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    PRICE T ROWE GROUP (TROW)

    TROW Q2 2025: $4.2B retirement & ETF inflows offset fee pressure

    Reported on Aug 1, 2025
    Pre-Earnings PriceN/ADate unavailable
    Post-Earnings PriceN/ADate unavailable
    Price ChangeN/A
    • Robust Retirement Platform & Inflows: The company’s retirement business remains resilient, with target date funds and related strategies delivering consistent inflows (e.g., $1.7B in retirement date inflows in Q2) and diversified client segmentation, supporting long‐term asset growth .
    • Technological Innovation & Cost Efficiency: T. Rowe Price is leveraging AI and digital tools to drive productivity gains and streamline operations, which supports margin improvement by mitigating expense pressures even in a volatile market environment .
    • Expanding ETF & Model Delivery Capabilities: The firm is expanding its product suite, as evidenced by strong ETF inflows (over $2.5B in Q2) and the integration of its model delivery assets into AUM, positioning it to capture new investor segments and benefit from fee compression advantages .
    • Regulatory uncertainty and delayed product adoption: There is continued hesitancy around incorporating private assets into 401(k) and retirement date funds due to unresolved regulatory guidance, which could delay product rollout and limit competitive advantage.
    • Persistent equity outflows and mix challenges: Ongoing elevated outflows in the active equity and mutual fund segments, coupled with a shift in asset mix toward lower fee-generating products, may pressure overall revenue growth.
    • Fee compression due to product mix changes: As the business increasingly wins flows from lower-fee products such as ETFs, trusts, and model-delivered solutions, the pressure on net fee revenue could impair margin expansion over time.
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Adjusted Operating Expenses (FY 2025)

    FY 2025

    Increase 1% to 3% over FY 2024’s $4.46 billion

    Increase 2% to 4% over FY 2024’s $4.46 billion

    raised

    Non-Market Driven Expense Growth

    FY 2026

    no prior guidance

    Targeted to remain in the low single digits

    no prior guidance

    Non-Market Driven Expense Growth

    FY 2027

    no prior guidance

    Targeted to remain in the low single digits

    no prior guidance

    Inclusion of Model Delivery Assets in AUM Reporting

    August 12, 2025

    no prior guidance

    Starting with the July AUM release on August 12, 2025; assets at a little over $9B as of June 30, 2025

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Retirement Business Growth and Innovation

    Consistently discussed across Q3 2024, Q4 2024 and Q1 2025 with emphasis on leadership in target date funds, global expansion, innovative product offerings (e.g., personalized retirement solutions, diversification across channels)

    Emphasis remains on a strong leadership position in retirement and innovation including integrating private assets, global expansion

    Consistent focus, with a slight increased emphasis on integrating private assets into retirement solutions and expanding global reach

    ETF Growth and Expansion

    Highlighted in Q3 2024, Q4 2024 and Q1 2025 with focus on strong inflows, expanded product lines, new ETF launches, and reaching new investor channels, including distinct platform placements

    Continued strong inflows, product line expansion (new equity and fixed income ETFs) and increased AUM are emphasized

    Growth trajectory remains robust with increasing product diversification and market penetration, building on previous momentum

    Fee Compression and Declining Fee Rates

    Discussed in Q3 2024 (noted decline due to asset shifts), Q4 2024 and Q1 2025 with a mix of structural and cyclical factors – a shift toward lower fee vehicles (ETFs, common trust, separate accounts) and strategic repricing

    Continued pressure from shifts in asset mix with lower fee products and emphasis on managing fee declines through asset re-allocation

    Persistent downward trend in fee rates driven by structural shifts toward lower-fee vehicles and continual strategic pricing

    Net Flow Dynamics and Outflow Challenges

    Addressed in Q3 2024, Q4 2024 and Q1 2025 highlighting significant outflows in active equity and mutual funds that were partially offset by inflows in target date, fixed income and ETF products

    Similar challenges persist with notable net outflows in U.S. equity partially offset by strong inflows in fixed income, alternatives, and ETFs

    Ongoing challenge with mixed flows – persistent outflow issues remain but noteworthy resilience in select segments and early signs of improvement

    Emerging Technological Innovation and AI-Driven Efficiency

    Initially mentioned in Q4 2024 (data science, Investor CoPilot) with no coverage in Q3 and Q1 2025

    Q2 2025 puts a robust focus on AI integration for improved operational efficiency, enhanced product delivery and cost savings, leveraging advanced technology

    Increased emphasis in the current period compared to earlier periods as the firm accelerates AI-driven process improvements and innovation initiatives

    Regulatory Uncertainty and Delayed Product Adoption

    Addressed in Q3 2024 and Q4 2024 regarding challenges incorporating private market alternatives and liquidity/regulatory hurdles, while Q1 2025 had no mention

    Continued cautious approach with concerns over fees, fiduciary risks and waiting for clearer regulatory guidance before full-scale product adoption in DC plans

    Consistent regulatory caution remains a theme, with ongoing uncertainty causing delayed adoption of new private asset products

    Disciplined Capital Allocation and Structural Cost Savings

    Covered in Q1 2025 (share buybacks, M&A strategy) and Q4 2024 (cost controls, "spend to save" initiatives) with no mention in Q3 2024

    Limited discussion in Q2 2025 focused on expense management and aligning expense growth with revenue, targeting low single-digit non-market driven expense growth

    Stable focus though less emphasized compared to earlier periods; the firm continues pursuing capital discipline and cost savings through controlled expense management

    Active Management Challenges and Investment Performance Issues

    A recurring theme in Q3 2024, Q4 2024 and Q1 2025 with discussions on market volatility, underperformance in select strategies and outflows in active equity contrasted with strong long-term results

    Q2 2025 maintains focus on active management challenges with short-term performance sensitivities in certain equity strategies while long-term performance remains strong

    Persistent challenge with active management; short-term headwinds exist despite robust long-term performance, indicating ongoing refinement in strategy and execution

    Asset Mix Shifts and Cannibalization of Mutual Funds into ETFs

    Previously addressed in Q3 2024, Q4 2024 and Q1 2025, noting shifts toward low-cost vehicles and some cannibalization of mutual funds by ETFs; impacts on fee rates and investor mix were discussed

    In Q2 2025, asset mix shifts continue with inflows driven by lower fee products and evidence of some mutual fund flows transitioning to ETFs (25% from mutual funds)

    Ongoing trend with continued movement towards ETFs and lower fee vehicles, balancing cannibalization with new investor growth

    Underperformance in Private Market Lending

    Mentioned in Q1 2025 showing challenges in deployment and competitive pressures for private lending strategies ; Q4 2024 and Q3 2024 had less emphasis or a positive tone on private credit

    Q2 2025 does not specifically mention underperformance, instead noting strong gains in private credit and structured credit portfolios, implying reduced emphasis on earlier issues

    Diminished emphasis on previous underperformance as focus shifts to stronger outcomes and improved deal flow in private market lending

    1. Fee Impact
      Q: What is the fee impact from product mix?
      A: Management explained that lower-fee new products like ETFs, trusts, and model-delivered accounts are beginning to offset the pressure from higher-fee active equity funds, which, combined with mix shifts from legacy products, should help lower overall fee levels.

    2. Retirement Flows
      Q: Are equity outflows concentrated in retirement funds?
      A: Management noted robust inflows in retirement date funds (around $1.7B this quarter), with flows favoring target date and QDIA products that have lower fee structures, despite some ongoing equity outflows due to market and rebalancing effects.

    3. DC Private
      Q: When will private assets join DC products?
      A: They believe a private asset solution in defined contribution plans will come once regulatory and fee concerns are clearer, and they are preparing the right investment and commercial case with options like partnering with OHA.

    4. ETF Growth
      Q: Is ETF growth from new or legacy clients?
      A: Management indicated that ETF growth is coming from both client transitions (roughly 25% shifting from mutual funds) and attracting entirely new business, especially through RIA channels.

    5. Acquisition Strategy
      Q: Will acquisitions expand the platform?
      A: They are open to acquisitions or minority investments only if they are culturally aligned and add significant capability or client reach without disrupting service to existing clients.

    6. Model Delivery
      Q: What’s driving model-delivered asset growth?
      A: The shift to include model delivery assets in AUM reflects the healthy growth of this channel, which alongside existing SMAs, demonstrates its increasing significance in servicing both taxable and institutional accounts.

    7. Expense & Technology
      Q: How will expenses and tech evolve?
      A: They are streamlining processes by leveraging tools like AI and other tech upgrades to improve productivity and keep non-market expense growth in the low single digits over the near term.

    8. Blockchain Potential
      Q: What are the tokenization opportunities?
      A: Management is closely monitoring blockchain and tokenization trends as additional digital assets enter the market, though currently retail products include only Bitcoin and Ethereum, aiming for a gradual expansion as regulation evolves.

    9. Organic Growth
      Q: Is organic growth necessary for success?
      A: The view is clear: sustaining long-term success and shareholder value depends on achieving continuous organic AUM growth, ensuring a dynamic base rather than relying solely on market returns.

    Research analysts covering PRICE T ROWE GROUP.