Products April 23, 2010

Federated Says Money-Market Fee Waivers to Stay

Federated Investors, the third-largest U.S. manager of money-market funds, announced that it expects to continue waiving some fees for the rest of the year because of low interest rates.
Reported by

Fees waived on money-market funds will likely reduce the Pittsburgh firm’s operating income by $15.5 million in the second quarter, Chief Financial Officer Thomas Donahue said on a call with analysts, Reuters reported. The waivers reduced first-quarter operating income by $17.8 million.

According to the news report, because interest rates on short-term debt bought by money market funds remain so low, managers like Federated have given up some of their fees to prevent yields on the funds from going negative.

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If yields on money market investments rose by 10 basis points, Federated’s fee waivers would be reduced by one-third, Donahue said. A 25-basis-point increase would reduce the waivers by two-thirds.

Federated managed $272 billion of money-market funds at the end of the first quarter, down from $360 billion a year earlier. It trailed only closely held Fidelity Investments and JPMorgan Chase in that sector, according to Reuters.

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