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Federated Hermes Inc Class B FHI

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Asset Manager Industry Consolidation Gathering Steam in a What's Likely to be a Decadeslong Process

Greggory Warren, CFA Sector Strategist

Analyst Note

| Greggory Warren, CFA |

For much of the past five years, we've believed that industry consolidation was inevitable for the traditional U.S.-based asset managers as they faced a new world order where organic growth and fees would be pressured, participants were expected to spend more on their investment operations and distribution capabilities, and profit margins were pressured. As we move forward, we expect to see a combination of capability-based transactions (aimed at filling product holes or diversifying a firm's operations by asset class/product, distribution channel or geography), transformative-scale acquisitions (which would be a hybrid of capability-based and pure-consolidation transaction) and deals that are purely aimed at the consolidation of existing fund infrastructure.

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Company Profile

Business Description

Federated provides asset management services for institutional and individual investors. The company had $634.1 billion in managed assets at the end of September 2021, composed of equity (15%), multiasset (1%), fixed-income (15%), alternative (4%), and money market (65%) funds. That said, the firm's cash-management operations are expected to generate around a fifth of Federated's revenue this year, compared with 50%, 18%, and 12%, respectively, for the firm's equity, fixed-income and alternatives/multi-asset operations. From a channel perspective, the company's products are distributed via trust banks, wealth managers and retail broker/dealers (63% of AUM), institutional investors (25%), and international clients (12%).

1001 Liberty Avenue
Pittsburgh, PA, 15222-3779
T +1 412 288-1900
Sector Financial Services
Industry Asset Management
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type High Yield
Employees 1,986