Despite first-quarter gains, T. Rowe lays off 5.5% of work force

Investment advisory revenue was down nearly 35%, or $163.3 million, from the comparable 2008 first quarter. Assets under management decreased 3% since the beginning of the year to $268.8 billion March 31. That figure includes $158.8 billion in the T. Rowe Price mutual funds distributed in the United States and $110 billion in other portfolios. Net cash inflows in the first quarter of 2009 was $4.5 billion. Lower market valuations, net of income, more than offset cash inflows and reduced assets under management by $12 billion. Assets under management were down one-third from their peak of $400 billion at the start of 2008. Before the good news was announced, T. Rowe announced yesterday that it had laid off 288 employees, representing 5.5% of its work force, due to a decline in assets, lower client volume and a reduction in the number of projects, said Ed Giltenan, spokesman for the Baltimore-based firm. While the layoffs were made across most areas of the firm, no portfolio managers were laid off. Of the total reductions, six of the firm’s 340 investment professionals were laid off, Mr. Giltenan said. The majority of the layoffs involved telephone, processing and technology areas, he said. The firm has been focused on cost reduction since late 2007 after recognizing that a difficult economic environment was ahead, Mr. Giltenan said. Last year, bonuses were reduced, and the firm stopped hiring to fill open positions, he said. “We reigned in projects and became more vigilant about doing things to save money,” Mr. Giltenan said. Layoffs are “something that we tried at all costs to avoid,” he said. T. Rowe’s assets under management fell to $269 billion as of March 31, from $276 billion as of Dec. 31. The firm’s decline of assets from its peak of $400 billion as of Dec. 31, 2007 was due largely to market depreciation, Mr. Giltenan said. In the first quarter of this year, T. Rowe’s mutual funds had net inflows of $1.8 billion, largely into its target date mutual funds. The last time the firm had layoffs was in 2001, when it reduced its work force by 235 employees, representing less than 7% of its work force. Additional reporting from the Associated Press.