Federated Hermes, Inc. : reports third quarter 2020 earnings; board declares cash dividend per share of $1.27, including $0.27 quarterly and $1.00 special dividend

PITTSBURGH, Oct. 29, 2020 /PRNewswire/ -- Federated Hermes, Inc. (NYSE: FHI), a global leader in active, responsible investing, today reported earnings per diluted share (EPS) of $0.85 for Q3 2020, compared to $0.72 for the same quarter last year, on net income of $85.8 million for Q3 2020, compared to $73.0 million for Q3 2019. Federated Hermes reported YTD 2020 earnings per diluted share of $2.29, compared to $1.88 for the same period in 2019, on YTD 2020 net income of $231.2 million, compared to $190.2 million for the same period in 2019.

Federated Hermes' total managed assets were $614.8 billion at Sept. 30, 2020, up $87.6 billion or 17% from $527.2 billion at Sept. 30, 2019 and down $14.0 billion or 2% from $628.8 billion at June 30, 2020. Total average managed assets for Q3 2020 were $628.1 billion, up $110.1 billion or 21% from $518.0 billion reported for Q3 2019 and down $8.8 billion or 1% from $636.9 billion reported for Q2 2020.

"In the third quarter, investors and advisors continued to show strong interest in a range of our actively managed strategies through market volatility and the Covid-19 pandemic," said J. Christopher Donahue, president and chief executive officer. "Federated Hermes' equity assets were at $80 billion, with strong investment performance from our international dividend strategy and both an emerging market equity and an international growth equity fund, which were added to our product mix in the last year and are managed by the Cleveland-based international equity team. We saw net sales in a variety of equity styles, including growth, ESG and impact funds.

"We reached record fixed-income assets under management of $80 billion at the end of the third quarter," said Donahue. "Our Total Return Bond Fund and Short-Intermediate Total Return Bond Fund outperformed a majority of their peers during the pandemic. Both funds, which seek to capture opportunities and manage risk through various rate environments, were among our funds with the strongest net sales, along with a range of short-duration and high-yield strategies."

Federated Hermes' board of directors declared a dividend of $1.27 per share. The dividend, which will be paid from Federated Hermes' existing cash balance, is considered an ordinary dividend for tax purposes and consists of a $0.27 quarterly dividend and a $1.00 special dividend. The dividend is payable on Nov. 13, 2020 to shareholders of record as of Nov. 6, 2020. During Q3 2020, Federated Hermes purchased 866,900 shares of Federated Hermes class B common stock for $20.0 million.

"The special dividend reinforces Federated Hermes' continued commitment to delivering shareholder value," said Thomas R. Donahue, chief financial officer. "The November dividend payment marks our fifth special-dividend, totaling $7.53 per share, in the last dozen years."

Equity assets were $80.4 billion at Sept. 30, 2020, down $0.4 billion from $80.8 billion at Sept. 30, 2019 and up $3.5 billion or 5% from $76.9 billion at June 30, 2020. Top-selling equity funds during Q3 2020 on a net basis were Federated Hermes

Kaufmann Small Cap Fund, Federated Hermes SDG Engagement Equity Fund (UCITS), Federated Hermes Global Equity ESG Fund, Federated Hermes Impact Opportunities Equity Fund and the Federated Hermes International Small-Mid Company Fund.

Fixed-income assets were a record $79.5 billion at Sept. 30, 2020, up $13.7 billion or 21% from $65.8 billion at Sept. 30, 2019 and up $6.4 billion or 9% from $73.1 billion at June 30, 2020. Top-selling fixed-income funds during Q3 2020 on a net basis were Federated Hermes Short-Intermediate Total Return Bond Fund, Federated Hermes Ultrashort Bond Fund, Federated Hermes Municipal Ultrashort Fund, Federated Hermes Total Return Bond Fund and Federated Hermes Institutional High Yield Bond Fund.

Money market assets were $433.0 billion at Sept. 30, 2020, up $73.7 billion or 21% from $359.3 billion at Sept. 30, 2019 and down $24.6 billion or 5% from $457.6 billion at June 30, 2020. Money market fund assets were $325.9 billion at Sept. 30, 2020, up $64.7 billion or 25% from $261.2 billion at Sept. 30, 2019 and down $18.9 billion or 5% from $344.8 billion at June 30, 2020.

Financial Summary

Q3 2020 vs. Q3 2019

Revenue increased $24.1 million or 7% percent primarily due to higher average money market and fixed-income assets and as a result of revenue of a previously nonconsolidated entity being recorded in operating revenue beginning March 2020. These increases in revenue were partially offset by 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). See "Impact of voluntary yield-related fee waivers."

During Q3 2020, Federated Hermes derived 60 percent of its revenue from long-term assets (38 percent from equity assets, 14 percent from fixed-income assets and 8 percent from alternative/private markets and multi-asset), 39 percent from money market assets, and 1 percent from sources other than managed assets. 

Operating expenses were flat, with increases in compensation being offset by decreased distribution expenses primarily resulting from voluntary yield-related fee waivers on certain money market fund assets.

Nonoperating income (expenses) decreased a net $1.2 million or 17% due to the net operating impact from the previously nonconsolidated entity no longer being recorded as nonoperating income, offset partially by increased investment gains.

Q3 2020 vs. Q2 2020

Revenue increased $3.7 million or 1% primarily due to higher average equity and fixed-income assets. These increases were partially offset by an increase in voluntary yield-related fee waivers and lower average money market assets.

Operating expenses decreased $12.4 million or 5% primarily due to decreased distribution expenses resulting from higher voluntary yield-related fee waivers on certain money market fund assets.

Nonoperating income (expenses) decreased a net $7.8 million or 56% primarily due to the Q3 2020 increase in the market value of investments being less than the Q2 2020 market value increase following the significant recovery from the Q1 2020 coronavirus impact to markets.

YTD 2020 vs. YTD 2019

Revenue increased $115.5 million or 12% primarily due to higher average money market assets, revenue of a previously nonconsolidated entity being recorded in operating revenue beginning March 2020 and higher average fixed-income assets.  These increases were partially offset by voluntary yield-related fee waivers.    

For the first nine months of 2020, Federated Hermes derived 57% percent of its revenue from long-term assets (37 percent from equity assets, 13 percent from fixed-income assets and 7 percent from alternative/private markets and multi-asset), 42 percent from money market assets, and 1 percent from sources other than managed assets.

Operating expenses increased $57.2 million or 8% primarily due to increased incentive compensation, an increase in distribution expenses associated with higher average money market fund assets and an increase due to a previously nonconsolidated entity being recorded in expenses beginning March 2020. These increases were partially offset by voluntary yield-related fee waivers.

Nonoperating income (expenses) increased a net $4.8 million or 56% primarily due to a gain from a fair value adjustment to the equity investment of a previously nonconsolidated entity.

Impact of voluntary yield-related fee waivers

During the three and nine months ended Sept. 30, 2020, voluntary yield-related fee waivers totaled $36.8 million and $56.9 million, respectively. These fee waivers were largely offset by related reductions in distribution expenses of $33.0 million and $51.0 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $3.8 million and $5.9 million for the three and nine months ended Sept. 30, 2020, respectively.

Federated Hermes' level of business activity and financial results are dependent upon many factors, including market conditions, investment performance and investor behavior. These factors and others, including asset levels and mix, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers, expenses and regulatory changes, can significantly impact Federated Hermes' business activity levels and financial results. Risk factors and uncertainties that can influence Federated Hermes' financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission (SEC).

Federated Hermes will host an earnings conference call at 9 a.m. Eastern on Oct. 30, 2020. Investors are invited to listen to the earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (international) prior to the 9 a.m. start time. To listen online, go to the Investor Relations section and the Analyst Information tab of FederatedHermes.com at least 15 minutes prior to register and join the call. A replay will be available at approximately 12:30 p.m. Eastern on Oct. 30, 2020. To access the telephone replay, dial 877-481-4010 (domestic) or 919-882-2331 (international) and enter access code 38009. The online replay will be available via FederatedHermes.com for one year.

Federated Hermes, Inc. is a leading global investment manager with $614.8 billion in assets under management as of Sept. 30, 2020. Guided by our conviction that responsible investing is the best way to create wealth over the long term, our investment solutions span equity, fixed-income, alternative/private markets, multi-asset and liquidity management strategies. Providing world-class active investment management and engagement services to more than 11,000 institutions and intermediaries, our clients include corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Headquartered in Pittsburgh, Federated Hermes' more than 1,900 employees include those in London, New York, Boston and several other offices worldwide. For more information, visit FederatedHermes.com.

Federated Hermes ranks in the top 6% of equity fund managers in the industry, the top 7% of money market fund managers and the top 10% of fixed-income fund managers¹. Federated Hermes also ranks as the 5th-largest manager of model-delivered SMAs². For more information, including an analyst presentation, visit FederatedHermes.com.

###

1) ISS Market Intelligence (SIMFUND), Sept. 30, 2020. Based on assets under management in open-end funds.
2) Money Management Institute/Cerulli, Q2 2020.
Federated Securities Corp. is distributor of the Federated Hermes funds.
Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling, Federated MDTA LLC, Hermes Fund Managers Ireland Limited, Hermes Investment Management Limited, and Hermes GPE LLP, each a registered investment advisor in one or more of the U.S., U.K. or Ireland.

Certain statements in this press release, such as those related to performance, investor preferences and demand, asset flows and mix, fee waivers, and the coronavirus and efforts to combat it, constitute or may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Other risks and uncertainties include the ability of the company to predict the level of fee waivers and expenses in future quarters, predict whether performance fees or carried interest will be earned and retained, and sustain product demand, asset flows and mix, which could vary significantly depending on various factors, such as market conditions, investment performance and investor behavior. Other risks and uncertainties include the risk factors discussed in the company's annual and quarterly reports as filed with the SEC. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness of such statements in the future.

Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
	Quarter Ended						% Change Q3 2019 to Q3 2020			Quarter Ended			% Change Q2 2020 to Q3 2020
	Sept. 30, 2020			Sept. 30, 2019						June 30, 2020
Revenue
Investment advisory fees, net	$	260,089		$	232,106		12	%		$	245,126		6	%
Administrative service fees, net—affiliates	83,028			64,216			29			83,733			(1)
Other service fees, net	21,338			44,018			(52)			31,853			(33)
Total Revenue	364,455			340,340			7			360,712			1
Operating Expenses
Compensation and related	126,186			112,247			12			123,583			2
Distribution	73,726			88,082			(16)			89,038			(17)
Systems and communications	16,193			13,353			21			15,091			7
Professional service fees	14,006			10,678			31			13,888			1
Office and occupancy	10,578			10,855			(3)			10,190			4
Advertising and promotional	2,921			4,102			(29)			3,065			(5)
Travel and related	542			4,158			(87)			325			67
Other	6,922			7,558			(8)			8,281			(16)
Total Operating Expenses	251,074			251,033			0			263,461			(5)
Operating Income	113,381			89,307			27			97,251			17
Nonoperating Income (Expenses)
Investment income (loss), net	6,622			444			NM			14,841			55
Debt expense	(494)			(1,239)			(60)			(785)			(37)
Other, net	103			8,264			(99)			(24)			NM
Total Nonoperating Income (Expenses), net	6,231			7,469			(17)			14,032			(56)
Income before income taxes	119,612			96,776			24			111,283			7
Income tax provision	32,928			23,191			42			26,482			24
Net income including the noncontrolling interests in subsidiaries	86,684			73,585			18			84,801			2
Less: Net income (loss) attributable to the noncontrolling interests in subsidiaries	862			623			38			3,605			(76)
Net Income	$	85,822		$	72,962		18	%		$	81,196		6	%
Amounts Attributable to Federated Hermes, Inc.
Earnings Per Share1
Basic	$	0.86		$	0.72		19	%		$	0.81		6	%
Diluted	$	0.85		$	0.72		18	%		$	0.80		6	%
Weighted-Average Shares Outstanding
Basic and Diluted	96,039			97,306						96,800
Dividends Declared Per Share	$	0.27		$	0.27					$	0.27

1)

Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of basic earnings per share under the "two-class method." As such, total net income of $3.4 million, $2.8 million and $3.2 million available to unvested restricted Federated Hermes shareholders for the quarterly periods ended Sept. 30, 2020, Sept. 30, 2019 and June 30, 2020, respectively, was excluded from the computation of basic earnings per share. In addition to the amounts excluded from the basic earnings per share calculation, the computation of diluted earnings per share excludes net income available to unvested shareholders of a nonpublic consolidated subsidiary.

Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
	Nine Months Ended
	Sept. 30, 2020			Sept. 30, 2019			% Change
Revenue
Investment advisory fees, net	$	745,875		$	663,974		12	%
Administrative service fees, net—affiliates	238,960			176,319			36
Other service fees, net	99,515			128,576			(23)
Total Revenue	1,084,350			968,869			12
Operating Expenses
Compensation and related	365,104			330,712			10
Distribution	258,925			247,713			5
Systems and communications	46,179			38,258			21
Professional service fees	41,162			31,445			31
Office and occupancy	32,539			33,283			(2)
Advertising and promotional	10,981			12,989			(15)
Travel and related	4,026			12,465			(68)
Other	22,058			16,868			31
Total Operating Expenses	780,974			723,733			8
Operating Income	303,376			245,136			24
Nonoperating Income (Expenses)
Investment income (loss), net	7,011			4,679			50
Debt expense	(2,211)			(3,971)			(44)
Other, net	8,426			7,756			9
Total Nonoperating Income (Expenses), net	13,226			8,464			56
Income before income taxes	316,602			253,600			25
Income tax provision	81,852			61,564			33
Net income including the noncontrolling interests in subsidiaries	234,750			192,036			22
Less: Net income (loss) attributable to the noncontrolling interests in subsidiaries	3,554			1,804			97
Net Income	$	231,196		$	190,232		22	%
Amounts Attributable to Federated Hermes, Inc.
Earnings Per Share1
Basic	$	2.30		$	1.88		22	%
Diluted	$	2.29		$	1.88		22	%
Weighted-Average Shares Outstanding
Basic and Diluted	96,726			97,211
Dividends Declared Per Share	$	0.81		$	0.81

1)

Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of basic earnings per share under the "two-class method." As such, total net income of $8.9 million and $7.3 million available to unvested restricted Federated Hermes shareholders for the nine months ended Sept. 30, 2020 and Sept. 30, 2019, respectively, was excluded from the computation of basic earnings per share. In addition to the amounts excluded from the basic earnings per share calculation, the computation of diluted earnings per share excludes net income available to unvested shareholders of a nonpublic consolidated subsidiary.

 

Unaudited Condensed Consolidated Balance Sheets
(in thousands)	Sept. 30, 2020			Dec. 31, 2019
Assets
Cash and other investments	$	437,159		$	340,635
Other current assets	132,255			120,649
Intangible assets, net, including goodwill	1,257,553			1,220,762
Other long-term assets	176,759			198,085
Total Assets	$	2,003,726		$	1,880,131
Liabilities, Redeemable Noncontrolling Interests and Equity
Current liabilities	$	234,379		$	230,713
Long-term debt	90,000			100,000
Other long-term liabilities	313,470			296,052
Redeemable noncontrolling interests	214,301			212,086
Equity excluding treasury stock	1,469,674			1,322,312
Treasury stock	(318,098)			(281,032)
Total Liabilities, Redeemable Noncontrolling Interests and Equity	$	2,003,726		$	1,880,131

 

Unaudited Changes in Long-Term Assets - By Asset Class
(in millions)	Quarter Ended										Nine Months Ended
	Sept. 30, 2020			June 30, 2020			Sept. 30, 2019				Sept. 30, 2020			Sept. 30, 2019
Equity
Beginning assets	$	76,859		$	68,239		$	81,999			$	89,011		$	72,497
Sales1	4,186			4,579			5,182				14,845			15,130
Redemptions1	(5,552)			(7,280)			(6,384)				(20,674)			(16,714)
Net sales (redemptions)1	(1,366)			(2,701)			(1,202)				(5,829)			(1,584)
Net exchanges	31			(56)			(11)				(62)			193
Acquisitions/(dispositions)	0			0			0				(71)			0
Impact of foreign exchange2	578			439			(577)				249			(695)
Market gains and (losses)3	4,303			10,938			541				(2,893)			10,339
Ending assets	$	80,405		$	76,859		$	80,750			$	80,405		$	80,750
Fixed Income5
Beginning assets	$	73,143		$	64,715		$	65,052			$	69,023		$	63,158
Sales1	9,859			10,691			4,805				28,237			15,414
Redemptions1	(4,897)			(5,407)			(5,418)				(20,092)			(16,940)
Net sales (redemptions)1	4,962			5,284			(613)				8,145			(1,526)
Net exchanges	(36)			146			10				(5)			(214)
Acquisitions/(dispositions)	0			0			0				(1)			0
Impact of foreign exchange2	135			29			(107)				9			(124)
Market gains and (losses)3	1,342			2,969			1,482				2,375			4,530
Ending assets	$	79,546		$	73,143		$	65,824			$	79,546		$	65,824
Alternative/Private Markets4
Beginning assets	$	17,485		$	18,061		$	17,917			$	18,102		$	18,318
Sales1	586			792			384				2,266			1,017
Redemptions1	(411)			(961)			(813)				(1,954)			(1,973)
Net sales (redemptions)1	175			(169)			(429)				312			(956)
Net exchanges	0			(3)			(61)				(1)			(64)
Acquisitions/(dispositions)	0			0			0				452			0
Impact of foreign exchange2	708			(33)			(560)				(446)			(608)
Market gains and (losses)3	(222)			(371)			289				(273)			466
Ending assets	$	18,146		$	17,485		$	17,156			$	18,146		$	17,156
Multi-asset
Beginning assets	$	3,705		$	3,494		$	4,213			$	4,199		$	4,093
Sales1	45			48			65				191			247
Redemptions1	(155)			(168)			(218)				(558)			(687)
Net sales (redemptions)1	(110)			(120)			(153)				(367)			(440)
Net exchanges	(4)			(5)			57				(23)			59
Impact of foreign exchange2	1			0			0				1			0
Market gains and (losses)3	145			336			23				(73)			428
Ending assets	$	3,737		$	3,705		$	4,140			$	3,737		$	4,140
Total Long-term Assets4, 5
Beginning assets	$	171,192		$	154,509		$	169,181			$	180,335		$	158,066
Sales1	14,676			16,110			10,436				45,539			31,808
Redemptions1	(11,015)			(13,816)			(12,833)				(43,278)			(36,314)
Net sales (redemptions)1	3,661			2,294			(2,397)				2,261			(4,506)
Net exchanges	(9)			82			(5)				(91)			(26)
Acquisitions/(dispositions)	0			0			0				380			0
Impact of foreign exchange2	1,422			435			(1,244)				(187)			(1,427)
Market gains and (losses)3	5,568			13,872			2,335				(864)			15,763
Ending assets	$	181,834		$	171,192		$	167,870			$	181,834		$	167,870

1)	For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
2)	Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
3)	Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
4)	The balance at September 30, 2019 includes $8.0 billion of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.
5)	For one fixed income separate account, sales, redemptions, net sales (redemptions) and market gains and (losses) were previously incorrectly reported for the quarters ended March 31, 2020 and June 30, 2020. Total assets were reported correctly and are not impacted. Corrections for the quarter ended March 31, 2020, resulted in increasing redemptions, and thereby reducing net sales, by $390 million and increasing market gains by the same amount. Corrections for the quarter ended June 30, 2020, resulted in decreasing sales, and thereby reducing net sales, by $1.1 billion and increasing market gains by the same amount.

 

Unaudited Changes in Long-Term Assets - By Asset Class and Product Type
(in millions)
	Quarter Ended
	Sept. 30, 2020
	Equity						Fixed Income						Alternative / Private Markets						Multi-asset						Total
	Funds			Separate Accounts1			Funds			Separate Accounts1			Funds			Separate Accounts1			Funds			Separate Accounts1			Funds.			Separate Accounts1
Beginning assets	$	43,723		$	33,136		$	46,046		$	27,097		$	11,037		$	6,448		$	3,516		$	189		$	104,322		$	66,870
Sales	2,937			1,249			7,183			2,676			471			115			44			1			10,635			4,041
Redemptions	(3,299)			(2,253)			(4,497)			(400)			(386)			(25)			(146)			(9)			(8,328)			(2,687)
Net sales (redemptions)	(362)			(1,004)			2,686			2,276			85			90			(102)			(8)			2,307			1,354
Net exchanges	31			0			(36)			0			0			0			(4)			0			(9)			0
Impact of foreign exchange2	306			272			105			30			440			268			0			1			851			571
Market gains and (losses)3	2,395			1,908			978			364			(169)			(53)			136			9			3,340			2,228
Ending assets	$	46,093		$	34,312		$	49,779		$	29,767		$	11,393		$	6,753		$	3,546		$	191		$	110,811		$	71,023
	Nine Months Ended
	Sept. 30, 2020
	Equity						Fixed Income						Alternative / Private Markets						Multi-asset						Total
	Funds			Separate Accounts1			Funds			Separate Accounts1,4			Funds			Separate Accounts1			Funds			Separate Accounts1			Funds			Separate Accounts1,4
Beginning assets	$	48,112		$	40,899		$	44,223		$	24,800		$	11,389		$	6,713		$	4,000		$	199		$	107,724		$	72,611
Sales	10,423			4,422			21,811			6,426			1,799			467			164			27			34,197			11,342
Redemptions	(12,431)			(8,243)			(17,474)			(2,618)			(1,511)			(443)			(538)			(20)			(31,954)			(11,324)
Net sales (redemptions)	(2,008)			(3,821)			4,337			3,808			288			24			(374)			7			2,243			18
Net exchanges	(56)			(6)			(5)			0			(1)			0			(23)			0			(85)			(6)
Acquisition-related	0			(71)			0			(1)			0			452			0			0			0			380
Impact of foreign exchange2	61			188			(23)			32			(258)			(188)			0			1			(220)			33
Market gains and (losses)3	(16)			(2,877)			1,247			1,128			(25)			(248)			(57)			(16)			1,149			(2,013)
Ending assets	$	46,093		$	34,312		$	49,779		$	29,767		$	11,393		$	6,753		$	3,546		$	191		$	110,811		$	71,023

1)	Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products. For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
2)	Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
3)	Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
4)	For one fixed income separate account, sales, redemptions, net sales (redemptions) and market gains and (losses) were previously incorrectly reported for the quarters ended March 31, 2020 and June 30, 2020. Total assets were reported correctly and are not impacted. Corrections for the quarter ended March 31, 2020, resulted in increasing redemptions, and thereby reducing net sales, by $390 million and increasing market gains by the same amount. Corrections for the quarter ended June 30, 2020, resulted in decreasing sales, and thereby reducing net sales, by $1.1 billion and increasing market gains by the same amount.

Unaudited Changes in Long-Term Assets - By Product Type
(in millions)	Quarter Ended										Nine Months Ended
	Sept. 30, 2020			June 30, 2020			Sept. 30, 2019				Sept. 30, 2020			Sept. 30, 2019
Total Fund Assets1
Beginning assets	$	104,322		$	92,251		$	100,946			$	107,724		$	92,359
Sales	10,635			12,201			6,900				34,197			22,324
Redemptions	(8,328)			(10,022)			(7,986)				(31,954)			(23,357)
Net sales (redemptions)	2,307			2,179			(1,086)				2,243			(1,033)
Net exchanges	(9)			82			0				(85)			4
Impact of foreign exchange2	851			93			(725)				(220)			(808)
Market gains and (losses)3	3,340			9,717			547				1,149			9,160
Ending assets	$	110,811		$	104,322		$	99,682			$	110,811		$	99,682
Total Separate Account Assets4, 6
Beginning assets	$	66,870		$	62,258		$	68,235			$	72,611		$	65,707
Sales5	4,041			3,909			3,536				11,342			9,484
Redemptions5	(2,687)			(3,794)			(4,847)				(11,324)			(12,957)
Net sales (redemptions)5	1,354			115			(1,311)				18			(3,473)
Net exchanges	0			0			(5)				(6)			(30)
Acquisitions/(dispositions)	0			0			0				380			0
Impact of foreign exchange2	571			342			(519)				33			(619)
Market gains and (losses)3	2,228			4,155			1,788				(2,013)			6,603
Ending assets	$	71,023		$	66,870		$	68,188			$	71,023		$	68,188
Total Long-term Assets1,4, 6
Beginning assets	$	171,192		$	154,509		$	169,181			$	180,335		$	158,066
Sales5	14,676			16,110			10,436				45,539			31,808
Redemptions5	(11,015)			(13,816)			(12,833)				(43,278)			(36,314)
Net sales (redemptions)5	3,661			2,294			(2,397)				2,261			(4,506)
Net exchanges	(9)			82			(5)				(91)			(26)
Acquisitions/(dispositions)	0			0			0				380			0
Impact of foreign exchange2	1,422			435			(1,244)				(187)			(1,427)
Market gains and (losses)3	5,568			13,872			2,335				(864)			15,763
Ending assets	$	181,834		$	171,192		$	167,870			$	181,834		$	167,870

1)	The balance at Sept. 30, 2019 includes $8.0 billion of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment.  As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.
2)	Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
3)	Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
4)	Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products.
5)	For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
6)	For one fixed income separate account, sales, redemptions, net sales (redemptions) and market gains and (losses) were previously incorrectly reported for the quarters ended March 31, 2020 and June 30, 2020. Total assets were reported correctly and are not impacted. Corrections for the quarter ended March 31, 2020, resulted in increasing redemptions, and thereby reducing net sales, by $390 million and increasing market gains by the same amount. Corrections for the quarter ended June 30, 2020, resulted in decreasing sales, and thereby reducing net sales, by $1.1 billion and increasing market gains by the same amount.

 

Unaudited Managed Assets	Quarter Ended
(in millions)	Sept. 30, 2020			June 30, 2020			March 31, 2020			Dec. 31, 2019			Sept. 30, 2019
By Asset Class
Equity	$	80,405		$	76,859		$	68,239		$	89,011		$	80,750
Fixed-income	79,546			73,143			64,715			69,023			65,824
Alternative / private markets1	18,146			17,485			18,061			18,102			17,156
Multi-asset	3,737			3,705			3,494			4,199			4,140
Total long-term assets	181,834			171,192			154,509			180,335			167,870
Money market	432,952			457,624			451,330			395,539			359,292
Total Managed Assets	$	614,786		$	628,816		$	605,839		$	575,874		$	527,162
By Product Type
Funds:
Equity	$	46,093		$	43,723		$	36,955		$	48,112		$	42,575
Fixed-income	49,779			46,046			40,601			44,223			42,329
Alternative / private markets1	11,393			11,037			11,365			11,389			10,826
Multi-asset	3,546			3,516			3,330			4,000			3,952
Total long-term assets	110,811			104,322			92,251			107,724			99,682
Money market	325,940			344,846			336,133			286,612			261,215
Total Fund Assets	$	436,751		$	449,168		$	428,384		$	394,336		$	360,897
Separate Accounts:
Equity	$	34,312		$	33,136		$	31,284		$	40,899		$	38,175
Fixed-income	29,767			27,097			24,114			24,800			23,495
Alternative / private markets	6,753			6,448			6,696			6,713			6,330
Multi-asset	191			189			164			199			188
Total long-term assets	71,023			66,870			62,258			72,611			68,188
Money market	107,012			112,778			115,197			108,927			98,077
Total Separate Account Assets	$	178,035		$	179,648		$	177,455		$	181,538		$	166,265
Total Managed Assets	$	614,786		$	628,816		$	605,839		$	575,874		$	527,162

1)	Includes $8.2 billion and $8.0 billion at Dec. 31, 2019 and Sept. 30, 2019, respectively, of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.

Unaudited Average Managed Assets	Quarter Ended
(in millions)	Sept. 30, 2020			June 30, 2020			March 31, 2020			Dec. 31, 2019			Sept. 30, 2019
By Asset Class
Equity	$	80,403		$	73,620		$	82,767		$	84,448		$	82,027
Fixed-income	76,798			69,603			69,068			67,602			65,074
Alternative / private markets1	18,270			18,022			17,983			17,838			17,407
Multi-asset	3,786			3,630			4,006			4,149			4,167
Total long-term assets	179,257			164,875			173,824			174,037			168,675
Money market	448,795			471,984			406,365			376,029			349,313
Total Avg. Managed Assets	$	628,052		$	636,859		$	580,189		$	550,066		$	517,988
By Product Type
Funds:
Equity	$	46,020		$	41,301		$	44,996		$	44,984		$	43,077
Fixed-income	48,418			43,229			44,017			43,304			41,958
Alternative / private markets1	11,539			11,345			11,143			11,283			11,035
Multi-asset	3,590			3,453			3,814			3,956			3,978
Total long-term assets	109,567			99,328			103,970			103,527			100,048
Money market	338,814			356,736			290,641			274,116			249,846
Total Avg. Fund Assets	$	448,381		$	456,064		$	394,611		$	377,643		$	349,894
Separate Accounts:
Equity	$	34,383		$	32,319		$	37,771		$	39,464		$	38,950
Fixed-income	28,380			26,374			25,051			24,298			23,116
Alternative / private markets	6,731			6,677			6,840			6,555			6,372
Multi-asset	196			177			192			193			189
Total long-term assets	69,690			65,547			69,854			70,510			68,627
Money market	109,981			115,248			115,724			101,913			99,467
Total Avg. Separate Account Assets	$	179,671		$	180,795		$	185,578		$	172,423		$	168,094
Total Avg. Managed Assets	$	628,052		$	636,859		$	580,189		$	550,066		$	517,988

1)

The average balance includes $8.3 billion and $8.1 billion for the quarters ended,Dec. 31, 2019 and Sept. 30, 2019, respectively, of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment.  As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.

Unaudited Average Managed Assets		Nine Months Ended
(in millions)		Sept. 30, 2020				Sept. 30, 2019
By Asset Class
Equity		$	78,930			$	80,133
Fixed-income		71,823				64,718
Alternative / private markets1		18,091				17,830
Multi-asset		3,808				4,206
Total long-term assets		172,652				166,887
Money market		442,381				328,664
Total Avg. Managed Assets		$	615,033			$	495,551
By Product Type
Funds:
Equity		$	44,106			$	41,955
Fixed-income		45,221				41,568
Alternative / private markets1		11,342				11,243
Multi-asset		3,619				4,018
Total long-term assets		104,288				98,784
Money market		328,730				227,130
Total Avg. Fund Assets		$	433,018			$	325,914
Separate Accounts:
Equity		$	34,824			$	38,178
Fixed-income		26,602				23,150
Alternative / private markets		6,749				6,587
Multi-asset		189				188
Total long-term assets		68,364				68,103
Money market		113,651				101,534
Total Avg. Separate Account Assets		$	182,015			$	169,637
Total Avg. Managed Assets		$	615,033			$	495,551

1)	The average balance for the nine months ended Sept. 30, 2019 includes $8.2 billion of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.

 

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SOURCE Federated Hermes, Inc.