Federated Investors

  • Overview

One of the top players in money market funds, Federated has come a long way since its founders, John Donahue, Richard Fisher and Thomas Donnelly, started selling savings plans and mutual funds door to door in Pittsburgh, Pa., in 1955.  As of June 2009, the firm is one of the nation's largest investment managers, with about $407 billion in assets under management.  Federated is a wholesaler of investment products, including 148 domestic and international equity, fixed-income and money market mutual funds, as well as a variety of separately managed accounts, which it sells to 5,400 client firms, including brokers-dealers, bank broker-dealers, corporations, pension funds and government entities.  Its specialty, though, is money market funds, which constitute more than half of Federated's total assets under management.

Donahue, Fisher and Donnelly got their start more than 50 years ago selling savings plans and mutual funds.  They made enough money peddling their wares among their fellow Pittsburghers to go public four years later in 1959.  Within a few years, Federated was making waves, introducing one of the first exchange funds, one of the first government bond funds, one of the first high-yield bond funds in the investment market.  By the mid-1970s, Federated Investors was selling money market funds, mostly to bank trust departments, and, by 1977, it reached $1 billion in assets under management.

In 1982, Federated Investors was bought by insurance giant Aetna for $256 million.  In the seven years under Aetna's watch, Federated Investors grew its mutual funds business by marketing them through broker and dealer affiliates of commercial banks and started offering administrative services to banks through proprietary private-label mutual funds.  But in 1989, John F. Donahue reacquired the company from Aetna, buying back all the remaining shares over a seven-year period.  In 1998, the company completed its initial public offering on the New York Stock Exchange, led by J. Christopher Donahue, founder John F. Donahue's son who had joined the firm in 1972 and was appointed chief operating officer in 1993.  Since 1998, J. Christopher Donahue has been president, CEO and director of the company.  His brother Thomas R. Donahue is chief financial officer and treasurer.

Since going public in 1998, the company has been growing at a rapid rate, adding nearly $150 billion dollars in assets over a nine-year period.  This growth has been mainly due to a series of strategic acquisitions, which gave the company a strong hold on the market.  Since the early 1990s, the firm has opened doors in offices around the world.  In 2001, Federated acquired the $3.2 billion Kaufmann Fund for approximately $400 million.  That same year, Federated bought $148 million in managed assets from Rightime Funds.  The following year, it bought $250 million in assets from FirstMerit Funds.  In 2003, Federated added another $465 million in assets from Riggs Funds, and in 2004, it acquired $265 million in additional assets from Banknorth Investment Advisors Funds.
In 2005, Federated managed to get tangled up in legal proceedings with the SEC and former New York Attorney General Eliot Spitzer (and now former New York state governor). They charged Federated with late trading and market timing (late trading means buying or selling funds after the market's close in order to take advantage of price discrepancies; market timing involves allowing preferred investors to move quickly into and out of funds in order to get ahead of market trends).

Federated was the 14th firm to face such charges since Spitzer began investigating the mutual fund industry in August 2003.  As a result of the inquiry, Federated agreed to pay $100 million, including $20 million in fee reductions, in November 2005 to settle the charges.  More recently, Federated added $19.3 billion in money market fund assets from Alliance Capital Management and $142 million in mutual fund assets from three Vintage equity mutual funds, managed by Amcore Financial.  In March 2006, the company announced another $376 million in acquired equity assets, and in July 2006, it completed its acquisition of Cambridge, Mass.-based MDT Advisers, which oversees $6.7 billion in managed assets.  In August 2007, the company increased its $267 billion in assets under management, acquiring certain assets of the $365.7 million Rochdale Atlas Portfolio.  The Rochdale Atlas Portfolio became part of Federated InterContinental Fund, which according to Federated "is positioned to be a core international equity holding that invests in both developed and emerging markets."



Federated Investors


Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Phone: (412) 288-1900
Fax: Fax: (412) 288-6446
www.federatedinvestors.com

STATS


  • Employer Type: Public
  • Stock Symbol: FII
  • Stock Exchange: NYSE
  • President, CEO, and Director: J. Christopher Donahue
  • 2007 Employees: 1,270

Key Financials

  • 2007 Income: $2,175 million
  • 2007 Revenue: $1,128 million

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