Federated Hermes, Inc. ((FHI)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Federated Hermes, Inc. recently held their earnings call, revealing a mixed sentiment among investors and stakeholders. The company celebrated record-breaking assets under management and strong MDT strategy performance, while also addressing challenges such as declines in equity and fixed income assets, a reduction in alternative private markets assets, and increased FX-related expenses.
Record Assets Under Management
Federated Hermes ended 2024 on a high note, achieving a record $830 billion in assets under management. This impressive milestone was largely driven by record money market assets of $630 billion, showcasing the company’s strong foothold in the market.
Strong Performance in MDT Strategies
The MDT strategies proved to be a significant growth area for Federated Hermes, with assets reaching $13 billion by the end of the year. This marks a remarkable 70% increase from the previous year, with net sales jumping to $3.4 billion in 2024, a substantial rise from $411 million in 2023.
Expansion of Product Offerings
Federated Hermes expanded its product offerings by launching four active ETFs and a new collective fund within the MDT product set. As of January 24th, these new products accumulated assets totaling approximately $424 million, demonstrating the company’s commitment to innovation and diversification.
Positive Start to 2025
The company began 2025 with a promising outlook, having approximately $3.7 billion in net institutional mandates yet to fund. This is expected to result in net additions across equities, private market strategies, and fixed income, suggesting continued growth and expansion.
Increase in Total Revenue
Federated Hermes reported a $16.2 million increase in total revenue for Q4, which equates to a 4% rise from the previous quarter. This growth was primarily driven by higher revenue from equity and money market assets, indicating solid financial health.
Decrease in Equity and Fixed Income Assets
Despite the positive highlights, the company faced decreases in its equity and fixed income assets, which fell by $4.2 billion and $2.1 billion, respectively, in Q4. These declines were attributed to market valuations and net redemptions, posing challenges for the company moving forward.
Alternative Private Markets Asset Decrease
Federated Hermes experienced a $1.8 billion decrease in assets within the alternative private markets category during Q4. This was mainly due to FX impacts and net redemptions, reflecting the volatility and complexities of this market segment.
FX-related Expense Increase
The company saw an increase in operating expenses by $17.5 million from Q3, with $13.8 million of this attributed to FX-related expense increases. The weakening of the pound significantly contributed to this rise, highlighting the impact of currency fluctuations on the company’s financials.
Slight Decrease in Money Market Mutual Fund Market Share
Federated Hermes reported a slight decrease in their money market mutual fund market share, from 7.32% in Q3 to 7.22% at the end of Q4. This decline suggests a competitive landscape in which the company operates.
Forward-Looking Guidance
Looking ahead, Federated Hermes remains optimistic despite some challenges. The company plans to expand their alternative asset offerings, with new funds like the European Direct Lending III and various private equity funds in the pipeline. They anticipate potential net additions in equities, private market strategies, and fixed income, while continuing to focus on capturing growth in money market strategies amid a favorable interest rate environment.
In conclusion, Federated Hermes, Inc.’s earnings call provided a balanced outlook, highlighting both achievements and challenges. The record assets under management and robust MDT strategy performance were tempered by declines in other asset categories and increased FX-related expenses. However, the company’s forward-looking strategies and product expansions suggest a proactive approach to navigating these challenges and capturing future growth opportunities.
