20. Consolidated Sponsored Investment Products

In the normal course of its business, the Company sponsors and is the manager of various types of investment products. During the years ended December 31, 2013 and 2012, the Company sponsored and consolidated several mutual funds in which it had a majority voting interest. The consolidation of these investment products has no impact on net income attributable to stockholders. The Company’s risk with respect to these investments is limited to its investment in these products. The Company has no right to the benefits from, nor does it bear the risks associated with, these investment products, beyond the Company’s investments in, and fees generated from these products. If the Company were to liquidate, these investments would not be available to the general creditors of the Company. The Company does not consider cash and investments held by consolidated sponsored investment products to be assets of the Company other than its direct investment in these products.

During the year ended December 31, 2012, the Company consolidated eight mutual funds. During the year ended December 31, 2013, the Company consolidated five additional mutual funds and deconsolidated five mutual funds because it no longer had a majority voting interest. As of December 31, 2013, the Company consolidated a total of eight mutual funds. No mutual funds were consolidated during the year ended December 31, 2011.

The following table presents the balances of the consolidated sponsored investment products that were reflected in the Consolidated Balance Sheets as of December 31, 2013 and 2012:


	As of December 31,
	2013			2012
*($ in thousands)*
Total cash	$	531		$	14
Total investments		139,054			43,227
All other assets		9,595			683
Total liabilities		(8,435	)		(377	)
Redeemable noncontrolling interest		(42,186	)		(3,163	)

The Company’s net interests in consolidated sponsored investment products	$	98,559		$	40,384

Consolidation

The following tables reflect the impact of the consolidated sponsored investment products in the Consolidated Balance Sheets as of December 31, 2013 and 2012 and the Consolidated Statements of Income for the years ended December 31, 2013 and 2012, respectively. The Company had no consolidated sponsored investment products during the year ended December 31, 2011:


As of December 31, 2013
	Balance Before Consolidation of Investment Products			Consolidated Sponsored Investment Products		Eliminations and Adjustments (a)			Balances as Reported in Consolidated Balance Sheet
*($ in thousands)*
Total cash	$	271,014		$	531	$	—		$	271,545
Total investments		135,692			139,054		(98,434	)		176,312
All other assets		187,627			9,595		(125	)		197,097

Total assets	$	594,333		$	149,180	$	(98,559	)	$	644,954

Total liabilities		101,465			8,560		(125	)		109,900

Redeemable noncontrolling interest		—			—		42,186			42,186
Equity attributable to stockholders of the Company		492,930			140,620		(140,620	)		492,930
Non-redeemable noncontrolling interest		(62	)		—		—			(62	)

Total liabilities and equity	$	594,333		$	149,180	$	(98,559	)	$	644,954


As of December 31, 2012
	Balance Before Consolidation of Investment Products			Consolidated Sponsored Investment Products		Eliminations and Adjustments (a)			Balances as Reported in Consolidated Balance Sheet
*($ in thousands)*
Total cash	$	63,432		$	14	$	—		$	63,446
Total investments		58,830			43,227		(40,397	)		61,660
All other assets		206,947			683		13			207,643

Total assets	$	329,209		$	43,924	$	(40,384	)	$	332,749

Total liabilities		84,738			364		13			85,115

Redeemable noncontrolling interest		—			—		3,163			3,163
Equity attributable to stockholders of the Company		244,474			43,560		(43,560	)		244,474
Non-redeemable noncontrolling interest		(3	)		—		—			(3	)

Total liabilities and equity	$	329,209		$	43,924	$	(40,384	)	$	332,749

(a)	Adjustments include the elimination of intercompany transactions between the Company and its consolidated sponsored investment products, primarily the elimination of the investments and equity and recording of any noncontrolling interest.


For the Year Ended December 31, 2013
	Balance Before Consolidation of Investment Products		Consolidated Sponsored Investment Products			Eliminations and Adjustments (a)			Balances as Reported in Consolidated Statement of Operations
*($ in thousands)*
Total operating revenues	$	389,202	$	—		$	13		$	389,215
Total operating expenses		274,913		785			13			275,711

Operating income (loss)		114,289		(785	)		—			113,504

Total other non-operating income (expense)		5,620		6,098			(3,314	)		8,404
Income (loss) before income tax expense		119,909		5,313			(3,314	)		121,908
Income tax expense		44,778		—			—			44,778

Net income (loss)		75,131		5,313			(3,314	)		77,130
Noncontrolling interests		59		—			(1,999	)		(1,940	)

Net income (loss) attributable to the Company	$	75,190	$	5,313		$	(5,313	)	$	75,190


For the Year Ended December 31, 2012
	Balance Before Consolidation of Investment Products			Consolidated Sponsored Investment Products			Eliminations and Adjustments (a)			Balances as Reported in Consolidated Statement of Operations
*($ in thousands)*
Total operating revenues	$	279,919		$	—		$	167		$	280,086
Total operating expenses		219,326			148			167			219,641

Operating income (loss)		60,593			(148	)		—			60,445

Total other non-operating income (expense)		4,106			2,649			(2,397	)		4,358
Income (loss) before income tax expense		64,699			2,501			(2,397	)		64,803
Income tax expense		27,030			—			—			27,030

Net income (loss)		37,669			2,501			(2,397	)		37,773
Noncontrolling interests		3			—			(104	)		(101	)
Allocation of earnings to preferred stockholders		(64	)		—			—			(64	)

Net income (loss) attributable to the Company	$	37,608		$	2,501		$	(2,501	)	$	37,608

(a)	Adjustments include the elimination of intercompany transactions between the Company and its consolidated sponsored investment products, primarily the elimination of the investments and equity and recording of any noncontrolling interest.

Investments of Consolidated Sponsored Investment Products

Investments of consolidated sponsored investment products represent the underlying debt and equity securities held in sponsored mutual funds in which the Company has an investment and are consolidated by the Company. They are summarized as follows:


December 31, 2013
	Cost		Unrealized Loss			Unrealized Gain		Fair Value
*($ in thousands)*
Trading debt securities	$	48,994	$	(2,097	)	$	217	$	47,114
Trading equity securities		84,862		(882	)		7,960		91,940

Total Investments of Consolidated Sponsored Investment Products	$	133,856	$	(2,979	)	$	8,177	$	139,054


December 31, 2012
	Cost		Unrealized Loss			Unrealized Gain		Fair Value
*($ in thousands)*
Trading debt securities	$	24,830	$	(21	)	$	1,003	$	25,812
Trading equity securities		16,537		(144	)		1,022		17,415

Total Investments of Consolidated Sponsored Investment Products	$	41,367	$	(165	)	$	2,025	$	43,227

Fair Value Measurements of Consolidated Sponsored Investment Products

The assets of the consolidated sponsored investment products measured at fair value on a recurring basis as of December 31, 2013 and December 31, 2012 by fair value hierarchy level were as follows:


December 31, 2013
	Level 1		Level 2		Level 3		Total
*($ in thousands)*
Debt securities	$	—	$	47,114	$	—	$	47,114
Equity securities		91,940		—		—		91,940

Total Investments of Consolidated Sponsored Investment Products at Fair Value	$	91,940	$	47,114	$	—	$	139,054


December 31, 2012
	Level 1		Level 2		Level 3		Total
*($ in thousands)*
Debt securities	$	—	$	25,812	$	—	$	25,812
Equity securities		10,092		7,323		—		17,415

Total Investments of Consolidated Sponsored Investment Products at Fair Value	$	10,092	$	33,135	$	—	$	43,227

The following is a discussion of the valuation methodologies used for the Company’s assets measured at fair value.

Investments of consolidated sponsored investment products represent the underlying debt and equity securities held in sponsored mutual funds in which the Company has an investment and are consolidated by the Company. Equity securities are valued at the official closing price on the exchange on which the securities are traded and are categorized within Level 1. Level 2 investments include certain non-U.S. securities for which closing prices are not readily available or are deemed to not reflect readily available market prices and are valued using an independent pricing service as well as most debt securities, which are valued based on quotations received from independent pricing services or from dealers who make markets in such securities. Pricing services do not provide pricing for all securities and therefore indicative bids from dealers are utilized, which are based on pricing models used by market makers in the security and are also included within Level 2.

There were no transfers between Level 1 and Level 2 during the years ended December 31, 2013 and 2012, respectively.