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Core Insights - Federated Hermes has been recognized for its strong risk-adjusted performance, winning multiple LSEG Lipper Fund Awards in 2026 for its investment strategies [1] - The company reported record assets under management of $902.6 billion as of December 31, 2025, reflecting the effectiveness of its investment portfolios [1] Performance Recognition - Four strategies from Federated Hermes received accolades for consistent performance across various time periods, including the MDT quantitative strategies and Multi-Asset Group [1] - The Federated MDT Mid Cap Growth Fund outperformed 99.5% of share classes and 98.6% of portfolios over a 10-year period [1] - The Federated Hermes Capital Income Fund outperformed 99.6% of share classes and 98.7% of portfolios in the Mixed-Asset Target Allocation Conservative category over three years [1] Investment Strategies - The MDT investment team employs a disciplined, bottom-up quantitative investment process to minimize human bias in stock selection [1] - The Federated Hermes Multi-Asset Group has been recognized for balancing income opportunities and risk through active management, with a focus on diverse asset classes [1] - The Corporate Bond Strategy Portfolio aims for total return by investing in a diversified portfolio of investment-grade corporate fixed-income securities [1] Fund Performance Metrics - The Federated Hermes MDT All Cap Core Fund outperformed 99.7% of share classes and 99.2% of portfolios in the Multi-Cap Core category over 10 years [2] - The Corporate Bond Strategy Portfolio outperformed 99.4% of share classes and 97.8% of portfolios in the Corporate Debt Funds BBB-Rated category for 10 years [2]

Summary of Federated Hermes Conference Call Company Overview - **Company**: Federated Hermes - **Assets Under Management**: Over $900 billion, with $698 billion in money market funds, $103 billion in equities, $102 billion in fixed income, and $22 billion in alternatives and multi-asset categories [2][3] - **Recent Growth**: Money market funds increased by $16 billion in the quarter, equities by $6 billion, and positive flows year-to-date are approximately $2.1 billion [2][3] Core Business Insights - **Diversification**: Federated is described as a "franchise for all seasons," indicating a diverse range of assets, clients, and products that provide stability [2] - **Product Offerings**: The company is expanding its product wrappers, including separately managed accounts (SMAs) at over $40 billion, ETFs at $2 billion, and collective investment trusts (CITs) at $4 billion [4] - **International Expansion**: Plans to open a Hong Kong office and expand in Europe, including a UCITS fund for sale in Europe [5][6] Money Market Funds - **Market Dynamics**: Institutional investors are attracted to money market funds due to higher yields compared to bank deposit rates, while retail investors are influenced by bank rates [17][18] - **Growth Potential**: Anticipated single-digit AUM growth in money market funds driven by cash flow dynamics in both up and down markets [16][19] Digital Assets and Tokenization - **Current Status**: Federated is exploring tokenization of money funds but acknowledges that client demand is not yet robust [6][20] - **Future Outlook**: The company believes that blockchain technology could enhance operations, but client readiness is crucial for adoption [23] Alternatives and Private Markets - **FCP Acquisition**: Federated is acquiring FCP, a U.S. real estate investment manager, to address the housing shortage in the U.S. and strengthen relationships with wealth clients [25][26] - **Private Credit Fund**: Recently closed a private credit fund with $780 million, focusing on strong relationships with European banks and maintaining a low default rate [27][28] Capital Allocation and Acquisitions - **Acquisition Strategy**: Federated is looking for roll-up opportunities in the market, focusing on funds that are underperforming and can be integrated into their operations [29][30] - **Share Repurchases**: The company has been active in share repurchases, buying approximately 1.5 million shares last quarter and over 700,000 shares year-to-date [35][36] Operating Expenses and Growth Investments - **Expense Outlook**: Anticipated increases in operating expenses due to transaction costs from the FCP acquisition and ongoing investments in technology and distribution [38][41] - **Growth Focus**: Federated is committed to investing in growth areas, including digital assets and new product rollouts, while being margin aware [41] Conclusion - **Overall Strategy**: Federated Hermes is focused on diversifying its product offerings, expanding internationally, and strategically acquiring assets to enhance its market position while maintaining a disciplined approach to capital allocation and expense management [2][25][29]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence through various resources like daily updates, research reports, and stock screens [1] Group 1: Zacks Style Scores - Zacks Style Scores are indicators that rate stocks based on value, growth, and momentum characteristics, helping investors identify stocks likely to outperform the market in the short term [2] - Each stock is rated from A to F, with A indicating the highest potential for outperformance [3] - The Style Scores are categorized into four types: Value Score, Growth Score, Momentum Score, and VGM Score, each focusing on different investment strategies [3][4][5][6] Group 2: Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to guide investors in stock selection, with 1 (Strong Buy) stocks historically yielding an average annual return of +23.86% since 1988, significantly outperforming the S&P 500 [7] - There are over 800 stocks rated by the Zacks Rank, making it essential for investors to utilize Style Scores to narrow down their choices [8] - For optimal returns, stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B are recommended [9] Group 3: Company Spotlight - Federated Hermes - Federated Hermes, Inc. is a global asset manager with $902.6 billion in assets under management as of December 31, 2025, formed from the merger of Federated Investors and Hermes Investment Management [11] - The company holds a Zacks Rank of 3 (Hold) and a VGM Score of B, indicating potential for growth [11] - Federated Hermes is projected to have a year-over-year earnings growth of 1.6% for the current fiscal year, with upward revisions in earnings estimates and an average earnings surprise of +17.8% [12]

Core Viewpoint - Federated Hermes, Inc. is a global leader in active investment management, with a significant presence in the financial services industry, and is scheduled to present at the 2026 RBC Capital Markets Global Financial Institutions Conference [1] Group 1: Company Overview - Federated Hermes, Inc. (NYSE: FHI) has $902.6 billion in assets under management as of December 31, 2025 [1] - The company provides a wide range of investment solutions, including equity, fixed-income, alternative/private markets, multi-asset, and liquidity management strategies [1] - Federated Hermes serves over 11,000 institutions and intermediaries globally, including corporations, government entities, insurance companies, foundations, endowments, banks, and broker/dealers [1] Group 2: Leadership and Events - J. Christopher Donahue, President and CEO of Federated Hermes, is scheduled to present at the 2026 RBC Capital Markets Global Financial Institutions Conference on March 11, 2026, from approximately 11:20 to 11:50 a.m. ET [1] - Investors and interested parties can access a live webcast of the presentation through the company's website [1] Group 3: Company Operations - Federated Hermes is headquartered in Pittsburgh and employs over 2,000 individuals across various locations, including London, New York, and Boston [1]

Financial Performance - Federated Hermes has $902.6 billion in assets under management (AUM) as of December 31, 2025, representing a 9% increase from $829.6 billion in 2024[21]. - The company reported total revenue of $1.8 billion for the year ended December 31, 2025, a 10% increase compared to $1.6 billion in 2024[22]. - Investment advisory fees increased by 9% to $1.2 billion in 2025, up from $1.1 billion in 2024[22]. - Approximately 53% of Federated Hermes' total 2025 revenue was attributable to money market assets[137]. - A significant portion of Federated Hermes' total AUM or revenue can be concentrated in one or more investment offerings, asset classes, or customers[135]. - Federated Hermes derives a significant portion of its revenue from the financial intermediary market, comprising over 11,000 institutions and intermediary customers worldwide[142]. - Distribution costs as a percentage of total fund revenue increased to 29% in 2025 compared to 28% in 2024[145]. - A substantial majority of Federated Hermes' revenue is derived from investment advisory agreements that are terminable upon 60 days' notice, which poses a risk to financial stability[149]. - The federal funds target rate was 3.50 - 3.75% as of December 31, 2025, impacting revenue from money market and fixed-income offerings[154]. - Rising interest rates can adversely affect revenue from various investment offerings and increase impairment risk on intangible assets[152]. - Changes in customer or shareholder activity and overall asset mix can materially affect assets under management (AUM) and revenue[146]. Market and Regulatory Environment - The company operates in three primary markets: U.S. financial intermediaries (68% of AUM), U.S. institutional (25%), and international (7%)[31]. - Federated Hermes is evaluating the impact of recent regulatory developments on its business and offerings[49]. - The SEC's focus in 2025 shifted towards traditional enforcement areas like insider trading and fraud, moving away from cryptocurrency[45]. - The Financial Stability Oversight Council's 2025 Annual Report emphasized deregulation to promote economic growth, contrasting with previous reports[47]. - Regulatory changes can increase operating expenses and affect the conduct of Federated Hermes' offerings, impacting AUM, revenues, and operating income[170]. - The company faces risks from economic downturns, market volatility, and geopolitical tensions, which can adversely affect investment performance and investor confidence[161]. - Federated Hermes' offerings are subject to extensive global regulation, which can impose different requirements and affect operational costs and compliance obligations[169]. - The Dodd-Frank Act may subject Federated Hermes to additional banking regulations if designated as a Systemically Important Financial Institution (SIFI)[177]. Employee and Organizational Structure - As of December 31, 2025, Federated Hermes employed 2,091 individuals, with 1,234 in Pittsburgh, 504 in London, and 60 in New York[97]. - 39% of Federated Hermes' employees are women, with female representation on the board at 33% and 10% of executive officers being women[111]. - The company emphasizes competitive compensation programs to attract and retain qualified professionals, with a focus on aligning interests with business strategy[99]. - Federated Hermes' employee turnover is tracked, and exit interviews are conducted to improve retention strategies[98]. - The company offers a range of benefits, including flexible work arrangements, wellness programs, and education assistance to support employee well-being[109]. - Recruiting and retaining key personnel remains a challenge due to competitive market conditions and hybrid work environments[197]. Cybersecurity and Operational Risks - The company has experienced daily cyber incidents, but as of December 31, 2025, these incidents have not materially affected its financial condition[191]. - Federated Hermes has established a committee to oversee information security and data governance, reviewing cyber risks quarterly[192]. - The company is utilizing artificial intelligence and machine learning technologies to enhance workflows, but faces risks related to the accuracy and reliability of these technologies[196]. - Cyber incidents can lead to significant financial losses, reputational damage, and increased compliance costs for Federated Hermes[191]. - The reliance on third-party service providers for technology and operations increases operational risks for Federated Hermes[188]. - Federated Hermes maintains a written cybersecurity program protocol that is regularly reviewed and updated to reflect best practices in risk management[212]. Strategic Initiatives and Future Outlook - The company plans to implement a T+1 settlement cycle in the U.K. and EU by October 11, 2027, aligning with the U.S. transition[87]. - Federated Hermes continues to expand its use of governance, environmental, and social data inputs in its offerings, responding to increasing market complexity[173]. - The company has implemented various cybersecurity measures, including firewalls and employee training, to mitigate cyber risks[192]. - Federated Hermes' strategy includes seeking acquisitions and strategic transactions, which involve risks and uncertainties regarding integration and cultural alignment[198]. - The company actively monitors regulatory developments that could materially impact its financial condition and compliance burdens[91].

Core Insights - Federated Hermes, Inc. (FHI) shares reached an all-time high of $56.68, closing at $54.88, reflecting strong investor confidence due to growth in assets under management (AUM) and robust strategic positioning [1][8] Performance Overview - Over the last six months, FHI stock increased by 5.7%, while the industry declined by 12.9%, outperforming peers like Ares Management Corporation (ARES) and T. Rowe Price Group (TROW) [2] Growth Drivers - **Strategic Business Expansion**: FHI is accelerating growth through strategic acquisitions, including an 80% stake in FCP Fund Manager, L.P. to enhance its private markets capabilities [6] - **Acquisition History**: The company has made several acquisitions, such as C.W. Henderson & Associates, Inc. in 2022, to diversify revenue streams and strengthen its global footprint [7] - **AUM Growth**: FHI's AUM grew at a compound annual growth rate (CAGR) of 7.8% over five years, reaching $902.6 billion by December 2025, driven by record money market assets and increased equity holdings [10] - **Money Market Strength**: Money market assets grew at a five-year CAGR of 10.2%, providing a broader range of fund options and favorable market conditions for money market strategies [11] Financial Stability - **Robust Balance Sheet**: As of December 31, 2025, FHI had long-term debt of $348.4 million and cash and investments totaling $724.3 million, indicating strong liquidity and manageable debt levels [12] - **Capital Distribution**: The company has a history of rewarding shareholders through share buybacks and dividends, with a recent 9.7% increase in its quarterly dividend to 34 cents per share [14] Challenges - **Rising Operating Expenses**: Operating expenses have a five-year CAGR of 4.5%, primarily due to intangible asset-related costs, which could increase further with new hires [15] - **Revenue Concentration Risk**: Investment advisory fees account for 65% of total revenues, making the company vulnerable to fluctuations in market conditions [18] Earnings and Valuation - **Earnings Estimates**: The Zacks Consensus Estimate indicates a 1.8% rise in 2026 earnings and a 10.9% rise in 2027 earnings, with upward revisions over the past month [19] - **Valuation Metrics**: FHI is trading at a trailing P/E ratio of 10.66X, lower than the industry average of 13.96X, indicating it may be undervalued compared to peers [21][23] Investment Consideration - The strong rally in FHI shares reflects confidence in its strategic growth initiatives and financial position, with ongoing expansion and a solid balance sheet enhancing shareholder value [25]

Industry Overview - The Zacks Investment Management industry is under pressure from rising technology and AI-related expenses, which are expected to impact near-term profitability despite potential long-term efficiency gains [1][4] - The industry is characterized by companies managing securities and funds for clients, earning revenue through service fees or commissions [3] Key Themes Influencing the Industry - Rising Expenses: Increased technology and AI-related costs are expected to hurt profits in the near term, alongside elevated compliance costs due to regulatory requirements [4] - Demand for Passive Investing: A shift towards low-cost passive funds has compressed fees and intensified competition, leading to reduced revenue per dollar of assets and limiting earnings growth [5][6] - Mergers and Partnerships: Firms are pursuing mergers and partnerships to achieve scale, cut costs, and diversify offerings in response to competitive pressures [7][8] Performance Metrics - The Zacks Investment Management industry has underperformed the S&P 500 Index, with a collective gain of 8.4% over the past two years compared to 41.6% for the S&P 500 [13] - The industry's current Zacks Industry Rank is 137, placing it in the bottom 44% of over 250 Zacks industries, indicating a bleak earnings outlook [9][10][11] Valuation Insights - The industry has a trailing 12-month price-to-tangible book ratio (P/TB) of 4.07X, significantly lower than the S&P 500's 11.78X, indicating a discount compared to the broader market [17][19] - Compared to the broader Finance sector, the Zacks Investment Management industry is trading at a discount, with the Finance sector's P/TB at 6.06X [19] Company Highlights Ameriprise Financial (AMP) - As of December 31, 2025, Ameriprise had total assets under management of $1.7 trillion, with a CAGR of 9.2% in net revenues over the past five years [24][25] - The company has been restructuring its business and focusing on core competencies to improve market share [26] - Ameriprise shares have gained 4.2% in the past three months, with a Zacks Rank of 2 (Buy) [28] SEI Investments Company (SEIC) - SEIC administered $1.9 trillion in assets as of December 31, 2025, with a CAGR of 9.9% in total assets under management over the past five years [31][32] - The company has made strategic acquisitions to enhance its business capabilities, including the recent acquisition of Stratos for $440.8 million [35][36] - SEIC shares have gained 0.7% in the past three months, also carrying a Zacks Rank of 2 [36] Federated Hermes, Inc. (FHI) - Federated Hermes had $902.6 billion in assets under management as of December 31, 2025, with a CAGR of 7.8% over the past five years [38][39] - The company has been actively seeking alliances and acquisitions to expand its global presence [39] - FHI shares have gained 14.2% in the past three months, maintaining a Zacks Rank of 2 [42]

Core Insights - The focus for income investors is generating consistent cash flow from liquid investments, particularly through dividends [1][2] Company Overview - Federated Hermes (FHI), headquartered in Pittsburgh, has experienced a price change of 6.47% this year and currently pays a dividend of $0.34 per share, resulting in a dividend yield of 2.45% [3] - The company's dividend yield is lower than the Financial - Investment Management industry's yield of 2.71% and the S&P 500's yield of 1.39% [3] Dividend Analysis - Federated Hermes has an annualized dividend of $1.36, which is a 2.3% increase from the previous year [4] - Over the past five years, the company has increased its dividend three times, averaging an annual increase of 0.78% [4] - The current payout ratio is 27%, indicating that the company pays out 27% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for Federated Hermes for 2026 is $5.07 per share, reflecting a year-over-year growth rate of 1.81% [5] Investment Considerations - Dividends are favored by investors as they enhance stock investing profits, reduce overall portfolio risk, and offer tax advantages [5] - High-growth firms and tech start-ups typically do not provide dividends, while established companies with secure profits are preferred for dividend investments [6] - Federated Hermes is positioned as an attractive dividend investment opportunity, supported by a strong Zacks Rank of 2 (Buy) [6]

Core Viewpoint - Federated Hermes has shown strong stock performance, reaching a 52-week high and outperforming its sector and industry peers in terms of year-to-date gains [1][2]. Performance Summary - The stock has increased by 1.7% over the past month and 4.3% since the beginning of the year, while the Zacks Finance sector has remained flat and the Zacks Financial - Investment Management industry has declined by 8.9% [1]. - The company has consistently beaten earnings estimates, with the latest EPS reported at $1.39 against a consensus estimate of $1.2, and revenue exceeding expectations by 2.72% [2]. Earnings Forecast - For the current fiscal year, Federated Hermes is projected to achieve earnings of $5.07 per share on revenues of $1.95 billion, reflecting a 1.81% increase in EPS and an 8.34% increase in revenues [3]. - The next fiscal year is expected to see earnings rise to $5.63 per share on revenues of $2.04 billion, indicating a year-over-year growth of 10.98% in EPS and 4.5% in revenues [3]. Valuation Metrics - The stock trades at a valuation of 10.7 times the current fiscal year EPS estimates, slightly below the peer industry average of 10.9 times [7]. - On a trailing cash flow basis, it trades at 15.4 times compared to the peer group's average of 11.9 times, with a PEG ratio of 0.53, positioning it favorably for value investors [7]. Zacks Rank and Style Scores - Federated Hermes holds a Zacks Rank of 2 (Buy), supported by rising earnings estimates, which is favorable for potential investors [8]. - The company has a Value Score of A, a Growth Score of D, and a Momentum Score of B, resulting in a combined VGM Score of B, indicating a solid investment opportunity [6][8].