Assets under management
For every asset manager, traditional or alternative, the total assets under management (or AUM) play a vital role in their performance. These companies generate their base fees on the basis of total AUM. The asset management industry (XLF) is affected by global uncertainties, which impact the performance of the equity markets.
The revenues of T. Rowe Price Group (TROW) depend on AUM, which is impacted by the market movements, flows, and investor sentiment. If equity markets decline as a result of global uncertainty, investors may be prompted to liquidate their investments. This could lead to a fall in the company’s total AUM.
Retaining the investors
The financial performance of T. Rowe Price is also impacted by its investment performance, which attracts and retains investors. Additionally, the company’s performance is also dependent on the interest rate changes announced by the Federal Reserve as well as by competitive pressures.
Another metric that impacts the performance of asset managers like T. Rowe Price, State Street Corporation (STT), Invesco Limited (IVZ), and BlackRock (BLK) is valuation, as deployment opportunities are dependent on this metric. Higher valuations limit the capabilities of making deployments, which concern investors.
On May 20, T. Rowe had an enterprise value of ~$26.9 billion. Its peers BlackRock, Franklin Resources (BEN), and Invesco Limited had enterprise values of ~$80.9 billion, ~$7.0 billion, and ~$16.0 billion, respectively.