Skip to Content
Stock Analyst Update

Strong Flows and Market Gains Lift T. Rowe Price's AUM

The firm closed out the June quarter with a record $1.22 trillion in managed assets.

Mentioned:

While there was little in wide-moat T. Rowe Price's second-quarter results that would alter our long-term view of the firm, we are likely to raise our $114 fair value estimate on improvements seen in the firm's near-term results that will positively impact our medium-term forecast. T. Rowe Price closed out the June quarter with a record $1.220 trillion in managed assets, up 20.9% sequentially and 8.4% on a year-over-year basis. Net inflows of $14.7 billion during the quarter were better than our expectations, as well as the positive $2.4 billion quarterly run rate we've seen for net flows at T. Rowe Price since the end of the 2008-09 financial crisis. Target-date funds saw an uncharacteristic $200 million in outflows during the second quarter, with most of the positive flows actually coming from the firm's subadvisory and separate account portfolios.

Even though average AUM was up 8.4% year over year during the June quarter, T. Rowe Price reported a 1.4% increase in revenue when compared with the prior-year's period, due to product mix shift and a decline in the firm's effective fee rate to 0.456% from 0.463% during the second quarter of 2019. First-half top-line growth of 5.7% was much better than our full-year forecast, even after adjusting for a difficult back half of the year (as the firm faces higher AUM and revenue hurdles). As for profitability, adjusted GAAP operating margins of 43.8% during the first two quarters of 2020 were about 170 basis points higher than the year-ago period, as expenses rose at a slower rate than revenue during the first half of the year. Our current five-year forecast (which we may need to revise upward) calls for operating margins in a 38% to 40% range, as the firm continues to make upfront investments in key regions and channels to help drive growth (and is likely to continue to take advantage of its better margin profile relative to peers to make additional investments that will help spur organic growth).

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.