Federated Hermes, Inc.

Q2 total revenues increased $23.8 million, or 5%, versus the prior quarter. Total operating expenses increased $17.3 million, or 5%, and the effective tax rate was 25.8%. Management did not disclose consolidated EPS in the prepared remarks. By segment, equity assets increased $8.8 billion, or 9%, to a record $110 billion; fixed-income assets were up $689 million to just over $100 billion; alternative/private-markets assets increased $2.6 billion to $21.6 billion; and money market assets decreased $7.9 billion, or about 1%, to $500 billion at quarter end. For the forward view, management said Q3 beginning institutional wins were about $3.4 billion yet to fund, with expected net sales of about $1.7 billion in equity, about $1.3 billion in private markets, and about $300 million in fixed income.

Chris Donahue struck a constructive tone, emphasizing record assets, strong equity sales, and the depth of Federated Hermes’ product set across the yield curve and private markets. He said the company’s cash franchise remains resilient despite quarter-to-quarter share swings and seasonality, and he framed the money market business as a long-term success. He also highlighted digital-asset initiatives, including a money market management digital treasury fund and early-stage work on tokenized and on-chain share classes, as longer-term growth opportunities.

Tom Donahue said Q2 revenue rose by $23.8 million, or 5%, with the FCP acquisition contributing about $14 million, equity asset growth adding $7.6 million, and an additional day adding $5.1 million. He noted that lower money market average assets reduced revenue by $8.4 million, while carried interest and performance fees were $1.4 million versus $388 thousand in Q1. Expenses rose $17.3 million, mainly from FCP-related transaction costs, compensation, professional fees, advertising, and amortization; he also quantified the combined Q2 impact of several items as about $4.7 million of lower net income, or about $0.06 per share. Cash investments ended Q2 at $481 million, or $416 million excluding noncontrolling interests, and he estimated the tax rate would be in the 25% to 28% range.

Analysts focused on fixed income flows, money market share movement, expenses after the FCP acquisition, and the company’s active ETF strategy. Management said fixed-income interest has improved in ultra-short, conservative micro-short, and higher-yielding products, and that the mix of products plus the team’s strength should support positive flows in the foreseeable future. On money markets, they said asset changes are driven by seasonality, large client movements, market deals, and short-rate attractiveness; they expect cash to remain attractive if rates stay higher for longer. On expenses, Tom Donahue said next quarter should see lower one-time FCP comp and professional fees, while systems/communications should rise a couple million and other lines will continue to be affected by FCP and FX.