T. Rowe Price Group, Inc. (TROW): A Bear Case Theory

We came across a bearish thesis on T. Rowe Price Group, Inc. on Valueinvestorsclub.com by jazz678. In this article, we will summarize the bears’ thesis on TROW. T. Rowe Price Group, Inc.’s share was trading at $103.51 as of January 13th. TROW’s trailing and forward P/E were 11.29 and 10.16 respectively according to Yahoo Finance.

Rowe Price Group, Inc. is a publicly owned investment manager. The firm provides its services to individuals, institutional investors, retirement plans, financial intermediaries, and institutions.TROW is a large asset manager overseeing approximately $1.77 trillion in AUM, with revenues primarily derived from equities (60%), followed by mixed assets (28%), fixed income (6.5%), and alternatives (5%). Its client base is heavily concentrated in the U.S. and skewed toward institutional investors, leaving the firm highly exposed to U.S. equity mutual funds.

This exposure represents a structural weakness, as active equity mutual funds continue to lose share to passive products, driving persistent AUM outflows, declining fee rates, and an unfavorable mix shift toward lower-fee strategies. Most of TROW’s flagship funds have failed to consistently outperform passive benchmarks, while competitors such as Vanguard continue to aggressively cut fees, intensifying long-term competitive pressure.

Recent quarterly results and management commentary reinforce that these secular headwinds remain firmly in place. TROW has experienced consistent net outflows since 2021 and declining average fees since 2015, trends that have persisted even through strong equity market rallies in 2024 and 2025. Outside of supportive market environments, revenue is likely to decline, and demographic shifts further compound the challenge as younger investors increasingly favor passive investing or trading platforms. Potential policy changes allowing private equity or private credit in 401(k)s could add incremental outflow pressure.

Attempts to diversify through alternatives and ETFs have had limited impact, as these offerings remain subscale and lack competitive differentiation. Meanwhile, the cost structure is rigid, with compensation-driven expenses growing at mid-single-digit rates over time and limited flexibility to cut without risking talent attrition.

Strategic initiatives such as the Goldman Sachs retirement partnership appear unlikely to meaningfully alter the company’s trajectory. As earnings remain closely tied to market performance, the stock lacks defensive qualities and has already lagged in a bull market. With flat-to-declining EPS expected and valuation implying downside, the shares appear overvalued relative to their long-term earnings power, with continued AUM outflows and fee pressure serving as the key catalyst.

Previously, we covered a bullish thesis on BlackRock, Inc. (BLK) by Kroker Equity Research in February 2025, which highlighted the firm’s scale, ETF dominance, strong inflows, and expansion into private markets and technology. BLK’s stock price has appreciated by approximately 9.82% since our coverage. This is because the thesis played out as inflows and earnings growth remained strong. jazz678 shares a contrarian view but emphasizes structural headwinds facing active asset managers like TROW.

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Disclosure: None.