Thank you. Good morning and welcome. Leading today’s call will be Chris Donahue, President and CEO of Federated Hermes; and Tom Donahue, Chief Financial Officer. And joining us for the Q&A are Saker Nusseibeh and Debbie Cunningham. Saker is the CEO of our International Business and Debbie is the Chief Investment Officer for Money Market. 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 as the future results and Federated Hermes assumes no duty to update any of these forward-looking statements. Chris?

Thank you Ray, good morning. I will review Federated Hermes' business performance and Tom will comment on our financial results. Q1 was another quarter of solid performance for Federated Hermes with a challenging backdrop of the global pandemic and fluid markets including rising long-term rates and short-term rates falling to extreme lows. We executed successfully against the variables that we can influence. We produced solid sales results as we have over much of the last year during this period. In fact, we achieved record high growth of 5.6 billion and net 1.2 billion in equity fund sales and total fund sales growth of 15.3 billion. A recent Ignite Study noted Federated Hermes’ long-term mutual fund organic growth rate of 15%, ranking 7th in the industry for net flows over the 11-month period ended February 28 of 2021. In Q1, our long-term strategies had net sales of 3.2 billion. We crossed over the 200 billion mark for long-term assets in the first quarter, finishing the quarter with a record high just under 206 billion in long-term assets. We also continue to grow our differentiated EOS at Federated Hermes engagement function. We added three new clients in the first quarter and assets under advice reached 1.5 trillion, up from 1.3 trillion at the end of 2020. Our staff level of engagers and other specialists reached 68, up from 49 in the first quarter of 2020. Equity managed assets reached a record high of 96 billion and had net sales of about 600 million. Equity fund net sales of 1.2 billion were partially offset by net redemptions in a separate account of 600 million. Equity gross sales increased by 38% from the fourth quarter and 28% over the first quarter of last year. We saw positive net sales in 19 fund strategies in the first quarter. Sustainable strategies managed by our UK teams drove the strong equity fund sales led by global emerging markets over 400 million, global equity ESG over 400 million, SDG Engagement Equity over 400 million, and Asia ex-Japan over 300 million. Other funds with net sales in the first quarter included impact opportunities and MDT Small Cap Core. Our Global Emerging Markets Fund shareholders have been informed that the strategy will close to new investors effective June 15. Existing shareholders will continue to be able to invest in the fund.

Thanks, Chris. Total revenue for the quarter was down from the prior quarter due to the increased negative impact of minimum yield waivers of 27 million, fewer days costing 9.3 million, lower money market assets costing 6.4 million, and lower performance fees. This was partially offset by higher revenue from long-term assets of about 21.5 million. Q1 revenue included 9.4 million in combined carried interest and performance fees compared to 11.2 million in Q4. Now Q1 includes carry interest of about 7 million from variable interest entities associated with the HGPE acquisition that are being consolidated beginning in Q1. This carried interest is paid solely to certain current and former employees of HGPE and therefore is also recorded as compensation expense beginning in the first quarter. This amount represents the current and former employees' carried interest since the March 1, 2020 acquisition date as we finalize the acquisition accounting for the transaction. As noted in the press release, negative impacts from operating income from minimum yield waivers on money market mutual funds and certain separate accounts may range from 35 million to 45 million during the second quarter. This range is based on gross yields on government money market portfolios of 3 to 10 basis points. The historically low yields are being driven by technical factors at the front-end of the yield curve. In March, we began taking on more of the impact of the low rates through waivers as we were not able to further reduce distribution expenses on certain funds and separate accounts. This was largely responsible for the higher than forecasted Q1 waivers and the higher forecast range for Q2. We believe that minimum yield waivers are likely to peak in Q2 and we expect short-term rates to increase in Q3 and Q4. The amount of minimum yield waivers and the impact on operating income will vary based on a number of factors, including, among others, interest rates, the capacity of distributors to absorb waivers, asset levels, and flows. Any changes in these factors can impact the amount of minimum yield waivers, including in a material way. As Ray indicated at the beginning, Federated Hermes is not undertaking any duty to update this information throughout the quarter.

Our first question comes from the line of Dan Fannon with Jeffries. You may proceed with your question.

Thanks and good morning. My question is about the outlook for fee waivers. You mentioned that the peak occurred in Q2 and is expected to decline afterwards. Is this based solely on future rate projections, or can you elaborate on the factors you are considering for your assessment that fee waivers will decrease in the latter part of the year?

Yeah Dan, I'll talk for a second and then Debbie will talk because it's the view of future rates that's driving that and our sharing with intermediaries.

Dan, this is Debbie. Some of the more specific factors about our outlook have to do with currently where overnight rates are trading, which is in the one basis point, maybe one to two basis range. If you go back to early in 2021 and throughout most of 2020 since the pandemic began, overnight rates have been somewhere in the neighborhood of five to eight basis points. Our expectation would be because of various processes that the Fed has already gone through by increasing their RRP counterparty limits per counterparty from 30 billion to 80 billion. They did that a couple of months ago by announcing their expansion of the potential counterparties that they will allow from a trading perspective with them through the RRP. We do believe that we will see some technical adjustments to that reverse repo rate, taking it from a floor of zero, which is largely driving that overnight repo rate of one basis point right now, up to a level that's more like what it was post the financial crisis during the zero interest rate environment, which was five basis points. Commensurate with that, we would likely see an IOER increase. And what this does, not only raises the floor from an overnight perspective by that amount of basis points, but it also raises the money market yield curve by upwards of probably three to five basis points depending upon what part of the curve you're looking at. So that plays directly through as we invest in those markets on a daily basis to the yields of the fund and thus the waivers.

Okay, that's helpful. And then just a follow-up on expenses and comp. So I think in the quarter you mentioned that the carried interest and the flow-through, so we have 7 million of comp that's non-recurring plus another 4 for seasonal. So anything else just in the expenses that we think about that you reported that could be one off in nature or non-recurring, and then also if there is more carried interest as we think about it going forward, is the payout ratio going to be as high as what we saw this quarter based on some of those legacy funds?

So the first question Dan, the 7 million we can't call it one-time. I call it more of a catch-up because as we get more carried interest, part of your second question will flow through there again. But this was since March first number so that's why it was much bigger and there was a decent amount of carried interest in there, obviously. So, I'm not allowed to call it one-time, but I do call it catch-up. Other things in the expenses. So with waivers, if they show up as forecasted and rates don't rise faster than we're expecting, I wouldn't see comp increasing or even decreasing. It is the same thing with distribution fees and the other items traveling related is that going to creep up higher because we're able to travel more because of the pandemic. I hope it does and expect it to. Advertising and promotional, while we kind of look at that over a whole year period, the Q1 number was probably like compared to what we're going to do the rest of the three quarters. Forecasting, your second question, forecasting, carry, and what's going to happen and you calculating trying to figure out some percentage of that versus anything, we're just not going to be able to help you out with that at all.

No, nothing. You are correct about it. As I always say, we have a profile for both carry and performance fees, and you can see them historically because we've declared them historically both, and the numbers we declare here and also the numbers we find in London where you cannot predict them, but we do know that they consistently come through over time. That's the best that I can say.

But just to clarify, it was 9.4 million in carried interest revenue and 7 million of compensation that was associated with that. And that's the same type of ratio we should think about for carried interest on a go-forward basis.

The 9.4 million consisted of a couple million from performance fees and 7 million from carried interest. That's the breakdown I should have mentioned.

So all carried interest goes into comp so then…

Yeah, the carried interest for this quarter was lower than it's been in other quarters without the 7 million catch-up. So the 7 million catch-up and the 7 million comp offset, but that doesn't mean that going forward, you're going to see a one-to-one offset.

Okay. Thank you.

Our next question comes from the line of Bill Katz with Citigroup. You may proceed with your question.

Okay, thanks. Just coming back to the money markets a little bit, maybe a bigger picture question. Is there any thoughts of repricing your platform to move away from the sensitivity to such low interest rates or is there anything you could do on the distribution side to reduce the reliance on the distribution to carry their weight, just trying to understand how to sort of soften some of this acute cyclicality on the business model?

It would be a great idea and if we had pricing power we would use it. We have discovered that there are many, many competitors who make those kinds of structural changes quite challenging and difficult. And that's just the way we've experienced it. We are now in our fifth decade of dealing with this conundrum and if you may recall, we started off back in your childhood, a 100 basis point money market fund. And we're a far cry from there. We have looked at other kinds of models, but we really aren't able to figure out one that avoids the marketplace. Remember what this fund is, is an actual marketplace rate, not an administered rate. And so it is subject to these vagaries. We still like the business because over time it adds a beautiful balanced ballast to the enterprise even though we have to suffer through these times with these big waivers.

Okay. The second question is about capacity. You mentioned the emerging market portfolio. Is there anything else in the equity or fixed income areas that we should be prepared for as potential closings that could further influence the net sale opportunity?

No.

Our next question comes from the line of Mike Carrier with Bank of America. You may proceed with your questions.

Good morning and thanks for taking question. Debbie, just on the money fund side, the changing rates and waivers over the past few quarters has been fairly significant. But given the economic growth that we're seeing, it seems like the rebound could be equally swift, so just want to get your view on what do you think could get rates and waivers back to the levels that we just saw in Q3 or Q4?

I believe that the technical adjustments we expect from the Fed in the second quarter regarding the RRP and IOER rates will be very beneficial. Additionally, we have to consider the impact of the debt ceiling issues that will start affecting us in the beginning of the third quarter. These issues will introduce supply challenges as the treasury needs to lower its cash balance. Once we move past these challenges, we are optimistic that the money market yield curves will respond positively. On the prime side, like the busy curve, which I’m referring to as the Bloomberg short-term bank yield index, this curve has already seen a slight increase of one to three basis points since the start of the year. In contrast, the bill curve, where most of our assets are held in the government fund, has actually declined in steepness by one to three basis points. We anticipate that in the third quarter, the bill curve will begin to normalize. Concurrently, we expect improvements in our current inflation measures due to economic recovery, prompting the Fed to address the target rate. We believe they will start announcing reductions in their bond purchasing towards the end of the second half of 2021, laying the groundwork for further economic recovery and inflation concerns in 2022. At that time, we anticipate the Fed will respond by raising rates by 25 basis points. To summarize, even without the Fed adjusting the target funds rate, we see substantial benefits from potential technical adjustments that could enhance yields and help waivers, but the major target adjustments will not occur until later in 2022.

Okay, great, that's helpful.

In terms of the distribution, we're seeing a lot of good things, singles and doubles occurring around the distribution. I will just give you a few without the names of the distributors. But one just added a preference for high yield bonds, that helps us. We added another one except our responsible investing institute training program. The micro shorts, new products are being added. The engagement fund is now on a number of other lists. ESG has come in to be a big theme in a lot of places. As I mentioned in my remarks, the short term remains strong, ultra-shorts are being well received, and people are looking at floating rate and around the horn. So what you have is a whole array of products. And that's why we keep mentioning 19, 20, 21 different products, whether it's equity or fixed income that have positive flows, because of the breadth of the offerings that we're able to make. Now, if you have specific questions, Ray has a comment.

Well, you mentioned the multi-asset and the largest fund we have in that category is our Muni and Stock Advantage Fund and we see a pretty bright outlook for that strategy, given the outlook for tax rates. It's a pretty unique strategy combining Muni’s and stock exposure. And in the first quarter, it was just about breakeven on net sales, and it's slightly positive here in the first part of April. And for the prior couple of quarters in 2020 we have seen some outflows in that strategy. So we think there's an improved outlook in the category.

Got it guys, thanks a lot.

Our next question comes from the line of Robert Lee with KBW. You may proceed with your question.

Great, thanks. Good morning, everyone. I hope everyone’s doing well. I want to return to the questions about the money fund. To frame this discussion, if we look beyond Q2, I understand there are many factors at play, but considering the guidance you provided for the current quarter, and with rates remaining low or declining further, if we were to return to an environment where rates are over five basis points, say between five and ten basis points, would we expect to see fee waivers in Q3, Q4, or perhaps beyond, similar to what you initially anticipated for Q1 or possibly the fourth quarter? I'm trying to understand how an increase in rates would impact stock performance.

Yeah Rob, so it's tough. The last time we predicted six months ago or so, we thought 2021 was going to be 9999. And, okay, so we have stopped talking about the future like that. We've run models based on Debbie's team's forecast and we don't get to as low as we were before based on their midpoint of their range. We don't get to Q1 and we don’t get to 2020 numbers. That's about as far as you're going to get me to go on that.

Well, it is always worth a shot. Maybe on the putting back into the minority interest from DT, just kind of curious, a couple questions. Number one, is there an option as part of that arrangement for the existing employees to increase their stake so once the price is agreed upon, that could actually be Hermes employees who take part of it or is it just going to be potentially Federated and how do you kind of price in any kind of way to think about potential financial impact from it or how we should be thinking about going forward?

So on the first question, it would be a straight deal between the pension scheme and Federated Hermes. And the employees have their 10% and would keep their 10% and have arrangements and numbers of years and all sorts of a whole different program. So those two do not intersect. And just as a comment here, recall that when we did the deal, we were perfectly happy to buy all the stock or buy a portion of the stock so long as we bought control. And the reason for that was that we have a very large client who created this whole enterprise. And however they wanted to handle it, is how we wanted to handle it on that subject. So now that they have put in for evaluation, we're happy to go down that road and see what happens. Now, in terms of the valuation and what impact it would have, they own 29.5%. We are on the threshold of acquiring a valuation, therefore, you will not get me to go spot fishing on valuation. But you are certainly welcome to have a swing at that pitch and if it comes to valuation we agree to, then there's no puts and calls and we just do it. Or maybe they put or maybe we call and maybe it gets delayed a year, and maybe it doesn't. But those are the dynamics. So it's 29.5% of the former Hermes Enterprise that we're talking about.

Great, thanks for taking my questions.

Our next question comes from the line of John Dunn with Evercore ISI. You may proceed with your question.

Hi good morning. You have been active going back on target M&A. I mean, you just mentioned Horizon. Do you see more opportunities like that and could you maybe give us an update on the M&A environment for both money market roll-ups and then for the long-term side?

So John, yeah, thanks. We're always out there with our team. If you've noticed in the press release, our gentlemen who are out there doing this says we're open, available. This is the Horizon press release. We're open and available and continually looking to help out all the various entities who may decide that it's better for them to do what we call roll up, which is turn their assets over to us, and so we continue to have discussions out there. In terms of bigger picture and you see lots of things have happened in the last year and a half in terms of bigger deals and where things fall in, as Chris has mentioned, we see ourselves set up with our Hermes, London business and what we have in the rest of the company as a great growth opportunity. And so we haven't seen that we're playing in those big, big transactions as we still get to look at them, we still get the books, we still get contacted. We haven't had a big level of excitement about moving forward as it stands right now.

If I may comment, we are active in this space too. If you recall, PNC, you mentioned Horizon. So you should not be surprised that we are still active in this space.

Got you. And then maybe just one more tiny one on the speed of change of fee waivers. It seemed like rates moved in Q1 and waivers changed pretty quickly too. How quickly can they turn back down if we get some cooperation from rates and plus there has to be any cycling through of the portfolios, which could take some time?

Let me answer that, in the context of the RRP rate currently being at zero and a potential five basis point move in that. The largest majority of our 430 billion in assets under management in the liquidity space is in the government product area, roughly two thirds of it. As such, those portfolios generally have about 40% to 60% of their composition of their assets in overnight securities. So, 50% of five basis points gives you two and a half basis points on two thirds of the assets. The other asset classes, the prime products, and the tax-free products, and then the remaining portion of the government products would be more impacted by what the curve does as opposed to what overnights do, and we think that impact is more along the lines of maybe a basis point or two.

Much appreciated. Thanks very much.

Our next question comes from the line of Ken Worthington with J.P. Morgan. You may proceed with your question.

Hey, good morning. Thanks for taking my questions. And to follow up on Rob's I don't think he got this and I sort of missed part of his question. But in terms of Hermes and the put call provisions, how much earnings or how much of your earnings is being generated by Hermes at this point and it just helps us gauge what this deal may be like? And would you be willing to do a dilutive deal if it came to that or is accretion a key metric that you're looking at to execute that transaction?

I will address the second part of your question, while Ken and Tom will handle the initial part. Regarding whether we would consider a deal that is accretive or dilutive, the specifics of that choice are irrelevant within the framework of the put-call arrangement. The essential factors are the price and valuation; if it’s put, we will purchase, and if it’s called, they will sell, with dilution or non-dilution potentially being a consideration. However, if the price falls within the range of the put, we will proceed with the purchase regardless of any impact. Ultimately, this process is determined by the put-call agreement, which can be modified or overridden through negotiation at any point. Tom?

Got it. Okay. Thank you.

On sharing, I will call it, so we have to do everything according to Hoyle from our arrangement with the pension scheme when we purchased the Hermes business, and that is pricing and sharing on distribution that we do here. So we've talked before about the funds that we started here and there's a solid arrangement there for sharing. We've talked before about the funds. I don't think we updated that. Over 100 million of the funds that we started here we've seen some green shoots on institutional starting to arise where our distribution in the U.S. is selling Hermes products. So we're excited about that. But it's not a whole lot of what we're generating as it stands and we have a lot of efforts and energy and a whole business development committee expecting that to grow into the future and starting to see it work.

Okay, great. Thank you very much there. And then the money fund business, I believe you guys just said in the past that even in the worst of the financial crisis, that the money market fund business was a profitable business for you. Given that the yield environment is sort of worse now than it had been and even if it's just temporary, is the money market fund business still a positive earning enterprise for you guys or are yields terrible enough at this point where it's more like breakeven or even generating losses?

It is not generating losses, it is still a profitable good thing to be doing.

Okay. Okay. Sorry, I'm going to be greedy and do one more, given that your competition in money market funds is probably under huge pressure, is there more opportunity to do these money market fund blocks or outright deals or is the business just sort of consolidated enough where that opportunity is not really much of an opportunity anymore?

Yes, there will be more of those come along, Ken. Each step in this process from prior to the big recession of 2008-2009, as I mentioned before, there were over 200 people doing money market funds. Now, if you look at the list it's 50 or so. And a lot of those are just in it, because they totally control the money in and out. And as time evolves and as these things occur, people decide they're going to throw in the towel. And then we work out a deal not unlike we worked out with PNC that works out for everybody. And as I always like to say we are a warm and loving home for any money market fund assets.

Our last question comes from one of Kenneth Lee with RBC. You may proceed with your questions.

Hi, thanks for taking my question. Just one on the money market fund fee waivers. I think in the prepared remarks you mentioned something about not obtaining cost sharing for certain distribution partners. Just wondering if you could clarify that and wondering if you could just talk about expectations for cost sharing going forward? Thanks.

Sure Ken. Generally, as rates decline during this period and the previous one, we have shared costs with our distribution partners on a pro rata basis. We also receive part of our administrative fee. As fees accumulate and we reach a point where there is no more sharing, meaning the distribution partner is receiving nothing, we absorb the full impact of the decrease in waivers or the increase in waivers due to declining rates. That’s why you noticed in the late first quarter that once rates were low enough, the distribution savings could not decrease further, and it resulted in all the hit to us.

Got you, got you. That's very helpful. And just one follow up if I may, and this is just the HGPE carried interest. And perhaps this will just help me understand and make sure I got all the nuances. But just wanted to see if the carried interest or level of carried interest is that going to be dependent upon portfolio realizations going forward within HGPE or are there other nuances that we should be aware of? Thanks.

It’s in HGPE carried interest. That's mainly where it shows up.

Okay. But is it going to be dependent on portfolio monetization or any other or is it really just based…?

The carried interest in GPE is realized. There are multiple funds, and when the assets of these funds mature and are sold, that follows the normal process for carried interest specific to private equity in GPE. Performance fees relate to other private market assets and have a slightly different cycle, but you are correct regarding the private equity funds.

Got you, very helpful. Thank you very much.

Ladies and gentlemen, we have finished our question-and-answer session. I would like to turn this call back over to Mr. Ray Hanley for closing remarks.

That concludes our call and we thank you for joining us today.

Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time.