Concentration Risk

9 Months Ended

Sep. 30, 2020

(a) Revenue Concentration by Asset Class

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


	Nine Months Ended
	September 30,
	2020		2019
Money Market Assets	42	%	39	%
Equity Assets	37	%	41	%
Fixed-Income Assets	13	%	14	%

The change in the relative proportion of Federated Hermes' revenue attributable to money market assets for the nine months ended September 30, 2020, as compared to the same period in 2019, was primarily the result of a higher proportion of average money market assets to total average assets in 2020. The change in the relative proportion of Federated Hermes' revenue attributable to equity assets for the nine months ended September 30, 2020, as compared to the same period in 2019, was primarily the result of a lower proportion of average equity assets to total average assets in 2020.

Low Short-Term Interest Rates

In March 2020, in response to disrupted economic activity as a result of Covid-19, 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, 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 Strategy/Fund

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Federated Hermes Government Obligations Fund	14	%	10	%	13	%	10	%
Federated Hermes Strategic Value Dividend strategy1	7	%	11	%	8	%	11	%

1 Strategy includes Federated Hermes Funds and Separate Accounts.

A significant and prolonged decline in the AUM in this fund or strategy 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 the Federated Hermes Funds managed in accordance with this fund or strategy.

Approximately 6% and 8% of Federated Hermes' total revenue for the three- and nine-month periods ended September 30, 2020, respectively, and 11% for both the three- and nine-month periods ended September 30, 2019 was derived from services provided to one intermediary, The Bank of New York Mellon Corporation, including its Pershing subsidiary. Significant negative changes in 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.