Federated Hermes, Inc.

Greetings and welcome to the Federated Hermes Incorporated second quarter 2024 analyst call and webcast. At this time, all participants are on a listen-only mode and 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, Mr. Richard Donoghue, Vice President, Financial Planning and Analysis. Sir, you may begin.

Thank you. Good morning. Leading today's call will be Chris Donoghue, CEO and President, and Tom Donoghue, Chief Financial Officer. Joining us for our Q&A are Debbie Cunningham, Chief Investment Officer at MoneyMarkets, and Zachary Nesebe, CEO of Federated Hermes Limited. Ray Hanley is attending a family funeral and will not be with us today. 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. We invite you to review the risk disclosures in our SEC filings. No insurance can be given as to future results, and Federated Hermes assumes no duty to update any of these forward-looking statements. Chris?

Thank you, Richard, and good morning all. I will review Federated Hermes' business performance, and Tom will comment on our financial results. We ended the second quarter with record assets under management of $783 billion, driven by record money market assets of $587 billion. Looking first at equities, assets decreased by 2.3 billion from Q1 to 77.9 billion due to net redemptions of 3.3 billion, partially offset by market gains of 933 million. We did see Q2 positive net sales in 11 equity strategies, including MDT large-cap growth, MDT mid-cap growth, and international leaders fund. The MDT fund strategies have shown accelerated sales and net sales in 2024, particularly in the growth space. Year to date, through the end of the second quarter, MDT fund strategies have had about $1.8 billion in gross sales and $1.1 billion in net sales. Looking at our equity fund performance at the end of Q2 and using Morningstar data for the trailing three years, 54% of our equity funds were beating peers, and 38% were in the top quartile of their category. Now, for the first three weeks of Q3, combined equity funds and equity SMAs had net redemptions of $151 million. As my grandkids say, meaningfully less worse. Turning now to fixed income. Assets decreased by about $1 billion in Q2 to $95.3 billion. Fixed income funds had Q2 net redemptions of $631 million, and fixed income separate accounts had net redemptions of $806 million. More on those numbers in a moment. We had 11 fixed income funds with positive net sales in Q2, including total return bond fund and institutional fixed income. Regarding performance, at the end of Q2 and using Morningstar data for the trailing three years, 45% of our fixed income funds were beating peers, and 21% were in the top quartile of their category. For the first three weeks of Q3, combined fixed income and SMAs had net redemptions of $273 million. In the alternative private markets category, assets decreased by about $400 million in Q2 to just over $20 billion. due mainly to net redemptions in the unconstrained credit fund of about $500 million. We held our final close of Horizon 3, the third vintage of our Horizon series of global private equity funds in Q2, with $1.08 billion raised. Horizon invests globally with a mid-market focus. It's a hybrid strategy with roughly 50-50 allocation to co-investments and funds. Continuing on with private markets, we're in the market now with Federated Hermes GPE Innovation Fund II, the second vintage of our Pan-European Growth Private Equity Innovation Fund. We're also in the market with our European Direct Lending III, the third vintage of our European Direct Lending Fund. For equities, we have 166 million wins to fund, offset by 188 million of known redemptions.