T. Rowe Price

T. Rowe Price exited August 2026 with a record $1.897 trillion in managed assets, up 6.6% year to date on $158.0 billion of market gains, offset by $36.3 billion worth of net outflows, primarily from the company's active equity operations.

Why it matters: T. Rowe Price's managed assets of $1.897 trillion at the end of August 2026 were better than our expectations for $1.840 trillion in assets under management, or AUM, with the firm putting up much better market performance than we were anticipating for the month. T. Rowe Price noted in its preliminary AUM release for August 2026 that the increase in its managed assets during the past month reflected net outflows of $7.9 billion, which were on par with outflows of $8.5 billion reported for July. We now expect the firm's outflows to be around $24 billion during the third quarter. For some perspective, during the past three years the company's quarterly run rate for outflows has been $13.8 billion, and had actually been trending down since the start of the year, with T. Rowe Price posting net outflows of $13.7 billion and $6.5 billion in the first and second quarters of 2026, respectively, after recording net outflows of $25.5 billion in the fourth quarter of 2025.

The Bottom Line: Expecting the equity and credit markets to close out the September quarter on a weaker note, and the December quarter likely being mixed, we see T. Rowe Price closing out the year with $1.872 trillion in managed assets, up 5.5% year over year. This helps inform our current $116 per share fair value estimate for narrow-moat T. Rowe Price. Our forecast includes total AUM rising to $2.060 trillion by the end of 2030, with revenue expanding at a 1.3% CAGR during fiscal 2026-30 and adjusted operating margins in a 34%-38% range. We view the shares as slightly undervalued right now.

For more insight into the trends and other issues affecting the traditional asset managers, which influence our long-term forecasts for firms like T. Rowe Price, please see our latest Industry Pulse, "US Traditional Asset Managers: 2026 Q2," which was published on June 24, 2026. We also have a broader industry primer available for the US-based asset managers in our annually updated Industry Landscape, "US Asset Managers," which was last published on Dec. 18, 2025.

Our fair value estimate for T. Rowe Price is $116 per share, which implies a price/earnings multiple of 11.4 and 11.1 times our estimates for adjusted earnings in 2026 and 2027, respectively. For some perspective, during the past five (10) years, the company's shares have traded at an average of 12.8 (14.4) times trailing earnings on an adjusted basis, with the highest (lowest) multiple during the past decade being 20.5 (9.2) times. We assume a 21% US statutory corporate tax rate and a 10.3% (10.2%) cost of equity (weighted average cost of capital) in our valuation.

T. Rowe Price ended the second quarter of 2026 with a record $1.893 trillion in managed assets, up 12.9% year over year. Net outflows of $6.5 billion (including money market flows) during the second quarter were much better than the quarterly run rate of $15.6 billion in average outflows we've seen at the firm since the Fed started raising rates in 2022. The firm, however, noted that it had quarter-to-date outflows of $16.1 billion during the past two months, and is likely to close out the third quarter with more than $20 billion in outflows. While the company ended August 2026 with preliminary AUM of $1.897 trillion, we expect the firm's managed assets to decline to $1.810 trillion at the end of the third quarter.

While we expect positive flows to continue to be difficult to come by in the near term, we see them eventually abating over the long run, especially as fewer baby boomers reach retirement age. Our current projections have T. Rowe Price generating average annual organic AUM growth in a range of negative 3% to positive 1% during 2026-30, with flows starting to improve after 2028 when fewer baby boomers are expected to retire, and millennials start reaching their peak earnings years. This, of course, assumes T. Rowe Price gets its investment performance back in line with its historical track record prior to 2022.

As a result, our five-year forecast has total and average AUM increasing at a low- to mid-single-digit rate on average (a period that includes a meaningful equity market correction). With management fees continuing to be pressured industrywide, we see T. Rowe Price generating a 1.3% CAGR for revenue during 2026-30. With asset management firms continuing to not only pare back fees but spending more to produce better investment results and enhance distribution, we expect to see adjusted operating margins for T. Rowe in a range of 34%-38% over our five-year projection period, compared with 37.2% last year and 39.7% on average annually during 2021-25.

We project a bull-case fair value estimate of $180 per share and a bear-case valuation of $70 per share. The key factors affecting our scenario analysis include the firm's ability to gather and retain assets, as well as the expected change in its overall realization rate as a result of its ongoing growth and changes in product mix driven by market conditions, investor sentiment, and overall fund performance.

Our upside case implies P/E multiples of 14.0 and 13.7 times our adjusted earnings estimate for 2026 and 2027, respectively. This scenario assumes T. Rowe Price overcomes much of the pressure on growth equities, with top-line growth buoyed by less fee compression than in our base case. The net result is a 6.8% CAGR for revenue over our five-year forecast, with adjusted operating margins approaching 40% by the end of 2030.

Our downside case implies P/E multiples of 9.3 and 9.1 times our adjusted earnings estimate for 2026 and 2027, respectively. This scenario assumes T. Rowe Price struggles to generate better than low-single-digit top-line growth in most years, faced not only with a disdain for growth equities but also a prolonged bout of equity market malaise, with the net result being a negative 7.2% CAGR for revenue, with operating margins dropping closer to 30%, during our five-year forecast.

We believe the asset management business can be conducive to the development of economic moats, with switching costs and intangible assets being the most durable sources of competitive advantage. Although the switching costs might not be explicitly large, inertia, the uncertainty of achieving better results by moving from one manager to another, and the potential tax consequences of selling a fund with significant gains have tended to keep investors in place. As a result, money that flows into asset managers tends to stay there.

For the overall industry, the average narrow retention rate, exclusive of exchange redemptions, was 75% or greater annually during the past 5-, 10-, 15-, 20-, 25-, and 30-year periods. Including exchange redemptions, the retention rate was greater than 70%. Firms offering niche products with significantly higher switching costs—like retirement accounts, funds with lockup periods, and tax-managed strategies—have tended to hold on to assets longer.

Because T. Rowe Price does not break out its net flows (which are gross sales less investor redemptions), we assume, based on its historical record of organic AUM growth, that the company's average annual retention rate has been somewhere between the industry's annual rate and estimated rates of 90% or more in the retirement channel. That said, redemptions have outpaced flows into 401(k) plans since the baby boomer retirement phase started in 2011, affecting the company's organic AUM growth.

During the past five (10) calendar years, T. Rowe Price's organic growth rate for its long-term AUM averaged negative 3.9% (negative 1.6%) annually with a standard deviation of 1.7% (2.7%). This meant that in most years, the firm was not fully compensating for investor redemptions with new flows. We expect T. Rowe Price to generate negative 1.1% (positive 0.3%) average annual organic growth for its long-term AUM during 2026-30 (2026-35), with a standard deviation of 1.6% (2.0%).

We believe the firm will continue to have a slightly better-than-average switching cost profile relative to its active asset manager peers, despite currently experiencing elevated redemption rates as the baby boomer retirement cycle continues, facing additional pressure from the growth of passively managed target-date funds, and struggling with uncharacteristically poor investment performance.

We think more traditional asset managers like T. Rowe Price can maintain their switching costs advantage by leveraging their product variety, distribution networks, and global presence, along with their strong brand names and record of generating above-average investment performance relative to peers.

While the barriers to entry are not particularly significant for the industry, the barriers to success are extremely high. It takes time and skill to not only put together a long enough record of investment performance to start gathering assets, but also to build the scale necessary to be competitive. As a result, larger, more established asset managers have tended to have an advantage over smaller players, especially in gaining cost-effective access to distribution platforms.

That said, we do not think a cost advantage moat source applies to the traditional asset managers—except in the case of index fund and ETF providers—as scale does not always confer better-than-average operating profitability and the industry tends to behave as an oligopoly when it comes to pricing.

Competition for investor flows can be stiff and has traditionally centered on investment performance. Although institutional investors and retail gatekeepers are exerting pressure on pricing, price-based competition has been rare, aside from what we've seen in the US market for exchange-traded funds. While compensation remains the single largest expense for most asset managers, supplier power has been manageable, as many firms have reduced their reliance on star managers and tied manager and analyst pay to both portfolio and overall firm performance.

Asset managers that have demonstrated an ability to gather and retain investor assets across different market cycles have tended to produce more stable profitability, with returns exceeding their cost of capital for longer periods. While the more broadly diversified asset managers are structurally set up to hold on to assets regardless of market conditions, it has been firms with solid product sets across asset classes (built on repeatable investment processes), charging reasonable fees, and with singular corporate cultures dedicated to a common purpose that have done a better job.

We assign T. Rowe Price a Narrow Morningstar Economic Moat Rating. The biggest differentiators for the firm have historically been the size and scale of its operations, the strength of its brand, its track record of active fund outperformance, and its reasonable fees. The company has also had a stickier set of clients than peers, with close to two-thirds of its AUM derived from retirement-based accounts.

That said, the switching costs and intangibles attached to the firm have not been strong enough to withstand the pressures of the baby boomer retirement cycle, with the firm facing increased competition from passively managed target-date funds (spearheaded by Vanguard) in the retirement channel. This has challenged not only pricing but sales and renewals of the company's actively managed target-date funds, only adding to the outflow headwinds the firm has been facing in the retirement channel from the baby boomer retirement cycle.

With few of T. Rowe Price's asset class strategies outperforming enough to land in the upper quartile on a three- and five-year basis, and outflows expected to continue in the near to medium term, it will take some time before things improve meaningfully for the firm. In the meantime, the company is operating with higher levels of operating leverage than it had five years ago, with adjusted operating margins being some 500 basis points below historical norms.

With $1.897 trillion in AUM at the end of August 2026, T. Rowe Price is one of the larger US-based asset managers. Retirement accounts and variable-annuity portfolios, which tend to be stickier than retail assets, account for close to two-thirds of managed assets.

T. Rowe Price has capacity to expand its international fund offerings, allowing its organic AUM growth to be bolstered once markets and performance recover.

While most of T. Rowe Price's AUM generate fees based on daily AUM levels rather than monthly or quarterly averages, revenue will rebound faster during favorable markets.

The firm's equity performance remains weak, with just 25% and 26% of US fund AUM beating passive peer medians on a three- and five-year basis, respectively, at the end of June 2026.

Bond fund performance has also stumbled, with just 63% and 83% of bond fund AUM beating passive peer medians on a three- and five-year basis, respectively, at the end of the second quarter.

Additionally, just 50% and 24% of T. Rowe Price's multiasset fund AUM, which has historically outperformed, were beating passive peer medians on a three- and five-year basis, respectively, at the end of June 2026.