Variable Interest Entities

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

 Variable Interest Entities

For additional information on our variable interest entities (VIEs), refer to pages 66 to 67 in Note 14 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, "Variable Interest Entities", in the 2018 Annual Financial Statements.

Tax Exempt Investment Program

In the normal course of our business, we structure and sell certificated interests in pools of tax exempt investment grade assets, principally to our mutual fund clients. We structure these pools as partnership trusts, and the assets and liabilities of the trusts are recorded in our consolidated statement of condition as AFS investment securities and other short term borrowings. As of September 30, 2019 and December 31, 2018, we carried AFS investment securities, composed of securities related to state and political subdivisions, with a fair value of $0.99 billion and $1.05 billion, respectively, and other short term borrowings of $0.86 billion and $0.93 billion, respectively, in our consolidated statement of condition in connection with these trusts. The interest income and interest expense generated by the investments and certificated interests, respectively, are recorded as components of NII when earned or incurred.

The trusts had a weighted average life of approximately 3.1 years and 3.6 years as of September 30, 2019 and December 31, 2018, respectively.

Interests in Investment Funds

As of September 30, 2019, the aggregate assets and liabilities of our consolidated sponsored investment funds totaled $20 million and $4 million, respectively. As of September 30, 2019, our maximum total exposure associated with the consolidated sponsored investment funds totaled $15 million and represented the value of our economic ownership interest in the funds. As of December 31, 2018, we did not have any consolidated investment funds.

We managed certain funds, considered VIEs, in which we held a variable interest but for which we were not deemed to be the primary beneficiary. Our potential maximum loss exposure related to these unconsolidated funds totaled $35 million as of September 30, 2019 and $70 million as of December 31, 2018, and represented the carrying value of our investments, which are recorded in either AFS investment securities or other assets in our consolidated statement of condition. The amount of loss we may recognize during any period is limited to the carrying amount of our investments in the unconsolidated funds.