Federated Hermes, Inc.

What they do

Federated Hermes advises its own mutual funds and separate accounts across equity, fixed-income, alternative/private markets, multi-asset and money market strategies, and also earns fund-related administrative, distribution and shareholder servicing fees. It operates in one reportable segment, the investment management business, and additionally provides stewardship, real estate development and renewable energy project development services. Fees are contract-based and generally calculated as a percentage of average net assets, so revenue moves with asset levels and asset mix.

Revenue drivers

• Money market assets — Largest asset class at $682.6 billion of the $902.6 billion in managed assets at December 31, 2025, and 50% of Q2 2026 revenue; money market carries the lowest advisory fee rates.
• Equity — Record $109.6 billion at June 30, 2026, up 23% year over year; equity funds carry the highest advisory fee rates, and 30% of Q2 2026 revenue came from equity long-term assets.
• Fixed-income — $100.5 billion at June 30, 2026, up 2% year over year; fixed-income fee rates sit between equity and money market, and it contributed 10% of Q2 2026 revenue.
• Alternative / private markets and multi-asset — Alternative/private markets assets were $21.6 billion at June 30, 2026, up 4% year over year including $3.2 billion from the FCP acquisition; together with multi-asset these contributed 8% of Q2 2026 revenue.

Recent performance

Q2 2026 EPS was $1.38 on net income of $104.3 million, versus $1.16 and $91.0 million in Q2 2025. Revenue rose 18% to $502.8 million, driven by higher average equity and money market assets plus $13.9 million from the FCP acquisition. Operating expenses rose 20%, including a $22.4 million increase in distribution expense, a $16.7 million increase in compensation and related expense (including $6.5 million of FCP-related costs), and a $7.0 million increase in professional service fees. Total managed assets reached a record $911.6 billion at June 30, 2026, up 8% from $845.7 billion a year earlier but up only $4.5 billion from March 31, 2026. Full-year 2025 revenue was $1.80 billion with net income of $403.3 million and diluted EPS of $5.13.

Strategy

Management is broadening the product line, launching two new ETFs in the quarter and introducing a fund designed for participants in the blockchain ecosystem. It is expanding private markets through the acquisition of a majority (80%) interest in U.S. real estate manager FCP Fund Manager, L.P., which closed in April 2026 and added $3.2 billion of assets. It continues to emphasize its MDT suite of quantitative solutions, which reached record gross sales and its 14th consecutive quarter of net positive sales. The company returned capital through a $0.38 per share quarterly dividend declared in July 2026 and repurchased 1,119,805 class B shares for $58.9 million during Q2 2026.

Risks

• Asset mix concentration — Money market assets were $682.6 billion of $902.6 billion at year-end 2025 and generated 50% of Q2 2026 revenue, but carry lower fee rates than equity or alternatives.
• Market and flow sensitivity — Revenue is contract-based on average net assets, and public market products can be redeemed at any time with no advance notice, so asset declines flow directly into revenue and earnings.
• Fee waivers — The company can implement voluntary yield-related fee waivers and other waivers or reimbursements, which reduce revenue and profitability.
• Intangible asset impairment — The indefinite-lived intangible for the FHL right to manage public fund assets had a carrying value of $72.2 million ($97.3 million) and was tested at year-end 2025 after projected cash flows declined; no impairment was recorded then or indicated in Q2 2026.

Outlook

The 8-K and 10-Q excerpts provided do not include forward earnings or guidance figures. Management highlighted record total and equity assets, record MDT gross sales, new ETF and blockchain-related fund launches, and the FCP private markets acquisition as recent progress. The company noted no material changes to its risk factors or market risk exposures as of June 30, 2026.