Federated Hermes Inc (FHI) 2025 Q4 法說會逐字稿

Greetings. Welcome to the FHI Q4 2025 Analyst Call and Webcast. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to your host, Ray Hanley, President of Federated Investors Management Company. You may begin.

Good morning and thanks for joining us. Today, we'll have brief remarks followed by Q&A. And leading today's call will be Chris Donahue, CEO and President of Federated Hermes; and Tom Donahue, Chief Financial Officer. And joining us for the Q&A are Saker Nusseibeh, the CEO of Federated Hermes Limited; and Debbie Cunningham, the Chief Investment Officer for Money Markets.

During today's call, we will 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 to future results, and Federated Hermes assumes no duty to update any of these forward-looking statements.

Chris?

Good morning. I will review Federated Hermes business performance, Tom will comment on the financial results. We ended the year with a record assets under management of $903 billion led by gains in money market and equity strategies. During Q4, equity assets increased by $3.2 billion, or 3% from prior quarter, and about half of that increase coming from net sales. 2025 saw record gross equity sales of $31 billion, including $9 billion in the fourth quarter.

Fourth quarter net equity sales were $1.5 billion. Our full year 2025 net [equity] sales of $4.6 billion showed substantial improvement from net redemptions of $10.7 billion in 2004. Equity sales results were driven by MDT fundamental quant strategies. MDT equity and market neutral strategies had a record $4 billion of gross sales and over $2 billion in net sales in the fourth quarter. For 2025, MDT grow sales of $19.1 billion, and net sales of $13 billion were both record highs.

For Q1 through January 23, these strategies had net sales in combined funds and SMAs of just under $700 million. Looking at MDT fund performance rankings ended December 31, six of nine MDT strategies are in the top performance quartile of their Morningstar categories for the trailing three years. Four strategies are in the top decile of their Morningstar category for the trailing three years.

We had 24 equity and SMA strategies -- equity fund and SMA strategies during the fourth quarter, including a variety of the MDT offerings, the Asia ex Japan fund, and the U.S. Strategic Value Dividend, ETF.

The MDT U.S. Equity UCITS fund launched in June of 2025, has seen strong demand from clients outside the U.S., with over $500 million in net sales from inception through year-end. Looking at our equity fund performance at the end of the year and using Morningstar data for the trailing three years, 49% of our equity funds were beating peers, 27% were in the top quartile of their category.

For Q1 through January 23, combined equity funds and SMAs had net sales of $432 million. Turning now to fixed income. Assets ended the year at $100 billion, down $1.7 billion from the prior quarter. Fixed income had Q4 net redemptions of $2.8 billion, including about $1.7 billion from two large public entities that have regular sizable inflows and outflows. These fixed income net redemptions included the $1 billion high-yield fund net redemption included in Q3's pipeline numbers.

We had 28 fixed income funds and SMAs with net sales in Q4, led by the ultrashort funds of $624 million, total return bond of about $200 million, short-term income of over $100 million, and core plus SMA of almost $100 million. Regarding performance at the end of 2025, and using Morningstar data for trailing three years, 42% of our fixed income funds were beating peers and 18% we're in the top quartile of their category.

For Q1, through January 23, combined fixed income and SMAs had net sales of $139 million. Turning to the alternative and private markets category. Assets increased slightly and net sales were positive. The MDT market neutral fund and recently launched ETF combined for $149 million of net sales. Positive net sales were also achieved in our European Direct Lending [Fund III], private equity funds, and the project and trade finance tender fund, partially offset by net redemptions in real estate strategies.

We held the final close of our European Direct Lending 3, the third vintage of our European direct lending fund this month. We raised $780 million. EDL 1 raised $330 million and EDL 2 raised about $700 million. We are currently in the market with global private equity co-invest fund, the sixth vintage of the PEC series. To date, we've closed on approximately $300 million.

The PEC Seres, PEC 1 to 5, raised approximately $400 million to $600 million in each fund, and PEC 5 raised about $500 million. We're also in the market with the European real estate debt fund, a new pooled European debt fund. We are progressing towards the FCP acquisition -- to closing the FCP acquisition during the first half of '26. The acquisition will add U.S. multifamily housing expertise to our long-standing U.K. based real estate capabilities.

The U.K. real estate team was recently selected as the exclusive developer on a significant mixed-use development opportunity in Manchester in the U.K. This week, at the Asian Financial Forum, we announced plans to open a Hong Kong office to capitalize on the region's rapidly growing wealth market. Subject to regulatory and other necessary approvals, the planned Hong Kong office represents a strategic expansion as we deepen relationships across the Asia Pacific region. The planned office will complement our existing regional offices in Singapore, Tokyo and Sydney.

Across our long-term investment platform, we began 2026 with about $2.7 billion in net institutional mandates yet to fund into both funds and separate accounts. Approximately $1.2 billion on a net basis is expected to come into private market strategies, including direct lending, private equity and trade finance. Equities expected additions totaled $1.4 billion, with about $1.3 billion into MDT strategies, and $100 million into international and global equity strategies. Fixed income is expected to have net sales of about $100 million into a low-duration strategy.

Moving on to money markets. We reached another record high at the end of 2025 for total money market assets, which increased by $30 billion, to reach $683 billion. Money market fund assets increased by $16 billion, or 3%, in Q4 to reach a record high of $508 billion. Money market separate accounts increased by $14 billion in the fourth quarter, reflecting seasonal patterns.

Market conditions remain favorable for cash as an asset class. In addition to the appeal of relative safety and periods of volatility, money market strategies present opportunities to earn attractive yields compared to alternatives, such as bank deposits and direct investments in T-bills in commercial paper.

Our estimate of money market fund market share, including sub-advised funds was about 7% at the end of '25, down from 7.1% at the end of Q3. Regarding digital asset efforts, we are advancing a series of strategic initiatives that bring together the strength of money market investment and operational expertise with efficiency and transparency of blockchain technology.

Our partnership with (inaudible), the first FCA regulated digital Securities Exchange to offer tokenized usage money market funds marks its first major non-U.S. digital asset initiatives. The platform enables professional investors to hold beneficial ownership tokens across multiple blockchains and access money market liquidity directly on chain.

The -- relationship complements our U.S. digital efforts where we have the sub-adviser for the super state short-duration U.S. government securities fund, a private tokenized fund. We are also participating in the launch of a collaborative initiative between BNY and Goldman Sachs, that will utilize mirrored tokenization of money market fund shares to improve transferability, collateral utility and real-time ownership tracking of money market fund shares.

We have a robust pipeline of tokenization projects in the U.S. and abroad, including the development of efforts for a GENIUS compliant money market fund, and ongoing integration discussions with several leading firms developing digital technology for fully on chain trading and settlement of tokenized share classes.

We believe these efforts position the firm well for the digital transition as we work collaboratively with service providers and stakeholders on developing new standards for combining liquidity, investor protections and blockchain-enabled capabilities for modern financial markets.

Looking now at recent asset totals as of a few days ago. Managed assets were approximately $909 billion, including $684 billion in money markets, $101 billion in equities, $101 billion in fixed income, $19.5 billion in alternative private markets, $3 billion in money market assets -- in multi-asset. Money market mutual fund assets were at $500 billion.

Tom?

Thanks, Chris. For Q4 compared to the prior quarter, total revenue increased $13.4 million, or 3%. Revenue from higher money market assets provided $8 million of this increase, while higher equity assets added $5.5 million. Q4 revenue included $8.2 million of real estate development fees for projects that did not advance into construction and is recorded in the other service line item. Total Q4 carried interest and performance fees were $1.6 million, compared to $3.6 million in the prior quarter.

Approximately $570,000 of the Q4 fees were offset by nearly the same amount of compensation expense. Q4 operating expenses increased by $7.3 million, or 2%, from the prior quarter due mainly to higher distribution expense of $8.8 million from higher fund assets.

Transaction costs from the FCP acquisition were about $1.3 million in Q4, nearly all in professional service fees. Additional transaction costs in 2026 are estimated to be approximately $9.2 million. The timing of most of these costs is based on a transaction closing date, which is expected to be in Q2 of this year.

Most of these costs will be lending consent fees in the professional service fee line item. In the other expense line item, FX and related expense decreased by $3.1 million in Q4 compared to the prior quarter. The effective tax rate was 24.4%. We estimate the tax rate to be in the 25% to 28% range for '26. At the end of 2025, cash and investments were $724 million. Cash and investments, excluding the portion attributable to noncontrolling interests were $680 million.

We expect to use $215.8 million in cash and $23.2 million in FHI Class B stock for the initial purchase price of the FCP controlling interest acquisition. Looking ahead to Q1, certain seasonal factors will impact results based on Q4 average asset levels, the impact of fewer days is expected to result in about $10.2 million in lower revenues and about $2.6 million in lower distribution expenses.

In addition, based on an early assessment compensation and related expense is expected to be higher than Q4, primarily due to about $8 million of seasonally higher expenses for stock compensation and payroll taxes. Of course, these line items and others, including incentive comp will vary on based on multiple factors.

Holly, we would like to open up the call for questions now.

(Operator Instructions)

Ken Worthington, JPMorgan.

First on distribution costs. If we look at distribution costs, in the fourth quarter of this year, compared to the fourth quarter of last year, they've jumped almost 25% and essentially all of that is coming from money market funds.

But if you look at money market funds, the assets grew just 10%. So what's going on? And to what extent is there any sort of offset to these higher costs on the revenue side?

Ken, it's Ray. We had last quarter, a significant amount of assets came into share class where there are higher than average distribution expenses. And so that jumped by about $10 million last quarter in terms of both the distribution revenue and the related distribution expense. I think that's the majority of the attribution for the delta that you're speaking about.

As you know, we have a lot of different share classes with different distribution fee arrangements and so those kind of changes in mix can impact that. As far as offsets, we don't really think of it that way. We -- that's essentially -- the distribution expense comes with distributing through the intermediaries and we manage that the best we can, but there's no real direct way to offset that.

Got it. And then this year, I believe there's five higher-profile PMs that are scheduled to retire. Can you talk about the transition of those PMs to the new leadership of those funds? And any impact you think it will have with your clients?

Yes, Ken. This is Chris. The succession planning that's going on here, has gone on for many, many years. And in every one of those cases, its on average, it's like you take someone who's been here 35 years to 40 years and replacing them with someone who's been here from 25 years to 30 years. And so we don't look for any disruption in the investment management techniques performance.

And we look for some great enthusiasm and opportunities by the new people coming in who get to call the shots now, whereas for a quarter of a century, they've been learning and how it's done. And this is part of the methodology that we have usually bring in people at the lower levels, train them, and it's part of the guts of our franchise for all seasons for keeping this ship super stage moving along in choppy waters.

Bill Katz, TD Cowen.

Just want to, sort of, refocus on the tokenization opportunity. Just, sort of, wondering if you could talk a little bit about what you're hearing from end demand from clients, if you can maybe break down your commentary between more of the institutional kind of investor versus the retail?

And what milestones would you anticipate either regulatory or legislative that we need to see to, sort of, see a faster uptake in the opportunity set?

So I will comment a little bit, Bill, and then Debbie will comment. So on the end demand from clients, it's not as robust as what you might expect from all the press, media and, in fact, all the work we're doing on it. It's getting ready for tomorrow. And we expect this will be the way things go down the road. But the end clients are perfectly sanguine about using the current products in the current way.

And when you ask about milestones, you've got to get lots of money moving into these things in addition to lots of work being done on how they're structured. Almost every week, there's another new structure and a new idea that is very intriguing. And this is what we're keeping our eyes on. And basically, we're working on all of them and a milestone would be when you start to see real money moving into them.

There could also be some regulatory things, and that's really hard to predict because you don't know what structures you're going to obtain. And this is true both in the U.S. and globally. Maybe Debbie can talk to this, but when I was in Singapore and Hong Kong last year for the same event Debbie was, both of those and government entities, Singapore and Hong Kong, we're most anxious to be the tokenized headquarters for trading money funds, and they were well down the road of organizing their government entities.

But how much is in it and how much money is actually flowing there is another question.

Debbie?

Thanks, Chris. So what we've identified in the U.S. so far from a use case perspective is generally on a distribution basis, diversification, and on a use case basis for collateral purposes and for margining purposes, both of which like the instantaneous settlement that is provided from a tokenized product. And ultimately, the ability to, sort of, impact flows pretty quickly on a real-time settlement basis. In the context of the geographic diversification that Chris was talking about.

Certainly, when we look at what is more an institutional use case that we've seen so far in the U.S. when we are in other parts of the world from our checks partnership to the work that we've been doing from an Asian perspective, so much, much more interest from what I'd call sort of the family, the multifamily offices. And so that's where the retail side of it comes in.

Our product outlook has many additional use cases, many additional benefits that accrue to the end user. So we feel like this is just the tip of the iceberg, and that it will serve more purposes and more ultimate end user clients.

It's just, as Chris said, a lot of, sort of, work and dissection of markets and underlying, sort of, strengths and everything that needs to be put into place to keep these, sort of, high-quality products that we have in money market funds, liquid and serving the purpose of all the end users.

Just as a follow-up. MDT has done very well for you for quite a while now and it seems like it's off to a good start into the new year as well. So maybe just a two part question. What is the underlying driver of the demand? And then secondly, are there any capacity constraints as you look across that portfolio?

Well, let's deal with the second one first. Capacity implies a number, and we don't look at it exactly like that. It's a very complex question as to how to look at what you've raised. And as we've done in other cases, this is rigorously analyzed by PM, CIOs and everybody on the basis that how can we continue to offer the product with the kind of alpha that it's being offered in the environment. We do not see any so-called capacity constraints at this time or in the foreseeable future.

Now on the other question about the demand, the demand is across the board. So far, our -- and live and sales force has been able to consult with a lot of people showing how the MDT various offerings and their pure style box discipline has caught on very well in the intermediary space.

And as you've heard in my comments about big institutions also coming into this, it's also on the big separate accounts as well and so the demand, in short terms, is both retail and institutional.

Yes, Bill, if you look at the Q4 net sales into MDT strategies, about two thirds of it would be into the mutual funds and the newer ETFs. And the rest of it is institutional and separately smaller SMAs, separately managed accounts. So weighted toward retail, but even within that fund mix, there would be institutional applications.

Patrick Davitt, Autonomous Research.

First, maybe one for Debbie. We're much further along in the Fed cutting cycle now. So curious to get your updated thoughts on what you're seeing in terms of the potential rotation from institutions into money funds? And to what extent you think there's still a lot of room to run on that theme with the curve potentially steepening here this year?

Sure. No problem, Patrick. Our outlook from an official perspective, from a firm standpoint, for 2026 is one rate cut by 25 basis points, taking the rate of 3.25% to 3.5% from a Fed funds target range. We feel like if we're wrong, we're wrong by having maybe two cuts instead of zero, so wrong on that side of the equation.

But in either case, you're looking at an end, sort of, terminal rate that is north of 3% with positively slow curve that probably allows you to generate something in the order of 20 basis points to 30 basis points on a government product basis above where the bottom of that range is so middle 3%-type of numbers for money market funds.

And when you look at the low-risk products, the high quality, the instantaneous liquidity and settlement that you get, especially if you're looking at the tokenized product aspect of it, you find that as still very compelling from a use case perspective by both institutions whose general other comparison outside of the fund industry is direct market security.

So repo, treasury bills, commercial paper, where the positive [research] yield curve should give the fund advantage. And then on the retail side of the equation, if you've got a Fed cutting cycle, or even a pause cycle, generally speaking, their other common type of product to use for liquidity purposes is bank deposits. And those are well below where a fund can generate a yield, especially the three plus percent environment.

So we saw a lot of retail growth driving the 2024 double-digit gains in the market from an AUM standpoint. The institutional side kicked in, in 2025 to help generate those double-digit gains again. Maybe we only get single-digit gains from an AUM standpoint in 2026, but our expectation is it's still pretty positive from an environment standpoint.

Helpful. And then on the expense side, it looks like you're seeing a lot of positive operating leverage on the compensation ratio, in particular, which I assume is a function of the large scale of money fund inflows. Kind of frame how you think that can track in '26? Do you think that operating leverage can continue, assuming flat markets?

Yes, Patrick, it's Tom. Yes, we had the comp numbers, as I mentioned in my remarks, because of the seasonally high stuff that happens in Q1, we certainly will have increase in -- expect an increase in the comp number.

And if we get the same kind of flows that we had in '25, if we get that in '26 in -- as we're trending in the MDT and in the money market world, comp will go up. But I think it won't be as fast and we will get positive leverage on it like you started out with.

Dan Fannon, Jefferies.

Given the success of MDT, I was hoping you could talk about the product development, or proliferation as you think about new products into this year and beyond?

As you see on the footprint of what we've done on MDT, the first thing really is to expand the buckets or the wrappers that it's used for. They began as an SMA shop overwhelmingly and had a few hundred million back in the acquisition of funds. So it grew from just SMAs, now it has a lot of funds. So then you saw us go into this the ETF, than the CIT format. And then we brought out the market neutral, which is as a fund and now as an ETF.

So you will continue to see us, seeing if there's more buckets or wrappers that we can use for MDT. And -- one, I did mention in the remarks is offering it where overseas through a usage format. And the usage is basically Irish registered for available for sale U.K., Europe and other places. And that is one where we raised $500 million over a short year last year.

So it's new wrappers it's new markets, and it's repeat the sounding joy of their investment expertise.

Understood. And then, Tom, just as a follow-up in terms of what you mentioned for the first quarter. So we've got from fewer days,10.2 lower of management fees. And then given the real estate fees in the fourth quarter and other revenues, we should assume that's obviously also not recurring kind of going into the '26?

Yes. I call those unusual items and because they really recur -- we may get another couple of million in Q1. It's -- we're still working on that. But to that level, I don't see that happening.

Brian Bedell, /Deutsche Bank.

Maybe two questions, both on money markets. Maybe just the first, Debbie, can you remind us just the seasonality trends that we might see for flows in money market funds in the first half? I think we started with outflows early A little bit of [offers] in January, if I'm not mistaken. And then, of course, you've got like tax season coming up.

So maybe if you can just remind us of what you're expecting for the cadence of money fund flows for the first half of this year, just on a seasonal basis?

Sure. On a seasonal basis, we generally, January is usually our worst month of the year from an inflow basis and it's usually actually an outflow. First quarter [set] similarly, the corporate tax date in March and then individual tax rate flowing into the second quarter in April are generally big hits from a money fund AUM standpoint.

And then the second half of the year is generally where the growth really picks up with December, generally, again, being the highest quarter from a, sort of, a year-end, window dressing to some degree that is then reversed in January. What's interesting from a fund standpoint versus an other type of product standpoint?

So generally, our separate accounts are state pools are, in fact gathering money starting first quarter and going strong into the third quarter -- or the second -- the beginning of the third quarter, and then they have large outflows that occur in -- later in the third quarter and at the end of fourth quarter.

So the two kind of nicely set offset each other from our own AUM standpoint, which is a good thing. But from a strictly money market fund standpoint, it gets better as the year goes on.

Yes. Perfect. And then the second one, just a follow-up on the tokenization of money market fund. Thanks for all the comments on that. A bit of a multipart question here.

But can you just describe in a little more detail the collaboration with Bank of New York and Goldman in terms of that mirroring process of tokenized money funds? How that's different from how you're talking with your other potential clients on tokenization opportunities.

And then also on being a stable coin reserve manager, as opposed to a tokenized money fund manager, how do you see the opportunity for that versus tokenized funds? And I guess, over the long term, do you see the tokenization opportunity as incrementally additive to your money fund franchise? or might for the industry that cannibalize existing money market funds?

That sounded like three questions and a comment at the end. We will do our best to try and catalog them. For the comment at the end, if you look at our charts, if you get them on Page 14, you will see that we have over decades, upon decades, upon decades had higher highs and higher lows. And we would look at this effort, along with other efforts like zero interest rates.

And like all of the competition that has come in over the decades, that we will continue to have higher highs and higher lows, because the fundamental business is people have cash or have money that they want daily liquidity at par.

And so that is the engine. Now on the first of your questions, which was BNY and Goldman. I'm reluctant to get too close into the details of it, but I will say this. The way that is structured is you have a regular good old-fashioned money fund and BNY Mellon basically looks at that money fund as the TA and works with Goldman with their platform, and buys and create tokens and they treat the money fund just like a good, old-fashioned, regular money market funds.

So from our point of view, it's tokenizing the process. The client sees a tokenized vehicle. But from the point of view of the fund, it's almost like business as usual. And I'll let Debbie comment on some of the others because maybe she remembers them.

Well, what I would say in addition to what Chris just mentioned with the BNY Goldman collaboration is, BNY is not only keeping its traditional books and letters on its -- books and records on a standardized ledger, but they are dual processing on the digital ledger.

So it's a way of tip toeing in the market and having both belts and suspenders attached to give underlying clients comfort that this process is, in fact, airtight and working [virtually] should be. So that's kind of the unique aspect of the BNY/Goldman collaboration at this point.

At some point, there will be -- the belt or the suspender will go away and it would just be the digital ledger where the books and records are maintained. But for this particular product, it's being doubly addressed.

The part that you asked about stable coins versus a tokenized money market fund, because of the GENIUS Act and some of the other regulatory changes that occurred, or elaborations that occurred in 2025, we have learned that stable coins have to be backed 100% by some form of what is a declined type of collateral. That's where our GENIUS Act funds come into play.

And what stable coins are not allowed to do from a competition standpoint with those funds is pay an interest rate or pay a dividend. And so we -- the stable coins for us represent an additional client base for which the tokenized money market funds that are that are managed under the rules and regs of the GENIUS Act can be the collateral that backs those stable coins to get the 100%.

Okay. Great. Any -- just any sense of the number of entities that you're talking with now on the tokenization effort? I don't know if you can disclose that or not?

(inaudible) on that one.

Your next question for today is a follow-up question from Patrick Davitt.

I just wanted to clarify, the AUM numbers you gave are all as of January 23? Is that correct?

The AUM numbers are actually as of the 28. The sales numbers that we gave were as of the 23.

Okay. And then -- so I guess that would suggest then that the money funds have net inflows through the 28, but against the fund that is showing like $9 billion of outflows. So I guess fair to assume that there's a big amount of separate account inflow?

Yes, that's correct. And it really is bucking the trend. It did it last year, it did it this year. And I think a lot of that has been influenced because of where the Fed has been and where we think they will be in 2026.

And then one quick one. The $10.2 million fee decline, that's just management fees, not including the real estate?

Yes. That's management fees, advisory fees and distribution fees, essentially the fees that are daily based.

And you -- go ahead.

I was going to say, Patrick, it may be worthwhile for Saker to comment further on the $8.2 million where we got the development fees. And Chris made a comment in his remarks about we won a new project over there. And it may be worthwhile for Saker to make a comment on that.

Thank you. So the fees are by a development company, MEPC in the U.K. MEPC in our view, is the leader in the things we call place development. We basically developed four clients who invest with us, states, manage the buildings, rent them out and when the time is right, sell them for them. And we've been -- we've got a successful long-term track record of that throughout the United Kingdom.

The two states that we are talking about in the Northern England, one is called Noma and the other one is called Wellington place. One is in Manchester, the other one is in Leeds. One is 500,000 square feet, others, 1.4 million. Now the scale of MEPC is comes in two sides.

The first one is the preparation for the development, and that's with close cooperation with the local government and the community. That's partly why we have such strong development potential and why we managed to let it. And the second one is the way we develop them in a way that makes them attractive spaces. So far, these have been office-based spaces, and they've been great, seen great success. Particularly with the move of companies who move the offices, including some major U.S.

companies from London up north and the government actually, which has done the same. In these two developments, two of our very large clients, institutional clients wanted to pause putting more money into these same developments.

So because we've incurred some costs in getting the development of particular building. So the state still exists, but buildings within them because we've expanded so much effort getting everything ready for the phase of actually building, they paid us the fees.

But we still have the option to carry on our clients as far as they're concerned, have an option to come back and ask for these to be participants in this, or we can find other clients who want to be participants in it because it's ready to go, which is an important phase, and that's half the difficulty of developing. At the same time, as Chris mentioned, we won a very major bid to do a development project also in the North of England. This one with much more mix, but towards living in fact. So it's not offices. It's much more mixed [to] living.

And that's very exciting because that's part of the pivotal living space and developing living space. And again, there's a huge demand in that part of the world and the same skills apply, the ability of every [PCR] developer to work with the local government, the ability to get the permits, and then they will develop something which is actually attractive to the market, both for people to come into it and of course, for the investors to get very strong returns outfit. Thank you.

I just want to go back to the $10 million. I just want to make sure I heard what you said exactly correctly. It's based on average AUM in the fourth quarter?

Yes.

End of period is 3% higher? It's something lower than that if we use end up period?

Yes, I think that's correct.

John Dunn, Evercore ISI

I wanted to ask, just given where we are in the cycle, kind of your appetite, and also the potential outlook for money market roll-ups?

The potential for money market roll-ups is almost entirely a function of the owner operator of those other money funds. Over time, with increased regulation and increased (inaudible) of this business, it's -- we have shaken out a lot of those money fund rollouts. Where they occur is when people are deciding to move a family of funds and they happen to have some money markets in them than those are opportunities.

But as we've said before, if you're running even a smaller-sized money fund operation and you control the right to redeem then you're not as worried about what you need to do for the future even if they aren't as economic as they may otherwise be.

We have also seen it occur where in some of our bank trust clients where, over the years, maybe a family of funds, or a family of money funds in the trust world doesn't make a lot of sense even though they do control the right to redeem. And then they have new leadership and then all of a sudden, we're back being looked at as a warm and loving home. In many of these deals we started in the '80s and '90s and sometimes it takes them that long to mature.

But there's no direct pipeline. You can't just put (inaudible) on it, but periodically, they show up.

Got it. And then just maybe on the outlook for the strategic value dividend fund, where do you think it goes from here from a flow perspective?

Well, the flows in all -- if you add the whole thing of strategic value dividend, they are positive flows, even though the fund is down. And notice that the ETF is up. And what you want to learn from that is that people are actually understanding exactly what that fund is, it's a dividend-oriented fund, with a four and four approach. You get 4% dividend growth at 4% dividend, and they've been doing it for 25 years.

And this is a good situation. So even though its Morningstar category rating is one side or the other, it is a very good, steady, long-term product. We have -- I think we're up to $36 billion in an overall and we expect it to continue to grow.

And it's off to a very solid start so far in January through yesterday, it's up about 5.3%.

We have reached the end of the question-and-answer session, and I will now turn the call over to Ray for closing remarks.

Well, that concludes our call, and we thank you for joining us today.

This concludes today's conference, and you may disconnect your phone lines at this time. Thank you for your participation.