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    FHI
    Earnings call· Mar 2026(Q1 FY26)

    FEDERATED HERMES Q1 FY26 earnings call FHI

    May 1, 2026 Source

    Executive summary

    Federated Hermes Q1 FY26 — Record AUM and Strong Equity Sales Driven by MDT Strategies

    Federated Hermes achieved record AUM in Q1 FY26, primarily fueled by strong equity sales, particularly from its MDT quant strategies, and continued growth in money market assets. The firm is actively pursuing digital initiatives to enhance distribution and efficiency across its product offerings, including tokenized funds. While fixed income saw redemptions and a significant institutional equity mandate is internalizing, management remains focused on strategic acquisitions and capital returns, including a recent dividend increase and share repurchases.

    Highlights

    5

    • Record assets under management (AUM) of $907 billion at Q1 end, driven by equity and money market strategies.

    • Record high equity assets of $101 billion at Q1 end, with $2.2 billion in net sales and $9.1 billion in gross sales.

    • MDT fundamental quant strategies achieved record gross sales of $5.8 billion and over $3.5 billion in net sales in Q1.

    • Successful final close of European Direct Lending 3 fund, raising $780 million.

    • Quarterly dividend increased by $0.04, up nearly 12%, marking the 113th consecutive quarterly dividend.

    Concerns

    4

    • Fixed income assets decreased by $329 million from year-end, with Q1 net redemptions of $422 million.

    • Money market fund assets decreased by $6 billion in Q1 compared to year-end.

    • Expected net redemptions of $1.4 billion in equity strategies for Q2, including $3 billion from a global equity sub-advised mandate due to client internalization.

    • Money market mutual fund market share decreased to 6.9% at Q1 end from 7.0% at year-end 2025.

    Guidance & targets

    3
    CategoryTargetConfidence
    FCP Acquisition Revenue Contribution
    $12 million
    medium materiality
    High
    FCP Acquisition Operating Expense Contribution
    $11 million
    medium materiality
    High
    Effective Tax Rate
    25% to 28%
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Equity
    Record AUM and strong sales driven by MDT quant strategies.
    Assets under management: $101 billion (record high)Net sales Q1: $2.2 billionGross sales Q1: $9.1 billion (record high)MDT strategies gross sales Q1: $5.8 billionMDT strategies net sales Q1: $3.5 billionMDT strategies net sales Q2 YTD (through April 24): $687 millionCombined equity funds and SMAs net sales Q2 YTD (through April 24): $606 millionMDT U.S. Equity UCITS fund net sales Q1: $177 millionMDT U.S. Equity UCITS fund AUM: $800 millionFunds beating peers (3-year Morningstar): 51%Funds in top quartile (3-year Morningstar): 30%
    		——3%—
    Fixed Income
    Experienced net redemptions in Q1.
    Assets under management: just under $100 billionAssets decrease from year-end: $329 millionNet redemptions Q1: $422 millionCombined fixed income funds and SMAs net redemptions Q2 YTD (through April 24): $214 millionFunds beating peers (3-year Morningstar): 41%Funds in top quartile (3-year Morningstar): 21%
    		————
    Alternative Private Markets
    Assets decreased slightly due to FX rates offsetting net sales.
    Net sales Q1: $82 millionM2 MDT Market Neutral Fund and ETF net sales: $341 millionEuropean Direct Lending 3 fund raised: $780 millionGlobal Private Equity Co-Invest Fund (PEC series) raised to date: $300 million
    		————
    Money Markets
    Reached record high assets, reflecting seasonal patterns.
    Assets under management: $685 billion (record high)Assets increase from year-end: $2 billionSeparate accounts increase: $8 billionFund assets decrease: $6 billionMoney market mutual fund market share: 6.9% (down from 7.0% at YE25)Money market mutual fund assets (as of a few days ago): $487 million
    		————
    Multi-Asset
    Stated as part of recent asset totals.
    Assets under management (as of a few days ago): $3 billion
    		————
    Firm-wide
    Recent asset totals as of a few days prior to the call.
    Managed assets (as of a few days ago): $902 billion
    		————

    Operational metrics

    26
    Assets under management
    $907 billion
    Q1 FY26

    Record AUM at the end of Q1.

    Total revenue
    decreased $3.9 milliondown 1% QoQ
    Q1 FY26

    Total revenue decreased due to fewer days, partially offset by higher money market and equity average assets.

    Revenue impact from money market average assets
    $8.3 millionhigher
    Q1 FY26

    Higher Q1 money market average assets provided higher revenue.

    Revenue impact from equity average assets
    $5.6 millionadded
    Q1 FY26

    Higher equity average assets added revenue.

    Carried interest and performance fees
    $388,000vs $1.6 million in prior quarter
    Q1 FY26

    Total carried interest and performance fees for Q1.

    Total operating expenses
    increased $5.4 millionup 2% QoQ
    Q1 FY26

    Operating expenses increased mainly due to seasonally higher compensation and distribution expenses.

    FCP acquisition transaction costs
    $1.5 millionvs $1.3 million in Q4 FY25
    Q1 FY26

    Transaction costs related to the FCP acquisition.

    FCP acquisition purchase price treated as compensation
    $6.2 million
    Q2 FY26

    Additional FCP transaction-related costs incurred in Q2. (Note: Transcript initially stated $4.2 million, then corrected to $6.2 million by management).

    FCP acquisition lender consent fees
    $4.6 million
    Q2 FY26

    Additional FCP transaction-related costs incurred in Q2.

    FCP acquisition transaction-related EPS impact
    $0.11
    Q2 FY26

    Total estimated EPS impact for Q2 from FCP acquisition costs.

    Effective tax rate
    26.1%
    Q1 FY26

    Effective tax rate for Q1.

    Cash and investments
    $645 million
    Q1 FY26

    Cash and investments at the end of Q1.

    Cash and investments (excluding noncontrolling interest)
    $607 million
    Q1 FY26

    Cash and investments excluding portion attributable to noncontrolling interest.

    Shares repurchased
    1.2 million
    Q1 FY26

    Shares of FHI stock purchased during Q1.

    FCP acquisition initial purchase price (cash)
    $216 million
    April 2026

    Cash used for the initial purchase price of the SCP controlling interest acquisition.

    FCP acquisition initial purchase price (stock)
    $23.1 million
    April 2026

    FHI Class B stock used for the initial purchase price of the SCP controlling interest acquisition.

    Quarterly dividend
    $0.38increased $0.04 (up nearly 12%)
    Q2 FY26

    Declared by the FDI Board of Directors for payment in May.

    Net institutional mandates yet to fund
    $1.1 billion
    Q2 FY26 (beginning)

    Expected to fund into both funds and separate accounts.

    Private market strategies expected net inflows
    $1.4 billion
    Q2 FY26 (expected)

    Expected net inflows into private market strategies.

    Fixed income expected net sales
    $1.1 billion
    Q2 FY26 (expected)

    Expected net sales in fixed income, with a large core plus win partially offset by redemptions.

    Equity strategies expected net redemptions
    $1.4 billion
    Q2 FY26 (expected)

    Expected net redemptions in equity strategies, mainly due to a large global equity sub-advised mandate.

    Money market organic growth
    single-digit growthdown from double-digits in 2024 and 2025
    FY26

    Expected growth rate for money markets in the current fiscal year.

    Government money market yields
    $3.72 to $3.75
    current

    Current yield range for government money market products.

    Prime money market yields
    $3.86 to $3.90
    current

    Current yield range for prime money market products.

    Tax-equivalent money market yields
    4%, 5% and 6%
    current

    Tax-equivalent yields for money market products.

    Total money market market size
    $7.5 to $8.2 trillion
    peak

    Estimated peak range for the money market mutual fund market.

    Industry KPIs

    3
    MetricValueDetails
    Fundraising inflows$780 millionUSD
    Performance revenue$388,000USD
    Deployment realizations$300 millionUSD

    Product announcements

    4
    ProductTypeDetails
    Money Market Management Digital Treasury Fundlaunch
    Mirror Tokenization of Money Market Fund Shares (BNY/Goldman Sachs collaboration)milestone
    Digital Sterling Liquidity Products (U.K. and Europe)roadmap
    Tokenized Access to UCITS Money Market Fund (via HBAR Foundation)expansion

    Deals & partnerships

    3
    FCP Fund Manager LPAcquisition of an 80% interest in a privately held U.S. real estate manager.$216 million cash and $23.1 million FHI Class B stock

    Brings U.S. multifamily housing expertise, complementing existing U.K.-based real estate capabilities.

    BNY and Goldman SachsCollaborative initiative for mirror tokenization of money market fund shares.

    Participation in a collaborative initiative to enhance digital capabilities.

    HBAR FoundationAlliance to offer tokenized access to a UCITS money market fund.

    HBAR Foundation is the first FCA-regulated digital Securities Exchange.

    Risks & headwinds

    3
    Institutional Client InternalizationQ2 FY26

    $3 billion in global equity sub-advised assets

    Mitigation: Management maintains a strong relationship with the client in other business areas; decision was strategic, not performance-driven.

    Money Market Fund Asset DecreaseQ1 FY26

    decreased by $6 billion in Q1

    Mitigation: Market conditions remain favorable for cash; money market strategies offer attractive yields; firm is developing digital product innovations to find new use cases.

    Money Market Mutual Fund Market Share DeclineQ1 FY26

    down from 7.0% at the end of 2025 to 6.9% at the end of Q1

    Mitigation: Firm is focused on digital initiatives to enhance distribution and efficiency, and expects new use cases to drive continued growth.

    What to watch in Q2 FY26

    5

    Global Equity Mandate Departure

    Q2 FY26
    CurrentExpected $3 billion redemptions
    TargetConfirmation of departure and actual impact on AUM.

    Why it matters

    Significant AUM outflow from a single client, impacting equity segment.

    Equity strategies are expected to have net redemptions of about $1.4 billion with net global equity expected redemptions of $3 billion, which offsets MDT's additions of $1.7 billion.

    Q&A highlights

    5

    What portion of existing clients care about/will utilize digital money market funds, and what portion of the entire cash market will care about tokenized money market funds in a decade?

    Currently, a very low percentage of clients are asking for tokenized products. Management views this as preparing for the future and protecting their franchise. They expect it to become routine in 10 years, with institutional utilization potentially reaching 25-50%, but emphasize the need for fundamental trust and regulatory frameworks.

    “Right now, it's a very low percentage of the clients that are asking for demanding or wanting these tokenized products. And so what you see with us and with others is a grand effort to get ready for tomorrow.”

    asked by Ken Worthington · answered by John Donahue

    2 min read5 chapters

    Detailed Narrative

    01

    Digital Asset Strategy

    Federated Hermes is focusing on digital assets as an infrastructure evolution rather than a speculative asset class, aiming to enhance distribution efficiency, settlement speed, transparency, and operational automation. They are prioritizing products aligned with liquidity management, including the upcoming launch of a money market management digital treasury fund supporting both traditional and on-chain distribution. The firm is also participating in collaborative initiatives with BNY and Goldman Sachs for mirror tokenization of money market fund shares and exploring digital sterling liquidity products in the U.K. and Europe.

    02

    Institutional Mandate Internalization

    A significant institutional client is internalizing the management of $3 billion in global equity sub-advised assets, expected to impact Q2. Management clarified this decision was strategic and not performance-driven, as the assets generally performed ahead of benchmark. The firm maintains a strong relationship with this client in other business areas, particularly in the EOS part of their business.

    03

    FCP Acquisition

    Federated Hermes completed the acquisition of an 80% interest in FCP Fund Manager LP on April 9, adding $3.2 billion of managed assets. FCP brings U.S. multifamily housing expertise, complementing existing U.K.-based real estate capabilities. The acquisition is expected to contribute $12 million in revenue and $11 million in operating expenses in Q2, with an estimated $0.11 EPS impact.

    04

    Fundraising Activities

    The firm successfully closed its European Direct Lending 3 fund at $780 million, building on previous vintages (EDL 1 raised $330 million, EDL 2 raised $700 million). They are currently in the market with the sixth vintage of their global private equity co-invest fund (PEC series), having closed on about $300 million to date (previous PC 1-5 raised $400-600 million each, and PCV raised $500 million), and a new European real estate debt fund.

    05

    Money Market Outlook

    Management expects money market growth to continue in the single-digit range for 2026, following double-digit growth in 2024 and 2025. They anticipate new use cases emerging from digital product innovations, with institutional utilization potentially reaching 25% to 50% over time⏳, despite current low client demand. Money market yields remain attractive compared to alternatives.

    AI-generated summary of the company’s earnings call. Not investment advice.