☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Pennsylvania
|
|
25-1111467
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(State or other jurisdiction of incorporation or organization)
|
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(I.R.S. Employer Identification No.)
|
Federated Investors Tower
|
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15222-3779
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||
Pittsburgh,
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|
Pennsylvania
|
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(Address of principal executive offices)
|
|
(Zip Code)
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Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Class B common stock, no par value
|
FII
|
New York Stock Exchange
|
Large accelerated filer
|
x
|
|
|
|
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
|
|
|
|
Smaller reporting company
|
☐
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|
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Emerging growth company
|
☐
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Item 1.
|
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
|
||
Consolidated Balance Sheets
|
|
|
|
||||
(dollars in thousands)
|
|
|
|
||||
(unaudited)
|
|
|
|
||||
|
September 30,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and Cash Equivalents
|
$
|
196,513
|
|
|
$
|
156,832
|
|
Investments—Consolidated Investment Companies
|
43,661
|
|
|
22,798
|
|
||
Investments—Affiliates and Other
|
68,831
|
|
|
10,860
|
|
||
Receivables, net of reserve of $5 and $50, respectively
|
59,832
|
|
|
60,094
|
|
||
Receivables—Affiliates
|
33,005
|
|
|
34,985
|
|
||
Prepaid Expenses
|
15,610
|
|
|
16,513
|
|
||
Other Current Assets
|
3,420
|
|
|
2,019
|
|
||
Total Current Assets
|
420,872
|
|
|
304,101
|
|
||
Long-Term Assets
|
|
|
|
||||
Goodwill
|
766,174
|
|
|
809,608
|
|
||
Intangible Assets, net of accumulated amortization of $16,136 and $11,203, respectively
|
367,196
|
|
|
339,639
|
|
||
Property and Equipment, net of accumulated depreciation of $90,743 and $89,937, respectively
|
51,555
|
|
|
53,229
|
|
||
Right-of-Use Assets, net of accumulated amortization of $9,086
|
102,516
|
|
|
0
|
|
||
Other Long-Term Assets
|
45,658
|
|
|
37,106
|
|
||
Total Long-Term Assets
|
1,333,099
|
|
|
1,239,582
|
|
||
Total Assets
|
$
|
1,753,971
|
|
|
$
|
1,543,683
|
|
LIABILITIES
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Accounts Payable and Accrued Expenses
|
$
|
66,843
|
|
|
$
|
56,110
|
|
Accrued Compensation and Benefits
|
100,777
|
|
|
113,865
|
|
||
Lease Liabilities
|
13,352
|
|
|
0
|
|
||
Other Current Liabilities
|
13,403
|
|
|
11,205
|
|
||
Total Current Liabilities
|
194,375
|
|
|
181,180
|
|
||
Long-Term Liabilities
|
|
|
|
||||
Long-Term Debt
|
120,000
|
|
|
135,000
|
|
||
Long-Term Deferred Tax Liability, net
|
161,778
|
|
|
148,164
|
|
||
Long-Term Lease Liabilities
|
109,200
|
|
|
0
|
|
||
Other Long-Term Liabilities
|
18,629
|
|
|
39,705
|
|
||
Total Long-Term Liabilities
|
409,607
|
|
|
322,869
|
|
||
Total Liabilities
|
603,982
|
|
|
504,049
|
|
||
Commitments and Contingencies (Note (15))
|
|
|
|
||||
TEMPORARY EQUITY
|
|
|
|
||||
Redeemable Noncontrolling Interest in Subsidiaries
|
199,492
|
|
|
182,513
|
|
||
PERMANENT EQUITY
|
|
|
|
||||
Federated Investors, Inc. Shareholders' Equity
|
|
|
|
||||
Common Stock:
|
|
|
|
||||
Class A, No Par Value, 20,000 Shares Authorized, 9,000 Shares Issued and Outstanding
|
189
|
|
|
189
|
|
||
Class B, No Par Value, 900,000,000 Shares Authorized, 109,505,456 Shares Issued
|
386,189
|
|
|
367,063
|
|
||
Additional Paid-In Capital from Treasury Stock Transactions
|
104
|
|
|
0
|
|
||
Retained Earnings
|
871,774
|
|
|
791,823
|
|
||
Treasury Stock, at Cost, 8,366,525 and 8,702,074 Shares Class B Common Stock, respectively
|
(279,472
|
)
|
|
(287,337
|
)
|
||
Accumulated Other Comprehensive Income (Loss), net of tax
|
(28,287
|
)
|
|
(14,617
|
)
|
||
Total Permanent Equity
|
950,497
|
|
|
857,121
|
|
||
Total Liabilities, Temporary Equity and Permanent Equity
|
$
|
1,753,971
|
|
|
$
|
1,543,683
|
|
Consolidated Statements of Income
|
||||||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Revenue
|
|
|
|
|
|
|
|
|
||||||||
Investment Advisory Fees, net—Affiliates
|
|
$
|
175,629
|
|
|
$
|
159,527
|
|
|
$
|
497,538
|
|
|
$
|
425,288
|
|
Investment Advisory Fees, net—Other
|
|
56,477
|
|
|
57,509
|
|
|
166,436
|
|
|
134,141
|
|
||||
Administrative Service Fees, net—Affiliates
|
|
64,216
|
|
|
49,855
|
|
|
176,319
|
|
|
147,248
|
|
||||
Other Service Fees, net—Affiliates
|
|
41,124
|
|
|
39,046
|
|
|
119,639
|
|
|
119,105
|
|
||||
Other Service Fees, net—Other
|
|
2,894
|
|
|
2,679
|
|
|
8,937
|
|
|
2,679
|
|
||||
Total Revenue
|
|
340,340
|
|
|
308,616
|
|
|
968,869
|
|
|
828,461
|
|
||||
Operating Expenses
|
|
|
|
|
|
|
|
|
||||||||
Compensation and Related
|
|
112,247
|
|
|
103,092
|
|
|
330,712
|
|
|
255,613
|
|
||||
Distribution
|
|
88,082
|
|
|
72,153
|
|
|
247,713
|
|
|
214,098
|
|
||||
Systems and Communications
|
|
13,353
|
|
|
12,213
|
|
|
38,258
|
|
|
28,397
|
|
||||
Office and Occupancy
|
|
10,855
|
|
|
9,332
|
|
|
33,283
|
|
|
24,238
|
|
||||
Professional Service Fees
|
|
10,678
|
|
|
13,535
|
|
|
31,445
|
|
|
32,443
|
|
||||
Advertising and Promotional
|
|
4,102
|
|
|
4,502
|
|
|
12,989
|
|
|
10,967
|
|
||||
Travel and Related
|
|
4,158
|
|
|
4,622
|
|
|
12,465
|
|
|
10,967
|
|
||||
Other
|
|
7,558
|
|
|
7,269
|
|
|
16,868
|
|
|
9,412
|
|
||||
Total Operating Expenses
|
|
251,033
|
|
|
226,718
|
|
|
723,733
|
|
|
586,135
|
|
||||
Operating Income
|
|
89,307
|
|
|
81,898
|
|
|
245,136
|
|
|
242,326
|
|
||||
Nonoperating Income (Expenses)
|
|
|
|
|
|
|
|
|
||||||||
Investment Income
|
|
1,030
|
|
|
938
|
|
|
3,009
|
|
|
5,030
|
|
||||
Gain (Loss) on Securities, net
|
|
(586
|
)
|
|
261
|
|
|
1,670
|
|
|
(1,736
|
)
|
||||
Debt Expense
|
|
(1,239
|
)
|
|
(1,602
|
)
|
|
(3,971
|
)
|
|
(4,363
|
)
|
||||
Other, net
|
|
8,264
|
|
|
2,240
|
|
|
7,756
|
|
|
(26,877
|
)
|
||||
Total Nonoperating Income (Expenses), net
|
|
7,469
|
|
|
1,837
|
|
|
8,464
|
|
|
(27,946
|
)
|
||||
Income Before Income Taxes
|
|
96,776
|
|
|
83,735
|
|
|
253,600
|
|
|
214,380
|
|
||||
Income Tax Provision
|
|
23,191
|
|
|
21,741
|
|
|
61,564
|
|
|
53,713
|
|
||||
Net Income Including the Noncontrolling Interests in Subsidiaries
|
|
73,585
|
|
|
61,994
|
|
|
192,036
|
|
|
160,667
|
|
||||
Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries
|
|
623
|
|
|
2,386
|
|
|
1,804
|
|
|
1,906
|
|
||||
Net Income
|
|
$
|
72,962
|
|
|
$
|
59,608
|
|
|
$
|
190,232
|
|
|
$
|
158,761
|
|
Amounts Attributable to Federated Investors, Inc.
|
|
|
|
|
|
|
|
|||||||||
Earnings Per Common Share—Basic and Diluted
|
|
$
|
0.72
|
|
|
$
|
0.59
|
|
|
$
|
1.88
|
|
|
$
|
1.57
|
|
Cash Dividends Per Share
|
|
$
|
0.27
|
|
|
$
|
0.27
|
|
|
$
|
0.81
|
|
|
$
|
0.79
|
|
Consolidated Statements of Comprehensive Income
|
||||||||||||||||
(dollars in thousands)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Net Income Including the Noncontrolling Interests in Subsidiaries
|
|
$
|
73,585
|
|
|
$
|
61,994
|
|
|
$
|
192,036
|
|
|
$
|
160,667
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other Comprehensive Income (Loss), net of tax
|
|
|
|
|
|
|
|
|
||||||||
Permanent Equity
|
|
|
|
|
|
|
|
|
||||||||
Foreign Currency Translation Gain (Loss)
|
|
(11,795
|
)
|
|
(3,778
|
)
|
|
(13,670
|
)
|
|
(4,257
|
)
|
||||
Reclassification Adjustment Related to Foreign Currency Items
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(191
|
)
|
||||
Reclassification Adjustment Related to Equity Securities
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(29
|
)
|
||||
Temporary Equity
|
|
|
|
|
|
|
|
|
||||||||
Foreign Currency Translation Gain (Loss)
|
|
(5,544
|
)
|
|
(1,781
|
)
|
|
(6,430
|
)
|
|
(1,781
|
)
|
||||
Other Comprehensive Income (Loss), net of tax
|
|
(17,339
|
)
|
|
(5,559
|
)
|
|
(20,100
|
)
|
|
(6,258
|
)
|
||||
Comprehensive Income Including the Noncontrolling Interests in Subsidiaries
|
|
56,246
|
|
|
56,435
|
|
|
171,936
|
|
|
154,409
|
|
||||
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interest in Subsidiaries
|
|
(4,921
|
)
|
|
605
|
|
|
(4,626
|
)
|
|
125
|
|
||||
Comprehensive Income Attributable to Federated Investors, Inc.
|
|
$
|
61,167
|
|
|
$
|
55,830
|
|
|
$
|
176,562
|
|
|
$
|
154,284
|
|
Consolidated Statements of Changes in Equity
|
||||||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||||||
|
|
Federated Investors, Inc. Shareholders' Equity
|
|
|
|
|
||||||||||||||||||||||
|
|
Common
Stock |
|
Additional
Paid-in Capital from Treasury Stock Transactions |
|
Retained
Earnings |
|
Treasury
Stock |
|
Accumulated
Other Comprehensive Income (Loss), net of tax |
|
Total
Permanent Equity |
|
Redeemable
Noncontrolling Interest in Subsidiaries/ Temporary Equity |
||||||||||||||
Balance at December 31, 2018
|
|
$
|
367,252
|
|
|
$
|
0
|
|
|
$
|
791,823
|
|
|
$
|
(287,337
|
)
|
|
$
|
(14,617
|
)
|
|
$
|
857,121
|
|
|
$
|
182,513
|
|
Net Income
|
|
0
|
|
|
0
|
|
|
54,546
|
|
|
0
|
|
|
0
|
|
|
54,546
|
|
|
65
|
|
|||||||
Other Comprehensive Income (Loss), net of tax
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
7,664
|
|
|
7,664
|
|
|
3,714
|
|
|||||||
Subscriptions—Redeemable Noncontrolling Interest Holders
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
42
|
|
|||||||
Stock Award Activity
|
|
7,110
|
|
|
0
|
|
|
(11,830
|
)
|
|
11,830
|
|
|
0
|
|
|
7,110
|
|
|
2,126
|
|
|||||||
Dividends Declared
|
|
0
|
|
|
0
|
|
|
(27,217
|
)
|
|
0
|
|
|
0
|
|
|
(27,217
|
)
|
|
0
|
|
|||||||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(2,260
|
)
|
|||||||
Purchase of Treasury Stock
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,485
|
)
|
|
0
|
|
|
(1,485
|
)
|
|
0
|
|
|||||||
Balance at March 31, 2019
|
|
$
|
374,362
|
|
|
$
|
0
|
|
|
$
|
807,322
|
|
|
$
|
(276,992
|
)
|
|
$
|
(6,953
|
)
|
|
$
|
897,739
|
|
|
$
|
186,200
|
|
Net Income
|
|
0
|
|
|
0
|
|
|
62,724
|
|
|
0
|
|
|
0
|
|
|
62,724
|
|
|
1,116
|
|
|||||||
Other Comprehensive Income (Loss), net of tax
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(9,539
|
)
|
|
(9,539
|
)
|
|
(4,600
|
)
|
|||||||
Subscriptions—Redeemable Noncontrolling Interest Holders
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,822
|
|
|||||||
Stock Award Activity
|
|
6,069
|
|
|
103
|
|
|
0
|
|
|
68
|
|
|
0
|
|
|
6,240
|
|
|
1,773
|
|
|||||||
Dividends Declared
|
|
0
|
|
|
0
|
|
|
(27,323
|
)
|
|
0
|
|
|
0
|
|
|
(27,323
|
)
|
|
0
|
|
|||||||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(541
|
)
|
|||||||
Business Acquisition
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(386
|
)
|
|||||||
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests
|
|
0
|
|
|
0
|
|
|
(16,604
|
)
|
|
0
|
|
|
0
|
|
|
(16,604
|
)
|
|
16,604
|
|
|||||||
Purchase of Treasury Stock
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(709
|
)
|
|
0
|
|
|
(709
|
)
|
|
0
|
|
|||||||
Balance at June 30, 2019
|
|
$
|
380,431
|
|
|
$
|
103
|
|
|
$
|
826,119
|
|
|
$
|
(277,633
|
)
|
|
$
|
(16,492
|
)
|
|
$
|
912,528
|
|
|
$
|
201,988
|
|
Net Income
|
|
0
|
|
0
|
|
72,962
|
|
|
0
|
|
|
0
|
|
|
72,962
|
|
|
623
|
|
|||||||||
Other Comprehensive Income (Loss), net of tax
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(11,795
|
)
|
|
(11,795
|
)
|
|
(5,544
|
)
|
|||||||
Subscriptions—Redeemable Noncontrolling Interest Holders
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
687
|
|
|||||||
Stock Award Activity
|
|
5,947
|
|
|
1
|
|
|
0
|
|
|
21
|
|
|
0
|
|
|
5,969
|
|
|
2,125
|
|
|||||||
Dividends Declared
|
|
0
|
|
|
0
|
|
|
(27,307
|
)
|
|
0
|
|
|
0
|
|
|
(27,307
|
)
|
|
0
|
|
|||||||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(387
|
)
|
|||||||
Purchase of Treasury Stock
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,860
|
)
|
|
0
|
|
|
(1,860
|
)
|
|
0
|
|
|||||||
Balance at September 30, 2019
|
|
$
|
386,378
|
|
|
$
|
104
|
|
|
$
|
871,774
|
|
|
$
|
(279,472
|
)
|
|
$
|
(28,287
|
)
|
|
$
|
950,497
|
|
|
$
|
199,492
|
|
Consolidated Statements of Changes in Equity
|
||||||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||||||
|
|
Federated Investors, Inc. Shareholders' Equity
|
|
|
|
|
||||||||||||||||||||||
|
|
Common
Stock |
|
Additional
Paid-in Capital from Treasury Stock Transactions |
|
Retained
Earnings |
|
Treasury
Stock |
|
Accumulated
Other Comprehensive Income (Loss), net of tax |
|
Total
Permanent Equity |
|
Redeemable
Noncontrolling Interest in Subsidiaries/ Temporary Equity |
||||||||||||||
Balance at December 31, 2017
|
|
$
|
343,378
|
|
|
$
|
0
|
|
|
$
|
697,359
|
|
|
$
|
(278,732
|
)
|
|
$
|
(790
|
)
|
|
$
|
761,215
|
|
|
$
|
30,163
|
|
Adoption of New Accounting Pronouncements
|
|
0
|
|
|
0
|
|
|
125
|
|
|
0
|
|
|
(254
|
)
|
|
(129
|
)
|
|
0
|
|
|||||||
Net Income
|
|
0
|
|
|
0
|
|
|
60,331
|
|
|
0
|
|
|
0
|
|
|
60,331
|
|
|
(325
|
)
|
|||||||
Other Comprehensive Income (Loss), net of tax
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
277
|
|
|
277
|
|
|
0
|
|
|||||||
Subscriptions—Redeemable Noncontrolling Interest Holders
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
500
|
|
|||||||
Stock Award Activity
|
|
6,966
|
|
|
0
|
|
|
(10,721
|
)
|
|
10,822
|
|
|
0
|
|
|
7,067
|
|
|
0
|
|
|||||||
Dividends Declared
|
|
0
|
|
|
0
|
|
|
(25,265
|
)
|
|
0
|
|
|
0
|
|
|
(25,265
|
)
|
|
0
|
|
|||||||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,684
|
)
|
|||||||
Purchase of Treasury Stock
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(3,876
|
)
|
|
0
|
|
|
(3,876
|
)
|
|
0
|
|
|||||||
Balance at March 31, 2018
|
|
$
|
350,344
|
|
|
$
|
0
|
|
|
$
|
721,829
|
|
|
$
|
(271,786
|
)
|
|
$
|
(767
|
)
|
|
$
|
799,620
|
|
|
$
|
28,654
|
|
Net Income
|
|
0
|
|
|
0
|
|
|
38,822
|
|
|
0
|
|
|
0
|
|
|
38,822
|
|
|
(155
|
)
|
|||||||
Other Comprehensive Income (Loss), net of tax
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(722
|
)
|
|
(722)
|
|
|
0
|
|
|||||||
Subscriptions—Redeemable Noncontrolling Interest Holders
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
663
|
|
|||||||
Consolidation (Deconsolidation)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,751
|
)
|
|||||||
Stock Award Activity
|
|
5,794
|
|
|
0
|
|
|
(567
|
)
|
|
673
|
|
|
0
|
|
|
5,900
|
|
|
0
|
|
|||||||
Dividends Declared
|
|
0
|
|
|
0
|
|
|
(27,331
|
)
|
|
0
|
|
|
0
|
|
|
(27,331)
|
|
|
0
|
|
|||||||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(6,427
|
)
|
|||||||
Purchase of Treasury Stock
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(17,164
|
)
|
|
0
|
|
|
(17,164)
|
|
|
0
|
|
|||||||
Balance at June 30, 2018
|
|
$
|
356,138
|
|
|
$
|
0
|
|
|
$
|
732,753
|
|
|
$
|
(288,277
|
)
|
|
$
|
(1,489
|
)
|
|
$
|
799,125
|
|
|
$
|
20,984
|
|
Net Income
|
|
0
|
|
|
0
|
|
|
59,608
|
|
|
0
|
|
|
0
|
|
|
59,608
|
|
|
2,386
|
|
|||||||
Other Comprehensive Income (Loss), net of tax
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(3,778
|
)
|
|
(3,778
|
)
|
|
(1,781
|
)
|
|||||||
Subscriptions—Redeemable Noncontrolling Interest Holders
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
3,262
|
|
|||||||
Stock Award Activity
|
|
5,456
|
|
|
15
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
5,471
|
|
|
0
|
|
|||||||
Dividends Declared
|
|
0
|
|
|
0
|
|
|
(27,185
|
)
|
|
0
|
|
|
0
|
|
|
(27,185
|
)
|
|
0
|
|
|||||||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,667
|
)
|
|||||||
Business Acquisition
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
169,560
|
|
|||||||
Purchase of Treasury Stock
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(5,877
|
)
|
|
0
|
|
|
(5,877
|
)
|
|
0
|
|
|||||||
Balance at September 30, 2018
|
|
$
|
361,594
|
|
|
$
|
15
|
|
|
$
|
765,176
|
|
|
$
|
(294,154
|
)
|
|
$
|
(5,267
|
)
|
|
$
|
827,364
|
|
|
$
|
192,744
|
|
Consolidated Statements of Cash Flows
|
||||||||
(dollars in thousands)
|
||||||||
(unaudited)
|
||||||||
|
|
Nine Months Ended
|
||||||
|
|
September 30,
|
||||||
|
|
2019
|
|
|
2018
|
|
||
Operating Activities
|
|
|
|
|
||||
Net Income Including the Noncontrolling Interests in Subsidiaries
|
|
$
|
192,036
|
|
|
$
|
160,667
|
|
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities
|
|
|
|
|
||||
Amortization of Deferred Sales Commissions
|
|
1,625
|
|
|
2,319
|
|
||
Depreciation and Other Amortization
|
|
19,165
|
|
|
10,767
|
|
||
Share-Based Compensation Expense
|
|
19,148
|
|
|
18,244
|
|
||
Subsidiary Share-Based Compensation Expense
|
|
6,024
|
|
|
0
|
|
||
(Gain) Loss on Disposal of Assets
|
|
11
|
|
|
(7
|
)
|
||
Provision (Benefit) for Deferred Income Taxes
|
|
5,956
|
|
|
7,813
|
|
||
Net Unrealized (Gain) Loss on Investments
|
|
(3,469
|
)
|
|
1,801
|
|
||
Net Sales (Purchases) of Investments—Consolidated Investment Companies
|
|
(20,076
|
)
|
|
9,302
|
|
||
(Increase) Decrease in Receivables, net
|
|
426
|
|
|
(9,462
|
)
|
||
(Increase) Decrease in Prepaid Expenses and Other Assets
|
|
(1,502
|
)
|
|
(1,052
|
)
|
||
Increase (Decrease) in Accounts Payable and Accrued Expenses
|
|
(4,057
|
)
|
|
(119,268
|
)
|
||
Increase (Decrease) in Other Liabilities
|
|
(2,946
|
)
|
|
7,589
|
|
||
Net Cash Provided (Used) by Operating Activities
|
|
212,341
|
|
|
88,713
|
|
||
Investing Activities
|
|
|
|
|
||||
Purchases of Investments—Affiliates and Other
|
|
(88,422
|
)
|
|
(3,081
|
)
|
||
Cash Paid for Business Acquisitions, Net of Cash Acquired
|
|
785
|
|
|
(168,430
|
)
|
||
Proceeds from Redemptions of Investments—Affiliates and Other
|
|
32,639
|
|
|
19,986
|
|
||
Cash Paid for Property and Equipment
|
|
(11,321
|
)
|
|
(11,900
|
)
|
||
Net Cash Provided (Used) by Investing Activities
|
|
(66,319
|
)
|
|
(163,425
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Dividends Paid
|
|
(81,869
|
)
|
|
(79,808
|
)
|
||
Purchases of Treasury Stock
|
|
(4,054
|
)
|
|
(27,064
|
)
|
||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
(3,188
|
)
|
|
(9,778
|
)
|
||
Contributions from Noncontrolling Interest in Subsidiaries
|
|
2,551
|
|
|
4,425
|
|
||
Proceeds from Shareholders for Share-Based Compensation
|
|
193
|
|
|
222
|
|
||
Proceeds from New Borrowings
|
|
8,800
|
|
|
79,150
|
|
||
Payments on Contingent Consideration Liabilities
|
|
0
|
|
|
(228
|
)
|
||
Payments on Debt
|
|
(23,800
|
)
|
|
(89,150
|
)
|
||
Net Cash Provided (Used) by Financing Activities
|
|
(101,367
|
)
|
|
(122,231
|
)
|
||
Effect of Exchange Rates on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
|
|
(3,569
|
)
|
|
(2,343
|
)
|
||
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
|
|
41,086
|
|
|
(199,286
|
)
|
||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period
|
|
157,426
|
|
|
316,809
|
|
||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period
|
|
198,512
|
|
|
117,523
|
|
||
Less: Restricted Cash Recorded in Other Current Assets
|
|
1,671
|
|
|
0
|
|
||
Less: Restricted Cash and Restricted Cash Equivalents Recorded in Other Long-Term Assets
|
|
328
|
|
|
580
|
|
||
Cash and Cash Equivalents
|
|
$
|
196,513
|
|
|
$
|
116,943
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
(in millions)
|
|
|
||
Cash and Cash Equivalents
|
|
$
|
175.8
|
|
Other Current Assets1
|
|
53.7
|
|
|
Goodwill2
|
|
114.1
|
|
|
Intangible Assets3
|
|
320.0
|
|
|
Other Long-Term Assets4
|
|
40.1
|
|
|
Less: Long-Term Deferred Tax Liability, net
|
|
(28.7
|
)
|
|
Less: Liabilities Acquired5
|
|
(162.3
|
)
|
|
Less: Fair Value of Redeemable Noncontrolling Interest in Subsidiary6
|
|
(169.2
|
)
|
|
Total Purchase Price Consideration
|
|
$
|
343.5
|
|
1
|
Includes $31.9 million of receivables, all of which has been collected as of June 30, 2019.
|
2
|
The goodwill recognized is attributable to enhanced revenue and AUM growth opportunities from future investors and the assembled workforce of Hermes. In this instance, goodwill is not deductible for tax purposes.
|
3
|
Includes $71.6 million for customer relationships with a weighted-average useful life of 8.5 years, $198.5 million for indefinite-lived renewable investment advisory contracts and $49.9 million for an indefinite-lived trade name, all of which are recorded in Intangible Assets, net on the Consolidated Balance Sheets.
|
4
|
Includes $11.2 million of Property and Equipment, net.
|
5
|
Includes $130.3 million related to Accrued Compensation and Benefits.
|
6
|
The fair value of the noncontrolling interest was determined utilizing the market approach and consideration of the overall business enterprise value.
|
|
|
Nine Months Ended
|
||
(in millions)
|
|
September 30, 2018
|
||
Revenue
|
|
$
|
923.3
|
|
Net Income1
|
|
$
|
179.9
|
|
1
|
Excludes a $29.0 million loss on foreign currency forward transactions entered into in order to hedge against foreign exchange rate fluctuations associated with the payment for the Hermes Acquisition.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(in thousands)
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Equity
|
$
|
136,655
|
|
|
$
|
138,624
|
|
|
$
|
394,324
|
|
|
$
|
344,323
|
|
Money Market
|
138,242
|
|
|
101,257
|
|
|
378,686
|
|
|
304,662
|
|
||||
Fixed-Income
|
45,018
|
|
|
45,897
|
|
|
133,476
|
|
|
135,442
|
|
||||
Other1
|
20,425
|
|
|
22,838
|
|
|
62,383
|
|
|
44,034
|
|
||||
Total Revenue
|
$
|
340,340
|
|
|
$
|
308,616
|
|
|
$
|
968,869
|
|
|
$
|
828,461
|
|
1
|
Includes Alternative / Private Markets (including but not limited to private equity, real estate and infrastructure), Multi-Asset and, beginning in the third quarter of 2018, stewardship services revenue.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(in thousands)
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Asset Management1
|
$
|
232,106
|
|
|
$
|
217,036
|
|
|
$
|
663,974
|
|
|
$
|
559,429
|
|
Administrative Services
|
64,216
|
|
|
49,855
|
|
|
176,319
|
|
|
147,248
|
|
||||
Distribution2
|
38,501
|
|
|
36,226
|
|
|
111,942
|
|
|
111,206
|
|
||||
Other3
|
5,517
|
|
|
5,499
|
|
|
16,634
|
|
|
10,578
|
|
||||
Total Revenue
|
$
|
340,340
|
|
|
$
|
308,616
|
|
|
$
|
968,869
|
|
|
$
|
828,461
|
|
1
|
The performance obligation may include administrative, distribution and other services recorded as a single asset management fee under Topic 606, as it is part of a unitary fee arrangement with a single performance obligation.
|
2
|
The performance obligation is satisfied at a point in time and may include contingent deferred sales charges and upfront commissions. A portion of this revenue relates to a performance obligation that has been satisfied in a prior period.
|
3
|
Includes shareholder service fees and, beginning in the third quarter of 2018, stewardship services revenue.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in thousands)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Domestic
|
|
$
|
282,777
|
|
|
$
|
251,683
|
|
|
$
|
801,060
|
|
|
$
|
756,647
|
|
Foreign1
|
|
57,563
|
|
|
56,933
|
|
|
167,809
|
|
|
71,814
|
|
||||
Total Revenue
|
|
$
|
340,340
|
|
|
$
|
308,616
|
|
|
$
|
968,869
|
|
|
$
|
828,461
|
|
1
|
This represents revenue earned by non-U.S. domiciled subsidiaries.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in thousands)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Federated Funds
|
|
$
|
280,970
|
|
|
$
|
248,428
|
|
|
$
|
793,496
|
|
|
$
|
691,641
|
|
Separate Accounts
|
|
56,477
|
|
|
57,508
|
|
|
166,436
|
|
|
134,140
|
|
||||
Other1
|
|
2,893
|
|
|
2,680
|
|
|
8,937
|
|
|
2,680
|
|
||||
Total Revenue
|
|
$
|
340,340
|
|
|
$
|
308,616
|
|
|
$
|
968,869
|
|
|
$
|
828,461
|
|
1
|
Includes stewardship services revenue beginning in the third quarter of 2018.
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
(in thousands)
|
|
|
||
Remainder of 2019
|
|
$
|
2,722
|
|
2020
|
|
5,734
|
|
|
2021
|
|
2,350
|
|
|
2022 and Thereafter
|
|
1,565
|
|
|
Total Remaining Unsatisfied Performance Obligations
|
|
$
|
12,371
|
|
|
|
Nine Months Ended
|
||||
|
|
September 30,
|
||||
|
|
2019
|
|
|
2018
|
|
Equity Assets
|
|
41
|
%
|
|
42
|
%
|
Money Market Assets
|
|
39
|
%
|
|
37
|
%
|
Fixed-Income Assets
|
|
14
|
%
|
|
16
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Federated Strategic Value Dividend strategy1
|
11
|
%
|
|
13
|
%
|
|
11
|
%
|
|
15
|
%
|
Federated Government Obligations Fund
|
10
|
%
|
|
8
|
%
|
|
10
|
%
|
|
9
|
%
|
Federated Kaufmann Mid-Cap Growth strategy2
|
9
|
%
|
|
10
|
%
|
|
9
|
%
|
|
10
|
%
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
(in millions)
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
||
Investments—Consolidated Investment Companies
|
|
$
|
13.2
|
|
|
$
|
21.2
|
|
Receivables
|
|
0.4
|
|
|
0.4
|
|
||
Less: Liabilities
|
|
0.5
|
|
|
0.3
|
|
||
Less: Redeemable Noncontrolling Interest in Subsidiaries
|
|
9.0
|
|
|
11.2
|
|
||
Federated's Net Interest in Federated Fund VIEs
|
|
$
|
4.1
|
|
|
$
|
10.1
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in thousands)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Investments—Consolidated Investment Companies
|
|
|
|
|
|
|
|
|
||||||||
Unrealized Gains (Losses)
|
|
$
|
(364
|
)
|
|
$
|
606
|
|
|
$
|
1,345
|
|
|
$
|
(1,737
|
)
|
Realized Gains1
|
|
79
|
|
|
99
|
|
|
239
|
|
|
1,424
|
|
||||
Realized Losses1
|
|
(198
|
)
|
|
(623
|
)
|
|
(1,025
|
)
|
|
(1,521
|
)
|
||||
Net Gains (Losses) on Investments—Consolidated Investment Companies
|
|
(483
|
)
|
|
82
|
|
|
559
|
|
|
(1,834
|
)
|
||||
Investments—Affiliates and Other
|
|
|
|
|
|
|
|
|
||||||||
Unrealized Gains (Losses) Recognized on Securities Still Held
|
|
2,298
|
|
|
142
|
|
|
3,515
|
|
|
(64
|
)
|
||||
Net Realized Gains (Losses) Recognized on Securities Sold1
|
|
(2,401
|
)
|
|
37
|
|
|
(2,404
|
)
|
|
162
|
|
||||
Net Gains (Losses) on Investments—Affiliates and Other
|
|
(103
|
)
|
|
179
|
|
|
1,111
|
|
|
98
|
|
||||
Gain (Loss) on Securities, net
|
|
$
|
(586
|
)
|
|
$
|
261
|
|
|
$
|
1,670
|
|
|
$
|
(1,736
|
)
|
1
|
Realized gains and losses are computed on a specific-identification basis.
|
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
September 30, 2019
|
|
|
|
|
|
|
|
|
||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
||||||||
Cash and Cash Equivalents
|
|
$
|
196,513
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
196,513
|
|
Investments—Consolidated Investment Companies
|
|
|
|
|
|
|
|
|
||||||||
Equity Securities
|
|
5,473
|
|
|
6,004
|
|
|
0
|
|
|
11,477
|
|
||||
Debt Securities
|
|
0
|
|
|
32,184
|
|
|
0
|
|
|
32,184
|
|
||||
Investments—Affiliates and Other
|
|
|
|
|
|
|
|
|
||||||||
Equity Securities
|
|
65,183
|
|
|
66
|
|
|
11
|
|
|
65,260
|
|
||||
Debt Securities
|
|
0
|
|
|
3,264
|
|
|
307
|
|
|
3,571
|
|
||||
Other1
|
|
4,334
|
|
|
19
|
|
|
0
|
|
|
4,353
|
|
||||
Total Financial Assets
|
|
$
|
271,503
|
|
|
$
|
41,537
|
|
|
$
|
318
|
|
|
$
|
313,358
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Financial Liabilities2
|
|
$
|
31
|
|
|
$
|
3,192
|
|
|
$
|
1,529
|
|
|
$
|
4,752
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
||||||||
Cash and Cash Equivalents
|
|
$
|
156,832
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
156,832
|
|
Investments—Consolidated Investment Companies
|
|
|
|
|
|
|
|
|
||||||||
Equity Securities
|
|
1,269
|
|
|
633
|
|
|
0
|
|
|
1,902
|
|
||||
Debt Securities
|
|
0
|
|
|
20,896
|
|
|
0
|
|
|
20,896
|
|
||||
Investments—Affiliates and Other
|
|
|
|
|
|
|
|
|
||||||||
Equity Securities
|
|
6,963
|
|
|
403
|
|
|
38
|
|
|
7,404
|
|
||||
Debt Securities
|
|
0
|
|
|
3,456
|
|
|
0
|
|
|
3,456
|
|
||||
Other
|
|
597
|
|
|
0
|
|
|
70
|
|
|
667
|
|
||||
Total Financial Assets
|
|
$
|
165,661
|
|
|
$
|
25,388
|
|
|
$
|
108
|
|
|
$
|
191,157
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Financial Liabilities2
|
|
$
|
53
|
|
|
$
|
3,852
|
|
|
$
|
385
|
|
|
$
|
4,290
|
|
1
|
Amounts primarily consist of security deposits and restricted cash.
|
2
|
Amounts primarily consist of derivative liabilities and acquisition-related future contingent consideration liabilities.
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
|
September 30,
|
|
September 30,
|
||||||||
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Class B Shares
|
|
|
|
|
|
|
|
|
||||
Beginning Balance
|
|
101,211,023
|
|
|
100,763,162
|
|
|
100,803,382
|
|
|
101,100,453
|
|
Stock Award Activity
|
|
7,500
|
|
|
5,000
|
|
|
528,574
|
|
|
501,219
|
|
Purchase of Treasury Stock
|
|
(79,592
|
)
|
|
(276,982
|
)
|
|
(193,025
|
)
|
|
(1,110,492
|
)
|
Ending Balance
|
|
101,138,931
|
|
|
100,491,180
|
|
|
101,138,931
|
|
|
100,491,180
|
|
|
|
|
|
|
|
|
|
|
||||
Treasury Shares
|
|
|
|
|
|
|
|
|
||||
Beginning Balance
|
|
8,294,433
|
|
|
8,742,294
|
|
|
8,702,074
|
|
|
8,405,003
|
|
Stock Award Activity
|
|
(7,500
|
)
|
|
(5,000
|
)
|
|
(528,574
|
)
|
|
(501,219
|
)
|
Purchase of Treasury Stock
|
|
79,592
|
|
|
276,982
|
|
|
193,025
|
|
|
1,110,492
|
|
Ending Balance
|
|
8,366,525
|
|
|
9,014,276
|
|
|
8,366,525
|
|
|
9,014,276
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in thousands, except per share data)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
2018
|
|
|||||
Numerator
|
|
|
|
|
|
|
|
|
||||||||
Net Income Attributable to Federated Investors, Inc.
|
|
$
|
72,962
|
|
|
$
|
59,608
|
|
|
$
|
190,232
|
|
|
$
|
158,761
|
|
Less: Total Net Income Available to Participating Unvested Restricted Shareholders1
|
|
(2,774
|
)
|
|
(2,355
|
)
|
|
(7,322
|
)
|
|
(6,261
|
)
|
||||
Total Net Income Attributable to Federated Common Stock - Basic
|
|
$
|
70,188
|
|
|
$
|
57,253
|
|
|
$
|
182,910
|
|
|
$
|
152,500
|
|
Less: Total Net Income Available to Unvested Restricted Shareholders of a Nonpublic Consolidated Subsidiary
|
|
(258
|
)
|
|
(480
|
)
|
|
(457
|
)
|
|
(480
|
)
|
||||
Total Net Income Attributable to Federated Common Stock - Diluted
|
|
$
|
69,930
|
|
|
$
|
56,773
|
|
|
$
|
182,453
|
|
|
$
|
152,020
|
|
Denominator
|
|
|
|
|
|
|
|
|
||||||||
Basic Weighted-Average Federated Common Stock2
|
|
97,306
|
|
|
96,664
|
|
|
97,211
|
|
|
97,013
|
|
||||
Dilutive Potential Shares from Stock Options
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1
|
|
||||
Diluted Weighted-Average Federated Common Stock2
|
|
97,306
|
|
|
96,664
|
|
|
97,211
|
|
|
97,014
|
|
||||
Earnings Per Share
|
|
|
|
|
|
|
|
|
||||||||
Net Income Attributable to Federated Common Stock – Basic and Diluted2
|
|
$
|
0.72
|
|
|
$
|
0.59
|
|
|
$
|
1.88
|
|
|
$
|
1.57
|
|
1
|
Includes dividends paid on unvested restricted Federated Class B Common shares and their proportionate share of undistributed earnings attributable to Federated shareholders.
|
2
|
Federated Common Stock excludes unvested restricted stock which are deemed participating securities in accordance with the two-class method of computing earnings per share.
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
1
|
Calculated using the IBR for each lease.
|
Weighted-average remaining lease term (in years)
|
|
8.8
|
|
|
Weighted-average discount rate (IBR)
|
|
3.8
|
%
|
|
Year-to-date cash paid for the amounts included in the measurement of lease liabilities (in millions)
|
|
$
|
13.6
|
|
(in thousands)
|
Unrealized
Gain (Loss) on Equity Securities
|
|
|
Foreign Currency
Translation Gain (Loss)
|
|
|
Total
|
|
||||
Balance at December 31, 2017
|
|
$
|
29
|
|
|
$
|
(819
|
)
|
|
$
|
(790
|
)
|
Other Comprehensive Income (Loss) Before Reclassifications and Tax
|
|
0
|
|
|
(4,257
|
)
|
|
(4,257
|
)
|
|||
Reclassification Adjustment, before Tax1
|
|
(80
|
)
|
|
(242
|
)
|
|
(322
|
)
|
|||
Tax Impact1
|
|
51
|
|
|
51
|
|
|
102
|
|
|||
Net Current-Period Other Comprehensive Income (Loss)
|
|
(29
|
)
|
|
(4,448
|
)
|
|
(4,477
|
)
|
|||
Balance at September 30, 2018
|
|
$
|
0
|
|
|
$
|
(5,267
|
)
|
|
$
|
(5,267
|
)
|
|
|
|
|
|
|
|
||||||
Balance at December 31, 2018
|
|
$
|
0
|
|
|
$
|
(14,617
|
)
|
|
$
|
(14,617
|
)
|
Other Comprehensive Income (Loss)
|
|
0
|
|
|
(13,670
|
)
|
|
(13,670
|
)
|
|||
Net Current-Period Other Comprehensive Income (Loss)
|
|
0
|
|
|
(13,670
|
)
|
|
(13,670
|
)
|
|||
Balance at September 30, 2019
|
|
$
|
0
|
|
|
$
|
(28,287
|
)
|
|
$
|
(28,287
|
)
|
1
|
Amount represents the reclassification from Accumulated Other Comprehensive Income (Loss), net of tax to Retained Earnings on the Consolidated Balance Sheets as a result of the adoption of ASU 2016-01 and ASU 2018-02.
|
Part I, Item 2. Management's Discussion and Analysis
|
|
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
On September 25, 2019, the SEC adopted a final rule (originally proposed on February 19, 2019) that will enable all issuers to engage in test-the-waters communications with certain institutional investors regarding a contemplated registered securities offering prior to, or following, the filing of a registration statement related to such offering. These communications will be exempt from restrictions imposed by Section 5 of the 1933 Act on written and oral offers prior to or after filing a registration statement and would be limited to qualified institutional buyers and institutional accredited investors. The proposed rule will be non-exclusive and an issuer could rely on other 1933 Act communications rules or exemptions when determining how, when and what to communicate related to a contemplated securities offering. There will be no filing or legend requirements, the "test-the-waters communications" may not conflict with material information in the related registration statement, and issuers subject to Regulation FD would need to consider whether any information in a "test-the-waters communication" would trigger disclosure obligations under Regulation FD or whether an exemption under Regulation FD would apply. The Final Rule will be effective December 3, 2019.
|
•
|
On September 25, 2019, the SEC adopted a new rule 6c-11 under the 1940 Act (Rule 6c-11) which will provide certain exemptions from the 1940 Act and specifically (1) permit exchange traded funds (ETFs) that satisfy certain conditions to operate without the expense and delay of obtaining an exemptive order; (2) impose certain enhanced disclosure requirements regarding ETF trading costs; and (3) amend Form N-1A to provide more useful, ETF-specific information to investors who purchase ETF shares on an exchange (and amend Form N-8B-2 to provide the same information to investors in ETFs organized as Unit Investment Trusts). Rule 6c-11 and the related form amendments will be effective 60 days after
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
On August 21, 2019, the SEC issued guidance to assist investment advisers in fulfilling their proxy voting responsibilities, particularly where they use the services of a proxy advisory firm, and to provide guidance on proxy voting disclosures. The guidance clarifies how an investment adviser's fiduciary duty and Rule 206(4)-6 under the Advisers Act relate to an adviser's proxy voting on behalf of clients. In particular, the guidance discusses, among other things: (1) how an investment adviser and its client, in establishing their relationship, may agree upon the scope of the investment adviser's authority and responsibilities to vote proxies on behalf of that client; (2) what steps an investment adviser, who has assumed voting authority on behalf of clients, could take to demonstrate it is making voting determinations in a client's best interest and in accordance with the investment adviser's proxy voting policies and procedures; (3) considerations that an investment adviser should take into account if the investment adviser retains a proxy advisory firm to assist the investment adviser in discharging the investment adviser's proxy voting duties; (4) steps for an investment adviser to consider if it becomes aware of potential factual errors, potential incompleteness, or potential methodological weaknesses in the proxy advisory firm's analysis that may materially affect one or more of the investment adviser's voting determinations; (5) how an investment adviser could evaluate the services of a proxy advisory firm that the investment adviser retains, including evaluating any material changes in services or operations by the proxy advisory firm; and (6) whether an investment adviser who has assumed voting authority on behalf of a client is required to exercise every opportunity to vote a proxy for that client. The SEC also issued an interpretation under the 1934 Act that proxy voting advice generally constitutes a solicitation under the federal proxy rules and related guidance regarding the application of the anti-fraud provisions under 1934 Act regulations relating to proxy voting advice. The SEC's interpretation does not affect the ability of proxy advisory firms to continue to rely on the exemptions from the federal proxy rules' filing requirements. These examples, among other things, provide relief from the obligation to file a proxy statement, as long as the advisory firm complies with the exemption's conditions. Solicitations that are exempt from the federal proxy rules' filing requirements remain subject to the proxy rules, which prohibit any solicitation from containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact. The SEC's guidance explains what a person providing proxy voting advice should consider when determining the information the proxy advisory firm may need to disclose in order to avoid a potential violation of the proxy rules where the failure to disclose such information would render the advice materially false or misleading. The SEC's guidance became effective on September 10, 2019.
|
•
|
On June 18, 2019, the SEC adopted amendments to the auditor independence rules (specifically Rule 2-01(c)(1)(ii)(A) of Regulation S-X (Loan Rule)) relating to the analysis that must be conducted to determine whether an auditor is independent when the auditor (or a covered person professional at the auditor) has a lending relationship with certain shareholders of an audit client, such as Federated or the Federated Funds. The amendments focus the analysis on beneficial ownership rather than on both record and beneficial ownership; replace the existing ten percent bright-line shareholder ownership test with a significant influence test; add a known through reasonable inquiry standard with respect to identifying beneficial owners of the audit client's equity securities; and exclude from the definition of audit client, for a fund under audit, any other funds that otherwise would be considered affiliates of the audit client under the rules for certain lending relationships. The Loan Rule amendments became effective on October 3, 2019. Federated believes the Loan Rule amendments are an improvement to the existing Loan Rule and mitigate (but not entirely eliminate) the risk that Federated's or the Federated Funds' auditors will inadvertently implicate the auditor independence rules.
|
•
|
On June 5, 2019, the SEC adopted a package of new rules (i.e. Regulation Best Interest) and amendments and interpretations intended to enhance the quality of retail investors' relationships with broker-dealers and investment advisers and to enhance investor protections while preserving retail investor access and choice in (1) the type of professional with whom they work; (2) the services they receive; and (3) how they pay for these services. The new rules are intended to enhance the standard of conduct that broker-dealers owe to their customers and align the standard of conduct with retail customers' reasonable expectations. The rules will also provide additional transparency and clarity for retail investors through enhanced disclosures on Form CRS designed to help them understand who they are dealing with, and why that matters. The interpretations reaffirm, and in some cases clarify, the standard of conduct that investment advisers owe to their clients and clarify the scope of the services a broker-dealer can provide consistent with the statutory definition of investment adviser. With the adoption of this package, regardless of whether a retail investor chooses a broker-dealer or an
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
The SEC proposed rules and amendments on March 20, 2019, to permit registered closed-end funds and business development companies to use the registration, offering and communications reforms the SEC had previously adopted for operating companies under the 1933 Act and to further harmonize the disclosure and regulatory framework for these funds with that of operating companies. The proposed rules and amendments implement provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the "CEF Act") and Small Business Credit Availability Act (the "BDC Act"), and would generally provide eligible closed-end funds and business development companies with flexibility to follow more lenient securities offering rules currently available to traditional public operating companies. The proposed rules and amendments may benefit certain types of business development companies or closed-end funds, such as exchange listed closed-end funds, but would impose additional regulatory requirements on other types of funds, such as continuously offered closed-end funds (including interval and tender offer closed-end funds). Federated offers exchange listed and continuously offered closed-end funds. The public comment period on the proposed rules and amendments ended on June 9, 2019.
|
•
|
SEC proposed rule 12d1-4 and amendments under the 1940 Act on December 19, 2018, which are designed to streamline and enhance the regulatory framework for funds that invest in other funds (or "fund of funds" arrangements). At the same time, the SEC rescinded rule 12d1-2 under the 1940 Act and most related exemptive orders granted by the SEC to provide relief from Sections 12(d)(1)(A), (B), (C) and (G) of the 1940 Act. The SEC also proposed related amendments to rule 12d-1 under the 1940 Act and Form N-CEN. The proposed rule would, under certain specified conditions, permit a fund to acquire shares of another fund in excess of the limits of section 12(d)(1) of the 1940 Act without obtaining an exemptive order from the SEC. Specifically, proposed rule 12d1-4 would: (1) prohibit an acquiring fund, except one that is part of the same group of investment companies as the acquired fund or one that has a sub-advisor that acts as advisor to the acquired fund, from controlling an acquired fund and requires an applicable acquiring fund that holds more than 3% of an acquired fund's outstanding voting securities to vote those securities in a prescribed manner in order to minimize influence over the acquired fund; (2) prohibit an acquiring fund that acquires more than 3% of an acquired fund's outstanding voting securities from redeeming more than 3% of the acquired fund's total outstanding securities in any 30-day period; (3) impose conditions designed to prevent duplicative and excessive fees in fund of funds arrangements by requiring an evaluation of aggregate fees associated with the investment in the acquired fund and the complexity of the fund of funds arrangement; and (4) prohibit funds from creating three-tier fund of fund structures, except in certain limited circumstances. Rule 12d1-2, which is proposed to be rescinded, permits funds that primarily invest in funds within the same group of investment companies to invest in unaffiliated funds and certain non-fund assets. The proposed amendments to rule 12d1-1 would allow funds that primarily invest in funds within the same group of investment companies to continue to invest in unaffiliated money market funds. Finally, the amendments to Form N-CEN would require funds to report whether they relied on rule 12d1-4 or the statutory exception in Section 12(d)(1)(G) of the 1940 Act during the applicable reporting period. The public comment period on the proposed rule ended on May 2, 2019. Federated continues to analyze the potential impact that the rule, if adopted as proposed, would have on Federated's fund of fund arrangements and relevant products and, as of September 30, 2019, given the uncertainty surrounding the scope and certain requirements of the
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
An SEC request for comment was issued on June 5, 2018 seeking public input on enhancing mutual fund, ETF and other investment fund disclosures to improve the investor experience and help investors to make informed investment decisions. Among other matters, it also solicits feedback on investor preferences for means of delivery and how to make better use of 21st century technology, including how to make disclosures more interactive and personalized. The public comment period ended on October 31, 2018.
|
•
|
Rule 30e-3 under the 1940 Act (Rule 30e-3), adopted by the SEC on June 6, 2018, creates an optional "notice and access" method for delivering shareholder reports through website posting in lieu of mailing. Subject to certain accessibility, quarterly holdings availability, formatting, notice, print upon request, and paper copy election conditions, the rule will allow funds to deliver their shareholder reports by making them publicly accessible on a website, free of charge, and sending investors a paper notice of each report's availability by mail. Federated intends to rely on Rule 30e-3 and the Federated Funds registered under the 1940 Act began including the required notice to shareholders in annual reports to fund shareholders and fund prospectuses beginning January 1, 2019.
|
•
|
In light of the adoption of Rule 30e-3, the SEC also issued on June 5, 2018, a request for public comment and additional data on the current processing fee framework intermediaries charge for forwarding fund materials, such as shareholder reports and prospectuses, to beneficial shareholders under current rules of the New York Stock Exchange (NYSE) and other self-regulatory organizations, to better understand the potential effects on funds and their investors. The public comment period ended on October 31, 2018.
|
•
|
The SEC adopted amendments on June 28, 2018 to the public liquidity-related disclosure requirements for open-end mutual funds to assist in providing investors with accessible and useful information about the liquidity risk management practices of the funds in which they invest. Under the amendments, funds will be required to discuss in their annual or semi-annual shareholder reports the operation and effectiveness of their liquidity risk management program, replacing a pending requirement that funds publicly provide the aggregate liquidity classification profile of their portfolios on Form N-PORT. This rule became effective on September 10, 2018, with a compliance date for the Form N-PORT amendments of June 1, 2019, and a compliance date for the shareholder report disclosure requirements of December 1, 2019, for larger fund complexes, such as the SEC-registered Federated Funds.
|
•
|
The SEC issued on June 28, 2018, a final rule that requires, among other things, the use of the Inline eXtensible Business Reporting Language (iXBRL) format for the submission of operating company financial statement information and fund risk/return summary information. The new rule became effective on September 17, 2018, and must be complied with by large mutual fund complexes, such as the Federated Funds, beginning September 17, 2020, and for public companies, such as Federated, with respect to fiscal periods ending on or after June 15, 2019.
|
•
|
While the SEC's proposed derivatives rule, which was issued on December 11, 2015 and would increase the regulation of the use of derivatives by investment companies, remains on the SEC's 2019 regulatory agenda, the SEC is considering issuing a new proposed derivatives rule later in 2019 or early 2020, which signals that this proposed rule will be modified from the SEC's original proposal. Among other recommendations on derivatives regulation, the Treasury Asset Management Report recommended that the SEC consider a derivatives rule that would include a derivatives risk management program and an asset segregation requirement, but reconsider what, if any, portfolio limits should be part of the rule.
|
•
|
The SEC adopted rules on October 13, 2016 relating to the modernization of investment company reporting and disclosure, the enhancement of liquidity risk management by open-end investment companies and the permitted use of "swing pricing" by open-end investment companies. Under the reporting modernization rules, the Federated Funds that are registered under the 1940 Act were required to report on Form N-CEN beginning in June 2018. For larger fund complexes, such as the SEC-registered Federated Funds, required information for Form N-PORT was to be compiled, maintained and made available to the SEC from and after June 1, 2018 and filing of Form N-PORT was to begin as of April 30, 2019. On February 27, 2019, the SEC issued an interim final rule that modified the timing requirements for filing monthly reports on Form N-PORT by amending Rule 30b1-9 under the 1940 Act and Form N-PORT to (1) require funds to file a report on Form N-PORT for each month in the fund's fiscal quarter not later than 60 days after the end of that fiscal quarter and (2) require funds, no later than 30 days after the end of each month to maintain in their records the information that is required to be included in Form N-PORT. Regarding the liquidity management rules, compliance with disclosure and certain other elements of the rules was required by June 1, 2017. Federated established its liquidity risk management program by December 1, 2018, as required for larger fund complexes. The rules' limitation of illiquid investments to 15% of net assets also took effect on
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
On July 19, 2019, the ESMA published a Final Report on Guidelines on stress test scenarios under the EU Money Market Fund Regulation (MMF Regulation) and a Final Report on reporting to competent authorities under Article 37 of the MMF Regulation, which are aimed at ensuring a coherent application of the MMF Regulation. As required by Article 28 of the MMF Regulation, the Guidelines on stress testing establish common reference parameters of the stress test scenarios money market funds or managers of money market funds should include in their stress testing scenarios. As required by Article 37 of the MMF Regulation, the Guidelines on reporting provide guidance on how to fill in the reporting template on money market funds that their managers will transmit to competent authorities as of the first quarter of 2020. Federated continues to analyze the new Guidelines and the requirements for compliance.
|
•
|
On May 31, 2019, the FCA issued a Policy Statement, final rules and a consultation paper on improving shareholder engagement in connection with the Shareholder Rights Directive II. The final rules and guidance apply to regulated life insurers, asset managers and companies with shares admitted to trading on a regulated market. The Policy Statement confirmed that firms, such as asset managers, had to implement an engagement policy, and make certain disclosures regarding their engagement policy and investment strategies (or explain why they have not done so), by June 10, 2019. The engagement policy is required to cover how firms integrate shareholder engagement in their investment strategies, how they monitor investee companies on strategy, financial and non-financial performance, capital structure and social, environmental impact and corporate governance, how they conduct dialogue and exercise voting, cooperate with other shareholders, communicate with other stakeholders and manage conflicts of interest. In addition to engagement policy, the detailed rules require firms to send details of portfolio composition, turnover and turnover costs to certain clients. Firms that are required to make annual disclosures must do so for the first full period after the rules come into effect. For Federated's non-U.S. operations (excluding Hermes) Federated elected to disclose support for the Shareholder Rights Directive II but not adopt a new set of engagement policies. Hermes also supports the Shareholder Rights Directive II and has been assessing the final rules and guidance as part of a process to confirm and finalize its engagement policies.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
On May 14, 2019, the UK Parliament published The Proxy Advisors (Shareholders' Rights) Regulations 2019. These new regulations, which became effective on June 10, 2019, place new requirements on firms that act as proxy advisory firms and have registered offices (or its head office) in the UK or that have a registered office or head office in any country or territory other than the UK, Gibraltar or in the European Economic Area (EEA) and provide proxy advisor services through an entity in the UK and provide services to investors holding shares in firms whose registered office is in the UK, Gibraltar or the EEA, and whose shares are traded on a regulated market in the UK, Gibraltar or the EEA. Hermes Equity Ownership Services provides proxy advisory services covered by these new regulations. These new regulations require covered proxy advisory firms to make public disclosures on their websites about whether they adhere to a relevant code of conduct (and, if they do not adhere to a code of conduct, they are required to disclose reasons for choosing not to adhere to a code of conduct). Covered proxy advisory firms are required to report on the application of their code of conduct, disclose departures from their code of conduct and why they departed from it and indicate any alternative measures adopted. Covered proxy advisory firms also are required to disclose information on their research capabilities and how they produce their advice and voting recommendations (e.g., models, methodologies, information sources and resources), as well as identify and disclose any actual or potential conflicts of interest or business relationships that may influence the preparation of their research. The FCA has been given responsibility for overseeing whether proxy firms comply with these new requirements and will establish and maintain a public register of proxy advisor firms. Hermes is assessing these new requirements and has taken steps to comply.
|
•
|
On April 5, 2017, European Parliament passed EU money market fund reforms (Money Market Fund Regulation or MMFR). The MMFR provides for the following types of money market funds in the EU: (1) Government constant NAV (CNAV) funds; (2) Low volatility NAV (LVNAV) funds; (3) Short-term variable NAV (VNAV) funds; and (4) standard VNAV funds. The reforms had to be completed in regard to new funds on July 21, 2018 and in regard to certain existing funds (including the Federated Funds in Ireland and the UK) on January 21, 2019. Federated utilized both internal and external resources to complete the conversion of two non-U.S. money market funds to LVNAV funds and two government non-U.S. money market funds to public debt CNAV funds, and otherwise began to comply with the MMFR, on January 11, 2019. Federated also continues to engage with trade associations and appropriate regulators in connection with the MMFR because the European Securities Market Authority and the European Commission continue work on implementing the MMFR and government CNAV and LVNAV fund reforms will be subject to a future review of their adequacy from a prudential and economic perspective by the European Commission in 2022.
|
•
|
The EU Securitization Regulation became applicable on January 1, 2019 for originators, sponsors, lenders, securitization special purpose entities, and institutional investors, including among others, UCITS funds, alternative investment fund managers and investment firms. Among other requirements, this regulation establishes requirements for due diligence, risk retention and transparency of disclosure for those involved in securitization transactions. For example, the regulation requires investors to conduct due diligence and to maintain written policies on due diligence and monitoring. The EU also will insist on investors only investing in products where the originator, lender or sponsor maintains at least a 5% retention in the product, even if another country (such as the U.S.) removes their requirement for a 5% risk retention. The regulation also requires the performance of stress tests on cash flows and collateral values or, in the absence of stress testing, testing based on assumptions having regard to the nature, scale and complexity of risk positions. The regulation also requires internal reporting to a relevant management body so that such management body is aware of material risks and can ensure that they are appropriately managed. Finally, under the regulation, the originators, sponsors or lenders involved with a securitized product have to agree amongst themselves to publish information that will be publicly available via repositories that will enable investors to more easily conduct due diligence when investing in securitized products.
|
•
|
A European FTT also continues to be discussed and an agreement is close to being reached regarding its adoption. Since the European Commission first proposed a European FTT in 2011, proponents of the FTT have sought the widest possible application of the FTT with low tax rates. On December 3, 2018, Germany and France discussed with other EU Member States, including Austria, Belgium, Greece, Italy, Portugal, Slovakia, Slovenia and Spain, at a finance ministers' meeting in Brussels, a renewed proposal for a European FTT based on an existing French FTT on stock trades involving domestically issued shares by companies with a market capitalization over one billion Euros. It has been reported that the Belgian Finance Minister indicated that the German-French initiative is a positive evolution in the discussions, and the Austrian Finance Minister indicated that more information is needed to assess the proposal, that an FTT with the scope limited to domestically issued shares would not be a real FTT, and that the finance ministers will consider it as a possible alternative. This new German-French initiative is narrower than prior proposals for a European FTT, which involved a broader, more substantial FTT applicable to securities transactions, including derivatives. For example, prior proposals would have imposed a 0.1% tax on equity and bond trades and a 0.01% tax on derivative transactions. The latest FTT proposal in 2019 would levy a 0.2% tax on the purchase price of shares issued by companies based in one of the participating countries and
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
The FCA has issued its final guidance on extending the Senior Managers and Certification Regime (SMCR) to insurers and all other firms offering financial services in the UK, intended to increase accountability for senior personnel and key staff. The FCA designates certain "senior management functions" and "certification functions." Under the SMCR, personnel conducting senior management functions (called Senior Managers) will need to be approved by the FCA and, those approved will be listed in a Financial Services Register. Personnel that do not perform senior management functions but whose role could cause significant harm to customers or the firm are considered to perform certification functions (called Certification Staff). As such, firms are required to certify that such personnel are fit and proper to perform their roles. Both Senior Managers and Certification Staff must be identified and trained by December 9, 2019. Firms will have an additional twelve months to complete the certification process for Certification Staff. All staff (other than ancillary staff) will be subject to certain conduct rules set forth by the FCA.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
September 30,
|
|
Percent
Change
|
|||||||
(in millions)
|
|
2019
|
|
|
2018
|
|
|
||||
By Asset Class
|
|
|
|
|
|
|
|||||
Equity
|
|
$
|
80,750
|
|
|
$
|
84,143
|
|
|
(4
|
)%
|
Fixed-Income
|
|
65,824
|
|
|
65,369
|
|
|
1
|
|
||
Alternative / Private Markets1
|
|
17,156
|
|
|
18,621
|
|
|
(8
|
)
|
||
Multi-Asset
|
|
4,140
|
|
|
4,790
|
|
|
(14
|
)
|
||
Total Long-Term Assets
|
|
167,870
|
|
|
172,923
|
|
|
(3
|
)
|
||
Money Market
|
|
359,292
|
|
|
264,233
|
|
|
36
|
|
||
Total Managed Assets
|
|
$
|
527,162
|
|
|
$
|
437,156
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|||||
By Product Type
|
|
|
|
|
|
|
|||||
Funds:
|
|
|
|
|
|
|
|||||
Equity
|
|
$
|
42,575
|
|
|
$
|
43,578
|
|
|
(2
|
)%
|
Fixed-Income
|
|
42,329
|
|
|
41,817
|
|
|
1
|
|
||
Alternative / Private Markets1
|
|
10,826
|
|
|
11,457
|
|
|
(6
|
)
|
||
Multi-Asset
|
|
3,952
|
|
|
4,585
|
|
|
(14
|
)
|
||
Total Long-Term Assets
|
|
99,682
|
|
|
101,437
|
|
|
(2
|
)
|
||
Money Market
|
|
261,215
|
|
|
182,966
|
|
|
43
|
|
||
Total Fund Assets
|
|
360,897
|
|
|
284,403
|
|
|
27
|
|
||
Separate Accounts:
|
|
|
|
|
|
|
|||||
Equity
|
|
38,175
|
|
|
40,565
|
|
|
(6
|
)
|
||
Fixed-Income
|
|
23,495
|
|
|
23,552
|
|
|
0
|
|
||
Alternative / Private Markets
|
|
6,330
|
|
|
7,164
|
|
|
(12
|
)
|
||
Multi-Asset
|
|
188
|
|
|
205
|
|
|
(8
|
)
|
||
Total Long-Term Assets
|
|
68,188
|
|
|
71,486
|
|
|
(5
|
)
|
||
Money Market
|
|
98,077
|
|
|
81,267
|
|
|
21
|
|
||
Total Separate Account Assets
|
|
166,265
|
|
|
152,753
|
|
|
9
|
|
||
Total Managed Assets
|
|
$
|
527,162
|
|
|
$
|
437,156
|
|
|
21
|
%
|
1
|
The balance at September 30, 2019 and 2018 includes $8.0 billion and $8.4 billion, respectively, of fund assets managed by a non-consolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
||||||||||||||
|
|
September 30,
|
|
Percent Change
|
|
September 30,
|
|
Percent Change
|
||||||||||||||
(in millions)
|
|
2019
|
|
|
2018
|
|
|
|
2019
|
|
|
2018
|
|
|
||||||||
By Asset Class
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity
|
|
$
|
82,027
|
|
|
$
|
84,262
|
|
|
(3
|
)%
|
|
$
|
80,133
|
|
|
$
|
68,212
|
|
|
17
|
%
|
Fixed-Income
|
|
65,074
|
|
|
64,750
|
|
|
1
|
|
|
64,718
|
|
|
63,312
|
|
|
2
|
|
||||
Alternative / Private Markets1
|
|
17,407
|
|
|
18,504
|
|
|
(6
|
)
|
|
17,830
|
|
|
6,393
|
|
|
179
|
|
||||
Multi-Asset
|
|
4,167
|
|
|
4,805
|
|
|
(13
|
)
|
|
4,206
|
|
|
4,869
|
|
|
(14
|
)
|
||||
Total Long-Term Assets
|
|
168,675
|
|
|
172,321
|
|
|
(2
|
)
|
|
166,887
|
|
|
142,786
|
|
|
17
|
|
||||
Money Market
|
|
349,313
|
|
|
261,571
|
|
|
34
|
|
|
328,664
|
|
|
263,162
|
|
|
25
|
|
||||
Total Average Managed Assets
|
|
$
|
517,988
|
|
|
$
|
433,892
|
|
|
19
|
%
|
|
$
|
495,551
|
|
|
$
|
405,948
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
By Product Type
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity
|
|
$
|
43,077
|
|
|
$
|
43,473
|
|
|
(1
|
)%
|
|
$
|
41,955
|
|
|
$
|
36,022
|
|
|
16
|
%
|
Fixed-Income
|
|
41,958
|
|
|
41,501
|
|
|
1
|
|
|
41,568
|
|
|
40,907
|
|
|
2
|
|
||||
Alternative / Private Markets1
|
|
11,035
|
|
|
11,109
|
|
|
(1
|
)
|
|
11,243
|
|
|
3,928
|
|
|
186
|
|
||||
Multi-Asset
|
|
3,978
|
|
|
4,598
|
|
|
(13
|
)
|
|
4,018
|
|
|
4,650
|
|
|
(14
|
)
|
||||
Total Long-Term Assets
|
|
100,048
|
|
|
100,681
|
|
|
(1
|
)
|
|
98,784
|
|
|
85,507
|
|
|
16
|
|
||||
Money Market
|
|
249,846
|
|
|
179,562
|
|
|
39
|
|
|
227,130
|
|
|
179,100
|
|
|
27
|
|
||||
Total Average Fund Assets
|
|
349,894
|
|
|
280,243
|
|
|
25
|
|
|
325,914
|
|
|
264,607
|
|
|
23
|
|
||||
Separate Accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity
|
|
38,950
|
|
|
40,789
|
|
|
(5
|
)
|
|
38,178
|
|
|
32,190
|
|
|
19
|
|
||||
Fixed-Income
|
|
23,116
|
|
|
23,249
|
|
|
(1
|
)
|
|
23,150
|
|
|
22,405
|
|
|
3
|
|
||||
Alternative / Private Markets
|
|
6,372
|
|
|
7,395
|
|
|
(14
|
)
|
|
6,587
|
|
|
2,465
|
|
|
167
|
|
||||
Multi-Asset
|
|
189
|
|
|
207
|
|
|
(9
|
)
|
|
188
|
|
|
219
|
|
|
(14
|
)
|
||||
Total Long-Term Assets
|
|
68,627
|
|
|
71,640
|
|
|
(4
|
)
|
|
68,103
|
|
|
57,279
|
|
|
19
|
|
||||
Money Market
|
|
99,467
|
|
|
82,009
|
|
|
21
|
|
|
101,534
|
|
|
84,062
|
|
|
21
|
|
||||
Total Average Separate Account Assets
|
|
168,094
|
|
|
153,649
|
|
|
9
|
|
|
169,637
|
|
|
141,341
|
|
|
20
|
|
||||
Total Average Managed Assets
|
|
$
|
517,988
|
|
|
$
|
433,892
|
|
|
19
|
%
|
|
$
|
495,551
|
|
|
$
|
405,948
|
|
|
22
|
%
|
1
|
The average for the three and nine months ended September 30, 2019 includes $8.1 billion and $8.2 billion, respectively, and the average for the three and nine months ended September 30, 2018 includes $8.2 billion and $2.7 billion, respectively, of average fund assets managed by a non-consolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Equity Funds
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
43,443
|
|
|
$
|
31,699
|
|
|
$
|
36,584
|
|
|
$
|
33,008
|
|
Sales
|
|
2,669
|
|
|
2,447
|
|
|
9,128
|
|
|
5,763
|
|
||||
Redemptions
|
|
(2,991
|
)
|
|
(3,047
|
)
|
|
(8,734
|
)
|
|
(8,283
|
)
|
||||
Net Sales (Redemptions)
|
|
(322
|
)
|
|
(600
|
)
|
|
394
|
|
|
(2,520
|
)
|
||||
Net Exchanges
|
|
(11
|
)
|
|
(9
|
)
|
|
193
|
|
|
65
|
|
||||
Acquisition-Related
|
|
0
|
|
|
11,131
|
|
|
0
|
|
|
11,131
|
|
||||
Impact of Foreign Exchange1
|
|
(291
|
)
|
|
0
|
|
|
(333
|
)
|
|
0
|
|
||||
Market Gains and (Losses)2
|
|
(244
|
)
|
|
1,357
|
|
|
5,737
|
|
|
1,894
|
|
||||
Ending Assets
|
|
$
|
42,575
|
|
|
$
|
43,578
|
|
|
$
|
42,575
|
|
|
$
|
43,578
|
|
|
|
|
|
|
|
|
|
|
||||||||
Equity Separate Accounts
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
38,556
|
|
|
$
|
26,274
|
|
|
$
|
35,913
|
|
|
$
|
29,808
|
|
Sales3
|
|
2,513
|
|
|
1,310
|
|
|
6,002
|
|
|
3,918
|
|
||||
Redemptions3
|
|
(3,393
|
)
|
|
(2,241
|
)
|
|
(7,980
|
)
|
|
(7,341
|
)
|
||||
Net Sales (Redemptions)3
|
|
(880
|
)
|
|
(931
|
)
|
|
(1,978
|
)
|
|
(3,423
|
)
|
||||
Net Exchanges
|
|
0
|
|
|
(2
|
)
|
|
0
|
|
|
(1
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
13,569
|
|
|
0
|
|
|
13,569
|
|
||||
Impact of Foreign Exchange1
|
|
(286
|
)
|
|
0
|
|
|
(362
|
)
|
|
0
|
|
||||
Market Gains and (Losses)2
|
|
785
|
|
|
1,655
|
|
|
4,602
|
|
|
612
|
|
||||
Ending Assets
|
|
$
|
38,175
|
|
|
$
|
40,565
|
|
|
$
|
38,175
|
|
|
$
|
40,565
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Equity
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
81,999
|
|
|
$
|
57,973
|
|
|
$
|
72,497
|
|
|
$
|
62,816
|
|
Sales3
|
|
5,182
|
|
|
3,757
|
|
|
15,130
|
|
|
9,681
|
|
||||
Redemptions3
|
|
(6,384
|
)
|
|
(5,288
|
)
|
|
(16,714
|
)
|
|
(15,624
|
)
|
||||
Net Sales (Redemptions)3
|
|
(1,202
|
)
|
|
(1,531
|
)
|
|
(1,584
|
)
|
|
(5,943
|
)
|
||||
Net Exchanges
|
|
(11
|
)
|
|
(11
|
)
|
|
193
|
|
|
64
|
|
||||
Acquisition-Related
|
|
0
|
|
|
24,700
|
|
|
0
|
|
|
24,700
|
|
||||
Impact of Foreign Exchange1
|
|
(577
|
)
|
|
0
|
|
|
(695
|
)
|
|
0
|
|
||||
Market Gains and (Losses)2
|
|
541
|
|
|
3,012
|
|
|
10,339
|
|
|
2,506
|
|
||||
Ending Assets
|
|
$
|
80,750
|
|
|
$
|
84,143
|
|
|
$
|
80,750
|
|
|
$
|
84,143
|
|
1
|
Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. Reporting only contains foreign exchange separately beginning with the first quarter 2019, previously included in Market Gains and (Losses).
|
2
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates for periods prior to the first quarter 2019.
|
3
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Fixed-Income Funds
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
42,084
|
|
|
$
|
39,877
|
|
|
$
|
40,490
|
|
|
$
|
41,144
|
|
Sales
|
|
3,971
|
|
|
3,878
|
|
|
12,266
|
|
|
11,817
|
|
||||
Redemptions
|
|
(4,136
|
)
|
|
(3,883
|
)
|
|
(12,707
|
)
|
|
(12,668
|
)
|
||||
Net Sales (Redemptions)
|
|
(165
|
)
|
|
(5
|
)
|
|
(441
|
)
|
|
(851
|
)
|
||||
Net Exchanges
|
|
15
|
|
|
3
|
|
|
(184
|
)
|
|
(77
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
1,565
|
|
|
0
|
|
|
1,565
|
|
||||
Impact of Foreign Exchange1
|
|
(81
|
)
|
|
0
|
|
|
(95
|
)
|
|
0
|
|
||||
Market Gains and (Losses)2
|
|
476
|
|
|
377
|
|
|
2,559
|
|
|
36
|
|
||||
Ending Assets
|
|
$
|
42,329
|
|
|
$
|
41,817
|
|
|
$
|
42,329
|
|
|
$
|
41,817
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed-Income Separate Accounts
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
22,968
|
|
|
$
|
21,558
|
|
|
$
|
22,668
|
|
|
$
|
23,016
|
|
Sales3
|
|
834
|
|
|
1,285
|
|
|
3,148
|
|
|
3,009
|
|
||||
Redemptions3
|
|
(1,282
|
)
|
|
(535
|
)
|
|
(4,233
|
)
|
|
(3,278
|
)
|
||||
Net Sales (Redemptions)3
|
|
(448
|
)
|
|
750
|
|
|
(1,085
|
)
|
|
(269
|
)
|
||||
Net Exchanges
|
|
(5
|
)
|
|
(1
|
)
|
|
(30
|
)
|
|
(1
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
1,167
|
|
|
0
|
|
|
1,167
|
|
||||
Impact of Foreign Exchange1
|
|
(26
|
)
|
|
0
|
|
|
(29
|
)
|
|
0
|
|
||||
Market Gains and (Losses)2
|
|
1,006
|
|
|
78
|
|
|
1,971
|
|
|
(361
|
)
|
||||
Ending Assets
|
|
$
|
23,495
|
|
|
$
|
23,552
|
|
|
$
|
23,495
|
|
|
$
|
23,552
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Fixed-Income
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
65,052
|
|
|
$
|
61,435
|
|
|
$
|
63,158
|
|
|
$
|
64,160
|
|
Sales3
|
|
4,805
|
|
|
5,163
|
|
|
15,414
|
|
|
14,826
|
|
||||
Redemptions3
|
|
(5,418
|
)
|
|
(4,418
|
)
|
|
(16,940
|
)
|
|
(15,946
|
)
|
||||
Net Sales (Redemptions)3
|
|
(613
|
)
|
|
745
|
|
|
(1,526
|
)
|
|
(1,120
|
)
|
||||
Net Exchanges
|
|
10
|
|
|
2
|
|
|
(214
|
)
|
|
(78
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
2,732
|
|
|
0
|
|
|
2,732
|
|
||||
Impact of Foreign Exchange1
|
|
(107
|
)
|
|
0
|
|
|
(124
|
)
|
|
0
|
|
||||
Market Gains and (Losses)2
|
|
1,482
|
|
|
455
|
|
|
4,530
|
|
|
(325
|
)
|
||||
Ending Assets
|
|
$
|
65,824
|
|
|
$
|
65,369
|
|
|
$
|
65,824
|
|
|
$
|
65,369
|
|
1
|
Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. Reporting only contains foreign exchange separately beginning with the first quarter 2019, previously included in Market Gains and (Losses).
|
2
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates for periods prior to the first quarter 2019.
|
3
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Alternative / Private Markets Funds1
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
11,400
|
|
|
$
|
292
|
|
|
$
|
11,365
|
|
|
$
|
366
|
|
Sales
|
|
200
|
|
|
723
|
|
|
695
|
|
|
779
|
|
||||
Redemptions
|
|
(651
|
)
|
|
(270
|
)
|
|
(1,251
|
)
|
|
(381
|
)
|
||||
Net Sales (Redemptions)
|
|
(451
|
)
|
|
453
|
|
|
(556
|
)
|
|
398
|
|
||||
Net Exchanges
|
|
(61
|
)
|
|
(2
|
)
|
|
(64
|
)
|
|
(3
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
10,823
|
|
|
0
|
|
|
10,823
|
|
||||
Impact of Foreign Exchange2
|
|
(353
|
)
|
|
0
|
|
|
(380
|
)
|
|
0
|
|
||||
Market Gains and (Losses)3
|
|
291
|
|
|
(109
|
)
|
|
461
|
|
|
(127
|
)
|
||||
Ending Assets
|
|
$
|
10,826
|
|
|
$
|
11,457
|
|
|
$
|
10,826
|
|
|
$
|
11,457
|
|
|
|
|
|
|
|
|
|
|
||||||||
Alternative / Private Markets Separate Accounts
|
|
|
|
|
|
|
||||||||||
Beginning Assets
|
|
$
|
6,517
|
|
|
$
|
0
|
|
|
$
|
6,953
|
|
|
$
|
0
|
|
Sales4
|
|
184
|
|
|
34
|
|
|
322
|
|
|
34
|
|
||||
Redemptions4
|
|
(162
|
)
|
|
(404
|
)
|
|
(722
|
)
|
|
(404
|
)
|
||||
Net Sales (Redemptions)4
|
|
22
|
|
|
(370
|
)
|
|
(400
|
)
|
|
(370
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
7,686
|
|
|
0
|
|
|
7,686
|
|
||||
Impact of Foreign Exchange2
|
|
(207
|
)
|
|
0
|
|
|
(228
|
)
|
|
0
|
|
||||
Market Gains and (Losses)3
|
|
(2
|
)
|
|
(152
|
)
|
|
5
|
|
|
(152
|
)
|
||||
Ending Assets
|
|
$
|
6,330
|
|
|
$
|
7,164
|
|
|
$
|
6,330
|
|
|
$
|
7,164
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Alternative / Private Markets1
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
17,917
|
|
|
$
|
292
|
|
|
$
|
18,318
|
|
|
$
|
366
|
|
Sales4
|
|
384
|
|
|
757
|
|
|
1,017
|
|
|
813
|
|
||||
Redemptions4
|
|
(813
|
)
|
|
(674
|
)
|
|
(1,973
|
)
|
|
(785
|
)
|
||||
Net Sales (Redemptions)4
|
|
(429
|
)
|
|
83
|
|
|
(956
|
)
|
|
28
|
|
||||
Net Exchanges
|
|
(61
|
)
|
|
(2
|
)
|
|
(64
|
)
|
|
(3
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
18,509
|
|
|
0
|
|
|
18,509
|
|
||||
Impact of Foreign Exchange2
|
|
(560
|
)
|
|
0
|
|
|
(608
|
)
|
|
0
|
|
||||
Market Gains and (Losses)3
|
|
289
|
|
|
(261
|
)
|
|
466
|
|
|
(279
|
)
|
||||
Ending Assets
|
|
$
|
17,156
|
|
|
$
|
18,621
|
|
|
$
|
17,156
|
|
|
$
|
18,621
|
|
1
|
The balance at September 30, 2019 and 2018 includes $8.0 billion and $8.4 billion, respectively, of fund assets managed by a non-consolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
|
2
|
Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. Reporting only contains foreign exchange separately beginning with the first quarter 2019, previously included in Market Gains and (Losses).
|
3
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates for periods prior to the first quarter 2019.
|
4
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Multi-Asset Funds
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
4,019
|
|
|
$
|
4,521
|
|
|
$
|
3,920
|
|
|
$
|
4,783
|
|
Sales
|
|
60
|
|
|
120
|
|
|
235
|
|
|
374
|
|
||||
Redemptions
|
|
(208
|
)
|
|
(205
|
)
|
|
(665
|
)
|
|
(654
|
)
|
||||
Net Sales (Redemptions)
|
|
(148
|
)
|
|
(85
|
)
|
|
(430
|
)
|
|
(280
|
)
|
||||
Net Exchanges
|
|
57
|
|
|
4
|
|
|
59
|
|
|
2
|
|
||||
Acquisition-Related
|
|
0
|
|
|
45
|
|
|
0
|
|
|
45
|
|
||||
Market Gains and (Losses)1
|
|
24
|
|
|
100
|
|
|
403
|
|
|
35
|
|
||||
Ending Assets
|
|
$
|
3,952
|
|
|
$
|
4,585
|
|
|
$
|
3,952
|
|
|
$
|
4,585
|
|
|
|
|
|
|
|
|
|
|
||||||||
Multi-Asset Separate Accounts
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
194
|
|
|
$
|
209
|
|
|
$
|
173
|
|
|
$
|
231
|
|
Sales2
|
|
5
|
|
|
0
|
|
|
12
|
|
|
0
|
|
||||
Redemptions2
|
|
(10
|
)
|
|
(6
|
)
|
|
(22
|
)
|
|
(21
|
)
|
||||
Net Sales (Redemptions)2
|
|
(5
|
)
|
|
(6
|
)
|
|
(10
|
)
|
|
(21
|
)
|
||||
Market Gains and (Losses)1
|
|
(1
|
)
|
|
2
|
|
|
25
|
|
|
(5
|
)
|
||||
Ending Assets
|
|
$
|
188
|
|
|
$
|
205
|
|
|
$
|
188
|
|
|
$
|
205
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Multi-Asset
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
4,213
|
|
|
$
|
4,730
|
|
|
$
|
4,093
|
|
|
$
|
5,014
|
|
Sales2
|
|
65
|
|
|
120
|
|
|
247
|
|
|
374
|
|
||||
Redemptions2
|
|
(218
|
)
|
|
(211
|
)
|
|
(687
|
)
|
|
(675
|
)
|
||||
Net Sales (Redemptions)2
|
|
(153
|
)
|
|
(91
|
)
|
|
(440
|
)
|
|
(301
|
)
|
||||
Net Exchanges
|
|
57
|
|
|
4
|
|
|
59
|
|
|
2
|
|
||||
Acquisition-Related
|
|
0
|
|
|
45
|
|
|
0
|
|
|
45
|
|
||||
Market Gains and (Losses)1
|
|
23
|
|
|
102
|
|
|
428
|
|
|
30
|
|
||||
Ending Assets
|
|
$
|
4,140
|
|
|
$
|
4,790
|
|
|
$
|
4,140
|
|
|
$
|
4,790
|
|
1
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
|
2
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
Total Long-Term Fund Assets1
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
100,946
|
|
|
$
|
76,389
|
|
|
$
|
92,359
|
|
|
$
|
79,301
|
|
Sales
|
|
6,900
|
|
|
7,168
|
|
|
22,324
|
|
|
18,733
|
|
||||
Redemptions
|
|
(7,986
|
)
|
|
(7,405
|
)
|
|
(23,357
|
)
|
|
(21,986
|
)
|
||||
Net Sales (Redemptions)
|
|
(1,086
|
)
|
|
(237
|
)
|
|
(1,033
|
)
|
|
(3,253
|
)
|
||||
Net Exchanges
|
|
0
|
|
|
(4
|
)
|
|
4
|
|
|
(13
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
23,564
|
|
|
0
|
|
|
23,564
|
|
||||
Impact of Foreign Exchange2
|
|
(725
|
)
|
|
0
|
|
|
(808
|
)
|
|
0
|
|
||||
Market Gains and (Losses)3
|
|
547
|
|
|
1,725
|
|
|
9,160
|
|
|
1,838
|
|
||||
Ending Assets
|
|
$
|
99,682
|
|
|
$
|
101,437
|
|
|
$
|
99,682
|
|
|
$
|
101,437
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Long-Term Separate Accounts Assets
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
68,235
|
|
|
$
|
48,041
|
|
|
$
|
65,707
|
|
|
$
|
53,055
|
|
Sales4
|
|
3,536
|
|
|
2,629
|
|
|
9,484
|
|
|
6,961
|
|
||||
Redemptions4
|
|
(4,847
|
)
|
|
(3,186
|
)
|
|
(12,957
|
)
|
|
(11,044
|
)
|
||||
Net Sales (Redemptions)4
|
|
(1,311
|
)
|
|
(557
|
)
|
|
(3,473
|
)
|
|
(4,083
|
)
|
||||
Net Exchanges
|
|
(5
|
)
|
|
(3
|
)
|
|
(30
|
)
|
|
(2
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
22,422
|
|
|
0
|
|
|
22,422
|
|
||||
Impact of Foreign Exchange2
|
|
(519
|
)
|
|
0
|
|
|
(619
|
)
|
|
0
|
|
||||
Market Gains and (Losses)3
|
|
1,788
|
|
|
1,583
|
|
|
6,603
|
|
|
94
|
|
||||
Ending Assets
|
|
$
|
68,188
|
|
|
$
|
71,486
|
|
|
$
|
68,188
|
|
|
$
|
71,486
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Long-Term Assets1
|
|
|
|
|
|
|
|
|
||||||||
Beginning Assets
|
|
$
|
169,181
|
|
|
$
|
124,430
|
|
|
$
|
158,066
|
|
|
$
|
132,356
|
|
Sales4
|
|
10,436
|
|
|
9,797
|
|
|
31,808
|
|
|
25,694
|
|
||||
Redemptions4
|
|
(12,833
|
)
|
|
(10,591
|
)
|
|
(36,314
|
)
|
|
(33,030
|
)
|
||||
Net Sales (Redemptions)4
|
|
(2,397
|
)
|
|
(794
|
)
|
|
(4,506
|
)
|
|
(7,336
|
)
|
||||
Net Exchanges
|
|
(5
|
)
|
|
(7
|
)
|
|
(26
|
)
|
|
(15
|
)
|
||||
Acquisition-Related
|
|
0
|
|
|
45,986
|
|
|
0
|
|
|
45,986
|
|
||||
Impact of Foreign Exchange2
|
|
(1,244
|
)
|
|
0
|
|
|
(1,427
|
)
|
|
0
|
|
||||
Market Gains and (Losses)3
|
|
2,335
|
|
|
3,308
|
|
|
15,763
|
|
|
1,932
|
|
||||
Ending Assets
|
|
$
|
167,870
|
|
|
$
|
172,923
|
|
|
$
|
167,870
|
|
|
$
|
172,923
|
|
1
|
The balance at September 30, 2019 and 2018 includes $8.0 billion and $8.4 billion, respectively, of fund assets managed by a non-consolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
|
2
|
Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. Reporting only contains foreign exchange separately beginning with the first quarter 2019, previously included in Market Gains and (Losses).
|
3
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates for periods prior to the first quarter 2019.
|
4
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
Percent of Total Average Managed Assets
|
|
Percent of Total Revenue
|
||||||||
|
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||
|
|
September 30, 2019
|
|
September 30, 2018
|
|
September 30, 2019
|
|
September 30, 2018
|
||||
By Asset Class
|
|
|
|
|
|
|
|
|
||||
Money Market
|
|
66
|
%
|
|
65
|
%
|
|
39
|
%
|
|
37
|
%
|
Equity
|
|
16
|
%
|
|
17
|
%
|
|
41
|
%
|
|
42
|
%
|
Fixed-Income
|
|
13
|
%
|
|
16
|
%
|
|
14
|
%
|
|
16
|
%
|
Alternative / Private Markets
|
|
4
|
%
|
|
1
|
%
|
|
3
|
%
|
|
1
|
%
|
Multi-Asset
|
|
1
|
%
|
|
1
|
%
|
|
2
|
%
|
|
4
|
%
|
Other
|
|
--
|
|
|
--
|
|
|
1
|
%
|
|
0
|
%
|
By Product Type
|
|
|
|
|
|
|
|
|
||||
Funds:
|
|
|
|
|
|
|
|
|
||||
Money Market
|
|
46
|
%
|
|
44
|
%
|
|
36
|
%
|
|
34
|
%
|
Equity
|
|
8
|
%
|
|
9
|
%
|
|
31
|
%
|
|
32
|
%
|
Fixed-Income
|
|
8
|
%
|
|
10
|
%
|
|
12
|
%
|
|
14
|
%
|
Alternative / Private Markets
|
|
2
|
%
|
|
1
|
%
|
|
1
|
%
|
|
0
|
%
|
Multi-Asset
|
|
1
|
%
|
|
1
|
%
|
|
2
|
%
|
|
4
|
%
|
Separate Accounts:
|
|
|
|
|
|
|
|
|
||||
Money Market
|
|
20
|
%
|
|
21
|
%
|
|
3
|
%
|
|
3
|
%
|
Equity
|
|
8
|
%
|
|
8
|
%
|
|
10
|
%
|
|
10
|
%
|
Fixed-Income
|
|
5
|
%
|
|
6
|
%
|
|
2
|
%
|
|
2
|
%
|
Alternative / Private Markets
|
|
2
|
%
|
|
0
|
%
|
|
2
|
%
|
|
1
|
%
|
Other
|
|
--
|
|
|
--
|
|
|
1
|
%
|
|
0
|
%
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
(a)
|
Federated carried out an evaluation, under the supervision and with the participation of management, including Federated's President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of Federated's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2019. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that Federated's disclosure controls and procedures were effective at September 30, 2019.
|
(b)
|
There has been no change in Federated's internal control over financial reporting that occurred during the quarter ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, Federated's internal control over financial reporting.
|
|
|
Total Number
of Shares
Purchased
|
|
Average
Price Paid
per Share
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs1
|
|
Maximum Number of Shares that
May Yet Be Purchased Under the
Plans or Programs1
|
|||||
July2
|
|
22,992
|
|
|
$
|
2.94
|
|
|
0
|
|
|
949,401
|
|
August
|
|
45,000
|
|
|
32.51
|
|
|
45,000
|
|
|
904,401
|
|
|
September2
|
|
11,600
|
|
|
28.39
|
|
|
10,000
|
|
|
894,401
|
|
|
Total
|
|
79,592
|
|
|
$
|
23.37
|
|
|
55,000
|
|
|
894,401
|
|
1
|
In October 2016, the board of directors authorized a share repurchase program with no stated expiration date that allows Federated to buy back up to 4.0 million shares of Federated Class B common stock. No other programs existed as of September 30, 2019. See Note (13) to the Consolidated Financial Statements for additional information on this program.
|
2
|
In July and September 2019, 22,992 and 1,600 shares, respectively, of restricted stock with a weighted-average price of $2.94 and $3.00 per share, respectively, were repurchased as employees forfeited restricted stock.
|
|
|
|
|
|
|
Federated Investors, Inc.
|
|
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
Date
|
|
November 1, 2019
|
|
By:
|
|
/s/ J. Christopher Donahue
|
|
|
|
|
|
|
J. Christopher Donahue
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
November 1, 2019
|
|
By:
|
|
/s/ Thomas R. Donahue
|
|
|
|
|
|
|
Thomas R. Donahue
|
|
|
|
|
|
|
Chief Financial Officer
|
Date
|
Portion Vested
|
Cumulative Percentage
|
November 16, 2020
|
5%
|
5%
|
November 16, 2021
|
5%
|
10%
|
November 16, 2022
|
5%
|
15%
|
November 17, 2023
|
5%
|
20%
|
November 18, 2024
|
30%
|
50% (restrictions lapse)
|
November 18, 2025
|
5%
|
55%
|
November 18, 2026
|
5%
|
60%
|
November 18, 2027
|
5%
|
65%
|
November 16, 2028
|
5%
|
70%
|
November 16, 2029
|
30%
|
100% (restrictions lapse)
|
Date
|
Portion Vested
|
Cumulative Percentage
|
November 18, 2024
|
100%
|
100% (restrictions lapse)
|
1.
|
Between
|
2.
|
Purpose of Election
|
3.
|
Application
|
Number of securities
|
10,000
|
|
Description of securities
|
Class B Common Stock
|
|
Name of issuer of securities
|
Federated Investors, Inc.
|
|
4.
|
Extent of Application
|
5.
|
Declaration
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Federated Investors, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
Date
|
November 1, 2019
|
By:
|
/s/ J. Christopher Donahue
|
|
|
|
|
|
J. Christopher Donahue
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Federated Investors, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
Date
|
November 1, 2019
|
By:
|
/s/ Thomas R. Donahue
|
|
|
|
|
|
Thomas R. Donahue
|
|
|
|
|
|
Chief Financial Officer
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date
|
November 1, 2019
|
By:
|
/s/ J. Christopher Donahue
|
|
|
|
|
|
J. Christopher Donahue
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
November 1, 2019
|
By:
|
/s/ Thomas R. Donahue
|
|
|
|
|
|
Thomas R. Donahue
|
|
|
|
|
|
Chief Financial Officer
|
|