UPDATE 2-Federated Investors Q2 profit falls, cites lower asset

* Federated says revenue down on lower equity assets

* Reports Q2 net income of $53.3 mln vs $58 mln

* CEO Donahue says fee waivers to increase in Q3 (Adds CEO comments, EPS, recasts with more details)

BOSTON, July 23 (Reuters) - Federated Investors Inc (FII.N), the third-largest U.S. money-market fund manager, said quarterly profit fell 8 percent on lower equity assets and fee waivers on certain money-market funds.

The Pittsburgh company said on Thursday that net income fell to $53.3 million, or 52 cents a share, in the second quarter, from $58 million, or 57 cents share, a year earlier. Income from continuing operations was 52 cents in the quarter compared with 54 cents a year ago. Revenue fell to $306.9 million from $310.3 million a year earlier.

Analysts surveyed by Thomson Reuters on average had expected earnings of 51 cents per share and revenue of $313.64 million.

Chief Executive J. Christopher Donahue said in an interview with Reuters that the declines in equity assets were driven by market conditions and that the company had positive flows into its equity products for the first time in many quarters. Although lower equity assets hurt profits in the quarter compared to a year ago, of late the level of equity assets "wasn't an issue," he said.

All money fund managers have been under pressure of late, squeezed by low yields and possible policy changes in Washington. With yields approaching zero, Federated and other companies have been waiving fees so it doesn't cost investors money to stay in their funds.

At Federated, waivers totaled $17 million in the quarter. Donahue said of the waivers that "We expect them to be increasing as we look into the third quarter, but not dramatically."

He also said he doesn't expect any of the changes under discussion to affect the profitability of the funds, such as a proposal that funds hold more assets in cash to meet redemptions. "None of it is draconian," he said.

Federated's total managed assets were $401.8 billion at June 30, up 20 percent from a year earlier but down 2 percent from the end of March. The majority of these were its money-market assets, which stood at $346.4 billion at June 30, up 28 percent from a year ago but down 4 percent from March.

Federated's shares have risen about 50 percent this year, higher than some rivals including BlackRock Inc (BLK.N) and Legg Mason Inc (LM.N). Before the results, Sandler O'Neill analyst Michael Kim noted improvements in Federated's fixed-income and equities businesses. (Reporting by Ross Kerber; Editing by Phil Berlowitz, Bernard Orr)