T. Rowe Price(TROW)2023-05-02 13:37Financial Data and Key Metrics Changes - Adjusted earnings per share for Q1 2023 was 1.74 in Q4 2022 and 528 million compared to Q4 2022, primarily due to a decline in expenses [15] - Assets under management (AUM) ended the quarter at 67 billion from December 31, 2022, driven by improving markets [16] Business Line Data and Key Metrics Changes - Net outflows for the first quarter were 7.5 billion into the target date franchise and over $250 million in various strategies such as global multi-sector bond and US dividend growth [10][17] - The effective fee rate was 42.7 basis points, reflecting a slight uptick from Q4 2022, with ongoing modest downward fee pressure expected [18] Market Data and Key Metrics Changes - The annual headline inflation rate in the US fell from 6.4% to 5% during the quarter, while the Eurozone saw a decrease from 9.2% to 6.9% [6] - The NASDAQ Composite Index increased nearly 17%, and technology shares within the S&P 500 Index returned nearly 22% during the first quarter [6] Company Strategy and Development Direction - The company is focused on long-term growth initiatives, including enhancing its US intermediary wealth channel and expanding its product offerings [11][12] - Strategic initiatives include enhancing digital experiences for individual investors and expanding private markets and alternative capabilities through acquisitions like OHA [13][14] - The firm aims to return to positive organic growth over time through improved market conditions and sustained investment performance [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term value of active investment management despite current market uncertainties and pressures on net flows [4][5] - The firm is committed to maintaining financial discipline and prioritizing investments in strategic initiatives to navigate market volatility [23] - Management acknowledged the competitive landscape and the need to adapt to changing market conditions while focusing on core strengths [11] Other Important Information - The company has been recognized as a top-tier provider to several large intermediary firms, enhancing its distribution capabilities [12] - The acquisition of Retiree, Inc. aims to improve retirement income planning capabilities across various channels [13] Q&A Session Summary Question: Progress on the OHA transaction - Management characterized the first year with OHA as successful, focusing on distribution synergies and product launches [24][25] Question: Collaboration between OHA and T. Rowe Price fixed income teams - Management stated that investment teams remain largely separate to minimize disruption, while exploring ways to leverage ideas across platforms [27][28] Question: Impact of last year's performance issues on target date flows - Management noted that long-term performance is more critical in target date strategies, and they remain engaged with plan sponsors [32][34] Question: Breakdown of expense growth - Management indicated that about a third of expenses are market-driven, with ongoing investments in strategic initiatives [37][39] Question: Outlook for non-US business growth - Management expressed optimism about growth in core markets like Japan and Australia, despite short-term lumpiness in flows [45][47] Question: Urgency to drive better growth versus M&A - Management acknowledged share loss in certain equity franchises but emphasized a long-term focus on organic growth and strategic acquisitions [49][51] Question: Product and vehicle expansion - Management highlighted ongoing momentum in ETFs and the introduction of new strategies to meet demand [54][56] Question: Employee retention post-OHA integration - Management reported strong employee retention at OHA, with no significant attrition among senior associates [59] Question: Long-term perspective on the 401(k) business - Management noted that while the unbundling trend is significant, T. Rowe Price maintains a strong value proposition in the core market [62][64]