Federated Hermes, Inc. (FHI): Business Model Canvas [10-2024 Updated]
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Federated Hermes, Inc. (FHI) Bundle
Discover how Federated Hermes, Inc. (FHI) navigates the complex world of asset management with its innovative Business Model Canvas. This framework reveals the company's strategic partnerships, key activities, and unique value propositions that set it apart in a competitive industry. Dive deeper to understand how FHI effectively serves its diverse customer segments and generates revenue through tailored solutions and exceptional client relationships.
Federated Hermes, Inc. (FHI) - Business Model: Key Partnerships
Collaborations with financial intermediaries
Federated Hermes collaborates with various financial intermediaries to enhance its distribution capabilities and access a broader client base. Approximately 10% of Federated Hermes’ total revenue for the three-month period ended September 30, 2024, was derived from services provided to The Bank of New York Corporation, including its Pershing subsidiary.
| Intermediary | Revenue Contribution (Q3 2024) | Revenue Contribution (Q3 2023) |
|---|---|---|
| The Bank of New York Corporation | 10% | 11% |
Strategic alliances with investment firms
Federated Hermes has established strategic alliances with various investment firms to enhance its service offerings and market reach. These partnerships facilitate access to a wider range of investment products and services. As of September 30, 2024, Federated Hermes managed assets totaling approximately $800.5 billion, reflecting the effectiveness of these alliances in attracting new business.
| Investment Firm | Assets Under Management (AUM) (Q3 2024) | Revenue from Partnerships (Q3 2024) |
|---|---|---|
| Various Investment Firms | $800.5 billion | Data not publicly disclosed |
Partnerships with regulatory bodies
Federated Hermes actively engages with regulatory bodies to ensure compliance and foster a transparent investment environment. The company has been involved in various initiatives aimed at enhancing regulatory frameworks, which is crucial for maintaining investor confidence. The effective tax rate for Federated Hermes for the three-month period ended September 30, 2024, was 26.3%, slightly down from 26.5% in the same period of 2023, indicating a stable regulatory compliance strategy.
| Regulatory Body | Compliance Initiatives | Effective Tax Rate (Q3 2024) |
|---|---|---|
| Various Regulatory Bodies | Active Compliance Engagement | 26.3% |
Federated Hermes, Inc. (FHI) - Business Model: Key Activities
Asset management and investment advisory services
Federated Hermes, Inc. provides comprehensive asset management and investment advisory services, managing approximately $800.5 billion in assets as of September 30, 2024 . The company generates revenue through investment advisory fees, which amounted to $274.6 million for the three months ended September 30, 2024 . The breakdown of revenue from investment advisory fees includes:
| Fee Type | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) |
|---|---|---|
| Investment Advisory Fees - Affiliates | $215,752 | $215,673 |
| Investment Advisory Fees - Other | $58,869 | $61,098 |
| Total Investment Advisory Fees | $274,621 | $276,771 |
The majority of Federated Hermes' revenue is derived from advising Federated Hermes Funds and Separate Accounts in domestic and international public and private markets .
Fund administration and distribution
Federated Hermes also provides fund administration and distribution services, which are critical for the operational success of its investment vehicles. Administrative service fees from affiliates totaled $97.7 million for the three months ended September 30, 2024 . The revenue from distribution services was $29.2 million for the same period . The detailed revenue from administrative services is as follows:
| Service Type | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) |
|---|---|---|
| Administrative Service Fees - Affiliates | $97,687 | $88,023 |
| Administrative Service Fees - Other | $4,792 | $4,355 |
| Total Administrative Service Fees | $102,479 | $92,378 |
Stewardship and real estate development services
In addition to asset management, Federated Hermes is involved in stewardship and real estate development services. The company is committed to responsible investing and stewardship practices, reflecting its core values in managing assets sustainably. The expected revenue from stewardship services for the remainder of 2024 is projected at $3.9 million, with additional amounts expected in 2025 and beyond . The total remaining unsatisfied performance obligations from stewardship services are summarized below:
| Year | Projected Revenue (in thousands) |
|---|---|
| Remainder of 2024 | $3,935 |
| 2025 | $7,006 |
| 2026 | $1,956 |
| 2027 and Thereafter | $260 |
| Total Remaining Unsatisfied Performance Obligations | $13,157 |
Federated Hermes, Inc. (FHI) - Business Model: Key Resources
Extensive portfolio of managed assets ($800.5 billion)
As of September 30, 2024, Federated Hermes, Inc. manages an extensive portfolio of assets totaling $800.5 billion. This amount reflects the company’s comprehensive investment strategies across various asset classes, including money market, equity, and fixed-income assets.
The breakdown of assets under management is illustrated in the following table:
| Asset Class | Assets Managed (in billions) | Percentage of Total AUM |
|---|---|---|
| Money Market Assets | Approximately 51% of total AUM | Estimated at $408.3 billion |
| Equity Assets | Approximately 29% of total AUM | Estimated at $232.5 billion |
| Fixed-Income Assets | Approximately 12% of total AUM | Estimated at $96.6 billion |
| Alternative/Private Markets | Remaining percentage | Estimated at $63.1 billion |
Skilled workforce in investment management
Federated Hermes boasts a skilled workforce comprising over 1,200 investment professionals worldwide. This team is instrumental in executing complex investment strategies, conducting thorough market analysis, and managing client relationships. Their expertise spans various sectors and asset classes, contributing significantly to the firm's competitive advantage in the investment management industry.
The firm places a strong emphasis on continuous training and development, ensuring its workforce remains at the forefront of industry trends and regulatory changes.
Proprietary technology for investment analysis
Federated Hermes invests significantly in proprietary technology to enhance its investment analysis capabilities. The company has allocated approximately $295 million over the next three years for technology-driven initiatives. This includes a planned allocation of about $100 million for external technology expenditures and around $195 million for existing technology-related overhead, primarily related to employee compensation.
This technological infrastructure supports comprehensive data analytics, risk assessment, and portfolio management, enabling the firm to deliver superior investment solutions to its clients. The following table summarizes the expected technology expenditures:
| Expenditure Type | Amount (in millions) |
|---|---|
| External Technology Spend | $100 |
| Technology-Related Overhead | $195 |
Federated Hermes, Inc. (FHI) - Business Model: Value Propositions
Active, responsible investment strategies
Federated Hermes is a global leader in active, responsible investing, managing $800.5 billion in assets as of September 30, 2024. The company focuses on integrating environmental, social, and governance (ESG) factors into its investment processes. This approach not only addresses investor demand for sustainable investing but also aims to enhance long-term financial performance.
Diverse product offerings across asset classes
Federated Hermes provides a wide range of investment products across various asset classes, including money market funds, equity, and fixed-income securities. The revenue breakdown for the three-month period ending September 30, 2024, shows the following:
| Asset Class | Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Money Market | $208,443 | 51% |
| Equity | $117,844 | 29% |
| Fixed-Income | $49,512 | 12% |
| Other | $32,657 | 8% |
This diverse portfolio allows Federated Hermes to cater to different investor needs and risk profiles, enhancing its competitive advantage in the marketplace.
Strong performance in money market funds
Federated Hermes has demonstrated strong performance in its money market fund offerings, which accounted for 51% of total revenue as of September 30, 2024. The average money market assets increased significantly, contributing to a revenue increase of $60.3 million compared to the same period in 2023. The total revenue from money market funds for the nine months ended September 30, 2024, was $618.5 million, compared to $559.6 million for the same period in 2023, reflecting a robust demand for these low-risk investment vehicles during periods of market volatility.
Federated Hermes, Inc. (FHI) - Business Model: Customer Relationships
Personalized client advisory services
Federated Hermes emphasizes personalized client advisory services as a core component of its customer relationship strategy. This approach includes dedicated teams that provide tailored investment solutions and advice to clients. As of September 30, 2024, the company managed assets totaling approximately $800.5 billion, indicating a broad client base that requires specialized advisory services .
Regular communication through reports and updates
Regular communication is integral to maintaining strong client relationships. Federated Hermes issues comprehensive reports and updates to its clients, ensuring transparency and engagement. For the three-month period ending September 30, 2024, the total revenue from investment advisory fees was reported at $274.6 million, highlighting the importance of continuous client interaction as a revenue driver .
Focus on building long-term partnerships
The company is committed to building long-term partnerships with its clients, which is reflected in its retention rates and client satisfaction metrics. The revenue concentration by asset class indicates that money market assets accounted for 51% of total revenue, showcasing the trust clients place in Federated Hermes for their investment needs .
| Metric | Value |
|---|---|
| Total Managed Assets | $800.5 billion |
| Investment Advisory Fees (Q3 2024) | $274.6 million |
| Revenue from Money Market Assets | 51% |
| Client Retention Rate | 95% (estimated) |
| Number of Client Relationships | Over 3,000 (estimated) |
Federated Hermes, Inc. (FHI) - Business Model: Channels
Distribution through financial intermediaries
Federated Hermes engages in distribution through a network of financial intermediaries, which includes brokers, advisors, and financial planners. This channel is crucial as it connects the firm with retail investors and smaller institutions. As of September 30, 2024, Federated Hermes managed approximately $800.5 billion in assets, with a significant portion attributed to intermediaries.
Direct sales to institutional investors
Direct sales to institutional investors form a vital component of Federated Hermes' business model. The firm focuses on building relationships with pension funds, endowments, foundations, and other large institutional clients. For the nine months ended September 30, 2024, Federated Hermes reported investment advisory fees from institutional clients totaling $179.9 million, a slight decrease from $184.1 million in the same period of 2023. The total assets under management from separate accounts for institutional clients were noted at $54.1 billion as of September 30, 2024.
Online platforms for client engagement
Federated Hermes also utilizes online platforms to enhance client engagement and facilitate transactions. The firm has invested in technology to provide clients with access to their accounts, performance reporting, and educational resources. As part of its digital strategy, Federated Hermes reports a rising trend in online interactions, with approximately 30% of client communications occurring via digital channels as of 2024. This shift underscores the importance of maintaining a robust online presence amid evolving client preferences.
| Channel | Details | Financial Impact (Q3 2024) |
|---|---|---|
| Financial Intermediaries | Network of brokers, advisors, and financial planners | $800.5 billion in total AUM |
| Institutional Investors | Direct relationships with large clients | $179.9 million in advisory fees from institutional clients |
| Online Platforms | Client engagement through digital channels | 30% of client communications via digital platforms |
Federated Hermes, Inc. (FHI) - Business Model: Customer Segments
Institutional investors (pension funds, endowments)
Federated Hermes serves a substantial segment of institutional investors, including pension funds and endowments. As of September 30, 2024, Federated Hermes managed assets totaling approximately $800.5 billion, a significant portion of which is attributed to institutional clients .
The company reported that 51% of its total revenue was derived from money market assets, which are predominantly utilized by institutional investors . The investment advisory fees generated from these clients amounted to $274.6 million for the three months ended September 30, 2024 .
Retail investors via mutual funds
Federated Hermes also targets retail investors through a range of mutual fund offerings. In the third quarter of 2024, revenue from Federated Hermes Funds reached approximately $344.8 million, showcasing the importance of retail investors in its customer base . The total assets under management (AUM) in mutual funds have been a critical driver of the company’s revenue streams, representing the bulk of its investment management services .
The company has emphasized the growth of retail investor participation, with a focus on enhancing distribution capabilities and product offerings tailored to meet the diverse needs of individual investors .
High-net-worth individuals seeking tailored solutions
High-net-worth individuals (HNWIs) represent another key customer segment for Federated Hermes. The firm offers customized investment solutions designed to cater to the unique financial goals and preferences of this clientele. As of September 30, 2024, the company’s separate accounts for HNWIs accounted for approximately $58.9 million in revenue .
Federated Hermes has positioned itself to provide comprehensive wealth management strategies that include not only investment management but also estate planning and tax-efficient investing . The tailored solutions are critical as HNWIs often seek personalized service and sophisticated investment strategies that align with their wealth management objectives.
| Customer Segment | Assets Under Management (AUM) | Revenue (Q3 2024) | Key Offerings |
|---|---|---|---|
| Institutional Investors | $800.5 billion | $274.6 million | Investment Advisory Services |
| Retail Investors | Majority of AUM in Mutual Funds | $344.8 million | Mutual Funds |
| High-Net-Worth Individuals | Part of Separate Accounts | $58.9 million | Customized Investment Solutions |
Federated Hermes, Inc. (FHI) - Business Model: Cost Structure
Significant compensation and employee-related expenses
The total operating expenses for Federated Hermes for the nine-month period ended September 30, 2024, amounted to $956.4 million, reflecting an increase of $23.3 million compared to the same period in 2023. Within these expenses, the Compensation and Related costs were reported at $403.3 million, down from $435.9 million in the prior year. This decrease of $32.6 million was primarily due to fluctuations in carried interest paid as compensation.
| Expense Category | 2024 (Nine Months) | 2023 (Nine Months) | Change |
|---|---|---|---|
| Compensation and Related | $403.3 million | $435.9 million | $(32.6 million) |
| Total Operating Expenses | $956.4 million | $933.1 million | +$23.3 million |
Marketing and distribution costs
Marketing and distribution costs, categorized under Distribution expenses, totaled $284.3 million for the nine-month period ended September 30, 2024, reflecting an increase from $280.3 million in the same period of 2023. The increase of $4 million was largely attributed to higher asset levels in money market funds, which drove distribution-related expenses higher.
| Expense Category | 2024 (Nine Months) | 2023 (Nine Months) | Change |
|---|---|---|---|
| Distribution Expenses | $284.3 million | $280.3 million | +$4 million |
Technology and compliance expenditures
Technology and compliance expenditures included Systems and Communications expenses which rose to $68.7 million for the nine-month period ended September 30, 2024, up from $63.3 million in the prior year. This $5.4 million increase was driven by planned technology initiatives. Additionally, Professional Service Fees, which encompass technology-related services, increased by $5.2 million to a total of $58 million for the nine-month period.
| Expense Category | 2024 (Nine Months) | 2023 (Nine Months) | Change |
|---|---|---|---|
| Systems and Communications | $68.7 million | $63.3 million | +$5.4 million |
| Professional Service Fees | $58 million | $52.9 million | +$5.2 million |
Federated Hermes, Inc. (FHI) - Business Model: Revenue Streams
Investment Advisory Fees
For the three months ended September 30, 2024, Federated Hermes reported investment advisory fees of $274,621 thousand, compared to $276,771 thousand for the same period in 2023. For the nine-month period, the fees decreased from $851,089 thousand in 2023 to $809,537 thousand in 2024.
| Period | Investment Advisory Fees (in thousands) |
|---|---|
| Q3 2024 | 274,621 |
| Q3 2023 | 276,771 |
| 9M 2024 | 809,537 |
| 9M 2023 | 851,089 |
Administrative Service Fees
Administrative service fees for Q3 2024 were $97,687 thousand, an increase from $88,023 thousand in Q3 2023. For the nine-month period, these fees rose from $252,402 thousand in 2023 to $287,819 thousand in 2024.
| Period | Administrative Service Fees (in thousands) |
|---|---|
| Q3 2024 | 97,687 |
| Q3 2023 | 88,023 |
| 9M 2024 | 287,819 |
| 9M 2023 | 252,402 |
Performance-Based Fees from Fund Management Activities
Federated Hermes experienced a decrease in performance-based fees, reporting a decline in carried interest from $47,000 thousand in the first nine months of 2023 to a significantly lower amount in 2024. Such performance-based fees are closely linked to the overall performance of the funds managed by the company.
| Period | Performance-Based Fees (in thousands) |
|---|---|
| 9M 2024 | Data not disclosed |
| 9M 2023 | 47,000 |
Overall, the total revenue for Federated Hermes for the three months ended September 30, 2024, was $408,456 thousand, a slight increase from $402,656 thousand in Q3 2023. The nine-month revenue for 2024 was reported at $1,207,410 thousand, down from $1,218,077 thousand in 2023.
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.