* Closes nine of 15 investor centers, moves services online
* CEO backs new managing director at Indian joint venture
By Ross Kerber
July 24 T. Rowe Price Group reported an
$8 billion net outflow of investor cash as part of
second-quarter results that missed Wall Street expectations, and
the asset manager's shares fell on Wednesday.
Although profit rose 20 percent, analysts expressed concern
over the outflows since a key metric for fund firms is whether
they are bringing in cash from investors.
T. Rowe Price of Baltimore said assets under management
were $614 billion at June 30, up from $541.7 billion at the same
point in 2012 but down from $617.4 billion at the end of March.
During the most recent quarter, market appreciation and
income added $4.6 billion to T. Rowe Price's assets, but that
was more than offset by the withdrawal of $8 billion by clients.
Most of the second-quarter outflows "were concentrated among
a small number of large institutional and intermediary clients
that changed their investment objectives or repositioned their
strategy allocations," T. Rowe Price said in a statement.
T. Rowe Price Chief Executive James Kennedy said
institutional clients withdrew money from investment products
that were doing well as well as those with mixed track records.
"I don't want to hide and say we don't have any portfolio
issues, we're not perfect," Kennedy said in a telephone
But flows into other areas have held up, such as the
company's popular target-date retirement funds, which now have
about $101 billion in assets, Kennedy said.
For the three months ended June 30, T. Rowe Price reported
net income of $247.8 million, or 92 cents per share, up from
$206.8 million, or 79 cents per share, a year earlier.
Analysts had expected the company to earn 95 cents per share
in the quarter, according to Thomson Reuters I/B/E/S.
The company's shares were down 5.6 percent to $75.15 in
T. Rowe Price did not repurchase any shares during the
quarter, which reduced profit per share about 1.5 cents below
expectations, Kennedy said. He added that profit was cut by
about another penny by investments the company made to seed new
T. Rowe Price had posted net inflows for 2012 as a whole and
during the first quarter this year, boosting its stature as one
of the largest publicly traded asset managers. But funds run for
large institutional investors can be volatile and T. Rowe Price
reported outflows in the fourth quarter of last year.
Mac Sykes, analyst for Gabelli & Co, had expected the
company to earn 96 cents per share and said he was surprised by
the outflows. "Obviously it was disappointing," he said of the
Sykes said he plans to maintain his "buy" rating on the
stock because of the relatively strong performance of its mutual
"They should continue to take share in this environment," he
At the end of May the company closed nine of 15 investor
centers and will rely more on serving retail customers via phone
and online services. "Dealing with our clients over the Internet
and phone has caught up to dealing with them face-to-face,"
Places where it closed investor centers include Century City
and Walnut Creek, California; Boca Raton, Florida; and Paramus
and Short Hills, New Jersey, company spokesman Brian Lewbart
said via-email. Centers remain open in places close to other T.
Rowe Price facilities such as in Maryland, Washington D.C. and
Tysons Corner, Virginia, he said.
Also during the quarter a fund firm in India in which T.
Rowe Price holds a 26 percent stake, UTI Asset Management, named
Leo Puri as its managing director after two years without a top
executive. [ID:nL3N0F92D3 ] The lag was reportedly tied to
disagreements between T. Rowe Price its Indian partners.
Kennedy said the search that led to Puri's appointment was
an open process among the company's board and that he was not
troubled by Puri's lack of prior experience in asset management,
as some had suggested.
"I want someone who understands the financial industry and
is really smart, and that's who we have in Puri," Kennedy said.
The other shareholders, all government-controlled, also liked
Puri but had to be sure the government approved of the process,