Federated Hermes, Inc. (NYSE:FHI) Q2 2022 Earnings Conference Call July 29, 2022 9:00 AM ET
Company Participants
Ray Hanley – President, Federated Investors Management Company
Chris Donahue – President and Chief Executive Officer
Tom Donahue – Chief Financial Officer
Saker Nusseibeh – Chief Executive Officer, Federated Hermes Limited
Debbie Cunningham – Chief Investment Officer
Conference Call Participants
Patrick Davitt – Autonomous Research
Dan Fannon – Jefferies
Kenneth Lee – RBC Capital Markets
Ken Worthington – JPMorgan
Michael Brown – KBW
John Dunn – Evercore ISI
Operator
Good day ladies and gentlemen and welcome to the Federated Hermes Q2 2022 Analyst Call and Webcast. [Operator Instructions] 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.
Ray Hanley
Good morning and welcome. Leading today’s call will be Chris Donahue, Federated’s CEO and President – Federated Hermes CEO and President; and Tom Donahue, Chief Financial Officer. And joining us for the Q&A are Saker Nusseibeh who is the CEO of Federated Hermes Limited, our international business; and Debbie Cunningham, Chief Investment Officer for the money markets.
During today’s call, we may make forward-looking statements and we want to note that Federated Hermes’ actual results maybe materially different than the results implied by such statements. Please review our risk disclosures in our SEC filings. No assurance can be given as to future results and Federated Hermes assumes no duty to update any of these forward-looking statements. Chris?
Chris Donahue
Thank you, Ray. Good morning, all. I will review Federated Hermes business performance. Tom will comment on our financial results. Last week, we proudly announced the agreement to acquire C.W. Henderson and Associates, Inc., a Chicago-based registered investment adviser with more than three decades of experience specializing in the management of tax-exempt municipal securities in SMA products. C.W. Henderson manages approximately $3.6 billion in assets. The expected addition will enhance and complement our existing muni team and strategies, where we manage about $13 billion at the end of the second quarter. It will also enhance our overall SMA business, where we currently manage about $26.5 billion in 35 equity and fixed income strategies. The transaction is expected to close in the third quarter and we welcome all of the employees of C.W. Henderson to Federated Hermes and look forward to working together to develop growth opportunities and to continue to provide outstanding performance in customer service.
Turning now to Q2, in a quarter that presented challenging markets across asset classes, our business mix enabled Federated Hermes to end the quarter with an increase in both total assets and revenues as growth in money market assets offset decreases in long-term assets. Looking first at equities, more than 90% of the decrease in assets during Q2 was due to market losses and the impact of foreign exchange rates. Equity total net redemptions were $969 million. This included approximately $1.1 billion in institutional separate account redemptions by BTPS. Our equity mutual funds and SMAs produced combined net sales of just under $600 million. These net sales were driven by the strategic value dividend strategy.
The domestic strategy had Q2 net sales of about $1.9 billion, with both the fund at $1 billion and the SMA at $900 million, producing solid net sales. The strategic value dividend fund was recently highlighted in our Wall Street Journal article as the top fund among the 32 out of 1,342 actively managed U.S. stock funds to finish the rolling 12-month period ending with Q2 in positive territory based on Morningstar data. The article further noted that the fund was the only one with double-digit positive returns for that period.
We saw Q2 positive sales in 16 equity fund strategies, including several international strategies such as International Strategic Value dividend, Asia ex-Japan, international equity and SDG engagement. Net redemptions were concentrated in growth strategies about $955 million, reflecting difficult market conditions for these strategies. We continued to emphasize asset classes and strategies that have responded well on past inflationary periods, including dividend income, international, emerging markets and value strategies.
We are also expanding our equity product line, including the recent launch of a biodiversity equity fund in collaboration with London’s Natural History Museum. The fund invests in companies that are helping to preserve and restore biodiversity. Our equity fund performance at the end of the second quarter compared to peers was solid Using Morningstar data for the trailing 3 years at the end of Q2, 57% of our equity funds were beating peers and 29% were in the top quartile of their category. For the first 3 weeks of Q3, combined equity funds and SMAs had net redemptions of $50 million. We had 16 equity funds with positive net sales in the first 3 weeks of July, including strategic value dividend, Asia ex-Japan, MDT Small Cap Core and MDT Small Cap Growth and International Strategic Value dividend, among others.
Turning now to fixed income, Q2 saw net redemptions of about $2 billion, down slightly from Q1. Fixed income separate account net sales of $1.8 billion were offset by $3.8 billion of fund net redemptions. Fixed income separate account net sales were driven by multi-sector strategies. Within fixed income funds, net redemptions of about $1.4 billion occurred in the 3 Ultrashort funds. In addition, high yield funds had about $900 million of redemptions. Most categories of bond funds had net redemptions, reflecting another quarter of difficult market conditions. Even so, we had 11 fixed income funds with positive net sales in the second quarter, including capital preservation, adjustable rate, conservative muni micro short, climate change high-yield credit, inflation-protected securities, among others.
Regarding performance, at the end of the second quarter and using Morningstar data for the 3 trailing years, 66% of our equity funds – of our fixed income funds were beating peers and 22% were in the top quartile of their category. For the first 3 weeks of the third quarter, fixed income funds and SMAs had net redemptions of about $524 billion. Again, mainly from the Ultrashort funds, $256 million and high yield of $172 million, each trending better. During the same period, however, we had 14 fixed income funds with positive net sales led by the municipal high-yield Advantage Fund, total return bond funds, and conservative municipal micro short.
In the alternative private markets category, net sales of $25 million included positive sales in real estate, Prudent Bear, MDT Market Neutral and trade finance. These, however, were largely offset by net redemptions and in absolute return credit, infrastructure, private equity and unconstrained credit. We recently closed the second vintage of our European direct lending private market strategy with nearly $600 million of committed funding. Of the 19 investors who make these commitments, 13 were new investors. We expect these fundings to occur over the next 9 to 12 months. We launched our fifth vintage of PEC, P-E-C, our co-invest private equity structure in 2021. We were pleased to hold our first closing in the fourth quarter of ‘21 with $350 million. We held our second closing last month adding a significant Korean institution and bringing our total raise to $401 million.
Due to demand, we will continue to market PEC 5 for the remainder of 2022. We recently launched our third vintage of the Horizon private equity fund with commitments so far of $1.05 billion, including $1 billion from BTPS as we announced this past May. We began Q3 with about $2.4 billion in net institutional mandates yet to fund, into both funds and separate accounts. About $1.9 billion of this total is expected to come into private market strategies, including direct lending, $900 million; private equity, $500 million and unconstrained credit $500 million.
Now moving to money markets assets increased about $19 billion in the second quarter compared to the first quarter, with nearly all of the growth coming from money market funds. The funds benefited from higher yields from continued elevated liquidity levels in the financial system. Money Funds also benefited from higher yields relative to deposit alternatives. Our money market mutual fund market share, which includes sub-advised funds, was about 7.3% at the end of the second quarter up from 6.9% at the end of the first quarter. With the recent increases in short-term interest rates, money fund minimum yield-related waivers have nearly ceased. We continue to believe that the higher short-term rates will benefit money market funds over time particularly as compared to deposit rates.
Taking a look at recent total assets, managed assets were approximately $631 billion, including $436 billion in money markets, $82.5 billion in equities, $88 billion in fixed income, $21.5 billion in alternative private markets and $3 billion in multi-asset. Money market mutual fund assets were at $296 billion. Tom?
Tom Donahue
Thank you, Chris. Total revenue for the quarter increased $41 million or 13% from the prior quarter due mainly to lower money market fund minimum yield-related waivers of $66.3 million, an additional day in the quarter and higher carried interest and performance fees, partially offset by lower average long-term assets, which reduced revenue by $22.6 million and lower average money market assets, which reduced revenue by $9 million. Q2 carried interest and performance fees were $2.5 million compared to about $100,000 in Q1. Operating expenses increased $33 million or 14% in Q2 compared to Q1, driven by $48.5 million of higher distribution expense from lower money market fund minimum yield related waivers. The decrease in compensation and related expense from the prior quarter reflects Q1 higher expenses for severance, seasonally higher stock compensation and payroll taxes and lower Q2 FX rates per pound sterling-based compensation.
Higher advertising and promotional and travel and related expenses were due mainly to seasonally lower Q1 expense and rebounding travel opportunities in Q2 as we move from the low travel volume during the pandemic. The short-term rates higher in Q2, the negative impact on operating income from money market fund minimum yield-related waivers decreased to about $500,000 compared to $18 million in Q1. These waivers are now de minimis. Non-operating results after subtracting the impact attributed to the non-controlling interest reduced earnings per share for the quarter by about $0.10 due to the negative market impact on our investments.
At the end of Q2, cash and investments were $430 million, of which about $379 million was available to us. Debt at the end of Q2 was $397 million, mostly from the $350 million of long-term debt added in Q1. During Q2, we repurchased 2.9 million shares of our stock for approximately $90 million. Chris mentioned in his comments, a large UK client that completed their planned multiyear draw down the public equity strategies. And we continue to have a great relationship with this large client since we purchased Hermes from them and completed that purchase last year. BTPS continues to be a great client and we have a great relationship in private markets in real estate, infrastructure and looking forward to growth further in private lending also.
Chris also mentioned that we recently announced the definitive agreement to acquire substantially all the assets of C.W. Henderson and Associates, Inc., subject to customary closing conditions. The initial purchase price for the transaction is expected to be $30 million based on current asset levels and assuming a certain level of consent to assignment of C.W. Henderson Investment advisory contracts are obtained. The transaction also involves the opportunity for C.W. Henderson to earn a series of contingent purchase price payments which in total as much as $20 million for the aggregate – $20 million in the aggregate and can become payable annually for the next 5 years based on certain levels of net revenue growth being obtained. We expect the transaction to be accretive by about $0.005 in the first year, excluding the upfront transaction costs.
Holly, that completes our prepared remarks, and we’d like to open up the call for questions now.
Question-and-Answer Session
Operator
[Operator Instructions] Your first question for today is coming from Patrick Davitt. Please announce your affiliation then pose your question.
Patrick Davitt
Hi, good morning, everyone. First question is on kind of the money fund flow dynamics. Obviously, you had a monster June took a lot of share in the second quarter. But now in July, you’re back in outflow, but the industry is still in significant inflow, so what do you think is driving that sudden divergence? And how should we think about your ability to take your fair share of these deposit rotations through the balance of the year?
Chris Donahue
First point, and then I’ll let Debbie comment is very, very, very difficult to make a long-term comment on a couple of weeks. And so we have big clients, I’m looking at the list and you’ve got $2 billion, $4 billion, $6 billion, $3 billion days, up and down so far here in July. And it’s just tough to make a prognostication from that, for more, Debbie will have a comment.
Debbie Cunningham
Thanks Chris, and ultimately, I’m just going to say that on those very negative days, we had a preauthorized client departure from about a year ago that was set for this summer. So we had some flows in outflows in May. They started in May, June, July, they got larger. If you mix those out, that single one large client that has moved into another type of product with their underlying client flows we are above the industry flows with that sort of data. So basically, large clients, similar to what Chris was saying, in this case, preauthorized that we knew about and we’re not surprised.
Patrick Davitt
Okay, great. That’s very helpful. And then a quick follow-up on the call, I just want to make sure I heard correctly that you said that BTPS has kind of finished with the base of the planned draw down from – in the merger.
Chris Donahue
Yes.
Patrick Davitt
Yes. Alright. Thank you very much.
Operator
Your next question for today is coming from Dan Fannon. Please announce your affiliation, then pose your question.
Dan Fannon
Thanks. Good morning. Dan Fannon from Jefferies. Just wanted to follow-up on the money market business and make sure we understand kind of the flow-through for the income statement. As we think about exiting 2Q, is the geography of the fee waivers and how we should think about the economics of those products flowing through now kind of normalized with both on the revenue side as well as thinking about the relationship with distribution expense.
Ray Hanley
Dan, it’s Ray. I think that’s largely true. I mean the yield improvement happened even coming out of Q1 continued into Q2. And of course, some of that came late. But – so the waiver recovery was nearly complete. You’ll still see a little bit of – in your terms, normalization in Q3, but it’s largely complete. And so yes, the geography is at this point, reflective of what it will look like based on the current assets, current channels, current funds and all of that, that can change around, obviously, but that would be based on client changes, not the yield waivers.
Tom Donahue
Also on the distribution expense line item, a full year – our full quarter, sorry, run rate, you’d expect that number to go up just based on – only on full restoring of the waivers than like Ray just said, what happens with assets and we will see what happens with the rest of the distribution expense line item.
Dan Fannon
Understood. And I believe there is also within investment management fees or advisory fees as well as other service fees, that mix also? Is that similar? There should still be some recovery in that, again, assuming the full flow-through of the full quarter just like the distribution expense.
Tom Donahue
Yes. I mean we were talking about it in both combined.
Ray Hanley
But it’s true of the line items as well, yes.
Dan Fannon
Got it. And then just looking at expenses in the back half of the year, obviously, travel is picking up, some of the more discretionary things. Other areas to think about whether – either you’re spending less or spending more from what we are seeing in the kind of first half levels? Any kind of forward-looking commentary around the second half of the year would be helpful.
Tom Donahue
Well, I would expect incentive comp to increase I’ve stopped predicting that. So I’ll at least say I expect it to go up. The ebb and flow, we’ve onboarded over 170 people this year. So you got to get the run rate of those people in. Of course, most of those were replacements. So the number was low. Then you have the stock stock-based compensation and severance things that kind of balance each other out. So overall, on the comp, to say the incentive, I’d expect it to go up. We just talked about distribution. So I don’t need to go into that one. Advertising, which includes conferences, I’d say probably a similar run rate systems in communications. We continue to invest, and we’ve got to deal with inflation on our market data costs, professional fees, inflation, T&E inflation. And I expect that’s about – I have to stay on that.
Dan Fannon
Okay, thank you.
Operator
Your next question is coming from Kenneth Lee. Please announce your affiliation, then pose your question.
Kenneth Lee
Hey, good morning. Thanks for taking my question. You mentioned in the prepared remarks ongoing fundraising for the PE funds, the direct lending fund as well. Just wondering how would you characterize the current fundraising environment? What are you seeing in terms of institutional investor demand for these products in the current environment? Thanks.
Chris Donahue
Saker, I’m going to let you take this swing it that way.
Saker Nusseibeh
Thank you very much, indeed. So if we look at the general demand for most of our private assets business. I say the demand is very strong. And this is evident by the fact that we closed our direct lending higher than we expected. We also have these three investments in our private equity fund, which was very encouraging. And remember, in that case, this is a commitment for several years. We’ve seen commitment to infrastructure as well. And we also announced one joint venture in our property fund. So it appears as if in this time of uncertainty, what we are seeing, I can’t speak for the whole market, but what we are seeing is that there is demand for our private assets.
Kenneth Lee
Great. That’s very helpful. And just one follow-up, if I may, just in terms of the money market fund side, on the regulatory side, any updated thoughts or any updates around that area? Thanks.
Chris Donahue
There aren’t any real updates, Ken. We continue to repeat the sounding joy of the beauty of money market funds. We continue our efforts to talk with all of the commissioners to talk to the staff and even to talk to treasury when we can about the importance of these money funds in the market. The only update that I would have to be timing the rumors are notice rumors that perhaps in October, they might finalize the rule. What will be in it? I don’t know. As you know, our comments have been that swing pricing is a plug on money funds, and it’s a novel plague and that it’s never been tried before. And we have also commented that, all you have to do is detach the fees and gates from the liquidity requirements, and you’re all set to go and let the Boards decide how to run these funds and use all the tools they have in order to do the best fiduciary response for the customers. So that’s a little summary just fix what was broken, declare victory and move on has been our message.
Kenneth Lee
Got it. Very helpful. Thanks again.
Operator
Your next question for today is coming from Ken Worthington. Please announce your affiliation, then pose your question.
Ken Worthington
Hi, good morning. Ken Worthington from JPMorgan. So first on SMAs, I believe strategic value is a big part of SMAs. Strategic value appears to be like just crushing it at the moment, but SMAs have are in reasonable redemptions. So I’m trying to sort of figure that out. How should we expect fund sales here to rebound in the SMA version of strategic value as we look forward? I’m a bit surprised that maybe things don’t look better in SMAs given how all strategic values are doing. But anyway, help me reconcile the strength of strategic value and the weakness of SMA sales?
Ray Hanley
Ken, it’s Ray. So on SMAs, the total net inflows for the quarter were just under $1 billion. And yes, most of that was from strategic value, but our fixed income SMAs had net inflows and some of the other equity strategies had net inflows though, again, strategic value was the bulk of it. So SMAs are a part of what we report as the separately managed account assets. And so when you’re seeing the negative there, you’re picking up the $1.1 billion that we talked about with – coming from BTPS to complete their drawdown and then other client puts and takes, but the SMA business in and of itself had a very solid quarter.
Ken Worthington
Okay, great. I probably screwed that up but thank you. And then on the planned client redemption in money market funds that you announced that’s taken place over the last couple of months. How much is left with that client? Are they mostly cleaned up in that redemption or are there – is there still significant money left to come out as part of that planned redemption? Thank you.
Chris Donahue
Debbie?
Debbie Cunningham
Yes. The vast majority of that is out. There is still some tails to clean up, but the majority of it is gone.
Ken Worthington
Okay, great. Thank you very much.
Operator
Your next question is coming from Michael Brown. Please announce your affiliation and post your question.
Michael Brown
Hi. Mike Brown from KBW. Good morning. I guess I wanted to take a step back and hear your thoughts a little bit about the outlook here for the money fund business. Obviously, we have seen a very rapid pace of rate hikes here from the Fed and the markets pricing and actually cut next year. So, I know you don’t have a crystal ball on the forward curve changes all of the time, but whether you incorporate industry research or your own historical experience. How do you – how should we think about how the money flows – money fund flows could perform over the next 12 months to 18 months. And obviously, it’s very fluid, but we would just be interested to hear your thoughts.
Chris Donahue
From a longer term perspective, Mike, we put a chart in our booklet that shows you the increase in the money supply going up, on average, 7% over some long, long, long period. And the money funds going up both in industry and in Federated, of course, Federated going higher than industry, but going up slightly higher. And what that tells you is that as the money stock goes up, people need to put it somewhere. And the money market funds as a group are a very, very valuable and efficacious place for short-term cash whether or not people are worried about inflation or up-rates or down-rates or whatever. So, these things have proven for half a century of being very resilient securities and places for short-term cash, we would expect that to continue. And I would certainly expect, especially given what the Fed has done to see increased flows. All of that is subject to whatever the SEC comes up with, which probably doesn’t get put into effect until sometime in ‘23, but you cannot let this question go by without hearing Debbie’s view on it.
Debbie Cunningham
Thanks Chris. Yes, I would say at this point, we are very optimistic, Michael. We are still looking at a Fed that is increasing rates. And as they should be, with respect to inflation fighting that continues to be their number one goal to bring inflation back under control. We had the PCE come out this morning at 4.8% on a year-over-year basis, 0.6% month-over-month. Those are both higher than expectations. So, we are not – I can’t think that they feel comfortable that their goal is being achieved yet at this point. However, if you look at sort of when they started raising rates and they started it with only 25 basis points back in March. We are not even six months into the process. And generally, there is leads and lags that are different in nature, but generally, it takes about six months for increasing rates to impact other types of specifics in the marketplace. So, we think that they are gaining control, but certainly not there yet. Our expectation will continue to see larger increases front-ended, so another 75 basis points likely in September. And then maybe trailing off towards the – in the fourth quarter and into the first half of 2023. And if you look at a terminal rate of somewhere in the 3.5% to 4% area, and that holding then for maybe about six months or so, depending upon again, what’s happening the Fed told us data dependency is now even more of a phrase, a catch raise than it has been historically. And so they are going to try to react on a dime, if you will and react to new news and additional news as it comes out. So, we are continuously listening to Fed speak. We are continuously watching the data as it comes out, and we will go with the guidance that they give us after each statistic with the hopes that what they have done so far starts to be felt. But agreeing with what Chris was saying, the flows are incoming, the money stock has increased, and we are not at zero rates anymore. So, it’s a good environment for people to take cover, it’s a good environment for new cash flows to be placed. It’s a good environment for people to earn something in a positive sense versus other asset classes at this point.
Michael Brown
Great. Thank you. Thank you for all that color Debbie and Chris, I really appreciate that. And then if I just change gears to capital allocation. So, you had $90 million of share repurchases in the quarter, you announced the acquisition of C.W. Henderson, which seems like a nice fit here. Can you just share an update on how you are thinking about capital allocation going forward? And then just touch on if you are seeing any other attractive acquisition opportunities at this time?
Tom Donahue
Sure, Mike. So, we borrowed the $350 million and 3.29% 10-year money. And we – when we borrowed that, we knew we were going to get it and we started buying shares. We expected to buy 8 million to 10 million shares. By the way, we thought that rates were going to go up and our stock price was undervalued. So, with the last three quarters, our pace got us to about 10 million shares, and we also have the money to pay for the C.W. Henderson acquisition. And so I would say I think buybacks should scale back from there from the recent pace. If you look at the history, we have completed about 15 buyback programs since going public and reduced our share count by 33%. And right now, we have a 5 million share program that is approved and available to us, and we will remain active. In terms of M&A, we – it’s perfect. We just announced a deal and then we are getting asked, what’s the next deal. So, we still need to close that deal and have that put our efforts to grow, which we expect to happen. But our team on the M&A side and on the alt side, which is a lot of opportunities, we are still active and out there, but I don’t have anything specific to talk about there.
Michael Brown
Okay. Great. I appreciate that. And certainly don’t mean to imply that you need to go on an acquisition spree. Just was interested in the thoughts there. So, appreciate it. Thanks for taking my questions.
Chris Donahue
Thank you.
Operator
Your next question for today is coming from John Dunn. Please announce your affiliation and post your question.
John Dunn
Yes. Hi, John Dunn, Evercore ISI. Could you maybe touch on where the sales discussions and kind of underlying gross decay picture is for the Kaufmann Small Cap Fund?
Chris Donahue
I missed some of your words, John. Please repeat.
John Dunn
Okay. Yes, sure. Okay. Sorry about that. Maybe could you just touch on where the sales discussions and maybe the underlying gross decay picture is for Kaufmann Small Cap?
Chris Donahue
Okay. In general, as you know, we closed that fund. It was closed for over a year. The asset figures were up at $10 billion. Now they are in the $6 billion range. So, we opened it back up because we were getting commentary from some clients that this would be the time to average in or buy in on the growth side – on the small cap growth side. So, at this point, I will let Ray tell you some of the dynamics.
Ray Hanley
Sure, John. If you look at the redemption trend in that fund, in Q1, it was about $638 million. That dropped to $365 million for Q2 and through the early part here three weeks of Q3, it’s running at more like 58%. So, it continues to trend downward. Those are the numbers. Anecdotally, our sales force, our regional consultants are having, there is a lot of conversation about when is the right time to get back into this strategy and the growth, but into this strategy, in particular, given its long-term history and the record and strength of that team. So, what we have seen so far is the diminution in redemptions, and we are anticipating ongoing improvement as there is considerable interest in that strategy.
John Dunn
Great. And then maybe just one other on another recent drag on flows. You talked about better trends in Ultrashort and high-yield funds. Do you think that could continue to trend closer to, if not to neutral, less of a drag?
Chris Donahue
Well, the word I had in there originally was they are less worse. And then that was amended to say they were better. So, that still continues. But the only good thing you can say about those redemptions like with any is once they are gone, they are gone. And that’s about what we are dealing with there. Those are still viable products and we even had one of our high-yield offerings have positive flows. So, Ray will give you some of the details on that. But those – we don’t see them stopping anytime soon.
Ray Hanley
Yes, same kind of picture. I mean if you look at high yield collectively where we had about $860 million of redemptions in Q2, that’s now more like about $170 million. And, again, there has been challenge with that asset class with credit, but our clients certainly know our long-term record and the strength of the team we have. And so as conditions improve and as people become more confident in things like high-yield exposure, we would fully expect that, that would continue to improve and eventually get back to inflows. On the Ultrashort side, it’s all part of the spectrum of what’s happening with liquidity options. So, Chris mentioned Microshorts having some inflows. Obviously, cash has had inflows. When you get the kind of rate movement that Debbie has talked about, and you had clients who moved out to Ultrashort when money market yields were down close to zero, and you could get 1% or plus or minus at an Ultrashort, there is less reason to do that now. And so we certainly, I am sure, has some of that money that’s left Ultrashort’s wash up into the money market part of the complex. But the pace of the net redemptions looks to be decreasing. It went down slightly in Q2 compared to Q1, and it’s trending to be down more again, through the very early part of Q3.
John Dunn
Understood. Thanks very much.
Operator
We do have a follow-up question coming from Patrick Davitt. Patrick, your line is live.
Patrick Davitt
Yes. Thanks for the follow-up. Real quick one on the big money fund client loss that you were talking about this summer. I assume given what’s clearly a pretty big chunk of money that the fee rate on that was quite small. Is that a fair assumption?
Ray Hanley
Yes. We – it’s hard for us to talk about any particular client even though, of course, we haven’t named them. But if you – the best we could do would be to look at the overall blended fee rate, Patrick. And because it is an intermediary, you – there is both revenue and related distribution expense and in – but there wouldn’t be a reason to highlight this one differently than others.
Patrick Davitt
Okay. Thanks.
Operator
There are no further questions in queue. I would like to turn the floor back over to Ray for any closing remarks.
Ray Hanley
Well, thank you very much, Holly, and that concludes our call, and we thank you for joining us today.
Operator
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.
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