T. Rowe Price Group (TROW.US) surged in pre-market trading! Partners with Goldman Sachs Group, Inc. (GS.US) to expand its private market business with a $1 billion investment.

Goldman Sachs Group, Inc. (GS.US) will invest up to $1 billion in T. Rowe Price Group, Inc. (TROW.US) and collaborate with the asset management company to sell private market products to retail investors. As of the time of writing, T. Rowe Price Group's stock price in pre-market trading on Thursday rose by over 7%. According to the statement, Goldman Sachs Group, Inc. will accumulate up to 3.5% of T. Rowe Price Group's shares through "a series of open market purchases," making the Wall Street top bank one of the top five shareholders of T. Rowe Price Group. This will also be Goldman Sachs Group, Inc.'s only investment in an external asset management company. This unusual arrangement means that Goldman Sachs Group, Inc. will use its balance sheet to hold T. Rowe Price Group's stocks, as the latter's stock price has declined by over 50% since its peak in 2021. Both companies stated in the announcement that they will collaborate on a series of investment projects for retirement savers and high-net-worth investors. This partnership is a latest sign of large financial institutions competing to attract wealthy Americans and 401(k) retirement plan holders, promoting the latest private equity, credit, and infrastructure investment strategies. T. Rowe Price Group's CEO Rob Sharps stated, "This equity investment is very important for our leadership team and board as it does signal a long-term commitment and creates alignment of interests." This partnership comes at a critical moment in the asset management industry. Traditional firms are accelerating their foray into the alternative asset space typically dominated by top private equity firms, seeking new sources of revenue. At the same time, leaders in the private market hope to attract retail investors with the help of traditional firms' sales teams and client relationships, as institutional fundraising has slowed down. It is worth noting that T. Rowe Price Group has been struggling since 2022. At that time, the stock and bond markets crashed, causing a dent in performance and leading clients to withdraw billions of dollars from the company's stock and bond funds. Meanwhile, investors continue to shift towards low-cost index funds and ETFs, leaving T. Rowe Price Group, which primarily focuses on actively managed public market investments, more exposed to an unfavorable environment. Marc Nachmann, Head of Asset and Wealth Management at Goldman Sachs Group, Inc., stated that he is not concerned about the over $200 billion outflow from T. Rowe Price Group's funds in the past five years. He said, "The scope of the partnership we're entering into is exceptionally broad. T. Rowe Price is still widely regarded as one of the best companies in the industry." The new partnership is helping T. Rowe Price Group move forward in an increasingly crowded market. In this market, asset management firms collectively invest billions of dollars in deals or partnerships to avoid being left behind in the latest boom in alternative assets. Blackstone, Vanguard Group, and Wellington Management have established partnerships. Apollo Global Management Inc. and Capital Group have launched products. Meanwhile, BlackRock, Inc. became a leader in private credit and infrastructure investments through a $25 billion deal. However, these new initiatives are still in the early stages, as companies are working hard to pitch private market assets to financial advisors, retirement plan sponsors, and investors for potentially higher returns (and higher fees). Two-thirds of T. Rowe Price Group's assets come from retirement funds, making it one of the largest companies in this market. Rob Sharps stated, "The wider your capabilities, the more choices you have to create tailored solutions." Earlier this year, he mentioned that T. Rowe Price Group is further expanding into private market assets after its acquisition of credit management firm Oak Hill Advisors in 2021. Goldman Sachs Group, Inc. and T. Rowe Price Group plan to launch a co-branded retirement fund in mid-2026, investing in assets including Oak Hill Advisors and private market strategies from Goldman Sachs Group, Inc. They will also offer joint investment portfolios for high-net-worth individuals and clients with lower wealth levels, as well as launch two new strategies, one covering private equity, credit, and infrastructure, and the other combining public and private equity.