Q3 2023 T. Rowe Price Group Inc Earnings Call

Yeah.

Speaker 1: Good morning, my name is Norma, and I'll be your conference facilitator today. Welcome to T-Roll Price's third quarter, 2023 earnings conference call. All participants will be in a listen only mode until question and answer period. I'll give you instructions on how to ask questions at that time. As we're reminded, this call is being recorded and will be available for replay on T-Roll Price's website shortly after the call concludes. I will now turn the call over to the lensly, Karooft T-Roll Price's Director of Investor Relations. Please go ahead.

Good morning, My name is Norma and I'll be your conference facilitator today welcome to T. Rowe Price's third quarter 2020 earnings conference call. All participants will be in a listen only mode until question and answer period I will give you instructions on how to ask questions at that time as a reminder, this call is being recorded and will be available.

A replay on T. Rowe Price's website. Shortly after the call concludes I will now turn the call over to chip.

Honestly charisma T Rowe Price's director of Investor Relations. Please go ahead.

Speaker 2: Hello and thank you for joining us today for our third quarter earnings call. The press release and a supplemental materials document can be found on our IR website at investors.trayprice.com.

Yeah.

Hello, and thank you for joining us today for our third quarter earnings call. The press release and a supplemental materials documents can be found on our IR website at investors Dot T Rowe price dotcom.

Speaker 2: Today's call will last approximately 45 minutes. Our CEO and President Rob Sharps and CFO Jen Dardis will discuss the company's results for about 15 minutes and then we'll open it up to your questions.

Today's call will last approximately 45 minutes, our CEO and president, Rob Sharps and CFO Jen Dartos well discuss the company's results for about 15 minutes and then we'll open it up to your questions. We ask that you limit. It to one question per participant. We also have Eric Vial T. Rowe price associates head of global equity here with Robin Gen. Today for the question.

Speaker 2: We ask that you limit it to one question per participant. We also have Eric Vile, T. Rowe Price Associates, Head of Global Equity, here with Rob and Jen today for the question and answers portion of the call.

And answers portion of the call.

Speaker 2: I'd like to remind you that during the course of this call, we may make a number of forward-looking statements and reference certain non-GAAP financial measures.

I'd like to remind you that during the course of this call. We may make a number of forward looking statements and reference certain non-GAAP financial measures. Please refer to the forward looking statement language and the reconciliations to GAAP in the supplemental materials as well as in our press release and 10-Q.

Speaker 2: Please refer to the forward-looking statement language and the reconciliations to GAP in the supplemental materials, as well as in our press release in 10Q.

Speaker 2: All investment performance reference to peer groups on today's call are using Morningstar peer groups. Now I'll turn it over to Rob. Thank you, Leslie.

All investment performance references to peer groups on today's call are using Morningstar peer groups now I'll turn it over to Rob.

Thank you Lindsay and thanks to all of you for joining us today.

Speaker 3: Third quarter trends were largely similar to what we experienced earlier in the year.

Third quarter trends were largely similar to what we experienced earlier in the year.

Speaker 3: Relative investment performance was solid and particularly strong in our largest franchise.

Relative investment performance was solid and particularly strong in our largest franchises.

Speaker 3: We make progress on our strategic initiatives and we execute it on playing cost savings up.

We made progress on our strategic initiatives and we executed on plan cost savings efforts.

Speaker 3: At the same time, we haven't seen any improvement in net flows and don't expect to for the balance of the year.

At the same time, we haven't seen any improvement in net flows and don't expect to for the balance of the year.

Speaker 3: That said, we do expect flow trends to recover somewhat in 2024, as improved performance takes the pressure off of redemptions from US large cap equity products. Investors come off the sidelines, and we realize the impact of our strategic investments.

That said, we do expect flow trends to recover somewhat in 'twenty 'twenty. Four is improved performance takes the pressure off of redemptions from U S large cap equity products.

Investors come off the sidelines and.

We realize the impact of our strategic investments.

Turning now to investment performance.

Speaker 3: As you know, most equity and fixed income markets fell in the third quarter as investors grew increasingly concerned about a prolonged period of higher interest.

As you know most equity and fixed income markets fell in the third quarter as investors grew increasingly concerned about a prolonged period of higher interest rates.

Speaker 3: During these choppy markets, we posted another quarter of solid investment performance relative to peers, particularly in many of our US equity and multi assets strategy.

During these choppy markets, we posted another quarter of solid investment performance relative to peers, particularly in many of our U S equity and multi asset strategies.

Speaker 3: Our US equity products were resilient with more than 70% of the mutual funds outperforming their peer group media.

Our U S equity products were resilient with more than 70% of the mutual funds outperforming their peer group mediums.

Speaker 3: All three of our large cap growth products were above the median and beat their benchmarks in the quarter. And each have top quartile performance for the year-to-date time period.

All three of our large cap growth products were above the median and beat their benchmarks in the quarter and each have top quartile performance for the year to date time period.

Speaker 3: Other strong performers in our U.S. equity range included all cap opportunities, U.S. large cap core and science and technology, which all had top core tile performance versus peers for the quarter, adding to their solid multi-year track record.

Other strong performers in our U S equity range included all cap opportunities U S large cap core and science and technology, which all had top quartile performance versus peers for the quarter, adding to their solid multiyear track records.

Speaker 3: International equity products continued to have solid long-term relative peer results, despite losing some ground during the quarter.

International equity products continued to have solid long term relative peer results, despite losing some ground during the quarter.

Speaker 3: We launched five new active ETFs in June and our four active US equity ETFs got off to a strong start with all beating their benchmarks in the first full quarter since launch.

We launched five new active Etfs in June and our four active U S equity Etfs got off to a strong start with all beating their benchmarks in the first full quarter since launching.

Speaker 3: Our Capital Appreciation Fund continues to deliver consistent out performance relative to peers and is in the top-desire versus peers in the 1, 3, 5, and 10-year time period.

Our capital appreciation fund continues to deliver consistent outperformance relative to peers and is in the top decile versus peers in the 135 and 10 year time periods.

Speaker 3: Our target date products added another strong quarter, largely driven by our active security selection and differentiated portfolio construction.

Our target date products added another strong quarter, largely driven by our active security selection and differentiated portfolio construction.

Speaker 3: All the vintages of the flagship retirement funds were in the top quarter tile versus peers adding to their strong long-term track record.

All vintages of the flagship retirement funds were in the top quartile versus peers, adding to their strong long term track record.

Speaker 3: Ficked income performance was solid, with over 60% of our mutual funds outperforming their peer group meeting.

Fixed income performance was solid with over 60% of our mutual funds outperforming their peer group meetings.

Topping the list, where our dynamic credit Bond fund, which was recently added to our target date building blocks and the global high income Bond fund both of which were top decile performers in the quarter.

Speaker 3: Alternative strategies generated solid absolute and relative performance during the quarter with strong results in private market strategy.

Alternative strategies generated solid absolute and relative performance during the quarter with strong results in private market strategies.

Speaker 3: OHA Liquid Credit Strategies outperform their benchmarks as well.

Ohh illiquid credit strategies outperformed their benchmarks as well.

Speaker 3: While I'm encouraged by improvements in our investment performance, as I mentioned at the outset, we continue to see net out.

While I'm encouraged by improvements in our investment performance as I mentioned at the outset, we continue to see net outflows.

Speaker 3: Third quarter flows and negative 17.4 billion dollars were largely consistent with recent levels.

Third quarter flows and negative $17 $4 billion were largely consistent with recent levels.

Speaker 3: The asset class trends remain the same, with US large capacity accounting for a majority of the net out.

The asset class trends remain the same with U S large cap equity accounting for a majority of the net outflows.

Speaker 3: Looking ahead, we expect four quarter flows to be worse than recent trends with further weakness concentrated in November and December .

Looking ahead, we expect fourth quarter flows to be worse than recent trends with further weakness concentrated in November and December.

Speaker 3: Our forecast considers that December has been particularly weak over the last few years and reflects notified terminations and redemptions, including those related to a handful of large sub-advisory mandates.

Our forecast considers the December has been particularly weak over the last few years and reflects notified terminations and redemptions, including those related to a handful of large sub advisory mandates.

Speaker 3: We continue to proactively manage expenses to create a cost structure appropriate for the size and scale of the firm today and to allow for continued investment in our strategic priority.

We continue to proactively manage expenses to create a cost structure appropriate for the size and scale of the firm today.

And to allow for continued investment in our strategic priorities.

Speaker 3: Jim will talk more about these expense efforts in a moment. But first, I'd like to highlight a few of our accomplishments during the court.

Jim will talk more about these expense efforts in a moment, but first I'd like to highlight a few of our accomplishments during the quarter.

Speaker 3: We launched our first joint investment offering with OHA, the T-Raprice OHA Select Private Credit.

We launched our first joint investment offering with OE Jay.

T Rowe price Ohh select private credit fund.

Speaker 3: offered as a non-traded, perpetual-like business development company or BDC structure.

Offered as a non traded perpetual like business development company or BDC structure.

Speaker 3: We are focused on building a durable and repeatable process to deliver alternative investments to the Welp Management Channel.

We are focused on building, a durable and repeatable process to deliver alternative investments to the wealth management channel.

Speaker 3: Ocredit launched with $1.5 billion of investable capital, making it one of the industry's largest non-traded BDC launches.

Oh credit launched with $1 $5 billion of Investable capital.

Making it one of the industry's largest non traded BDC launches.

Speaker 3: This includes over $600 million raised in equity commitments from T. Rowe Price and a group of global institutional investors, in addition to $875 million in credit facility commitments.

This includes over $600 billion raised in equity commitments from T Rowe price and a group of global institutional investors. In addition to $875 million in credit facility commitments.

Speaker 3: A RETF franchise is expanding with AUM to like $1.7 billion as of September 30.

Our ETF franchise is expanding with AUM totaling $1 $7 billion as of September 30.

Speaker 3: Our new Capital Appreciation Equity ETF, or TCAF, has attracted strong interest since launching in June , with over $190 million in net flows and placement with 12 broker-dealer clients.

Our new capital appreciation equity ETF or T. Cap has attracted strong interest since launching in June with over $190 million and net flows and placement with 12 broker dealer clients.

Speaker 3: In the third quarter, associates in London moved to our new office in Warwick Court on Patternoster Square, and we marked the end of exterior construction of our new global headquarters at Harbor Point in Baltimore, Maryland, with a ceremonial beam sign.

In the third quarter Associates in London moved to our new office in warrant CT on pattern Auster square.

And we Mark the end of exterior construction of our new Global headquarters at Harbor point in Baltimore, Maryland, with a ceremonial beam signing.

Speaker 3: Both offices are an investment in the associate experience and have been designed to foster collaboration, a cornerstone of our culture.

Both offices are in investment and the associate experience that have been designed to foster collaboration a cornerstone of our culture.

Speaker 3: It's our culture and the dedication and hard work of our associates that are driving our progress on our path to return the firm to organic growth. We have some of the best talent in the industry and we're squarely focused on delivering consistently strong long term investment performance and world class service for our clients, sustaining our culture of excellence and collaboration and carefully managing our financial results through this environment.

It is our culture and the dedication and hard work of our associates that are driving our progress on our path to return the firm to organic growth.

We have some of the best talent in the industry and we're squarely focused on delivering consistently strong long term investment performance and World class service for our clients sustaining our culture of excellence and collaboration and carefully managing our financial results through this environment.

Speaker 3: I'm grateful to our teams for keeping our clients at the center of all we do. I'll now turn to Jen to cover our financial

I am grateful to our team for keeping our clients at the center of all we do.

I'll now turn to adjourn to cover our financial results for the quarter.

Speaker 4: Thank you, Rob, and hello, everyone. I'll review our financial results, and then we will open the line for questions.

Thank you, Rob and Hello, everyone I'll review, our financial results and then we will open the line for questions.

Speaker 4: Our adjusted earnings per share of $2.17 for Q3 2023 was up from $2.02 in Q2 2023, driven by higher investment advisory revenues and higher carried interest related income.

Our adjusted earnings per share of $2 17 for Q3 2023 was up from $2 <unk> in Q2, 2023, driven by higher investment advisory revenues and higher carried interest related income.

Speaker 4: A decline in markets following a peak at the end of July led to Q3 end of period AUM of $1.35 trillion, down 3.8% from Q2.

A decline in market following a peak at the end of July led to Q3 end of period AUM.

<unk> three five trillion.

Down three 8% from Q2.

Speaker 4: But our Q3 average AUM of $1.4 trillion was 2.7% higher than Q2 and 3.4% higher than Q3 2022, driving the higher investment advisory revenues this quarter.

But our Q3 average AUM of $1 four trillion was two 7% higher than Q2, and three 4% higher than Q3 2022, driving the higher investment advisory revenues this quarter.

Speaker 4: As Rob mentioned, we had $17.4 billion in net outflows for the quarter, including a previously disclosed sub-advisory mandate termination in August .

As Rob mentioned, we had $17 4 billion and net outflows for the quarter, including a previously disclosed sub advisory mandate termination in August.

Speaker 4: Consistent with last quarter, our three U.S. large cap growth equity strategies drove a majority of the net outflows.

Consistent with last quarter, our three U S large cap growth equity strategies drove a majority of the net outflows.

Speaker 4: Outflows from equity products were partially offset with inflows in our multi-asset, fixed income, and alternative asset class.

Outflows from equity products were partially offset with inflows in our multi asset fixed income and alternative asset classes and our Asia Pacific business posted positive flows for the quarter as well.

Speaker 4: and our Asia-Pacific business posted positive flows for the quarter as well.

Speaker 4: Within multi-asset, target date net inflows were $2.9 billion for the quarter, bringing year-to-date inflows to $12.8 billion.

Within multi asset target date, net inflows were $2 9 billion for the quarter, bringing year to date inflows to $12 8 billion.

Speaker 4: When thinking about the rest of the year, keep in mind we historically have seen some plan-driven seasonality in the D.C. Channel with some plans departing in December and new ones onboarding in January .

When thinking about the rest of the year keep in mind, we historically have seen some planned driven seasonality in the DC channel with some plans departing in December and new ones on boarding in January.

Speaker 4: Other highlights from the quarter included net inflows into capital appreciation, all-cap opportunities equity, international core equity, and blended emerging market bonds.

Other highlights from the quarter included net inflows into capital appreciation, all cap opportunities equity international core equity and blended emerging market bond.

Speaker 4: In September , we reopened our international small-cap equity and our high-yield bond strategies to new clients, which we expect will support future sales. Both strategies have solid long-term.

In September we reopened our international small cap equity and our high yield bond strategies to new clients, which we expect will support future sales.

Both strategies have solid long term performance track records.

Speaker 4: Turning to the income statement, Q3 adjusted net revenues were nearly $1.7 billion, including over $1.4 billion in investment advisory revenue.

Turning to the income statement Q3, adjusted net revenues were nearly $1 7 billion.

Including over $1 4 billion in investment advisory revenue.

Speaker 4: Our annualized effective fee rate was 41.7 basis points in Q3 2023, down from 42.3 in Q2.

Our annualized effective fee rate was 41 seven basis points in Q3 2023 down from 42 three in Q2.

Speaker 4: The effective fee rate decrease is primarily driven by the timing of performance-based fee earnings on certain equity and alternatives products that were realized in Q2, along with mixed shifts toward lower fee asset classes and VFPs.

The effective fee rate decrease is primarily driven by the timing of performance based fee earnings on certain equity and alternatives products that were realized in Q2, along with mix shift towards lower fee asset classes and vehicle.

Speaker 4: Q3 adjusted net revenues also included over $90 million in accrued carried interest-related revenue, reflecting strong absolute and relative performance in those alternatives products with carried interest-paying structure.

Q3, adjusted net revenues also included over $90 million in accrued carried interest related revenue, reflecting strong absolute and relative performance and those alternatives products with carried interest paying structures.

Speaker 4: This is a higher level of carried interest-related revenue than previous quarters, and this will likely continue to vary widely quarter to quarter in line with absolute and relative returns in the product.

This is a higher level of carried interest related revenue in previous quarters, and this will likely continue to vary widely quarter to quarter in line with absolute and relative returns in the product.

Speaker 4: Our adjusted operating expenses were nearly $1.1 billion, up a little over 3% from both Q2 2023 and Q3 2022.

Our adjusted operating expenses were nearly $1 1 billion up a little over 3% from both Q2 2023 in Q3 2022.

Speaker 4: Q3 included severance costs related to our July reduction in forks and higher carried interest related expense, partially offset by a non-recurring benefit in GNA.

Q3 included severance costs related to our July reduction enforce and higher carried interest related expense, partially offset by a nonrecurring benefit in G&A.

Speaker 4: For full year 2023, we are narrowing our guidance range for adjusted operating expense excluding the carried interest related compensation to be 2 to 4% over the comparable full year 2022 amount of nearly $4.1 billion.

For full year 2023, we are narrowing our guidance range for adjusted operating expense, excluding the carried interest related compensation to be 2% to 4% over the comparable full year 2022 amount of nearly $4 1 billion.

Speaker 4: With adjusted operating expense growth excluding carried interest compensation of just under 1% year-to-date, we do expect higher expenses in a few categories in Q4, several of which are seasonal or timing-related, so will not fully carry forward into 2024.

With adjusted operating expense growth, excluding carried interest compensation of just under 1% year to date, we do expect higher expenses in a few categories in Q4, several of which are seasonal or timing related so will not fully carryforward into 2024.

Speaker 4: Specifically, we expect GNA to be higher than typical run rate as we have higher professional fee spend in Q4 that spilled over from Q3.

Specifically, we expect G&A to be higher than typical run rate as we have higher professional fee spend in Q4, that's spilled over from Q3.

Speaker 4: Stock-based compensation is typically higher in Q4 as our annual grant date falls in December .

Stock based compensation is typically higher in Q4 as our annual grants pause in December.

Speaker 4: Advertising and promotion is also typically highest in Q4 to support seasonal campaigns. And finally, we will realize a full quarter of higher technology, occupancy, and facilities costs related to our new London location.

Advertising and promotion is also typically highest in Q4 to support seasonal campaigns and.

And finally, we will realize a full quarter of higher technology occupancy and facilities costs related to our new London location.

Speaker 4: As we mentioned last quarter, we have been focused on managing our expense growth and driving efficiency to allow us to continue to invest in the strategic initiatives that we believe will result in future growth.

As we mentioned last quarter, we have been focused on managing our expense growth and driving efficiency to allow us to continue to invest in the strategic initiatives that we believe will result in future growth.

Speaker 4: As part of this effort and in light of our hybrid working environment, we have been reviewing our real estate usage with the dual goals of enhancing in-person collaboration and reducing real estate costs.

As part of this effort and in light of our hybrid working environment, we have been reviewing our real estate usage with the dual goals of enhancing in person collaboration and reducing real estate cost.

Speaker 4: As a result of this review, we made the decision to consolidate Associates at our Owings Mills, Maryland campus into four buildings down from six and to reduce the amount of space occupied in our Colorado Springs buildings by year end.

As a result of this review we made the decision to consolidate associates at our Owings Mills, Maryland campus into four buildings down from six and to reduce the amount of space occupied in our Colorado Springs buildings by year end.

Speaker 4: This is a change in office configuration, not a change in location or workforce strategy.

This is a change in office configuration, not a change in location or workforce strategy.

Speaker 4: We have also been focused on enhancing our business, data, and technology architecture to ensure we have the foundational support to underpin our strategic initiatives and drive efficiency going forward.

We have also been focused on enhancing our business data and technology architecture to ensure we have the foundational support to underpin our strategic initiatives and drive efficiency going forward.

Speaker 4: As we shared last quarter, our cost savings efforts over the last 12 months have removed or reallocated over $200 million in operating expenses versus the run rate for 2024. We continue to expect 2024 adjusted operating expenses, excluding carried interest compensation, will grow in the low single-digit range.

As we shared last quarter, our cost savings efforts over the last 12 months have removed or reallocated over $200 million and operating expenses versus the run rate for 2024.

We continue to expect 2024 adjusted operating expenses, excluding carried interest compensation will grow in the low single digit range.

Speaker 4: This growth rate will depend on final 2023 adjusted operating expense levels. And as always, this estimated growth rate is based on current market levels, and we may choose to adjust it if markets rise or fall significantly.

This growth rate will depend on final 2023, adjusted operating expense level.

And as always this estimated growth rate is based on current market levels, and we may choose to adjust it if markets rise or fall significantly.

Speaker 4: Spending a moment on capital management, we repurchased over 977,000 shares in the third quarter at an average price of about $108 for a total of $106 million.

Spending a moment on capital management, we repurchased over 977000 shares in the third quarter at an average price of about $108 for a total of $106 million year.

Speaker 4: Year to date, we have repurchased a little under 1.4 million shares for just over $150 million.

Year to date, we have repurchased a little under $1 4 million shares or just over $150 million.

Speaker 4: As of September 30, we had 223.5 million shares outstanding.

As of September 30, we had $223 5 million shares outstanding.

Speaker 4: Our recurring dividend remains a top priority. Through buybacks and dividends year to date, we have returned about $992 million to stockholders while maintaining ample liquidity to support our seed capital program, opportunistic share buybacks, and potential M&A.

Our recurring dividend remains a top priority through buybacks and dividends year to date, we have returned about $992 million to stockholders, while maintaining ample liquidity to support our seed capital program opportunistic share buybacks and potential M&A.

Speaker 4: As we complete the year in plan for 2024, we will continue to invest in our strategic priorities to pursue excellent investment performance and client service and to drive growth over time.

As we complete the year and plan for 2024, we will continue to invest in our strategic priority to pursue excellent investment performance and client service and to drive growth over time.

Speaker 4: We are also executing on our plans to reduce costs to fund these initiatives and maintain a low single-digit expense growth into 2024.

We are also executing on our plans to reduce cost on these initiatives and maintain a low single digit expense growth into 2024.

Speaker 4: While flows will remain challenged through the fourth quarter, we are confident that we will start to see the benefits of these efforts in 2024. With that, I'll ask the operator.

While flows will remain challenged through the fourth quarter. We are confident that we will start to see the benefits of these efforts in 2024.

With that I'll ask the operator to open the line for questions.

Speaker 1: Thank you. To ask a question, you'll need to press star 11 on your telephone.

Thank you.

To ask a question you will need to press star one one on your telephone.

Speaker 1: To withdraw your question, please press star one one again. Please wait for your name to be announced. We ask that you please limit your questions to one.

Unknown Executive: Good morning.

Linsley Carruth: My name is Norma, and I'll be your conference facilitator today. Welcome to T. Rowe Price's third quarter, 2023 earnings conference call.

To withdraw your question. Please press Star one again, please wait for your name to be announced we ask that you. Please limit your questions to one.

Speaker 1: Again, to ask a question that's star 11, one moment for our first call.

Linsley Carruth: All participants will be in a listen only mode until question and answer period. I'll give you instructions on how to ask questions at that time. As a reminder, this call is being recorded and will be available for replay on T. Rowe Price's website shortly after the call concludes.

Again to ask a question Thats Star 111 moment for your first question. Please.

Speaker 1: This question comes from the line of Alexander Blostein with Goldman Sachs. Your line is now open.

Question comes from the line of Alexander <unk> with Goldman Sachs. Your line is now open.

Linsley Carruth: I will now turn the call over to the Linsley Carruth T. Rowe Price's Director of Investor Relations. Please go ahead.

Speaker 3: Hey, good morning. Thanks for the question. So maybe starting on the last point, Jen, you just made, and Rob, you alluded to that as well earlier around confidence and improvement flows into 2024. Can you spend a minute on maybe some of the key strategies and initiatives you expect to contribute to flows in 24 that will start to move the needle? I'm not sure if it's ETFs or the private credit strategy. So anything you can help us to better frame the opportunities at UC for next year.

Hey, good morning. Thanks for the question so maybe starting on the last point, John just made and Rob you alluded to that as well earlier around confidence in improvement flows into 2024 can you spend a minute on maybe some of the key strategies strategies and initiatives do you expect to contribute to close to 24 that will start to move the needle I am not sure if it's.

Linsley Carruth: Hello, and thank you for joining us today for our third quarter earnings call. The press release and the supplemental materials document can be found on our I. R website at investors. T. Rowe Price dot com. Today's call will last approximately 45 minutes. Our CEO and President Rob Sharps and CFO Jen Dardis will discuss the company's results for about 15 minutes, and then we'll open it up to your questions. We ask that you limit it to one question per participant.

<unk> or the private credit strategy. So anything you can help us to better frame the opportunity set that you see for next year. Thanks.

Speaker 3: Alex Good morning and thank you for the question.

Yes, Alex good morning, and thank you for the question.

Speaker 3: Look, I did note in the prepared remarks that we expect November and December to have elevated outflows.

Linsley Carruth: We also want to have Eric file T. Rowe Price associates head of global equity here with Robin Jen today for the question and answers portion of the call. I'd like to remind you that during the course of this call, we may make a number of forward looking statements and reference certain non gap financial measures. Please refer to the forward looking statement language and the reconciliations to gap in the supplemental materials as well as in our press release and 10 Q. All investment performance reference to peer groups on today's call are using Morningstar peer groups.

Okay I did note in the prepared remarks that we expect November and December to have elevated outflows.

Speaker 3: And November in particular is impacted by a single large mandate.

November in particular is impacted by.

Single large mandate.

Speaker 3: that December should be consistent with what we've seen in December for the last couple years. So I do think it's logical to ask given that weakness, why are we confident that outflows?

December should be consistent with what we've seen in December for the last couple of years. So I do think it's logical to ask given given that weakness why are we confident that outflows should be lower next year and the first thing I would say is that we're already seeing some year over year.

Speaker 3: should be lower next year. And the first thing I would say is that we're already seeing some year over year improvement in flows in certain channels.

Rob Sharps: Now I'll turn it over to Ross.

Rob Sharps: Thank you, Leslie, and thanks to all of you for joining us today. Third quarter trends were largely similar to what we experienced earlier in the year. Relative investment performance was solid and particularly strong in our largest franchises. We made progress on our strategic initiatives and we executed on plan cost savings efforts. At the same time, we haven't seen any improvement in net flows and don't expect to for the balance of the year.

The improvement in flows in certain channels.

Speaker 3: In particular, channels that tend to respond a little more quickly to changes in performance.

In particular channels that tend to respond a little more quickly to changes in performance.

Speaker 3: And that's despite what I would characterize as a pretty challenging industry backdrop.

And that's despite what I would characterize it as a pretty challenging industry backdrop.

Speaker 3: That is specific.

Okay.

That is specific.

Rob Sharps: That said, we do expect flow trends to recover some. On what in 2024 is improved performance takes the pressure off of redemptions from US large cap equity products. Investors come off the sidelines and we realize the impact of our strategic investments.

Speaker 3: That improvement, I'd say you can point to a number of areas.

That improvement I'd say, you can you can point to a number of areas.

Speaker 3: And if you just look at trends in Q3, we had just under three billion dollars of inflows in the retirement date funds and gross sales up 10% year over year. And we had positive flows in fixed income, multi-asset broadly and alternative.

Just look at trends in Q3, we had just under $3 billion of inflows in the retirement date funds and gross sales up 10% year over year.

Rob Sharps: Turning now to investment performance. As you know, most equity and fixed income markets fell in the third quarter as investors grew increasingly concerned about a prolonged period of higher interest rates. During these shopping markets, we posted another quarter of solid investment performance relative to peers, particularly in many of our US equity and multi asset strategies. Our US equity products were resilient with more than 70% of the mutual funds outperforming their peer group mediums.

We had positive flows in fixed income.

The asset broadly and alternatives.

Speaker 3: You mentioned ETFs, we had our best quarter for ETF sales. It's still small in building. I think it can be a contributor in 2024, but I don't think it will be the most meaningful driver of performance.

You mentioned Etfs, we had our best quarter for ETF sales, it's still small and building I think it can be a contributor in 2024, but I don't think it will be the most meaningful driver of performance.

Speaker 3: or of improvement in flows. I think the most meaningful driver will be one, I think of some of the money on the sidelines from an industry perspective extends their time horizon or risk appetite and you have the more flows in equities broadly. Two, I think a broadening of performance in the US equity market would be helpful for active relative to passive.

Rob Sharps: All three of our large cap growth products were above the median and beat their benchmarks in the quarter and each have top core tile performance for the year to date time period. Other strong performers in our US equity range included all cap opportunities US large cap core and science and technology, which all had top core tile performance versus peers for the quarter adding to their solid multi year track records. International equity products continued to have solid long term relative peer results despite losing some ground during the quarter.

Or.

But it flows I think the most meaningful driver will be one I think if some of the money on the sidelines from an industry perspective extends their time horizon or risk appetite and you have the more flows in equities broadly to I think a broadening of performance in the U S equity market would be helpful for active.

Relative to passive.

Speaker 3: three, you'll have ultimately the longer term.

Three youll have or ultimately.

Speaker 3: performance numbers as they flow through will really begin to impact flows. And for we've highlighted a number of different strategic initiatives that we're working on. Alternatives being one of them. So we do think that that O credit will contribute next year. But in the overall scale of our organization, I wouldn't necessarily say that I think either O credit or ETF will be a predominant driver of improved flows. I think they'll be additive.

The longer term.

<unk> numbers as they flow through will really begin to impact flows in four we've highlighted a number of different strategic initiatives that we're working on alternatives being one of them. So we do think that Oh credit will contribute next year, but in the overall scale of our organization I wouldn't necessarily say that I think either O creditor.

Rob Sharps: We launched five new active ETFs in June and our four active US equity ETFs got off to a strong start with all beating their benchmarks in the first full quarter since launch. Our Capital Appreciation Fund continues to deliver consistent out-performance relative to peers and is in the top-design versus peers in the one, three, five, and ten-year time periods. Our target-date products added another strong quarter, largely driven by our active security selection and differentiated portfolio construction.

Jeff will be a predominant driver of improved flows I think there'll be additive, but we're going to have to see improvement in the core asset classes and in the core channels to really have 24, you'll kind of be be a better picture with regard to flows in 2023.

Speaker 3: But we're going to have to see improvement in the core asset classes and in the core channels to really have 24, kind of be a better picture with regard to flows than 2023. Thank you.

Thank you one moment for our next question. Please.

Rob Sharps: All the advantages of the flagship retirement funds were in the top-courtile versus peers, adding to their strong long-term track record. Fiction income performance was solid with over 60% of our mutual funds outperforming their peer group meetings. Topping the list were our dynamic credit bond fund, which was recently added to our target-date building blocks and the global high-income bond fund, both of which were top-designal performers in the quarter. Alternative strategies generated solid absolute and relative performance during the quarter was strong results in private market strategies.

Speaker 5: Our next question comes from the line of Craig Siggand-Thawler with Bank of America. Your line is now open. Good morning, Rob Erick. Hope everyone's doing well. We have a question on another flow question, but focusing more on the redemption side of the equation. Most of your key equity flags.

Our next question comes from the line of Craig Siegenthaler with Bank of America. Your line is now open.

Good morning, Rob, Eric I hope everyone's doing well.

We have a question on another flow question, but focusing more on the redemption side of the equation.

Most of your key equity flagship funds and we're looking at Blue Chip gross stock in mid cap growth generated very strong performance over the last 12 months.

And Youre actually seeing this translate into month over month improvement in the flows from June to September. So my question is how is this impacting client discussions to better 12 months numbers and if you strip out the large institutional sub advisory redemptions that you're expecting at year end.

Rob Sharps: OHA liquid credit strategies outperform their benchmarks as well. While I'm encouraged by improvements in our investment performance, as I mentioned at the outset, we continue to see net outflows. Third quarterflows and negative $17.4 billion were largely consistent with recent levels. The asset class trends remain the same with US-large capability accounting for a majority of the net outflows. Looking ahead, we expect four quarterflows to be worse than recent trends with further weakness concentrated in November and December.

Why can't this lead to continued monthly net flow improvement in 2024.

Speaker 6: Sure, Craig, nice to hear your voice and good morning.

Sure Craig Nice to hear your voice and good morning.

Speaker 6: I would say a couple of things as it relates to these strategies. First of all, we're definitely encouraged by the improved performance over the year-to-date period. We're encouraged because it's come broadly and it's come with the support of really strong performance from our underlying research platform. Our analyst managed portfolio had a really strong year and continues to support our overall performance, which is key to what we do. Client conversations, you know, very

I would say a couple of things as it relates to these strategies first of all we're definitely encouraged by the improved performance over the year to date period.

We're encouraged because it's come broadly and it has come with the support of really strong performance from our underlying research platform or our analyst managed portfolio had a really strong year and continues to support our overall performance, which is which is key to what we do our client conversations very.

Rob Sharps: Our forecast considers that December has been particularly weak over the last few years and reflects notified terminations and redemptions, including those related to a handful of large sub-advisory mandates. We continue to proactively manage expenses to create a cost structure appropriate for the size and scale of the firm today and to allow for continued investment in our strategic priorities.

Speaker 6: a lot depending upon the type of coin. As you know, we're in basically every channel and every geography around the world with these strategies.

A lot depending upon the type of client as you know we're in basically every channel and every geography around the world with these strategies.

Speaker 6: What we're seeing as it relates to flows as you discussed, those channels that tend to respond more quickly to performance, we are starting to see some better numbers.

Rob Sharps: General talked more about these expense efforts in a moment, but first, I'd like to highlight a few of our accomplishments during the quarter.

We're seeing as it relates to flows as you discussed those channels that tend to respond more quickly to performance. We are starting to see some better numbers, but we have to continue to deliver the performance that we delivered year to date.

Rob Sharps: We launched our first joint investment offering with OHA, the T-reprise OHA Select Private Credit Fund, offered as a non-traded perpetual-like business development company or BDC structure. We were focused on building a durable and repeatable process to deliver alternative investments to the Wealth Management Channel. OCredit launched with $1.5 billion of investible capital, making it one of the industry's largest non-traded BDC launches. This includes over $600 million raised in equity commitments from T-reprise in a group of global institutional investors in addition to $875 million credit facility commitments.

Speaker 6: But we have to continue to deliver the performance that we delivered here to date. Over.

Speaker 6: continued time periods because we will see eventually those one, the three and the five get better as we do that. And more and more channels are focused on those three and those five. So we're encouraged in the short term, but we are far from complacent about it and recognize that we still have...

Over continued time periods, because we will see eventually the one to three and the five get better as we do that and more and more channels are focused on those three and those five so we're encouraged in the short term, but we are far from complacent about it and recognize that we still have.

Speaker 6: Many more quarters and years of strong performance to deliver to get those three and five year numbers where we want them to be.

Many more quarters and years of strong performance to deliver to get those three and five year numbers, where we want them to be.

Thank you.

One moment for our next question please.

Speaker 1: Our next question comes from the line of Patrick David with Autonomous. Your line is now...

Our next question comes from the line of Patrick Davitt with Autonomous your line is now open.

Rob Sharps: Our ETF franchise is expanding, with AUM totally $1.7 billion as of September 30th. Our new capital appreciation equity ETF, or key calf, has attracted strong interest since launching in June, with over $190 million in net flows and placement with 12 broker dealer clients.

Speaker 7: Hey, good morning, everyone. You mentioned the kind of few chunky sub advisory losses that have been announced over the last couple of months. So could you frame the AUM base specifically exposed to that particular issue and more broadly frame the risk that this is becoming a more regular trend?

Hey, good morning, everyone.

You mentioned kind of a few.

Chunky sub advisory losses that have been announced over the last couple of months. So could you frame the AUM base, specifically exposed to that particular issue and more broadly frame the risk that this is becoming a more regular trend.

Rob Sharps: In the third quarter, Associates in London moved to our new office and work court on Pattern Uster Square, and we marked the end of exterior construction of our new global headquarters at Harbor Point in Baltimore, Maryland, with a ceremonial beam signing. Both offices are an investment in the associate experience and have been designed to foster collaboration. A cornerstone of our culture. It's our culture and the dedication and hard work of our associates that are driving our progress on our path to return the firm to organic growth.

Okay.

I'll start.

And then.

Speaker 3: and the general area can add any perspective. But our sub-advisory business is broad. We have sub-advisory opportunities in the wealth channel, and we have meaningful variable newities sub-advisory.

General Eric can add any perspective, but our sub advisory business is broad we have sub advisory opportunities in the wealth channel.

And we have meaningful variable annuities sub advisory business.

Speaker 3: The variable annuity sub advisory business over time is, is,

The variable annuity sub advisory business over time as is likely to be under more pressure.

Speaker 3: likely to be under more pressure. In terms of sizing it, it is meaningful, but, you know, kind of well less than 10% of our overall book.

Rob Sharps: We have some of the best talent in the industry and we're squarely focused on delivering consistently strong long-term investment performance and world-class service for our clients, sustaining our culture of excellence in collaboration and carefully managing our financial results through this environment. I'm grateful to our teams for keeping our clients at the center of all we do.

In terms of sizing it is meaningful but kind of well less than 10% of our overall book.

Speaker 3: Overall, sub-advisories are very, very good business for us and a business that we're committed to. We think it's a channel that values our brand. We think it's a channel that values performance. We do see some additional opportunity over the long term in sub-advisory, particularly in the wealth channel, but we don't anticipate that there'll be much opportunity for growth outside of perhaps consolidating some market share, which is really dependent on

Our overall sub advisory is a very very good business for us and a business that we are committed to we think it's a channel that values. Our brand. We think it is a channel that values performance, we do see some additional opportunity over the long term in sub advisory, particularly in the wealth channel, but we don't anticipate that.

Jennifer Dardis: I'll now turn to Jim to cover our financial results for the quarter. Thank you Rob and hello everyone. I'll review our financial results and then we will open the line for questions. Our adjusted earnings per share of $2.17 for Q3 2023 was up from $2.02 in Q2 2023 driven by higher investment advisory revenues and higher carried interest related income. A decline in markets following a peak at the end of July led to Q3 end of period AUM of $1.35 trillion down 3.8% from Q2 but our Q3 average AUM of $1.4 trillion was 2.7% higher than Q2 and 3.4% higher than Q3 2022 driving the higher investment advisory revenues this quarter.

There'll be much opportunity for growth outside of perhaps consolidating some market share which is really dependent on.

Speaker 3: Very good service as well as excellent performance in that VH channel.

Very good service as well as excellent performance in that VA channel.

Yeah.

Thank you.

Speaker 3: I would know quickly with regard to the VH channel, the challenges in the VH channel, something that we've navigated for a very long period of time. So that's not something that's new or specific to the elevated outflows this year. It may be in a particular month or a particular quarter, but it's a part of the book that we've navigated some pressure over a relatively long period of time.

I wouldn't know quickly with regard to the VA channel the challenges in the VA channel is something that we've navigated for a very long period of time. So that's not something that's new or specific to the elevated outflows. This year. It may be in a particular month or a particular quarter, but it is a part of the book that.

We've navigated some pressure over a relatively long period of time.

Jennifer Dardis: As Rob mentioned we had $17.4 billion in net outflows for the quarter including a previously disclosed sub advisory mandate termination in August. Consistent with last quarter our three US large cap growth equity strategies drove a majority of the net outflows outflows from equity products for partially offset with inflows in our multi asset fixed income and alternatives asset classes and our Asia Pacific business posted positive flows for the quarter as well. Within multi asset target date net inflows were $2.9 billion for the quarter bringing year to date inflows to $12.8 billion.

Thank you one moment for our next question.

Speaker 1: Our next question comes from the line of Brian Badeau with Doater Bank. Your line is now open. Okay, thanks. Good morning.

Our next question comes from the line of Brian Bedell with Deutsche Bank. Your line is now open.

Okay, great. Thanks, Good morning folks thanks for taking my question.

Speaker 8: Maybe just one of the investment processes could see the improved performance. But if you can comment on, have there been any major changes to

Maybe just I just wanted the investment process as you could see the improved performance, but if you can comment on.

Have there been any major changes to how you incorporate ESG risks I know thats something thats been.

Speaker 8: how you incorporate ESG risks. I know that's something that's been...

Speaker 8: You've been working on for several years, particularly this year, and given the political backlash against the ESG, is that changing how you incorporate that into the investment process, and then similarly...

<unk> been working on for several years, particularly this year and given the political backlash against ESG is that is that changing.

Jennifer Dardis: When thinking about the rest of the year keep in mind we historically have seen some plan driven seasonality in the DC channel with some plans departing in December and new ones onboarding in January. Other highlights from the quarter included net inflows into capital appreciation all cap opportunities equity international core equity and blended emerging market bond. In September we reopened our international small cap equity and our high yield bond strategies to new clients which we expect will support future sales.

How you incorporate that into the investment process and then similarly, what are you hearing from distribution partners in terms of demand for either ESG products or that inclusion within the investment process, particularly I know in Europe. It was yes. It is.

Speaker 8: What are you hearing from distribution partners in terms of demand?

Speaker 8: for either ESG products or that inclusion within the investment process, particularly I know in Europe it has always been table stakes there, are you seeing any change in the institutional demand in Europe ?

It's always been table stakes, there or are you seeing any change.

The institutional demand in Europe.

Speaker 6: Yeah, Brian , very good question.

Yes, Hi, Brian.

Good question.

Jennifer Dardis: Both strategies have solid long term performance track records. Turning to the income statement Q3 adjusted net revenues were nearly $1.7 billion including over $1.4 billion in investment advisory revenue. Our annualized effective fee rate was 41.7 basis points in Q3 2023 down from 42.3 in Q2. The effective fee rate decrease is primarily driven by the timing of performance based fee earnings on certain equity and alternative products that were realized in Q2 along with mixed shifts toward lower fee asset classes and vehicles.

Speaker 6: We incorporate ESG into our investment decision-making process consistently, and we don't let near-term or long-term political issues affect.

But we incorporate ESG into our investment decision, making process consistently and we don't let near term or long term political issues affecting our process is very much based on using insights generated by our fundamental analysts our using our fixed income team using our responsible.

Speaker 6: Our process is very much based on using insights generated by our fundamental analysts, our using our fixed income team, using our responsible investing team.

Speaker 6: And what the R.I. team specifically does is help support volume managers and analysts identify risks and opportunities, understand the parts of a company's long-term strategy that could be materially affected by changes across ES or G, and then incorporate that into our investment decision-making process.

<unk> team and with our it team specifically does is helps our portfolio managers and analysts identify risks and opportunities understand the parts of our company's long term strategy that could be materially affected by changes across <unk> <unk> and then incorporating that into our investment decision, making process. So it does not affect.

Jennifer Dardis: Q3 adjusted net revenues also included over $90 million in accrued carried interest related revenue reflecting strong absolute and relative performance in those alternatives products with carried interest paying structures. This is a higher level of carried interest related revenue than previous quarters and this will likely continue to vary widely quarter to quarter in line with absolute and relative returns in the product. Our adjusted operating expenses were nearly 1.1 billion dollars, up a little over 3% from both Q2, 2023 and Q3, 2022. Q3 included severance costs related to our July reduction in force and higher carried interest related expense, partially offset by a non-recurring benefit in GNA.

Speaker 6: So it is not affected by short-term political wins. And it leads us to better outcomes for our clients in all.

<unk> by short term political wins and wins and it leads us to better outcomes for our clients in all environments in terms of demand.

Speaker 6: In terms of demand, the ESG set broadly defined, still grew in 2023, across the channels geographically. If you look at MEA, APAC, and even North America, if you exclude one very large reallocation that was done by a competitor firm within their retirement set. So...

The ESG set broadly defined still grew in 2023.

Across the channels are geographically if you look at EMEA APAC and even North America. If you exclude one very large reallocation that was done by a competitor firm within there.

Retirement, so we still think that there is commercial opportunity here and we work with clients to meet them, where they want to be.

Speaker 6: We still think that there's commercial opportunity here and we work with clients to meet them where they want to be. We have the capabilities to do that across fixed income and equities.

Have the capabilities to do that across fixed income and equities and we feel really good about the capability that we've built over many years.

Speaker 6: And we feel really good about that capability that we've built over many years.

Jennifer Dardis: For full year 2023, we are narrowing our guidance range for adjusted operating expense, excluding the carried interest related compensation, to be 2 to 4% over the comparable full year 2022 amount of nearly 4.1 billion dollars. With adjusted operating expense growth excluding carried interest compensation of just under 1% year-to-date, we do expect higher expenses in a few categories in Q4, several of which are seasonal or timing related so will not fully carry forward into 2024.

Thank you.

One moment for our next question please.

Okay.

Speaker 1: Our next question comes from the line of Ken Worthington with JP Morgan, your line is now

Our next question comes from the line of Ken Worthington with JP Morgan. Your line is now open.

Speaker 9: Hi, good morning and thanks for taking the question. You seem to have critical mass in your active ETF offering with the recent launches. A couple questions here. One, can you talk about how you're marketing the ETFs and what resources you're dedicating here? Maybe second, where's distribution today versus your goals? And then the bigger picture question is, certain, seeing and seeing.

Hi, good morning, and thanks for taking the question.

You seem to have critical mass in your active ETF offering with the recent launches.

Couple of questions here, one can you talk about how you're marketing the Etfs and what resources, you're dedicating here, maybe second whereas distribution today versus your goals and then the bigger picture question is.

Jennifer Dardis: Specifically, we expect GNA to be higher than typical run rate as we have higher professional fee spend in Q4 that's spilled over from Q3. Stock base compensation is typically higher in Q4 as our annual grant date falls in December. Advertising in promotion is also typically highest in Q4 to support seasonal campaigns. And finally, we will realize a full quarter of higher technology, occupancy and facilities costs related to our new London location.

Certainly.

Speaker 9: Certain active managers like a GP Morgan have been particularly successful in taking in pretty significant assets into relatively new active equity ETF offering.

Certain active managers like J P. Morgan had been particularly successful in taking in pretty significant assets into relatively new active equity ETF offerings.

Speaker 9: Do you see a path forward for similar success at K-RO or is there something fundamentally different with your approach and others that you're seeing in the...

Jennifer Dardis: As we mentioned last quarter, we have been focused on managing our expense growth and driving efficiency to allow us to continue to invest in the strategic initiatives that we believe will result in future growth. As part of this effort and in light of our hybrid working environment, we have been reviewing our real estate usage with the dual goals of enhancing in-person collaboration and reducing real estate costs. As a result of this review, we made the decision to consolidate associates at our own Smills Maryland campus into four buildings down from six and to reduce the amount of space occupied in our Colorado Springs buildings by year end.

Do you see a path forward for similar success at T. Rowe or is there something fundamentally different with your approach and and others that youre seeing in the industry.

Speaker 6: Yeah, hey Ken, this is Eric Alstart and then, you know, Robert Jen, they want to come in as well. The way we've approached this market has been, I think, a very thoughtful one. As you know, we started first with five semi-transparent active ETFs, which were clones of existing strategies that were well known for. We then added five fixed income, fully transparent ETFs. And then this year launched five fully transparent active equity ETFs.

Yeah, Hey, Ken this.

This is Eric I'll start and then Robert Jan May want to come in as well.

The way we've approached this market has been I think a very thoughtful one as you know we started first with five semi transparent active etfs, which were clones of existing strategies that were well known for.

We then added five fixed income fully transparent Etfs and then this year launched five fully transparent active equity Etfs our approach to marketing. These is to target the channels, where we think that there is.

Jennifer Dardis: This is a change in office configuration, not a change in location or workforce strategy. We have also been focused on enhancing our business, data and technology architecture to ensure we have the foundational support to underpin our strategic initiatives and drive efficiency going forward. As we shared last quarter, our cost savings efforts over the last 12 months have removed or reallocated over $200 million in operating expenses versus the run rate for 2024.

Speaker 6: Our approach to marketing these is to target the channels where we think that there's the most uptake for the improved structure that the ETF offers, especially for taxable accounts.

The most uptake for the improved structure that the ETF offers especially for taxable accounts, so that would be ideally the us wealth channel and within that the RIAA channels as well as now were starting to gain some traction on the larger broker dealers as we get to our 12 month track records across the different suite in the case of <unk>.

Speaker 6: So that would be ideally the US wealth channel and within that the RIA channels as well as now, we're starting to gain some traction on the larger broker dealers as we get to our 12 month track records across this different suite. In the case of TCASF, because the capital appreciation strategy and the portfolio manager, David Drew, are quite well known. We've been able to accelerate some of the placements with that specific strategy. We've also backed this with targeted marketing campaigns and some dedicated sales function as well.

Because the capital appreciation strategy and the portfolio manager David drew are quite well known we've been able to accelerate some of the placements with that specific strategy. We've also back this with targeted marketing campaigns and some dedicated sales function as well. So we feel good about the approach that we're taking and I think long term.

Jennifer Dardis: We continue to expect 2024 adjusted operating expenses excluding carried interest compensation will grow in a low single-digit range. This growth rate will depend on final 2023 adjusted operating expense levels and as always, this estimated growth rate is based on current market levels and we may choose to adjust it if markets rise or fall significantly. Sending a moment on capital management, we repurchased over 977,000 shares in the third quarter at an average price of about $108 for a total of $106 million.

Speaker 6: So we feel good about the approach that we're taking and I think long-term over the next call it three to five plus years. There's no reason why this can't be a very large and important business for us. And I think we'll grow.

Over the next call it 3% to five plus years. There is no reason why this can't be a very large and important business for us.

And I think we will grow meaningfully.

Speaker 6: I'm not going to comment about how, you know, we'll do versus other specific competitors. I'm very comfortable with the approach that we're taking and I'm bullish on our long-term prospects.

Not going to comment about how we will do versus other specific competitors.

Jennifer Dardis: Year-to-date, we have repurchased a little under $1.4 million shares for just over $150 million. As of September 30, we had 223.5 million shares outstanding. Our recurring dividend remains a top priority. Through buybacks and dividends year-to-date, we have returned about $992 million to stockholders while maintaining ample liquidity to support our seed capital program, opportunistic share buybacks, and potential emanates. As we complete the year and plan for 2024, we will continue to invest in our strategic priorities to pursue excellent investment performance and client service and to drive growth over time. We are also executing on our plans to reduce costs to fund these initiatives and maintain a low single digit expense growth into 2024.

I am very comfortable with the approach that we're taking and im bullish on our long term prospects here.

Speaker 3: I would just add quickly we do think there's a big opportunity for active ETFs in the wealth channel. We do have some ETF specialists that support our

I would just add quickly we do think there's a big opportunity for active Etfs in the wealth channel.

We do have some ETF specialists that support our.

Speaker 3: regional investment consultants and home offices teams that engage with our broker dealer and advisory clients. We think there's a big opportunity given our multi-asset capabilities in models over time to use our ETFs as components of those underlying models.

Regional investment consultants and home office teams in.

Gauge with our.

Our broker dealer and advisory clients, we think theres, a big opportunity given our multi asset capabilities and models over time to use our etfs as components of those underlying models.

Speaker 3: And I do think longer term, given some of the traits of the ETF vehicle, that there will be more for us to do with regard to evaluating opportunities where we can deliver our unique investment capabilities and address needs that clients have. So I think I'm encouraged that we're making some progress, but I do think we've got much more to do here.

Yes, I do think longer term given the <unk>.

Some of the traits of the ETF vehicle that there will be more for us to do with regard to evaluating opportunities, where we can deliver our unique investment capabilities and.

Jennifer Dardis: While flows will remain challenged through the fourth quarter, we are confident that we will start to see the benefits of these efforts in 2024.

Address needs that clients have so.

Unknown Executive: With that, I'll ask the operator to open the line for questions. Thank you. To ask a question, you'll need to press star 11 on your telephone. To withdraw your question, please press star 11 again. Please wait for your name to be announced. We ask that you please limit your questions to one. Again, to ask a question that star 11, one moment for our first question, please.

I think I'm encouraged that we're making some progress but I do think we've got much more to do here.

Speaker 4: I think, I think, as Eric talked about ESG and being able to be important, we can talk with clients about their needs and meeting when they are. ETFs are similar in the sense it's another capability where we can have conversations with clients about where they have gaps in their lineups and how we can meet those with the capabilities that we can develop, given the suite of products we already have.

I would also add I think thematic leave as Eric talked about ESG and being able to be a point, we can talk with clients about their needs and meeting them, where they are etfs are similar in the sense. It to another capability, where we can have conversations with clients about where they have gaps in their lineups and how we can how we can meet those are the capabilities that we can develop given the suite of products we already have.

Alexander Blostein: The question comes from the line of Alexander Blostein with Goldman Sachs real lines now open.

Thank you one moment for our next question. Please.

Speaker 1: Our next question comes from the line of Brennan Hawking with UBS. The line is now open.

Our next question comes from the line of Brennan Hawken with UBS. Your line is now open.

Rob Sharps: Good morning. Thanks for the question. Maybe starting on the last point, Jen just made and Rob, you alluded to that as well earlier around confidence and improvement flows into 2024. Keyes betterment on some of the key strategies and initiatives. You expect to contribute to flows in 2024 that will start to move the needle. I'm not sure if it's ETFs or the private credit strategy. So anything you can help us to better frame the opportunity that you see for next year.

Rob Sharps: Thanks. Yeah, Alex. Good morning. And thank you for the question. I did note in the prepared remarks that we expect November and December to have elevated outflows. And November in particular is impacted by a single large mandate. December should be consistent with what we've seen in December for the last couple of years. So I do think it's logical to ask given given that weakness, why are we confident that outflows should be lower next year.

Good morning, Thanks for taking my questions.

Speaker 10: I was hoping you spoke of a 4Q uplift in some expenses, so, you know, it would be helpful if you could maybe size that versus the 1% year-to-date expense growth.

Was hoping you spoke to the <unk> uplift in some expenses so.

It would be helpful. If you could maybe size that versus the 1% year to date expense growth.

Speaker 10: carry, you also said that it's seasonal and shouldn't carry it in 2024. So just hoping to clarify, are you saying that you don't expect a seasonal uplift in 4Q, 24 from similar items because of your expense efforts or were you just saying that it won't carry it in the first form?

Carrie you also said that it is seasonal and shouldn't carried in 2024. So just hoping to clarify are you, saying that you don't expect a seasonal uplift in <unk> 24 from similar items because of your expense efforts or were you just saying that it won't carry into the first quarter.

Thanks.

Speaker 4: Sure. So from an overall perspective, that's what we tried to give the 2 to 4% range for the full year to give you a sense for what the fourth quarter would be to fill in against the actual through the first three quarters.

Sure. So from an overall perspective, that's why we tried to give the 2% to 4% range for the full year to give you a sense for what the fourth quarter would be to fill in against the actuals through the first three quarters.

Speaker 4: And then with regard to the seasonal item, some are seasonal and would be similar in fourth quarter this year and fourth quarter next year. Some are more one time in nature, but the comment that you made about carrying over into Q1, certainly things that are seasonal in Q4, we would expect wouldn't go into the Q1 number. Just to dimensionalize it, first of all, we mentioned a one time item. This was an operating item that we mentioned was a recovery of prior period costs. That's about $20 million, so you would expect that would not recur.

And then with regard to the seasonal items some are seasonal and would be similar in fourth quarter. This year and fourth quarter next year.

Some are more onetime in nature.

But the comment that you made about carrying over into Q1, certainly things that are seasonal in Q4, we would expect it wouldn't go into the Q1 number.

Rob Sharps: And the first thing I would say is that we're already seeing some year over year improvement in flows in certain channels. In particular, channels that tend to respond a little more quickly to changes in performance. And that's despite what I would characterize as a pretty challenging industry backdrop. That is specific. That improvement, I'd say you can point to a number of areas. And just look at trends in Q3. We had just under three billion dollars of inflows in the retirement date funds and grows sales up 10% year over year.

Just to Dimensionalize it and first of all we mentioned a one time item. This was an operating item that we mentioned was a recovery of prior period cost us about $20 million. So you would expect that would not recur.

Speaker 4: and then that benefit would not recur. And then the other items are a little bit more evenly split in terms of an increase in professional fees. The long-term incentive plans, this is the stock-based compensation, and we have retirement bestings that are recognized in December when we do those grants, so that creates a pop every quarter, every fourth quarter.

And then that benefit will not recur and then the other items are a little bit more evenly split in terms of an increase in professional fees.

Our long term incentive plans is the stock based compensation and we have retirement vesting that are recognized in December when we do those grants so that creates a pop every quarter every every fourth quarter.

Thank you.

Speaker 1: One moment for our next question. As a reminder, to ask a question, you'll need to press star 11 and wait for your name to be announced.

One moment for our next question.

As a reminder to ask a question you will need to press star one one and wait for your name to be announced.

Rob Sharps: And we have positive flows in fixed income multi asset broadly and alternatives. You mentioned ETFs. We had our best quarter for ETF sales. It's still small in building. I think it can be a contributor in 2024, but I don't think it will be the most meaningful driver of performance or improvement in flows. I think the most meaningful driver will be one, I think of some of the money on the sidelines from an industry perspective extends their time horizon or risk appetite and you have more flows in equities broadly.

Speaker 1: Our next question comes from the line of Michael Cypress with Morgan Stanley . Your line is now...

Our next question comes from the line of Michael Cyprus with Morgan Stanley. Your line is now open.

Speaker 11: Great, thank you. Good morning. Just a question on retail SMAs. I was hoping you could update it on the traction that you're seeing in your approach to the marketplace there with retail SMAs. And how much is it contributing to AWS flows today? And maybe you can just remind us how many strategies you currently offer in SMAs. And where you'd like to see that in three years and some of the hurdles you guys may have to overcome if you kind of want to bring more to the marketplace, particularly over on the fixed incomes.

Great. Thank you. Good morning, just a question on retail SMA I was hoping you could update us on the traction that youre seeing in your approach to the marketplace, there with <unk> and how much is it contributing to a woman and flows today and maybe you can just remind us how many strategies you're currently offer in sma's and where you'd like to see that in three years and some of that.

Rob Sharps: Two, I think a broadening of performance in the US equity market would be helpful for active relative to passive. Three, you'll have ultimately the longer term performance numbers as they flow through will really begin to impact flows. And four, we've highlighted a number of different strategic initiatives that we're working on alternatives being one of them. So we do think that that O credit will contribute next year. But in the overall scale of our organization, I wouldn't necessarily say that I think either O credit or ETF will be a predominant driver of improved flows.

So you guys may have to overcome so you kind of want to bring more to the marketplace, particularly over on the fixed income side.

Speaker 3: Yeah, front end. This is an important element of our strategic initiative with regard to US wealth.

Okay.

Yes Brendan.

This is an important element of.

Our strategic initiative with regard to U S wealth.

Speaker 3: And we've worked pretty hard to bring a broader number of strategies to market. Today, we're over 20 in terms of the number of investment strategies that we offer in retail SMA. And we are getting traction as we broaden the availability and broaden our offering.

And we've worked pretty hard to bring a broader number of strategies to market. Today. We are over 20 in terms of the number of investment strategies that we offer in retail SMA.

And we are we are getting traction as we broaden the availability and broaden our offering.

<unk>.

Rob Sharps: I think they'll be additive. But we're going to have to see improvement in the core asset classes and in the core channels to really have 24. You'll kind of be a better picture with regard to flows than 2023. Thank you.

Speaker 3: It's going to take some time. This is a part of the market where manager rosters and lineups are in many instances reasonably well established. I do think that many of our wealth partners want T-Row price strategies available in SMA and are looking for opportunities for us to get new placements. We have seen a number of new placements this year, so it is a focus.

It's going to take some time this is a.

Unknown Executive: One moment for our next question, please.

Part of the market, where manager rosters and lineups are in many instances reasonably well established I do think that many of our wealth partners what T. Rowe price strategies available in SMA and are looking for opportunities for us to get new placements, we have seen a number of new placements this year. So.

Craig Siegenthaler: Our next question comes from the line of Craig Siegenthaler with Bank of America. Your line is now open. Good morning, Rob, Eric. Hope everyone's doing well. We have a question on another flow question, but focusing more on the redemption side of the equation. Most of your key equity flagship funds, and we're looking at blue chip growth stock in the cap growth. They generated very strong performance over the last 12 months. And you're actually seeing this translate into month over month improvement, the flows from June to September.

It is a focus.

Speaker 4: Jen, any specifics with regard to AU AgriFlows that we share? No, there hasn't been. It's not a significant number in the flows at this point. Again, I think this is part of an overall plan. If you think about the wealth strategy that we've been talking about for the last year, newer vehicles are part of that broader plan. And some clients prefer ETFs just based on their clients and how they buy. Some prefer SMAs. And obviously, some platforms still have a fairly large mutual fund.

Any specifics with regard to Ara flows that we share no there hasn't been it's not a significant number in the <unk> at this point and again I think this is part of an overall plan. If you think about the wealth strategy that we've been talking about for the last year.

Newer vehicles are part of that broader plan and some clients prefer etfs based on their clients and how they buy some prefer SMA.

Some platform and still have a fairly large mutual fund.

Speaker 4: mutual fund complex. And so as we think about being able to provide our products for clients, we want to just make sure we have that broad suite of vehicles available for whatever type of clients that are buying from them.

Craig Siegenthaler: So my question is, how is this impacting client discussions, the better 12 month numbers. And if you strip out the large institutional sub-advisory redemption that you're expecting at year end, you know, why can't this lead to continued monthly net flow improvement to 2024?

And Youll fund complex and so as we think about being able to provide products for clients, who want to just make sure. We have that broad suite of vehicles available for whatever type of clients that are buying from them.

Speaker 3: Yeah, but with regard to specific successes or launches this year, we did bring a Muni SMA that was developed specifically for a single distribution partner. We also launched earlier this year to additional equity SMAs, US all cap opportunities and global focus growth.

Yes.

With regard to specific successes or launches this year, we did bring.

Rob Sharps: Sure, Craig, nice to hear your voice and good morning. I would say a couple of things as it relates to these strategies. First of all, we're definitely encouraged by the improved performance over the year-to-date period, and we're encouraged because it's come broadly, and it's come with the support of really strong performance from our underlying research platform. Our analyst managed portfolio had a really strong year and continues to support our overall performance, which is key to what we do.

A muni SMA that was developed specifically for our single distribution partner. We also launched earlier this year to additional equity SMA as U S. All cap opportunities in global focus growth.

Speaker 3: As I said, this continues to be a big opportunity. I think we disclose an AUA number that is roundly $10 billion. But you have to remember that that includes not only model accounts submission in retail SMA, but also where we do glide path advisory on custom target date funds. So that wouldn't all be the sort of SMA that you're necessarily referring to or that we're talking about in terms of addressing the opportunity in the wealth channel.

As I said this continues to be a big opportunity I think we disclosed a number that is roundly $10 billion, but you have to remember that that includes not only model account submission in retail SMA, but also where we do glidepath advisory on custom target date funds. So that wouldn't all be the sort of SMA that you are necessarily referring to where that we're talking about.

Rob Sharps: A client conversations, you know, very a lot, depending upon the type of client, as you know, we're in basically every channel and every geography around the world with these strategies. What we're seeing as it relates to flows, as you discussed, those channels that tend to respond more quickly to performance, we are starting to see some better numbers. But we have to continue to deliver the performance that we delivered year-to-date over continued time periods, because we will see eventually the one, the three, and the five get better as we do that, and more and more channels are focused on those three and those five.

In terms of addressing the channel the opportunity in the wealth channel.

Thank you one.

One moment for our next question please.

Rob Sharps: So, we're encouraged in the short term, but we are far from complacent about it and recognize that we still have many more quarters and years of strong performance to deliver to get those three and five year numbers where we want them to be. Thank you.

Speaker 12: Our next question comes from the line of Blend Shore with Evacore ISI. Your line is now open. Hi, thanks very much. Thank you.

Our next question comes from the line of Glenn Schorr with Evercore ISI. Your line is now open.

Hi, Thanks, very much guys straightforward one.

Target date allocations do you all have nor.

Speaker 12: normally or traditionally been very long equity. It's helped you have great performance. Your flows are great, kind of no complaints. But I'm curious if you've made or contemplated making any shifts in allocation given the rise in yields and flows into fixed income. Just curious how you're thinking about that as the world has obviously shifted some things.

Unknown Executive: One moment for our next question, please.

Normally or traditionally been very long equity. It helps you have great performance. Your flows are great kind of no complaints, but.

I'm curious, if you've made or contemplated making any shifts in allocation.

Given the rising yields in flows into fixed income just curious how youre thinking about that as the world has obviously shifted some.

Patrick Davitt: Our next question comes from the line of Patrick David with Autonomous.

Thanks.

Speaker 3: Yeah, Glenn, maybe less straightforward than you think. First.

Yeah, Glenn maybe less straightforward than you think first.

Rob Sharps: Your line is now open. Good morning, everyone. You mentioned the kind of few chunky sub-advisory losses that have been announced over the last couple of months. Could you frame the AUM base, specifically exposed to that particular issue, and more broadly frame the risk that this is becoming a more regular trend? I'll start, and then generic can add any perspective, but our sub-advisory business is broad. We have sub-advisory opportunities in the wealth channel, and we have a meaningful variable newities sub-advisory business.

Speaker 3: We offer our flagship series, which is a higher equity glide path. We also offer a target series, which is a lower equity glide path for those clients whose participant base has a lower risk tolerance or for clients that prefer that as part of their overall plan design. That's the first point I would make.

We offer our flagship series, which is a higher equity glide path. We also offer a target series, which is a lower equity glide path for those clients, who participate base has a lower risk tolerance or for clients that prefer that as part of their overall plan design. That's the first.

I would make the.

Speaker 3: The second point I would make is that while the strategic portfolio design determines the equity allocation at a certain point along the glide path, we also have the ability to make tactical allocations to asset classes and underlying building blocks. And we've actually been underweight equities over the course of this year from a tactical asset allocation perspective. So our asset allocation committee has the flexibility to within within bands.

The second point I would make is that while the strategic portfolio designed determines the equity allocation at a certain point along the glide path. We also have the ability to make tactical allocations to asset classes and underlying building blocks and we've actually been underweight equities over the course of this year.

Rob Sharps: The variable annuity sub-advisory business over time is likely to be under more pressure. In terms of sizing, it is meaningful, but kind of well less than 10% of our overall book. Overall, sub-advisory is a very, very good business for us and a business that we are committed to. We think it's a channel that values our brand. We think it's a channel that values performance. We do see some additional opportunity over the long term in sub-advisory, particularly in the wealth channel, but we don't anticipate that there will be much opportunity for growth outside of perhaps consolidating some market share, which is really dependent on very good service as well as excellent performance in that VA channel.

And tactical asset allocation perspective so.

Our asset allocation committee has the flexibility to within within bands.

Speaker 3: reallocate funds along that that that glide path.

Reallocate funds along that that glide path I also would say that within our equity allocation. There are building blocks that are more or less conservative we've worked on developing and introducing our hedged equity component that ultimately has a little less equity beta finally, I would point out that in.

Speaker 3: I also would say that within our equity allocation, there are building blocks that are more or less conservative and we've worked on developing and introducing a hedge equity component that ultimately has a little less equity beta. Finally, I would point out that in Q3, while the markets were down, we had excellent performance within our target date series across the market.

Q3, while the markets were down we had excellent performance within our target date series across low and high equity glide path and across vintages and that was driven at the margin a little bit by that underweight of equities, but I would say more so by the strategic portfolio design and some of the build.

Speaker 3: low and high equity glide path and across ventages. And that was driven at the margin a little bit by that underweight of equities, but I would say more so by the strategic portfolio design and some of the building blocks that we have in fixed income and just very strong security selection in the underlying strategy.

Rob Sharps: Thank you. I wouldn't know quickly with regard to the VA Channel, the challenges in the VA Channel, something that we've navigated for a very long period of time. So that's not something that's new or specific to the elevated outflows this year. It may be in a particular month or a particular quarter, but it's a part of the book that we've navigated some pressure over relatively long period of time.

<unk> blocks that we have in fixed income and just very strong security selection and the underlying strategies, so but beneath the surface. There is there is a law.

Speaker 3: So beneath the surface, there's a lot going on there. You're right that philosophically we do believe, particularly for longer dated vintages, that a high equity component's really important. But there are other ways to drive value in terms of the strategic portfolio design and the building blocks, the tactical asset allocation, and the security selection of the underlying portfolios. And so far this year, I think we've been hitting on all cylinders.

Unknown Executive: Thank you.

Lot going on there.

But philosophically, we do believe particularly for a longer dated vintages that are high equity component is really important.

Unknown Executive: One moment for our next question.

But there are other ways to drive value in terms of the strategic portfolio designed in the building blocks the tactical asset allocation to the security selection to the underlying portfolios and so far this year I think we've been hitting on all cylinders.

Brian Bedell: Our next question comes from the line of Brian Bedell with Deutsche Bank. Your line is now open. Okay, thanks. Good morning, folks. Thanks for taking my question. Maybe just one of the investment processes. Good to see the improved performance. But if you can comment on, have there been any major changes to how you incorporate ESG risks? I know that's something that's been even working on for several years. Particularly this year and given the political backlash against ESG, is that changing how you incorporate that into the investment process?

Thank you.

Our final question.

Speaker 1: comes from the line of Daniel Fanon with Jeffree's Journaline Is Now.

Comes from the line of Daniel Fannon with Jefferies. Your line is now open.

Speaker 11: Thanks. Good morning. I wanted to follow up on the Target Date franchise. I think, Rob, you mentioned gross sales were up 10% year over year.

Thanks, Good morning, I wanted to follow up on the target date franchise I think Rob you mentioned gross sales were up 10% year over year.

Speaker 11: And then Jen, you also mentioned some of the year end dynamics that sometimes happens with plant sponsors. And so, was hoping to talk about the near term opportunity associated with some of the strong performance you just highlighted and what that means for gross sales, but also maybe longer term as you think about the passive dynamic within this asset class or this channel and ultimately how conversations are happening with plant sponsors and how you think that's developed over the next kind of 12 months.

Then John you also mentioned some of the year and dynamics that sometimes happens with plan sponsors and so I was hoping to talk about the near term opportunity associated with some of the strong performance you just highlighted and what that means for gross sales, but also maybe longer term as you think about the passive dynamic within this asset class for this channel and an ultimate.

Brian Bedell: And then similarly, what are you hearing from distribution partners in terms of demand for either ESG products or that inclusion within the investment process? Particularly I know in Europe, it has always been table stakes there. Are you seeing any change in the institutional demand? And in Europe?

How conversations are happening with plan sponsors and how you think thats develops over the next kind of 12 months.

Yep.

Speaker 3: Dan, thank you for the question. Look, we feel like our flagship.

And thank you for the question.

Rob Sharps: Yeah, Brian, very good question. But we incorporate ESG into our investment decision making process consistently. And we don't let near term or long term political issues affected. Our process is very much based on using insights generated by our fundamental analysts, our using our fixed income team, using our responsible investing team. And what the RI team specifically does is helps our portfolio managers and analysts identify risks and opportunities, understand the parts of the company's long term strategy that could be materially affected by changes across ESG.

We feel like our flagship retirement date funds are the best offering in the business. If you look at the strategic portfolio of design. If you look at the.

Speaker 3: Retirement date funds are the best offering in the business if you look at the strategic portfolio design if you look at the

Rob Sharps: And then incorporating that into our investment decision making process. So it is not affected by short term political wins and wins and it leads us to better outcomes for our clients in all environments. In terms of demand, the ESG set broadly defined, still grew in 2023 across the channels geographically. If you look at MEA, APAC, and even North America, if you exclude one very large reallocation that was done by a competitor firm within their retirement set.

Speaker 3: underlying building blocks, a number of alpha-rich diversifiers in there, areas like bank loan, areas like high yield. It's been a big focus for us. We made a substantial investment in 2021 in the competitiveness of our fees. We also have a broad range for those.

Underlying building blocks, we are number of alpha rich diversify errors in their areas like bank loan areas like high yield it's been a big focus for US we made a substantial investment in 2021 and the competitiveness of our fees.

We also have a broad range for those plans.

Speaker 3: plans that are particularly fee sensitive. We have a blend series that does use passive in US in large cap US equity and in core fixed income

Plans that are particularly sensitive we have a blend series that does use passive in.

U S and large cap U S equity and in core fixed income.

Speaker 3: So, we really believe we have a great value proposition to take on passive, and I think if you look at the performance of the T. Rowe Price Fund, whether it's the flagship or whether it's Blend, and you compare that to passive, I think that the numbers really stand for themselves.

So we really believe we have a great value proposition to take on passive and I think if you look at the performance of the T. Rowe price funds, whether it's the flagship or whether its blend and you compare that to passive I think the numbers really stand for themselves. It's an important area for us it's an area that we dedicate specific.

Speaker 3: It's an important area for us. It's an area that we dedicate specific marketing dollars and support to. And it's an area where we have momentum right now. Uh, we have record flows on the, on a year to date basis in the target day franchise, there, there are always some plan dynamics around year end where, you know, you might have a, a plan that's terminated.

Marketing.

And support too.

And it's an area, where we have momentum right now we have record flows on the on a year to date basis in the target date franchise. There are always some planned dynamics around year end, where you might have a plan that's terminated.

Rob Sharps: So we still think that there's commercial opportunity here, and we work with clients to meet them where they want to be. We have the capabilities to do that across fixed income and equities. And we feel really good about the capability that we've built over many years.

Speaker 3: you know oftentimes new ones on board in January so I'm not going to comment on it and sometimes there's not even a lot of visibility as you go into to year end with regard to whether or not something you know kind of either going out or coming in will land in in in December or land in January .

Unknown Executive: Thank you.

Oftentimes new ones onboard in January so I'm, not going to comment on and sometimes there's not even a lot of visibility as you go into year end with regard to whether or not something kind of either going out or coming in will land in in December or land in January but if you take the longer view, we feel really good about the value proposition, we feel really good.

Kenneth Worthington: One moment for our next question, please. Our next question comes from the line of Ken Worthington with JP Morgan. Your line is now open. Hi, good morning and thanks for taking the question. You seem to have critical mass in your active ETF offering with the recent launches. A couple of questions here. One, can you talk about how you're marketing the ETFs and what resources you're dedicating here? Maybe second, where's distribution today versus your goals?

Speaker 3: But if you take the longer view, we feel really good about the value proposition. We feel really good about our momentum.

Our momentum.

Speaker 3: It feels like our retirement date franchise as a whole is really resonating in the marketplace and we're excited to carry that momentum forward into 2024.

It feels like.

Our retirement franchise as a whole is really resonating in the marketplace and we're excited to carry that momentum forward into 2024.

Speaker 4: I think we've talked in previous times if you think about the flows into target dates, there's two components, there's the participant flows that go in that are kind of more regular, these are the paycheck additions or distributions for people who are in retirement. Those don't add significantly to the balances year in and throughout the year, but so when you see the flows into target dates on a net basis, those are actual new plan wins typically. And so when we talk about

Yes, I think we've talked in previous times, if you think about the flow and to target. These there are two components. There's the participant funds that go into it or kind of more regular than either of the paycheck.

Check conditions, our distributions for people who are in retirement.

Kenneth Worthington: And then the bigger picture question is certain. Certain active managers like a GP Morgan have been particularly successful in taking in pretty significant assets into relatively new active equity ETF offerings. Do you see a path forward for similar success at T. Rowe, or is there something fundamentally different with your approach and others that you're seeing in the industry?

Add significantly to the balances.

Throughout the year, but so when you see the flows into target dates on a net basis. Those are actual new plan when typically and so when we talk about.

Speaker 4: pressure at your end, that's about plan changes, not about participant changes. And so this is good to sign for us as we look at positive flows that we're continuing to add new plans to the stable of clients that we have.

Pressure at year end Thats about plan changes not about participant changes and so this is a good sign for us as we look at that we're continuing to add new plans.

Key to the stable of clients that we have.

Thank you.

Eric Veiel: Yeah, hey Ken, this is Eric Alstair, and then Robert Jen may want to come in as well. The way we've approached this market has been, I think, a very thoughtful one. As you know, we started first with five semi-transparent active ETFs, which were clones of existing strategies that were well known for. We then added five fixed income fully transparent ETFs, and then this year launched five fully transparent active equity ETFs. Our approach to marketing these is to target the channels where we think that there's the most uptake for the improved structure that the ETF offers, especially for taxable accounts.

I actually have one more question one moment. Please for our next question.

Speaker 1: next question comes from the line, Affinian O'Shae with Wells Fargo Securities. Your line is now open.

Our next question comes from the line of Finian O'shea with Wells Fargo Securities. Your line is now open.

Speaker 11: I have everyone good morning. Thanks so much. A question for O-Credit. Can you give an update on your progress with distribution partners and maybe how you're seeing monthly or quarterly sales starting out in the context of what the industry's doing?

Hey, everyone. Good morning, Thanks, so much.

A question for credit can you give an update on your progress with distribution partners and maybe how you are seeing.

Monthly or quarterly sales starting out in the context of what the industry is doing.

Speaker 11: And then maybe how do you consider the puts and takes and rolling out additional direct lending vehicles for retail in the registered fund format? I think.

And then maybe how do you consider that.

The puts and takes and rolling out additional.

Eric Veiel: So that would be ideally the US wealth channel, and within that the RIA channels as well as now we're starting to gain some traction on the larger broker dealers as we get to our 12 month track records across this different suite. In the case of T. Calf, because the capital appreciation strategy and the portfolio manager David Drew are quite well known. We've been able to accelerate some of the placements with that specific strategy.

Direct lending vehicles for retail and the registered fund format.

Thank you.

Speaker 3: Yes, Tidiot, thank you for the question. Okay. In terms of trends, we actually just reached effectiveness at the end of the third quarter. So this is really our first month.

Yes. Thank you and thank you for the question in terms of trends, we actually just reached our.

Effectiveness at the end of the third quarter. So this is really our first month.

Speaker 3: And our current focus is on building a wide distribution syndicate of wealth platforms by leveraging our strong existing relationships in the

And our current focus is on building a wide distribution syndicate of wealth platforms by leveraging our strong existing relationships in the wealth channel.

Eric Veiel: We've also backed this with targeted marketing campaigns and some dedicated sales function as well. So we feel good about the approach that we're taking, and I think long term over the next call it three to five plus years. There's no reason why this can't be a very large and important business for us, and I think we'll grow meaningfully. I'm not going to comment about how we'll do versus other specific competitors. I'm very comfortable with the approach that we're taking and I'm bullish on our long term prospects here.

Speaker 3: So we have regional investment consultants in the field that have relationships with brokers and advisors. We've got home office relationships and we're really just getting started. You know, I think what we've heard is the combination of OHA's 30 year history of delivering great performance in alternative credit and Tiro Price's

So we have regional investment consultants in the field that have relationships with brokers and advisors. We've got home office relationships. So we're really just getting started I think what we've heard is that the combination of Ohh 30 year history of delivering great performance in alternative credit and T. Rowe Price's.

Speaker 3: presence in the wealth channel and resources in the wealth channel should be pretty powerful. Before we worry about, you know, kind of...

Rob Sharps: I would just add quickly we do think there's a big opportunity for active ETFs in the wealth channel. We do have some ETF specialists that support our regional investment consultants and home offices teams that engage with our broker dealer and advisory clients. We think there's a big opportunity given our multi asset capabilities in models over time to use our ETFs as components of those underlying models. I do think longer term given some of the traits of the ETF vehicle that there will be more for us to do with regard to evaluating opportunities where we can deliver our unique investment capabilities and address needs that clients have.

<unk> presence in the wealth channel and resources in the wealth channel should be pretty powerful.

Before we worry about kind of.

Speaker 3: thinking about what we're going to do next. I think we're really, really focused on executing with regard to, oh, credit. We think it is a very well designed, excellent value proposition in a way to bring the OHA capabilities to the well channel. We will in time think about what our product pipeline is and you've had, ultimately, I think, build on the success of this with follow-on offerings. And we'll engage with our wealth clients to see where there are opportunities to do some things that are unique. And that will be in time.

Thinking about what what we're going to do next I think we're really really focused on executing with regard to credit. We think it is a very well designed excellent value proposition in a way to bring the <unk> capabilities to the wealth channel. We will in time think about what our product pipeline is and kind of ultimately I think build on this.

Success of this with follow on offerings and will engage with our wealth clients to see where there are opportunities to do some things that are unique and that will be in demand.

Speaker 3: You know, we, as we go out, we do have a handful of top advisory platforms that we're launching on in Q4 and have some visibility with regard to launch.

We as we go out we do have a handful of top advisory platforms that we're launching on in Q4 and have some visibility with regard to launch with regard to other partners as we get into early 2024. So for now we're really excited about Oh credit I'd say much.

Rob Sharps: I think I'm encouraged that we're making some progress, but I do think we've got much more to do here. I also add, I think thematically as Eric talked about ESG and being able to be a point we can talk with clients about their needs and meeting where they are. ETFs are similar in the sense it's another capability where we can have conversations with clients about where they have gaps in their lineups and how we can meet those with the capabilities that we can develop given the suite of products we already have. Thank you.

Speaker 3: with regard to other partners as we get into early 2024. So for now, we're really excited about Ocredit. I'd say much too early to comment on, you know, kind of monthly flows, but we're encouraged by the platforms that we're launching on. And our team will be working hard on what the right follow-on will be in this marketplace. But it will be some time until our focus pivots from being really successful with Ocredit to what the next offering will be. Thank you.

Unknown Executive: One moment for our next question, and Blake's.

Early to comment on.

Monthly flows, but we're encouraged by the platforms that we're launching on and our team will be working hard on what the right follow wall will be in this marketplace, but it will be some time until our focus pivots from being really successful with O credit to what the next offering would be.

Thank you.

Brennan Hawken: Our next question comes from the line of Brennan Hawken with UBS. The line is now open. Good morning, Ben, for taking more questions.

I would now like to turn the conference back to Rob sorry.

For closing remarks.

Speaker 3: All right, very good. Thank you for joining us and for your interest in Tiro Price.

Alright very good.

Thank you for joining us and for your interest and T Rowe price.

Jennifer Dardis: What's happening? You spoke to a 4-2 uplift in some expenses. So, you know, it would be helpful if you could maybe size that versus the 1% year-to-date expense growth. Next to carry, you also said that it's seasonal and shouldn't carry it in 2024. So, just hoping to clarify, are you saying that you don't expect a seasonal uplift in 4Q-24 from similar items because of your expense efforts, or were you just saying that it won't carry it in the first 100-24?

Speaker 3: We've talked about our investment performance continued to show signs of strength, this quarter, particularly in our largest franchises.

We've talked about our investment performance continued to show signs of strength this quarter, particularly in our largest franchises.

Speaker 3: Our associates are working hard to make progress on our strategic initiatives, and we're very, very focused on executing against our cost saving efforts. Yeah.

Our associates are working hard to make progress on our strategic initiatives and we're very very focused on executing against our cost saving efforts.

While we.

Speaker 3: continue to face elevated net outflows. We are very optimistic that the flow picture will improve in 2024. And I'm very confident in the work our associates are doing and our plan to make progress toward returning to organic growth. Really appreciate the dedication and hard work of our associates and that's kind of really what's behind that progress. So thank you again.

We continue to face elevated net outflows, we are very optimistic that the flow picture will improve in 2024.

I'm very confident in the work of our associates are doing in our plan to make progress toward returning to organic growth.

Jennifer Dardis: Thanks. Sure. So, from an overall perspective, that's what we tried to give the 2-4% range for the full year to give you a sense for what the fourth quarter would be to fill in against the actual through the first three quarters. And then with regard to the seasonal item, some are seasonal and would be similar in fourth quarter this year and fourth quarter next year. Some are more one-time in nature, but the comments that you made about carrying over into Q1, certainly things that are seasonal in Q4, we would expect wouldn't go into the Q1 number.

Really appreciate the dedication and hard work of our associates.

And that's really what's behind that progress. So thank you again.

Speaker 1: This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.

This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

Jennifer Dardis: Just to dimensionize it, first of all, we mentioned a one-time item. This was an operating item that we mentioned was a recovery of prior period costs. That's about 20 million dollars, so you would expect that would not recur. And then that benefit would not recur. And then the other items are a little bit more evenly split in terms of an increase in professional fees. The long-term incentive plans, this is the stock-based compensation, and we have retirement bestings that are recognized in December when we do those grants, so that creates a pop every quarter, every fourth quarter.

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Unknown Executive: Thank you. One moment for our next question. As a reminder, to ask a question, you'll need to press star 1-1 and wait for your name to be announced.

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Yes.

Brennan Hawken: Our next question comes from the line of Michael Cypress with Morgan Stanley. Your line is now open. Great. Thank you. Good morning. Just a question on retail SMAs. I was hoping you could update it from the traction that you're seeing in your approach to the marketplace there with retail SMAs. And how much is it contributing to AWS and flows today? And maybe you can just remind us how many strategies you currently offer in SMAs.

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Rob Sharps: And where you'd like to see that is three years and some of the hurdles you guys may have to overcome if you kind of want to bring more to the marketplace, particularly over on the fixed income side. Yeah, Brendan. This is an important element of our strategic initiative with regard to U.S, wealth. And we've worked pretty hard to bring a broader number of strategies to market. Today, we're over 20 in terms of the number of investment strategies that we offer in retail SMA.

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Rob Sharps: And we are we are getting traction as we broaden the availability and broaden our offering. It's going to take some time. This is a part of the market where manager rosters and lineups are in many instances reasonably well established. I do think that many of our wealth partners want T-Roy price strategies available in SMA and are looking for opportunities for us to get new placements. We have seen a number of new placements this year.

Rob Sharps: So, you know, it is a focus. Just specifics with regard to AUA reflows that we share. No, there hasn't been. It's not a significant number in the flows at this point. Again, I think this is part of an overall plan.

Rob Sharps: If you think about the wealth strategy that we've been talking about for the last year, newer vehicles are part of that broader plan. And some clients prefer ETFs just based on their clients and how they buy some prefer SMAs. And obviously, some platforms still have a fairly large mutual fund complex. And so, as we think about being able to provide our products for clients, we want to just make sure we have that broad suite of vehicles available for whatever type of clients that are buying from them.

Rob Sharps: With regard to specific successes or launches this year, we did bring a Muni SMA that was developed specifically for a single distribution partner. We also launched earlier this year to additional equity SMAs, US all-cap opportunities and global focus growth. As I said, this continues to be a big opportunity. I think we disclose an AUA number that is roundly $10 billion, but you have to remember that that includes not only model accounts submission in retail SMA, but also where we do glide path advisory on custom target date funds, so that that wouldn't all be the sort of SMA that you're necessarily referring to or that we're talking about in terms of addressing the channel, the opportunity in the wealth channel. Thank you.

Unknown Executive: One moment for next question, please.

Glenn Schorr: Our next question comes from the line of Linshort with Evacore ISI, your line is now open. Hi, thanks very much. I think a straight-forward one, target date allocations to you all have normally or traditionally been very long equity.

Rob Sharps: It helps you have great performance, your throws are great, kind of no complaints, but I'm curious if you've made or contemplated making any shifts in allocation as given the rise in yields and flows into fixed income, just curious how you're thinking about that as the world is obviously shifted from, thanks. Yeah, Glenn, maybe less straight-forward than you think. First, we offer our flagship series which is a higher equity glide path. We also offer a target series which is a lower equity glide path for those clients whose participant base has a lower risk tolerance or for clients that prefer that as part of their overall plan design.

Rob Sharps: That's the first point I would make. The second point I would make is that while the strategic portfolio design determines the equity allocation at a certain point along the glide path, we also have the ability to make tactical allocations to asset classes and underlying building blocks. We've actually been underweight equities over the course of this year from a tactical asset allocation perspective. Our asset allocation committee has the flexibility to within bands to reallocate funds along that glide path.

Rob Sharps: I also would say that within our equity allocation, there are building blocks that are more or less conservative and we've worked on developing and introducing a hedge equity component that ultimately has a little less equity beta. Finally, I would point out that in Q3, while the markets were down, we had excellent performance within our target date series across low and high equity glide path and across ventages and that was driven at the margin a little bit by that underweight of equities, but I would say more so by the strategic portfolio design and some of the building blocks that we have in fixed income and just very strong security selection in the underlying strategies.

Rob Sharps: But beneath the surface, there's a lot going on there. You're right that philosophically we do believe particularly for longer dated ventages that a high equity component is really important, but there are other ways to drive value in terms of the strategic portfolio design and the building blocks, the tactical asset allocation and the security selection of the underlying portfolios. And so far this year, I think we've been hitting on all cylinders.

Daniel Fannon: Our final question comes from the line of Daniel Fannon with Jeffries. Your line is now open. Thanks.

Daniel Fannon: Good morning. I wanted to follow up on the target date franchise. I think Rob, you mentioned gross sales or up 10% year over year. And then a genuine also mentioned some of the year end dynamics that sometimes happens with the sponsors. And so, was hoping to talk about the near term opportunity associated with some of the strong performance you just highlighted. And what that means for gross sales, but also maybe longer term as you think about the passive dynamic within this asset class or this channel and ultimately how conversations are happening with plan sponsors and how you think that develops over the next kind of 12 months.

Daniel Fannon: Yeah, Dan, thank you for the question. Look, we feel like our flagship retirement date funds are the best offering in the business. If you look at the strategic portfolio design, if you look at the underlying building blocks, a number of alpha rich diversifiers in there. Are areas like bank loan areas like high yield. It's been a big focus for us. We made a substantial investment in 2021 in the competitiveness of our fees.

Daniel Fannon: We also have a broad range for those plans that are particularly fee sensitive. We have a blend series that does use passive in US in large cap US equity and in core fixed income. So we really believe we have a great value proposition to take on passive. And I think if you look at the performance of the t-reprise funds, whether it's the flagship or whether it's blend and you compare that to passive, I think the numbers really stand for themselves.

Daniel Fannon: It's an important area for us. It's an area that we dedicate specific marketing dollars and support to. And it's an area where we have momentum right now. We have record flows on a year to date basis in the target day franchise. There are always some plan dynamics around your end where you might have a plan that's terminated oftentimes new ones on board in January. So I'm not going to comment on it.

Daniel Fannon: And sometimes there's not even a lot of visibility as you go into to your end with regard to whether or not something kind of either going out or coming in will land in in December or land in January. But if you take the longer view, we feel really good about the value proposition. We feel really good about our momentum. It feels like our retirement date franchise as a whole is really resonating in the marketplace.

Daniel Fannon: And we're excited to carry that momentum forward into 2024. I think we've talked in previous times. If you think about the flows into target dates, there's two components. There's the participant flows that go in that are kind of more regular. These are the paycheck, the paycheck additions or distributions for people who are in retirement. Those don't add significantly to the balances, you know, year in and throughout the year. But so when you see the flows into target dates on a net basis, those are actual new plan wins typically.

Daniel Fannon: And so when we talk about pressure at year end, that's about plan changes, not about participant changes. And so this is good to sign for us as we look at positive flows that we're continuing to add new plans to the stable of clients that we have. Thank you.

Unknown Executive: I actually have one more question, one moment please, for our next question.

Unknown Executive: Our next question comes from the line, opinion OSHA with Wells Fargo Securities. The line is now open. I have everyone good morning. Thanks so much.

Rob Sharps: And then maybe how do you consider the puts and takes and rolling out additional direct lending vehicles for retail in the registered fund format. Thank you. Yeah. Thank you for the question. Okay. In terms of trends, we actually just reached effectiveness at the end of the third quarter. So this is really our first month. And our current focus is on building a wide distribution syndicate of wealth platforms by leveraging our strong existing relationships in the wealth channel.

Rob Sharps: So we have regional investment consultants in the field that have relationships with with brokers and advisors. We've got home office relationships and we're really just getting started. You know, I think what we've heard is that the combination of OHA's 30 year history of delivering great performance and alternative credit and Tiro Price's presence in in the wealth channel and resources in the wealth channel should be pretty powerful. Before we worry about, you know, kind of thinking about what we're going to do next, I think we're really, really focused on executing with regard to credit.

Rob Sharps: We think it is a very well designed, excellent value proposition in a way to bring the OHA capabilities to the wealth channel. So we will in time think about what our product pipeline is and you've had ultimately I think build on the success of this with follow on offerings and will engage with our wealth clients to see where there are opportunities to do some things that are unique and that will be in demand.

Rob Sharps: You know, we as we go out, we do have a handful of top advisory platforms that we're launching on in Q4 and have some visibility with regard to launch with regard to other partners as we get into early 2024. So for now, we're really excited about OHA, I'd say much too early to comment on, you know, kind of monthly flows, but we're encouraged by the platforms that we're launching on and you know, our team will be working hard on what the right follow on will be in this marketplace, but it will be some time until our focus pivots from being really successful with OHA to what the next offering will be.

Unknown Executive: Thank you.

Rob Sharps: I would now like to turn the conference back to Rob Schart for closing remarks. All right, very good. Thank you for joining us and for your interest in Tiro Price. As we've talked about, our investment performance continued to show signs of strength this quarter, particularly in our largest franchises. Our associates are working hard to make progress on our strategic initiatives and we're very, very focused on executing against our cost saving efforts.

Rob Sharps: While we continue to face elevated net outflows, we are very optimistic that the flow picture will improve in 2024 and I'm very confident in the work our associates are doing and our plan to make progress toward returning to organic growth. Really appreciate the dedication and hard work of our associates and that's kind of really what's behind that progress.

Unknown Executive: Thank you again.

Unknown Executive: This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.