T Rowe Price Group Inc (TROW)

• Strong momentum in retirement offerings with innovative products and partnerships: T. Rowe Price has launched Personalized Retirement Manager, the industry's first managed account tailored for individuals, and Managed Lifetime Income, a new retirement solution offering stable monthly income for life - - . These products, along with a custom glide path win, demonstrate T. Rowe Price's deepening leadership in the retirement market - .
• Significant progress towards positive net flows: Excluding a specific variable annuity mandate loss, 2024 net outflows would have been less than half of 2023 levels, reflecting substantive progress - . T. Rowe Price expects sizable further improvement in 2025, with positive flows in all asset classes except active equities, strong growth in retirement date funds, and larger contributions from alternatives, ETFs, and SMAs - .
• Expansion of ETF franchise attracting new clients and driving incremental growth: T. Rowe Price is expanding its ETF business, reaching new buyers including advisors exclusive to ETFs, and offering strategies not available in open-ended funds - - . The ETF franchise includes top quartile performance ETFs, contributing to incremental growth beyond existing fund assets - - .

• Net outflows are expected to continue into 2025, with the CEO stating, "I think we'll demonstrate that we're on a path that will take us back to organic growth, whether we get there in 2025 or not... we'll make meaningful further progress but won't get there for the full year." -
• Investment performance metrics are soft and not where we want them. The CEO acknowledged, "I'm the first to acknowledge that the aggregate statistics as they stand today are soft and not where we want them... It wasn't a great quarter." -
• Cannibalization of existing mutual fund assets into ETFs. The CEO noted, "There has to be some element, particularly with the semi-transparent clone, of cannibalization... we can say with reasonable confidence that a substantial portion of what we're getting in the ETF business is new and incremental. But there clearly is some cannibalization." -

1. Organic Growth Outlook
   Q: Unpack Q4 outflows excluding VA; thoughts on '25 flows?
   A: Excluding the VA loss, 2024 outflows would be less than half of 2023 levels, showing substantive progress. - Seasonal redemption pressure in Q4 is typical, but underlying trends are improving. - For 2025, we expect sizable further improvement as we trend toward positive flows, though we may not get there for the full year. -

2. Performance Decline
   Q: What caused the performance hit this quarter? Any actions planned?
   A: It wasn't a great quarter; aggregate statistics are soft and not where we want them. - Despite this, we're confident in our research platform and expect metrics to improve as prior poor periods roll off. -

3. Institutional Backlog and Pipeline
   Q: Context around institutional backlog and funding timeline?
   A: Despite a sizable termination, our risk-weighted pipeline increased quarter-over-quarter. - Over the next 12 months, we have broad-based opportunities across asset classes, with momentum in active equity, fixed income, and a strong pipeline in retirement date products. -

4. Expense Growth in 2025
   Q: How are you thinking about expense growth next year and key investments?
   A: We're aiming to align expense growth with forecasted revenue growth. - Given stronger revenue momentum into 2025, our opening expense guide may be slightly higher than last year's. - Investments focus on ETFs, expanding marketing outside the U.S., alternative sales platforms, and improving operational efficiency. -

5. Private Credit Opportunities
   Q: Positioning for expected pickup in private credit activity?
   A: OHA closed its first dedicated senior private lending fund at $2 billion. - OHA had a record quarter with $5.5 billion in new capital commitments, bringing the year-to-date to over $9 billion, with a notable portion in private credit. - We expect alternatives flow to accelerate into 2025. -

6. ETF Expansion vs. Cannibalization
   Q: Is the ETF franchise expanding reach or cannibalizing funds? Cost differences?
   A: We're reaching new buyers, including ETF-exclusive advisers, and offering strategies not available in open-ended funds. - There's some cannibalization, but a substantial portion is new and incremental. - Cost to access is similar to open-ended funds. -

7. Retirement Market Growth
   Q: Update on retirement market and steps driving growth?
   A: We have strong momentum across retirement offerings, including a custom glide path win. - New products like Personalized Retirement Manager and a lifetime income product incorporating a QLAC have been launched on our recordkeeping platform. - We aim to extend these to other platforms over time. -

8. Managed Lifetime Income Costs
   Q: How does adding an insurance guarantee affect costs and returns?
   A: The design balances risk and cost by using QLACs, which are affordable relative to other fixed annuities. - The guarantee comes at some cost but offers an optimal outcome for participants. -

9. Private Markets in Retirement Plans
   Q: How close are we to seeing private market allocations in target date funds?
   A: It's hard to know due to regulatory uncertainty. - The defined contribution market is fee-sensitive, and platforms aren't designed for private market alternatives. - When regulatory clarity comes, we'll be an attractive partner with a range of options. -

10. Stickiness of Sub-advised Assets
    Q: What's the makeup of the other $85B client base? Why is it stickier than VA?
    A: The other $85 billion is sub-advised assets in retirement plans outside of variable annuities, which tend to be more sticky. - Unlike VA, these assets don't face the same underlying pressures. -

Annual guidance for FY 2024:

• Adjusted Operating Expenses: 6% to 8% - (no change from prior 6% to 8% - )
• Non-GAAP Effective Tax Rate: 23.5% to 25.5% - (no change from prior 23.5% to 25.5% - )

Annual guidance for 2025:

• Expense Growth for 2025: Goal to align expense growth with forecasted revenue growth, with the opening expense guide for 2025 expected to be higher than the previous year's 3% to 5% range - (no prior guidance)