4.Investment Securities

Investment securities at June 30, 2016 and December 31, 2015 are as follows:


	June 30,		December 31,
	2016		2015
(in thousands)
Available for sale securities:
Sponsored funds	$	84,947	40,552
Sponsored privately offered funds		868	825
Total available for sale securities		85,815	41,377
Trading securities:
Mortgage-backed securities		16	20
Corporate bond		3	5
Common stock		97	87
Consolidated sponsored funds		111,803	—
Sponsored funds		29,924	29,701
Total trading securities		141,843	29,813
Equity method securities:
Sponsored funds		130,898	217,380
Sponsored privately offered funds		3,059	3,173
Total equity method securities		133,957	220,553
Total securities	$	361,615	291,743

The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at June 30, 2016:


	Amortized		Unrealized	Unrealized
	cost		gains	losses	Fair value
	(in thousands)
Available for sale securities:
Sponsored funds	$	89,278	1,928	(6,259)	84,947
Sponsored privately offered funds		500	368	—	868
	$	89,778	2,296	(6,259)	85,815

The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2015:


	Amortized		Unrealized	Unrealized
	cost		gains	losses	Fair value
	(in thousands)
Available for sale securities:
Sponsored funds	$	46,800	434	(6,682)	40,552
Sponsored privately offered funds		500	325	—	825
	$	47,300	759	(6,682)	41,377

A summary of available for sale sponsored funds with fair values below carrying values at June 30, 2016 and December 31, 2015 is as follows:


	Less than 12 months			12 months or longer		Total
			Unrealized		Unrealized		Unrealized
June 30, 2016	Fair value		losses	Fair value	losses	Fair value	losses
	(in thousands)
Sponsored funds	$	2,258	(44)	33,859	(6,037)	36,117	(6,081)
Sponsored privately offered funds		7,001	(178)	—	—	7,001	(178)
	$	9,259	(222)	33,859	(6,037)	43,118	(6,259)

Less than 12 months

12 months or longer

Total

Unrealized

December 31, 2015

Fair value

losses

Fair value

losses

Fair value

losses

(in thousands)

Sponsored privately offered funds

The Company holds interests in privately offered funds structured in the form of limited liability companies. The members of these entities have the substantive ability to remove the Company as managing member or dissolve the entity upon a simple majority vote. These entities do not meet the criteria of a variable interest entity and are considered to be voting interest entities.

Consolidated sponsored funds

The following table details the balances related to consolidated sponsored funds at June 30, 2016, as well as the Company’s net interest in these funds:


	June 30, 2016
	(in thousands)

Cash	$	7,801
Investments		111,803
Other assets		2,014
Other liabilities		(955)
Redeemable noncontrolling interests		(10,865)
Net interest in consolidated sponsored funds	$	109,798

During the six months ended June 30, 2016, we consolidated Ivy Funds and IGI Funds in which we provided initial seed capital at the time of the funds formation. When we no longer have a controlling financial interest in a sponsored fund, it is deconsolidated from our financial statements. We deconsolidated $44.2 million of these investments from our consolidated balance sheet during the first quarter of 2016. There was no impact to the consolidated statement of income as a result of this deconsolidation.

Accounting standards establish a framework for measuring fair value and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of the asset. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset. An individual investment’s fair value measurement is assigned a level based upon the observability of the inputs that are significant to the overall valuation. The three-level hierarchy of inputs is summarized as follows:

Level 1 – Investments are valued using quoted prices in active markets for identical securities.

Level 2 – Investments are valued using other significant observable inputs, including quoted prices in active markets for similar securities.

Level 3 – Investments are valued using significant unobservable inputs, including the Company’s own assumptions in determining the fair value of investments.

Assets classified as Level 2 can have a variety of observable inputs. These observable inputs are collected and utilized, primarily by an independent pricing service, in different evaluated pricing approaches depending upon the specific asset to determine a value. The fair value of municipal bonds is measured based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-wants lists, offerings, market movements, the callability of the bond, state of issuance and benchmark yield curves. The fair value of corporate bonds is measured using various techniques, which consider recently executed trades in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads and fundamental data relating to the issuer.

Securities’ values classified as Level 3 are primarily determined through the use of a single quote (or multiple quotes) from dealers in the securities using proprietary valuation models. These quotes involve significant unobservable inputs, and thus, the related securities are classified as Level 3 securities.

The following tables summarize our investment securities as of June 30, 2016 and December 31, 2015 that are recognized in our consolidated balance sheets using fair value measurements based on the differing levels of inputs.


June 30, 2016	Level 1		Level 2	Level 3	Total
	(in thousands)
Available for sale securities:
Sponsored funds	$	84,947	—	—	84,947
Sponsored privately offered funds measured at net asset value (2)		—	—	—	868
Trading securities:
Mortgage-backed securities		—	16	—	16
Corporate bonds		—	3	—	3
Common stock		97	—	—	97
Consolidated sponsored funds (2)		—	—	—	111,803
Sponsored funds		29,924	—	—	29,924
Equity method securities: (1)
Sponsored funds		130,898	—	—	130,898
Sponsored privately offered funds measured at net asset value (2)		—	—	—	3,059
Total	$	245,866	19	—	361,615


December 31, 2015	Level 1		Level 2	Level 3	Total
	(in thousands)
Available for sale securities:
Sponsored funds	$	40,552	—	—	40,552
Sponsored privately offered funds measured at net asset value (2)		—	—	—	825
Trading securities:
Mortgage-backed securities		—	20	—	20
Corporate bonds		—	5	—	5
Common stock		87	—	—	87
Sponsored funds		29,701	—	—	29,701
Equity method securities: (1)
Sponsored funds		217,380	—	—	217,380
Sponsored privately offered funds measured at net asset value (2)		—	—	—	3,173
Total	$	287,720	25	—	291,743

(1)

Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value. Fair value is measured using the Company’s share of the investee’s underlying net income or loss, which is predominantly representative of fair value adjustments in the investments held by the investee.

(2)

Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.