Summary of Federated Hermes Q1 2026 Earnings Call

1Key Financial Results and Metrics

Assets Under Management (AUM):: Reached a record $907 billion, driven by gains in equity and money market strategies.

Equity Assets:: Increased to $101 billion, up 3% from year-end, with net sales of $2.2 billion and gross sales of $9.1 billion.

Fixed Income Assets:: Decreased slightly to just under $100 billion, with net redemptions of $422 million in Q1.

Money Market Assets:: Increased by $2 billion to $685 billion, although money market fund assets decreased by $6 billion.

Revenue:: Decreased by $3.9 million (1%) from the prior quarter, attributed to fewer days and lower real estate development fees.

Operating Expenses:: Increased by $5.4 million (2%) due to higher compensation and distribution expenses.

Dividends:: Increased to $0.38 per share, marking the 113th consecutive quarterly dividend.

2Strategic Updates and Business Highlights

Equity Strategies:: Strong performance from MDT fundamental quant strategies, with significant net sales and a majority of funds outperforming peers.

Private Markets:: Launched the European Direct Lending 3 fund, raising $780 million, and is preparing for the launch of a new global private equity co-invest fund.

Digital Assets:: Focus on developing digital cash products and tokenized funds, with initiatives aimed at enhancing distribution and operational efficiency.

Acquisition:: Completed the acquisition of an 80% interest in FCP Fund Manager LP, adding $3.2 billion in managed assets.

3Forward Guidance and Outlook

Q2 Expectations:: Anticipate $12 million in revenue from the FCP acquisition, with an estimated EPS impact of $0.11 due to transaction-related costs.

Net Institutional Mandates:: Approximately $1.1 billion expected to fund into private market strategies, with mixed expectations for equity and fixed income strategies.

Money Market Growth:: Expected to see continued growth in the money market segment, albeit at a slower pace than previous years.

4Bad News, Challenges, or Points of Concern

Fixed Income Challenges:: Continued net redemptions in fixed income strategies, with expectations for further redemptions in Q2.

Global Equity Withdrawals:: Anticipated $3 billion in global equity redemptions primarily from an institutional client internalizing asset management, which could impact fees.

Market Share Decline:: Slight decrease in money market mutual fund market share from 7.0% to 6.9%.

Digital Product Demand:: Current low demand for tokenized products among clients, indicating a need for further education and trust-building in this area.

5Notable Q&A Insights

Digital Cash Utilization:: Current client interest in digital money market funds is low, with expectations for gradual adoption over the next decade.

Equity Redemptions Timing:: Clarified that the $3 billion in global equity withdrawals is expected in Q2 and involves lower fee structures compared to new MDT strategies.

Demand for Real Assets:: Fund V is currently investing, with Fund VII launch expected mid-2027, indicating a cautious approach to new fund launches.

Money Market Growth Projections:: Anticipated single-digit growth in money market funds for 2026, down from previous double-digit growth rates, reflecting market maturity. This summary encapsulates the key elements of Federated Hermes' Q1 2026 earnings call, highlighting both the successes and challenges faced by the company.