Federated Investors, Inc. Reports Third Quarter 2019 Earnings – Wire Real Estate

Federated Investors, Inc. Reports Third Quarter 2019 Earnings




Oct 25, 2019

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PITTSBURGH,– Federated Investors, Inc. (NYSE: FII), a leading global investment manager, today reported earnings per diluted share (EPS) of $0.72 for Q3 2019, compared to $0.59 for the same quarter last year, on net income of $73.0 million for Q3 2019, compared to $59.6 million for Q3 2018. Federated reported YTD 2019 EPS of $1.88, compared to $1.57 for the same period in 2018, on YTD 2019 net income of $190.2 million, compared to $158.8 million for the same period in 2018. Federated’s YTD 2018 results included a $27.2 million pre-tax net expense, representing $0.21 per diluted share net of tax, primarily related to two foreign currency forward derivative instruments (FX Forward Loss) entered into in connection with Federated’s Q3 2018 acquisition of a majority interest in Hermes Fund Managers Limited (Hermes).

Federated’s total managed assets were a record $527.2 billion at Sept. 30, 2019, up $90.0 billion or 21% from $437.2 billion at  Sept. 30, 2018 and up $25.0 billion or 5% from $502.2 billion at June 30, 2019. Total average managed assets for Q3 2019 were $518.0 billion, up $84.1 billion or 19% from $433.9 billion reported for Q3 2018 and up $24.7 billion or 5% from $493.3 billion reported for Q2 2019.

“As the Federal Reserve cut rates twice in the quarter, investors sought Federated’s range of ultrashort products and other fixed-income strategies, and our liquidity management solutions approached record highs,” said J. Christopher Donahue, president and chief executive officer. “Federated also continued to see interest in the growth-focused Federated Kaufmann Small Cap Fund, as well as a range of Hermes equity strategies.”

Federated’s board of directors declared a quarterly dividend of $0.27 per share. The dividend is payable on Nov. 15, 2019 to shareholders of record as of Nov. 8, 2019. During Q3 2019, Federated purchased 79,592 shares of Federated class B common stock for $1.9 million.

Federated’s equity assets were $80.8 billion at Sept. 30, 2019, down $3.3 billion or 4% from $84.1 billion at Sept. 30, 2018 and down $1.2 billion or 1% from $82.0 billion at June 30, 2019. Top-selling equity funds during Q3 2019 on a net basis were Federated Kaufmann Small Cap Fund; Hermes Global Emerging Markets Fund; Hermes SDG Engagement Equity Fund;  Hermes Global Equity ESG Fund; and Federated MDT Small Cap Growth Fund.

Federated’s fixed-income assets were a record $65.8 billion at Sept. 30, 2019, up $0.4 billion or 1% from $65.4 billion at Sept. 30, 2018 and up $0.7 billion or 1% from $65.1 billion at June 30, 2019. Top-selling fixed-income funds during Q3 2019 on a net basis were Federated Bond Fund; Federated Municipal Ultrashort Fund; Federated Institutional High Yield Bond Fund; Hermes Global High Yield Credit Fund; and Federated Government Ultrashort Duration Fund.

Money market assets were $359.3 billion at Sept. 30, 2019, up $95.1 billion or 36% from $264.2 billion at Sept. 30, 2018 and up $26.2 billion or 8% from $333.1 billion at June 30, 2019. Money market fund assets were $261.2 billion at Sept. 30, 2019, up $78.2 billion or 43% from $183.0 billion at Sept. 30, 2018 and up $29.9 billion or 13% from $231.3 billion at June 30, 2019.

Federated’s money market separate account assets were $98.1 billion at Sept. 30, 2019, up $16.8 billion or 21% from $81.3 billion at Sept. 30, 2018 and down $3.6 billion or 4% from $101.7 billion at June 30, 2019.

Financial Summary

Q3 2019 vs. Q3 2018

Revenue increased $31.7 million or 10% primarily due to higher average money market assets. This increase in revenue was partially offset by a decrease in revenue from lower average equity assets.

During Q3 2019, Federated derived 58% of its revenue from long-term assets (40% from equity assets, 13% from fixed-income assets and 5% from alternative/private markets and multi-asset), 41% from money market assets, and 1% from sources other than managed assets.

Operating expenses increased $24.3 million or 11% primarily due to an increase in distribution expenses associated with higher average money market fund assets and an increase in compensation and related expenses.

Nonoperating income (expenses), net increased $5.6 million primarily due to an increase in private equity carried interest income on assets managed by a nonconsolidated entity.

Q3 2019 vs. Q2 2019

Revenue increased $18.9 million or 6% primarily due to higher average money market assets and an extra day of revenue in Q3 2019.

Operating expenses increased $14.5 million or 6% primarily due to an increase in distribution expenses associated with higher average money market fund assets and an increase in compensation and related expenses.

Nonoperating income (expenses), net increased $8.1 million primarily due to an increase in private equity carried interest income on assets managed by a nonconsolidated entity.

YTD 2019 vs. YTD 2018

Revenue increased $140.4 million or 17% primarily due to the consolidation of Hermes’ revenue (which included performance fees of $4.2 million in 2019) for three quarters in 2019 as compared to one quarter in 2018 and higher average money market assets. These increases were partially offset by a decrease in revenue from lower average equity and multi-asset assets and a change in the mix of average domestic fixed-income assets.

For the first nine months of 2019, Federated derived 60% of its revenue from long-term assets (41% from equity assets, 14% from fixed-income assets and 5% from alternative/private markets and multi-asset), 39% from money market assets, and 1% from sources other than managed assets.

Operating expenses increased $137.6 million or 23% primarily due to the consolidation of Hermes’ expenses for three quarters in 2019 as compared to one quarter in 2018 and an increase in distribution expenses associated with higher average money market fund assets.

Nonoperating income (expenses), net increased $36.4 million primarily due to the FX Forward Loss recorded in Q2 2018.

Federated’s level of business activity and financial results are dependent upon many factors, including market conditions, investment performance and investor behavior. These factors and others, including asset levels and mix, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers, expenses and regulatory changes, can significantly impact Federated’s business activity levels and financial results. Risk factors and uncertainties that can influence Federated’s financial results are discussed in the company’s annual and quarterly reports as filed with the Securities and Exchange Commission (SEC).

Federated will host an earnings conference call at 9 a.m. Eastern on Oct. 25, 2019. Investors are invited to listen to Federated’s earnings teleconference by calling 844-602-0380 (domestic) or 862-298-0970 (international) prior to the 9 a.m. start time. The call may also be accessed online in real time via the About section of FederatedInvestors.com. A replay will be available from approximately 12:30 p.m. Eastern on Oct. 25, 2019 until Nov. 1, 2019 by calling 877-481-4010 (domestic) or 919-882-2331 (international) and entering access code 54018. An online replay will be available via FederatedInvestors.com for one year.

Federated Investors, Inc. is a leading global investment manager with $527.2 billion in assets under management as of Sept. 30, 2019. Our investment solutions span 131 equity, fixed-income, alternative/private markets, multi-asset and liquidity management strategies, and a range of separately managed account strategies. Providing comprehensive investment management to more than 11,000 institutions and intermediaries, our clients include corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Headquartered in Pittsburgh, Federated’s nearly 1,900 employees include those in New YorkBostonLondon and several other offices worldwide. In 2018, Federated acquired a majority interest in Hermes Investment Management, which provides world-class active management and stewardship services.

Federated ranks in the top 6% of equity fund managers in the industry, the top 7% of money market fund managers and the top 11% of fixed-income fund managers1. Federated also ranks as the 10th-largest SMA manager2. Information regarding Hermes is available at Hermes-Investment.comAn analyst presentation that includes information about Hermes also is availableFor more information, visit FederatedInvestors.com.

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1) Strategic Insight, Sept. 30, 2019. Based on assets under management in open-end funds.
2) Money Management Institute/Cerulli, Q2 2019.
Federated Securities Corp. is distributor of the Federated funds.
Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling, Federated MDTA LLC, Hermes Investment Management Limited and Hermes European Equities Limited, each a registered investment adviser.

Certain statements in this press release, such as those related to performance, investor preferences and demand, and asset flows and mix, constitute or may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Other risks and uncertainties include the ability of the company to predict the level of fee waivers and expenses in future quarters, predict whether performance fees or carried interest will be earned and retained, sustain product demand, and asset flows and mix, which could vary significantly depending on various factors, such as market conditions, investment performance and investor behavior. Other risks and uncertainties include the risk factors discussed in the company’s annual and quarterly reports as filed with the SEC. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness of such statements in the future.

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