How I Invest · Oct 30, 2026 · 48m · 39m saved
With Christopher Donahue, President, Chair and CEO of Federated Hermes
Photo via federatedhermes.com
Christopher Donahue, President, Chair and CEO of Federated Hermes, told How I Invest that his firm runs about $700 billion in money market assets. Most investors treat cash as the part of a portfolio that earns nothing. Chris treats it as the reason an investor never has to sell at the bottom.
"What they misunderstand about cash is it adds enormous financial flexibility to their profile... you will not get forced to sell when things are in a problem." — Christopher Donahue
Chris joined the firm his father co-founded in 1972, started out selling money funds to bank trust departments, and has spent 50-plus years there while the industry shrank from over 200 competitors to fewer than 50.
The full interview is covered here so you can skip it. 48 minutes of audio, 9 minutes of reading.
Here are the 8 lessons that matter.
Key Takeaways
Cash is a source of financial flexibility, not dead weight
A buffer means an investor is never forced to sell into a falling market
Regulation, size and decades of trust turned money funds into an oligopoly
Over 200 firms once offered money funds, fewer than 50 do now, and about 20 compete for big mandates
Stablecoins will face the same shakeout money funds went through
Federated refuses to compete with the banks and brokers that sell its funds, and clients pick it for that reason
Chris frames AI as a way to raise quality, not to cut staff
AI now lets the firm review every customer call instead of one in 50 or 100
Chris thinks the private markets business could outgrow the rest of Federated Hermes
A recent $700 million European credit deal yields about 3.5 points over Euribor
1. Cash Buys Flexibility
Federated Hermes manages roughly $700 billion in money market assets. About $400 billion of it sits in government securities, which Chris calls "guvvies," and the other $300 billion is in munis and prime securities.
Money funds won bank trust departments in the 1970s by removing the paperwork
"It was so easy to do a money fund... what they want is a dollar in, dollar out, liquidity at par." — Christopher Donahue
The alternative in those years was rolling Treasury bills by hand, or wheeling a shopping cart of passbooks to the local savings and loan to post interest. A money fund replaced that with daily liquidity at par and almost no operational work for the trust officer.
