Concentration Risk

3 Months Ended

Mar. 31, 2021

(a) Revenue Concentration by Asset Class

The following table presents Federated Hermes' revenue concentration by asset class:


	Three Months Ended
	March 31,
	2021		2020
Equity Assets	49	%	38	%
Money Market Assets	24	%	43	%
Fixed-Income Assets	16	%	13	%

The change in the relative proportion of Federated Hermes' revenue attributable to money market assets for the three months ended March 31, 2021, as compared to the same period in 2020, was primarily the result of an increase in fee waivers. See section entitled Low Short-Term Interest Rates below.

The change in the relative proportion of Federated Hermes' revenue attributable to equity and fixed-income assets for the three months ended March 31, 2021, as compared to the same period in 2020, was primarily the result of decreased money market revenue mentioned above and a higher proportion of average equity and fixed-income assets in 2021.

Low Short-Term Interest Rates

In March 2020, in response to disrupted economic activity as a result of the outbreak of a novel coronavirus (Covid-19, or the Pandemic), the Federal Open Market Committee of the Federal Reserve Board (FOMC) decreased the federal funds target rate range to 0% - 0.25%. The federal funds target rate drives short-term interest rates. As a result of the 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. Beginning in the first quarter 2020, Federated Hermes began to waive fees in order for certain money market funds to maintain positive or zero net yields (Voluntary Yield-related Fee Waivers). These Voluntary Yield-related Fee Waivers have been partially offset by related reductions in distribution expense as a result of Federated Hermes' mutual understanding and agreement with third-party intermediaries to share the impact of the Voluntary Yield-related Fee Waivers.

During the three months ended March 31, 2021, Voluntary Yield-related Fee Waivers totaled $83.1 million. These fee waivers were partially offset by related reductions in distribution expenses of $61.4 million, such that the net negative pre-tax impact to Federated Hermes was $21.7 million for the three months ended March 31, 2021. See Management's Discussion and Analysis under the caption Business Developments - Low Short-Term Interest Rates for additional information on management's expectations regarding Voluntary Yield-related Fee Waivers.

(b) Revenue Concentration by Investment Fund Strategy

The following table presents Federated Hermes' revenue concentration by investment fund strategy:


	Three Months Ended
	March 31,
	2021		2020

Federated Hermes Kaufmann Fund and Federated Hermes Kaufmann Fund II	11	%	8	%
Federated Hermes Government Obligations Fund	7	%	12	%

A significant and prolonged decline in the AUM in these funds could have a material adverse effect on Federated Hermes' future revenues and, to a lesser extent, net income, due to a related reduction in distribution expenses associated with these funds.

Approximately 3% and 11% of Federated Hermes' total revenue for the three-month periods ended March 31, 2021 and 2020, respectively, was derived from services provided to one intermediary, The Bank of New York Mellon Corporation, including its Pershing subsidiary. The decrease in 2021 as compared to 2020 was primarily due to an increase in Voluntary Yield-related Fee Waivers. Significant negative changes in Voluntary Yield-related Fee Waivers or Federated Hermes' relationship with this intermediary could have a material adverse effect on Federated Hermes' future revenues and, to a lesser extent, net income due to a related reduction in distribution expenses associated with this intermediary.