Tuesday, February 5, 2008

Investment fund manager T. Rowe Price reported a 28 percent increase in profit in the fourth quarter of 2007 at a time hedge funds are going bankrupt and a mortgage meltdown has the nation’s economy teetering on the edge of recession.

The Baltimore-based company follows a conservative strategy with its stock and retirement funds that includes avoiding risky investments that seek high returns, such as the subprime mortgage market.

“Don’t get too focused on the short term,” said James Kennedy, T. Rowe Price’s chief executive officer, in explaining his company’s investment strategy. “We manage money for our clients over the long term.”

The company’s biggest plan for the next year is to start building two additional buildings in Baltimore County after it hired about 10 percent more employees in the past year. The company operates with more than 5,000 employees in the United States as well as Europe and Asia.

Their services include investment advice, which produced $506.6 million in fees for T. Rowe Price in the fourth quarter of 2007 compared with $409.7 million in the same period one year earlier.

Regarding any big corporate changes or new directions for the company, T. Rowe Price plans “nothing,” Mr. Kennedy said. “We’ll continue to invest like we have for our clients.”

T. Rowe Price’s corporate philosophy has been honed over decades and changed little since its founding in 1937, he said.

Financial industry analysts say T. Rowe Price is well managed but that a slowing economy will challenge the company to produce the same rate of profit increases this year.

“While still a premium asset manager, we believe [T. Rowe Price] is vulnerable to a near-term correction,” said Matt Snowling, research analyst for the Arlington investment firm Friedman Billings Ramsey.

Investment risks are arising “as the impact of the market sell-off and softening economy transfers into slower inflow levels for the industry,” Mr. Snowling wrote in a research note to clients.

The company’s assets under management increased to $400 billion by the end of 2007 compared with $334.7 billion one year earlier.

Investors produced $9.1 billion in new cash in the fourth quarter. The new investment income compensated for lower valuations in some markets.

Its “life-cycle” funds for retirement savings received $3.4 billion from investors in the fourth quarter.

Net income increased to $190.7 million, or 68 cents a share, from $148.9 million, or 53 cents a share, in the same period of 2006.

Fourth-quarter revenue rose to $597.8 million from $489.1 million a year earlier.

Marc Irizarry, analyst for Goldman Sachs, said, “This quarter offered more proof of [T. Rowe Price’s] ability to generate strong net flows in a difficult context. However, the market conditions have deteriorated since year end.”

T. Rowe Price’s stock closed yesterday at $51.81, down 30 cents or about half a percent. Its shares have fallen almost 9 percent since Jan. 1.

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