Andrew Cannarsa and Aaron Cahall, The Examiner
2008-02-04 08:00:00.0
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BALTIMORE -

Investors know how their portfolios are faring during times of economic uncertainty. But what about the asset managers who oversee investors’ funds?

While the end of 2007 was marked by high stock market volatility amid concerns of a credit crunch and rising energy costs, Baltimore’s T. Rowe Price Group closed the year with record assets under management, revenues and earnings.

The company totaled net revenues of more than $2.2 billion and net income of more than $670 million last year. Assets under management increased 19.5 percent, or $65.3 billion, to more than $400 billion in 2007, as the company introduced several new mutual funds and increased the number of its retirement plans.

The company last week did warn investors they’re dealing with an up-and-down stock market and that it may take some time to regain stability.

“We would caution investors to be patient as the market goes through a period of transition and adjustment, and to have modest market return expectations and an awareness of risk and uncertainty,” James Kennedy, T. Rowe Price’s CEO, said when the company announced fourth-quarter and year earnings.

In a recent panel discussion about the current stock market environment, T. Rowe Price Chairman and Chief Investment Officer Brian Rogers said the challenge for investors is that stocks likely will perform better before investors begin to feel better about the market and the economy.

“As we work through the year, I suspect the news will begin to be less bad, and less bad will translate into optimism,” Rogers said. “By the time the year ends, I suspect some of the credit problems that we’ve experienced will begin to diminish in terms of intensity.”

An unpredictable market had a noticeable effect on Baltimore’s Legg Mason, as the company last week announced that third-quarter fiscal 2008 net income declined 11 percent to $154.6 million.

“This past quarter was among the most volatile periods the market has experienced,” Raymond “Chip” Mason, Legg Mason’s founder and chairman, said last week. “Throughout the quarter, concerns about the dollar, a potential recession and the financial sector at large were widely felt around the world.”

The market’s big swings through January may make some investors nervous but can also provide them with an opportunity, said Larry Adam, chief investment strategist at Deutsche Bank Alex. Brown’s Baltimore offices.

“I don’t think volatility is necessarily a bad thing,” Adam said. “It gives people a chance to get back into the market.”

Adam said some of the firm’s clients have shifted their money into new venues. With the Federal Reserve’s rate cuts curbing interest profits on money market accounts, he said investors have looked to commodities including grain and wheat for growth.

Earnings reports for U.S companies are showing an average 11 percent gain, Adam said, showing economic growth despite troubles in the residential housing market.

“I think you’re going to see this choppiness in the market for the next couple months. There’s still some uncertainty,” Adam said. “I would use this time to build a base, because I think at the end of the year we’ll be stronger than where we are.”

acannarsa@baltimoreexaminer.com

acahall@baltimoreexaminer.com