Concentration Risk

9 Months Ended

Sep. 30, 2021

(a) Revenue Concentration by Asset Class

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


	Nine Months Ended
	September 30,
	2021		2020
Equity Assets	52	%	37	%
Money Market Assets	19	%	42	%
Fixed-Income Assets	18	%	13	%

The change in the relative proportion of Federated Hermes' revenue attributable to money market assets for the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily the result of an increase in fee waivers. See section below entitled Low Short-Term Interest Rates.

The change in the relative proportion of Federated Hermes' revenue attributable to equity and fixed-income assets for the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily the result of decreased money market revenue and higher 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 and nine months ended September 30, 2021, Voluntary Yield-related Fee Waivers totaled $109.2 million and $310.2 million, respectively. These fee waivers were partially offset by related reductions in distribution expenses of $72.3 million and $204.9 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $36.9 million and $105.3 million for the three and nine months ended September 30, 2021, respectively. During the three and nine months ended September 30, 2020, Voluntary Yield-related Fee Waivers totaled $36.8 million and $56.9 million, respectively. These fee waivers were partially offset by related reductions in distribution expenses of $33.0 million and $51.0 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $3.8 million and $5.9 million for the three and nine months

ended September 30, 2020, respectively. 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				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Federated Hermes Kaufmann Fund and Federated Hermes Kaufmann Fund II	12	%	9	%	11	%	9	%


Federated Hermes Government Obligations Fund	5	%	14	%	5	%	13	%

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.