PR Newswire | Oct 29, 2020 04:17PM EDT

dividend per share of $1.27, including $0.27 quarterly and $1.00 special dividend

10/29 15:17 CDT

Federated Hermes, Inc. reports third quarter 2020 earnings; board declares cash dividend per share of $1.27, including $0.27 quarterly and $1.00 special dividend- Q3 2020 earnings per diluted share of $0.85 compared to $0.72 for Q3 2019- Equity assets at $80 billion; fixed-income assets reach a record $80 billion PITTSBURGH, Oct. 29, 2020

PITTSBURGH, Oct. 29, 2020 /PRNewswire/ -- Federated Hermes, Inc. (NYSE: FHI), a global leader in active, responsible investing, today reported earnings per diluted share (EPS) of $0.85 for Q3 2020, compared to $0.72 for the same quarter last year, on net income of $85.8 million for Q3 2020, compared to $73.0 million for Q3 2019. Federated Hermes reported YTD 2020 earnings per diluted share of $2.29, compared to $1.88 for the same period in 2019, on YTD 2020 net income of $231.2 million, compared to $190.2 million for the same period in 2019.

Federated Hermes' total managed assets were $614.8 billion at Sept. 30, 2020, up $87.6 billion or 17% from $527.2 billion at Sept. 30, 2019 and down $14.0 billion or 2% from $628.8 billion at June 30, 2020. Total average managed assets for Q3 2020 were $628.1 billion, up $110.1 billion or 21% from $518.0 billion reported for Q3 2019 and down $8.8 billion or 1% from $636.9 billion reported for Q2 2020.

"In the third quarter, investors and advisors continued to show strong interest in a range of our actively managed strategies through market volatility and the Covid-19 pandemic," said J. Christopher Donahue, president and chief executive officer. "Federated Hermes' equity assets were at $80 billion, with strong investment performance from our international dividend strategy and both an emerging market equity and an international growth equity fund, which were added to our product mix in the last year and are managed by the Cleveland-based international equity team. We saw net sales in a variety of equity styles, including growth, ESG and impact funds.

"We reached record fixed-income assets under management of $80 billion at the end of the third quarter," said Donahue. "Our Total Return Bond Fund and Short-Intermediate Total Return Bond Fund outperformed a majority of their peers during the pandemic. Both funds, which seek to capture opportunities and manage risk through various rate environments, were among our funds with the strongest net sales, along with a range of short-duration and high-yield strategies."

Federated Hermes' board of directors declared a dividend of $1.27 per share. The dividend, which will be paid from Federated Hermes' existing cash balance, is considered an ordinary dividend for tax purposes and consists of a $0.27 quarterly dividend and a $1.00 special dividend. The dividend is payable on Nov. 13, 2020 to shareholders of record as of Nov. 6, 2020. During Q3 2020, Federated Hermes purchased 866,900 shares of Federated Hermes class B common stock for $20.0 million.

"The special dividend reinforces Federated Hermes' continued commitment to delivering shareholder value," said Thomas R. Donahue, chief financial officer. "The November dividend payment marks our fifth special-dividend, totaling $7.53 per share, in the last dozen years."

Equity assets were $80.4 billion at Sept. 30, 2020, down $0.4 billion from $80.8 billion at Sept. 30, 2019 and up $3.5 billion or 5% from $76.9 billion at June 30, 2020. Top-selling equity funds during Q3 2020 on a net basis were Federated Hermes

Kaufmann Small Cap Fund, Federated Hermes SDG Engagement Equity Fund (UCITS), Federated Hermes Global Equity ESG Fund, Federated Hermes Impact Opportunities Equity Fund and the Federated Hermes International Small-Mid Company Fund.

Fixed-income assets were a record $79.5 billion at Sept. 30, 2020, up $13.7 billion or 21% from $65.8 billion at Sept. 30, 2019 and up $6.4 billion or 9% from $73.1 billion at June 30, 2020. Top-selling fixed-income funds during Q3 2020 on a net basis were Federated Hermes Short-Intermediate Total Return Bond Fund, Federated Hermes Ultrashort Bond Fund, Federated Hermes Municipal Ultrashort Fund, Federated Hermes Total Return Bond Fund and Federated Hermes Institutional High Yield Bond Fund.

Money market assets were $433.0 billion at Sept. 30, 2020, up $73.7 billion or 21% from $359.3 billion at Sept. 30, 2019 and down $24.6 billion or 5% from $457.6 billion at June 30, 2020. Money market fund assets were $325.9 billion at Sept. 30, 2020, up $64.7 billion or 25% from $261.2 billion at Sept. 30, 2019 and down $18.9 billion or 5% from $344.8 billion at June 30, 2020.

Financial Summary

Q3 2020 vs. Q3 2019

Revenue increased $24.1 million or 7% percent primarily due to higher average money market and fixed-income assets and as a result of revenue of a previously nonconsolidated entity being recorded in operating revenue beginning March 2020. These increases in revenue were partially offset by voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields (voluntary yield-related fee waivers). See "Impact of voluntary yield-related fee waivers."

During Q3 2020, Federated Hermes derived 60 percent of its revenue from long-term assets (38 percent from equity assets, 14 percent from fixed-income assets and 8 percent from alternative/private markets and multi-asset), 39 percent from money market assets, and 1 percent from sources other than managed assets.

Operating expenses were flat, with increases in compensation being offset by decreased distribution expenses primarily resulting from voluntary yield-related fee waivers on certain money market fund assets.

Nonoperating income (expenses) decreased a net $1.2 million or 17% due to the net operating impact from the previously nonconsolidated entity no longer being recorded as nonoperating income, offset partially by increased investment gains.

Q3 2020 vs. Q2 2020

Revenue increased $3.7 million or 1% primarily due to higher average equity and fixed-income assets. These increases were partially offset by an increase in voluntary yield-related fee waivers and lower average money market assets.

Operating expenses decreased $12.4 million or 5% primarily due to decreased distribution expenses resulting from higher voluntary yield-related fee waivers on certain money market fund assets.

Nonoperating income (expenses) decreased a net $7.8 million or 56% primarily due to the Q3 2020 increase in the market value of investments being less than the Q2 2020 market value increase following the significant recovery from the Q1 2020 coronavirus impact to markets.

YTD 2020 vs. YTD 2019

Revenue increased $115.5 million or 12% primarily due to higher average money market assets, revenue of a previously nonconsolidated entity being recorded in operating revenue beginning March 2020 and higher average fixed-income assets. These increases were partially offset by voluntary yield-related fee waivers.

For the first nine months of 2020, Federated Hermes derived 57% percent of its revenue from long-term assets (37 percent from equity assets, 13 percent from fixed-income assets and 7 percent from alternative/private markets and multi-asset), 42 percent from money market assets, and 1 percent from sources other than managed assets.

Operating expenses increased $57.2 million or 8% primarily due to increased incentive compensation, an increase in distribution expenses associated with higher average money market fund assets and an increase due to a previously nonconsolidated entity being recorded in expenses beginning March 2020. These increases were partially offset by voluntary yield-related fee waivers.

Nonoperating income (expenses) increased a net $4.8 million or 56% primarily due to a gain from a fair value adjustment to the equity investment of a previously nonconsolidated entity.

Impact of voluntary yield-related fee waivers

During the three and nine months ended Sept. 30, 2020, voluntary yield-related fee waivers totaled $36.8 million and $56.9 million, respectively. These fee waivers were largely offset by related reductions in distribution expenses of $33.0 million and $51.0 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $3.8 million and $5.9 million for the three and nine months ended Sept. 30, 2020, respectively.

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

Federated Hermes will host an earnings conference call at 9 a.m. Eastern on Oct. 30, 2020. Investors are invited to listen to the earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (international) prior to the 9 a.m. start time. To listen online, go to the Investor Relations section and the Analyst Information tab of FederatedHermes.com at least 15 minutes prior to register and join the call. A replay will be available at approximately 12:30 p.m. Eastern on Oct. 30, 2020. To access the telephone replay, dial 877-481-4010 (domestic) or 919-882-2331 (international) and enter access code 38009. The online replay will be available via FederatedHermes.com for one year.

Federated Hermes, Inc. is a leading global investment manager with $614.8 billion in assets under management as of Sept. 30, 2020. Guided by our conviction that responsible investing is the best way to create wealth over the long term, our investment solutions span equity, fixed-income, alternative/private markets, multi-asset and liquidity management strategies. Providing world-class active investment management and engagement services to more than 11,000 institutions and intermediaries, our clients include corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Headquartered in Pittsburgh, Federated Hermes' more than 1,900 employees include those in London, New York, Boston and several other offices worldwide. For more information, visit FederatedHermes.com.

Federated Hermes ranks in the top 6% of equity fund managers in the industry, the top 7% of money market fund managers and the top 10% of fixed-income fund managers1. Federated Hermes also ranks as the 5th-largest manager of model-delivered SMAs2. For more information, including an analyst presentation, visitFederatedHermes.com.

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1) ISS Market Intelligence (SIMFUND), Sept. 30, 2020. Based on assets under management in open-end funds.2) Money Management Institute/Cerulli, Q2 2020.Federated Securities Corp. is distributor of the Federated Hermes funds.Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling, Federated MDTA LLC, Hermes Fund Managers Ireland Limited, Hermes Investment Management Limited, and Hermes GPE LLP, each a registered investment advisor in one or more of the U.S., U.K. or Ireland.

Certain statements in this press release, such as those related to performance, investor preferences and demand, asset flows and mix, fee waivers, and the coronavirus and efforts to combat it, 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 and retained, and sustain product demand, 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 Quarter % Change Ended % Change Q3 2019 toQ2 2020 to Sept. 30, Sept. 30, Q3 2020 June 30, Q3 2020 2020 2019 2020

Revenue

Investment advisory fees, net $260,089$232,10612 % $245,1266 %

Administrative service fees, net-affiliates 83,028 64,216 29 83,733 (1)

Other service fees, net 21,338 44,018 (52) 31,853 (33)

Total Revenue 364,455 340,340 7 360,712 1



Operating Expenses

Compensation and related 126,186 112,247 12 123,583 2

Distribution 73,726 88,082 (16) 89,038 (17)

Systems and communications 16,193 13,353 21 15,091 7

Professional service fees 14,006 10,678 31 13,888 1

Office and occupancy 10,578 10,855 (3) 10,190 4

Advertising and promotional 2,921 4,102 (29) 3,065 (5)

Travel and related 542 4,158 (87) 325 67

Other 6,922 7,558 (8) 8,281 (16)

Total Operating Expenses 251,074 251,033 0 263,461 (5)

Operating Income 113,381 89,307 27 97,251 17



Nonoperating Income (Expenses)

Investment income (loss), net 6,622 444 NM 14,841 55

Debt expense (494) (1,239) (60) (785) (37)

Other, net 103 8,264 (99) (24) NM

Total Nonoperating Income (Expenses), net 6,231 7,469 (17) 14,032 (56)

Income before income taxes 119,612 96,776 24 111,283 7

Income tax provision 32,928 23,191 42 26,482 24

Net income including the noncontrolling interests in 86,684 73,585 18 84,801 2 subsidiaries

Less: Net income (loss) attributable to the noncontrolling862 623 38 3,605 (76) interests in subsidiaries

Net Income $85,822 $72,962 18 % $81,196 6 %



Amounts Attributable to Federated Hermes, Inc.

Earnings Per Share^1

Basic $0.86 $0.72 19 % $0.81 6 %

Diluted $0.85 $0.72 18 % $0.80 6 %

Weighted-Average Shares Outstanding

Basic and Diluted 96,039 97,306 96,800

Dividends Declared Per Share $0.27 $0.27 $0.27

Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of basic earnings per share under the "two-class method." As such, total net income of $3.4 million, $2.8 million and $3.2 million available to unvested restricted Federated Hermes shareholders for the1) quarterly periods ended Sept. 30, 2020, Sept. 30, 2019 and June 30, 2020, 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 available to unvested shareholders of a nonpublic consolidated subsidiary.

Unaudited Condensed Consolidated Statements of Income

(in thousands, except per share data)

Nine Months Ended

Sept. 30, 2020Sept. 30, 2019% Change

Revenue

Investment advisory fees, net $745,875 $663,974 12 %

Administrative service fees, net-affiliates 238,960 176,319 36

Other service fees, net 99,515 128,576 (23)

Total Revenue 1,084,350 968,869 12



Operating Expenses

Compensation and related 365,104 330,712 10

Distribution 258,925 247,713 5

Systems and communications 46,179 38,258 21

Professional service fees 41,162 31,445 31

Office and occupancy 32,539 33,283 (2)

Advertising and promotional 10,981 12,989 (15)

Travel and related 4,026 12,465 (68)

Other 22,058 16,868 31

Total Operating Expenses 780,974 723,733 8

Operating Income 303,376 245,136 24



Nonoperating Income (Expenses)

Investment income (loss), net 7,011 4,679 50

Debt expense (2,211) (3,971) (44)

Other, net 8,426 7,756 9

Total Nonoperating Income (Expenses), net 13,226 8,464 56

Income before income taxes 316,602 253,600 25

Income tax provision 81,852 61,564 33

Net income including the noncontrolling interests in subsidiaries 234,750 192,036 22

Less: Net income (loss) attributable to the noncontrolling interests in3,554 1,804 97 subsidiaries

Net Income $231,196 $190,232 22 %



Amounts Attributable to Federated Hermes, Inc.

Earnings Per Share^1

Basic $2.30 $1.88 22 %

Diluted $2.29 $1.88 22 %

Weighted-Average Shares Outstanding

Basic and Diluted 96,726 97,211

Dividends Declared Per Share $0.81 $0.81

Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of basic earnings per share under the "two-class method." As such, total net income of $8.9 million and $7.3 million available to1) unvested restricted Federated Hermes shareholders for the nine months ended Sept. 30, 2020 and Sept. 30, 2019, 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 available to unvested shareholders of a nonpublic consolidated subsidiary.

Unaudited Condensed Consolidated Balance Sheets

(in thousands) Sept. 30, 2020Dec. 31, 2019

Assets

Cash and other investments $437,159 $340,635

Other current assets 132,255 120,649

Intangible assets, net, including goodwill 1,257,553 1,220,762

Other long-term assets 176,759 198,085

Total Assets $2,003,726 $1,880,131



Liabilities, Redeemable Noncontrolling Interests and Equity

Current liabilities $234,379 $230,713

Long-term debt 90,000 100,000

Other long-term liabilities 313,470 296,052

Redeemable noncontrolling interests 214,301 212,086

Equity excluding treasury stock 1,469,674 1,322,312

Treasury stock (318,098) (281,032)

Total Liabilities, Redeemable Noncontrolling Interests and Equity$2,003,726 $1,880,131

Unaudited Changes in Long-Term Assets - By Asset Class

(in millions) Quarter Ended Nine Months Ended

Sept. 30, 2020June 30, 2020Sept. 30, 2019Sept. 30, 2020Sept. 30, 2019

Equity

Beginning assets $76,859 $68,239 $81,999 $89,011 $72,497

Sales^1 4,186 4,579 5,182 14,845 15,130

Redemptions^1 (5,552) (7,280) (6,384) (20,674) (16,714)

Net sales (redemptions)^1 (1,366) (2,701) (1,202) (5,829) (1,584)

Net exchanges 31 (56) (11) (62) 193

Acquisitions/(dispositions) 0 0 0 (71) 0

Impact of foreign exchange^2 578 439 (577) 249 (695)

Market gains and (losses)^3 4,303 10,938 541 (2,893) 10,339

Ending assets $80,405 $76,859 $80,750 $80,405 $80,750



Fixed Income^5

Beginning assets $73,143 $64,715 $65,052 $69,023 $63,158

Sales^1 9,859 10,691 4,805 28,237 15,414

Redemptions^1 (4,897) (5,407) (5,418) (20,092) (16,940)

Net sales (redemptions)^1 4,962 5,284 (613) 8,145 (1,526)

Net exchanges (36) 146 10 (5) (214)

Acquisitions/(dispositions) 0 0 0 (1) 0

Impact of foreign exchange^2 135 29 (107) 9 (124)

Market gains and (losses)^3 1,342 2,969 1,482 2,375 4,530

Ending assets $79,546 $73,143 $65,824 $79,546 $65,824



Alternative/Private Markets^4

Beginning assets $17,485 $18,061 $17,917 $18,102 $18,318

Sales^1 586 792 384 2,266 1,017

Redemptions^1 (411) (961) (813) (1,954) (1,973)

Net sales (redemptions)^1 175 (169) (429) 312 (956)

Net exchanges 0 (3) (61) (1) (64)

Acquisitions/(dispositions) 0 0 0 452 0

Impact of foreign exchange^2 708 (33) (560) (446) (608)

Market gains and (losses)^3 (222) (371) 289 (273) 466

Ending assets $18,146 $17,485 $17,156 $18,146 $17,156



Multi-asset

Beginning assets $3,705 $3,494 $4,213 $4,199 $4,093

Sales^1 45 48 65 191 247

Redemptions^1 (155) (168) (218) (558) (687)

Net sales (redemptions)^1 (110) (120) (153) (367) (440)

Net exchanges (4) (5) 57 (23) 59

Impact of foreign exchange^2 1 0 0 1 0

Market gains and (losses)^3 145 336 23 (73) 428

Ending assets $3,737 $3,705 $4,140 $3,737 $4,140



Total Long-term Assets^4, 5

Beginning assets $171,192 $154,509 $169,181 $180,335 $158,066

Sales^1 14,676 16,110 10,436 45,539 31,808

Redemptions^1 (11,015) (13,816) (12,833) (43,278) (36,314)

Net sales (redemptions)^1 3,661 2,294 (2,397) 2,261 (4,506)

Net exchanges (9) 82 (5) (91) (26)

Acquisitions/(dispositions) 0 0 0 380 0

Impact of foreign exchange^2 1,422 435 (1,244) (187) (1,427)

Market gains and (losses)^3 5,568 13,872 2,335 (864) 15,763

Ending assets $181,834 $171,192 $167,870 $181,834 $167,870

For certain accounts, Sales and Redemptions are calculated as the remaining1) difference between beginning and ending assets after the calculation of total investment return.

2) Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

Reflects the approximate changes in the fair value of the securities held by3) the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

The balance at September 30, 2019 includes $8.0 billion of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated4) Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.

For one fixed income separate account, sales, redemptions, net sales (redemptions) and market gains and (losses) were previously incorrectly reported for the quarters ended March 31, 2020 and June 30, 2020. Total assets were reported correctly and are not impacted. Corrections for the5) quarter ended March 31, 2020, resulted in increasing redemptions, and thereby reducing net sales, by $390 million and increasing market gains by the same amount. Corrections for the quarter ended June 30, 2020, resulted in decreasing sales, and thereby reducing net sales, by $1.1 billion and increasing market gains by the same amount.

Unaudited Changes in Long-Term Assets - By Asset Class and Product Type

(in millions)

Quarter Ended

Sept. 30, 2020

Equity Fixed Income Alternative / PrivateMulti-asset Total Markets

Funds Separate Funds Separate Funds Separate Funds Separate Funds^. Separate Accounts^1 Accounts^1 Accounts^1 Accounts^1 Accounts^1

Beginning assets $43,723$33,136 $46,046$27,097 $ 11,037$6,448 $3,516$189 $104,322$66,870

Sales 2,937 1,249 7,183 2,676 471 115 44 1 10,635 4,041

Redemptions (3,299) (2,253) (4,497) (400) (386) (25) (146) (9) (8,328) (2,687)

Net sales (redemptions) (362) (1,004) 2,686 2,276 85 90 (102) (8) 2,307 1,354

Net exchanges 31 0 (36) 0 0 0 (4) 0 (9) 0

Impact of foreign exchange^2306 272 105 30 440 268 0 1 851 571

Market gains and (losses)^3 2,395 1,908 978 364 (169) (53) 136 9 3,340 2,228

Ending assets $46,093$34,312 $49,779$29,767 $ 11,393$6,753 $3,546$191 $110,811$71,023



Nine Months Ended

Sept. 30, 2020

Equity Fixed Income Alternative / PrivateMulti-asset Total Markets

Funds Separate Funds Separate Funds Separate Funds Separate Funds Separate Accounts^1 Accounts^1,4 Accounts^1 Accounts^1 Accounts^1,4

Beginning assets $48,112$40,899 $44,223$24,800 $ 11,389$6,713 $4,000$199 $107,724$72,611

Sales 10,423 4,422 21,811 6,426 1,799 467 164 27 34,197 11,342

Redemptions (12,431)(8,243) (17,474)(2,618) (1,511) (443) (538) (20) (31,954) (11,324)

Net sales (redemptions) (2,008) (3,821) 4,337 3,808 288 24 (374) 7 2,243 18

Net exchanges (56) (6) (5) 0 (1) 0 (23) 0 (85) (6)

Acquisition-related 0 (71) 0 (1) 0 452 0 0 0 380

Impact of foreign exchange^261 188 (23) 32 (258) (188) 0 1 (220) 33

Market gains and (losses^)3 (16) (2,877) 1,247 1,128 (25) (248) (57) (16) 1,149 (2,013)

Ending assets $46,093$34,312 $49,779$29,767 $ 11,393$6,753 $3,546$191 $110,811$71,023

Includes separately managed accounts, institutional accounts, sub-advised1) 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) Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

Reflects the approximate changes in the fair value of the securities held by3) the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

For one fixed income separate account, sales, redemptions, net sales (redemptions) and market gains and (losses) were previously incorrectly reported for the quarters ended March 31, 2020 and June 30, 2020. Total assets were reported correctly and are not impacted. Corrections for the4) quarter ended March 31, 2020, resulted in increasing redemptions, and thereby reducing net sales, by $390 million and increasing market gains by the same amount. Corrections for the quarter ended June 30, 2020, resulted in decreasing sales, and thereby reducing net sales, by $1.1 billion and increasing market gains by the same amount.

Unaudited Changes in Long-Term Assets - By Product Type

(in millions) Quarter Ended Nine Months Ended

Sept. 30, 2020June 30, 2020Sept. 30, 2019Sept. 30, 2020Sept. 30, 2019

Total Fund Assets^1

Beginning assets $ 104,322 $ 92,251 $ 100,946 $ 107,724 $ 92,359

Sales 10,635 12,201 6,900 34,197 22,324

Redemptions (8,328) (10,022) (7,986) (31,954) (23,357)

Net sales (redemptions) 2,307 2,179 (1,086) 2,243 (1,033)

Net exchanges (9) 82 0 (85) 4

Impact of foreign exchange^2 851 93 (725) (220) (808)

Market gains and (losses)^3 3,340 9,717 547 1,149 9,160

Ending assets $ 110,811 $ 104,322 $ 99,682 $ 110,811 $ 99,682



Total Separate Account Assets^4, 6

Beginning assets $ 66,870 $ 62,258 $ 68,235 $ 72,611 $ 65,707

Sales^5 4,041 3,909 3,536 11,342 9,484

Redemptions^5 (2,687) (3,794) (4,847) (11,324) (12,957)

Net sales (redemptions)^5 1,354 115 (1,311) 18 (3,473)

Net exchanges 0 0 (5) (6) (30)

Acquisitions/(dispositions) 0 0 0 380 0

Impact of foreign exchange^2 571 342 (519) 33 (619)

Market gains and (losses)^3 2,228 4,155 1,788 (2,013) 6,603

Ending assets $ 71,023 $ 66,870 $ 68,188 $ 71,023 $ 68,188



Total Long-term Assets^1,4, 6

Beginning assets $ 171,192 $ 154,509 $ 169,181 $ 180,335 $ 158,066

Sales^5 14,676 16,110 10,436 45,539 31,808

Redemptions^5 (11,015) (13,816) (12,833) (43,278) (36,314)

Net sales (redemptions)^5 3,661 2,294 (2,397) 2,261 (4,506)

Net exchanges (9) 82 (5) (91) (26)

Acquisitions/(dispositions) 0 0 0 380 0

Impact of foreign exchange^2 1,422 435 (1,244) (187) (1,427)

Market gains and (losses)^3 5,568 13,872 2,335 (864) 15,763

Ending assets $ 181,834 $ 171,192 $ 167,870 $ 181,834 $ 167,870

The balance at Sept. 30, 2019 includes $8.0 billion of assets managed by a previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes1) held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.

2) Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

Reflects the approximate changes in the fair value of the securities held by3) the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

4) Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products.

For certain accounts, Sales and Redemptions are calculated as the remaining5) difference between beginning and ending assets after the calculation of total investment return.

For one fixed income separate account, sales, redemptions, net sales (redemptions) and market gains and (losses) were previously incorrectly reported for the quarters ended March 31, 2020 and June 30, 2020. Total assets were reported correctly and are not impacted. Corrections for the6) quarter ended March 31, 2020, resulted in increasing redemptions, and thereby reducing net sales, by $390 million and increasing market gains by the same amount. Corrections for the quarter ended June 30, 2020, resulted in decreasing sales, and thereby reducing net sales, by $1.1 billion and increasing market gains by the same amount.

Unaudited Managed Assets Quarter Ended

Sept. 30, 2020June 30, 2020March 31, 2020Dec. 31, 2019Sept. 30, 2019(in millions)

By Asset Class

Equity $80,405 $76,859 $68,239 $89,011 $80,750

Fixed-income 79,546 73,143 64,715 69,023 65,824

Alternative / private markets^118,146 17,485 18,061 18,102 17,156

Multi-asset 3,737 3,705 3,494 4,199 4,140

Total long-term assets 181,834 171,192 154,509 180,335 167,870

Money market 432,952 457,624 451,330 395,539 359,292

Total Managed Assets $614,786 $628,816 $605,839 $575,874 $527,162



By Product Type

Funds:

Equity $46,093 $43,723 $36,955 $48,112 $42,575

Fixed-income 49,779 46,046 40,601 44,223 42,329

Alternative / private markets^111,393 11,037 11,365 11,389 10,826

Multi-asset 3,546 3,516 3,330 4,000 3,952

Total long-term assets 110,811 104,322 92,251 107,724 99,682

Money market 325,940 344,846 336,133 286,612 261,215

Total Fund Assets $436,751 $449,168 $428,384 $394,336 $360,897

Separate Accounts:

Equity $34,312 $33,136 $31,284 $40,899 $38,175

Fixed-income 29,767 27,097 24,114 24,800 23,495

Alternative / private markets 6,753 6,448 6,696 6,713 6,330

Multi-asset 191 189 164 199 188

Total long-term assets 71,023 66,870 62,258 72,611 68,188

Money market 107,012 112,778 115,197 108,927 98,077

Total Separate Account Assets $178,035 $179,648 $177,455 $181,538 $166,265

Total Managed Assets $614,786 $628,816 $605,839 $575,874 $527,162

Includes $8.2 billion and $8.0 billion at Dec. 31, 2019 and Sept. 30, 2019, respectively, of assets managed by a previously nonconsolidated entity,1) Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.

Unaudited Average Managed Assets Quarter Ended

(in millions) Sept. 30, 2020June 30, 2020March 31, 2020Dec. 31, 2019Sept. 30, 2019

By Asset Class

Equity $ 80,403 $ 73,620 $ 82,767 $ 84,448 $ 82,027

Fixed-income 76,798 69,603 69,068 67,602 65,074

Alternative / private markets^1 18,270 18,022 17,983 17,838 17,407

Multi-asset 3,786 3,630 4,006 4,149 4,167

Total long-term assets 179,257 164,875 173,824 174,037 168,675

Money market 448,795 471,984 406,365 376,029 349,313

Total Avg. Managed Assets $ 628,052 $ 636,859 $ 580,189 $ 550,066 $ 517,988



By Product Type

Funds:

Equity $ 46,020 $ 41,301 $ 44,996 $ 44,984 $ 43,077

Fixed-income 48,418 43,229 44,017 43,304 41,958

Alternative / private markets^1 11,539 11,345 11,143 11,283 11,035

Multi-asset 3,590 3,453 3,814 3,956 3,978

Total long-term assets 109,567 99,328 103,970 103,527 100,048

Money market 338,814 356,736 290,641 274,116 249,846

Total Avg. Fund Assets $ 448,381 $ 456,064 $ 394,611 $ 377,643 $ 349,894

Separate Accounts:

Equity $ 34,383 $ 32,319 $ 37,771 $ 39,464 $ 38,950

Fixed-income 28,380 26,374 25,051 24,298 23,116

Alternative / private markets 6,731 6,677 6,840 6,555 6,372

Multi-asset 196 177 192 193 189

Total long-term assets 69,690 65,547 69,854 70,510 68,627

Money market 109,981 115,248 115,724 101,913 99,467

Total Avg. Separate Account Assets$ 179,671 $ 180,795 $ 185,578 $ 172,423 $ 168,094

Total Avg. Managed Assets $ 628,052 $ 636,859 $ 580,189 $ 550,066 $ 517,988

The average balance includes $8.3 billion and $8.1 billion for the quarters ended,Dec. 31, 2019 and Sept. 30, 2019, respectively, of assets managed by a1) previously nonconsolidated entity, Hermes GPE LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.

Unaudited Average Managed Assets Nine Months Ended

(in millions) Sept. 30, 2020Sept. 30, 2019

By Asset Class

Equity $ 78,930 $ 80,133

Fixed-income 71,823 64,718

Alternative / private markets^1 18,091 17,830

Multi-asset 3,808 4,206

Total long-term assets 172,652 166,887

Money market 442,381 328,664

Total Avg. Managed Assets $ 615,033 $ 495,551



By Product Type

Funds:

Equity $ 44,106 $ 41,955

Fixed-income 45,221 41,568

Alternative / private markets^1 11,342 11,243

Multi-asset 3,619 4,018

Total long-term assets 104,288 98,784

Money market 328,730 227,130

Total Avg. Fund Assets $ 433,018 $ 325,914

Separate Accounts:

Equity $ 34,824 $ 38,178

Fixed-income 26,602 23,150

Alternative / private markets 6,749 6,587

Multi-asset 189 188

Total long-term assets 68,364 68,103

Money market 113,651 101,534

Total Avg. Separate Account Assets$ 182,015 $ 169,637

Total Avg. Managed Assets $ 615,033 $ 495,551

The average balance for the nine months ended Sept. 30, 2019 includes $8.2 billion of assets managed by a previously nonconsolidated entity, Hermes GPE1) LLP, in which Federated Hermes held an equity method investment. As of March 1, 2020, Hermes GPE LLP is a consolidated subsidiary as a result of Federated Hermes' acquisition of the remaining equity interests in Hermes GPE LLP.

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SOURCE Federated Hermes, Inc.