Federated Hermes Prime Cash Obligations Fund (PCOXX) Review (October 2026)
Short answer
PCOXX's 7-day net yield was 3.88% on October 2, 2026, per Federated Hermes (3.85% before fee waivers). PCOXX is the Wealth share class of Federated Hermes Prime Cash Obligations Fund, a $104 billion prime money market fund that holds bank CDs, commercial paper and repurchase agreements. It paid more than the big retail Treasury funds that day (VUSXX 3.82%), in exchange for bank and corporate credit exposure and a possible liquidity fee in stressed markets.
Federated launched its first money market fund in 1974, so few firms have run this kind of fund longer. Its prime funds pay yields in line with the BlackRock and JPMorgan offerings. Like every prime fund, this one holds commercial paper, and that credit exposure is the main thing you are deciding on.
| Fund family | Federated Hermes |
| Holdings type | Prime (commercial paper, CDs, bank notes, repo, agency, Treasury) |
| Weighted avg. maturity | 46 days (09/30/2026) |
| State tax on dividends | Minimal state-tax exemption (prime fund) |
Money market fund vs MYGA, after tax
What $100,000 earns in 5 years: money market fund vs MYGA, after tax
Rates used: Money market fund 3.76%, the highest 7-day yield we tracked (VUSXX, fund sites, September 23, 2026); yields change daily; change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).
| Money market fund, interest taxed every year | $115,550 |
|---|---|
| MYGA, tax-deferred, before tax | $133,507 |
| MYGA after paying tax on all the interest at withdrawal | $126,136 |
| Tax deferral alone adds about | $674 |
| MYGA ahead of the money market fund, after tax | $10,586 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. A MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.
How Federated Hermes Prime Cash Obligations Fund works
Federated runs its prime funds the way it has for half a century: heavy credit research and tight liquidity. The fund is fine and so is the expense ratio. The real question for a retail buyer is whether you want commercial paper exposure at all, or would rather hold a government or Treasury MMF.
Every U.S. money market fund operates under SEC Rule 2a-7, which sets portfolio quality, weighted average maturity (60 days max for the WAM, 120 days for the weighted average life), and daily/weekly liquid asset minimums. The differences between funds are at the margin: which short paper they hold, what expense ratio they charge, and what tax treatment the dividends qualify for.
Holdings overview
Holdings type: Prime (commercial paper, CDs, bank notes, repo, agency, Treasury).
Weighted average maturity (WAM): 46 days, weighted average life 82 days (09/30/2026, Federated Hermes). WAM sets how fast the fund's yield adjusts when the Fed moves. With a 30-day WAM the whole portfolio has repriced within about a month of a rate change, which is why MMF yields track the Fed funds rate so closely.
State-tax treatment: Minimal state-tax exemption (prime fund).
Rates expire like milk.
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What I like
- Long-standing money market specialist, one of the first in the business.
- Competitive yield, reasonable expense ratio.
- Multiple share classes for institutional and retail access.
- Strong credit research infrastructure built over 50 years.
What I don't
- Prime exposure: commercial paper credit risk.
- May impose a discretionary liquidity fee of up to 2% on redemptions in stressed markets, per Federated Hermes.
- Almost no state-tax exemption.
- Minimums and expenses depend on the share class and the platform you buy through; confirm both in the prospectus.
- Yield resets fast on Fed cuts.
Tax notes
Money market fund dividends are reported on Form 1099-DIV as ordinary income and taxed at your marginal federal rate (10% to 37%). For high earners in the 32% bracket or above, plus state tax, the after-tax yield on a 4.20% MMF can drop to 2.50% to 2.70%.
If the fund holds U.S. Treasury obligations, the portion of dividends attributable to those holdings is exempt from state and local income tax in most states (CA, NY, NJ, MA, OR enforce this strictly; CT, IL have minimum percentage thresholds). The fund publishes a year-end disclosure showing what percentage of dividends qualify. For a Californian in the 9.3% state bracket, the state-tax exemption on a Treasury-only MMF is worth ~40 bps of effective after-tax yield.
By contrast, multi-year guaranteed annuity (MYGA) growth defers tax until withdrawal. For a high earner who doesn't need the income, that deferral adds real after-tax yield over the term.
When a MYGA beats this MMF: $250,000 math
Federated Hermes Prime Cash Obligations Fund paid 3.88% (7-day net yield, October 2, 2026, per Federated Hermes). That yield resets within days of any Fed move, up or down. A multi-year guaranteed annuity (MYGA) locks a rate for the entire term. Comparing both on $250,000:
| Scenario | 5-Year Term |
|---|---|
| Federated Hermes Prime Cash Obligations Fund @ 3.88% (yield above, held constant: optimistic) | $302,412 |
| A-rated 5-year MYGA @ 5.50% (low end of the range on October 14, 2026, public carrier rate sheets) | $326,740 |
| MYGA advantage | +$24,300 |
The table actually understates the gap, for three reasons:
- The MMF yield is held constant. In reality MMF yields move with the Fed funds rate, and the Fed moves both ways: it raised its target range to 3.75% to 4.00% on September 16, 2026.
- MMF dividends are taxed every year as ordinary income. MYGA growth defers tax until withdrawal. For someone in the 32% federal and 9.3% CA brackets, the annual tax drag is about 30% to 40% of the yield.
- The MYGA rate is guaranteed for the term by the issuing insurer, backed by its claims-paying ability; the MMF yield is not guaranteed at all.
For money you don't need within 3 years, the math almost always favors a MYGA. MMFs are fine; they were just never built for multi-year money.
PCOXX 7-day yield: recent history
| As of | 7-day net yield | 7-day unsubsidized |
|---|---|---|
| 10/02/2026 | 3.88% | 3.85% |
| 10/01/2026 | 3.88% | 3.85% |
| 09/30/2026 | 3.88% | 3.85% |
| 09/29/2026 | 3.88% | 3.85% |
| 09/28/2026 | 3.87% | 3.84% |
| 09/25/2026 | 3.86% | 3.83% |
| 09/24/2026 | 3.85% | 3.82% |
The yield crept up through late September after the Fed raised its target range to 3.75% to 4.00% on September 16, 2026; prime funds reprice as their commercial paper and CDs roll over. See how money fund yields follow the Fed.
What does PCOXX hold?
| Holding type | % of portfolio |
|---|---|
| Other repurchase agreements | 25.8% |
| Financial company commercial paper | 18.1% |
| Certificates of deposit | 16.5% |
| U.S. government agency repurchase agreements | 16.2% |
| U.S. Treasury repurchase agreements | 5.5% |
| Asset-backed commercial paper | 4.9% |
| Other instruments | 4.9% |
| Non-negotiable time deposits | 4.0% |
| Non-financial company commercial paper | 3.1% |
| Variable rate demand notes | 1.0% |
Federated lists the fund's ratings as AAAm (S&P Global), Aaa-mf (Moody's) and AAAmmf (Fitch). Portfolio assets were $103.7 billion on September 30, 2026. The difference between this kind of fund and a government fund is explained in government vs prime money market funds.
PCOXX vs Treasury and government money funds (October 2, 2026)
| Fund | Type | 7-day yield |
|---|---|---|
| PCOXX (Federated Hermes Prime Cash Obligations, WS) | Prime | 3.88% |
| VUSXX (Vanguard Treasury) | Treasury | 3.82% |
| VMFXX (Vanguard Federal) | Government | 3.79% |
| SWVXX (Schwab Prime Advantage) | Prime | 3.71% |
| SPAXX (Fidelity Government) | Government | 3.49% |
The 0.06-point edge over VUSXX disappears after state tax for most people in a taxed state, because almost none of a prime fund's income is state-exempt while most of a Treasury fund's is. More funds are ranked on the best money market funds page.
From my desk: how I compare this to locked rates
People usually find PCOXX through an advisor or a bank platform, not on their own, and the question I get is whether a higher money fund yield is the same thing as a better place for the money. For a few months of cash, the yield is what matters. For money that will sit for years, the yield resetting every day is the risk.
Example: $250,000 at 3.88% held constant for five years grows to about $302,412 before tax; a 5-year MYGA at 5.50% (low end of the A-rated range on October 14, 2026) grows to about $326,740, tax-deferred until withdrawal and backed by the claims-paying ability of the issuing insurer. I do not sell or advise on money market funds; this is the insurance side of the comparison.
Who this fund is best for
Short-term cash you may need within the next 6 to 12 months. Brokerage cash that would otherwise sit in a low-yield sweep. Emergency reserves. Any cash position where liquidity and current yield matter more than rate certainty.
Who should consider an alternative
If you have $50K or more that you won't touch for 3 years or longer, this is the wrong place for it. For 3 to 5 year money I would look at a MYGA from an A-rated carrier; A-rated 5-year MYGAs paid about 5.50% to 6.05% on October 14, 2026 (public carrier rate sheets). The table above shows the difference. See current MYGA rates →
FAQ: Federated Hermes Prime Cash Obligations Fund
Q: Is my money market fund FDIC-insured?
A: No. Money market funds are SEC-regulated mutual funds, not bank deposits. They are not FDIC- or NCUA-insured. Government and Treasury MMFs invest in extremely safe collateral (T-bills, repo backed by Treasuries, agency paper) but are not guaranteed to maintain the $1.00 NAV.
Q: What is the 7-day SEC yield?
A: The 7-day SEC yield is the annualized net yield earned by the fund over the prior 7 days, after expenses. It is the industry-standard yield disclosure and is updated daily. It is roughly forward-looking for the next week, not a guarantee of forward yield.
Q: How quickly does the yield reset when the Fed changes rates?
A: Very fast. Government MMFs hold paper with a weighted average maturity (WAM) of roughly 7 to 45 days, so within a month of a Fed move the entire portfolio has repriced. A 25 bp cut typically shows up in the 7-day yield within 2 to 4 weeks.
Q: Can I lose money in a money market fund?
A: Realistically, almost never on government and Treasury funds. Twice in history a U.S. money market fund has 'broken the buck' (NAV below $1.00): the Community Bankers U.S. Government Fund in 1994 and the Reserve Primary Fund in 2008. Both were edge cases. Government and Treasury MMFs are the safest tier.
Q: Are Treasury MMF dividends state-tax-exempt?
A: Generally yes. The portion of dividends attributable to direct U.S. Treasury obligations is exempt from state and local income tax in most states. Funds publish a year-end 'U.S. government interest' percentage. For high-state-tax residents (CA, NY, NJ, OR), this can boost effective yield by 30 to 50 bps.
Q: How is a MMF different from a high-yield savings account?
A: HYSAs are FDIC-insured bank deposits; MMFs are SEC-regulated mutual funds. HYSA APYs are set by the bank and tend to lag the Fed. MMF 7-day yields move with the Fed within weeks. Top MMFs typically out-yield top HYSAs by 30 to 80 bps when rates are stable.
Q: Why would I ever choose a MYGA over a money market fund?
A: For money you won't need for 3+ years. A MYGA locks its rate for the full term (A-rated 5-year MYGAs paid about 5.50% to 6.05% on October 14, 2026, per public carrier rate sheets). The MMF yield can fall 200+ bps in a single year if the Fed cuts. MYGAs also defer tax until withdrawal, which is meaningful for high earners.
Q: What happens to a MMF in a Fed cutting cycle?
A: Yield drops in lockstep, fast. In 2020 the Fed cut from 1.75% to 0.25% over 4 months; government MMF 7-day yields fell from ~1.65% to ~0.02% by mid-year. Anyone who locked a 3 to 5 year CD or MYGA at the 2020 highs out-earned MMF holders by hundreds of bps annually.
More Money Market Fund research
- Best Money Market Funds 2026 (ranked)
- MMF vs MYGA, when each wins
- MMF vs HYSA: yield spread and risk
- MMF vs CD: liquidity vs lock
- Breaking the buck: 1994 & 2008 cases
- How MMF yields track the Fed funds rate
- High-Yield Savings reviews
- Best MYGA rates 2026
My take
Federated Hermes Prime Cash Obligations Fund (PCOXX) is a competent, reasonably priced money market fund. For short-term cash held through a platform that offers it, it does its job. For money you won't need for 3+ years, you can do better with a locked rate on a MYGA from an A-rated insurer: 100+ bps more, with the tax deferred. If six figures is going to sit here for years, run the comparison first.
About Hans Goldstein: Independent retirement income specialist. CA Life License #4273294. NPN #20602398. Reviews 30+ carriers and the full menu of cash alternatives. Phone: 213-414-2808. Email: hans@hansgoldstein.com.
Hans is independently licensed as an insurance producer; he does not sell money market funds or other securities. These reviews are based on publicly available fund prospectuses, fact sheets, SEC filings, and SEC-yield reporting requirements.
A multi-year guaranteed annuity (MYGA) is the insurance version of a CD: one fixed rate for a set term. As of October 14, 2026, A-rated-or-better insurers were paying about 5.50% to 6.05% on 5-year MYGAs. The best nationally available 5-year CDs paid about 4.70% to 5.00% APY, and big-institution 5-year CDs less (as of September 24, 2026: Capital One 360 60-month 3.60%, Navy Federal 5-year 3.85 to 3.90%). A MYGA also defers the tax, where a CD or money market fund is taxed every year on interest you have not spent.
The trade is liquidity: breaking a MYGA early costs a surrender charge, not a few months of interest, and it is backed by the insurer and your state guaranty association rather than the FDIC. See the side-by-side · Current MYGA rates
Sources: public carrier rate sheets (MYGAs, as of October 14, 2026; rates vary by state, premium and carrier); Bankrate 5-year CD table (as of October 14, 2026); capitalone.com; navyfederal.org (as of September 24, 2026). Rates change often; confirm before you buy.
Comparing MMF yield to a locked rate? Get a 5-min independent read.
Talk to Hans Goldstein, a licensed independent insurance producer.
Money market funds are great for short-term cash. For money you don't need for 3+ years, a multi-year guaranteed annuity (MYGA) typically pays 100 to 150 bps more and defers tax. Get an independent side-by-side before you let cash drift in a MMF for 5 years.
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Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple A-rated carriers
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Disclosure
This review reflects publicly available fund prospectuses, fact sheets, and approximate 7-day SEC yields as of the date stated above. Money market fund yields change daily and reset roughly in line with the federal funds rate; always confirm current yield, expense ratio, holdings, and weighted average maturity against the most recent fund disclosure document before committing capital. Money market funds are not FDIC-insured. Government and Treasury money market funds historically maintain a stable $1.00 NAV but are not guaranteed to do so. See the "breaking the buck" history. Prime money market funds may impose liquidity fees or redemption gates during market stress. This is general education, not a personal recommendation or an offer of any product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) and does not sell securities or money market funds; comparisons to multi-year guaranteed annuities (MYGAs) are provided for informational context only. No compensation has been received from any fund company in connection with the publication of this review. Always read the actual fund prospectus and consult a licensed advisor before investing. Past yield does not predict future yield. State income tax treatment of U.S. Treasury obligations varies and is subject to change. Tax discussion reflects federal and California law as of 2026 and is subject to change.