8-K: Federated Hermes Achieves Record Assets Under Management in Q3 2024, Driven by Money Market and Fixed Income Growth

Federated Hermes reported record assets under management of $800.5 billion in Q3 2024, driven by strong inflows into money market and fixed income products, and increased earnings per diluted share to $1.06.

Summary

• Federated Hermes reported a record $800.5 billion in assets under management (AUM) as of September 30, 2024, marking the eighth consecutive quarter of record AUM.
• This represents a 12% increase from $715.2 billion on September 30, 2023, and a 2% increase from $782.7 billion on June 30, 2024.
• Money market assets reached a record $593.0 billion, while fixed income assets also hit a record at $100.2 billion.
• The company's Q3 2024 earnings per diluted share (EPS) were $1.06, up from $0.86 in Q3 2023.
• Net income for Q3 2024 was $87.5 million, compared to $75.0 million in Q3 2023.
• The board of directors declared a dividend of $0.31 per share, payable on November 15, 2024.
• Federated Hermes repurchased 818,164 shares for $26.9 million during Q3 2024 and authorized a new share repurchase program for up to 5 million shares.
• Revenue increased by 1% compared to Q3 2023, primarily due to higher average money market assets, but was partially offset by a decrease in carried interest and lower average equity assets.
• Operating expenses decreased by 1% compared to Q3 2023, mainly due to a decrease in other expenses, partially offset by an increase in distribution expenses.
• Nonoperating income increased significantly due to an increase in the market value of investments.

Sentiment

Score: 9

Explanation: The document conveys a very positive sentiment due to record AUM, strong earnings growth, and a new share repurchase program. The company's performance is clearly exceeding expectations.

Positives

• The company achieved record assets under management for the eighth consecutive quarter.
• Strong inflows into money market and fixed-income products drove asset growth.
• Earnings per share increased significantly year-over-year.
• The company authorized a new share repurchase program, indicating confidence in its financial position.
• The dividend per share increased from $0.28 to $0.31.
• The company saw positive net flows in nine of its strong-performing Federated Hermes MDT quantitative mutual funds and ETFs.
• Nonoperating income increased significantly due to an increase in the market value of investments.

Negatives

• Revenue was partially offset by a decrease in carried interest and lower average equity assets.
• Operating expenses increased year-to-date due to increased intangible asset expense.
• The company experienced a decrease in revenue from lower average equity assets.

Risks

• The company's performance is subject to market conditions, investment performance, and investor behavior.
• Fluctuations in foreign currency exchange rates can impact operating expenses.
• The company's ability to predict the level of fee waivers and expenses in future quarters is uncertain.
• The timing and level of product sales and redemptions can vary significantly.
• The company's performance is subject to the risk factors discussed in its SEC filings.

Future Outlook

The company's future performance is subject to various market and economic conditions, and there is no guarantee of future results. The company will continue to focus on its investment strategies and product offerings to meet changing market conditions.

Management Comments

• Federated Hermes reached record assets under management for the eighth consecutive quarter on the strength of flows into money market and fixed-income products, along with market appreciation of equity and fixed-income assets.
• Money market products historically offer a yield advantage when compared to bank deposit accounts and some securities in the direct market.
• The company saw interest in its Total Return Bond Fund and core plus strategies in mutual fund, ETF and collective investment fund offerings.
• In equities, the company saw positive net flows in nine of its strong-performing Federated Hermes MDT quantitative mutual funds and ETFs.

Industry Context

The results reflect a broader trend of investors seeking safety and yield in money market and fixed income products, particularly after the Fed's mid-September rate cut. The company's strong performance in these areas positions it well within the current market environment.

Comparison to Industry Standards

• Federated Hermes ranks in the top 7% of equity fund managers, the top 8% of money market fund managers and the top 10% of fixed-income fund managers according to Morningstar data as of September 30, 2024.
• This performance places Federated Hermes ahead of many of its competitors in the asset management industry, such as BlackRock, Vanguard, and Fidelity, particularly in money market and fixed income fund flows.
• While specific fund performance varies, Federated Hermes' overall AUM growth and fund rankings suggest a strong competitive position.
• The company's focus on active, responsible investing also aligns with a growing trend in the industry.

Stakeholder Impact

• Shareholders will benefit from increased earnings per share and a higher dividend.
• Employees may benefit from the share repurchase program and potential acquisitions.
• Customers will continue to have access to a range of investment solutions.
• The company's strong financial position may positively impact suppliers and creditors.

Next Steps

• The company will host an earnings conference call on October 25, 2024.
• The company will continue to execute its share repurchase program.
• The company will pay the declared dividend on November 15, 2024.

Key Dates

Keywords

assets under management, money market, fixed income, earnings per share, share repurchase, dividend, investment management, mutual funds, ETF, financial results