What is the timing of the $3 billion global equity withdrawal, and how do the fees on that mandate compare to new MDT wins?

The $3 billion departure is likely a Q2 event, and the fees on that mandate were lower than the average. “That's probably a Q2 departure and the fees on that were lower than the average bear.”

What is the timeline for SCP's next fund launch and the demand for real assets from LPs?

SCP is currently investing in Fund V (about 30% invested) and will not launch Fund VI until Fund V is well underway, likely mid-year 2027. Management is excited about the future launch. “they won't start Fund VII until they're well down the path to finishing Fund VI. So that will be maybe midyear in 2027.”

Are MDT ETFs attracting a new customer or is much of the demand coming from existing customers that like the ETF wrapper?

It's a combination, expanding footprint through more RIAs who are attentive to ETFs. The firm also sees a bigger push for portfolio construction services where clients want to integrate these products. “it is a combination of old intermediaries, new intermediaries, the underlying clients who are actually the owners, we don't see that much. But what we are seeing is a bigger push for what we call portfolio construction or PCS, where you're seeing our intermediary clients wanting to see how these things fit, how they work and how they make solutions.”

FHI

Federated Hermes (FHI) Q1 FY26 earnings call: guidance and Q&A

Q: 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.”

Earnings call· Mar 2026 (Q1 FY26)· Financials· May 1, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
FCP Acquisition Revenue Contribution	$12 million medium materiality	Q2 · FY26	High
FCP Acquisition Operating Expense Contribution	$11 million medium materiality	Q2 · FY26	High
Effective Tax Rate	25% to 28% medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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	—	—	—	—

FHI operating KPIs by quarter

FHI operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Assets under management (AUM)	$907B We ended Q1 with record assets under management of $907 billion led by gains in equity and money market strategies. Source: earnings call transcript	$912B We ended the second quarter with record assets under management of $912 billion, led by growth in equity and private market assets. Source: earnings call transcript	+0.6%
Assets under management (AUM) Equity	$101B Equity assets closed Q1 at a record high of $101 billion. Source: earnings call transcript	$110B Equity assets closed the second quarter at a record high of $110 billion. Source: earnings call transcript	+8.9%
Long-term net inflows Equity	$2.2B During Q1, equity assets increased by $2.9 billion or 3% from year-end driven by $2.2 billion in net sales. Source: earnings call transcript	-$1.1B Equity net redemptions in the second quarter were $1.1 billion, which included the expected global equity sub-advisory redemption of $3 billion that we discussed last quarter. Source: earnings call transcript	—
Long-term net inflows MDT Equity and Market-Neutral Strategies	$3.5B+ Equity sales results continue to be led by our MDT fundamental quant strategies, MDT equity and market-neutral strategies together had a record $5.8 billion of gross sales and over $3.5 billion in net sales in Q1. Source: earnings call transcript	$3.5B+ MDT equity and market-neutral strategies had a record $6 billion of gross sales and over $3.5 billion in net sales in the second quarter. Source: earnings call transcript	—
Assets under management (AUM) Fixed Income	<$100B Assets ended Q1 at just under $100 billion, down $329 million from year-end. Source: earnings call transcript	$100B+ Assets ended Q2 at just over $100 billion, up $689 million. Source: earnings call transcript	—
Long-term net inflows MDT Market Neutral Fund and ETF	$341M The M2 MDT Market Neutral Fund and recently launched ETF combined for $341 million in net sales. Source: earnings call transcript	$150M The MB2 Market Neutral Fund and its ETF combined for $150 million in net sales. Source: earnings call transcript	-56%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
Money Market Management Digital Treasury Fund	launch	upcoming launch
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

FCP Fund Manager LP Acquisition 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 Sachs Collaborative initiative for mirror tokenization of money market fund shares.

Participation in a collaborative initiative to enhance digital capabilities.

HBAR Foundation Alliance to offer tokenized access to a UCITS money market fund.

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

Risks & headwinds

Institutional Client Internalization Q2 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 Decrease Q1 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 Decline Q1 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

Global Equity Mandate Departure

Q2 FY26

Current Expected $3 billion redemptions

Target Confirmation 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.

Find out whether FHI delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.