UPDATE 2-Federated Investors fourth-quarter profit declines

* EPS of 45 cents vs Street view of 43 cents

* Assets under management down 8 percent to $358 billion

* Q4 inflow of $464 mln in stock and bond funds, accounts

* Fee waivers reduced operating income by $12.3 mln

(Adds details of fee waivers)

BOSTON, Jan 27 (Reuters) - Federated Investors (FII.N), the third-largest manager of U.S. money market funds, saw its fourth-quarter profit fall 11 percent as low rates continued to squeeze its bottom line.

Net income fell to $46.4 million, or 45 cents per share, in the fourth quarter from $51.9 million, or 51 cents per share a year earlier. Analysts had expected 43 cents per share, according to Thomson I/B/E/S.

Like other money market fund managers, Federated was forced by low short-term rates to forgo charging some fees on its funds to prevent yields from going negative. The company has suffered declining year-over-year revenue for seven straight quarters.

In the fourth quarter, Federated waived $60 million of fees and paid out $47.7 million less in distribution expense on money market funds and accounts, leading to a $12.3 million reduction in operating income. That was less than the $14.9 million operating income hit taken a year earlier but up slightly from the $11.2 million drop in the third quarter.

Assets under management totaled $358.2 billion at the end of the fourth quarter, down 8 percent from a year ago but up 5 percent from the end of the third quarter. Investors added $15.1 billion to money markets, removed $477 million from equities and added $941 million to bonds.

Shares of Pittsburgh-based Federated closed at $28 on the New York Stock Exchange on Thursday. The shares have gained 17 percent over the past three months, outperforming the 10 percent increase in the Standard & Poor's 500 Index.

Federated trails only closely held Fidelity Investments and JPMorgan Chase (JPM.N) in the U.S. money market fund management business. (Reporting by Aaron Pressman; Editing by Tim Dobbyn; editing by Carol Bishopric)