Federated Q1 profits rise 3%, but miss analyst estimates

Federated Investors said first-quarter profits rose 3 percent on a 4 percent increase in revenue. Both figures fell shy of analyst estimates.

The Downtown investment manager reported net income of $36.3 million, or 35 cents per share, on revenue of $220.5 million vs. earnings of $35.2 million, or 34 cents per share, and revenue of $211.5 million, in the yearago quarter.

Analysts had expected Federated to report earnings of 37 cents per share on revenue of $222 million.

The results reflect a $27 million pre-tax impact from fees that Federated waived on its money market funds so investors realized some income or broke even on their investments. Without the waivers, fees for managing the funds would have exceeded income that the funds generate in a record-low interest rate environment.

Fee waivers had a $29.7 million pre-tax impact in the year-ago quarter.

Assets under management totaled $355.8 billion, down 2 percent from the end of 2014 and 3 percent from last year’s first quarter. The total included a record $54 billion in equity assets, up 18 percent from a year ago.

Speaking Thursday at the company’s shareholder meeting at the Westin Convention Center Hotel Downtown, president and CEO J. Christopher Donahue said Federated picked up more than $1 billion in money market fund assets as a result of highprofile money manager Bill Gross leaving Pimco.

Mr. Gross, who cofounded Pacific Investment Management Co. and became manager of the world’s biggest bond mutual fund, left the position last year in dispute with company management.

Mr. Donahue said Federated remains interested in expanding its money fund business as more competitors exit that area because of increased government regulations that take effect in October 2016.

Mr. Donahue said there are now about 80 money market fund providers, down from more than 200 in 2008.

Federated is in the process of acquiring about $7 billion in money market fund assets from Reich & Tang Asset Management. Terms were not disclosed.