Federated Investors, Inc. : Reports Fourth Quarter and Full-Year 2018 Earnings

PITTSBURGH, Jan. 24, 2019 /PRNewswire/ -- Federated Investors, Inc. (NYSE: FII), one of the world's largest investment managers, today reported earnings per diluted share (EPS) for Q4 2018 of $0.61, down from $1.31 for the same quarter last year, on net income of $61.5 million for Q4 2018, compared to $131.8 million for Q4 2017.  Full-year 2018 EPS was $2.18, down from $2.87 for 2017 on net income of $220.3 million for 2018, compared to $291.3 million for 2017.  Federated's Q4 2017 and full-year 2017 results included $70.4 million of net income, representing $0.70 and $0.69 per share for Q4 2017 and full-year 2017, respectively, resulting from the enactment of the Tax Cuts and Jobs Act of 2017 (Tax Act). The results in this press release include the acquisition of Hermes Fund Managers Limited (Hermes), beginning July 1, 2018.

Management believes adjusted EPS and adjusted net income for 2017, which are non-GAAP financial measures, are useful measures for investors to evaluate Federated's financial performance as a result of the tax-rate changes resulting from the Tax Act.  The adjusted measures reflect what earnings would have been in 2017 had the tax law changes not reduced the federal corporate income tax rate from 35 percent to 21 percent, resulting in a revaluation of Federated's net deferred tax liability in 2017.  As such, Federated's Q4 2017 adjusted EPS was $0.61, matching Q4 2018 EPS, and adjusted net income was $61.4 million, compared to net income of $61.5 million for Q4 2018.  Full-year 2017 adjusted EPS was $2.18, matching 2018 EPS, and adjusted net income was $220.9 million, compared to net income of $220.3 million for 2018¹.

Federated's total managed assets were $459.9 billion at Dec. 31, 2018, up $62.3 billion or 16 percent from $397.6 billion at Dec. 31, 2017 and up $22.7 billion or 5 percent from $437.2 billion at Sept. 30, 2018.  Average managed assets for Q4 2018 were $443.7 billion, up $61.7 billion or 16 percent from $382.0 billion reported for Q4 2017 and up $9.8 billion or 2 percent from $433.9 billion reported for Q3 2018.

"As the Federal Reserve raised short-term interest rates four times in 2018, Federated's wide range of liquidity products offered competitive yields for investors seeking cash-management solutions," said J. Christopher Donahue, president and chief executive officer.  "Federated's money market assets increased nearly $38 billion in the fourth quarter, crossing the $300 billion threshold."

Federated's board of directors declared a quarterly dividend of $0.27 per share.  The dividend is payable on Feb. 15, 2019 to shareholders of record as of Feb. 8, 2019.  During Q4 2018, Federated purchased 95,298 shares of Federated class B common stock for $2.2 million, bringing the total shares of Class B common stock purchased in 2018 to 1,205,790 shares for $29.1 million.

Federated's equity assets were $72.5 billion at Dec. 31, 2018, up $9.7 billion or 15 percent from $62.8 billion at Dec. 31, 2017 and down $11.6 billion or 14 percent from $84.1 billion at Sept. 30, 2018.  Top-selling equity funds on a net basis during Q4 2018 were Hermes SDG Engagement Equity Fund, Federated MDT Small Cap Growth Fund, Federated Kaufmann Small Cap Fund, Hermes Global Equity ESG Fund and Hermes Global Emerging Markets Small and Mid Cap Equity Fund.

"With the 2018 acquisition of a controlling interest in London-based Hermes Investment Management complete, Hermes is integrated into Federated's performance," Donahue said.  "Hermes' ESG strategies, which invest with an emphasis on environmental, social and governance factors, were among Federated's equity fund net-sales leaders in the fourth quarter, which highlights investor interest in these products."

Federated's fixed-income assets were $63.2 billion at Dec. 31, 2018, down $1.0 billion or 2 percent from $64.2 billion at Dec. 31, 2017 and down $2.2 billion or 3 percent from $65.4 billion at Sept. 30, 2018.  Top-selling fixed-income funds on a net basis during Q4 2018 included Federated Ultrashort Bond Fund, Federated Municipal Ultrashort Fund, Federated Short-Term Income Fund, Federated Government Ultrashort Duration Fund and Federated Real Return Bond Fund.

Federated's money market assets were $301.8 billion at Dec. 31, 2018, up $36.6 billion or 14 percent from $265.2 billion at Dec. 31, 2017 and up $37.6 billion or 14 percent from $264.2 billion at Sept. 30, 2018.  Money market mutual fund assets were $208.5 billion at Dec. 31, 2018, up $23.0 billion or 12 percent from $185.5 billion at Dec. 31, 2017 and up $25.5 billion or 14 percent from $183.0 billion at Sept. 30, 2018.  Federated's money market separate account assets were $93.3 billion at Dec. 31, 2018, up $13.6 billion or 17 percent from $79.7 billion at Dec. 31, 2017 and up $12.0 billion or 15 percent from $81.3 billion at Sept. 30, 2018.

Financial Summary

Q4 2018 vs. Q4 2017

Revenue increased $28.9 million or 10 percent primarily due to the consolidation of Hermes' revenue, which included performance fees of $5.8 million and higher average money market assets.  This increase in revenue was partially offset by a decrease in revenue from lower average equity assets, a decrease in revenue due to the adoption of the new revenue recognition accounting standard and higher voluntary fee waivers for certain money market funds for competitive purposes.

During Q4 2018, Federated derived 63 percent of its revenue from long-term assets (41 percent from equity assets, 14 percent from fixed-income assets and 8 percent from alternative/private markets and multi-asset), 36 percent from money market assets, and 1 percent from sources other than managed assets.

Operating expenses increased $31.8 million or 17 percent primarily due to the consolidation of Hermes' expenses.  This increase was partially offset by a decrease in expense due to the adoption of the new revenue recognition accounting standard.

Nonoperating (expenses) income, net decreased $8.5 million primarily due to a decrease in the market value of investments, fewer gains realized from the redemption of investments and a decrease in the market value of derivatives used to hedge foreign exchange risk.

Q4 2018 vs. Q3 2018

Revenue decreased $1.4 million primarily due to a decrease in revenue from lower average equity assets.  This decrease was partially offset by an increase in revenue from higher average money market assets and an increase in performance fees.

Operating expenses decreased by $7.5 million or 3 percent primarily due to a decrease in transaction-related costs associated with the acquisition of Hermes.

Nonoperating (expenses) income, net decreased $8.0 million primarily due to private equity carried interest income received in Q3 2018 on assets managed by a nonconsolidated entity, a decrease in the market value of derivatives used to hedge foreign exchange risk and a decrease in the market value of investments, primarily from securities held by consolidated investment companies.

2018 vs. 2017

Revenue increased $32.8 million or 3 percent primarily due to the Hermes acquisition.  This increase in revenue included performance fees of $8.6 million that were recorded in 2018, compared to $0.3 million in 2017.  This increase in revenue was offset by a decrease in revenue due to the adoption of the new revenue recognition accounting standard, higher voluntary fee waivers for certain money market funds for competitive purposes, and a previously disclosed Q1 2017 change in a customer relationship.

During 2018, Federated derived 62 percent of its revenue from long-term assets (41 percent from equity assets, 16 percent from fixed-income assets and 5 percent from multi-asset and alternative/private markets), 37 percent from money market assets and 1 percent from sources other than managed assets.

Operating expenses increased by $44.0 million or 6 percent primarily due to the consolidation of Hermes' expenses.  This increase was partially offset by a decrease in expense due to the adoption of the new revenue recognition accounting standard and a change in the mix of average money market fund assets.

Nonoperating (expenses) income, net decreased $44.6 million primarily due to a loss recorded in Q2 2018 from two foreign currency forward derivative instruments entered into in connection with the Hermes acquisition, a decrease in the market value of investments, primarily from securities held by consolidated investment companies, and fewer gains realized from the redemption of investments in 2018 as compared to 2017.

Federated's 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's business activity levels and financial results.  Risk factors and uncertainties that can influence Federated's financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission (SEC).

Federated will host an earnings conference call at 9 a.m. Eastern on Jan. 25, 2019.  Investors are invited to listen to Federated's earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (international) prior to the 9 a.m. start time.  The call may also be accessed in real time via the About Federated section of FederatedInvestors.com.  A replay will be available from approximately 12:30 p.m. Eastern on Jan. 25, 2019 until Feb. 1, 2019 by calling 877-481-4010 (domestic) or 919-882-2331 (international) and entering access code 41747.  An online replay will be available via FederatedInvestors.com for one year.

Federated Investors, Inc. is a leading global investment manager with $459.9 billion in assets under management as of Dec. 31, 2018.  Our investment solutions span 130 equity, fixed-income, alternative/private markets, multi-asset and money market funds and a range of separately managed account strategies.  Providing comprehensive investment management to more than 9,500 institutions and intermediaries, our clients include corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers.  Headquartered in Pittsburgh, Federated's nearly 1,900 employees include those in New York, Boston, London and several other offices worldwide.  In 2018, Federated acquired a majority interest in Hermes Investment Management, which provides world-class active management and stewardship services.

Federated ranks in the top 6 percent of equity fund managers in the industry, the top 7 percent of money market fund managers and the top 11 percent of fixed-income fund managers².  Federated also ranks as the 10th-largest SMA manager³.  Information regarding Hermes is available at Hermes-Investment.com.  An analyst presentation that includes information about Hermes also is available.  For more information, visit FederatedInvestors.com.

###

1) Reconciliation of Non-GAAP Financial Measures (Adjusted EPS and Adjusted Net Income): For Q4 2017, GAAP EPS of $1.31, less $0.70 resulting from the revaluation of Federated's net deferred tax liability, results in an adjusted EPS of $0.61 and GAAP net income of $131.8 million, less $70.4 million resulting from the revaluation of Federated's deferred tax liability, results in an adjusted net income of $61.4 million. For full-year 2017, GAAP EPS of $2.87, less $0.69 resulting from the revaluation of Federated's net deferred tax liability, results in an adjusted EPS of $2.18, and GAAP net income of $291.3 million, less $70.4 million resulting from the revaluation of Federated's deferred tax liability, results in adjusted net income of $220.9 million.
2) Strategic Insight as of Dec. 31, 2018.  Based on assets under management in U.S. open-end funds.
3) Money Management Institute/Cerulli Associates, Q3 2018.
Federated Securities Corp. is distributor of the Federated funds.
Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling, Federated MDTA LLC, Hermes Investment Management Limited and Hermes European Equities Limited, each a registered investment adviser.

Certain statements in this press release, such as those related to the level of fee waivers and expenses incurred by the company, performance, investor preferences and demand, asset flows and mix, and expenses 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, sustain product demand, and 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 Q4 2017 to Q4 2018		Quarter Ended			% Change Q3 2018 to Q4 2018
	Dec. 31, 2018			Dec. 31, 2017					Sept. 30, 2018
Revenue
Investment advisory fees, net	$	213,990		$	186,145		15	%	$	217,036		(1)	%
Administrative service fees, net	52,022			49,051			6		49,855			4
Other service fees, net	41,204			43,116			(4)		41,725			(1)
Total Revenue	307,216			278,312			10		308,616			0
Operating Expenses
Compensation and related	99,153			71,990			38		103,092			(4)
Distribution	73,482			80,408			(9)		72,153			2
Systems and communications	11,528			7,713			49		12,213			(6)
Professional service fees	10,461			8,922			17		13,535			(23)
Office and occupancy	10,384			7,453			39		9,332			11
Advertising and promotional	5,174			2,771			87		4,502			15
Travel and related	4,627			3,496			32		4,622			0
Other	4,453			4,725			(6)		7,269			(39)
Total Operating Expenses	219,262			187,478			17		226,718			(3)
Operating Income	87,954			90,834			(3)		81,898			7
Nonoperating (Expenses) Income
Investment (loss) income, net	(1,666)			3,601			(146)		1,199			(239)
Debt expense	(1,522)			(1,239)			23		(1,602)			(5)
Other, net	(2,972)			(9)			NM		2,240			(233)
Total Nonoperating (Expenses) Income, net	(6,160)			2,353			(362)		1,837			(435)
Income before income taxes	81,794			93,187			(12)		83,735			(2)
Income tax provision (benefit)1	20,162			(38,787)			(152)		21,741			(7)
Net income including the noncontrolling interests in subsidiaries	61,632			131,974			(53)		61,994			(1)
Less: Net income attributable to the noncontrolling interests in subsidiaries	96			164			(41)		2,386			(96)
Net Income	$	61,536		$	131,810		(53)	%	$	59,608		3	%
Amounts Attributable to Federated Investors, Inc.
Earnings Per Share2,3
Basic and Diluted	$	0.61		$	1.31		(53)	%	$	0.59		3	%
Weighted-Average Shares Outstanding
Basic	96,758			97,084					96,664
Diluted	96,758			97,086					96,664
Dividends Declared Per Share	$	0.27		$	0.25				$	0.27

1)	Dec. 31, 2017 includes a reduction of $70.4 million resulting from the revaluation of the net deferred tax liability due to the enactment of the Tax Act.
2)	Dec. 31, 2017 includes an increase of $0.70 per share resulting from the revaluation of the net deferred tax liability due to the enactment of the Tax Act.
3)	Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of earnings per share under the "two-class method." As such, total net income of $2.3 million, $5.0 million and $2.4 million available to unvested restricted Federated shareholders for the quarterly periods ended Dec. 31, 2018, Dec. 31, 2017 and Sept. 30, 2018, 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 of $0.3 million and $0.5 million available to unvested shareholders of a nonpublic consolidated subsidiary for the quarterly periods ended Dec. 31, 2018 and Sept. 30, 2018, respectively.

     

Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
		Year Ended
		Dec. 31, 2018				Dec. 31, 2017				% Change
Revenue
Investment advisory fees, net		$        773,418				$        731,670				6	%
Administrative service fees, net		199,269				188,814				6
Other service fees, net		162,990				182,440				(11)
Total Revenue		1,135,677				1,102,924				3
Operating Expenses
Compensation and related		354,765				289,215				23
Distribution		287,580				342,779				(16)
Professional service fees		42,903				29,064				48
Systems and communications		39,925				31,971				25
Office and occupancy		34,622				29,258				18
Advertising and promotional		16,141				11,166				45
Travel and related		15,594				12,646				23
Other		13,867				15,317				(9)
Total Operating Expenses		805,397				761,416				6
Operating Income		330,280				341,508				(3)
Nonoperating (Expenses) Income
Investment income, net		1,628				15,308				(89)
Debt expense		(5,885)				(4,772)				23
Other, net		(29,849)				(42)				NM
Total Nonoperating (Expenses) Income, net		(34,106)				10,494				(425)
Income before income taxes		296,174				352,002				(16)
Income tax provision1		73,875				57,101				29
Net income including the noncontrolling interests in subsidiaries		222,299				294,901				(25)
Less: Net income attributable to the noncontrolling interests in subsidiaries		2,002				3,560				(44)
Net Income		$	220,297			$	291,341			(24)	%
Amounts Attributable to Federated Investors, Inc.
Earnings Per Share2,3
Basic and Diluted		$	2.18			$	2.87			(24)	%
Weighted-Average Shares Outstanding
Basic		96,949				97,411
Diluted		96,949				97,412
Dividends Declared Per Share		$	1.06			$	1.00

1)	Dec. 31, 2017 includes a reduction of $70.4 million resulting from the revaluation of the net deferred tax liability due to the enactment of the Tax Act.
2)	Dec. 31, 2017 includes an increase of $0.69 per share resulting from the revaluation of the net deferred tax liability due to the enactment of the Tax Act.
3)	Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of earnings per share under the "two-class method." As such, total net income of $8.6 million and $11.4 million available to unvested restricted shareholders for the years ended Dec. 31, 2018 and Dec. 31, 2017, 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 of $0.8 million available to unvested shareholders of a nonpublic consolidated subsidiary for the year ended Dec 31, 2018.

 

Unaudited Condensed Consolidated Balance Sheets
(in thousands)	Dec. 31, 2018			Dec. 31, 2017
Assets
Cash and other investments	$	190,490		$	369,538
Other current assets	113,611			67,736
Intangible assets, net, including goodwill	1,149,247			736,915
Other long-term assets	90,335			57,221
Total Assets	$	1,543,683		$	1,231,410
Liabilities, Redeemable Noncontrolling Interests and Equity
Current liabilities	$	181,180		$	128,849
Long-term debt	135,000			170,000
Other long-term liabilities	187,869			141,183
Redeemable noncontrolling interests	182,513			30,163
Equity excluding treasury stock	1,144,458			1,039,947
Treasury stock	(287,337)			(278,732)
Total Liabilities, Redeemable Noncontrolling Interests and Equity	$	1,543,683		$	1,231,410

 

Unaudited Changes in Long-Term Assets - By Asset Class
(in millions)	Quarter Ended										Year Ended
	Dec. 31, 2018			Sept. 30, 2018			Dec. 31, 2017				Dec. 31, 2018			Dec. 31, 2017
Equity
Beginning assets	$	84,143		$	57,973		$	61,721			$	62,816		$	56,759
Sales1	4,274			3,757			2,483				13,955			11,614
Redemptions1	(6,777)			(5,288)			(3,220)				(22,401)			(14,806)
Net redemptions1	(2,503)			(1,531)			(737)				(8,446)			(3,192)
Net exchanges	(180)			(11)			42				(116)			(11)
Acquisition-related	0			24,700			0				24,700			287
Market gains and losses2	(8,963)			3,012			1,790				(6,457)			8,973
Ending assets	$	72,497		$	84,143		$	62,816			$	72,497		$	62,816
Fixed Income
Beginning assets	$	65,369		$	61,435		$	52,701			$	64,160		$	51,314
Sales1	5,330			5,163			15,771				20,156			27,549
Redemptions1	(7,424)			(4,418)			(4,617)				(23,370)			(17,032)
Net (redemptions) sales1	(2,094)			745			11,154				(3,214)			10,517
Net exchanges	214			2			(50)				136			(123)
Acquisition-related	0			2,732			0				2,732			148
Market gains and losses2	(331)			455			355				(656)			2,304
Ending assets	$	63,158		$	65,369		$	64,160			$	63,158		$	64,160
Alternative / Private Markets3
Beginning assets	$	18,621		$	292		$	407			$	366		$	458
Sales1	437			757			38				1,250			132
Redemptions1	(530)			(674)			(74)				(1,315)			(251)
Net (redemptions) sales 1	(93)			83			(36)				(65)			(119)
Net exchanges	1			(2)			(1)				(2)			57
Acquisition-related	0			18,509			0				18,509			0
Market gains and losses2	(211)			(261)			(4)				(490)			(30)
Ending assets	$	18,318		$	18,621		$	366			$	18,318		$	366
Multi-asset
Beginning assets	$	4,790		$	4,730		$	4,998			$	5,014		$	5,164
Sales1	119			120			112				493			483
Redemptions1	(369)			(211)			(257)				(1,044)			(1,166)
Net redemptions1	(250)			(91)			(145)				(551)			(683)
Net exchanges	(23)			4			(7)				(21)			(28)
Acquisition-related	0			45			0				45			0
Market gains and losses2	(424)			102			168				(394)			561
Ending assets	$	4,093		$	4,790		$	5,014			$	4,093		$	5,014
Total Long-term Assets3
Beginning assets	$	172,923		$	124,430		$	119,827			$	132,356		$	113,695
Sales1	10,160			9,797			18,404				35,854			39,778
Redemptions1	(15,100)			(10,591)			(8,168)				(48,130)			(33,255)
Net (redemptions) sales1	(4,940)			(794)			10,236				(12,276)			6,523
Net exchanges	12			(7)			(16)				(3)			(105)
Acquisition-related	0			45,986			0				45,986			435
Market gains and losses2	(9,929)			3,308			2,309				(7,997)			11,808
Ending assets	$	158,066		$	172,923		$	132,356			$	158,066		$	132,356

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 approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates.
3)	Includes $8.3 billion and $8.4 billion at Dec. 31, 2018 and Sept. 30, 2018, respectively, of assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.

 

Unaudited Changes in Long-Term Assets - By Asset Class and Product Type
(in millions)
	Quarter Ended
	Dec. 31, 2018
	Equity						Fixed Income						Alternative / Private Markets						Multi-asset						Total
	Funds			Separate Accounts1			Funds			Separate Accounts1			Funds2			Separate Accounts1			Funds			Separate Accounts1			Funds2			Separate Accounts1
Beginning assets	$	43,578		$	40,565		$	41,817		$	23,552		$	11,457		$	7,164		$	4,585		$	205		$	101,437		$	71,486
Sales	2,645			1,629			4,777			553			348			89			98			21			7,868			2,292
Redemptions	(3,909)			(2,868)			(5,698)			(1,726)			(409)			(121)			(359)			(10)			(10,375)			(4,725)
Net (redemptions) sales	(1,264)			(1,239)			(921)			(1,173)			(61)			(32)			(261)			11			(2,507)			(2,433)
Net exchanges	(180)			0			215			(1)			1			0			(23)			0			13			(1)
Market gains and losses3	(5,550)			(3,413)			(621)			290			(32)			(179)			(381)			(43)			(6,584)			(3,345)
Ending assets	$	36,584		$	35,913		$	40,490		$	22,668		$	11,365		$	6,953		$	3,920		$	173		$	92,359		$	65,707
	Year Ended
	December 31, 2018
	Equity						Fixed Income						Alternative / Private Markets						Multi-asset						Total
	Funds			Separate Accounts1			Funds			Separate Accounts1			Funds2			Separate Accounts1			Funds			Separate Accounts1			Funds2			Separate Accounts1
Beginning assets	$	33,008		$	29,808		$	41,144		$	23,016		$	366		$	0		$	4,783		$	231		$	79,301		$	53,055
Sales	8,408			5,547			16,594			3,562			1,127			123			472			21			26,601			9,253
Redemptions	(12,192)			(10,209)			(18,366)			(5,004)			(790)			(525)			(1,013)			(31)			(32,361)			(15,769)
Net (redemptions) sales	(3,784)			(4,662)			(1,772)			(1,442)			337			(402)			(541)			(10)			(5,760)			(6,516)
Net exchanges	(115)			(1)			138			(2)			(2)			0			(21)			0			0			(3)
Acquisition-related	11,131			13,569			1,565			1,167			10,823			7,686			45			0			23,564			22,422
Market gains and losses3	(3,656)			(2,801)			(585)			(71)			(159)			(331)			(346)			(48)			(4,746)			(3,251)
Ending assets	$	36,584		$	35,913		$	40,490		$	22,668		$	11,365		$	6,953		$	3,920		$	173		$	92,359		$	65,707

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)	Includes $8.3 billion at Dec. 31, 2018 of assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
3)	Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates.

 

Unaudited Changes in Long-Term Assets - By Product Type
(in millions)
	Quarter Ended										Year Ended
	Dec. 31, 2018			Sept. 30, 2018			Dec. 31, 2017				Dec. 31, 2018			Dec. 31, 2017
Total Fund Assets1
Beginning assets	$	101,437		$	76,389		$	78,955			$	79,301		$	75,665
Sales	7,868			7,168			5,050				26,601			20,579
Redemptions	(10,375)			(7,405)			(5,831)				(32,361)			(24,261)
Net redemptions	(2,507)			(237)			(781)				(5,760)			(3,682)
Net exchanges	13			(4)			(16)				0			(49)
Acquisition-related	0			23,564			0				23,564			435
Market gains and losses2	(6,584)			1,725			1,143				(4,746)			6,932
Ending assets	$	92,359		$	101,437		$	79,301			$	92,359		$	79,301
Total Separate Accounts Assets3
Beginning assets	$	71,486		$	48,041		$	40,872			$	53,055		$	38,030
Sales4	2,292			2,629			13,354				9,253			19,199
Redemptions4	(4,725)			(3,186)			(2,337)				(15,769)			(8,994)
Net (redemptions) sales4	(2,433)			(557)			11,017				(6,516)			10,205
Net exchanges	(1)			(3)			0				(3)			(56)
Acquisition-related	0			22,422			0				22,422			0
Market gains and losses2	(3,345)			1,583			1,166				(3,251)			4,876
Ending assets	$	65,707		$	71,486		$	53,055			$	65,707		$	53,055
Total Long-term Assets1,3
Beginning assets	$	172,923		$	124,430		$	119,827			$	132,356		$	113,695
Sales4	10,160			9,797			18,404				35,854			39,778
Redemptions4	(15,100)			(10,591)			(8,168)				(48,130)			(33,255)
Net (redemptions) sales 4	(4,940)			(794)			10,236				(12,276)			6,523
Net exchanges	12			(7)			(16)				(3)			(105)
Acquisition-related	0			45,986			0				45,986			435
Market gains and losses2	(9,929)			3,308			2,309				(7,997)			11,808
Ending assets	$	158,066		$	172,923		$	132,356			$	158,066		$	132,356

1)	Includes $8.3 billion and $8.4 billion at Dec. 31, 2018 and Sept. 30, 2018, respectively, of assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
2)	Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates.
3)	Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products.
4)	For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

 

Unaudited Managed Assets
(in millions)	Dec. 31, 2018			Sept. 30, 2018			June 30, 2018			March 31, 2018			Dec. 31, 2017
By Asset Class
Equity	$	72,497		$	84,143		$	57,973		$	58,830		$	62,816
Fixed-income	63,158			65,369			61,435			62,205			64,160
Alternative / private markets1	18,318			18,621			292			343			366
Multi-asset	4,093			4,790			4,730			4,843			5,014
Total long-term assets	158,066			172,923			124,430			126,221			132,356
Money market	301,794			264,233			255,247			265,944			265,214
Total Managed Assets	$	459,860		$	437,156		$	379,677		$	392,165		$	397,570
By Product Type
Funds:
Equity	$	36,584		$	43,578		$	31,699		$	31,507		$	33,008
Fixed-income	40,490			41,817			39,877			40,529			41,144
Alternative / private markets1	11,365			11,457			292			343			366
Multi-asset	3,920			4,585			4,521			4,620			4,783
Total long-term assets	92,359			101,437			76,389			76,999			79,301
Money market	208,480			182,966			172,671			182,437			185,536
Total Fund Assets	$	300,839		$	284,403		$	249,060		$	259,436		$	264,837
Separate Accounts:
Equity	$	35,913		$	40,565		$	26,274		$	27,323		$	29,808
Fixed-income	22,668			23,552			21,558			21,676			23,016
Alternative / private markets	6,953			7,164			0			0			0
Multi-asset	173			205			209			223			231
Total long-term assets	65,707			71,486			48,041			49,222			53,055
Money market	93,314			81,267			82,576			83,507			79,678
Total Separate Account Assets	$	159,021		$	152,753		$	130,617		$	132,729		$	132,733
Total Managed Assets	$	459,860		$	437,156		$	379,677		$	392,165		$	397,570

1)	Alternative/private markets at Dec. 31, 2018 and Sept. 30, 2018 includes $8.3 billion and $8.4 billion, respectively, of fund assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.

 

Unaudited Average Managed Assets	Quarter Ended
(in millions)	Dec. 31, 2018			Sept. 30, 2018			June 30, 2018			March 31, 2018			Dec. 31, 2017
By Asset Class
Equity	$	78,084		$	84,262		$	58,818		$	61,555		$	62,140
Fixed-income	63,881			64,750			61,648			63,538			64,280
Alternative / private markets1	18,410			18,504			319			355			397
Multi-asset	4,449			4,805			4,824			4,979			5,000
Total long-term assets	164,824			172,321			125,609			130,427			131,817
Money market	278,885			261,571			260,371			267,546			250,197
Total Avg. Managed Assets	$	443,709		$	433,892		$	385,980		$	397,973		$	382,014
By Product Type
Funds:
Equity	$	39,871		$	43,473		$	31,911		$	32,680		$	32,829
Fixed-income	41,088			41,501			40,199			41,022			41,169
Alternative / private markets1	11,351			11,109			319			355			397
Multi-asset	4,268			4,598			4,604			4,749			4,771
Total long-term assets	96,578			100,681			77,033			78,806			79,166
Money market	194,009			179,562			175,885			181,856			176,918
Total Avg. Fund Assets	$	290,587		$	280,243		$	252,918		$	260,662		$	256,084
Separate Accounts:
Equity	$	38,213		$	40,789		$	26,907		$	28,875		$	29,311
Fixed-income	22,793			23,249			21,449			22,516			23,111
Alternative / private markets	7,059			7,395			0			0			0
Multi-asset	181			207			220			230			229
Total long-term assets	68,246			71,640			48,576			51,621			52,651
Money market	84,876			82,009			84,486			85,690			73,279
Total Avg. Separate Account Assets	$	153,122		$	153,649		$	133,062		$	137,311		$	125,930
Total Avg. Managed Assets	$	443,709		$	433,892		$	385,980		$	397,973		$	382,014

1)	Alternative/private markets for the quarter ended Dec. 31, 2018 and Sept. 30, 2018 includes $8.3 billion and $8.2 billion, respectively, of fund assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.

 

Unaudited Average Managed Assets		Year Ended
(in millions)		Dec. 31, 2018				Dec. 31, 2017
By Asset Class
Equity		$	70,680			$	60,255
Fixed-income		63,454				55,204
Alternative / private markets1		9,397				441
Multi-asset		4,764				5,062
Total long-term assets		148,295				120,962
Money market		267,093				245,459
Total Avg. Managed Assets		$	415,388			$	366,421
By Product Type
Funds:
Equity		$	36,984			$	32,160
Fixed-income		40,952				40,676
Alternative / private markets1		5,784				441
Multi-asset		4,554				4,841
Total long-term assets		88,274				78,118
Money market		182,828				176,580
Total Avg. Fund Assets		$	271,102			$	254,698
Separate Accounts:
Equity		$	33,696			$	28,095
Fixed-income		22,502				14,528
Alternative / private markets		3,613				0
Multi-asset		210				221
Total long-term assets		60,021				42,844
Money market		84,265				68,879
Total Avg. Separate Account Assets		$	144,286			$	111,723
Total Avg. Managed Assets		$	415,388			$	366,421

1)	Alternative/private markets for the year ended Dec. 31, 2018 includes $4.1 billion of fund assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.

 

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SOURCE Federated Investors, Inc.