ITEM 1A – RISK FACTORS
−Removed: As an investment manager, risk is inherent to Federated Hermes’ business and offerings.
−Removed: U.S., UK, EU and other global financial/securities, capital, commodities, currency, real estate, credit and other markets (collectively, as applicable, markets), by their nature, are prone to uncertainty and subject participants to a variety of risks.
−Removed: If any of the following risks actually arise, Federated Hermes’ Financial Condition can be materially adversely affected.
−Removed: The risks described below are not the only risks to Federated Hermes’ business and offerings.
−Removed: Additional risks not presently known or that are currently considered immaterial can also adversely affect its Financial Condition.
+Added: Risk is inherent to Federated Hermes’ investment management business and offerings.
+Added: Global financial, securities, capital, commodities, currency, real estate, energy, credit and other markets (collectively, as applicable, markets) are inherently uncertain and subject participants to a variety of risks.
+Added: If any of the following risks arise, Federated Hermes’ Financial Condition can be materially adversely affected.
+Added: The risks described below are not exhaustive, and additional risks including those not presently known or considered immaterial can also adversely affect its Financial Condition.
Specific Risk Factors
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Potential Adverse Effects of a Material Concentration in Revenue.
−Removed: At any point in time, a significant portion of Federated Hermes’ total AUM or revenue can be attributable to one or more of its investment offerings, or asset classes, or one or more customers with whom it has a relationship.
+Added: At any time, a significant portion of Federated Hermes’ total AUM or revenue can be concentrated in one or more investment offerings, asset classes, or customers.
See Note (5) to the Consolidated Financial Statements for information on material concentrations in Federated Hermes’ revenue.
−Removed: A significant and prolonged decline in the AUM of an offering, strategy, or asset class with a material concentration can 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 offerings and assets.
−Removed: Likewise, significant negative changes in Federated Hermes’ relationship with a customer or shareholder with a material concentration can 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 customer or shareholder.
−Removed: A significant change in Federated Hermes’ business and offerings, or a significant reduction in AUM due to regulatory developments and new or amended regulatory requirements, market changes, such as significant and rapid increases or decreases in interest rates over a short period of time causing certain investors to prefer direct investments in interest-bearing securities, non-competitive performance, declines in asset values, the availability, supply and/or market interest in repurchase agreements and other investments, significant deterioration in investor confidence, continuing declining or prolonged periods of low short-term interest rates or negative interest rates or negative yields and resulting fee waivers, investor preferences for deposit products or other Federal Deposit Insurance Corporation (FDIC)-insured products, or certain exchange-traded offerings, index funds or other passive investment offerings, changes in offering fee structures, changes in relationships with customers, or other circumstances, can have a material adverse effect on Federated Hermes’ Financial Condition.
+Added: A significant and prolonged decline in the AUM of materially concentrated offering, strategy, or asset class can materially adversely affect Federated Hermes’ future revenues and, to a lesser extent, net income, due to a related reduction in distribution expenses associated with these offerings, strategies and assets.
+Added: Similarly, significant adverse changes in relationships with customers or shareholders representing material concentrations can materially adversely affect future revenues and, to a lesser extent, net income due to a related reduction in distribution expenses associated with this customer or shareholder.
+Added: A significant change in Federated Hermes’ business and offerings, or a significant reduction in AUM due to regulatory developments and new or amended regulatory requirements, market changes, such as significant and rapid increases or decreases in interest rates over a short period of time causing certain investors to prefer direct investments in interest-bearing securities, non-competitive performance, declines in asset values, the availability, supply and/or market interest in repurchase agreements and other investments, significant deterioration in investor confidence, continuing declining or prolonged periods of low short-term interest rates or negative interest rates or negative yields and resulting fee waivers, investor preferences for deposit products or other Federal Deposit Insurance Corporation (FDIC)-insured products, or certain exchange-traded offerings, index funds or other passive investment offerings, changes in offering fee structures, changes in relationships with customers, or other circumstances, or factors that change Federated Hermes’ business and offerings, reduce AUM or alter asset mix, can materially adversely affect Federated Hermes’ Financial Condition.
Potential Adverse Effect of Providing Financial Support to Investment Offerings.
Federated Hermes can, from time to time, elect to provide financial support to its sponsored investment offerings.
−Removed: Providing such support utilizes capital that would otherwise be available for other corporate purposes or to satisfy certain applicable capital or liquidity adequacy requirements.
−Removed: Losses resulting from such support, or failure to have or devote sufficient capital to support offerings, can have a material adverse effect on Federated Hermes’ Financial Condition.
+Added: Such support requires the use of capital otherwise available for corporate purposes or to meet applicable capital or liquidity requirements.
+Added: Any losses from such support, or an inability to have or timely deploy sufficient capital, can materially adversely affect Federated Hermes’ Financial Condition.
Risk of Federated Hermes’ Money Market Offerings’ Ability to Maintain a Stable Net Asset Value.
−Removed: Approximately 51% of Federated Hermes’ total revenue for 2024 was attributable to money market assets.
−Removed: An investment in money market funds is neither insured nor guaranteed by the FDIC or any other government agency.
−Removed: Federated Hermes’ retail and government/public debt money market funds, and its private and collective money market funds, seek to maintain a stable or constant NAV.
−Removed: Federated Hermes also offers non-U.S.
−Removed: low volatility NAV money market funds that seek to maintain a constant NAV, but will move to a four-digit NAV if such fund’s NAV falls outside of a 20-basis point collar.
+Added: Approximately 53% of Federated Hermes’ total 2025 revenue was attributable to money market assets.
+Added: Money market fund investments are neither insured nor guaranteed by the FDIC or any other government agency.
+Added: Federated Hermes’ retail, government/public debt, private and collective money market funds seek to maintain a stable or constant NAV, and its non-U.S.
+Added: low-volatility NAV money market funds seek to maintain a constant NAV, but will move to a four-digit NAV if such fund’s NAV falls outside of a 20-basis point collar.
While stable or constant NAV money market funds seek to maintain a NAV of $1.00 per share, it is also possible to lose money by investing in these funds.
−Removed: Federated Hermes also offers institutional prime or municipal (or tax-exempt) money market funds which transact at a fluctuating NAV that uses four-decimal-places ($1.0000), and a short-term variable NAV non-U.S.
+Added: Federated Hermes also offers institutional prime or municipal (or tax-exempt) money market funds which transact at a fluctuating NAV that use four-decimal-places ($1.0000), and a short-term variable NAV non-U.S.
money market fund.
It is also possible to lose money by investing in these funds.
−Removed: Federated Hermes devotes substantial resources, such as significant credit analysis, integration of proprietary insights from fundamental investment analysis, including governance, environmental or social factors and engagement interactions (for many of its investment offerings) and attention to security valuation, in connection with the management of its offerings.
−Removed: However, the NAV of an institutional prime or municipal (or tax-exempt) money market fund, or variable NAV fund or, if the above described conditions are met, a low-volatility NAV money market fund, can fluctuate, and there is no guarantee that a government/public debt or retail ( i.e., stable or constant NAV) money market fund will be able to preserve a stable or constant NAV in the future.
−Removed: Market conditions can lead to a limited supply of money market securities and severe liquidity issues and/or declines in interest rates or additional prolonged periods of low yields in money market offerings, and regulatory developments and regulatory requirements can lead to shifts in asset levels and mix, which can impact money market fund NAVs and performance.
−Removed: If the NAV of a Federated Hermes stable or constant NAV money market fund were to decline to less than $1.00 per share, or if the fluctuating NAV of an institutional prime or municipal (or tax-exempt) money
−Removed: market fund, or variable NAV money market fund or low-volatility NAV money market fund consistently or significantly declines to less than $1.0000 per share, such Federated Hermes money market fund would likely experience significant redemptions, resulting in reductions in AUM, loss of shareholder confidence and reputational harm, all of which can cause material adverse effects on Federated Hermes’ Financial Condition.
−Removed: money market fund reforms, significant redemptions on any day from Federated Hermes’ registered institutional prime or municipal (or tax-exempt) money market funds also may result in the imposition of discretionary or mandatory redemption fees, which would likely lead to further reductions in AUM, loss of shareholder confidence, and reputational harm, and can cause additional material adverse effects on Federated Hermes’ Financial Condition.
+Added: Federated Hermes devotes substantial resources to credit analysis, integration of proprietary insights from fundamental investment analysis (including governance, environmental or social factors and engagement interactions for many of its investment offerings) and security valuation, managing its offerings.
+Added: However, the NAV of an institutional prime or municipal (or tax-exempt) money market fund, or variable NAV fund or, if the above described conditions are met, a low-volatility NAV money market fund, can fluctuate, and there is no guarantee that a retail, government/public debt, private and collective (i.e., stable or constant NAV) money market fund will be able to preserve a stable or constant NAV in the future.
+Added: Market conditions, liquidity constraints, prolonged periods of low interest rates or regulatory developments and requirements that limit supply of money market securities, create illiquidity, or shift asset levels and mix can adversely affect money market fund NAVs, asset levels and performance.
+Added: If the NAV of a Federated Hermes stable or constant NAV money market fund were to decline to less than $1.00 per share, or if the fluctuating NAV of an institutional prime or municipal (or tax-exempt) money market fund, or variable NAV money market fund or low-volatility NAV money market fund consistently or significantly declines to less than $1.0000 per share, such Federated Hermes money market fund would likely experience significant redemptions, resulting in reductions in AUM, loss of shareholder confidence and reputational harm, all of which can cause material adverse effects on Federated Hermes’ Financial Condition.
+Added: money market fund reforms, significant daily redemptions from institutional prime or municipal (tax-exempt) money market funds also can trigger discretionary or mandatory redemption fees, potentially leading to further AUM reductions, loss of confidence, and material adverse effects on Federated Hermes’ Financial Condition.
Potential Adverse Effects of Increased Competition in the Investment Management Business.
The investment management business is highly competitive.
−Removed: Federated Hermes competes in the management and distribution of investment offerings (such as the Federated Hermes Funds and Separate Accounts), stewardship services and real estate development services with other fund management companies and investment advisors, foreign, national, and regional broker/dealers, commercial banks, insurance companies and other institutions.
−Removed: Many of these competitors have substantially greater resources and brand recognition than Federated Hermes.
−Removed: Competition is based on various factors, including, among others, business reputation, investment performance, quality of service, engagement, carbon neutrality and other governance, environmental or social-related commitments and initiatives, the strength and continuity of management and selling relationships, distribution services offered, technological innovation (e.g., the use of financial technology, artificial intelligence, natural language processing, digital client engagement tools and data science), the ability to generate, validate and publish accurate reports in a timely manner, the ability to offer customers and shareholders 24/7 access to their funds, the type (e.g., passive- versus actively-managed, fund versus FDIC-insured deposits, governance, environmental or social factor integrated versus non-governance, environmental or social factor integrated) and range of offerings made available, fees charged, customer or shareholder preferences, political or other views surrounding governance, environmental or social-related offerings or governance, environmental or social factor integration, transformation, and investing, and geopolitical developments.
+Added: Federated Hermes competes with other investment advisors, fund managers, broker‑dealers, banks, insurance companies and other institutions in the management and distribution of investment offerings, stewardship services, real estate development and renewal energy project services, many of which have substantially greater resources and brand recognition.
+Added: Certain intermediaries also distribute proprietary or competitor offerings that can be prioritized over Federated Hermes’ offerings.
+Added: Federated Hermes’ offerings also can compete against each other as new similar or “clone” offerings (such as exchange-traded funds with similar strategies as mutual fund offerings), or new exchange-traded share classes are added to mutual funds, which can result in redemptions from traditional mutual funds or share classes.
+Added: Competition is based on various factors, including, among others, business reputation, investment performance, quality of service, engagement, carbon neutrality and other governance, environmental or social-related commitments and initiatives, the strength and continuity of management and selling relationships, distribution services offered, technological innovation (e.g., the use of financial technology, tokenization, block chain, artificial intelligence, natural language processing, digital client engagement tools and data science), the ability to generate, validate and publish accurate reports in a timely manner, the ability to offer customers and shareholders 24/7 access to their funds, the type (e.g., passively- versus actively-managed, fund versus FDIC-insured deposits, governance, environmental or social factor integrated versus non-governance, environmental or social factor integrated) and range of offerings made available, fees charged, customer or shareholder preferences, political or other views surrounding governance, environmental or social-related offerings or governance, environmental or social factor integration, transformation, and investing, and geopolitical developments.
As with any highly competitive market, competitive pricing structures are important.
−Removed: If competitors charge lower fees for similar offerings, Federated Hermes has reduced, or can further reduce, the fees on its own offerings (either directly on a gross basis or on a net basis through fee waivers) for competitive purposes in order to retain or attract customers and shareholders.
+Added: If competitors charge lower fees for similar offerings, Federated Hermes has reduced, or can further reduce, the fees on its own offerings (either directly on a gross basis or on a net basis through fee waivers) for competitive purposes to retain or attract customers and shareholders.
Increased competition also can require changes in Federated Hermes’ business strategy or model, offerings, operational strategies, governance, environmental or social strategies and human resource management strategies to respond to competition from existing and new market innovations and competitors, which can increase expenses, create risks that such changes will not be successfully implemented, and cause Federated Hermes to not achieve its long-term strategic objectives.
Such fee reductions, business strategy changes, or other effects of competition, or failures to adequately adjust to meet competition, can have a material adverse effect on Federated Hermes’ Financial Condition.
−Removed: Many of Federated Hermes’ offerings are designed for use by institutions such as banks, insurance companies and other corporations.
−Removed: A large portion of Federated Hermes’ managed assets, particularly money market, fixed-income and alternative/private markets assets, are held by institutional investors.
−Removed: If the structure of institutional investment offerings, such as money market funds, changes or becomes disfavored by institutions, whether due to regulatory or market changes, competing offerings (such as FDIC-insured deposit products or non-transparent, actively managed ETFs) or otherwise, Federated Hermes could be unable to retain or grow market share and this can adversely affect Federated Hermes’ profitability and have a material adverse effect on Federated Hermes’ Financial Condition.
−Removed: Certain of Federated Hermes’ offerings also can be impact oriented and not suitable investments for certain fiduciary customers in the U.S.
−Removed: without obtaining appropriate consent.
−Removed: Certain customers or potential customers of Federated Hermes also can disfavor impact oriented or other governance, environmental or social offerings for political or other reasons.
−Removed: These factors can limit Federated Hermes’ ability to market or grow assets and this can adversely affect Federated Hermes’ future profitability and affect, potentially in a material way, Federated Hermes’ Financial Condition.
−Removed: A significant portion of Federated Hermes’ revenue comes from providing offerings and strategies to the financial intermediary market, comprising over 10,000 institutions and intermediary customers worldwide.
−Removed: Federated Hermes’ future profitability will be adversely affected if it is unable to retain or grow its market share and can be adversely affected by consolidations in the banking and securities industries, as regulatory developments and regulatory requirements impact customers and shareholders.
+Added: Many of Federated Hermes’ offerings are designed for banks, insurance companies and other institutional investors, which hold a large portion of its assets, particularly in money market, fixed‑income and alternative/private market strategies.
+Added: the structure or attractiveness of institutional investment offerings, due to regulatory developments, market conditions, competing offerings (such as FDIC-insured deposit products or non-transparent, actively managed ETFs) or other factors, can limit Federated Hermes’ ability to retain or grow market share and materially adversely affect profitability and Federated Hermes’ Financial Condition.
+Added: Certain offerings can also be impact-oriented or other governance, environmental or social offerings and unsuitable for certain fiduciary customers in the U.S.
+Added: without consent, or disfavored for political or other reasons, which can constrain asset growth and adversely affect, potentially in a material way, future profitability and Federated Hermes’ Financial Condition.
+Added: A significant portion of Federated Hermes’ revenue is derived from the financial intermediary market, comprising over 11,000 institutions and intermediary customers worldwide.
+Added: Federated Hermes’ future profitability depends on retaining and growing market share and can be adversely affected by banking and securities industry consolidation and regulatory developments impacting customers and shareholders.
+Added: There can be no assurance that Federated Hermes’ growth is sustainable or that it can maintain its current size and scale, and competitive, market and other factors can result in reduced growth or contraction, adversely affecting, potentially in a material way, Federated Hermes’ Financial Condition.
Risks Related to the Development of New Offerings.
−Removed: Federated Hermes’ financial performance depends, in part, on its ability to develop, market and manage new investment and related offerings.
−Removed: The development and introduction of new offerings requires continued innovative efforts on Federated Hermes’ part and may require significant time and resources as well as ongoing support and investment.
−Removed: Substantial risks and uncertainties are associated with the introduction of new offerings, including the implementation of new and appropriate operational controls and procedures, shifting customer, shareholder and market preferences, the introduction of competing offerings and compliance with regulatory requirements.
−Removed: New offerings often
−Removed: must be in the marketplace for three or more years in order to generate the track records required to attract significant AUM inflows.
−Removed: Increasingly, customers and intermediaries are looking to investment managers to deliver investment outcomes tailored to particular circumstances and needs, and to augment traditional investment offerings with additional value-added services.
−Removed: A failure to innovate and introduce successful new offerings or to effectively manage the risks related to such offerings can impact Federated Hermes’ market share and cause reductions in AUM, loss of shareholder confidence and reputational harm, all of which can cause material adverse effects on Federated Hermes’ Financial Condition.
+Added: Federated Hermes’ financial performance depends, in part, on its ability to successfully develop, market and manage new investment and related offerings.
+Added: Developing and introducing new offerings requires sustained innovation and significant time, resources and ongoing support and investment.
+Added: The introduction of new offerings involves substantial risks and uncertainties, including implementation of controls, operational readiness, changing customer, shareholder and market preferences, competitive pressures and regulatory compliance.
+Added: New offerings often require three or more years in the marketplace to establish track records sufficient to attract significant AUM.
+Added: Customers, shareholders and intermediaries increasingly seek tailored investment outcomes and value-added services beyond traditional offerings.
+Added: Failure to innovate, successfully launch new offerings or manage related risks can reduce market share and AUM, harm business reputation and shareholder confidence, and materially adversely affect Federated Hermes’ Financial Condition.
Potential Adverse Effects of Changes in Federated Hermes’ Distribution Channels.
−Removed: Federated Hermes acts as a wholesaler of investment offerings to its customers, including, for example, banks, broker/dealers, registered investment advisors and other financial planners.
−Removed: It also sells investment offerings, and stewardship services and real estate development services, directly to corporations, institutions, government agencies and other customers.
−Removed: There can be no assurance that any offering diversification efforts (whether to Federated Hermes’ fund line-up or geographically), governance, environmental or social positioning or investments in data and analytics to bolster Federated Hermes’ distribution efforts will be successful.
−Removed: There also can be no assurance that Federated Hermes will continue to have access to any customer that currently distributes its offerings, that its relationship with any one or more such customers will continue over time or on existing economic terms or that its sales or distribution efforts will achieve any particular level of success.
−Removed: The impact of Voluntary Yield-related Fee Waivers, other waivers for competitive purposes and related reductions in distribution expense can vary depending upon, among other variables, changes in distribution models, changes in such customers’ distribution fee arrangements, changes in customer or shareholder relationships and changes in the extent to which the impact of the waivers is shared by one or more customers.
−Removed: The cost of distribution as a percentage of total fund revenue remained flat at 28% in 2024 as compared to 2023.
+Added: Federated Hermes distributes its investment offerings as a wholesaler through financial intermediaries, including banks, broker‑dealers, registered investment advisors and other financial planners, and also sells investment offerings, stewardship services, real estate development services, and renewable energy project development services, including the origination and monetization of development-stage renewable projects, directly to corporations, institutions, government agencies and other customers.
+Added: Revenues from certain development services can be linked to project activity and milestone-based payments, which can be difficult to forecast and can increase period-to-period revenue volatility.
+Added: There can be no assurance that diversification efforts (whether to Federated Hermes’ offerings or geographically), governance, environmental or social positioning, or investments in technology, data and analytics to support distribution efforts will be successful.
+Added: There can also be no assurance that Federated Hermes will maintain access to current customers or distribution channels, or that market conditions will support the sale or financing of development-stage projects on acceptable terms, that customers will not narrow or reduce the offerings they distribute, that such relationships will continue over time or on existing terms, or that sales and distribution efforts will be successful.
+Added: The impact of Voluntary Yield-related Fee Waivers (if any), other waivers for competitive purposes and related reductions in distribution expense can vary depending upon, among other variables, changes in distribution models, changes in such customers’ distribution fee arrangements, changes in customer or shareholder relationships and changes in the extent to which the impact of the waivers is shared by one or more customers.
+Added: Distribution costs as a percentage of total fund revenue increased to 29% in 2025 compared to 28% in 2024.
Potential Adverse Effects of Declines in the Amount of or Changes in the Mix of Assets under Management.
−Removed: A significant portion of Federated Hermes’ revenue is derived from investment advisory fees, which are typically based on the value of managed assets and vary with the type of asset being managed, with higher fees generally earned on multi-asset and equity investment offerings than on alternative/private market, fixed income and money market offerings.
−Removed: Federated Hermes also can earn performance fees or carried interest on certain offerings and types of assets.
−Removed: Mutual fund and other fund offerings generally have higher advisory fees than Separate Accounts.
−Removed: Additionally, certain components of distribution expense can vary depending upon the asset class, distribution channel and/or the size or structure of the customer or shareholder relationship.
−Removed: Consequently, significant fluctuations in the number of shareholders or customers of Federated Hermes’ offerings, the value of securities or other investments held by, or the level of subscriptions to or redemptions from, the offerings advised by its advisory subsidiaries and overall asset mix among offerings, can materially affect AUM and thus Federated Hermes’ revenue, profitability and growth.
−Removed: Similarly, changes in Federated Hermes’ average asset mix across offerings or asset types have a direct impact on Federated Hermes’ revenue and profitability.
−Removed: Federated Hermes generally pays out a larger portion of the revenue earned from managed assets in money market and multi-asset fund offerings than the revenue earned from managed assets in equity, fixed-income and alternative/private markets fund offerings.
−Removed: A significant portion of Federated Hermes’ managed assets is in investment offerings that permit investors to redeem or withdraw their investment at any time.
−Removed: Capacity constraints, where the size of AUM in a particular offering or asset class make it more difficult to trade efficiently in the market, can result in certain offerings or asset classes being partially or fully closed to new investments, which can result in redemptions or a reallocation of assets to other offerings or asset classes.
−Removed: Changing market conditions, regulatory developments and regulatory requirements, among other factors, can cause a shift in Federated Hermes’ asset mix among different types of offerings or asset classes, such as towards money market and fixed-income offerings.
−Removed: Regulatory developments and regulatory requirements also can cause a shift between different types of offerings or asset classes, such as toward or between money market offerings or from money market offerings to other offerings.
−Removed: Each of the above factors can cause a decline in or otherwise affect, potentially in a material way, Federated Hermes’ Financial Condition.
+Added: A significant portion of Federated Hermes’ revenue is derived from investment advisory fees, which are typically based on the value of managed assets and vary with the type of asset being managed, with higher fees generally earned on multi-asset and equity investment offerings than on alternative/private markets, fixed income and money market offerings.
+Added: Federated Hermes can also earn performance fees or carried interest on certain offerings and types of assets.
+Added: Mutual fund and other fund offerings generally generate higher advisory fees than Separate Accounts, and components of distribution expense can vary by asset class, distribution channel and/or customer or shareholder relationship.
+Added: Accordingly, changes in customer or shareholder activity, security or other asset values, the level of subscriptions or redemptions, overall asset mix among offerings, and average asset mix across offerings or asset types can materially affect AUM and Federated Hermes’ revenue, profitability and growth.
+Added: Federated Hermes generally pays out a larger portion of the revenue earned from managed assets in money market, multi-asset, and fixed-income funds than the revenue earned from managed assets in equity and alternative/private markets funds.
+Added: A significant portion of Federated Hermes’ managed assets is held in offerings that permit redemptions or withdrawals at any time.
+Added: Capacity constraints, where the size of AUM in a particular offering or asset class make it more difficult to efficiently
+Added: trade, can require certain offerings or asset classes to be partially or fully closed to new investments, potentially resulting in redemptions or asset reallocation.
+Added: Changing market conditions, regulatory developments and regulatory requirements, among other factors, can cause a shift in Federated Hermes’ asset mix among offerings or asset classes, such as towards money market and fixed-income offerings, between money market offerings or from money market offerings to other offerings.
+Added: Each of these factors can cause a decline in or otherwise affect, potentially in a material way, Federated Hermes’ Financial Condition.
Impairment Risk.
−Removed: At December 31, 2024, Federated Hermes had intangible assets including goodwill totaling approximately $1.1 billion, the vast majority of which represents assets capitalized in connection with acquisitions and business combinations.
+Added: At December 31, 2025, Federated Hermes had approximately $1.2 billion of intangible assets including goodwill, the vast majority of which represent assets capitalized in connection with acquisitions and business combinations.
Federated Hermes might not realize the value of these assets.
Management performs a review of the carrying values of goodwill and indefinite-lived intangible assets annually or when indicators of potential impairment exist and periodically reviews carrying values of other assets to determine whether events and circumstances indicate an impairment in value has occurred.
−Removed: A variety of factors could cause the carrying value of an asset to become impaired.
−Removed: For example, the value of an asset can be impacted if, among other factors, projected future revenue streams are reduced due to lower managed assets, increased projected expenses, higher discount rates or other changes in interest rates.
−Removed: Should a review indicate impairment, a write-down of the carrying value of the asset would occur, resulting in a noncash charge which would adversely affect Federated Hermes’ results of operations and Financial Condition for the period.
+Added: Asset values can be impaired by various factors including, among others, reduced projected revenues, lower managed assets, increased expenses, higher discount rates or changes in interest rates.
+Added: Any identified impairment would cause a write-down of the carrying value of the asset, resulting in a noncash charge which would adversely affect Federated Hermes’ results of operations and Financial Condition for the period.
Potential Adverse Effects of Termination or Failure to Renew Advisory Agreements.
−Removed: A substantial majority of Federated Hermes’ revenue is derived from investment advisory agreements with Federated Hermes Funds (and to a lesser extent, sub-
−Removed: advised mutual funds) registered under the 1940 Act that are terminable upon 60 days’ notice.
−Removed: In addition, each such investment advisory agreement must be approved and renewed annually by each mutual fund’s board of directors or trustees, including independent members of the board of directors or trustees, or its shareholders, as required by law.
−Removed: Failure to renew, changes resulting in lower fees under, or termination of, certain or a significant number of, these agreements can have a material adverse impact on Federated Hermes’ Financial Condition.
−Removed: As required by the 1940 Act, each investment advisory agreement with a mutual fund automatically terminates upon its assignment, although new investment advisory agreements can be approved by the mutual fund’s directors or trustees and, as required by law, shareholders.
+Added: A substantial majority of Federated Hermes’ revenue is derived from investment advisory agreements with Federated Hermes Funds (and to a lesser extent, sub-advised mutual funds) registered under the 1940 Act that are terminable upon 60 days’ notice.
+Added: These agreements must be approved and renewed annually by each mutual fund’s board, including independent directors or trustees, or by shareholders, as required by law.
+Added: Failure to renew, termination of, or fee reductions under a significant number of these agreements can materially adversely affect Federated Hermes’ Financial Condition.
+Added: Under the 1940 Act, each mutual fund investment advisory agreement automatically terminates upon assignment, although a new agreement can be approved by the mutual fund’s board and, if required by law, its shareholders.
A sale or other transfer of a sufficient number of shares of Federated Hermes’ voting securities to transfer control of Federated Hermes can be deemed an assignment in certain circumstances.
An assignment, actual or constructive, will trigger these termination provisions and can adversely affect Federated Hermes’ ability to realize the value of these agreements.
−Removed: Federated Hermes’ investment advisory agreements for Separate Accounts that are not investment companies subject to the 1940 Act are generally terminable upon notice to Federated Hermes (or, in certain cases, after a 30-day, 60-day or other notice period).
−Removed: As required by the Advisers Act, investment advisory agreements for Separate Accounts also provide that consent is required from customers before the agreements can be assigned.
−Removed: The failure to obtain customer consents for an assignment, actual or constructive, can adversely affect Federated Hermes’ ability to realize the value of these agreements.
+Added: Investment advisory agreements for Separate Accounts not subject to the 1940 Act are generally terminable on notice (or, in certain cases, after a 30-day, 60-day or other notice period) and, as required by the Advisers Act, require customer consent for assignment.
+Added: Failure to obtain required customer consents for an actual or constructive assignment can adversely affect Federated Hermes’ ability to realize the value of these agreements.
Regarding the investment advisory agreements with non-U.S.
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The terms of investment advisory agreements, including consent or director or trustee, shareholder or other notice or approval requirements for amending, renewing, or terminating them, can be negotiated and vary among types of Federated Hermes Funds and Separate Accounts.
−Removed: The termination of, or failure to renew, or reduction in fees under, an investment advisory agreement will reduce Federated Hermes’ revenue and the termination of, or failure to renew, or reduction in fees under, an investment advisory agreement with a significant customer, or investment advisory agreements with a series of customers, can negatively effect, potentially in a material way, Federated Hermes’ Financial Condition.
+Added: Termination, failure to renew or fee reductions under investment advisory agreements, particularly with significant customers or a series of customers, would reduce revenue and can adversely affect, potentially in a material way, Federated Hermes’ Financial Condition.
There are also unique requirements applicable when entering into or renewing investment advisory agreements with certain management investment companies.
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Potential Adverse Effects of Rising Interest Rates.
−Removed: Increases in interest rates can have an adverse effect on Federated Hermes’ revenue from money market, fixed-income, alternative/private markets and other investment offerings.
−Removed: The value of equity securities (such as dividend-paying equity securities) can rise and fall in response to changes in interest rates.
−Removed: In a rising short-term interest rate environment, certain investors using money market offerings or other short-duration fixed-income offerings for cash management purposes can shift these investments to direct investments in comparable instruments in order to realize higher yields.
−Removed: In addition, rising interest rates will tend to reduce the fair value of securities held in various offerings.
−Removed: Rising interest rates can also impact the value of intangible or other assets held on Federated Hermes’ financial records and contribute to financial impairment.
−Removed: Rising interest rates can also impact demand for, and cost to, finance real estate, and impact the value of, and returns on, real estate and other alternative offerings.
−Removed: Among other potential adverse effects, rising interest rates can result in decreased liquidity, inflation and decreased affordability, changes in customer or shareholder preferences, higher costs for borrowings and increased market volatility, and can negatively impact the performance of Federated Hermes’ offerings and revenue.
−Removed: Management cannot estimate the impact of rising interest rates (including, for example, on Federated Hermes’ revenue), but such impact can have a material adverse effect on Federated Hermes’ Financial Condition.
+Added: Increases in interest rates can adversely affect Federated Hermes’ revenue from money market, fixed‑income, alternative/private markets and other investment offerings.
+Added: Equity security values (such as dividend‑paying equity securities) can fluctuate in response to interest rate changes.
+Added: In rising short‑term rate environments, certain investors can shift from money market or other short‑duration fixed income offerings to direct investments in comparable instruments to seek higher yields.
+Added: Rising interest rates also tend to reduce the fair value of securities held in various offerings.
+Added: Rising interest rates can reduce the value of intangible or other assets and increase impairment risk.
+Added: Rising rates can
+Added: also reduce demand for, increase the cost of financing, and adversely affect the value and returns of, real estate and other alternative offerings.
+Added: Additional adverse effects of rising interest rates can include, among others, reduced liquidity, inflation and decreased affordability, changes in customer or shareholder preferences, higher borrowing costs, increased market volatility, and decreased performance of Federated Hermes’ offerings and revenue.
+Added: The timing and magnitude of these impacts (including, for example, on Federated Hermes’ revenues) are uncertain but can materially adversely affect Federated Hermes’ Financial Condition.
Potential Adverse Effects of Low Short-Term Interest Rates.
−Removed: In March 2020, in response to disrupted economic activity as a result of the outbreak of the coronavirus pandemic, the FOMC decreased the federal funds target rate range to 0% - 0.25%.
The federal funds target rate drives short-term interest rates.
−Removed: 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.
−Removed: Beginning in the first quarter 2020, Federated Hermes began to incur Voluntary Yield-related Fee Waivers.
−Removed: These waivers were partially offset by related reductions in distribution expense as a result of Federated Hermes’ mutual understanding and agreement with third-party intermediary customers to share the impact of the Voluntary Yield-related Fee Waivers.
−Removed: In response to global economic activity
−Removed: and elevated inflation levels, the FOMC raised the federal funds target rate multiple times in 2022 and 2023, partially offset by reductions to the federal funds target rate in 2024.
−Removed: The range was 4.25% - 4.50% as of December 31, 2024, and as of January 29, 2025, the FOMC continued the range at that level.
−Removed: The rate increases in 2022 and 2023 eliminated the net negative pre-tax impact of the Voluntary Yield-related Fee Waivers by the second half of 2022.
+Added: In a near-zero or negative interest-rate environment, gross yields on certain money market funds can be insufficient to cover the fund’s operating expenses, resulting in Federated Hermes incurring Voluntary Yield-related Fee Waivers, which can be partially offset by related reductions in distribution expense as a result of Federated Hermes’ mutual understanding and agreement with third-party intermediary customers to share the impact of the Voluntary Yield-related Fee Waivers.
+Added: Following multiple increases in 2022 and 2023 and subsequent reductions in 2024 and 2025, the federal funds target rate was 3.50 - 3.75% as of December 31, 2025, and remained in that range as of January 28, 2026.
See Item 1A – Risk Factors – Specific Risk Factors – Risks Related to Federated Hermes’ Investment Management Business and Offerings – Potential Adverse Effects of Increased Competition in the Investment Management Business for information on competitive waivers currently being implemented by Federated Hermes, other than the Voluntary Yield-related Fee Waivers.
−Removed: Voluntary Yield-related Fee Waivers are calculated as a percentage of AUM in certain money market funds and thus can vary depending upon the asset levels and mix in such funds.
+Added: Voluntary Yield-related Fee Waivers are calculated as a percentage of AUM in certain money market funds and can vary based on the asset levels and mix.
While the level of fee waivers is impacted by various factors, as an isolated variable, increases in short-term interest rates that result in higher yields on securities purchased in money market funds would likely reduce the negative pre-tax impact of these waivers.
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Any increases in yields due to increases in interest rates and resulting decreases in fee waivers, or any decreases in yields due to decreases in interest rates and resulting increases in fee waivers, would be uncertain and not directly proportional.
−Removed: The level and actual amount of fee waivers, and the resulting negative impact of these fee waivers, are contingent on a number of variables, such as changes in assets within the money market funds, changes in yields available for purchase by such funds, changes to the level of government stimulus programs which can result in the issuance of additional Treasury debt instruments, actions by the FOMC, the USDT, the SEC, the FSOC and other governmental entities, changes in expenses of the money market funds, changes in the mix of money market assets, changes in customer or shareholder relationships, changes in money market offerings structures, demand for competing investment offerings, changes in the distribution fee arrangements with third parties, Federated Hermes’ willingness to implement, or, when applicable, continue, Voluntary Yield-related Fee Waivers and changes in the extent to which the impact of the waivers is shared by third parties.
+Added: The level and actual amount of fee waivers, and the resulting negative impact of these fee waivers, are contingent on a number of variables, such as changes in assets within the money market funds, changes in yields available for purchase by such funds, changes to the level of government stimulus programs (if any), which can result in the issuance of additional Treasury debt instruments, actions by the Federal Open Market Committee (FOMC), the USDT, the SEC, the FSOC and other governmental entities, changes in expenses of the money market funds, changes in the mix of money market assets, changes in customer or shareholder relationships, changes in money market offerings structures, demand for competing investment offerings, changes in distribution fee arrangements with third parties, Federated Hermes’ willingness to implement, or, when applicable, continue, Voluntary Yield-related Fee Waivers and changes in the extent to which the impact of the waivers is shared by third parties.
In any period, a combination of variables can impact the amount of Voluntary Yield-related Fee Waivers, if any, and the actual amount and resulting negative impact of future fee waivers, if any, can vary significantly from period to period.
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Federated Hermes did not incur Voluntary Yield-related Fee Waivers for the years ended December 31, 2025, 2024 or 2023.
−Removed: The duration, level and impact of an interest rate decline or future Voluntary Yield-related Fee Waivers can have a material adverse effect on Federated Hermes’ Financial Condition.
+Added: However, the duration, level and impact of future interest‑rate declines or future Voluntary Yield-related Fee Waivers can materially adversely affect Federated Hermes’ Financial Condition.
Potential Adverse Effects of Poor Investment Performance.
−Removed: Success in the investment management business is largely dependent on the investment performance of Federated Hermes Funds, Separate Accounts, or other investment offerings relative to market conditions and competing offerings.
−Removed: Investment performance also depends on the quality of investment selection, proper valuation of investments, liquidity management, and the performance of the portfolio companies and other investments in which Federated Hermes’, shareholders’ and customers’ assets are invested.
−Removed: The value and performance of the portfolio companies in which Federated Hermes’, shareholders’ and customers’ assets are invested also can be adversely impacted, potentially in a material way, by climate, social, environmental, governance and geopolitical changes, or other factors, which, in turn, can adversely impact Federated Hermes’ and its offerings’ performance.
−Removed: Good performance generally assists retention and growth of AUM, resulting in additional revenues.
−Removed: Good performance can also result in performance fees or carried interest being earned on certain offerings.
−Removed: Conversely, poor performance, or the failure to meet the investment objectives and policies of offerings, tends to have the opposite effect.
+Added: Success in the investment management business depends largely on the investment performance of Federated Hermes’ Funds, Separate Accounts, and other offerings relative to market conditions and competing offerings.
+Added: Investment performance also depends on security selection, proper valuation, liquidity management and the performance of underlying portfolio investments.
+Added: Value and performance of Federated Hermes’ offerings, and underlying portfolio investments, can also be adversely impacted, potentially in a material way, by climate, social, environmental, governance, benchmark, index and geopolitical changes, as well as associated pricing, operational, implementation and other risks.
+Added: Strong performance generally supports AUM retention and growth, resulting in additional revenues, including, among other revenue, performance fees or carried interest, while poor performance or failure to meet stated
+Added: investment objectives and policies of offerings tends to have the opposite effect.
There can be no guarantee that any offering, or underlying investment, will be successful or have good performance.
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Poor performance can, therefore, have a material adverse effect on Federated Hermes’ Financial Condition.
−Removed: conditions, such as volatility, illiquidity and rising or falling interest rates, among others, can adversely affect the performance of certain quantitative or other offerings, asset classes or sectors.
−Removed: Limitations imposed by certain customers, trade agreements and government-imposed restrictions, such as those on investments in certain countries or companies, can limit investment opportunities and negatively affect performance.
−Removed: Performance also can be adversely affected by inferior security selection, human error, government or issuer financial constraints, climate change that impacts portfolio company performance, pandemics or other unexpected events, and other factors.
+Added: Market conditions, such as volatility, illiquidity and rising or falling interest rates, among others, can adversely affect the performance of certain quantitative or other offerings, asset classes or sectors.
+Added: Limitations imposed by certain customers, trade agreements, tariffs and government-imposed restrictions, such as those on investments in certain countries or companies, can limit investment opportunities and negatively affect performance.
+Added: Performance can also be adversely affected by inferior security selection, human error, government or issuer financial constraints, climate change that impacts portfolio company performance, pandemics or other unexpected events, and other factors.
The effects of poor performance on Federated Hermes can be magnified where assets, customers or shareholders are concentrated in certain offerings, asset classes or sectors.
Changes in foreign currency exchange rates and poor performance of investments made by Federated Hermes, or derivatives (including, for example, hedges or forward contracts) or other financial transactions entered into by Federated Hermes, can result in investment or capital losses and materially adversely affect Federated Hermes’ Financial Condition.
−Removed: Risk Related to Federated Hermes’ Corporate Structure
−Removed: Status as a Controlled Company.
+Added: The failure or poor performance of competitors’ offerings, which can be like those offered by Federated Hermes, can undermine investor confidence in those offering types, regardless of Federated Hermes’ own performance.
+Added: Risk Related to Federated Hermes’ Common Stock and Corporate Structure
+Added: Common Stock and Status as a Controlled Company.
Federated Hermes has two classes of common stock:
1 unchanged sentence
and Class B, which is non-voting except in certain limited circumstances.
−Removed: All of the outstanding shares of Class A common stock are held by the Voting Shares Irrevocable Trust for the benefit of certain members of the Donahue family.
+Added: All the outstanding shares of Class A common stock are held by the Voting Shares Irrevocable Trust for the benefit of certain members of the Donahue family.
The three trustees of this trust are Federated Hermes’ President and CEO and Chairman of the board of directors, J.
7 unchanged sentences
and (2) the entity maintains a nominating/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
−Removed: As a result, while Federated Hermes’ board of directors may from time to time have a majority of independent directors, Federated Hermes’ board of directors is not required to have (and, as of December 31, 2024, did not have) a majority of independent directors.
+Added: As a result, while Federated Hermes’ board of directors can from time to time have a majority of independent directors, Federated Hermes’ board of directors is not required to have (and, as of December 31, 2025, did not have) a majority of independent directors.
It also does not maintain a nominating/corporate governance committee.
Federated Hermes is also exempt as a “controlled company” from certain additional independence requirements and responsibilities regarding compensation advisors applicable to Compensation Committee members.
+Added: The Class A common stock and Class B common stock of Federated Hermes have equal rights to dividends and distributions, when declared, whether in cash or stock, and receive the same amount of consideration per share, notwithstanding any differences in voting rights, in the event of a purchase of Federated Hermes by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation or stock purchase) or a sale of all or substantially all of the assets of Federated Hermes.
+Added: There can be no assurance that Federated Hermes will generate sufficient earnings and cash flow to pay dividends or distributions at current levels or at all.
+Added: Any reduction or elimination of dividends can adversely affect the market price of Federated Hermes’ Class B common stock.
While Federated Hermes believes its dual-class structure is appropriate and benefits its shareholders, and should be a factor taken into account by shareholders when investing in Federated Hermes, as a company with a dual-class structure, Federated Hermes can be excluded from certain financial indexes, which can result in decreased investments in its Class B common stock and adversely affect its stock price.
+Added: The sale or issuance of substantial amounts of Federated Hermes’ Class B common stock in the public market also can adversely affect its price.
+Added: If existing shareholders sell substantial amounts of Class B common stock, or if there is a perception that such sales will occur, the market price of Federated Hermes Class B common stock can decline as a result.
General Risk Factors
1 unchanged sentence
Potential Adverse Effects of a Decline or Disruption in the Economy or Markets.
−Removed: Economic or market downturns, deficits, disruptions, or other conditions (domestic or international) can cause volatility, illiquidity and other potential adverse effects in the markets.
−Removed: Such conditions also can adversely affect, potentially in a material way, the supply of investments, such as money market or municipal (tax-exempt) securities and the profitability and performance of, demand for, and investor confidence in investment offerings.
−Removed: Such economic or market downturns, deficits, disruptions or other conditions can include, for example, disruptions in the markets, defaults or poor performance in certain sectors of the economy, changes in the levels of consumer spending and personal savings, unemployment, excessive or unsustainable corporate or emerging market debt levels, increased personal, business or government/municipality bankruptcies, supply chain disruptions, the commencement, continuation or ending of government policies and reforms, stimulus programs and other market-related actions, quantitative easing or tightening, or other changes in monetary policy, central bank changes in risk perception or activism through continued, high/rising deficits, market wariness, increased or decreased ownership, exchange, cancellation or issuance of debt or other means, increased regulation or the pace of new regulation or deregulation, changes in interest rates, changes in oil prices or other changes in commodity markets or prices, changes in currency values, changes in property values and financial costs, or exchange rates or currency abandonment, inflation, deflation, or stagflation, index changes, widening bid/ask spreads, changes in the allocation of capital to market-making, restructuring of government-sponsored entities, imposition of economic sanctions or government-imposed investment restrictions, trade friction or trade wars and increased trade tariffs, economic or political weakness, political turmoil, changes in political views on governance, environmental or social-related matters, geopolitical tensions (such as between the U.S.
−Removed: and Russia, China, Iran and North Korea) or military escalation (such as Russia’s invasion of Ukraine or the Israel-Hamas war) or other instability in certain countries or regions, technology-related or cyber-attacks or incidents, terrorism, climate change, the prospects for or concerns about any of the foregoing factors or events, or other factors or events that affect the markets.
−Removed: Each of the above factors, among others, can cause or contribute to volatility, illiquidity, economic or market downturns, loss of value, market and supply-chain disruptions, or other conditions and have potentially
−Removed: adverse effects.
−Removed: For example, increased sanctions or tariffs (or the threat thereof) can result, among other effects, in currency devaluation, credit rating downgrades, decreased liquidity, increased volatility, asset freezes, or retaliatory actions, which can exacerbate cybersecurity, market and other risks.
+Added: Economic or market downturns, deficits, disruptions or other domestic or international conditions can result in volatility, illiquidity and other adverse market effects, including, among other potentially material adverse impacts, reduced investment supply (such as money market or municipal (tax-exempt) securities), diminished profitability, and performance, and demand for and investor confidence in, investment offerings.
+Added: These conditions can include, among others, market disruptions, sector defaults or underperformance, changes in consumer spending and personal savings, unemployment, excessive or unsustainable private, public, corporate, or emerging market debt levels, increased bankruptcies, supply‑chain disruptions, shifts in fiscal or monetary policy or reform (such as stimulus programs, quantitative easing or tightening) or other market-related activities), central bank changes in risk perception or activism through continued, high/rising deficits, market wariness, increased or decreased ownership, exchange, cancellation or issuance of debt or other means, increased regulation or the pace of new regulation or deregulation, changes in interest rates, changes in oil prices or other changes in commodity markets or prices, changes in currency values, changes in property values and financial costs, or exchange rates or currency abandonment, inflation, deflation, or stagflation, index changes, widening bid/ask spreads, changes in the allocation of capital to market-making, restructuring of government-sponsored entities, imposition of economic sanctions or government-imposed investment restrictions, trade friction or trade wars and increased trade tariffs, economic or political weakness, political turmoil, changes in political views on governance, environmental or social-related matters, geopolitical tensions (such as between the U.S.
+Added: and Russia, China, Iran, North Korea and Venezuela) or military escalation (such as Russia’s invasion of Ukraine or the Israel-Hamas war) or other instability in certain countries or regions, technology-related or cyber-attacks or incidents, terrorism, climate change, the prospects for or concerns about any of the foregoing factors or events, or other factors or events that affect the markets.
+Added: In addition, power grid congestion or capacity constraints, including curtailment of renewable generation or storage, can reduce project economics and delay or limit project development and related services.
+Added: These and related factors or events can contribute to volatility, illiquidity, economic or market downturns, loss of value, market or supply‑chain disruptions and other adverse effects.
+Added: For example, actual or threatened sanctions or tariffs can lead to, among other effects, currency devaluation, credit‑rating downgrades, reduced liquidity, increased volatility, asset freezes or retaliatory measures, which can exacerbate cybersecurity, market and other risks.
See also Item 1A – Risk Factors – General Risk Factors – Other General Risks – Potential Adverse Effects of Unpredictable Events or Consequences.
−Removed: In addition, Federated Hermes’ offerings, and their portfolio holdings, can be adversely affected, potentially in a material way, by changes in U.S., UK, EU or other markets, downgrades of U.S., UK or other countries’ credit ratings, the U.S.
−Removed: debt limit or other developments in the U.S., UK, and other countries as well as by actual or potential deterioration in international sovereign or other market conditions.
−Removed: At December 31, 2024, Federated Hermes’ liquid assets of $694.1 million included investments in certain money market and fluctuating NAV Federated Hermes Funds that can have direct and/or indirect exposures to international sovereign debt and currency risks.
−Removed: Federated Hermes and its money market and other Federated Hermes Funds also interact with various other financial industry participants, such as counterparties, broker/dealers, banks, clearing organizations, other investment offerings, service providers, customers, and shareholders, as a result of operations, trading, distribution, and other relationships.
−Removed: As a result, Federated Hermes’ Financial Condition can be adversely affected by the creditworthiness or financial soundness of other financial industry participants, particularly in times of stress or disruption.
−Removed: There can be no assurance that any potential losses realized as a result of these exposures will not have a material adverse effect on Federated Hermes’ Financial Condition.
−Removed: The ability of Federated Hermes to compete and sustain asset and revenue growth is dependent, in part, on the relative attractiveness of the types of investment offerings it distributes or markets, and their performance under prevailing market conditions.
−Removed: Adverse market conditions or other events also can impact Federated Hermes’ customers and shareholders.
−Removed: In the event of extreme circumstances, such as economic, political, or business crises, Federated Hermes’ offerings can suffer significant net redemptions in AUM causing severe liquidity issues in its short-term, fixed-income or certain other offerings and declines in the value of and returns on AUM, all of which can cause material adverse effects on Federated Hermes’ Financial Condition.
+Added: Federated Hermes’ offerings, and portfolio investments can be adversely affected, potentially in a material way, by changes in U.S., U.K., EU or other markets, sovereign credit‑rating downgrades of debt-limit and other economic developments, or other actual or potential deterioration in international sovereign or other market conditions.
+Added: At December 31, 2025, Federated Hermes’ liquid assets of $769.4 million included investments in certain money market and fluctuating‑NAV Federated Hermes Funds with direct and/or indirect exposure to international sovereign debt and currency risks.
+Added: Federated Hermes and its money market and other Federated Hermes Funds also rely on and interact with financial industry participants, including counterparties, broker‑dealers, banks, clearing organizations, other investment offerings, service providers, customers, and shareholders, whose creditworthiness or financial soundness can adversely affect Federated Hermes’ Financial Condition, particularly during periods of market stress.
+Added: Losses arising from these exposures can materially adversely affect Federated Hermes’ Financial Condition.
Custody, depository and portfolio accounting services for the Federated Hermes Funds generally are outsourced to third-party financial institutions.
4 unchanged sentences
No Assurance of Access to Sufficient Liquidity or Capital.
−Removed: From time to time, like other companies, Federated Hermes’ operations (including corporate initiatives, such as stock repurchases, acquisitions and other corporate actions) can require more cash than is available from operations.
−Removed: In these circumstances, it can be necessary to borrow from lending facilities or to raise capital by securing new debt or by selling Federated Hermes equity or debt securities.
−Removed: Certain subsidiaries of Federated Hermes, such as its non-U.S.
−Removed: subsidiaries, also can be required to maintain a specified level of liquidity or regulatory capital.
−Removed: Federated Hermes’ ability to raise additional capital in the future will be affected by several factors including, for example, its creditworthiness and credit ratings and the market value of its common stock, as well as interest rates and general market conditions.
−Removed: There can be no assurance that Federated Hermes will be able to obtain or maintain necessary capital or obtain these funds and financing on acceptable terms, if at all.
−Removed: If Federated Hermes cannot obtain or maintain necessary capital or obtain such funds and financing, it can have a material adverse effect on Federated Hermes’ Financial Condition.
−Removed: If a Federated Hermes Fund requires liquidity to meet shareholder redemptions or for other reasons, there also can be no assurance that such Federated Hermes Fund will be able to access any available line of credit, rely on inter-fund lending arrangements or access other sources of liquidity on acceptable terms, or at all, and, if such a Federated Hermes Fund cannot obtain sufficient liquidity, it can have a material adverse effect on such Federated Hermes Fund, result in redemptions and a corresponding reduction in Federated Hermes’ AUM and Federated Hermes’ revenue.
−Removed: While not obligated, if Federated Hermes decides to provide credit support to a Federated Hermes Fund, Federated Hermes’ liquidity and income can be adversely impacted.
−Removed: These factors can have a material adverse effect on Federated Hermes’ Financial Condition.
+Added: Like other companies, Federated Hermes’ operations, including corporate actions like stock repurchases, acquisitions and other actions, can at times require more cash than operations generate.
+Added: In such cases, Federated Hermes can borrow money from lending facilities or raise capital through new debt or equity issuances or sales.
+Added: Certain subsidiaries including its broker-dealer and certain non-U.S.
+Added: subsidiaries, can also be required to maintain specified liquidity levels or regulatory capital.
+Added: Significant changes to required capital, operating losses, or extraordinary charges against required capital can adversely affect their ability to maintain or expand operations if Federated Hermes cannot make additional investments in them.
+Added: Federated Hermes’ ability to raise additional capital depends on many factors including, for
+Added: example, its creditworthiness, credit ratings, stock value, interest rates and general market conditions.
+Added: There can be no assurance that Federated Hermes will be able to obtain or maintain necessary capital or obtain funds or financing on acceptable terms, if at all.
+Added: Failure to obtain or maintain needed capital can materially adversely affect Federated Hermes’ Financial Condition.
+Added: Likewise, if a Federated Hermes Fund needs liquidity to pay shareholder redemptions or for other reasons, there can be no assurance it can access credit lines, inter-fund lending arrangements, or other liquidity sources on acceptable terms, if at all, which can have a material adverse effect on such Federated Hermes Fund and result in redemptions and a corresponding reduction in Federated Hermes’ AUM and revenue.
+Added: While not obligated, if Federated Hermes elects to provide credit support to a Federated Hermes Fund, its own liquidity and income can be adversely affected.
+Added: These factors can materially adversely affect Federated Hermes’ Financial Condition.
Regulatory and Legal Risks
Potential Adverse Effects of Changes in Laws, Regulations and Other Regulatory Requirements.
−Removed: Like other companies, Federated Hermes and its investment management business are (and any new business line commenced or acquired by Federated Hermes would be) subject to extensive regulation both within and outside the U.S.
−Removed: Federated Hermes and its investment offerings (such as the Federated Hermes Funds), are subject to various U.S.
−Removed: regulatory requirements.
−Removed: In the U.S., such regulatory requirements include, among others, the federal securities laws, principally the 1933 Act, the 1934
−Removed: Act, the 1940 Act and the Advisers Act;
−Removed: state laws regarding securities fraud and registration;
−Removed: and regulations or other rules, promulgated by various regulatory authorities, self-regulatory organizations or exchanges, both domestically and internationally.
−Removed: From time to time, applicable securities laws can be amended substantially.
−Removed: Federated Hermes and its domestic offerings, and any non-U.S.
−Removed: offerings, to the extent distributed or marketed in the U.S., continue to be primarily regulated by the SEC.
−Removed: Federated Hermes, and certain Federated Hermes Funds, are also subject to regulation by the CFTC and the NFA due to their investment in futures, swaps or certain other commodity interests in more than de minimis amounts.
−Removed: In addition, during the past several years, regulators, self-regulatory organizations, or exchanges, such as the SEC, FINRA, CFTC, NFA, NYSE and state or local governments and regulators, have adopted, and could adopt, other regulatory requirements and amendments that have increased Federated Hermes’ operating expenses and affected the conduct of its offerings, as well as Federated Hermes’ AUM, revenues, and operating income, and can continue to do so.
−Removed: Federated Hermes’ offerings are affected by regulatory requirements and regulatory authorities that impact the manner in which Federated Hermes’ offerings are structured, marketed, distributed, delivered, or sold.
−Removed: Federated Hermes and its offerings also are affected by certain other regulatory requirements governing banks, other financial institutions, intermediaries, or real estate.
−Removed: Federated Hermes, and its business and offerings, engaged in, domiciled or offered outside of the U.S.
−Removed: are subject to foreign regulatory requirements, which are promulgated or amended from time to time by foreign regulatory or other authorities, such as the FCA for London-based operations, the CBI for Dublin-based operations, the CIMA for Cayman Island offerings, and the CSSF for Luxembourg offerings.
−Removed: In addition, Federated Hermes’ stewardship (including engagement and proxy recommendation) services can be impacted by securities laws, proxy advisor regulations, antitrust or competition laws, governance, environmental or social-related laws, and other regulatory requirements, as well as Congressional or regulatory/government inquiries, examinations, hearings, investigations, or enforcement actions.
+Added: Like other companies, Federated Hermes, its investment management business, and its offerings are subject to extensive regulation globally, and any new business line, acquired business, or new or acquired offerings would be as well.
+Added: In the U.S., key regulatory requirements include, among others:
+Added: the 1933 Act, the 1934 Act, the 1940 Act, the Advisers Act and other federal securities laws;
+Added: state anti-fraud, state registration and certain other state laws;
+Added: regulations and other rules, promulgated by various regulatory authorities, self-regulatory organizations or exchanges.
+Added: Securities laws can be substantially amended from time to time.
+Added: The SEC primarily regulates Federated Hermes and its U.S.‑distributed offerings.
+Added: FINRA also regulates Federated Hermes, particularly its registered broker-dealer subsidiary.
+Added: Federated Hermes, and certain Federated Hermes Funds, are also subject to CFTC and National Futures Association (NFA) regulation when their investments in futures, swaps or certain other commodity interests are above de minimis levels.
+Added: Outside the U.S., Federated Hermes, its business, and its offerings are regulated by foreign regulatory or other authorities, such as the FCA (U.K.), CBI (Ireland), CIMA (Cayman Islands), Monetary Authority of Singapore, ASIC (Australia) and CSSF (Luxembourg), which can impose different regulatory requirements than in the U.S.
+Added: Operating outside the U.S.
+Added: through foreign subsidiaries and offerings organized or distributed outside the U.S.
+Added: can provide a different (including a lessor) level of legal protections, transparency, and regulatory certainty than in the U.S.
+Added: Recent and future legislation by Congress, state legislatures, foreign parliaments, and other governments, and rulemaking by the SEC, FINRA, CFTC, NFA, NYSE, state or local governments and regulators, the FCA, CBI, CIMA, Monetary Authority of Singapore, ASIC, CSSF, and other regulators, self-regulatory organizations or exchanges, have increased, and can further increase, Federated Hermes’ operating expenses, and affected the conduct of its offerings, as well as its AUM, revenues, and operating income.
+Added: Federated Hermes’ offerings are affected by regulatory requirements and regulatory authorities that impact the way Federated Hermes’ offerings are structured, marketed, distributed, delivered or sold.
+Added: Federated Hermes’ stewardship (engagement and proxy recommendations) services are also impacted by securities laws, proxy‑advisor regulation, antitrust or competition laws, governance, environmental, and social‑related laws, and other regulatory requirements, as well as Congressional and other governmental inquiries, examinations, investigations, hearings, and enforcement.
+Added: Regulatory requirements applicable to banks, other financial institutions, intermediaries, real estate and power generation can also affect Federated Hermes and its offerings, including changes to renewable energy grid connection, capacity allocation, and permitting regimes that can delay projects or reduce their viability.
Failure to comply with applicable U.S.
−Removed: regulatory requirements in the various jurisdictions where Federated Hermes operates, and its offerings are distributed or marketed, can result in a wide range of liability or disciplinary actions against Federated Hermes or its business or offerings, which can impact, potentially in a material way, Federated Hermes’ Financial Condition.
−Removed: Breaches of regulatory requirements can result in regulatory enforcement, civil or criminal liability, and/or the imposition of sanctions or orders against or affecting Federated Hermes, or its business or offerings, including monetary damages, injunctions, disgorgements, fines, penalties, cease and desist orders, censures, reprimands, and the revocation, cancellation, suspension or restriction of licenses, registration status or required approvals.
−Removed: A public regulatory issue can also have a negative impact on Federated Hermes’ reputation, and as a result impact Federated Hermes’ offerings and Financial Condition.
−Removed: As Federated Hermes’ business and offerings grow (whether organically or through acquisition, new offerings being distributed or marketed, increased market values of assets held by or in offerings, expansion into new countries, jurisdictions or markets, or otherwise), Federated Hermes’ offerings and operations need to comply with applicable regulatory requirements, which increases compliance risk and operating expenses, including reporting risks and the costs associated with compliance.
+Added: regulatory requirements can result in regulatory enforcement, civil or criminal liability, the imposition of sanctions or restrictive orders, and/or a wide range of liability or other disciplinary actions against or affecting Federated Hermes, its business or its offerings, including monetary damages, injunctions, disgorgements, fines, penalties, cease and desist orders, censures, reprimands, and the revocation, cancellation, suspension or restriction of licenses, registration status or required approvals.
+Added: A public regulatory issue can also have a negative impact on Federated Hermes’ reputation.
+Added: Accordingly, a failure to comply with applicable regulatory requirements can affect, potentially in a material way, Federated Hermes’ offerings and Financial Condition.
+Added: Growth of Federated Hermes’ business and offerings (whether organic or through acquisitions, product expansion, market appreciation, or entry into new jurisdictions or markets, or otherwise) can increase compliance obligations, costs and risk, reporting risks, and operating costs.
The pace of the issuance and adoption/enactment of new regulatory developments and regulatory requirements, overlapping compliance deadlines, and actual or potential conflicts amongst requirements and regulatory approaches across or among the various jurisdictions where Federated Hermes operates, and its offerings are distributed or marketed, compound compliance risks, internal and external resource requirements, and operational costs.
−Removed: Compliance risk, internal and external resource requirements, and operating expenses also can increase as Federated Hermes continues to expand its use of governance, environmental or social, sustainability, stewardship or other data inputs or investment techniques in providing its offerings, as well as when markets, customer or shareholder requirements, support models and technology increase in complexity.
−Removed: Federated Hermes has taken steps to integrate the proprietary insights from fundamental investment analysis, including governance, environmental or social factors and engagement interactions, into many of its offerings.
+Added: Compliance risk, internal and external resource requirements, and operating expenses also can increase as Federated Hermes
+Added: continues to expand its use of governance, environmental or social, sustainability, stewardship or other data inputs or investment techniques in providing its offerings, as well as when markets, customer or shareholder requirements, support models and technology increase in complexity.
+Added: Federated Hermes has taken steps to integrate proprietary insights from fundamental investment analysis, including governance, environmental or social factors and engagement interactions, into many of its offerings.
Related compliance expense is further exacerbated by the increasing spectrum of governance, environmental or social disclosure requirements that can differ between jurisdictions, countries and markets, as well as jurisdiction-specific legislation affecting the ability to utilize certain (e.g., non-material) governance, environmental or social research factors to manage certain customer assets (such as state government or pension fund assets).
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Significant or repeated failures also can change Federated Hermes’ regulators’ views of, and relationship with, Federated Hermes.
−Removed: Regulators or other government bodies also have undertaken or could undertake examinations, investigations, inquiries, hearings and/or enforcement actions involving investment management industry participants, such as Federated Hermes and its offerings.
−Removed: Regulators also can adopt
−Removed: new or different interpretations of regulatory requirements, either through formal rulemaking or informally through enforcement proceedings, no-action letters, or exemptive orders or through providing comments to filings, which can negatively affect, potentially in a material way, Federated Hermes’ offerings or its ability to operate.
+Added: Regulators or other government bodies also have undertaken or can undertake examinations, investigations, inquiries, hearings and/or enforcement actions involving investment management industry participants, such as Federated Hermes and its offerings.
+Added: Regulators also can adopt new or different interpretations of regulatory requirements, either through formal rulemaking or informally through enforcement proceedings, no-action letters, or exemptive orders or through providing comments to filings, which can negatively affect, potentially in a material way, Federated Hermes’ offerings or its ability to operate.
Federated Hermes expends internal and external resources to respond to examinations, Congressional/government inquiries and investigations, to defend hearings and enforcement actions, and to resolve comments from regulators, which increases operating expenses, including professional fees and costs of compliance.
Federated Hermes continues to monitor and evaluate the impact of the regulatory developments and regulatory requirements discussed above (and in Item 1- Business – Regulatory Matters) on Federated Hermes’ Financial Condition.
−Removed: Among other potential impacts, regulatory developments and requirements have increased, and could continue to increase, in addition to compliance risks and compliance costs, the costs associated with technology, legal, operations and other efforts to address regulatory-related matters.
+Added: Among other potential impacts, increases in regulatory developments and requirements have led, and can continue to lead to greater compliance risks and compliance costs, including increased costs associated with technology, legal, operations and other efforts to address regulatory-related matters.
Deregulation also is a possibility.
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For example, certain money market funds or other offerings can become less attractive to institutional or other investors, which can change asset mix and reduce AUM, revenues and operating income.
−Removed: Changes in money market fund regulation increases this risk.
+Added: Changes in money market fund regulation increase this risk.
On a cumulative basis, Federated Hermes’ regulatory, product development and restructuring, and other efforts in response to regulatory developments and regulatory requirements, including the internal and external resources dedicated to such efforts, have had, and can continue to have, a material impact on Federated Hermes’ expenses and, in turn, Financial Condition.
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Given the current regulatory environment, Federated Hermes is unable to fully assess the degree of the impact of proposed or adopted regulatory developments and regulatory requirements, and Federated Hermes’ efforts related thereto, on its Financial Condition.
−Removed: In addition, the Dodd-Frank Act provides for a systemic risk regulation regime under which it is possible that Federated Hermes, and/or any one or more of its offerings could be subject to designation as a systemically important financial institution (SIFI) by the FSOC.
−Removed: Similarly, it is possible that the FSB could designate Federated Hermes, and/or one of its offerings (such as the non-U.S.
+Added: In addition, the Dodd-Frank Act provides for a systemic risk regulation regime under which it is possible that Federated Hermes, and/or any one or more of its offerings can be subject to designation as a SIFI by the FSOC.
+Added: Similarly, it is possible that the FSB can designate Federated Hermes, and/or one of its offerings (such as the non-U.S.
Federated Hermes Funds), as a non-bank, non-insurance company global SIFI.
−Removed: Among other potential impacts, any such designation would result in Federated Hermes and/or its offerings being subject to additional banking regulation and bank-oriented measures and oversight by the Board of Governors of the Federal Reserve System or FSB.
+Added: Among other potential impacts, any such designation would result in Federated Hermes and/or its offerings being subject to additional banking regulation and bank-oriented measures and oversight by the Federal Reserve or the FSB.
Any such designation of Federated Hermes or one or more of its offerings (particularly money market funds) would be detrimental to Federated Hermes’ business and offerings and can materially and adversely affect Federated Hermes’ Financial Condition.
−Removed: In addition, a FTT, particularly if enacted with broad application in the UK or EU, or the U.S., would be detrimental to Federated Hermes’ business and offerings.
+Added: In addition, a FTT, particularly if enacted with broad application in the U.K., the EU, or the U.S., would be detrimental to Federated Hermes’ business and offerings.
Changes in regulatory developments and regulatory requirements, and related regulatory supervision, domestically and abroad, as well as market conditions, also have impacted, and/or can impact, Federated Hermes' service providers, intermediaries and other customers, shareholders and other third parties with whom Federated Hermes, and its offerings, conduct business, as well as their preferences, and their businesses.
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These changes resulted, and will likely continue to result, in Federated Hermes or one or more of these third parties seeking to restructure or alter their compensation or other terms of the business arrangements between Federated Hermes or its offerings and one or more of these third parties.
−Removed: In addition, these developments have caused, and/or can cause, certain offering line-up, structure, pricing and product development changes, as well as money market, equity, fixed-income, alternative/private markets or multi-asset offerings to be less attractive to institutional and other investors, reductions in the number of Federated Hermes Funds offered by intermediaries, changes in the fees Federated Hermes, retirement plan advisors and intermediaries will be able
−Removed: to earn on offerings sold to retirement plan clients, changes in work arrangements and facility-related expenses, and reductions in AUM, revenues and operating profits.
+Added: In addition, these developments have caused, and/or can cause, certain offering line-up, structure, pricing and product development changes, as well as money market, equity, fixed-income, alternative/private markets or multi-asset offerings to be less attractive to institutional and other investors, reductions in the number of Federated Hermes Funds offered by intermediaries, changes in the fees Federated Hermes, retirement plan advisors and intermediaries will be able to earn on offerings sold to retirement plan clients, changes in work arrangements and facility-related expenses, and reductions in AUM, revenues and operating profits.
In addition, these developments have caused, and/or can cause, changes in asset flows, levels and mix, as well as customer and service provider relationships.
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In addition, various service industries, including, for example, mutual fund service providers, have been, and continue to be, the subject of changes in tax policy that impact their state and local tax liability.
−Removed: Changes that have been adopted or proposed include (1) an expansion of the nature of a service company’s activities or services that subject it, or Federated Hermes or its offerings, to tax in a jurisdiction, (e.g., income, sales, use or other types of taxes), (2) a change in the methodology by which multi-state companies apportion their income between jurisdictions, and (3) a requirement that affiliated companies calculate their state tax as one combined entity.
+Added: Changes that have been adopted or proposed include:
+Added: (1) an expansion of the nature of a service company’s activities or services that subject it, or Federated Hermes or its offerings, to tax in a jurisdiction, (e.g., income, sales, use or other types of taxes);
+Added: (2) a change in the methodology by which multi-state companies apportion their income between jurisdictions;
+Added: and (3) a requirement that affiliated companies calculate their state tax as one combined entity.
As adopted changes become effective and additional jurisdictions enact similar changes, among other potential impacts, there can be a material adverse effect on Federated Hermes’ tax liability and effective tax rate and, as a result, net income.
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Potential Adverse Effects of Litigation, Investigations, Proceedings and Other Claims.
−Removed: Like other companies, Federated Hermes, and its offerings (such as the Federated Hermes Funds and Federated Hermes’ stewardship business), can be subject to regulatory or Congressional/government examinations, inquiries, investigations, hearings, enforcement actions, litigation and other claims and proceedings.
−Removed: Regarding examinations, Federated Hermes and its offerings are subject to routine, sweep and other examinations, inquiries, investigations, proceedings (administrative, regulatory, civil, or otherwise) and other claims by its regulators (regulatory claims).
−Removed: Federated Hermes and its offerings also can be subject to employee, former employee, customer, shareholder and other third-party, complaints, proceedings (such as civil litigation) and other claims (business-related claims).
−Removed: As Federated Hermes’ business and offerings grow (whether organically or through acquisition, growth in AUM, or new offerings being distributed or marketed, or otherwise), the attention and resources devoted to compliance, and the possibility of noncompliance, can increase.
−Removed: The attention and resources devoted to compliance, and the possibility of noncompliance, as well as the threat of Congressional/government inquiries, investigations, hearings, or enforcement actions, or other litigation, also can increase as Federated Hermes uses governance, environmental or social, sustainability, stewardship or other data inputs or investment techniques in providing its offerings, enters new countries, jurisdictions, or markets, and offers financial investment offerings, as well as when markets, customer requirements, support models and technology increase in complexity.
−Removed: Federated Hermes has business-related claims asserted and threatened against it, and Federated Hermes and its offerings are subject to certain regulatory claims (such as routine and sweep examinations and other inquiries), in the ordinary course of business.
+Added: Like other companies, Federated Hermes and its offerings, such as the Federated Hermes Funds and its stewardship business, can face one or more (including potentially parallel) regulatory, Congressional/governmental examinations, inquiries, investigations, hearings, enforcement actions, litigation, and other claims and proceedings.
+Added: Federated Hermes and its offerings undergo routine, sweep and other examinations, inquiries, investigations, proceedings (administrative, regulatory, civil, or otherwise) and other claims by its regulators (regulatory claims).
+Added: Federated Hermes and its offerings also face complaints, proceedings (such as civil litigation) and other claims from employees, former employees, customers, shareholders, or other third parties (business-related claims).
+Added: As Federated Hermes’ business and offerings grow (whether through organic expansion, acquisitions, rising AUM, or new offerings being distributed or marketed, or otherwise) the attention and resources devoted to compliance, and the possibility of noncompliance, can increase.
+Added: Compliance demands and noncompliance risk can also increase as Federated Hermes and its offerings expand into new jurisdictions or markets, offer new investment offerings, and incorporate governance, environmental, social, sustainability, stewardship, or other data inputs or investment techniques, or as markets, customer requirements, support models and technology become more complex.
+Added: Federated Hermes has business-related claims asserted and threatened against it, and Federated Hermes and its offerings are subject to certain regulatory claims (such as routine and sweep examinations and
+Added: other inquiries), in the ordinary course of business.
In addition, Federated Hermes, and its offerings, can be subject to business-related claims, claims related to Federated Hermes sponsorship or management of, or inclusion of proprietary offerings in, its 401(k) plan or other benefit plans, and administrative, regulatory, or civil investigations and proceedings or other regulatory claims, outside of the ordinary course of business.
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District Court for the Western District of Pennsylvania (Western District) against Federated Hermes and certain other defendants alleging breach of their fiduciary duties of prudence and loyalty, and certain other causes of action, relating to administering the Plan.
−Removed: Federated Hermes, and a subsidiary, also filed suit in the Western District against its first two primary insurance carriers relating to Federated Hermes’ claims for coverage of certain losses incurred.
+Added: In March 2025, a former employee filed a lawsuit against Federated Hermes alleging discrimination.
+Added: In July 2023, Federated Hermes, and a subsidiary, also filed suit in the Western District against its first two primary insurance carriers relating to Federated Hermes’ claims for coverage of certain losses incurred.
Federated Hermes cannot assess or predict whether, when or what types of business-related claims, fiduciary claims or regulatory claims (collectively, claims) can be threatened or asserted, the types or amounts of damages or other remedies that can be sought (which can be material when threatened or asserted), whether claims that have been threatened will become formal asserted pending investigations, proceedings or litigation, whether claims ultimately will be successful entirely or in part (whether through settlement or adjudication), or whether or not any such claims are threatened or asserted in or outside the ordinary course of business.
Federated Hermes can initially be unable to accurately assess a claim’s impact.
−Removed: Given that the
−Removed: outcome of any claim is inherently unpredictable and uncertain, a result can arise from time to time that adversely impacts, potentially in a material way, Federated Hermes’ Financial Condition.
+Added: Given that the outcome of any claim is inherently unpredictable and uncertain, a result can arise from time to time that adversely impacts, potentially in a material way, Federated Hermes’ Financial Condition.
In certain circumstances, insurance coverage might not be available or deductible amounts might not be exceeded, and Federated Hermes, or its offerings (including the Federated Hermes Funds or Separate Accounts), could have to bear the costs related to claims or any losses or other liabilities resulting from any such matters, or from the operation of Federated Hermes’ business and offerings.
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As with other public companies, there can be no assurance that a registered public accounting firm (Accounting Firm) engaged by Federated Hermes or the Federated Hermes Funds to audit or review their respective financial statements will remain eligible to serve as the independent Accounting Firm to Federated Hermes or any Federated Hermes Fund under applicable securities laws.
−Removed: Similar to other fund sponsors that are public companies, certain Federated Hermes Funds also utilize the Accounting Firm engaged by Federated Hermes.
+Added: Like other fund sponsors that are public companies, certain Federated Hermes Funds also utilize the Accounting Firm engaged by Federated Hermes.
If it were to be determined that the independence requirements under applicable securities laws or International Ethics Standards Board for Accountants (IESBA) rules, or any applicable similar rules in relevant jurisdictions outside the U.S., were not complied with regarding Federated Hermes, its previously filed Annual Reports on Form 10-K (including financial statements audited by its existing Accounting Firm) and Quarterly Reports on Form 10-Q (including financial statements reviewed by its existing Accounting Firm) might not be considered compliant with the applicable securities laws and/or IESBA rules.
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Operational Risks.
−Removed: Like other companies, Federated Hermes’ business, offerings and operations are supported internally and through management of relationships, including, for example, outsourcing relationships, with various third-party service providers, both domestically and internationally.
−Removed: In turn, service providers’ operations rely on additional relationships with other third parties.
−Removed: Operational risks include, but are not limited to:
−Removed: improper, inefficient, or unauthorized execution, processing, pricing and/or monitoring of transactions;
−Removed: inadequate, inefficient, inflexible, non-resilient, deficient or non-scalable technology, processes, operating systems, security or other infrastructure, resources or controls;
−Removed: poor performance by internal resources or third party service providers;
−Removed: failure to appropriately attract, retain, train, supervise and promote the wellbeing and resiliency of qualified human capital resources, whether internal or external;
−Removed: failure to perform due diligence on third party service providers (particularly when due diligence is conducted remotely);
−Removed: business disruptions;
−Removed: supply chain disruptions (whether within Federated Hermes or third party);
−Removed: employee turnover (particularly involving executives, management or other key employees);
−Removed: failure to effectively upgrade or patch, or decommission, integrate, or modernize, technology or transition to a “cloud-based” environment;
−Removed: inadequacies or breaches in Federated Hermes’, its investment offerings’ or a service provider’s governance policies or internal control processes;
+Added: Like other companies, Federated Hermes’ business, offerings, and operations rely globally on internal resources and numerous outsourcing and vendor relationships with third‑party service providers, whose own operations depend on additional third‑party relationships.
+Added: Operational risks include, among others:
+Added: improper, inefficient or unauthorized transaction execution, processing, pricing or monitoring;
+Added: inadequate, deficient, inefficient, inflexible, non-resilient, or non‑scalable technology, processes, operating systems, security or other infrastructure, resources or controls;
+Added: underperformance by internal resources or third-party service providers;
+Added: inadequate recruiting, supervision, training, retention or promotion of the well-being and resiliency of qualified human capital resources (whether internal or external);
+Added: employee turnover (whether because of retirement or otherwise, and particularly involving executives, management or other key employees);
+Added: due diligence on third-party service providers;
+Added: business or supply‑chain disruptions;
+Added: health and safety incidents and work conditions involving employees, contractors, or third parties at facilities and project sites;
+Added: failures to effectively upgrade, patch, integrate, modernize or decommission technology or transition to a “cloud-based” environment;
+Added: weaknesses in or breaches of governance or internal controls (whether by Federated Hermes, its offerings, or third-party service providers);
unauthorized disclosure or manipulation of, or access to, confidential, proprietary or non-public personal or business information;
unauthorized access to accounts, applications or systems;
−Removed: and noncompliance with regulatory requirements, investment mandates and related investment parameters or customer-imposed restrictions.
−Removed: As Federated Hermes’ and its relevant service providers’ businesses expand or become more complex and require additional scalability or customization, operational risk increases.
−Removed: There is a risk that changes (including upgrades or patches) in operational systems, models and business processes are not completed correctly or in a controlled, timely, integrated or effective manner.
−Removed: These types of changes also give rise to other risks, such as the risk that an employee, service provider or third party, or group of employees, service providers or third parties, can intentionally or unintentionally compromise the integrity or security of confidential, proprietary or personal information or other data of Federated Hermes, its employees or its customers, shareholders, or service providers.
−Removed: Management relies on its service providers and employees, systems, and business continuity plans, to comply with established procedures, controls, regulatory requirements, investment parameters or customer-imposed restrictions.
−Removed: Breakdown or improper use of systems, human error or improper action by employees or service
−Removed: providers, or noncompliance with regulatory requirements, investment parameters or customer-imposed restrictions, can cause material adverse effects on Federated Hermes’ Financial Condition.
+Added: and noncompliance with investment mandates and related investment parameters, regulatory requirements or customer-imposed restrictions.
+Added: As Federated Hermes and its service providers expand or face increasing complexity or customization or scalability needs, operational risk can increase.
+Added: System or process changes, including upgrades or patches, can be implemented in an improperly controlled environment, ineffectively, untimely, inefficiently or incorrectly, creating additional risks, such as, among others, intentional or unintentional compromise of the integrity or security of confidential, proprietary or personal information or other data of Federated Hermes, its employees, its customers, shareholders, service providers or other third parties.
+Added: Federated Hermes relies on employees, service providers, technology, and business continuity plans to comply with established procedures, controls, regulatory requirements, investment parameters or customer‑imposed restrictions.
+Added: Failures in or improper use of systems, human error, improper actions, or noncompliance can materially adversely affect Federated Hermes’ Financial Condition.
Systems, Technology and Cybersecurity Risks.
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Service providers to whom certain services, functions or responsibilities are outsourced by or for, and customers and shareholders of, Federated Hermes and its offerings, and third parties on which such service providers, customers and shareholders rely, also utilize software and related technologies in their businesses.
+Added: Certain software applications that Federated Hermes uses in its business are licensed by, and supported, upgraded, and maintained by, third-party vendors.
+Added: A suspension or termination of certain of these licenses or the related support, upgrades, and maintenance can cause temporary system delays or interruptions that can adversely affect Federated Hermes’ business and offerings.
Federated Hermes continues to increase its investment in systems and technology, including externally hosted or cloud-based systems and technology, and its reliance on third parties, for investment management and trading operations, information and data management and governance, disaster recovery, compliance, and other areas of its business, and continues to explore innovative technological solutions and offerings involving artificial intelligence and financial technology.
Federated Hermes has adopted a measured approach to artificial intelligence technology given reliability, cybersecurity, and other concerns, and it is possible that competitors will more quickly or effectively implement the use of artificial intelligence technology giving them a competitive advantage over Federated Hermes.
−Removed: Unanticipated issues also can occur with any software, system or other technology and it is not possible to predict with certainty all of the adverse effects that can result from a failure of Federated Hermes or a third party to address technology or computer system problems.
+Added: Unanticipated issues also can occur with any software, system or other technology and it is not possible to predict with certainty all the adverse effects that can result from a failure of Federated Hermes or a third party to address technology or computer system problems.
Along with cyber incidents described more fully below, business changes, data or model imprecision, control failures, obsolescence, software or other technology malfunctions, severe weather, natural disaster or other climate conditions, human error, programming inaccuracies and similar or other circumstances or events can impair the performance of systems and technology or render them non-available.
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Changes to Federated Hermes’ business, offerings, processes, systems, or technology, if not implemented or integrated properly, can increase cyber incident vulnerability.
−Removed: Like other companies, Federated Hermes has experienced, and will continue to experience, cyber incidents on a daily basis.
+Added: Like other companies, Federated Hermes has experienced, and will continue to experience, cyber incidents daily.
As of December 31, 2025, cyber incidents have not had a material adverse effect on Federated Hermes’ Financial Condition.
−Removed: Cyber incidents can affect, potentially in a material way, Federated Hermes’ relationships with its offerings, accounts, customers,
−Removed: employees, shareholders, relevant service providers and other third parties.
+Added: Cyber incidents can affect, potentially in a material way, Federated Hermes’ relationships with its offerings, accounts, customers, employees, shareholders, relevant service providers and other third parties.
A cyber incident can cause Federated Hermes, its business, offerings, accounts, customers, employees, shareholders or relevant service providers, or other third parties, to lose proprietary, sensitive, confidential or non-public business offering, account, customer, employee, shareholder, or personal information, or intellectual property, suffer data corruption or business interruption, impair data coverage or quality, lose operational capacity (for example, the loss of the ability to process transactions, generate or make filings or deliver reports or statements, calculate NAVs, or allow the transaction of business, or other disruptions to operations), and/or fail to comply with applicable privacy and other regulatory requirements.
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Cyber incidents affecting issuers in which Federated Hermes’ or its customers’ or shareholders’ assets are invested also can cause such investments to lose value.
−Removed: Any of these cyber incidents can become incrementally worse if they were to remain undetected for an extended period of time.
+Added: Any of these cyber incidents can become incrementally worse if they were to remain undetected for an extended period.
The operating systems of Federated Hermes, and its offerings, customers, shareholders, and relevant service providers are dependent on the effectiveness of information security policies and procedures (both at Federated Hermes and its service providers) which seek to ensure that such systems are protected from cyber incidents.
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Among other reasons, the cybersecurity landscape is constantly evolving, the nature of malicious cyber incidents is becoming increasingly sophisticated and Federated Hermes, and its relevant affiliates and offerings, cannot control the systems and cybersecurity systems and practices of issuers, relevant service providers or other third parties.
−Removed: Federated Hermes’ risk from cyber incidents also can increase as a result of expansion into new markets, jurisdictions or countries, acquisitions, new technology, or previously unexploited vulnerabilities in software or related patches becoming activated (or “weaponized”) by hackers.
+Added: Federated Hermes’ risk from cyber incidents also can increase because of expansion into new markets, jurisdictions or countries, acquisitions, new technology, or previously unexploited vulnerabilities in software or related patches becoming activated (or “weaponized”) by hackers.
While Federated Hermes has obtained cyber-insurance, there is no guarantee that a particular incident would be covered by such insurance.
In certain circumstances, insurance coverage might not be available or sufficient, or deductible amounts might not be exceeded, and Federated Hermes or its offerings could have to bear the costs related to claims or any losses or other liabilities resulting from a cyber incident.
−Removed: While Federated Hermes cannot predict the financial or reputational impact to its business or offerings resulting from any cyber incident, depending upon its nature, magnitude and severity, the occurrence of a cyber incident, or a similar situation or incident, can have a material adverse effect on Federated Hermes’ Financial Condition.
+Added: While Federated Hermes cannot predict the financial or reputational impact to its business or offerings resulting from any cyber incident, depending upon its nature, magnitude and severity, the occurrence of a cyber incident, or a similar situation or
+Added: incident, can have a material adverse effect on Federated Hermes’ Financial Condition.
The internal and external resources and efforts necessary to implement system and technology upgrades, decommissions, integrations, and modernizations, data governance and management, and cybersecurity policies, procedures and measures, as well as service provider management, have increased, and will continue to increase, Federated Hermes’ operating expenses, and can adversely affect, potentially in a material way, Federated Hermes’ Financial Condition.
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Federated Hermes has begun using artificial intelligence and machine learning technologies to enhance certain workflows and processes used in its business.
−Removed: Artificial intelligence is still in its early stages, and the introduction and incorporation of artificial intelligence technologies may result in unintended consequences or other new or expanded risks and liabilities.
+Added: Artificial intelligence is still in its early stages, and the introduction and incorporation of artificial intelligence technologies can result in unintended consequences, emerging ethical issues, or other new or expanded risks and liabilities (including, without limitation, reputational harm and legal liability).
If the content, analyses, or recommendations that artificial intelligence applications assist in producing are, or are alleged to be, deficient, inaccurate, or biased, such as due to limitations in artificial intelligence algorithms, insufficient or biased base data or flawed training methodologies, Federated Hermes’ Financial Condition can be adversely affected.
−Removed: Additionally, artificial intelligence technology is continuously evolving, and Federated Hermes can incur costs to adopt and deploy artificial intelligence technologies that could become obsolete earlier than expected, and there can be no assurance that Federated Hermes will realize the desired or anticipated benefits from artificial intelligence.
−Removed: Also, Federated
−Removed: Hermes’ competitors, customers, intermediaries, shareholders, service providers and other third parties can incorporate artificial intelligence into their investment offerings more quickly or more successfully than Federated Hermes, which could impair Federated Hermes’ ability to compete effectively and adversely affect its Financial Condition.
+Added: Additionally, artificial intelligence technology is continuously evolving, and Federated Hermes can incur costs to adopt and deploy artificial intelligence technologies that can become obsolete earlier than expected, and there can be no assurance that Federated Hermes will realize the desired or anticipated benefits from artificial intelligence.
+Added: Also, Federated Hermes’ competitors and other third parties can incorporate artificial intelligence into their investment offerings more quickly or more successfully than Federated Hermes, which can impair Federated Hermes’ ability to compete effectively and adversely affect its Financial Condition.
Other General Risks
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The internal transfer or departure of any such personnel can have an adverse effect on Federated Hermes.
−Removed: In certain circumstances, the internal transfer or departure of key employees can cause higher redemption rates for certain AUM, the loss of customer or shareholder relationships.
−Removed: or create risk that job responsibilities are not successfully re-distributed or transferred.
+Added: In certain circumstances, the internal transfer, retirement or other departure of key employees can cause higher redemption rates for certain AUM, the loss of customer or shareholder relationships, or create risk that job responsibilities are not successfully re-distributed or transferred or experience, management skills and/or institutional business knowledge are not retained.
Moreover, since certain of Federated Hermes’ offerings, or customer or shareholder relationships, contribute significantly to its revenues and earnings, the loss of even a small number of key personnel associated with these offerings, or customer or shareholder relationships, can have a disproportionate adverse impact, potentially in a material way, on Federated Hermes’ Financial Condition.
+Added: In addition, due to the global nature of Federated Hermes’ business, key personnel can have reasons to travel to regions susceptible to higher risk of civil unrest, organized crime, or terrorism, and it can be difficult for Federated Hermes to ensure the safety of personnel traveling to such regions.
See Item 1 – Business – Human Capital Resource Management for additional information on recruiting and retention practices.
−Removed: No Assurance of Successful Acquisitions.
−Removed: Like other companies, Federated Hermes’ business strategy contemplates seeking acquisition candidates and growing through acquisitions.
+Added: No Assurance of Successful Strategic Transactions.
+Added: Like other companies, Federated Hermes’ business strategy contemplates seeking acquisition candidates and other business relationships, and growing through such acquisitions and other strategic transactions, each of which involves risks and uncertainties.
For Federated Hermes, this generally involves acquisitions of other investment management companies, investment assets and related businesses, both domestically and internationally.
−Removed: There can be no assurance that Federated Hermes will find suitable acquisition candidates at acceptable prices and with an aligned business culture and vision, have sufficient capital resources to realize its acquisition strategy, be successful in entering into definitive acquisition agreements or consummating acquisitions, or successfully collaborating with, or integrating or consolidating, acquired companies or assets into Federated Hermes or its offerings.
−Removed: There also can be no assurance that any such acquisitions, if consummated, will not increase organizational stress to unacceptable levels or cause process failures, result in violations of applicable regulatory requirements, increased taxes or otherwise increase legal, tax or compliance concerns, or will increase value or otherwise prove to be advantageous to Federated Hermes.
−Removed: On the other hand, successful collaboration with, or integration or consolidation of, acquired companies or assets can increase the value of such acquired companies or assets and result in increased contingent deferred payments or other payment obligations for Federated Hermes, which can affect Federated Hermes’ Financial Condition.
+Added: There can be no assurance that Federated Hermes will find suitable acquisition candidates or opportunities for other strategic transactions at acceptable prices and with an aligned business culture and vision, have sufficient capital resources to realize its acquisition or strategic strategy, be successful in entering into definitive acquisition or transaction agreements or consummating acquisitions or other strategic transactions, or successfully collaborating with, or integrating or consolidating,
+Added: acquired companies, other businesses or assets into Federated Hermes or its offerings.
+Added: There also can be no assurance that any such acquisitions or other strategic transactions, if consummated, will not increase organizational stress to unacceptable levels or cause process failures, result in violations of applicable regulatory requirements, increase taxes or otherwise increase legal, tax or compliance concerns, or increase value or otherwise prove to be advantageous to Federated Hermes.
+Added: On the other hand, successful collaboration with, or integration or consolidation of, acquired companies, other businesses, or assets can increase the value of such acquired companies, businesses or assets and result in increased contingent deferred payments or other payment obligations for Federated Hermes, which can affect Federated Hermes’ Financial Condition.
Potential Adverse Effects of Reputational Harm.
−Removed: Like other companies, any material losses in customer or shareholder confidence in Federated Hermes, or its offerings, or in the investment management industry as a result of actual or potential regulatory proceedings or litigation, economic or market downturns or disruptions, material errors in public news reports, political or other views for or against governance, environmental or social investing or integration, oppositions to trademark or other intellectual property registration applications or allegations of trade name, trademark or other intellectual property infringement or misappropriation, allegations of breaches of fiduciary duty, misconduct or unprofessional, unethical or illegal behavior, improper corporate actions, poor communications with investors or the public via social media or otherwise, abuse of authority, a cyber incident, rumors or inaccurate information being posted on the internet or social media, failure to achieve carbon neutrality, climate change or other public commitments or pledges, failure to implement or accurately disclose governance, environmental or social strategies or initiatives, controversial tenants in real estate owned or managed by Federated Hermes, fraudulent or fake websites or domain names using Federated Hermes’ or a subsidiary’s name, logo or address, or similar names, logos or addresses, or other matters can negatively impact Federated Hermes’ brand, culture, trusted status,
−Removed: reputation and/or stock price, increase redemptions from and/or reduce sales of Federated Hermes’ offerings (such as the Federated Hermes Funds) and/or change employee or potential employee perceptions of the company which can impact the willingness of a potential employee to be hired by, or an employee to remain at, Federated Hermes.
+Added: Like other companies, any material losses in customer or shareholder confidence in Federated Hermes, or its offerings, or in the investment management industry as a result of actual or potential regulatory proceedings or litigation, economic or market downturns or disruptions, material errors in public news reports, political or other views for or against governance, environmental or social investing or integration, oppositions to trademark or other intellectual property registration applications or allegations of trade name, trademark or other intellectual property infringement or misappropriation, allegations of breaches of fiduciary duty, actual or perceived misconduct or unprofessional, unethical or illegal behavior, improper corporate actions, poor communications with investors or the public via social media or otherwise, abuse of authority, a cyber incident, rumors or inaccurate information being posted on the internet or social media, failure to achieve carbon neutrality, climate change or other public commitments or pledges, failure to implement or accurately disclose governance, environmental or social strategies or initiatives, controversial tenants in real estate owned or managed by Federated Hermes, fraudulent or fake websites or domain names using Federated Hermes’ or a subsidiary’s name, logo or address, or similar names, logos or addresses, misleading or unfavorable research or reports published by securities or industry analysts about Federated Hermes or its business prospects or other matters can negatively impact Federated Hermes’ brand, culture, trusted status, reputation and/or stock price, increase redemptions from and/or reduce sales of Federated Hermes’ offerings (such as the Federated Hermes Funds) and/or change employee or potential employee perceptions of the company which can impact the willingness of a potential employee to be hired by, or an employee to remain at, Federated Hermes.
If such losses or events were to occur, it can have a material adverse effect on Federated Hermes’ Financial Condition.
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Potential Adverse Effects of Unpredictable Events or Consequences.
−Removed: Like other companies, unpredictable events, such as a natural disaster, unforeseen risks associated with the coronavirus pandemic or a new pandemic, war, or military escalation (such as Russia’s invasion of Ukraine or the Israel-Hamas war), terrorist attack or other business continuity event, unexpected market, or economic developments, such as changes in interest rates, or political developments, or extreme weather, droughts, storms, climate, or other similar governance, environmental or social changes (particularly in the case of portfolio companies in which Federated Hermes’ investment offerings are invested), or unpredictable consequences or side effects of certain known, unknown, planned, or unexpected events, can adversely impact Federated Hermes’, its offerings’, accounts’, customers’, shareholders’ and portfolio companies’ (in which Federated Hermes and its offerings are invested), and each of their respective service providers’, ability to conduct business, as well as Federated Hermes’ Financial Condition.
+Added: Like other companies, unpredictable events, such as a natural disaster, unforeseen risks associated with the coronavirus pandemic or a new pandemic, war, or military escalation (such as Russia’s invasion of Ukraine or the Israel-Hamas war), terrorist attack or other business continuity event, unexpected market, or economic developments, such as changes in interest rates, or political developments, including shifts in governmental support for renewable energy or changes in permitting, planning or consenting regimes, or extreme weather, droughts, storms, climate, or other similar governance, environmental or social changes (particularly in the case of portfolio companies in which Federated Hermes’ investment offerings are invested), or unpredictable consequences or side effects of certain known, unknown, planned, or unexpected events, can adversely impact Federated Hermes’, its offerings’, accounts’, customers’, shareholders’ and portfolio companies’ (in which Federated Hermes and its offerings are invested), and each of their respective service providers’, ability to conduct business, as well as Federated Hermes’ Financial Condition.
Physical climate change risks arising from changing or adverse weather and climate change (particularly in the case of portfolio companies in which Federated Hermes’ offerings are invested), and transition climate change risks arising as economies and markets transition to low carbon and other environments, also can have adverse impacts.
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Hybrid work arrangements can stress business processes, such as due diligence of service providers, customer or shareholder onboarding, and controls, as well as increase cybersecurity, privacy and digital communications risks.
−Removed: The failure to maintain an infrastructure commensurate with the size and scope of Federated Hermes’ business or offerings, or the occurrence of a business outage or event outside of Federated Hermes’ control (particularly in locations where Federated Hermes has offices), or the failure to keep business continuity plans up-to-date, or if such plans are improperly implemented or deployed during a disruption, can adversely impact Federated Hermes’ ability to operate, which can cause its AUM, revenue and earnings to decline or impact Federated Hermes’ ability to comply with regulatory obligations leading to reputational harm, regulatory fines, penalties and/or sanctions.
+Added: The failure to maintain an infrastructure commensurate with the size and scope of Federated Hermes’ business or offerings, or the occurrence of a business outage or event outside of Federated Hermes’ control (particularly in locations where Federated
+Added: Hermes has offices), or the failure to keep business continuity plans up-to-date, or if such plans are improperly implemented or deployed during a disruption, can adversely impact Federated Hermes’ ability to operate, which can cause its AUM, revenue and earnings to decline or impact Federated Hermes’ ability to comply with regulatory obligations leading to reputational harm, regulatory fines, penalties and/or sanctions.
Any such failure or disruption also can impact, potentially in a material way, Federated Hermes’ Financial Condition.
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There also can be times when industry databases or other third parties publish or distribute information regarding Federated Hermes, or its offerings (including Federated Hermes Fund asset levels), that might be inaccurate or incomplete.
−Removed: There can be no assurance that unpredictable or unexpected events, reports or consequences, or the costs to address such events, inaccurate reports, or consequences, would not have a material adverse effect on Federated Hermes’ Financial Condition.
+Added: There can be no assurance that unpredictable or unexpected events, reports or consequences, or the costs to address such events, reports, or consequences, would not have a material adverse effect on Federated Hermes’ Financial Condition.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.