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.

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.

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.