By Andrew Welsch

Shares of T. Rowe Price rose after the company reported better-than-expected earnings results and its CEO expressed confidence that it can reverse several quarters of net asset outflows.

The asset manager reported quarterly adjusted earnings per share of $2.23, beating Wall Street estimates by 10 cents, according to FactSet. For the same period a year ago, the asset-management company reported adjusted earnings of $2.38. Shares were up 2.94% Friday morning, a strong day for financial stocks and compared with 1.17% gain for the S&P 500.

But it's still tough times for T. Rowe Price, which has faced what its CEO describes as "pretty intense headwinds" in its open-end mutual fund business. The company's stock is down 20.2% this year and the S&P 500 is down 3.3%. Revenue in the first quarter barely budged, coming in at $1.76 billion, up from $1.75 billion for the same period a year ago. Wall Street analysts had expected $1.78 billion, according to FactSet.

The Baltimore-based fund company, known for growth stock investing and retirement plans, also reported another quarter of net client outflows, with $8.6 billion leaving T. Rowe Price. The recent outflows were largely concentrated in U.S. equity funds, according to the company. That compares favorably with $19.3 billion of outflows for the fourth quarter, but is a bit worse than the $8 billion of outflows in the first quarter of 2024. The company ended the recent quarter with $1.57 trillion in assets under management, up 1.6% year over year.

"I'm confident that we have a path back to positive flows," T. Rowe Price CEO Rob Sharps said on the conference call with analysts Friday. "I think it's unlikely to be in 2025, but I think [this year] we will take another step back in that direction."

An industrywide issue. The asset management industry has been struggling with outflows from mutual funds -- actively managed stock mutual funds in particular -- as investor preferences shift in favor of exchange-traded funds and passive strategies.

Sharps says the company expects 2025 flows to improve compared with 2024, despite recent market volatility. His comments on the first quarter earnings call echo the strategies the asset management industry is using more broadly to deal with current challenges.

"While we're fighting some pretty intense headwinds in open ended mutual funds as a vehicle and active equity as an asset class, we've got a lot to be excited about," he said on the call Friday.

He pointed to momentum in fixed-income and growth in ETFs and retirement solutions. The company has 19 ETFs and plans to launch more. The ETFs are gaining scale, Sharps said. That is important, because as Sharps noted, brokerage and wealth management firms often require a minimum level of assets before making new funds available on their platforms.

The alts play. In response to an analyst question about alternative investments, Sharps said T. Rowe Price has had "substantial discussions" with alternative investment firms about partnering on potential offerings.

Alternatives are investments other than stocks and bonds, and can include private-equity funds and private credit. They are generally used by ultrawealthy investors and institutional investors, and can carry high fees and be more illiquid than stocks and bonds.

"If ultimately, we can help them by creating offerings that have compelling risk reward, that are at the right fee point, that provide the right amount of liquidity, we'll do that," he said.

Other asset managers and alternative investment firms have been exploring partnerships, and there is more interest in expanding access to alternative investments for retail investors.

The defined contribution market and more of wealth management market will open up to alts, Sharps says. "In my mind there's no question that it eventually will happen," he says. "I think you can debate timing and magnitude, but at some point and to some degree defined contribution, more traditional high-net-worth and mass affluent [clients] will get access to private market alternatives."

Write to Andrew Welsch at andrew.welsch@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 02, 2025 12:10 ET (16:10 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.