T. Rowe Price Group NASDAQ: TROW reported fourth-quarter 2025 adjusted diluted earnings per share of $2.44 and full-year adjusted diluted EPS of $9.72, up 4.2% from 2024, as higher average assets under management (AUM) and investment advisory revenue offset continued net outflows and fee pressure tied to shifting client preferences.
Markets helped lift AUM despite outflows
CEO Rob Sharps said 2025 marked a “third straight year of strong global market returns,” though he described the market as narrow and led by a handful of mega-cap stocks—an environment he said was “not highly conducive to fundamental research, active management, and long-term investing.” He noted some evidence of market broadening in the fourth quarter, which he said would be positive for research-driven active management.
The firm ended 2025 with $1.78 trillion in AUM, up more than 10% from the start of the year, despite $56.9 billion in net outflows. Outflows were concentrated in equities and mutual funds, including $75 billion of net outflows from equity and nearly $64 billion from mutual funds for the year. Sharps said higher gross sales helped—up from 2024 and more than 40% above 2023—but were offset by redemptions that were “greater than anticipated,” driven by performance shortfalls in certain strategies and portfolio rebalancing amid elevated equity markets.
Investment performance: mixed near-term, stronger asset-weighted longer term
Sharps said the company is seeing improvement in several key strategies and continues to show strong long-term results across asset classes, though he added “there remains room for further improvement.” About half of funds beat their Morningstar peer groups across time periods, with 49%, 56%, 46%, and 61% outperforming for the one-, three-, five-, and 10-year periods, respectively.
He emphasized stronger results on an asset-weighted basis over longer horizons:
- Asset-weighted outperformance of 72%, 54%, and 79% of fund assets for the three-, five-, and 10-year periods, respectively
- 42% of fund assets outperforming for the one-year period
- Fixed income performance described as strong, with over 75% of fund assets beating peer groups across one-, three-, five-, and 10-year periods
Sharps said long-term performance in the target date franchise remains strong, with 81%, 55%, and 98% of assets outperforming peers over the three-, five-, and 10-year periods, respectively. However, one-year performance was weaker (29% of assets outperforming), which he attributed to a slightly lower weight to international equities than some peers and security selection in certain underlying portfolios, primarily in the second and third quarters of 2025.
Flows: equities pressured, strength in fixed income, alternatives, ETFs
CFO Jen Dardis said net outflows were $25.5 billion in the fourth quarter and $56.9 billion for the full year. She said redemptions remained elevated in the legacy equity and mutual fund business, but strong equity market returns more than offset outflows, and the firm ended 2025 with nearly $50 billion in additional equity AUM. She added that equity market appreciation exceeding equity net outflows has been consistent over the past three years.
Still, management pointed to areas of positive momentum. Dardis said fixed income and alternatives had positive net flows in the fourth quarter and, along with multi-asset, were positive for the full year. Fixed income posted eight consecutive quarters of positive net flows, and the target date franchise ended the year with $5.2 billion of net inflows. The ETF business saw $1.8 billion in net inflows in the quarter, bringing full-year ETF net inflows to nearly $10.5 billion.
In the Q&A, Sharps said fourth-quarter flows were “meaningfully softer than we anticipated,” particularly in December, driven largely by equities and pressure in growth equity portfolios due to a handful of institutional losses and rebalancing following strong market returns. He also addressed an unusual fourth-quarter outflow in retirement date funds, noting roughly a third was tied to M&A-related mandate losses when acquired clients’ plans were consolidated, with additional “lumpy” losses not related to M&A.
Sharps said fully active target date funds are losing share to passive and blend offerings, creating a headwind given T. Rowe Price’s position as the largest fully active target date fund manager. However, he said the firm’s blend and hybrid offerings—incorporating passive components—are positioned to mitigate that shift, adding the blend category is the fastest growing within target date and that T. Rowe Price is gaining share there. He also noted $1.7 billion of target date inflows in January and said while January overall saw just under $6 billion of outflows, the pipeline suggested February and March could improve.
Revenue, fee rate, and expense outlook
Dardis said fourth-quarter adjusted net revenue was $1.9 billion, bringing full-year adjusted net revenue to nearly $7.4 billion, up 2.8% from 2024. Fourth-quarter investment advisory revenue was $1.7 billion, up 2.3% from the prior quarter and 4.2% from the year-ago quarter, driven by higher average AUM and partially offset by a lower effective fee rate. Full-year investment advisory revenue was $6.6 billion, up 3.1%.
The fourth-quarter annualized effective fee rate, excluding performance-based fees, was 38.8 basis points, down from 39.1 basis points in the third quarter. Dardis said the decline continues to be driven by changes in asset and vehicle mix as demand shifts toward lower-priced vehicles and strategies such as ETFs, trusts, and separately managed accounts (SMAs), while redemptions are concentrated in higher-priced equity strategies and mutual funds.
Performance-based fees were $14.2 million in the fourth quarter, predominantly from alternative strategies, up from the prior quarter but down from the year-ago period. Full-year performance-based fees totaled $37.4 million versus $59.3 million in 2024.
On expenses, Dardis said fourth-quarter adjusted operating expenses were $1.2 billion and full-year 2025 adjusted operating expenses (excluding carried interest expense) were $4.6 billion, up 3.4% and within prior guidance of 2% to 4%. For 2026, the company expects adjusted operating expenses (excluding carried interest) to rise 3% to 6% from 2025, citing investment in growth areas alongside expense management efforts. In response to a question on operating leverage and margin sensitivity, management said equity market returns remain the largest single driver of operating margin, and noted about one-third of the expense base is variable.
Strategy updates: partnerships, ETFs, alternatives, and tokenization
Sharps outlined progress across partnerships and product development. He highlighted a strategic collaboration with Goldman Sachs to pursue wealth and retirement opportunities via co-developed public-private offerings and advice solutions. The firm launched the first co-branded model portfolios in the fourth quarter, with four live on the GeoWealth platform and a fifth expected in the first half of 2026. In January, T. Rowe Price launched the Goldman Sachs T. Rowe Price Dynamic ETF Portfolio model series on Morgan Stanley’s platform. Sharps also said the company extended retirement offerings globally through a sub-advised target date series with a Japanese asset manager and new retirement allocation funds with a strategic partner in Asia.
On ETFs, Sharps said the company launched 13 ETFs in 2025, bringing the total to 30, and grew ETF AUM to more than $21 billion by year-end. He noted two new active core ETFs (U.S. and international) and added fixed income ETF expansion included new municipal and multi-sector strategies.
In alternatives, Sharps said Oak Hill Advisors (OHA) recorded a second consecutive record fundraising year with more than $16 billion of capital raising, led by private lending. He also said that at the start of January 2026, T. Rowe Price held a first close for a managed private equity fund structured as a closed-end drawdown vehicle targeting a portfolio of roughly 25 private companies. Management said private credit deployment finished 2025 strongly and that expectations remain for acceleration in deal volume given a robust pipeline.
During Q&A, Sharps said the firm expects the market opportunity for private assets in defined contribution plans to evolve slowly, citing mixed views among plan sponsors related to fiduciary clarity, fees, and liquidity. He said the firm continues product work with Goldman Sachs and expects the co-branded retirement date offering to be in market around mid-year.
Head of Global Investments Eric Veiel also discussed tokenization and blockchain, saying the firm has invested in digitization capabilities since 2022 and sees opportunities across efficiency (middle- and back-office processes), product innovation (including public-private convergence and customization), and distribution to new investor segments. Veiel said the company has registered an active crypto ETF it hopes to bring to market in 2026, using a blend of fundamental and quantitative analysis for a multi-token ETF.
On capital returns, Sharps said the firm generated more than $2 billion of free cash flow in 2025 and returned nearly $1.8 billion to stockholders. Dardis said the company repurchased $141 million of shares in the fourth quarter, bringing 2025 buybacks to $624.6 million, or 2.8% of shares outstanding. The firm ended the year with $3.8 billion of cash and discretionary investments, up $735 million from the start of the year, and Sharps noted the company increased its regular dividend for the 39th consecutive year since its 1986 IPO.
About T. Rowe Price Group NASDAQ: TROW
T. Rowe Price Group, Inc is a global investment management firm headquartered in Baltimore, Maryland, founded by Thomas Rowe Price Jr. in 1937. The company provides a broad range of investment products and services for individual investors, financial intermediaries, retirement plan sponsors and institutional clients. Its offerings are built around active investment management and in-house research across equity, fixed income and multi-asset strategies, reflecting a long history as a research-driven asset manager.
The firm's product lineup includes mutual funds, separate accounts, collective investment trusts, target-date and target-risk funds, and managed account solutions, as well as services for defined contribution and defined benefit retirement plans.
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