 
|
|||||||||||||||||||||||||
              
|
Federated Investors tops in return on equity
Sunday, April 09, 2000 By Patricia Sabatini, Post-Gazette Staff Writer
If you aren't quite sure what Pittsburgh-based Federated Investors Inc. does, you're forgiven. After all, the giant mutual fund company -- the winner in the return on equity category -- isn't exactly a household name.
Unlike most mutual fund companies, Federated doesn't sell its products directly to the public. Instead, it is a behind-the-scenes wholesaler, selling its funds and investment services through banks, brokerages, insurers and other financial service providers, which sell them to the public.
The company's low profile doesn't mean it isn't big or adept at making money, however.
With more than $125 billion in assets under management, Federated ranks as one of the largest mutual fund companies in the country.
Founded in 1955 by Chairman John F. Donahue and high school pals Richard Fisher and Thomas Donnelly, the company employs some 1,600 in the region, plus another 200 or so at satellite offices in Boston, New York City, Dublin and Frankfurt.
Last year, net income surged 34 percent, to a record $124 million. Revenue jumped 15 percent, to $601 million, also a record.
Besides revenue and profit growth, return on equity is another standard measure of a company's performance. The figure, which is determined by dividing net income by stockholder equity (which represents retained earnings and proceeds from initial and secondary stock sales), can help shareholders tell how effectively management is using their money.
Federated's return on equity was 115 percent last year, tops among the roughly 80 local public companies surveyed.
That's a stunning figure, although it isn't as meaningful a performance measure in the money management business as it is in more capital-intensive industries.
The reason is that running a money management business doesn't require as much capital as, for instance, it takes to run an airline or manufacturing concern, which have lots of money tied up in equipment. Because Federated has a relatively small equity base, cranking out fat profits results in a relatively higher percentage return.
A more important barometer in Federated's industry is generating cash flow.
In case you were wondering, Federated is good at that, too.
|
||||||||||||||||||||||||
