Federated Hermes : 2024 FHI Annual Report

Published: 2025-03-14 14:44:06 ET FHI

2024 Annual Report

Active management for today’s investors

Federated Hermes, Inc.

2024 at a glance…

(as of Dec. 31, 2024)

$829.6 billion record assets under management

$70.4 billion increase in money market assets in 2024

69 years managing assets

108consecutive quarterly dividends

9consecutive years of growth in managed assets

Federated Hermes 2024 Annual Report

Financial overview

as of and for the years ended December 31,

Summary of operations (in thousands)

2024

2023

Total revenue

1,632,093

1,609,574

Operating income

361,467

387,549

Net income

268,314

298,980

Per share data

Basic and diluted earnings per share

3.23

3.40

Cash dividends per share

2.21

1.11

Managed assets (in millions)

Money market

630,349

559,993

Total long-term assets

199,229

197,629

Fixed-income

98,059

94,920

Equity

79,423

79,291

Alternative/private markets

18,864

20,551

Multi-asset

2,883

2,867

Total managed assets

829,578

757,622

Total

Dividend

managed assets

history

(in billions)

(per share)

2022

$668.9

$1.08

2023

$757.6

$1.11

2024

$1.21

$1.00

$829.6

$2.21

● Quarterly

● Special

Federated Hermes 2024 Annual Report

Dear fellow shareholders,

For nearly seven decades, Federated Hermes has been a leading provider of active investment strategies. Our mix of performance across asset classes and robust global distribution capabilities has positioned the firm with the opportunity to achieve resilient business results across bull and bear markets.

We are pleased to share this annual report on Federated Hermes’ 2024 performance. Full-year earnings per share were $3.23. Overall assets under management were a record $829.6 billion at year-end, up $72.0 billion or 10% from the previous year.

Revenue

(in millions)

2022 $1,446

2023 $1,610

2024 $1,632

Federated Hermes’ record assets were driven by increases in money market assets, which reached a record $630.3 billion at year-end. In 2024, as central banks worldwide began lowering interest rates, the Federal Reserve also began reducing its federal funds rate, cutting rates three times and settling at a range of 4.25% to 4.5% in December. In this environment, our money market funds continued to offer a yield advantage when compared to certain securities in the direct market, specifically overnight securities and those with floating rates, which more quickly adjust to actions by the Federal Reserve. All segments of our liquidity offerings—government, prime and municipal—provided sensible cash-management resources and opportunities for attractive returns.

Federated Hermes’ offerings in long-term asset categories—which comprise equity,

fixed income, alternative/private markets and multi-asset—rose slightly to $199.2 billion. Our equity offerings had net sales and strong performance across a range of growth, value, dividend income and international strategies. We also saw customer interest in fixed-income offerings, such as our Federated Hermes Total Return Bond Fund and core plus strategies. By distributing our diverse mix of investment offerings that provide customer solutions in a variety of market conditions, Federated Hermes achieved growth in assets over nine consecutive year-over-year periods.

With these results, Federated Hermes continued to employ capital to benefit shareholders in 2024. The firm repurchased 4,012,017 shares of Class B common stock and, through year-end, has paid quarterly dividends to our shareholders for 27 straight years—or

108 consecutive quarters. Four quarterly dividends—one of $0.28 per share followed by three of $0.31 per share—along with a $1.00 special dividend, brought dividends to a total of $2.21 per share in 2024. Since the firm’s initial public offering in 1998, Federated Hermes has paid $3.0 billion in shareholder dividends and has spent $2.1 billion for share repurchases and $1.3 billion for acquisitions.

2024 highlights

A half century of cash management solutions

Federated Hermes marked the year by celebrating 50 years of money market innovations. Our firm, in 1974, was the first to offer a mutual fund that included “money market”

in its name. Over the ensuing five decades, Federated Hermes has maintained a steadfast dedication to offerings that are vetted through diligent credit analysis and broad diversification—providing customers with competitive yields and daily liquidity. By the end of 2024, money market funds had grown to nearly $7 trillion industrywide and Federated Hermes’ money market assets had grown 13% year over year. The cash-management asset class provided ballast for our firm, accounting for 51% of revenue in 2024. Going forward, we will seek to broaden the availability and use of our cash-management offerings globally, including in Europe and the Asia Pacific region.

Performance across asset classes

As one of the world’s foremost providers of actively managed investment strategies, Federated Hermes offers a range of solutions aligned with varied customer goals. Our 384 investment professionals work collaboratively to evaluate potential investment opportunities and identify risks. The team again delivered solid performance across many of our offerings in 2024.

In equities, a majority of our U.S. equity funds with at least three years of performance beat their peers, and six funds had top-quartile three-year performance.1 Among top-quartile performers were several Federated Hermes MDT fundamental quantitative funds—in core, growth and value strategies across market capitalizations. Our MDT fund and SMA offerings also had $3.5 billion in net sales in 2024, up from $411 million in 2023. The sales momentum helped Federated Hermes MDT offerings exceed $14.3 billion in assets at year-end, up 73% from the previous year.

In fixed income, 18 Federated Hermes funds had net sales, led by our flagship Federated Hermes Total Return Bond Fund. The Federated Hermes Total Return Bond ETF, launched in January 2024, was also among the top-selling fixed-income offerings. These core plus offerings can dynamically shift sector, duration, yield curve and currency positioning in changing market conditions. Investors who sought offerings with slightly more duration than our money market offerings drove net sales in our ultrashort and microshort offerings.

Another MDT offering, the Federated Hermes MDT Market Neutral Fund, led net sales in our alternatives category. We also saw strong interest in our Project and Trade Finance Tender Fund.

Revenue

by source

$1.6 billion

Federated Hermes 2024 Annual Report

Equity

$79.4 billion

Fixed

income

$98.1 billion

Varied investment offerings

Our growing range of investment solutions extend beyond mutual funds to provide additional investment opportunities for financial professionals to meet the investment needs of their customers. Federated Hermes now manages $264.3 billion in equity, fixed income, alternative/private markets, multi-asset and money market separate accounts, of which $34.2 billion are in SMAs. We currently manage SMAs in various categories including 19 equity strategies, 15 fixed-income strategies and one multi-asset strategy.

Complementing these offerings are active ETF versions of some of our most popular investment strategies, providing the advantages of an ETF structure—tax efficiency, lower costs and intraday trading. In 2024, we more than doubled our ETF offerings with the launch of four MDT fundamental quantitative ETFs in large cap core, large cap growth, large cap value and small cap core strategies. We also launched a collective investment trust version of our MDT Mid Cap Growth strategy.

Diversifying and growing globally

As our firm’s investment and distribution capabilities expand globally, we also continue to add new offerings for non-U.S. investors. Private markets represent an important diversification strategy and exceptional growth opportunity for our firm, and our alternative/private markets offerings have approximately $18.9 billion of assets under management. Private markets include private equity, real estate, infrastructure and private credit. In 2024, we continued to be in the market with the second vintage of our pan-European growth innovation private fund, the third vintage of our European direct lending fund, the sixth vintage of our private equity co-investment fund and a new pooled European debt fund. Each fund is available for distribution across various countries, including but not limited to the U.S., U.K., Switzerland and core European Union member states.

Two decades of leadership in stewardship services

Our stewardship service provider, London-based EOS at Federated Hermes Limited, which celebrated 20 years of experience and industry leadership in 2024, had

$2.1 trillion in assets under advisement and completed approximately 1,000 company engagements in 2024. EOS at Federated Hermes Limited engages with companies with the aim of improving long-term risk-adjusted returns for issuers and creating long-term value for customers and investors consistent with applicable fiduciary duties and customer and investor objectives. Our 60+ member stewardship and responsible investing team comprises individuals of 16 nationalities who are fluent in at least

16 languages. EOS at Federated Hermes Limited grew its customer roster by adding nine new accounts in 2024.

Additionally, the investment insights from these engagements enhance the fundamental portfolio analysis for many of our investment offerings, as investment managers

glean forward-looking insights from direct company engagement and authentic, strategy-appropriate data integration into our active management processes. The EOS at Federated Hermes Limited stewardship efforts are a part of our firm’s broad focus on pursuing long-term risk-adjusted investment performance for customers and other investors.

A focus on customer relationships

Federated Hermes has maintained an unwavering commitment to a consultative approach to our customer relationships. The firm’s 244 regional consultants enhanced our reputation as a trusted advisor to more than 10,000 customers, including corporations, government entities, insurance companies, foundations and endowments, banks and broker dealers.

In 2024, the firm’s growth was led by a 16% increase in assets in our U.S. financial intermediary channel. The intermediary market continues to evolve, and many advisors are moving to independent registered investment advisor (RIA) roles. Accordingly, Federated Hermes continues to grow its RIA business. The firm recently evolved its approach to the intermediary market, with additional regional consultants dedicated to RIAs. We will continue to refine our sales process to focus on what we believe are the best opportunities, leading to additional revenue sources.

Our global sales team also continues to provide value-added services that inform decision-making processes, while at the same time offering our range of investment solutions to prospective customers and new global markets. Financial intermediaries and institutions turn to Federated Hermes for our latest views on data, trends and events influencing the markets, and our regional consultants regularly share Federated Hermes’ insights and thought leadership materials from our leading strategists and portfolio managers.

A long-term perspective

Every market environment creates new challenges and opportunities. Through it all, we remained focused on our core competency—making available trusted and competitive offerings to meet the varied needs of our customers and other investors. Our accomplishments in sales, performance and customer service in 2024 instill us with confidence going forward.

We are grateful for the trust investors place in Federated Hermes and our investment offerings. Our 2,072 employees have shown resilience, resolve and creativity. We thank them for their continued dedication to meeting the needs of our valued customers. And finally, we offer appreciation to you, our shareholders, for your support of our efforts to continue to pursue growth and add shareholder value.

J. Christopher Donahue

President, Chief Executive Officer

and Chairman

Alternative/

private markets and multi-asset

$21.7 billion

Money market

$630.3 billion

Federated Hermes 2024 Annual Report

Directors

J. Christopher Donahue

President, Chief Executive Officer and Chairman, Federated Hermes, Inc.

Committee: Executive

Joseph C. Bartolacci

President and Chief Executive Officer,

Matthews International Corporation

Committees: Audit, Compensation, Compliance

Thomas R. Donahue

Vice President, Treasurer and Chief Financial Officer,

Federated Hermes, Inc.

President, FII Holdings, Inc.

Committee: Executive

John B. Fisher

Vice President, Federated Hermes, Inc.

President and Chief Executive Officer,

Federated Advisory Companies

Committee: Executive

Karen L. Hanlon

Executive Vice President and Chief Operating Officer, Highmark Health

Committees: Audit, Compensation, Compliance

Marie Milie Jones

Founding Partner, JonesPassodelis, PLLC

Committees: Audit, Compensation, Compliance

Executives

J. Christopher Donahue

President, Chief Executive Officer and Chairman, Federated Hermes, Inc.

Thomas R. Donahue

Vice President, Treasurer and Chief Financial Officer,

Federated Hermes, Inc.

President, FII Holdings, Inc.

Dolores D. Dudiak

Vice President and Director, Human Resources, Federated Hermes, Inc.

John B. Fisher

Vice President, Federated Hermes, Inc.

President and Chief Executive Officer,

Federated Advisory Companies

Peter J. Germain

Executive Vice President, Chief Legal Officer and Secretary Federated Hermes, Inc.

Richard A. Novak

Vice President, Assistant Treasurer and

Principal Accounting Officer,

Federated Hermes, Inc.

Saker A. Nusseibeh

Chief Executive Officer,

Federated Hermes Limited

Paul A. Uhlman

Vice President, Federated Hermes, Inc.

President, Federated Securities Corp.

Stephen P. Van Meter

Vice President and Chief Compliance Officer, Federated Hermes, Inc.

Theodore W. Zierden III

Vice President,

Federated Hermes, Inc.

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Part I

Item 1

Item 1A

Item 1B

Item 1C

Item 2

Item 3

Item 4

Part II

Item 5

Item 6

Item 7

Item 7A

Item 8

Item 9

Item 9A

Item 9B

Item 9C

Part III

Item 10

Item 11

Item 12

Item 13

Item 14

Part IV

Item 15

Signatures

Table of Contents

Page

Business

Risk Factors

Unresolved Staff Comments

Cybersecurity

Properties

Legal Proceedings

Mine Safety Disclosures

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities

[Reserved]

Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Quantitative and Qualitative Disclosures about Market Risk

Financial Statements and Supplementary Data

Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure

Controls and Procedures

Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Directors, Executive Officers and Corporate Governance

Executive Compensation

Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

Certain Relationships and Related Transactions, and Director Independence

Principal Accounting Fees and Services

Exhibits, Financial Statement Schedules

Disclaimer

Federated Hermes Inc. published this content on March 14, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 14, 2025 at 18:43:05.887.