FHI — Federated Hermes, Inc.

Summary of Federated Hermes Q1 2026 Earnings Call

1. Key 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.

2. Strategic 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.

3. Forward 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.

4. Bad 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.

5. Notable 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.