Federated Hermes (3KC) Q3 2026 Earnings Report

The call was broadly constructive, led by record equity assets, strong MDT sales and performance, a substantial institutional pipeline, operating expense control and continued digital distribution initiatives. These positives were tempered by declines in money market assets and market share, fixed income valuation-related asset pressure and expected redemptions, lower carried interest and performance fees, and limited immediate client demand for tokenized products.

For 2026, Federated Hermes estimates the full year tax rate to be in the 25% to 28% range; for Q4 through October 23, combined equity funds and SMAs had net sales of $242 million and combined fixed income funds and SMAs had net redemptions of $2 billion, including $1.7 billion in redemptions from a client in the total return bond strategy. The long-term investment platform began Q4 with about $6.5 billion in net institutional wins yet to fund, with equity strategies expected to have net sales of about $7 billion in MDT additions, approximately $1.2 billion on a net basis expected to come into private markets, and fixed income expected to have net redemptions of about $1.7 billion; the equity portion is expected to fund over the next 2 quarters. Management expects comp here in the fourth quarter to go up as we continue to grow, distribution to follow primarily how the money market assets go, more spending in the systems and communications line item, and no big changes for next quarter in the remaining expenses, while maintaining a margin over 30%.