T. Rowe Price Falls as Firm Cuts Fees on Some Mutual Funds

  • Firm ‘not immune’ from pricing pressures affecting industry
  • T. Rowe had net outflows from U.S. equity in the first quarter

Money manager T. Rowe Price Group Inc. fell the most in three months after the company said it cut fees on some of its mutual funds. 

T. Rowe, in a statement accompanying its release of first-quarter earnings Tuesday, said it “regularly assesses the competitiveness of such fees and will continue to make adjustments as deemed appropriate.” The reductions, which were not spelled out, were part of the reason its investment-advisory revenue grew more slowly than assets under management, the Baltimore-based firm said. 

“This demonstrates that they are not immune to the pricing pressure in the industry,” said Macrae Sykes, an analyst with Gabelli & Co. 

Active managers such as T. Rowe Price have seen their revenue squeezed as investors shift money from funds run by stock pickers to low-cost products that track indexes. The firm attracted $700 million in investor cash in the first quarter, but had net outflows in U.S. equity, a development Chief Executive Officer William Stromberg attributed to clients reallocating to passive products.

“We are always paying attention to the competitiveness of our products,” Brian Lewbart, a company spokesman, said about the fee cuts in an interview.

In November the firm reduced the management fee on its $33.5 billion New Income Fund by about six basis points, Lewbart said. It also cut the cost of its $4.9 billion T. Rowe Price Short-Term Bond Fund by five basis points, he said. Lewbart didn’t provide a complete list of funds on which fees were reduced. A basis point is equal to .01 percentage point.

The firm’s shares fell 4.8 percent to $69.16 at 11:32 a.m. in New York trading, the biggest intraday decline since January, according to data compiled by Bloomberg. By comparison, the 18-member S&P index of asset managers and custody banks fell less than 1 percent.

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