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Federated Investors: All According To Plan


  • Federated Investors has executed well this year; analysts were off-base forecasting drops for the company in 2017.
  • This in spite of some weakness in the company's equity product offerings, which I believe is due to strategy bias towards value over growth.
  • Look for incremental earnings accretion next year, particularly within money markets as Fed rate hikes continue.

Federated Investors (FII) has been a bit of a stubborn position for me in 2017 as far as positive price action, but one that I’ve been extremely happy with as far as management execution goes, as well as the strength of my own analysis and modeling. Readers can find the original work here on Seeking Alpha, now behind the PRO paywall. But before getting into how the company has performed over nearly the past year, it is worth highlighting the key points of what still makes this a compelling play in financials space:

  • No reliance on a steepening yield curve (a concern I had going into 2017 that has materialized)
  • Strong equity and fixed income asset business
  • Highly stable AUM within its money markets; market underestimating the turnaround
  • Great value from the company’s asset-light business model

2017 Results: Strong And Above Prior Street Consensus

Federated Investors has beaten on the bottom line all three quarters in 2017, despite some weakness on the top line. While some might be put off by the drops in revenue, this is largely due to the change in a customer relationship highlighted in my prior research: the reorganization of Edward Jones deal. Under the agreement, $19B in money market funds moved from being under Federated Investors' control to within Edward Jones', where Federated Investors is now just advising in a sub-advisor capacity. As far as company presentations go, these assets did not drop off of assets under management (“AUM”), but they are receiving less compensation as a result of the new structure. As well as the Edward Jones deal, money market AUM has fallen from $252B to $244B, which has been driven by continued investor interest in equity/fixed income products.

However, on the bright side in money market, fee waivers are no longer an issue, and were

This article was written by

Michael Boyd profile picture
Compelling income and growth plays in the energy sector.

Author of Energy Investing Authority

Top 1% Analyst According to TipRanks

I have a decade of experience in both the investment advisory and investment banking spaces, with stints in portfolio management, residential mortgage-backed securities, derivatives, and internal audit at various firms. Today, I am a full-time investor and "independent analyst for hire" here on Seeking Alpha.

Analyst’s Disclosure: I am/we are long FII. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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