Lesson 1 of 8
Reading an asset manager
T. Rowe Price's assets under management rose 169.0 billion dollars in 2025 while clients withdrew 56.9 billion. Only one of those two facts is the business.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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In one minute
- Revenue is a fee rate applied to a balance, and the balance moves for two reasons that have nothing to do with each other: markets, and client flows.
- T. Rowe Price's assets under management rose 169.0 billion dollars in 2025 to 1,775.6 billion, made up of 216.7 billion of market appreciation against 56.9 billion of net cash outflows.
- The realised fee rate is investment advisory fees over average assets, which comes to about 39 basis points for 2025 and is the number that says what the manager actually charges.
An asset manager has almost no balance sheet worth reading and almost no cost that varies with revenue. What it has is a fee rate multiplied by a balance, and the whole analysis is about those two numbers.
What moved assets under management in 2025
- Assets under management at 31 December 2024$1,606.6bn
- Market appreciation, net of distributions not reinvested+$216.7bn
- Net cash outflows−$56.9bn
- Model delivery portfolio assets added from 1 July 2025+$9.2bn
- Assets under management at 31 December 2025= $1,775.6bn
Two facts, one balance
The balance rose. Clients took money out. Both are true, and a headline that reports only the first has reported the market rather than the business.
Market appreciation net of distributions not reinvested added 216.7 billion dollars and net cash outflows removed 56.9 billion. A further 9.2 billion arrived from 1 July 2025 as managed account model delivery portfolio assets were included in the reported total, which is a definitional change rather than a flow.
Flows are the part management controls and the part that persists. Market appreciation is a levered exposure to something nobody at the firm decides, and it reverses.
The fee rate is the other half
Investment advisory fees were 6,602.3 million dollars in 2025, against 6,399.7 million in 2024 and 5,709.5 million in 2023. Against average assets under management of about 1,691.1 billion dollars across the year, that is a realised rate of about 39.0 basis points.
The filing explains why a single rate is a simplification: fees are computed at a contracted annual rate or an effective rate for tiered structures, and the rate varies by service, asset class and vehicle. Rates are typically higher for equities and alternatives than for multi-asset and fixed income products, and higher for commingled vehicles than for separately managed accounts and subadvised funds.
That is why a mix shift from equity into fixed income lowers revenue with no change in assets, and why the realised rate is the figure to track rather than the balance alone.
Operating leverage, on both sides
Net revenues were 7,314.8 million dollars against operating expenses of 5,126.0 million, giving net operating income of 2,188.8 million and an operating margin of 29.9 percent.
Most of that expense base is people and does not fall when markets do. So the same leverage that makes a rising market lucrative makes a falling one expensive, and a manager with outflows in a falling market is squeezed from both directions at once.
Check yourself
Assets under management rose 169.0 billion dollars in 2025. What were the two components?
- Both from client inflows
- Market appreciation of 216.7 billion against net cash outflows of 56.9 billion, plus 9.2 billion from a definitional change
- Both from acquisitions
Show the answer
Answer: B.
The balance grew while clients withdrew. Reporting the balance alone reports the market rather than the business.What is the realised fee rate and why does it move without the balance moving?
- Fees over revenue; it moves with interest rates
- Advisory fees over average assets, about 39 basis points for 2025; it moves when the mix shifts between asset classes and vehicles charging different rates
- Fees over net income; it moves with tax
Show the answer
Answer: B.
The filing states that rates are typically higher for equities and alternatives than for multi-asset and fixed income, and higher for commingled vehicles than for separately managed accounts.Net revenues rose 3.1 percent in 2025 and net operating income fell 6.2 percent. What does that show?
- A fall in assets under management
- That the expense base grew faster than the fee base, which a reading of the balance alone would miss
- An accounting change
Show the answer
Answer: B.
An asset manager's costs are largely people and do not scale down with markets, so the operating leverage runs in both directions.Sources
- T. Rowe Price Group, Inc., Form 10-K for the year ended 31 December 2025, filed 2026-02-13, accession 0001628280-26-008002: assets under management and its components, investment advisory fees, net revenues, operating expenses, net operating income, net income, and the description of how advisory fees are computed.
What this leaves out
- The realised fee rate of about 39.0 basis points is this course's arithmetic: 2025 investment advisory fees over the simple average of the opening and closing assets under management. The company does not publish it in that form, and a simple average is an approximation to the balance the fees were actually charged on.
- The opening balance of 1,606.6 billion dollars is derived by subtracting the disclosed increase from the disclosed closing balance.
- From 1 July 2025 the reported total includes managed account model delivery portfolio assets, so the closing and opening figures are not on an identical basis.
- Nothing here is a view on T. Rowe Price Group or on any security.