Investment in Partnerships, Offshore Funds and Variable Interest Entities

12 Months Ended

Dec. 31, 2011

Investment In Partnerships Offshore Funds And Variable Interest Entities [Abstract]

Investment in Partnerships, Offshore Funds and Variable Interest Entities

D.  Investment in Partnerships, Offshore Funds and Variable Interest Entities

The Company is general partner or co-general partner of various sponsored limited partnerships and the investment manager of various sponsored offshore funds, totaling $86.9 million and $64.0 million at December 31, 2011 and 2010, respectively, whose underlying assets consist primarily of marketable securities (the "affiliated entities").  We also have investments in unaffiliated partnerships, offshore funds and other entities of $14.0 million and $18.9 million at December 31, 2011 and 2010, respectively (the "unaffiliated entities").  We evaluate each entity for the appropriate accounting treatment and disclosure.  Certain of the affiliated entities are consolidated, as discussed in Note A.  In addition, our balance sheet caption "investments in partnerships" includes those investments, in both affiliated and unaffiliated entities, which the Company accounts for under the equity method of accounting, as well as certain investments that the feeder funds hold that are carried at fair value, as described in Note C.  The Company reflects the equity in earnings of these equity method investees and the change in fair value of the consolidated feeder funds under the caption net gain from investments on the consolidated statements of income.

The following table highlights the number of entities that we consolidate as well as under which accounting guidance they are consolidated, including CFFs which retain their specialized investment company accounting, and partnerships and offshore funds which we consolidate as described in Note A.

Entities consolidated
	CFFs					Partnerships					Offshore Funds					Total
	VIEs		VOEs			VIEs		VOEs			VIEs			VOEs		VIEs			VOEs
Entities consolidated at December 31, 2008		1		5			-		1			1			-		2			6
Additional consolidated entities		-		-			-		-			-			-		-			-
Deconsolidated entities		-		(3	)		-		-			(1	)		-		(1	)		(3	)
Entities consolidated at December 31, 2009		1		2			-		1			-			-		1			3
Additional consolidated entities		-		-			-		1			1			-		1			1
Deconsolidated entities		-		-			-		-			-			-		-			-
Entities consolidated at December 31, 2010		1		2			-		2			1			-		2			4
Additional consolidated entities		-		-			-		-			-			1		-			1
Deconsolidated entities		-		-			-		(1	)		(1	)		-		(1	)		(1	)
Entities consolidated at December 31, 2011		1		2			-		1			-			1		1			4

On January 1, 2011, upon analysis of several factors, including the additional contribution of capital from unrelated third parties into a partnership that we consolidated for the year ended and as of December 31, 2010, we determined that the Company was no longer deemed to control the partnership, resulting in the deconsolidation of this partnership, effective January 1, 2011.  The deconsolidation did not result in the recognition of any gain or loss.  The Company continues to serve as the general partner and earns fees for this role, and it also maintains an investment in the deconsolidated partnership which is included in investments in partnerships on the consolidated statements of financial condition and is accounted for under the equity method (which approximates fair value).

The following table includes the impact by line item on the consolidated statements of financial condition for each category of entity consolidated (in thousands):

	December 31, 2011
	Prior to
	Consolidation		CFFs			Partnerships			Offshore Funds			As Reported
Assets
Cash and cash equivalents	$	259,531	$	15,000		$	1,809		$	-		$	276,340
Investments in securities		284,796		-			6,228			6,523			297,547
Investments in partnerships		107,981		933			(8,021	)		-			100,893
Receivable from brokers		17,593		-			270			3,050			20,913
Investment advisory fees receivable		32,157		1			(2	)		-			32,156
Other assets		43,889		(14,989	)		-			-			28,900
Total assets	$	745,947	$	945		$	284		$	9,573		$	756,749
Liabilities and equity
Securities sold, not yet purchased	$	5,488	$	-		$	-		$	-		$	5,488
Accrued expenses and other liabilities		69,929		51			28			4,652			74,660
Total debt		263,119		-			-			-			263,119
Redeemable noncontrolling interests		-		894			256			4,921			6,071
Total equity		407,411		-			-			-			407,411
Total liabilities and equity	$	745,947	$	945		$	284		$	9,573		$	756,749
	December 31, 2010
	Prior to
	Consolidation		CFFs			Partnerships			Offshore Funds			As Reported
Assets
Cash and cash equivalents	$	167,753	$	-		$	1,297		$	551		$	169,601
Investments in securities		219,364		-			20,410			65,712			305,486
Investments in partnerships		147,801		1,069			(13,381	)		(52,618	)		82,871
Receivable from brokers		23,062		-			8,388			15,171			46,621
Investment advisory fees receivable		44,944		7			(149	)		(142	)		44,660
Other assets		23,429		10			10			48			23,497
Total assets	$	626,353	$	1,086		$	16,575		$	28,722		$	672,736
Liabilities and equity
Securities sold, not yet purchased	$	2,557	$	-		$	10,157		$	6,585		$	19,299
Accrued expenses and other liabilities		75,608		193			1,639			825			78,265
Total debt		158,580		-			-			-			158,580
Redeemable noncontrolling interests		-		893			4,779			21,312			26,984
Total equity		389,608		-			-			-			389,608
Total liabilities and equity	$	626,353	$	1,086		$	16,575		$	28,722		$	672,736

The following table breaks out the Company's net earnings (loss) from non consolidated entities, a component of net gain/(loss) from investments on the consolidated statements of income, management fee and incentive allocation, components of investment advisory and incentive fees on the consolidated statements of income, by type of entity (in thousands):

	2011
	Net Earnings			Management		Incentive
	(Loss)			Fees		Allocation
Feeder funds	$	(58	)	$	114	$	-
Affiliated partnerships		1,558			3,029		1,397
Affilated offshore funds		1,057			976		876
Unaffiliated entities		(929	)		-		-
Total	$	1,628		$	4,119	$	2,273
	2010
	Net Earnings			Management		Incentive
	(Loss)			Fees		Allocation
Feeder funds	$	159		$	97	$	151
Affiliated partnerships		1,975			2,031		2,118
Affilated offshore funds		1,070			722		1,337
Unaffiliated entities		3,761			-		-
Total	$	6,965		$	2,850	$	3,606
	2009
	Net Earnings			Management		Incentive
	(Loss)			Fees		Allocation
Feeder funds	$	49		$	121	$	27
Affiliated partnerships		1,235			1,428		1,730
Affilated offshore funds		1,055			501		923
Unaffiliated entities		2,585			-		-
Total	$	4,924		$	2,050	$	2,680

Variable Interest Entities

We also have sponsored a number of investment vehicles where we are the general partner or investment manager.  These vehicles are variable interest entities ("VIEs"), and we are not the primary beneficiary because we do not absorb a majority of the entities' expected losses or expected returns.  The Company has not provided any financial or other support to these entities.  The total assets of these entities at December 31, 2011 and 2010 were $73.7 million and $13.3 million, respectively.  Our maximum exposure to loss as a result of our involvement with the VIEs is limited to the investment in one VIE and the deferred carried interest that we have in another.  On December 31, 2011, we had an investment in one of the VIE offshore funds of approximately $5.0 million which was included in investments in partnerships on the consolidated statements of financial condition.  On December 31, 2011 and 2010, we had a deferred carried interest in one of the VIE offshore funds of approximately $47,000 and $325,000, respectively, which was included in investments in partnerships on the consolidated statements of financial condition.  Additionally, as the general partner or investment manager to these VIEs the Company earns fees in relation to these roles, which given a decline in AUMs of the VIEs would result in lower fee revenues earned by the Company which would be reflected on the consolidated statement of income, consolidated statement of financial condition and consolidated statement of cash flows.

Prior to January 1, 2011, we were consolidating two VIEs since we had determined that we were the primary beneficiary of each because we had equity interests and absorbed a majority of each entity's expected losses; therefore they were consolidated in the financial statements.  Effective October 1, 2011, we deconsolidated one of the VIEs upon analysis of several factors, including the redemption of the $49.2 million of proprietary capital from this VIE, we determined that the Company was no longer deemed to be the primary beneficiary of the VIE.  The deconsolidation did not result in the recognition of any gain or loss.  The Company has not provided any financial support to these VIEs but does continue to serve as the investment manager and earn fees for this role, and it also maintains an investment in the deconsolidated VIE, which is included in investments in partnerships on the consolidated statement of financial condition and is accounted for under the equity method (which approximates fair value).  The assets of these VIEs may only be used to satisfy obligations of the VIEs.  The following table presents the balances related to these VIEs that were included on the consolidated statements of financial condition as well as GAMCO's net interest in these VIEs:

	December 31,			December 31,
	2011			2010
(In thousands)
Cash and cash equivalents	$	15,000		$	551
Investments in securities		-			65,712
Investments in partnerships		1,433			1,522
Receivable from brokers		-			15,171
Other assets		-			47
Securities sold, not yet purchased		-			(6,585	)
Accrued expenses and other liabilities		(15,006	)		(864	)
Redeemable noncontrolling interests		(381	)		(21,699	)
GAMCO's net interests in consolidated VIEs	$	1,046		$	53,855