Federated Investors, which released second quarter earnings late yesterday and which hosts its quarterly conference call at 9am Friday, showed lower revenues but also lower fee waivers in Q2. The company's release says, "As the equity and fixed-income markets contracted in 2007 and 2008, Federated's money market assets increased by $182 billion and as markets recovered in 2009 and 2010, Federated's assets reflected industry trends as $95 billion flowed out of Federated's money market products. Since the end of 2006, Federated's money market managed assets have increased $86.9 billion to $260.5 billion at June 30, 2010."
It continues, "Money market assets in both funds and separate accounts were $260.5 billion at June 30, 2010, down $85.9 billion or 25 percent from $346.4 billion at June 30, 2009 and down $11.8 billion or 4 percent from $272.3 billion at March 31, 2010. Money market mutual fund assets were $231.2 billion at June 30, 2010, down $81.6 billion or 26 percent from $312.8 billion at June 30, 2009 and down $9.0 billion or 4 percent from $240.2 billion at March 31, 2010."
Federated explains, "For Q2 2010, revenue decreased by $75.4 million or 25 percent from the same quarter last year. The decrease in revenue primarily reflects a $41.3 million increase (to $58.3 million from $17.0 million for Q2 2009) in voluntary fee waivers related to certain money market funds in order to maintain positive or zero net yields. This increase in fee waivers was largely offset by a related decrease in distribution expenses of $33.9 million (to $45.3 million from $11.4 million) such that the net impact on operating income was a decrease of $7.4 million (to $13.0 million from $5.6 million.) In addition, revenue decreased due to lower average money market managed assets. In Q2 2010, Federated derived 50 percent of its revenue from money market assets."
It adds, "[V]oluntary fee waivers on certain money market funds in order to maintain positive or zero net yields were $11.2 million lower (to $58.3 million from $69.5 million) than Q1 2010. This decrease in fee waivers was largely offset by a related increase in distribution expenses of $6.4 million (to $45.3 million from $51.7 million) such that the net impact on operating income was an increase of $4.8 million (to $13.0 million from $17.8 million) compared to the prior quarter."
Federated's release continues, "Revenue for the first half of 2010 decreased by $153.1 million or 25 percent compared to the same period last year. The decrease in revenue primarily reflects a $101.2 million increase (to $127.8 million from $26.6 million for YTD 2009) in voluntary fee waivers on certain money market funds in order to maintain positive or zero net yields. This increase in fee waivers was largely offset by a related decrease in distribution expenses of $81.1 million (to $97.0 million from $15.9 million) such that the net impact on operating income was a decrease of $20.1 million (to $30.8 million from $10.7 million). In addition, revenue decreased due to lower average money market managed assets."
Finally, they say, "Fee waivers to produce positive or zero net yields are expected to decrease over time, but could vary significantly based on market conditions. The amount of these waivers will be determined by a variety of factors including available yields on instruments held by the money market funds, changes in assets within money market funds, actions by the Federal Reserve and the U.S. Department of the Treasury, changes in the mix of money market customer assets, changes in expenses of the money market funds and Federated’s willingness to continue these waivers. Federated will host an earnings conference call at 9 a.m. Eastern on Friday, July 23, 2010. Investors are invited to listen to Federated's earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (international) prior to the 9 a.m. start time."
