Investment management firm Federated Investors Inc. (FII) accomplished the transition of $14 billion in money market assets that were previously managed by SunTrust Bank Inc.’s (STI) RidgeWorth Captial Management unit.

On September 20, 2010, Federated acquired the money market management business of SunTrust Bank. Pursuant to the definitive agreement signed on July 16, 2010, money market assets to the tune of $11 billion were transitioned to Federated during the third quarter of 2010. The acquisition is part of Federated’s strategic expansion initiatives in money market fund business, where it is a significant player. The assets were moved into Federated money market funds with similar investment objectives through a series of closings that started in September 2010.

Federated Investors reported third quarter operating earnings per share of 42 cents, which surpassed the Zacks Consensus Estimate by 4 cents. Results reflected an increase in fixed income equity funds and fixed income assets, decrease in operating expenses and a decline in the amortization of deferred sales commissions. This was offset by an increase in voluntary fee waivers, reduced top-line growth and lower assets under management on a year-over-year basis.

As of September 30, 2010, Federated managed $341.3 billion in assets, down 13% from $392.3 billion as of September 30, 2009 and slightly up from $336.8 billion as of June 30, 2010.

The financial service industry had been the hardest hit during the recent economic crisis and Federated Investors was jolted by the credit crunch as well, with a significant reduction in money market managed assets. However, the company is now in a restructuring and recovering phase, hence the bumps in the ride are justified at the moment.

Nevertheless, the near-term outlook remains cautious and we wait for a strong and steady rebound that will help increase market activity and regenerate client demand. Overall, the company has the potential for substantial growth in the long run, given its fairly healthy balance sheet, firm cost-cutting initiatives and a diversified asset and product mix.

Federated currently retains its Zacks #3 Rank, which translates to a short-term Hold rating.

 
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