Good morning, ladies and gentlemen, and welcome to the Federated Hermes Q3 2021 analyst call and webcast. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Ray Hanley, President of Federated Investors Management Company. Sir, the floor is yours. Thank you, and good morning, and welcome. Leading today's call will be Chris Donahue, Federated Hermes CEO and President, and Tom Donahue, Chief Financial Officer. Joining us for the Q&A are Saker Nusseibeh, who's the CEO of the international business of Federated Hermes, and Debbie Cunningham, our Chief Investment Officer for Money Markets. During today's call, we may make forward-looking statements, and we want to note that Federated Hermes actual results may be materially different than the results implied by such statements. Please review the risk disclosures in our SEC filings. No assurance can be given to future results, and Federated Hermes assumes no duty to update any of these forward-looking statements. Chris. Thank you, Ray, and good morning. I will review Federated Hermes business performance, and Tom will comment on our financial results, including waivers. Q3 ended with a record long-term assets under management of $220 billion, including record assets in fixed income at $97 billion and in alternative private markets of $22 billion. Assets under advice by EOS at Federated Hermes were $1.7 trillion at the end of Q3. We added one new client in the third quarter and six new clients year to date. While equity fund flows were negative in the third quarter by $867 million, we saw positive net sales in 15 equity fund strategies and added about $400 million in equity assets from the Hancock Horizon transaction. Our equity fund performance compared to peers was solid. Using Morningstar data for trailing three years at the end of the third quarter, 50% of our equity funds were beating peers, and almost 20% were in the top quartile of their category. Equity SMAs had third quarter net redemptions of about $15 million, down from $160 million in Q2, down from $450 million in Q1, and down from $900 million in Q4 of 2020. The domestic Strategic Value Dividend strategy had positive Q3 SMA sales of $34 million and slightly positive combined fund and SMA sales. For the first three weeks of Q4, equity funds and SMAs had net redemptions of about $463 million. Interestingly, about three-fourths of this was a tactical shift by one client. Now turning to fixed income. Q3 was another very solid quarter of net sales and performance. Assets increased by $6.4 billion or 7% from the prior quarter, with nearly all the growth coming from net sales. Fixed income separate account net sales of $4.6 billion were driven by multi-sector strategies. Most of the Q3 separate account net sales came from a large public entity. Fixed income fund net sales of $1.7 billion were driven by short duration strategies of $1.4 billion, with solid results in core total return strategies as well. That's about $360 million. We had 19 fixed income funds with net sales in the third quarter. Now we're progressing towards the planned Q4 launch of our first two active, transparent ETFs, an investment-grade short duration corporate bond fund, and a high-yield short duration bond fund. These initial offerings draw on our strengths in these areas, and we're focused on the successful launch and growth of these initial products while we also plan for additional ETF offerings. At the end of the third quarter, and using Morningstar data for the trailing three years, we had 28% of our funds in the top quartile and 44% above median. For the first three weeks of Q4, fixed income funds and SMAs had net sales of about $454 million. Now in the alternative private market category, net sales were diversified across unconstrained credit, $568 million, absolute return credit, a little over $200 million, real estate, $180 million, and direct lending, $68 million. We began Q4 with about $1.4 billion in net institutional mandates yet to fund into both funds and separate accounts. These additions are expected to occur in fixed income and alternative private markets, including the aforementioned unconstrained credit, direct lending, and trade finance. Now we are working on two new private markets products. We expect the initial closing for our new direct lending fund during Q4 for about $270 million and expect to raise additional assets in 2022. We're also working on a new private equity fund with an initial closing set for Q4. This will be a mix of existing clients rolling over to the new fund and some new clients. We expect around $300 million in the initial close with an additional capital raise expected to occur next year. Moving to money markets. Assets were down about $16 billion in Q3 with about $10 billion from funds and $6 billion from separate accounts. Our money market mutual fund market share, including sub-advised funds, was about 7.2% at the end of Q3, down slightly from Q2 of 7.4%. While the Fed raised the administered rates in mid-June, the money fund yield curve remained flat and rates didn't change much in the third quarter. We believe that we will see higher short-term rates in 2022. We continue to experience more waivers for competitive purposes. Tom will update this program, as I mentioned. Now taking a look at recent asset totals. Managed assets were approximately $636 billion, including $413 billion in money markets, $99 billion in equities, $98 billion in fixed income, and $22 billion in the alternative private markets, and $4 billion in multi-asset. Money market mutual fund assets were $290 billion. With that, I'll turn it over to Tom. Okay, Chris, thank you. Total revenues for the quarter was up from the prior quarter due mainly to the impact of lower minimum yield waivers of $8.6 million and an extra day in Q3 which increased revenue by $4.9 million. The increased revenue of $5.4 million from higher average fixed income and equity average assets was offset by lower average money market asset related revenue. Q3 carried interest and performance fees were $5.2 million compared to $4.4 million in Q2. Operating expenses decreased slightly in Q3 compared to Q2. Most categories were lower or about flat. We are seeing restoration in travel and entertainment expenses as pandemic related restrictions ease. The negative impact on operating income from minimum yield waivers on money market mutual funds is currently estimated to be about $39 million for Q4, up slightly from $37 million in Q3. The Q4 estimate is based on our investment team's expectations for portfolio yields, recent asset levels, asset mix, and other factors. The amount of minimum yield waivers and the impact on operating income will vary based on several factors, including, among others, interest rates, the capacity of distributors to absorb waivers, asset levels, and asset mix. Any change in these factors can impact the amount of minimum yield waivers, including in a material way. During the third quarter, we completed the acquisition of the BT Pension Scheme's remaining 29.5% non-controlling interest in Hermes Fund Managers Limited for GBP 116.5 million. During Q3, we purchased about 600,000 shares of our stock for approximately $18 million. John, that completes our prepared remarks, and we'd like to open the call up for questions now. Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your touch-tone phone. Pressing star two will remove you from the queue should your question be answered. Lastly, while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. The first question is coming from Dan Fannon from Jefferies. Your line is live. Thanks. Good morning. First question is on the fee waiver outlook, and I understand the inputs that you mentioned that can drive the changes, but curious about the competitive factors and maybe what is different as you think about this cycle of rates and competition versus previous ones and is the relationship potentially between distribution expense sharing and the economics of that different this time as we come potentially back to more normalized rate levels? Yes Dan, this is Tom. Our competitive environment remains. It has always remained. As we expect rates to go up over time, we will remain competitive with the rest of the market. That's basically how we view it. Okay. I guess just trying to clarify then, just the sequential delta with assets being down, rates generally being up, but the fee waivers going higher. Can you give us the factors that are specifically driving that? Yes. The competitive discussion on that is not the minimum yield waivers are the waivers to maintain zero or just above zero in the rates, and that's how we do it. If we are going higher than that, then that's really the competitive nature and that depends on what's going on in the marketplace. You know, we can't really predict what's going to happen there. Dan, it's Ray. Just to jump down to the assets a little bit, in more detail. At the end of the third quarter, the money market fund assets were higher than the average for the third quarter. We at least entered into the quarter at a higher average asset level. The assets were up about $3 billion, but government funds were up about $5 billion, and that's where the bulk of the waivers happened. You know, we do our look ahead, you know, with those assets in mind. Got it. Okay. Thank you. Okay. The next question is coming from Ken Worthington from JP Morgan. Your line is live. Okay. Coincidence. Similar topic here on competitive fee waivers. It looked like the yield on the Government Obligations Fund rose in August and rose in September to match yield levels by some other big government funds at say, BlackRock and Goldman, although there's some others as well. I assume that this is a matter of competitive fee waivers that we've been talking about. To follow up on Dan, I do know you've always said, you know, the money market fund business is always very competitive. Now that we're seeing more conviction around rate increases possibly coming next year, is there jockeying taking place to kind of try to win share through yield in a way that maybe you know you in the industry didn't see six to 12 months ago before there was sort of conviction that maybe we might have higher yields happening in 2022 rather than 2023 or beyond? Anyway, just maybe more of the same. Thanks. Ken, it's really hard to jump into the skin and the brain of the competitors as to whether they're trying to do something one way or the other. We don't just do that. We deal with the reality of the marketplace, what those yields are. I don't disagree with your observations about what was going on in the summer. This game will continue. I'll let Debbie comment on some of the specifics of what was behind those rate moves. Sure. This is, you know, Debbie looking at the various curves and, you know, what's available. The government funds, which as Ray mentioned, are generally the ones that are contributing to the highest amounts in waivers, were constrained in the third quarter by what was going on from a debt ceiling limit. That has unfortunately been kicked down the road a little bit and will be impacting us to a large degree in the fourth quarter as well. If you look though at other curves that are not being influenced by that debt ceiling constraint, you're looking at curves that in the money markets have generally risen anywhere from 4-10 basis points. Our expectation would be as soon as we start tapering and get some supply and the debt ceiling is behind us providing more supply, the government curve will follow in turn. You know, expectations from a competitor standpoint are that, you know, with expected increasing yields, there's less of a concern about what needs to be enhanced to our, you know, various shareholders in the marketplace. I think that's, you know, what we're basically hearing and seeing that flip the calendar into 2022, get the debt ceiling behind us, get tapering underway, and the government curve starts to look like the prime curve, you know, whether you're looking at LIBOR or BSBY or whatever the indices are, and that means increasing rates. Perfect. Thank you so much. Okay. The next question is coming from Bill Katz from Citigroup. Your line is live. Okay. Thanks very much for taking the question this morning. You were whipping through some of the product launches pretty quickly this morning. Just wondering if you could repeat what you had mentioned in terms of the direct lending and private equity, and how do those funds compare to predecessor funds? A broader question, Chris, there seems to be a fairly big focus on tapping into the retail democratization for alternatives. I was also sort of wondering what's your sort of go-to-market strategy to try and pick up on that opportunity? Yes, Bill. In terms of those various items, there are two basic items. One, of course, is the direct lending, and this brings us up to new totals, and we'll get into that in a second. What's going on here is a step out into private markets that was part of the sort of behind the curtain, not in the first wave of enthusiasm for the Hermes deal in the first place. That the entire of the private markets business, in our view, could obtain the similar size to where the whole Federated enterprise was when we did the acquisition. We're very happy to see this private lending proceed along. This is consistent with what's going on in the other marketplace broadly as well. On private equity, we have a very good set of investors there. As I said, we expect around $300 million in the initial close. That brings us up to some pretty tidy figures as well. I'll let Ray give you those numbers, and then I'll have Saker talk to you about the whole effort from his point of view as well. Yeah, Bill, just on the, you know, the activity we expect in Q4. On the direct lending, we will have funding in the EUR 300 million range, which would bring our total direct lending assets to about EUR 700 million. Then we're looking at additional asset raise for that product next year. That'll stay open and continue to raise. On the private equity side, this would be another iteration of what we've done to date. We expect, as we said, about $300 million in the initial closing from a mix of rolling over existing clients staying in and some new investors as well. That vehicle will also look to raise additional funds next year. Saker? Thank you very much. So in terms of the whole private markets business, we have a very strong footprint across the firm in private markets, going from property through to infrastructure, through to private equity, through to direct lending, through to unconstrained credit. We view this as a singular platform. We're increasingly working on being able to present it to our clients as one, so that they can choose on various facets within it. Specifically talking about what went through and what Chris talked about. The direct lending fund typically works in vintages that close. The fact is that we've raised the first part of the vintage faster than we'd anticipated, and the flows look, as you just said, to be strong, and we expect to continue raising assets for that into next year, into next quarter. It is a well-regarded team, one of the best in the business, according to many analysts out there. The performance has been strong in the past, which is why we continue to see this flow through. The private equity team is a very well-established team, and this is again a new vintage that they've raised, and we're hoping to raise the assets that you've heard about, and it's very strong. In real estate, I've talked to you in the past, there are two kinds of real estate we do. It's particularly U.K.-focused. One is a fund, a unit trust, an equivalent of what the Americans would call a mutual fund that continues to have the best track record over 10 years and continues to attract capital. In addition, we have these development projects, which we call placemaking, which have had outstanding returns and which continue to attract assets. We're pretty confident that we will continue to see clients coming into this. There tends to be big chunks one-off, so they don't tend to be sort of distributed. As far as your question of how do we democratize the access to private markets, it is something we're working on. We're not yet ready to come to the market and talk about how we're doing it. It's certainly something that we do think about, and we're thinking about how to make our capability available in different ways. It is combined a very strong business with a projection for growth, as Chris has said, which is quite substantial. I return it to Chris. Bill, thank you. Yeah, one other thing, Bill. You know, when we purchased Hermes and had all these exciting businesses, Saker and his team developed those with the relationship with the pension scheme. What we've talked about now is how do we institutionalize this and make it, you know, available to a broad group. That's gonna. You know, we're coming down the path to being faced with, you know, adding some distribution and other operating expenses that will, you know, come along in this business next year. But we continue to be pretty excited about it. Thank you. Okay. The next question is coming from Kenneth Lee from RBC Capital Markets. Your line is live. Hi. Thanks for taking my question. One just around the competitive landscape for money market funds. Wondering if part of the competitive reasoning is seeing any clients going to either money market fund substitutes of any sort? Thanks. Well, it seems as though, you know, deposits are always in the picture, unfortunately, as a money market competitive product. Even in today's low-rate environment where there are substantial amount of the deposits that are uninsured and that are non-interest-bearing, that seems to be nonetheless a choice of many of our clients. As far as other types of products, I know lots have been mentioned as far as ETFs, cash-like ETFs, cryptocurrencies. We're not seeing that occur at this point. You know, we have those on our landscape as something to watch. We're certainly, you know, understanding and involved in the market so that it doesn't creep up on us and become a distinctive competitor before we would recognize it. That's not necessarily anything we're seeing at this red-hot moment in time. Ken, just to add to that, we are seeing, of course, you know, clients, corporations putting cash to work, investing as we, you know, enter an upcycle and come out of the pandemic. We will expect to continue to see uses of cash, whether that's, you know, stimulus money that's flowed through and flowed into money funds and eventually goes on to do its intended stimulus work, as well as I mentioned, corporations beginning to invest and, you know, seeing opportunities where they were more hunkered down over the last eighteen months. One last thing, Ken, is that, in the context of, you know, our Microshort and our ultra short products, there have been clients that have, you know, over the course of the last two years with ultra-low rates, continued to bucket cash and go a little bit longer into those products. In addition, you know, those that are concerned about a steeper yield curve and higher rates in the long end of the curve have also come into those products. Again, you know, with a full lineup of funds that go from, you know, basically overnight out to 30 years, you know, we're liking those flows. Great. Very helpful. Just one on the private markets direct lending fund. Wonder if you could just talk a little bit more about how the underlying economics work for Federated Hermes. Perhaps it sounds as if it’s a very experienced team there. Just wondering in general how the fund can compete against perhaps some other players that do direct lendings through permanent capital vehicles. Thanks. I can comment just broadly on the fee levels for alternative private market and Saker can address the competitive landscape for direct lending. Essentially, our private market alternative business blends in at around just under 40 basis points, and that does not include performance fees and carry interest, which come along episodically. You know, that's a range of strategies. We wouldn't comment on particular fund levels for particular slices of that at this point. Saker, do you wanna talk to the competitive landscape? Sure. I mean, you're right. There are many different direct lending funds and efforts out there. I think what differentiates us is three things. The first thing is the team under the leadership of Patrick Marshall. It's a particularly experienced team, particularly in the lending space, going all the way back to the financial crisis. That carries a lot of weight. The second one is the methodology of assessing loans is slightly different, not least because as you've heard from both Chris and myself in the past, integrating ESG factors, we believe adds to alpha. We believe looking at stewardship factors also adds to alpha and gives you insight. We think that allows us to continue to have a competitive advantage against our competitors and make it more attractive to buyers, particularly in Europe. The third way is the way that we source the loans are a little bit different from the marketplace. We can take this offline, but we have a slightly different model, which we think is particularly successful. We're pretty certain when we approach clients, and we've seen this very much so in Europe, it is a very strong proposition, and that is attested to by the fact that whenever we launch new tranches, we have so far managed to fill the first and second tranches very quickly. I'm pretty certain that we do have a strong competitive advantage. Thank you. I would add on the PE side, the way you phrased the question, you had it that the private equity and direct lending fund, they're not together. They're completely separate, each individual fund. On the PE side, it's a unique way of offering that has gone on quite successfully for a long time, originating obviously with the pension scheme, but growing into third-party investors with a club-like approach of investors and a very thematic approach from the investment advisory side of it, coupled with the ESG integration. In each of the direct lending and the PE, you see what we think is a unique flavor that allows us to be enthusiastic for these offerings. Great. That's very helpful. Thanks again. Once again, if you have a question or a comment, please indicate so by pressing star one on your touch tone phone. The next question is coming from Patrick Davitt from Autonomous Research. Your line is live. Hey, good morning. One more follow-up on that. Am I hearing correctly that the private equity strategy doesn't have kind of like vintages like we're used to with, you know, the alternative asset managers we cover. Through that lens, is it almost an evergreen type strategy that can kind of always be raising money? Is that the right way to think about it? It does have vintages, but it rolls vintages. The methodology, as Chris said, is what really matters in the private equity business. Again, I'd like to emphasize it's a lead investor and a team that has a stunning track record going back many years, and that's public domain, so you can check it out. They've developed this very differentiated way of accessing deals in private equity markets. The second element is this, again, very differentiated thematic overview that they put on. Now, what we typically do with all of these strategies in private equity is we launch different vintages of funds, and that's what we're looking to do as we go forward. Quite often, this is, you know, past performance is no guarantee of future. Quite often, clients who are in the previous vintage will roll over into the next vintage. Private equity has to live in vintages because if you think about it, what happens is once you invest in private equity, there comes a time when you sell it on. That's how you realize the profit and hopefully get the carry too. I hope that answers your question. It doesn't sound like there's like a Hermes Fund five or like that's following a Hermes Fund four. Is that correct? That. It sounds like there's a Hermes Fund 5. Is that what you said? Yeah. Let me answer that. Yes, you do name them like that, but it's far better for us not to talk about the names just yet because of legal constraints. That is exactly what happens. Can you tell us the size of the previous funds? I will come back off the line and get back to you with that. Yes, I will do that. All right. Last question. Any color on how to think about the incremental earnings impact from having a full quarter of the new Hermes ownership in 4Q? I think we went over that last time that, you know, there was small cents involved. Got it. In the positive side of things. Saker, Ray does have the numbers from the previous equity fund. Yeah, yeah. Patrick, as you know, I mean, there's committed capital and invested capital. At the last read around midyear, we had about $850 million in that fund. There was more than that, about twice that, committed. So I don't have any more recent figures. There may have been additional investments made, you know, over the last quarter. That gives you a rough dimension. Thanks. Okay. The next question is coming from Robert Lee from KBW. Your line is live. Great. Thanks. Good morning. Good morning, everyone. I guess my first question is, in thinking about, you know, expenses heading into next year now. You know, I know, you know, Tom, you don't, you know, have no interest in giving guidance or anything. I'm just kind of curious, kind of, generally, you know, T&Es coming up, investing in the private markets business. I assume you're seeing like the rest of the U.S. industry pressure on compensation costs. If we're thinking into next year, putting aside any, you know, fee waiver impacts on distribution expenses and whatnot. You know, how should we be thinking about kind of comp growth into next year? Is it like inflation rate plus, you know, reasonable spread? I mean, how are you kind of b ecause you have to be getting close to your budgeting process. You know, how should we be thinking of it next year? If we just go back and read your question, that's the answer. I'm being funny, but yeah, you got most of the subjects. I'd start out with this on, you know, just looking at this quarter and into Q3. You know, inflation, it's real. It's going to affect us. Incentive comp, you know, versus run rate benefits. You know, our tech continuing to invest into the operations here. Market data, you know, particularly ESG related. You know, professional service fees, that's just going to be inflation. You know, office and occupancy. Why does that go up? Well, that's basically return to the office that we expect to be happening more. Advertising and promotion. In our advertising and promotion line, you know, that's conferences, which what is that? That's sales meetings. We certainly hope and expect that to tick up. You know, travel and entertainment or travel and related, which is our salespeople and investment people and others, going around visiting clients and visiting companies. We have seen that, you know, tick up in Q3, and we expect it to go up in Q4. All those same things, I think, will also affect next year, including, you know, furthering our private markets business. Okay, thanks. Also, I mean, going back to the private markets, but maybe a little bit from a different angle. You know, obviously, and you know, there's a big notable one yesterday. Obviously, a lot of managers like yourselves are expanding their private markets capabilities in different ways. You know, from a capital perspective, you know, private market strategies often take bigger commitments of capital, whether it's to, you know, for GP commitments to funds or to seed new strategies, and I guess BP served some of that purpose in the past. Do you envision this being a bigger use of capital to kind of accelerate growth of that business? Part two of that would be, as you do think about M&A, both on M&A, you know, is that kind of an increased focus to find the complementary or scalable, you know, private markets businesses as well? Yeah. So on capital, each of our teams has talked to us about how exciting it will be for Federated Hermes, Inc. to make an investment in there as part of the process to show good faith to help the capital raise. Of course, we'll make a lot of money on it with this investment. Yeah, Rob, I would expect us to be doing more of that. In terms of M&A, you know, it's hard to buy those businesses, and we really are very fortunate to have purchased Hermes and to have each one of those lines of businesses in a shape that we could grab hold of it, structure it together, as I said before, institutionalize it, get some distribution teams going, and go out and move it further and further away from just the original investor of which Hermes has already, and the Saker's team has already done a lot of it, but we expect a lot more. That's a lot easier to do since we already did make the acquisition. We do have our team out looking and how do we bring things One of the interesting factors is how do we bring this, these four areas, five areas that Saker's talked about to the U.S. and what, you know, what will we need M&A to do some of those? We have considered, and we'll look at, you know, various opportunities there. It's just they're hard to do. Great. Thanks for taking my questions this morning. I'd now like to turn the floor back to management for any closing remarks. Thank you, John. That concludes our call for today, and we thank you for joining us. Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.