Greetings and welcome to the Federated Investors first quarter 2019 analyst call and webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ray Hanley, President of Federated Investors Management Company. Thank you. You may begin.
Good morning and welcome. Leading our call today will be Chris Donahue, Federated CEO and President, Tom Donahue, Chief Financial Officer. Joining us for the Q&A are Saker Nusseibeh, the CEO of Hermes, and Debbie Cunningham, the Chief Investment Officer for our money market investment operation. During today's call, we may make forward-looking statements, and we want to note that Federated's 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. Federated assumes no duty to update any of these forward-looking statements. Chris?
Thank you and good morning. I will briefly review Federated's business performance and Tom will comment on our financial results. Looking first at equities. We closed the first quarter with $80.2 billion of assets, up from $72.5 billion at the end of 2018. Market-related gains offset net redemptions, which decreased from the prior quarter. Equity mutual fund flows were positive by about $400 million, and equity SMA net redemptions decreased to $228 million, which is down from $884 million in the fourth quarter. Higher gross sales and lower redemptions in the Strategic Value Dividend strategy factored into the improvement in the equity fund and SMA results. Equity institutional accounts had about $970 million in net redemptions in Q1, with about $750 million due to BTPS making substantially all of their expected 2019 drawdowns from various Hermes accounts.
We had 16 equity funds with positive net sales in the first quarter, led by Kaufmann Small Cap, Hermes Global Emerging Markets Fund, and several MDT funds. Additional Hermes equity funds that achieved positive net sales in the first quarter included Global Emerging Markets SMID Fund, Global Equity ESG Fund, and the Impact Opportunities Fund. Using Morningstar data for the trailing three years at the end of the year, about one-third of our equity funds were in the top quartile, and about two-thirds were in the top half. Five-star equity funds at the end of the first quarter included MDT Small Cap Core, Mid Cap Growth, and All Cap Core, the Kaufmann Small Cap, and Hermes Global Emerging Markets. We had 11 four-star equity funds, including various MDT, Kaufmann, and Hermes strategies.
Looking at the Strategic Value Dividend strategy, its objective is to provide a high and growing dividends income stream from high-quality companies. The domestic fund's 12-month distribution yield of 3.77% ranked in the first percentile of its Morningstar category at the end of the first quarter. Domestic Strategic Value Dividend strategy had combined mutual fund and SMA outflows of $450 million in Q1, down from $1.5 billion in Q4. Looking at early Q2 2019 results, combined fund and SMA net redemptions for this strategy were about $57 million through the first three weeks of April. Overall, combined equity fund and SMA net sales for the first three weeks of April were positive at about $62 million. Now turning to fixed income.
Assets increased by about $1 billion in Q1 to $64 billion, due mainly to market-related gains of just about $2 billion, partially offset by nearly $1 billion of net redemptions. On the fund side, net inflows of about $275 million in Total Return Bond and Trade Finance combined were offset by outflows of about $535 million in high yield and Multi-Strategy Credit, also combined. These outflows included about $200 million from the planned redemptions of BTPS seed investments in certain Hermes funds. For fixed income separate accounts, net outflow was due largely to the net redemption of about $375 million related to a large client's usage of cash. Our fixed income business has a variety of strategies that are performing well.
At quarter end, using Morningstar data for three years, we had eight funds, 25% in the top quartile, including Total Return Bond and Hermes Multi-Strategy Credit. 23 funds, almost 75%, in the top half. Fixed income fund and SMA net sales are positive early in Q2 at about $214 million. In the alternatives category, assets at quarter end were $17.9 billion, down from $18.3 billion at year-end. This decrease, however, was due to the success of various Hermes private market strategies that have been reflected as distributions of gains. Now looking at money markets. Total money market assets increased approximately $16 billion in Q1, with funds up about $6 billion and separate accounts up about $10 billion. We saw positive money market fund flows from a variety of institutional and intermediary clients in Q1 as money market strategies continue to offer yields well in excess of average deposit rates.
Prime money fund assets increased nearly $8 billion or 18% in Q1 from about $45 billion in Q4 to almost $53 billion here in Q1. Our money market mutual fund market share, including sub-advised funds at the end of the quarter, was up slightly, just below 8%. Taking a look at our most recent available asset totals, Federated, as of the 24th, and really Hermes as of the 17th, managed assets were approximately $490 billion, including $321 billion in money markets, $82 billion in equities, $65 billion in fixed income, $18 billion in alternative, $4 billion in multi-asset. Money market mutual fund assets were $215 billion. Federated and Hermes RFP and related activity levels continue to be solid and diversified, with interest in NBT, Kaufmann, and Global Emerging Markets for equities, and multi-sector and short duration for fixed income.
We began the quarter with about $1.9 billion in net institutional mandates yet to fund, with about $800 million in fixed income and $1 billion in equities. We expect these wins to fund over 2019, with about $1.7 billion into separate accounts and $200 million into funds. Turning to the international side, we announced this week the launch of the next two Federated Hermes funds, the Federated Hermes Global Equity Fund and the Federated Hermes Global Small Cap Fund. Each fund follows the investment strategy of a similar Hermes fund, which combined have grown to nearly $4 billion. We continue to move forward in registering additional U.S. mutual funds to offer additional Hermes strategies to our customers. We are also actively presenting Hermes strategies with our institutional clients and are working with Hermes to develop opportunities for them to offer Federated strategies to their clients.
We are continuing with plans for U.S. expansion in 2019 of the Hermes EOS, Equity Ownership Services business that features leading ESG stewardship and engagement services to institutional asset owners and pension funds. Hermes EOS assets under administration reached $587 billion at the end of Q1, up from just under $500 billion at year-end. Hermes managed assets at year-end were approximately $44.3 billion, up from $42.6 billion at year-end, with market gains offsetting net redemptions. Third-party positive net sales of $263 million were offset by BTPS's net redemptions of about $1.3 billion. Hermes built on the successful Q4 launch of the Global Emerging Markets SMId strategy with more than $50 million of new net sales to bring that fund to over $100 million in assets.
Hermes continues to progress in the development and growth of a world-class multi-asset credit platform featuring the Hermes Unconstrained Credit Fund and the Hermes European Direct Lending Fund, both launched during 2018. We also continue our business development in the Asia Pac region with a focus on opportunities in Greater China, Korea, Japan, and are actively working to establish strategic relationships with select financial institutions to add regional distribution of Federated's investment strategies. This effort complements Federated's European, U.K., and Canadian operations. Tom?
Thank you, Chris. Total revenue was down slightly from the prior quarter, due mainly to fewer days, which reduced revenue by $7.6 million a $2.7 million decrease in performance fees, which were $3.1 million in Q1 compared to $5.8 million in Q4. These decreases were partially offset by $10.8 million in higher revenue from higher average money market assets. Revenue was up about $43 million compared to Q1 of last year, due mainly to the consolidation of Hermes revenue of $48.3 million and higher money market revenue of $16 million. These revenue increases were partially offset by lower equity-related revenue of $12.4 million and lower fixed income-related revenue of $3.3 million.
The increase in operating expenses from the prior quarter of $16.9 million was mainly due to higher incentive compensation and seasonally higher payroll taxes, seasonal bonus restricted stock expense, and to higher distribution expense from higher average money market fund assets. The increase from Q1 2018 of approximately $52 million was due mainly to the consolidation of Hermes expense of $51.3 million, including the amortization of intangibles from the deal. As we've said before, we expect the Hermes deal-related amortization to be about $11 million in 2019. At the end of Q1, cash and investments were $162 million, of which about $124 million was available to us. Michelle, that concludes our prepared remarks, and we would like to open the call up for questions now.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from the line of Ken Worthington with JP Morgan. Please proceed with your question.
Hi. Good morning. Thanks for taking my questions. Maybe first, Federated's money market fund business lost market share pretty consistently in the decade that followed the financial crisis. Market share gains have actually been pronounced more recently. Can you talk about positioning of your funds and maybe what you attribute this transition from the more consistent market share losses to the more consistent market share gains that we've seen more recently?
Ken, this is Debbie. I think there was a massive amount of consolidation that occurred in the money market space after reform took place in 2016. I think that to some degree is part of it. We continue to offer a very full slate of money market funds that includes every type of government money market fund. That's the largest category. It includes all types of both institutional as well as retail prime funds, which have been on a percentage growth basis, the largest growers over the course of the last nine months. A full slate of both federally tax-exempt as well as state tax-exempt municipal products.
As interest rates continue to climb, but as the differentials between those various sectors sort of ebb and flow, we continue to offer a very diversified group of products, which I think is not necessarily the case with many of our competitors at this point.
There are some additional factors, Ken. What Debbie's talking about is a commitment over decades that gets then reflected when you see the deposit numbers running up all during that time frame, then the yields on our funds being substantially higher than deposits today. If you keep your commitment when it's raining dollars, you are a beneficiary. Another factor is that it is important to keep the funds competitive. Back in the old days, it was just keep the funds at one basis point or something above zero. Now we've been very good in both the investment performance and in how we manage the business to keep those yields on a very competitive basis.
Okay. Maybe just to press a little more, Prime would seem to be part of the share loss versus share gain. Do you agree there? Then maybe looking at your distribution channels, is there a channel that seems to be maybe outperforming for you in the money market fund area that we should attribute maybe more of the market share gains to versus the losses in the past?
Prime is a little different because Prime required people to look through the new rules on the NAVs and things like that. People are increasingly becoming more sanguine about going into these funds with four nines or four zeroes behind the decimal point. That is a different overriding factor. The reason people are in money funds is because they want daily liquidity at par, and they had to be absolutely certain that they would get that in the Prime area.
Just to give you a couple examples along those lines, our Prime products have grown both with regard to the retail distribution side and the institutional distribution side. Our largest retail prime product at its peak pre-reform was about $30 billion in assets, went down to $2 billion, now stands at $22 billion. It substantially has grown, and it has not come out of our government funds. It's come basically from what Chris was saying, the retail deposit bases. From an institutional perspective, our largest product historically hit close to $50 billion at its peak, went down to $800 million. Yes, less than a billion, $800 million post-reform, and today stands just under $20 billion. The strength and diversification of the growth in that prime product has been pretty substantial. From a total distribution channel perspective, it spans the gamut.
It's universities, it's broker-dealers, it's bank distributions, it's various types of large private offices, it's governmental entities, it's corporations. It spans the gamut, and that's the best kind of growth you can have because it continues to add to the diversification of the client base.
Okay. Thank you. Just on compensation, I apologize if I missed this. Can you help us with an outlook here? The swing between Q4 and Q1 was substantial, as I think most of us expected it to be. How should we look at the rest of the year? How good is that Q1 number, compensation number, as the run rate for the coming quarters?
Ken, great question. If you remember last quarter, I kind of put up my hands in surrender on trying to predict the future. I'm still surrendering on predicting the future. However, I will answer your questions because we have to put a number in Q1 that we think is going to be the expense for the year. This is our best estimate right now on it. We're also telling you there are some seasonal things in there, the payroll taxes, and as I mentioned, the bonus restricted stock expense. We had about half a million dollars of under-accrued that's in Q1 that wasn't in Q4, obviously. The 401(k) is a little heavier weighted to Q1. I wouldn't change the number except for the seasonal items.
Great. Thank you very much.
Thank you. Our next question comes from the line of Michael Carrier with Bank of America Merrill Lynch. Please proceed with your question.
Hi, thanks, and good morning for taking the questions. Giving a little more time with Hermes. Can you provide an update on where you're seeing some of the attractive distribution opportunities? Then just on the pension redemptions, and even the performance fees, I don't know if you guys can provide any more color on timing. Meaning, are the pension outflows typically going to be in 1Q, or was this more unusual this year? Then same thing for the performance fees. Are there any quarters that tend to generate more performance fees versus less?
Let's try to do these questions in reverse. I'll let Saker handle the question of BTPS and their redemptions. Then I will come back with the other opportunities, and Saker can add in other opportunity ideas as well. Saker?
Thank you. As you know, we have a very strong relationship with BTPS, both as a minority owner and a large client of ours. At the time of the deal, we had assumed that some of the growth assets, certainly the equity assets, would over time redeem at a given and pre-agreed flight path. The reason for that, it's a mature defined benefit DB fund. As time passes by, they just put more and more of the money in matching assets. Roughly speaking, we've got about $13 billion of their assets, with about $9 billion in private market assets and about $4 billion in global separate assets, and these are the ones that come down over time. This year, it so happened that pretty much the amount of redemption that we were expecting throughout this year happened in the first quarter. Is this normal?
It depends on what their use of cash is. You can't say that therefore going forward, it will only happen in the first quarter and not on a quarterly basis. What we are more comfortable with is that this is the level that we agreed at the time of the deal, that continues to be on track.
In terms of your question on the opportunities we see, we had very good success with our initial roadshows to American clients back at the end of last year. That set the stage for launching the half a dozen or so funds that are either in registration or actually out on the field that I talked about in my remarks, that we made a press release earlier this week on. What this involves is we think that all of those funds, each of those funds have great opportunity for a retail presence. On the institutional side, both as a follow-up to the roadshow and responding to various RFPs, the institutional sales are going well. You're not going to see anything immediately. That's a little longer sales cycle. We are quite optimistic about what we can do there.
It's across the board on several of Hermes' mandates.
Down the road, we would see opportunities for us to bring the alternatives infrastructure and real estate ideas to the U.S., but that's a down the road deal. The other thing that we would talk about here would be the EOS, the Equity Ownership Services, which we plan to start and develop here in the U.S. under Hermes auspices to continue the engagement success that they've had and to offer this service to asset owners in the U.S. Another picture of the opportunities, though, has to be what I've come to term a reverse transformational merger, where we are most anxious to move from doing the way we've done business, which is analyzing governance and social factors, environmental factors, to becoming what would be labeled as aware of these to becoming integrated.
The way that happens is to allow the data from Hermes on both their investment analysis side and on the EOS side to flow through to the investment platforms of our investment professionals. That's another great opportunity that we see in how a lot of our clients in our funds can benefit from an entire operation that is integrated and using those factors to improve performance.
Mike, it's Ray. Just to reiterate some of the points that Saker made and that we made at other points during the call, the redemptions that BTPS had in Q1 included some seed money and distributions from private markets. Obviously, distributions from private markets will be ongoing when and as they come. The seed money substantially has been drawn out, so that would not repeat. As Saker mentioned, we're really talking about the roughly $4 billion in equity separate accounts being on a multi-year redemption pattern. Mike, your last question on timing of performance fees. Certainly there were Q1 numbers and Q4 numbers, and I can't really tie that down. Saker, you want to talk about your expectation of performance fees, have at it.
I'm afraid I can't tie it down either. I mean, we get performance fees from a variety of private markets all the way through from property to private equity, it depends on when the assets are sold and when the hurdles are met. It cannot be predicted. There is, generally speaking, an amount that we'd expect on a yearly basis, but again, the distribution depends on how it comes through. I'm afraid I can't be much help there. I will go back on the previous question, though. I know that in previous discussions that you've had with Federated, we've always talked about AUM. In Hermes, we tend to talk about revenue because, of course, as we move our asset base around, it is logical to think that essentially our net revenues can increase. That is quite substantial.
When we look at our flows coming through, one of the things that we look for is, particularly in third-party flows, is how much net new revenue have we added on an annualized basis to the year. That is sort of the measure of future success, if you like. A redemption of assets is not always negative because in the long term, it might allow you to have higher fees.
Right. Okay. No, that's helpful color. Tom, just real quick on the comp, just for clarification, I know you don't want to predict it at this point, but do you have just the amount that was just the seasonal items? That would just be helpful so we can try to figure out the run rate.
Yeah. The payroll tax and 401 (k) items were about $3.3 million. The bonus restricted stock expense was about $1.4 million.
Okay. Thanks a lot.
Thank you. Our next question comes from the line of Bill Katz with Citi. Please proceed with your question.
Okay. Thank you very much for taking the questions. Just coming back to the pipeline of new mandates won but not yet funded. It seems like it's heavily skewed toward the more separate count institutional side. Can you give us a sense of how the fee rates on those product wins compare to legacy business?
Bill, it's Ray. I would expect them to be comparable, but I don't have a summary of that to refer to. That's something we could take a look at and follow up on.
Okay. Just my follow-up question then would be just on capital management. It does look like repurchase slowed for the second quarter in a row or relatively low compared to maybe prior run rates. I know there's been a lot going on in terms of funding the Hermes platform and debt. Can you sort of give us a sense of as you look ahead, how you sort of see free cash flow usage priorities?
Yeah. Right. There is a lot going on. Chris mentioned a couple products that we've seeded. We expect more seeding in the future. We did use up a pretty significant amount of cash in the Hermes deal, so we've been building that back up. We of course continue our dividend. Again, we were light on repurchases this quarter. We run our models on repurchases, and the price is going up, and we make our decisions daily on what we're going to do there. Also, if you remember our history, when we've done deals and
Had M&A going on before and after. We have not purchased as many shares in the past. Would that continue in the future? Probably.
Okay. Thank you.
Thank you. Our next question comes from the line of Daniel Fannon with Jefferies. Please proceed with your question.
Thanks. Just curious about the outlook for the growth in the alternatives kind of private market business. Is that something where we should see larger kind of fundraising cycles? Would this be more piecemeal in terms of how that's going to grow?
Saker, I'll let you address that from the European side, because that is overwhelmingly a U.K. European effort at this point. As I mentioned in my remarks, bringing it to the U.S. is a longer-term deal. Saker?
Yeah. Thank you. Again, I'm afraid the answer is none, since that it depends which part of the private markets we're talking about. If you're talking about something like our private equity, typically speaking, that follows a cycle of raising assets for funds, which are then closed and put to work, that goes into a multi-year cycle, that tends to work very well, we've had very strong success there. When it comes to property, it tends to be much more project-by-project related, where we have a group of clients that we go to, and that is generally seen as a much more substantial commitment for a much longer period of time. That tends to be much more lumpy, just by the nature of the investment within the projects.
Here we're talking about long-term development projects as opposed to simply managing assets over a five-year horizon. We're talking about a much longer-term horizon than that. In general, we go at funding on a normalized basis, on a continuing basis, but by definition, some of it, particularly the very large property ones, can be lumpy, but the others are not. I hope that sort of helps answer your question.
Sure. Just to follow up. When was the last private equity fund you raised, and when do you think you might be coming to market again with another one?
We've just closed the last one we've raised very successfully, we have just launched the next one, we will be launching the next one as we speak, as we go forward.
Okay. Just to follow up on compensation, maybe with Hermes versus legacy versus Federated and thinking about the businesses. We've talked about revenue versus asset growth. I guess, is there different compensation plans within the two entities, versus how we might have thought about Federated historically versus now as we think about Hermes combined? Are there different incentives in people paid off revenues versus profitability versus kind of various targets? Just curious about, as we think about performance fees and different metrics we have today, then looking at legacy Federated, how the overall compensation pool might differ now.
One has to be careful here because we are, of course, part of the same group and therefore follow the same theory, if you like. However, English law is different. Specifically within English law, you are not allowed to link compensation to sales, as an example. You can link it to % of revenue if you want to. We don't, but you can. You cannot incentivize people on sales. In general, the way that we do it at Hermes is we link it to the overall profitability of the entirety of the firm, and that's the profitability of the entirety of the firm. We link it also to our revenue growth and to our long-term performance. It's discretionary, which is a standard within the U.K. Both the pot itself is discretionary and then the allocation of the pot is discretionary.
You would expect us, because we're such an alpha house in our equity stage, and we're so high active share, meaning we're very differentiated from the benchmark, to put a large part of that discretion for the fund managers, depending on long-term risk-adjusted returns after fees, which we do. Just looking at our public record will give you an idea of how the compensation is going. By long-term, I mean five years. For our business development and for our operational platforms, you'd expect us to link it to the growth of our business. I hope, again, that gives you a color of how we do it. We also put a lot of emphasis on behaviors, particularly within Hermes.
I mean, we are a very specific firm, behavior is ranked very highly for us because we think it leads to looking after the client first and foremost, more than other firms who compete with us here in the U.K. market. We think it leads to better cooperation between the teams, we think it leads to better cooperation between the business development and the teams on operations. Behaviors are a large part of also the compensation requirement. It's all discretionary.
If you're interested in the contrast, which I gathered from your question you were, remember a couple of things at the beginning. The reason this transaction occurred successfully was because of a cultural connection, successful connection between Federated and Hermes. That however you do it, the way Saker just described or the way I'm going to describe we do a lot of our compensation here, it is based on performance. Performance in the marketplace, performance in the office, et cetera. One of the strengths of how we did this deal was to allow Hermes to flourish the way they had been flourishing before, so that we are not imposing Federated's method or the American method of compensation onto their business.
On the other hand, if you talk to the head of HR here and the head of HR over there, you'll find a very similar approach to all of these different things. Just to reflect what we've said on here before about how we do the compensation, the investment professionals are compensated primarily on the three-year rolling performance of their mandates. The salespeople are compensated on the basis of sales and net sales, depending on which department and which area they're working on. The executives are compensated on the basis of the overall performance of the entire enterprise. That will shortcut a lot of different things, but those, you picked up the basics in these last few minutes.
Great. Thank you.
Thank you. Our next question comes from the line of Kenneth Lee with RBC Capital Markets. Please proceed with your question.
Hi. Thanks for taking my question. Just a follow-up on the alternatives and private market AUM. Is there a way you could quantify the distribution of gains and perhaps give us a sense of what the flows were like, excluding the distribution of gains?
If you ask me, can I give you how much we've raised in third party, I will come back to that. We'll certainly get it to you because we publish the data. We can get that to you. Absolutely.
Okay, great. Perhaps just one on the institutional prime money market fund. Sounds like there's good growth there in terms of the clients getting more warmed up to the product. Just wondering how much of that could be due to more corporate customers getting either operational changes to be more accepting of the floating NAVs. Just wondering what that change could be driven by. Thanks.
Sure. I'll take that one, Kenneth. Ultimately, back in 2016, when customers chose to go en masse into government products, I'd say three-quarters of them did not have to. From an operational perspective, maybe they were a little leery about their operations being able to process and accept a four-digit NAV. Maybe they were a little bit concerned about what these gates and fees phenomenon might provide for them or put up as some sort of a hurdle for them. Ultimately, I think many just didn't want to be sort of the test guinea pigs, if you will, for what was an uncertainty on a product change basis for the packaging of the product. They understood the investment ideas, they didn't understand the packaging changes.
That to me is the types of customers that today have reviewed over the course of the last two and a half years what has happened from an NAV movement standpoint, are comfortable with their own systems at this point, and have seen that no one's come anywhere close to putting a fee or a gate on any of these products. It's, again, new cash coming into the market. They're still putting a lot into the government sector, they're taking a portion of that and voting with their feet, if you will, into the prime product. The other difference I think that is the case now versus maybe back in 2016, is that there's a yield differential.
As Chris mentioned, for the longest time when we were in a zero rate environment, it was a maintenance of a zero or one basis point that was kind of sustaining the market. To the extent that we now are in a yield curve environment where there's a 20, 25 basis point differential between government and prime, that also factors into the equation.
Got you. Very helpful. Thank you very much.
Thank you. Our next question comes from the line of Macrae Sykes with Gabelli & Company. Please proceed with your question.
Good morning, everyone.
Good morning.
Just to ask two questions separate. Would it be fair to assume the money fund progress in 1Q was actually better, just given some of the seasonality? If you could comment on that. Secondly, are you looking at the non-transparent ETF structure as a potential vehicle for the future?
On the money funds, you have a good insight there because, frankly, if you talk to our salespeople on that, they would've been happy to just hold serve during the first quarter. The monies were actually up. We withstood the normal amount of tax withdrawals and tax planning that goes on and still had an up quarter. Compared to what we normally see historically, yes, it was better. Do you have additional color on that? Okay. What was your second question on the-
Non-transparent
non-transparent ETF. Okay. The SEC let one operation out of the cage. There are several others that are still being worked on there. Our comments on this particular business is that, when, as, and if we believe that the non-transparent ETF is a viable thing, then we start to look at it for it just as any other package of our underlying mandates. We've said on this call many times that we look at this business a lot, but we remain, as you know, and that's why you're asking the question, active alpha hunters, high active share, as Saker likes to say. The
The index portion of that doesn't interest us a lot. Now, in terms of which products may be able to do this the earliest, we've talked before about perhaps there'd be some MDT mandates or others, but this is at the brainstorming stage here. Don't forget, there are several other methodologies in line at the SEC, which many of the practitioners believe will be coming out soon. There were those who were surprised that one group got out ahead of the others, but we'll see what happens.
Great. Thank you.
Thank you. Our next question is a follow-up from Bill Katz with Citi. Please proceed with your question.
Thank you very much for taking the extra ones. I just want to clarify that the two sizable mandates you called out, just in terms of the full-year impact of BTPS coming out of Hermes, and then on the fixed income side, the $375 or so you suggested was due to some off-index items. Are those both in the separately managed account buckets? I am just trying to verify that. Relative to the flows you gave quarter to date, could you bifurcate that between mutual funds and separately managed accounts?
Bill, on the first part, yes, those were all in separate accounts. On the quarter to date flows, they would be weighted toward mutual funds. Just looking at the numbers, the SMA are slightly positive quarter to date, literally by a couple million dollars, the rest would've been in funds.
Okay, thank you.
Thank you. We have reached the end of our question and answer session. I would like to turn the call back over to management for any closing remarks.
That will conclude our call, and we thank you for joining us today.
Thank you. This concludes today's call conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.