Last year will be one that the mutual fund industry would like to forget and no where will the wish to forget be stronger than at T. Rowe Price, where asset flows took a severe plunge of 62 percent, from $9.14 billion to $3.48 billion, according to the Financial Research Corporation in Boston.

Despite the drop in asset flows, Rowe's total assets climbed 16 percent, from $78.1 billion to $90.7 billion, securing a place in the top five in FRC's best-selling funds list behind Fidelity Investments ($520.5 billion), Vanguard Group ($384.1 billion), American Fund Distributors ($268.1 billion) and Putnam Investments ($183.8 billion.)

Although a drop in cash flows is not something to be taken lightly, Rowe and mutual fund industry observers were relatively sanguine about the year-end numbers.

The company's funds, like its peers, were affected adversely by volatility in the third quarter last year and did not recover by the end of the fourth quarter, said Rowena Itchon, a spokesperson for T. Rowe Price. Rowe's substantial positions in international funds also hurt asset flows, she said.

"Given the volatility in the emerging markets, cash flows to those funds were very small," she said. "In previous years, international was a bit stronger."

Although the company says its setback was no different than those of other companies, some market observers say that T. Rowe Price's investment strategy fell into disfavor with many investors last year and aggravated problems suffered industry-wide.

"Their flows have weakened because they have a range of styles that have become less popular which haven't been offset by styles that have become more popular," said Neal M. Epstein, vice president of Putnam, Lovell, de Guardiola & Thornton, an investment bank in New York.

Those styles tend to be conservative, explained Russ Kinnell, an equity fund analyst with Morningstar in Chicago.

"The funds that were attracting assets were the go-go mid- and large-cap growth funds," he said. "T. Rowe has growth funds, but they're on the tame side. They're not momentum funds. They care about valuations. So they didn't have any funds that were shooting the lights out."

High-valuation stocks like Microsoft, Cisco Systems and America Online were driving the market last year, which worked to Rowe's detriment, Kinnell said.

"They're sensitive to price risk so they're not going to own a lot of expensive stocks," he said.

In 1997, the discrepancy between growth and value stocks was not as large as it was last year, which helped T. Rowe Price, he said. The fact that several of its funds also posted good three-year performance numbers also helped.

Robert Frick, a staff writer for Kiplinger's Personal Finance magazine, who wrote a bullish article on T. Rowe Price at the beginning of 1998, echoed Kinnell's sentiments.

"There isn't any reason to be concerned by the numbers," he said. "They're mainly a value shop and value got crushed last year. Unless you invested in Internet stocks or the top 70 S&P stocks, you didn't do very well."

Most analysts will agree that no one year breaks or makes a fund so no one is predicting T. Rowe Price's demise because of its asset flows last year.

"Clearly, T. Rowe Price has one of the best performance profiles in the business," said Avi Nachmany, an analyst with Strategic Insight in New York. "But, as an organization, they're biased toward defensive styles. What happened last year was that caution was thrown to the wind and companies who are somewhat more conservative weren't as appealing to people as other firms," said Nachmany.

All companies selling actively-managed funds directly to the consumer saw significant declines in their business last year, he said. Rowe did relatively well.

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