10-Q 1 fhi-20220630.htm 10-Q fhi-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _______________________________________________________________________________________
FORM 10-Q
 _______________________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 001-14818
 _______________________________________________________________________________________
Federated Hermes, Inc.
(Exact name of registrant as specified in its charter)
 _______________________________________________________________________________________
Pennsylvania 25-1111467
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1001 Liberty Avenue 15222-3779
Pittsburgh,
Pennsylvania
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code) 412-288-1900
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class B common stock, no par valueFHINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerx  Accelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date: As of July 22, 2022, the Registrant had outstanding 9,000 shares of Class A common stock and 89,132,652 shares of Class B common stock.

Table of Contents


FORWARD-LOOKING STATEMENTS
Certain statements in this report on Form 10-Q constitute forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that could cause the actual results, levels of activity, performance or achievements of Federated Hermes, Inc. and its consolidated subsidiaries (collectively, Federated Hermes), or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “believe,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “projection,” “assume,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “can,” “may,” and similar expressions. Among other forward-looking statements, such statements include certain statements relating to, or, as applicable, statements concerning management’s assessments, beliefs, expectations, assumptions, judgments, projections or estimates regarding: the pandemic and its impact; Russia’s invasion of Ukraine and its impact; asset flows, levels, values and mix and their impact; the possibility of impairments, business mix; the level, timing, degree and impact of changes in interest rates or gross or net yields; fee rates and recognition; sources, levels and recognition of revenues, expenses, gains, losses, income and earnings; the level and impact of reimbursements, rebates or assumptions of fund-related expenses and fee waivers for competitive reasons such as to maintain positive or zero net yields (Voluntary Yield-related Fee Waivers), to maintain certain fund expense ratios, to meet regulatory requirements or to meet contractual requirements (collectively, Fee Waivers); whether, under what circumstances and the degree to which Fee Waivers will be implemented; the impact of market volatility, liquidity, and other market conditions; whether and when revenue or expense is recognized; whether and when capital contributions could be made; the components and level of, and prospect for, distribution-related expenses; guarantee and indemnification obligations; the timing and amount of acquisition-related payment obligations; payment obligations pursuant to employment or incentive arrangements; vesting rights and requirements; business and market expansion opportunities, including acceleration of global growth; interest and principal payments or expenses; taxes, tax rates and the impact of tax law changes; borrowing, debt, future cash needs and principal uses of cash, cash flows and liquidity; the ability to raise additional capital; type, classification and consolidation of investments; uses of treasury stock; Federated Hermes’ product and market performance and Federated Hermes’ performance indicators; investor preferences; product and strategy demand, distribution, development and restructuring initiatives and related planning and timing; the effect, and degree of impact, of changes in customer relationships; legal proceedings; regulatory matters, including the pace, timing, impact, effects and other consequences of the current regulatory environment; the attractiveness and resiliency of money market funds; dedication of resources; accounting-related determinations; compliance, and related legal, compliance and other professional services expenses; and interest rate, concentration, market, currency and other risks and their impact. Among other risks and uncertainties, market conditions can change significantly and impact Federated Hermes’ business and results, including by changing Federated Hermes’ asset flows, levels, and mix, and business mix, which could cause a decline in revenues and net income, result in impairments and change the amount of Fee Waivers incurred by Federated Hermes. The obligation to make purchase price payments in connection with acquisitions is subject to certain adjustments and conditions, and the obligation to make contingent payments is based on net revenue growth levels and will be affected by the achievement of such levels. The



obligation to make additional payments pursuant to employment or incentive arrangements can be based on satisfaction of certain conditions set forth in those arrangements. Future cash needs, cash flows and uses of cash will be impacted by a variety of factors, including the number and size of any acquisitions, Federated Hermes’ success in developing, structuring and distributing its products and strategies, potential changes in assets under management (AUM) and/or changes in the terms of distribution and shareholder services contracts with intermediaries who offer Federated Hermes’ products to intermediary customers, and potential increased legal, compliance and other professional services expenses stemming from additional or modified regulation or the dedication of such resources to other initiatives. Federated Hermes’ risks and uncertainties also include liquidity and credit risks in Federated Hermes’ money market funds and revenue risk, which will be affected by yield levels in money market fund products, Fee Waivers, changes in fair values of AUM, any additional regulatory reforms, investor preferences and confidence, and the ability of Federated Hermes to collect fees in connection with the management of such products. Many of these factors could be more likely to occur as a result of continued scrutiny of the mutual fund industry by domestic or foreign regulators, and any disruption in global financial markets. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither Federated Hermes nor any other person assumes responsibility for the accuracy and completeness, or updating, of such statements in the future. For more information on these items and additional risks that could impact the forward-looking statements, see Item 1A - Risk Factors included in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2021 and Part II, Item 1A - Risk Factors.


Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
June 30,
2022
December 31,
2021
ASSETS
Current Assets
Cash and Cash Equivalents$248,732 $233,327 
Investments—Consolidated Investment Companies102,865 105,542 
Investments—Affiliates and Other78,170 87,805 
Receivables, net of reserve of $21 and $21, respectively
53,850 65,317 
Receivables—Affiliates36,487 30,956 
Prepaid Expenses34,175 29,322 
Other Current Assets7,124 7,178 
Total Current Assets561,403 559,447 
Long-Term Assets
Goodwill784,900 798,871 
Intangible Assets, net of accumulated amortization of $41,649 and $39,618, respectively
433,091 471,209 
Property and Equipment, net of accumulated depreciation of $112,432 and $113,624, respectively
41,588 46,965 
Right-of-Use Assets, net99,238 108,306 
Other Long-Term Assets31,697 33,389 
Total Long-Term Assets1,390,514 1,458,740 
Total Assets$1,951,917 $2,018,187 
LIABILITIES
Current Liabilities
Accounts Payable and Accrued Expenses$73,761 $64,019 
Accrued Compensation and Benefits93,929 162,203 
Lease Liabilities17,788 17,447 
Other Current Liabilities21,669 27,038 
Total Current Liabilities207,147 270,707 
Long-Term Liabilities
Long-Term Debt397,448 223,350 
Long-Term Deferred Tax Liability, net197,484 205,206 
Long-Term Lease Liabilities94,758 105,270 
Other Long-Term Liabilities32,456 36,435 
Total Long-Term Liabilities722,146 570,261 
Total Liabilities929,293 840,968 
Commitments and Contingencies (Note (17))
TEMPORARY EQUITY
Redeemable Noncontrolling Interests in Subsidiaries54,731 63,202 
PERMANENT EQUITY
Federated Hermes, Inc. Shareholders’ Equity
Common Stock:
Class A, No Par Value, 20,000 Shares Authorized, 9,000 Shares Issued and Outstanding
189 189 
Class B, No Par Value, 900,000,000 Shares Authorized, 109,505,456 Shares Issued
467,647 448,929 
Additional Paid-In Capital from Treasury Stock Transactions3,472 0 
Retained Earnings1,224,527 1,187,001 
Treasury Stock, at Cost, 20,307,504 and 16,094,488 Shares Class B Common Stock, respectively
(684,286)(538,464)
Accumulated Other Comprehensive Income (Loss), net of tax(43,656)16,362 
Total Permanent Equity967,893 1,114,017 
Total Liabilities, Temporary Equity and Permanent Equity$1,951,917 $2,018,187 
(The accompanying notes are an integral part of these Consolidated Financial Statements.)
4


Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
 2022202120222021
Revenue
Investment Advisory Fees, net—Affiliates$197,466 $149,107 $367,687 $332,941 
Investment Advisory Fees, net—Other60,577 65,182 123,350 129,037 
Administrative Service Fees, net—Affiliates70,182 77,750 143,689 152,051 
Other Service Fees, net—Affiliates33,248 15,192 46,855 31,062 
Other Service Fees, net—Other4,535 3,809 9,191 7,122 
Total Revenue366,008 311,040 690,772 652,213 
Operating Expenses
Compensation and Related128,086 132,769 262,051 276,389 
Distribution84,243 38,115 132,804 82,504 
Systems and Communications18,446 18,954 37,940 37,549 
Professional Service Fees13,976 15,122 27,444 29,759 
Office and Occupancy10,512 11,082 21,835 22,322 
Advertising and Promotional4,736 4,623 7,468 7,447 
Travel and Related3,328 898 5,123 1,195 
Other10,363 7,668 19,840 15,761 
Total Operating Expenses273,690 229,231 514,505 472,926 
Operating Income92,318 81,809 176,267 179,287 
Nonoperating Income (Expenses)
Investment Income, net1,577 1,148 2,671 1,780 
Gain (Loss) on Securities, net(20,885)6,245 (32,580)7,624 
Debt Expense(3,350)(346)(4,571)(837)
Other, net(13)(184)68 161 
Total Nonoperating Income (Expenses), net(22,671)6,863 (34,412)8,728 
Income Before Income Taxes69,647 88,672 141,855 188,015 
Income Tax Provision18,889 35,193 36,500 60,190 
Net Income Including the Noncontrolling Interests in Subsidiaries50,758 53,479 105,355 127,825 
Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries(6,899)(2,405)(8,165)(2,543)
Net Income$57,657 $55,884 $113,520 $130,368 
Amounts Attributable to Federated Hermes, Inc.
Earnings Per Common Share—Basic$0.64 $0.57 $1.24 $1.32 
Earnings Per Common Share—Diluted$0.64 $0.56 $1.24 $1.31 
Cash Dividends Per Share$0.27 $0.27 $0.54 $0.54 
(The accompanying notes are an integral part of these Consolidated Financial Statements.)

5


Consolidated Statements of Comprehensive Income
(dollars in thousands)
(unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
 2022202120222021
Net Income Including the Noncontrolling Interests in Subsidiaries$50,758 $53,479 $105,355 $127,825 
Other Comprehensive Income (Loss), net of tax
Permanent Equity
Foreign Currency Translation Gain (Loss)(42,884)1,495 (60,018)5,053 
Temporary Equity
Foreign Currency Translation Gain (Loss)(1,068)868 (1,525)2,298 
Other Comprehensive Income (Loss), net of tax(43,952)2,363 (61,543)7,351 
Comprehensive Income Including the Noncontrolling Interests in Subsidiaries6,806 55,842 43,812 135,176 
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests in Subsidiaries(7,967)(1,537)(9,690)(245)
Comprehensive Income Attributable to Federated Hermes, Inc.$14,773 $57,379 $53,502 $135,421 
(The accompanying notes are an integral part of these Consolidated Financial Statements.)


6


Consolidated Statements of Changes in Equity
(dollars in thousands)
(unaudited)
 Federated Hermes, Inc. Shareholders’ Equity  
 Common
Stock
Additional
Paid-in
Capital from
Treasury
Stock
Transactions
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive Income (Loss), net of
tax
Total
Permanent
Equity
Redeemable
Noncontrolling
Interest in
Subsidiaries/
Temporary
Equity
Balance at December 31, 2021$449,118 $0 $1,187,001 $(538,464)$16,362 $1,114,017 $63,202 
Net Income (Loss)55,863 55,863 (1,266)
Other Comprehensive Income (Loss), net of tax(17,134)(17,134)(457)
Subscriptions—Redeemable Noncontrolling Interest Holders30,340 
Consolidation (Deconsolidation)(16,034)
Stock Award Activity9,288 (12,116)12,147 9,319 707 
Dividends Declared(24,952)(24,952)
Distributions to Noncontrolling Interests in Subsidiaries(4,339)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests(14,221)(14,221)14,221 
Acquisition of Additional Equity of FHL3,518 34,048 37,566 (37,805)
Purchase of Treasury Stock(102,537)(102,537)
Balance at March 31, 2022$458,406 $3,518 $1,191,575 $(594,806)$(772)$1,057,921 $48,569 
Net Income (Loss)57,657 57,657 (6,899)
Other Comprehensive Income (Loss), net of tax(42,884)(42,884)(1,068)
Subscriptions—Redeemable Noncontrolling Interest Holders15,314 
Stock Award Activity9,430 (46)0 62 9,446 0 
Dividends Declared(24,705)(24,705)
Distributions to Noncontrolling Interests in Subsidiaries(1,185)
Purchase of Treasury Stock(89,542)(89,542)
Balance at June 30, 2022$467,836 $3,472 $1,224,527 $(684,286)$(43,656)$967,893 $54,731 
Consolidated Statements of Changes in Equity
(dollars in thousands)
(unaudited)
 Federated Hermes, Inc. Shareholders' Equity  
 Common
Stock
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive Income (Loss), net of
tax
Total
Permanent
Equity
Redeemable
Noncontrolling
Interest in
Subsidiaries/
Temporary
Equity
Balance at December 31, 2020$418,858 $1,027,699 $(324,731)$15,171 $1,136,997 $236,987 
Net Income (Loss)74,484 74,484 (138)
Other Comprehensive Income (Loss), net of tax3,558 3,558 1,430 
Subscriptions—Redeemable Noncontrolling Interest Holders25,762 
Consolidation (Deconsolidation)(16,237)
Stock Award Activity9,216 (15,234)15,249 9,231 2,481 
Dividends Declared(26,788)(26,788)
Distributions to Noncontrolling Interests in Subsidiaries(1,898)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests2,670 2,670 (2,670)
Purchase of Treasury Stock(45,030)(45,030)
Balance at March 31, 2021$428,074 $1,062,831 $(354,512)$18,729 $1,155,122 $245,717 
Net Income (Loss)055,884 0055,884(2,405)
Other Comprehensive Income (Loss), net of tax0001,495 1,495868 
Subscriptions—Redeemable Noncontrolling Interest Holders00000899,962 
Consolidation (Deconsolidation)00000(894,175)
Stock Award Activity7,760 (189)205 07,7762,518 
Dividends Declared0(26,550)00(26,550)
Distributions to Noncontrolling Interests in Subsidiaries000(1,016)
Purchase of Treasury Stock00(31,797)0(31,797)
Balance at June 30, 2021$435,834 $1,091,976 $(386,104)$20,224 $1,161,930 $251,469 
(The accompanying notes are an integral part of these Consolidated Financial Statements.)
7


Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Six Months Ended
June 30,
20222021
Operating Activities
Net Income Including the Noncontrolling Interests in Subsidiaries$105,355 $127,825 
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities
Depreciation and Amortization14,423 14,999 
Share-Based Compensation Expense18,720 16,976 
Subsidiary Share-Based Compensation Expense707 4,999 
(Gain) Loss on Disposal of Assets(737)(5,163)
Provision (Benefit) for Deferred Income Taxes(2,163)18,678 
Consolidation/(Deconsolidation) of Other Entities(20)11,029 
Net Unrealized (Gain) Loss on Investments33,315 (2,442)
Net Sales (Purchases) of Investments—Consolidated Investment Companies(43,219)(64,399)
Other Changes in Assets and Liabilities:
(Increase) Decrease in Receivables, net10 6,933 
(Increase) Decrease in Prepaid Expenses and Other Assets(3,526)(2,504)
Increase (Decrease) in Accounts Payable and Accrued Expenses(53,008)(67,723)
Increase (Decrease) in Other Liabilities9,659 (4,257)
Net Cash Provided (Used) by Operating Activities79,516 54,951 
Investing Activities
Purchases of Investments—Affiliates and Other(5,081)(5,643)
Proceeds from Redemptions of Investments—Affiliates and Other8,067 13,915 
Cash Paid for Property and Equipment(2,889)(3,255)
Net Cash Provided (Used) by Investing Activities97 5,017 
Financing Activities
Dividends Paid(49,659)(53,339)
Purchases of Treasury Stock(204,604)(77,973)
Distributions to Noncontrolling Interests in Subsidiaries(5,524)(2,914)
Contributions from Noncontrolling Interests in Subsidiaries45,654 34,394 
Proceeds from New Borrowings488,300 0 
Payments on Debt(311,650)(10,000)
Other Financing Activities(9,484)(1,978)
Net Cash Provided (Used) by Financing Activities(46,967)(111,810)
Effect of Exchange Rates on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents(17,717)1,826 
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents14,929 (50,016)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period238,052 308,635 
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period252,981 258,619 
Less: Restricted Cash Recorded in Other Current Assets3,978 4,598 
Less: Restricted Cash and Restricted Cash Equivalents Recorded in Other Long-Term Assets271 289 
Cash and Cash Equivalents$248,732 $253,732 
(The accompanying notes are an integral part of these Consolidated Financial Statements.)
8

Notes to the Consolidated Financial Statements
(unaudited)

(1) Basis of Presentation
Federated Hermes, Inc. and its consolidated subsidiaries (collectively, Federated Hermes) provide investment advisory, administrative, distribution and other services to various investment products, including sponsored investment companies, collective funds and other funds (Federated Hermes Funds) and separate accounts (which include separately managed accounts, institutional accounts, certain sub-advised funds and other managed products, collectively Separate Accounts) in both domestic and international markets. In addition, Federated Hermes markets and provides stewardship and real estate development services to various domestic and international companies. The interim consolidated financial statements of Federated Hermes included herein (Consolidated Financial Statements) have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP). In the opinion of management, the financial statements reflect all adjustments that are of a normal recurring nature and necessary for a fair presentation of the results for the interim periods presented.
In preparing the Consolidated Financial Statements, management is required to make estimates and assumptions that affect the amounts reported therein and in the accompanying notes. Actual results may differ from those estimates, and such differences may be material to the Consolidated Financial Statements.
The Consolidated Financial Statements should be read in conjunction with Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2021. Certain items reported in previous periods have been reclassified to conform to the current period’s presentation.
(2) Significant Accounting Policies
For a listing of Federated Hermes’ significant accounting policies, please refer to Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2021.
(3) Equity Acquisition
On March 14, 2022, Federated Hermes completed a tender offer resulting in the acquisition of the remaining approximate 10% noncontrolling interests in Federated Hermes Limited (FHL, formerly known as Hermes Fund Managers Limited) from a trustee of a non-U.S. domiciled employee benefit trust established for the benefit of certain members of FHL’s management, a non-U.S. resident former FHL employee and other non-U.S. resident key FHL employees under a long-term incentive plan established in connection with the 2018 acquisition of FHL (2022 Acquisition of FHL Noncontrolling Interests). Pursuant to the 2022 Acquisition of FHL Noncontrolling Interests, FHL became a 100% indirect, wholly-owned subsidiary of Federated Hermes.
The 2022 Acquisition of FHL Noncontrolling Interests was transacted in shares whereby Federated Hermes issued awards of restricted Class B common stock under Federated Hermes Stock Incentive Plan and Federated Hermes UK Sub-Plan, as amended, and treasury Class B common stock, in exchange for the beneficial interests in shares of FHL. The FHL shares were exchanged at fair value for Federated Hermes shares valued at £36.4 million or $47.5 million, which was based on a third-party valuation of FHL. See Note (12) for additional information regarding the share exchange.
(4) Revenue from Contracts with Customers
The following table presents Federated Hermes’ revenue disaggregated by asset class:
Three Months EndedSix Months Ended
June 30,June 30,
(in thousands)2022202120222021
Equity$132,602 $171,595 $279,459 $337,953 
Money market145,807 49,286 232,097 129,978 
Fixed-income51,954 57,716 109,828 114,493 
Other1
35,645 32,443 69,388 69,789 
Total Revenue$366,008 $311,040 $690,772 $652,213 
1    Primarily includes Alternative / Private Markets (including but not limited to private equity, real estate and infrastructure), multi-asset and stewardship services revenue.
9

Notes to the Consolidated Financial Statements
(unaudited)
The following table presents Federated Hermes’ revenue disaggregated by performance obligation:
Three Months EndedSix Months Ended
June 30,June 30,
(in thousands)2022202120222021
Asset Management1
$258,043 $214,289 $491,037 $461,978 
Administrative Services70,182 77,750 143,689 152,051 
Distribution2
31,182 12,191 42,259 25,219 
Other3
6,601 6,810 13,787 12,965 
Total Revenue$366,008 $311,040 $690,772 $652,213 
1    The performance obligation may include administrative, distribution and other services recorded as a single asset management fee under Topic 606, as it is part of a unitary fee arrangement with a single performance obligation.
2    The performance obligation is satisfied at a point in time. A portion of this revenue relates to a performance obligation that has been satisfied in a prior period.
3    Primarily includes shareholder service fees and stewardship services revenue.
The following table presents Federated Hermes’ revenue disaggregated by geographical market:
Three Months EndedSix Months Ended
June 30,June 30,
(in thousands)2022202120222021
Domestic$291,507 $224,283 $538,316 $480,773 
Foreign1
74,501 86,757 152,456 171,440 
Total Revenue$366,008 $311,040 $690,772 $652,213 
1    This represents revenue earned by non-U.S. domiciled subsidiaries.
The following table presents Federated Hermes’ revenue disaggregated by product type:
Three Months EndedSix Months Ended
June 30,June 30,
(in thousands)2022202120222021
Federated Hermes Funds$300,896 $242,049 $558,231 $516,054 
Separate Accounts60,577 65,182 123,350 129,037 
Other1
4,535 3,809 9,191 7,122 
Total Revenue$366,008 $311,040 $690,772 $652,213 
1    Primarily includes stewardship services revenue.
For nearly all revenue, Federated Hermes is not required to disclose certain estimates of revenue expected to be recorded in future periods as a result of applying the following exemptions: (1) contract terms are short-term in nature (i.e., expected duration of one year or less due to termination provisions) and (2) the expected variable consideration would be allocated entirely to future service periods.
Federated Hermes expects to recognize revenue in the future related to the unsatisfied portion of the stewardship services and real estate development performance obligations at June 30, 2022. Generally, contracts are billed in arrears on a quarterly basis and have a three-year duration, after which the customer can terminate the agreement with notice, generally from three to 12 months. Based on existing contracts and the applicable foreign exchange rates as of June 30, 2022, Federated Hermes may recognize future fixed revenue from these services as presented in the following table:
(in thousands)
Remainder of 2022$6,693 
20236,006 
20243,100 
2025 and Thereafter1,143 
Total Remaining Unsatisfied Performance Obligations$16,942 
10

Notes to the Consolidated Financial Statements
(unaudited)
(5) Concentration Risk
(a) Revenue Concentration by Asset Class
The following table presents Federated Hermes’ significant revenue concentration by asset class:
Six Months Ended
June 30,
20222021
Equity Assets40 %52 %
Money Market Assets34 %20 %
Fixed-Income Assets16 %18 %
The change in the relative proportion of Federated Hermes’ revenue attributable to money market assets for the six months ended June 30, 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 six months ended June 30, 2022 as compared to the same period in 2021, was primarily the result of lower average equity 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 was 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 global economic activity and elevated inflation levels, the FOMC raised the federal funds target rate four times in 2022. The range is currently 2.25% - 2.50% as of the July 2022 FOMC meeting. These rate increases have nearly eliminated the net negative pre-tax impact of the Voluntary Yield-related Fee Waivers.
During the three and six months ended June 30, 2022, Voluntary Yield-related Fee Waivers totaled $9.5 million and $85.3 million, respectively. These fee waivers were partially offset by related reductions in distribution expenses of $9.0 million and $66.5 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $0.5 million and $18.8 million for the three and six months ended June 30, 2022, respectively. During the three and six months ended June 30, 2021, Voluntary Yield-related Fee Waivers totaled $117.8 million and $200.9 million, respectively. These fee waivers were partially offset by related reductions in distribution expenses of $71.0 million and $132.5 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $46.8 million and $68.4 million for the three and six months ended June 30, 2021, respectively.
(b) Revenue Concentration by Investment Fund Strategy
The following table presents Federated Hermes’ revenue concentration by investment fund strategy:
Three Months EndedSix Months Ended
June 30,June 30,
2022202120222021
Federated Hermes Government Obligations Fund11 %3 %9 %5 %
Federated Hermes Kaufmann Fund and Federated Hermes Kaufmann Fund II7 %11 %8 %11 %
Federated Hermes Global Emerging Markets strategy5 %10 %6 %9