* Investment advisory fees up 19 pct
* Customers pull out $4.2 billion, mainly from non-U.S.
* CEO Kennedy latest to support "floating NAV" for some
* Shares down 1.2 pct
By Ross Kerber
Jan 29 Asset manager T. Rowe Price Group Inc's
fourth-quarter profit rose 23 percent on higher
investment advisory revenue, but the Baltimore firm reported on
Tuesday a rare outflow of customer cash for the period.
The results saw the company's shares fall as much as 5.8
percent but by late on Tuesday they were down just 1.2 percent
from Monday's all-time closing high of $72.18.
Shares of T. Rowe Price have climbed 11 percent so far this
year on expectations that the stock fund-laden firm will benefit
from a recent investor turn towards equities.
T. Rowe Price's assets rose $2.4 billion to a record $576.8
billion during the fourth quarter. But that was only because
market gains and income offset the $4.2 billion that customers
withdrew, mainly from institutional portfolios which suffered
from what the company called "performance challenges."
Overall, T. Rowe said performance at most of its funds was
strong and analysts cautioned against overreacting to the
"While we're not used to seeing TROW in outflow, we think it
should fare better" in the current quarter, Nomura analyst Glenn
The outflows were primarily from institutional accounts that
use investment strategies similar to T. Rowe's $485 million
Global Stock mutual fund that is sold to retail
investors. The fund, which buys stocks from all over the world,
trailed 55 percent of similar funds last year and had an outflow
of $166 million, according to data from Lipper, a unit of
David Eiswert took over as manager of the fund in October,
replacing Robert Gensler, who has retired.
In a telephone interview, T. Rowe Price Chief Executive
James Kennedy said the institutional portfolios' performance has
improved lately. "Clients are seeking performance, and we did
not do well for those clients in those portfolios," he said.
Kennedy said the company was doing well overall, however. In
all, 78 percent of its mutual funds outperformed the Lipper
average return for their categories over the three years ended
Dec. 31, T. Rowe Price said.
Many of the firm's largest funds attracted considerable cash
from investors last year, according to Lipper data. The $20.4
billion New Income Fund, which buys investment-grade bonds, took
in $3.9 billion last year and the $15.4 billion Blue Chip Growth
Fund, which buys stocks of fast-growing companies, took in $1.6
T. Rowe Price reported net income of $232 million, or 88
cents per share, for the fourth quarter compared with $188.4
million, or 73 cents per share, a year earlier.
Analysts surveyed by Thomson Reuters I/B/E/S on average had
expected 89 cents per share.
Investment advisory fees increased 19 percent to $677.6
FLOATING NAV FOR SOME FUNDS
Separately, CEO Kennedy said he would accept allowing the
net asset values of some institutional money market funds to
vary, or "float," away from their traditional fixed price of $1
per share, as a way to reduce the risk that large clients would
rush to pull out cash during a crisis.
T. Rowe Price has about $15 billion in money funds, a modest
slice of the $2.6 trillion industry.
Larger money fund sponsors and the industry's main trade
group have resisted calls to drop the fixed $1 per share value,
worried about losing investors. But some, including brokerage
Charles Schwab Corp, have backed the idea lately for
some institutional funds, which could presage a compromise with
regulators in Washington.