Federated Hermes, Inc.

Greetings and welcome to Federated Hermes Q2 2021 Analyst Call and Webcast Conference. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Ray Hanley, President of Federated Investors Management Company. Thank you, sir. You may begin.

Thank you, Laura. Good morning and welcome. Thank you all for joining us. Leading today's call will be Chris Donahue, Federated Hermes CEO and President, and Tom Donahue, Chief Financial Officer. Joining us for the Q&A are Sacher Nasebe, who is the CEO of the International Business of Federated Hermes, and Debbie Cunningham, the Chief Investment Officer for Money Markets. During today's call, we may make forward-looking statements, and we want to note that Federated Hermes' actual results may be materially different than the results implied by such statements. Please review the risk disclosures in our SEC filings. No assurance can be given as to future results, and Federated Hermes assumes no duty to update any of these forward-looking statements. Chris?

Thank you, Ray. Good morning, all. I will review Federated Hermes business performance. Tom will comment on our financial results. Q2 ended with a record total assets under management of $646 billion, including record assets in each of equities, $101 billion, fixed income, $91 billion, and private markets, $21 billion. Assets under advice by EOS at Federated Hermes also reached a record high of $1.75 trillion, with a T, at the end of the second quarter. We added two new clients in the second quarter in addition to the three we added in the first quarter. Now, while equity fund flows were slightly negative in the second quarter, about $300 million, we saw positive Q2 net sales in 18 equity fund strategies led by international global with about $1.1 billion in net flows. Here, net sales were strong again in our UK-managed sustainable strategies, including SDG engagement, Asia ex-Japan, global equity ESG, and global emerging markets. Our equity fund performance compared to peers was solid, Using Morningstar data for the trailing three years at the end of the second quarter, 53%, that's 16 out of 30, of our equity funds were beating their peers. 23%, which is 7 out of 30, were in the top quartile of their category. Among the performance highlights, using Morningstar data, the soft closed five-star Kauffman small cap fund finished in the top 12% for Q2. in line with its long-term record. At the end of the second quarter, its trailing three-year record was top 16%, and it was top decile for the trailing five and ten years. It was fourth quartile for the trailing one year. Equity SMAs had Q2 net redemptions of about $162 million, down from about $450 million in Q1 and $900 million in Q4. Equity institutional separate accounts had about $950 million of net redemptions, including $817 million from a UK-based client. For the first three weeks of the third quarter, Equity funds and SMAs had positive net sales of about $115 million. Turning now to fixed income. The second quarter was another very solid quarter of growth and performance. Assets increased by $4.3 billion, or 5% from the prior quarter, with about $3.2 billion, or nearly three-quarters of the growth, coming from net sales. We had 21 fixed income funds with net sales in the second quarter, led by multi-sector funds with about $1.8 billion, and high-yield and other corporate strategies with about $400 million. Within high-yield, net sales were again led by a UK sustainable strategy, i.e., the SDG Engagement High-Yield Credit Fund, with $350 million. Fixed income separate account net sales of $1.1 billion were led by multi-sector mandates. At the end of the second quarter, and using Morningstar data for the trailing three years, we had 10 funds, 28% in the top quartile, and 16 funds, 44% above median. For the first three weeks of the third quarter, fixed income funds and SMAs had positive net sales of about $835 million. In the alternative private market category, net sales were driven by our differentiated trade finance strategy with net sales of nearly $600 million. We begin the third quarter with about $1.9 billion in in net institutional mandates yet to fund into both funds and separate accounts. These fundings are expected to occur in private markets with a concentration in unconstrained credit and in fixed income. Now moving to money markets. Assets were up nearly $11 billion in the second quarter with just under half from funds and the rest from separate accounts. Our money market mutual fund market share, which includes our subadvised funds, was about 7.4% at the end of the second quarter, up slightly from the first quarter percentage. As we said on our previous call, we believe that Q2 was the high watermark for money market fund yield waiver impact. As we expected, the Fed raised the administered rates in mid-June moving repo rates from 0 to 5 basis points and interest on excess reserves from 10 to 15 basis points. While the Fed movement was a step in the right direction, the money fund yield curve remains very flat, and we are experiencing more waivers for competitive purposes. Tom will update our yield waiver outlook for the third quarter. Taking a look now at recent asset totals, Managed assets were approximately $638 billion, including $421 billion in money markets, $99 billion in equities, $93 billion in fixed income, $21 billion in alternative, and $4 billion in multi-asset. Money market mutual fund assets were at $293 billion. Tom? Thanks, Chris.