Concentration Risk

3 Months Ended

Mar. 31, 2022

(a) Revenue Concentration by Asset Class

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


	Three Months Ended
	March 31,
	2022		2021
Equity Assets	45	%	49	%
Money Market Assets	27	%	24	%
Fixed-Income Assets	18	%	16	%

The change in the relative proportion of Federated Hermes' revenue attributable to money market assets for the three months ended March 31, 2022, as compared to the same period in 2021, was primarily the result of a decrease in Voluntary Yield-related 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 three months ended March 31, 2022 as compared to the same period in 2021, was primarily the result of lower average equity assets, higher average fixed-income assets and increased money market revenue in 2022.

Low Short-Term Interest Rates

In March 2020, in response to disrupted economic activity as a result of the outbreak of a novel coronavirus (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 implement Voluntary Yield-related Fee Waivers 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. In response to the recovering U.S. economy and elevated inflation levels, during its March 2022 meeting, the FMOC raised the federal funds target rate range 25 bps to 0.25% - 0.50%.

During the three months ended March 31, 2022, Voluntary Yield-related Fee Waivers totaled $75.8 million. These fee waivers were partially offset by related reductions in distribution expenses of $57.5 million such that the net negative pre-tax impact to Federated Hermes was $18.3 million for the three months ended March 31, 2022. 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 - 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,
	2022		2021
Federated Hermes Strategic Value Dividend strategy1	10	%	8	%
Federated Hermes Kaufmann Fund and Federated Hermes Kaufmann Fund II	9	%	11	%

1 Strategy includes Federated Hermes Funds and Separate Accounts

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.