Fair Value Measurements for Operating Entities and Consolidated Funds (Tables)

12 Months Ended

Dec. 31, 2014

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents the assets and liabilities that are measured at fair value on a recurring basis on the accompanying consolidated statements of financial condition by caption and by level within the valuation hierarchy as of December 31, 2014 and 2013:

Operating Entities



	Assets at Fair Value as of December 31, 2014
	Level 1		Level 2		Level 3		Total
			(dollars in thousands)
Securities owned
US Government securities	$	2,010	$	—	$	—	$	2,010
Preferred stock	—		—		12,517		15,070
Common stocks	578,934		3		412		579,349
Restricted common stocks	—		18,127		—		18,127
Convertible bonds	—		—		900		900
Corporate bonds	—		159,557		—		159,557
Warrants and rights	95		—		1,322		1,417
Mutual funds	15,776		—		—		15,776
Receivable on derivative contracts, at fair value
Futures	75		—		—		75
Currency forwards	—		310		—		310
Equity swaps	—		251		—		251
Options	10,462		1,972		36,807		49,241
Other investments
Portfolio Funds	—		37,195		66,271		103,466
Real estate investments	—		—		2,175		2,175
Lehman claim	—		—		380		380
	$	607,352	$	219,968	$	120,784	$	948,104



	Liabilities at Fair Value as of December 31, 2014
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Securities sold, not yet purchased
Common stocks	$	207,815	$	—	$	—	$	207,815
Corporate bonds	—		60		—		60
Payable for derivative contracts, at fair value
Futures	33		—		—		33
Equity and credit default swaps	—		1,603		—		1,603
Options	2,887		—		36,807		39,694
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (a)	$	—	$	—	$	4,083	$	4,083
	$	210,735	$	1,663	$	40,890	$	253,288

(a) In accordance with the terms of purchase agreements for acquisitions that closed during 2012, the Company is required to pay to the sellers a portion of future net income of the acquired businesses, if certain revenue targets are achieved through the period ended October 2016. The Company estimated the contingent consideration liability using the income approach (discounted cash flow method) which requires the Company to make estimates and assumptions regarding the future cash flows and profits. Changes in these estimates and assumptions could have a significant impact on the amounts recognized. The undiscounted amounts as of December 31, 2014 can range from $0.9 million to $7.1 million.



	Assets at Fair Value as of December 31, 2013
	Level 1		Level 2		Level 3		Total
			(dollars in thousands)
Securities owned
US Government securities	$	9	$	—	$	—	$	9
Preferred stock	—		—		324		324
Common stocks	171,277		2,103		3,559		176,939
Convertible bonds	—		4,008		1,950		5,958
Corporate bonds	—		121,372		—		121,372
Warrants and rights	107		—		5,805		5,912
Mutual funds	525		—		—		525
Receivable on derivative contracts, at fair value
Futures	285		—		—		285
Currency forwards	—		22		—		22
Equity swaps	—		70		—		70
Options	9,698		—		—		9,698
Other investments
Portfolio Funds	—		19,402		51,649		71,051
Real estate investments	—		—		2,088		2,088
Lehman claim	—		—		378		378
	$	181,901	$	146,977	$	65,753	$	394,631



	Liabilities at Fair Value as of December 31, 2013
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Securities sold, not yet purchased
Common stocks	$	130,899	$	—	$	—	$	130,899
Corporate bonds	—		55		—		55
Payable for derivative contracts, at fair value
Futures	275		—		—		275
Currency forwards	—		301		—		301
Equity swaps	—		525		—		525
Options	6,573		—		—		6,573
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (a)	—		—		6,937		6,937
	$	137,747	$	881	$	6,937	$	145,565

Consolidated Funds' investments



	Assets at Fair Value as of December 31, 2014
	Level 1		Level 2		Level 3		Total
			(dollars in thousands)
Other investments
Portfolio Funds	$	—	$	50,631	$	138,253	$	188,884
Lehman claims	—		—		493		493
	$	—	$	50,631	$	138,746	$	189,377



	Assets at Fair Value as of December 31, 2013
	Level 1		Level 2		Level 3		Total
			(dollars in thousands)
Other investments
Portfolio Funds	—		26,964		155,674		182,638
Lehman claims	—		—		4,842		4,842
	$	—	$	26,964	$	160,516	$	187,480

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table includes a rollforward of the amounts for the years ended December 31, 2014, 2013, and 2012, for financial instruments classified within level 3. The classification of a financial instrument within level 3 is based upon the significance of the unobservable inputs to the overall fair value measurement.



	Year Ended December 31, 2014
	Balance at December 31, 2013		Transfers in		Transfers out				Purchases/(covers)		(Sales)/shorts			Realized and Unrealized gains/losses			Balance at December 31, 2014		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	324	$	—	$	(2,000	)	(b)	$	14,396	$	—		$	(203	)	$	12,517	$	(203	)
Common stocks	3,559		—		(3,150		)	(b)	12		(1		)	(8		)	412		(135		)
Convertible bonds	1,950		—		—				—		(200		)	(850		)	900		(850		)
Options, asset	—		—		—				35,710		—			1,097			36,807		1,097
Options, liability	—		—		—				35,710		—			1,097			36,807		1,097
Warrants and Rights	5,805		—		(1,288		)		57		(97		)	(3,155		)	1,322		(1,415		)
Portfolio Funds	51,649		—		—				13,453		(9,940		)	11,109			66,271		9,704
Real estate	2,088		—		—				50,000		(50,168		)	255			2,175		255
Lehman claim	378		—		—				—		(76		)	78			380		79
Contingent consideration liability	6,937		—		—				21		(820		)	(2,055		)	4,083		—
Consolidated Funds
Portfolio Funds	155,674		—		—				—		(28,466		)	11,045			138,253		9,996
Lehman claim	4,842		—		—				—		(4,711		)	362			493		(3,897		)



	Year Ended December 31, 2013
	Balance at December 31, 2012		Transfers in			Transfers out				Purchases/(covers)			(Sales)/shorts			Realized and Unrealized gains/losses			Balance at December 31, 2013		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	2,332	$	—		$	(2,000	)	(b)	$	—		$	—		$	(8	)	$	324	$	(8	)
Common stocks	2,549		—			—				4			(275		)	1,281			3,559		1,451
Convertible bonds	—		—			—				3,938			(1,988		)	—			1,950		—
Corporate Bond	515		—			—				2,735			(3,346		)	96			—		—
Warrants and Rights, asset	1,713		291		(a)	—				166			(110		)	3,745			5,805		4,011
Warrants and Rights, liability	3		—			—				—			—			(3		)	—		—
Portfolio Funds	25,670		13,128		(c)	—				16,914			(9,001		)	4,938			51,649		3,568
Real estate	1,864		—			—				—			(124		)	348			2,088		348
Lehman claim	706		—			—				—			(607		)	279			378		279
Contingent consideration liability	8,116		—			—				(779		)	—			(400		)	6,937		—
Consolidated Funds
Portfolio Funds	182,920		—			—				—			(33,504		)	6,258			155,674		10,984
Lehman claim	14,124		—			—				—			(13,377		)	4,095			4,842		(7,781		)

(1) Unrealized gains/losses are reported in other income (loss) in the accompanying consolidated statements of

operations.

(a) The security was acquired through an acquisition (See Note 2).

(b) The company completed an initial public offering.

(c) The investment was transferred into level 3 due to the Company's commitment as part of its long term extension of its

partnership with credit funds.

Fair Value Inputs, Assets, Quantitative Information

The following table includes quantitative information as of December 31, 2014 and 2013 for financial instruments classified within level 3. The table below quantifies information about the significant unobservable inputs used in the fair value measurement of the Company's level 3 financial instruments.



	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2014		Valuation techniques	Unobservable Inputs	Range

Level 3 Assets
Common and preferred stocks	$	12,269	Market multiples and option pricing method	Volatility Market multiples	45% 1x to 6x
Warrants and rights, net	1,322		Model based	Volatility	20% to 60% (weighted average 34%)
Options	36,807		Option pricing models	Volatility Credit spreads	30% to 40% 500bps - 750 bps
Other level 3 assets (a)	209,132
Total level 3 assets	259,530
Level 3 Liabilities
Options	36,807		Option pricing models	Volatility Credit spreads	30% to 40% 500bps - 750 bps
Contingent consideration	4,083		Discounted cash flows	Projected cash flow and discount rate	9%
Total level 3 liabilities	$	40,890



	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2013		Valuation techniques	Unobservable Inputs	Range

Level 3 Assets
Common and preferred stocks	$	3,474	Discounted cash flows, market multiples, recent transactions, bid levels, and comparable transactions	Market multiples	2x to 3x
Warrants and rights, net	5,805		Model based	Volatility	20% to 100% (weighted average 37%)
Other level 3 assets (a)	216,990
Total level 3 assets	226,269
Level 3 Liabilities
Contingent consideration	6,937		Discounted cash flows	Projected Cash Flow and DCF rate	0% to 15%
Total level 3 liabilities	6,937

(a)

Quantitative disclosures of unobservable inputs and assumptions are not required for investments for which NAV per share is used as a practical expedient to determine fair value, as their redemption features rather than observability of inputs cause them to be classified as a level 3 type asset within the fair value hierarchy. In addition, the fair value of the Consolidated Funds' investments are determined based on net asset value and therefore quantitative disclosures are not included in the table above. The quantitative disclosures also exclude financial instruments for which the determination of fair value is based on prices from prior transactions.

Fair Value Measurements, Nonrecurring

The following table presents the carrying values and estimated fair values, at December 31, 2014 and 2013, of financial assets and liabilities and information on their classification within the fair value hierarchy which are measured at fair value on a recurring basis. For additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value, see Note 3.



	December 31, 2014						December 31, 2013					Fair Value Hierarchy
	Carrying Amount			Estimated Fair Value			Carrying Amount		Estimated Fair Value			Fair Value Hierarchy
				(dollars in thousands)
Financial Assets
Operating companies
Cash and cash equivalents	$	129,509		$	129,509		$	54,720	$	54,720		Level 1
Cash collateral pledged	8,306			8,306			10,907		10,907			Level 2
Securities borrowed	676,100			660,445			927,773		892,792			Level 1
Consolidated funds
Cash and cash equivalents	501			501			2,048		2,048			Level 1
Financial Liabilities
Securities sold under agreement to repurchase	—			—			3,657		3,657		(a)	Level 2
Securities loaned	682,493			661,533			918,577		881,690			Level 1
Convertible debt	118,475		(b)	160,713		(c)	—		—			Level 2
Notes payable and other debt	67,144			69,548			2,564		2,564			Level 2


(a)	Transactions involving the purchase or sale of securities under repurchase/resell agreements are carried at their contract value, which approximates fair value, and are accounted for as collateralized financings.


(b)	The carrying amount of the convertible debt includes unamortized discount of $31.0 million.


(c)	The Convertible Notes include the conversion option and is based on the last broker quote available.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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