Investment in Partnerships, Offshore Funds and Variable Interest Entities

3 Months Ended

Mar. 31, 2012

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

Investment in Partnerships, Offshore Funds and Variable Interest Entities

C. Investments 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, and have investments totaling $86.9 million, $86.9 million and $74.4 million at March 31, 2012, December 31, 2011 and March 31, 2011, 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 $14.8 million, $14.0 million and $20.2 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively (the "unaffiliated entities").  We evaluate each entity for the appropriate accounting treatment and disclosure.  Certain of the affiliated entities are consolidated.  In addition, our statement of financial condition 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 D.  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 condensed 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 consolidated feeder funds ("CFFs"), which retain their specialized investment company accounting, partnerships and offshore funds.

Entities consolidated
	CFFs				Partnerships					Offshore Funds					Total
	VIEs		VOEs		VIEs		VOEs			VIEs			VOEs		VIEs			VOEs
Entities consolidated at December 31, 2010		1		2		-		2			1			-		2			4
Additional consolidated entities		-		-		-		-			-			1		-			1
Deconsolidated entities		-		-		-		(1	)		-			-		-			(1	)
Entities consolidated at March 31, 2011		1		2		-		1			1			1		2			4
Additional consolidated entities		-		-		-		-			-			-		-			-
Deconsolidated entities		-		-		-		-			(1	)		-		(1	)		-
Entities consolidated at December 31, 2011		1		2		-		1			-			1		1			4
Additional consolidated entities		-		-		-		-			-			-		-			-
Deconsolidated entities		-		-		-		-			-			-		-			-
Entities consolidated at March 31, 2012		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 earn fees for this role, and it also maintains an investment in the deconsolidated partnership which is included in investments in partnerships on the condensed consolidated statements of financial condition and is accounted for under the equity method (which approximates fair value).

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

	March 31, 2012
	Prior to
	Consolidation		CFFs			Partnerships			Offshore Funds			As Reported
Assets
Cash and cash equivalents	$	322,523	$	-		$	2,107		$	-		$	324,630
Investments in securities		236,387		-			6,503			14,717			257,607
Investments in sponsored investment companies		62,289		-			16			-			62,305
Investments in partnerships		109,136		990			(8,441	)		-			101,685
Receivable from brokers		18,400		-			121			10,777			29,298
Investment advisory fees receivable		27,189		5			(1	)		-			27,193
Other assets		23,691		16			-			-			23,707
Total assets	$	799,615	$	1,011		$	305		$	25,494		$	826,425
Liabilities and equity
Securities sold, not yet purchased	$	9,633	$	-		$	-		$	24		$	9,657
Accrued expenses and other liabilities		101,149		59			38			9,861			111,107
Total debt		264,300		-			-			-			264,300
Redeemable noncontrolling interests		-		952			267			15,609			16,828
Total equity		424,533		-			-			-			424,533
Total liabilities and equity	$	799,615	$	1,011		$	305		$	25,494		$	826,425
	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		225,599		-			6,211			6,523			238,333
Investments in sponsored investment companies		59,197		-			17			-			59,214
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
	March 31, 2011
	Prior to
	Consolidation		CFFs			Partnerships			Offshore Funds			As Reported
Assets
Cash and cash equivalents	$	162,685	$	-		$	32		$	1,954		$	164,671
Investments in securities		196,142		-			6,542			77,029			279,713
Investments in sponsored investment companies		65,879		-			24			-			65,903
Investments in partnerships		155,507		1,124			(8,587	)		(53,460	)		94,584
Receivable from brokers		24,631		-			2,390			16,287			43,308
Investment advisory fees receivable		25,043		9			(2	)		(58	)		24,992
Other assets		24,258		10			-			64			24,332
Total assets	$	654,145	$	1,143		$	399		$	41,816		$	697,503
Liabilities and equity
Securities sold, not yet purchased	$	3,279	$	-		$	-		$	12,271		$	15,550
Accrued expenses and other liabilities		88,681		95			55			2,053			90,884
Total debt		159,697		-			-			-			159,697
Redeemable noncontrolling interests		-		1,048			344			27,492			28,884
Total equity		402,488		-			-			-			402,488
Total liabilities and equity	$	654,145	$	1,143		$	399		$	41,816		$	697,503

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

	Three Months Ended March 31, 2012
	Prior to
	Consolidation		CFFs			Partnerships			Offshore Funds			As Reported
Total revenues	$	82,579	$	(1	)	$	(1	)	$	(828	)	$	81,749
Total expenses		54,521		23			11			182			54,737
Operating income		28,058		(24	)		(12	)		(1,010	)		27,012
Total other income, net		9,544		85			23			1,058			10,710
Income before income taxes		37,602		61			11			48			37,722
Income tax provision		13,756		-			-			-			13,756
Net income		23,846		61			11			48			23,966
Net income attributable to noncontrolling interests		10		61			11			48			130
Net income attributable to GAMCO	$	23,836	$	-		$	-		$	-		$	23,836
	Three Months Ended March 31, 2011
	Prior to
	Consolidation		CFFs			Partnerships			Offshore Funds			As Reported
Total revenues	$	76,968	$	(4	)	$	(1	)	$	(58	)	$	76,905
Total expenses		55,974		31			15			125			56,145
Operating income		20,994		(35	)		(16	)		(183	)		20,760
Total other income, net		6,996		251			96			466			7,809
Income before income taxes		27,990		216			80			283			28,569
Income tax provision		10,288		-			-			-			10,288
Net income		17,702		216			80			283			18,281
Net income attributable to noncontrolling interests		59		216			80			283			638
Net income attributable to GAMCO	$	17,643	$	-		$	-		$	-		$	17,643

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 March 31, 2012, December 31, 2011 and March 31, 2011 were $74.5 million, $73.7 million and $9.8 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 March 31, 2012 and December 31, 2011, we had an investment in one of the VIE offshore funds of approximately $8.2 million and $5.0 million, respectively, which was included in investments in partnerships on the condensed consolidated statements of financial condition.  On March 31, 2012, December 31, 2011 and March 31, 2011, we had a deferred carried interest in one of the VIE offshore funds of approximately $49,000, $47,000 and $48,000, respectively, which was included in investments in partnerships on the condensed 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 condensed consolidated statements of income, condensed consolidated statements of financial condition and condensed consolidated statements 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 $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 condensed consolidated statements 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 are consolidated and were included on the condensed consolidated statements of financial condition as well as GAMCO's net interest in these VIEs:

	March 31,			December 31,			March 31,
	2012			2011			2011
(In thousands)
Cash and cash equivalents	$	-		$	15,000		$	-
Investments in securities		-			-			-
Investments in partnerships		17,183			1,433			1,598
Receivable from brokers		-			-			-
Other assets		-			-			-
Securities sold, not yet purchased		-			-			-
Accrued expenses and other liabilities		(7	)		(15,006	)		(41	)
Redeemable noncontrolling interests		(403	)		(381	)		(522	)
GAMCO's net interests in consolidated VIEs	$	16,773		$	1,046		$	1,035