FEDERATED HERMES, INC. Q1 FY2025 earnings call

• Equities: MDT strategies had strong net sales in Q1, with net sales of $2.5 billion; strategic value dividend strategies saw improved flows.
• Fixed Income: Assets affected by market valuations and net redemptions.
• Alternative Private Markets: Acquired Rivington Energy Management, expanding private markets platform; had significant institutional mandates yet to fund.
• Money Markets: Record assets, favorable market conditions for cash, but competitive environment.
• Financial Results: Total revenue decreased slightly, operating expenses decreased, tax rate lower than expected; dividend increased, shares repurchased.

Equities: Assets increased by $1.5 billion from year-end, mainly due to net sales of $1.4 billion. MDT fundamental quant strategies had net sales of $2.5 billion in Q1, more than double prior quarter. 44% of equity funds beating peers and 31% in top-quartile over trailing three years. Fixed Income: Assets increased by ~$1.4 billion from year-end due to higher market valuations, partially offset by net redemptions. 44% of fixed-income funds beating peers and 18% in top-quartile over trailing three years. Alternative Private Markets: Assets increased by $562 million in Q1. Completed acquisition of Rivington Energy Management. Had $3.9 billion in net institutional mandates yet to fund, with equities expected to add $1.8 billion, private markets $1.7 billion, and fixed income $400 million. Money Markets: Record-high money market assets at $637 billion, with $465 billion in money market assets. Market-share was ~7.10% at end of Q1, down slightly from 7.22% at end of 2024.

• Equities: Continued interest in MDT strategies, with net sales of $345 million in Q2 through April 18 and $208 million in first three weeks of Q2.
• Fixed Income: Expected net additions of ~$400 million in sustainable investment-grade credit, active cash short-duration, and government bonds.
• Private Markets: Continued development, with ongoing fundraising for various funds.
• Money Markets: Expect flows to continue given favorable rates and market conditions, though competitive.

• Competitive Pressure: Intense competition in money market business may affect market-share.
• Market Volatility: Impact on asset valuations and flows.
• Economic Uncertainty: Tariff noise and macroeconomic factors may affect client behavior and allocations.

Q: Ken Worthington inquired about money market market-share divergence and competitive environment.

A: Debbie Cunningham discussed cyclical factors, tax payments, and macroeconomic concerns affecting money market flows. Tom Donahue noted industry inflows vs. Federated's flows, and no tariff noise impact on international clients.

Q: Patrick Davitt asked about money fund flows post-tax and institutional rotation.

A: Debbie Cunningham mentioned flows back in after tax date, and continued interest in money funds due to rate cut expectations. Tom Donahue noted $5 billion inflows since tax stop.

Q: Bill Katz questioned capital allocations and institutional interest.

A: Tom Donahue discussed share repurchases and future capital allocations. Deborah Cunningham and Tom Donahue talked about institutional interest in MDT, private equity, and cash strategies.

Q: John Dunn asked about fee rate pipeline and MDT ETF.

A: Tom Donahue said pipeline is accretive. Chris Donahue and Ray Hanley discussed active ETFs plan and MDT ETF AUM.

Q: Patrick Davitt asked about MDT AUM capacity.

A: Chris Donahue stated no capacity issues with MDT's growth.