T. Rowe Price Group, Inc. · NASDAQ:TROW
T. Rowe Price — Investor Day (February 2017)
58 slides from T. Rowe Price's investor day presentation, Feb 2, 2017
Slide 1: T. Rowe Price Overview
T. ROWE PRICE OVERVIEW T. Rowe Price Investor Day February 2, 2017 William J. Stromberg President and CEO Welcome everyone, and thank you for coming today. We are here to provide an update on T. Rowe Price and our strategic priorities. ̶ From August 2015 through June 2016, we conducted a thorough
Slide 2: Forward-looking statements
Forward-looking statements This presentation, and other statements that T. Rowe Price may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to T. Rowe Price’s future financial or business performance, strategies, or expectat
Slide 3: Agenda
Agenda Opening and T. Rowe Price Overview William J. Stromberg, President and CEO Product Overview Robert Higginbotham, Head of Global Investment Services Multi-asset Investment Capabilities Sebastien Page, Head of Asset Allocation Individual and Retirement Plan Services Scott David, Head of Individ
Slide 4: A Very Successful Past Since Our 1986 IPO
A Very Successful Past Since Our 1986 IPO Annualized Growth Rates Since IPO 13% Assets Under 14% 16% Net Operating Management Revenue Income 17% 23% Diluted Dividends 19% Total Stock Earnings per per Share** Return Share* *U.S. GAAP **Split adjusted Numbers through December 31, 2016. 4 We are please
Slide 5: Many Factors Contributed to This Healthy Growth
Many Factors Contributed to This Healthy Growth Consistently Strong Mutual Fund Defined Contribution Investment Industry Growth Evolution Performance New Intermediary Early Entrant Our Unique Distribution Practices Into Retirement Culture Date Funds 5 Factors contributing to growth: Consistently s
Slide 6: Diversified by Assets and by Client Type
Diversified by Assets and by Client Type Asset Class* Client Type Global Equity Institutional 7% Investors U.S. 20% U.S. Fixed Intermediaries Income 47% 14% Retirement – Global Fixed Full-Service Income Recordkeeping 1% 13% U.S. Equity 49% Asset Individual EMEA/APAC Allocation Investors Intermediari
Slide 7: How We Access Clients
How We Access Clients T. Rowe Price U.S. EMEA & APAC U.S. Plan Financial Financial Global Direct Sponsors Intermediaries Intermediaries Institutions Individual Investors 7 We access clients across the globe through five different channels: Direct – 1.4+ million individual investors U.S. Plan Spo
Slide 8: How We Are Organized to Access Clients
How We Are Organized to Access Clients T. Rowe Price IRPS USI GIS U.S. EMEA & APAC U.S. Plan Financial Financial Global Direct Sponsors Intermediaries Intermediaries Institutions Individual Investors IRPS: U.S. Individual and Retirement Plan Services | USI: U.S. Intermediaries | GIS: Global Investme
Slide 9: The New Realities Are Clear
The New Realities Are Clear Aging Intermediaries Millennials and Regulatory Population Using New Vehicles Digital Technology Change Passive and Alternative Investments 9 The marketplace is evolving quickly Aging population is shifting demand from equities to income-oriented solutions. Intermedia
Slide 10: T. Rowe Price Future Vision
T. Rowe Price Future Vision We Are Executing on a Longer-Term Plan Premier active asset manager Integrated investment solutions provider Global partner for retirement-oriented investors More globally diversified asset manager Destination of choice for top talent More agile company Stro
Slide 11: Active Management Beliefs
Active Management Beliefs We believe that active and passive will coexist and complement each other. Given the need for returns around the world, we believe there will always be demand for good active management. We also believe that certain characteristics of active firms increase their odds of out
Slide 12: Active Management Is Hard, We've Consistently Done It Well
Active Management Is Hard, We’ve Consistently Done It Well T. Rowe Price has performed consistently well versus benchmarks, across broad product offerings, over the long term — including our important U.S. equity and target date offerings: U.S. Equity: Over the last 20 years, 75% of active T. Rowe P
Slide 13: Significant Opportunities to Extend Our Core Business
Significant Opportunities to Extend Our Core Business Products Distribution Technology High-performing but International Digital transformation not-yet-scaled investors Operating scale strategies Traditional Solutions beyond institutional investors target date product Financial advisor
Slide 14: High-Performing, Not-yet-scaled Strategies
High-Performing, Not-yet-scaled Strategies Global Unconstrained Bond Outstanding Performance Over Two Years (Since Inception) AUM: $1.7 Billion Capacity: $10 Billion Global Focused Growth Equity Outstanding Performance Over Five Years (Since PM Inception) AUM: $5 Billion Capacity: $25 Bi
Slide 15: Multiyear Investment – Expense Growth Rate Peaks in 2017
Multiyear Investment – Expense Growth Rate Peaks in 2017 $3,500 5%–6% Adjusted Operating Expenses* ($M) $3,000 6%–7% 8%–9% 5% $2,500 New Investment (High) New Investment (Low) $2,000 Baseline Growth (Net 4%) Baseline (2016) $1,500 $1,000 $500 $-0 2016 2017P 2018P 2019P 15 Our model’s financial assum
Slide 16: Returning Capital to Stockholders
Returning Capital to Stockholders 1 Year 5 Years (millions) (millions) Dividends $541 $3,063 Recurring $541 $2,282 Special — $781 Share Repurchases $677 $2,230 TOTAL $1,218 $5,293 Percent of Earnings 100% 95% As of December 31, 2016. 16 While we have been reinvesting in our business for t
Slide 17: Strategic Investments to Grow and Diversify
Strategic Investments to Grow and Diversify Investment Management Excellence 17 We are responding to a more challenging environment by investing in key initiatives that will broaden and strengthen our capabilities. Broadening product offerings and vehicles Strengthening distribution across all c
Slide 18: Product Capabilities
PRODUCT CAPABILITIES T. Rowe Price Investor Day February 2, 2017 Robert Higginbotham, Head of Global Investment Services T. Rowe Price Investor Day • February 2, 2017 18
Slide 19: Key Dimensions of Product
Key Dimensions of Product Investment + Vehicle = Product Market Requirements 100+ 10+ 54 Investment Vehicle Types Market Segments Disciplines Equity Fixed Income Multi- asset 290+ 4 16 Funds Channels Countries 480+ 40+ Share Regulators Classes $1.3 b Seed Capital Product is the nexus of value crea
Slide 20: Market Trends in Product
Market Trends in Product North America net flow growth and revenue margin by asset class1 North America includes Canada and the United States of America 70 Bubble size = 2015 AUM Alternatives 60 Active Core Passive Equity Multi-asset Active 2015 Revenue (bps) 50 Alternatives 40 Active Specialty Equi
Slide 21: Market Trends Affecting Product
Market Trends Affecting Product Key Product Increased Pricing Regulation Demand Drivers Tailoring and Policy Key Product Demand Drivers – We have existing products, recent launches, and new product plans to continue to meet these: — Separation of alpha and beta — Absolute return — Income — Diversi
Slide 22: T. Rowe Price Investment Capability Development
T. Rowe Price Investment Capability Development 1950s 1960s 1970s 1980s 1990s 2000s 2010s U.S. Equity Global Equity U.S. Fixed Income Global Fixed Income Asset Allocation We have a long track record of developing products to meet the developing needs of our customers In the 1980s we had a strong
Slide 23: Mapping Investment Capabilities to Client Needs
Mapping Investment Capabilities to Client Needs Client Need Income – Higher- Domestic Global Solutions All Asset Conviction for EMEA Fixed Absolute and Classes Strategies and APAC Income Return Retirement Investment Capabilities Income Absolute Return Alpha and Beta Separation Diversification Home M
Slide 24: Mapping Vehicles to Client Needs
Mapping Vehicles to Client Needs 2013 – 2016 Future Geography Pre-2013 Vehicles Developments Developments Global Separate Account Subadvisory U.S. Retail Mutual Funds Model Delivery Institutional Mutual Funds Retail SMA Common Trust Funds Pooled Pension Canada Funds UK SICAV OEIC NURS, ACS EMEA SICA
Slide 25: Summary
Summary Market trends Significant High-quality Future plans benefit global, platform in active is a aligned to scale players place for growth durable theme client needs like T. Rowe Price T. Rowe Price Investor Day • February 2, 2017 25
Slide 26: Multi-Asset Investment Capabilities
MULTI-ASSET INVESTMENT CAPABILITIES T. Rowe Price Investor Day February 2, 2017 Sebastien Page, CFA Head of Asset Allocation T. Rowe Price Investor Day • February 2, 2017 26
Slide 27: From a Position of Strength
From a Position of Strength $250 $239 billion $200 Asset Allocation AUM $150 billions $100 $50 $0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 As of December 31, 2016. 27 We are approaching our strategic initiatives from a position of strength. The capabilities are already
Slide 28: Continued Strong Performance Is Critical for Success
Continued Strong Performance Is Critical for Success T. Rowe Price Asset Allocation Funds 1 Year 3 Years 5 Years 10 Years Percent of Funds Beating the Morningstar Median 49% 97% 95% 95% Percent of Funds Beating the Lipper Median 53% 97% 95% 95% As of December 31, 2016. Sources: Morningstar Direct an
Slide 29: We Have the Fundamentals in Place
We Have the Fundamentals in Place Strategic Tactical Portfolio Asset Design Allocation Active Security Selection 29 Leveraging the investment process below, we are delivering multi-asset advice, portfolio diagnostics, and customized investment solutions to clients, financial advisors, and intermedia
Slide 30: An Opportunity to Capture Global Market Share
An Opportunity to Capture Global Market Share Outside of U.S. Institutional Non- U.S. 42% institutional 48% 58% 52% Net New Flows Into Global Total Global AUM Multi-asset Products (2016–2020) ~$70 trillion $2.7 trillion Source: McKinsey’s Performance Lens Global Growth Cube. Used with permission. 30
Slide 31: Focusing on Three Key Initiatives
Focusing on Three Key Initiatives Maintain Expand Broaden Retirement Global Solutions Leadership Presence Capabilities 31 Our overarching goals are to expand our multi-asset presence globally, while maintaining our leadership in our retirement franchise. Our brand is consistent with being a “trust
Slide 32: Multi-asset Investment Increasing
Multi-asset Investment Increasing People Technology Product Enhanced and Innovative Capabilities 32 Investment in multi-asset increasing to accommodate shifting client objectives/needs. More than doubling the size of our dedicated multi-asset investment professional staff People Adding dedicated
Slide 33: Key Takeaways
Key Takeaways Position of Headwinds Opportunities Time for Strength Present to Diversify Execution 33 T. Rowe Price Investor Day • February 2, 2017 33
Slide 34: Individual and Retirement Plan Services
INDIVIDUAL AND RETIREMENT PLAN SERVICES T. Rowe Price Investor Day February 2, 2017 Scott David, Head of Individual and Retirement Plan Services T. Rowe Price Investor Day • February 2, 2017 34
Slide 35: U.S. Individual & Retirement Plan Services
U.S. Individual & Retirement Plan Services T. Rowe Price U.S. EMEA & APAC U.S. Plan Financial Financial Global Direct Sponsors Intermediaries Intermediaries Institutions Individual Investors 35 T. Rowe Price Investor Day • February 2, 2017 35
Slide 36: Investing for the Future
Investing for the Future Products Distribution IRPS Technology 36 Individual and Retirement Plan Services brings together: Products Distribution Technology Investment capabilities Client segments Operating scale Historically strong Products and vehicles Digital transformation performance
Slide 37: Retirement Plan Services Business and Opportunities
Retirement Plan Services Business and Opportunities Projected Industry AUM CAGR 2015–2020 3,600 plans 6.5%– 1.9 million participants 4.5%– 6%–7% 7.5% 5.5% $156 billion AUA 0.5%–3% $100 billion AUM Large & Mega Medium Small & Micro Education T. Rowe Price data as of December 31, 2016. Industry plan c
Slide 38: Capturing Opportunities in Retirement Plan Services
Capturing Opportunities in Retirement Plan Services Products Distribution Technology Capture the asset Retain current Operational scale management clients Plan sponsor digital opportunity Invest in talent to experience accelerate growth Participant digital in key segments experience 38 W
Slide 39: Individual Investors Business and Opportunities
Individual Investors Business and Opportunities 1.4 million clients Projected Distribution Channel Net Flows CAGR 2016–2020 $147 billion II total AUM 2%–5% 2%–4% 58% II retirement AUM 0%–1% ~0% Wirehouse Regional Direct/ RIA/IFA** BDs/Banks Discount* T. Rowe Price data as of December 31, 2016. Proje
Slide 40: Capturing Opportunities With Individual Investors
Capturing Opportunities With Individual Investors Products Distribution Technology No-load mutual funds Expand our service Operational scale Spectrum of advice capabilities in key Digital experience capabilities segments Launch T. Rowe Launch T. Rowe Price® ActivePlus Price® ActivePlus
Slide 41: Digital Transformation Is Critical
Digital Transformation Is Critical Personalized Goal-based Simple Efficient 41 Our digital transformation will touch all parts of the firm, beginning with Retirement Plan Services and Individual Investors: Clients require engaging personalized experiences Goal-based interactions help clients to
Slide 42: U.S. Intermediaries
U.S. INTERMEDIARIES T. Rowe Price Investor Day February 2, 2017 George Riedel, Head of U.S. Intermediaries T. Rowe Price Investor Day • February 2, 2017 42
Slide 43: U.S. Intermediaries
U.S. Intermediaries T. Rowe Price U.S. EMEA & APAC U.S. Plan Financial Financial Global Direct Sponsors Intermediaries Intermediaries Institutions Individual Investors T. Rowe Price U.S. Intermediaries Business A unique institutional approach to intermediary distribution Built with discipline ov
Slide 44: The U.S. Intermediary Landscape
The U.S. Intermediary Landscape Broker/Dealers Banks Registered Investment Advisors Platform Services Defined Contribution Retirement Plans (investment only) Insurance Where We’ve Come From Successful, well-established client coverage teams Long-tenured relationships with key intermediary platfo
Slide 45: U.S. Intermediaries Market Growth
U.S. Intermediaries Market Growth $380b $400b +21% T. Rowe Price U.S. $200b $85b Intermediaries AUM CAGR 2008-2016 $0b (billions) 2008 2009 2010 2011 2012 2013 2014 2015 2016 $20t $18.0t $9.8t +8% U.S. Intermediaries $10t Market AUM CAGR 2008-2016E (trillions) $0t 2008 2009 2010 2011 2012 2013 2014
Slide 46: Supporting Client Transition to Advisory
Supporting Client Transition to Advisory U.S. Intermediary Market AUM T. Rowe Price U.S. Intermediaries Nonretirement AUM 28% 40% ADVISORY Brokerage 21% BROKERAGE 72% 60% Advisory 79% 2007 2015 Industry AUM by account type from 2007 to 2015 T. Rowe Price U.S. Intermediaries Nonretirement AUM as of D
Slide 47: Poised to Benefit From the New Fiduciary Landscape
Poised to Benefit From the New Fiduciary Landscape Legacy U.S. Intermediary Paradigm Commission- Open Advisor Wholesaler- Digital/Web Rollover Asset Class Based, Architecture Fragmentation Driven Advertising Capture & Expertise Brokerage Wealth Advisor Retirement Platforms Sales Planning Fee-Based,
Slide 48: Enabled for Growth, Execution Focused
Enabled for Growth, Execution Focused Deliver the Deepen Support Continue Complete Advisor Transition to Invest Firm Relationships to Advisory in Talent Our Execution Priorities Continue market-leading home office engagement Deliver multi-asset capabilities and insights Deploy disciplined, dig
Slide 49: Global Investment Services
GLOBAL INVESTMENT SERVICES T. Rowe Price Investor Day February 2, 2017 Robert Higginbotham, Head of Global Investment Services T. Rowe Price Investor Day • February 2, 2017 49
Slide 50: Global Investment Services
Global Investment Services T. Rowe Price U.S. EMEA & APAC U.S. Plan Financial Financial Global Direct Sponsors Intermediaries Intermediaries Institutions Individual Investors T. Rowe Price Investor Day • February 2, 2017 50
Slide 51: Opportunity
Opportunity North America Japan Developed Asia Emerging Markets $2,203b Markets $4,147b $869b $249b $291b $263b $201b $2,579b $33,817b AUM $3,421b AUM $5,412b AUM Western Europe Australia $1,465b Other Emerging $3,354b Markets $906b $376b $776b $343b $37b $135b $59,225b AUM $8,896b AUM $20,433b AUM
Slide 52: Market Trends
Market Trends Continued DC Exploration of Institutionalization Regulatory Growth in More In-House Asset of the Buying Pressure Developed Management Process Markets We see continued growth in DC, particularly in the nearer term in the more developed retirement markets. T. Rowe Price has significant
Slide 53: Phase 1: 2000–2013
Phase 1: 2000–2013 Primarily Institutional (incl. DC) Combined Intermediary & Institutional Phase 1: 2000 to 2013 Continue incremental investment in core institutional business Easier entry, sophisticated large buyers “Institutional” sales and service model High leverage and operating efficien
Slide 54: Phase 2: 2014
Phase 2: 2014 Hong Kong Singapore Primarily Institutional (incl. DC) Primarily Intermediary Combined Intermediary & Institutional Phase 2: 2014 Scale up and broaden geographic range of institutional and intermediary businesses Extension of existing sales model Build revenue to fund future growth
Slide 55: Phase 3: Future
Phase 3: Future Hong Kong Singapore Primarily Institutional (incl. DC) Combined Intermediary & Institutional Phase 3: Future Develop capabilities to reach broader base of distribution opportunities High-quality revenue for long-term growth More complex infrastructure, operations, marketing Bui
Slide 56: Summary
Summary Disciplined Positive Core T. Rowe Price global growth momentum capabilities scale a key aligned to in recent new already in place competitive market potential businesses for growth advantage T. Rowe Price Investor Day • February 2, 2017 56
Slide 57: The Plan, The Capabilities, The Resources
The Plan The Capabilities The Resources T. Rowe Price has the plan, capabilities, and resources to meet the evolving needs of our clients and the asset management marketplace Execution of our plan is designed to Enhance our ability to deliver value to clients across the globe Allow us to grow an
Slide 58: Reconciliation Between GAAP and Adjusted
Reconciliation Between GAAP and Adjusted 2016 (millions) Operating Expenses, GAAP Basis $2,489.5 Non-GAAP Adjustments Expenses of consolidated sponsored investment (6.5) portfolios, net of elimination of the firm’s related management fee1 Nonrecurring charge related to Dell appraisal matter2 (66.2)