Company Reports

Poor relative active fund performance, the growth of low-cost index-based products, and the expanding power of the retail-advised channel have left firms like Federated more dependent on market gains to increase their assets under management, or AUM. We believe there will always be room for active management, but the advantage of getting and retaining placement on platforms will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.

Federated exited June 2026 with $234.7 billion in long-term assets under management. With fee rates up 8.1% year over year, and average AUM up 8.7%, second-quarter revenue rose 18.3%. Adjusted operating margins declined 115 basis points, though, to 26.4% when compared with the year-ago period.

With the US equity markets up more than 15% in the second quarter and more than 10% year to date at the end of June 2026, most of the traditional asset managers have positive momentum coming into the second-quarter earnings season.

Poor relative active fund performance, the growth of low-cost index-based products, and the expanding power of the retail-advised channel have left firms like Federated more dependent on market gains to increase their assets under management, or AUM. We believe there will always be room for active management, but the advantage of getting and retaining placement on platforms will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.

Federated ended March 2026 with $222 billion in long-term assets under management. With fee rates up 2.3% year over year, and money market fund assets increasing as well, first-quarter revenue rose 13.1%. Adjusted operating margins declined to 26.4%, though, from 28.1% in the year-ago period.

oor relative active fund performance, the growth of low-cost index-based products, and the expanding power of the retail-advised channel has Left firms like Federated more dependent on market gains to increase their assets under management, or AUM. We believe there will always be room for active management, but the advantage of getting and retaining placement on platforms will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.

Federated ended December 2025 with $220 billion in long-term assets under management, or AUM. With fee rates up 0.3% year over year, and money market fund assets increasing as well, fourth-quarter revenue rose 13.9%. Adjusted operating margins increased to 28.1% from 26.0% in the year-ago period.

Several issues have made it increasingly difficult for asset managers running predominantly active portfolios to generate positive organic growth in assets under management. Poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel are leaving them more dependent on market gains to increase managed assets. We believe there will always be room for active management, but the advantage of getting and retaining placement on platforms will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.

Federated ended September 2025 with $218 billion in long-term assets under management. With fee rates up 4.3% year over year, and money market fund assets increasing as well, third-quarter revenue rose 14.9%. Adjusted operating margins increased to 27.6% from 27.4% in the year-ago period.

Several issues have made it increasingly difficult for asset managers running predominantly active portfolios to generate positive organic growth in assets under management. Poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel are leaving them more dependent on market gains to increase managed assets. We believe there will always be room for active management, but the advantage of getting and retaining placement on platforms will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.

Federated ended June 2025 with $209 billion in long-term assets under management, or AUM. With fee rates down slightly, and money market fund assets increasing year over year, second-quarter revenue rose 5.5%. Adjusted operating margins increased to 27.6% from 26.6% in the year-ago period.

Several issues have made it increasingly difficult for asset managers running predominantly active portfolios to generate positive organic growth in assets under management. Poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel are leaving them more dependent on market gains to increase managed assets. We believe there will always be room for active management, but the advantage of getting and retaining placement on platforms will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.

Federated closed out March 2025 with $203 billion in long-term assets under management, or AUM. With fee fates rates up slightly, and money market fund assets increasing year over year, first-quarter revenue rose 6.9%. Adjusted operating margins increased to 31.1% from 24.9% in the year-ago period.

While the threat of tariffs on Canadian, Mexican, and Chinese imports has roiled the equity markets this week, it has not been the only news to impact the traditional asset managers in our US-based asset manager coverage, as Vanguard's decision to cut fees on around one quarter of its mutual funds, ETFs, and money market funds (which collectively held $9.2 trillion in assets under management, or AUM) at the end of 2024 has only added to their woes.

There was little in no-moat-rated Federated Hermes' fourth-quarter results that would alter our long-term view of the firm. We expect to leave our $42 per share fair value estimate in place and view the shares as being slightly undervalued right now. Federated closed out December 2024 with $199.2 billion in long-term assets under management, down 3.9% sequentially but up 0.8% on a year-over-year basis. Money market fund assets, meanwhile, stood at $630.3 billion at the end of the fourth quarter, up 6.3% sequentially and 12.6% year over year. The company picked up $37.3 billion in money market flows during the December quarter, bringing full-year flows to $70.4 billion.

We've increased our fair value estimate for Federated Hermes to $42 per share from $35 to account for revised near-term expectations for managed assets, revenue, and profitability since our last update. The company closed out September 2024 with $207 billion in long-term AUM, up 9.1% on a year-over-year basis. Money market fund assets, meanwhile, stood at $593 billion at the end of the third quarter, up 12.9% when compared with the prior year’s period.

Several issues have made it increasingly difficult for asset managers running predominantly active portfolios to generate positive organic growth in assets under management. Poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel are leaving them more dependent on market gains to increase managed assets. We believe there will always be room for active management, but the advantage of getting and retaining placement on platforms will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.

While there was little in no-moat-rated Federated Hermes' third-quarter results that would alter our long-term view of the firm, we expect to increase our $35 fair value estimate by 5%-10% to account for better levels of assets under management and flows than we were expecting at this point in the cycle (which will affect where managed assets are a decade from now). Even with the fair value estimate increase, we still see the shares as fairly valued.

On the heels of the US-based asset managers' second-quarter 2024 earnings, we have a better sense of how recent market activity has been affecting results. The rally in the US equity markets the past year has lifted most traditional and alternative-asset manager valuations close to our fair value estimates.

Several issues have made it increasingly difficult for asset managers running predominantly active portfolios to generate positive organic growth in assets under management. Poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel are leaving them more dependent on market gains to increase managed assets. We believe there will always be room for active management, but the advantage of getting and retaining placement on platforms will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.