Core Insights - Federated Hermes, Inc. (FHI) reported fourth-quarter 2025 earnings per share of $1.39, exceeding the Zacks Consensus Estimate of $1.20, marking a 33.6% increase from the previous year [1][10] - The company achieved a record level of assets under management (AUM) at $902.6 billion, driven by strong growth in money-market and equity assets [7][10] Financial Performance - Net income for the fourth quarter was $107 million, reflecting a 26.3% increase year over year [2][10] - Total revenues rose 13.7% year over year to $482.8 million, surpassing the Zacks Consensus Estimate by 2.7% [4][10] - For the full year 2025, earnings per share were $5.13, exceeding the Zacks Consensus Estimate of $4.95, and net income increased by 50.3% to $403.3 million [3] Revenue and Expense Breakdown - Operating revenue for 2025 was $1.8 billion, exceeding the Zacks Consensus Estimate of $1.79 billion, with a year-over-year increase of 10.3% [4] - Quarterly net investment advisory fees increased by 8.9% year over year to $313.9 million [4] - Net other service fees grew significantly by 61.3% year over year to $59.1 million, while net administrative service fees rose by 10.1% to $109.7 million [5] Asset Management and Growth - Average managed assets totaled $873.7 billion, up 8.6% year over year [8] - The company reported record money-market assets of $682.6 billion, an increase of 8.3% year over year, and equity assets rose by 23.3% to $97.9 billion [7][10] Capital Management - The company repurchased 1,566,901 shares of its class B common stock during the reported quarter [11] - A dividend of 34 cents per share was declared, payable on February 13, 2026, to shareholders of record as of February 6, 2026 [11] Balance Sheet Strength - As of December 31, 2025, cash and other investments totaled $724.3 million, while total long-term debt was $348.4 million, indicating a stable balance sheet [6]

Core Insights - The firm emphasizes the importance of net returns after fees, taxes, and inflation, managing most fixed-income and equity assets in-house to avoid high third-party management fees [1][4][19] Client Relationships - The firm has significant client relationships, with an average household investment between $15 million and $30 million, and a median net worth exceeding $25 million [2] - Clients are typically multi-generational families with complex financial situations requiring tailored advisory services [2][3] Investment Strategy - The firm manages approximately $2.3 billion in assets under management (AUM) and serves around 130 families, often managing multiple family units [3][4] - Fixed-income strategies are tailored to individual client tax situations, allowing for tax-loss harvesting and investment in both taxable and tax-free bonds [5][6][7] - In equity markets, the firm employs direct indexing and tax-loss harvesting without incurring additional fees, aiming to outperform benchmarks like the Russell 1000 or S&P 500 [8][9][10] Private Markets Investment - The firm invests in private markets across four main areas: private real estate, private debt, private equity, and infrastructure, with some clients allocating up to 50% of their portfolios to these assets [12][13][14] - The firm has adapted to the evolving private markets landscape, utilizing both drawdown funds and evergreen funds to provide clients with liquidity and access to diverse investment opportunities [11][15][16] Manager Selection - The firm prefers established asset managers for private market investments, focusing on long-term relationships and thorough due diligence processes [20][21] - For fixed-income and equity investments, the firm primarily manages assets in-house but may utilize third-party managers for specific niches like mid-cap, small-cap, and international markets [17][18] Portfolio Management - The firm has a seven-person investment committee that meets weekly to discuss market outlooks and client allocations, with monthly market reports and quarterly webinars to keep clients informed [22][23] - Rebalancing of portfolios is typically assessed quarterly but executed during periods of market volatility [24] Cryptocurrency Investments - The firm assists clients interested in cryptocurrencies, primarily through ETFs or closed-end funds, while acknowledging the evolving nature of the cryptocurrency market [25][26] International Market Exposure - The firm maintains a home country bias in international investments, typically allocating 15% to 20% of portfolios to international assets, with a focus on emerging markets and currency exposure [27][28] Cash Management - The firm generally holds minimal cash in managed accounts, typically between 1% and 3%, influenced by client preferences for opportunistic investments [29]