Investments in Partnerships, Offshore Funds and Variable Interest Entities

12 Months Ended

Dec. 31, 2012

Investments in Partnerships, Offshore Funds and Variable Interests [Abstract]

Investments in Partnerships, Offshore Funds and Variable Interests

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

The Company is general partner or co-general partner of various affiliated entities, in which the Company has investments totaling $83.9 million and $86.9 million at December 31, 2012 and 2011, respectively, and whose underlying assets consist primarily of marketable securities (the "affiliated entities").  We also have investments in unaffiliated entities of $13.6 million and $14.0 million at December 31, 2012 and 2011, respectively (the "unaffiliated entities").  We evaluate each entity for the appropriate accounting treatment and disclosure.  Certain of the affiliated entities, and none of the unaffiliated entities, are consolidated.

For those entities where consolidation is not deemed to be appropriate, we report them in our statement of financial condition under the caption "Investments in partnerships".  This caption 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 ("CFFs") under the caption "Net gain/(loss) from investments" on the consolidated statements of income.

The following table highlights the number of entities, including voting interest entities ("VOEs"), that we consolidate as well as under which accounting guidance they are consolidated, including 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, 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
Additional consolidated entities		-		-		-		-			-			-		-			-
Deconsolidated entities		-		-		-		-			-			-		-			-
Entities consolidated at December 31, 2012		1		2		-		1			-			1		1			4

At and for the year ended December 31, 2012, the one CFF VIE is consolidated, as the Company has been determined to be the primary beneficiary because it has an equity interest and absorbs the majority of the expected losses and/or expected gains.  At and for the year ended December 31, 2012, the two CFF VOEs, the one Partnership VOE and the one Offshore Fund VOE are consolidated because the unaffiliated partners or shareholders lack substantive rights, and the Company, as either the general partner or investment manager, is deemed to have control.

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).

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.  On October 1, 2011, we deconsolidated one of these VIEs upon analysis of several factors, including the redemption of $49.2 million of proprietary capital from this VIE, as a result of which 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 following table breaks down the investments in partnerships line by accounting method, either fair value or equity method, and investment type.

	December 31, 2012
	Investment Type
	Affiliated						Unaffiliated
	Consolidated
Accounting method	Feeder Funds		Partnerships		Offshore Funds		Partnerships		Offshore Funds		Total
Fair Value	$	26,128	$	-	$	-	$	-	$	-	$	26,128
Equity Method		-		28,158		29,679		6,505		7,079		71,421
Total	$	26,128	$	28,158	$	29,679	$	6,505	$	7,079	$	97,549
	December 31, 2011
	Investment Type
	Affiliated						Unaffiliated
	Consolidated
Accounting method	Feeder Funds		Partnerships		Offshore Funds		Partnerships		Offshore Funds		Total
Fair Value	$	27,122	$	-	$	-	$	-	$	-	$	27,122
Equity Method		-		34,135		25,588		7,610		6,438		73,771
Total	$	27,122	$	34,135	$	25,588	$	7,610	$	6,438	$	100,893

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

	December 31, 2012
	Prior to
	Consolidation		CFFs			Partnerships			Offshore Funds			As Reported
Assets
Cash and cash equivalents	$	189,743	$	-		$	865		$	-		$	190,608
Investments in securities		275,491		-			6,964			(1,740	)		280,715
Investments in partnerships		100,164		5,388			(8,003	)		-			97,549
Receivable from brokers		25,972		-			1,480			23,203			50,655
Investment advisory fees receivable		42,425		9			(5	)		-			42,429
Other assets		32,673		(2,986	)		(1,000	)		90			28,777
Total assets	$	666,468	$	2,411		$	301		$	21,553		$	690,733
Liabilities and equity
Securities sold, not yet purchased	$	3,033	$	-		$	-		$	103		$	3,136
Accrued expenses and other liabilities		76,135		384			21			6,395			82,935
Total debt		216,366		-			-			-			216,366
Redeemable noncontrolling interests		-		2,027			280			15,055			17,362
Total equity		370,934		-			-			-			370,934
Total liabilities and equity	$	666,468	$	2,411		$	301		$	21,553		$	690,733
	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

The CFFs, Partnerships and Offshore Funds columns above include only affiliated entities as no unaffiliated entities are consolidated.

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

	Twelve Months Ended December 31, 2012
	Prior to
	Consolidation			CFFs			Partnerships			Offshore Funds			As Reported
Total revenues	$	346,195		$	2		$	(6	)	$	(1,910	)	$	344,281
Total expenses		232,313			132			39			667			233,151
Operating income		113,882			(130	)		(45	)		(2,577	)		111,130
Total other income, net		3,264			216			67			2,639			6,186
Income before income taxes		117,146			86			22			62			117,316
Income tax provision		41,721			-			-			-			41,721
Net income		75,425			86			22			62			75,595
Net income attributable to noncontrolling interests		(114	)		86			22			62			56
Net income attributable to GAMCO	$	75,539		$	-		$	-		$	-		$	75,539
	Twelve Months Ended December 31, 2011
	Prior to
	Consolidation			CFFs			Partnerships			Offshore Funds			As Reported
Total revenues	$	328,151		$	(24	)	$	(3	)	$	(996	)	$	327,128
Total expenses		212,844			121			40			829			213,834
Operating income		115,307			(145	)		(43	)		(1,825	)		113,294
Total other income (expense), net		(4,872	)		71			34			1,915			(2,852	)
Income before income taxes		110,435			(74	)		(9	)		90			110,442
Income tax provision		40,767			-			-			-			40,767
Net income		69,668			(74	)		(9	)		90			69,675
Net income (loss) attributable to noncontrolling interests		(14	)		(74	)		(9	)		90			(7	)
Net income attributable to GAMCO	$	69,682		$	-		$	-		$	-		$	69,682
	Twelve Months Ended December 31, 2010
	Prior to
	Consolidation			CFFs			Partnerships			Offshore Funds			As Reported
Total revenues	$	280,713		$	(13	)	$	(149	)	$	(171	)	$	280,380
Total expenses		188,793			51			240			267			189,351
Operating income		91,920			(64	)		(389	)		(438	)		91,029
Total other income, net		16,054			264			1,194			800			18,312
Income before income taxes		107,974			200			805			362			109,341
Income tax provision		38,817			74			300			135			39,326
Net income		69,157			126			505			227			70,015
Net income attributable to noncontrolling interests		365			126			505			227			1,223
Net income attributable to GAMCO	$	68,792		$	-		$	-		$	-		$	68,792

The CFFs, Partnerships and Offshore Funds columns above include only affiliated entities as no unaffiliated entities are consolidated.

Variable Interest Entities

We sponsor a number of investment vehicles where we are the general partner or investment manager.  Certain of these vehicles are VIEs, but we are not the primary beneficiary, in all but one case, because we do not absorb a majority of the entities' expected losses or expected returns, and they are, therefore, not consolidated.  We consolidate the one VIE where we are the primary beneficiary.  The Company has not provided any financial or other support to these entities.  The total assets of these non-consolidated VIEs at December 31, 2012 and 2011 were $75.0 million and $73.7 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, 2012 and 2011, we had an investment in one of the VIE offshore funds of approximately $7.7 million and $5.0 million, respectively, which was included in investments in partnerships on the consolidated statements of financial condition.  On December 31, 2012 and 2011, we had a deferred carried interest in one of the VIE offshore funds of approximately $45,000 and $47,000, 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.

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 consolidated statements of financial condition as well as GAMCO's net interest in these VIEs.  Only one VIE is consolidated at both December 31, 2012 and December 31, 2011:

	December 31,			December 31,
	2012			2011
(In thousands)
Cash and cash equivalents	$	-		$	15,000
Investments in securities		-			-
Investments in partnerships		18,507			1,433
Receivable from brokers		-			-
Other assets		-			-
Securities sold, not yet purchased		-			-
Accrued expenses and other liabilities		(3,010	)		(15,006	)
Redeemable noncontrolling interests		(411	)		(381	)
GAMCO's net interests in consolidated VIEs	$	15,086		$	1,046