T. Rowe Price Group on Wednesday reported $614 billion in assets under management as of June 30, down 0.6% from the previous quarter but 13.3% higher than a year earlier.
Net outflows were $8 billion in the second quarter, compared with net inflows of $3.3 billion in the first quarter. T. Rowe's earnings statement attributed the outflows to “a small number of large institutional and intermediary clients that changed their investment objectives or repositioned their strategy allocations.”
Market appreciation and income totaled $4.6 billion.
“Despite the outflows we have experienced from certain institutional clients, our ability to win new business and our active pipeline for new institutional accounts remain in line with previous years,” James A.C. Kennedy, CEO and president, said in the earnings release.
Mutual fund assets totaled $379.5 billion in the latest quarter, an increase of 0.7% from the quarter ended March 31 and up 18% from the previous year.
As of June 30, $101.4 billion was in T. Rowe Price's target-date portfolios — $89.4 billion in target-date funds and $12 billion in target-date trusts. Total target-date AUM was up 3% from the first quarter and up 28.4%from a year earlier.
Net income for the quarter came to $247.8 million, a 2.4% increase from the previous quarter and 19.8% higher than the year-earlier period. Revenue totaled $854.3 million, up 4.7% from three months earlier and up 15.9% from the previous year.
The outflows marked the seventh time in the past eight quarters that institutional flows were negative, analyst Daniel Fannon at Jefferies & Co. said in a note to clients.
“The institutional outflows this quarter reflect a continued shift in investment objectives and allocation strategies from a few large institutional customers domiciled outside the U.S.,” Mr. Fannon wrote. “We do not see this redemption headwind abating in the near term despite continued improvement in… (T. Rowe Price's) international fund performance.”
William Katz, analyst at Citigroup Global Markets, said in a client note that T. Rowe management told him about 90% of the outflows came from “a handful of sovereign wealth fund clients that ironically rotated away from equities for other uses, even as performance is strong and markets are trending higher. As such, the underlying trends are better than the stated results.”