T. Rowe Price Group, Inc. · NASDAQ:TROW
T. Rowe Price — Investor Day (May 2021)
54 slides from T. Rowe Price's investor day presentation, May 26, 2021
Slide 1: Investor Day
INVESTOR DAY T. Rowe Price Group, Inc. May 26, 2021 A copy of this presentation, which includes additional information, is available at troweprice.gcs-web.com/investor-relations. Data as of March 31, 2021, unless otherwise noted. All figures are USD, unless otherwise noted.
Slide 2: Opening and T. Rowe Price Overview
Opening and T. Rowe Price Overview Bill Stromberg CHIEF EXECUTIVE OFFICER T. ROWE PRICE GROUP, INC. INVESTOR DAY 2021 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, with respect to T. Rowe Price’s future financial or business performance, strategies, or expectat
Slide 4: Agenda
Agenda Opening and T. Rowe Price Overview Bill Stromberg CHIEF EXECUTIVE OFFICER Investments, Performance, and Capabilities Rob Sharps PRESIDENT, HEAD OF INVESTMENTS, GROUP CIO Global Distribution Robert Higginbotham HEAD OF GLOBAL DISTRIBUTION Financial Overview Céline Dufétel CHIEF OPERATING OFFIC
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 § We are focused solely on investment management and related services Alignment of Interests 1.52 trillion USD § We are a publicly owned company with substantial employee ownership in assets
Slide 6: 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 7: Diversity, Equity, and Inclusion—strategic enablers for our business
Diversity, Equity, and Inclusion— strategic enablers for our business 2020–2021 Progress 29 are ethnically diverse % of our U.S. associates § Onboarded new global head of DEI and expanded the team under his leadership of our associates in § Executed strategy to improve representation of under-repres
Slide 8: Consistent AUM growth over time, particularly in Multi-Asset
Consistent AUM growth over time, particularly in Multi-Asset Driven by market returns + alpha + net cash inflows $1,600 Total Multi-Asset $1,471 $1,518 $1,400 AUM 10 YR CAGR $1,207 $1,200 Ending AUM ($b) $991 $962 Total AUM $1,000 $800 $692 $747 $763 $811 12% $577 $600 $490 $428 $406 $360 $400 $239
Slide 9: Consistent results and long-term orientation
Consistent results and long-term orientation As of December 31, 2020 $12.00 5 10 20 30 years years years years $10.00 $9.98 Diluted Net revenues 8% 10% 9% 13% EPS $8.00 (GAAP) Diluted EPS 17% 15% 12% 17% $6.00 (GAAP) $4.00 $3.60 Dividends 12% 13% 14% 16% Dividend per Share $2.00 Annualized total sto
Slide 10: Several trends continue to drive disruption
Several trends continue to drive disruption Investment Product Distribution Capabilities Delivery Channels § Target date § Passive and pricing § Consolidating buying competition pressure power and pressure from intermediaries § Growing demand § Personalization – for ESG segment of one § Increased ne
Slide 11: Good progress on our 2020 strategic priorities
Good progress on our 2020 strategic priorities Investments Distribution Corporate § Strong investment results § Net flows of $5.6b; § Revenue grew 11% and continued momentum in adjusted EPS increased § Announced plans to EMEA and APAC helped 19%* launch TRPIM in Q2 2022 diversification § Raised divi
Slide 12: Our 2021 priorities
Our 2021 priorities Investments Distribution Corporate § Enhance target date offerings § Deliver 1%–3% organic growth § Plan for associate return to office through reduced fees and new Retirement Blend products § Begin transformation of RPS § Deliver on expanded DEI goals technology and operations §
Slide 13: Investments, Performance, and Capabilities
Investments, Performance, and Capabilities Rob Sharps PRESIDENT, HEAD OF INVESTMENTS, GROUP CIO T. ROWE PRICE GROUP, INC. INVESTOR DAY 2021 2020
Slide 14: Multiyear investment to grow our investment capabilities globally
Multiyear investment to grow our investment capabilities globally Investment professional headcount 2005–2021 724 745 158 12 81 82 London/EMEA Tokyo Global Multi-Asset 506 2 Shanghai Baltimore/U.S. 46 227 496 227 Global Hong Kong Fixed Income 23 9 385 Singapore 15 173 175 169 125 International Equit
Slide 15: Investment performance overview
Investment performance overview Performance across global equity remains strong with global fixed income performance improving in the near term U.S. Mutual Funds U.S. Mutual Funds Composites Outperforming Outperforming Outperforming Morningstar Median1 Passive Peer Median2 Benchmark3 1 3 5 10 1 3 5
Slide 16: Rotation underway…long heritage of value investing
Rotation underway…long heritage of value investing Our value franchise is broad, is at scale, US Large-Cap US Small-Cap US Value US Mid-Cap International and has generated Equity Income Value Equity Equity Value Equity Value Equity strong results. 1985 1988 1994 1996 1999 US Large-Cap Global Emergin
Slide 17: Global/International Equity performance and capabilities
Global/International Equity performance and capabilities— ready for any rotation away from U.S. Equities % of funds and composites % total AUM by investment strategy 1 Year 3 Year 5 Year 10 Year Int'l. Index & Other 2% U.S. Mutual Funds Global Equity Outperforming 71% 75% 61% 86% 26% Peers1 U.S. Mut
Slide 18: Fixed Income efforts underway
Fixed Income efforts underway Improved near term performance AUM and fixed income net flows (% outperforming – trailing 12 months) ($Billions, ex FOF) 87% 91% Flows: ex FOF Flows: FOF AUM 60% 66% 72% $40 $300 53% 54% $30 $250 47% $200 $20 22% 23% $150 $10 $100 $0 $50 1Q 2020 2Q 2020 3Q 2020 4Q 2020
Slide 19: Target date fund performance remained strong
Target date fund performance remained strong 1 Year 3 Year 5 Year 10 Year ROLLING TIME PERIODS TDF Performance vs. Passive Peers Average Excess Return1 (%): +1.49 +1.17 +1.12 +1.38 ROLLING TIME PERIODS Percentage of time TDFs outperform passive peers 73% 88% 95% 100% Hit Rate2: 23% 11% 8% 4% Perform
Slide 20: Investment capabilities
Investment capabilities Introducing strategies that form the intersection of what we believe we can do well as a capability and meeting our clients’ needs Vehicle extensions Introducing Growing our ESG-specific More concentrated to help EMEA and additional vehicles alternatives lineup products portf
Slide 21: T. Rowe Price Investment Management (TRPIM)
T. Rowe Price Investment Management (TRPIM) We announced1 our intent to create a fully independent investment capability with the T. Rowe Price cultural tenets of investment excellence, placing clients first, collaboration, and a long-term time horizon to deliver superior investment client outcomes.
Slide 22: Balance of experienced portfolio managers and analysts at each adviser
Balance of experienced portfolio managers and analysts at each adviser T. Rowe Price Associates T. Rowe Price Investment Management Central Research* Central Research* ~45 ~25 ~30 ~15 analysts associate analysts associate analysts analysts Research Platform* Research Platform* 6 years 11 years 6 yea
Slide 23: We have made significant progress on our ESG journey
We have made significant progress on our ESG journey, with more planned 2007 2008 2010 2012 2013 2014 Governance Corporate PRI1 CSR Report “E” and “S” Sustainalytics Responsibility Research Donna Anderson Responsible T. Rowe Price becomes First Corporate Sustainalytics appointed Sustainalytics ESG r
Slide 24: Expanding our ETF offering
Expanding our ETF offering Launched first suite Semi-transparent Our proprietary We have plans to of semi-transparent active ETFs are still model is producing broaden our lineup active equity ETFs in their infancy but industry-leading in 2021 and beyond in August 2020 have significant spreads room f
Slide 25: Investment Data Insights team
Investment Data Insights team Improving our client’s investment outcomes through data-driven insights People Fundamental Research Our cross-functional team is comprised of fundamental analysts, Mac quantitative analysts, data h earn ine Machine LLearning ing scientists, data engineers, application d
Slide 26: Summary
Summary Investment Investing Expanding Positioning excellence in talent capabilities for the future T.T.R R OOWW E EP R PRI CI C E EG G RROO UUP,P,I NI N CC. .I NI N VEVS ETSO TOR RD D AYAY2 022012 1 26
Slide 27: Global Distribution
Global Distribution Robert Higginbotham HEAD OF GLOBAL DISTRIBUTION T. ROWE PRICE GROUP, INC. INVESTOR DAY 2021 2020
Slide 28: One of the broadest distribution franchises in global asset management
T. Rowe Price has one of the broadest distribution franchises in global asset management Client Access EMEA APAC U.S. U.S. U.S. Americas Intermediaries Intermediaries Direct Bundled DC Intermediaries Institutional & Institutional & Institutional T. Rowe Price Global Distribution T. R O W E P R I C E
Slide 29: Transforming the distribution workforce
Transforming the distribution workforce—more global, more enabled, more expertise in key areas Associate growth by region (past 3 years) Propelled by technology investments $330m1 overall spend § Operating scale § Marketing § Digital acceleration enablement § Opportunity § Client experience AMERICAS
Slide 30: Our diversified access to clients is shown in our AUM
Our diversified access to clients is shown in our AUM Global AUM $1,471b $1,518b Other $18 $17 APAC, EMEA, $134 $133 and Canada $250 $257 $153 U.S. Institutional U.S. Bundled DC +11.8 % $148 AUM CAGR $763b $228 U.S. Direct $9 $36 $222 2010–2020 $128 $482b $99 $5 $60 $139 $79 $701 $728 U.S. Intermedi
Slide 31: Our 2020 results show continued diversified organic growth
Our 2020 results show continued diversified organic growth Net flows by client geography Net flows by channel $20 $20 $5.6b EMEA and APAC $13.2b $15 $13.2b $13.2b 84% $15 $13.2b $5.6b of Net Flows $10 since 2018 $10 $1.2b Other $1.2b Bundled DC $5 $5 APAC Direct Americas Intermediaries $0 $0 EMEA In
Slide 32: Strengthening target date solutions franchise for growth
Strengthening target date solutions U.S. Direct U.S. Bundled DC U.S. Intermediaries Americas Institutional EMEA Intermediaries /Institutional APAC Intermediaries /Institutional franchise for growth New initiatives designed to help our clients achieve desired retirement outcomes Competitive § Reducin
Slide 33: Investing to sustain the strength of U.S. Direct business
Investing to sustain the strength of U.S. Direct U.S. Bundled DC U.S. Intermediaries Americas Institutional EMEA Intermediaries /Institutional APAC Intermediaries /Institutional U.S. Direct business Activating three-year strategy with an enhanced, $228b growth-oriented value proposition AUM 8.5% Sus
Slide 34: Reaffirming commitment to U.S. Bundled DC
Reaffirming commitment to U.S. Bundled U.S. Direct U.S. Bundled DC U.S. Intermediaries Americas Institutional EMEA Intermediaries /Institutional APAC Intermediaries /Institutional DC via accelerated transformation $153b 6,386 2.3m 80 AUM Retirement Plans Plan Participants Net Promoter Score (2020 Pl
Slide 35: Expansion of Broker-Dealer business drives results
Expansion of Broker-Dealer business U.S. Direct U.S. Bundled DC U.S. Intermediaries Americas Institutional EMEA Intermediaries /Institutional APAC Intermediaries /Institutional drives results Growth of Broker-Dealer channel $1,518b Investment in Field Resources $1,471b 49 Territories filled1 Home Of
Slide 36: APAC: A large, heterogeneous region of growth
APAC: A large, heterogeneous U.S. Direct U.S. Bundled DC U.S. Intermediaries Americas Institutional EMEA Intermediaries /Institutional APAC Intermediaries /Institutional region of growth Presence § Deepening relationships, local 65% incorporation enhance outcomes § Shanghai research office opened To
Slide 37: Global Equities suite: A meaningful driver of flows
Global Equities suite: A meaningful U.S. Direct U.S. Bundled DC U.S. Intermediaries Americas Institutional EMEA Intermediaries /Institutional APAC Intermediaries /Institutional driver of flows with room to scale Global Global Global Global Global QM Global Global Focused Growth Value Select SRS Glob
Slide 38: Summary
Summary Principled pursuit of Extensive range of Scale continues to Strong, sustainable, our clients’ success retirement solutions be a competitive 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 T O R D AY 2 0 2 1 38
Slide 39: Financial Overview
Financial Overview Céline Dufétel CHIEF OPERATING OFFICER, CHIEF FINANCIAL OFFICER AND TREASURER T. ROWE PRICE GROUP, INC. INVESTOR DAY 2021 2020
Slide 40: Creating value for stockholders over time
Creating value for stockholders over time As of March 31, 2021 Net Revenue Expense Growth1 Return of Capital2 1 year 1 year 1 year 14.2% 6.9% 52% 5 year 5 year 5 years (average) (average) (cumulative) 9.6 % 7.8 % 81 % Strong revenue Continued investment in Consistent return of momentum driven by cap
Slide 41: Continued positive organic growth—institutional flows lessening seasonality
Continued positive organic growth— institutional flows lessening seasonality T. Rowe Price quarterly net flows Long-term organic growth Q1 Q2 Q3 Q4 target of 1%–3% Avg. $2.9b $5.2b $1.1b $0.9b $15 Lower seasonality due to $10 growing institutional and $5 EMEA/APAC businesses $0 ($5) Within retiremen
Slide 42: Positioning our target date franchise for continued growth
Positioning our target date franchise for continued growth Target Date Industry As of March 31, 2021 Growth Rate § Fee reductions of ~5.5 bps across the $351.6b target date Overall Target franchise Date Market § 6.3 bps on funds § 4.8 bps on trusts 8.2% § Fee changes and expansion of blend capabilit
Slide 43: Making investments across the firm in 2021
Making investments across the firm in 2021 Technology, Investments Distribution Operations, and Corporate § Final year of TRPIM hiring § ~25% planned expansion in § Front and middle office ramp up broker-dealer coverage team modernization including and support enabling TRPIM and product § Talent to
Slide 44: Areas of investment over next two to three years
Areas of investment over next two to three years Technology, Investments Distribution Operations, and Corporate § Talent to support product § Continued expansion of wealth § Continued front and middle expansions management coverage office modernization including § Expansion of digital marketing trad
Slide 45: Driving efficiencies for reinvestment
Driving efficiencies for reinvestment Strategic Partnership Technology Cost with FIS Optimization Disciplined strategic and § Increased efficiency across § Software demand management financial planning operations and technology, leveraging § Application decommissioning scale and automation § Consoli
Slide 46: Effectively deploying capital
Effectively deploying capital Grow dividend § Continued year-on-year dividend increase since IPO annually § 38% payout ratio over past five years1 § 8% decline in shares outstanding over past five years Buy back stock § Repurchased $4.2b over past five years at an average opportunistically and share
Slide 47: 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 through of alpha business practices distributio
Slide 48: Summary: Clear objectives to measure our success
Summary: Clear objectives to measure our success Striving for 1%–3% Investing in Consistently long-term organic strategic initiatives returning capital growth to support long-term to stockholders growth over time T. R O W E P R I C E G R O U P, I N C . I N V E S T O R D AY 2 0 2 1 48
Slide 49: Questions
Questions T. ROWE PRICE GROUP, INC. INVESTOR DAY 2021 2020
Slide 50: Appendix
Appendix T. ROWE PRICE GROUP, INC. INVESTOR DAY 2021 2020
Slide 51: Non-GAAP operating income and net revenues reconciliation
Non-GAAP operating income and net revenues reconciliation 2021 2020 2019 2018 2017 Net Revenues, GAAP basis $6,570.9 $5,753.2 $5,371.9 $5,050.3 $4,342.4 Non-GAAP adjustments: Consolidated Investment Products 8.7 7.8 6.0 6.5 6.0 Net Revenues, Non-GAAP basis $6,579.6 $5,761.0 $5,377.9 $5,056.8 $4,348.
Slide 52: Reconciliation between GAAP and adjusted (non-GAAP) EPS
Reconciliation between GAAP and adjusted (non-GAAP) EPS As of December 31, 2020 2020 2019 Diluted Earnings per Common Share, GAAP Basis $9.98 $8.70 Non-GAAP adjustments: Consolidated T. Rowe Price Investment Products (.27) (.42) Other non-operating income (.19) (.23) Non-operating income of investme
Slide 53: Additional information
Additional information ©2021 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its conten
Slide 54: 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