T. Rowe Price Group Inc. reported yesterday that its second-quarter profit rose 27 percent as the Baltimore investment firm lured investors with retirement funds and mutual funds that had better results than most.
The firm earned $103 million, or 76 cents a share, compared with $80.3 million, or 60 cents a share, in the comparable period last year. The latest earnings report beat Wall Street expectations by 2 cents a share, according to a survey of analysts by Thomson Financial.
Investors barely reacted to the news. T. Rowe shares declined less than 1 percent, or 7 cents, to close at $66.21 on the Nasdaq stock market.
"It was a fine quarter," said David Haas, an analyst at Fox-Pitt, Kelton in New York, who doesn't own shares in the company. The flow of investor money to T. Rowe Price funds "has been decelerating but continues to be very good."
Despite a lackluster stock market, investors still poured $2.8 billion into the company's mutual funds in the second quarter, including $750 million into retirement funds, which are designed to provide a single, diversified portfolio that automatically shifts focus to less risky investments as the investor ages. Investors also put $750 million into separate accounts managed for institutions. Total assets under management reached a new record of $245 billion.
Assets in the retirement funds have grown more than tenfold in less than two years to $5.4 billion at the end of last month.
George A. Roche, the company's chairman and president, said investors continue to turn to stocks because many have 401(k) plans or individual retirement accounts.
"So much of the market is retirement-related, and they are investing systematically and investing some money every quarter," he said. Roche said the outlook for financial markets "remains positive" though higher energy costs and the potential for further interest rate increases by the Federal Reserve have weighed on investors.
"The economy remains on solid footing, and inflation does not appear to be threatening at this time," he said.
Investors have gone to T. Rowe Price because a majority of its funds had top ratings of four or five stars from Morningstar Inc., which tracks mutual funds, said Franklin Morton, an analyst and portfolio manager. His firm, Ariel Capital Management, owns 3.8 million shares in the company.
Lipper Inc., another mutual fund tracker, found more than 80 percent of T. Rowe Price funds had better investment performances than their peers over the three-year period that ended in June.
"Those are the highest numbers I've seen for quite a while out of a money management firm," Morton said. "That's the hallmark of T. Rowe."