Derivative Instruments

12 Months Ended

Dec. 31, 2021

Derivative Instruments.

Derivative Instruments

Note 7 — Derivative Instruments

Derivative Instruments Used to Hedge Seeded Investment Products

We maintain an economic hedge program that uses derivative instruments to mitigate against market volatility of certain seeded investments by using index and commodity futures (“futures”), index swaps, total return swaps and credit default swaps. Foreign currency exposures associated with our seeded investment products are also hedged by using foreign currency forward contracts and swaps.

We were party to the following derivative instruments as of December 31, 2021 and 2020 (in millions):

	Notional value
	December 31, 2021		December 31, 2020
Futures	$	368.7	$	164.5
Credit default swaps		207.2		166.2
Total return swaps		55.0		35.6
Foreign currency forward contracts and swaps		415.6		205.0

The derivative instruments are not designated as hedges for accounting purposes. Changes in fair value of the derivatives are recognized during the period in which they occur in investment gains, net in our Consolidated Statements of Comprehensive Income.

Derivative assets and liabilities are generally recognized on a gross basis and included in other current assets or in accounts payable and accrued liabilities on the Consolidated Balance Sheets. The derivative assets and liabilities as of December 31, 2021 and 2020, are summarized as follows (in millions):

	Fair value
	December 31, 2021		December 31, 2020
Derivative assets	$	8.8	$	9.1
Derivative liabilities		15.5		10.8

In addition to using derivative instruments to mitigate against market volatility of certain seeded investments, we also engage in short sales of securities. As of December 31, 2021 and 2020, the fair value of securities sold but not yet purchased was $3.1 million and $7.9 million, respectively. The cash received from the short sale and the obligation to repurchase the shares are classified in other current assets and in accounts payable and accrued liabilities on our Consolidated Balance Sheets, respectively. Fair value adjustments are recognized in investment gains, net on our Consolidated Statements of Comprehensive Income.

Derivative Instruments in Consolidated Seeded Investment Products

Certain of our consolidated seeded investment products utilize derivative instruments to contribute to the achievement of defined investment objectives. These derivative instruments are classified within other current assets or in accounts payable and accrued liabilities on our Consolidated Balance Sheets. Gains and losses on these derivative instruments are classified within investment gains, net in our Consolidated Statements of Comprehensive Income.

Our consolidated seeded investment products were party to the following derivative instruments as of December 31, 2021 and 2020 (in millions):

	Notional value
	December 31, 2021		December 31, 2020
Futures	$	190.1	$	57.0
Credit default swaps		6.1		1.5
Interest rate swaps		—		75.0
Options		0.1		0.5
Foreign currency forward contracts and swaps		22.1		56.1

Derivative Instruments Used in Foreign Currency Hedging Program

In January 2021, we implemented the Program to take reasonable measures to minimize the income statement effects of foreign currency remeasurement of monetary balance sheet accounts. The Program is not designed to eliminate all impacts of foreign currency risk; rather it is designed to reduce income statement volatility. The Program utilizes foreign currency forward contracts and swaps to achieve its objectives, and it is considered an economic hedge for accounting purposes.

The notional value of the foreign currency forward contracts and swaps was $171.4 million at December 31, 2021. The derivative assets and liabilities are generally recognized on a gross basis and included in other current assets or in accounts payable and accrued liabilities on our Consolidated Balance Sheets. The derivative assets as of December 31, 2021, are summarized as follows (in millions):

	Fair Value
	December 31, 2021
Derivative assets	$	3.2

Changes in fair value of the derivatives are recognized in other non-operating income, net on our Consolidated Statements of Comprehensive Income, and we recognized a gain of $0.4 million during the year ended December 31, 2021. Foreign currency remeasurement is also recognized in other non-operating income, net on our Consolidated Statement of Comprehensive Income.