T. Rowe Price's 2025 Q3 Earnings Call: Contradictions Emerge in Digital Asset Strategy, ETF Expansion, and Private Credit Investments

Date of Call: October 31, 2025

Financials Results

• Revenue: $1.9B total adjusted revenues, up 6% YOY and up ~10% sequentially
• EPS: $2.81 adjusted diluted EPS, up versus prior quarter and Q3 2024

Guidance:

• Q4 flows outlook: weaker at the margin, October resembled low-flow months (e.g., August).
• 2025 adjusted operating expenses (excl. carried interest) expected to be up 2%–4% versus 2024 ($4.46B).
• Anticipate seasonal increases in long-term incentive compensation and marketing in Q4 that will not carry into Q1 2026.
• Nonrecurring real-estate charge of ~ $100M in Q4 will be excluded from non-GAAP measures.
• Product timing: initial Goldman collaboration/model products targeted into market within ~6 months; additional multi-asset/public-private launches expected by mid-2026.
• Controllable expenses targeted to grow in low single digits in 2026–2027.

Business Commentary:

• Asset Growth and Performance:
• T. Rowe Price Group reported an end-of-period high of $1.77 trillion in assets under management (AUM) as of September 30.
• The growth was driven by strong third-quarter returns in equity markets and innovative new solutions brought by their strategic collaboration with Goldman Sachs.

• On an asset-weighted basis, 64%, 57%, and 78% of fund assets beat their peer groups on the 3-, 5-, and 10-year periods, respectively.

• Flows and Market Trends:

• T. Rowe Price Group experienced net outflows of $7.9 billion in Q3, with fixed income, multi-asset, and alternatives showing positive net flows.
• The outflows were largely driven by higher redemptions in U.S. equities due to strong equity market returns and passive share gains.

• Positive net flows were seen in the Target Date franchise, EMEA, and APAC regions, indicating growing demand for specific strategies.

• Executive Partnership and Strategic Initiatives:

• The strategic collaboration with Goldman Sachs aims to deliver diversified public and private market solutions, focusing on co-branded series, model portfolios, and personalized advice solutions.
• The partnership is expected to enhance retirement and wealth investor offerings, with the potential to generate significant AUM over time.

• The first co-branded sister series for the Target Date franchise is expected to launch in mid-2026, with plans to include allocations to high-quality alternatives.

• ETF Expansion and Digital Asset Exploration:

• T. Rowe Price's ETF business grew to $19 billion in AUM, with 12 ETFs surpassing $500 million in assets, and five reaching over $1 billion.
• The company is actively pursuing growth in the active ETF space, with a focus on expanding market share and exploring innovative solutions like multi-token crypto ETFs.
• Their ongoing expense management program aims to reduce controllable expenses by aligning revenue growth with strategic priorities, enabling investments in strategic growth opportunities.

Sentiment Analysis:

Overall Tone: Neutral

• Management highlighted positives ("end-of-period high of $1.77 trillion" AUM; "$2.81 adjusted diluted EPS" and revenue growth) while also disclosing challenges ("we had $7.9 billion of net outflows in Q3" and "our outlook for Q4 flows is weaker at the margin").

Q&A:

• Question from Michael Cyprys (Morgan Stanley): I wanted to ask about digital assets, I saw that you filed for a multi-token crypto ETF. So I was hoping you could talk about how you see crypto fitting into client portfolios, how you're seeing demand trends evolve? And if you could talk about your strategy, aspirations and the steps that you're taking in the digital asset space?
  Response: Built digital-asset capability since 2022, seeded modest internal capital across tokens/blockchains, and will launch a multi-token ETP as a client building block — management sees digital assets as a growing client solution with rising adviser demand.

• Question from Benjamin Budish (Barclays Bank PLC): Rob, you gave some helpful detail on the partnership with Goldman Sachs in your prepared remarks. I was wondering if you could unpack a little bit more -- any details you could share on the economic arrangements. So T. Rowe will be acting as an adviser. There will be some OHA credit assets. I know it's probably still early, perhaps those discussions are still ongoing, and it will obviously be some time before these products launch, but anything you can share there in terms of how we should think about the ultimate economic impact given an assumed level of flows would be helpful.
  Response: Economics are described as balanced and equitable; T. Rowe Price will be adviser on the sister series and multi-asset solutions, Goldman will advise the model accounts; product/fee discussions are advanced and initial offerings are being moved to market at pace (targeted within ~6 months).

• Question from Daniel Fannon (Jefferies LLC): Rob, I was hoping you could just talk a little bit more broadly about flows and kind of trends. We obviously have the seasonal impacts going into year-end and maybe how that might transpire in terms of the near-term momentum. But also then looking into next year, you've highlighted improving performance. I guess, areas where you think there could be emerging strength and then obviously, the U.S. equity headwinds, do you see that persisting at a similar rate as you look ahead? Or is there some changes underneath that maybe are a little more encouraging?
  Response: Near-term flows are softer (October similar to August) driven by equity redemptions and passive share gains; offsets include higher gross sales across channels, strong Target Date and fixed-income inflows, ETF/SMA momentum and OHA’s $6B+ of gross commitments that should convert to AUM over time.

• Question from Craig Siegenthaler (BofA Securities): We have a follow-up on the potential migration of privates into 401(k)s and your newly formed partnership with Goldman. So I heard your commentary that a co-branded sister series will be launched very soon. But when will you start marketing these strategies to DC plan sponsors, both via your DCIO relationships and also with plans where T. Rowe Price is the record keeper. And from your recent conversations with clients, do you have an idea of the level of substituting that you expect with the new strategy from your legacy Target Date strategies?
  Response: Sister series will launch in collective trust timed with initial client; marketing to DC plan sponsors will be gradual because fees and ERISA/fiduciary risk are meaningful concerns — uptake depends on DOL/SEC guidance and will build slowly as track record and comfort increase.

• Question from Kenneth Worthington (JPMorgan Chase & Co): Can you help us better gauge the potential sales you could generate from the 3 strategies you highlighted this morning. I think it's the co-branded, the public private and the managed account. I would think that the addressable market for these 3 are substantial. But if we look at a few years, what does success look like in terms of assets under management from these products? Are we talking success looking like a couple of billion? Could it be far greater than that if we look at a couple of years? Like help us sort of size what you're thinking with these 3, I don't know, come strategies?
  Response: Aspirations are materially larger than 'a couple of billion' over a multi-year horizon; initial product rollout begins late this year with scale expected over the following years depending on track record, placement and platform distribution.

• Question from William Katz (TD Cowen): I appreciate the commentary. Just coming back to expenses a little bit. Just sort of wondering, as we look into next year, obviously, a really good belt tightening quarter this quarter. Can you maybe frame out some of the savings you could see on the real estate side? Or maybe just if you want to frame it out relative to the 2% to 4% growth rate that you still anticipate for this year?
  Response: Expense program targets low-single-digit controllable expense growth in 2026–27 via headcount reductions, technology sourcing and real-estate actions (including exiting two Owings Mills buildings with a ~$100M nonrecurring Q4 charge); savings will be reinvested in retirement solutions, product/distribution and enterprise AI.

• Question from Alexander Bond (Keefe, Bruyette, & Woods): Hoping to drill down a bit on the ETF offerings. Wondering how traction has been here more recently and where you're seeing relative strength. And then also curious just to get your take on how big of an opportunity you think this could be -- the active ETF space could be for both T. Rowe and the broader industry?
  Response: ETF traction is growing across retail, RIAs and advisers; filed 8 active ETFs (including two to enter the active core lower-fee market), seeing platform additions and expect over a dozen more filings/planned ETFs for 2026 — long-term opportunity viewed as substantial.

• Question from Brennan Hawken (BMO Capital Markets): I totally appreciate that performance is a little hard to speak to. I know Rob, you spoke to the improvement versus last quarter. But it's still down pretty substantially versus even just 6 months ago, the performance versus the benchmarks and the passive is also still rather weak and actually deteriorated. So is it possible to give some color around the sources and attribution around some of that weakness and possible -- I know it's challenging to take steps -- possible steps that you could take to address that?
  Response: A narrow market since Nov 2024 favored high-risk/risky stocks and hurt their factor exposures; management identified stock-selection errors and omissions, is re-underwriting decisions and has made some portfolio manager changes to address shortcomings.

• Question from Patrick Davitt (Autonomous Research): I have a follow-up on the sister Target Date series. Any early read on how you think the mix between T. Rowe and GS managed products will look like? And if you're adding more higher fee alts to the mix, do you think you'll need to barbell that with more passive to keep the all-in costs more palatable for platforms? Or will they just be higher fee products?
  Response: Product design is largely set; they expect competitive all-in fees despite allocations that can reach mid/high‑teens to private alternatives by incorporating underlying private costs — the aim is to be consistent with market offerings while delivering private exposure.

Contradiction Point 1

Digital Asset Strategy and Investment Plans

It highlights a shift in the company's approach to digital assets, with differing perspectives on the timing and focus of product development.

How does crypto fit into client portfolios, and what is your strategy for digital assets? - Michael Cyprys (Morgan Stanley)

2025Q3: T. Rowe Price started exploring digital assets in 2022, focusing on building capabilities before launching products. They are launching a multi-token crypto ETF. Digital assets are seen as a growing part of client portfolios and are being studied for momentum, volatility, and tail risk characteristics. Demand is increasing, and it's expected to play a role in different portfolios over time. - Eric Veiel(CIO)

How is the industry evolving with advances in AI, blockchain, and stablecoins, and how are you adapting your business model? - Michael J. Cyprys (Morgan Stanley)

2025Q2: We are developing digital asset capabilities and are comfortable with tokenization technology. We are leveraging AI tools for faster and more efficient processes. - Eric Lanoue Veiel(CIO)

Contradiction Point 2

ETF Growth and Client Base

It involves differing perspectives on the impact of ETF growth on the company's client base, including whether ETFs are attracting new investors or cannibalizing existing funds.

What is the traction with ETF offerings and the potential for active ETFs? - Alex Bond (KBW)

2025Q3: Traction with ETFs is growing, with over $19 billion in AUM and plans for more filings. There is significant opportunity for growth in the active ETF space. T. Rowe Price aims to increase market share and expand into ETFs outside the U.S. in time. Innovative solutions like digital assets could also be additive. - Eric Veiel(CIO), Robert Sharps(CEO)

Are ETFs cannibalizing legacy funds or attracting new investors? - Ivory Gao (Bank of America)

2025Q2: It's a combination of both legacy clients moving to ETFs and new clients entering through ETFs. New ETFs are targeting lower price points to attract new business. - Jennifer Benson Dardis(CFO), Eric Lanoue Veiel(CIO)

Contradiction Point 3

ETF Expansion and Strategy

It involves differing statements regarding the strategy and timing of T. Rowe Price's expansion into the ETF market, which is crucial for their growth and competitiveness in the investment landscape.

What is the traction with ETF offerings and the growth potential for active ETFs? - Alex Bond (KBW)

2025Q3: Traction with ETFs is growing, with over $19 billion in AUM and plans for more filings...There is significant opportunity for growth in the active ETF space...T. Rowe Price aims to increase market share and expand into ETFs outside the U.S. in time. - Eric Veiel(CIO)

What steps are you taking to drive early success in ETFs? How do you view the opportunity set now that Vanguard's ETF share class patent has expired? What is the path and timeline for T. Rowe's ETF share class launch? - Michael Cyprys (Morgan Stanley)

2025Q1: Strong performance from investments, scaling products, and platform placement are key to ETF success...We believe there's a great opportunity to grow in the ETF space...We're actually not viewing ETFs as a separate business. It's just an important part of our overall business. - Rob Sharps(CEO)

Contradiction Point 4

Investment in Private Credit and Alternatives

It highlights differing views on the deployment and focus on private credit and alternative investments, impacting potential future growth and client offerings.

Update on OCREDIT and private lending? What portion of T. Rowe's AUM is in direct lending? - Benjamin Budish (Barclays Capital)

2025Q3: The private market alternatives are roughly $25 billion, primarily private credit...We are deploying them across our 10 platform placements and are continuing to build momentum with significant inflows. - Rob Sharps(CEO)

Can you provide an update on OCREDIT and private lending? What portion of T. Rowe's AUM is related to direct lending? - Benjamin Budish (Barclays Capital)

2025Q1: Private market alternatives are roughly $20 billion, primarily private credit...Deployment limited due to soft M&A environment...OCREDIT has seen $54 million in flows but is slow. - Rob Sharps(CEO)

Contradiction Point 5

Marketing and Outreach of ETF Offerings

It involves differing statements on the level of marketing and promotional efforts for T. Rowe Price's ETF offerings, which directly affects their visibility and potential market share.

How does crypto integrate into client portfolios, what are demand trends, and what is your digital asset strategy? - Michael Cyprys (Morgan Stanley)

2025Q3: Plans to invest more in marketing as ETFs scale...We've been doing a good job in just building the AUM, and now we want to -- we're going to start marketing them as they grow. - Rob Sharps(CEO)

What steps are you taking to drive early success in ETFs? How do you assess the opportunity given Vanguard's expired ETF share class patent? What is the path and timeline for T. Rowe's ETF share class? - Michael Cyprys (Morgan Stanley)

2025Q1: We have found over the long term, though, that marketing is important. There is a beginning when you have a product like this. You really have to build the product, get it to scale, and then you can begin to market it. - Rob Sharps(CEO)