Segment Reporting

The Company conducts its operations through two segments: the alternative investment segment and the broker‑dealer segment. These activities are conducted primarily in the United States and substantially all of its revenues are generated domestically. The performance measure for these segments is Economic Income (Loss), which management uses to evaluate the financial performance of and make operating decisions for the segments including determining appropriate compensation levels. Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other factors.

In general, Economic Income (Loss) is a pre-tax measure that (i) eliminates the impact of consolidation for consolidated funds and (ii) excludes certain other acquisition-related and/or reorganization expenses (See Note 2). In addition, Economic Income (Loss) revenues include investment income that represents the income the Company has earned in investing its own capital, including realized and unrealized gains and losses, interest and dividends, net of associated investment related expenses. For US GAAP purposes, these items are included in each of their respective line items. Economic Income (Loss) revenues also include management fees, incentive income and investment income earned through the Company's investment as a general partner in certain real estate entities and the Company's investment in the activist business. For US GAAP purposes, all of these items are recorded in other income (loss). In addition, Economic Income (Loss) expenses are reduced by reimbursement from affiliates, which for US GAAP purposes is presented gross as part of revenue.

As further stated below, one major difference between Economic Income (Loss) and US GAAP net income (loss) is that Economic Income (Loss) presents the segments' results of operations without the impact resulting from the full consolidation of any of the Consolidated Funds. Consolidation of these funds results in including in income the pro rata share of the income or loss attributable to other owners of such entities which is reflected in net income (loss) attributable to redeemable non-controlling interest in consolidated subsidiaries in the accompanying consolidated statements of operations. This pro rata share has no effect on the overall financial performance for the alternative investment segment, as ultimately, this income or loss is not income or loss for the alternative investment segment itself. Included in Economic Income (Loss) is the actual pro rata share of the income or loss attributable to the Company as an investor in such entities, which is relevant in management making operating decisions and evaluating financial performance.

The following tables set forth operating results for the Company's alternative investment and broker dealer segments and related adjustments necessary to reconcile the Company's Economic Income (Loss) measure to arrive at the Company's consolidated US GAAP net income (loss):



	Year Ended December 31, 2014
									Adjustments
	Alternative Investment			Broker-Dealer (1)		Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	—		$	170,506	$	170,506		$	—		$	—			$	170,506
Brokerage	55			146,192		146,247			—			(6,115		)	(e)	140,132
Management fees	64,774			—		64,774			(963		)	(23,184		)	(a)	40,627
Incentive income	45,708			—		45,708			(281		)	(42,642		)	(a)	2,785
Investment income	45,193			20,022		65,215			—			(65,215		)	(c)	—
Interest and dividends	—			—		—			—			48,870			(c)(e)	48,870
Reimbursement from affiliates	—			—		—			(342		)	12,837			(f)	12,495
Other revenue	4,645			523		5,168			—			4,278			(c)	9,446
Consolidated Funds revenues	—			—		—			2,915			—				2,915
Total revenues	160,375			337,243		497,618			1,329			(71,171		)		427,776
Expenses
Non interest expense	115,601			320,261		435,862			—			7,609			(c)(d)(g)	443,471
Goodwill impairment	—			—		—			—			2,334			(g)	2,334
Interest and dividends	7,804			1,994		9,798			—			32,954			(c)(e)	42,752
Consolidated Funds expenses	—			—		—			1,634			—				1,634
Total expenses	123,405			322,255		445,660			1,634			42,897				490,191
Total other income (loss)	—			—		—			5,775			114,476			(c)	120,251
Income taxes expense / (benefit)	—			—		—			—			(124,944		)	(b)	(124,944		)
(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries and funds	(7,802		)	—		(7,802		)	(5,470		)	(2,292		)		(15,564		)
Economic Income (Loss) / Net Income (loss) attributable to Cowen Group, Inc. stockholders	$	29,168		$	14,988	$	44,156		$	—		$	123,060			$	167,216



	Year Ended December 31, 2013
										Adjustments
	Alternative Investment			Broker-Dealer (1)			Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	—		$	105,333		$	105,333		$	—		$	—			$	105,333
Brokerage	—			121,065			121,065			—			(6,472		)	(e)	114,593
Management fees	56,984			—			56,984			(1,146		)	(18,535		)	(a)	37,303
Incentive income	21,205			—			21,205			—			(8,619		)	(a)	12,586
Investment income	30,713			5,947			36,660			—			(36,660		)	(c)	—
Interest and dividends	—			—			—			—			39,454			(c)(e)	39,454
Reimbursement from affiliates	—			—			—			(99		)	10,533			(f)	10,434
Other revenue	524			2,010			2,534			—			2,884			(c)	5,418
Consolidated Funds revenues	—			—			—			3,398			—				3,398
Total revenues	109,426			234,355			343,781			2,153			(17,415		)		328,519
Expenses
Non interest expense	86,054			237,841			323,895			—			7,684			(c)(d)	331,579
Interest and dividends	231			119			350			—			26,949			(c)(e)	27,299
Consolidated Funds expenses	—			—			—			2,039			—				2,039
Total expenses	86,285			237,960			324,245			2,039			34,633				360,917
Total other income (loss)	—			—			—			2,618			48,077			(c)	50,695
Income taxes expense / (benefit)	—			—			—			—			457			(b)	457
(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries and funds	(12,995		)	—			(12,995		)	(2,732		)	2,534				(13,193		)
Economic Income (Loss) / Net Income (loss) attributable to Cowen Group, Inc. stockholders	$	10,146		$	(3,605	)	$	6,541		$	—		$	(1,894	)		$	4,647

(1) For the year ended December 31, 2013, the Company has reflected $7.6 million of investment income and related compensation expense of $2.5 million within the broker-dealer segment in proportion to that segment's capital.



	Year Ended December 31, 2012
										Adjustments
	Alternative Investment			Broker-Dealer (1)			Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	—		$	71,762		$	71,762		$	—		$	—			$	71,762
Brokerage	—			93,903			93,903			—			(2,736		)	(e)	91,167
Management fees	56,381			—			56,381			(1,474		)	(16,791		)	(a)	38,116
Incentive income	14,518			—			14,518			—			(9,107		)	(a)	5,411
Investment income	40,374			9,742			50,116			—			(50,116		)	(c)	—
Interest and dividends	—			—			—			—			24,608			(c)(e)	24,608
Reimbursement from affiliates	—			—			—			(288		)	6,562			(f)	6,274
Other revenue	844			404			1,248			—			2,420			(c)	3,668
Consolidated Funds revenues	—			—			—			509			—				509
Total revenues	112,117			175,811			287,928			(1,253		)	(45,160		)		241,515
Expenses
Non interest expense	90,949			211,729			302,678			—			10,409			(c)(d)	313,087
Interest and dividends	151			188			339			—			11,798			(c)(e)	12,137
Consolidated Funds expenses	—			—			—			1,676			—				1,676
Total expenses	91,100			211,917			303,017			1,676			22,207				326,900
Total other income (loss)	—			—			—			2,556			59,320			(c)	61,876
Income taxes expense / (benefit)	—			—			—			—			448			(b)	448
(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries and funds	(2,480		)	—			(2,480		)	373			2,179				72
Economic Income (Loss) / Net Income (loss) attributable to Cowen Group, Inc. stockholders	$	18,537		$	(36,106	)	$	(17,569	)	$	—		$	(6,316	)		$	(23,885	)

(1) For the year ended December 31, 2012, the Company has reflected $10.2 million of investment income and related compensation expense of $3.4 million within the broker-dealer segment in proportion to that segment's capital.

The following is a summary of the adjustments made to US GAAP net income (loss) for the segment to arrive at

Economic Income (Loss):

Funds Consolidation: The impacts of consolidation and the related elimination entries of the Consolidated Funds are not included in Economic Income (Loss). Adjustments to reconcile to US GAAP net income (loss) include elimination of incentive income and management fees earned from the Consolidated Funds and addition of fund expenses excluding management fees paid, fund revenues and investment income (loss).

Other Adjustments:

(a) Economic Income (Loss) recognizes revenues (i) net of distribution fees paid to agents and (ii) our proportionate share

of management and incentive fees of certain real estate operating entities and the activist business.

(b) Economic Income (Loss) excludes income taxes as management does not consider this item when evaluating the

performance of the segment.

(d) Economic Income (Loss) recognizes the Company's proportionate share of expenses for certain real estate and other

operating entities for which the investments are recorded under the equity method of accounting for investments.

(e) Economic Income (Loss) recognizes stock borrow/loan activity and other brokerage dividends as brokerage revenue.

(f) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of

revenues under US GAAP.

(g) Economic Income (Loss) excludes goodwill impairment and other reorganization expenses.

For the years ended December 31, 2014, 2013, and 2012, there was no one fund or other customer which represented more than 10% of the Company's total revenues.