rowe Price faced challenges with net outflows, but also made progress in improving investment performance and positioning the firm for future growth. The company's active ETF business and private credit fund have seen success, and they have also acquired Retiree, Inc. to enhance their retirement capabilities. T. Rowe Price has also partnered with the International Finance Corporation to create a new bond strategy and launched a new fund for income-oriented investors.

The company has a strong position in the Target Date franchise, with good investment performance and net inflows. They are continuously innovating and expanding their capabilities. The engagement and collaboration among teams have improved, leading to better performance for clients. The company is evolving to meet market demands and is confident in a slower pace of net outflows this year. Strategic initiatives are delivering positive results, with improving gross sales and positive momentum for net flows. The company's balance sheet remains solid, with a focus on maintaining dividends and ample liquidity for potential growth opportunities. The progress is a result of the company's commitment to investment excellence, client service, and corporate strategy.

Eric Veiel discusses the strong investment performance of the firm, with 64% of funds beating their peer group medians for the year. The US Equity Research Fund, Capital Appreciation Fund, and Mid-Cap Value Fund were top performers, and the Capital Appreciation Fund has tied a record for consecutive years of outperformance. The large-cap growth equity funds also had strong performance, with over 60% of the return coming from a wider set of investment choices. The Target Date suite and multi-asset products also had a successful year, with the majority beating their peer group medians. The fixed-income franchise also had a solid year, with several non-investment grade funds performing well.

In 2023, Global Multi-Sector Bond Fund was the top performer in its peer group, while the overall investment performance across the alternatives platform was strong. With over 900 investment professionals adhering to a rigorous investment process and leveraging insights from the research platform, the team engagement is back to pre-pandemic levels. The team conducted over 14,000 due diligence meetings, with the majority being held in-person thanks to their proprietary in-house corporate access capabilities. The strength of their research platform is evident in their US equity research strategy, which has consistently outperformed its peers and now includes over 75 global analysts.

In the final paragraph, the speaker, Jen, reviews the financial results for the company, stating that adjusted earnings per share for Q4 2023 were $1.72 and $7.59 for the year, lower than the previous year due to lower average AUM and investment advisory revenue and higher expenses. She also mentions the company's focus on pursuing excellent investment performance for clients and the tools they have to achieve this, such as their investment platform and three pillars of people, process, and culture.

In the fourth quarter, the company experienced $28.3 billion in net outflows, bringing the total for the year to $81.8 billion. This was mainly due to redemptions in sub-advisory and institutional channels, with US Equity being the main driver of outflows. However, there were positive net flows in the Target Date and Alternatives products. The company's Q4 adjusted net revenue was $1.7 billion, and the full year total was $6.5 billion. Investment advisory revenue was higher in Q4 compared to the previous year, but lower for the full year. The effective fee rate for Q4 was 42.2 basis points, with a slight increase due to performance-based fees on Alternatives products. Q4 adjusted operating expenses were $1.2 billion.

In the last quarter of 2023, the company had higher expenses due to seasonal advertising and promotion, stock-based compensation, and professional fees. They also increased their investment in their brands for future growth. Despite this, they were able to keep their adjusted operating expenses within the previously provided guidance range. They expect a 3-5% increase in operating expenses for 2024. The non-GAAP effective tax rate is expected to be lower in 2024. The company remains committed to maintaining a strong balance sheet and returning capital to stockholders through share buybacks and dividends. They have returned $1.38 billion to stockholders in 2023 and plan to continue investing in seed capital or M&A opportunities.

The company is focused on managing expenses and investing in strategic priorities while maintaining financial discipline. They expect improvements in outflows for 2024 due to better investment performance and lower client redemptions. Gross sales are already showing signs of improvement and the company expects contributions from new vehicles to continue building momentum.

The speaker is confident that the company will have a better year in 2024 due to early-stage sales momentum from strategic initiatives. However, the extent of improvement is still uncertain and dependent on factors such as investment performance, risk appetite, and market volatility. The speaker sees positive trends in target date, RPS core market, USI wealth, and individual investments. When it comes to OHA, the next chapter of the story is focused on investments and the OCredit business has $1.5 billion of investable capital, with potential for increased flows in 2024.

The speaker is thanking the questioner and discussing the success of OCredit, which has raised over $100 million since September and expects to raise a similar amount in Q1. They acknowledge that the private credit market in the wealth channel is competitive, but are confident in the combination of T. Rowe Price and OHA's relationships and track record. They also mention potential follow-on products for the wealth platforms and evaluate alternatives. Despite a redemption in January, they expect OHA to build momentum and see an acceleration in flows in 2024. They note that some of the capital raised in 2023 is for distressed strategies and will only go into flows when deployed, but overall the performance of OHA's strategies is strong.

The company's pipeline is strong and they are confident in the contribution from their private credit division. The fixed income flows were negative in the quarter, but they anticipate an increase in demand due to higher rates. The company has a strong fixed income team and is focused on launching new vehicles and improving sales capabilities in this area. They intend to compete aggressively for business.

The speaker discusses the recent Q4 flows and notes that a redemption in a short duration strategy is not predictive of future flows. They also mention their stable value and floating rate franchise, which benefited from the rising rate environment in 2022. The company is making investments in their fixed income capabilities and plans to grow in this area. The speaker also mentions the strong performance of their municipal team and the potential impact of taxes. The next question asks about the company's focus on international markets, to which the speaker responds that 8.6% of their business is currently from outside the U.S. and they have resources dedicated to these markets. They have also made management changes in their non-U.S. business and have a strong opportunity for growth in this area compared to the U.S.

The paragraph discusses the resources and management changes in the non-U.S. business of the company. The company expects growth in this area to be greater than in the U.S., with a focus on specific markets in Asia Pacific and EMEA. The company also has a significant number of employees outside of the U.S., some of whom work on global investment strategies. The profitability of these regions should not be judged solely based on their associated accounts.

The speaker states that the company is profitable in the EMEA and APAC regions when looking at revenue and expenses. They have built a strong presence in these areas and expect to see leverage from their investments. The next question asks about the impact of performance fees on the fee rate, and the speaker mentions a $25 million amount for the fourth quarter. They clarify that most of these fees come from SMAs within OHA and typically occur in the fourth quarter. The following question asks about the company's buyback activity, and the speaker notes that there was an increase in the fourth quarter and they plan to continue with share repurchases in the first quarter.

T. Rowe Price's priorities for capital allocation have not changed, with a focus on investing in the company, protecting and raising dividends, and making appropriate acquisitions. The company plans to be opportunistic with share repurchases in 2024, with the goal of reducing the share count. The recent acquisition of Retiree Inc. was driven by strategic rationale and is expected to enhance T. Rowe Price's growth profile.

In this paragraph, Robert Sharps, the CEO of T. Rowe Price, discusses the potential benefits of their recent acquisition of Retiree, a company with algorithms to help retirement investors. He explains how this acquisition fits into their strategic initiatives and could potentially be incorporated into their record-keeping offerings and partnerships with wealth channel intermediaries. Sharps also mentions their approach to M&A, which focuses on adding capabilities that make them more important to their clients and fit strategically and culturally. He concludes by thanking the audience for their interest in T. Rowe Price.

The speaker reflects on the challenges of 2023 but also highlights the progress made in terms of investment performance and strategic work for future growth. They express confidence in the potential for continued success and thank participants for their involvement in the conference call. The call is now concluded.

This summary was generated with AI and may contain some inaccuracies.