FHI - Earnings call transcript Q4 2024

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Operator

Greetings. Welcome to the Federated Hermes, Inc. Q4 2024 Analyst Call and Webcast. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Ray Hanley, President of Federated Investors Management Company.

You may begin.

Raymond Hanley

Holly. you, Thank welcome and call. Good to morning, our today's and President will Financial Chris Tom be Officer Executive Officer. Chief Donahue, of Chief Leading Donahue, call Federated and Hermes;

CEO Saker for the Cunningham, Officer markets. who Q&A us money Investment Hermes are our Joining is and the Chief the of for Debbie Federated Limited; Nusseibeh

Please Hermes' disclosures make results be forward-looking may materially assumes statements. Chris? our than the we any During and update No be want results today's will assurance call, of risk to duty no future given actual we by review such SEC filings. as statements. implied these to statements, Hermes in results, forward-looking note the that Federated can Federated and different to

John Donahue

Tom record will XXXX market on results. We Ray. ended under record driven billion. financial assets comment you, morning. review Good Federated and Thank our with of will of $XXX money by I $XXX management assets billion, Hermes performance, business

at equities. looking Now first

$X.X $X.X to billion mainly from due FX Assets billion. $X.X and decreased of billion by QX of redemptions net impact

funds to January of QX SMA had These $XXX have of in As from strategies, was a million. included fund these international. flows $XXX sub-advised compared had strategies $XXX $X.X domestic strategies improvement million combined, million the XXth, in from net dividend mentioned Through both billion redemptions strategic sponsor. QX in and and that by QX. the value internalized redemptions fund quarter, last net a saw further net sales

Through about million. in up sales in from million had $XXX strategies XXXX. strategies MDT XX% year. in in 'XX. strategies of million in billion solid capping saw topped January from $XXX also fund net year-end QX, from up and MDT strong from sales XXth, at quant performance continued billion results these MDT QX. year-end, have assets QX, in We of the fundamental off net had a flow These billion strategies $XXX $X.X sales SMA net strategies $XX $X.X in up XXXX, in had

During by fund. second as MDT ETFs half product set of new the expanded funds January of collective approximately million we These assets active the X a launching have of XXth. XXXX, and $XXX

equity equity [indiscernible] have QX, mid-cap SMID Dividend ] net strategies fund fund, [ U.S. growth, in We and MDT UCITS large-cap ETF. MDT sales the U.S. growth, NDT had including core Strategic XX during

Looking at at equity fund our years, and category. XX% the performance our top X of their using end the data the equity funds 'XX and peers of were trailing Morningstar beating were in of quartile XX% for

sales the X QX, equity had side For net $XXX weeks equity [indiscernible] the of of combined million. on first and funds SM

fixed to turning income. Now

$X.X billion Assets of of large due billion by of XX income to billion, $XXX separate had has net the government sales net decreased entity that in of $X redemptions Fund. led and mainly Return and mainly quarter, funds regular public a redemptions sizable We Ultrashort inflows sales valuations had about fixed from to by net redemptions the due $X.X Fund fourth QX about Fixed income funds in Bond and had Total quarter with accounts outflows. QX Fixed the $XXX million. million. about income fourth market

'XX peers, beating their and funds income top quartile XX% for were at the the of the of using of XX% Regarding fixed data performance years, X were end in trailing Morningstar category.

manager mid-'XX. redemptions and the first billion by net senior alternative had combined impact to the the decreased fourth FX of of discussed billion, mainly $XXX million due approximately $X.X markets and QX, included departure redemptions previously For $X.X net weeks SMAs assets related X the funds rates, income in category, in fixed to which portfolio of quarter, private million. In the $XX

million. approximately our with $XXX lending we've of X, fund. raised, To third European direct our are the Direct on date, $XXX the in Lending market we closed Now European million. vintage Target

PEC target our ], EDL the [ with ] real approximately equity -- a million vehicle the overall And Innovation also global $XXX estate the and $XXX the Fund $XXX information, sixth Federated raised fund. equity Hermes co-invest $XXX target of million. the X EDL The X PECs on to in in million. series. pan-European to GPE European second million, Target about also X launching private [ million. fund $XXX the new is the debt vintage vintage market to growth each raised private X, raised million. We're raise approximately We're to million, pooled in first equity the private first fund raised also about debt of Innovation X we've raised European QX date, $XXX million To and working million. 'XX, $XXX $XXX Fund. $XXX continue on planning closed We're close fund, targeting market For

Now million, and to of wins into with expected institutional government market $X.X global is expected accounts. Approximately in separate Equities about both equity. strategies, MDT and in Ultrashort we wins additions net in totaled $XXX billion fund, expected total private billion began yet Fixed including billion, $X.X in wins to XXXX totaled wins with $X.X bonds. and and funds growth, come duration mandates into additions lending. credit direct with investment-grade and about equity net net private income sustainable net

market as assets around for by another money accounts view Money market to alternatives class. positive Total the money money added sentiment QX billion. Market billion. Higher a the markets. as for attractive have billion, funds $XXX $XX strategies. indicates market compared rates deposits money yields $XX at in T-bills in money assets bank of direct billion $XX We of money commercial support rates high cash about this paper. an money Now namely $XXX market environment and assets is aforementioned and end conducive in separate strategies moving added billion reached fund asset in of a higher record market which market and like 'XX, investments interest short-term longer growth market total and to for increased view,

fund slightly from the market down 'XX, at end which X.XX% funds, at mutual money of market sub-advised the about our end of estimate of includes X.XX% about QX. share, Our was

Now $XXX were markets, as billion $XXX including income, ago. approximately days in markets looking private billion money $XXX $XXX billion. Tom? alternative $XX billion of totals equities, and market billion, asset Money at fund mutual billion a in billion assets in in fixed $X $XX Managed recent were few at multi-asset. in assets

Thomas Donahue

performance Thanks, proxy assets. higher waivers the reduced higher $X.X Chris. $X.X money Total million, fund in The from QX in weakened of were quarter. QX mid-quarter increases as $X.X and redemption million mainly versus approximately will compared expenses assets QX due revenue line by by the quarters QX rate our occurred for of operating the million increased advertising expense. timing expense QX to than lower be Compensation and dollar. up mainly by as and other expense $X.X $XXX,XXX. was by tax in spend. higher severance was about The expected to impacted expense $XX.X item Advertising revenues pound sub-advised and recorded of $XX.X in from QX offset increased QX million $X.X revenues costs quarter, campaign The or was mainly million interest largely $X.X million $X.X of of equity per expense from of the million million costs, additional fund promotion related QX. Total were million impact XX.X% prior expense. about QX due the the offset QX and in FX-related revenue market future slightly incentive QX lower were X% to Chris compensation range. $X.X to increased from that $XX.X related to million, the nearly compared due proxy same and compensation in of QX, amount by account from mentioned the QX to million carried fees revenue fees

to We and were XXXX. At attributable excluding expect was million. $XXX the million. Cash the XX% in investments, the the of portion cash and year, for tax noncontrolling be the to range rate to XX% interest investments $XXX end

average ahead expenses. Based looking will result lower $X.X certain days levels, million impact to results. fewer to distribution and of QX factors is revenues Now expected about asset the of million impact about $X in in seasonal lower QX, on

to be seasonally $X compensation stock expense QX, based In payroll on about our expense to of million related addition, assessment, [indiscernible] is than higher early due higher expected taxes. primarily and and for

incentive the like we multiple Of compensation, questions now. course, will factors. Holly, items vary open for would and others, up including these to call based on

Operator

Your is Instructions] Autonomous Davitt Research. Patrick question first with from for [Operator today

Patrick Davitt

to the SMAs. mutual making you dynamics would with [ seeing of fund there large excluding morning, what market a BlackRock I'm looks you're going the It maybe say, level appreciate we like of start see to why speak some of at that on are the that higher position? from going so fund up Good banks higher fund than kind for much SMAs I'm question other flows, market that managers side. Could fund that, are are maybe money feels the share, fund everyone. guys? kind or a asset curious bit any like market SMAs you just can't and complexes, up on are our but loss the ] money like I explain on what the share trends large flows seeing little even making of other the

John Donahue

little bit, talk some offer comments. I'll a then Patrick, Debbie will

the over first it share out you The data be X.XX%. average quarter. you X.XX% giving and back years our that and and I all market last turns looked every went been those for we've to numbers, is between thing And X

you were clients. at And XXth money that's quarter a from So ebb loss clients market less, process. say looking at of amounts flow lose yes, you the We big share. X it can see don't we of the in over okay, and any where of percent of

let So response. the I share. I'll a Debbie better don't losing you have of worries market give about any pulse marketplace

Deborah Cunningham

every there's our I large with loss Chris. may Chris share But XXX% just clients. It is position noise. I the that flow of flows we're and kind first most of the defensive of Thanks year context is the loss at basis. tends a be this I market not ultimately, to generally said. The And of background And the any fund year-end, is from not times just that, basis of one in some volatile which if speaking, everything agree apologize of a a quarter year. year. be mutual that would cyclical What that worst on seeing say

very will quarter. think that's maybe only month We're first one change. Now that positive into ultimately, But a trend. the we

Patrick Davitt

repurchase obviously, ratcheted a as follow-up, large quick a the been quite then but bit. price bound, has range you down balance. rebuilding And fairly Stock a Helpful. cash

you're again? update us range-bound price thinking of much and repurchases higher cash the the through now about how maybe on lens So balance

Thomas Donahue

under was looking value. anymore, of buying it the our significantly right these ratchet we we as belief which down, buy weren't because fit price all then models were stock is backwards, stock the And to firm, the tell Patrick, Well, in went down. as of the our the of going up. are allowed And into that okay, soon us as growth still

is to have day two to we it answer decide, level expect we better be is say, to in get today And yes. don't think and how characterize better a or to we buy. tomorrow and really Look at to stock? down, view So high get we should And to that that's do buying the ratcheted then okay, really things. buy quarter, The on every I to which would buy XXXX. we I

Operator

is question with Ken next from Your Worthington JPMorgan.

Unknown Analyst

today. in This money just Ken is for on Michael the up to discussion. [ wanted market follow Chell ], I'm I

be here guess, called You year fund that money opening remarks strengthening and start called And business, think fund on you higher to the from flows I the your your you out backdrop of in [indiscernible] envision side. seems the do change the in in mutual rate out I strong rates. a for

Ultrashort And which understand, better maybe longer fund of or for as just well, the business appreciate a some and the as trying well how business. considerable you money seem I backdrop products guess as envision higher to your up make the so to of I'm here portion

John Donahue

basis going double a have that having not once first. When institutions doing continues we be for extra rates believe deposit the better relationship The available I'll things and institutional they the a rates, trade down Well, to are for again, is that to trade. trade the we'll go point. exactly answer. very, getting very retail team are as and you good

we fund have attitude for cash didn't business. even And so an funds are To still fast So though owner big rates of even you marketplace. the push that to still said it a because for asset business, that to drop great operator, to class. And institutional in gives said us, an that as before. time a money created I've money and a though I happen didn't a the is this this about owner advantage operator, the means a they that's an positive why lot credence great remember,

If a it's total you Nirvana. handle, X have

on [ delightful But are to being ] it's still handle, there. you sanguine the X a worried about handle or money a quite factors, have XX And is basis adviser than the comes that war of the a fund. clients who's X recognizing have convince and customer up more regulatory, the up. Then you return. to lot If deserves trying between people marketplace, in the cash maybe At about move from cetera. a messing XXX lot or that point a et of XX legal, competitive, type a still

So a our that business. Debbie? sets for stage good

Deborah Cunningham

I wholeheartedly agree.

invested think latter a still think, that I terminal standpoint, inflationary points there. And course market with higher, market are, that basis in that the be environment later of rate things I substantially but the tightening And of with this backdrop years, from balance to of year, the the when was And ago they're might I the into you allow own users the couple at X of their start not they're expectations asset look us the it's is the the not their comfortable from that. When standpoint to what regard maybe stickiness versus have in second in economic it -- add although more of to with standpoint leaving. there the new aspect where ultimately, in to in and a Nirvana it, expected XX doesn't growth to have a current of months some class. it, think, cash is likely, they're over in XXXX, again. the X-plus a are the of an half sheet the going from happen delightful good balances additional the have I'm last policies, it's higher. again, maybe to their come administration's believer receiving because what a than very a increase increasing with happen you

continued XXXX outlook the be 'XX, in percentage continues that sector. but to not substantial in our and exceeds what certainly So maybe growth we saw growth

Unknown Analyst

want various just in or thanks and for maybe that ESG color. for [indiscernible] mean switch Global recent how us impact and even very might Global -- ESG a If remind touch more ESG less sustainability of all broader you so gears plan in ], on now. products the to on with just years [ focused funds through and I I Great, ESG sustainability Can seemingly could I just and your sustainable of be some Equity kind your ahead? talk like in products and positioned market second.

John Donahue

can and point already of element you're I back did broader using Hermes good we still And that portfolio And will those managers decisions. and what view additional talk and while making the this information of to in a had 'XX, you risk/reward investor. teams a you about tools, funds. When because are of and lot that that questions analysis fiduciaries so these ESG the as are decanted the underlying in is we asking. focused from Debbie continue on investment on the returns than and long yes legal the we believe. Saker therefore, the doing that comment to acquisition work say we acquisition good will the through assist

Now of Saker the you that comment I'll let some on funds mentioned.

Saker Nusseibeh

Chris. you, Thank

factor us as So as always Hermes our the part just achieve terms. At Hermes, to about financial have which long used point the we sustainability to a return uses in reiterate one Federated study Limited, an is ESG essential old of term. the help how better

to part different are there expectations we ESG thematic a who people and funds in Europe be be the Now for answering consider specific to requirements. want mainstream different We outright And to in your live are returns back world with not of also which different do also going some not specific for these these but aiming funds. just consider outcomes. question. funds. Then We aiming market

is it global important. materiality, fronts, main that to interest for either clients well the they it clients because as because continues far and double buying continues which to them ultimately, performance As because want ESG, for see to example, or from is good do

interest. in If to you funds, our SDG same look Income continues see the at Fixed thing the Fund income fixed

element. specifically. funds, of Europe to the strength risk last flows, it If The to the in the risk the lack But seen these flows back. with of off Europe year come on are advising go on ebbs of so the -- we've and funds. in at risk are the sentiment affected course, of fund clients you look what had in And more the with advisers have depending with the into the did this than or do thematic

fulfilling clients seat exactly giving abide both the the by returns want, far for and thematic in as the achieve funds fiduciary in they funds want financial specific are as and So the want. regulators They're exception clients with here the the sold specific the trying to the outcomes. because we're the are doing they what very back best of U.S., duty outcome of Europe concerned, as

Operator

today for question Dan is Jefferies. Fannon next Your with from

Unknown Analyst

is [indiscernible] This on for Trevor Dan.

and first to question, of growth those speak spending priorities the of investments? from rate into how where the XXXX differing And you about think my should year? for last we it's can For

Thomas Donahue

-- fourth I bit, because expect assets, knock an on at I've first We the least payroll on The that compensation to quarter. are there. basis -- distribution the more If we addressed raise first If incentive thing there. Same things line asset future that's bonus that least up. paying less days the more and of Sure. the quarter down in side. quarter think for reflected go will a already we'll comp, and into going distribution little QX but will from the and at wise great, the and recalibrating comp, be

a I lines, to there. would say step communication have and up systems the On expect we

each market and the and data quarterly really rest much on related. And spending that would basis, don't about the into be and the areas, I -- expectation. a $X that's quarter technology future, into change have million, around Somewhere of

And other London. Of our hedging expenses infamous in line, course, the we the line with FX. are other remember,

so when for get doesn't down, over really expenses affect we less we in it our And -- because us pound pay the pounds then goes London.

doesn't We hedged the over seed think goes line -- down I basically. I we're our the the up. So year and was up was we basis, the that a addressed the it The why tax. control why money and or was little tax price whether -- nonoperating can't stock line. was -- already reason sorry, a because it I'm reason tax rate the down up with bit

that so had as a to And was rate caused the so vestings we tax benefit. go down, that

Unknown Analyst

there. Great. products, there I alternative color interest you would regions? to or firm specific market subscale? or the appreciate in, you for what And on the like been follow-up, certain the areas overall then pretty strong. as my guys has view guys areas of invest areas And Are

John Donahue

you got It Would repeat that? garbled. please

Unknown Analyst

yes. Yes,

view So on What the are alternative pretty areas specific subscale? to interest looking products, has overall market the regions And within are that you guys strong. expand? there firm areas are or been to

John Donahue

Yes, places, expand done side, Cross, Paradise those to where the on we team have one of are One a situation. the that with in interested would able and calls regeneration on are be do projects where Circus number is And that willing be be a we've don't us any we times kinds Okay. especially of do to another of of And the things areas that to U.K. kinds the subscale. improving it are and that in then and about talked there other couple do estate, his interesting Birmingham in of King's infrastructure these Taylor U.S. for in Chris would we're U.S. where that to real to

get would of to or it's still billion, them at And ones have get looking but I couple over in mentioned. though, PE like to the opportunities as very go So have small great mentioned. those good on I've past to with that lending, a we we would activity. The be be again. size I the may I where, we'd direct even opportunities, we're side, greater numbers love don't where and say

there. strong pretty we're So

the there's on interesting ago, depending which private of clients in on very, one, is and of trade opportunity I trade count was end finance, Another very you this credit. with interest the globe. is And in Kong a a out it, Hong short that is Singapore lot side. across how finance weeks X the and

billion, that's but projects and with another it's And $X good again, we've good one so records, got where, about good opportunities clients.

Operator

[ Holby Robin with from is ] Cowen. question next TD Your

Unknown Analyst

on Cass ]. This Bill is markets [ the Follow-up private for question. last Holby Robin ] on [

portfolio? And Just outlook given accelerating, funds the capital when markets the these for to to is the respect that that what is expect you mentioned, offset your you activity start with distributions? fundraising, near-term realizations do in

John Donahue

take let to at going pitch. a swing Saker I'm that

Saker Nusseibeh

Thank you, Chris.

we about PEC is I PEC answer raising as VI speak The following distributing PEC having of the V speak. and nature V, raises we It's So pays are point is capital new VI whole in and we as capital. the PEC out comes markets. assets to as

debt, money at back getting look We take that's you paid actually, to we direct raised If its a place. lending, off the money more investors. to

be X. same the can So in direct within now we're said that. In lending, EDL

we will again, of mature, these Now as be paying course, back.

would we of is we in whether replenishing I it's because we're we assets assets exactly lending. balance actually, more it's think it and And have are cycle. in we're shows whether in in pay clients success success we're of returning infrastructure, I say sign where of that in that course, that, the making I'm where So than the back. And the equity, direct to whether made a the it's private a

then client our a returning triggers and sign So flows more to the assets of success way. is coming

answers re-ups seeing old So the we're strategies, that you more good which tells that place. with across we're in what from and we're our coming what clients importantly, we're to re-up hope clients lot of we're of the a up the And our we question. raised pleased the and are midst in cycle, I money are pleased a seeing. with

Operator

for with ISI. today John Dunn is from next question Your Evercore

John Dunn

kind and given and of markets and for see flipping to improving contextualize the But about so backdrop the dividend can it fund of how think strategic rates? far value Great demand positive you that this people year.

John Donahue

the with way this of idea this product or people historically, is will dividend fund presented an top times, because the dividends. it chart that tend Not chart. people A the way it's lot growth will it, buy The fund is class in the where because at the the belong for at a growing in doesn't top either reason -- to dividend it's the fund charts right the that of the of chart looking because towards the bottom the put it of Yes. for be dividends.

interesting here One about is even that when traction. the of the flows, the negative fund the dynamic things strategic last was year in gaining was ETF dividend

And that that dividend is buying of dividend you it fund. they aspect shows someone so that particular understand strategic a

a So many at this market. looking stone the people into today, coming in of stepping the are as

a and you out, get dividend do broadening in a And you You get yield if the along paid there's the market. participate good way. yet a

is And numbers pretty so turning fund now. this up right good

John Dunn

And then could more then Got worried point at of could of it. risk? -- to And areas you what is might institutional there chunky just risk? that be kind broadly, mandates any be at are you institutional

John Donahue

the Well, first thing institutional short everywhere. side, on the a we're on leash is

the say for for no the there reason long, the And any money to however even so for everybody. though they're any it's reason. time they Basically, right pull or have institutions

a where anywhere. second. I'm not losing talking say something, we're to you're going that I can't for of but worried but like about, risk risk kind at let the about Ray talk And So that not about we're it's

Raymond Hanley

separate And net through which sometimes pipeline quarter. redemptions we low side, coming ], in known account [ any When the this using the institutional the of $X.X or so known our could give be funds. were they're million fund, a redemptions very John. very, numbers, in Sure, that's a

side. any have redemptions visibility We really material don't -- the institutional have we to very on

can And large basis, then they change. Now have us not cash. about, that there's in may we they tell clients you use on as the coming, have Chris talked that and like says, a they regular come a I entity but cash redemption always mean, public

not have out terms But -- on there's there this an so And outflow those in of kind visibility, of from at material standpoint. point, you anything swings.

by sales, have, strong NDT interest hand, On other getting we for the to accelerated big inflow that of equity in of strategies, bunch the around growth, institutional we're that was the good the yet continues institutional as are particular had very in gross being up side optimistic those in the build, of ones which really other terms pipeline that the size. that our some pipeline and sales, driven of MDT, aren't asset have remarks, for noted that about wins a increase in we make number they in net bubbling

Operator

question-and-answer remarks. We end to have over session, the closing for reached of and turn will I now call Ray the the

Raymond Hanley

joining That you Holly. concludes you, Thank Thank our call. for us today.

Operator

This you. Thank does conference. conclude today's

You may disconnect your for your participation. you lines at this time. Thank

Federated Hermes (FHI) 31 Jan 252024 Q4 Earnings call transcript