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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 Q2; No Change to FVE

Greggory Warren, CFA Sector Strategist

Analyst Note

| Greggory Warren, CFA |

There was nothing in no-moat-rated Federated Hermes second-quarter results that would alter our long-term view of the firm. We are leaving our $31 per share fair value estimate in place. Federated closed out the June quarter with a record $645.8 billion in managed assets, up 3.3% sequentially but only 2.72% on a year-over-year basis. Net long-term inflows of $2.1 billion during the second quarter were driven primarily by the company's fixed-income operations, which reported $3.2 billion in inflows, some of which we believe has been due to rotation out of the firm's money market funds (which are not offering much in the way of yield these days).

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Company Profile

Business Description

Federated provides asset management services for institutional and individual investors. We estimate that the company will have $633 billion in managed assets at the end of June 2021, composed of equity (16%), multiasset (1%), fixed-income (14%), alternative (3%), and money market (66%) funds. That said, the firm's cash-management operations are expected to generate around a quarter of Federated's revenue this year, compared with 50%, 15%, and 10%, 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 (62% of AUM), institutional investors (25%), and international clients (13%).

1001 Liberty Avenue
Pittsburgh, PA, 15222-3779
T +1 412 288-1900
Sector Financial Services
Industry Asset Management
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type High Yield
Employees 1,986