Federated Hermes, Inc.

Greetings and welcome to the Federated Hermes Incorporated second quarter 2025 analyst call and webcast. At this time all participants are in a listen-only mode and 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 will now turn the conference over to your host, Mr. Raymond Hanley. Sir, the floor is yours.

Hello and welcome to our call. Leading today's call will be Chris Donahue, CEO and President of Federated Hermes, and Tom Donahue, Chief Financial Officer. Joining us for the Q&A are Sakhar Nasebi, who is the CEO of Federated Hermes Limited, and Debbie Cunningham, the Chief Investment Officer for MoneyMarket. 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, and good morning. I will review Federated Hermes' business performance, and Tom will comment on our financial results. We ended Q2 with record assets under management of $846 billion, led by gains from our equity strategies. Equity assets increased by $8.1 billion, or 10% from the prior quarter. Second quarter equity net sales of $1.8 billion represent an organic growth rate of just under 9%. Our MDT fundamental quant strategies produced solid sales results again in the second quarter. MDT equity strategies had net sales of $3.8 billion in the second quarter, up from $3.3 billion in the first quarter. For Q3 through July 25th, these strategies have had net sales in combined funds and SMAs of $730 million. Seven of the eight MDT equity mutual fund strategies are in the top performance quartile of their Morningstar categories for the trailing three years ended June 30th. Four of these strategies are in the top decile. The second quarter saw further improvement in flows from strategic value dividend strategies. These strategies had second quarter net sales of $344 million compared to $131 million in the prior quarter. And this includes the funds, the SMA, and the institutional separate accounts under these strategies. We had net sales. in 19 equity fund strategies during the second quarter, including a variety of the MDT offerings and including the Asia X Japan Fund. MDT's offerings included, by highlight, MDT mid-cap growth, MDT mid-cap collective, and the all-cap core. Looking at our equity fund performance at the end of the second quarter and using Morningstar data for the trailing three years, 56% of our equity funds were beating peers and 26% were in the top quartile of their category. For Q3 through 7-25, combined equity funds and SMAs had net sales of $480 million. Now turning to fixed income, assets decreased by about 800 million or 1% in the second quarter from the prior quarter due mainly to net redemptions of 2.4 billion, partially offset by higher market valuations and FX of 1.6 billion. Redemptions included about 1.5 billion from two large public entities, that have regular sizable inflows and outflows. We had 15 fixed income funds with net sales in the second quarter, including the conservative micro short fund and the total return bond fund ETF. Regarding performance at the end of the second quarter and using Morningstar data for the trailing three years, 46% of our fixed income funds were beating peers, and 21% were in the top quartile of their category. For Q3 through 7-25, combined fixed income and SMAs had net sales of 47 million. In the alternative private markets category, assets increased by 1.3 billion, or 7% in the second quarter, due mainly to the impact of FX rates, which was $1.1 billion, and net sales of $231 million, mostly in the MDT market-neutral fund. Now, we are in the market, as I've said in previous calls, with European direct lending III, the third vintage of our European direct lending fund. To date, we've closed on $450 million. Target raise is $750 million. and EDL 1 raised $300, EDL 2 raised $640. We're also in the market with the Global Private Equity Co-Invest Fund, which is the sixth vintage of the PEC series. Our first close in April was for about $114 million. The target raise is $500 million, and PEC PEC 1 to 5 raised approximately 400 to 600 in each fund. The Federated Hermes GPE Innovation Fund II, the second vintage of our Pan-European Growth Private Equity Innovation Fund, is in the market. To date, we've closed on 110 million with a target raise of 300, and the first vehicle raised 240 million. We're also in the market with the European real estate debt fund, a new pooled European debt fund. Our marketing is here in 2025 and our target is $300 million. Early in the second quarter, we completed the acquisition of a majority interest in Rivington Energy Management Limited, a UK renewable energy company. The acquisition enhances our private markets platform by adding project development expertise, and specialist energy transition sector experience to our institutional investment and asset management capabilities in the infrastructure asset class. We're actively working on product development plans with the Rivington team. Across our long-term investment platform, we began Q3 with about $1 billion in net institutional mandates yet to fund in both funds and separate accounts. Fixed income expected net additions total about $545 million, with wins in multi-sector, high yield, and active cash. Approximately $439 million of total wins are expected to come into private market strategies. We have approximately $1.6 billion in wins yet to fund, mostly in direct lending, private equity, and trade finance, partially offset by $1.2 billion in redemptions from the restructuring of our UK property trust, which will occur in the third quarter. We have managed this particular fund for decades and it has delivered solid performance to our investors. The restructuring and transition of the fund to a third party is a result of changing market demand for such products. It is being done in collaboration with our investors and with the goal of providing them liquidity options to suit their preferences as expressed in their recent voting. The wins in this area are obviously in direct lending and private equity and trade finance. Equities expected additions total about $59 million driven by MDT and some offset by some outflows. Moving on to money markets. We reached another record high at the end of Q2 for money market fund assets, which increased by 3.1 billion to reach 468 billion. These assets moved higher in the second quarter, despite seasonal factors that often result in lower assets. Money market separate accounts decreased by 5.9 billion, reflecting usual seasonal patterns. Market conditions remain favorable for cash as an asset class. In addition to the appeal of relative safety in periods of volatility, money market strategies present opportunities to earn attractive yields compared to alternatives such as bank deposits and direct investments in T-bills and commercial paper. We are actively participating in the development of tokenized money market funds and digital asset infrastructure and continue to rigorously explore opportunities ranging from tokenized share classes to offering fully digitized assets. Over the past several years, we have engaged with a broad array of innovators and well-regarded financial institutions to identify and evaluate opportunities in the digital assets arena, accompanying going along with a significant amount of knowledge gained and experience along the way. We are sub-advisor for the Super State Short Duration U.S. Government Securities Fund, a private tokenized fund that has assets of about $425 million. It was also recently announced that Federated Hermes will participate in the launch of a collaborative initiative between Bank of New York and Goldman Sachs that will use blockchain technology to maintain a record of their customers' ownership of select money market funds. This is a significant step towards enhancing the utility and transferability of existing money market fund shares. Our participation highlights our commitment to the digital asset space where we expect ongoing innovation and growth. Our estimate of money market mutual fund market share, including subadvised funds, was about 7.11% at the end of the second quarter, up slightly from about 7.10 at the end of the first quarter. Now, looking at recent asset totals, as of the last few days, Managed assets were approximately $854 billion, including $642 billion in money markets, $91 billion in equities, $98 billion in fixed income, $20 billion in alternative private markets, $3 billion in multi-asset. Money market mutual fund assets were $476 billion. Tom?