T Rowe Price (TROW) Risk Analysis

We derive our revenues primarily from investment advisory services provided by our subsidiaries to individual and institutional investors. Our investment advisory fees typically are calculated as a percentage of the market value of the assets under our management. As a result, our revenues are dependent on the value and composition of the assets under our management, all of which are subject to substantial fluctuation due to many factors, including: - Investment Performance. If the investment performance of our managed investment products is less than that of our competitors or applicable third-party benchmarks, we could lose existing and potential clients and suffer a decrease in assets under management. Poor performance relative to other competing products tends to result in decreased sales and increased redemptions with corresponding decreases in our revenues. - General Financial Market Declines. We derive a significant portion of our revenues from advisory fees on managed investment products. A downturn in financial markets would cause the value of assets under our management to decrease, and may also cause investors to withdraw their investments, thereby further decreasing the level of assets under our management. - Investment Concentration. Our fees vary depending on product offering, and our assets under management may be overly concentrated within limited market segments or strategies, which could impact our revenues should these fees be impacted. - Investor Mobility. Our investors may generally withdraw their funds at any time, without advance notice and with little to no significant penalty. Any redemptions and other withdrawals from, or shifting among, our investment products could reduce our assets under management. These could be caused by investors reducing their investments in our products in general or in the market segments in which we focus; investors taking profits from their investments; product risk characteristics, which could cause investors to move assets to other investment managers; and investor and market sentiments. - Capacity Constraints. Prolonged periods of strong relative investment performance and/or strong investor inflows has resulted in, and may result in, capacity constraints within certain strategies, which can lead to, among other things, the closure of those strategies to new investors. - Investing Trends. Changes in investing trends, particularly investor preference for passive or alternatives investment products as well as changes in retirement savings trends, may reduce interest in our products and may alter our mix of assets under management. - Interest Rate Changes. Investor interest in and the valuation of our fixed income and multi-asset investment products are affected by changes in as well as uncertainty about interest rates. - Geo-Political Exposure. Our managed investment products may have significant investments in markets that are subject to risk of loss from political or diplomatic developments, government policies, wars, conflicts or civil unrest (such as the Russian invasion of Ukraine, recent events in Venezuela and the on-going conflicts in the Middle East), trade policies, wars or tariffs (including those imposed or threatened by the U.S. and retaliatory tariffs by U.S. trading partners), currency fluctuations, market volatility, illiquidity and capital controls, and changes in legislation related to ownership limitations. - Government Shutdown. The U.S. federal government periodically experiences funding gaps that result in partial or complete shutdowns of government operations. A prolonged shutdown could adversely impact the U.S. economy, financial markets, and our business directly and indirectly. During a shutdown, many federal agencies, such as the SEC, suspend or delay regulatory approvals. A delay in the approval of new products which we intend to offer could materially impact our performance and the timing with which we begin to attract investors. Additionally, a shutdown could have broader negative effects on consumer and business confidence, the financial markets, and the overall economy. Uncertainty regarding the duration or frequency of government shutdowns may contribute to market volatility and increased redemptions from our products. A decrease in the value of our assets under management, or an adverse change in their composition, particularly in market segments where our assets are concentrated, could have a material adverse effect on our investment advisory fees and revenues. For any period in which revenues decline, net income and operating margins will likely decline by a greater proportion because certain expenses will be fixed over that finite period and may not decrease in proportion to the decrease in revenues.