Inside T. Rowe Price: Markets, AI & the Future of Investing | The Close 8/31/2026

>> WELCOME EVERYONE WE ARE LIVE FROM THE HEADQUARTERS OF T. ROWE PRICE IN BALTIMORE, MARYLAND. A SHOW WE CHOSE TO TAKE ON THE ROAD. FEW COMPANIES REPRESENT BETTER THE EVOLUTION OF THE DEMAND SIDE OF U.S. CAPITAL MARKETS FOR HOW ORDINARY AMERICANS GAIN STOCKS. THAT STORY STARTED ABOUT A MILE AND HALF FROM HERE WHEN THOMAS ROWE PRICE JUNIOR CAME UP WITH TWO UNIQUE IDEAS. START AN INVESTMENT FIRM THE CHARGES CLIENTS A FEE ON THE ASSETS MANAGED RATHER THAN COMMISSIONS. AND FOCUS ON GROWTH STOCKS. WELL-MANAGED COMPANIES AND FERTILE INDUSTRIES FOR DECADES. THOSE IDEAS PROVED TO BE BRILLIANT AND IN 1950 HE OPENED THE STRATEGY TO ORDINARY AMERICANS WITH THE T. ROWE PRICE GROWTH STOCK FUND. ONE OF THE OLDEST CONTINUOUSLY OPERATED ALONG WITH THE SMALL-CAP FOCUS NEW HORIZONS FUND INTRODUCED IN THE 60'S THAT WOULD HELP IN TRENCH T. ROWE PRICE IS ONE OF THE GREAT RETIREMENT MACHINES. ALLOWING U.S. HOUSEHOLDS TO PARTICIPATE IN THE STOCK MARKET WITHOUT ALL OF THE FUSS TO PICK THE INDIVIDUAL STOCKS THEMSELVES. THE REST OF THE FINANCIAL WORLD HAS GONE WITH THAT BUSINESS MODEL. TURNING PRICES MUTUAL FUND CRAFT PAYING SKILLED HUMANS TO PICK STOCKS TO ONE OF THE MOST CONSTRUCTIVE FRANCHISES IN FINANCE. THE PAST FIVE YEARS OR SO WITHIN THE MOST CONSEQUENTIAL SINCE THE COMPANY'S FOUNDING AND THE CHANGES HAVE BEEN DRAMATIC. THE ACQUISITION OF PRIVATE CREDIT POWERHOUSE OAK HILL ADVISOR, THE 2020 FIVE LANDMARK ALLIANCE WITH GOLDMAN SACHS TO BRING ALTERNATIVE ASSETS INTERVAL FUNDS TO MAIN STREET IN LESS THAN TWO WEEKS AGO A DEAL TO BUY FIXED INCOME ETF. AND THERE IS EVEN A CRYPTO FUND. 90 YEARS IN AND OVER TWO TRILLION UNDER MANAGEMENT, T. ROWE PRICE IS LETTING THEM PLAY AGAIN FIND WHERE THE GROWTH IS GOING AND GET THERE EARLY. FOR THE NEXT TWO HOURS, BLOOMBERG BROADCAST LIVE FROM INSIDE THAT STORY. WE ARE FROM THE CIO, CHIEF ECONOMIST, ETF PORTFOLIO MANAGER, HEAD OF GLOBAL DISTRIBUTION AND THE MAN IN THOMAS ROWE PRICE'S CHAIR ON THE FUTURE OF THIS FIRM IN THE FUTURE OF AN INDUSTRY THAT THIS FIRM HELPED INVENT. THIS IS THE CLOSE. >> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE OF THE END OF A MARKET DAY. THIS IS THE CLOSE. ROMAINE: HERE IN THE LAST TRADING DAY OF OFFICE -- OF AUGUST. TWO STRAIGHT MONTHS OF LOSSES BUT STILL SOME QUESTIONS ABOUT THE CONCENTRATION OF GAINS. NVIDIA, MICROSOFT MAKING UP CLOSE TO 60% OF THE MOVE ON THE S&P THIS MONTH. WE KICK IT OFF FROM T. ROWE PRICE HEADQUARTERS IN BALTIMORE WITH THE CIO AND COHEAD SEBASTIEN PAGE WHO HELPED LEAD INVESTMENTS ACROSS THE $1.9 TRILLION FIRM. HE ALSO COCHAIRS THE COMMITTEE THAT SETS THE FOUNDATION. THAT COMMITTEE YOU CAME INTO 2026 ON THE BROADENING OF THE MARKET. AS WE LEARNED LET'S FIND OUT IF HE STILL BELIEVES IT. THANKS FOR HAVING US ON YOUR HOME TURF. >> THIS IS SO EXCITING. YOU KNOW WHAT I LIKE THE MOST ABOUT THIS. RIGHT BEFORE WE WENT ON THE AIR YOUR CAMERAMAN TURNED TO ME AND SAID I'M A T. ROWE PRICE INVESTOR. I CAN'T WAIT TO START THE DISCUSSION. ROMAINE: YOU ARE RESPONSIBLE FOR A LOT OF MONEY NOW AT A PIVOTAL TIME FOR MARKETS. YOU SEE THE OUTPERFORMANCE OVER THE LAST FEW YEARS WITH A LOT OF THESE AI NAMES AND TECH RELATED NAMES. GIVE US A BREAKDOWN -- WE SAW A BREAKDOWN IN JULY. IT'S BOUNCED BACK IN AUGUST BUT THERE ARE QUESTIONS ABOUT WHERE LEADERSHIP COMES IN. SEBASTIEN: I THINK MARKETS CONTINUE TO BROADEN. LET'S HIGHLIGHT HOW STRONG MOMENTUM HAS BEEN. IF YOU HAD SIMPLY BOUGHT THE TOP 10 PERFORMING STOCKS IN THE S&P EVERY MONTH JUST LOOKING AT THE PRIOR YEAR, FOR THE THREE YEARS LEADING UP TO JUNE THIS IS JUST RETURNS RANKED BY THE TOP 10 PERFORMING. YOU WOULD HAVE OUTPERFORMED THE S&P BY 40% A YEAR. THIS IS HOW STRONG MOMENTUM WAS GOING INTO JUNE. IN JULY THAT TRADE REVERSED AND WENT DOWN 28%. BUT MOMENTUM HERE HAS BEEN A MAJOR FACTOR ACROSS INVESTMENT PLATFORMS. WE HAVE 500 INVESTMENT PROFESSIONALS, WE PUBLISHED 10,000 RESEARCH NOTES A YEAR. THOUSANDS AND THOUSANDS, WE ARE ALL OBSESSED WITH THE MODELS. AND THIS IS PART OF A BROADENING OF THE AI TRADE ITSELF. ROMAINE: WHEN WE TALK ABOUT THE PERFORMANCE OF MOMENTUM, IT'S BEEN MEANINGFUL. IT WASN'T JUST JULY. WE SAW THAT IN AUGUST AS WELL. WHEN YOU LOOK AT SOME OF THE MAIN FACTORS WITH HER AS A LONGSHORE BASIS OR A LONG BASIS. HAVE PEOPLE GIVEN UP ON THAT MOMENTUM? PEOPLE ARE STILL CHASING? SEBASTIEN: I THINK WE HAVE MOMENTUM IN THE ECONOMY AND IN THE AI TRADE. WE ARE LOOKING AT 3 TRILLION OF SPENDING OVER THE NEXT YEARS. MOMENTUM IS ROTATING ON THE BOTTLENECKS. THINK ABOUT THIS FOR FUNDAMENTAL RESEARCH OR EQUITY TEAM LOOKING AT WHERE THE BOTTLENECKS ARE GOING FROM COMPUTER TO MEMORY, TO COOLING, TO THE ELECTRICAL GRID TO THE COMPONENTS. SMALL-CAP COMPANIES THAT OWN A LITTLE COMPONENT WE CALL IT THE GOLDEN COMPONENT. THAT BECOMES A HUGE OPPORTUNITY FOR THE STOCK TO OUTPERFORM. IT IS BROADENING BECAUSE THE ECONOMY IN GENERAL IS DOING QUITE WELL. 6% GROWTH. IT'S ALSO THE AI TRADE ITSELF. ROMAINE: YOU'VE BEEN PRETTY PRESENT ON A LOT OF THIS PARTICULARLY THE CAPEX SPEND. I SEE NUMBERS THROWN OUT FOR $1 TRILLION IN CAPEX FOR THIS YEAR WHICH IS MATERIALLY HIGHER. BUT THEN YOU HEARD FROM SOME OF THESE COMPANIES THEY ARE ALREADY OUT TO 2028 AND DON'T SEE A LET UP. >> EARNINGS LAST WEEK. JENSEN WAS TALKING ABOUT 7% GROWTH FROM HERE FOR THE NEXT 12 MONTHS. AND SOMETHING THAT COULD BE EVEN HIGHER. THIS IS TREMENDOUS REVENUE GROWTH. A YEAR OR TWO AGO PEOPLE WERE ASKING WHAT IS THE MONETIZATION OF AIA. ROMAINE: THEY ARE STILL ASKING THAT. SEBASTIEN: OPENAI WAS ADDING USERS THE FASTEST PROBABLY TOO CLOSE TO A BILLION USER OF ANYTHING EVER BUILT IN TECHNOLOGY. YOU STARTED TO SEE IT. YOU SEE IT IN THE DEMAND WE KNOW IT'S REAL AND TRANSFORMATIONAL. BUT YOU ALSO SEE IT IN OPENAI GROWING THEIR REVENUES IN ABOUT A YEAR FROM 20 BILLION TO 50 BILLION. ANTHROPIC FROM 5 BILLION TO 70 BILLION. AND BY THE WAY THAT IS STILL GROWING. NIKE AND COKE THEIR 50 BILLION IN REVENUES. JUST PUT THAT IN PERSPECTIVE. ROMAINE: I DO HAVE TO ASK ABOUT THE HISTORY. EVERONE WANTS TO DRAW COMPARISONS TO DOTCOM OR TELECOM BOOM AND BUST. PEOPLE STILL TALKING ABOUT TULIPS. YOU DON'T SEE ANY PARALLELS AT ALL, NOT SEEING THIS IS AN EXACT ONE FOR ONE BUT PARTICULARLY AS SOMEONE WHO HAS TO ALLOCATE, ARE YOU KEEPING THAT IN THE BACK OF YOUR MIND. ROMAINE: THERE'S ALWAYS A RISK OF -- SEBASTIEN: THERE'S A WAS A RISK OF OVERINVESTMENT AND SPECULATION. THE PRICE-EARNINGS RATIO IS 30 A YEAR AGO IT'S DOWN TO 21. THIS IS HOW STRONG EARNINGS HAVE BEEN. THE VALUATIONS FOR THE S&P 500 IF YOU LOOK AT THE MOMENTUM TRADE, MOMENTUM OVER LONG TIMES IF YOU CHASED HAS PERFORMING STOCKS AFTER THE FACT IT DOESN'T MAKE MONEY. THE LAST TIME IT WAS AS STRONG AS OVER THE LAST THREE YEARS WAS THE TECH BUBBLE. SO THERE IS A COMPARISON THERE. YOU LOOK AT THE MOMENTUM STOCKS AND THE FUNDAMENTALS, THEIR MARGINS ARE EIGHT TIMES HIGHER THAN THE MOMENTUM STOCKS AT THE PEAK. THEIR RETURN ON EQUITY'S NINE TIME HIRES AND THEIR CASH FLOW IS A THIRD. SO IT'S NOT THE SAME KIND OF MOMENTUM, THE SAME KIND OF SPECULATION. THIS IS AN INDUSTRIAL REVOLUTION BASED ON TECHNOLOGY. I REALIZE I SOUND REALLY BULLISH. MARKETS ARE EXPENSIVE BY MANY TRADITIONAL MEASURES. MODESTLY OVERWEIGHT STOCKS. WHEN I LOOK ACROSS THE PLATFORM AND I USE AI TO READ THE 10,000 RESEARCH NOTES. I SEE ENTHUSIASM. >> LET ME ASK FROM A DIFFERENT ANGLE RATHER THAN BEING INVESTED IN THE SPACE. IT SEEMS LIKE EVERYBODY IS ON DIFFERENT LEVELS OF BULLISHNESS. BUT THERE HAS BEEN A CONCERN NO ONE WAS REALLY HEDGING FOR THE DOWN SIDE. WE HAVE A BIG WAKE-UP CALL FOR THE DOWNSIDE LAST WEEK FOR KEVIN WARSH'S SPEECH. A HAWKISH FED, INFLATION STILL PERSISTENT. THE COST OF CAPITAL THAT'S ALREADY MATERIAL HIGHER THAN A YEAR AGO AND LIKELY POTENTIALLY EVEN HIGHER HEADING INTO NEXT YEAR. DOES THAT WORRY YOU? SEBASTIEN: I THINK KEVIN WARSH DID WELL. HE DEFINED INFLATION. MUCH MORE PRECISE TALKING ABOUT PCE. HE SAID IT'S HIGH, HE TOOK ACCOUNTABILITY AND SAYS IT'S OUR JOB TO ADDRESS IT AND THEN HE HINTED THE EMPLOYMENT MARKET IS IN BALANCE AND LOOKS QUITE FINE AND CONSUMPTION IS PRETTY GOOD SO TAKE THE WHOLE MESSAGE IT COMES OUT PRETTY HAWKISH. THE LONG RATES RISING IS A CONCERN. I'M SURE YOU TALK ABOUT IT ON YOUR SHOW. BY THAT EVERYBODY WHO COMES IN A DIFFERENT EXPLANATION OF A LONG RATES ARE RISING. INCLUDED BECAUSE OF GROWTH IN PRODUCTIVITY OR INFLATION. IT COULD BE BECAUSE RATES OUTSIDE THE U.S. ARE RISING AS WELL. ROMAINE: THERE ARE PEOPLE WHO COME ON AND SAY IT'S JUST AN INFLATION CONCERN. SAYING THIS IS MORE TERM PREMIUM THE FISCAL DEFICIT. WHAT IS YOUR EXPLANATION FOR WHY WE SAW THAT IN THE 30 YEAR YIELD AND EVEN TODAY IF YOU WANT TO LOOK AT THE BENCHMARK. THE HIGHEST IN THE YEAR AND A HALF. SEBASTIEN: THE DOMINANT NARRATIVE IS ITS DEFICITS AND TERM PREMIUM. YOU CAN SEND TO STRATEGISTS A REQUEST TO DEFINE THE TERM PREMIUM AND IF YOU SEND 10 LETTERS YOU WILL GET 10 DIFFERENT DEFINITIONS BACK. IT'S A TECHNICAL TERM. I NOTICED SOMETHING. I THINK THE MARKETS UNDERESTIMATE FROM INFLATION ON THE LONG RATES. THE BREAKEVENS HAVEN'T MOVED BY A LOT SO THE PRICING OUT INFLATION AT ALL. I LOOK AT THE CORRELATION BETWEEN OIL PRICES AND THE 10 YEAR YIELD OR THE 30 YEAR YIELD. AROUND 80% ON THE 30 DAY MOVING AVERAGE. AND THAT'S THE 90TH PERCENTILE. THIS COULD BE THE WAR WILL GO ON FOR LONGER TRADE THAT CREATES MORE DEFICITS BUT IT ALSO SMELLS OF INFLATION CONCERNS. ROMAINE: WE HAVE SEEN A BIT OF A BREAK OUT IN YIELDS. I'M CURIOUS WHAT THAT SAYS. SEBASTIEN: I THINK WE ARE IN A REGIME WHERE YOU COULD SEE HIGHER PRODUCTIVITY DUE TO AI AND HIGHER NOMINAL GDP GROWTH AND HIGHER REAL GDP GROWTH. I THINK THAT'S WHAT YOU'RE SEEING ON THAT PART OF THE EQUATION. YES PROTECTION PORTFOLIOS. IF SOMEONE SEES ME AND SAYS WHAT ARE YOU THINKING OF MARKETS. OR SAY THE SAME THING. INVESTING BITE HAD INFLATION RISK. ROMAINE: I DO HAVE TO ASK YOU. YOU'RE RUNNING THE MULTI-ASSET BUSINESS. TO COHEAD OF ALL INVESTMENTS HERE. THAT'S A PRETTY BIG TASK. I'M CURIOUS ABOUT YOUR BACKGROUND. YOU ARE HERE IN WHAT MOST PEOPLE WOULD DESCRIBE AS A KICK THE TIRES FUNDAMENTAL SHOCK. IS THAT IN CONFLICT WITH EACH OTHER? SEBASTIEN: IT IS COMPLEMENTARY. I LOVE YOUR ASKING THAT QUESTION. PER FOLIO CONSTRUCTION RISK MANAGEMENT PLUS DEEP FUNDAMENTAL INSIGHTS IN A WORLD OF AIA A LOT OF THE BASIC MATH IS GETTING DONE AUTOMATICALLY. THE FUNDAMENTAL RESEARCH, READING REPORTS AND SO ON IS BEING DONE AUTOMATICALLY. WHAT YOU LEFT WITH? YOU ARE LEFT WITH INSIGHTS. THOUSANDS OF MEETINGS OUR ANALYSTS HAVE WITH CEOS AROUND THE WORLD AND VERY DEEP DISCUSSIONS WITH CFOS ON INSIGHTFUL RESEARCH. THAT'S WHERE YOU BUILD AN EDGE IN ACTIVE MANAGEMENT. ROMAINE: REALLY APPRECIATE YOU HAVING US HERE. SEBASTIEN PAGE CIO AND COHEAD OF GLOBAL INVESTMENTS AT T. ROWE PRICE KICKING OFF OUR SPECIAL COVERAGE FROM THEIR HEADQUARTERS LIVE IN BALTIMORE, MARYLAND. WE WILL CATCH UP WITH THEIR CHIEF ECONOMIST TO TALK A LITTLE BIT MORE ABOUT WHERE SHE SEES RATES GOING. WE HEAR FROM JODY LOVE AND THE HEAD OF GLOBAL DISTRIBUTION AND OF COURSE WE WILL HEAR FROM THE CEO HIMSELF. ALL THAT AND MORE COMING UP ON THE CLOSE. THIS IS BLOOMBERG. ROMAINE: WELCOME BACK. FROM T. ROWE PRICE HEADQUARTERS IN BALTIMORE MARYLAND. >> WE HAVE A BIG INTERVIEW ON DECK AND I ENJOYED YOUR CHAT WITH THE CIO. HE TALKED ABOUT THE BROADENING OF THE AI TRADE AND HOW MOMENTUM IS KEEPING THIS MARKET GOING. HE SOUNDED PRETTY BULLISH OVERALL AND THEY ARE OVERWEIGHT STOCKS. ROMAINE: HE'S BEEN VERY CLEAR ABOUT THIS. IN FACT, THE WHOLE TEAM HERE. I DON'T THINK IT'S REALLY A SURPRISE, BUT IT'S ALSO THE IDEA OF DO YOU START TO HEDGE NOW ARLENE DEEPER INTO THIS? HE IS THE GUY WHO HAS TO MAKE THESE DECISIONS AS TO THE BEST WAY TO ALLOCATE MONEY. IT'S HARD TO UNDERSTAND, IT'S A FIRM THAT TOUCHES SOME ANY PEOPLE IN TERMS OF THEIR RETIREMENT PROGRAM. IT IS NOT JUST PLAYING WITH HOUSE MONEY. THIS IS ABOUT REALLY MANAGING AND BEING THE PROPER FIDUCIARY FOR EVERYONE ELSE'S MONEY. >> AND WE HAVE A FANTASTIC LINE UP AHEAD. MORE TO COME, WE WILL CHECK IN WITH YOU SHARPLY -- SHORTLY. A QUICK MARKET CHECK AND WERE LOOKING AT THE S&P AND NASDAQ LOWER. BONDS ARE ALSO LOWER. THERE ARE INFLATIONARY PRESSURES SO INVESTORS ARE CONCERNING BECAUSE IT COULD MAKE THE FEDERAL RESERVE RAISE INTEREST RATES. CRUDE IS ABOVE $90 A BARREL AND TREASURY TENURE YIELDS AT THE HIGHEST SINCE JANUARY 2025. LOTS OF CROSS MARKET VOLATILITY HERE. WE WILL BE BACK AFTER THIS RAKE. -- AFTER THIS BREAK. >> NVIDIA DEEPENING ITS TIES WITH MEDIATECH TODAY, ANNOUNCING THE NEW IS $.5 MILLION -- $3.5 BILLION INVESTMENT TO HELP COMMUNICATE MORE SEAMLESSLY. ED LUDLOW -- ED LUDLOW SPOKE WITH JENSEN HUANG EARLIER TODAY IN HERE IS PART OF THAT GREAT CONVERSATION. >> TODAY WE ARE ANNOUNCING A BIG PARTNERSHIP. WE ALREADY HAVE A BIG ART WORSHIP BUT TODAY WERE GOING TO MAKE IT A LOT BIGGER. STARTED WITH US WORKING ON RECOGNIZING THAT MEDIATECH MAKES THE WORLD'S BEST SOC'S, AND WE INTEGRATED THE CHIP TO CHIP INTERFACE TO THIS, TO MEDIATECH SO WHENEVER THERE IS AN SOC FOR MEDIATECH WE CAN CONNECT THE TWO. WHAT CAME OUT OF THAT FIRST ENDEAVOR IS THIS PROJECT, THESE LITTLE INCREDIBLE COMPUTERS ALLOW YOU TO RUN AN ADVANCE AGENTIC AI RIGHT ON YOUR DESK, INSTEAD OF HAVING TO RUN IT IN THE CLOUD. TODAY WE ARE GOING TO EXPAND OUR PARTNERSHIP SO THAT WE DO MULTIPLE GENERATIONS OF THIS. THIS PROCESSOR WILL ALSO BE THE FOUNDATION OF THE REVOLUTIONARY NEW COMPUTER THAT IS COMING FROM MICROSOFT AND OURSELVES. A REINVENTION OF THE WINDOWS PC FOR THE AGE OF AGENTS. THE SECOND THING WE'RE DOING IS THAT MEDIATECH IS INCREDIBLY SUCCESSFUL BUILDING XP USE. WERE GOING TO CONNECT OUR FUSION SO THE SCALED UP IN D-LINK SYSTEM WHICH HAS REVOLUTIONIZED AI AND ARE ENTIRE NETWORKING FRANCHISE SYSTEM CHASSIS TO MEDIATECH. SO WHEN THEY WIN PROJECTS, BRINGS ALONG NVIDIA NETWORKING. HOWEVER, YOU ALSO KNOW THAT NVIDIA IS ALREADY IN EVERY CLOUD AND EVERY DATA CENTER. SO WHENEVER THERE IS THAT MEDIATECH XP YOU WE WILL BE ABLE TO CONNECT IT RIGHT INTO THAT DATA CENTER IN A REALLY SEAMLESS WAY. AND OF COURSE WE ARE PARTNERING IN ROBOTICS SYSTEMS LIKE AUTONOMOUS VEHICLES. SO YOU KNOW THAT AI HAS REVOLUTIONIZED HOW WE DO COMPUTING HIM AND WE ARE GOING TO WORK WITH MEDIATECH AND ALL OF THESE DIFFERENT AREAS. WHEN THEY WIN, WE HAVE AN OPPORTUNITY TO SELL A LOT MORE. WHEN WE WIN, THEY HAVE AN OPPORTUNITY TO SELL A LOT MORE. >> THAT WAS JENSEN HUANG SITTING DOWN WITH ED LUDLOW. THAT WAS A GREAT INTERVIEW AND IT MADE ME THINK, IS NVIDIA INVESTING IN A COMPETITOR, OR IS IT MAKING SURE THE COMPETITOR STILL NEEDS NVIDIA? ED: WE ARE IN A WORLD WHERE CUSTOM CHIPS ARE HERE. LATER IN THE CONVERSATION JENSEN HUANG SAID WERE NOT ANTICIPATING THAT WHAT HE CALLS AND XP YOU ARE COMING, THEY ARE ALREADY IN THE MARKET. WHAT HE TRIED TO DO WITH MEDIATECH IS, IF THEY ARE WORKING WITH THE HYPER-SCALERS OR FRONTS OR LABS AND THEY WANT TO DEVELOP THEIR OWN CHIPS, THEY NOW HAVE AN AVENUE TO TAKE THOSE CHIPS AND JUST PLUG THEM STRAIGHT INTO EVERYTHING ELSE IN DATA CENTER INFRASTRUCTURE THAT NVIDIA UNDERPINS. TO THIS POINT THE STORY HAS BEEN NVIDIA PROVIDES A GPU, BUT IT OWN SO MUCH MORE PROPORTIONATELY OF THE CONTENT OF A SERVER DESIGN. SO NOW THEY CAN HAVE IT BOTH WAYS. THEY WILL BE LARGELY INFERENCE FOCUSED ACCELERATORS BUT THEY WILL GO INTO DATA CENTERS WHERE NVIDIA IS PROVIDING THE NETWORKING, THE MEMORY AND OTHER CONNECTION FUNCTIONS WITHIN THAT ARCHITECTURE. >> AND YOU ASK HIM ABOUT WHETHER THIS IS CIRCULAR FINANCING. HE SAID NOT REALLY, BECAUSE THEIR INDEPENDENT AND PROFITABLE. WHAT COULD PROVE HIM WRONG? >> IT'S INTERESTING, THEY ARE BUYING $3.5 BILLION WORTH OF CONVERTIBLE BONDS. THAT IS THE MECHANISM. AND VERY SIMPLY, THE PUSHBACK ON CIRCULAR FINANCING IS THAT MEDIATECH ARE RUNNING THEIR OWN BUSINESS AND VERY PROFITABLY AND NVIDIA IS RUNNING THEIR OWN BUSINESS AND VERY PROFIT ECONOMY AND PROFITABLY, AND THEY EXPECT TO HAVE A GREAT PAYOFF. MEDIATECH HAS ITS HISTORY IN A SMALL PHONE BUT IT HAS FOUND SOME FOOTING. IN THE AI WORLD IT IS GETTING SOME MOMENTUM. IF YOU LOOK AT THE TERMS OF THE BOND DEAL ANNOUNCES MORNING, OFF ABOUT IS PARTICIPATING, TOO. >> YOU ALSO HIGHLIGHTED THAT THIS IS A DECADE-LONG PARTNERSHIP. IT'S NOT JUST A ONE-OFF FINANCIAL INVESTMENT. WHAT IS IMPORTANT THING THAT WILL GET FROM MEDIATECH OVER THE NEXT DECADE, IT JUST CAN'T BUILT ITSELF. WITH TAPPING THE DEBT MARKET AND ALL THE MONEY IT RAISED FROM INVESTORS. >> JUST COMES BACK TO ACCEPTANCE AT CUSTOM SILICON, TP USE, XP USE, IF MEDIATECH HAS SUCCESS IN THAT AND THERE IS GROWTH AND DEMAND FOR THOSE PLATFORMS, A, MEDIATECH WOULD ARGUE THAT BY PARTNERING WITH NVIDIA THEY ARE DEPLOYED MORE QUICKLY BECAUSE NVIDIA HAS HANDLED THE REST OF THE DESIGN OF THE DATA CENTER. AND NVIDIA BENEFITS FROM GROWTH IN THAT MARKET. IT STILL GROWS EVEN IF THE GROWTH IS AWAY FROM ITS OWN GPU-BASED SYSTEMS. THEY ARE HAVING IT BOTH WAYS, HAVING THEIR CAKE AND EATING IT IN THIS CONTEXT. THERE'S A LOT OF CONCERN WITH NVIDIA'S FUTURE GROWTH PROJECTIONS -- AND SEEING HOW IT IS MODERATE OVER MULTIYEAR HORIZON. IF PART OF THE DECELERATION ABOUT THIS BECAUSE THERE ARE OTHER TYPES OF CHIPS ON THE MARKET, I WAS A FOUNDING, JENSEN HUANG IS ROBUSTLY STANDING FIRM THAT HE IS NOT WORRIED ABOUT THAT. THAT IN BE THIS GPU-BASED SYSTEMS HAVE BETTER ECONOMIC CENTER MORE PERVASIVE. SO IT WAS AN INTERESTING AND SPIRITED CONVERSATION. >> IT DEFINITELY WAS. THANK YOU FOR EDUCATING US WHEN IT COMES TO THAT. COMING UP, ROMAINE BOSTICK SITS DOWN WITH A CHEAP U.S. ECONOMIST AND CEO. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: WELCOME BACK TO "THE CLOSE." HERE ON THE FINAL DAY OF AUGUST, INTEREST-RATE PUZZLE FOR INVESTORS. INFLATION IS DECELERATING, A WAGE GROWTH AT POST-PANDEMIC LOWS IN THE LABOR MARKET IS BALANCED BUT NOT HOT. A LOT OF ECONOMISTS WOULD BE LOOKING FOR A CUT INTEREST RATES. INSTEAD WALL STREET IS PREPPING FOR A HIKE. KEVIN WARSH'S SPEECH TRADES IN THAT DIRECTION AS THE FED CHAIR SEEMED UNCONVINCED FINANCIAL CONDITIONS ARE RESTRICTIVE AND A BIT MORE CONCERNED THAT MORE THAN HALF THE PCE COMPONENTS ARE STILL RUNNING ABOVE 3%. BEFORE THAT SPEECH, THE U.S. ECONOMIST WAS EXPLAINED -- EXPECTING THE FED TO REMAIN ON HOLD NOW EVEN SHE PUTS THE ODDS FOR RATE HIKE AT 50-50 AND SAYS KEVIN WARSH MAY DELIVER MORE THAN ONE THIS YEAR. JOINING US NOW, GREAT TO HAVE YOU. >> THANK YOU AND WELCOME TO OUR HEADQUARTERS IN BALTIMORE. >> I FEEL LIKE IF WE HAD THIS CONVERSATION A FEW WEEKS AGO IT WOULD BE A LITTLE BIT DIFFERENT ABOUT WHERE THE RATES ARE GOING. RIGHT NOW IF YOU LOOK AT THE BLOOMBERG TERMINAL 50% CHANCE RIGHT NOW OF A HIKE IN SEPTEMBER IS WHAT TRADERS ARE BETTING ON. NOW YOU HAVE A LOT OF ECONOMISTS SAYING EVEN IF WE GET THAT HIKE IN SEPTEMBER. >> I THINK IT'S AN INTERESTING QUESTION AND SOME OF IT HAS TO DO WITH THE DATA AND THE VOLATILITY AND THE FACT WE HAVEN'T HAD THAT MUCH PROGRESS ON INFLATION OVER THE LAST FIVE YEARS. A LOT OF IT HAS TO DO WITH SOME MISUNDERSTANDING OR LACK OF CLARITY WHEN IT COMES TO THE FED REACTION FUNCTION RATHER THAN CASH UNDER THE NEW FED CHAIR. WHAT IS HAPPENED SINCE THE WEEKEND IS NOW WE HAVE A BIT MORE -- WE DON'T HAVE FORWARD GUIDANCE AND I THINK IT'S CLEAR HE'S NOT GOING TO GO DOWN THAT PATH IF WE HAVE SOME GUIDANCE WITH REGARDS TO THE REACTION FUNCTION. THE MARKET IS READING A LOT INTO HIS STATEMENT THAT FINANCIAL CONDITIONS ARE NOT THAT TIGHT. THE 2% INFLATION IS STILL THE GOAL AND WE HAVEN'T SEEN SUFFICIENT PROGRESS IN BRINGING INFLATION DOWN EVEN FOR THE LAST TWO REPORTS THAT HAVE TRENDED LOWER AND SHOW SOME PROGRESS. HE INDICATED ON FRIDAY THAT IS NOT ENOUGH YET. ROMAINE: WHEN YOU LOOK AT THE MARKET REACTION TO WHAT HE SAID, DO YOU THINK THE MARKET GOT THE RIGHT MESSAGE? BLERINA: I FEEL THAT THEY DID. THE THING IS HIS REACTION FUNCTION HE DID NOT COMMUNICATE THAT WELL BETWEEN THE JUNE AND JULY FED MEETING. I THINK HE MADE A MISTAKE TO SAY FINANCIAL CONDITIONS HAVE TIGHTENED AND THEREFORE THE MARKET IS DOING THE WORK FOR US. SO THE MARKET NEEDED TO SEE THIS REASSESSMENT AND THIS RECOMMITMENT TO PRICE STABILITY AND TO THE 2% INFLATION TARGET AND NOW I FEEL THEY HAVE THE RIGHT SIGNAL. WHAT IS IMPORTANT BETWEEN NOW AND THE SEPTEMBER FOMC MEETING WE HAVE CPI AND DATA. THE DECISION IN SEPTEMBER REMAINS DATA-DEPENDENT BUT THE HURDLE HAS BECOME QUITE DIFFERENT -- DIFFERENT FROM WHAT HAS BEEN FRIDAY. ROMAINE: WITH THE BALANCE BETWEEN THE LABOR MARKET AND THE DAYS AHEAD AFTER THAT. I MEAN THERE'S A LOT OF PEOPLE THAT CAME OUT OF THAT SPEECH AT JACKSON HOLE AND SAID THIS IS A FED THAT SOUNDS LIKE IT'S FOLLOWING A DUAL MANDATE. IT LOOKS LIKE FOR THE SHORT TERM THERE IS ONE MANDATE AND THAT IS BRING INFLATION BACK DOWN TO THE 2% TARGET. BLERINA: I THINK THAT'S A GREAT QUESTION AND I DO AGREE WITH YOU. SO WHAT WE HEARD ON FRIDAY IS LET'S LOOK AT WHAT'S HAPPENED WITH WAGES AND THE LABOR MARKET. THE LABOR MARKET IS IN FULL EMPLOYMENT AND WAGE GROWTH IS DECELERATING BUT WARSH VERY CLEARLY SET I'M NOT TAKING SIGNALS FROM THAT. WAGES ARE NOT A GOOD PREDICTOR FORWARD INFLATION. WHAT I'M LOOKING AT IS THE BREATH OF INFLATION. WE HAVE 54% OF THE PCE BASKET THAT'S BEEN ABOUT 3% FOR QUITE SOME TIME. THAT'S THE KIND OF BREATH THAT HE SEEMS TO BE UNCOMFORTABLE WITH. SO I THINK THE REACTION FUNCTION IS BIASED TOWARDS INFLATION RIGHT NOW IN THE FED IS ACTING LIKE A SINGLE MANDATE CENTRAL BANK. ROMAINE: AS AN ECONOMIST DO YOU BELIEVE THAT WITH REGARDS TO THE IDEA THAT WAGES AREN'T NECESSARILY THE BEST GAUGE TO FOLLOW? BLERINA: I WOULD NOT AGREE WITH THAT ASSESSMENT. I WOULD SAY WAGES ARE ANOTHER RISK TO THE INFLATION OUTLOOK BECAUSE PRODUCTIVITY GROWTH HAS BEEN QUITE RESILIENT. SO THAT EXPLAINS PART OF THE WAGE GROWTH WE'VE SEEN IN RECENT QUARTERS. AS LONG AS THE ECONOMY IS BECOMING MORE PRODUCTIVE, EVEN HIGHER RATES OF WAGE INFLATION ARE NOT NECESSARILY INFLATIONARY. I DON'T AGREE WITH HIS STATEMENT THAT WAGES ARE THE OUTLOOK FOR INFLATION BUT I DO THINK WAGES ARE NOT AN UPSIDE RISK. ROMAINE: DOES THE U.S. UNEMPLOYMENT RATE MATTER AS MUCH AS A PROPER SIGNAL. BLERINA: THE LABOR MARKET IN THE U.S. HAS BEEN BUFFETED BY MANY STRUCTURAL FORCES IN RECENT YEARS, AND I THINK THOSE CENTRAL FORCES ARE DRIVING BE EMPLOYMENT RATE. THAT'S WHY IT'S BEEN VERY IMPORTANT TO LOOK AT THE LABOR MARKET AND ITS ENTIRETY AND TO LOOK AT HIRING RATES AS WELL AS THE UNEMPLOYMENT RATE. WHEN WE LOOK AT THE UNEMPLOYMENT RATE NOW IT IS TRUE THAT IT'S LOWER BUT A LOT OF IT IS BEING DRIVEN BY LABOR SUPPLY AND DEMOGRAPHICS. AGING POPULATION, SLOWER MIGRANT FLOWS. IT IS NOT NECESSARILY A SIGN OF A TIGHT LABOR MARKET. YOU GO TO WAGES AND THEY ARE MODERATE. THEN YOU GO TO THE VACANCY RATE WHICH IS LOW GOING TO PRE-PANDEMIC LEVELS YOU LOOK AT HIRING RATES THEY ARE NOT VERY ELEVATED. WE DON'T HAVE A HOT LABOR MARKET RIGHT NOW. ROMAINE: I AM CURIOUS HOW PRODUCTIVITY GAINS ADDRESS THE INFLATION SITUATION. AND I ASSUME THOSE PRODUCTIVITY GAINS ARE COMING PARTLY FROM SOME OF THIS AI ADOPTION IF YOU WILL AND IMPLEMENTATION. BLERINA: WE NEED TO LOOK AT PRODUCTIVITY OVER A LONG TIME IN THE NEAR TERM WE WILL HAVE EASY PRODUCTIVITY GAINS. THE WAY WE MEASURE IT IS GDP PER WORKER. SO WHEN YOU'RE NOT HIRING A LOT IN THE OUTPUT OR GDP IS INCREASING BECAUSE YOU ARE INVESTING A LOT IN CAPEX THAT'S HIGH. THEN YOU HAVE A MECHANICAL AND DRIVEN ECONOMIC -- PRODUCTIVITY GROWTH. IN THE MEDIUM TO LONG-TERM RUN. THE INTERACTION OF THIS NEW TECHNOLOGY AI WITH LABOR I THINK THOSE DAYS ARE STILL AHEAD OF US. SO I AM QUITE OPTIMISTIC ABOUT THE OUTLOOK FOR U.S. PRODUCTIVITY. STRONGER PRODUCTIVITY GROWTH ALSO MEANS WE CAN LOOK FORWARD TO HIGH YOUR GDP GROWTH BOTH REAL AND NOMINAL WITHOUT IT NECESSARILY BEING INFLATIONARY. WHEN I AM LOOKING AT THE OUTFLOW FOR NEXT YEAR AND BEYOND, I AM QUITE POSITIVE WE WILL BE ABLE TO BRING INFLATION DOWN TO 2% EVEN WITHOUT INTEREST RATES BEING TOO RESTRICTIVE. BECAUSE OF THESE PRODUCTIVITY GAINS. >> SOME ARE SAYING AI ITSELF IS INFLATIONARY, MAY BE DISINFLATIONARY AT SOME POINT. BLERINA: I THINK THIS KIND OF DEBATE DOESN'T FULLY TAKE INTO ACCOUNT ALL THE EFFECTS THE AI IN THE ECONOMY. IN THE SHORT-TERM AI WILL BE INFLATIONARY IS LOOKING AT SPECIFIC CPI COMPONENTS LIKE SOFTWARE AND COMPUTERS AND IT IS TRUE THOSE ARE INCREASING BUT THEY ARE A SMALL PART OF THE BASKET. THIS DEBATE IS IGNORING COMPLETELY THE EFFECT OF AI ON THE LABOR MARKET. THE FACT WE HAVE THIS LABOR ENHANCING TECHNOLOGY. BUT WORKERS MAY BE DON'T FEEL SO CONFIDENT TO SWITCH JOBS RIGHT NOW OR TO ASK FOR HIGHER WAGE INCREASES I THINK THAT HAS AN EFFECT ON INFLATION ON THE OTHERS. NOW IT'S MUCH HARDER TO QUANTIFY IT. IF I HAD TO BET ON ONE OUTCOME I WOULD SAY THE DISINFLATIONARY EFFECT OF AI WOULD BE MUCH IN THE NEAR AND MEDIUM TERM. ROMAINE: WITH REGARDS TO STRUCTURAL ISSUES THERE'S BEEN A LOT OF FOCUS ON THE U.S. DEFICIT. ITS DEBT LOAD AND MORE IMPORTANTLY THE TREASURY. DOES THAT SORT OF WORK IN CONFLICT WITH MAYBE WHAT WE THINK KEVIN WARSH WANTS TO DO WITH REGARDS TO THE COMMUNICATION AND HIS DESIRE TO GET INFLATION BACK DOWN TO THE 2% TARGET. BLERINA: EVEN THE REACTION OF THE LONG END OF THE TREASURY CURVE OVER THE LAST TWO TO THREE MONTHS, OF THE THREE ARE VERY CLOSE AND WHAT WE NOTICE EVERY TIME KEVIN WARSH COMES OUT WITH A MESSAGE THAT IS TOUGH ON INFLATION THAT EMPHASIZES FED CREDIBILITY WE SEE THE LONG END YIELDS COMING DOWN. TERM PREMIUM SUPPRESSING. SO I THINK THOSE THREE THINGS ARE VERY CLOSELY TOGETHER AND TRYING TO ACHIEVE LOWER YIELDS BY CUTTING INTEREST RATES CAN IN FACT BE COUNTERPRODUCTIVE AS WE SEEN MANY TIMES WITH A LONG END MOVES HIGHER. ROMAINE: AS SOMEONE WITH FIXED INCOME AS PART OF THEIR UMBRELLA ARE YOU ANTICIPATING YOU SEE MORE VOLATILITY ON RATES IN THE SECONDARY MARKET GIVEN THE PRESUMED LESS GUIDANCE WE WILL HAVE ON KEVIN WARSH. BLERINA: I THINK THIS IS A PERIOD OF HUGE UNCERTAINTY. NO FORWARD GUIDANCE, THE DATA HAS BEEN MORE VOLATILE. WE ARE CROSSCURRENTS IN THE LABOR MARKET AND INFLATION. SO ALL OF THESE THINGS WILL NEED -- LEAD TO MORE VOLATILITY. THAT'S WHY IT'S EXCITING TO BE IN AN ACTIVELY MANAGED FUND. ROMAINE: THANK YOU FOR HAVING US HERE. CHIEF U.S. ECONOMIST HERE AT T. ROWE PRICE. WE WILL HAVE A CONVERSATION WITH THE CHAIRMAN AND CEO ROB SHARP'S. THIS IS BLOOMBERG. >> TODAY'S STOCK OF THE HOUR IS PG IN THE. THE CALIFORNIA UTILITIES ON BASE FOR THE WORST DAY SINCE MARCH 2020 AFTER LAWMAKERS DECIDED TO REVOKE LIABILITY PROTECTIONS. IT COULD OPEN UP THEM TO WILDFIRE CLAIMS. JOINING US, THE STOCK IS DOWN SOME DOUBLE DIGITS WHETHER WE LOOK AT IT FROM YEAR-TO-DATE BASIS, ONE MONTH. HOW MUCH OF THE WILDFIRE RISK IS PRICED INTO THE PG&E STOCK. >> A LOT OF THIS RISK IS NOT PRICED IN. ANALYSTS AND INVESTORS HAD LARGELY EXPECTED THE CALIFORNIA LEGISLATURE WAS GOING TO BACK LEGISLATION THAT WOULD HAVE SHIELDED THE UTILITY COMPANIES FROM SOME OF THIS LIABILITY AND THAT'S WHERE WE ARE SEEING SUCH PRESSURE ON SHARES TODAY. EVEN GAVIN NEWSOM HAD ENDORSED THIS PROTECTIONS BEING IN THE FINAL TEXT. SO THERE WAS A LOT OF CONCERN THAT THIS WOULD OPEN THEM UP TO A LOT MORE LIABILITY. OF ADDED RISK AS A RESULT OF THIS AND WE SAW AT LEAST THREE DIFFERENT ANALYST DOWNGRADE PG&E TODAY BECAUSE THEY WEREN'T EXPECTING THIS RESULT. >> SO COULD THIS PUSH PG&E TOWARD A CAPITAL QUENCHER EVEN TOWARD BANKRUPTCY? >> PG&E DID WARNED THERE IS POTENTIAL RISK OF A CAPITAL CRUNCH IF THEY DID NOT GET THIS TYPE OF LIABILITY PROTECTION. THE COMPANY IN 2019 DECLARED CHAPTER 11 BANKRUPTCY BECAUSE OF WILDFIRE LIABILITIES THAT THEY WERE FACING SO THIS IS A REAL THREAT FOR THESE COMPANIES. THAT GONE THROUGH THIS BEFORE AND INVESTORS ARE AFRAID THIS COULD HAPPEN AGAIN JUST ONE OF HER SEEING SO MANY OF THEM PULL OUT OF THE STOCK TODAY. >> THANK YOU FOR THAT UPDATE. COMING UP, WE ARE LOOKING HOW ETF'S COULD FIT INTO THE FABRIC OF A MULTIMILLION DOLLAR OPERATION WITH A PORTFOLIO MANAGER AND THE CEO ROB SHARPS STILL AHEAD. STOCKS AND BONDS STILL DOWN AS OIL PRICES CLIMB AGAIN. BECAUSE OF THE RESULTS OF A FLARE UP IN GEOPOLITICAL RISK, RAISING CONCERNS ABOUT INFLATIONARY PRESSURES THAT COULD MAKE THE FED POSSIBLY RAISE RATES. AND U.S. CRUDE IS ABOVE $90 A BARREL, 2% HIGHER. HIGHER ENERGY COSTS PUSHING TREASURY YIELDS TO THE HIGHEST LEVEL SINCE JANUARY 2025. ALL THAT AND MORE AHEAD. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: 10 MINUTES TO THE CLOSE IN 10 MINUTES UNTIL WE CLOSE THE BOOK ON THE STRANGE MONTH OF AUGUST. A PHENOMENAL EARNINGS SEASON TO BE SURE AND A PHENOMENA REBOUND FROM THE RICE LOSS WE SAW IN JULY. THE S&P SET TO CLOSE THIS MONTH UP ABOUT 3%, NASDAQ UP 4%. LEADERS AMONG THE MAJOR BENCHMARKS, BUT DESPITE A REBOUND BACK TO THOSE RECORD HIGHS, RELATIVE OUTPERFORMANCE IS MASKING A SHARP BREAK DOWN IN THIS YEAR'S LEADERSHIP. THE MOMENTUM TRADE IS A FACTOR, DEEP IN THE RED THIS MONTH. A MID-ROTATION INTO BETTER SIGNS OF VALUE. BLINK AND YOU MISS IT, BUT THE RUSSELL 2000 SMALL-CAP ONLY UP ABOUT 1% THIS MONTH, UP 20% TO THE FIRST EIGHT MONTHS OF THE YEAR. THAT OUTPACES THE NASDAQ 100 BY THREE PERCENTAGE POINTS. THE S&P 400 MID-CAPS UP ABOUT 14%. THE OUTPERFORMANCE STARTED IN JANUARY. WHETHER THE SMALL AND MID-CAP REVOLUTION CAN GO WIRE-TO-WIRE IN DECEMBER IS ABOUT TO BE PUT TO THE TEST. CAN ROTATIONS AROUND THE TIGHTENING? OUR NEXT GUEST, JODI LOVE IS LEAD PORTFOLIO MANAGER ON FOUR OF THE ACTIVE ETF'S THAT JUST CROSSED A THREE-YEAR BENCHMARK. GREAT TO SEE YOU. LET'S START WITH THEM ALL -- SMALL AND MID-CAPS UNDER YOUR UMBRELLA. NEVER HAVING A PRETTY GOOD YEAR, THE RUSSELL 2000 A RECORD A COUPLE OF WEEKS AGO. DOES THIS RALLY AND OUTPERFORMANCE WE'VE SEEN A SMALL CAP SPACE STILL HAVE LEGS? >> DESPITE WHAT WARSH SAID ON FRIDAY, OR MORE HAWKISH VIEW, WHICH HISTORICALLY HAS BEEN NEGATIVE FOR SMALL CAPS. PEOPLE HAVE ALWAYS, IF RATES ARE RISING, ALL SMALL CAPS WILL GO DOWN. IT GIVES US THE ADVANTAGE AS ACTIVE MANAGERS AT T. ROWE PRICE IS THERE'S A LOT OF DIFFERENTIATION AND A LOT OF DIFFERENT STOCKS. THE MSL FOLLOWS THE RUSSELL 500 BENCHMARK SO WE HAVE THOUSANDS OF NAMES WHERE WE CAN LOOK TO LEAN INTO FOREIGN INVESTMENT OPPORTUNITY. THE CRUCIAL SCREEN FOR THAT IS FINANCIAL SELF-SUFFICIENCY. A COMPANY THAT HAS STRONG BALANCE SHEETS, PRIME REVENUES AND PRICING POWER SHOULD STILL BE ABLE TO BE IN A FUNDAMENTALLY VERY DIFFERENT POSITION AND ONE THAT IS HIGHLY LEVERED THAT WOULD OBVIOUSLY BE MUCH MORE PROBLEMATIC IF RATES STARTED GOING UP AGAIN, AND A COMPANY WHO IS REALLY DEPENDENT POTENTIALLY ON REFINANCING AT HIGHER RATES OR EVEN A MULTIPLE DERATING. WHILE WE ARE OF COURSE ALWAYS WATCHING THE FED, WE ARE A BOTTOMS UP DRIVEN PORTFOLIO. AND DRIVEN BY THE NAMES THAT ARE GIVEN TO US AND SOURCED BY OUR RESEARCH PLATFORM, WE FEEL THERE ARE STILL A LOT OF LEGS TO THIS RALLY, EVEN IF RATES MAY START TO RISE WITH THE DECISION IN SEPTEMBER. ROMAINE: WE TALK ABOUT AN ACTIVELY MANAGED ETF I WOULD THINK THE SMALL AND MID-CAP SPACE PROVIDES MORE OPPORTUNITY TO SHOW THAT ALPHA RELATIVE TO IN THESE DAYS WHAT WE ARE SEEN IN THE LARGE-CAP SPACE. BUT YOU HAVE LARGE CAPS UNDER YOUR UMBRELLA, TOO. I'M CURIOUS ABOUT THE CONCENTRATION RISK WHEN YOU HAVE NVIDIA MAKING UP 60% OF YOUR GROWTH FUND, DOES THAT MAKE YOUR JOB HARDER OR EASIER BECAUSE YOU CAN RIDE THE MOMENTUM? >> I SAY IT ACTUALLY ALLOWS US TO LEAN IN AS ACTIVE MANAGERS TO FIND THE STOCKS THAT WE THINK WILL OUTPERFORM. SO THE TOP FIVE NAMES IN OUR LARGE-CAP GROWTH ETF WHICH IS TGRT ARE NOT THE TOP FIVE NAMES YOU FIND IN THE BENCHMARK. ONE IS A BIOTECH COMPANY THAT WE'VE OWNED FOR THE LAST SEVERAL YEARS. ANOTHER IS MASTERCARD, BECAUSE WE BELIEVE WE HAVE A UNIQUE THESIS IN ALL OF THOSE NAMES AND IN THE NAMES THAT WE HOLD AND THOSE STOCKS WILL OUTPERFORM SOME OF THE MAG SEVEN OR SOME OF THE NAMES THAT ARE HIGHLY CONCENTRATED AT THE TOP OF THE BENCHMARK. THAT'S REALLY HOW WE THINK ABOUT THAT DIFFERENTIATION BETWEEN PASSIVE AND ACTIVE. THERE'S DEFINITELY PLACES IN PORTFOLIOS FOR PASSIVE, BUT WE BELIEVE THAT WHEN THE CONCENTRATION GETS AS DEEP AS IT HAS BEEN OVER THE LAST FEW YEARS, PARTICULARLY IN THE LARGE-CAP SPACE, THAT'S WHERE WE REALLY HAVE THE OPPORTUNITY TO LEAN IN AND LET ACTIVE MANAGEMENT SHINE BECAUSE WE CAN GO JUST BEYOND THE BENCHMARK. WE LOOK AT VALUATIONS, EARNINGS AND FREE CASH FLOW AND THE DURABILITY OF THAT GROWTH COME IN TRYING TO FIND NAMES THAT OTHERS MAY MISS, SO THAT WE CAN GENERATE ALPHA ABOVE AND BEYOND WHAT THE -- JUST A PASSIVE INDEX MAYBE OFFERING THEIR CLIENTS. ROMAINE: HOW DID IT CHANGE YOUR ALLOCATION IN A MEANINGFUL WAY? >> THIS YEAR WAS THE LARGEST RUSSELL RECONSTITUTION IN HISTORY ACROSS A MORE -- MAJORITY OF OUR PORTFOLIOS. A LOT OF THE NAMES WE HAD HELD IN OUR LARGE-CAP VALUE STRATEGY WHEN INTO LARGE-CAP GROWTH, AND SEVERAL OF THE NAMES IN A LARGE CAP GROWTH STRATEGY WHEN INTO THE LARGE-CAP VALUE BENCHMARKS. SO A LOT OF SHIFTS BETWEEN THE R1 V AND R WHEN G. WE WERE VERY AWARE OF THAT. THE MEMORY TRADE REALLY HELPED THE VALUE, WHEN INTO THE LARGE-CAP GROWTH WHICH AT PETE VALUATIONS. THOUGH STOCKS HAVE HAD INCREDIBLE RUNS AND THAT HELPED PERFORMANCE AND LARGE-CAP VALUE. SO WE DID MAKE SOME DECISIONS AS THOSE NAMES SHIFTED INTO OUR LARGE-CAP GROWTH PORTFOLIO TO BE UNDERWEIGHT SOME OF THEM AND WAIT FOR BETTER INTRO POINTS AND BETTER OPPORTUNITIES WHERE WE COULD LEAN IN. ROMAINE: THAT RECONSTITUTION WAS MASSIVE AND I WONDER IF IT CREATED TO SOME DEGREE THIS PRICING OUT THERE. I KNOW THEY HAD TO DO IT, BUT STILL. >> WE BELIEVE IT DID, A LOT OF NAMES GOT REPRICED AND WE LOOK AT OUR PORTFOLIOS FOR SEVERAL MONTHS. A LOT OF DIFFERENT FIRMS COME OUT WITH RUSSELL PROJECTIONS AND WE SPENT A SIGNIFICANT AMOUNT OF TIME LEADING INTO THE RECONSTITUTION REMODELING OUR PORTFOLIOS. IF WE HAD DONE NOTHING, WE WOULD'VE BEEN EVEN MORE OVERWEIGHT MOMENTUM AND EVEN MORE OVERWEIGHT TECHNOLOGY, ESPECIALLY SEMIS BECAUSE OF THE WAY THE RECONSTITUTION WENT. SOFTWARE WENT UP A SIGNIFICANT AMOUNT, HEALTH CARE AND UP A SIGNIFICANT AMOUNT. SO WE DID MAKE SOME CHANGES, ALL DRIVEN BY STOCK SELECTION, LEADING INTO THE HIGHEST RATED NAMES ACROSS OUR PLATFORM THAT WERE RECOMMENDED AND DID MAKE SOME CHANGES BASED ON THAT, BECAUSE MOMENTUM HAD REACHED SUCH AN EXTREME THAT IT SEEMED UNLIKELY WAS GOING TO CONTINUE. SO DID CREATE THAT DISLOCATION OF OPPORTUNITIES WERE NOW WE JUST HAD A MONTH AS YOU MENTIONED WHERE MOMENTUM CRASHED, FOR LACK OF A BETTER WORD. SOFTWARE AND SOME OTHERS. ROMAINE: YOU ARE MANAGING GROWTH AND VALUE, SMALL CAPS, I WONDER WHETHER THESE TRADITIONAL STYLE BOXES IN THIS DAY AND AGE OR MAYBE A LITTLE BIT LESS USEFUL. >> WE TRY TO LEAN INTO UNDERSTANDING WHAT STOCKS ARE GOING TO WIN. TRIGGER POINT, HIGH, MEANINGFUL DISPERSANT AND VALUATIONS AND EARNINGS AND BUSINESS QUALITY, SO WE ALWAYS LEAD WITH STOCK SELECTION AND WE ARE ACTIVE MANAGERS. SO IF WE DON'T HAVE A FAVORABLE THESIS ON A CERTAIN SECURITY, BUT IT IS A BIG PART OF THE BENCHMARK, WE AS ACTIVE MANAGERS HAVE THAT FLEXIBILITY, ENTER YOUR POINT, IN ORDER TO LEAN IN OR SAY THIS DOESN'T FIT HERE. SOMETIMES YOU HAVE FALLEN ANGELS THAT AREN'T NECESSARILY IN THE RUSSELL 1000 VALUE INDEX. THEY STARTED IN GROWTH, BUT IT'S A VERY HIGH-QUALITY COMPANY, WE'VE DONE A LOT OF WORK ON IT AND MET WITH THE MANAGEMENT TEAM. WE CAN MAKE AS MANY OUT OF BENCHMARK THAT SETS WE WANT. SOURCE NOT ALL BASED ON JUST THE BENCHMARK WHICH IS WHAT PASSIVE FUNDS DO. ROMAINE: YOU JUST CROSS THE THREE YEAR MARK, THAT'S KIND OF THE MAGIC NUMBER FOR A LITTLE MORE OF THE TOP FORMS AND MODELS OUT THERE. ARE YOU ANTICIPATING ANY MEANINGFUL UPTICK IN CLOSE AS A RESULT OF IT? THE ETFTO YOUR PRICES BUT ONCE YOU CROSS THE MILESTONES, PEOPLE NOTICE. JODI: YEAH, WE ARE CURRENTLY AT APPROXIMATELY $34 BILLION IN ETF'S AT T. ROWE PRICE. WE HAVE 34 ETF'S IN MARKET. 20 ARE EQUITY, AND THE REMAINDER ARE FIXED INCOME. FOR US, THESE FOUR JUST CROSSED $7.5 BILLION IN AUM AND HAD THEIR THREE YEAR TRACK RECORD, SO THAT HAS BEEN A GREAT ACCOMPLISHMENT BECAUSE A LOT OF OUR CLIENTS, THEY DON'T WANT TO LOOK AT FUNDS THAT DON'T HAVE A LONG TRACK RECORD, THAT DON'T HAVE EXPERIENCE THROUGH DIFFERENT TYPES OF MARKETS. SO YES, WE BELIEVE THIS WILL OPEN MORE DOORS FOR MODELS AND BEING ABLE TO LEAN INTO MARKETING THE SUITE AS A WHOLE, ALL OF THE ETF'S ARE WELL OVER $1 BILLION. SMID BEING THE MOST ATTRACTIVE BECAUSE IT IS THE MOST UNIQUE. THAT HAS BEEN WHERE WE HAVE HAD THE MOST OPPORTUNITY TO DIFFERENTIATE OUR OUTFLOW. ROMAINE: ALL RIGHT, WE HAVE TO LEAVE IT THERE. GREAT TO HAVE YOU. THE CLOSING BELLS IN NEW YORK. JODI HERE AT T. ROWE PRICE. BACK TO YOU IN NEW YORK FOR THE CLOSING BELLS. ISABELLE: THANK YOU. LET'S GET A QUICK MARKETS CHECK. YOU ARE SEEING STOCKS LOWER AS OIL PRICES ARE RISING AGAIN. SEEING A FLAREUP IN GEOPOLITICAL RISKS SENDING THESE CROSS ASSET MOVES AND RAISING CONCERNS ABOUT INFLATIONARY PRESSURES THAT COULD MAKE THE FED RAISE RATES. I THINK WE ARE ON TRACK FOR THE S&P TO SEE THE BEST MONTHS IN TWO MONTHS AND ALSO FOR THE NASDAQ. YOU ARE SEEING TREASURY MOVES. THE 10 YEAR TOPPED 4.75% FOR THE FIRST TIME SINCE JANUARY 2025. OIL IS ABOVE $95 A BARREL. FOR SOME INDIVIDUAL MEMBERS, LET'S BRING IN EMILY GRAFFEO. TO GET US SOME OF THE ACTION UNDER THE HOOD. WHAT DO YOU HAVE? EMILY: I WANT TO START WITH TESLA, ONE OF THE BEST PERFORMERS OF THE S&P 500 TODAY. IT WAS ONE OF THE TWO MAG SEVEN MEMBERS UP ON THE DAY. NVIDIA WAS THE OTHER ONE. NOT A LOT OF FUNDAMENTAL NEWS ON THE DAY, BUT INVESTORS ARE PREPARING FOR TESLA'S INVITE ONLY CYBER CAB LAUNCH IN AUSTIN, TEXAS. THIS IS COMING ON THURSDAY. THIS IS AN AUTONOMOUS VEHICLES I HAVE BEEN MARKETING FOR QUITE SOME TIME NOW -- THEY HAVE BEEN MARKETING FOR QUITE SOME TIME NOW. IT WILL NOT HAVE A STEERING WHEEL OR PEDALS. ISABELLE: I DON'T KNOW IF I WANT THAT. EMILY: SOME PEOPLE LIKE IT. SHAREHOLDERS ARE EXCITED ABOUT IT. THE STOCK IS STILL DOWN 19% YEAR TO DATE. BUT IN THE LAST MONTHS, IT IS UP 18%. TODAY, AND HIT THE HIGHEST INTRADAY LEVEL SINCE JULY. SO LOOKING FORWARD TO THE THURSDAY EVENT AND WHAT COMES OUT OF THAT. ALSO, CROWDSTRIKE HOLDINGS. THIS WAS ANOTHER STOCK OUTPERFORMING THE BROADER INDEXES TODAY. THE SHARE IS UP 6% ON THE CLOSE, CLOSING AT A RECORD. IT IS A CYBER FIRM TODAY ANNOUNCING IT IS PARTNERING WITH THE AIRPORT SECURITY LINE, CLEAR. THEY ARE FORMING A STRATEGIC PARTNERSHIP. THE CLEAR ONE IDENTITY PLATFORM WILL BE INTEGRATING WITH CROWDSTRIKE'S FALCON RISK DETECTION. EARNINGS LAST WEEK, THEY BLEW IT OUT OF THE WATER. THE STOCK HAS BEEN ON A TEAR EVER SINCE. ISABELLE: HIGHEST IN OVER TWO YEARS I THINK. EMILY: YEAH, ALL ON THE IDEA THERE IS MORE ARTIFICIAL INTELLIGENCE, MORE ENTERPRISE DEMAND FOR CYBERSECURITY AND PROTECTION. FINALLY, SHIFTING FROM CYBER AND AI TO AGRICULTURE AND FARMING MACHINERY. DEERE WAS ANOTHER ONE OF THE BEST PERFORMERS IN THE S&P 500 TODAY. THEY GOT AN UPGRADE AT BAIRD. THE ANALYST BULLISH ON THE STOCK SAYING CORN AND SOY FUTURES ARE REACHING LEVELS THAT WILL LEAD TO HIGHER AGRICULTURAL MACHINE DEMANDS. THAT STOCK UP ABOUT 4% TO FINISH THE DAY. ISABELLE: WE ALWAYS NEED MORE CORN AND SOY FUTURES. ONTO THE DECLINERS. WHAT DO YOU HAVE? >> STAYING IN THE COMMODITIES, LOOKING AT PG&E. WE HAVE LEGISLATION MOVING FROM CALIFORNIA THAT IS ALL ABOUT WILDFIRE RESPONSE. WHAT WAS EXPECTED IS SOME MEASURES TO SHIELD UTILITY COMPANIES FROM LIABILITY WOULD BE INCLUDED IN THE LEGISLATION. THIS IS SOMETHING WE DID NOT SEE, AND WE ARE SEEING MASSIVE MOVES IN THE STOCK. PG&E FELL AS MUCH AS 21%, THE BIGGEST MOVE SINCE 2020. SIMILAR MEANS FOR EDISON. THE BIGGEST DROP SINCE 2001. REALLY MASSIVE MOVES. IT IS A VERY INTERESTING CASE AND THERE ARE A LOT OF PEOPLE INVOLVED FROM FIRE SURVIVORS TO INSURERS. PEOPLE ARE FIGURING OUT WHO CARRIES THE COST OF THIS. VERY BAD NEWS FOR UTILITY COMPANIES WHO HAD A PRETTY BIG JUMP GOING INTO IT. OBVIOUSLY, ENERGY PRICES. BUT NONETHELESS, WE ARE SEEING VERY DIFFERENT RESULTS TODAY. FROM PINTEREST, VERY DIFFERENT STORY. YOU KNOW HOW PEOPLE ARE LIKE, WE USE SOCIAL MEDIA AND PINTEREST IS LIKE YOUR FRIEND AND YOU DO MOOD BOARDS AND IT IS ASPIRATIONAL. IT IS HAVING NOT SUCH A GREAT TIME AS I STOCK. STOCK IS DOWN 7% TODAY. A BIG MOVE. JULIE BROWN DONNELLY WILL STEP DOWN A FEW WEEKS AFTER THE COMPANY GAVE A REVENUE OUTLOOK FOR THE CURRENT QUARTER THAT DISAPPOINTED INVESTORS. THE STOCK IS DOWN 17% YEAR TO DATE. WE ARE SEEING SOME GOOD RESULTS, SOME REVENUE GROWTH. WE ARE SEEING THAT TREND THAT THIS IS AN ALTERNATIVE AFTER SOCIAL MEDIA. BUT NONETHELESS, THE STOCK IS DOWN. TODAY'S NEWS IS NOT GREAT. WE ARE SEEING ANOTHER STOCK FALLING 11%, HERBALIFE. THE CEO STEPPING DOWN NOT LONG AFTER THE CFO STEPPED DOWN. A LOT OF PRESSURE FOR THE COMPANY. IT HAS BEEN INTERESTING IN THE YEAR OF OZEMPIC AND WEIGHT LOSS DRUGS. A LOT OF THE HERBALIFE PRODUCTS HAVE BEEN DOING WELL. THEY HAVE ACTUALLY BEEN PROFITABLE. ISABELLE: PEOPLE TAKE THEM. DENITSA: IT IS A PROTEIN THING, NOT NECESSARILY ABOUT LOSING WEIGHT BUT KEEPING CONSISTENCY, GETTING PROTEIN. IT IS HELPING, BUT NOT TODAY. TODAY, THE STOCK IS DOWN. ISABELLE: THANK YOU FOR THOSE MOVERS. ALWAYS A PLEASURE TO HAVE THEM BOTH ON THE SET. COMING UP, MORE FROM THE TOP LINES AT T. ROWE PRICE, INCLUDING THE FIRM'S HEAD OF GLOBAL DISTRIBUTION ROB SHARPS, AND DEE SAWYER. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ >> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS "THE CLOSE." ROMAINE: WELCOME BACK TO "THE CLOSE." ROMAINE BOSTICK HERE WITH A SPECIAL EDITION LIVE FROM T. ROWE PRICE HEADQUARTERS IN BALTIMORE AS WE CLOSE OUT THE TRADING DAY AND THE MONTH OF AUGUST. WE SHOULD REMEMBER THE S&P 500 STARTED OFF THE MONTH OF AUGUST WITH ITS STRONGEST TWO DAY RALLY IN A MONTH, AND IT CLOSES ON AUGUST WITH WHAT WILL BE A MODEST TWO DATA KLEIN, DOWN 0.2%. STILL WE ARE UP FOR THE MONTH ON ALL OF THE MAJOR INDICES. ROUGHLY 4% ON THE NASDAQ COMPOSITE. IT GIVES US AN IDEA OF WHAT COMES NEXT. TAKE A LOOK AT THE RUSSELL 1000 INDEX ON THE MONTHLY BASIS. THE GAINS ADDED AT 2.7%. A BIG REBOUND IN A LOT OF THE SOFTWARE STOCKS, THE SOFTWARE ETF UP 16% TO CLOSE OUT THE MONTH. LOOK AT THE DIFFERENTIAL BETWEEN THE PHILADELPHIA SEMICONDUCTOR INDEX ONLY ADDING 2%. THAT IS A BIG FLIP-FLOP FOR THE WORLD BEATING PHILADELPHIA SEMICONDUCTOR INDEX FOR THE FIRST FEW MONTHS OF THE YEAR. FLIP IT UP ONCE MORE AND TAKE A LOOK AT THE INDIVIDUAL GAINERS IN THE MOST RECENT MONTHS AND THE BIGGEST DECLINERS WE SAW IN THAT MONTH BELIEVE IT OR NOT. TAKE A LOOK AT THE BOTTOM OF YOUR SCREEN. IT GIVES YOU A SENSE OF WHERE WE HAVE GONE AND WHAT MAY COME NEXT. A BIG SOFTNESS IN ALPHABET FOR THE MONTH. BUT SOME OF THE BIGGER GAINERS, SOME OF THOSE BEATEN-DOWN NAMES LIKE PALANTIR. A 92% GAIN FOR ATLASSIAN. THE STRUCTURAL PATTERN IS STILL UNCHANGED. THE BIG INFLOWS WE HAVE SEEN INTO MUTUAL FUNDS AND ETF'S STILL OUTPACING WHAT WE SAW THROUGH THE SIMILAR PERIOD BAKKEN 20 -- BACK IN 2025. AT T. ROWE PRICE, IN JULY THEY SAW $8.2 BILLION OF THAT WALK OUT THE DOOR. THE PERSON IN CHARGE OF REVERSING THIS IS DEE SAWYER, WHO OVERSEES EVERY CHANNEL FROM 401(K) PLANS TO WIRE HOUSES TO THE FIRM'S INTERNATIONAL BUSINESS, AND HER TOOLKIT HAS EVOLVED. AND AN ACQUISITION ANNOUNCED. THAT IS A LOT. YOU ARE OBVIOUSLY INTEGRAL RIGHT NOW TO THE EVOLUTION OF T. ROWE PRICE FROM ITS ROOTS. NOW A COMPANY THAT IS DIVERSIFIED. STILL ACTIVE BUT DIVERSIFIED. TALK ABOUT WHERE THE DIVERSIFICATION WILL TAKE YOU. DEE: WE ARE EXCITED THAT WE CONTINUE TO MEET CLIENTS WHERE THEY NEED US TO BE, AND WE CONTINUE TO OFFER REALLY STRONG VALUE PROPOSITION. THE VALUE PROPOSITION STARTS WITH INVESTMENT EXCELLENCE BUT GOES BEYOND THAT. WE BELIEVE CLIENTS ARE LOOKING FOR MORE CHOICE, LOOKING FOR MORE PERSONALIZATION, LOOKING FOR US TO BE MORE RELEVANT TO WHAT THEY ARE TRYING TO ACHIEVE. WE ARE EXCITED ABOUT WHERE WE HAVE SEEN POSITIVE FLOWS FOR THE ORGANIZATION. WE HAVE SEEN A REALLY STRONG CLOSE IN FIXED INCOME AND MULTI-ASSET SOLUTIONS, SO WHEN YOU THINK ABOUT WHERE WE ARE, WE HAVE THE OPPORTUNITY TO CONTINUE TO PROVIDE A BREADTH OF SOLUTIONS FOR OUR CLIENTS THAT COME IN MANY SHAPES AND SIZES. WE BELIEVE WE HAVE THE OPPORTUNITY TO CONTINUE TO PROVIDE ACTIVE MANAGEMENT BUT WITH A STRONGER VALUE PROPOSITION FOR THE FUTURE. ROMAINE: OBVIOUSLY, THERE IS A BRIDGE BETWEEN THE MORE LEGACY BUSINESS FOR LACK OF A BETTER PHRASE, BUT STILL HALF OF YOUR PRODUCTS NOW ARE OUTSIDE OF THE MUTUAL FUND WORLD. I THINK I EVEN SAW A STATISTIC YOU ARE HEADED FOR RECORD INFLOWS ON A GROSS BASIS BUT ON THE NET THERE IS STILL SOME CONCERN HERE. IS THERE A BRIDGE YOU LOOK TO OR DOES THAT NOT MATTER ANY LOOK OUT TO THE FUTURE AND THAT IS IN FOCUS? DEE: WE ARE A LONG-TERM FIRM FOCUSED ON THE SOLUTIONS AND INVESTMENT EXCELLENCE PROPOSITION THAT DELIVERS OUTCOMES FOR CLIENTS OVER THE LONG-TERM. WE BELIEVE ACTIVE MANAGEMENT STILL REALLY MATTERS. IT MATTERS IN TAXABLE ACCOUNTS, RETIREMENT ACCOUNTS, AND THAT MATTERS OVER THE LONG-TERM. ROMAINE: DO YOU THINK THAT MATTERS TO CLIENTS? DEE: ABSOLUTELY, 100%. WHY DOES SOMEBODY CHOOSE SOMEBODY LIKE T. ROWE? THEY CHOOSE US BECAUSE OF ACTIVE MANAGEMENT AND THE ABILITY FOR A FIRM LIKE T. ROWE PRICE TO UNIQUELY DRIVE BETTER OUTCOMES, SO THAT TO ME MAKES A DIFFERENCE. EVERYBODY IS LOOKING FOR ACTIVE SOLUTIONS THAT MAKE A DIFFERENCE OVER TIME, AND WE BELIEVE ACTIVE HAS A PLACE IN EVERYBODY'S PORTFOLIO. ROMAINE: I LISTED A LONG LIST OF THINGS IN THAT INTRO. WE TALKED ABOUT THE PUSH INTO ACTIVE ETF'S, THE ACQUISITION, THE PARTNERSHIP WITH GOLDMAN. WHICH ONE OF THOSE DO YOU LOOK TO AS BEING THE FIRST BIG DRIVER OF INCREMENTAL AND MORE IMPORTANTLY MEANINGFUL REVENUE GROWTH? DEE: I THINK THE FIRST WHERE I WOULD START IS YOU HAVE TO RECOGNIZE WE ARE A $1.8 TRILLION ASSET MANAGER. WE HAVE 16 OFFICES AROUND THE GLOBE. WE OPERATE IN 61 COUNTRIES. WE HAVE GLOBAL SCALE. YOU HAVE TO DELIVER THAT IN LOCAL SOLUTIONS. WE ARE REALLY EXCITED ABOUT WHERE WE ARE WITH ACTIVE ETF'S. WE HAVE OVER $30 BILLION IN ACTIVE ETF'S. WE HAVE A SUITE OF OVER 30 PRODUCTS, AND THAT IS JUST IN THE PAST SIX YEARS. THAT IS PHENOMENAL GROWTH. WE THINK THAT IS AN ENGINE OF GROWTH FOR US. THE FM ACQUISITION WE THINK IS ANOTHER ENGINE OF GROWTH FOR US. IT IS AROUND CASH MANAGEMENT, ADDING TO OUR FIXED INCOME CAPABILITIES THAT ARE ALREADY REALLY STRONG. THAT IS A CAPABILITY EXTENSION. THE GOLDMAN PARTNERSHIP IS ANOTHER EXAMPLE OF A CAPABILITY EXTENSION IN ORDER TO SOLVE CLIENT NEEDS. ROMAINE: I AM CURIOUS ON THE FM ACQUISITION. WE WILL HAVE YOUR CEO ON IN A MINUTE TO TALK MORE ABOUT THAT, BUT WHY BUY INTO THAT SPACE INSTEAD OF BUILDING IT OUT INTERNALLY? DEE: I THINK THAT RECOGNITION IS THEY HAVE A PROVEN TRACK RECORD, A REALLY GOOD LEADERSHIP TEAM, AND WE FOUND THEIR CULTURE WAS ALIGNED WITH THE CULTURE OF T. ROWE PRICE. SO IN THIS INSTANCE, WE FELT LIKE THE SUM OF THE PARTS WAS GREATER THAT WE COULD OFFER TO A CLIENT. THEY ARE DOING THINGS WE ARE EXCITED ABOUT THAT WE HAVE NOT NECESSARILY DONE, AND THAT GIVES US AN EARLY ENTRY INTO LIQUIDITY AND CASH MANAGEMENT AND EXTENDING FIXED INCOME. ROMAINE: WAS IT ABOUT DISTRIBUTION? DEE: THEY HAVE A DISTRIBUTION TEAM AS WELL AND SOMEBODY WE ARE EXCITED TO PARTNER WITH BUT PRIMARILY AROUND INVESTMENT CAPABILITIES. ROMAINE: GIVE ME A SENSE, WE TALK ABOUT THE HISTORY OF THIS COMPANY AND HOW MUCH INVESTMENT WORLD HAS CHANGED. A LOT OF PEOPLE GO FOR THE SIZZLE, AND I DON'T THINK PEOPLE THINK OF T. ROWE PRICE AS THE SIZZLE, BUT HAS THAT CULTURE BECOME MORE RELEVANT GIVEN SOME OF THE SHIPS THAT WE'VE SEEN NOT ONLY IN THE MARKET WERE OVERALL IN OUR ECONOMY AND A LOT OF THE UNCERTAINTY OUT THERE? HAS THAT BECOME AN ADVANTAGE FOR YOU GUYS? DEE: WE'VE HAD THE OPPORTUNITY TO WORK WITH CLIENTS OVER THE PAST 90 YEARS AND WE HAVE THE BREATH OF WORKING WITH, AS YOU HIGHLIGHTED IN THE INTRODUCTION, WORKING WITH INDIVIDUAL INVESTORS TO RETIREMENT PLAN PARTICIPANTS TO INSTITUTIONS. IN THOSE INSIGHTS THAT CUT ACROSS ALLOW US TO BE SMARTER IN TERMS OF WHAT TYPES OF SOLUTIONS WE CAN OFFER TO CLIENTS, IT ALLOWS US TO BE MORE RELEVANT. WE ARE NOT LOOKING FOR THE SIZZLE. WE ARE LOOKING FOR SOLUTIONS THAT DRIVE LONG-TERM OUTCOMES FOR OUR CLIENTS. ROMAINE: I HAVE TO ASK ABOUT THE GOLDMAN PARTNERSHIP. I DON'T THINK ANYONE DOUBTS THAT A LOT OF CLIENTS ARE LOOKING FOR ETF'S AND SMA'S AND THE OTHER PRODUCTS YOU MENTION. ARE THOSE CLIENTS ASKING TO BE INVESTED IN PRIVATE ASSETS RIGHT NOW? DEE: ABSOLUTELY, AND IN A LOT OF VARIETIES. WE'VE SEEN IT THERE INTERVAL FUNDS, THROUGH SEPARATE MANAGED ACCOUNTS, THROUGH RETIREMENT. WE HAVE A LOT OF INTEREST AROUND HOW WE CONTINUE TO DELIVER OUTCOMES IN THE INVESTMENT PROPOSITION FOR PRIVATE AND RETIREMENT IS THERE. SO YOU WOULD SAY SOME CLIENTS ARE VERY INTERESTED IN DOING THAT OTHER CLIENTS ARE MORE IN A WAIT-AND-SEE ENVIRONMENT AND THAT IS COMPLETELY OK TOO. ROMAINE: I NOTICED YOU GUYS REORGANIZE A LOT OF OR U.S. INSTITUTIONAL COVERAGE AROUND INTEGRATING REGIONAL TEAMS. WHY? DEE: THE IDEA BEHIND THAT IS HOW DO WE CONTINUE TO MEET CLIENTS WHERE THEY ARE AND BRING THE BEST OF T. ROWE PRICE TO OUR CLIENTS. SOMETIMES THAT MEANS WE NEED TO RESTRUCTURE OUR ORGANIZATION AND RESET TEAMS IN ORDER TO DELIVER ON THEM. ROMAINE: IS THAT THE SIGNAL THAT SOME OF THE CONSULTANTS AND HOME-OFFICE PLATFORMS NEED TO HAVE MORE WEIGHT IN THE MARKET THAN WHAT THEY HAD IN THE PAST? DEE: IT'S A RECOGNITION THAT THERE'S LOTS OF DIFFERENT BUYER TIMES, A RECOGNITION THAT CONSULTANTS PLAY APART PART AND HOW DO WE MAKE SURE WE ARE PROVIDING INSIGHTS TIMELY, RELEVANT TO CONSULTANTS AS WELL AS TO THE IN CLIENT I'M WHETHER IT'S AN INSTITUTION OR AN INVESTOR. ROMAINE: I HAVE TO ASK ABOUT THE USE OF ARTIFICIAL INTELLIGENCE INTERNALLY. THERE HAS BEEN A LOT OF TALK THAT WERE GOING TO REPLACE THE ANALYST, THE FUND MANAGER, EVERYONE ELSE. HOW ARE YOU EMPLOYING THAT INTERNALLY HERE AT T. ROWE PRICE, AND WHAT IS THE GOAL? DEE: OUR GOAL IS NOT ABOUT A REPLACEMENT OF A PORTFOLIO MANAGER OR ANALYST. OUR GOAL IS REALLY ROUND HOW DO WE USE AI TO AMPLIFY AND AUGMENT THE HUMAN? WE BELIEVE IN HUMAN EXPERTISE. YOU CAN'T REPLACE HUMAN EXPERTISE, JUDGMENT, AND CLIENT RELATIONSHIPS WITH AI. AI HELPS US GET FASTER AND PROVIDE MORE RELEVANT INSIGHTS. IT HELPS ANALYZE INFORMATION THAT THEY WERE NEVER ABLE TO DO IN SECONDS, VERSUS DAYS. SO THERE'S SOMETHING REALLY POWERFUL ABOUT THAT. WE HAVE TO USE IT SPONSORED LEAVE BUT IT'S ALSO REALLY EXCITING FROM A CLIENT PROPOSITION AND THAT'S HOW WE LOOK AT IT, WHAT CAN WE DO THAT HELPS US DRIVE BETTER OUTCOMES FOR OUR CLIENTS? ROMAINE: ARE THEY UTILIZING THESE TOOLS, ARE YOU SHARING THEM WITH THEM IN SOME WAY? WHAT DO YOU MEAN BY THAT? DEE: PART OF IT IS AROUND OUR CLIENTS WILL SEE IT IN TERMS OF FASTER INSIGHTS, IN TERMS OF CONTENT THAT'S MORE RELEVANT TO THEM. SOMETHING THAT IS REALLY COOL IS SOME OF OUR CLIENTS ARE ACTUALLY SEEING HOW WE ARE ACTUALLY DEPLOYING AI AND WORKING FOR USE CASES, HOW WE ARE DEPLOYING AGENTS IN CERTAIN AREAS BECAUSE THEY WANT TO LEARN AND UNDERSTAND WHAT IS A FIRM LIKE T. ROWE PRICE DOING IN ORDER TO APPLY THEM IN THEIR OWN ORGANIZATIONS. SO WE HAVE SET UP LABS AROUND THE GLOBE ARE CLIENTS COME IN AND SEE HOW IT ACTUALLY WORKS INSIDE T. ROWE PRICE. IT'S REALLY COOL. ROMAINE: I HAVE TO ASK ABOUT WHERE WE SIT RIGHT NOW. WE ARE IN BALTIMORE, MARYLAND. IT HAS A LONG LEGACY WITH REGARD TO FINANCIAL COMPANIES. I WONDER WHAT DOES THAT SIGNAL TO CLIENTS THAT MAYBE YOU AREN'T NECESSARILY ON WALL STREET OR MIDTOWN MANHATTAN. DEE: I THINK IT'S BECAUSE OF WHO WE ARE AS AN ORGANIZATION, IT SPEAKS TO OUR CULTURE AND OUR COMMITMENT TO THE CITY. AND I BELIEVE THAT AN ORGANIZATION LIKE T. ROWE PRICE IS ABLE TO THRIVE BECAUSE OF WHERE WE ARE LOCATED. BECAUSE OF THE FACT THAT WE BELIEVE WE WANT A GREAT CULTURE, WE WANT TO NEST IN THE COMMUNITIES WHERE WE LIVE AND WORK. WANT TO MAKE SURE THAT WE CONTINUE TO THRIVE AS AN ORGANIZATION AND WE CONTINUE TO ATTRACT GREAT TALENT. SO BALTIMORE, WHILE IT MAY HAVE SOME DIFFERENCES TO NEW YORK, IT'S REALLY A CITY THAT WE BELIEVE WILL CONTINUE TO OFFER TALENT TO GROW THEIR CAREERS AND ALLOW US TO CONTINUE TO CONTRIBUTE TO THE COMMUNITY AROUND THE BALTIMORE AREA. ROMAINE: WE APPRECIATE YOU HAVING US HERE. COMING UP, A CONVERSATION WITH THE CEO AND CHAIRMAN ROB SHARPS. WE LAST HIM WHAT HE SEES HEAD FOR THE FIRM, THE INDUSTRY, AND THE GLOBAL ECONOMY. THAT'S COMING UP RIGHT HERE ON BLOOMBERG ON "THE CLOSE." ♪ >> APPLE SHARES ENDING THE DAY LESS THAN A PERCENT LOWER AS CEO TIM COOK WRAPS UP HIS TENURE OF 15 YEARS, PASSING THE BATON TOMORROW. SHARES SKYROCKETED DURING HIS TIME AT THE HELM. WHAT'S NEXT, WE HAVE THE APPLE CHIEF CORRESPONDENT JOINING US. WHEN TIM COOK TOOK OVER APPLE, THE COMPANY HAD A MARKET CAP OF LESS THAN 350 BILLION DOLLARS. TODAY THE MARKET CAP IS $4.7 TRILLION. TALK IS ABOUT WHAT NEEDS TO CHANGE AT APPLE AND MAYBE HOW DIFFERENT IT WILL BE FROM TIM COOK SERA. >> I DON'T THINK THERE'S ANYTHING THAT NEEDS TO CHANGE IMMEDIATELY. HE'S BEING HANDED THIS ENORMOUS AMOUNT OF NEW PRODUCT, SMART HOME DEVICES, MAJOR NEW IPHONES, NEW AIRPODS, NEW AI PRODUCTS. IN TERMS OF THE CORE BUSINESS, EVERYTHING IS DOING AMAZING. THIS IS THE ULTIMATE HANDOFF FROM COOK, WHEN YOU THINK ABOUT IT. HE'S NOT COMING INTO FIX A COMPANY OR SAVE THE COMPANY. HE NEEDS TO COME IN AND BASICALLY NOT MESS IT UP. THAT'S THE BIG THING HE NEEDS TO FOCUS ON IS HOW TO MAINTAIN THE CONTINUITY WITHOUT GETTING SO CAUGHT UP IN THE CONTINUITY AND DESIRING TO DO NEW THINGS ON TOP OF WHAT TIM COOK HAS CREATED. >> YOU DETAILED ALL THE MILESTONES AND CHALLENGES AHEAD. AT A TIME WHEN AI IS CLEARLY AT THE TOP OF THE AGENDA AND APPLE CATCHING UP WITH ITS ARRIVALS. -- AFTER ITS RIVALS. >> DOES NOT GOING TO BE ANYTHING NEW AI TOMORROW, HE TAKES THE HELM TOMORROW. BUT WE WILL SEE A SIRI AI WHICH WAS INTRODUCED IN JUNE. I THINK WE WILL SEE THE THEME PUSHING SIRI AI THROUGH ALL THESE PRODUCTS, NEW IPHONES, NEW IPADS, NEW MACS AND BEING AN ICLOUD TYPE OF SERVICE. I'M PRETTY EXCITED FOR THAT AND THE CUSTOMER. SIRI AI IS NOWHERE NEAR AS GOOD AS CHATGPT OR CLAUDE, BUT IT WORKS. IT DOES THE THINGS THAT 95% OF THE UNIVERSE NEEDS TO DO IN TERMS OF AI. >> COOK WILL STILL HANDLE A LOT OF GOVERNMENT RELATIONS INCLUDING CHINA. HOW MUCH POWER DOES THE NEW CEO GET FROM DAY ONE? >> HE GETS ALL THE POWER. IF HE WANTS TO BE THE ONE TO MEET WITH DONALD TRUMP OR CHINA, HE WILL BE THE ONE TO MAKE THOSE MEETINGS. HE HAS ENOUGH ON HIS PLATE SO IT MAKES 10 -- MAKE SENSE FOR TIM COOK FOR THE FORESEEABLE FUTURE TO BE THE ONE CONTINUING TO HANDLE IT. >> THANK YOU SO MUCH, MARK, OUR GO TO FOR ANYTHING APPLE. LET'S TAKE A QUICK CHECK ON THE MARKETS, WE ENDED THE DAY IN THE RED, BUT FOR THE MONTH, THE S&P IS UP FOR ITS BEST SINCE AUGUST 2021. THE NASDAQ ALSO IS ON PACE, OR HAS TWO STRAIGHT MONTHS OF LOSSES. YOU'RE SEEING OIL HIGHER, $90 A BARREL, AND I WANT TO BRING YIELDS INTO THE PICTURE BECAUSE WE ARE SEEING A LOT OF FASCINATING MOVES THERE AND THE 10-YEAR YIELD TOPPED THE HIGHEST SINCE JANUARY 22 ANY FIVE. RISING ALL PRICES BOLSTERED EQUITATION'S A FEDERAL INCREASE RATES. REMAINED AUSTIN -- ROMAINE BOSTICK SITS DOWN FOR A WIDE-RANGING CONVERSATION ABOUT THE BROADER INDUSTRY. THIS IS BLOOMBERG. ♪ ROMAINE: WE SPENT THE PAST HOUR AND A HALF INSIDE T. ROWE PRICE. SEBASTIAN PAGE ON HOW THE FIRM IS ALLOCATING INTO THE FED THAT MAY ACTUALLY HIKE. WE SPOKE UNWIND THE HIKE IS NOW A COIN FLIP. JODI JOIN US ON THE ACTIVE ETFS THAT JUST EARNED THEIR THREE TRACK RECORDS. DEE SAWYER GETTING MORE ON HOW THE MONEY WILL START FLOWING BACK THROUGH THE DOOR. THE PERSON THAT ALL OF THIS ROSE UP TO IS ROB SHARP'S. HE HAS BEEN WITH THE COMPANY FOR THREE DECADES, ALMOST HIS ENTIRE CAREER, AND A THIRD OF THE SPAN OF THE LIFE OF T. ROWE ITSELF. RISING TO BECOME THE CEO OF ONE OF THE PILLARS OF THE AMERICAN RETIREMENT SYSTEM. IF YOU HAVE A 401(K) IN THIS COUNTRY, THERE IS A DECENT CHANCE ONE OF HIS DEPUTIES HAS A HAND IN MANAGING SOME OF THAT MONEY. GREAT TO HAVE YOU HERE. ROB: GREAT TO BE HERE. ROMAINE: I WANT TO START OFF WITH THE RESPONSIBILITY THAT COMES WITH MANAGING THE MONEY. YOU HIT $1.9 TRILLION, A BIG MILESTONE, MONTHS AGO. TALK ABOUT WHAT THAT MEANT WITHIN THESE WALLS. ROB: YEAH. IT IS A SIGNIFICANT RESPONSIBILITY THAT WE ARE DEEPLY FOCUSED ON. I WOULD ALSO POINT OUT THAT TWO THIRDS OF THE $1.9 TRILLION IS RETIREMENT RELATED IN SOME WAY. I FEEL RETIREMENT IS A FIRST-ORDER OBJECTIVE CERTAINLY FOR MOST INDIVIDUALS AND MANY INSTITUTIONS AROUND THE GLOBE. I REALLY THINK WE ARE INCREDIBLY WELL POSITIONED TO DELIVER GREAT OUTCOMES FOR RETIREMENT SAVERS AND RETIREES. ROMAINE: WHEN YOU THINK ABOUT WHAT YOUR JOB IS AND MORE IMPORTANTLY WHAT YOUR JOB IS FOR YOUR CLIENTS, HOW MUCH DOES THAT MESH WITH THE ORIGINAL IDEA AND IS THOSE THAT THOMAS ROY PRICE JUNIOR HAD WHEN HE FOUNDED THIS COMPANY YEARS AGO? ROB: THE FOUNDER'S VISION WAS IF YOU TAKE CARE OF YOUR CLIENTS, THEY WILL TAKE CARE OF YOU, AND I THINK THAT IS VERY CENTRAL TO OUR CULTURE AND TO OUR VALUE PROPOSITION. I THINK WE ARE A VERY CLIENT CENTRIC ORGANIZATION AND FOCUSED ON DELIVERING GREAT INVESTMENT OUTCOMES FOR THOSE CLIENTS, BUT I THINK THE FOUNDATION OF ALL OF IT IS OUR INTEGRATED GLOBAL INVESTMENT PLATFORM. THE DEEP EXPERTISE ASSET, ACROSS MARKETS THAT ULTIMATELY ALLOWS US TO DELIVER AGAIN THOSE REALLY COMPELLING INVESTMENT OUTCOMES FOR OUR CLIENTS. THE STRONGER THAT ENGINE IS, THE STRONGER WE ARE AS AN ORGANIZATION. ROMAINE: I AM ALWAYS SURPRISED THAT YOUR CAREER. YOU HAVE BEEN HERE FOR 29, 30 YEARS, STARTED AS AN ANALYST, WORK YOUR WAY UP, BUT WHEN YOU CONTACT ON THE SHOULDER WHEN YOU WERE GOING TO BE ELEVATED TO PRESIDENT, CEO, ULTIMATELY CHAIRMAN, WERE YOU SURPRISED? ROB: IN SOME WAYS. I DID NOT HAVE THE CLASSIC BACKDROP OR EXPERIENCE SET TO BE THE CEO OF AN ENTERPRISE THE SCOPE OF T. ROWE PRICE IN THE SENSE THAT I HAD REALLY ONLY BEEN ON THE MANAGEMENT COMMITTEE AND LEADERSHIP TEAM AT THAT POINT FOR A LITTLE OVER FOUR YEARS, BUT IF YOU TAKE A STEP BACK, I STARTED MY CAREER AS A RESEARCH ANALYST FOLLOWING FINANCIAL SERVICES SO I HAD THE OPPORTUNITY TO COVER MANY OF OUR COUNTERPARTIES, CLIENTS, COMPETITORS AS A RESEARCH ANALYST. I SPENT THE BULK OF MY CAREER BUILDING A LARGE FRANCHISE SO HAD THE OPPORTUNITY TO REALLY MASTER THE CRAFT OF INVESTING BUT ALSO GET A SENSE FOR THE COMMERCIAL ASPECT, FINALS PRESENTATIONS, FEES, POSITIONING , AND PERFORMANCE UPDATES. GOT A SENSE FOR WHAT WAS REALLY IMPORTANT TO THE CLIENTS THAT WE SERVE IN TERMS OF CONSISTENCY OF PHILOSOPHY AND PROCESS. ULTIMATELY DELIVERING THOSE GREAT RETURNS. IT GAVE ME A SENSE FOR THE ESSENCE OF WHAT WE DO. I WAS READY FOR A NEW CHALLENGE AND HAD THE OPPORTUNITY TO RUN OUR GLOBAL EQUITY BUSINESS AND ULTIMATELY RUN ALL OF INVESTMENT AS OUR GROUP CHIEF INVESTMENT OFFICER SO I AM NOT SURE I WAS SURPRISED BUT CERTAINLY VERY FLATTERED BY THE OPPORTUNITY. ROMAINE: YOU HAVE TO BE BECAUSE YOU CAME IN AT A BIG CONFESSION INFECTION -- A BIG INFLECTION POINT FOR T. ROWE. GETTING BACK ON TRACK FOR ORGANIC REVENUE GROWTH, YOU HAVE AN AUM HITTING RECORD AND GROSS INFLOWS BUT THERE ARE CONCERNS ABOUT NET INFLOWS AND THE TRANSITION FROM THE MUTUAL FUND SIDE OF THE BUSINESS TO ALL OF THESE OTHER ELEMENTS, WHETHER IT IS ACTIVE ETF'S, ETC. ROB: I WENT TO RECORD GROSS INFLOWS AND RECORD AUM BUT WE HAVE FACED HEADWINDS THAT ARE CONSISTENT THROUGHOUT THE INDUSTRY IN TERMS OF OUTFLOWS FROM ACTIVE EQUITY WITHIN FUNDS IN THE U.S. AND THE EQUITY ASSET CLASS. PASSIVE HAS 64% MARKET SHARE AND IS PICKING UP 2% TO 3%. SOME OF THAT HAS TO DO WITH THE COMPUNCTION OF THE MARKET OVER A RELATIVELY LONG PERIOD OF TIME NOW WHERE THE LARGEST MARKET CAP COMPANIES HAVE DELIVERED THE BEST PERFORMANCE. SOME OF THAT ALSO HAS TO DO WITH THE OPEN ENDED FUND AS A VEHICLE WHERE WE HAVE BEEN VERY SUCCESSFUL IN THE PAST AND REMAIN DEEPLY COMMITTED BUT IT HAS BECOME LESS CENTRAL TO MANY OF OUR CLIENTS, SO IN RESPONSE, WE ARE REELING INTO ETF, SMA, ON THE RETIREMENT SIDE, TRUSTS, SO OTHER VEHICLES. WE ARE GROWING IN FIXED INCOME. WE HAVE HAD SEVERAL YEARS OF THE SIGNIFICANT GROWTH IN FIXED INCOME. OUR PERFORMANCE IN FIXED INCOME IS STRONG, AND WE HAVE A POWERFUL RETIREMENT FRANCHISE THAT HAS BEEN A GROWTH ENGINE FOR US. I THINK THAT POSITIONS US WELL GOING FORWARD. WE ARE ALSO PUSHING INTO ALTERNATIVE ACQUIRED OHA BEFORE I BECAME CEO AT THE END OF 2021. THEY ARE ALL ALTERNATIVE CREDIT PROVIDER. THEY DO STRESSED, DISTRESSED STRUCTURED CREDIT. WE HAVE DEVELOPED INTERNALLY A LATE STAGE VENTURE COMPANY WE ARE HAVING SUCCESS WITH, AND WE PARTNERSHIP FOR PUBLIC-PRIVATE OFFERINGS FOR THE WEALTH IN RETIREMENT MARKET NOT QUITE A YEAR AGO SO WE HAVE SIGNIFICANT OPPORTUNITY TO GROW AND OVERCOME EVENTUALLY THE HEADWIND FROM ACTIVE EQUITY. ROMAINE: TALK ABOUT THAT BRIDGE FROM THE ACQUISITION IN 2021. YOU ARE RESPONSIBLE FOR THE GOLDMAN PARTNERSHIP AND A LOT OF PEOPLE RELY, OK, THAT IS INTERESTING. YOU WILL HAVE AN INTERVAL FUND LUNCH OUT OF THAT. BUT WHY PARTNER RATHER THAN GO OUT TO FIND SOMEBODY TO BUY OR BUILD IT YOURSELF? ROB: WE ARE OPEN TO BUILDING THINGS ORGANICALLY LIKE WE HAVE DONE WITH LATE STAGE VENTURE CAPABILITY. WE ARE OPEN TO ACQUISITION LIKE WITH OHA. WE ARE OPEN TO PARTNERING. IN THE INSTANCE OF THE GOLDMAN SACHS PARTNERSHIP, WE THINK THEY ARE A COMPELLING PARTNER IN THE SENSE THAT MANY OF THEIR STRENGTHS ARE COMPLEMENTARY WITH HOURS AND THEY BROUGHT SOME CAPABILITIES THAT WE DID NOT HAVE IN CERTAIN PARTS OF PREGNANT WORK ON ALTERNATIVES THAT WOULD ALLOW US TO BRING THESE PRODUCTS TO MARKET RELATIVELY QUICKLY. I THINK THE INDUSTRY LANDSCAPE IS EVOLVING PRETTY RAPIDLY AND SPEED TO MARKET WAS PART OF THE DECISION WITH REGARD TO PARTNERING RELATIVE TO BUILDING INTERNALLY OR ORGANICALLY OR ACQUIRING, BOTH OF WHICH WOULD TAKE SIGNIFICANTLY MORE TIME. ROMAINE: GIVE ME A SENSE ONE WE TALK ABOUT -- THE INTERVAL FUND CAME OUT QUICKLY. WE START TO SEE PRIVATE ASSETS IN A T. ROWE TARGET DATE FUND SOMETIME SOON? ROB: WE ARE OPERATIONALLY READY TO LAUNCH A TRUST THAT INCORPORATES PRIVATE MARKET ASSETS AT CERTAIN POINTS ALONG THE GLIDE PATH. WE ARE SEEING SOME CLIENT INTERESTS. AT THE OUTSET, IT WILL BE A SUBSEGMENT OF THE MARKET. THEY WILL BE PART OF THE MARKET THAT IS ENTHUSIASTIC ABOUT INCORPORATING THE DIVERSIFICATION AND ELEVATED RETURNS THAT YOU SHOULD BE ABLE TO GET BY TRADING ALTERNATIVES, BUT THERE ARE CERTAIN PARTS OF THE MARKET THAT WILL WANT TO WATCH HOW THIS PLAYS OUT AND MAYBE THERE WILL BE A GREATER FOCUS ON FEES, WHERE THERE WILL BE A LITTLE MORE HESITANCY. I DO SEE ADOPTION OF PRIVATE WORK ALTERNATIVES INTO CONTRIBUTION PLANS. I THINK IT WILL BE A RELATIVELY SLOW CONTRIBUTION IN A SUBSEGMENT OF THE MARKET. ROMAINE: WHAT DO YOU THINK SPEEDS THAT UP? MOST OF THE OTHER ASSET CLASSES ARE TRANSPARENT AND SOME CONCERN WITH THE PRIVATE ASSETS AT THIS FROM A POTENTIAL CLIENT PERSPECTIVE IS YOU DO NOT NECESSARILY HAVE THAT TRANSPARENCY ALWAYS. IT IS ONE THING TO SEE THE GREEN BUT ULTIMATELY PEOPLE WANT TO KNOW HOW IT IS PERFORMING, SO HOW DO YOU CREATE PRODUCTS WHERE PEOPLE HAVE A CONFIDENT SENSE THAT I CAN GO AND CHECK MY MUTUAL FUND, ETF, WHATEVER ANY DAY OF THE WEEK AND HAVE A COMPLETELY ACCURATE SENSE OF WHAT IT IS DOING? ROB: DEFINE CONSERVATION PLANS SHOULD HAVE A LONG TIME HORIZON, AND I THINK THIS IS SOMETHING THAT WILL HAVE TO PLAY ITSELF OUT OVER AN EXTENDED PERIOD OF TIME. I DON'T THINK YOU WILL BE ABLE TO LOOK AFTER A YEAR OR PERHAPS EVEN THREE OR FIVE YEARS AND SAY THIS HAS BEEN A SUCCESS, BUT FOR MOST PEOPLE THAT ARE PARTICIPANTS AND ARE CONTRIBUTING TO THE PLAN, THEIR RETIREMENT DATE IS DECADES AWAY AND IN MANY INSTANCES, THEY WILL WANT TO CONTINUE TO OWN THAT ASSET WELL INTO RETIREMENT. IF YOU LOOK AT HISTORICAL RETURNS BUT EVEN IF YOU CAN GET A CONTRIBUTION TO ELEVATE YOUR COMPOUND RETURN BY HALF OF A PERCENT OR 8% BY INCORPORATING PRIVATE MARKET ASSETS ALONG THE GLIDE PATH, IT CREATES A MORE DIFFERENTIATED OUTCOME IN RETIREMENT FOR THAT PARTICULAR PARTICIPANT. I THINK THERE IS A SUBSET OF THE MARKET THAT WILL BE COMFORTABLE WITH THAT WERE QUICKLY, AND IT WILL BE HAVE -- AND IT WILL HAVE TO BE SOMETHING THAT PROVES ITSELF OUT. ROMAINE: IT IS AN INTERESTING DYNAMIC AND EVERYONE FEELS LIKE WE ARE GOING THERE ONE WAY OR ANOTHER. I AM CURIOUS ABOUT YOUR INTEREST AND YOUR CLIENTS'S INTEREST TO SOME OF THESE STRATEGIES, WHETHER YOU ARE LOOKING AT NEW PRODUCTS TO FEED INTO THAT AT ALL. ROB: WE ARE. THE FIRST THING I WOULD SAY IS THE ETF AS A RAPPER IS MORE TAX EFFICIENT THAN OPEN-ENDED MUTUAL FUNDS. SO, FIRST ORDER OF BUSINESS FOR US IS TO MAKE SURE WE HAVE A GREAT RANGE OF ETF'S AND ULTIMATELY WE USE THOSE ETF'S IN MODEL ACCOUNTS, ASSET ALLOCATION MODELS THAT DELIVER SOLUTIONS AND OUTCOMES ON BEHALF OF CLIENTS TRYING TO BUILD AFTER-TAX WEALTH. WE ALSO HAVE AN SMA BUSINESS WHERE A LOT OF THE EMPHASIS ON TAX LOSS HARVESTING AND OPERATION HAS MANIFESTED ITSELF. WE HAVE THAT CAPABILITY AS WELL AND HAVE ULTIMATELY BELIEVED THAT SCENARIO IS WHERE WE WILL HAVE THE OPPORTUNITY TO GROW. ROMAINE: ON THE REGULAR TOY SIDE, I AM SURE YOU KNOW THE IRS IS TAKING A CLOSER LOOK AT THESE THINGS. HAVE YOU BEEN IN CONTACT AND TO MAKE SURE YOU THINK WILL BE COPACETIC? ROB: THE APPROACH WE WOULD USE I FEEL VERY COMFORTABLE WITH. I THINK THERE ARE CERTAIN PRODUCTS IN THE MARKET LIKELY TO COME UNDER MORE SCRUTINY. WE CURRENTLY DO NOT HAVE ANY OFFERINGS IN THAT ARENA. AGAIN, THE PARTS WE WOULD USE WOULD BE RELATIVELY STRAIGHTFORWARD AND I DON'T REALLY HAVE ANY CONCERNS ALONG THOSE LINES. ROMAINE: THE INVESTMENT PURCHASE COP A LOT OF ATTENTION AND PROBABLY FOR GOOD REASON. I GUESS WHY F/M SPECIFICALLY AND FIXED-INCOME? ROB: SO, THE F/M ACQUISITION ALTHOUGH SMALL IS A REALLY IMPORTANT SIGNAL OF THE IMPORTANCE OF FIXED INCOME ETF'S AND SMA'S TO T. ROWE PRICE AND ITS STRATEGY. FIXED INCOME IS A STRATEGY THAT I THINK HAS THUS FAR PROVEN TO BE MORE RESISTANT TO PASSIVE. IT IS AN AREA DIVERSIFYING FOR US AS A FIRM. THAT GIVES US A LOT OF EQUITY BETA EXPOSURE IN OUR UNDERLYING FINANCIALS AS A COMPANY, SO THE MORE WE CAN BUILD OUR FIXED INCOME BUSINESS, THE MORE YOU HAVE LESS OF THAT VOLATILITY YOU WILL BE SUBJECTED TO, AND AS WE TALKED ABOUT, ETF AND SMA IS THE PREFERRED WAY TO ACCESS WHILE CAPABILITY MOVING FORWARD SO THAT IS SOMETHING THAT IS VERY IMPORTANT TO US. THE WEALTH BUSINESS IS A VERY BIG CHANNEL FOR US, ONE OF THE AREAS WE ARE FOCUSED ON STRATEGICALLY. IN TERMS OF WHY F/M, THEY HAVE A UNIQUE CAPABILITY WE DON'T IN THE LIQUIDITY AND CASH MANAGEMENT AREA, AND I THINK THEY HAVE SOME TALENT, THE TEAM THAT IS EXCITED TO JOIN T. ROWE, THAT IS INNOVATIVE. MY VIEW IS WE CAN TAKE THOSE CAPABILITIES THAT THEY HAVE, TAKE THEIR TALENT IN THEIR TEAM, EXTEND IT, GROW IT IN A MUCH MORE MEANINGFUL WAY THAT THEY WOULD HAVE BEEN ABLE TO DO ON THEIR OWN AND MUCH MORE QUICKLY THAN WE WOULD HAVE BEEN ABLE TO DO IF WE WERE TRYING TO BUILD THOSE CAPABILITIES. ROMAINE: CORRECT ME IF I AM WRONG BUT YOU ARE ALLOWING THEM TO STAY INDEPENDENT FOR LACK OF A BETTER TERM TO AN EXTENT. WHY? WAS THAT A DELIBERATE CHOICE? ROB: IT WAS A DECISION BASICALLY TO MAKE SURE THAT WE GOT OFF TO A STRONG START TO GATHER AND WE WERE REALLY FOCUSED ON EVALUATING THE BEST WAYS TO INTEGRATE, AND I DON'T THINK IT IS AN END STATE. ULTIMATELY, WE WILL LEARN EACH OTHER'S BUSINESSES AND APPROACHES IN A DEEPER WAY AND DETERMINE WHERE WE CAN ADD DISTRIBUTION MUSCLE, WHERE THEY CAN HELP US WITH OUR PRODUCT ROADMAP, ETC., SO MY SENSE IS WITH A LONGER LENS, THERE WILL BE MORE OPPORTUNITY FOR US TO WORK MORE CLOSELY TOGETHER. ROMAINE: ARE YOU PLANNING ANY OTHER M&A? ROB: WE ARE ALWAYS EVALUATING. THE DEFINITION OF SCALES BEING REDEFINED AND WE ARE ALWAYS EVALUATING M&A OPPORTUNITIES. WE HAVE A HIGH BAR BUT ARE INTERESTED IN THINGS THAT BRING US NEW CAPABILITY THAT CAN HELP US REACH NEW CLIENTS. PARTICULARLY TO THE EXTENT THEY ARE NOT DISRUPTIVE TO OUR EXISTING OBLIGATIONS TO ROMAINE: GIVING YOUR SIZE AND MIGHT, ARE PEOPLE KNOCKING ON YOUR DOOR WITH POTENTIAL OPPORTUNITIES TO BE BOUGHT? ROB: ANYTHING BROUGHT TO US. WE HAVE SCALE, WE HAVE A WONDERFUL BRAND. ROMAINE: HOW MANY THINGS DO YOU SAY NO TO? ROB: MOST ALL OF THEM. YOU CAN SEE HOW MANY THINGS WE HAVE SAID YES TO. OHA, RETIREE AND FM INVESTMENTS OVER A PERIOD OF FIVE YEARS. THAT WOULD BE A VERY FAIR, VERY SMALL MINORITY. ROMAINE: THAT ALSO GETS TO YOUR OWN INDEPENDENCE. I'M SURE THERE ARE PLENTY POINTS IN THE HISTORY OF THE COMPANY WHERE SOMEONE PROBABLY WAS READY TO WRITE A CHECK IF YOU GUYS WERE WILLING. I'M NOT SURE ANYONE COULD AFFORD IT NOW BUT IT GETS TO THE SENSE OF WHAT DOES THAT INDEPENDENCE MEAN TO YOU AS CEO AND CHAIRMAN, AS YOU TRY TO POSITION THIS COMPANY FOR THE NEXT 90 YEARS? ROB: IT IS NOT SOMETHING I THINK TREMENDOUSLY ABOUT IN TERMS OF INDEPENDENCE FOR THE SAKE OF INDEPENDENCE. I THINK WE ARE FOCUSED ON DELIVERING FOR OUR CLIENTS, CREATING OPPORTUNITY FOR OUR ASSOCIATES. ULTIMATELY, I BELIEVE THAT WILL DELIVER RETURN FOR SHAREHOLDERS. AS LONG AS THAT IS THE CASE, IT IS NOT SOMETHING WE SHOULD HAVE TO WORRY ABOUT. WE HAVE A VERY LONG TIME HORIZON. THE INDUSTRY IS CONSOLIDATING. WE ARE FINANCIALLY STRONG. WE CAN PARTICIPATE IN THAT CONSOLIDATION TO THE EXTENT WE THINK IT IS THE RIGHT THING TO DO FOR ALL OF THOSE STAKEHOLDERS. I'M CONFIDENT IN OUR PATH FORWARD. ROMAINE: WHY DON'T YOU THINK INVESTORS ARE GIVING YOU MORE CREDIT? WE HAVE SEEN THE UNDERPERFORMANCE OF THE STOCK AS OF LATE AND THERE ARE A LOT OF PEOPLE CONCERNED AS YOU SHIFT INTO THESE NEW PRODUCTS, SOME OF THEM ARE EFFECTIVELY LOWER PRODUCTS YOU WOULD HAVE GOTTEN ON YOUR TRADITIONAL MUTUAL FUNDS. THERE ARE SOME CONCERNS ABOUT THAT BRIDGE HAS TO IS THIS A COMPANY THAT DOES A LOT MORE BUSINESS IN TERMS OF ASSETS, BUT MAY BE LESS REVENUE ON A RELATIVE BASIS? IS THAT THE FUTURE? ROB: THERE'S NO QUESTION THAT INDUSTRYWIDE, THERE IS PRESSURE ON FEES FROM A LIKE FOR LIKE PERSPECTIVE. TO SOME EXTENT, WE GET OFFSET THAT IF WE ARE A IN ALTERNATIVES WHERE THERE ARE ALSO PRESSURE BUT THE MIX IS MUCH RICHER THAN WHAT OUR CURRENT MIX WOULD LOOK LIKE. I THINK INVESTORS ARE VERY FOCUSED ON THE NEAR-TERM OUTFLOWS AND NEAR-TERM PRESSURE. SOME INVESTORS WOULD LIKE US TO GO MORE QUICKLY IN TERMS OF LEANING INTO SOME OF THESE AREAS THAT ARE REALLY ON TRENT AND REALLY GROWING IN THE INDUSTRY. FOR US, IT IS IMPORTANT TO DO IT RIGHT. TO MAKE SURE THAT ULTIMATELY WE LAUNCH THE RIGHT STRATEGIES THAT HAVE DIFFERENTIATED VALUE PROPOSITION. THINGS THAT ARE REALLY COMPELLING. THINGS THAT WILL DELIVER THOSE GREAT OUTCOMES FOR RN CLIENTS THAN TO DO IT QUICKLY. WE HAVE A LONG TIME HORIZON. I AM CONFIDENT WE CAN GROW FIXED INCOME, GROWTH ALTERNATIVES, GROWTH IN RETIREMENT. WE CAN STABILIZE AN ACTIVE EQUITY AND GET ACTIVE GROWTH. IT MAY BE THAT PERIOD OF TIME IS NOT AS QUICK AS SOME INVESTORS MIGHT LIKE. ROMAINE: I HAVE TO ASK YOU ABOUT TECHNOLOGY AND SOME OF THE CHANGES THAT HAVE BEEN MADE WITH REGARDS TO USING AI INTERNALLY WITHIN THE COMPANY. YOU HAVE A NEW AI LEADERSHIP STRUCTURE. I'M CURIOUS HOW THAT IS BEING INTEGRATED AND WHAT THE END GOAL IS. ROB: WE ARE REALLY LEANING INTO AI. THE FIRST ORDER OBJECTIVE WILL BE TO LEVERAGE THOSE POWERFUL TOOLS TO ENHANCE OUR INVESTMENT INSIGHT GENERATION. ALL OF OUR INVESTMENT PROFESSIONALS HAVE ACCESS TO AI TOOLS. WE HAVE EXPERTS THAT ARE PARTNERING WITH OUR PORTFOLIO MANAGERS, RESEARCH ANALYSTS TO REALLY USE THOSE TO ENHANCE THEIR ABILITY TO SURFACE INSIGHTS FROM OUR PROPRIETARY RESEARCH. ROMAINE: THAT IS WHY I ASKED YOU BECAUSE I FIGURE SOMEONE WHO STARTED HIS CAREER AS AN ANALYST, THAT IS THE FEAR THAT THESE AI TOOLS WILL REPLACE THE ANALYSTS. ROB: NO, I THINK THEY ARE TOOLS THAT ANALYSTS WILL BE ABLE TO USE TWO DUES -- TO DO CERTAIN PORTIONS OF THE ROLE IN A MUCH MORE EFFICIENT WAY AND ALLOCATE MORE TIME TO VALUE ADDED INSIGHT GENERATION. INTERACTION WITH INDUSTRY EXPERTS, LEADERS OF THE COMPANIES THEY ARE FOLLOWING. PERHAPS EXPAND THEIR COVERAGE. I THINK THERE ARE TOOLS THAT WILL MAKE THE JOB MORE INTERESTING AND HOPEFULLY MORE IMPACTFUL. THERE CERTAINLY WILL BE AREAS WHERE YOU ARE DRIVING PRODUCTIVITY OR EFFICIENCY AND WE ARE DOING THAT IN A NUMBER OF PARTS OF BUSINESSES AS WELL. I THINK IF WE GET RIGHT LEVERAGING THOSE TOOLS TO ENHANCE WHAT ALREADY IS A DIFFERENTIATED RESEARCH PLATFORM, THAT WILL BE THE MOST POWERFUL FOR OUR CLIENTS AND SHAREHOLDERS. ROMAINE: SPEAKING OF TECHNOLOGY -- I SAW YOU GUYS LAUNCHED A CRYPTO ETF. WHAT WOULD THE FOUNDER THINK OF THAT? [LAUGHTER] ROB: TIMES CHANGE. YOU HAVE TO EVOLVE. WE LISTEN TO CLIENTS AND ULTIMATELY, I THINK WE TAKE FEEDBACK FROM CLIENTS THAT SAY IS THERE A WAY WE CAN MEET THIS NEED WITH A STRONG VALUE PROPOSITION? DURABLE INVESTMENT PROPOSITION AND A DIFFERENTIATED WAY RELATIVE TO OUR COMPETITION. WHAT WE LAUNCHED IS AN ACTIVELY MANAGED, MULTI-TOKEN EXCHANGE TRADED PRODUCT. I THINK IT IS UNIQUE IN THE INDUSTRY. I AM NOT AWARE OF ANOTHER ONE LIKE IT. FOR CLIENTS THAT DO WANT DIGITAL ASSETS AS PART OF THEIR OVERALL PORTFOLIO OR PART OF THEIR ASSET ALLOCATION, I THINK WHAT WE OFFER CAN BE REALLY OUTSTANDING RELATIVE TO WHAT'S AVAILABLE IN THE MARKETPLACE TODAY. ROMAINE: WE ARE SITTING HERE IN THIS BRAND-NEW BUILDING, RELATIVELY BRAND-NEW THAT YOU BUILT HERE. IT JUST OPENED LAST YEAR. I HAVE TO ASK YOU ABOUT T. ROWE PRICE'S ROOTS IN BALTIMORE, BUT ALSO THE FACT IT STAYED HERE. I WOULD ASSUME THE FACT YOU SPENT ALL THIS MONEY TO BUILD THIS BUILDING MEANS YOU ARE NOT GOING ANYWHERE SOON. YOU'VE GOT THOUSANDS OF EMPLOYEES BASED HERE IN THIS BUILDING AND OUT IN THE SUBURBS SOMEWHERE HERE. AT A TIME WHERE YOU SEEM A LOT MORE -- YOU ARE SEEING A LOT MORE DISPERSION OF FINANCIAL INDUSTRY JOBS AWAY FROM WALL STREET AND THE OTHER FINANCIAL CENTERS. WHY STAY? ROB: IT HAS BEEN OUR HOME SINCE T. ROWE PRICE WAS FOUNDED IN 1937. I THINK BALTIMORE IS A SPECIAL PLACE. IT HAS A NUMBER OF UNIQUE ADVANTAGES. WE ARE RIGHT ON THE CHESAPEAKE BAY. YOU HAVE THE INNER HARBOR RIGHT HERE. 40 MILES FROM THE NATION'S CAPITAL. WE HAVE AN INTERNATIONAL AIRPORT. WE ARE ON THE CORRIDOR. INVESTORS CAN BE ON A TRAIN AND IN NEW YORK IN TWO HOURS AND 20 MINUTES. YOU HAVE GREAT HEALTH CARE INSTITUTIONS, HOPKINS, UNIVERSITY OF MARYLAND MEDICAL CENTER HERE. I THINK THAT HAS TREMENDOUS POTENTIAL. AS I SAID, IT HAS BEEN OUR HOME FOR A LONG TIME. WE ARE COMMITTED. WE HAVE 7000 PLUS ASSOCIATES GLOBALLY AND A NUMBER OF OTHER LOCATIONS WHERE WE CAN ACCESS TALENT. BUT, I THINK OUR LEADERSHIP TEAM IS REALLY COMMITTED TO THE FUTURE OF T. ROWE PRICE IN BALTIMORE. ROMAINE: OBVIOUSLY, THE FUTURE OF T. ROWE PRICE HELPS THE CITY OF BALTIMORE AND THE ECONOMY HERE. WE REALLY APPRECIATE YOU HOSTING US HERE ON YOUR HOME TURF, ROB. THANK YOU VERY MUCH. ROB: THANK YOU. ROMAINE: ROB SHARPS, CHAIRMAN AND CEO OF T. ROWE PRICE. ♪ ROMAINE: WELCOME BACK TO THE CLOSE. ROMAINE BOSTICK LIFE AND T. ROWE PRICE HEADQUARTERS IN BALTIMORE. ISABELLE: YOU JUST WRAPPED UP A BUSY DAY OF INTERVIEWS INCLUDING WITH ROB SHARPS AND YOU HAD A WIDE-RANGING CONVERSATION THAT MADE HEADLINES. PRIVATE ASSETS ARE SLOWLY MOVING INTO 401(K)S AND YOU ALSO SNEAKED IN A CRYPTO QUESTION. HE SAID HE LISTENS TO CLIENTS. THE CRYPTO CROWD WOULD LOVE TO HEAR THAT. ROMAINE: YOU HAVE TO PUT THAT ON THE CRYPTO SHOW. IT GETS TO THIS IDEA OF THE EVOLUTION OF THE FIRM AND WHAT CLIENTS WANT. THAT REALLY IS THE UNDERLYING STORY NOT ONLY FOR T. ROWE BUT THE INVESTMENT INDUSTRY. ISABELLE: HE ALSO SAID THE INDUSTRY IS CONSOLIDATING AND ALWAYS EVALUATING M&A OPPORTUNITIES. WE LOOK FORWARD TO HAVING YOU BACK IN NEW YORK TOMORROW. THANK YOU FOR BRINGING US ALL THOSE GREAT INTERVIEWS. THAT DOES IT FOR US. BALANCE IS UP NEXT. HAVE A GREAT EVENING. THIS IS BLOOMBERG.