Federated Hermes, Inc.

Greetings. Welcome to the Federated Hermes Q1 2023 Analyst Call and Webcast. 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. Please note this conference is being recorded. I will now turn the conference over to your host, Ray Hanley, President of Federated Investors Management Company. You may begin.

Thank you, Holly. Good morning and welcome. Leading today's call are Chris Donahue, CEO and President of Federated Hermes, and Tom Donahue, Chief Financial Officer. And joining for the Q&A are Saka Nasebi, CEO of Federated Hermes Limited, our international business, and Debbie Cunningham, the Chief Investment Officer for the Money Markets. During today's call, we may make forward-looking statements. 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 these forward-looking statements. Chris?

Thank you, and good morning. I will review Federated Hermes business performance. Tom will comment on our financial results. In a quarter that saw considerable market fluctuations and uncertainty, Federated Hermes ended the first quarter with record total assets under management of $701 billion, driven by Q1 growth of $29 billion in money market assets to a record high of $506 billion. Turning to equities. Assets increased by about $2.1 billion to $83.6 billion, which includes market gains of $1 billion and net positive sales of $900 million. The strategic value dividend strategy continued to produce solid net sales with $678 million in the first quarter. The U.S. strategic value dividend ETF which was launched in mid-November, now has $51 million in assets. We saw Q1 positive net sales in 25 equity strategies, including global emerging markets, international leaders, Asia X Japan, MDT large-cap, MDT mid-cap, and MDT all-cap core. Our equity performance compared to peers remains solid. Using Morningstar data for the trailing three years at the end of the first quarter, 57% of our equity funds were beating peers, and 34% were in the top quartile of their category. For the first three weeks of Q2, combined equity funds and SMAs had net redemptions of $246 million. Turning now to fixed income. Assets increased by about $700 million in Q1 to $87.5 billion as higher market values were partially offset by net redemptions. Within funds, our flagship core plus strategy, total return bond fund, had first quarter net sales of about $1.1 billion, up from $650 million in the prior quarter. High yield category net sales were positive at $231 million compared to net redemptions of $470 million in the prior quarter. Core Plus and other fixed income SMA strategies added $170 million of Q1 net sales, including about $43 million in our C.W. Henderson strategies. Within fixed income funds, first quarter net redemptions of about 1.2 billion occurred in the three offshore funds. That 1.2 billion redemption is down from 1.8 billion in the prior quarter. We had 16 fixed income funds with positive net sales in the first quarter, including obviously the total return bond fund, the SDG engagement high yield, and sustainable investment grade credit funds. Regarding performance, at the end of the first quarter, again using Morningstar data for the trailing three years, 57% of our fixed income funds were beating peers, and 24% were in the top quartile for their category. For the first three weeks of Q2, Fixed income funds and SMAs had net redemptions of 69 million. In the alternative private markets category, assets increased by approximately 400 million in the first quarter compared to the prior quarter, reaching 21.2 billion. This increase was due to net sales and positive FX impact partially offset by market losses. Net sales were led by absolute return credit, direct lending, market neutral, and real estate. We continue marketing PEC 5, the fifth vintage of our private equity co-invest fund, and Horizon 3, the third vintage of our Horizon series of private equity funds. We have also begun marketing the Hermes Innovation Fund II, the second vintage of our private equity innovation fund, the first vintage of our real estate debt fund, and the first vintage of our nature-based solutions fund. We began Q2 with about $3.8 billion in net institutional mandates yet to fund in both funds and separate accounts. Pay attention to the diversity of the types of mandates we're winning. About $1.9 billion of this net total is expected to come in equity strategies, which includes Asia X Japan, global emerging markets, biodiversity, and global equity. Approximately $1.3 billion of the net total wins is expected to come in these private market strategies. Private equity, direct lending, and unconstrained credit. Fixed income is expected to have about $640 million, which includes wins in investment-grade credit, high yield, and core plus. Moving to money markets. We reached record asset highs for money market funds, $357 billion, money market separate accounts, and total money markets, which I've already mentioned. The first quarter increase reflected movement into money market strategies from bank deposits in March, as investors became increasingly concerned following the failure of certain banks. Money market strategies also continue to benefit from favorable market conditions for cash as an asset class, higher yields, elevated liquidity levels in the financial system, and favorable yields compared to bank deposits. As short-term interest rates peak, we expect market conditions for money market strategies will remain favorable compared to both direct markets and bank deposit rates. Our estimate of money market mutual fund market share, including subadvised funds, was about 7.4% at the end of the first quarter, down from 7.7% at the end of 2022. Looking now at recent asset totals as of a few days ago, managed assets were approximately $707 billion, including $511 billion in money markets, $83 billion in equities, $89 billion in fixed income, $21 billion in alternative private, and $3 billion in multi-asset. Money market mutual fund assets were $362 billion. Tom?