Concentration Risk

The following information summarizes Federated's revenue concentrations. See additional information on the risks related to such concentrations in Item 1A - Risk Factors.

(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:



	2017		2016		2015
Money market assets	41	%	45	%	33	%
Equity assets	42	%	38	%	46	%
Fixed-income assets	17	%	17	%	21	%

The change in the relative proportion of Federated's revenue attributable to money market assets in 2017 as compared to 2016 was primarily the result of a change in the mix of average money market assets and a decrease related to a change in a customer relationship. This was partially offset by a decrease in Voluntary Yield-related Fee Waivers. The change in the relative proportion of Federated's revenue attributable to equity assets in 2017 as compared to 2016 was primarily the result of higher average equity assets primarily due to market appreciation, partially offset by net redemptions.

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 information about the current regulatory environment and related risks. See Item 1A - Risk Factors under the caption Potential Adverse Effects of a Material Concentration in Revenue.

Low Short-Term Interest Rates

After initiating short-term interest rate increases of 0.25% in late 2015 and 2016, the FOMC raised the federal funds target rate by 0.25% three times during 2017 to its current target range of 1.25%-1.50%. The federal funds target rate, which drives short-term interest rates, had been close to zero for nearly seven years prior to the December 2015 increase. The long-term low interest-rate environment resulted in the gross yield earned by certain money market funds not being sufficient to cover all of the fund's operating expenses. As a result, beginning in the fourth quarter of 2008, Federated implemented Voluntary Yield-related Fee Waivers. These waivers were 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.

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	2017			2016			2015
Revenue	$	(4.4	)	$	(87.8	)	$	(333.6	)
Less: Reduction in Distribution expense	3.6			65.8			240.6
Operating income	(0.8		)	(22.0		)	(93.0		)
Less: Reduction in Noncontrolling interest	0.0			0.0			7.1
Pre-tax impact	$	(0.8	)	$	(22.0	)	$	(85.9	)

The negative pre-tax impact of Voluntary Yield-related Fee Waivers decreased in 2017 and 2016 due primarily to higher yields on instruments held by the money market funds. As previously mentioned, since late 2015, the FOMC increased the federal funds target rate range by 0.25% five times. The interest rate increase in December 2017 eliminated the need to continue the Voluntary Yield-related Fee Waivers. See Note (19) for information regarding the quarterly pre-tax impact of these fee waivers.

(b) Revenue Concentration by Investment Strategy

Approximately 18%, 15% and 14% of Federated's total revenue for 2017, 2016 and 2015, respectively, was derived from services provided to a specific domestic strategy, the Federated Strategic Value Dividend strategy, which includes Federated Funds and Separate Accounts. A significant and prolonged decline in the AUM of this strategy could have a material adverse effect on Federated's future revenues and, to a lesser extent, net income, due to a related reduction in distribution expenses associated with the Federated Funds managed in accordance with this strategy.

Approximately 9%, 8% and 11% of Federated's total revenue for 2017, 2016 and 2015, respectively, was derived from services provided to the Federated Kaufmann mid-cap growth strategy, which includes the Federated Kaufmann Fund and the Federated Kaufmann Fund II. A significant and prolonged decline in the AUM of this strategy could have a material adverse effect on Federated's future revenues and, to a lesser extent, net income, due to a related reduction in distribution expenses associated with these funds.

Approximately 16%, 15% and 8% of Federated's total revenue for 2017, 2016 and 2015, respectively, was derived from services provided to one intermediary customer, The Bank of New York Mellon Corporation, including its Pershing subsidiary. Significant negative changes in Federated's relationship with this customer could have a material adverse effect on Federated's future revenues and, to a lesser extent, net income, due to a related reduction in distribution expenses associated with this intermediary.