Q3 2025 Federated Hermes Inc Earnings Call

In a listen only mode a.

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'll now turn the conference over to your host Ray Hanley President of Federated Investors Management Company you may begin.

Good morning, and welcome.

Leading today's call will be Christiani, who's CEO and president of Federated Hermes, Inc.

Tom Donahue Chief Financial Officer.

Participating in the Q&A, our soccer and a savvy CEO of Federated Hermes limited.

Speaker #1: Greetings. Welcome to the Federated Hermes Q3 2025 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.

Cunningham, our chief investment officer for money markets. During today's call. We may make forward looking statements and we want to note that Federated Hermes actual results may be materially different than the results implied by such statements. Please review the risk disclosures in our SEC filings.

Speaker #1: 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 will now turn the conference over to your host, Ray Hanley, president of FEDERATED INVESTORS MANAGEMENT COMPANY.

Assurance can be given as to future results and Federated Hermes assumes no duty to update any of these forward looking statements Chris.

Speaker #1: You may begin.

Thank you Ray and good morning.

Speaker #2: Good morning and welcome. Leading today's call will be Chris Donahue, CEO and president of FEDERATED HERMES, and Tom Donahue, chief financial officer. And participating in the Q&A are Saker Nasebi, the CEO of FEDERATED HERMES, Ltd., and Debbie Cunningham, our chief investment officer for Money Markets.

I will review Federated Hermes business performance, Tom will comment on the financial results.

We ended the third quarter with record assets under management of 871 billion led by gains from our money market and equity strategies.

Equity assets increased by $5 7 billion or 6% from the prior quarter due mainly to market gains.

Speaker #2: During today's call, we may make forward-looking statements, and we want to note that FEDERATED HERMES' actual results may be materially different than the results implied by such statements.

Ray Hanley: During today's call, we may make forward-looking statements, and we want to note that Federated Hermes' actual results may be materially different than the results implied by such statements. Please review the risk disclosures in our SEC filings. No assurance can be given as to future results, and Federated Hermes assumes no duty to update any of these forward-looking statements. Chris? Thank you, Ray. Good morning. I will review Federated Hermes' business performance. Tom will comment on the financial results. We ended the third quarter with record assets under management of $871 billion, led by gains from our money market and equity strategies. Equity assets increased by $5.7 billion, or 6%, from the prior quarter, due mainly to market gains.

Q3 equity net sales were slightly negative $130 million.

Speaker #2: Please review the risk disclosures in our SEC filings. No assurance can be given as the future results and FEDERATED HERMES assumes no duty to update any of these forward-looking statements.

As solid net fund sales were $1 $4 billion were offset by about one 5 billion of separate account net redemptions driven by one client at all of their <unk> strategies.

Speaker #2: Chris?

Speaker #3: Thank you, Ray. Good morning. I will review FEDERATED HERMES' business performance. Tom will comment on the financial results. We ended the third quarter with record assets under management of $871 billion.

Strategies moving to passive Etfs and another client where pension funds were emerge and the surviving planned happens to use private strategies passive strategies.

Speaker #3: Led by gains from our money market and equity strategies. Equity assets increased by 5.7 billion, or 6%, from the prior quarter, due mainly to market gains.

Interestingly, we are also seeing other clients interested in moving from passives into our MDT strategies, which have had several rfps come in from investors considering this switch.

Speaker #3: Q3 equity net sales were slightly negative, $130 million, as solid net fund sales of $1.4 billion were offset by about $1.5 billion of separate account net redemptions driven by one client and all their CIT strategies moving to passive ETFs.

Ray Hanley: Q3 equity net sales were slightly negative, $130 million, as solid net fund sales of $1.4 billion were offset by about $1.5 billion of separate account net redemptions driven by one client and all their CIT strategies moving to passive ETFs. Another client where pension funds were merged, and the surviving plan happens to use private strategies, passive strategies. Interestingly, we're also seeing other clients interested in moving from passives into our MDT strategies, which have had several RFPs come in from investors considering this switch. The MDT fundamental quant strategies produced solid results again in the third quarter. MDT equity strategies had Q3 net sales of $2 billion. Looking at MDT fund performance rankings as of September 30, seven of the eight MDT equity mutual fund strategies are in the top performance quartile of their Morningstar categories for the trailing one and three years.

The MDT fundamental quant strategies produced solid results.

Again in the third quarter MDT strategy equity strategies.

Q3 net sales.

$2 billion.

Looking at MDT Fund performance rankings as of September 37.

Speaker #3: And another client where pension funds were merged, and the surviving plan happens to use private strategies. Passive strategies. Interestingly, we are also seeing other clients interested in moving from passives into our MDT strategies, which have had several RFPs come in from investors considering this switch.

Seven of the eight MDT equity mutual fund strategies are in the top performance quartile of their morningstar categories for the trailing one and three years.

And all eight are top quartile for the trailing five and 10 years.

Four of these strategies are in the top decile for the trailing three years.

Speaker #3: The MDT fundamental quant strategies produce solid results again in the third quarter. MDT equity strategies had Q3 net sales of $2 billion. Looking at MDT fund performance rankings as of September 30th, seven of the eight MDT equity mutual fund strategies are in the top performance quartile of their Morningstar categories for the trailing one, and three years.

We had net sales in 'twenty equity fund strategies during the third quarter.

Including obviously, a variety of the MDT offerings, and the Asia ex Japan fund, leading the pack.

Excuse me.

We are actively developing.

MDT distribution opportunities outside of the U S.

And our finding considerable interest from institutions intermediaries and others for example.

Speaker #3: And all eight are top quartile for the trailing five and ten years. And four of these strategies are in the top decile for the trailing three years.

Ray Hanley: All eight are top quartile for the trailing five and ten years. Four of these strategies are in the top decile for the trailing three years. We had net sales in 20 equity fund strategies during the third quarter, including, obviously, a variety of the MDT offerings and the Asia X Japan fund leading the pack. We are actively developing MDT distribution opportunities outside of the U.S. and are finding considerable interest from institutions, intermediaries, and others. For example, the MDT US Equity UCITS fund, that means it's registered for us in Dublin, launched in June and is off to a great start. We are seeing strong demand from clients outside of the U.S. and have already had $340 million in net sales from inception through last week.

The MDT U S equity UCITS fund that means is registered for us in Dublin.

Launched in June is off to a great start.

We are seeing strong demand from clients outside of the U S and have already had $340 million in net sales from inception through last week.

Speaker #3: We had net sales in 20 equity fund strategies during the third quarter, including obviously a variety of the MDT offerings, and the Asia ex-Japan fund leaving the pack.

Now looking at our equity fund performance at the end of Q3 end using Morningstar data for trailing three years, 53% of our equity funds were beating peers and 33% were in the top quartile of their category.

Speaker #3: Excuse me. We are actively developing MDT distribution opportunities outside of the U.S. and are finding considerable interest from institutions intermediaries and others. For example, the MDT U.S.

For the fourth quarter through <unk>.

October 24th combined equity fund and SMA had net sales of $580 million.

Speaker #3: The equity usage fund, which is registered for us in Dublin and launched in June, is off to a great start. We are seeing strong demand from clients outside of the U.S.

Now turning to fixed income assets increased by $3 1 billion from the prior quarter due each a record high of 101 8 billion at the end of Q3.

Speaker #3: and have already had 340 million in net sales from inception through last week. Now, looking at our equity fund performance at the end of Q3 and using Morningstar data for trailing three years, 53% of our equity funds were beating peers, and 33% were in the top quartile of their category.

Fixed income total net sales improved by $4 1 billion.

Ray Hanley: Now, looking at our equity fund performance at the end of Q3 and using Morningstar data for trailing three years, 53% of our equity funds were beating peers, and 33% were in the top quartile of their category. For the fourth quarter through October 24, combined equity funds and SMAs had net sales of $580 million. Now, turning to fixed income, assets increased by $3.1 billion from the prior quarter to reach a record high of $101.8 billion at the end of Q3. Fixed income total net sales improved by $4.1 billion as we had $1.7 billion of net sales in the third quarter compared to net redemptions of $2.4 billion in the second quarter. Q3 net sales included about $1.4 billion from two large public entities that have regular sizable inflows and outflows.

As we had $1 7 billion of net sales in the third quarter compared to net redemptions of $2 4 billion in the second quarter.

Q3, net sales included about $1 4 billion from two large public entities that have regular sizable inflows and outflows.

Speaker #3: For the fourth quarter through October 24th, combined equity funds and SMAs had net sales of $580 million. Now, turning to fixed income: assets increased by $3.1 billion from the prior quarter, to a record high of $101.8 billion at the end of Q3.

We had 24 fixed income funds with net sales in the third quarter.

Led by the three ultra short funds with $579 billion combined and the sustainable global investment grade UCITS fund about $240 million.

Speaker #3: Fixed income total net sales improved by 4.1 billion, as we had $1.7 billion of net sales in the third quarter, compared to net redemptions of $2.4 billion in the second quarter.

Regarding performance at the end of the third quarter using Morningstar data for the trailing three years, 44% of our equity.

Fixed income funds were beating peers and 15% were in the top quartile of their categories.

Speaker #3: Q3 net sales included about $1.4 billion, from two large public entities that have regular sizable inflows and outflows. We had 24 fixed income funds with net sales in the third quarter.

For Q4 through.

October 24th.

Combined fixed income funds and SMA had net redemptions of about $250 million.

Ray Hanley: We had 24 fixed income funds with net sales in the third quarter, led by the three ultra-short funds with $579 million combined and the sustainable global investment-grade UCITS fund, about $240 million. Regarding performance at the end of the third quarter, using Morningstar data for the trailing three years, 44% of our equity fixed income funds were beating peers, and 15% were in the top quartile of their category. For Q4 through October 24, combined fixed income funds and SMAs had net redemptions of about $250 million. This was occasioned by positives in ultra-shorts and Total Return Bond Fund that were overcome by negatives in high-yield bonds.

This was occasion by positives in ultra shorts and total return Bond fund.

Speaker #3: Led by the three ultra-short funds with $579 billion combined, and the sustainable global investment-grade usage fund, about $240 million. Regarding performance at the end of the third quarter, using Morningstar data for the trailing three years, 44% of our equity fixed income funds were beating peers, and 15% were in the top quartile of their category.

That were overcome by negatives in high yield bonds.

In the alternative private markets category.

Assets decreased by about $1 7 billion from the prior quarter, mainly due.

Two a $1 $1 billion in real estate fund transactions.

From that we have previously discussed the restructuring of the UK property Trust in the third quarter.

Speaker #3: For Q4 through October 24th, combined fixed income funds and SMAs had net redemptions of about $250 million. This was occasioned by positives in ultra-shorts and total return bond fund that were overcome by negatives in high-yield bonds.

This fund was successfully managed by US for many years. It was specifically designed for defined benefit clients. There are very few of these left.

The liquidity was an important factor the decision was made to move into one of the last remaining managers of this type of DB fund for which we received from natural consideration that Tom will address.

Speaker #3: In the alternative private markets category, assets decreased by about 1.7 billion, from the prior quarter, mainly due to a $1.1 billion in real estate fund transactions from that we have previously discussed.

Ray Hanley: In the alternative private markets category, assets decreased by about $1.7 billion from the prior quarter, mainly due to $1.1 billion in real estate fund transactions from what we have previously discussed, the restructuring of a UK property trust in the third quarter. This fund was successfully managed by us for many years. It was specifically designed for defined benefit clients. There are very few of these left. The liquidity was an important factor. The decision was made to move it to one of the last remaining managers of this type of DB fund, for which we received financial consideration that Tom will address. Real estate also had net redemptions of $446 million from separate accounts in Q3, due mainly to property sales that were driven by a client's change to their asset composition.

Real estate also had net redemptions of $446 million from separate accounts in Q3, due mainly to property sales that were driven by a clients change to their asset composition.

Speaker #3: The restructuring of a UK property trust in the third quarter. This fund was successfully managed by us for many years. It was specifically designed for defined benefit clients.

The MDT market neutral.

Alternative strategy had net sales of $173 million in Q3, and now stands with assets of about $1 7 billion.

Speaker #3: There are very few of these left. The liquidity was an important factor. The decision was made to move it to one of the last remaining managers of this type of DB fund, for which we received financial consideration that Tom will address.

We are currently in the market with European direct lending III, the third vintage of our European direct lending fund to.

To date, we've closed on about $680 million.

The new information <unk> raised 300.

Speaker #3: Real estate also had net redemptions of $446 million, from separate accounts in Q3, due mainly to property sales that were driven by a client's change to their asset composition.

<unk> raised about $640 million.

We are also in the market with our global private equity co invest funds, which is the sixth vintage of the <unk> series.

Date, we've closed on approximately $318 million.

Speaker #3: The MDT market neutral alternative strategy had net sales of $173 million in Q3, and now stands with assets of about $1.7 billion. We are currently in the market with European direct lending three, the third vintage of our European direct lending fund.

Ray Hanley: The MDT market-neutral alternative strategy had net sales of $173 million in Q3 and now stands with assets of about $1.7 billion. We are currently in the market with European Direct Lending III, the third vintage of our European Direct Lending Fund. Today, we've closed on about $680 million. For your information, EDL raised $300 million, and EDL II raised about $640 million. We are also in the market with our Global Private Equity Co-Invest Fund, which is the sixth vintage of the PEC series. Today, we've closed on approximately $318 million, and PECs I through V raised approximately $400 million to $600 million in each fund. We're also in the market with the European Real Estate Debt Fund, which is a new pooled debt equity fund. The marketing will continue here into 2026.

And <unk> one through five raised approximately 400 to 600 in each fund.

We're also in the market with the European.

Real estate debt fund, which is a new pooled debt equity fund by debt fund and the marketing will continue here.

Speaker #3: To date, we've closed on about 680 million. For any information, EDL raised $300, and EDL2 raised about $640 million. We are also in the market with our global private equity co-invest fund, which is the sixth vintage of the PEC series.

Into 2026.

We're also actively working on energy solutions product development plans. Following the Q2 acquisition of a majority interest in Rivington.

Last week, we announced the agreement to purchase a controlling interest in FCP.

A U S based real estate investment manager with $3 8 billion of assets under management as of June 30.

Speaker #3: To date, we've closed on approximately $318 million, and PECs one through five raised approximately $400 to $600 in each fund. We're also in the market with the European real estate debt fund, which is a new pooled debt equity fund, that debt fund, and the marketing will continue here into 2026.

The acquisition will facilitate Federated Hermes entrance into the U S real estate market at a time when the U S multifamily sector, where FCP concentrates its efforts enjoys strong fundamentals and significant growth opportunities.

Speaker #3: We're also actively working on energy solutions product development plans following the Q2 acquisition of a majority interest in Rivington. Last week, we announced the agreement to purchase a controlling interest in FCP.

<unk> has a strong experienced management team, who have led the firm's growth through changing market conditions for over 25 years we.

Ray Hanley: We're also actively working on energy solutions product development plans following the Q2 acquisition of a majority interest in Rivington. Last week, we announced the agreement to purchase a controlling interest in FCP, a U.S.-based real estate investment manager with $3.8 billion of assets under management as of June 30. The acquisition will facilitate Federated Hermes' entrance into the U.S. real estate market at a time when the U.S. multifamily sector, where FCP concentrates its efforts, enjoys strong fundamentals and significant growth opportunities. FCP has a strong, experienced management team who have led the firm's growth through changing market conditions for over 25 years. We believe that FCP will be an excellent complement to our UK-based real estate business. There, with more than 40 years of experience, our UK-based team has more than 55 professionals managing $5.5 billion as of the end of Q3.

We believe that FCB will be an excellent complement to our U K based real estate business.

Speaker #3: A U.S.-based real estate investment manager with $3.8 billion of assets under management as of June 30. The acquisition will facilitate federated Hermes entrance into the U.S.

There with more than 40 years of experience our UK based team has more than 55 professionals managing five 5 billion.

As of the end of Q3.

Speaker #3: the real estate market at a time when the U.S. multifamily sector, where FCP concentrates its efforts, enjoys strong fundamentals and significant growth opportunities. FCP has a strong, experienced management team who have led the firm's growth through changing market conditions for over 25 years.

Now back on FCC, we're planning to close the purchase around the end of the first quarter of 2026.

Across our long term investment platform.

We began Q4 with about $2 1 billion in net institutional mandates yet to fund in both funds and separate accounts.

Speaker #3: We believe that FCP will be an excellent complement to our UK-based real estate business. There, with more than 40 years of experience, our UK-based team has more than 55 professionals managing five and a half billion dollars as of the end of Q3.

Let's delve into that approximately one 6 billion is expected to come into private market strategies, which include direct lending over 800.

Private equity a little over 650 and trade finance it 100.

Equities are.

Speaker #3: Now, back on FCP, we're planning to close the purchase around the end of the first quarter of 2026. Across our long-term investment platform, we began Q4 with about $2.1 billion in net institutional mandates yet to fund in both funds and separate accounts.

Our expected additions of $1 2 billion.

Ray Hanley: Now, back on FCP, we're planning to close the purchase around the end of the first quarter of 2026. Across our long-term investment platform, we began Q4 with about $2.1 billion in net institutional mandates yet to fund in both funds and separate accounts. Let's delve into that. Approximately $1.6 billion is expected to come into private market strategies, which include direct lending over $800 million, private equity a little over $650 million, and trade finance at $100 million. Equities are expected additions of $1.2 billion, with about $875 million into MDT and about $365 million into international and global equity strategies. Fixed income is expected to have net redemptions of about $650 million, with wins of about $380 million in high yield and short duration, offset by a single $1 billion high-yield redemption.

With about $875 million into MDT, and about 365 into international and global equity strategies.

Fixed income is expected to have net redemptions of about $650 million with wins of about 380.

Speaker #3: Let's delve into that. Approximately $1.6 billion is expected to come into private market strategies which include direct lending over 800, private equity a little over 650, and trade finance at 100.

So in high yield and short duration offset by a single $1 billion of high yield redemption.

Moving on to money markets.

We reached another record high at the end of Q3 for total money market assets, which increased by $18 billion to reach 653 billion.

Speaker #3: Equities are expected additions of $1.2 billion, with about $875 million into MDT and about $365 million into international and global equity strategies. Fixed income is expected to have net redemptions of about $650 million, with wins of about $380 million in high yield and short duration offset by a single $1 billion high-yield redemption.

Money market fund assets increased by $24 7 billion or 5% in Q3 to reach a record high of $492 7 billion.

Money market separate accounts decreased by $6 3 billion in Q3.

<unk> seasonal patterns.

Market conditions remain favorable for cash as an asset class. In addition to the appeal of the relative safety and in periods of volatility money market strategies presented opportunities to earn attractive yields compared to alternatives like bank deposits direct investments in T bills and commercial paper.

Speaker #3: Moving on to money markets. We reached another record high at the end of Q3 for total money market assets, which increased by $18 billion to reach $653 billion.

Ray Hanley: Moving on to money markets, we reached another record high at the end of Q3 for total money market assets, which increased by $18 billion to reach $653 billion. Money market fund assets increased by $24.7 billion, or 5%, in Q3 to reach a record high of $492.7 billion. Money market separate accounts decreased by $6.3 billion in Q3, reflecting seasonal patterns. Market conditions remain favorable for cash as an asset class. In addition to the appeal of the relative safety and periods of volatility, money market strategies present opportunities to earn attractive yields compared to alternatives like bank deposits, direct investments in T-bills, and commercial paper. We're also developing money market funds and share classes available in tokenized form and working with parties on digital asset infrastructure. These efforts include a planned Genius Act-compliant money market fund designed to serve as collateral for stablecoins.

Speaker #3: Money market fund assets increased by 24.7 billion, or 5%, in Q3 to reach a record high of $492.7 billion. Money market separate accounts decreased by 6.3 billion in Q3, reflecting seasonal patterns.

We're also developing money market funds and share classes available in <unk> four.

And working with parties on digital asset infrastructure.

These efforts include a planned genius Act compliant money market fund designed to serve as collateral for stable coins.

Last week, we announced that we have made two of our UCITS money market funds are sterling Prime in U S dollar prime available in <unk> form.

Speaker #3: Market conditions remain favorable for cash as an asset class. In addition to the appeal of the relative safety and periods of volatility, money market strategies present opportunities to earn attractive yields compared to alternatives like bank deposits, direct investments in T-bills, and commercial paper.

Through our checks or checks is a well known digital assets operator in the UK.

<unk> launched in 2018 and become the first FCA regulated digital securities exchange broker dealer and custodian.

Speaker #3: We're also developing money market funds and share classes available in tokenized form, and working with parties on digital asset infrastructure. These efforts include a planned GENIUS Act-compliant money market fund designed to serve as collateral for stablecoins.

This represents a federated Hermes initial non U S digital asset initiatives.

The art checks relationship complements our digital efforts, where we are the sub advisor for the Super Safe short duration U S Government Securities Fund a private <unk> fund was about $735 million in assets.

Speaker #3: Last week, we announced that we have made two of our usage money market funds, our Sterling Prime and U.S. Dollar Prime, available in tokenized form through our checks.

Ray Hanley: Last week, we announced that we have made two of our UCITS money market funds, our Sterling Prime and U.S. Dollar Prime, available in tokenized form through Archax. Archax is a well-known digital assets operator in the UK, having launched in 2018 and become the first FCA-regulated digital securities exchange, broker-dealer, and custodian. This represents Federated Hermes' initial non-U.S. digital asset initiative. The Archax relationship complements our digital efforts, where we are the sub-advisor for the Superstate Short Duration U.S. Government Securities Fund, a private tokenized fund with about $735 million in assets. We will also participate in the launch of a collaborative initiative between BNY and Goldman Sachs that will use blockchain technology to maintain a record of their customers' ownership of select money market funds, a significant step towards enhancing the utility and transferability of existing money market fund shares.

We will also participate in the launch of our collaborative initiatives between.

Speaker #3: Our checks indicate that we are a well-known digital assets operator in the UK, having launched in 2018 and become the first FCA-regulated digital securities exchange broker-dealer and custodian.

<unk> and Goldman.

That will use blockchain technology to maintain our record of their customers' ownership of select money market funds.

A significant step towards enhancing the utility and transferability of existing money market fund shares.

Speaker #3: This represents federated Hermes initial non-US digital asset initiative. The our checks relationship complements our digital efforts where we are the sub-advisor for the super state short duration US government securities fund, a private tokenized fund with about $735 million in assets.

We are exploring numerous other additional digital asset opportunities. We are committed to the digital space, where we expect ongoing innovation and growth.

Our estimate of money market mutual fund market share, including sub advised funds remained at about 711% at the end of the third quarter.

Speaker #3: We are also participating in the launch of a collaborative initiative between a BNY and Goldman that will use blockchain technology to maintain a record of their customers' ownership of select money market funds.

Now looking at recent asset totals as of a few days ago.

Managed assets were approximately 865 billion.

Including $645 billion in money markets.

Speaker #3: A significant step towards enhancing the utility and transferability of existing money market fund shares. We are exploring numerous other additional digital asset opportunities. We are committed to the digital space, where we expect ongoing innovation and growth.

<unk> 96 billion in equities.

102 billion in fixed income.

Ray Hanley: We are exploring numerous other additional digital asset opportunities. We are committed to the digital space, where we expect ongoing innovation and growth. Our estimate of money market mutual fund market share, including sub-advised funds, remained at about 7.11% at the end of the third quarter. Now, looking at recent asset totals as of a few days ago, managed assets were approximately $865 billion, including $645 billion in money markets, $96 billion in equities, $102 billion in fixed income, $19 billion in alternative private markets, and $3 billion in multi-asset. Money market mutual fund assets stood at $486 billion. Tom? Thanks, Chris. For Q3, compared to the prior quarter, total revenue increased $44.6 million, or 10%. Revenue from higher money market assets provided $17.6 million of this increase, while higher equity assets added $14.8 million.

$19 billion in alternatives private markets 3 billion in <unk>.

Multi asset.

Money market mutual fund assets stood at 486 billion.

Speaker #3: Our estimate of money market mutual fund market share including sub-advised funds remained at about 7.11% at the end of the third quarter. Now, looking at recent asset totals as of a few days ago.

Tom Thanks.

Thanks, Chris.

For Q3 compared to the prior quarter total revenue increased.

$44 6 million or 10%.

Revenue from higher money market assets provided $17 6 million of this increase while higher equity assets added $14 8 million an extra day in the quarter added $4 9 million higher performance fees at a $2 4 million and the <unk> acquisition added $1 2 million.

Speaker #3: Managed assets were approximately $865 billion. Including $645 billion in money markets, $96 billion in equities, $102 billion in fixed income, $19 billion in alternative private markets, $3 billion in multi-asset, money market mutual fund assets stood at $486 billion.

Q3 revenue also included a termination fee of four 6 million from the restructure of the UK property Trust.

This is about was about one year of revenue from that mandate.

Speaker #3: Tom?

Speaker #2: Thanks, Chris.

Speaker #1: For Q3, compared to the prior quarter, total revenue increased by $44.6 million or 10%. Revenue from higher money market assets provided $17.6 million of this increase, while higher equity assets added $14.8 million.

Total Q3 carried interest and performance fees were $3 6 million compared to one four.

$4 million last quarter.

Approximately 733000 of the Q3 fees were offset by nearly the same amount of compensation expense.

Speaker #1: An extra day in the quarter added 4.9 million, higher performance fees added 2.4 million, and the Rivington acquisition added 1.2 million. Q3 revenue also included a termination fee of 4.6 million from the restructure of the UK property trust, and this is about was about one year of revenue from that mandate.

Ray Hanley: An extra day in the quarter added $4.9 million, higher performance fees added $2.4 million, and the Rivington acquisition added $1.2 million. Q3 revenue also included a termination fee of $4.6 million from the restructure of the UK property trust, and this was about one year of revenue from that mandate. Total Q3 carried interest and performance fees were $3.6 million compared to $1.4 million last quarter. Approximately $733,000 of the Q3 fees were offset by nearly the same amount of compensation expense. Q3 operating expenses increased by $32.2 million, or 10%, from the prior quarter, due mainly to higher distribution expense from higher fund assets of $14.2 million. We had about $2 million in transaction costs from the FCP acquisition in Q3 in the professional service fees line. In other expense line items, FX and related expense increased by $9.4 million in Q3 compared to the prior quarter.

Q3, operating expenses increased by $32 2 million or 10% from the prior quarter due mainly to higher distribution expense from higher fund assets of $14 2 million.

We had about $2 million in transaction costs from the FCP acquisition in Q3 in the professional service fees line.

Speaker #1: Total Q3 carried interest and performance fees were 3.6 million, compared to 1.4 million last quarter. Approximately $733,000 of the Q3 fees were offset by nearly the same amount of compensation expense.

And other expense line items, FX and related expense increased by $9 4 million in Q3 compared to the prior quarter. These expenses were $3 7 million in Q3 compared to a credit of $5 7 million.

Speaker #1: Q3 operating expenses increased by $32.2 million, or 10%, from the prior quarter, due mainly to higher distribution expenses resulting from higher fund assets of $14.2 million.

For Q2 as the pound weakened against the dollar in Q3.

The other expense line item for Q3 also included $2 8 million related to a U S withholding tax matter on certain non U S funds.

Speaker #1: We had about $2 million in transaction costs from the FCP acquisition in Q3 in the professional service fees line. In other expense line items, FX and related expenses increased by $9.4 million in Q3 compared to the prior quarter. These expenses were $3.7 million in Q3 compared to a credit of $5.7 million for Q2, as the pound weakened against the dollar in Q3.

The effective tax rate was 24, 4%.

Tax rate was impacted by $1 6 million related to R&D tax credits.

At the end of Q3 cash and investments were $647 million cash and investments excluding the portion of attributable to noncontrolling interests were $610 million.

Ray Hanley: These expenses were $3.7 million in Q3 compared to a credit of $5.7 million for Q2 as the pound weakened against the dollar in Q3. The other expense line item for Q3 also included $2.8 million related to a U.S. withholding tax matter on certain non-U.S. funds. The effective tax rate was 24.4%. The tax rate was impacted by $1.6 million related to R&D tax credits. At the end of Q3, cash and investments were $647 million. Cash and investments, excluding the portion attributable to non-controlling interest, were $610 million. We expect to use about $216 million in cash and about $23 million in FHI Class B stock for the upfront purchase price of FCP controlling interest acquisition. During Q3, the company paused its open market share repurchase as we entered exclusive negotiations with FCP. We expect to be active again in Q4 and repurchase shares in the open market.

We expect to use about $216 million in cash and about $23 million in.

Jai class B stock for the upfront purchase price of FCP controlling interest acquisition.

Speaker #1: The other expense line item for Q3 also included $2.8 million related to a U.S. withholding tax matter on certain non-U.S. funds. The effective tax rate was 24.4%.

During Q3, the company pause its open market share repurchase as we entered exclusive negotiations with FCC, we expect to be active again in Q4 and repurchase shares in the open market.

Speaker #1: The tax rate was impacted by 1.6 million related to R&D tax credits. At the end of Q3, cash and investments were $647 million, cash and investments excluding the portion of tributable to non-controlling interest were $610 million, we expect to use about $216 million in cash and about $23 million in FHI class B stock for the upfront purchase price of FCP controlling interest acquisition.

We'd like to open the call up for questions now.

Yes.

At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Formation tone will indicate your line is in the question queue you.

You May press Star two if you would like to remove your question from the queue for.

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 Ken Worthington with Jpmorgan.

Ray Hanley: Holly, we'd 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 one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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 Ken Worthington with JP Morgan. Hi. Good morning, Kristen. This is Michael Choen for Ken. Thanks for taking my questions today. For my first question, I just want to touch on the MDT franchise. I mean, there's clearly some growing momentum there.

Hi.

This is Michael Cho on for Ken Thanks for taking my questions today.

So my first question I, just wanted to touch on MTS 18.

18, French site slowly growing momentum there you called out some new RFP I'm.

Pretty sizable pipeline as well as some initiatives to expand distribution more notably outside the U S. So how do we think.

We should kind of frame the potential sizing and maybe the pace of.

Our flows growth overall and the key franchises continued scale in the non U S distribution starts that starts to pull up there just trying to get a sense of how we should frame that opportunity set.

I think you should frame it with enthusiasm.

And optimism.

If you look at the.

Sales to date through this timeframe.

They're still running.

Net sales of <unk>.

Ray Hanley: You called out some new RFPs, a pretty sizable pipeline, as well as some initiatives to expand distribution, more notably outside the U.S. How do we think we should kind of frame the potential sizing and maybe the pace of AUM or flow's growth of the overall MDT franchise as you continue to scale and as the non-U.S. distribution starts to pull through? Just trying to get a sense of how we should frame that opportunity set. I think you should frame it with enthusiasm and optimism. If you look at the sales to date through this timeframe, they're still running. Net sales up through October 24 of about $660 million. The pipeline continues. For us, the exciting thing is the fact that we are able to sell these mandates across the globe.

Up through October 24th.

About $660 million. So the pipeline continues but for US the exciting thing is the fact that we were able to sell these mandates across the globe.

And if you look at.

Where they're coming from they're coming from different countries in different ways and in different.

Of the mandates exactly on MDT I cant get into exactly who the clients are.

But in those pipeline numbers is a great variety of.

Client client types and geographies.

Understood.

And then if I could just ask a quick.

Follow up on expenses.

Just broader over the year ahead, you have a number of initiatives you called out a bunch today clearly alternatives in the STP acquisition into the AD.

Ray Hanley: If you look at where they're coming from, they're coming from different countries in different ways and in different of the mandates exactly on MDT. I can't get into exactly who the clients are, but in those pipeline numbers is a great variety of client types and geographies. Thanks. Understood. If I could just ask a quick follow-up on expenses, just broader over the year ahead. You have a number of initiatives. You called out a bunch today, clearly alternatives and the FCP acquisition is ahead. You also have a number of things happening within money markets and blockchain, digital assets, and clearly kind of extension of some of your key franchises. If I just think about the expense base and over the next 12 months or so, how should we kind of think about. The trajectory there as you can continue to invest organically and inorganically across the business?

Also have a number of things happening within money markets and blockchain digital assets and clearly kind of expansion of some of your key franchises.

Think about the expense base.

And over the next 12 months or so how should we think about.

Geoffrey there as we can continue to invest organically and inorganically across the business.

Okay.

The first thing FCP, if we close that near the end of the.

And if you look at where they're coming from, they're coming from different countries in different ways and in different, um, of the mandates. Exactly on MDT. I can't get into exactly who the clients are, um, but in those pipeline numbers is a great variety of, uh, of a client client types and geographies.

First quarter, then of course, those expenses will come in but we've kind of factored that in.

On last week's discussion about our view of after transaction costs will be an accretive thing.

And also in 2007.

<unk> more accretive.

Based on our estimates of what we think is going to happen. There. So of course revenue go up and the expenses will go up.

And in terms of.

You are calling out a few things obviously, the digital things in the money market.

Ray Hanley: Thanks. The first thing, FCP, we closed that near the end of the first quarter. Of course, those expenses will come in, but we've kind of factored that in. On last week's discussion about our view of after-transaction costs, it will be an accretive thing. Also, in 2027, much more accretive based on our estimates of what we think is going to happen there. Of course, revenue will go up and the expenses will go up. In terms of you're calling out a few things, obviously the digital things and the money market stuff and other expansions, I don't see outside expenses coming in here. If they do, we would fully expect them to come with revenue shortly thereafter.

Thanks understood. Um, and then if I could just ask a quick follow-up on on expenses, um, just just broader, you know, over the year ahead, you have a number of initiatives, you called out a bunch today, clearly Alternatives and the SCP acquisition is ahead, but you also have a number of things happening within money markets and blockchain digital assets and and clearly kind of extension of some of your key franchises. So if I just think about the expense base and and and and, you know, over the next, you know, 12 months or so, how should we kind of think about? Um, the trajectory there as you can continue to invest organically and inorganically across the business, thanks.

Other expansions.

Okay. Um,

I don't see outsized.

Expenses coming in here and if they do we would fully expect them to come with revenue shortly thereafter.

my first thing FCP, you know, we close that you know, near near the end of the um,

And if you want me to go through the.

For the year, but for the.

For the next quarter, a few comments on the line items.

A factor that in, uh, on last week's discussion about our view of, you know, after transaction costs, it would be an accretive thing and also in, in 27, you know, much more creative.

I'd expect comp and related to go up as sales are increasing and therefore incentive comp is going up in investment management performance.

Based on our estimates of what we think is going to happen there. So, of course, revenue will go up and the expenses will go up.

um, and and in terms of,

Is causing us to increase the incentives there and on the corporate side. We're also increasing the instead of these are all positive success items.

On the distribution line item, we expect that to go up as you look at average assets distribution line item. Another success item goes up.

uh, you know, you're calling out a few things, you know, obviously the digital things and the money market stuff, and, and other expansions, you know, I don't, I don't see, you know, outside,

On the professional service fees.

Ray Hanley: If you want me to go through, not for the year, but for the next quarter, a few comments on the line items, I'd expect comp and related to go up as sales are increasing and therefore incentive comp is going up and investment management performance is causing us to increase the incentives there. On the corporate side, we're also increasing the incentive. These are all positive success items. On the distribution line item, we expect that to go up. As you look at average assets, distribution line item, another success item goes up. On the professional service fees, looking at it today, we already said we'd expect some more FCP closing costs in Q4, but we had a couple of million, as I mentioned, in Q3. Maybe we'll have $3 million more as a change.

Uh expenses coming in here and if they do we would fully expect them to come with, you know, Revenue uh shortly thereafter.

Looking at it today, we already said, we would expect some more.

and if you want me to go through the

FCP closing costs in Q4, but.

Uh, you know, not for the year, but for the...

But we had a couple of million dollars as I mentioned in.

For the next quarter, a few comments on the line items.

In Q3, so maybe well have 3 million more.

Uh, you know, I I'd expect prompt and related to go up.

As a change and then the.

Other line has FX in it and.

That has that.

Tax payment that we talked about and what's going to happen in FX we.

As, uh, sales are increasing and therefore incentive comp is going up, and Investment Management performance, uh, is causing us to increase the incentives there. On the corporate side, we're also increasing the incentives. These are all, you know, positive success items.

We will see but those are all comments on a quarterly or yearly basis.

Okay.

Great. Thanks, Thank you.

Okay.

You know, on the distribution line item, we expect that to go up. As you look at average assets distribution line item, another success item goes up.

Your next question for today is from Bill Katz with TD Cowen.

Yes.

Good morning. This is robin holding on for Bill Katz and thanks for taking the question.

You know, on the professional service fees, you know, are looking at it. You know, today, we we already said, we'd expect some more. Uh, FCP closing costs in Q4, but we had a couple million as I mentioned.

Going into 2026, what are you hearing from your institutional investors on allocations, where are you seeing opportunities and how are you thinking about the pace of deployment for the institutional pipeline.

In Q3 so maybe we'll have 3 million more. Uh,

Ray Hanley: The other line has FX in it and that has that tax payment that we talked about. What's going to happen in FX, we will see. Those are all comments on a quarterly, not a yearly basis. Great. Thank you. Your next question for today is from Bill Katz with TD Cowan. Good morning. This is Robin Holbey on for Bill Katz, and thanks for taking the question. Heading into 2026, what are you hearing from your institutional investors on allocations? Where are you seeing opportunities? How are you thinking about the pace of deployment for the institutional pipeline? The institutional pipeline, I tried to hint at this a few minutes ago, is very, very strong. As we told you, we've got over $2 billion in it. If you look into that, the pipeline is to see performance and different countries.

You know, as a change and then.

The institutional pipeline I tried to hint at this a few minutes ago.

You know, the other line has FX in it, and

it has that, um,

Is very very strong as we told you we've got over $2 billion in it and if you look into that.

Tax payment that we talked about and you know what's going to happen in FX?

We will see but those are all comments on a quarterly, not a yearly basis.

The pipeline is to see performance.

And different countries. So.

Great, and thank you.

I was a little more general the last time, but.

We have a Belgium, all cap core MDT big mandate that we've won.

Your next question for today is from Bill cats with TD Cowen.

In Canada, it's in international leaders mandate that we've won in the UK a global equity mandate.

In South Korea, a blended MDT.

Another U K client came into the all cap core MDT.

Good morning. This is Robin. Holy on for Bill cats, and thanks for taking the question heading into 2026. What are you hearing from your institutional investors on allocations? Where are you seeing opportunities? And how are you thinking about the pace of deployment for the institutional pipeline?

We have been and MDT win in the mid east as well.

The institutional pipeline, I tried to hint at this a few minutes ago.

So it's across the board of performance.

Oriented.

Activity and then if you look at.

Is very, very strong. As we told you, we've got, uh, uh, over 2 billion in it. And if, if you look into that, um, the pipeline is to see performance.

Ray Hanley: I was a little more general the last time, but. We have a Belgium all-cap core MDT big mandate that we've won. In Canada, it's an international leaders mandate that we've won. In the UK, a global equity mandate. In South Korea, a blended MDT. Another UK client came into the all-cap core MDT. We have an MDT win in the Mid East as well. It's across the board of performance-oriented activity. If you look at the style box purity of the various MDT offerings, you get a sense that people are looking at it that way. I did hint that we are seeing some clients—this is not an avalanche, don't go writing big hairy articles—that people are looking at what they really own inside a passive or indexed situation and are thinking that maybe they need to look at some of the MDT mandates as alternatives.

The style box purity of the various MDT offerings.

Get a sense that people are looking at it that way and then I did hint that we are seeing some clients is not an avalanche <unk>, writing big hairy articles that people are looking at what they really own inside.

Passive or indexed situation and are thinking that may be they need to look at some of the MDT mandates.

And different countries. So, I was a little more general the last time. But, um, you know, we have a Belgium All Cap Core MDT, a big mandate that we've won; in Canada, it's an international leaders mandate that we've won; in the UK, a global equity mandate; in South Korea, a blended MDT. Another UK client came into the All Cap Core MDT.

As alternatives.

And Robin on the terms of the pace of the funding of the pipeline.

We have an MDT win in the Mid East as well.

About two thirds of it we expect to fund here in the fourth quarter.

With the equity and fixed income.

so it's a board of performance uh oriented uh, activity and then if you uh, look at

Equity inflows fixed income outflows happening this quarter and.

About half of the funding.

And in this quarter the <unk>, usually have a longer tail. So they will continue to fund through the first half of next year.

The style box purity of the various MDT offerings gives you a sense that, uh, people are looking at it that way. And then I did hint that we are seeing some clients. This is not an avalanche; don't go writing big hairy articles.

Q1 and Q2.

Pretty evenly.

Ray Hanley: Robin, in terms of the pace of the funding of the pipeline, about two-thirds of it we expect to fund here in the fourth quarter. With the equity and fixed income equity inflows, fixed income outflows happening this quarter, and about half of the alt funding happening this quarter. The alts usually have a longer tail, so they will continue to fund through the first half of next year, Q1 and Q2, pretty evenly. Okay. Holly, we must go to the next question. We have reached the end of the question and answer session. I will now turn the call over to Ray for closing remarks. Thank you for joining us. That concludes our call. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

That people are looking at what they really own inside a passive or indexed, uh, situation and are thinking that maybe, uh, they need to look at some of the MDT mandates, um, uh, as alternatives.

Okay. We must go to the next question. We have reached the end of the question and answer session and I will now turn the call over to Ray for closing remark.

Okay, well, thank you for joining us that concludes our call.

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

Pretty evenly.

Okay, Holly, we must go to the next question. We have reached the end of the question and answer session, and I will now turn the call over to Ray for closing remarks.

Okay, well, thank you for joining us that concludes our call.

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