Federated Investors, one of the largest managers of U.S. money market funds, said it expects to waive more fees on those funds in the first quarter than it did in the prior quarter due to lower interest rates.
Fee waivers could reduce pre-tax net income by about $21 million in the quarter, up from a hit of $15.5 million in the fourth quarter, Federated chief financial officer Tom Donahue said on Friday on a call with analysts.
With rates on short-term bonds so low, Federated and other money market fund managers have been forced to waive some of their management fees to prevent fund yields from turning negative.
In the fourth quarter, a slight uptick in rates allowed Pittsburgh-based Federated to garner more fees than a year earlier. But rates in the first quarter have turned back down, Donahue said.
Federated's fourth-quarter profit jumped 34 percent to $49.6 million, or 44 cents per share, the company said on Thursday. Assets under management totaled $379.8 billion on December 31, 2012.
Federated is the third-largest manager of money market funds, trailing only Fidelity Investments and JPMorgan Chase & Co.
(Reporting by Aaron Pressman; Editing by Nick Zieminski)