T. Rowe Price Group, Inc. · NASDAQ:TROW
T. Rowe Price — Investor Day (February 2020)
72 slides from T. Rowe Price's investor day presentation, Feb 19, 2020
Slide 1: Investor Day February 19, 2020
T. Rowe Price Group, Inc. INVESTOR DAY February 19, 2020 A copy of this presentation, which includes additional information, is available at troweprice.gcs-web.com/investor-relations. Data as of December 31, 2019, unless otherwise noted.
Slide 2: Opening and T. Rowe Price Overview
Opening and T. Rowe Price Overview Bill Stromberg PRESIDENT AND CEO T. ROWE PRICE GROUP, INC. INVESTOR DAY 2020
Slide 3: 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 of 1995, with respect to T. Rowe Price’s future financial or business performance, strategies, or
Slide 4: Agenda
Agenda Opening and T. Rowe Price Overview Bill Stromberg PRESIDENT AND CEO Investments, Performance, and Capabilities Rob Sharps HEAD OF INVESTMENTS AND GROUP CIO Multi-Asset Overview Sébastien Page HEAD OF GLOBAL MULTI-ASSET Global Distribution Robert Higginbotham HEAD OF GLOBAL DISTRIBUTION AND PR
Slide 5: A global asset management firm focused on client success
A global asset management firm focused on client success Independent Investment Organization Founded in 1937 ▪ Focused solely on investment management and related services Alignment of Interests 1.2 trillion USD ▪ Publicly owned company with substantial employee ownership in assets under management¹
Slide 6: Culture is central to our long-term success
Culture is central to our long-term success Investment Excellence The heart of everything we do Clients First We succeed if our clients succeed Long-Term Collegiality and Collaboration Leveraging our best ideas creates Success competitive advantage Trust and Mutual Respect Essential for a strong com
Slide 7: Diversity & Inclusion are critical to our culture
Diversity & Inclusion are critical to our culture Our long-held reputation for excellence and reliability is made possible by the diversity of backgrounds, perspectives, skills, and experiences of our associates. To bring Diversity & Inclusion to life, we: Retain & attract Include & Develop our Hold
Slide 8: Our vision is to be a premier global active asset manager
Our vision is to be a premier global active asset manager By executing on important multiyear strategic objectives More global and diversified asset Strong process orientation and effective manager internal controls, while becoming a more adaptive and agile company Global partner for retirement inve
Slide 9: Healthy AUM growth over time
Healthy AUM growth over time Driven by Market Returns + Alpha + Net Cash Inflows Assets Under Management 2009–2019 ($billions) Total $1,207 Multi-Asset $991 AUM 10-YR CAGR $962 $811 Total AUM $747 $763 $577 $692 12% $482 $490 $391 $360 $293 $286 Multi-Asset $213 $239 $194 $68 $89 $97 $126 $165 18% 2
Slide 10: Consistent results and long-term orientation
Consistent results and long-term orientation $10.00 5 10 20 30 $8.70 years years years years $8.00 Diluted EPS Net revenues 7% 12% 9% 13% (GAAP) $6.00 Diluted EPS 14% 18% 12% 15% (GAAP) $4.00 $3.04 Dividend Dividends 12% 12% 14% 17% $2.00 per Share Annualized total stock 11% 12% 12% 17% $0.00 return
Slide 11: Better fundamental growth than the S&P 500
Better fundamental growth than the S&P 500 5-Year Revenue, Earnings, and Dividend Growth T. Rowe Price 13.8% S&P 500 11.6% 8.1% 7.1% 6.4% 3.9% Revenue Earnings per Share (GAAP) Dividends per Share Data as of December 31, 2019. Sources: T. Rowe Price Company Filings; S&P via FactSet (refer to page 72
Slide 12: Industry challenges continue
Industry challenges continue Market Context Impact on Asset Managers ▪ Passive investments continue to take share from active ▪ Higher bar on investment performance for active managers Aging population Low interest rate ▪ Increased prevalence of alternatives around the globe environment ▪ Continued
Slide 13: Scale positions us well to address industry challenges
Scale positions us well to address industry challenges But investment performance guides our strategic decision-making Benefits of scale… ▪ Investment platform – Deep, global, collaborative investment teams generate insights across asset classes. Means to pay for talent and external research while i
Slide 14: Good progress on our 2019 strategic priorities
Good progress on our 2019 strategic priorities ▪ Maintained strong longer-term relative investment performance ▪ Increased investment professional headcount to 661 worldwide, with 32% outside the U.S. Investment 1 ▪ Launched six new strategies and 20 new products Capabilities ▪ Received exemptive re
Slide 15: Our 2020 priorities
Our 2020 priorities ▪ Deliver excellent investment results ▪ Attract and retain talent while further advancing our Diversity & Inclusion strategy ▪ Build/launch new investment strategies and vehicles to meet client needs (e.g., ETFs) and diversify our business ▪ Enhance our standing as a retirement
Slide 16: Investments, Performance, and Capabilities
Investments, Performance, and Capabilities Rob Sharps HEAD OF INVESTMENTS AND GROUP CIO T. ROWE PRICE GROUP, INC. INVESTOR DAY 2020
Slide 17: Investment performance overview
Investment performance overview Performance across asset classes is strong overall versus both active peers and benchmarks Outperforming Top Morningstar Outperforming U.S. mutual funds Morningstar median1 quartile1 benchmark2 3 5 10 3 5 10 3 5 10 Asset Class years years years years years years years
Slide 18: Overall performance—asset-weighted
Overall performance—asset-weighted Asset-weighted results exceed equal-weighted results1 over all time periods Funds outperforming Funds in top Funds outperforming Morningstar median2 Morningstar quartile2 benchmark3 90% 94% 90% 77% 79% 63% 59% 56% 57% 3 years 5 years 10 years 3 years 5 years 10 yea
Slide 19: Long-term benefits of our approach to active management in U.S. equity
Long-term benefits of our approach to active management in U.S. equity Percentage of U.S. equity funds with positive active success rates 3 years 5 years 10 years (205 rolling time periods) (181 rolling time periods) (121 rolling time periods) 89% 89% 89% Annualized, time-weighted excess returns, ne
Slide 20: Performance against peers and benchmarks is strong in Global and International equity
Performance against peers and benchmarks is strong in Global and International equity Morningstar1 vs. Benchmark2 % Outperforming benchmark 87% 100% 86% % Outperforming median 100% 68% 70% 70% 64% 60% in Top 48% 41% Quartile in Top in Top Quartile Quartile 0% 0% 3-year 5-year 10-year 3-year 5-year 1
Slide 21: Fixed income performance is stronger in composites
Fixed income performance is stronger in composites Fixed income funds outperforming Fixed income composites outperforming benchmark1 benchmark2 3-year 3-year 5-year 5-year 10-year 10-year 65% 65% 62% 60% 58% 56% 48% 40% 39% 31% 29% 30% Equal-weighted AUM-weighted Equal-weighted AUM-weighted Past per
Slide 22: Multiyear investment to grow our investment capabilities globally
Multiyear investment to grow our investment capabilities globally Investment professional 661 133 10 headcount 2004–2019 76 Global Multi-Asset London/EMEA Tokyo 452 48 Baltimore/U.S. 454 Global Hong Kong 217 Fixed Income 22 7 345 Singapore 15 158 145 International Equity 11 225 109 108 Sydney 80 79
Slide 23: Investing in expanded capabilities
Investing in expanded capabilities T. Rowe Price’s strength in scale Corporate Access ▪ Dedicated in-house capabilities ▪ Supplemental to third-party access ▪ Structuring unique events Equity Data Insights ▪ Improving investment outcomes through data-driven insights ▪ Quantitative research team dedi
Slide 24: Embedding ESG considerations into our investment decisions
Embedding ESG considerations into our investment decisions The Responsible Investing Indicator Model (RIIM) Supply chain (environment) Raw materials R.I. Risk Indicator Energy and emissions Operations Land use Environment Water use Waste Environment General operations Product sustainability End Prod
Slide 25: ESG is integrated into our investment process
ESG is integrated into our investment process Focus of 650+ ESG Engagements in 2019 Environment, social, or ethics only 9% Top 5 Topics by Pillar: Environment Ethics 1. Environmental disclosure 1. Bribery and corruption 2. Product sustainability 2. Lobbying activities 3. GHG emissions 3. Proxy votin
Slide 26: ESG is extending to products
ESG is extending to products ESG SRI Impact Integration Strategies Strategies ▪ Incorporating environmental, ▪ Imposing values-based ▪ Investment is meant to social, and governance factors investment parameters on a effect change either through into investment analysis for portfolio regardless of th
Slide 27: Delivering our investment capabilities through ETFs
Delivering our investment capabilities through ETFs New Offering Right at the Starting Line ▪ Launching semi-transparent active ETFs ▪ As an early provider of semi-transparent active presents an opportunity to help redefine the ETFs, we have demonstrated our commitment to ETF industry providing inno
Slide 28: Scaling outperforming, high-capacity strategies globally
Scaling outperforming, high-capacity strategies globally AUM % 3-year annualized 5-year annualized AUM change excess returns 3-year eVestment excess returns 5-year eVestment Investment strategy ($m) yr./yr. (bps)1 percentile rank2 (bps)1 percentile rank2 Equity U.S. U.S. Dividend Growth Equity $16,8
Slide 29: Investment capabilities
Investment capabilities Expanding our product lineup globally Global Equity Global Fixed Income Global Multi-Asset 2018 ▪ Global Equity Dividend ▪ Asia Credit ▪ Retirement Blend Trusts ▪ SMAs: Large-Cap Core, Equity ▪ Multi-Strategy Total Return Income, International Core, ▪ Custom Target Date Funds
Slide 30: Summary
Summary Evolving Investment capabilities Culture excellence T. R O W E P R I C E G R O U P, I N C . I N V E S TO R D AY 2 0 2 0 30
Slide 31: Multi-Asset Overview
Multi-Asset Overview Sébastien Page HEAD OF GLOBAL MULTI-ASSET T. ROWE PRICE GROUP, INC. INVESTOR DAY 2020
Slide 32: Over years of delivering multi-asset class solutions
Over 25 years of delivering multi-asset class solutions $360b in Assets Under Management 1,2 $400 2015 Retirement I Funds 2016 $350 Global Allocation Fund SICAV 2017 $300 T. Rowe Price® 2010 Assets in $ Billions ActivePlus Real Assets Fund $250 2012 2017 Retirement Income Retirement Trusts 2020 Port
Slide 33: Strong performance and risk-adjusted outcomes
Strong performance and risk-adjusted outcomes Versus Morningstar peers 3-year rolling 5-year rolling 10-year rolling Top quartile Percent of time Retirement Funds 92% 98% were in top quartile 84% Top half Percent of time Retirement Funds were in top half 98% 97% 99% Risk-adjusted outperformance Perc
Slide 34: Investment process and sources of value added
Investment process and sources of value added T. R O W E P R I C E G R O U P, I N C . I N V E S TO R D AY 2 0 2 0 34
Slide 35: Sources of value add have been consistent over time
Sources of value add have been consistent over time Strategic asset allocation1 Tactical asset allocation2 Underlying active management3 Percent of time added value Percent of time added value Percent of time added value 99% 100% 99% 84% 86% 78% 74% 76% 70% 3 years 5 years 10 years 3 years 5 years 1
Slide 36: What it means for investors
What it means for investors Retirement 2030 Strategy vs. S&P Target Date 2030 Index Cumulative growth of $100,000 $468,980 Retirement 2030 Strategy Hypothetical Total Account Value $400,000 $389,571 S&P Target Date 2030 Index $300,000 $200,000 $100,000 $100,000 Initial investment 2002 2006 2010 2014
Slide 37: Continued focus on three key initiatives
Continued focus on three key initiatives Maintain Expand Broaden Retirement Global Solutions Leadership Presence Capabilities T. R O W E P R I C E G R O U P, I N C . I N V E S TO R D AY 2 0 2 0 38 37
Slide 38: Retirement: Expanding our product set
Retirement: Expanding our product set Maintain Retirement More Growth Active Active/Passive Mix Leadership Retirement Retirement Retirement Hybrid Trusts Solutions Consumption Strategies Retirement Replacement Blend Trusts Glide-Path Design Target Target Solutions Target Blend Trusts Balance Strateg
Slide 39: Target date innovation continues
Target date innovation continues Maintain As announced in our February 13 press release Retirement Leadership Adjusting our Adding investment Launching top-level glide paths components pricing T. R O W E P R I C E G R O U P, I N C . I N V E S TO R D AY 2 0 2 0 42 39
Slide 40: Globalization: A growing opportunity
Globalization: A growing opportunity Expand Global Presence Top 1 % We are planting seeds Established local Global Allocation for growth across a Solutions teams in Fund SICAV 3-yr. wide range of markets three countries peer group percentile¹ outside the U.S. +50 % Launched first Growth in Korea Lau
Slide 41: Solutions: Focusing on client needs
Solutions: Focusing on client needs Broaden Solutions Capabilities 1,500+ We are engaging Consultative client Increased flows with clients as a engagements in off-the-shelf trusted advisor across strategies channels and markets 450+ 35 Asset allocation New customized Revitalizing our studies deliver
Slide 42: Our platform is our competitive advantage
Our platform is our competitive advantage Global Equities Fundamental Global U.S. International Global Equity Size and Style Sector Size and Style Emerging Markets Regional and Country ▪ Growth and Value ▪ Large-, Mid-, and Small-Cap ▪ Financial Services ▪ Growth, Core, and Value ▪ Diversified ▪ Eur
Slide 43: Summary
Summary Demonstration Dedication to Pursuit of of leadership performance innovation T. R O W E P R I C E G R O U P, I N C . I N V E S TO R D AY 2 0 2 0 46 43
Slide 44: Global Distribution
Global Distribution Robert Higginbotham HEAD OF GLOBAL DISTRIBUTION AND PRODUCT T. ROWE PRICE GROUP, INC. INVESTOR DAY 2020
Slide 45: We continue to position ourselves against key client trends
We continue to position ourselves against key client trends Key client trends Our positioning Passive investments continuing to take Continuing focus on excellent, active investment share from active, leading to higher bar on management supporting flow momentum investment performance for active mana
Slide 46: How we access clients
How we access clients T. Rowe Price Global Distribution EMEA APAC U.S. U.S. U.S. Americas Intermediaries Intermediaries Direct Bundled DC Intermediaries Institutional & Institutional & Institutional Individual Investors T. R O W E P R I C E G R O U P, I N C . I N V E S TO R D AY 2 0 2 0 49 46
Slide 47: Our diversified access to clients is shown in our AUM
Our diversified access to clients is shown in our AUM Global AUM $1,400 Other Non-U.S. $1,207 $1,200 U.S. Institutional U.S. Bundled DC $83 $17 +12.0% $1,000 U.S. Direct $204 U.S. Intermediaries $128 AUM CAGR $800 $747 $40 $13 $191 2009–2019 $600 $122 $97 $391 $400 $7 $139 $46 $63 $584 $200 $64 $86
Slide 48: Our 2019 results show continued diversified organic growth
Our 2019 results show continued diversified organic growth Percentage of Net Flows by Client Geography Percentage of Net Flows by Channel 100% 150% 100% 50% 50% 0% 0% 2017 2018 2019 -50% 2017 2018 2019 Net Net $14.0b $13.2b $13.2b $14.0b $13.2b $13.2b Flows Flows Americas Global Intermediaries Globa
Slide 49: Key distribution highlights
Key distribution highlights Benefit of Balanced retention Strong retirement Diversified asset Continued strong diversification within driven by multiple franchise led by class growth in market share U.S. Intermediaries lower churn channels DCIO across retail EMEA and APAC in active target Diversifie
Slide 50: A retirement leader in the U.S.
A retirement leader in the U.S. Comprehensive U.S. retirement offering with complementary retirement channels and vehicles U.S. Americas U.S. U.S. Multiple Vehicles Intermediaries Institutional Direct Bundled DC U.S. mutual fund Broker- Collective Banks DB DC Mega Large dealer investment trust RIA P
Slide 51: U.S. Intermediaries drives growth and is diversified
U.S. Intermediaries drives growth and is diversified Broker-Dealer Banks RIA ▪ #10 U.S. active broker- ▪ #5 U.S. active bank & ▪ #5 U.S. active RIA provider3 Enhanced and focused dealer market provider1 trust provider2 ▪ Focusing sales coverage to value-added services, ▪ Continued investment in ▪ La
Slide 52: U.S. Direct and U.S. Bundled DC
U.S. Direct and U.S. Bundled DC both provide access to individual investor clients U.S. Direct U.S. Bundled DC Return to positive organic Inflows with high proprietary $191b growth, which we believe can be sustained share in the small to mid-market $128b AUM AUM Outflows in the large and Maintain st
Slide 53: We are seeing returns on our investment in EMEA and APAC
We are seeing returns on our investment in EMEA and APAC EMEA APAC 7.1% Regrown a more diversified business with our new markets Saw strong sales and flows momentum, largely driven by 21.3% Organic growth1 all making strong contributions the Japanese ITMs Organic growth1 Defined a more focused strat
Slide 54: Our product range continues to be critical for success
Our product range continues to be critical for success Target Firmwide product Our primary vehicle types Number of products1 country/region2 statistics U.S. mutual fund3,4,5 181 U.S. Société d'investissement à capital 50 EMEA/APAC variable (SICAV6) Collective investment trust4,5 Open-ended investmen
Slide 55: Summary
Summary Well positioned Scale is a Continued focus on against key global Strong, sustainable, competitive putting clients first demand pools diversified growth advantage T. R O W E P R I C E G R O U P, I N C . I N V E S TO R D AY 2 0 2 0 58 55
Slide 56: Financial Overview
Financial Overview Céline Dufétel CHIEF FINANCIAL OFFICER T. ROWE PRICE GROUP, INC. INVESTOR DAY 2020
Slide 57: Creating value for stockholders over time
Creating value for stockholders over time Organic AUM Growth Operating Margin1 Return of Capital2 1 year 1 year 1 year 1.4% 44.0% 68% 5 year 5 year 5 years (average) (average) (cumulative) 0.9% 43.6% 95% Driving sustainable, Maintaining a strong Consistently returning diversified, and profitable ope
Slide 58: Driving organic AUM growth
Driving organic AUM growth Net flows as a percent of prior year’s ending AUM 3% 2% 1.7% 1.3% 1.4% Targeting sustainable, 1% diversified, and 0.2% profitable organic 0% growth of 1%–3% per year (0.4)% -1% 2015 2016 2017 2018 2019 Net $1.6b ($2.8b) $14.0b $13.2b $13.2b flows Source: T. Rowe Price. T.
Slide 59: Maintaining a strategic pricing approach
Maintaining a strategic pricing approach Active U.S. Mutual Funds: Morningstar Our pricing approach Fee Level % of T. Rowe Price US Mutual Fund AUM ▪ Maintain reasonable pricing for alpha generation 4th Quintile 3% ▪ Remain competitive in our 3rd Quintile positioning 18% 1st Quintile ▪ Treat all cli
Slide 60: Offering vehicles and pricing structures that are mutually beneficial
Offering vehicles and pricing structures that are mutually beneficial to our clients and us CITs ETFs TDF Restructure ▪ Tiered pricing based on ▪ Similar advisory fee as ▪ 2-7 bps lower total client scale equivalent mutual fund expense ratio for the Retirement Date Fund ▪ No AFP or 12b-1 ▪ Lower ope
Slide 61: Investing for the long term
Investing for the long term Non-GAAP operating expense growth1 8.9% 6%–9% 4.1% 2018 2019 2020 1See the reconciliation between 2019 and 2018 GAAP operating expenses and non-GAAP operating expenses in the Appendix. See the firm’s 2019 Annual Report on Form 10-K for further information. T. R O W E P R
Slide 62: Making investments across the firm in 2020
Making investments across the firm in 2020 Technology and Investments Distribution operations Building out investment teams Expanding our global footprint Modernizing infrastructure, globally to sustain and improve to strengthen our regional enhancing client experience, the competitiveness of our re
Slide 63: Modernizing our technology over multiple years
Modernizing our technology over multiple years 2016–2018 2019–2021 ▪ Equity data insights support ▪ Fund accounting and trade management Front and ▪ Middle office outsourcing outsourcing Middle Office ▪ Derivatives enablement ▪ Core data distribution architecture ▪ Fixed income modernization ▪ Marke
Slide 64: Driving efficiencies for reinvestment
Driving efficiencies for reinvestment Procured services Client digitization Disciplined three-year management and automation strategic and financial ▪ Renegotiations with top vendors ▪ Digitization of client interactions planning ▪ Vendor consolidation ▪ Transaction processing automation ▪ Demand ma
Slide 65: Effectively deploying capital
Effectively deploying capital Grow dividend annually ▪ Continued year-on-year dividend increase since IPO and maintain strong payout ratio ▪ Strong payout ratio—40% over past five years1 ▪ 10% decline in shares outstanding over past five years Buy back stock ▪ Repurchased $3.9b over past five years
Slide 66: Our perspective on evaluating inorganic opportunities
Our perspective on evaluating inorganic opportunities Advance our Align with best-in- Minimize existing Add value to strategy class investors business disruption stockholders ▪ New capabilities ▪ Repeatable source ▪ Similar culture and ▪ Value creation of alpha business practices through distributio
Slide 67: Summary: Clear objectives to measure our success
Summary: Clear objectives to measure our success Driving 1%–3% organic growth Maintaining a strong Consistently across diversified, operating margin returning capital profitable, and while investing for to stockholders sustainable sources long-term growth over time T. R O W E P R I C E G R O U P, I
Slide 68: Closing thoughts
Closing thoughts Pleased Strong Board Investing to Attractive, Consistent, with 2019 and senior grow and resilient disciplined progress leaders with diversify business capital focused over the long model with return business term talented, plans engaged associates T. R O W E P R I C E G R O U P, I N
Slide 69: Appendix
Appendix T. ROWE PRICE GROUP, INC. INVESTOR DAY 2020
Slide 70: Non-GAAP operating income and net revenues reconciliation
Non-GAAP operating income and net revenues reconciliation 2019 2018 2017 2016 2015 Net Revenues, GAAP basis $5,617.9 $5,372.6 $4,854.9 $4,284.8 $4,200.6 Non-GAAP adjustments: Consolidated Investment Products 6.8 6.2 5.6 6.5 - Net Revenues, Non-GAAP basis $5,624.7 $5,378.8 $4,860.5 $4,291.3 $4,200.6
Slide 71: Additional information
Additional information Scaling outperforming, high-capacity strategies globally (p. 28) Investment strategy eVestment Universe # of Peers Equity U.S. US Dividend Growth Equity US Large Cap Core Equity 913 Emerging Markets Discovery Equity Global Emerging Mkts All Cap Value Equity 78 International Gl
Slide 72: Important information
Important information This material, including any statements, information, data and content contained within it and any materials, information, images, links, graphics or recordings provided in conjunction with this material are being furnished by T. Rowe Price for general informational purposes on