T. Rowe Price Projects 4%-7% Operating Expense Growth in 2026, Bets on ETFs, SMAs, and Goldman Sachs Private Funds

Global asset management giant T. Rowe Price has revealed in its latest financial outlook that it expects adjusted operating expenses to grow 4% to 7% year-over-year in 2026, while accelerating strategic initiatives in exchange-traded funds (ETFs), separately managed accounts (SMAs), and Goldman Sachs private market funds. This guidance underscores the company's intent to expand proactively amid market volatility, and it has also drawn investor attention to the balance between cost control and growth.

Strategic Rationale Behind Expense Growth

In a statement to shareholders, T. Rowe Price said the moderate increase in operating expenses is primarily due to continued investments in technology infrastructure, distribution channels, and product innovation. The company emphasized that ETF and SMA businesses are the most important growth engines over the next three years, while the introduction of Goldman Sachs private market funds aims to meet robust client demand for alternative asset allocations.

According to internal estimates, about half of the 2026 expense increase will be allocated to expanding the ETF product line, including actively managed and thematic ETFs. T. Rowe Price believes that despite intense competition in the ETF market, its long-term investment performance and brand reputation will allow it to gain share in niche segments. Meanwhile, the SMA business is expanding from high-net-worth clients to the mass affluent segment, with plans to lower service costs and improve operational efficiency through digital platforms.

Goldman Sachs Private Market Funds: Expanding Alternative Investment Boundaries

The partnership with Goldman Sachs Asset Management is one of T. Rowe Price's most notable recent moves. By distributing Goldman Sachs' private credit, private equity, and real estate funds, T. Rowe Price can quickly enter this high-growth area without building its own alternatives team. According to industry analysis, private market funds surpassed $13 trillion in global assets under management in 2024, with annual growth rates in the double digits.

“We are seeing rising demand for illiquid assets among clients, particularly pensions and insurance companies,” said a T. Rowe Price executive during a conference call. “Our partnership with Goldman Sachs allows us to offer top-tier alternative products at a lower upfront cost while retaining control over client relationships.” However, analysts also noted that private market funds involve higher due diligence and risk management challenges, and T. Rowe Price must ensure its distribution network can effectively screen suitable investors.

The Race Between Costs and Revenue

Although the expense growth appears moderate, investors are more concerned about whether revenue can accelerate in tandem. In 2025, T. Rowe Price's assets under management recovered somewhat due to market rebounds, but net flows remained negative, particularly in active equity funds. The company expects net inflows from ETFs and SMAs in 2026 to partially offset outflows from traditional funds, but overall revenue growth may still lag expense growth.

“A 4% to 7% expense increase is moderate within the industry, but given T. Rowe Price's lackluster revenue growth in recent years, this guidance may imply short-term margin pressure,” commented a sell-side analyst. However, management emphasized that the expense increase is a one-time investment expected to generate positive operating leverage by 2027.

Market Reaction and Peer Comparison

Following the announcement, T. Rowe Price's stock saw modest after-hours trading fluctuations, reflecting divergent interpretations of the guidance. Compared to peers, BlackRock and Vanguard have clear scale advantages in ETFs, but T. Rowe Price's active management capabilities are seen as a differentiator. The addition of Goldman Sachs private market funds positions it ahead of most traditional active fund companies in alternative product distribution.

From an industry trend perspective, asset managers are facing dual pressures of declining fee rates and the passive investing wave. T. Rowe Price's choice is to proactively embrace new product forms rather than cling to traditional mutual funds. Whether this strategy succeeds will depend on execution and market conditions.

Outlook: Key Milestones for 2026

Looking ahead to 2026, T. Rowe Price plans to launch at least 10 new ETFs and expand the customization scope of its SMA offerings. Additionally, the company will intensify sales of Goldman Sachs private funds in Asia and Europe. Management expects that by the end of 2026, ETFs and SMAs combined will account for approximately 8% of total assets under management, up from less than 5% currently.

For investors, T. Rowe Price's expense guidance sends a clear signal: the company is willing to sacrifice short-term profits for long-term growth. In a context of potentially lower interest rates and heightened market volatility, whether this strategy is wise remains to be seen. But at least T. Rowe Price is striving to shed the label of a “traditional active fund company” and transform into a diversified modern asset manager.