Federated Hermes filed its latest "10-K Annual Report" with the SEC Friday, and the 103-page document contains a wealth of information on money market mutual funds, including a discussion on "EU and UK MMF Reforms". The report tells us, "Federated Hermes ... is a global leader in active investing with $902.6 billion in assets under management ... at December 31, 2025. Federated Hermes has been in the investment management business since 1955 and is one of the largest investment managers in the United States (U.S.).... Federated Hermes provides investment advisory services to 176 Federated Hermes Funds as of December 31, 2025.... Of the 176 Federated Hermes Funds, Federated Hermes' investment advisory subsidiaries managed as of December 31, 2025, 22 money market funds with $508.4 billion in AUM, 46 equity funds with $55.0 billion in AUM, 52 fixed-income funds with $46.0 billion in AUM, 51 alternative/private markets funds with $12.1 billion in AUM and five multi-asset funds with $2.9 billion in AUM." (Note: Register and make hotel reservations soon for Bond Fund Symposium, Crane Data's ultra-short bond fund conference, which will take place March 19-20 in Boston. We hope to see you next month!)
It continues, "As of December 31, 2025, Federated Hermes provided investment strategies to $278.3 billion in Separate Account assets. These Separate Accounts represent assets of government entities, high-net-worth individuals, pension and other employee benefit plans, corporations, trusts, foundations, endowments, sub-advised funds and other accounts or offerings owned or sponsored by third parties."
The filing explains, "Federated Hermes, which began selling money market fund offerings to institutions in 1974, is one of the largest U.S. managers of money market assets, with $682.6 billion in AUM at December 31, 2025. Federated Hermes has developed expertise in managing cash for institutions, which typically have strict requirements for regulatory compliance, relative safety, liquidity and competitive yields. Federated Hermes also manages retail money market offerings that are typically distributed through broker/dealers and other financial intermediary customers. At December 31, 2025, Federated Hermes managed money market assets across a wide range of categories: government ($420.5 billion); prime ($242.7 billion); and municipal (or tax-exempt) ($19.4 billion)."
Federated says, "As of December 31, 2025, managed assets in the U.S. financial intermediary market included $491.1 billion in money market assets, $70.3 billion in equity assets, $46.9 billion in fixed-income assets, $2.6 billion in multi-asset and $1.8 billion in alternative/private markets assets.... As of December 31, 2025, managed assets in the U.S. institutional market included $167.9 billion in money market assets, $49.6 billion in fixed-income assets, $7.3 billion in equity assets, $1.2 billion in alternative/private markets assets and $0.2 billion in multi-asset.... As of December 31, 2025, managed assets in the international market included $23.6 billion in money market assets, $20.3 billion in equity assets, $16.0 billion in alternative/private markets assets and $3.6 billion in fixed-income assets."
On the "U.K. and EU Money Market Fund reform, they write, "In the EU, the European Systemic Risk Board published a compliance report on the implementation of its recommendations on the reform of MMFs on February 12, 2025. It is yet to be established whether there will be substantive changes to the EU MMF Regulation following that report. On April 17, 2025, the CBI published a 'Notice of Intention on ESMA Guidelines on Stress Testing Scenarios under the Money Market Fund (MMF) Regulation' in which the CBI indicated its expectation of full compliance with ESMA's updated MMF stress-testing guidelines, which ESMA published on February 24, 2025 and applied beginning on May 4, 2025. These guidelines, updating 2024 parameters, establish common risk scenarios (credit, interest rate, liquidity, redemption) under Article 28 of the MMFR, and apply to competent authorities, MMFs and managers of MMFs."
Federated says, "On January 13, 2026, ESMA published a Final Report titled 'Guidelines on stress test scenarios under the MMF Regulation,' which includes updated guidelines and risk parameters, so that managers of MMFs have the information needed to fill in the reporting template mentioned in the MMF Regulation. In the U.K. and EU, public statements regarding progress on reforms of the regulatory regime for MMFs are expected. In the U.K., the FCA and BoE published a joint consultation setting forth their proposals for a post-Brexit MMF regime in the U.K., while HMT consulted on changes to legislation. While the U.K. regime proposed by the FCA and BoE was substantially based on the EU MMF Regulation, certain differences were proposed. As of January 31, 2026, the European Commission has not yet reopened its MMF Regulation file."
Discussing the "Risk of Federated Hermes' Money Market Offerings' Ability to Maintain a Stable Net Asset Value," they explain, "Approximately 53% of Federated Hermes' total 2025 revenue was attributable to money market assets. Money market fund investments are neither insured nor guaranteed by the FDIC or any other government agency. Federated Hermes' retail, government/public debt, private and collective money market funds seek to maintain a stable or constant NAV, and its non-U.S. low-volatility NAV money market funds seek to maintain a constant NAV, but will move to a four-digit NAV if such fund's NAV falls outside of a 20-basis point collar. While stable or constant NAV money market funds seek to maintain a NAV of $1.00 per share, it is also possible to lose money by investing in these funds."
The 10-K continues, "Federated Hermes also offers institutional prime or municipal (or taxexempt) money market funds which transact at a fluctuating NAV that use four-decimal-places ($1.0000), and a short-term variable NAV non-U.S. money market fund. It is also possible to lose money by investing in these funds. Federated Hermes devotes substantial resources to credit analysis, integration of proprietary insights from fundamental investment analysis (including governance, environmental or social factors and engagement interactions for many of its investment offerings) and security valuation, managing its offerings. However, the NAV of an institutional prime or municipal (or tax-exempt) money market fund, or variable NAV fund or, if the above described conditions are met, a low-volatility NAV money market fund, can fluctuate, and there is no guarantee that a retail, government/public debt, private and collective (i.e., stable or constant NAV) money market fund will be able to preserve a stable or constant NAV in the future. Market conditions, liquidity constraints, prolonged periods of low interest rates or regulatory developments and requirements that limit supply of money market securities, create illiquidity, or shift asset levels and mix can adversely affect money market fund NAVs, asset levels and performance."
It also states, "If the NAV of a Federated Hermes stable or constant NAV money market fund were to decline to less than $1.00 per share, or if the fluctuating NAV of an institutional prime or municipal (or tax-exempt) money market fund, or variable NAV money market fund or low-volatility NAV money market fund consistently or significantly declines to less than $1.0000 per share, such Federated Hermes money market fund would likely experience significant redemptions, resulting in reductions in AUM, loss of shareholder confidence and reputational harm, all of which can cause material adverse effects on Federated Hermes' Financial Condition. Under U.S. money market fund reforms, significant daily redemptions from institutional prime or municipal (tax-exempt) money market funds also can trigger discretionary or mandatory redemption fees, potentially leading to further AUM reductions, loss of confidence, and material adverse effects on Federated Hermes' Financial Condition."
Finally, the filing adds, "Many of Federated Hermes' offerings are designed for banks, insurance companies and other institutional investors, which hold a large portion of its assets, particularly in money market, fixed-income and alternative/private market strategies. Changes in the structure or attractiveness of institutional investment offerings, due to regulatory developments, market conditions, competing offerings (such as FDIC-insured deposit products or non-transparent, actively managed ETFs) or other factors, can limit Federated Hermes' ability to retain or grow market share and materially adversely affect profitability and Federated Hermes' Financial Condition. Certain offerings can also be impact-oriented or other governance, environmental or social offerings and unsuitable for certain fiduciary customers in the U.S. without consent, or disfavored for political or other reasons, which can constrain asset growth and adversely affect, potentially in a material way, future profitability and Federated Hermes' Financial Condition."
