T Rowe Price reported that its first-quarter profit surpassed expectations, buoyed by a market upswing that bolstered its assets under management (AUM) and mitigated the impact of outflows. The company disclosed this information on Friday.
The departure of funds from asset managers has been observed as higher interest rates enhance the allure of secure assets such as cash. Additionally, some investors are awaiting further clarity on the direction of interest rates before re-entering the market.
Despite the outflows, which totaled $8 billion, the AUM, determining managers’ fees, has continued to expand due to the appreciation in investment value. T Rowe’s AUM reached $1.54 trillion by the quarter’s end, marking a 15% increase from the previous year.
CEO Rob Sharps expressed, “While outflows will persist in 2024, we continue to believe that there will be substantial improvement this year driven by higher sales and lower redemptions.”
Profit surged by 36% to $573.8 million for the three months concluding on March 31. Excluding one-time expenses, the company earned $2.38 per share, surpassing the anticipated $2.04 per share, according to LSEG data.
In recent years, such companies have been losing market share to low-cost passive funds, which can achieve satisfactory returns by merely tracking benchmark indexes or other passive instruments, eliminating the necessity for active stock selection.
However, the prospect of higher interest rates and market volatility could signal a shift in favor of active investing.
Analysts speculate that investors may need to adopt a more hands-on approach to enhance portfolio value and manage risk, departing from the passive, set-and-forget strategy that has characterized investing over the past decade.
