3.Investment Securities

Investment securities at March 31, 2017 and December 31, 2016 are as follows:


	March 31,		December 31,
	2017		2016
		(in thousands)
Available for sale securities:
Sponsored funds	$	120,756	122,806
Sponsored privately offered funds		—	570
Total available for sale securities		120,756	123,376
Trading securities:
Mortgage-backed securities		12	13
Common stock		104	101
Consolidated sponsored funds		133,276	145,710
Sponsored funds		30,555	29,541
Sponsored privately offered funds		614	—
Total trading securities		164,561	175,365
Equity method securities:
Sponsored funds		20,441	26,775
Sponsored privately offered funds		3,545	3,234
Total equity method securities		23,986	30,009
Total securities	$	309,303	328,750

Mortgage-backed securities accounted for as trading and held as of March 31, 2017 mature in 2022.

The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at March 31, 2017:


	Amortized		Unrealized	Unrealized
	cost		gains	losses	Fair value
	(in thousands)
Available for sale securities:
Sponsored funds	$	124,954	1,258	(5,456)	120,756

The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2016:


	Amortized		Unrealized	Unrealized
	cost		gains	losses	Fair value
	(in thousands)
Available for sale securities:
Sponsored funds	$	129,427	828	(7,449)	122,806
Sponsored privately offered funds		265	305	—	570
	$	129,692	1,133	(7,449)	123,376

A summary of available for sale sponsored funds with fair values below carrying values at March 31, 2017 and December 31, 2016 is as follows:

Less than 12 months

12 months or longer

Total

Unrealized

March 31, 2017

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 VIE and are considered to be VOEs.

Consolidated Sponsored Funds

The following table details the balances related to consolidated sponsored funds at March 31, 2017, and at December 31, 2016, as well as the Company’s net interest in these funds:


	March 31,		December 31,
	2017		2016
	(in thousands)
Cash	$	3,638	6,885
Investments		133,276	145,710
Other assets		3,346	763
Other liabilities		(2,253)	(390)
Redeemable noncontrolling interests		(8,516)	(10,653)
Net interest in consolidated sponsored funds	$	129,491	142,315

During the three months ended March 31, 2017, we consolidated certain of the Ivy Funds in which we provided initial seed capital at the time of the fund’s formation. When we no longer have a controlling financial interest in a sponsored fund, it is deconsolidated from our financial statements. During the first quarter of 2017, we closed three of the IGI Funds that were previously consolidated. Accordingly, we deconsolidated $2.6 million from Cash and cash equivalents and $2.6 million from Redeemable noncontrolling interests. There was no impact to the Consolidated Statements of Income as a result of this deconsolidation, as the IGI Funds were carried at fair value.

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 pricing approaches evaluated differently 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 March 31, 2017 and December 31, 2016 that are recognized in our consolidated balance sheets using fair value measurements based on the differing levels of inputs.


March 31, 2017	Level 1		Level 2	Level 3	Other Assets Not Held at Fair Value	Total
	(in thousands)
Available for sale securities:
Sponsored funds	$	120,756	—	—	—	120,756
Trading securities:
Mortgage-backed securities		—	12	—	—	12
Common stock		104	—	—	—	104
Consolidated sponsored funds		94,945	38,331	—	—	133,276
Sponsored funds		30,555	—	—	—	30,555
Sponsored privately offered funds measured at net asset value (1)		—	—	—	614	614
Equity method securities: (2)
Sponsored funds		20,441	—	—	—	20,441
Sponsored privately offered funds measured at net asset value (1)		—	—	—	3,545	3,545
Total	$	266,801	38,343	—	4,159	309,303


December 31, 2016	Level 1		Level 2	Level 3	Other Assets Not Held at Fair Value	Total
	(in thousands)
Available for sale securities:
Sponsored funds	$	122,806	—	—	—	122,806
Sponsored privately offered funds measured at net asset value (1)		—	—	—	570	570
Trading securities:
Mortgage-backed securities		—	13	—	—	13
Common stock		101	—	—	—	101
Consolidated sponsored funds		100,847	44,863	—	—	145,710
Sponsored funds		29,541	—	—	—	29,541
Equity method securities: (2)
Sponsored funds		26,775	—	—	—	26,775
Sponsored privately offered funds measured at net asset value (1)		—	—	—	3,234	3,234
Total	$	280,070	44,876	—	3,804	328,750

(1)

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.

(2)

Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value.