8-K: Federated Hermes Reports Record AUM, Strong Q3 2025 Earnings

Federated Hermes, Inc. announced record assets under management of $871.2 billion and Q3 2025 diluted earnings per share of $1.34, significantly up from the prior year.

Summary

• Total managed assets reached a record $871.2 billion at Sept. 30, 2025, an increase of 9% from $800.5 billion at Sept. 30, 2024.
• Money market assets hit a record $652.8 billion, up 10% year-over-year, and fixed-income assets reached a record $101.8 billion, up 2% year-over-year.
• Diluted earnings per share (EPS) for Q3 2025 were $1.34, a 26% increase compared to $1.06 for Q3 2024.
• Net income for Q3 2025 was $104.1 million, up 19% from $87.5 million in Q3 2024.
• Revenue increased by $61.0 million, or 15%, in Q3 2025 compared to Q3 2024, primarily due to higher average money market and equity assets.
• The board of directors declared a dividend of $0.34 per share, payable on Nov. 14, 2025, to shareholders of record as of Nov. 7, 2025.
• Record net sales of equity funds were driven by interest in MDT equity and alternative quantitative investment offerings.
• Investors continued to rely on money market offerings and microshort/ultrashort funds in a declining rate environment.

Sentiment

Score: 8

Explanation: The company reported record assets under management and substantial growth in earnings per share and net income, driven by strong performance in money market and equity funds. While operating expenses increased and alternative assets saw a decline, the overall financial health and growth trajectory are very positive.

Positives

• Total managed assets reached a record $871.2 billion at Sept. 30, 2025, up 9% from the prior year.
• Money market assets achieved a record $652.8 billion, increasing 10% year-over-year.
• Fixed-income assets reached a record $101.8 billion, up 2% year-over-year.
• Q3 2025 diluted EPS of $1.34 represents a 26% increase from $1.06 in Q3 2024.
• Net income for Q3 2025 grew 19% to $104.1 million from $87.5 million in Q3 2024.
• Total revenue increased by 15% ($61.0 million) in Q3 2025 compared to Q3 2024.
• Equity assets grew by 13% to $94.7 billion at Sept. 30, 2025, compared to $83.6 billion at Sept. 30, 2024.
• Record net sales of equity funds were observed in Q3, driven by MDT equity and alternative quantitative investment offerings.
• The company ranks in the top 6% of equity fund managers, top 7% of money market fund managers, and top 11% of fixed-income fund managers.
• Federated Hermes is the 10th-largest manager of model-delivered separately managed accounts.
• Year-to-date 2025 diluted EPS increased by 70% to $3.75 from $2.20 in YTD 2024.
• Year-to-date 2025 net income increased by 61% to $296.260 million from $183.598 million in YTD 2024.
• Year-to-date 2025 revenue increased by 9% to $1,317.830 million from $1,207.410 million in YTD 2024.

Negatives

• Alternative/private markets assets decreased by 8% to $19.0 billion at Sept. 30, 2025, from $20.7 billion at Sept. 30, 2024, and June 30, 2025.
• Operating expenses increased by 15% ($43.3 million) in Q3 2025 compared to Q3 2024, primarily due to higher distribution expenses, foreign currency exchange rate fluctuations impacting 'Other expense', and increased compensation.
• Nonoperating income (expenses), net decreased by $2.9 million in Q3 2025 compared to Q2 2025, primarily due to a smaller increase in the market value of investments.
• Year-to-date dividends declared per share decreased significantly to $0.99 in 2025 from $1.90 in 2024.

Risks

• Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different.
• Significant business, market, economic, competitive, and regulatory risks and uncertainties, many of which are difficult to predict and beyond control.
• The ability to predict the level of fee waivers and expenses in future quarters.
• The ability to predict whether performance fees or carried interest will be earned and retained.
• The ability to sustain offering demand, the timing and level of offering sales and redemptions, market appreciation or depreciation, revenues, and asset levels, flows, and mix, which could vary significantly depending on various factors, such as market conditions, investment performance, and investor behavior.
• Other risk factors discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission.

Future Outlook

The filing contains cautionary statements regarding forward-looking statements, noting that actual results may differ due to various business, market, economic, competitive, and regulatory risks. It highlights that the ability to sustain offering demand, the timing and level of sales and redemptions, market appreciation or depreciation, revenues, and asset levels, flows, and mix are factors that could vary significantly depending on market conditions, investment performance, and investor behavior.

Management Comments

• "We saw record net sales of equity funds in the third quarter, driven by continued interest in our MDT equity and alternative quantitative investment offerings—a broad suite of quantitative investment solutions that employ a disciplined, bottom-up investment approach that fits a variety of portfolio structures as core or complementary strategies."
• "In the declining rate environment of the third quarter, investors with interest in capital preservation and liquidity continued to rely on our money market offerings. They also turned to our microshort and ultrashort funds, which are a step further out the yield curve and pursue higher yields than money market strategies."

Industry Context

The company's strong performance in money market and ultrashort funds is directly linked to a 'declining rate environment,' indicating investors' preference for capital preservation and higher yields in such conditions. The record net sales in equity funds, particularly MDT quantitative offerings, suggest a robust demand for specialized, disciplined investment strategies, aligning with broader trends of investors seeking diversified and actively managed solutions.

Comparison to Industry Standards

• Ranks in the top 6% of equity fund managers based on U.S. fund flows rankings as of Sept. 30, 2025 (Morningstar).
• Ranks in the top 7% of money market fund managers based on U.S. fund flows rankings as of Sept. 30, 2025 (Morningstar).
• Ranks in the top 11% of fixed-income fund managers based on U.S. fund flows rankings as of Sept. 30, 2025 (Morningstar).
• Ranks as the 10th-largest manager of model-delivered separately managed accounts as of Q2 2025 (Money Management Institute/Cerulli).

Stakeholder Impact

• Shareholders are positively impacted by the significant increase in diluted EPS and net income, record AUM, and the declared dividend of $0.34 per share.
• Employees may benefit from higher incentive compensation, which contributed to increased operating expenses.
• Customers and investors benefit from a broad suite of investment solutions, including MDT equity and alternative quantitative offerings, and reliable money market and ultrashort funds for capital preservation and higher yields in a declining rate environment.

Next Steps

• Host an earnings conference call on Friday, Oct. 31, 2025, at 9 a.m. Eastern.
• Make a replay of the earnings teleconference available online and via telephone starting approximately 12:30 p.m. Eastern on Oct. 31, 2025.

Key Dates

Recommendation

The company delivered exceptional Q3 2025 results, marked by record assets under management across money market and fixed-income categories, and significant year-over-year growth in diluted EPS (26%) and net income (19%). Revenue also saw a robust 15% increase. The strategic focus on MDT equity and alternative quantitative offerings, coupled with strong demand for liquidity solutions in a declining rate environment, positions the company favorably. Despite rising operating expenses and a decrease in YTD dividends, the overall financial performance, strong industry rankings, and consistent quarterly dividend declaration indicate a healthy and growing business, making it an attractive investment.

Keywords

Federated Hermes, FHI, earnings, Q3 2025, assets under management, AUM, money market, equity funds, fixed income, alternative investments, financial results, investment management, asset management, dividend, MDT equity, quantitative investment