Federated's Q2 2025: Contradictions in Money Market Funds Growth, Institutional Rotation, and Capital Return Strategies

Record Assets Under Management:
- Federated Hermes ended Q2 with record assets under management of $846 billion, led by gains in equity strategies.
- The growth in assets was driven by strong performance in equity strategies, particularly the MDT fundamental quant strategies.

Equity Funds Performance and Flows:
- Equity assets increased by $8.1 billion or 10% from the prior quarter, with second-quarter equity net sales of $1.8 billion.
- This performance was supported by solid sales results from MDT equity strategies and improved flows from strategic value dividend strategies.

Fixed Income and Fund Redemptions:
- Fixed income assets decreased by $800 million or 1% in the second quarter, mainly due to net redemptions of $2.4 billion.
- Redemptions were partially offset by higher market valuations and FX, reflecting regular inflows and outflows from large public entities.

Alternative Private Markets Growth:
- Assets in alternative private markets increased by $1.3 billion or 7% in the second quarter, primarily due to net sales of $231 million.
- The growth was mainly driven by the impact of FX rates and strong sales in the MDT Market Neutral Fund.

Money Market Fund Assets Increase:
- Money market fund assets reached $468 billion at the end of Q2, a $3.1 billion increase.
- This growth, despite seasonal factors, was driven by the favorable market conditions for cash as an asset class and the appeal of attractive yields compared to alternatives.