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Federated Hermes Inc Class B FHI

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Morningstar’s Analysis

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Positive Flows and Market Gains Lift Federated Hermes' AUM to Record Levels in Q1; No Change to FVE

Greggory Warren, CFA Sector Strategist

Analyst Note

| Greggory Warren, CFA |

There was nothing in no-moat Federated Hermes first-quarter results that would alter our long-term view of the firm. We are leaving our $28 per share fair value estimate in place. Federated closed out the March quarter with a record $625 billion in managed assets, up 0.9% sequentially and 3.2% on a year-over-year basis. Net long-term inflows of $3.2 billion during the first quarter were driven primarily by the company's fixed-income operations, which reported $2.9 billion in inflows, some of which we believe was due to rotation out of the firm's money market funds, as well as portfolio rebalancing activity that typically takes place during the first quarter of any given year.

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Company Profile

Business Description

Federated provides asset management services for institutional and individual investors. The company's $619.4 billion in managed assets at the end of 2020 were composed of equity (15%), multiasset (1%), fixed-income (14%), alternative (3%), and money market (67%) funds. That said, the firm's cash-management operations are expected to generate 35%-40% of Federated's revenue this year, compared with 40%, 15%, and 8%, respectively, for the firm's equity, fixed-income and alternatives/multi-asset operations. From a channel perspective, the company's products are distributed via trust banks, wealth managers and retail broker/dealers (63% of AUM), institutional investors (25%), and international clients (12%).

1001 Liberty Avenue
Pittsburgh, PA, 15222-3779
T +1 412 288-1900
Sector Financial Services
Industry Asset Management
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type High Yield
Employees 1,986