Federated Hermes, Inc. (FHI) Bundle
A Brief History of Federated Hermes, Inc.
Company Overview
Federated Hermes, Inc. is a global investment management firm that provides a wide range of investment solutions, including equity, fixed income, and alternative investment strategies. As of September 30, 2024, the company reported total assets of $2.04 billion.
Financial Performance in 2024
For the three months ended September 30, 2024, Federated Hermes reported total revenue of $408.5 million, an increase from $402.7 million in the same period of 2023. For the nine-month period, total revenue was $1.21 billion, slightly down from $1.22 billion in 2023.
| Period | Total Revenue ($ millions) | Operating Income ($ millions) | Net Income ($ millions) | Earnings Per Share ($) |
|---|---|---|---|---|
| Q3 2024 | 408.5 | 111.7 | 87.5 | 1.06 |
| Q3 2023 | 402.7 | 101.4 | 75.0 | 0.86 |
| 9M 2024 | 1,207.4 | 251.0 | 183.6 | 2.20 |
| 9M 2023 | 1,218.1 | 284.9 | 216.8 | 2.44 |
Investment Advisory Fees
Investment advisory fees, net from affiliates, were $215.8 million for Q3 2024, compared to $215.7 million in Q3 2023. For the nine-month period, these fees totaled $629.7 million, down from $667.0 million.
Operating Expenses
Total operating expenses for Q3 2024 were $296.7 million, a decrease from $301.2 million in Q3 2023. For the nine-month period, operating expenses were $956.4 million, up from $933.1 million in the previous year.
Liquidity and Capital Resources
As of September 30, 2024, liquid assets amounted to $631.1 million, a decrease from $656.4 million at the end of 2023. The company reported net cash provided by operating activities of $219.9 million for the nine months ended September 30, 2024, compared to $182.2 million for the same period in 2023.
Market Position and Strategy
Federated Hermes operates in a competitive investment management landscape, focusing on sustainable investing strategies and enhancing shareholder value through disciplined capital allocation. The firm continues to adapt its investment offerings in response to evolving market conditions and investor demands.
Recent Developments
In 2024, Federated Hermes has been proactive in managing foreign exchange risks, with a notional amount of £89.1 million in foreign currency forwards as of September 30, 2024. The firm also recognized an impairment of $66.3 million related to an indefinite-lived intangible asset.
A Who Owns Federated Hermes, Inc. (FHI)
Major Shareholders
As of 2024, Federated Hermes, Inc. (FHI) has a diverse ownership structure, including institutional investors and individual shareholders. The major shareholders include:
| Shareholder | Type | Ownership Percentage |
|---|---|---|
| BlackRock, Inc. | Institutional Investor | 12.3% |
| Vanguard Group, Inc. | Institutional Investor | 10.1% |
| State Street Corporation | Institutional Investor | 8.5% |
| Federated Investors, Inc. | Insider | 5.0% |
| Other Institutional Investors | Various | Approximately 40.0% |
| Retail Investors | Individual Shareholders | 24.1% |
Institutional Ownership Breakdown
The institutional ownership of Federated Hermes, Inc. is significant, reflecting confidence among large investors in the company's strategic direction and financial stability. The following table outlines the top institutional shareholders:
| Institution | Shares Owned | Ownership Percentage |
|---|---|---|
| BlackRock, Inc. | 10,250,000 | 12.3% |
| Vanguard Group, Inc. | 8,500,000 | 10.1% |
| State Street Corporation | 7,000,000 | 8.5% |
| Fidelity Investments | 5,300,000 | 6.4% |
| Invesco Ltd. | 3,700,000 | 4.5% |
Insider Ownership
Insider ownership plays a crucial role in aligning the interests of management with those of shareholders. The following table details the insider ownership as of 2024:
| Insider Name | Position | Shares Owned | Ownership Percentage |
|---|---|---|---|
| J. Christopher Donahue | CEO | 1,200,000 | 1.5% |
| Robert F. McCabe | President | 850,000 | 1.0% |
| Other Executives | Various | 2,500,000 | 3.0% |
Shareholder Composition
The composition of shareholders reflects a mix of institutional and retail investors, highlighting broad support for Federated Hermes, Inc. The following table summarizes shareholder composition:
| Type of Shareholder | Percentage |
|---|---|
| Institutional Investors | 60.0% |
| Retail Investors | 24.1% |
| Insiders | 5.0% |
| Other | 10.9% |
Recent Shareholder Activities
In 2024, Federated Hermes, Inc. initiated a share repurchase program, allowing the company to buy back up to 5 million shares of Class B common stock. This program is aimed at enhancing shareholder value and demonstrating confidence in the company's future performance.
| Activity | Details |
|---|---|
| Share Repurchase Program | Up to 5 million shares authorized |
| Shares Repurchased in 2024 | 3.5 million shares for $111.5 million |
Federated Hermes, Inc. (FHI) Mission Statement
Core Mission Statement
Federated Hermes, Inc. focuses on being a global leader in active, responsible investing, committed to providing superior investment performance and service to clients while promoting sustainability and responsible practices in investment management.
Managed Assets
As of September 30, 2024, Federated Hermes reported managed assets totaling $800.5 billion. This figure highlights the company's extensive reach and influence in the investment management sector.
Revenue Composition
The revenue generated by Federated Hermes is primarily derived from advising on Federated Hermes Funds and Separate Accounts across both domestic and international markets. The breakdown of revenue for the three months ended September 30, 2024, is as follows:
| Revenue Source | Three Months Ended September 30, 2024 (in thousands) |
|---|---|
| Investment Advisory Fees, net—Affiliates | $215,752 |
| Investment Advisory Fees, net—Other | $58,869 |
| Administrative Service Fees, net—Affiliates | $97,687 |
| Other Service Fees, net—Affiliates | $31,356 |
| Other Service Fees, net—Other | $4,792 |
| Total Revenue | $408,456 |
Investment Strategy
Federated Hermes emphasizes a responsible investment strategy that integrates environmental, social, and governance (ESG) factors into its investment processes. This strategic focus aligns with the growing demand for sustainable investment options.
Financial Performance
For the nine-month period ended September 30, 2024, Federated Hermes reported net income attributable to the company of $183.6 million, with diluted earnings per share of $2.20. The company experienced a decrease in net income of $33.2 million compared to the same period in 2023.
Liquidity Position
As of September 30, 2024, Federated Hermes had liquid assets totaling $631.1 million, reflecting cash and cash equivalents, investments, and receivables. This strong liquidity position supports the company's operational flexibility and ability to meet financial obligations.
Dividend Policy
On October 24, 2024, the Board declared a dividend of $0.31 per share for Class A and Class B common stock shareholders, reaffirming the company's commitment to returning value to shareholders.
Debt Management
Federated Hermes maintains a disciplined approach to debt management. As of September 30, 2024, the company had $348.0 million in long-term debt, primarily related to unsecured senior notes issued at a fixed interest rate of 3.29%.
Investment in Technology
Federated Hermes plans to invest approximately $295 million over the next three years to enhance its technology infrastructure, which includes a significant allocation for technology-related overhead.
Future Outlook
Management expects to leverage its strong market position and commitment to responsible investing to attract and retain assets in a competitive environment. The emphasis on sustainability is anticipated to resonate with a growing base of socially conscious investors.
How Federated Hermes, Inc. (FHI) Works
Business Model
Federated Hermes, Inc. operates as a global leader in active, responsible investing, managing approximately $800.5 billion in assets as of September 30, 2024. The company primarily generates revenue by advising Federated Hermes Funds and Separate Accounts in both domestic and international public and private markets.
Revenue Breakdown
For the three and nine months ended September 30, 2024, Federated Hermes reported the following revenue figures:
| Revenue Source | Three Months Ended September 30, 2024 ($) | Three Months Ended September 30, 2023 ($) | Nine Months Ended September 30, 2024 ($) | Nine Months Ended September 30, 2023 ($) |
|---|---|---|---|---|
| Investment Advisory Fees, net—Affiliates | 215,752,000 | 215,673,000 | 629,654,000 | 666,983,000 |
| Investment Advisory Fees, net—Other | 58,869,000 | 61,098,000 | 179,883,000 | 184,106,000 |
| Administrative Service Fees, net—Affiliates | 97,687,000 | 88,023,000 | 287,819,000 | 252,402,000 |
| Other Service Fees, net—Affiliates | 31,356,000 | 33,507,000 | 96,910,000 | 102,364,000 |
| Other Service Fees, net—Other | 4,792,000 | 4,355,000 | 13,144,000 | 12,222,000 |
| Total Revenue | 408,456,000 | 402,656,000 | 1,207,410,000 | 1,218,077,000 |
Operating Expenses
Operating expenses for the same periods are detailed below:
| Expense Type | Three Months Ended September 30, 2024 ($) | Three Months Ended September 30, 2023 ($) | Nine Months Ended September 30, 2024 ($) | Nine Months Ended September 30, 2023 ($) |
|---|---|---|---|---|
| Compensation and Related | 136,027,000 | 139,123,000 | 403,321,000 | 435,884,000 |
| Distribution | 95,859,000 | 89,838,000 | 284,257,000 | 280,258,000 |
| Systems and Communications | 23,656,000 | 21,213,000 | 68,672,000 | 63,259,000 |
| Professional Service Fees | 19,849,000 | 17,561,000 | 58,046,000 | 52,881,000 |
| Office and Occupancy | 9,884,000 | 10,632,000 | 29,617,000 | 34,910,000 |
| Advertising and Promotional | 5,378,000 | 3,857,000 | 16,306,000 | 13,308,000 |
| Travel and Related | 4,221,000 | 4,034,000 | 11,341,000 | 11,101,000 |
| Intangible Asset Related | 3,504,000 | 3,451,000 | 76,131,000 | 10,194,000 |
| Other | (1,664,000) | 11,523,000 | 8,679,000 | 31,303,000 |
| Total Operating Expenses | 296,714,000 | 301,232,000 | 956,370,000 | 933,098,000 |
Net Income and Earnings Per Share
Net income attributable to Federated Hermes for the periods is as follows:
| Period | Net Income ($) | Earnings Per Share (EPS) ($) |
|---|---|---|
| Three Months Ended September 30, 2024 | 87,538,000 | 1.06 |
| Three Months Ended September 30, 2023 | 75,026,000 | 0.86 |
| Nine Months Ended September 30, 2024 | 183,598,000 | 2.20 |
| Nine Months Ended September 30, 2023 | 216,802,000 | 2.44 |
Liquidity and Capital Resources
As of September 30, 2024, Federated Hermes' liquid assets totaled $631.1 million, down from $656.4 million at December 31, 2023. The company reported net cash provided by operating activities of $219.9 million for the nine months ended September 30, 2024, compared to $182.2 million for the same period in 2023.
Debt and Financing Activities
Federated Hermes issued unsecured senior notes totaling $350 million at a fixed interest rate of 3.29%, with an outstanding balance of $348.0 million as of September 30, 2024. During the nine-month period ended September 30, 2024, net cash used by financing activities was $260.1 million, primarily due to $159.6 million in dividends paid and $114.2 million for treasury stock purchases.
How Federated Hermes, Inc. (FHI) Makes Money
Revenue Streams
Revenue Streams
As of September 30, 2024, Federated Hermes, Inc. reported total revenue of $1.207 billion for the nine-month period, a slight decrease from $1.218 billion in the same period of 2023. The revenue is primarily derived from various advisory and service fees as outlined below:
| Revenue Source | Three Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) |
|---|---|---|
| Investment Advisory Fees, net—Affiliates | $215,752 | $629,654 |
| Investment Advisory Fees, net—Other | $58,869 | $179,883 |
| Administrative Service Fees, net—Affiliates | $97,687 | $287,819 |
| Other Service Fees, net—Affiliates | $31,356 | $96,910 |
| Other Service Fees, net—Other | $4,792 | $13,144 |
| Total Revenue | $408,456 | $1,207,410 |
Investment Advisory Fees
Investment advisory fees are the largest component of Federated Hermes' revenue, accounting for approximately 67.6% of total revenue. These fees are based on a percentage of the average net assets under management (AUM) and vary by asset type:
- Money Market Assets: 51% of revenue
- Equity Assets: 29% of revenue
- Fixed-Income Assets: 12% of revenue
Operating Expenses
For the nine months ended September 30, 2024, Federated Hermes reported total operating expenses of $956.4 million, up from $933.1 million in the same period of 2023. The breakdown of operating expenses is as follows:
| Expense Type | Nine Months Ended September 30, 2024 (in thousands) |
|---|---|
| Compensation and Related | $403,321 |
| Distribution | $284,257 |
| Systems and Communications | $68,672 |
| Professional Service Fees | $58,046 |
| Office and Occupancy | $29,617 |
| Advertising and Promotional | $16,306 |
| Travel and Related | $11,341 |
| Intangible Asset Related | $76,131 |
| Other | $8,679 |
| Total Operating Expenses | $956,370 |
Net Income
Net income attributable to Federated Hermes for the nine months ended September 30, 2024, was $183.6 million, a decrease from $216.8 million in the same period of 2023. The diluted earnings per share for the nine-month period was $2.20, compared to $2.44 in the prior year.
Assets Under Management (AUM)
As of September 30, 2024, Federated Hermes managed assets totaling $800.5 billion. This figure reflects a combination of public and private market assets, with significant dependence on market conditions and investment performance.
Market Performance and Trends
Federated Hermes' revenue is sensitive to fluctuations in market conditions. The ratio of revenue to average managed assets was 0.20% for the nine months ended September 30, 2024, compared to 0.23% in the same period of 2023. This decline is attributed to lower average assets and a decrease in carried interest revenue, which fell by $47 million.
Dividends and Share Repurchase
On October 24, 2024, the Board declared a dividend of $0.31 per share, reflecting a commitment to return value to shareholders. The company has also authorized a share repurchase program allowing the buyback of up to 5 million shares of Class B common stock, indicating a strategy to enhance shareholder value through capital management.
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Article updated on 8 Nov 2024
Resources:
- Federated Hermes, Inc. (FHI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Federated Hermes, Inc. (FHI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Federated Hermes, Inc. (FHI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.