Concentration Risk

(a) Revenue Concentration by Asset Class

The following table summarizes the percentage of total revenue earned from Federated's asset classes over the last three years:



	2015		2014		2013
Equity assets	46	%	45	%	37	%
Money market assets	33	%	32	%	39	%
Fixed-income assets	21	%	22	%	23	%

The change in the relative proportion of Federated's revenue attributable to equity assets from 2014 to 2015 was primarily the result of higher average equity assets due to net sales. The change in the relative proportion of Federated's revenue attributable to equity assets from 2013 to 2014 was primarily the result of higher average equity assets due to net sales and, to a lesser extent, market appreciation.The change in the relative proportion of Federated's revenue attributable to money market assets from 2014 to 2015 was primarily the result of a decrease in Voluntary Yield-related Fee Waivers partially offset by lower average money market assets. The change in the relative proportion of Federated's revenue attributable to money market assets from 2013 to 2014 was primarily the result of lower average money market assets and increases in Voluntary Yield-related Fee Waivers, as well as the increase in average equity assets. A significant change in Federated's investment management business (such as its money market business) or a significant reduction in AUM (such as money market assets) due to regulatory changes or developments, changes in the financial markets, such as significant and rapid increases in interest rates over a short period of time causing certain investors to prefer direct investments in interest-bearing securities, the availability, supply and/or market interest in repurchase agreements and other investments, significant deterioration in investor confidence, a return to declining or additional prolonged periods of low short-term interest rates and resulting fee waivers, investor preferences for deposit products or other FDIC-insured products, or passive investment products, changes in relationships with financial intermediaries, or other circumstances, could have a material adverse effect on Federated's business, results of operations, financial condition and/or cash flows.

Current Regulatory Environment

Federated and its investment management business are subject to extensive regulation in the U.S. and abroad. Federated and its products (such as the Federated Funds) and strategies are subject to federal securities laws, principally the 1933 Act, the 1934 Act, the 1940 Act, the Advisers Act, state laws regarding securities fraud, and regulations, or other rules, promulgated by various regulatory authorities, self-regulatory organizations or exchanges, as well as foreign laws, regulations or other rules promulgated by foreign regulatory or other authorities. In 2014, among other developments, the SEC promulgated new money market reform in the form of the 2014 Money Fund Rules and the SEC staff published the Money Fund Rules Guidance in 2015. Federated continues to analyze the potential impact of these reforms. Internationally, among other developments, European money market fund reforms, similar in some respects to the U.S. reforms, have not been finalized in 2015, and are expected to continue to be considered in 2016. Federated continued to dedicate internal and external resources to analyze the potential impact of the 2014 Money Fund Rules, and certain related regulations and developments, on Federated's business, results of operations, financial condition and/or cash flows. Federated also continued to implement in 2015, and expects to continue to implement in 2016, product development and restructuring initiatives in response to the 2014 Money Fund Rules. See Item 1 - Business under the caption Regulatory Matters and Item 1A - Risk Factors under the caption Potential Adverse Effects of Changes in Laws, Regulations and Other Rules on Federated's Investment Management Business for additional information.

Low Short-Term Interest Rates

In December 2015, the FOMC increased the federal funds target rate range by 25 basis points to 0.25%-0.50%, slightly raising short-term interest rates late in the year. The federal funds target rate, which drives short-term interest rates, had been near zero for nearly seven years. As a result of the long-term near-zero interest-rate environment, the gross yield earned by certain money market funds is not sufficient to cover all of the fund's operating expenses. Since the fourth quarter of 2008, Federated has experienced Voluntary Yield-related Fee Waivers. These fee waivers have been partially offset by related reductions in distribution expense and net income attributable to noncontrolling interests as a result of Federated's mutual understanding and agreement with third-party intermediaries to share the impact of the Voluntary Yield-related Fee Waivers.

These Voluntary Yield-related Fee Waivers are calculated as a percentage of AUM in certain money market funds and thus will vary depending upon the asset levels in such funds. In addition, the level of waivers are dependent on several other factors including, but not limited to, yields on instruments available for purchase by the money market funds, changes in expenses of the money market funds and changes in the mix of money market assets. In any given period, a combination of these factors drives the amount of Voluntary Yield-related Fee Waivers. As an isolated variable, an increase in yields on instruments held by the money market funds will cause the pre-tax impact of fee waivers to decrease. Conversely, as an isolated variable, an increase in expenses of the money market funds would cause the pre-tax impact of fee waivers to increase.

With regard to asset mix, changes in the relative amount of money market fund assets in prime and government money market funds (or between such funds and other money market funds or other products) as well as the mix among certain share classes that vary in pricing structure will impact the level of fee waivers. Generally, prime money market funds waive less than government money market funds as a result of higher gross yields on the underlying investments. As such, as an isolated variable, an increase in the relative proportion of average managed assets invested in prime money market funds as compared to total average money market fund assets should typically result in lower Voluntary Yield-related Fee Waivers. Conversely, the opposite would also be true.

The impact of such fee waivers on various components of Federated's Consolidated Statements of Income was as follows for the years ended December 31:



in millions	2015			2014			2013
Revenue	$	(333.6	)	$	(410.6	)	$	(389.0	)
Less: Reduction in Distribution expense	240.6			280.9			277.1
Operating income	(93.0		)	(129.7		)	(111.9		)
Less: Reduction in Noncontrolling interest	7.1			10.7			6.8
Pre-tax impact	$	(85.9	)	$	(119.0	)	$	(105.1	)

The negative pre-tax impact of Voluntary Yield-related Fee Waivers decreased in 2015 as compared to 2014 primarily as a result of higher yields on instruments held by the money market funds and, to a lesser extent, by a decrease in average money market assets. During 2014, the negative pre-tax impact of Voluntary Yield-related Fee Waivers increased compared to 2013 primarily as a result of lower yields on instruments held by the money market funds, partially offset by a decrease in average money market assets. (See Note (19) for information regarding the quarterly pre-tax impact of these fee waivers.)

On December 16, 2015, the FOMC increased the federal funds target rate range by 25 basis points to 0.25% - 0.50% slightly raising short-term interest rates late in the year. While the FOMC implied in its economic projections that it would continue to raise the federal funds target rate in a measured and gradual way, Federated is unable to predict when, or to what extent, the FOMC will further increase their target for the federal funds rate. As such, Voluntary Yield-related Fee Waivers and the related reduction in distribution expense and net income attributable to noncontrolling interests could continue for the foreseeable future. See Management's Discussion and Analysis under the caption Business Developments - Low Short-Term Interest Rates for additional information on management's expectations regarding fee waivers.

A listing of Federated's risk factors is included in Item 1A - Risk Factors.

(b) Revenue Concentration by Investment Fund

A significant portion of Federated's total revenue for 2015 was derived from services provided to a sponsored fund, the Federated Kaufmann Fund (11%). A significant and prolonged decline in the AUM in this fund could have a material adverse effect on Federated's future revenues and net income.