Federated Hermes Inc - Ordinary Shares (FHI) Q2 Earnings call transcript Jul 26, 2024

Federated Hermes Incorporated, a leading global investment management firm, recently held its Q2 2024 earnings call, shedding light on the company's performance, financial health, and future prospects. The call, led by Chris Donahue, CEO and President, and Tom Donahue, Chief Financial Officer, provided valuable insights into the company's strategic direction and market positioning.

Record Assets Under Management and Positive Net Sales in Equities

Despite a decrease in equity assets due to net redemptions, Federated Hermes ended the second quarter with a record assets under management of $783 billion, driven by record Money Market assets of $587 billion. The company also reported positive net sales in 11 equity strategies, including MDT large-cap growth, MDT mid-cap growth, and International Leaders Fund. These positive net sales, particularly in the growth space, signal a strong long-term outlook for the company.

Strong Performance in Fixed Income and Private Markets

In fixed income, Federated Hermes reported net redemptions of $631 million and $806 million in fixed income funds and separate accounts, respectively. However, the company also highlighted 11 fixed income funds with positive net sales, including Total Return Bond Fund and Institutional Fixed Income. The company's fixed income strategies have shown consistent performance, with 45% of its funds beating peers and 21% in the top quartile of their category.

In the alternative private markets category, Federated Hermes saw a decrease of about $400 million in assets due mainly to net redemptions in the unconstrained credit fund. Despite this, the company is actively in the market with Federated Hermes GPE Innovation Fund II and European Direct Lending III, showcasing its commitment to private market investments.

Strategic Positioning and Future Outlook

During the call, management discussed the company's strategic positioning and future outlook, highlighting the potential impact of interest rate cuts on money market funds and the company's anticipation of continued growth in this area. The company also addressed the rotation in the market, particularly towards emerging markets and non-U.S. strategies, which are expected to see high demand due to attractive valuations and declining interest rates.

Key Takeaways and Future Prospects

The Federated Hermes earnings call provided a comprehensive overview of the company's performance, strategic direction, and future prospects. The company's record assets under management, positive net sales in equities, and strong performance in fixed income and private markets underscore its robust financial health and growth potential. The company's strategic positioning, particularly in the money market and emerging market sectors, positions it well for future growth and success. As Federated Hermes continues to navigate the evolving market landscape, investors and stakeholders will closely watch its progress and execution on its strategic initiatives.