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Consolidation (Tables)

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The following table presents the balances of CIP that, after intercompany eliminations, were reflected in the Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019:



	As of
	March 31, 2020									December 31, 2019
				VIEs									VIEs
(in thousands)	VOEs			CLOs			Other			VOEs			CLOs			Other
Cash and cash equivalents	$	11,790		$	221,505		$	1,875		$	2,665		$	97,130		$	363
Investments	44,525			2,117,938			27,294			22,223			1,976,148			31,739
Other assets	6,485			22,532			416			1,563			21,450			599
Notes payable	—			(2,134,108		)	—			—			(1,834,535		)	—
Securities purchased payable and other liabilities	(8,419		)	(138,977		)	(438		)	(2,964		)	(164,887		)	(200		)
Noncontrolling interests	(23,540		)	(10,247		)	(1,406		)	(3,865		)	(10,558		)	(1,564		)
Net interests in CIP	$	30,841		$	78,643		$	27,741		$	19,622		$	84,748		$	30,937

Schedule of Consolidated Collateralized Loan Obligations

Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative prescribed by ASU 2014-13, Consolidation (Topic 810) ("ASU 2014-13") results in the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by the Company at March 31, 2020, as shown in the table below:



(in thousands)
Subordinated notes	$	77,325
Accrued investment management fees	1,318
Total beneficial interests	$	78,643

As noted above, the financial information of certain CLOs are included in the Company's condensed consolidated financial statements on a one-month lag based upon the availability of financial information. The Company's beneficial interest consisting of subordinated notes in the CLOs decreased by approximately $20.0 million during the month of March 2020 primarily driven by decreases in the fair values of bank loan assets as result of the COVID-19 pandemic and its economic effects, which is not reflected in the CLOs current period results.

The following table represents income and expenses of the consolidated CLOs included in the Company’s Condensed Consolidated Statements of Operations for the period indicated:



(in thousands)	Three Months Ended March 31, 2020
Income:
Realized and unrealized gain (loss), net	$	1,391
Interest income	28,748
Total income	30,139

Expenses:
Other operating expenses	6,631
Interest expense	24,486
Total expense	31,117
Noncontrolling interests	(255		)
Net Income (loss) attributable to CIP	$	(1,233	)

As summarized in the table below, the application of the measurement alternative as prescribed by ASU 2014-13 results in the consolidated net income summarized above to be equivalent to the Company’s own economic interests in the consolidated CLOs, which are eliminated upon consolidation:



(in thousands)	Three Months Ended March 31, 2020
Distributions received and unrealized gains (losses) on the subordinated notes held by the Company	$	(3,261	)
Investment management fees	2,028
Total economic interests	$	(1,233	)

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 15, as of March 31, 2020 and December 31, 2019 by fair value hierarchy level were as follows:

March 31, 2020



(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	127,862	$	—	$	—	$	127,862
Investment securities - fair value
Sponsored funds	24,825		—		—		24,825
Equity securities	10,629		—		—		10,629
Debt securities	—		6		—		6
Nonqualified retirement plan assets	7,166		—		—		7,166
Total assets measured at fair value	$	170,482	$	6	$	—	$	170,488

December 31, 2019



(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	187,255	$	—	$	—	$	187,255
Investment securities - fair value
Sponsored funds	47,654		—		—		47,654
Equity securities	13,320		—		—		13,320
Debt securities	—		16		—		16
Nonqualified retirement plan assets	8,724		—		—		8,724
Total assets measured at fair value	$	256,953	$	16	$	—	$	256,969

The assets and liabilities of CIP measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 by fair value hierarchy level were as follows:

As of March 31, 2020



(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	221,505	$	—	$	—	$	221,505
Debt investments	16,368		2,151,158		707		2,168,233
Equity investments	18,303		2,638		583		21,524
Derivatives	803		1,408		—		2,211
Total assets measured at fair value	$	256,979	$	2,155,204	$	1,290	$	2,413,473
Liabilities
Notes payable	$	—	$	2,134,108	$	—	$	2,134,108
Derivatives	333		1,443		—		1,776
Short sales	313		—		—		313
Total liabilities measured at fair value	$	646	$	2,135,551	$	—	$	2,136,197

As of December 31, 2019



(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	97,130	$	—	$	—	$	97,130
Debt investments	218		1,973,427		39,389		2,013,034
Equity investments	15,872		171		1,033		17,076
Total assets measured at fair value	$	113,220	$	1,973,598	$	40,422	$	2,127,240
Liabilities
Notes payable	$	—	$	1,834,535	$	—	$	1,834,535
Short sales	430		—		—		430
Total liabilities measured at fair value	$	430	$	1,834,535	$	—	$	1,834,965

Reconciliation of Assets of Consolidated Sponsored Investment Products For Level 3 Investments, Unobservable Inputs Used to Determine Fair Value

The following table is a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determine fair value for the three months ended March 31, 2019:



	Three Months Ended March 31,
(in thousands)	2019
Level 3 Investments (1)
Balance at beginning of period	$	4,122
Purchases (sales), net	232
Change in realized and unrealized gain (loss), net	63
Balance at end of period	$	4,417

(1)

The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment.

The following table is a reconciliation of assets of CIP for Level 3 investments for which significant unobservable inputs were used to determine fair value:



	Three Months Ended March 31,
(in thousands)	2020			2019
Level 3 Investments of CIP (1)
Balance at beginning of period	$	40,422		$	6,848
Realized gains (losses), net	4			6
Change in unrealized gains (losses), net	(643		)	(45		)
Purchases	119			1,595
Amortization	6			2
Sales	(1,193		)	(429		)
Transfers to Level 2	(38,013		)	(7,199		)
Transfers from Level 2	588			30,981
Balance at end of period	$	1,290		$	31,759

(1)

The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment. Transfers between Level 2 and Level 3 were due to trading activities at period end.

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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