What to Know
- Federated Hermes plans to issue its first tokenized fund share classes in early 2027.
- The Pittsburgh-based investment manager oversees $911 billion in assets.
- Prometheum is expected to provide regulated brokerage, custody, clearing and settlement services for the planned products.
- Federated Hermes has not disclosed which funds it will tokenize or which blockchains will be used.
- Money market funds are viewed as a likely starting point because of the firm’s large liquidity funds business.
- The initiative moves beyond earlier arrangements in which third parties created tokenized representations of Federated Hermes products.
- Wall Street firms including BlackRock, Franklin Templeton, JPMorgan and New York Life Insurance Company have also advanced blockchain-based versions of traditional financial products.
- Citi has projected that the tokenized securities market could reach $5.5 trillion by 2030.
Federated Hermes Moves From Experiments to Direct Issuance
Federated Hermes is preparing to take a more direct role in Wall Street’s tokenization race, with plans to issue its first tokenized fund share classes in early 2027. The move would mark a notable step for the Pittsburgh-based investment manager, which oversees $911 billion in assets and has already tested blockchain-based distribution models through earlier collaborations.
The planned structure is significant because Federated Hermes aims to issue tokenized fund share classes itself. That approach differs from prior arrangements in which outside platforms created digital representations of existing Federated Hermes investment products. By moving toward direct issuance, the firm is positioning tokenization as part of its own product architecture rather than only as an external wrapper around conventional fund exposure.
For traditional asset managers, that distinction matters. Tokenized share classes can allow a fund sponsor to preserve the core investment strategy while changing the way ownership, transfer, recordkeeping and settlement are handled. In practical terms, the fund may still pursue familiar objectives, but investors could hold a blockchain-based share class designed to operate more efficiently across digital and conventional financial systems.
Prometheum Partnership Focuses on Regulated Access
Federated Hermes is working with Prometheum to support the planned tokenized products. Prometheum’s SEC-registered broker-dealer subsidiaries are expected to provide custody, clearing and settlement services, while its correspondent clearing platform is intended to allow other broker-dealers to offer the tokenized products to customers.
The partnership points to one of the most important themes in institutional tokenization: access through familiar channels. Many investors, advisers and brokerage platforms are not seeking to rebuild their operations around crypto-native infrastructure. Instead, market participants want digital securities to fit into existing workflows for account opening, portfolio management, custody, compliance and reporting.
That distribution question may prove just as important as the blockchain technology itself. Tokenized funds may offer faster movement and more automated operational processes, but wider adoption depends on whether advisers and brokerages can use them without abandoning systems they already rely on. Federated Hermes is framing the effort as an extension of how its products are already distributed, rather than as a separate channel aimed only at crypto-native users.
Money Market Funds Seen as a Natural Starting Point
Federated Hermes has not yet disclosed which funds it plans to tokenize or which blockchains will support the products. However, money market funds are viewed as a likely starting point, reflecting the firm’s established strength in liquidity products.
Money market funds invest in short-term debt instruments and are widely used by investors seeking a place to hold cash while earning yield. That role makes them especially relevant for tokenization. In a blockchain-based format, cash-like investment products may be able to move more quickly across platforms, serve as collateral, and support around-the-clock treasury management use cases.
Tokenized money market funds and tokenized U.S. Treasuries have become a leading area of institutional experimentation because they sit at the intersection of cash management and digital asset settlement. Companies and institutional investors often need liquid, yield-bearing assets that can be mobilized quickly. A tokenized structure may allow those assets to be transferred or pledged without requiring investors to sell holdings first.
Technical traders and infrastructure-focused market participants also see tokenized cash products as a bridge between traditional capital markets and blockchain-based settlement rails. Unlike more speculative crypto assets, tokenized money market funds are designed around familiar underlying instruments. The innovation is less about changing the investment exposure and more about modernizing how that exposure is recorded and transferred.
Why Wall Street Is Pushing Funds Onchain
The Federated Hermes plan lands amid a broader Wall Street push to bring traditional investments onto blockchain rails. Major financial firms have been testing or launching blockchain-based versions of funds and other securities, with the goal of making issuance, transfer and settlement more efficient.
Proponents argue that blockchains can reduce operational friction by creating shared records of ownership, automating certain functions and allowing assets to move across platforms more easily. In traditional markets, settlement and recordkeeping often depend on multiple intermediaries, separate ledgers and established batch-based processes. Tokenization aims to streamline some of those layers by representing financial claims on a blockchain.
That does not mean tokenization eliminates the need for regulated entities. In fact, the Federated Hermes and Prometheum model underscores the opposite. Institutional adoption is being built around broker-dealers, custodians, clearing systems and regulated market infrastructure. The goal is not simply to put assets on a blockchain, but to do so in a way that works for advisers, brokerages, compliance teams and end investors.
Wall Street firms including BlackRock, Franklin Templeton, JPMorgan and New York Life Insurance Company have already embraced blockchain-based versions of traditional financial products. Their activity has helped move tokenization from a niche crypto-market theme into a mainstream financial infrastructure discussion.
Tokenized Securities Market Draws Large Forecasts
The potential market opportunity has drawn attention because tokenization could apply to a wide range of assets, including funds, Treasuries and other securities. Citi has projected that the tokenized securities market could reach $5.5 trillion by 2030, a figure that has helped sharpen institutional focus on the sector.
Forecasts of that scale remain projections rather than guarantees. Adoption depends on regulatory clarity, platform interoperability, investor demand, adviser education and operational readiness across the brokerage industry. Still, the direction of travel is clear: large financial institutions are increasingly treating tokenization as a serious infrastructure upgrade rather than a short-lived experiment.
For Federated Hermes, the planned tokenized share classes could help the firm participate directly in that shift. If the first products are successfully distributed through traditional brokerage and adviser channels, they could create a framework for broader use of tokenized fund structures across other areas of the business.
From Third-Party Tokenization to Internal Product Strategy
Federated Hermes has previously worked with platforms including Archax, Goldman Sachs and Conduit Digital on tokenized representations of existing investment products. Those initiatives gave the firm exposure to blockchain-based distribution without placing direct issuance at the center of its own fund architecture.
The next phase is different. By preparing to issue tokenized share classes itself, Federated Hermes is moving tokenization closer to its core product strategy. That may give the asset manager more control over how the products are structured, distributed and integrated into existing client relationships.
The shift also reflects a broader evolution in institutional thinking. Early tokenization projects often focused on proofs of concept, limited pilots or third-party wrappers. More recent efforts are increasingly aimed at live distribution, regulated custody and practical access for financial advisers. The market is moving from demonstration toward implementation, even as important details remain unresolved.
What Investors Should Watch Next
Several key questions remain before Federated Hermes launches the planned tokenized fund share classes. The firm has not identified the specific funds that will be tokenized. It has also not named the blockchains that will be used. Those details will matter because the choice of fund type, network design and distribution model can influence liquidity, operational efficiency, investor access and compliance processes.
Investors should also watch how the Prometheum infrastructure is integrated with broker-dealer platforms. If other broker-dealers can offer the tokenized products through a correspondent clearing model, adoption could extend beyond a narrow group of early users. That would support the broader industry thesis that tokenized securities can become part of conventional brokerage accounts rather than remaining confined to specialized digital asset venues.
The early 2027 target gives Federated Hermes time to refine product selection, operational workflows and regulatory processes. For now, the initiative adds another established asset manager to the institutional tokenization movement and reinforces the view that blockchain-based share classes are becoming a strategic priority for traditional finance.
Frequently Asked Questions (FAQs)
What is Federated Hermes planning to launch?
Federated Hermes plans to issue its first tokenized fund share classes in early 2027. These share classes would use blockchain-based infrastructure while remaining tied to traditional investment products.
How large is Federated Hermes?
Federated Hermes is a Pittsburgh-based investment manager overseeing $911 billion in assets. Its scale makes the planned tokenized share classes a notable development in the institutional tokenization market.
What role will Prometheum play?
Prometheum is expected to provide regulated brokerage, custody, clearing and settlement services. Its correspondent clearing platform is also intended to help other broker-dealers make Federated Hermes’ tokenized products available to customers.
Which funds will Federated Hermes tokenize first?
Federated Hermes has not disclosed which funds it plans to tokenize. Money market funds are viewed as a likely starting point because of the firm’s liquidity funds business and the broader market interest in tokenized cash management products.
Which blockchain will be used?
The firm has not disclosed which blockchain or blockchains will support the planned tokenized share classes. That information is expected to be important for assessing interoperability, settlement design and operational workflow.
Why are money market funds attractive for tokenization?
Money market funds are used to hold cash while earning yield, making them a practical candidate for faster movement and collateral use. Tokenization may allow these assets to be transferred or managed more efficiently across financial platforms.
How is this different from earlier Federated Hermes tokenization efforts?
Earlier efforts involved third parties creating tokenized representations of existing Federated Hermes investment products. The new plan involves Federated Hermes issuing tokenized fund share classes itself, giving the firm a more direct role in the process.
Why is Wall Street interested in tokenized securities?
Wall Street firms are exploring tokenized securities because blockchain infrastructure may improve settlement speed, automate recordkeeping and make assets easier to move between platforms. The technology is being evaluated as a potential upgrade to existing market infrastructure.
How big could the tokenized securities market become?
Citi has projected that the tokenized securities market could reach $5.5 trillion by 2030. That remains a projection, but it highlights why major financial institutions are paying close attention to tokenization.