It’s increasingly obvious that the Federal Reserve Open Market Committee (FOMC) will start to raise short-term interest rates by the end of this year. For banks, insurance companies, and many other financial institutions, higher rates can’t come soon enough, as they will start to generate higher interest income on their vast cash balances. Yet one financial services company in particular has especially strong leverage to rising rates, making it a timely investment. #-ad_banner-# Federated Investors (NYSE: FII) is an asset management firm with a focus on equity, fixed income, and money market accounts. Money market funds are investment… Read More
It’s increasingly obvious that the Federal Reserve Open Market Committee (FOMC) will start to raise short-term interest rates by the end of this year. For banks, insurance companies, and many other financial institutions, higher rates can’t come soon enough, as they will start to generate higher interest income on their vast cash balances. Yet one financial services company in particular has especially strong leverage to rising rates, making it a timely investment. #-ad_banner-# Federated Investors (NYSE: FII) is an asset management firm with a focus on equity, fixed income, and money market accounts. Money market funds are investment vehicles in which the primary focus is protection of principal. Fund managers invest in only very short-term bonds where the risk of loss is nearly zero. In normal interest rate environments, the firm keeps a sliver of the investment profits for itself. But these are not normal interest rate times. With short-term yields at nearly zero, Federated Investors has not been able to cover the costs of running the funds. Instead of charging the cost difference to fund investors, Federated Investors has voluntarily issued “fee waivers” to its clients. The waived fees, which would constitute a significant source of revenue… Read More