Shares of T. Rowe Price advanced after the asset manager reported better-than-expected earnings for the first quarter and signaled progress toward reversing persistent outflows. Despite continued net redemptions—primarily from U.S. equity mutual funds—CEO Rob Sharps expressed cautious optimism about a longer-term return to organic growth.
The firm posted adjusted earnings of $2.23 per share, surpassing analyst estimates by $0.10, according to FactSet. That result, while down slightly from $2.38 a year ago, was welcomed by investors. The stock rose nearly 3% on the day, outperforming both financial peers and the broader S&P 500, which gained 1.17%.
Still, T. Rowe faces significant challenges. The company has seen its stock price decline more than 20% year-to-date, compared with a 3.3% drop for the S&P 500. Revenue for the quarter was flat, coming in at $1.76 billion versus $1.75 billion a year earlier, slightly missing consensus expectations of $1.78 billion.
Net outflows remained a headwind, with $8.6 billion in client redemptions during the quarter, primarily from U.S. equity strategies. While that figure represents an improvement from the $19.3 billion withdrawn in Q4, it is slightly worse than the $8 billion in outflows reported a year ago. Total assets under management ended the quarter at $1.57 trillion, a 1.6% increase year-over-year.
On a call with analysts, Sharps acknowledged that inflows are unlikely to turn positive in 2025 but emphasized the firm is taking “another step back in that direction.” He pointed to pockets of strength, including momentum in fixed income, growing traction in ETFs, and expansion in retirement solutions.
T. Rowe Price is hardly alone in facing these challenges. Across the asset management industry, active mutual funds—especially those focused on U.S. equities—are losing ground to lower-cost, passive ETFs. This structural shift has driven significant pressure on legacy open-end fund flows.
Nonetheless, Sharps stressed that T. Rowe’s strategy is evolving to meet these headwinds. “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.
ETFs are one clear area of growth. The firm now offers 19 ETFs, with plans to introduce additional strategies. Sharps noted that achieving scale in these vehicles is critical, particularly because wirehouses and custodians often require a threshold level of AUM before approving new products for platform distribution. The company’s ETF franchise is beginning to reach that threshold, a positive signal for future flows.
The firm is also positioning itself to capitalize on rising demand for alternative investments. In response to an analyst question, Sharps confirmed that T. Rowe Price is engaged in “substantial discussions” with alternative investment managers about potential partnerships. The goal is to co-develop vehicles that offer attractive risk-adjusted returns, appropriate liquidity structures, and competitive pricing.
While traditionally reserved for institutions and ultra-high-net-worth investors, alternative investments—such as private credit and private equity—are increasingly being adapted for broader client access. Sharps echoed a growing view that these solutions will eventually find their way into the defined contribution and mass affluent segments.
“In my mind there’s no question that it eventually will happen,” Sharps said. “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.”
This shift represents a key growth opportunity for asset managers that can navigate the operational and regulatory complexities of bringing alternatives to a broader client base. As RIAs and broker-dealers look to expand their value proposition, access to differentiated sources of return has become more important—especially in an environment where traditional asset classes are producing more muted long-term expectations.
T. Rowe’s interest in alternatives aligns with broader industry trends. Several large firms have announced partnerships between traditional asset managers and alt-focused firms, including co-branded offerings and private credit funds made available through model portfolios or retirement plan platforms.
For wealth managers, this means clients may increasingly encounter institutional-caliber investments packaged in more accessible formats. However, Sharps was clear that T. Rowe will be selective in its approach. “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.
Beyond alternatives and ETFs, the firm continues to emphasize retirement solutions as a pillar of growth. Its long-established position in the defined contribution market gives it a distribution edge, particularly as plan sponsors seek more tailored investment options. T. Rowe has also expanded its model delivery capabilities, helping advisors construct portfolios that integrate mutual funds, ETFs, and custom retirement income solutions.
The backdrop, however, remains challenging. Investors continue to shift allocations away from higher-cost actively managed funds, and the company is still contending with fee pressure, limited revenue growth, and mixed performance across some core equity strategies. Sharps acknowledged these realities but reiterated that T. Rowe’s business model is resilient and adapting.
“We have a lot of reasons to be optimistic over the long term,” he said. “We’re building capabilities in areas that matter to our clients—ETFs, model portfolios, alts, retirement—and we’re doing so while maintaining investment integrity.”
For advisors and RIA firms, the evolution of a legacy active manager like T. Rowe Price offers a window into how incumbents are reshaping themselves for a new investment landscape. As client expectations shift toward more tax-efficient, liquid, and diversified investment vehicles, firms that can balance innovation with fiduciary rigor may be best positioned to regain traction.
Sharps’s outlook for 2025, while tempered, suggests a transition year—one in which progress may be measured less by net flows and more by strategic alignment and product innovation. With $1.57 trillion in AUM and strong brand equity in retirement and growth strategies, T. Rowe retains the scale to compete—but execution will be critical.
In the near term, the firm’s performance will hinge on continued improvement in its fixed income franchise, broader adoption of its ETF lineup, and successful entry into the alternatives market through thoughtful partnerships. Advisors will be watching closely to see how effectively the company navigates this transition, particularly as competitive pressures remain elevated and market volatility challenges investor sentiment.
T. Rowe Price is not yet back in growth mode, but it is actively retooling its product shelf and distribution strategy. For wealth managers seeking active partners that understand the evolving needs of clients—from retirement income to access to private markets—the firm’s ongoing transformation bears monitoring.
