PRICE T ROWE GROUP INC Q3 FY2024 earnings call

• AUM stood at $1.63T, up 3.9% from June 30 despite net outflows.
• Encouraging signs: expanding active ETF franchise, deepening retirement leadership with new solutions.
• Investment performance: Equity, ETF, fixed income, and alternative strategies had mixed results but some top quartile performances.
• Net outflows: $12.2B in Q3, expected to rise in Q4; on track to reduce net outflows in 2024 excluding VA termination.
• Launched new products: technology ETF, personalized retirement manager, managed lifetime income; notified of a custom glide path win.
• OLEND had its first close, increasing unfunded capital commitments by $3B; weighted net pipeline grew quarter-over-quarter.

T. Rowe Price closed the third quarter with $1.63 trillion in assets under management (AUM), up 3.9% from June 30th despite $12.2 billion in net outflows. In the equity franchise, several strategies were top quartile for 1, 3, and 5-year periods. The ETF franchise had top quartile performance for certain time periods. Fixed income strategies like muni-strategies, floating rate, and ultra short-term bond ETFs were top quartile. Alternative strategies had positive returns but some segments lagged. Net outflows totaled $12.2 billion in Q3, expected to increase in Q4 due to seasonality and a large VA termination. Excluding the VA termination, 2024 net outflows are estimated to be less than half of 2023 levels. The ETF business is expanding, new retirement solutions like personalized retirement manager and managed lifetime income were launched, and there was a custom glide path win expected next year. Unfunded capital commitments increased by $3 billion due to the first close of OLEND.

• Expect further net outflows in Q4 due to seasonality and VA termination.
• Excluding VA, 2024 net outflows are estimated to be less than half of 2023 levels.
• 2025 expected stronger growth in retirement date funds, alternatives, ETFs, and SMAs; opportunities in fixed income and insurance.
• 2024 adjusted operating expenses, excluding carried interest, are expected to be 6%-8% over 2023; Q4 expenses may increase due to seasonality.

• Net outflows in Q4 expected due to seasonality and VA termination.
• Regulatory uncertainty regarding private market allocations in target date funds.
• VA business trends not expected to change meaningfully, leading to higher outflows.

Q: Alex Blostein from Goldman Sachs asks about organic growth excluding VA sub-advisory outflows and 2025 expectations.

A: Rob Sharps responds that outside VA, Q4 outflows are consistent with seasonal patterns, expects sizable improvement in 2025 with positive flows, and highlights progress in active equities and retirement date funds.

Q: Michael Cyprys from Morgan Stanley inquires about the retirement market, new products, and custom Glide Path.

A: Rob Sharps talks about custom Glide Path being a small fee-based opportunity, momentum in retirement offerings like personalized retirement manager and managed lifetime income, and their launch on the recordkeeping system.

Q: Benjamin Budish from Barclays Capital asks about private credit and fixed income in insurance.

A: Rob Sharps says fixed income in insurance includes opportunities in investment-grade corporate credit and private credit, and OHA closed its first senior private lending fund with increased capital commitments.

Q: Dan Fannon from Jefferies asks about institutional backlog.

A: Rob Sharps states the weighted pipeline increased quarter-over-quarter despite the VA termination, with broad-based opportunities in active equity, structured research, fixed income, and retirement date funds.

Q: Ken Worthington from JPMorgan asks about ETF franchise expansion and distribution costs.

A: Rob Sharps says ETFs reach new buyers and have incremental opportunities, with distribution economics similar to open-ended funds but some cannibalization in certain strategies.

Q: Craig Siegenthaler from Bank of America asks about Managed Lifetime Income's cost and return math.

A: Rob Sharps says the product is well-designed with a QLAC, and Linsley Carruth mentions it's designed to balance risk and cost trade-off with a small portion of assets.

Q: Glenn Schorr from Evercore ISI asks about private market allocations in target date funds.

A: Rob Sharps says regulatory clarity is needed, and once available, T. Rowe Price is well-positioned to incorporate private market alternatives with partnerships and proprietary options.

Q: Patrick Davitt from Autonomous Research asks about VA client base stickiness.

A: Jen Dardis and Rob Sharps explain that the rest of the sub-advisory business (wealth and retirement) doesn't face the same pressure as VA, with different trends.

Q: Brennan Hawken from UBS asks about Q3 performance hit and actions.

A: Rob Sharps notes a momentary soft quarter due to market rally, confident in research platform and portfolio managers, expecting improvement as 2022 poor performance period rolls off.

Q: Mike Brown from WFS asks about 2025 expense growth and investments.

A: Jen Dardis says 2025 expense growth planning aligns with revenue growth, with investments in ETFs, marketing, alternatives, and efficiency.