- Federated Hermes, which manages $911 billion, plans to issue its first tokenized fund share classes in early 2027, partnering with digital securities infrastructure provider Prometheum. Money market funds are the likely starting point, according to Kevin Barr, the firm’s director of digital asset products and platform.
- The distribution arrangement is the substance. Prometheum’s SEC-registered broker-dealer subsidiaries will provide custody, clearing and settlement, while its correspondent clearing platform will let other broker-dealers offer the products to their own customers. Barr said the main barrier to adoption has been access rather than the underlying technology, since advisers and brokerages need a way to offer tokenized funds without rebuilding their systems.
- Federated is also moving from third-party issuance to doing it itself. It has previously worked with Archax, Goldman Sachs and Conduit Digital, where outside parties created digital versions of its conventional holdings. Issuing tokenized share classes directly gives the manager the economics and control of the process.
- The firm has not disclosed which funds or which blockchains. Barr said tokenised funds allow instantaneous movement and programmability that is operationally inefficient under traditional infrastructure, and described tokenization as a fundamental upgrade to market infrastructure for this generation.
What Happened?
BlackRock, Franklin Templeton, JPMorgan and more recently New York Life have all embraced blockchain-based versions of traditional funds. Citi has projected the tokenized securities market could reach $5.5 trillion by 2030. Barr joined Federated in May after 15 years at BNY, most recently as head of digital cash and innovation.
Why It Matters?
Access through existing brokerage plumbing is what separates this from the tokenization announcements of the past three years. Earlier efforts required the buyer to come to the blockchain, which meant institutional pilots and little else. A correspondent clearing arrangement that lets any broker-dealer offer these products to clients without new systems puts tokenized funds in front of advisers through the channel they already use. Whether or not the blockchain matters to the end investor, the distribution does, and Barr is right that this has been the constraint. The choice of money market funds reveals the real use case and sets up a collision worth watching. The appeal is not yield, which investors can already get. It is that a tokenized cash fund settles instantly, operates around the clock and can serve as collateral for loans or trades, letting a firm put cash to work without selling the position. That is a treasury management product, and it competes directly with stablecoins. A stablecoin pays its holder nothing, with the European Central Bank pushing to keep it that way by extending its ban on stablecoin yields, while a tokenized money market fund pays a yield and sits inside the regulated fund framework. If both reach the same rails, the stablecoin proposition narrows to payments alone. The shift from third-party issuance to doing it in-house follows a pattern visible across this sector. Arbitrum joined a stablecoin consortium specifically to capture reserve income it currently forgoes, and Stripe is funding a competitor to the stablecoin its own card programmes run on. Whoever controls issuance keeps the economics, and asset managers have worked out that paying an intermediary to tokenize their own products is a poor trade. On the $5.5 trillion projection, treat market-size forecasts in emerging technologies with the scepticism their historical accuracy warrants.
What Next?
Early 2027 is the stated launch, and the disclosures to watch are which funds and which chains, neither of which has been named. The same period is when ESMA makes tokenization a supervisory priority in Europe, so the regulatory frameworks on both sides will be forming as these products launch. For advisers the practical question is whether their broker-dealer plans to connect through Prometheum’s correspondent clearing platform, since that determines client access. Watch whether other large managers follow Federated in issuing share classes directly rather than through third parties. The competitive response from stablecoin issuers is the other development worth tracking, given tokenized money market funds target the same institutional cash balances.
Affected Tickers and Coins: FHI, GS, BLK, BEN, JPM
Source: CoinDesk
