Federated Hermes, Inc. (FHI): Business Model Canvas [Dec-2025 Updated]

You're looking to cut through the noise and see exactly how Federated Hermes, Inc. makes its money, especially now that they've hit a record $871.2 billion in managed assets as of Q3 2025. Honestly, after two decades analyzing firms like this, I can tell you their model hinges on balancing massive, high-liquidity money market operations-which drive 53% of their year-to-date revenue-with a growing focus on active, responsible investing across private markets and equities. With a trailing twelve-month revenue of $1.74 billion, understanding their key partnerships, like the one with Archax for tokenization, and their massive intermediary channel (representing 67% of AUM) is crucial for anyone tracking the asset management space. Dive into the nine blocks below for the precise breakdown of their strategy.

Federated Hermes, Inc. (FHI) - Canvas Business Model: Key Partnerships

You're looking at the structure Federated Hermes, Inc. (FHI) uses to get its products to market as of late 2025. It's a mix of old-school distribution and cutting-edge digital finance.

The scale of the operation is significant; as of the third quarter of 2025, Federated Hermes reported total managed assets of $871.2 billion. This is the foundation upon which these partnerships are built.

Here is a snapshot of how their assets were distributed across major channels as of mid-2025:

The firm's cash-management services, heavily reliant on these distribution channels, are expected to contribute approximately 52% of its revenue this year (2025).

Strategic alliance with AmeriServ Financial Bank for regional distribution

Federated Hermes entered a strategic alliance with AmeriServ Financial Bank, announced December 3, 2025, to enhance investment options for AmeriServ's wealth management clients in the Western Pennsylvania area. This collaboration gives AmeriServ Bank's Wealth and Capital Management unit and its RIA subsidiary access to FHI's research and Portfolio Construction Solutions (PCS). As of June 2025, Federated Hermes managed $843.7 billion in assets, with a significant portion allocated to money market funds. AmeriServ Wealth and Capital Management, the partner entity, currently has $2.6 billion of customer assets under management and administration.

Global financial partners for blockchain-based fund ownership

Federated Hermes is actively engaging with innovators in the digital assets arena. The firm serves as subadvisor to a private tokenised fund in the U.S.. Furthermore, Federated Hermes participated in a collaborative initiative with BNY and Goldman Sachs to explore using blockchain technology to record customer ownership for select money market funds.

Archax for tokenized UCITS money market fund distribution

On October 22, 2025, Federated Hermes announced a partnership with Archax, an FCA-regulated digital securities exchange, to offer two UCITS Money Market Funds (MMFs) in tokenised form. This is FHI's first non-US digital assets initiative. The funds involved are the Federated Hermes Short-Term Sterling Prime Fund and the Federated Hermes Short-Term U.S. Prime Fund. At the time of this announcement, Federated Hermes cited over five decades of experience and $634.4 billion in money market assets under management. The tokens representing investor holdings are available on multiple blockchains:

• Ethereum
• Polygon
• Algorand
• Hedera
• Etherlink
• XRPL (Ripple)
• Arbitrum
• Solana
• Stellar
• XDC

Broker/dealer networks for retail product distribution

The distribution network is heavily weighted toward intermediaries. As noted in the Q2 2025 data, U.S. financial intermediaries accounted for 67% of total AUM, equating to approximately $565 billion. This network generally includes retail broker/dealers, trust banks, and wealth managers.

Sub-advisory relationships with other asset managers

Beyond the specific digital asset collaboration, Federated Hermes maintains sub-advisory relationships. The firm acts as a subadvisor to a private tokenised fund in the U.S.. This structure allows the firm to deploy its expertise in specific mandates managed by other entities.

Finance: review the Q3 2025 revenue breakdown against distribution expenses reported in Q2 2025 by Friday.

Federated Hermes, Inc. (FHI) - Canvas Business Model: Key Activities

You're looking at the core engine of Federated Hermes, Inc. (FHI) as of late 2025. The key activities revolve around managing capital across distinct strategies and ensuring those strategies are governed responsibly. Let's break down the numbers driving these operations.

Active investment management across five core asset classes

Federated Hermes, Inc. (FHI) is actively managing capital across the main buckets that make up their total assets. As of September 30, 2025, total managed assets hit a record of $871.2 billion. This management spans the five core areas you mentioned, which we can map to their reported asset figures and revenue contribution for the first nine months of 2025.

Here's how the assets break down based on the latest available figures, showing the scale of their active management:

The quantitative strategies, specifically the MDT suite, are a key driver within the equity space. Assets in MDT strategies reached $23.2 billion by the end of Q3 2025, marking an increase of $6.4 billion since Q1 2025. That's serious momentum in their systematic offerings.

Liquidity management for $652.8 billion in money market assets

Managing liquidity is a massive activity, given that money market assets hit a record $652.8 billion as of September 30, 2025. This segment was responsible for 53% of the firm's revenue for the first nine months of 2025. Investors are clearly using Federated Hermes, Inc. (FHI) for capital preservation, driving demand for their microshort and ultrashort funds, which offer yields a step above traditional money market strategies.

Global stewardship and ESG engagement services

Stewardship is integrated, not an afterthought. Looking at data as of June 30, 2025, the engagement focus shows where they spend their time:

• Environmental themes accounted for 37.8% of engagement objectives, with Climate change being the largest part at 62.2% of those environmental discussions.
• Social and ethical engagement covered 37.8% of objectives, focusing heavily on Human Capital at 48.9%.
• Governance issues made up 18.5% of objectives, with Executive remuneration being a key topic at 45.5%.
• In terms of voting, 60% of meetings involved voting against, against and abstained, or with management by exception, while 40% saw votes in favour.

The dialogue is global; for instance, North America saw 37 engagement meetings, while Europe saw 13 as of that June 2025 snapshot.

Quantitative investment strategy development (MDT equity)

The MDT quantitative approach is a core activity, using thousands of data points and uncompromising testing. The MDT Mid Cap Growth Fund, for example, held assets of $5.4 billion as of November 30, 2025. The firm saw continued interest in its broad suite of MDT equity and alternative quantitative investment solutions during Q2 2025. The systematic process evaluates companies using fundamental and technical factors, aiming for outperformance.

Regulatory compliance and global distribution oversight

While specific compliance spending isn't itemized, the scale of distribution oversight is evident in the revenue figures. Distribution expenses rose by 15% in Q3 2025, contributing to the increase in operating expenses to $340.0 million for that quarter. The firm delivers solutions to more than 10,000 institutions and intermediaries worldwide. Oversight is necessary to manage the flow of assets across these channels, especially as ETF and collective investment trust offerings were noted as quarterly leaders in net sales in Q2 2025.

Finance: draft 13-week cash view by Friday.

Federated Hermes, Inc. (FHI) - Canvas Business Model: Key Resources

You're assessing the core assets that power Federated Hermes, Inc.'s global operation as of late 2025. These aren't just line items; they are the engine room for their active management platform.

The sheer scale of assets under management defines a primary resource. Federated Hermes, Inc. reported total managed assets of a record $871.2 billion as of September 30, 2025. This massive pool of capital is supported by a significant global footprint and specialized intellectual property.

The firm relies heavily on its quantitative investment capabilities. Specifically, the success of their proprietary MDT quantitative investment models is noted, driving record net sales in equity funds during Q3 2025. Furthermore, the firm utilizes a proprietary responsible investment framework that integrates sustainability factors into investment models, often using discounted cash flow analysis.

Human capital is another critical, tangible resource. Federated Hermes maintains a global network of more than 2,000 employees, including investment professionals headquartered in Pittsburgh, with major offices in London, New York, and Boston. The specific headcount for 2025 is reported as 2,072 employees.

The brand reputation is built on specific areas of strength, particularly in liquidity management and responsible investing. The firm ranks in the top 7% of money market fund managers in the industry. Their commitment to ESG is evidenced by the EOS engagement team, which conducted engagements with 994 companies worldwide in 2024 alone.

Tangible and intangible assets supporting global operations include the necessary infrastructure for market access. This involves maintaining global distribution licenses across various jurisdictions and possessing the requisite regulatory capital to operate these funds. The firm delivers strategies to more than 10,000 institutions and intermediaries worldwide.

Here's a quick look at the asset composition driving the firm's revenue as of the end of Q3 2025:

The firm's expertise is also reflected in its rankings and specialized teams:

• Ranks in the top 6% of equity fund managers.
• Ranks as the 10th-largest manager of model-delivered separately managed accounts.
• The global stewardship and responsible investing team includes more than 60 professionals.

For context on revenue generation, for the first nine months of 2025, Federated Hermes derived 52% of its revenue from money market assets.

Finance: draft 13-week cash view by Friday.

Federated Hermes, Inc. (FHI) - Canvas Business Model: Value Propositions

You're looking at what Federated Hermes, Inc. (FHI) promises to deliver to its clients-the core value it offers across its diverse investment spectrum. It's a mix of stability, specialized expertise, and active ownership.

Active, Responsible Investing Across Equity, Fixed Income, and Private Markets

Federated Hermes, Inc. provides active management across the main asset classes, which is key to capturing alpha, especially when markets are volatile. As of September 30, 2025, the firm managed a record total of $871.2 billion in assets under management (AUM). This active approach is reflected in the revenue mix; for the third quarter of 2025, long-term assets-equity, fixed income, and alternatives-accounted for 46% of total revenue. You can see the scale in the specific asset classes:

The responsible investing piece is delivered through its stewardship services, which are designed to ensure companies are managed for long-term, sustainable value. The EOS at Federated Hermes Limited team actively engages with companies on material ESG risks and opportunities. For instance, the Q3 2025 Public Engagement Report from EOS focused on themes like the implications of the ratified High Seas Treaty and the energy demands of AI datacentres. This active ownership is a core part of the value proposition for clients seeking to be more active owners of their assets.

High-Liquidity, Capital Preservation Strategies via Money Market Funds

When market uncertainty flares up, liquidity and capital preservation become paramount, and this is where Federated Hermes, Inc.'s money market offerings shine. In the declining rate environment of Q3 2025, investors continued to rely on these offerings. The money market segment provides significant stability; as of September 30, 2025, money market fund assets hit a record $492.7 billion, contributing 52% of the firm's revenue that quarter. Total money market assets were even higher at $652.8 billion on that date. Also, for investors wanting a step further out the yield curve than pure money market funds, the firm offers microshort and ultrashort funds. This is a clear value proposition for cash management.

Access to World-Leading Stewardship and Engagement Services

You get more than just asset management; you gain access to EOS at Federated Hermes Limited, a service provider focused on stewardship. This service enables long-term institutional investors to engage with company management and boards on governance, strategy, and ESG issues. The engagement plan is client-led, meaning the priorities reflect the long-term objectives of their investors. While the most recent AUA figure is from the end of 2022, EOS represented assets under advice of over US$1.34tn then, showing the scale of their influence. The firm's commitment is evident in its ongoing engagement themes, such as the Q2 2025 report covering the automotive sector's EV transition and the threat of AMR (Antimicrobial Resistance).

Diverse Suite of MDT Quantitative Investment Solutions

Federated Hermes MDT Advisers offers a distinct value proposition through its quantitative investment solutions, which employ a disciplined, bottom-up approach based on fundamental and technical factors. As of September 30, 2025, MDT managed $26.1 billion across 12 investment strategies. This systematic process aims for objective, less human-biased investment selection. The performance demonstrates the potential of this approach:

• MDT Large Cap Growth Fund IS shares delivered +1.84% more annual return than the Russell 1000 Growth over the last five years.
• MDT All Cap Core Fund IS shares delivered +4.05% more annual return than the Russell 3000 over the last five years.

The MDT team uses proprietary software and intensive risk management to optimize alpha potential. It's definitely a differentiated offering in the active space.

Portfolio Construction Solutions (PCS) for Intermediaries

For financial advisors and other intermediaries, Federated Hermes, Inc. provides Portfolio Construction Solutions (PCS) to help them build client portfolios. The firm has a significant distribution footprint through U.S. financial intermediaries, which represented 67% (or $565 billion) of total AUM as of Q2 2025. This large base shows the importance of the intermediary channel to the firm's business structure. You can use their suite of strategies-from the stable money market funds to the specialized MDT quant products-to construct tailored solutions for your clients, all backed by the firm's $871.2 billion in total managed assets as of late Q3 2025.

Finance: draft 13-week cash view by Friday.

Federated Hermes, Inc. (FHI) - Canvas Business Model: Customer Relationships

Federated Hermes, Inc. serves a broad base of clients, structured to address the distinct needs of large asset owners and the distribution channels that reach other investors.

Dedicated institutional sales and client service teams. The firm supports its client base with a global team, with more than 2,000 employees operating across locations including Pittsburgh, London, New York, and Boston as of Q3 2025. This structure supports the delivery of equity, fixed-income, alternative/private markets, multi-asset, and liquidity management strategies. The firm's expertise is recognized, ranking in the top 7% of money market fund managers and the top 11% of fixed-income fund managers in the industry as of Q3 2025.

Relationship management with over 10,000 intermediaries. Federated Hermes actively manages relationships across a wide network. The firm delivers investment solutions to more than 10,000 institutions and intermediaries worldwide as of late 2025. This network includes specific client types such as:

• Corporations
• Government entities
• Insurance companies
• Foundations and endowments
• Banks and broker/dealers

The firm also ranks as the 10th-largest manager of model-delivered separately managed accounts.

High-touch, consultative service for large institutional clients. The service model is tailored to the complexity of institutional mandates. As of September 30, 2025, total managed assets reached a record $871.2 billion. The firm manages assets for 176 Federated Hermes Funds as of December 31, 2024. The focus on institutional service is evident in the asset allocation within the U.S. institutional market as of December 31, 2024, which totaled $207.3 billion across key strategies:

Digital platforms for fund access and reporting. Federated Hermes supports client interaction through digital means, alongside its direct service teams. The firm has published updated Digital Governance Principles in early 2025.

Advisor training and support for product distribution. Distribution to retail and intermediary channels is a key component of the business. The firm's distribution network includes trust banks, wealth managers, and retail broker/dealers. The focus on this segment is highlighted by the release of the Results of the 2025 Federated Hermes RIA and Independent Advisor Study.

Federated Hermes, Inc. (FHI) - Canvas Business Model: Channels

You're looking at how Federated Hermes, Inc. (FHI) gets its investment products into the hands of clients as of late 2025. This is all about the pipes they use to move that $845.7 billion in Assets Under Management (AUM) as of June 30, 2025.

The distribution strategy is clearly weighted toward intermediaries, which makes sense for a firm with deep roots in fund distribution. The core of the business flows through established financial networks, but they are definitely pushing direct institutional and global reach too.

The U.S. financial intermediaries segment is the powerhouse, representing 67% of the total AUM. This channel is where you find the bulk of their business with broker/dealers, banks, and registered investment advisors (RIAs). Honestly, this is the bread-and-butter for many established asset managers.

For the direct institutional sales to corporations and governments, that falls squarely into the U.S. Institutional Clients bucket, which accounted for 26% of AUM, or about $218 billion as of Q2 2025. This segment serves entities like corporations, government entities, insurance companies, foundations, and endowments, using a trained sales force of nearly 250 representatives to build and expand those relationships.

The global distribution network via the Hermes platform is key to their international presence. As of June 30, 2025, the international business represented 7% of AUM, totaling $62 billion. This is managed through subsidiaries focused on gathering assets in regions like Europe, the Middle East, Canada, Latin America, and the Asia Pacific region.

When you look at specific product wrappers, Federated Hermes, Inc. uses a variety of structures to reach different investors. You see their offerings distributed through vehicles like:

• Exchange-Traded Funds (ETFs), such as the U.S. Strategic Dividend ETF, which held $691.3 million in assets as of Q2 2025.
• Collective Investment Trusts (CITs), often mirroring their mutual fund strategies for retirement plans.
• Federated Hermes Funds, which included 45 equity funds and 54 fixed-income funds as of December 31, 2024.

The firm makes its investment strategies available to over 10,000 institutions and intermediaries globally. This reach is supported by specialized capabilities, including their stewardship service, EOS at Federated Hermes, which advises on a massive $2.2 trillion in assets, even if that is assets under advice, not AUM.

Finance: draft the Q3 2025 AUM breakdown by channel for the next board meeting by Friday.

Federated Hermes, Inc. (FHI) - Canvas Business Model: Customer Segments

You're looking at who Federated Hermes, Inc. (FHI) serves, and the numbers show a clear focus on institutional money and the intermediaries that reach everyone else. As of mid-2025, the total assets under management (AUM) hit a record of $845.7 billion at the end of the second quarter of 2025. That's the big picture; now let's break down where that money comes from.

The distribution channels clearly show where the bulk of the assets flow through. The largest segment is definitely the distribution network that works with advisors and platforms. Honestly, this structure is typical for a firm with deep roots in money market products, which often flow through these channels.

Here's the quick math on how the AUM was split across the main distribution channels based on the Q2 2025 figures:

Institutional investors (corporations, government entities) make up that significant 26% slice of the pie, representing about $218 billion in AUM as of June 30, 2025. This group includes corporations and government entities looking for specialized mandates, often in fixed income or liquidity solutions, which remain a core strength.

The Financial intermediaries (banks, broker/dealers, wealth advisors) segment is your powerhouse, accounting for 67% of total AUM, or $565 billion in Q2 2025. This channel is how Federated Hermes, Inc. reaches a vast number of smaller institutions and, critically, the Individual investors accessing funds through intermediaries. For you, this means the success of their retail-facing products is tied directly to the relationships they maintain with these distribution partners.

When we look at the international side, Global institutional clients represent about 7% of the total AUM, reaching $62 billion by Q2 2025. This segment is where the global mandates, particularly those focused on specialized strategies like ESG and private markets, are often domiciled.

The focus on specialized, long-term assets is clear when you look at the revenue mix for the first half of 2025. While money market assets drove 53% of revenue, long-term assets accounted for 46%. Within that long-term bucket, you see the key areas for sophisticated clients:

• Equity assets: 28% of long-term revenue contribution.
• Fixed-income assets: 12% of long-term revenue contribution.
• Alternative/private markets and multi-asset: 6% of long-term revenue contribution.

For Insurance companies, foundations, and endowments, the appeal lies in the long-term and alternative capabilities. The Private Markets platform, which covers real estate, infrastructure, private equity, and debt, held $19.0 billion in AUM as of September 30, 2025. This is where you see the deep, multi-decade relationships, like the one established with a major UK pension scheme back in 1983, which is defintely a testament to their client-centric approach in this space.

The commitment to responsible investing is a major draw for global institutional clients, which often overlap with the private markets group. Federated Hermes Limited, the international business, managed $53.6 billion as of September 30, 2025. Furthermore, their stewardship service, EOS, is engaged with companies on sustainability concerns for assets totaling $2.1 trillion under advisement, showing the breadth of their influence beyond just their own AUM.

Finance: draft 13-week cash view by Friday.

Federated Hermes, Inc. (FHI) - Canvas Business Model: Cost Structure

You're looking at the hard numbers that drive the operational engine of Federated Hermes, Inc. as of late 2025. The cost structure is heavily weighted toward personnel and getting the product-the investment management-to the client.

Compensation and benefits for over 2,000 employees represent a significant fixed and variable cost base. For the first six months ended June 30, 2025, Compensation and related expense totaled $288,143 thousand. This figure is subject to fluctuation based on performance, as seen in Q3 2025, where Compensation and related expense increased by $8.5 million primarily due to higher incentive compensation. For the nine months ended September 30, 2025, this expense line saw an increase of $29.4 million year-over-year, driven by higher incentive compensation. The firm employs over 2,000 people, so personnel costs are definitely the core expense here.

Distribution expenses scale directly with Assets Under Management (AUM) and fund activity, especially in money market products. For the first six months of 2025, Distribution expenses were $198,484 thousand. The impact of higher AUM was clear in Q3 2025, where distribution expenses increased by $17.7 million compared to Q3 2024, and by $14.2 million compared to Q2 2025, directly resulting from higher average managed money market fund assets. Year-to-date (YTD) 2025, this expense was up $27.8 million versus the prior year period.

Technology and data costs are embedded within several operating lines, but 'Systems and communications' gives us a concrete look at the investment in infrastructure. For the first half of 2025, Systems and communications costs were $47,707 thousand. This supports the investment research and trading platforms necessary for the firm's active strategies, including the MDT offerings.

General and administrative expenses include various overheads. While a single G&A line isn't explicitly broken out for the full period, related costs show movement. For instance, in Q3 2025, Other expense increased by $13.7 million, largely due to foreign currency fluctuations. Furthermore, the firm incurred about $2 million in transaction costs related to the FCP acquisition within the professional service fees line in Q3 2025. The quarterly dividend declared in Q3 2025 was $0.34 per share.

Intangible asset-related expenses reflect the amortization or impairment charges from past deals, like the 2018 acquisition of Federated Hermes Limited. The cost structure benefited significantly from a prior event; Q3 2025 operating expenses decreased due to lower intangible asset related expense resulting from the $66.3 million impairment recorded in Q2 2024. For Q1 2025, the Intangible asset related expense was $3,196 thousand, a slight decrease from $3,235 thousand in Q1 2024.

Here is a summary of key expense components for recent periods (in thousands, unless otherwise noted):

The total operating expenses for Q3 2025 increased by 15% or $43.3 million compared to Q3 2024. Conversely, for the nine months ended September 30, 2025, total operating expenses actually decreased by $16.8 million or 2% compared to the same period in 2024, largely due to the lower intangible asset expense following the Q2 2024 impairment.

You should keep an eye on the incentive compensation component of compensation expense, as it clearly moves with performance, and the distribution expense, which is a direct function of the AUM growth you're seeing, especially in money market funds. Finance: draft 13-week cash view by Friday.

Federated Hermes, Inc. (FHI) - Canvas Business Model: Revenue Streams

The revenue streams for Federated Hermes, Inc. (FHI) are heavily concentrated in asset management fees derived from the assets they manage for clients. As of late 2025, the total Trailing Twelve Month (TTM) revenue stood at $1.74 billion.

For the first nine months of 2025 (YTD 2025), the breakdown of revenue sources clearly shows the dominance of two main fee categories:

The 45% derived from long-term assets is further segmented by the underlying asset class generating those fees. This shows where the firm is earning its management fees from its longer-duration strategies:

• Fees from equity assets: 28% of YTD 2025 revenue.
• Fees from fixed-income assets: 11% of YTD 2025 revenue.
• Fees from alternative/private markets and multi-asset strategies: 6% of YTD 2025 revenue.

To give you a snapshot of the most recent quarter, the Q3 2025 revenue split showed a slight shift, with money market assets accounting for 52% of revenue and long-term assets at 46% for that quarter. Still, the overall dependence on money market fee income remains substantial.

Beyond the recurring management fees, another important component is performance fees and carried interest from alternative strategies. For instance, performance fees and stronger investment income were noted as supporting the beat against consensus estimates in Q2 2025. The growth in revenue for the first half of 2025 also included an increase in performance fees.