TROW T Rowe Price Group Inc

By Sarah Krouse 

Giant money manager T. Rowe Price Group Inc. reported better earnings and mutual fund performance during the third quarter. Yet clients still pulled some money from the firm's actively managed stock funds.

The opposing trends reinforce the predicament facing T. Rowe Price and other active managers as they experience pressure from index-tracking rivals. Those typically lower-cost funds continue to attract new money at the expense of funds that make specific bets.

"What's within our control is to continue to deliver alpha after fees and hope that over time it carries the day," Chief Executive William Stromberg said in an interview.

The Baltimore manager said Thursday its third-quarter earnings rose 18% as investment advisory fees and assets under management increased. Gains in global stock and fixed-income markets helped boost assets to $812.9 billion at the end of September compared with $725.5 billion a year earlier.

The firm also said 84% of its mutual funds outperformed their Lipper averages on a total return basis over three years at the end of September, up from 78% at the same time last year. Over five years 82% of those funds outperformed, up from 77% at the same time a year earlier.

Despite that improved performance clients still pulled a net $200 million from the firm during the quarter. Most of that came out of U.S. equity funds. T. Rowe did attract new money to its fixed-income mutual funds, international stock funds and other accounts.

Mr. Stromberg said in a press release that "passive headwinds" and strategies that are closed to new investors because they have reached maximum capacity had a "significant impact" on U.S. equity flows.

The firm's leaders are still discussing whether to proceed with actively managed exchange-traded funds that must disclose their portfolio holdings daily or to wait for a potential green light from the Securities and Exchange Commission to launch so-called nontransparent actively managed ETFs that don't disclose their holdings each day.

T. Rowe Price reported a third-quarter profit of $327.8 million, or $1.28 a share, up from $277.1 million, or $1.06 a share, a year earlier.

Revenue increased 4.2% to $1.09 billion. Investment advisory fees grew 5.2% to $970.5 million.

Mr. Stromberg said investment advisory fees during the period were helped by the firm's investment performance and products outside the U.S. that typically charge higher fees.

Analysts polled by Thomson Reuters expected a per-share profit of $1.18 and revenue of $1.08 billion.

Write to Sarah Krouse at sarah.krouse@wsj.com

(END) Dow Jones Newswires

October 27, 2016 13:19 ET (17:19 GMT)

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