Federated Hermes joins Wall Street's tokenization push with plans for first onchain fund shares

Pittsburgh-based investment manager Federated Hermes plans to issue its first tokenized fund share classes in early 2027, according to CoinDesk. The firm, which oversees $911 billion in assets, is partnering with New York-based digital securities infrastructure provider Prometheum to make the products available through traditional brokerages and financial advisers. The companies told CoinDesk on Tuesday that the arrangement is designed to bring blockchain-based share classes of Federated Hermes funds into standard brokerage accounts.

The firm has not yet disclosed which funds it will tokenize or which blockchains it will use. Kevin Barr, Federated Hermes' director of digital asset products and platform, told CoinDesk that money market funds are a likely starting point. He said the strategy aligns with the firm's liquidity franchise, noting "enormous interest in the industry at large around tokenized money market funds." Such funds invest in short-term debt and allow investors to hold cash while earning yield. Barr said tokenization offers instantaneous movement and programmability of fund holdings that are more difficult to achieve with traditional infrastructure.

The initiative marks a change in approach for Federated Hermes. The firm previously worked with London-based Archax, Goldman Sachs and Singapore-based Conduit Digital to create tokenized representations of its existing products, arrangements in which third parties issued the digital versions. Under the new plan, Federated Hermes would issue tokenized fund share classes itself. Barr joined the firm in May after 15 years at BNY, most recently as head of digital cash and innovation.

The Prometheum partnership is intended to address access rather than blockchain technology itself, according to Barr, who said access has been one of the main barriers to wider adoption. Prometheum's SEC-registered broker-dealer subsidiaries will handle custody, clearing and settlement, while its correspondent clearing platform will let other broker-dealers offer the products to clients without rebuilding their systems.

The move follows similar efforts by BlackRock, Franklin Templeton, JPMorgan and, more recently, New York Life Insurance Company. Proponents argue that blockchain-based funds can settle faster, automate recordkeeping and move more easily between platforms. Citi has projected the tokenized securities market could reach $5.5 trillion by 2030.