Federated Hermes assets slip, but fixed-income AUM jumps to record high

Federated Hermes said assets under management totaled $634.1 billion as of Sept. 30, down 2% from three months earlier, but up 3% from a year earlier.

Federated Hermes also noted that equity AUM amounted to $97.4 billion as of Sept. 30, down 3% June 30, but up 21% from Sept. 30, 2020, according to a news release issued after the markets closed Thursday.

However, fixed-income assets jumped to a record $97.2 billion as of Sept. 30, up 7% from three months earlier and up 22.2% from a year earlier.

J. Christopher Donahue, president and CEO, said in the news release that the third quarter marked the sixth straight quarter of positive net flows into fixed-income assets. "Investors sought a range of Federated Hermes' fixed-income strategies, including multisector, high-yield and low-duration offerings, which have offered a yield advantage in this low-rate environment," Mr. Donahue added.

The top fixed-income funds for net inflows in the third quarter were Federated Hermes Ultrashort Bond Fund, Federated Hermes Total Return Bond Fund, Federated Hermes Institutional High Yield Bond Fund, Federated Hermes Short-Term Income Fund and Federated Hermes Short-Intermediate Municipal Fund, the release said.

Alternative/private market assets under management also reached a record — $22.1 billion at the end of the third quarter, up 5% from the end of the second quarter and up 22% from the end of the year-earlier quarter.

Federated Hermes also said in the release that it posted earnings per diluted share of 73 cents for the third quarter, down from earnings per diluted share of 85 cents for the same quarter last year.

Revenue fell 10% to $327 million in the third quarter compared with the year-ago period, Federated Hermes said in the release, primarily due to an "increase in 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) and lower average money market assets." But these decreases were partially offset by an "increase in revenue due to higher average equity and fixed-income assets," the release added.

However, compared with the second quarter, third-quarter revenues actually increased by 5%, primarily due to a "decrease in voluntary yield-related fee waivers, an extra day of revenue in (the third quarter) and an increase in revenue due to higher average fixed-income and equity assets," the release said. But these increases were partially offset by a "decrease in revenue due to lower average money market assets."

Investment advisory fees rose 7% to $230 million in the third quarter vs. the second quarter, but this represented an 11% decline from the year-earlier quarter.

Mr. Donahue said During a conference call Friday that Federated Hermes is "working on two new private markets products," according to a transcript of the call. He added they expect the initial closing for a new direct lending fund during the fourth quarter at about $270 million, and that he also expects to raise "additional assets" in 2022.

"We're also working on a new private equity fund, with an initial closing set for (the fourth quarter)," Mr. Donahue said according to a transcript of the call.