Jennifer Dardis
Chief Financial Officer at T. Rowe Price Group
Thank you, Rob, and hello, everyone. I'll review our financial results, and then we will open the line for questions. Our adjusted earnings per share of $2.17 for Q3 2023 was up from $2.02 in Q2 2023, driven by higher investment advisory revenues and higher carried interest-related income. A decline in markets, following a peak at the end of July, led to Q3 end-of-period AUM of $1.35 trillion, down 3.8% from Q2. But our Q3 average AUM of $1.4 trillion was 2.7% higher than Q2 and 3.4% higher than Q3 2022, driving the higher investment advisory revenues this quarter.
As Rob mentioned, we had $17.4 billion in net outflows for the quarter, including a previously disclosed sub-advisory mandate termination in August. Consistent with last quarter, our three U.S. large-cap growth equity strategies drove the majority of the net outflows. Outflows from equity products were partially offset with inflows in our multi-asset, fixed income, and alternatives asset classes. And our Asia-Pacific business posted positive flows for the quarter as well.
Within multi-asset, target date net inflows were $2.9 billion for the quarter, bringing year-to-date inflows to $12.8 billion. When thinking about the rest of the year, keep in mind, we historically have seen some plan-driven seasonality in the DC channel with some plans departing in December and new ones onboarding in January.
Other highlights from the quarter included net inflows into capital appreciation, all cap opportunities in equity, international core equity, and blended emerging market bond. In September, we reopened our international small-cap equity and our high-yield bond strategies to new clients, which we expect will support future sales. Both strategies have solid long-term performance track records.
Turning to the income statement. Q3 adjusted net revenues were nearly $1.7 billion, including over $1.4 billion in investment advisory revenue. Our annualized effective fee rate was 41.7 basis points in Q3 2023, down from 42.3% in Q2. The effective fee rate decrease is primarily driven by the timing of performance-based fee earnings on certain equity and alternatives products that were realized in Q2, along with mix-shift toward lower-fee asset classes and vehicles. Q3 adjusted net revenues also included over $90 million in accrued carried interest-related revenue, reflecting strong, absolute, and relative performance in those alternatives products with carried interest paying structures. This is a higher-level of carried interest-related revenue in previous quarters and this will likely continue to vary widely quarter-to-quarter, in line with absolute and relative returns in the products.
Our adjusted operating expenses were nearly $1.1 billion, up a little over 3% from both Q2 2023 and Q3 2022. Q3 included severance costs related to our July reduction in force and higher carried interest-related expense, partially offset by a nonrecurring benefit in G&A. For full year 2023, we are narrowing our guidance range for adjusted operating expense, excluding the carried interest-related compensation, to be 2% to 4% over the comparable full-year 2022 amount of nearly $4.1 billion. With adjusted operating expense growth, excluding carried interest compensation of just under 1% year-to-date, we do expect higher expenses in a few categories in Q4, several of which are seasonal or timing-related, so will not fully carry forward into 2024. Specifically, we expect G&A to be higher than typical run rate as we have higher professional fee spend in Q4 that's spilled over from Q3. Stock-based compensation is typically higher in Q4 as our annual grant date falls in December. Advertising and promotion is also typically highest in Q4 to support seasonal campaigns. And finally, we will realize a full quarter of higher technology, occupancy, and facilities costs related to our new London location.
As we mentioned last quarter, we have been focused on managing our expense growth and driving efficiency to allow us to continue to invest in the strategic initiatives that we believe will result in future growth. As part of this effort and in light of our hybrid working environment, we have been reviewing our real estate usage with the dual goals of enhancing in-person collaboration and reducing real estate costs. As a result of this review, we made the decision to consolidate associates at our Owings Mills, Maryland campus into four buildings down from six, and to reduce the amount of space occupied in our Colorado Springs buildings by year end. This is a change in office configuration, not a change in location or workforce strategy.
We've also been focused on enhancing our business, data, and technology architecture to ensure we have the foundational support to underpin our strategic initiatives and drive efficiency going forward. As we shared last quarter, our cost savings efforts over the last 12 months have removed or reallocated over $200 million in operating expenses versus the run rate for 2024. We continue to expect 2024 adjusted operating expenses, excluding carried interest compensation, will grow in the low-single-digit range. This growth rate will depend on final 2023 adjusted operating expense levels. And as always, this estimated growth rate is based on current market levels and we may choose to adjust it if markets rise or fall significantly.
Spending a moment on capital management. We repurchased over 977,000 shares in the third quarter at an average price of about $108 for a total of $106 million. Year-to-date, we have repurchased a little under 1.4 million shares for just over $150 million. As of September 30, we had 223.5 million shares outstanding. Our recurring dividend remains a top priority. Through buybacks and dividends year-to-date, we've returned about $992 million to stockholders, while maintaining ample liquidity to support our seed capital program, opportunistic share buybacks, and potential M&A.
As we complete the year and plan for 2024, we will continue to invest in our strategic priorities to pursue excellent investment performance and client service and to drive growth over time. We are also executing on our plans to reduce costs to fund these initiatives and maintain a low-single digit expense growth into 2024. While flows will remain challenged through the fourth quarter, we are confident that we will start to see the benefits of these efforts in 2024.
With that, I'll ask the operator to open the line for questions.
