Derivative Instruments

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

See Note 15, Consolidated Company-Sponsored Investment Funds, for disclosure of derivative instruments held by our consolidated company-sponsored investment funds.

We enter into various futures, forwards, options and swaps to economically hedge certain seed capital investments. Also, we have currency forwards that help us to economically hedge certain balance sheet exposures. In addition, our options desk trades long and short exchange-traded equity options. We do not hold any derivatives designated in a formal hedge relationship under ASC 815-10, Derivatives and Hedging.

The notional value, fair value and gains and losses recognized in investment gains (losses) as of December 31, 2022 and 2021 for derivative instruments (excluding derivative instruments relating to our options desk trading activities discussed below) not designated as hedging instruments were as follows:


	Notional Value			Derivative Assets			Derivative Liabilities			Gains (Losses)
	(in thousands)
December 31, 2022
Exchange-traded futures		$	154,687		$	1,768		$	162		$	19,994
Currency forwards		34,597			4,446			5,047			1,965
Interest rate swaps		16,847			386			262			70
Credit default swaps		225,671			17,507			7,302			(1,000)
Total return swaps		28,742			605			933			14,828
Option swaps		50,000			—			6			5,211
Total derivatives		$	510,544		$	24,712		$	13,712		$	41,068
December 31, 2021
Exchange-traded futures		$	131,876		$	392		$	1,186		$	(5,072)
Currency forwards		66,058			7,344			6,980			1,746
Interest rate swaps		13,483			497			833			(316)
Credit default swaps		155,757			6,594			6,967			(2,914)
Total return swaps		63,817			595			527			(6,433)
Option swaps		50,000			—			430			(309)
Total derivatives		$	480,991		$	15,422		$	16,923		$	(13,298)

As of December 31, 2022 and 2021, 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 investment gains (losses) on the consolidated statements of income.

We may be exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments. We minimize our counterparty exposure through a credit review and approval process. In addition, we have 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, 2022 and 2021, we held $8.4 million and $2.9 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 typical measure of volume in the derivatives 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 pertaining 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, 2022 and 2021, we delivered $4.2 million and $5.6 million, respectively, of cash collateral into brokerage accounts. We report this cash collateral in cash and cash equivalents in our consolidated statements of financial condition.

As of December 31, 2022 long and short exchange-traded equity options were classified as held for sale on our consolidated statement of financial position. For further discussion, see Note 24 Acquisitions and Divestitures. As of December 31, 2021, we held $1.9 million, respectively, of long exchange-traded equity options, which are included in other investments on our consolidated statements of financial condition. In addition, as of December 31, 2021, we held $2.8 million, respectively, of

short exchange-traded equity options, which are included in securities sold not yet purchased on our consolidated statements of financial condition. Our options desk provides our clients with equity derivative strategies and execution for exchange-traded options on single stocks, exchange-traded funds and indices. While predominately agency-based, the options desk may commit capital to facilitate a client's transaction. Our options desk hedges the risk associated with this activity by taking offsetting positions in equities. For the year ended December 31, 2022 and 2021, we recognized $22.1 million of losses and zero gains or losses on equity options activity, respectively. These losses are recognized in investment gains (losses) in the consolidated statements of income.