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How T. Rowe Managed to Increase Net Revenues

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Nov. 21 2017, Updated 10:40 a.m. ET

YoY rise

T. Rowe Price Group (TROW) witnessed an 11.8% YoY rise in its net revenues in 3Q17. The company reported net revenues of $1.2 billion in 3Q17 compared to $1.1 billion in 3Q16. The YoY rise was mainly a result of the rise in investment advisory fees.

T. Rowe’s major revenue driver is investment advisory fees, which it garners through the services provided by its subsidiaries to investors. These investors invest in the company’s sponsored US mutual funds and also in its other investment portfolios.

T. Rowe has a beta value of 1.2. Peers (XLF) BlackRock (BLK), Federated Investors (FII), and Invesco Limited (IVZ) have beta values of 1.7, 1.4, and 1.9, respectively.

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Other components

T. Rowe Price Group has reported investment advisory fees of $970.5 million in 3Q16, while in 3Q17, it reported $1.1 billion, a rise of 13%. This YoY rise was mainly due to the rise in the company’s average assets under management.

T. Rowe’s investment advisory fees are primarily dependent on the company’s managed assets. Thus, the company’s revenues get impacted by volatility in the company’s managed assets and also in the financial markets.

T. Rowe’s other two components of net revenues include distribution and servicing fees and administrative fees. The company witnessed a marginal YoY rise in its distribution and servicing fees from $36.7 million in 3Q16 to $37.4 million in 3Q17. T. Rowe has also witnessed a marginal YoY increase in its administrative fees from $85.7 million in 3Q16 to $87.6 million in 3Q17.

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