The paragraph outlines the start of T. Rowe Price's First Quarter 2025 Earnings Conference Call, facilitated by Daniel. Linsley Carruth, the Director of Investor Relations, introduces the call, mentioning that materials are available on their website. The call will last 45 minutes, with Chair, CEO, and President Rob Sharp, along with CFO Jen Dardis, discussing company results for 15 minutes before opening up for questions, joined by Eric Veiel, Head of Global Investments. Carruth highlights the use of forward-looking statements and non-GAAP measures, advising participants to refer to supplemental materials for details. Sharps thanks attendees, noting market volatility's impact on assets and revenues, while emphasizing progress.

The paragraph discusses the strong investment performance of a company’s platform, highlighting improvements across various asset classes compared to peers. It notes that over 60% of their funds outperformed peer groups across different time frames, with especially high performance on an asset-weighted basis. Equity value outperformed growth due to changes in market sentiment, improving the performance of several products. While most funds performed well, some faced challenges. Target date assets notably excelled, with nearly all outperforming peers over longer periods. Retirement strategies gained from value overweight and strong international asset selection, though overall equity exposure detracted slightly.

The paragraph highlights the performance and strategic developments of a financial firm in fixed income and alternative portfolios. Fixed income funds showed solid performance, with a majority beating peer median benchmarks over one and five years, though three-year results were mixed. U.S. taxable bonds performed best last quarter. Alternative portfolios yielded mixed outcomes, with private lending and structured strategies showing gains but opportunistic and liquid strategies facing challenges due to certain negative developments. The firm expanded its retirement services globally, partnering with a Japanese asset manager and a leading banking institution to offer customized retirement funds in Asia, the UK, the Middle East, and Canada. In the US, they launched a Social Security Analyzer tool for financial advisors.

T. Rowe Price is exploring the inclusion of private market alternative investments in their target date products to meet potential demand and maintain their leading position in active target date offerings. They are expanding their presence in global retirement and growing their ETF and SMA offerings, having launched two new equity ETFs and broadened their SMA lineup. As of March 31, they manage 19 ETFs with over $12.5 billion in assets. The firm continues to receive recognition for its efforts and achievements, including awards for their private credit fund and accolades from Fortune Magazine and Extel for their asset management excellence.

The company has opened its global headquarters in Baltimore to enhance collaboration and the associate experience, while managing expenses to support strategic initiatives. They report a robust balance sheet with $3.3 billion in cash and investments and have announced a quarterly dividend increase for the 39th year. Strategic stock repurchases will be made opportunistically. The associates are acknowledged for their resilience and client commitment. In Q1 2025, adjusted earnings per share were $2.23, down from the prior year but up from the previous quarter. There were $8.6 billion in net outflows due to U.S. equities and rebalancing, but positive inflows in target date funds, fixed income, and ETFs. Notably, fixed income saw $5.4 billion in net inflows, and the ETF business had $3.26 billion in inflows.

In the mentioned quarter, the company experienced notable financial movements, including significant inflows into several ETFs and capital appreciation equity, totaling almost $1 billion. Despite increased retail outflows in early April due to market volatility, this normalized by the month's end. The company's Q1 adjusted net revenue was $1.8 billion, up slightly from the previous year's Q1 but down 3.6% from Q4 2024. Investment advisory revenue increased by 4% compared to last year, driven by higher average assets under management (AUM), though offset by a lower effective fee rate. Performance-based fees contributed $10 million, but overall revenue was impacted by a decline in accrued carried interest. The effective fee rate declined due to a shift in assets and lower-fee strategies. Operating expenses rose by 7.4% from Q1 2024, primarily due to increased market-driven expenses and compensation costs, without the one-time cost benefit from the previous year.

In the paragraph, the company outlines its financial activities and future expectations. Adjusted operating expenses decreased by 7.2% from Q4 2024 due to seasonal expense variations and a move to new headquarters in Baltimore, which had minimal impact in Q1. Depreciation and the end of the previous lease started in April. They anticipate a 1% to 3% rise in 2025 adjusted operating expenses over 2024's $4.46 billion, a decrease from the previously projected 4% to 6% range, attributed to market-driven expense management. The company highlighted strong shareholder returns, redistributing over $500 million in Q1, including dividends and share buybacks, with further buybacks in April. They focus on careful expense management due to market volatility while investing in growth opportunities. The paragraph ends with a transition to a Q&A session, where an inquiry is made regarding the growth and future of their ETF business, noting its $12.5 billion assets under management.

Rob Sharps from T. Rowe Price discusses the company's progress and opportunities in the ETF market following the expiration of Vanguard's patent on the ETF share class. He highlights their expanding range of offerings, which currently includes 19 ETFs, and their ongoing efforts to build track records and achieve placement on wealth platforms. T. Rowe Price is investing in sales capabilities to reach more ETF users and emphasizes the importance of strong investment performance, scaling products, and differentiated offerings in their success. Sharps sees significant potential in third-party asset allocation models, which T. Rowe Price has yet to fully explore.

The paragraph discusses the opportunities and considerations for Rowe Price with their ETFs. There's a significant potential for growth using ETFs as building blocks, especially with rising demand outside the U.S., anticipated to be more relevant post-2026. The possibility of offering ETFs as a share class also presents opportunities, though careful consideration around transparency, intellectual property, capacity, and client needs is required. Rowe Price sees innovation as key, evidenced by their launch of two new differentiated ETFs––the capital appreciation premium income ETF and the hedged equity ETF––which address market needs despite their complex implementation.

Rob Sharps discusses the state of the company's private market alternatives, which comprise around $20 billion, primarily in private credit. Despite OHA's success in raising capital for senior private lending, deployment has been slow due to a softer LBO and M&A environment. This means there's significant committed capital yet to enter the fee-based AUM, which would drive flows for OHA. Specifically, the progress with OCREDIT has been slower than desired due to intense competition. The company has seen $54 million in flows for the quarter and is expanding its presence by adding more placements and enhancing its sales and consulting teams. Despite the challenges, Rob sees a large long-term opportunity in delivering OHA's capabilities via various investment structures to the wealth sector.

The paragraph discusses the potential for alternative investments to enter the U.S. retirement market, which has traditionally lacked access to private market alternatives. Rob Sharps believes it is inevitable that defined contribution plans, high net worth, and mass affluent markets will eventually gain access to these investments. He notes the importance of these markets to his firm and the need to create offerings with compelling risk-reward, appropriate fees, and liquidity. Additionally, some solutions may combine liquid public and private market alternatives.

The paragraph discusses the openness of T. Rowe Price and OHA to consider partnerships for crossover portfolios across different channels, emphasizing the importance of aligning interests in successful partnerships. It highlights OHA's expertise in credit portfolios, which includes private credit and non-investment grade liquid assets, as part of their strategy for the wealth, retirement, and insurance channels. The paragraph also notes T. Rowe Price's strong position in retirement solutions, continuously evolving their offerings through innovations such as a personalized retirement manager and managed lifetime income to enhance retirement outcomes.

The paragraph discusses the incorporation of private market alternatives into 401(k) plans, suggesting that while these alternatives could provide better outcomes for participants due to the long-term nature of retirement investments, there are concerns such as fiduciary risk, liquidity, daily pricing, and fees that need addressing. The speaker believes these challenges can be solved over time, with confidence that private market offerings, possibly in collaboration with partners, will enhance portfolio risk-reward profiles. Following this discussion, Dan Fannon from Jefferies raises a question about market flows, sales, and redemptions amidst market volatility, to which Rob Sharps responds, humorously noting the predictability of the question and indicating that the flow outlook for the year remains largely unchanged despite various factors.

The paragraph discusses the company's financial performance and outlook. In the first quarter, the company's results were slightly behind last year's, with a notable improvement in April compared to April 2024 despite some initial retail outflows that later stabilized. Institutional flows partially offset these outflows. The company is optimistic about performance improvements in 2025 relative to 2024, despite challenges in certain sectors like open-ended mutual funds and active equity. They are experiencing strong momentum in fixed income and retirement solutions, while continuing to grow in areas such as ETFs and low-fee, low-risk alternatives. Overall, they are confident in returning to positive flows, although that is not expected in 2025.

In the paragraph, there is a discussion about asset class rebalancing due to market volatility in late March and early April, with equities seeing outflows and fixed income seeing inflows, particularly more outside the U.S. than inside. Rob Sharps notes this aligns with industry trends, with rebalancing and de-risking activities observed. Despite facing cyclical and ongoing challenges, the team's outlook remains largely unchanged. An analyst, on behalf of Bill Katz, inquires about fee rate dynamics, and Jen Dardis explains that the fee rate can vary significantly quarter to quarter due to the diverse asset classes and strategies, suggesting a multi-quarter perspective is more beneficial.

In the first quarter, approximately 60% of the reduction in the effective fee rate was due to structural shifts in investment strategies and vehicles, with a trend toward lower-cost vehicles like ETFs, collective investment trusts, and separate accounts. Within the target date franchise, both vehicle and strategy shifts were noted, particularly with increased interest in blend products and collective trust vehicles. The remaining 40% of the impact was more cyclical, related to changes in the asset mix due to market and flow impacts, such as a decline in equity assets under management from 52% to 49%, with increases in fixed income and multi-asset percentages. While the current quarter was significantly affected by equity market declines, predicting future impacts is challenging, though structural changes are expected to persist. The conversation then shifts to a question from Alexander Blostein of Goldman Sachs, who inquires about budget setting amid market volatility and assumptions about equity market returns included in guidance. Jen Dardis acknowledges the difficulties in budget setting within such an environment.

The paragraph discusses the consideration of market volatility and asset management in setting an expense growth range of 1% to 3%. If assets had been maintained at $1.57 trillion as of March 31st, expense growth would have been on the higher end. The reduction from 4%-6% to 1%-3% reflects both market-driven adjustments and deliberate cost management measures, such as slowing hiring and reducing variable expenses like travel. The focus remains on seeking structural cost savings to contain expense growth through 2026 and beyond. Following this discussion, Ken Worthington from JPMorgan asks about expanding retirement services outside the U.S., specifically in Asia, Canada, and Europe, and whether the firm's approach involves launching local target date funds or more nuanced strategies. Rob Sharps responds by noting that defined contribution schemes vary greatly in development across different countries.

The paragraph discusses the development and variation of retirement investment strategies across different countries. It highlights how these strategies and partnerships vary by country, including examples from Korea, Japan, Canada, Asia, the UK, and the Middle East. In Korea, there is a partnership with a local manager for target date and retirement income series. In Japan, a local firm helps manage the Japanese portion of a target date series. In Canada, they partner with life insurers offering products similar to those in the US. For Asia, the UK, and the Middle East, a bespoke target allocation product is being launched in collaboration with a large private bank. The overall approach emphasizes custom solutions and partnerships with local institutions.

The paragraph covers a Q&A session involving discussions on strategic growth and capital allocation. Eric Veiel emphasizes a shift in focus from products to capabilities, highlighting partnerships on both strategic and tactical asset allocation. Mike Brown from Wells Fargo Securities inquires about the company's capital allocation strategy, noting an increase in cash reserves to $2.8 billion. He asks whether the company plans to increase share buybacks or pursue inorganic growth opportunities, specifically in private markets. Jen Dardis begins responding to his inquiries.

The paragraph discusses the company's $3.3 billion in cash and discretionary investments, with half earmarked for strategic opportunities like share buybacks, mergers and acquisitions (M&A), or as a general buffer. It notes increased share buyback activity in early 2024 compared to 2023. Rob Sharps explains that the company remains opportunistic with buybacks and maintains an unchanged framework for M&A, focusing on acquisitions that add new, unique, and sustainable capabilities, align culturally, and make financial sense. The company is keen on private market alternatives and remains strategic in its industry approach.

The paragraph discusses the idea that certain goals can be achieved through partnerships, implying that ownership of all resources or aspects isn't necessary. The paragraph ends with the conference call operator thanking participants and announcing the conclusion of the call.

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