Federated Hermes reported year-on-year gains in profits and revenues for the quarter ended March 31, as rising rates and banking sector instability boosted assets under management for the Pittsburgh-based manager's money market business to record levels.
Chris Donahue, the firm's CEO and president, in an earnings presentation Friday said considerable market fluctuations and uncertainty lifted Federated's money market AUM $29 billion for the quarter to a record $506 billion, buoying the firm's broader total — including equity, fixed income and private markets assets — to a record $701 billion.
An 11% rise in money market assets for the 12 months ended March 31 helped Federated offset year-on-year declines of 8.8% for equity AUM to $83.6 billion, 5.0% for fixed income to $87.5 billion and 8.2% for alternative and private markets assets to $21.2 billion.
Federated reported revenues of $382.2 million for the latest quarter, up 18% from the year before and up 2% for the latest quarter. Net income, meanwhile, came to $69.6 million, up 25% on year and up 23% for the three months ended March 31.
The monetary policy backdrop, meanwhile, looks set to encourage continued inflows to money market funds, Federated executives predicted. Deborah Cunningham, the firm's chief investment officer for money market strategies, speaking at the same earnings presentation, noted that it's when interest rates reach a terminal rate and actually start going down that "money generally comes flooding" into money market products.
And executives said the firm is well positioned to continue benefiting from industry consolidation.
While the number of firms offering money market funds has fallen to 50 from over 200 in years gone by, perhaps 25 of those remaining don't have the scale to compete over the long term, noted Mr. Donahue, calling Federated a "very warm and loving home" for those money market fund assets.
Meanwhile, executives predicted Federated Hermes' alternative and private markets offerings — such as the firm's real estate debt fund, nature-based solutions fund and biodiversity fund — could become an increasingly important part of the firm's business over the long haul.