T. Rowe Price's Q2 2025 Earnings Call: Unpacking Contradictions in ETF Growth, Fee Rates, and AI Strategy

Impact of ETF growth, fee rate dynamics, AI and blockchain in business strategy, integration of private assets into retirement solutions, and impact of fee rates on business strategy are the key contradictions discussed in T. Rowe Price's latest 2025Q2 earnings call.



Equity Market Performance and Fund Flows:
- T. Rowe Price experienced net outflows of $14.9 billion, driven primarily by U.S. equities, and positive flows in fixed income, multi-asset, and alternatives.
- The net outflows were influenced by equity market volatility in April and rebalancing activities.
- Despite challenges, the company saw strong performance in fixed income, with 6 consecutive quarters of positive net flows, and its Target Date funds maintained top quartile performance.

ETF Growth and Expansion:
- The ETF franchise had over $6 billion in inflows for the first half of the year, with AUM reaching $16.2 billion as of June 30.
- T. Rowe Price launched 2 new diversified equity ETFs and 3 sector ETFs, expanding its ETF range to 24.
- The growth in ETFs is attributed to new product launches and increased platform placement, targeting both new and existing clients.

Expense Management and Efficiency:
- The company anticipates 2% to 4% annualized increase in adjusted operating expenses for 2025, excluding carried interest.
- T. Rowe Price is implementing a multiyear plan to align expense growth with revenue growth, focusing on process improvements and efficiencies.
- Initiatives include streamlining organizational structure, leveraging technology, and outsourcing capabilities to manage expense growth.

Private Market Opportunities in Retirement Plans:
- The company is exploring the integration of private assets in defined contribution plans, especially in Target Date funds, given positive investment and commercial case prospects.
- An executive order from the Trump administration is expected to provide guidance for fiduciary responsibility regarding private assets in defined contribution plans.
- T. Rowe Price aims to enhance retirement solutions with private assets if the investment case remains compelling and there is demand from clients.