There was nothing in the first-quarter results from narrowmoat Federated Investors FII that would alter our longterm view on the firm. With the company’s assets under management (AUM) so heavily skewed toward money market funds, Federated continues to be affected not only by historically low interest rates (which require the use of fee waivers to keep fund costs from driving yields into negative territory) but the prospect for money market reform (which include ongoing proposals for floating NAVs, redemption restrictions, and capital requirements). While the firm has been able to offset some of the negative impact of its cash management business with growth from its equity and fixed-income operations, it hit a couple of speed bumps in the last two quarters, with Federated reporting its first long-term outflows since the third quarter of 2011 during the first quarter of 2013. In a period where investors were willing to invest in actively managed U.S. stock funds, the firm’s equity division recorded -0.1% organic growth. Federated also reported its first quarterly outflows from its fixed-income operations since the fourth quarter of 2007. Add to that another $5.0 billion in net redemptions from its money market funds, and the firm closed out the first quarter of 2013 with $5.4 billion in total outflows, detracting from the $3.0 billion in market appreciation generated during the period. With close to three quarters of its total AUM invested in money market funds (which also account for more than 40% of annual revenue), Federated continues to be impacted by fee waivers, which cost it an additional $22.5 million in operating income during the first quarter. Having expected the firm’s fee waivers for all of 2013 to be on par with what we saw during 2012, we were a little surprised to see a somewhat higher quarterly run rate than we were envisioning during the first quarter, which is likely to continue into the second quarter of 2013. Tending to be much more conservative when forecasting out Federated’s nearto medium-term prospects, and with the firm producing somewhat better profitability than we were expecting so far in 2013, our fair value estimate of $23 per share was not meaningfully affected by the change in our fee waiver assumptions for the full year.