Federated Hermes' Chairman & CEO Chris Donahue spoke last week at the 2026 RBC Capital Markets Global Financial Institutions Conference," and comments on tokenization, "The BNY, Goldman deal is where we have our regular fund. BNY makes a token. The token invests, in effect, money in the fund, so the money fund's the same as it was five minutes ago, and it participates in Goldman's platform. That's another whole deal. Archax is one we're doing in Europe. It's about the same as the BNY Goldman setup. We have the structures inside to actually tokenize a money fund." (Note: There's still time to register for our Bond Fund Symposium, which is later this week, March 19-20, in Boston, Mass. Attendees and Crane Data subscribers may access the conference materials via our Bond Fund Symposium 2026 Download Center. Safe travels to those attending and see you soon!)
He continues, "One story I like to tell is that The Wall Street Journal a few months ago wrote a title that said, 'Federated Tokenized a Money Fund.' Our independent director said, 'Well, wait, you didn't tell us you were tokenizing a money fund.' Well, the truth is we didn't tokenize the money fund. It's the same money fund; it's just that BNY put the token on it. From the customer standpoint, it looks, tastes, and feels like a tokenized money fund and can be used that way. You get this kind of education and confusion going. But we're working on it. The governments are working on it. The regulators are working on it. Everybody can see that it could work. But the use cases are not yet profound and not yet really lighting fires under people."
Donahue then says, "Okay, if we begin with the difference between the institutional trade and the retail trade, it'll be helpful. As long as the Fed is lowering rates, whether it's gradual over time, big amounts or whatever, then it's immediately obvious that the money market funds of the 45-day average maturity is going to have a higher yield than the spot rate on T-bills or even repo. The institutional people really like this, and they like a higher yield. That's not that complicated. That institutional money is still available to come into the funds. On the retail side, it's not so much what the spot market's doing, it's what the bank doing.... What are the deposit rates? Right now, and more or less forever, the bank deposit rates are going to be lower than the mutual fund rates."
He says of bank deposit rates, "They vary all over the lot from 10 or 15 basis points to a few hundred basis points, but nonetheless, less than the money fund. If you add to that, if people's balance sheets are going up, market moves to the contrary recently notwithstanding, their percentage of cash also goes up. So that in an up market, money fund assets go up. In a down market, what happens? People go risk off, they get more defensive, and guess what? Money market assets go up. How could this be a bad business? When it goes up, you go up, and when it goes down, you go [up]. It's really nice. Corporations are always going to be having cash. Now some of those corporate treasurers will sell their mother for a basis point."
Donahue adds, "You know, those are [the] kinds of clients. You have state pools, which are tremendous.... Think about a state. The taxes come in, the money goes out, the ebb and flow. Even in the first quarter, we had less [outflows] than usual. We usually have a drawdown, and it basically did not happen. That's another non-correlated cash movement inside the Federated fort. That helps tremendously because if you have a variety of clients all doing different things at different times, makes the whole effort a lot stronger."
Talking about digital assets, he states, "If you're a Coinbase guy and that's your wallet, that's your world, you're gonna want your money fund right there.... That's not our clients. Okay, that's lovely people, but that's not our clients, and that's not the world yet. You could see moves where collateral, where that becomes important. That's expensive to move, and how do you do it? That could be another use case."
Donahue comments, "Everybody talks about the fact that some companies and international transactions want 24-by-7 all around the globe. Yes, that's true. But we don't have clients that are, you know, clawing at the door to make that happen. At the end of the day, if you foresee, as we do, that blockchain is gonna be a better way to [go] it's gotta come at a time when the client sees it as a solution. The clients have to really wanna make this happen. I don't know when the tipping point will be."
Finally, he says, "As we look out, we are seeing roll-up opportunities. They show up periodically, almost ongoing. What is a roll-up opportunity? Somebody has a fund or a bunch of funds. They're sort of languid. They're not doing anything. They can't be sold. What are you gonna do with them? Then they find a warm and loving home at Federated Hermes. We don't take the people, we just merge the fund in, and this is lumpy growth. We're talking about some of those right now. On bigger ones, we are not. Let's talk about the real biggest ones, the ones that are all in the news. We're not inclined to do those types of deals."
In other news, money fund yields (7-day, annualized, simple, net) inched lower by one basis point to 3.47% on average during the week ended Friday, March 13 (as measured by our Crane 100 Money Fund Index), after decreasing 1 basis point the week prior. Fund yields haven't been below 3.5% since November 2022, and they are down from a recent high of 5.20% in November 2023. They should remain flat in coming days (and weeks), since the market expects the Fed to leave rates unchanged at their meeting this week. Yields were 3.49% on 2/28/26, 3.50% on 1/31/26, 3.58% on 12/31/25, 3.78% on 11/30, 3.90% on 10/31, 3.94% on 9/30, 4.11% on 8/31, 4.12% on 7/31, 4.13% on 6/30, 4.14% on 3/31/25 and 4.28% on average on 12/31/24. MMFs averaged 4.75% on 9/30/24, 5.10% on 6/28/24, 5.14% on 3/31/24 and 5.20% on 12/31/23.
The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 682), shows a 7-day yield of 3.37%, down 1 bp in the week through Friday. Prime Inst money fund yields were down 1 bp at 3.59% in the latest week. Government Inst MFs were down 1 bp at 3.47%. Treasury Inst MFs were down 1 bp at 3.43%. Treasury Retail MFs currently yield 3.20%, Government Retail MFs yield 3.18% and Prime Retail MFs yield 3.37%, Tax-exempt MF 7-day yields were up 30 bps to 1.83%.
Money market mutual fund assets have paused since hitting a record high of $8.271 trillion on March 3, according to our Money Fund Intelligence Daily. Assets have fallen $22.8 billion in the week through Friday, and they've decreased by $19.0 billion in March month-to-date (through 3/13). MMF assets increased by $99.5 billion in February, $32.9 billion in January, $126.3 billion in December, $132.8 billion in November, $142.1 billion in October, $105.2 billion in September and $132.0 billion in August. They rose by $63.7 billion in July, $6.7 billion in June and $100.9 billion in May. But MMFs decreased $24.4 billion in April and increased by $2.8 billion last March.
Weighted average maturities were at 42 days for the Crane MFA and 44 days the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (3/13), just 161 money funds (out of 792 total) yield under 3.0% with $190.0 billion in assets, or 2.3%, while the vast majority (631) of funds yield between 3.00% and 3.99% ($8.032 trillion, or 97.7%). No funds yield over 4.0%.
Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.30%, after falling 1 basis point twelve weeks prior. The latest Brokerage Sweep Intelligence, with data as of March 13, shows no changes over the past week. Four of the 10 major brokerages tracked by our BSI offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch, Morgan Stanley and Schwab.
