News Archives: August, 2025
Federated Hermes reported Q2'25 earnings and hosted its Q2'25 earnings call on Friday. On the call, President & CEO J. Christopher Donahue, comments, "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 $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 remained 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."
He continues, "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 subadvisor for the Superstate Short Duration U.S. Government Securities Fund, a private tokenized fund that has assets of about $425 million."
Donahue says, "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 the existing money market fund shares. Our participation highlights our commitment to the digital asset space where we expect ongoing innovation and growth."
He tells the call, "Our estimate of money market mutual fund market share, including sub-advised 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."
During the Q&A Patrick Davitt from Autonomous Research, asks, "On the back of your stablecoin tokenization comments, I think it would be helpful maybe if you could update us on your broader thoughts around the extent to which you think these products could disintermediate the traditional money fund business? Or do you see it more as incremental to that traditional money fund cash exposure?"
Donahue answers, "Baseline, we would see it as incremental. New customers, new things. There's not an avalanche of use [cases for] these things right now. And don't forget, the basic thing ... people with cash want ... daily liquidity at par. They're willing to go with a stablecoin that doesn't pay a yield, but then they also would like a respectable daily yield."
He states, "We think that the Goldman-Bank of New York methodology where Goldman creates a platform, Bank of New York is the custody and transfer agent and the money fund sits there, just like it always sat there as a money fund, and yet someone else is taking care of the tokenization. So from the customer standpoint, it is, in fact, a tokenized money fund. But from the money fund operator standpoint, it's operating a regular 2a-7 money fund in order to provide daily liquidity at par. So this is a very sound strategy. I'm not saying it's the only one that will go into the future, but overall, we think that's a very good one. One of the reasons that people are getting excited about this is because you can get 7/24 activity trade anytime, but you still have to work out some of the mechanics of who gets the dividend."
Donahue adds, "The way our program will work with BNY and Goldman right now is whoever owns the token at the end of the day is going to get the dividend. And this is not as much a tokenized money fund as others have to full tokenized money funds. So our overall view is that you have to play in this space. And we are talking to people, I got a list of them, and ... many of them [include] European players where we're dealing with all the ideas of innovation. I can't go through all of them with you. The one with the Bank of New York and Goldman, obviously, has been made public, as have Superstate."
Money Market CIO Deborah Cunningham comments, "The only thing I'd add is, right now, we think this is the tip of the iceberg, Patrick. This is, for our current products that are on this platform, a different way to distribute. So we distribute through various types of intermediaries, through states, through insurers, through broker-dealers, through banks. We distribute directly. This is another way of distributing our product, and in the process, turning it into a ledger product that has better transferability than a typical money market fund share does."
She explains, "So we think it's a very clever and new way to be able to distribute product. And as Chris mentioned, there's lots of innovation that we think can happen that provide additional bells and whistles to why this is a product that will take over, to some degree, the future. But that's not what is in existence today. What is in existence today is a traditional money fund being distributed to a different group of clients, particularly from a collateralization standpoint. So ... stablecoins, you mentioned, they need to be backed by something. They need to be backed by Treasury bills or money funds containing those Treasury bills. That's what the GENIUS Act is all about. Money funds will provide that collateral, and we will provide it on chain so that the ease of use is basically seamless. But lots of innovation to come as it exists today, distribution changes that are beneficial."
Asked about money funds benefiting from falling rates, Cunningham says, "It's been alive and well, Patrick, ... from the second half of 2024 and all of 2025 year-to-date, so for the last year. But it's not really started in earnest because what we saw in Fed rate cuts at the end of 2024 didn't materialize into anything yet in 2025. So it's one of those 'wait till you see the whites of their eyes' sort of thing, I think, as far as volume goes. But we were basically flat on a money fund asset basis for the second quarter.... May and June are more confirmation of what we've been saying on the institutional side from a rotation into money funds and out of direct securities, whereas April was more based on what the situation was happening from an economic and a fiscal standpoint."
Asked about stablecoins and T-bills, Cunningham responds, "The current size of the stablecoin market is about $250 billion, very concentrated in 2 coins, basically. And then the assets that are backing those 2 coins. Tether and Circle are basically in Treasury securities.... What happens with the GENIUS Act is there's now more definition as to what needs to be backing a stablecoin, and it's very short Treasuries or Treasury-backed repo. [Whether it's] ultimately $1 trillion, $2 trillion, it's -- put your finger in the air. I'm not sure where the number goes, but it's somewhere ... drastically above where it is in the $250 billion market today."
Donahue adds, "One of the other features of the GENIUS Act was to not allow stablecoins to pay interest or return. So the people who ought to be concerned about the $2 trillion going into stablecoins are the ones who have deposit accounts with little or no interest, and how does that dynamic exactly work? ... But it's important to note that the stablecoin can't pay a yield."
Finally, on the potential size of the new sectors, he says, "It is very, very difficult to say what that kind of number would be. We haven't done any numbers on that. `Both Debbie and I believe it's incremental to the business. But as with any of these things, especially when you're doing blockchain, you've got a lot of a lot of people on there first in order to have it grow. It's a little bit of a chicken/egg thing. So everybody is working on it now, and there's a lot of excitement and a lot of articles and all of that, but the assets are not yet there. We're ready for when it goes, but it's just hard for us to say."
The Investment Company Institute released its latest weekly "Money Market Fund Assets" report Thursday and its latest monthly "Trends in Mutual Fund Investing - June 2025" and "Month-End Portfolio Holdings of Taxable Money Funds" on Wednesday. The former shows money fund assets rising $1.5 billion to a near-record $7.076 trillion, after rising $9.2 billion the week prior and falling $6.8 billion two weeks prior. Assets rose $55.6 billion to a record $7.078 trillion four weeks ago (the week ended July 2). MMF assets are up by $942 billion, or 15.4%, over the past 52 weeks (through 7/30/25), with Institutional MMFs up $520 billion, or 14.3% and Retail MMFs up $422 billion, or 16.9%. Year-to-date, MMF assets are up by $226 billion, or 3.3%, with Institutional MMFs up $47 billion, or 1.1% and Retail MMFs up $179 billion, or 6.5%.
ICI's weekly release says, "Total money market fund assets increased by $1.52 billion to $7.08 trillion for the week ended Wednesday, July 30, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $1.45 billion and prime funds decreased by $906 million. Tax-exempt money market funds increased by $973 million." ICI's stats show Institutional MMFs increasing $1.7 billion and Retail MMFs decreasing $0.2 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.758 trillion (81.4% of all money funds), while Total Prime MMFs were $1.181 trillion (16.7%). Tax Exempt MMFs totaled $136.8 billion (1.9%).
It explains, "Assets of retail money market funds decreased by $193 million to $2.91 trillion. Among retail funds, government money market fund assets decreased by $1.69 billion to $1.83 trillion, prime money market fund assets increased by $755 million to $959.15 billion, and tax-exempt fund assets increased by $745 million to $124.01 billion." Retail assets account for 41.2% of the total, and Government Retail assets make up 62.8% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $1.71 billion to $4.16 trillion. Among institutional funds, government money market fund assets increased by $3.14 billion to $3.93 trillion, prime money market fund assets decreased by $1.66 billion to $222.02 billion, and tax-exempt fund assets increased by $228 million to $12.82 billion." Institutional assets accounted for 58.8% of all MMF assets, with Government Institutional assets making up 94.4% of all institutional MMF totals.
According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have increased by $61.6 billion in July (through 7/30/25) to $7.468 trillion. Assets hit a record high of $7.472 trillion on July 29 but have since inched lower. Assets increased by $6.7 billion in June and jumped by $100.9 billion in May. They fell by $24.4 billion in April, but rose $2.8 trillion in March, $94.2 billion in February and $52.8 billion in January. They jumped $110.9 billion in December, $200.5 trillion in November, $97.5 billion in October, $149.8 billion in September and $109.7 billion in August. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than Crane's asset series.
ICI's monthly Trends shows money fund totals increasing $29.3 billion, or 0.4%, in June to $7.025 trillion. MMFs have increased by $933.0 billion, or 15.3%, over the past 12 months (through 6/30/25). Money funds' June asset increase follows an increase of $84.7 billion in May, a decrease of $63.8 billion in April, $10.9 billion in March, an increase of $99.0 billion in February, $31.9 billion in January and $139.3 billion in December. They rose $171.5 billion in November, $117.4 billion in October and $158.6 billion in September. Bond fund assets increased $85.8 billion to $5.223 trillion, and bond ETF assets increased to $1.98 trillion in June 2025.
The monthly release states, "The combined assets of the nation’s mutual funds increased by $805.92 billion, or 2.8 percent, to $29.72 trillion in June, according to the Investment Company Institute's official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI.... Bond funds had an inflow of $14.20 billion in June, compared with an inflow of $21.19 billion in May.... Money market funds had an inflow of $14.96 billion in June, compared with an inflow of $69.26 billion in May. In June funds offered primarily to institutions had an outflow of $7.29 billion and funds offered primarily to individuals had an inflow of $22.25 billion."
The Institute's latest statistics show that Taxable MMFs were higher while Tax Exempt MMFs were lower from last month. Taxable MMFs increased by $31.9 billion in June to $6.887 trillion. Tax-Exempt MMFs decreased $2.6 billion to $138.2 billion. Taxable MMF assets increased year-over-year by $924.1 billion (15.5%), and Tax-Exempt funds rose by $8.9 billion over the past year (6.9%). Bond fund assets increased by $85.8 billion (after increasing by $10.9 billion in May) to $5.223 trillion; they've increased by $352.9 billion (7.2%) over the past year.
Money funds represent 23.6% of all mutual fund assets (down 0.6% from the previous month), while bond funds account for 17.6%, according to ICI. The total number of money market funds was 262, down 1 from the prior month and down from 276 a year ago. Taxable money funds numbered 221 funds, and tax-exempt money funds numbered 41 funds.
ICI's "Month-End Portfolio Holdings" confirms a jump in Repo and a drop in Treasuries last month. Repurchase Agreements once again became the largest composition segment three months prior, this past month increasing $187.2 billion, or 6.9%, to $2.900 trillion, or 42.1% of holdings. Repo holdings have increased $468.4 billion, or 19.3%, over the past year. (See our July 11 News, "July Money Fund Portfolio Holdings: Repo Jumps to 42%, T-Bills Plunge.”)
Treasury holdings in Taxable money funds fell down to the second largest composition segment three months prior; this past month they decreased $56.0 billion, or -2.2%, to $2.482 trillion, or 36.0% of holdings. Treasury securities have increased by $206.3 billion, or 9.1%, over the past 12 months. U.S. Government Agency securities were the third largest segment; they increased $4.4 billion, or 0.5%, to $912.0 billion, or 13.2% of holdings. Agency holdings have increased by $224.1 billion, or 32.6%, over the past 12 months.
Certificates of Deposit (CDs) were in fourth place, down $18.8 billion, or -5.9%, to $296.5 billion (4.3% of assets). CDs decreased $2.3 billion, or -0.8%, over one year. Commercial Paper was in fifth place; they decreased by $7.8 billion, or -2.6%, to $292.4 billion (4.2% of assets). CP held by money funds rose by $39.4 billion, or 15.6%, over 12 months. Other holdings decreased to $20.8 billion (0.3% of assets), while Notes (including Corporate and Bank) increased to $38.0 billion (0.6% of assets).
The Number of Accounts Outstanding in ICI's series for taxable money funds increased to 79.563 million, while the Number of Funds was down 1 at 221. Over the past 12 months, the number of accounts rose by 9.826 million and the number of funds decreased by 10. The Average Maturity of Portfolios was 36 days, down 2 days from May. Over the past 12 months, WAMs of Taxable money are up 2 days.
