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 presents Federated's revenue concentration by asset class over the last three years:



	2018		2017		2016
Equity Assets	41	%	38	%	33	%
Money Market Assets	37	%	41	%	45	%
Fixed-Income Assets	16	%	17	%	17	%

The change in the relative proportion of Federated's revenue attributable to equity assets in 2018, as compared to the same period in 2017, was primarily the result of higher average equity assets mostly as a result of the July 2018 Hermes Acquisition. Because the Hermes Acquisition was primarily comprised of equity assets and alternative/private markets assets, the relative proportion of Federated's revenue attributable to money market assets decreased in 2018 as compared to 2017. Furthermore, Federated's revenue attributable to money market assets decreased as a result of a change in the mix of average money market assets.

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.

Low Short-Term Interest Rates

The FOMC raised the federal funds target rate by 0.25% four times during 2018 to its current target range of 2.25%-2.50%, which was the ninth such interest rate increase since December 2015. 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	2018		2017			2016
Revenue	$	0.0	$	(4.4	)	$	(87.8	)
Less: Reduction in Distribution Expense	0.0		3.6			65.8
Operating Income	0.0		(0.8		)	(22.0		)
Less: Reduction in Noncontrolling Interest	0.0		0.0			0.0
Pre-tax Impact	$	0.0	$	(0.8	)	$	(22.0	)

The negative pre-tax impact of Voluntary Yield-related Fee Waivers decreased in 2017 as compared to 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% nine times. The interest rate increase in December 2017 eliminated the need to continue the Voluntary Yield-related Fee Waivers.

(b) Revenue Concentration by Investment Strategy

The following table presents Federated's revenue concentration by investment strategy over the last three years:



	2018		2017		2016
Federated Strategic Value Dividend strategy¹	15	%	18	%	15	%
Federated Kaufmann Mid-Cap Growth strategy²	10	%	9	%	8	%


1	Strategy includes Federated Funds and Separate Accounts.


2	Strategy includes Federated Funds.

A significant and prolonged decline in the AUM in either of these strategies 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 these strategies.

Approximately 13%, 16% and 15% of Federated's total revenue for 2018, 2017 and 2016, respectively, was derived from services provided to one intermediary, The Bank of New York Mellon Corporation, including its Pershing subsidiary. Significant negative changes in Federated's relationship with this intermediary 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.