News Archives: February, 2026
Federated Hermes reported it Q4'25 earnings Thursday night and hosted its Q4'25 earnings call on Friday morning. In the press release, President & CEO J. Christopher Donahue, says, "Federated Hermes' record assets at year-end were again driven by money market asset increases, as our liquidity products provided attractive cash management resources and opportunities for risk-adjusted returns. We also continued to see investor interest in our growing range of investment solutions beyond mutual funds, including ETFs, CITs and SMAs, which provide additional opportunities for financial professionals to meet the needs of their customers. In the fourth quarter, SMA net sales were led by our MDT All Cap Core strategy, our MDT Mid Cap Growth equity strategy and our Core Plus fixed-income strategy." (Note: Please join us for our next event, Bond Fund Symposium, which is March 19-20 in Boston, Mass.!)
The release says, "Federated Hermes' money market assets were a record $682.6 billion at Dec. 31, 2025, up $52.3 billion or 8% from $630.3 billion at Dec. 31, 2024 and up $29.8 billion or 5% from $652.8 billion at Sept. 30, 2025. Money market mutual fund assets were a record $508.4 billion at Dec. 31, 2025, up $46.7 billion or 10% from $461.7 billion at Dec. 31, 2024 and up $15.7 billion or 3% from $492.7 billion at Sept. 30, 2025. Federated Hermes' money market separate account assets were a record $174.2 billion at Dec. 31, 2025, up $5.6 billion or 3% from $168.6 billion at Dec. 31, 2024 and up $14.1 billion or 9% from $160.1 billion at Sept. 30, 2025."
Donahue explains on the call, "We reached another record high at the end of 2025 for total money market assets, which increased by $30 billion to reach $683 billion. Money market fund assets increased by $16 billion or 3% in Q4 to reach a record high of $508 billion. Money market separate accounts increased by $14 billion in the fourth quarter, reflecting seasonal patterns. Market conditions remain favorable for cash as an asset class. In addition to the appeal of relative safety in periods of volatility, money market strategies present opportunities to earn attractive yields compared to alternatives such as bank deposits and direct investments in T-bills and commercial paper. Our estimate of money market fund market share, including sub-advised funds, was about 7% at the end of 2025, down from 7.1 at the end of Q3."
He continues, "Regarding digital asset efforts, we are advancing a series of strategic initiatives that bring together the strength of money market investment and operational expertise with efficiency and transparency of blockchain technology. Our partnership with Archax, the first FCA-regulated digital securities exchange to offer tokenized U.S. money market funds, marks its first major non-US digital asset initiative. The platform enables professional investors to hold beneficial ownership tokens across multiple blockchains and access money market liquidity directly on-chain. The Archax relationship complements our US digital efforts, where we are the sub-adviser for the Superstate Short Duration US Government Securities Fund, a private tokenized fund. We are also participating in the launch of a collaborative initiative between BNY and Goldman Sachs that will utilize mirrored tokenization of money market fund shares."
Donahue comments, "We have a robust pipeline of tokenization projects in the U.S. and abroad, including the development of efforts for a Genius Act compliant money market fund and ongoing integration discussions with several leading firms developing digital technology for fully on-chain trading and settlement of tokenized share classes. We believe these efforts position the firm well for the digital transition as we work collaboratively with service providers and stakeholders on developing new standards for combining liquidity, investor protections, and blockchain-enabled capabilities for modern financial markets. Looking now at recent asset totals as of a few days ago, managed assets were approximately $909 billion, including $684 billion in money markets, $101 billion in equities, $101 billion in fixed income, $19.5 billion in alternative private markets, $3 billion in multi-asset. Money market mutual fund assets were at $500 billion."
Asked about tokenization during the Q&A, Donahue answers, "So on the end demand from clients, it's not as robust as what you might expect from all the press, media, and in fact, all the work we're doing on it. It's getting ready for tomorrow, and we expect this will be the way things go down the road. But the end clients are perfectly sanguine about using the current products in the current way. And when you ask about milestones, you've got to get lots of money moving into these things, in addition to lots of work being done on how they're structured. Almost every week, there's another new structure and a new idea that is very intriguing. And this is what we're keeping our eyes on, and, basically, we're working on all of them."
He states, "A milestone would be when you start to see real money moving into them. There could also be some regulatory things, and that's really hard to predict because you don't know what structures you're going to obtain, and this is true both in the U.S. and globally.... When I was in Singapore and Hong Kong last year ..., both of those government entities, Singapore and Hong Kong, were most anxious to be the tokenized headquarters for trading money funds, and they were well down the road of organizing their government entities. But how much is in it and how much is how much money is actually flowing there is another question."
Money market CIO Debbie Cunningham responds, "So what we've identified in the US so far from a use case perspective is generally on a distribution basis, diversification, and on a use case basis for collateral purposes and for margining purposes. Both of which like the instantaneous settlement that is provided from a tokenized product.... So that's where the retail side of it comes in. You know, our product outlook has many additional use cases, many additional benefits that accrue to the end user. So we feel like this is just the tip of the iceberg, and that it will serve more purposes and more ultimate end user clients. It's just, as Chris said, a lot of ... work ... needs to be put into place to keep these ... high-quality products that we have in money market funds, liquid and ... serving the purpose of all the end users."
Given a question on the rate cycle, Cunningham replies, "Our outlook from ... a firm standpoint for 2026, is one rate cut by 25 basis points.... You're [still] looking [a] terminal rate that is north of 3%, with a positively sloped curve.... When you look at the low-risk products, the high quality, the instantaneous liquidity and settlement that you get, especially if you're looking at the tokenized product aspect of it, you find that it's still very compelling from a use case perspective by both institutions, whose general other comparison outside of the fund industry is direct market securities -- repo, treasury bills, commercial paper -- where the positively sloped yield curve should give the fund the advantage."
She adds, "And then on the retail side of the equation, if you've got a Fed cutting cycle or even a pause cycle, generally speaking, their other common type of product to use for liquidity purposes is bank deposits, and those are well below where a fund can generate.... So, you know, we saw a lot of retail growth driving the 2024 double-digit gains in the market from an AUM standpoint. The institutional side kicked in in 2025 to help generate those double-digit gains again. Maybe we only get single-digit gains from an AUM standpoint in 2026, but our expectation is it's still pretty positive from an environment standpoint."
Finally, when asked about the seasonality of money fund flows, Cunningham explains, "On a seasonal basis, generally, January is usually our worst month of the year from an inflow basis, and it's usually actually an outflow. First quarter, ... the corporate tax date in March and then individual tax date flowing into the second quarter in April, are generally big hits from a money fund AUM standpoint. Then the second half of the year is generally where the growth really picks up, with December generally ... being the highest quarter from ... year-end.... [It's] window dressing to some degree that is then reversed in January."
She adds, "What's interesting from a fund standpoint versus another type of product standpoint ... generally our separate accounts. Our state pools are in fact gathering money starting in the first quarter and going strong into the third quarter, ... and then they have large outflows that occur later in the third quarter and in the fourth quarter. So the two kind of nicely offset each other from our own AUM standpoint, which is a good thing. But from a strictly money market fund standpoint, it gets better as the year goes on."
