T. Rowe Price awash in funds Prosperity: In the first five months of this year, investors poured $5 billion in new money into the booming Baltimore mutual fund company, shattering the record $3.9 billion set for all of 1993.

June 16, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

In a cavernous room packed with brown cubicles on the 10th floor of T. Rowe Price Associates Inc., Seamus Ray's day begins and ends with the incessant ringing of a phone.

The 25-year-old telephone rep was blitzed one day in January with 85 phone calls from customers seeking information on T. Rowe Price mutual funds.

"If we are mentioned in a radio program nationwide, that will spike it pretty high," Ray said.

And sharp movement up or down, he said, can "set off a wave that might last a few hours."

But regardless which way the market moves, busy phones have meant a booming business for T. Rowe Price, the rapidly expanding Baltimore mutual fund company.

Consider these numbers:

Investors have poured $5 billion in new money into T. Rowe Price in the first five months of this year, shattering the record $3.9 billion set for all of 1993.

Over the same period, the firm has added about 600,000 new accounts.

Revenues have more than tripled since 1987 to $439 million last year, and in the first quarter they came in at a record $132 million.

The total amount of money the firm manages has more than tripled since 1987 to $75.4 billion in 1995, and in the first quarter it jumped to $82 billion.

The number of employees has risen to 2,323, up from 986 in 1987.

As for Ray and the 200 others like him in Baltimore, Los Angeles and Tampa, Fla., they answer anywhere from 11,000 to 15,000 calls a day.

"We look at these numbers and pinch ourselves," said George J. Collins, president and chief executive.

"The company is hitting on a lot of cylinders."

Cycles when the stock market is rising and money is plentiful don't last forever, so T. Rowe Price executives plan to make the most of it.

Although it recently decided to close two mutual funds to new investors because of high demand, the company is spending heavily to promote its products.

In the first quarter of this year, T. Rowe Price spent $15 million on advertising, more than double the amount it spent in the same period in 1995.

"We are continuing to spend at an aggressive pace because the market warrants it," said Edward C. Bernard, president of T. Rowe Price Investment Services, who oversees advertising and retail marketing.

"We see a window of opportunity. We are going to try to take advantage of it."

T. Rowe Price's growth is being propelled by the baby boomers, the 78 million Americans born from 1946 to 1964 and credited with fueling sales of luxury cars, houses and personal computers.

As the boomers have gotten older, they have poured billions into the stock market and have picked mutual funds as one of their prime investment vehicles.

And the company has benefited from the creation of retirement savings programs like Individual Retirement Accounts and 401 (k)s.

The flood of money has boosted the mutual fund industry's assets to $3.104 trillion in April.

Stock mutual funds took in $26.35 billion in April alone in net new cash, and since the beginning of the year, $99.13 billion in new money has been pumped into stock mutual funds.

The recent inflows have capped a period of spectacular growth that began in 1984.

T. Rowe Price, which opened its doors in 1937 and offered its first fund in 1950, now has 68 mutual funds with $57 billion in assets.

It ranks as the third-largest no-load mutual fund company in the country, behind giant Fidelity Investments Inc., which manages $407.7 billion in assets in 238 funds, and Vanguard Group, which manages $205 billion assets in about 90 funds.

T. Rowe Price executives see little to stop the growth. Inflation and unemployment remain low, interest rates are favorable and the economy is humming along.

"We think there are good fundamental underlying trends not only for the economy, but for the business," said Collins, who will retire from the company next spring.

"We are a growth company in a growth industry," he said. "We are in a fertile field."

But what if there is a downturn, as in 1990 when a bear market dropped cash inflow to a paltry $110 million? How will T. Rowe Price handle it?

"We would cut some of our spending in advertising," Collins said. "In an environment like that, we would have to cut bonuses for executives, particularly at the top.

"In 1987 [the market crashed in October of that year], we did this and we exceeded our earnings expectations in the fourth quarter."

Despite hiring hundreds of new people, Collins doesn't see layoffs even in a slump because there is little fat in the organization.

"We don't add people to add people," he said. "We have a very lean staff."

T. Rowe Price has prepared for such a growing market by patiently building a diversified company over the years.

In the early 1980s, for example, it began servicing 401(k) plans when the vast majority of corporations were offering their employees traditional pensions.

"We placed a bet that the 401(k) plan would take hold," Bernard said. "We wanted to be there with a catcher's mitt."

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