Federated Hermes, Inc. reports third quarter 2020 earnings; board declares cash dividend per share of $1.27, including $0.27 quarterly and $1.00 special dividend
PITTSBURGH, Oct. 29, 2020 /PRNewswire/ -- Federated Hermes, Inc. (NYSE: FHI), a global leader in active, responsible investing, today reported earnings per diluted share (EPS) of $0.85 for Q3 2020, compared to $0.72 for the same quarter last year, on net income of $85.8 million for Q3 2020, compared to $73.0 million for Q3 2019. Federated Hermes reported YTD 2020 earnings per diluted share of $2.29, compared to $1.88 for the same period in 2019, on YTD 2020 net income of $231.2 million, compared to $190.2 million for the same period in 2019.
Federated Hermes' total managed assets were $614.8 billion at Sept. 30, 2020, up $87.6 billion or 17% from $527.2 billion at Sept. 30, 2019 and down $14.0 billion or 2% from $628.8 billion at June 30, 2020. Total average managed assets for Q3 2020 were $628.1 billion, up $110.1 billion or 21% from $518.0 billion reported for Q3 2019 and down $8.8 billion or 1% from $636.9 billion reported for Q2 2020.
"In the third quarter, investors and advisors continued to show strong interest in a range of our actively managed strategies through market volatility and the Covid-19 pandemic," said J. Christopher Donahue, president and chief executive officer. "Federated Hermes' equity assets were at $80 billion, with strong investment performance from our international dividend strategy and both an emerging market equity and an international growth equity fund, which were added to our product mix in the last year and are managed by the Cleveland-based international equity team. We saw net sales in a variety of equity styles, including growth, ESG and impact funds.
"We reached record fixed-income assets under management of $80 billion at the end of the third quarter," said Donahue. "Our Total Return Bond Fund and Short-Intermediate Total Return Bond Fund outperformed a majority of their peers during the pandemic. Both funds, which seek to capture opportunities and manage risk through various rate environments, were among our funds with the strongest net sales, along with a range of short-duration and high-yield strategies."
Federated Hermes' board of directors declared a dividend of $1.27 per share. The dividend, which will be paid from Federated Hermes' existing cash balance, is considered an ordinary dividend for tax purposes and consists of a $0.27 quarterly dividend and a $1.00 special dividend. The dividend is payable on Nov. 13, 2020 to shareholders of record as of Nov. 6, 2020. During Q3 2020, Federated Hermes purchased 866,900 shares of Federated Hermes class B common stock for $20.0 million.
"The special dividend reinforces Federated Hermes' continued commitment to delivering shareholder value," said Thomas R. Donahue, chief financial officer. "The November dividend payment marks our fifth special-dividend, totaling $7.53 per share, in the last dozen years."
Equity assets were $80.4 billion at Sept. 30, 2020, down $0.4 billion from $80.8 billion at Sept. 30, 2019 and up $3.5 billion or 5% from $76.9 billion at June 30, 2020. Top-selling equity funds during Q3 2020 on a net basis were Federated Hermes
Kaufmann Small Cap Fund, Federated Hermes SDG Engagement Equity Fund (UCITS), Federated Hermes Global Equity ESG Fund, Federated Hermes Impact Opportunities Equity Fund and the Federated Hermes International Small-Mid Company Fund.
Fixed-income assets were a record $79.5 billion at Sept. 30, 2020, up $13.7 billion or 21% from $65.8 billion at Sept. 30, 2019 and up $6.4 billion or 9% from $73.1 billion at June 30, 2020. Top-selling fixed-income funds during Q3 2020 on a net basis were Federated Hermes Short-Intermediate Total Return Bond Fund, Federated Hermes Ultrashort Bond Fund, Federated Hermes Municipal Ultrashort Fund, Federated Hermes Total Return Bond Fund and Federated Hermes Institutional High Yield Bond Fund.
Money market assets were $433.0 billion at Sept. 30, 2020, up $73.7 billion or 21% from $359.3 billion at Sept. 30, 2019 and down $24.6 billion or 5% from $457.6 billion at June 30, 2020. Money market fund assets were $325.9 billion at Sept. 30, 2020, up $64.7 billion or 25% from $261.2 billion at Sept. 30, 2019 and down $18.9 billion or 5% from $344.8 billion at June 30, 2020.
Financial Summary
Q3 2020 vs. Q3 2019
Revenue increased $24.1 million or 7% percent primarily due to higher average money market and fixed-income assets and as a result of revenue of a previously nonconsolidated entity being recorded in operating revenue beginning March 2020. These increases in revenue were partially offset by voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields (voluntary yield-related fee waivers). See "Impact of voluntary yield-related fee waivers."
During Q3 2020, Federated Hermes derived 60 percent of its revenue from long-term assets (38 percent from equity assets, 14 percent from fixed-income assets and 8 percent from alternative/private markets and multi-asset), 39 percent from money market assets, and 1 percent from sources other than managed assets.
Operating expenses were flat, with increases in compensation being offset by decreased distribution expenses primarily resulting from voluntary yield-related fee waivers on certain money market fund assets.
Nonoperating income (expenses) decreased a net $1.2 million or 17% due to the net operating impact from the previously nonconsolidated entity no longer being recorded as nonoperating income, offset partially by increased investment gains.
Q3 2020 vs. Q2 2020
Revenue increased $3.7 million or 1% primarily due to higher average equity and fixed-income assets. These increases were partially offset by an increase in voluntary yield-related fee waivers and lower average money market assets.
Operating expenses decreased $12.4 million or 5% primarily due to decreased distribution expenses resulting from higher voluntary yield-related fee waivers on certain money market fund assets.
Nonoperating income (expenses) decreased a net $7.8 million or 56% primarily due to the Q3 2020 increase in the market value of investments being less than the Q2 2020 market value increase following the significant recovery from the Q1 2020 coronavirus impact to markets.
YTD 2020 vs. YTD 2019
Revenue increased $115.5 million or 12% primarily due to higher average money market assets, revenue of a previously nonconsolidated entity being recorded in operating revenue beginning March 2020 and higher average fixed-income assets. These increases were partially offset by voluntary yield-related fee waivers.
For the first nine months of 2020, Federated Hermes derived 57% percent of its revenue from long-term assets (37 percent from equity assets, 13 percent from fixed-income assets and 7 percent from alternative/private markets and multi-asset), 42 percent from money market assets, and 1 percent from sources other than managed assets.
Operating expenses increased $57.2 million or 8% primarily due to increased incentive compensation, an increase in distribution expenses associated with higher average money market fund assets and an increase due to a previously nonconsolidated entity being recorded in expenses beginning March 2020. These increases were partially offset by voluntary yield-related fee waivers.
Nonoperating income (expenses) increased a net $4.8 million or 56% primarily due to a gain from a fair value adjustment to the equity investment of a previously nonconsolidated entity.
Impact of voluntary yield-related fee waivers
During the three and nine months ended Sept. 30, 2020, voluntary yield-related fee waivers totaled $36.8 million and $56.9 million, respectively. These fee waivers were largely offset by related reductions in distribution expenses of $33.0 million and $51.0 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $3.8 million and $5.9 million for the three and nine months ended Sept. 30, 2020, respectively.
Federated Hermes' 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 Hermes' business activity levels and financial results. Risk factors and uncertainties that can influence Federated Hermes' financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission (SEC).
Federated Hermes will host an earnings conference call at 9 a.m. Eastern on Oct. 30, 2020. Investors are invited to listen to the earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (international) prior to the 9 a.m. start time. To listen online, go to the Investor Relations section and the Analyst Information tab of FederatedHermes.com at least 15 minutes prior to register and join the call. A replay will be available at approximately 12:30 p.m. Eastern on Oct. 30, 2020. To access the telephone replay, dial 877-481-4010 (domestic) or 919-882-2331 (international) and enter access code 38009. The online replay will be available via FederatedHermes.com for one year.
Federated Hermes, Inc. is a leading global investment manager with $614.8 billion in assets under management as of Sept. 30, 2020. Guided by our conviction that responsible investing is the best way to create wealth over the long term, our investment solutions span equity, fixed-income, alternative/private markets, multi-asset and liquidity management strategies. Providing world-class active investment management and engagement services 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 Hermes' more than 1,900 employees include those in London, New York, Boston and several other offices worldwide. For more information, visit FederatedHermes.com.
Federated Hermes ranks in the top 6% of equity fund managers in the industry, the top 7% of money market fund managers and the top 10% of fixed-income fund managers1. Federated Hermes also ranks as the 5th-largest manager of model-delivered SMAs2. For more information, including an analyst presentation, visit FederatedHermes.com.
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1) ISS Market Intelligence (SIMFUND), Sept. 30, 2020. Based on assets under management in open-end funds. 2) Money Management Institute/Cerulli, Q2 2020.Federated Securities Corp. is distributor of the Federated Hermes funds.Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling, Federated MDTA LLC, Hermes Fund Managers Ireland Limited, Hermes Investment Management Limited, and Hermes GPE LLP, each a registered investment advisor in one or more of the U.S., U.K. or Ireland.
Certain statements in this press release, such as those related to performance, investor preferences and demand, asset flows and mix, fee waivers, and the coronavirus and efforts to combat it, 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, and sustain product demand, 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.
Unaudited Condensed Consolidated Statements of Income | ||||||||||||||
(in thousands, except per share data) | ||||||||||||||
Quarter Ended | % ChangeQ3 2019 toQ3 2020 | QuarterEnded | % Change Q2 2020 toQ3 2020 | |||||||||||
Sept. 30,2020 | Sept. 30,2019 | June 30,2020 | ||||||||||||
Revenue | ||||||||||||||
Investment advisory fees, net | $ | 260,089 | $ | 232,106 | 12 | % | $ | 245,126 | 6 | % | ||||
Administrative service fees, net—affiliates | 83,028 | 64,216 | 29 | 83,733 | (1) | |||||||||
Other service fees, net | 21,338 | 44,018 | (52) | 31,853 | (33) | |||||||||
Total Revenue | 364,455 | 340,340 | 7 | 360,712 | 1 | |||||||||
Operating Expenses | ||||||||||||||
Compensation and related | 126,186 | 112,247 | 12 | 123,583 | 2 | |||||||||
Distribution | 73,726 | 88,082 | (16) | 89,038 | (17) | |||||||||
Systems and communications | 16,193 | 13,353 | 21 | 15,091 | 7 | |||||||||
Professional service fees | 14,006 | 10,678 | 31 | 13,888 | 1 | |||||||||
Office and occupancy | 10,578 | 10,855 | (3) | 10,190 | 4 | |||||||||
Advertising and promotional | 2,921 | 4,102 | (29) | 3,065 | (5) | |||||||||
Travel and related | 542 | 4,158 | (87) | 325 | 67 | |||||||||
Other | 6,922 | 7,558 | (8) | 8,281 | (16) | |||||||||
Total Operating Expenses | 251,074 | 251,033 | 0 | 263,461 | (5) | |||||||||
Operating Income | 113,381 | 89,307 | 27 | 97,251 | 17 | |||||||||
Nonoperating Income (Expenses) | ||||||||||||||
Investment income (loss), net | 6,622 | 444 | NM | 14,841 | 55 | |||||||||
Debt expense | (494) | (1,239) | (60) | (785) | (37) | |||||||||
Other, net | 103 | 8,264 | (99) | (24) | NM | |||||||||
Total Nonoperating Income (Expenses), net | 6,231 | 7,469 | (17) | 14,032 | (56) | |||||||||
Income before income taxes | 119,612 | 96,776 | 24 | 111,283 | 7 | |||||||||
Income tax provision | 32,928 | 23,191 | 42 | 26,482 | 24 | |||||||||
Net income including the noncontrolling interests insubsidiaries | 86,684 | 73,585 | 18 | 84,801 | 2 | |||||||||
Less: Net income (loss) attributable to the noncontrollinginterests in subsidiaries | 862 | 623 | 38 | 3,605 | (76) | |||||||||
Net Income | $ | 85,822 | $ | 72,962 | 18 | % | $ | 81,196 | 6 | % | ||||
Amounts Attributable to Federated Hermes, Inc. | ||||||||||||||
Earnings Per Share1 | ||||||||||||||
Basic | $ | 0.86 | $ | 0.72 | 19 | % | $ | 0.81 | 6 | % | ||||
Diluted | $ | 0.85 | $ | 0.72 | 18 | % | $ | 0.80 | 6 | % | ||||
Weighted-Average Shares Outstanding | ||||||||||||||
Basic and Diluted | 96,039 | 97,306 | 96,800 | |||||||||||
Dividends Declared Per Share | $ | 0.27 | $ | 0.27 | $ | 0.27 | ||||||||
1) | Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of basic earnings per share under the "two-class method." As such, total net income of $3.4 million, $2.8 million and $3.2 million available to unvested restricted Federated Hermes shareholders for the quarterly periods ended Sept. 30, 2020, Sept. 30, 2019 and June 30, 2020, respectively, was excluded from the computation of basic earnings per share. In addition to the amounts excluded from the basic earnings per share calculation, the computation of diluted earnings per share excludes net income available to unvested shareholders of a nonpublic consolidated subsidiary. |
Unaudited Condensed Consolidated Statements of Income | ||||||||
(in thousands, except per share data) | ||||||||
Nine Months Ended | ||||||||
Sept. 30, 2020 | Sept. 30, 2019 | % Change | ||||||
Revenue | ||||||||
Investment advisory fees, net | $ | 745,875 | $ | 663,974 | 12 | % | ||
Administrative service fees, net—affiliates | 238,960 | 176,319 | 36 | |||||
Other service fees, net | 99,515 | 128,576 | (23) | |||||
Total Revenue | 1,084,350 | 968,869 | 12 | |||||
Operating Expenses | ||||||||
Compensation and related | 365,104 | 330,712 | 10 | |||||
Distribution | 258,925 | 247,713 | 5 | |||||
Systems and communications | 46,179 | 38,258 | 21 | |||||
Professional service fees | 41,162 | 31,445 | 31 | |||||
Office and occupancy | 32,539 | 33,283 | (2) | |||||
Advertising and promotional | 10,981 | 12,989 | (15) | |||||
Travel and related | 4,026 | 12,465 | (68) | |||||
Other | 22,058 | 16,868 | 31 | |||||
Total Operating Expenses | 780,974 | 723,733 | 8 | |||||
Operating Income | 303,376 | 245,136 | 24 | |||||
Nonoperating Income (Expenses) | ||||||||
Investment income (loss), net | 7,011 | 4,679 | 50 | |||||
Debt expense | (2,211) | (3,971) | (44) | |||||
Other, net | 8,426 | 7,756 | 9 | |||||
Total Nonoperating Income (Expenses), net | 13,226 | 8,464 | 56 | |||||
Income before income taxes | 316,602 | 253,600 | 25 | |||||
Income tax provision | 81,852 | 61,564 | 33 | |||||
Net income including the noncontrolling interests in subsidiaries | 234,750 | 192,036 | 22 | |||||
Less: Net income (loss) attributable to the noncontrolling interests insubsidiaries | 3,554 | 1,804 | 97 | |||||
Net Income | $ | 231,196 | $ | 190,232 | 22 | % | ||
Amounts Attributable to Federated Hermes, Inc. | ||||||||
Earnings Per Share1 | ||||||||
Basic | $ | 2.30 | $ | 1.88 | 22 | % | ||
Diluted | $ | 2.29 | $ | 1.88 | 22 | % | ||
Weighted-Average Shares Outstanding | ||||||||
Basic and Diluted | 96,726 | 97,211 | ||||||
Dividends Declared Per Share | $ | 0.81 | $ | 0.81 | ||||
1) | Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of basic earnings per share under the "two-class method." As such, total net income of $8.9 million and $7.3 million available to unvested restricted Federated Hermes shareholders for the nine months ended Sept. 30, 2020 and Sept. 30, 2019, respectively, was excluded from the computation of basic earnings per share. In addition to the amounts excluded from the basic earnings per share calculation, the computation of diluted earnings per share excludes net income available to unvested shareholders of a nonpublic consolidated subsidiary. |
Unaudited Condensed Consolidated Balance Sheets | ||||||
(in thousands) | Sept. 30, 2020 | Dec. 31, 2019 | ||||
Assets | ||||||
Cash and other investments | $ | 437,159 | $ | 340,635 | ||
Other current assets | 132,255 | 120,649 | ||||
Intangible assets, net, including goodwill | 1,257,553 | 1,220,762 | ||||
Other long-term assets | 176,759 | 198,085 | ||||
Total Assets | $ | 2,003,726 | $ | 1,880,131 | ||
Liabilities, Redeemable Noncontrolling Interests and Equity | ||||||
Current liabilities | $ | 234,379 | $ | 230,713 | ||
Long-term debt | 90,000 | 100,000 | ||||
Other long-term liabilities | 313,470 | 296,052 | ||||
Redeemable noncontrolling interests | 214,301 | 212,086 | ||||
Equity excluding treasury stock | 1,469,674 | 1,322,312 | ||||
Treasury stock | (318,098) | (281,032) | ||||
Total Liabilities, Redeemable Noncontrolling Interests and Equity | $ | 2,003,726 | $ | 1,880,131 | ||
Unaudited Changes in Long-Term Assets - By Asset Class | ||||||||||||||||
(in millions) | Quarter Ended | Nine Months Ended | ||||||||||||||
Sept. 30, 2020 | June 30, 2020 | Sept. 30, 2019 | Sept. 30, 2020 | Sept. 30, 2019 | ||||||||||||
Equity | ||||||||||||||||
Beginning assets | $ | 76,859 | $ | 68,239 | $ | 81,999 | $ | 89,011 | $ | 72,497 | ||||||
Sales1 | 4,186 | 4,579 | 5,182 | 14,845 | 15,130 | |||||||||||
Redemptions1 | (5,552) | (7,280) | (6,384) | (20,674) | (16,714) | |||||||||||
Net sales (redemptions)1 | (1,366) | (2,701) | (1,202) | (5,829) | (1,584) | |||||||||||
Net exchanges | 31 | (56) | (11) | (62) | 193 | |||||||||||
Acquisitions/(dispositions) | 0 | 0 | 0 | (71) | 0 | |||||||||||
Impact of foreign exchange2 | 578 | 439 | (577) | 249 | (695) | |||||||||||
Market gains and (losses)3 | 4,303 | 10,938 | 541 | (2,893) | 10,339 | |||||||||||
Ending assets | $ | 80,405 | $ | 76,859 | $ | 80,750 | $ | 80,405 | $ | 80,750 | ||||||
Fixed Income5 | ||||||||||||||||
Beginning assets | $ | 73,143 | $ | 64,715 | $ | 65,052 | $ | 69,023 | $ | 63,158 | ||||||
Sales1 | 9,859 | 10,691 | 4,805 | 28,237 | 15,414 | |||||||||||
Redemptions1 | (4,897) | (5,407) | (5,418) | (20,092) | (16,940) | |||||||||||
Net sales (redemptions)1 | 4,962 | 5,284 | (613) | 8,145 | (1,526) | |||||||||||
Net exchanges | (36) | 146 | 10 | (5) | (214) | |||||||||||
Acquisitions/(dispositions) | 0 | 0 | 0 | (1) | 0 | |||||||||||
Impact of foreign exchange2 | 135 | 29 | (107) | 9 | (124) | |||||||||||
Market gains and (losses)3 | 1,342 | 2,969 | 1,482 | 2,375 | 4,530 | |||||||||||
Ending assets | $ | 79,546 | $ | 73,143 | $ | 65,824 | $ | 79,546 | $ | 65,824 | ||||||
Alternative/Private Markets4 | ||||||||||||||||
Beginning assets | $ | 17,485 | $ | 18,061 | $ | 17,917 | $ | 18,102 | $ | 18,318 | ||||||
Sales1 | 586 | 792 | 384 | 2,266 | 1,017 | |||||||||||
Redemptions1 | (411) | (961) | (813) | (1,954) | (1,973) | |||||||||||
Net sales (redemptions)1 | 175 | (169) | (429) | 312 | (956) | |||||||||||
Net exchanges | 0 | (3) | (61) | (1) | (64) | |||||||||||
Acquisitions/(dispositions) | 0 | 0 | 0 | 452 | 0 | |||||||||||
Impact of foreign exchange2 | 708 | (33) | (560) | (446) | (608) | |||||||||||
Market gains and (losses)3 | (222) | (371) | 289 | (273) | 466 | |||||||||||
Ending assets | $ | 18,146 | $ | 17,485 | $ | 17,156 | $ | 18,146 | $ | 17,156 | ||||||
Multi-asset | ||||||||||||||||
Beginning assets | $ | 3,705 | $ | 3,494 | $ | 4,213 | $ | 4,199 | $ | 4,093 | ||||||
Sales1 | 45 | 48 | 65 | 191 | 247 | |||||||||||
Redemptions1 | (155) | (168) | (218) | (558) | (687) | |||||||||||
Net sales (redemptions)1 | (110) | (120) | (153) | (367) | (440) | |||||||||||
Net exchanges | (4) | (5) | 57 | (23) | 59 | |||||||||||
Impact of foreign exchange2 | 1 | 0 | 0 | 1 | 0 | |||||||||||
Market gains and (losses)3 | 145 | 336 | 23 | (73) | 428 | |||||||||||
Ending assets | $ | 3,737 | $ | 3,705 | $ | 4,140 | $ | 3,737 | $ | 4,140 | ||||||
Total Long-term Assets4, 5 | ||||||||||||||||
Beginning assets | $ | 171,192 | $ | 154,509 | $ | 169,181 | $ | 180,335 | $ | 158,066 | ||||||
Sales1 | 14,676 | 16,110 | 10,436 | 45,539 | 31,808 | |||||||||||
Redemptions1 | (11,015) | (13,816) | (12,833) | (43,278) | (36,314) | |||||||||||
Net sales (redemptions)1 | 3,661 | 2,294 | (2,397) | 2,261 | (4,506) | |||||||||||
Net exchanges | (9) | 82 | (5) | (91) | (26) | |||||||||||
Acquisitions/(dispositions) | 0 | 0 | 0 | 380 | 0 | |||||||||||
Impact of foreign exchange2 | 1,422 | 435 | (1,244) | (187) | (1,427) | |||||||||||
Market gains and (losses)3 | 5,568 | 13,872 | 2,335 | (864) | 15,763 | |||||||||||
Ending assets | $ | 181,834 | $ | 171,192 | $ | 167,870 | $ | 181,834 | $ | 167,870 | ||||||
1) | For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return. |
2) | Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. |
3) | Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income. |
4) | The balance at September 30, 2019 includes $8.0 billion of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP. |
5) | For one fixed income separate account, sales, redemptions, net sales (redemptions) and market gains and (losses) were previously incorrectly reported for the quarters ended March 31, 2020 and June 30, 2020. Total assets were reported correctly and are not impacted. Corrections for the quarter ended March 31, 2020, resulted in increasing redemptions, and thereby reducing net sales, by $390 million and increasing market gains by the same amount. Corrections for the quarter ended June 30, 2020, resulted in decreasing sales, and thereby reducing net sales, by $1.1 billion and increasing market gains by the same amount. |
Unaudited Changes in Long-Term Assets - By Asset Class and Product Type | ||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||
Quarter Ended | ||||||||||||||||||||||||||||||
Sept. 30, 2020 | ||||||||||||||||||||||||||||||
Equity | Fixed Income | Alternative / PrivateMarkets | Multi-asset | Total | ||||||||||||||||||||||||||
Funds | Separate Accounts1 | Funds | SeparateAccounts1 | Funds | SeparateAccounts1 | Funds | Separate Accounts1 | Funds. | SeparateAccounts1 | |||||||||||||||||||||
Beginning assets | $ | 43,723 | $ | 33,136 | $ | 46,046 | $ | 27,097 | $ | 11,037 | $ | 6,448 | $ | 3,516 | $ | 189 | $ | 104,322 | $ | 66,870 | ||||||||||
Sales | 2,937 | 1,249 | 7,183 | 2,676 | 471 | 115 | 44 | 1 | 10,635 | 4,041 | ||||||||||||||||||||
Redemptions | (3,299) | (2,253) | (4,497) | (400) | (386) | (25) | (146) | (9) | (8,328) | (2,687) | ||||||||||||||||||||
Net sales (redemptions) | (362) | (1,004) | 2,686 | 2,276 | 85 | 90 | (102) | (8) | 2,307 | 1,354 | ||||||||||||||||||||
Net exchanges | 31 | 0 | (36) | 0 | 0 | 0 | (4) | 0 | (9) | 0 | ||||||||||||||||||||
Impact of foreign exchange2 | 306 | 272 | 105 | 30 | 440 | 268 | 0 | 1 | 851 | 571 | ||||||||||||||||||||
Market gains and (losses)3 | 2,395 | 1,908 | 978 | 364 | (169) | (53) | 136 | 9 | 3,340 | 2,228 | ||||||||||||||||||||
Ending assets | $ | 46,093 | $ | 34,312 | $ | 49,779 | $ | 29,767 | $ | 11,393 | $ | 6,753 | $ | 3,546 | $ | 191 | $ | 110,811 | $ | 71,023 | ||||||||||
Nine Months Ended | ||||||||||||||||||||||||||||||
Sept. 30, 2020 | ||||||||||||||||||||||||||||||
Equity | Fixed Income | Alternative / PrivateMarkets | Multi-asset | Total | ||||||||||||||||||||||||||
Funds | Separate Accounts1 | Funds | Separate Accounts1,4 | Funds | Separate Accounts1 | Funds | SeparateAccounts1 | Funds | SeparateAccounts1,4 | |||||||||||||||||||||
Beginning assets | $ | 48,112 | $ | 40,899 | $ | 44,223 | $ | 24,800 | $ | 11,389 | $ | 6,713 | $ | 4,000 | $ | 199 | $ | 107,724 | $ | 72,611 | ||||||||||
Sales | 10,423 | 4,422 | 21,811 | 6,426 | 1,799 | 467 | 164 | 27 | 34,197 | 11,342 | ||||||||||||||||||||
Redemptions | (12,431) | (8,243) | (17,474) | (2,618) | (1,511) | (443) | (538) | (20) | (31,954) | (11,324) | ||||||||||||||||||||
Net sales (redemptions) | (2,008) | (3,821) | 4,337 | 3,808 | 288 | 24 | (374) | 7 | 2,243 | 18 | ||||||||||||||||||||
Net exchanges | (56) | (6) | (5) | 0 | (1) | 0 | (23) | 0 | (85) | (6) | ||||||||||||||||||||
Acquisition-related | 0 | (71) | 0 | (1) | 0 | 452 | 0 | 0 | 0 | 380 | ||||||||||||||||||||
Impact of foreign exchange2 | 61 | 188 | (23) | 32 | (258) | (188) | 0 | 1 | (220) | 33 | ||||||||||||||||||||
Market gains and (losses)3 | (16) | (2,877) | 1,247 | 1,128 | (25) | (248) | (57) | (16) | 1,149 | (2,013) | ||||||||||||||||||||
Ending assets | $ | 46,093 | $ | 34,312 | $ | 49,779 | $ | 29,767 | $ | 11,393 | $ | 6,753 | $ | 3,546 | $ | 191 | $ | 110,811 | $ | 71,023 | ||||||||||
1) | Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products. For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return. |
2) | Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. |
3) | Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income. |
4) | For one fixed income separate account, sales, redemptions, net sales (redemptions) and market gains and (losses) were previously incorrectly reported for the quarters ended March 31, 2020 and June 30, 2020. Total assets were reported correctly and are not impacted. Corrections for the quarter ended March 31, 2020, resulted in increasing redemptions, and thereby reducing net sales, by $390 million and increasing market gains by the same amount. Corrections for the quarter ended June 30, 2020, resulted in decreasing sales, and thereby reducing net sales, by $1.1 billion and increasing market gains by the same amount. |
Unaudited Changes in Long-Term Assets - By Product Type | ||||||||||||||||
(in millions) | Quarter Ended | Nine Months Ended | ||||||||||||||
Sept. 30, 2020 | June 30, 2020 | Sept. 30, 2019 | Sept. 30, 2020 | Sept. 30, 2019 | ||||||||||||
Total Fund Assets1 | ||||||||||||||||
Beginning assets | $ | 104,322 | $ | 92,251 | $ | 100,946 | $ | 107,724 | $ | 92,359 | ||||||
Sales | 10,635 | 12,201 | 6,900 | 34,197 | 22,324 | |||||||||||
Redemptions | (8,328) | (10,022) | (7,986) | (31,954) | (23,357) | |||||||||||
Net sales (redemptions) | 2,307 | 2,179 | (1,086) | 2,243 | (1,033) | |||||||||||
Net exchanges | (9) | 82 | 0 | (85) | 4 | |||||||||||
Impact of foreign exchange2 | 851 | 93 | (725) | (220) | (808) | |||||||||||
Market gains and (losses)3 | 3,340 | 9,717 | 547 | 1,149 | 9,160 | |||||||||||
Ending assets | $ | 110,811 | $ | 104,322 | $ | 99,682 | $ | 110,811 | $ | 99,682 | ||||||
Total Separate Account Assets4, 6 | ||||||||||||||||
Beginning assets | $ | 66,870 | $ | 62,258 | $ | 68,235 | $ | 72,611 | $ | 65,707 | ||||||
Sales5 | 4,041 | 3,909 | 3,536 | 11,342 | 9,484 | |||||||||||
Redemptions5 | (2,687) | (3,794) | (4,847) | (11,324) | (12,957) | |||||||||||
Net sales (redemptions)5 | 1,354 | 115 | (1,311) | 18 | (3,473) | |||||||||||
Net exchanges | 0 | 0 | (5) | (6) | (30) | |||||||||||
Acquisitions/(dispositions) | 0 | 0 | 0 | 380 | 0 | |||||||||||
Impact of foreign exchange2 | 571 | 342 | (519) | 33 | (619) | |||||||||||
Market gains and (losses)3 | 2,228 | 4,155 | 1,788 | (2,013) | 6,603 | |||||||||||
Ending assets | $ | 71,023 | $ | 66,870 | $ | 68,188 | $ | 71,023 | $ | 68,188 | ||||||
Total Long-term Assets1,4, 6 | ||||||||||||||||
Beginning assets | $ | 171,192 | $ | 154,509 | $ | 169,181 | $ | 180,335 | $ | 158,066 | ||||||
Sales5 | 14,676 | 16,110 | 10,436 | 45,539 | 31,808 | |||||||||||
Redemptions5 | (11,015) | (13,816) | (12,833) | (43,278) | (36,314) | |||||||||||
Net sales (redemptions)5 | 3,661 | 2,294 | (2,397) | 2,261 | (4,506) | |||||||||||
Net exchanges | (9) | 82 | (5) | (91) | (26) | |||||||||||
Acquisitions/(dispositions) | 0 | 0 | 0 | 380 | 0 | |||||||||||
Impact of foreign exchange2 | 1,422 | 435 | (1,244) | (187) | (1,427) | |||||||||||
Market gains and (losses)3 | 5,568 | 13,872 | 2,335 | (864) | 15,763 | |||||||||||
Ending assets | $ | 181,834 | $ | 171,192 | $ | 167,870 | $ | 181,834 | $ | 167,870 | ||||||
1) | The balance at Sept. 30, 2019 includes $8.0 billion of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP. |
2) | Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. |
3) | Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income. |
4) | Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products. |
5) | For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return. |
6) | For one fixed income separate account, sales, redemptions, net sales (redemptions) and market gains and (losses) were previously incorrectly reported for the quarters ended March 31, 2020 and June 30, 2020. Total assets were reported correctly and are not impacted. Corrections for the quarter ended March 31, 2020, resulted in increasing redemptions, and thereby reducing net sales, by $390 million and increasing market gains by the same amount. Corrections for the quarter ended June 30, 2020, resulted in decreasing sales, and thereby reducing net sales, by $1.1 billion and increasing market gains by the same amount. |
Unaudited Managed Assets | Quarter Ended | ||||||||||||||
(in millions) | Sept. 30, 2020 | June 30, 2020 | March 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | ||||||||||
By Asset Class | |||||||||||||||
Equity | $ | 80,405 | $ | 76,859 | $ | 68,239 | $ | 89,011 | $ | 80,750 | |||||
Fixed-income | 79,546 | 73,143 | 64,715 | 69,023 | 65,824 | ||||||||||
Alternative / private markets1 | 18,146 | 17,485 | 18,061 | 18,102 | 17,156 | ||||||||||
Multi-asset | 3,737 | 3,705 | 3,494 | 4,199 | 4,140 | ||||||||||
Total long-term assets | 181,834 | 171,192 | 154,509 | 180,335 | 167,870 | ||||||||||
Money market | 432,952 | 457,624 | 451,330 | 395,539 | 359,292 | ||||||||||
Total Managed Assets | $ | 614,786 | $ | 628,816 | $ | 605,839 | $ | 575,874 | $ | 527,162 | |||||
By Product Type | |||||||||||||||
Funds: | |||||||||||||||
Equity | $ | 46,093 | $ | 43,723 | $ | 36,955 | $ | 48,112 | $ | 42,575 | |||||
Fixed-income | 49,779 | 46,046 | 40,601 | 44,223 | 42,329 | ||||||||||
Alternative / private markets1 | 11,393 | 11,037 | 11,365 | 11,389 | 10,826 | ||||||||||
Multi-asset | 3,546 | 3,516 | 3,330 | 4,000 | 3,952 | ||||||||||
Total long-term assets | 110,811 | 104,322 | 92,251 | 107,724 | 99,682 | ||||||||||
Money market | 325,940 | 344,846 | 336,133 | 286,612 | 261,215 | ||||||||||
Total Fund Assets | $ | 436,751 | $ | 449,168 | $ | 428,384 | $ | 394,336 | $ | 360,897 | |||||
Separate Accounts: | |||||||||||||||
Equity | $ | 34,312 | $ | 33,136 | $ | 31,284 | $ | 40,899 | $ | 38,175 | |||||
Fixed-income | 29,767 | 27,097 | 24,114 | 24,800 | 23,495 | ||||||||||
Alternative / private markets | 6,753 | 6,448 | 6,696 | 6,713 | 6,330 | ||||||||||
Multi-asset | 191 | 189 | 164 | 199 | 188 | ||||||||||
Total long-term assets | 71,023 | 66,870 | 62,258 | 72,611 | 68,188 | ||||||||||
Money market | 107,012 | 112,778 | 115,197 | 108,927 | 98,077 | ||||||||||
Total Separate Account Assets | $ | 178,035 | $ | 179,648 | $ | 177,455 | $ | 181,538 | $ | 166,265 | |||||
Total Managed Assets | $ | 614,786 | $ | 628,816 | $ | 605,839 | $ | 575,874 | $ | 527,162 | |||||
1) | Includes $8.2 billion and $8.0 billion at Dec. 31, 2019 and Sept. 30, 2019, respectively, of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP. |
Unaudited Average Managed Assets | Quarter Ended | ||||||||||||||
(in millions) | Sept. 30, 2020 | June 30, 2020 | March 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | ||||||||||
By Asset Class | |||||||||||||||
Equity | $ | 80,403 | $ | 73,620 | $ | 82,767 | $ | 84,448 | $ | 82,027 | |||||
Fixed-income | 76,798 | 69,603 | 69,068 | 67,602 | 65,074 | ||||||||||
Alternative / private markets1 | 18,270 | 18,022 | 17,983 | 17,838 | 17,407 | ||||||||||
Multi-asset | 3,786 | 3,630 | 4,006 | 4,149 | 4,167 | ||||||||||
Total long-term assets | 179,257 | 164,875 | 173,824 | 174,037 | 168,675 | ||||||||||
Money market | 448,795 | 471,984 | 406,365 | 376,029 | 349,313 | ||||||||||
Total Avg. Managed Assets | $ | 628,052 | $ | 636,859 | $ | 580,189 | $ | 550,066 | $ | 517,988 | |||||
By Product Type | |||||||||||||||
Funds: | |||||||||||||||
Equity | $ | 46,020 | $ | 41,301 | $ | 44,996 | $ | 44,984 | $ | 43,077 | |||||
Fixed-income | 48,418 | 43,229 | 44,017 | 43,304 | 41,958 | ||||||||||
Alternative / private markets1 | 11,539 | 11,345 | 11,143 | 11,283 | 11,035 | ||||||||||
Multi-asset | 3,590 | 3,453 | 3,814 | 3,956 | 3,978 | ||||||||||
Total long-term assets | 109,567 | 99,328 | 103,970 | 103,527 | 100,048 | ||||||||||
Money market | 338,814 | 356,736 | 290,641 | 274,116 | 249,846 | ||||||||||
Total Avg. Fund Assets | $ | 448,381 | $ | 456,064 | $ | 394,611 | $ | 377,643 | $ | 349,894 | |||||
Separate Accounts: | |||||||||||||||
Equity | $ | 34,383 | $ | 32,319 | $ | 37,771 | $ | 39,464 | $ | 38,950 | |||||
Fixed-income | 28,380 | 26,374 | 25,051 | 24,298 | 23,116 | ||||||||||
Alternative / private markets | 6,731 | 6,677 | 6,840 | 6,555 | 6,372 | ||||||||||
Multi-asset | 196 | 177 | 192 | 193 | 189 | ||||||||||
Total long-term assets | 69,690 | 65,547 | 69,854 | 70,510 | 68,627 | ||||||||||
Money market | 109,981 | 115,248 | 115,724 | 101,913 | 99,467 | ||||||||||
Total Avg. Separate Account Assets | $ | 179,671 | $ | 180,795 | $ | 185,578 | $ | 172,423 | $ | 168,094 | |||||
Total Avg. Managed Assets | $ | 628,052 | $ | 636,859 | $ | 580,189 | $ | 550,066 | $ | 517,988 | |||||
1) | The average balance includes $8.3 billion and $8.1 billion for the quarters ended,Dec. 31, 2019 and Sept. 30, 2019, respectively, of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP. |
Unaudited Average Managed Assets | Nine Months Ended | |||||||
(in millions) | Sept. 30, 2020 | Sept. 30, 2019 | ||||||
By Asset Class | ||||||||
Equity | $ | 78,930 | $ | 80,133 | ||||
Fixed-income | 71,823 | 64,718 | ||||||
Alternative / private markets1 | 18,091 | 17,830 | ||||||
Multi-asset | 3,808 | 4,206 | ||||||
Total long-term assets | 172,652 | 166,887 | ||||||
Money market | 442,381 | 328,664 | ||||||
Total Avg. Managed Assets | $ | 615,033 | $ | 495,551 | ||||
By Product Type | ||||||||
Funds: | ||||||||
Equity | $ | 44,106 | $ | 41,955 | ||||
Fixed-income | 45,221 | 41,568 | ||||||
Alternative / private markets1 | 11,342 | 11,243 | ||||||
Multi-asset | 3,619 | 4,018 | ||||||
Total long-term assets | 104,288 | 98,784 | ||||||
Money market | 328,730 | 227,130 | ||||||
Total Avg. Fund Assets | $ | 433,018 | $ | 325,914 | ||||
Separate Accounts: | ||||||||
Equity | $ | 34,824 | $ | 38,178 | ||||
Fixed-income | 26,602 | 23,150 | ||||||
Alternative / private markets | 6,749 | 6,587 | ||||||
Multi-asset | 189 | 188 | ||||||
Total long-term assets | 68,364 | 68,103 | ||||||
Money market | 113,651 | 101,534 | ||||||
Total Avg. Separate Account Assets | $ | 182,015 | $ | 169,637 | ||||
Total Avg. Managed Assets | $ | 615,033 | $ | 495,551 | ||||
1) | The average balance for the nine months ended Sept. 30, 2019 includes $8.2 billion of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP. |
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