Price Funds Go Flat

April 08, 1994|By Ian Johnson | Ian Johnson,Sun Staff Writer

The recent stock market downturn has caused the amount of money in T. Rowe Price's mutual funds to stagnate for the first time in 3 1/2 years, but its management said yesterday that the mutual fund giant will be able to weather the current turmoil without much trouble.

Speaking at T. Rowe Price Associates Inc.'s annual meeting in downtown Baltimore, Chief Financial Officer George A. Roche said preliminary numbers for the first three months of this year show that money in Price's mutual funds has stayed virtually level, inching up from $34.7 billion on Dec. 31, 1993, to $35 billion on March 31. That is the first time that assets have grown so slowly since the bear market in the third quarter of 1990, when Price's assets declined 6.6 percent.

The reason for this year's lackluster performance: Even as investors have continued to plow money into Price's funds, the market's downturn has reduced the assets' value, Mr. Roche said.

"When the market turns upward, that figure will go up, but for now it's flat," he said.

Flat assets did not hurt Price's revenues during the first quarter, Mr. Roche said, which will increase by more than 25 percent. Profits will not increase as much, Mr. Roche said, because of record spending on advertising and promotions, which rose 50 percent.

Chief Executive Officer George J. Collins said he did not expect many investors to redeem their funds once they see that their funds' declines tracked the market. More than 40 percent of Price's business comes from managing retirement funds, and these investors tend not to jump ship during the market's periodic corrections, Mr. Collins said.

"If the market stays the way it is, we will be fine. Absolutely," Mr. Collins said. "History tells us that dips, corrections or bear markets -- whatever we may be in now -- have always ended. Perhaps this one has run its course in two weeks, but it's too early to say."

Talk of the market was the only pall on an otherwise upbeat meeting that was dominated by a summary of the company's record year in 1993. Revenues rose 26 percent to $310 million, while profits rose 35 percent to $48.5 million.

The company's share price also rose during the year, and the company completed a 2-for-1 stock split.

Despite the strong performance and increasing interest of larger financial companies in buying out mutual fund companies, Mr. Collins reiterated that the company was not for sale.

"We are confident of our ability to serve our private and mutual fund clients most effectively as an independent company," Mr. Collins told the shareholders.

The shareholders voted overwhelmingly to return the company's officers to their current positions.

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