Skip to content
    FHI
    Earnings call· Jun 2026(Q2 FY26)

    FEDERATED HERMES Q2 FY26 earnings call FHI

    Jul 31, 2026 Source

    Executive summary

    Federated Hermes Q2 FY26 — Record AUM Driven by Equity and Private Markets Growth

    Federated Hermes achieved record assets under management in Q2 FY26, primarily fueled by strong performance in equity and private market strategies, despite significant expected redemptions in global equity. The firm is actively pursuing digital initiatives, including a new money market management digital treasury fund, to adapt to evolving market structures. While money market assets saw a slight decline, the company maintains a strong market position and anticipates continued growth in fixed income and private markets.

    Highlights

    5

    • Achieved record assets under management of $912 billion at quarter-end, led by equity and private market growth.

    • Equity assets reached a record high of $110 billion, increasing 9% from Q1.

    • MDT equity and market-neutral strategies achieved record gross sales of $6 billion and over $3.5 billion in net sales in Q2.

    • The long-term investment platform began Q3 with $3.4 billion in net institutional wins yet to fund.

    • Money market fund managed assets more than doubled from $208 billion to $500 billion over the last 7.5 years.

    Concerns

    4

    • Equity net redemptions were $1.1 billion in Q2, including an expected $3 billion global equity sub-advisory redemption.

    • Total money market assets decreased by $7.9 billion or 1% in Q2.

    • Money market mutual fund market share decreased from 6.9% at the end of Q1 to 6.7% at the end of Q2.

    • Q2 operating expenses increased by $17.3 million or 5% from Q1, primarily due to FCP acquisition costs.

    Guidance & targets

    4
    CategoryTargetConfidence
    Effective tax rate
    25% to 28%
    medium materiality
    High
    Compensation and related expense (reduction)
    down around $5 million
    medium materiality
    High
    Systems and Communications expense (increase)
    up a couple of millions
    low materiality
    Medium
    Professional service fees (reduction)
    down by about $6 million
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Equity
    Record assets under management, with strong market value gains. Net redemptions included an expected $3 billion sub-advisory redemption. MDT strategies led sales.
    Assets Under Management: $110 billionGross Sales: $9.1 billionNet Redemptions: $1.1 billionFunds beating peers (3-year): 54%Funds in top quartile (3-year): 30%
    		——9%—
    Fixed Income
    Assets increased slightly, driven by market appreciation, partially offset by net redemptions. Core Plus and Core Ag SMA, Ultrashort funds, and conservative muni micro short fund led net sales.
    Assets Under Management: $100 billionMarket Appreciation: $1 billionFunds beating peers (3-year): 39%Funds in top quartile (3-year): 19%
    		————
    Alternative Private Markets
    Assets increased significantly, boosted by the FCP acquisition. New funds like the global private equity co-invest fund (PEC series) and European real estate debt fund are in the market.
    Assets Under Management: $21.6 billionIncrease from Q1: $2.6 billionFCP Acquisition Contribution: $3.2 billion
    		————
    Money Markets
    Total money market assets decreased due to seasonality and client movements. Money market funds were up year-over-year despite a quarterly decrease. Separate accounts are impacted by state pool liquidity.
    Total Assets: $7.9 billion decreaseMoney Market Funds Assets: $2.9 billion decreaseMoney Market Separate Accounts Assets: $5 billion decreaseMarket Share (including sub-advised): 6.7%
    		—-1% (total assets)-1% (total assets)—

    Operational metrics

    54
    Assets Under Management (AUM)
    $912 billion
    Q2 FY26 end

    record assets under management

    MDT equity and market-neutral strategies gross sales
    $6 billion
    Q2 FY26
    MDT equity and market-neutral strategies net sales
    $3.5 billion
    Q2 FY26
    MDT offerings net sales
    $2.7 billion
    Q2 FY26

    not including market neutral

    Strategic Value net sales
    $470 million
    Q2 FY26
    Equity funds and SMAs net sales
    $61 million
    Q3 FY26 (through July 24)
    Core Plus and Core Ag SMA net sales
    $190 million
    Q2 FY26
    Ultrashort funds net sales
    $134 million
    Q2 FY26
    Conservative muni micro short fund net sales
    $100 million
    Q2 FY26
    Fixed income and SMAs net sales
    $362 million
    Q3 FY26 (through July 24)
    MB2 Market Neutral Fund and ETF net sales
    $150 million
    Q2 FY26
    Global private equity co-invest fund (PEC series) raised to date (PEC 6)
    $300 million
    Q2 FY26

    PEC 1 to 4 raised $400 million to $600 million each, PEC 5 raised $500 million

    Net institutional wins yet to fund
    $3.4 billion
    Q3 FY26 start

    into both funds and separate accounts

    Expected net sales - Equity strategies
    $1.7 billion
    Q3 FY26
    Expected net sales - Private market strategies
    $1.3 billion
    Q3 FY26
    Expected net sales - Fixed income
    $300 million
    Q3 FY26
    Money market fund assets
    $508 billion
    FY25 end

    record high

    Money market fund assets
    $500 billion
    Q2 FY26 end
    Money market separate account assets
    $10 billionup 6.4% year-over-year
    Q2 FY26 end
    Money market mutual fund market share (including sub-advised)
    6.7%down from 6.9% at Q1 end
    Q2 FY26 end
    Money market fund average share gain (over 7.5 years)
    $0.20
    7.5 years
    Money market fund average share loss (over 7.5 years)
    $0.23
    7.5 years
    Money market fund managed assets (start of 7.5 year period)
    $208 billionmore than doubled to $500 billion
    7.5 years ago
    Managed assets
    $899 billion
    July 2026

    as of a few days ago

    Money market assets (as of July 2026)
    $665 billion
    July 2026
    Equity assets (as of July 2026)
    $109 billion
    July 2026
    Fixed income assets (as of July 2026)
    $100 billion
    July 2026
    Alternative private markets assets (as of July 2026)
    $23 billion
    July 2026
    Multi-asset assets (as of July 2026)
    $3 billion
    July 2026
    Money market mutual fund assets (as of July 2026)
    $490 billion
    July 2026
    Money market fund assets range
    $490 billion to $501 billion
    July 2026
    Money market fund average asset levels
    $496 billion
    July 2026
    Total revenues
    $23.8 millionup 5% from prior quarter
    Q2 FY26
    Revenue impact from FCP acquisition
    $14 million
    Q2 FY26
    Revenue impact from equity asset growth
    $7.6 million
    Q2 FY26
    Revenue impact from additional day
    $5.1 million
    Q2 FY26
    Rivington gain on sale of renewable energy property
    $2.9 million
    Q2 FY26

    recorded in other service fees

    U.K. real estate development fee
    $2 million
    Q2 FY26

    for a project that did not advance into construction, recorded in other service fees

    Revenue impact from lower money market average assets
    $8.4 millionlower revenues
    Q2 FY26
    Total carried interest and performance fees
    $1.4 millioncompared to $388,000 in prior quarter
    Q2 FY26
    Carried interest and performance fees offset by compensation expense
    $682,000
    Q2 FY26
    Total operating expenses
    $17.3 millionincreased 5% from prior quarter
    Q2 FY26
    Transaction costs from FCP acquisition
    $9.7 million
    Q2 FY26
    Compensation and related expense increase
    $6.9 million
    Q2 FY26

    due to FCP's quarterly compensation expense, normal merit increases and other factors

    Stock-based compensation expense
    $6 millionseasonally lower
    Q2 FY26
    Advertising and promotional activities increase
    $3.2 million
    Q2 FY26

    due to spring advertising campaign

    Intangible asset amortization increase
    $3 million
    Q2 FY26

    primarily from FCP acquisition

    Distribution expense decrease
    $4 million
    Q2 FY26

    due to lower money market fund average assets

    Other expense increase (FCP property management)
    $2.8 million
    Q2 FY26
    Net income impact from Q2 specific items
    $4.7 millionlower net income
    Q2 FY26
    Effective tax rate
    25.8%
    Q2 FY26
    Cash and investments
    $481 million
    Q2 FY26 end
    Cash and investments (excluding noncontrolling interest)
    $416 million
    Q2 FY26 end
    Short-end yield range
    3.5% to 4.5%
    H1 FY26

    Industry KPIs

    2
    MetricValueDetails
    Fundraising inflows$300 millionUSD
    Performance revenue$1.4 millionUSD

    Product announcements

    1
    ProductTypeDetails
    Money Market Management Digital Treasury Fundlaunch

    Deals & partnerships

    1
    FCP Fund Manager LPAcquisition of an 80% interest in FCP Fund Manager LP, adding U.S. multifamily real estate managed assets.

    The completion of the acquisition of an 80% interest in FCP Fund Manager LP in early April, added $3.2 billion of U.S. multifamily real estate managed assets.

    Risks & headwinds

    4
    Global equity sub-advisory redemptionQ2 FY26

    $3 billion

    Mitigation: Expected and discussed last quarter.

    Money market separate account seasonalityQ2 and Q3 annually

    $5 billion decrease in Q2

    Mitigation: Impacted by liquidity levels of large state pools, typically decreasing after tax collections.

    Volatility in money market fund market shareQ2 FY26

    Decreased from 6.9% in Q1 to 6.7% in Q2

    Mitigation: Attributed to large market deals (IPOs), client movements, and retail programs; management emphasizes long-term growth and revenue share over short-term asset share fluctuations.

    Uncertainty in digital asset regulationsOngoing

    Early-stage efforts, clients looking more for information than transaction ability

    Mitigation: Engaging with regulated digital asset intermediaries; expecting engagements to grow as regulations clarify and platform develops.

    What to watch in Q3 FY26

    4

    Compensation and related expense

    Q3 FY26
    Current$6.9 million increase in Q2
    Targetdown around $5 million

    Why it matters

    This will indicate if the one-time📎 acquisition-related compensation costs have indeed rolled off, impacting profitability.

    On the comp-related line, I expect in the next quarter, we won't have the onetime comp expense from them. We will have their ongoing. So that number to be down around $5 million.

    Q&A highlights

    6

    Has investor interest in fixed income changed with higher rates, and can the strategy return to positive net flows?

    Management believes fixed income can achieve positive net flows due to product variety (e.g., ultrashort funds, payer ETF) and strong investment management, especially if rates remain "higher for longer." They note some client movement into ultrashort funds and conservative muni micro short funds.

    “We think our products, including our payer ETF, which gives a little higher yield and the FAs and the clients like that. has had good response as well. And so we think the variety of products out the yield curve. The strength of the team and the investment management will entitle us to positive flows here in the foreseeable future in fixed income.”

    asked by Robin Holby · answered by John Donahue

    2 min read5 chapters

    Detailed Narrative

    01

    Record AUM and Segment Performance

    Federated Hermes achieved a record $912 billion in assets under management, driven by strong growth in equity and private market assets. Equity assets reached $110 billion, up 9% from Q1, with MDT strategies contributing significantly to gross and net sales. Private market assets increased by $2.6 billion to $21.6 billion, boosted by the FCP acquisition and new fund launches.

    02

    Money Market Dynamics

    Money market assets experienced a slight decrease of 1% in Q2, attributed to typical seasonality, large market deals, and client movements. Despite this, money market fund managed assets have more than doubled over the past 7.5 years, and the firm maintains a top-tier market share. Management noted that if the "higher for longer" interest rate environment persists, money market funds remain attractive.

    03

    Digital Asset Initiatives

    The company is actively developing its digital asset platform, including the launch of a money market management digital treasury fund with both traditional and on-chain distribution. This dual-track approach aims to provide flexibility for institutional investors and stablecoin issuers, with ongoing engagement with regulated digital asset intermediaries as regulations evolve.

    04

    Acquisition Impact and Expenses

    The acquisition of an 80% interest in FCP Fund Manager LP added $3.2 billion in U.S. multifamily real estate assets and contributed approximately $14 million to Q2 revenues. However, the acquisition also led to a $9.7 million increase in Q2 operating expenses, including $6.5 million in non-recurring📎 compensation and $3.2 million in professional service fees.

    05

    Fixed Income Stabilization and ETF Strategy

    Fixed income assets saw a modest increase of $689 million in Q2, with net flows stabilizing. Management expressed confidence in achieving positive net flows in the foreseeable future, citing a variety of products across the yield curve and strong investment management. The firm continues to launch active ETFs, focusing on areas of traditional mutual fund success and high industry sales, with plans to explore active ETFs outside the U.S.

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