FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2015

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Note 4 — Fair Value Measurements

The following table presents assets, liabilities and redeemable noncontrolling interests presented in the financial statements or disclosed in the notes to the financial statements at fair value on a recurring basis as of September 30, 2015 (in millions):

	Fair value measurements using:
	Quoted prices in
	active markets for		Significant other		Significant
	identical assets		observable inputs		unobservable inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash equivalents	$	46.3	$	120.9	$	—	$	167.2
Futures	0.4		—		—		0.4
Index swaps	0.1		—		—		0.1
Trading securities:
Seeded investment products	172.5		94.8		—		267.3
Investments in advised mutual funds	4.0		—		—		4.0
Investments related to deferred compensation plans	15.8		—		—		15.8
Available-for-sale securities:
Seeded investment products	70.2		—		—		70.2
Total investment securities	262.5		94.8		—		357.3
Total assets	$	309.3	$	215.7	$	—	$	525.0
Liabilities:
Futures	$	0.2	$	—	$	—	$	0.2
Credit default swaps	0.2		—		—		0.2
Current portion of long-term debt(1)	—		154.5		—		154.5
Long-term debt(1)	—		306.6		—		306.6
Kapstream contingent consideration	—		—		5.6		5.6
VelocityShares contingent consideration	—		—		21.8		21.8
Total liabilities	$	0.4	$	461.1	$	27.4	$	488.9
Redeemable noncontrolling interests:
Consolidated seeded investment products	$	5.8	$	23.0	$	—	$	28.8
INTECH	—		—		7.5		7.5
Total redeemable noncontrolling interests	$	5.8	$	23.0	$	7.5	$	36.3

(1) Carried at amortized cost and disclosed at fair value.

The following table presents assets, liabilities and redeemable noncontrolling interests presented in the financial statements or disclosed in the notes to the financial statements at fair value on a recurring basis as of December 31, 2014 (in millions):

	Fair value measurements using:
	Quoted prices in
	active markets for		Significant other		Significant
	identical assets		observable inputs		unobservable inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash equivalents	$	7.7	$	292.5	$	—	$	300.2
Index swaps	—		0.3		—		0.3
Trading securities:
Seeded investment products	136.6		121.7		—		258.3
Investments in advised mutual funds	4.4		—		—		4.4
Investments related to deferred compensation plans	13.0		—		—		13.0
Available-for-sale securities:
Seeded investment products	68.3		—		—		68.3
Total investment securities	222.3		121.7		—		344.0
Total assets	$	230.0	$	414.5	$	—	$	644.5
Liabilities:
Long-term debt(1)	$	—	$	558.0	$	—	$	558.0
VelocityShares contingent consideration	—		—		17.9		17.9
Index futures	1.2		—		—		1.2
Total liabilities	$	1.2	$	558.0	$	17.9	$	577.1
Redeemable noncontrolling interests in INTECH	$	—	$	—	$	5.4	$	5.4

(1) Carried at amortized cost and disclosed at fair value.

Level 1 Fair Value Measurements

JCG’s Level 1 fair value measurements consist mostly of seeded investment products, investments in advised mutual funds, cash equivalents and investments related to deferred compensation plans with quoted market prices in active markets. The fair value level of seeded investment products classified as trading securities is determined by the underlying securities of the product. The fair value level of equity-method and unconsolidated seeded investment products is determined using the respective net asset value (“NAV”) of each product. All seeded investment products that use the NAV to determine their fair value are classified as Level 1 and primarily represent seeded mutual funds where JCG’s ownership level is under 50%.

Level 2 Fair Value Measurements

JCG’s Level 2 fair value measurements consist mostly of cash equivalents, seeded investment products and JCG’s long-term debt. Cash equivalents are short-term, highly liquid investments with an initial maturity of three months or less when purchased and consist primarily of commercial paper and certificates of deposits. The fair value of consolidated seeded investment products where JCG’s ownership level is above 50% is determined by the underlying securities of the product. The fair value of JCG’s long-term debt is determined using broker quotes and recent trading activity, which are considered Level 2 inputs.

Level 3 Fair Value Measurements

JCG’s Level 3 recurring fair value measurements largely represent redeemable noncontrolling interests in INTECH Investment Management LLC (“INTECH”) and contingent consideration related to the acquisition of VS Holdings Inc., the parent company of VelocityShares, LLC (“VelocityShares”) and Kapstream.

INTECH

Redeemable noncontrolling interests in INTECH are measured at fair value on a quarterly basis or more frequently if events or circumstances indicate that a material change in the fair value of INTECH has occurred. The fair value of INTECH is determined using a valuation methodology that incorporates observable metrics from publicly traded peer companies as valuation comparables and adjustments related to investment performance and changes in assets under management. The valuation analysis is prepared internally within JCG’s finance organization by personnel with appropriate valuation experience and credentials. In preparing the analysis, JCG benchmarks valuation metrics such as multiples of earnings before interest expense, taxes, depreciation and amortization (“EBITDA”) against current market observables and recent market transactions of a similar size and nature to ensure that the estimates are reasonable. The analysis is reviewed by senior JCG finance personnel and JCG’s Chief Financial Officer. The analysis is also reviewed by the holders of the noncontrolling interests in INTECH. If the valuation is agreed to by both JCG and the holders of noncontrolling interests, JCG uses the analysis to value the redeemable noncontrolling interests.

Significant inputs related to the valuation analysis include INTECH’s trailing 12-month operating results, performance fees, investment performance and trends in assets under management. In addition, market trading comparables from a relevant publicly traded peer set are included to complete the valuation process. Publicly available comparables used for the third quarter 2015 valuation analysis ranged from approximately 7.0x to 14.0x EBITDA. Significant increases or decreases in historical INTECH operating results would result in a significantly higher or lower fair value measurement, respectively. Additionally, a significant increase or decrease in market trading comparables would result in a significantly higher or lower fair value measurement, respectively. Generally, any period-over-period change in INTECH performance or level of assets under management in isolation is accompanied by a directionally similar change in the fair value measurement.

VelocityShares

Contingent consideration was a component of the purchase price of VelocityShares. The contingent consideration is payable on the first, second, third and fourth anniversaries of the acquisition, in amounts up to $10.0 million each for the first and second anniversaries, and $8.0 million each for the third and fourth anniversaries. The total maximum payment over the entire contingent consideration period is $36.0 million. The payments are contingent on certain VelocityShares’ exchange-traded products reaching defined net revenue targets. The fair value of the contingent consideration is calculated on a quarterly basis by forecasting net exchange-traded product revenue, as defined by the purchase agreement, over the contingency period, and determining whether targets are met given forecasted VelocityShares operating results. Forecasted contingent payments are then discounted back to the valuation date. Significant unobservable inputs used in the valuation are limited to forecasted gross revenues and certain expense items, which are deducted from these revenues. Increases in forecasted net revenue would increase the fair value of the consideration, subject to payment limitations, while decreases in net revenues would decrease the fair value. The contingent consideration was most recently valued during the third quarter 2015 and resulted in a $3.3 million increase to the liability and expense, including the monthly accretion of the liability to the future value of the consideration.

Kapstream

Contingent consideration was a component of the purchase price of Kapstream. The contingent consideration is payable in Australian dollars at 18 months and 36 months after the acquisition date if certain Kapstream assets under management reach defined targets. The total maximum payment over the entire contingent consideration period is $8.8 million as of September 30, 2015. The fair value of the contingent consideration is calculated on a quarterly basis by forecasting certain Kapstream assets under management over the contingency period and determining whether the forecasted amounts meet the defined targets. Significant unobservable inputs used in the valuation are limited to forecasted Kapstream assets under management.

The changes in fair value of JCG’s Level 3 items for the three and nine months ended September 30, 2015 and 2014, are as follows (in millions):

	Three months ended September 30,
	2015								2014
	Redeemable  noncontrolling  interests in  INTECH			VelocityShares contingent  consideration		Kapstream  contingent  consideration			Redeemable  noncontrolling  interests in  subsidiaries
Beginning of period fair value	$	7.2		$	18.5	$	—		$	4.6
Distributions	(0.1		)	—		—			(0.2		)
Current earnings	0.1			—		—			0.1
Amortization of INTECH appreciation rights	0.8			—		—			—
Issuance	—			—		6.0			—
Foreign currency translation	—			—		(0.5		)	—
Change in fair value	(0.5		)	3.3		0.1			0.3
End of period fair value	$	7.5		$	21.8	$	5.6		$	4.8

	Nine months ended September 30,
	2015								2014
	Redeemable  noncontrolling  interests in  INTECH			VelocityShares  contingent  consideration		Kapstream  contingent  consideration			Redeemable  noncontrolling  interests in  subsidiaries
Beginning of period fair value	$	5.4		$	17.9	$	—		$	7.3
Distributions	(0.7		)	—		—			(0.7		)
Current earnings	0.4			—		—			0.4
Purchase of redeemable noncontrolling interests	—			—		—			(0.6		)
Amortization of INTECH appreciation rights	2.7			—		—			—
Issuance	—			—		6.0			—
Foreign currency translation	—			—		(0.5		)	—
Change in fair value	(0.3		)	3.9		0.1			(1.6		)
End of period fair value	$	7.5		$	21.8	$	5.6		$	4.8

Nonrecurring Level 3 Fair Value Measurements

Nonrecurring Level 3 fair value measurements include goodwill and intangible assets. JCG measures the fair value of goodwill and intangible assets using a discounted cash flow analysis that requires assumptions regarding projected future earnings and discount rates. Because of the significance of the unobservable inputs in the fair value measurements of these assets and liabilities, such measurements have been classified as Level 3.

Transfers Between Fair Value Levels

The underlying securities of mutual funds and separate accounts may be denominated in a foreign currency. In some cases, the closing price of such securities may be adjusted to capture the effects of any post-closing activity affecting the markets in which they trade. Security prices are adjusted based upon historical impacts for similar post-close activity. These adjustments result in the securities being classified as Level 2 and may also result in movements of securities between Level 1 and Level 2.

Additionally, the deconsolidation of a seeded investment product can cause changes to its fair value level classification. Upon deconsolidation, the entire seeded investment product is valued using the NAV rather than valued using its underlying securities. Generally, seeded investment products that use the NAV to determine their fair value are classified as Level 1. During the first quarter 2015, the Global Unconstrained Bond Fund in the Company’s international trust was deconsolidated and its $44.3 million of Level 2 assets were reclassified to Level 1.

Transfers are recognized at the end of each reporting period. Transfers from Level 1 and Level 2 classifications for the nine months ended September 30, 2015 and 2014, are summarized as follows (in millions):

	September 30,
	2015		2014
Transfers from Level 1 to Level 2	$	1.7	$	5.5
Transfers from Level 2 to Level 1	$	44.3	$	0.4