Federated Hermes plans tokenized fund shares as asset managers expand blockchain distribution

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Federated hermes tokenized fund plans

Highlights

Federated Hermes, managing $911 billion, will issue blockchain-based share classes of its funds by partnering with Prometheum, focusing initially on money market funds.
Prometheum's SEC-registered broker-dealer subsidiaries will provide custody, clearing, and settlement, enabling other broker-dealers to distribute Federated Hermes’ tokenized products.
Federated Hermes’ move to directly issue tokenized share classes marks a strategic expansion beyond its earlier third-party tokenization efforts, aligning with major asset managers' blockchain adoption.

Launch plan and distribution structure

As reported by CoinDesk, Federated Hermes is partnering with Prometheum to offer blockchain-based share classes of its funds through traditional brokerages and financial advisers. The Pittsburgh-based manager oversees $911 billion in assets and has not yet disclosed which funds it will tokenize or which blockchains it will use.

Kevin Barr, the firm's director of digital asset products and platform, says money market funds are a likely starting point because they align closely with Federated Hermes' liquidity franchise. He says the company intends to issue tokenized fund share classes itself, a step that gives it a more direct role in bringing its investment products onchain than in some of its earlier tokenization work.

A central part of the partnership is Prometheum's role in market access and post-trade functions. Its SEC-registered broker-dealer subsidiaries are set to provide custody, clearing and settlement services, while its correspondent clearing platform is designed to let other broker-dealers distribute Federated Hermes' tokenized products to clients.

Tokenization push across Wall Street

Federated Hermes joins a broader industry move in which firms including BlackRock, Franklin Templeton and New York Life Insurance Company are embracing blockchain-based versions of traditional funds. Supporters of the model say blockchain infrastructure can speed settlement, automate recordkeeping and make assets easier to move across financial platforms.

The company has already tested tokenization through arrangements with platforms including Archax, Goldman Sachs and Conduit Digital, where third parties issued digital representations of existing investment products. The new plan goes further by having Federated Hermes issue the tokenized share classes directly.

Tokenized money market funds and U.S. Treasuries remain among the leading use cases in Wall Street's digital asset push because they allow companies and institutional investors to earn yield on cash reserves while keeping those assets available around the clock. Barr says the longer-term opportunity goes beyond repackaging current products, extending to changes in how investors manage cash, shift between assets and build portfolios.

Our earlier coverage of the Esun Money Market Fund’s first-time ‘AA’ rating highlighted how the assessment underscored the fund’s strong liquidity profile and disciplined approach to investing in high-quality short-term instruments. We noted that, in a competitive cash-management market, such external validation can help a fund differentiate itself, strengthen investor confidence, and support efforts to broaden its investor base.

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