Federated Hermes (FHI -0.69%), a leading active asset manager known for its broad range of investment products, released its Q2 2025 earnings on July 31, 2025. The most significant news was that earnings per share (EPS) reached $1.16 (GAAP), outpacing the analyst consensus of $1.03 GAAP EPS and climbing sharply from $0.20 in the prior year (GAAP). Total revenue (GAAP) was $424.8 million, slightly ahead of the $422.81 million revenue estimate and up compared to last year's $402.6 million. The quarter was marked by record-high assets under management (AUM) of $845.7 billion as of June 30, 2025 and improved profitability. Overall, the quarter showed stronger performance than expected, as Federated Hermes' GAAP EPS of $1.16 exceeded the analyst estimate of $1.03, largely fueled by gains in equity products and a rebound from one-off charges in the prior year.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $1.16 | $1.03 | $0.20 | 480% |
| Revenue (GAAP) | $424.8 million | $422.81 million | N/A | N/A |
| Net Income | $91.0 million | $21.0 million | 333.3% | |
| Total Managed Assets (Period-End) | $845.7 billion | $782.7 billion | 8.0% | |
| Total Average Managed Assets | $837.3 billion | $779.6 billion | 7.4% |
Source: Analyst estimates for the quarter provided by FactSet.
Company Overview and Business Drivers
Federated Hermes is an investment management firm that manages assets across money market funds, equity funds, fixed-income products, and alternative/private market strategies. It generates most of its revenue by charging fees based on the value of assets under management. The firm is also well known for its strength in money market products, which remain a significant source of income and stability.
The company's recent business focus revolves around growing assets under management, compliance with evolving regulations, and capitalizing on its distribution network. Key factors to its success include investment performance, regulatory discipline, and innovation across its investment product offerings. Retaining talented professionals and managing operational costs have grown in importance as business activity has scaled up.
Quarterly Highlights and Segment Performance
This quarter set a new high for Federated Hermes's assets under management, rising to $845.7 billion as of June 30, 2025. Equity AUM jumped 14% to $89.0 billion as of June 30, 2025, compared to the prior year, driven by strong demand for MDT strategies—quantitative investment products that blend computer models with traditional financial analysis. MDT AUM reached $23.2 billion, up $6.4 billion from the previous quarter. That strong growth was concentrated in funds like MDT Mid Cap Growth and MDT All Cap Core, and management specified that there are currently no capacity constraints for these strategies.
Fixed-income assets under management (AUM) increased 4% year-over-year to $98.7 billion as of June 30, 2025, although it experienced a modest 1% sequential decline in average managed assets, due in part to net redemptions and other factors. Money market assets were $634.4 billion as of June 30, 2025, an increase of 8% year-over-year but dipped slightly from the previous quarter. Alternative and private market AUM, which includes investments like private equity and direct lending, rose 3% year-over-year to $20.7 billion as of June 30, 2025. This segment benefited from both new product launches and the acquisition of Rivington Energy Management Ltd, which adds expertise in renewable energy infrastructure to the firm's platform.
On the financial front, total revenue increased 6% year-over-year. The uptick was mainly driven by higher average balances in money market and equity products. Operating expenses were down 15% compared to the prior year, mainly because last year included a $66.3 million non-cash impairment charge that did not recur. Excluding one-time items, compensation and distribution expenses grew due to higher business volume and sales activity. Nonoperating income, reflecting gains on market investments, also contributed positively, rising from $1.9 million to $13.7 million.
Net income (GAAP) surged to $91.0 million, compared to $21.0 million in the prior year. The diluted share count dropped to 75,072 shares, down from 80,026 in the prior year, thanks to the company's active share repurchase program. In total, 1,547,182 shares were bought back for $64.5 million, and the board authorized another buyback program for up to 5 million additional shares.
Products, Flows, and Strategic Initiatives
This period highlighted the continued momentum in MDT equity strategies and alternatives, both areas of strategic growth. MDT strategies—advanced quantitative equity products—garnered over $2.5 billion in net sales in the previous quarter. In contrast, fixed-income strategies posted $2.4 billion in net outflows, while private markets recorded a modest $231 million in net inflows. These flows underscore a trend where investors have shown greater preference for equity and alternative solutions over traditional bond products.
Money market assets, a core pillar for Federated Hermes, remain the firm's largest AUM category, representing $634.4 billion of total managed assets as of June 30, 2025. Within this, Money market fund balances reached a record $468.0 billion as of June 30, 2025, up 10.0% from June 30, 2024. Short-term declines in money market and fixed-income assets in the previous quarter were attributed by management to seasonal factors and industry-wide volatility, rather than any structural loss in competitiveness.
The quarter also saw further investment in new product development, such as the use of blockchain platforms for money market fund tokenization, and expansion of exchange-traded funds (ETFs) and collective investment trusts. As of June 30, 2025, alternatives and private markets account for 2.5% of total managed assets, and these products continue to grow as a share of assets. The acquisition of Rivington Energy Management Ltd. broadened the firm's expertise in renewable infrastructure and opened opportunities for new fundraising mandates.
On the capital return front, The regular quarterly dividend was $0.34 per share. Board approval for ongoing share buybacks reflects management's continued focus on returning capital to shareholders. Share count reductions also contributed to EPS growth.
Outlook and What to Watch Next
The company did not issue formal forward financial guidance for either the next quarter or full fiscal year. However, management commentary pointed to continued demand for MDT strategies and alternatives. The pipeline of new mandates in equity, alternative, and direct lending products suggests that the firm anticipates further asset growth in those segments.
The dividend was declared at $0.34 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
