Federated Hermes Q2 2025 Earnings Report

Federated Hermes EPS Results

• Actual EPS: $1.16
• Consensus EPS: $0.99
• Beat/Miss: Beat by +$0.17
• One Year Ago EPS: $0.96

Federated Hermes Revenue Results

• Actual Revenue: $424.84 million
• Expected Revenue: $424.83 million
• Beat/Miss: Beat by +$14.00 thousand
• YoY Revenue Growth: +5.50%

Federated Hermes Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: After Market Closes
• Conference Call Date: Friday, August 1, 2025
• Conference Call Time: 9:00AM ET

Federated Hermes (NYSE:FHI) is a publicly owned investment manager. Through its subsidiaries, the firm provides its services to individuals, including high net worth individuals, banking or thrift institutions, investment companies, pension and profit sharing plans, pooled investment vehicles, charitable organizations, state or municipal government entities, and registered investment advisors. Through its subsidiaries, it manages separate client-focused equity, fixed income, balanced and money market mutual funds along with separate client-focused equity, fixed income, money market, and balanced portfolios. Through its subsidiaries, the firm invests in the public equity and fixed income markets across the globe. It invests in growth and value stocks of small-cap, mid-cap, and large-cap companies. The firm makes its fixed income investments in ultra-short, short-term, and intermediate-term mortgage-backed, U.S. Government, U.S. corporate, high yield, and municipal securities. It employs both fundamental and quantitative analysis to make its equity investments. Federated Hermes, Inc. was founded in 1955 and is based in Pittsburgh, Pennsylvania with additional offices in New York City and London, United Kingdom.

Federated Hermes Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record assets under management reached $846 billion in Q2, driven by a 10% rise in equity AUM and $1.8 billion in net equity sales.
• Positive Sentiment: MDT fundamental quant equity strategies achieved $3.8 billion in net sales and saw seven of eight mutual funds rank in the top Morningstar quartile over three years.
• Negative Sentiment: Fixed income AUM decreased by about 1% (∼$0.8 billion), primarily due to $2.4 billion in net redemptions from large public entities.
• Positive Sentiment: The Board approved a new share repurchase program for 5 million shares after repurchasing $64.5 million of stock in Q2.
• Neutral Sentiment: Approximately $1 billion of institutional mandates are committed but yet to fund in Q3, offering potential AUM growth if fully converted.

Presentation

[Operator]

Greetings, and welcome to the Federated Hermes Incorporated Second Quarter twenty twenty five Analyst Call and Webcast. At this time, all participants are in a listen only mode and a question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Raymond Hanley. Sir, the floor is yours.

[Raymond Hanley, President at Federated Investors Management Company]

Hello and welcome to our call. Leading today's call will be Chris Donahue, CEO and President of Federated Hermes and Tom Donahue, Chief Financial Officer. Joining us for the Q and A are Safran Nasebe, who is the CEO of Federated Hermes Limited and Debbie Cunningham, the Chief Investment Officer for Money Market. During today's call, we may make forward looking statements and we want to note that Federated Hermes' actual results may be materially different than the results implied by such statements. Please review the risk disclosures in our SEC filings.

[Raymond Hanley, President at Federated Investors Management Company]

No assurance can be given as to future results and Federated Hermes assumes no duty to update any of these forward looking statements. Chris?

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Thank you, Ray, good morning. I will review Federated Hermes business performance and Tom will comment on our financial results. We ended Q2 with record assets under management of $846,000,000,000 led by gains from our equity strategies. Equity assets increased by $8,100,000,000 or 10% from the prior quarter. Second quarter equity net sales of $1,800,000,000 represent an organic growth rate of just under 9%.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Our MDT fundamental quant strategies produced solid sales results again in the second quarter. MDT equity strategies had net sales of $3,800,000,000 in the second quarter, up from $3,300,000,000 in the first quarter. For Q3 through July 25, these strategies have had net sales in combined funds and SMAs of $730,000,000 Seven of the eight MDT equity mutual fund strategies are in the top performance quartile of their Morningstar categories for the trailing three years ended June 30. Four of these strategies are in the top decile. The second quarter saw further improvement in flows from strategic value dividend strategies.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

These strategies had second quarter net sales of $344,000,000 compared to $131,000,000 in the prior quarter. And this includes the funds, the SMA and the institutional separate accounts under these strategies. We had net sales in 19 equity fund strategies during the second quarter, including a variety of the MDT offerings and including the Asia ex Japan fund. MDT's offerings included by highlight, MDT MidCap Growth, MDT MidCap Collective and the AllCap Core. Looking at our equity fund performance at the end of the second quarter and using Morningstar data for the trailing three years, 56% of our equity funds were beating peers and 26% were in the top quartile of their category. For

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Q3 through seventwenty five combined equity funds and SMAs had net sales of $480,000,000 Now turning to fixed income, assets decreased by about $800,000,000 or 1% in the second quarter from the prior quarter due mainly to net redemptions of $2,400,000,000 partially offset by higher market valuations and FX of 1,600,000,000.0 Redemptions included about $1,500,000,000 from two large public entities that have regular sizable inflows and outflows. We had 15 fixed income funds with net sales in the second quarter, including the conservative micro short fund and the total return bond fund ETF. Regarding performance at the end of the second quarter and using Morningstar data for the trailing three years, 46% of our fixed income funds were beating peers and 21% were in the top quartile of their category. For Q3 through seventwenty five combined fixed income and SMAs had net sales of 47,000,000 In the alternative private markets category, assets increased by $1,300,000,000 or 7% in the second quarter due mainly to the impact of FX rates, which was 1,100,000,000 and net sales of $231,000,000 mostly in the MDT market neutral fund. Now we are in the market, as I've said in previous calls, with European Direct Lending III, the third vintage of our European Direct Lending Fund.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Today, we've closed on $450,000,000 target raises $750,000,000 and EDL-one raised 300,000,000 EDL-two raised $6.40 We're also in the market with the global private equity co invest fund, which is the sixth vintage of the PEC series. Our first close in April was for about $114,000,000 the target raises $500,000,000 and PEC PEC one to five raised approximately 400,000,000 to $600,000,000 in each fund. The Federated Hermes GPE Innovation Fund II, the second vintage of our pan European growth private equity innovation fund is in the market. To date, we've closed on $110,000,000 with a target raise of 300,000,000 and the first vehicle raised $240,000,000 We're also in the market with the European Real Estate Debt Fund, a new pooled European debt fund. Our marketing is here in 2025 and our target is 300,000,000 Early in the second quarter, we completed the acquisition of a majority interest in Rivington Energy Management Limited, a UK renewable energy company. The acquisition enhances our private markets platform by adding project development expertise and specialist energy transition sector experience to our institutional investment and asset management capabilities in the infrastructure asset class. We are actively working on product development plans with the Rivington team.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Across our long term investment platform, we began Q3 with about $1,000,000,000 in net institutional mandates yet to fund in both funds and separate accounts. Fixed income expected net additions total about $545,000,000 with wins in multi sector, high yield and active cash. Approximately $439,000,000 of total wins are expected to come into private market strategies. We have approximately 1,600,000,000 in wins yet to fund mostly in direct lending, private equity and trade finance, partially offset by $1,200,000,000 in redemptions from the restructuring of our UK property trust, which will occur in the third quarter. We have managed this particular fund for decades and it has delivered solid performance to our investors.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

The restructuring and transition of the fund to a third party is a result of changing market demand for such products. It is being done in collaboration with our investors and with the goal of providing them liquidity options to suit their preferences as expressed in their recent voting. The wins in this area are obviously in direct lending and private equity and trade finance. Equities expected additions total about $59,000,000 driven by MDT and some offset by some outflows. Moving on to money markets.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

We reached another record high at the end of Q2 for money market fund assets, which increased by $3,100,000,000 to reach $468,000,000,000 These assets moved higher in the second quarter despite seasonal factors that often result in lower assets. Money market separate accounts decreased by 5,900,000,000 reflecting usual 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. We are actively participating in the development of tokenized money market funds and digital asset infrastructure and continue to rigorously explore opportunities ranging from tokenized share classes to offering fully digitized assets.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Over the past several years, we have engaged with a broad array of innovators and well regarded financial institutions to identify and evaluate opportunities in the digital assets arena, going along with a significant amount of knowledge gained and experience along the way. We are sub advisor for the Super State Short Duration U. S. Government Securities Fund, a private tokenized fund that has assets of about $425,000,000 It was also recently announced that Federated Hermes will participate in the launch of a collaborative initiative between Bank of New York and Goldman Sachs that will use blockchain technology to maintain a record of their customers' ownership of select money market funds. This is a significant step towards enhancing the utility and transferability of existing money market fund shares.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Our participation highlights our commitment to the digital asset space where we expect ongoing innovation and growth. Our estimate of money market mutual fund market share, including sub advised funds was about 7.11 at the end of the second quarter, up slightly from about 7.1% at the end of the first quarter. Now looking at recent asset totals as of the last few days, managed assets were approximately $854,000,000,000 including six forty two billion dollars in money markets, 91,000,000,000 in equities, 98,000,000,000 in fixed income, 20,000,000,000 in alternative private markets, 3,000,000,000 in multi asset. Money market mutual fund assets were $476,000,000,000 Tom?

[Thomas Donahue, VP, Treasurer, CFO & Director at Federated Hermes]

Thanks, Chris. Total revenue for Q2 increased slightly from the prior quarter due mainly to higher revenue from more days in the quarter and revenue related to the Rivington acquisition, which were partially offset by lower revenue from performance fees and carried interest. Total Q2 carried interest and performance fees were $1,400,000 compared to $5,900,000 last quarter. Approximately $829,000 of the Q2 fees were offset by nearly the same amount of compensation expense. Q2 operating expenses increased from the prior quarter due mainly to the $12,900,000 VAT refund in Q1.

[Thomas Donahue, VP, Treasurer, CFO & Director at Federated Hermes]

In the other expense line item, FX and related expense was a credit of $5,800,000 for Q2 compared to a credit of $5,600,000 in Q1 as the pound strengthened against the dollar again. We have lowered the notional amount of our foreign currency forwards to £31,500,000 down from £86,700,000 at the end of Q2. Compensation and related expense increased by $1,600,000 from the prior quarter due mainly to higher incentive comp and base pay merit increases of 6,900,000 partially offset by seasonally lower expense for stock based compensation of $4,700,000 and payroll taxes of about 600,000 Advertising and promotional expense increased due mainly to the timing of our advertising campaign spend. The Q2 effective tax rate was 26.1. We expect the rate to be in the 25% to 28% range for 2025.

[Thomas Donahue, VP, Treasurer, CFO & Director at Federated Hermes]

At the end of Q2, cash and investments were $6.00 7,000,000 Cash and investments excluding the portion attributable to non controlling interests were $474,000,000 During Q, the company purchased approximately 1,500,000.0 shares of its stock for about $64,500,000 The Board of Directors approved a new share repurchase program yesterday for 5,000,000 shares in addition to the 1,100,000.0 shares remaining from the prior program. Ali, that concludes our prepared comments. We'd like to open up the call for questions.

[Operator]

Thank you. At this time, we'll be conducting our question and answer If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue and you may press 2 if you would like to remove your question from the queue. Our first question is coming from Patrick Davitt with Autonomous Research. Line is live.

[Patrick Davitt, Senior Analyst - US Asset Management at Autonomous Research]

Good morning everyone.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Morning.

[Patrick Davitt, Senior Analyst - US Asset Management at Autonomous Research]

On the back of your stablecoin tokenization comments, I think it'd be helpful maybe if you could update us on your broader thoughts around the extent to which you think these products could disintermediate the traditional money fund business? Or do you see it more as incremental to that traditional money fund cash exposure? Thank you.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Baseline, we would see it as incremental. New customers, new things. There's not an avalanche of use of these things right now. And don't forget, the basic thing on people with cash is they want daily liquidity at par. Now they're willing to go with a stable point that doesn't pay a yield, but then they also like a respectable daily yield.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

And we think that the Goldman Bank of New York methodology where Goldman creates a platform. Bank of New York is the custody and transfer agent, and the money fund sits there just like it always sat there as a money fund, and yet someone else is taking care of the tokenization. So that from the customer standpoint, it is in fact a tokenized money fund. But from the money fund operator standpoint, it's operating a regular 2A7 money fund in order to provide daily liquidity at par. So this is a very sound strategy.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

I'm not saying it's the only one that will go into the future, but overall, we think that's a very good one. One of the reasons that people are getting excited about this is because you can get seventwenty 4 activity trade anytime, but you still have to work out some of the mechanics of who gets the dividend. The way our program will work with Bony and Goldman right now is whoever owns the token at the end of the day is going to get the dividend. And this is not as much a tokenized money fund as others have full tokenized money funds. So our overall view is that you have to play in this space and we are talking to people, I got a list of them and there are many of them on there including European players where we're dealing with all the ideas of innovation.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

I can't go through all of them with you. One with Bank of New York and and Goldman, obviously, has been made public as as have super super safe.

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

Super safe.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Yeah. So Debbie, what would you add to that?

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

You know, you covered it very, very, very succinctly. The only thing I'd add is right now, we think this is the tip of the iceberg, Patrick. This is for our current products, that are on this platform, a different way to distribute. So we distribute through various types of intermediaries, through states, through insurers, through, broker dealers, through banks. We distribute directly.

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

This is another way of distributing our product, and in the process, turning it into a, a a ledger, product that has better transferability than a typical money market fund share, does. So we think it's a very, clever and new way, to be able to distribute product. And as Chris mentioned, there's lots of innovation that we think can happen that provide additional bells and whistles to why this is a product that will, you know, take over to some degree the future, but that's not what what is in existence today. What is in existence today is a traditional money fund being distributed to a different group of clients, particularly from a collateralization standpoint. So money funds, stablecoins you mentioned, they need to be backed by something.

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

They need to be backed by treasury bills or or money funds containing those treasury bills. That's what the Genius Act is all about. Money funds will provide that collateral, and we we will provide it on chain so that the ease of use is basically seamless. But lots of innovation to come as it exists today, distribution changes that are beneficial.

[Patrick Davitt, Senior Analyst - US Asset Management at Autonomous Research]

Great. Thanks. This is just a quick follow-up Debbie. I feel like we've been talking about this for a couple of years now, but as we get closer to likely Fed cuts, you starting to see any more institutions come in to talk to you about this long awaited rotation into money funds that we've been talking about for a while now? Thanks.

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

It's been alive and well, Patrick, through all of, 2000 you know, through from from the 2024 and all of 2025 year to date, so for the last year. But it's not really started in earnest because what we saw in Fed rate cuts at the 2024 didn't materialize into anything yet in 2025. So it's one of those wait till you see the whites of their eyes sort of thing, I I think, as far as volume goes. But we were basically flat on a money fund asset basis for the second quarter, which had really two different aspects to it. The first month, April, was very much personal tax outflows, so huge personal taxes, and from an institutional side, outflows due to margin calls.

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

If you recall, April 6 was the, you know, Liberation Day announcements, tariff announcements, many margin calls that came from institutional accounts. So what we lost in assets in April basically were then needed to be made up in May, they were as we ended up the quarter flat. However, it was definitely a tale of two quarters when you look at April compared to May and June. May and June are more confirmation of what we've been saying on the institutional side from a rotation into money funds and out of direct securities, whereas April was was more based on what the situation in the you know, what's happening from an economic and fiscal standpoint.

[Operator]

Thank you. Our next question is coming from Ken Worthington with JPMorgan. Your line is live.

[Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co]

Hi. Good morning. Thanks for taking the question. Debbie, how do you see growth in stablecoins impacting the money market fund industry? Our Treasury Secretary has suggested $2,000,000,000,000 of stablecoin assets in coming years.

[Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co]

If his target is reached, what does this mean for money markets given the supply of Teba Hills that are outstanding today? Does all the math work for money market funds?

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

Absolutely, Kenneth. Sure, the current size of the stablecoin market is about $250,000,000,000 very concentrated in two coins basically. And then the assets that are backing those two coins, Tether and Circle, are basically in treasury securities. There's some commercial paper in there, but it's mostly treasury securities. So that's all being soft up very easily right now.

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

What happens with the Genius Act is there's now more definition as to what needs to be backing a stable coin, and it's very short treasuries or treasury backed repo, which, you know, ultimately, a trillion, 2,000,000,000,000, it's put your finger in the air, I'm not sure where the number goes, but it's somewhere above, drastically above where it is in the $250,000,000,000 market today. What we thankfully have done in addition to the Genius Act is pass the debt ceiling renewal that gives us an extra $5,000,000,000 in treasuries, and ultimately we've seen a pretty good, know, coffers had extraordinary measures depleted some coffers which are being replenished at this point, but we also have had an improvement in bill supply, which we do believe will continue. And despite the fact that when Treasury went from Janet Yellen to Besson, there was a pushback on how much short term debt had been available in the market during the Yellen years with the expectation that Besson would start to term that debt out to some degree. That has not been the case, and what they have, you know, provided is a pretty nice increase in the bill supply. So we do think there will be extra supply in that, you know, one to three month sector, basically ninety three day bill market and under.

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

It'll probably make it a little bit more expensive, but that's being offset to some degree by the additional supply that we have, and our expectation would be for the foreseeable future, it is enough to meet the demand of what we're expecting at least at this point from the stablecoin market.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

I could add, Ken, one of the other features of the Genius Act was to not allow stablecoins to pay interest or return. And so the people who ought to be concerned about the $2,000,000,000,000 going into stablecoins are the ones who have deposit accounts with little or no interest. And how does that dynamic exactly work? And so then you see the next level of things where people offer deals where, oh yes, you own a stable coin and they'll take a bunch of your money and put it into a money fund, charge you a fee and keep 80% of your money in a money fund so you get at least some return. And you're seeing those kinds of innovations going on right now.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

But it's important to note that the stablecoin can't pay a yield.

[Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co]

Fair enough. And then just on MDT having wild success here with that franchise. How do we think about capacity in some of the MDT mid and small cap products? I don't know what sort of separate account assets are sort of there as well. But how do we think about the capacity for those given the inflows you're seeing?

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Well, at this point, on all of the funds, each of the funds, we don't expect any capacity issues. The methodologies and the ability to buy shares is robust. And so believe me, we're looking at that too to see if something is going to poke a hole in our balloon. But at this point, we're not seeing it.

[Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co]

Okay. Great. Thank you.

[Operator]

Thank you. Our next question is coming from Bill Katz with TD Cowen. Your line is live.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

Thank you. Good morning, everybody. Appreciate you taking the questions.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

Tom, question good morning, Tom, maybe to start with you. Just given how you've been hedging maybe some of the pound versus the dollar, can you talk a little bit about where you think the exit pace is for expenses and maybe break that down between comp and maybe the non comp line, particularly the other line has been sort of negative last few quarters? Thank you.

[Thomas Donahue, VP, Treasurer, CFO & Director at Federated Hermes]

Okay, Bill. On the FX, that's why I mentioned in there that we've lowered our notional amount on the hedging and basically we're looking at it on a quarterly basis. We had previously looked at it on a yearly basis and we got the benefit in the first two quarters by looking at it on a yearly basis. And so now we only our exposure is much less on the pound and it worked out quite well for us. In terms of the compensation line and I would say next quarter we expect that to be up a couple million dollars or something like that.

[Thomas Donahue, VP, Treasurer, CFO & Director at Federated Hermes]

Of course, every time I predict that something happens and we end up paying out more or less. On the distribution line item, with the Chris mentioning our assets month to date in July being up pretty significantly on the money fund side, we would expect a higher distribution payouts. And then in the beginning of the year, I talked on the systems and communication line about having pretty decent amount of more dollars per quarter and it's taken us a little bit longer time to get moving on those. And I still see that line going up a couple million dollars next quarter. And the rest of the line items, I think they just I don't see big changes there.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

Okay. I'll circle back on the other expense line still. So maybe Chris one for you, just been a lot of M and A in the industry. It seems like the opportunity with your old business is percolating a little bit, but still somewhat small in the grand scheme of things. You bought back a lot of stock in the second quarter.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

You ramped up the authorization as well. How do we think about maybe capital return priorities from here? And there's a way to be a bit more strident on the M and A side to maybe accelerate the opportunity and also where I think a lot of the incremental growth seems to sit for the industry? Thank you.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Bill, we have said this before that the highest and best use of our cash is with doing acquisitions. And we are actively talking about doing various acquisitions, especially in the private markets type space. And until we have something to announce, we don't announce. But remember, the whole history we had before we bought Hermes that from 2012 to 2018, I agree that was six years, so that's long. But we were saying all along, we were going to do an international one and we took a lot of calls and consternation on that not happening for a while.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

But when we say we're going to do stuff, we do stuff, it just might not be lickety split. So, we continue to look in the space exactly as you're saying for acquisitions. But this is not to say that we stop doing look at the roll ups and other things that are attractive. For example, anyone who has a Morabond money fund knows that we are their warm and loving home.

[Thomas Donahue, VP, Treasurer, CFO & Director at Federated Hermes]

So, back on the other, I don't expect to have a VAT and we don't forecast what's going to happen FX. And so, if you take those things both out of there, our other line has lots of items in it. And if you look back 06/30/2024, that line was $5,000,000 and I would say it would be a little higher than that would be our forecast maybe 6,500,000.0 but so many things change in there, that's why I don't really like doing what I just did.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

Okay. Thank you. I can put my slide ruler back. Thanks so much.

[Operator]

Thank you. Our next question is coming from Brian Bedell with Deutsche Bank. Your line is live.

[Brian Bedell, Director at Deutsche Bank Securities]

Great. Thanks. Good morning. Advancing to the next century here. I joined late, pardon me if you've answered part of this on the tokenization side, but maybe a different angle.

[Brian Bedell, Director at Deutsche Bank Securities]

To what extent do you see the tokenization of money market funds expanding the overall size of the money market fund industry? How dramatic could that be if it's much easier to hold this in a digital format?

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

It is very, very difficult to say what that kind of number would be. We haven't done done any numbers on that. Both Debbie and I believe it's incremental, to the business. But as with any of these things, especially when you're dealing with blockchain, you got a lot a lot of people on there first in order to have it grow. It's a little bit of a chicken egg thing.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

And so everybody's working right now, and there's a lot of excitement and a lot of articles and all of that. But the the assets are are not yet are not yet there. Now we're ready for when it goes, but it's just hard for us to say. And maybe Debbie's done some research that I'm not aware of on how big that could be, but I don't know.

[Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager at Federated Hermes]

No, Chris. Exactly. I mean, we think it is an additional, provision of distribution and an additional collateral management tool, but the actual estimation of the size of the growth is really it's too early to tell at this point.

[Brian Bedell, Director at Deutsche Bank Securities]

Yes. And maybe just a follow on to that. As you think about this industry evolving and also including the reserve management requirements for stablecoin, expanding the money market fund industry as well. Do you see yourself for that incremental growth in those assets potentially getting in higher market share than your current base? I think that's in the 7% to 8% range.

[Brian Bedell, Director at Deutsche Bank Securities]

So going forward, would you see yourself as a share gainer on this dynamic given your low cost and obviously your long standing reputation in the industry?

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

Well, this business due in large part to two things, regulation. Regulation oligopolizes business, and so you only have 10 or 12 players who can actually give clients the idea that they have daily liquidity apart if they have a $100,000,000. And and so new entrants have a very big challenge. Even with the Genius Act where you're gonna have to create new funds because they shrunk the average or or the maximum maturity of a fund, you've have enough of a big enough pool of money in order to make that make the customer believe they're gonna get daily liquidity at par. So by that, I would we're always striving to get more market share, but I'm not gonna say, oh, yeah.

[J. Christopher Donahue, Chairman, President, CEO & Director at Federated Hermes]

This is a definite thing that's gonna happen. It's a very tight business. It's a very competitive business. And we certainly expect to grow in it and get our fair share and try hard to get that number back up to a higher number than the 7.11 I mentioned.

[Brian Bedell, Director at Deutsche Bank Securities]

Great. That's great color. Thank you.

[Operator]

Thank you. As we have no further questions on the lines at this time, I would like to hand the call back over to Mr. Hanley for any closing remarks.

[Raymond Hanley, President at Federated Investors Management Company]

Okay. Well, thank you for joining us today. That concludes our call.

[Operator]

Thank you. Ladies and gentlemen, this does conclude today's call and you may disconnect your lines at this time. Thank you for your participation. Thanks.

Participants

Executives

• J. Christopher Donahue, Chairman, President, CEO & Director
• Thomas Donahue, VP, Treasurer, CFO & Director
• Deborah Cunningham, EVP - Chief Investment Officer - Global Liquidity Markets & Senior Portfolio Manager

Analysts

• Raymond Hanley, President at Federated Investors Management Company
• Patrick Davitt, Senior Analyst - US Asset Management at Autonomous Research
• Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co
• William (Bill) katz, Senior Equity Analyst at TD Cowen
• Brian Bedell, Director at Deutsche Bank Securities