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Federated Hermes Inc Class B FHI

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Morningstar’s Analysis

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Continued Long-Term Inflows and Market Gains Lift Federated Hermes’ Q3 Results; Reducing FVE to $25

Greggory Warren, CFA Sector Strategist

Analyst Note

| Greggory Warren, CFA |

While there was little in no-moat Federated Hermes' third-quarter results that would alter our long-term view of the firm, we've lowered our fair value estimate to $25 per share from $27 on the expectation that weaker fees on money market funds, as well as an ongoing exodus from those funds in search of higher yield, will leave AUM levels lower in the near to medium term than we had been previously forecasting.

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Company Profile

Business Description

Federated provides asset management services for institutional and individual investors. The company's $614.8 billion in managed assets at the end of September 2020 were composed of equity (13%), multiasset (1%), fixed-income (13%), alternative (3%), and money market (70%) funds. That said, the firm's cash-management operations are expected to generate 40% of Federated's revenue this year, compared with 38%, 14%, 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 (65% of AUM), institutional investors (24%), and international clients (11%).

1001 Liberty Avenue
Pittsburgh, PA, 15222-3779
T +1 412 288-1900
Sector Financial Services
Industry Asset Management
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 1,826