Equity Method Investments in Affiliates

12 Months Ended

Dec. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

In the third quarter of 2023, the Company completed a minority investment in Forbion Group Holding B.V., a private markets firm focused on investing in high-quality life sciences companies, and in the fourth quarter of 2023, the Company completed a minority investment in Ara Partners Group, LLC (“Ara Partners”), a private markets firm specializing in industrial decarbonization. The majority of the consideration paid for Ara Partners will be deductible for U.S. tax purposes over a 15-year life. The Company’s provisional purchase price allocation for each investment was measured using financial models that include assumptions of expected market performance, net client cash flows, and discount rates.

The financial results of certain Affiliates accounted for under the equity method are recognized in the Consolidated Financial Statements one quarter in arrears.

Equity method investments in Affiliates (net) consisted of the following:


	December 31,
	2022		2023
Goodwill	$	1,262.4	$	1,323.3
Definite-lived acquired client relationships (net)	479.4		652.5
Indefinite-lived acquired client relationships (net)	119.0		122.6
Undistributed earnings and tangible capital	278.7		190.1
Equity method investments in Affiliates (net)	$	2,139.5	$	2,288.5

The following table presents the change in Equity method investments in Affiliates (net):


	Equity Method Investments in Affiliates (Net)
	2022		2023
Balance, beginning of period	$	2,134.4	$	2,139.5
Investments in Affiliates	326.1		349.8
BPEA Transaction(1)	(150.6)		—
Earnings	497.2		375.6
Intangible amortization and impairments	(159.1)		(95.6)
Distributions of earnings	(394.7)		(492.1)
Return of capital	(0.8)		(0.2)
Foreign currency translation	(68.5)		29.3

Other	(44.5)		(17.8)
Balance, end of period	$	2,139.5	$	2,288.5

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(1)Represents the Company’s equity method investment in BPEA as of the closing date.

Definite-lived acquired client relationships at the Company’s Affiliates accounted for under the equity method are amortized over their expected period of economic benefit. The Company recorded amortization expense for these relationships of $123.0 million, $109.1 million, and $86.0 million for the years ended December 31, 2021, 2022, and 2023, respectively. Based on relationships existing as of December 31, 2023, the Company estimates the amortization expense attributable to its Affiliates will be approximately $65 million in 2024, approximately $62 million in 2025, approximately $55 million in each of 2026 and 2027, and approximately $50 million in 2028.

For the year ended December 31, 2022, the Company recorded a $50.0 million expense to reduce the carrying value of an Affiliate to fair value. The decline in the fair value was a result of a decline in assets under management and a reduction in projected margin, which decreased the forecasted income associated with the investment. The fair value of the investment was determined using a probability-weighted discounted cash flow analysis, a Level 3 fair value measurement that included a projected compounded growth in assets under management over the first five years of 2%, long-term growth rate of 5%, discount rates of 11% and 20% for asset- and performance-based fees, respectively, and a market participant tax rate of 25%. Based on the discounted cash flow analysis, the Company concluded that the fair value of its investment had declined below its carrying value and that the decline was other-than-temporary.

For the year ended December 31, 2023, the Company recorded $9.6 million of expenses to reduce the carrying values of certain of its Affiliates because it concluded that the fair value of its investments had declined below their carrying values and that the declines were other-than-temporary.

For the year ended December 31, 2023, the Company completed its annual assessment of its investments in Affiliates accounted for under the equity method and no other impairments were indicated.

The Company had 20 and 22 Affiliates accounted for under the equity method as of December 31, 2022 and 2023, respectively. The majority of these Affiliates are partnerships with structured interests that define how the Company will participate in Affiliate earnings, typically based upon a fixed percentage of revenue reduced by, in some cases, certain agreed-upon expenses. The partnership agreements do not define a fixed percentage for the Company’s ownership of the equity of the Affiliate. These percentages would be subject to a separate future negotiation if an Affiliate were to be sold or liquidated.

The following table presents summarized financial information for Affiliates accounted for under the equity method:


	For the Years Ended December 31,
	2021		2022		2023
Revenue(1)	$	3,228.1	$	3,239.5	$	3,115.6
Net income(1)	1,656.6		1,358.7		1,313.0


	December 31,
	2022		2023
Assets	$	2,816.7	$	3,269.1

Liabilities and Non-controlling interests	1,221.4		1,467.3

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(1)Revenue and net income include asset- and performance-based fees, the impact of consolidated sponsored investment products, and new Affiliate investments for the full-year, regardless of the date of the Company’s investment.

BPEA Transaction

In the fourth quarter of 2022, the Company completed the sale of its equity interest in BPEA, an Affiliate accounted for by the Company under the equity method, to EQT (the “BPEA Transaction”) in connection with the strategic combination of BPEA and EQT. Pursuant to the terms of the Securities Purchase and Merger Agreement with EQT, under which the Company and each of the other owners agreed to sell their respective equity interests in BPEA, the Company received $223.6 million in cash, net of transaction costs, and 28.68 million EQT ordinary shares (25% of which were subject to a six-month lock-up, which expired in April 2023), and other investments. BPEA is included in the Company’s results through the closing date, and the Company’s gain on the transaction was $641.9 million, which is recorded in Affiliate Transaction gains.