Greetings. Welcome to the Federated Hermes Q2 Analyst Call and Webcast. At this time, all participants are in a recently mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Ray Hanley, President of Federated Investors Management Company. You may begin.

Hello and welcome. Thank you for joining us today. Applied by such fancy filings. Your results.

Performance. Tom will comment on financial. Of $912 billion led by growth in equity and private market assets. Second quarter at a record high of $110 billion. Equity assets increased by reflecting solid market value gains. $0.1 billion in the second quarter. Just about even with the first quarter's record level. The net redemptions in the second quarter were $1.1 billion. The global equity sub-advisory redemption of $3 billion that we discussed last quarter. Those results were again led by our MDT fundamental quant strategies. And market neutral strategies had a record $6 billion in net sales in the second quarter. On performance rankings at the end of the second quarter, six of nine MDT fund strategies were in the top performance quartile of their Morningstar categories for the trailing three years. We had net sales in 35 equity fund and SMA strategies during the second quarter, including a variety of MDT offerings, which contributed $2.7 billion, not including market neutral, which we'll discuss later. and strategic value, which had $470 million. Looking at our equity fund performance at the end of the second quarter and using Morningstar data for trailing three years, 54% of our equity funds were beating peers in 30% of their category. Through July 24th, equity funds and SMAs had net sales of $61 million, dollars up six hundred and eighty nine million market appreciation added a billion and was partially offset by net redemptions and exchanges at 26 fixed income funds and SMAs with net sales in Q2 led by core plus and core AG SMA which combined for a hundred and ninety million with three ultra short funds that were up a combined $134 million, and the conservative Muni micro-short fund was up almost $100 million. Regarding performance at the end of Q2, in using Morningstar data for the trailing three years, 39% of our fixed income funds were beating peers and 19% were in the top quartile of their category. Now, for Q3 through July 24, combined fixed income and SMAs had net sales. In the Alternative Private Markets category, assets increased $2.6 billion in Q2 to reach $21.6 billion of an 80% interest in FCP Fund Manager LP in early April, added $3.2 billion of U.S. multifamily real estate managed assets, $450 million in net sales of the PEC, the PEC Series, European Real Estate Debt Fund, which is a new pulled European debt offer. On the long-term investment platform, we began Q3 with about $3.4 billion in net institutional wins yet to fund. Into both funds, these are expected to have net sales of about $1.7 billion, with MDT additions expected to come into private market strategies, including direct lending of about 700 million and trade finance net sales of about 300 million including total return bond now moving on to money markets by seven point nine billion or about one percent or one percent two thousand and here to five hundred billion percent the liquidity level eight pools that we manage and keep typically peak with is that year-end through mid-april before decreasing in Q2 at the end of Q2 in 14 quarters. We lost share in 14 quarters with two quarters of no change. The average share loss was about 0.23. Our money market fund managed assets more than doubled from 208 billion to 500 billion of delight. Of course, it's important to note that But we remain in the top ten in every category of money market fund managed asset levels in the top five in Prime and Tax-Free. Talk about digital. Our digital initiatives include the recent launch of Money Market Management Digital Treasury Fund, which is expected to support both traditional and on-chain distribution. The initial reserve share compliance, financial investors, and stable coin issuers seeking investments aligned with intended to place official books and records of that share class on blockchain infrastructure as we implement a digital transfer agency model flexibility between traditional and on-chain record-keeping models we have selectively engaged with that intermediaries participation in the BNY Goldman domestic initiative involving mirrored tokenization and the Archex initiative to offer tokenized assets to a usage money market fund in the UK several other intermediaries these are early stage efforts currently looking more for digital asset information than transaction ability we expect our engagements with intermediaries to grow as regulations clarify and as our digital assets platform and product development progress assets were approximately 899 billion we should have picked the day before including 665 billion in money markets under nine billion in equities a hundred billion in fixed income of private markets and 3 billion were four hundred and ninety billion money market fund assets have

ranged from four hundred and ninety billion to five hundred and one billion during July set levels of four hundred and ninety six billion for Q2 compared to the prior quarter total revenues increased twenty three point eight million or five percent the FCP acquisition added about fourteen million service fees. In private markets, Rivington had a 2.9 million reported in other service fees. It had a 2 million real estate. These increases were partially offset due to money market average of 4 million compared to 388,000 in the prior quarter. 82,000 of the Q2 fees were offset by compensation expense. Two operating expenses and transaction costs from the FCP acquisition, including $6.5 million and $3.2 million of higher professional service fees, including FCP acquisition. These distribution expenses due mainly to lower money market fund average assets. The Q2 increase in property sale, the UK real estate development revenue fee the FCP acquisition related comp expense and professional service fees was about 4.7 Q2 effective tax rate was twenty five point eight percent twenty

eight percent eighty one million double to non controlling interest and 16 million up for questions certainly at this time we will be conducting a question-and-answer session if you would like to ask a question please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question for today is from Bill Katz with TD Cowan.

Good morning. This is Robin Holbeon for Bill Cass, and thank you for taking the question. We wanted to ask on fixed income, gross sales were up nicely quarter over quarter and year over year, while net flows seem to have somewhat stabilized. Has investor interest changed at all with the prospects of higher rates? And do you think the strategy can get back to positive net flows in the foreseeable future?

Well, the reason we mentioned about the flows right now is that they have gotten exactly there. If you talk about have become kind of numb to all the negative geo, as I mentioned, the conservative micro-short as well. So there is no macro answer to that that is going to take us through. And so we think the variety of products in the investment management.

Thank you. That's helpful. And then I wanted to follow up on strategic value. You mentioned it in the prepared remarks. The fund has solid year-to-day performance. Just maybe how are your conversations with investors tracking there?

The investors like the performance, but we don't like being in the category because we're either in the top of it or the bottom of it. And this always attracts the attention of the portfolio manager who just likes doing what he's doing, which is increasing the dividend, growth of dividend, and the dividend. These are people who come in who haven't had the experience of the fund, who understand exactly what the fund is doing.

This question is from Kenneth Lee with RBC Capital Markets.

Hey, good morning, and thanks for taking my question. Just one on the money market fund assets there. Just given the rate outlook and the environment there, any updated outlook in terms of potential asset growth for this year?

Well, let me comment first, and then I know Debbie's chomping at the bit to get at this one. But in terms of the money market fund overall, you know, we've been at this for 50 years, and there's all sorts of things that come together, like our rivers in a big confluence, which is of changes in market share. But because of the seasonality itself that we do expect that seasonality to come back just like it has, All these years, we've had these pools. Interesting things have happened in the marketplace. One of the big firms offered a sort of a bonus yield program that moved some assets. In the previous question, we had some ultra-shorting people moving out the curve a little bit. But with the Fed situation, if it is really higher for longer, i.e. they don't do anything, that's fine with us. Remember, a 3.5% or so percent yield on a money fund is a great thing. Debbie?

Thanks, Chris. Yes, I agree. A lot of volatility in the first half of the year. There were some very large market deals that occurred, you know, from an IPO standpoint and a long-term debt standpoint, Amazon, Alphabet, Anthropics, SpaceX. They issued large amounts in the marketplace, which then subsequently, for a period of time, came into the money market universe and has subsequently gone out, still some of it left in there. So a lot of volatility and noise around the first half of the year. But ultimately, what Chris mentioned with regard to a Warsh-led Fed, And that at this point is showing no signs of, you know, being in the mode of lowering rates, keeping rates higher for longer where they are now. I mean, the market is actually predicting that the rate environment is increased at the September meeting, which I don't particularly think will be the likely scenario. But nonetheless, if you're with rates on the short end somewhere between 3.5% and 4.5% on a yield curve basis over the first half of the year, money market funds look very attractive. Most of the industry, including ourselves, has lowered their weighted average maturity to have some fuel available to light the fire even further. As rates and the yield curve steepen to some degree, floaters are a really good use of investments in these funds during a rising rate environment, and those have been plentiful in the marketplace. Sometimes we like to spread in the floaters, sometimes we don't. But all of this really leads us to a conclusion that with rates where they are marginally higher from a steeper yield curve standpoint, the attractiveness of cash and the attractiveness of money market funds as well as the separate accounts and the pools that we manage will continue to gather assets as does the industry.

Helpful caller there. And just one follow-up, if I may, just on the expense side there. in the quarter, but just...

Sure can. We won't have the one-time comp expense from them. We will have their ongoing. So, you know, that number could be down around 5 million money market assets. And a professional service piece, FCP comment, we'd expect that one to go down. We'll continue with FCP. FCP line, that will continue.

The question is from Michael Cho with J.P. Morgan.

Hi. Thanks for taking my question. I just wanted to peel in just a little bit on the money market share discussion you had in your comments and just now as well. I just, you know, appreciate all the color on the history of the share shifts over the last seven years. But I'm just wondering, you know, as you looked at that and you analyzed it, I mean, are there any, you know, particular reasons of why these share shifts occur from time to time? And is it really just running promotion programs or anything that you're seeing from a key takeaway perspective as these shares just occur from time to time?

Michael, that's why I tried to list a whole bunch of confluence of factors every single quarter. We talked about all these big guys came in, and then that goes out. Who has more of it than the other guy? Then that changes the market share. The movement of some of the server micro-short, that does it. You already commented on the one that's some big retail programs. And then there's just the ebb and flow of cash, and it is volatile. And there's nothing that you can do about it. So the seasonality, the steady-eddy of the program, and as I try to hint in my remarks, we would trade every time to go from $200 billion to $500 billion. It goes down a little bit. Operators love revenues, but you're on revenues.

I can just switch gears to active ETS, a key priority here for you as well. I think you launched a couple more during the quarter. You can update us on, you know, the pace of launch from here, maybe over the next 12 to 18 months, you know, priorities in terms of products. And maybe any opportunities that you might see through maybe deeper distribution partnerships to maybe step up to scale in that business. I know you also had to mention none in the past as well, but just kind of a curious update there.

So we like some special deals with some of our distribution for the firm of the nature of the deal. If you play ball with them, your ETF does a lot better, or your family of ETFs, so we're doing some of that. It's a, has some other comments. We can go on the specifics. We can't tell you the names. They call that gun jumping.

If you look at what we've done, we've launched in the areas where we've had the most success in our traditional mutual funds, and so that's a roadmap to how we're thinking about the next wave. We've had a lot of success, ETFs, the focus initially has been domestic, but that's- I'd make one other comment on the whatever, then that can do well.

Add it and say where are the, where we would go, which is sort of how payers got The end of the question-and-answer session, and I will now turn the call over to Ray Hanley for closing remarks.

Thank you, Holly. That concludes our call, and we appreciate it.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Welcome to the Federated Hermes Q2 Analyst Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Ray Hanley, president of Federated Investors Management Company. You may begin.

Hello and welcome. Thank you for joining us today for the Q&A of Sacher Nasebi, the CEO of Federated Hermes Limited, and Debbie Cunningham, our chief investment officer applied by such agency filings.

Future results under management of $912 billion, led by growth in equity and private market assets, closed the second quarter at a record high of $110 billion. During the second quarter, equity assets increased by $8.8 billion, or 9%, from the first quarter, reflecting solid market value gains. Equity sales were $9.1 billion in the second quarter, just about even with the first quarter's record level. Net redemptions in the second quarter were $1.1 billion, which included the expected global equity sub-advisory redemption of $3 billion that we discussed last quarter. Equity sales results were again led by our MDT fundamental quant strategies. MDT equity and market neutral strategies had a record $6 billion in net sales in the second quarter. Performance rankings at the end of the second quarter, six of nine MDT fund strategies were in the top performance quartile of their Morningstar categories for the trailing three years. We had net sales in 35 equity fund and SMA strategies during the second quarter, including a variety of MDT offerings, which contributed $2.7 billion, not including market neutral, which we'll discuss later, and strategic value, which had $470 million. Looking at our equity fund performance at the end of the second quarter, and using Morningstar data for trailing three years, 54% of our equity funds were beating peers and 30% of two-three through July 24th combined equity funds and SMAs had net sales of $61 million dollars to fixed income at just over a hundred billion and 89 million market appreciation added a billion and was partially offset by net redemptions and exchanges we had 26 fixed income funds and SMAs with net sales in Q2 led by Core Plus and Core Ag SMA, which combined for $190 million, with three ultra-short funds that were up a combined $134 million, and the conservative Muni micro-short fund was up almost $100 million. Regarding performance at the end of Q2, in using Morningstar data for the trailing three years 39% of our fixed income funds were beating peers and 19% were in the top quartile of their category. Now for Q3 through July 24th and SMAs had net save in the private markets category. Assets increased 2.6 billion in Q2 to reach 21.6 billion. Acquisition of an 80% interest in FCP fund manager LP in early April, added $3.2 billion of U.S. multifamily real estate managed ETF, combined $50 million in net sales of the PEC, the PEC series, $400 to $600, the European fund, which is a new pulled European debt offer. Across our long-term investment platform, we began Q3 with about $3.4 billion in net institutional wins have net sales of about 1.7 billion with MDT additions expected to come into private market strategies including direct lending of about 700 million including total return bond low duration now moving on to money markets point nine billion point nine billion or 1% from q1 first half of the year to 500 or 3% over year and typically peak with tax collections at year end through mid-April before decreasing at the end of June in 14 quarters. We lost share in 14 quarters with two quarters of no change. The average share loss was about .23. 3 fund-managed assets more than doubled from $208 billion to $500 billion from an owner-operator. Of course, it's important to note that we remain in the top 10 in every category of money market fund-managed asset levels in the top 5 in Prime and Tax-Free. Our digital initiatives include the recent launch of Money Market Management Digital Treasury Fund, which is expected to support both traditional and on-chain distribution. The initial reserve shares class provides a non-tokenized, genius-compliant structural investors and stablecoin issuers seeking investments aligned with... ...attended to place official books and records of that share class on blockchain infrastructure as we implement a digital transfer agency model between traditional and on-chain record-keeping models. We have selectively engaged with asset intermediaries for participation in the BNY Goldman Domestic Initiative involving mirrored to offer tokenized assets to a UCITS money market fund in the UK. several other intermediaries these are early stage efforts being more for digital asset information than transaction ability we expect our engagements with intermediaries to grow as regulations clarify and as our digital assets platform and product development progress look at the recent asset totals as of a few days ago assets were approximately eight hundred and We should have picked the day before $65 billion in money markets and fixed income, $23 billion in markets, and $3 billion in multi-asset. Money market mutual fund assets were $490 billion, from $490 billion to $501 billion during July of $496 billion.

For Q2 compared to the prior quarter, total revenues increased $23.8 million, or 5%. The FCP acquisition added about $14 million, $0.1 million. In private markets, Bribington had a $2.9 million property into construction assets, $0.4 million. 82,000 of the Q2 Cs were offset by compensation expense. Q2 operating expense, $9.7 million in transaction costs from the FCP acquisition, including $6.5 million in compensation, and $3.2 million of higher professional service fees, including FCP. In addition, increased percent, 25 to 28 percent range. Investments were $481 million, attributable to non-controlling interests. Holly, we would like to open the call up for questions. now.

Certainly. At this time we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Your first question for today is from Bill Katz with TD Cowan.

Good morning. This is Robin Holdian for Bill Katz, and thank you for taking the question. We wanted to ask on fixed income, gross sales were up nicely quarter over quarter and year over year, while net flows seem to have somewhat stabilized. Has investor interest changed at all with the prospects of higher rates, and do you think the strategy can get back to positive net flows in the foreseeable future?

Well, the reason we mentioned about the flows right now is that they have gotten exactly there. Kind of numbed all the negative geopolitical news and issues. As I mentioned, the conservative micro-short and, of course, the money market fund thing as well. There is no macro answer to that that is going to take us through the next core response as well. And so we think the variety of products and the investment management will entitle us to the foreseeable future.

That's helpful. And then I wanted to follow up on strategic value. You mentioned it in the prepared remarks. The fund has solid year-to-date performance. Just maybe how are your conversations with investors tracking there?

The investors like the performance, but we don't like being in the category because we're either in the top of it or the bottom of it. And this always attracts the attention of the portfolio manager who just likes doing what he's doing, which is increasing the dividend, growth of dividend, and the dividend. When you look at the ETF also doing well, these are people who come in with exactly what the fund is.

The question is from Kenneth Lee with RBC Capital Markets.

Hey, good morning, and thanks for taking my question. Just one on the money market fund assets there. Just given the rate outlook and the environment there, any updated outlook in terms of potential asset growth for this year?

Well, let me comment first, and then I know Debbie's chomping at the bit to get at this one. But in terms of the money market fund overall, you know, we've been at this for 50 years, and there's all sorts of things that come together, like our rivers in a big confluence month to month. That's why I went through all those percentages of changes in market share. But because of the seasonality itself, that we do expect that seasonality to come back just like it has all these years we've had these pools. Some other interesting things have happened in the marketplace. One of the big firms offered a sort of a bonus yield program. As I mentioned in the previous question, we had some ultra-shorting people moving out the curve a little bit. But with the Fed situation, if it is really higher for longer, i.e. they don't do anything, that's fine with us. Remember, a 3.5% or so percent yield on a money fund is a great thing.

Thanks, Chris. Yes, I agree. A lot of volatility in the first half of the year. There were some very large market deals that occurred, you know, from an IPO standpoint and a long-term debt standpoint, Amazon, Alphabet, Anthropics, SpaceX. They issued large amounts in the marketplace, which then subsequently, for a period of time, came into the money market universe and has subsequently gone out, still some of it's left in there. So a lot of volatility and noise around the first half of the year. But ultimately what Chris mentioned with regard to a Warsh-led Fed that at this point is showing no signs of, you know, being in the mode of lowering rates, keeping rates higher for longer where they are now. I mean, the market is actually predicting that the rate environment is increased at the September meeting, which I don't particularly think will be the likely scenario. But nonetheless, if you're – with rates on the short end somewhere between 3.5% and 4.5% on a yield curve basis over the, you know, over the first half of the year, money market funds look very attractive. Most of the industry, including ourselves, has lowered their weighted average maturity. to have some fuel available to light the fire even further as rates and the yield curve steepen to some degree. Floaters are a really good use of investments in these funds during a rising rate environment, and those have been plentiful in the marketplace. Sometimes we like to spread in the floaters, sometimes we don't. But all of this really leads us to a conclusion that with rates where they are marginally higher from a steeper yield curve standpoint, the attractiveness of cash and the attractiveness of money market funds as well as the separate accounts and the pools that we manage will continue to gather assets as does the industry.

Very helpful caller there. And just one follow-up, if I may, just on the expense side there. realize there was some noise in the quarter but just go forward any update our bonus approval as things come out the distribution line you know that's

going to money market assets primary which way those go systems and communications would expect that to go up a couple million for the next quarter and a professional service piece FCP comment would expect that one to go down by about $6 million. Of course, we might have some other additions, smaller, come through there. And no comments on, you know, the intangible will continue with FCP. And other, you know, there's an FCP line expense I pointed out in there. That will continue. And then what happens with FX?

Very helpful there. Thanks again.

Your next question is from Michael Cho with J.P. Morgan.

Hi. Good morning. Thanks for taking my question. I wanted to peel in just a little bit on the money market share discussion you had in your comments and just now as well. Again, you know, I appreciate all the color on the history of the share shifts over the last seven years, but I'm just wondering, you know, as you looked at that and you analyzed it, I mean, are there any, you know, particular reasons of why these share shifts occur from time to time? Is it really just from running promotion programs or anything that you're seeing from a key takeaway perspective as these shares just occur from time to time?

Michael, that's why I tried to list a whole bunch of confluence of factors, single quarter. Debbie talked about all these big bins, and that goes out. Who has more of it than the other guy? Then that changes the market share. The movement of some of the conservative micro-short, that does it. And you already commented on the one that's some big retail programs. And then there's just the ebb and flow of cash, and it is volatile. And there's nothing that you can do about it. So we look for the seasonality, the steady-eddy of the program. And as I try to hint in my remarks, we would trade every time. There's love revenue.

Appreciate that, caller. If I can just switch gears to active ETFs, key priority here for you as well. I think you launched a couple more during the quarter. You can update us on, you know, the pace of launch from here, maybe over the next 12 to 18 months, you know, priorities in terms of products. And maybe any opportunities that you might see through maybe deeper distribution partnerships to maybe step up to scale in that business. I know you also had to mention none left in the past as well, but just kind of a curious update. Yeah, thanks.

So we like special deals with some of our distribution firms where the firm of the nature of the deal, all with them, your ETF does a lot better, or your family of ETFs, so we're doing some of that. But basically, it has some other comments on as far as we can go on the specifics. We can't tell you the names. They call that gun jumping.

If you look at what we've done, we've launched in the areas where we've had the most success, traditional mutual funds. And so that's a roadmap to how we're thinking about the next wave. We've had a lot of success porting the MDT strategy over there. The focus initially has been domestic.

If I had a comment on an ETF that's similar or whatever, then that can do well. and say, where are the things in the industry? And then that's another way, a pointer finger as to where we would go, which is sort of how payers got burped out onto the field.

The end of the question and answer session, and I will now turn the call over to Ray Hanley for closing remarks.

This concludes our call, and we appreciate you joining us today.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.