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J. Christopher Donahue, Federated Investors CEO, on the company’s stock performance and how new regulations are threatening the business.
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Things results but looming over federated and a mutual fund industry is a whole are potential regulations that my next guest says could kill.
At least parts of his business joining me now this business exclusive -- Federated Investors president and CEO Chris Donahue welcome Seacrest.
Thank you very much great to be here -- let's talk first about business and I stock performance 23% gain over the last -- eight and a half percent year to date.
Will federated maintain this rate of growth.
Well we certainly hope to -- we're certainly set up to because we have a very very strong performance.
In 2012.
On the sales of equity and fixed income funds.
Reaching over thirty billion.
With six billion in net additions to our SMA and product line and the performance associated with those funds is outstanding.
So we've got about 24 different funds.
That have three year talk quart tile records and this sets the stage for excellent performance in 2013.
Obviously renewed focus on Wall Street with the markets.
Flirting if you will with historic highs here that have to be good for business as well.
We've we've seen it be good for business yes indeed we've seen slight movements -- -- towards more towards stock here in the first three weeks of 2013.
As some clients are apparently moving more into the equity side -- the fixed income but it's not -- -- turn it's just polite move in that direction.
And I understand that you are federated able to charge higher fees higher management -- now that conditions have loosened up and -- so much so your customers are accepting that.
Well the higher fees are only on the products themselves -- naturally an equity fund.
Commands a higher fee than a fixed income -- so it's not like we change the fees they stay the same on all the funds.
But certainly we're very happy to see customers rolling into equity products.
Okay let's talk about regulation now because you Chris are on the record saying.
The government has been standing over money market funds with fake blood since the 1970s trying to kill -- And that these recent proposals by the SEC are three forms of death there's subtle the.
I yes and it by the way it was that it was a three items that F sock was coming up with the SEC had.
And idea about coming up with very similar proposals last year and the majority a bipartisan maturity of the SEC commissioners.
Would not support those ideas so then they turned around and came out with with F sock.
And because they change their net asset value put restrictions on redemptions were cause -- capital to be considered.
Then that's what I did say that it would be death by hanging death by poison or death.
By bullet OK but you know this is all reaction to the 62 and a half billion dollar collapse of the reserve primary fund back in 2008 the systemic risk right that.
Was partly to blame for the entire credit crisis during that time period so what's the right solution here.
Well the money market funds were not to blame.
For the credit problem they were a victim of the problem and the situation that is not usually told.
This a story of the Putnam fund.
Which at the same time roughly had big redemptions six billion against the twelve billion dollar fund.
-- merged in with federated had liquidity and had no problem.
And so our idea is to come up with some sort of voluntary.
Gauging.
Which would basically gives the directors the same rights that are foreign funds have and the same right that even a drug company has.
To hit a pause mode on the distribution or movement of money market funds like this would eliminate -- run.
Yeah eliminate first mover advantage let every shareholder be treated the same and give you time to solve an impending problem.
Chris Donahue Federated Investors the CEO thank you so much we know mutual funds are so important to our financial structure because they are easily liquidated and easily accessible when you need to get cash though it's important part in the industry.
Will continue to follow up thank you again.
Thank you.
