Derivative Instruments

6 Months Ended

12 Months Ended

Jun. 30, 2013

Dec. 31, 2012

Derivative Instruments [Abstract]

Derivative Instruments

9. Derivative Instruments

        We enter into various futures, forwards and swaps to economically hedge certain of our seed money investments. In addition, we have currency forwards that economically hedge certain cash accounts. We do not hold any derivatives designated in a formal hedge relationship under ASC 815-10, Derivatives and Hedging.

        The following tables present the notional value and fair value as of June 30, 2013 and December 31, 2012 for derivative instruments not designated as hedging instruments:

			Fair Value
	Notional Value		Asset Derivatives		Liability Derivatives
	(in thousands)
June 30, 2013:
Exchange-traded futures	$	90,115	$	1,619	$	70
Currency forwards		104,553		716		477
Interest rate swaps		56,755		705		534
Credit default swaps		19,625		374		7
Option swaps		118		94		44
Total return swaps		106,123		4,118		146
Total derivatives	$	377,289	$	7,626	$	1,278

			Fair Value
	Notional Value		Asset Derivatives		Liability Derivatives
	(in thousands)
December 31, 2012:
Exchange-traded futures	$	89,901	$	64	$	1,598
Currency forwards		80,445		473		429
Interest rate swaps		55,435		73		888
Credit default swaps		53,775		457		272
Option swaps		103		83		92
Total return swaps		90,673		1,475		3,791
Total derivatives	$	370,332	$	2,625	$	7,070

        As of June 30, 2013 and December 31, 2012, the derivative assets and liabilities are included in both receivables and payables to brokers and dealers on our condensed consolidated statements of financial condition.

        The following table presents the gains and losses recognized in investment gains (losses) in the condensed consolidated statements of income:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands)
Exchange-traded futures	$	1,686		$	8,049		$	(2,245	)	$	(8,548	)
Currency forwards		206			1,365			382			1,184
Interest rate swaps		223			(1,460	)		506			(723	)
Credit default swaps		111			(752	)		(1	)		(3,351	)
Options swaps		(62	)		(89	)		(186	)		(89	)
Total return swaps		2,774			(133	)		(601	)		(2,555	)
Balance as of end of period	$	4,938		$	6,980		$	(2,145	)	$	(14,082	)

        We may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. We take steps to minimize our counterparty exposure through a credit review and approval process. In addition, we executed various collateral arrangements with counterparties to the over-the-counter derivative transactions that require both pledging and accepting collateral in the form of cash. As of June 30, 2013 and December 31, 2012, we held $3.9 million and $1.5 million, respectively, of cash collateral payable to trade counterparties. This obligation to return cash is reported in payables to brokers and dealers in our condensed consolidated statements of financial condition.

        Although notional amount is the most commonly used measure of volume in the derivative market, it is not used as a measure of credit risk. Generally, the current credit exposure of our derivative contracts is limited to the net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received. A derivative with positive value (a derivative asset) indicates existence of credit risk because the counterparty would owe us if the contract were closed. Alternatively, a derivative contract with negative value (a derivative liability) indicates we would owe money to the counterparty if the contract were closed. Generally, if there is more than one derivative transaction with a single counterparty, a master netting arrangement exists with respect to derivative transactions with that counterparty to provide for aggregate net settlement.

        Certain of our standardized contracts for over-the-counter derivative transactions ("ISDA Master Agreements") contain credit risk related contingent provisions regarding each counterparty's credit rating. In some ISDA Master Agreements, if a counterparty's credit rating (or in some agreements, our AUM) falls below a specified threshold, either a default or a termination event permitting the counterparty to terminate the ISDA Master Agreement would be triggered. In all agreements that provide for collateralization, various levels of collateralization of net liability positions are applicable, depending on the credit rating of the counterparty. As of June 30, 2013 and December 31, 2012, we delivered $4.7 million and $8.4 million, respectively, of cash collateral into brokerage accounts, which is reported in cash and cash equivalents in our condensed consolidated statements of financial condition.

8. Derivative Instruments

We enter into various futures, forwards and swaps to economically hedge certain of our seed money investments. In addition, we have currency forwards that economically hedge certain cash accounts. We do not hold any derivatives designated in a formal hedge relationship under ASC 815-10, Derivatives and Hedging.

The following table presents the notional value, fair value and gains and losses recognized in investment gains (losses) in the consolidated statements of income as of December 31, 2012 and 2011 for derivative instruments not designated as hedging instruments:

	Notional Value		Derivative Assets		Derivative Liabilities		Gains (Losses)
	(in thousands)
December 31, 2012:
Exchange-traded futures	$	89,901	$	64	$	1,598	$	(18,291	)
Currency forwards		80,445		473		429		(503	)
Interest rate swaps		55,435		73		888		(1,358	)
Credit default swaps		53,775		457		272		(8,598	)
Option swaps		103		83		92		(424	)
Total return swaps		90,673		1,475		3,791		(6,470	)
Total derivatives	$	370,332	$	2,625	$	7,070	$	(35,644	)

	Notional Value		Derivative Assets		Derivative Liabilities		Gains (Losses)
	(in thousands)
December 31, 2011:
Exchange-traded futures	$	111,447	$	127	$	2,054	$	8,979
Currency forwards		38,330		358		227		453
Interest rate swaps		47,640		136		3,301		(5,585	)
Credit default swaps		84,215		2,962		639		676
Total return swaps		38,148		38		1,038		(184	)
Total derivatives	$	319,780	$	3,621	$	7,259	$	4,339

As of December 31, 2012 and 2011, the derivative assets and liabilities are included in both receivables and payables to brokers and dealers on our consolidated statements of financial condition. Gains and losses on derivative instruments are reported in investments gains and losses on the consolidated statements of income.

We may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. We take steps to minimize our counterparty exposure through a credit review and approval process. In addition, we executed various collateral arrangements with counterparties to the over-the-counter derivative transactions that require both pledging and accepting collateral in the form of cash. As of December 31, 2012 and 2011, we held $1.5 million and $4.4 million, respectively, of cash collateral payable to trade counterparties. This obligation to return cash is reported in payables to brokers and dealers in our consolidated statements of financial condition.

Although notional amount is the most commonly used measure of volume in the derivative market, it is not used as a measure of credit risk. Generally, the current credit exposure of our derivative contracts is limited to the net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received. A derivative with positive value (a derivative asset) indicates existence of credit risk because the counterparty would owe us if the contract were closed. Alternatively, a derivative contract with negative value (a derivative liability) indicates we would owe money to the counterparty if the contract were closed. Generally, if there is more than one derivative transaction with a single counterparty, a master netting arrangement exists with respect to derivative transactions with that counterparty to provide for aggregate net settlement.

Certain of our standardized contracts for over-the-counter derivative transactions ("ISDA Master Agreements") contain credit risk related contingent provisions related to each counterparty's credit rating. In some ISDA Master Agreements, if the counterparty's credit rating (or in some agreements, our AUM) falls below a specified threshold, either a default or a termination event permitting the counterparty to terminate the ISDA Master Agreement would be triggered. In all agreements that provide for collateralization, various levels of collateralization of net liability positions are applicable, depending on the credit rating of the counterparty. As of December 31, 2012 and 2011, we delivered $8.4 million and $14.7 million, respectively, of cash collateral into brokerage accounts, which is reported in cash and cash equivalents in our consolidated statements of financial condition.