Federated Hermes, Inc. (FHI) Q1 2013 Earnings Report, Transcript and Summary

Greetings, and welcome to the Federated Investors First Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ray Hanley, President of Federated Investors Management Company. Thank you, sir. You may now begin.

Good morning, and welcome. Today, as usual, we have some brief remarks before opening up for your questions. Leading today's call will be Chris Donahue, Federated CEO and President; and Tom Donahue, Chief Financial Officer. And joining us for the Q&A is Debbie Cunningham, who is the Chief Investment Officer for our money market area. And let me say that 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. We invite you to review the risk disclosures in our SEC filings. No assurance can be given as to future results, and Federated assumes no duty to update any of these forward-looking statements. And with that, I'll turn it over to Chris.

Thank you, Ray. I'll begin today with a brief review of Federated's recent business performance, and Tom will comment on our financials. Looking first at cash management. Average of money market fund to assets were up about $2 billion from Q4. And period-end money fund assets decreased by $13 billion. As in prior years, we saw money fund assets grow going into year end and then decreased in the first quarter. Most of the decrease came from bank-related channels, where we saw about $9 billion come in, in Q4 and then the same amount leave in Q1. We had a similar experience in the broker/dealer channel, where we gained $3 billion in the fourth quarter and decreased by about the same amount in the first quarter. Our market share for money market funds decreased slightly in the first quarter. Money market separate account assets were up $8 billion in the first quarter, with most of the increase coming from the addition of previously discussed State of Massachusetts' mandate. As expected, the impact of yield-related fee waivers increased in Q1, and Tom will cover that. On the regulatory front. Public comments from an SEC commissioner indicate that a proposal may be forthcoming in the next couple of months, "near-term." Unless and until a proposal is put out for comment, there's not much in the way of additional commentary that I can make. We continue to advocate for sound policy that enhances the resiliency of money funds for our clients, who fully understand that money funds, like other investments, have elements of risk. They are not interested in radical and unnecessary changes like floating NAVs, holdbacks or capital requirements. Money fund investors have remained confident in the product as presently constructed, a dollar in and a dollar out, uninsured, transparent, invested in a diversified portfolio of high-quality securities and supported by proper accounting and market valuations. Our position is straightforward. We will continue to champion those things that enhance the resiliency of money funds while retaining the core features of a sound product with an unparalleled long safety record and success, all based on daily liquidity at par with the market rate of interest. Now turning to equities. While flows for equity mutual funds and separate accounts combined were slightly negative in the first quarter, we had solid results in a number of products. On strategies with net inflows included international equities, led by International Leaders, a core blend fund, and the International Strategic Dividend Fund. The Kaufmann Large Cap Growth Fund had a step-up in flows in the first quarter, and this has continued in the early part of the second quarter. Blend products, including Capital Income and Muni and Stock Advantage, also produced solid inflows. Our net sales results were impacted by model changes made by a couple of clients using this Strategic Value Dividend strategy. These changes resulted in about $600 million of lumpy redemptions in the first quarter. The clients attributed the changes to a desire to add more beta to their mixes. The Strategic Value Dividend strategy continues to be in demand by investors attracted by its income objective, a 5% yield and a 5% growth rate in its income stream. For the first couple of weeks of the second quarter, the fund returned to solidly positive inflows. Pru Bear had negative flows in the first quarter, not surprising given the strong equity market conditions. This fund has had positive flows for the first couple of weeks of April. Q1 flows in equity separate accounts were solidly positive, driven by Strategic Value SMA strategy. We also saw inflows in a couple of Clover value strategies and in an international equity strategy. A comment on early second quarter flows, equity flows are solidly positive, led by domestic and international Strategic Value Dividend strategies, Kaufmann Large Cap and Capital Income Funds. 11 different equity funds have positive flows for the first 3 weeks of April, including Pru Bear, Managed Volatility, the aforementioned Capital Income and Kaufmann Large, Muni Stock, InterContinental, International Leaders, Clover Small and Equity Income Fund. Equity SMA flows are negative early in the second quarter due to model changes that have impacted one of the MDT strategies. Combined equity and SMA flows are slightly negative. Looking at equity performance at the end of the first quarter, we had 13 equity strategies in a variety of styles with top quartile 3-year records and 10 in the top quartile for the 1-year period. Turning now to fixed income. High-yield strategies had another strong quarter of inflows. Ultrashort funds were positive, as were Floating Rate, Total Return, Emerging Market Debt and Federated Bond funds. At quarter end, we had 11 fixed income strategies with top quartile 3-year records and 8 in the top quartile on a 1-year basis. Fixed income separate accounts were slightly negative. Results included a $360 million redemption from a client whose asset allocation decision was really rerisking. Our RFP activity for fixed income increased in the first quarter versus the rate in 2012. Our fixed income flows are slightly negative for the first 3 weeks of April. However, we are pleased to announce this week that we won about a $200 million account from the State of Delaware in the short-duration mandate area. Turning to overall fund investment performance and looking at the Morningstar-rated funds, just under 1/2 of the rated equity fund assets are in 4- and 5-star products as of the end of the quarter, and a little over 3/4 are in 3-, 4- and 5-star products. For bond funds, the comparable percentages are just over 40% 4- and 5-star and just under 80% 3-, 4- and 5-star. During the first quarter, 2 of our income funds, the Capital Income Fund and the Federated Strategic Income Fund, won Lipper Awards as leaders in their respective categories for consistent return for the 10-year period ended 12/31/2012. As of April 24, managed assets were approximately $375 billion, including $277 billion in money markets, $38 billion in equities and $60 billion in fixed income, which includes the liquidation portfolios. Money market mutual fund assets stand at about $239 billion. So far in April, money fund assets have ranged between $237 billion and $245 billion and have averaged $241 billion. As a reminder, we and the industry typically see tax-related outflows in money funds assets in April. Looking at distribution. Equity fund gross sales grew by 24% in the first quarter compared to the fourth quarter. We saw the strongest growth in the wealth management trust channel at plus 32%, followed by broker/dealer at plus 23% and institutional at plus 12%. Fixed income sales grew by 20% in broker/dealer channel versus Q4, and we're up 9% in wealth management trust channel. In the broker/dealer channel, we continue to leverage our investment in additional distribution capacity. We are expanding the number of advisors doing business with us and grow the product set used by these advisors. The number of advisors doing business with us is nearing 39,000, up from 29,000 in 2008. On the institutional side, we completed the onboarding process to begin management of the $7.1 billion Massachusetts Municipal Deposit Trust in March and continued to be active in pursuing other state mandates for both cash management and fixed income pools. I just recently mentioned the Delaware victory. At quarter end, we had about $200 million in equity and fixed income institutional accounts yet to be funded. To this, we would add the Delaware amount, giving us about a $400 million pipeline. Acquisitions and offshore business. We continue to develop our Asia Pac operation in Australia. We're evaluating strategies to offer and expect to begin adding sales personnel later in 2013. In Europe, we had our first trades booked in April from our expanded distribution efforts with Bury Street Capital and look forward to growing this during 2013. We continue to look for alliances and acquisitions to advance our business in Europe and Asia as well as the United States. Tom?

Thank you, Chris. Taking a look first at money fund fee waivers. As expected, the impact to pretax income in Q1 was $21.7 million, up from $15.5 million in the prior quarter. The increase was due mainly to lower rates for treasury and mortgage-related securities. Based on current assets and expected yield levels, the impact of minimum yield waivers to pretax income in Q2 could be similar to the level it was in the first quarter. Looking forward and holding all other variables constant, we estimate that gaining 10 basis points in gross yields would likely reduce the impact of minimum yield waivers by about 40%, and a 25 basis point increase would reduce the impact by about 70%. It's important to note that the variables impacting waivers can and do frequently change. Revenues in Q1 decreased 7% from the prior quarter due largely to minimum yield waivers and fewer days, partially offset by higher average assets for equities, fixed income and money markets. Operating expenses decreased from Q4 due largely to lower distribution expenses due to minimum yield waivers and fewer days. Comp and related included a reversal of $3 million of incentive compensation expense that was accrued in 2012 but not paid. For Q2 comp and related expense, an earlier -- an early forecast is around $69 million. The increase in professional service fees was due to $3 million of insurance reimbursements in Q4, and change in nonoperating income was due mainly to the Q4 $3 million charge related to the impairment of a minority interest investment. Looking at our balance sheet. Cash investments totaled $307 million at quarter end, of which about $24 -- or $224 million is available to us. Our net debt remained below $100 million. And looking forward, cash and investments combined with expected additional cash flows from operations and availability under present debt facilities provide us with significant liquidity to be able to take advantage of acquisition opportunities and related contingent payments, share repurchases, dividends, new product seeds and other investments, capital expenditures and debt repayments. That completes our presentation, and we would now like to open the call up for questions.

[Operator Instructions] Our first question comes from the line of Michael Kim with Sandler O'Neill. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: First, Chris, just maybe to follow up on the regulatory front. It does seem like the FSOC and the SEC are still kind of working through the next round of recommendations, if you will. But if, in fact, they do opt to kind of go down the floating NAV route, just any sense of what sort of contingency plans, maybe, some of your institutional clients are considering, particularly as it relates to potential alternatives that they might be looking at?

Well, as regards what these guys might come up with, whether it's a variable NAV or not, it's a separate subject, which we can get into. But get to your question is the alternatives, we've discussed this on the calls before. We have a very large separate account business, which works very well for large clients, very large clients, and so that is one thing that can be considered. Moving funds to offshore can be considered. Moving funds to other types of products, enhanced cash, et cetera, can be considered. Moving products to depository institutions and largely larger banks would also be considered. So all of these things, and there are other new products that I think could get created that haven't even shown up yet. Some have filed, including us, various forms of ETFs. But the thing about all of these alternatives is that none of them are as good for the customer, the economy or the issuer as the money market fund. But that would be an array of potential options. Obviously, the simplest one is if they throw prime funds under the buses, then everybody runs over the government funds. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: Okay, that's helpful. And then for Tom, just wondering, broadly speaking, where you kind of see the leverage in the model. Are there sort of further expense efficiencies that can drive margins higher, or is it really mostly a function of kind of the underlying mix and revenue growth going forward?

I think we're on the latter part. We continue to manage things pretty efficiently on a cost basis. And if we get some growth in here, we would expect some nice leverage. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then just finally, can you just give us an update on what you're seeing in terms of M&A opportunities out there, as it relates to kind of supply or the level of competition or maybe some pricing trends, particularly as it relates to the types of properties that you sort of highlighted, sort of institutional equities -- I'm sorry, international equities, if you will?

Right. And that's kind of been a bigger part of our focus, although you're -- kind of a couple of different ways of looking at it. We have our roll-ups in the U.S., which we continue to look to do, and -- but we, in particular, focus on the Asia Pac business with -- Gordy's there as CEO and Craig Bingham out talking to many different parties and looking for opportunities. And we're -- they're in -- they're building relationships, and there's nothing to grab onto to say, "Here's something that we're going to do," yet. But I think they're having good discussions. And there are -- Craig has a good reputation and a lot of contacts that looks to be pretty opportunistic for us. On the European side, we also had numerous meetings and calls, and it takes a long time to develop your relationship and then to move forward. But we are also optimistic on something coming that way too.

The next question comes from the line of Robert Lee with KBW. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: I'd actually like to ask a follow-up on the Bury Street comments. And just -- Chris, could you maybe flesh that out a little bit more. I'm just kind of curious -- I know it's just getting up and running, the relationship, but kind of which -- are there any particular products or distribution channels that they are really focusing on, where they think they can really make some headway with your products? And just maybe what your own expectations are for contributions from that relationship over the -- in the next year or two. I don't know if you think it'll be a noticeable or meaningful contributor to the sales events in '13?

Put simply, we expect billions. And what they are selling primarily right now, okay, having just started an actual sale, isn't on high yield. Okay, they are also presenting, in addition to high-yield emerging market debt, strategic value dividend and a core ag. So those are the 4 usage products that they are presenting. And we did this in order to jump-start our usage distribution in London and on the continent. And we expect that we might be able to also hire new sales individuals on the institutional side with consultants, et cetera, to do some of that business direct and end up having a two-pronged attack that's well organized and not overlapping. So that's kind of what we're expecting out of this. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: And maybe shifting to the other side of the world, with Asia Pac. It's come up, you've mentioned it a couple of times, and is it -- I'm just curious if the products that you're thinking about targeting there, is it really pretty much the same products that you're looking at with -- in Europe? Same kind of list or...

Yes. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, nothing, no new product developments specifically for the market?

Well, what's going on there, in addition, is that there's, as Tom was describing, there's a worthy search going on in both Australia and then throughout the Asia Pac region for operations or businesses that have both good investment management capabilities and some sort of distribution footprint. And so I would expect that some acquisition on the Asia Pac side would involve new mandates that are being generated and managed locally in various jurisdictions. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: And maybe one last question, just shifting back to the M&A. I mean, understanding that in the U.S., your primary focus has been the kind of the incremental kind of buying portfolios of kind of small mutual fund assets from banks and others. But are -- when you look at your product set here, and it's fairly full, but are there any -- as the industry evolves, are there any kind of product holes that you've started thinking about in regards to your existing domestic footprint, and that maybe it would make more sense to fill through a acquisition versus internal development?

Well, there are product sets that we think we're working on, but we've decided to do it more or less internally. When you add a managed vol and a managed tail-risk product and you put them into insurance-type products, when you create an unconstrained bond fund and go anywhere, a balanced-type asset, allocation-type funds, and combine them with the Pru Bear and the Pru Dollar Bear Funds, you have a pretty good gang of what the world would call alternatives. And we have looked at whether to do that by acquisition many times, and we just can't get convinced of the value proposition for the underlying clients and, sometimes, not even the repeatability of the performance. So we've taken those ideas, put them into various mutual fund components managed by various of the teams that we have going here, but we package them and refer to them as 2 pods, of one is alternative and one is our asset allocation, that address this need. So that's how we've approached what we saw as a need in the product array.

The next question comes from the line of Cynthia Mayer with Bank of America Merrill Lynch.

Maybe just a flow question to start. Just to clarify [Audio Gap] for account flows in April. It sounded like equity asset inflows were negative due to a change in allocation away from MDT, you said, and then fixed income separate account flows were also negative due to a change in allocation. So I guess, is that -- are either of these something that you could see recurring? Is there -- on the fixed income side, which strategy is that? And on MDT, maybe if you give us a sense of how large the assets are for SMA, and could there be more allocations? Is there anything particular about now?

Cynthia, it's Ray. Just to clarify, the color we made on the equity SMA is correct on MDT. What actually happened was the manager model changed. They reduced the number of managers on their platform, and that resulted in the MDT strategy change. The MDT assets are about $2.2 billion, and about 1/2 of that would be SMA. The performance there has really rebounded quite strongly. All 7 of their strategies are ahead from inception. And a number of them, the majority of them, are ahead on 1 and 3 years as well. And so we don't know of any other changes in the pipeline for that strategy. And as I said, the performance has been quite good of late. On the fixed income side, the comment was not on separate accounts in terms of quarter to date. The comment was on the mutual fund flows being slightly negative, and that's really a function of an Ultrashort product we think that would have similar characteristics to the money markets in terms of its utilization for things like tax payments. So within the fixed income, we're -- we have a number of strategies that are doing well from a flow standpoint. I would highlight the high-yield, in particular, and then we have other positive ones there. Capital preservation short-duration product would be the next one that comes to mind.

Okay, sorry about that. So within fixed income separate accounts then, you're positive in April?

Well, we don't measure the -- we don't measure fixed -- we don't measure the larger separate accounts until the end of the quarter. We don't have the same kind of flow reporting there. We do for SMAs because they're more of a retail-like product, and that's why we're able to make the equity SMA comment. We do have a fixed income SMA business, but it's much, much smaller than the equity business, and it actually has positive flows quarter-to-date.

Got it, got it. So I'll just think more about your pipeline that you mentioned, the $400 million on -- for the fixed income side. So...

Well, yes. And the $400 million -- on the $400 million, Chris talked about the $200 million State of Delaware. That's clearly fixed income. The other $200 million of other institutional accounts is actually about 3/4 equity. It's about $150 million equity and $50 million fixed.

Great, great. And then maybe one other clarification. Tom, I thought you said -- did you give guidance for comp in 2Q of $69 million?

Yes.

Okay. And last quarter, I think guidance was also $69 million, right? But it came in lower. Was there anything particularly that was...

Yes, we overaccrued by $3 million. So we had a reversal in Q1.

Okay, but you're thinking it goes back to $69 million. Okay.

Right.

Okay. And then maybe one big-picture question, which is just coming back to the question of some of the alternatives to money funds that you mentioned, like ETFs, enhanced cash, some of the firms we see are announcing this or that innovation. If you step back and look at the industry in the last few years, there's been growing concentration in money market products. And I'm just wondering if you think maybe we're going to see kind of a wave of innovation which could reverse some of the concentration and institutional clients could begin dispersing their cash around a lot of different products, a lot of different firms.

I don't see that. I see more the impact of the regulatory environment that we live in as the continuing the oligopolization of the business. Perhaps that's not its intent, but that's certainly its effect. It's very difficult to start off brand-new products, especially on the cash management side, when what the customer wants is daily liquidity at par and you need a bigger bunch of assets in order to make that viable. And so I just don't see that. More likely, depending on what the proposal is, it will follow the line of a bunch of money moving into govies if they trash prime and moving into large bank deposits for the rest of the money. That will be the main show. Then all these other products that could come up will take their place in line, but it'll be well behind. And I just don't see the underlying business efficacy of all new businesses for new type cash management products, which don't do what people want and require a lot more of assets than are available.

The next question comes from the line of Bill Katz with Citigroup.

This is actually Neil filling in for Bill. My first question is, you did mention the pickup in RFP activity year-over-year. How would you characterize the incremental activity between equities and fixed income?

Neil, it's Ray. I would say that in Q1, equity was consistent with the trend that we saw in 2012. Fixed income would be running at a higher pace and slightly higher than the rate we saw in 2012. The interesting thing aside from that is the variety of strategies that we're -- that we have RFP interest in. So on the equity side, in particular, the international Strategic Value Dividend strategy has generated good RFP activity, but we've also had Kaufmann Large, the Clover Small Value and, in fact, MDT Small Cap, which has had some wins and had positive flows on the funds side. Within fixed income, it's weighted towards short-duration, but high-yield continues to be very strong, emerging market debt and core broad.

Okay. And then my second question is, you mentioned a step-up in cost inflows in 1Q. Was that continuing so far in 2Q? All else equal, how would you see that impacting the fee realization?

Well, the cost in step-up is, in particular, on the Large Cap Fund. And that fund is about a little over $500 million against an equity fund base of $24 billion, north of $24 billion. So on the margin, it would be positive, but I wouldn't expect a measurable change on our overall fee rate because of the success of that particular product.

The next question comes from the line of Eric Berg with RBC Capital Markets.

It's Eric Berg here with Bulent Ozcan. We have questions regarding the money fund business and, in particular, sort of your sense of expectations among customers, and also questions around the needs of customers from money funds. My first question is this: while you talk about how customers expect daily liquidity at $1, NAV at $1, isn't it quite possible that if we had this money market fund perform, say, go to a floating NAV, that corporate customers understand that the underlying assets in a money fund carry risk to them, that there's always been risk? And that their expectations really -- they like -- isn't it possible that they like NAV at $1, but that they've never really expected it because they know there is risk in the funds?

Well, with respect to corporate treasurers, they do know there is risk in the funds. And if reserve fund accomplished anything, it underscored that and made it an absolute certainty, but they know anyway. The reason the corporate treasurers like the money funds is because of ease of operation. It is because it is first and foremost a cash management system. So when a corporate treasurer decides to use the money fund for their salary payments and things like that, they know exactly what to put in, and they know exactly what it's going to be coming out. They don't have to put in extra money for reserves or things like that, and it works very, very efficiency -- efficiently. They don't have to hire extra clerks, like they used to have to do in the old days, to buy T-bills and roll them over. And so it is a very, very efficient system. They've also designed their systems to be able to accommodate the $1 net asset value. Now everybody says, "Okay, fine. You can change any system." I guess that's true, but that comes with a lot of cost and consternation as well. And so yes, they have consistently -- on survey after survey, I indicated that they strongly prefer the use of the money fund. And when you look at the pricing of that, when they could've gotten, in a Ultrashort fund, a hundred basis points more in yield and they still remain with the money market fund, it tells you that it is very, very serious item for them. The Ultrashort funds are, what, $100 billion against $2.5 trillion? And so the evidence on surveys on use and then on the practical aspects of a corporate treasurer's life are really overwhelming in favor of the $1 NAV.

And then our second and related question relates to just what is required. We've heard that there were many -- and the ultimate question is, is this true, that there were many professional money managers, particularly in the public sector, that have to have NAV of $1? Is that true, that there are municipalities, states, so forth, that if NAV were floating in certain circumstances, they would be required to take their money out, or -- is that the case?

Yes, that is exactly the case. And it happens in a number of ways. The first way is under state law. I think it's now all 50 states have state laws that have declared certain types of money market funds to be the functional equivalent of the underlying investments so long as it's in a money fund that pays $1 or that's $1 in [Audio Gap] So there are trust indentures that are operated under those laws, there are trust accounts operating under those laws, and they would all have to leave. The next area where it happens is under the individual trust instrument or in under the individual trust arrangement due to beneficiaries or due to what the donors have intended, that cash had to be invested in cash and couldn't take a gain or a loss position. And so that would be another gang. And there's yet a third one that's a little further than what you're getting at, but when you have these omnibus systems that go in dollar in, dollar out, it is impossible for them to function unless you have the dollar in, dollar out, because they are giving us net positions for underlying accounts that could number in the thousands. But there are large number of our accounts that would have to quit the money fund if it had a variable NAV for legal reasons. There would also be others who would quit because of technical reasons, efficiency reasons and computer systems reasons, but a large component of them would quit because of the state law provisions.

The next question comes from the line of Patrick Devitt with Autonomous Research.

I'm curious, if floating NAV was enacted on solely prime funds, do you get the sense that, that money would just move to the govies or not? And why?

As I said, I think twice already on this call, that I think that there would be some movement to govies. How much? I just can't say. I just don't know. But there would be a good bit. And I think the other place people would move would be into deposits at primarily the largest banks. So those would be the first 2 beneficiaries if they simply throw prime funds under the bus. But as you know, we are not in favor of that and don't think that, that's a very logical or proper thing to do in the marketplace, nor is it justified.

Okay. I mean, I think that there is a presumption there that, that's where the SEC is going and the FSOC is going, though, right? Or is that not your understanding?

Well, everybody has their own opinion about it. And somehow, it's interesting that everybody's opinion seems to follow their own book, including me. Okay, so we have $100 billion of prime funds, and so we are a big player. And we tend to argue strenuously for our clients, for the issuers and for the efficacy of these funds. Others who may have only a little bit of prime fund are happy to throw them under the bus, and others who have a different clientele that they may want to approach, want to approach the other clientele. So yes, everyone's talking their book. Now what these proposals will be, I don't think anybody knows. We have been told for years that this proposal or that proposal was going to come out and is going to come out at this time, and that isn't exactly what happened. At the FSOC meeting yesterday, they said, well, if the SEC comes out with meaningful proposals, then they will demur because they have acknowledged the importance and the legitimacy of SEC regulation here because they have done an excellent job, the SEC, and are very knowledgeable about money market funds. And that's what convinces me that good policy will win out and that the resiliency of money funds will govern the outcome of any proposal or any proposal that then turns into a rule.

The next question comes from the line of Matt Kelley with Morgan Stanley.

This is Tom Whitehead filling in for Matt. Just a quick question on fee rates. Have you guys seen a change in fee rates in the last quarter? I'd say, even looking at the last year, if you back out the money fund fee waivers, fee rates, look like they ticked down a little bit. So any comments you have on that would be great.

Well, as you point out, Tom, the money fund fee waivers really are the primary thing that have affected fee rates. And that was the primary driver of the decrease and the first quarter change. To a lesser extent, the equity fee rate ticked down a little bit, and that would've been driven by the gains on the separate account side, where the fees are a bit lower. But that's really apropos of Q1. I would say the same trends were in play, looking back over the last year.

The next question is coming from the line of Ken Worthington with JPMorgan. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Maybe first for Debbie. Overnight rates have fallen off most recently, looking at repo rates. What's driving the recent declines? And how do you kind of see your outlook for short-term rates over the next couple of quarters?

Sure. They -- if you looked at overnight rates during the second half of 2012, they averaged in the low 20s, 22, 23 basis points. In the first quarter we were a little bit pleasantly surprised that they did not fall down into the high single digits. They were instead right around 15, 16 basis points. They've subsequently now, in the month of April, for the last 1.5 weeks, been fairly volatile in that single digit -- high single-digit to mid double-digit range. We do believe that the April timeframe is reflective of a large amount of tax payments being received and a lack of a need for funding, if you will, because of that in the second half of the month of April. We do expect that to rebound a little bit in the -- at the end of the month when there are some issuance of -- expected issuance of treasury securities that will be put back into the marketplace. Our outlook depends to some degree on what we think will happen from a QE perspective. Right now, we all know that the QE buyback program by the Fed on a monthly basis is about $85 billion. Our expectation is, with a little bit better pace in the economy, from the U.S. perspective at least, that, that buying program will taper off to some degree or be modified in the second half of 2013, which, in our minds, will put a little bit more collateral out there for the financing side of the equation and keep a floor under the repo rates of, again, back in that mid-teens area. Probably not back up to the high end of the 0 to 25 basis point range that has obviously been in place for many years now, but better than the high single digits, which was sort of the low end of expectations. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Okay, great. And then maybe Chris, Federated had done -- had gained meaningful market share since the financial crisis. The percentage has really increased quite a bit. But over the last year or so, it seems as though Federated has been giving back share. It looks like a little less than 50 basis points has been given back, and you mentioned in the latest quarter it declined a little bit more. What's happening there? Is there anything that you can point to? Is it just mix and distribution? Your focus is a little bit different than some of the others. Is competition getting a little bit more active on the pricing side? Is there a reason, or is it just kind of noise?

I would view it as the latter. When you look at the total picture, from a 5% market share in 2000 to 7% in 2007 and 8.5% as we concluded '08 and 8.7% in 2010, 9.4% in June of 2012, then it got to 9.5%, and so then at the end of 2012, we were 9.6%, and now we're at 9.2%. Okay. To me, this is just the ebb and flow of natural moving money. We don't see any particular aspect of this business that is -- been under fire or isn't performing or where competition is taking more. We generally have a large component of taxpayers in our mix, and maybe that is a little bit of what's going on here. But I just wouldn't make too much of the move from 9.6% at the end of the year to the 9.2% right now. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Okay. And then finally, in a world that's -- that transitions to floating NAVs, does price competition for treasury funds start to increase? My thought is there's a lot of money moving around. Treasury funds, government funds are more commoditized than a prime fund, which has a much bigger credit component to it. Do you think the competition will start to use price as a way to kind of gain share, given what probably is a lot of potential business moving around?

It's very difficult to see price competition when the return, i.e. the price competition, the effect of it, is either 0 or 1. And that's where these funds are. And so it's just -- I just don't see how that materializes, at least under the current rate environment. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Okay. And does that mean it's 0 for 1 to -- for you as well, or is that sort of more for the industry?

Oh, no, no, no. We -- you're seeing gross yields of 9 -- okay, whatever the repo rate is that you and Debbie were talking about would be the gross yield. I'm talking about the net yield to the customer because when you talk about price competition, you have to be talking about what the experience is to the investor. And so right now, all of those funds -- anyone who's offering them are either 0 or 1.

It appears there are no further questions at this time. I would like to turn the floor back over to management for any concluding remarks.

Well, thank you for joining us today. That concludes our remarks, and we appreciate your time.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a beautiful day.