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

3 Months Ended

Mar. 31, 2016

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 condensed consolidated statements of financial condition by caption and by level within the valuation hierarchy as of March 31, 2016 and December 31, 2015:



	Assets at Fair Value as of March 31, 2016
	Level 1			Level 2			Level 3			Total
				(dollars in thousands)
Operating Entities
Securities owned
US Government securities	$	3,774		$	—		$	—		$	3,774
Preferred stock	6,669			3,381			13,646			23,696
Common stocks	580,184			2,910			6,265			589,359
Convertible bonds	—			—			250			250
Corporate bonds	—			6,853			—			6,853
Warrants and rights	226			—			2,505			2,731
Mutual funds	1,104			—			—			1,104
Receivable on derivative contracts, at fair value
Futures	1,289			—			—			1,289
Currency forwards	—			154			—			154
Equity swaps	—			811			—			811
Options	16,238			6,341			20,892			43,471
Other investments
Lehman claim	—			—			293			293
Consolidated funds
Securities owned
Preferred stock	—			—			28,000			28,000
Common stocks	806			6,294			—			7,100
Corporate Bonds	—			4,218			—			4,218
Term Loan	—			1,205			—			1,205
Receivable on derivative contracts, at fair value
Currency forwards	—			2			—			2
Equity swaps	—			61			—			61
Options	46			16			—			62
	$	610,336		$	32,246		$	71,851		$	714,433
Percentage of total assets measured at fair value	85.4		%	4.5		%	10.1		%
Portfolio funds measured at net asset value (a)										118,599
Consolidated funds' portfolio funds measured at net asset value (a)										394,478
Equity method investments										47,893
Total investments										$	1,275,403



	Liabilities at Fair Value as of March 31, 2016
	Level 1			Level 2			Level 3			Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased
Common stocks	$	412,750		$	—		$	—		$	412,750
Corporate bonds	—			60			—			60
Payable for derivative contracts, at fair value
Futures	1,834			—			—			1,834
Currency forwards	—			426			—			426
Equity and credit default swaps	—			156			—			156
Options	1,826			—			20,892			22,718
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—			—			8,293			8,293
Consolidated funds
Securities sold, not yet purchased
Common stocks	352			—			—			352
Corporate bonds	—			1,015			—			1,015
Payable for derivative contracts, at fair value
Currency forwards	—			2			—			2
	$	416,762		$	1,659		$	29,185		$	447,606
Percentage of total liabilities measured at fair value	93.1		%	0.4		%	6.5		%

(a) In accordance with US GAAP, certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated statement of financial condition.

(b) In accordance with the terms of the purchase agreements for acquisitions that closed during 2012 and the third and fourth quarter of 2015, 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 periods ended August 2016, December 2020, and December 2018, respectively. 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 March 31, 2016 can range from $0.1 million to $8.6 million.



	Assets at Fair Value as of December 31, 2015
	Level 1			Level 2			Level 3			Total
				(dollars in thousands)
Operating Entities
Securities owned
US Government securities	$	3,016		$	—		$	—		$	3,016
Preferred stock	7,891			4,800			12,872			25,563
Common stocks	505,303			7,527			3,278			516,108
Convertible bonds	—			—			819			819
Corporate bonds	—			47,192			—			47,192
Warrants and rights	487			—			2,572			3,059
Mutual funds	14,477			—			—			14,477
Receivable on derivative contracts, at fair value
Futures	189			—			—			189
Currency forwards	—			659			—			659
Equity swaps	—			2,327			—			2,327
Options	11,895			6,354			18,194			36,443
Other investments
Lehman claim	—			—			299			299
Consolidated funds
Preferred stock	—			—			32,000			32,000
	$	543,258		$	68,859		$	70,034		$	682,151
Percentage of total assets measured at fair value	79.6		%	10.1		%	10.3		%
Portfolio funds measured at net asset value (a)										113,281
Consolidated funds' portfolio funds measured at net asset value (a)										263,818
Equity method investments										27,067
Total investments										$	1,086,317



	Liabilities at Fair Value as of December 31, 2015
	Level 1			Level 2			Level 3			Total
	(dollars in thousands)
Securities sold, not yet purchased
Common stocks	$	257,101		$	—		$	—		$	257,101
Corporate bonds	—			58			—			58
Payable for derivative contracts, at fair value
Futures	101			—			—			101
Currency forwards	—			463			—			463
Equity and credit default swaps	—			71			—			71
Options	2,354			—			18,194			20,548
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—			—			6,158			6,158
	$	259,556		$	592		$	24,352		$	284,500
Percentage of total liabilities measured at fair value	91.2		%	0.2		%	8.6		%

(b) In accordance with the terms of the purchase agreements for acquisitions that closed during 2012 and the third and fourth quarter of 2015, 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 periods ended August 2016, December 2020, and December 2018, respectively. 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, 2015 can range from $0.1 million to $10.0 million.

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

The following table includes a rollforward of the amounts for the three months ended March 31, 2016 and 2015, 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.



	Three Months Ended March 31, 2016
	Balance at December 31, 2015		Transfers in		Transfers out				Purchases/(covers)		(Sales)/shorts			Realized and Unrealized gains/losses			Balance at March 31, 2016		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	12,872	$	—	$	—			$	—	$	(218	)	$	992		$	13,646	$	566
Common stocks	3,278		—		—				1,069		—			1,918			6,265		2,054
Convertible bonds	819		—		—				—		(569		)	—			250		—
Options, asset	18,194		—		—				—		—			2,698			20,892		2,698
Options, liability	18,194		—		—				—		—			2,698			20,892		2,698
Warrants and Rights	2,572		—		—				—		—			(67		)	2,505		150
Lehman claim	299		—		—				—		—			(6		)	293		(6		)
Contingent consideration liability	6,158		—		—									2,135			8,293		2,135
Consolidated Funds
Preferred stock	32,000				(4,000		)	(a)	—		—			—			28,000		—



	Three Months Ended March 31, 2015
	Balance at December 31, 2014		Transfers in		Transfers out				Purchases/(covers)		(Sales)/shorts			Realized and Unrealized gains/losses			Balance at March 31, 2015		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	12,517	$	—	$	—			$	7,375	$	—		$	(412	)	$	19,480	$	(412	)
Common stocks	412		—		—				—		(3		)	2			411		5
Convertible bonds	900		—		—				—		—			(21		)	879		(21		)
Options, asset	36,807		—		—				—		—			4,835			41,642		4,835
Options, liability	36,807		—		—				—		—			4,835			41,642		4,835
Warrants and Rights, asset	1,322		—		(14		)	(a)	26		—			1,225			2,559		1,224
Lehman claim	380		—		—				—		—			(19		)	361		(19		)
Contingent consideration liability	4,083		—		—				—		(109		)	—			3,974		—
Consolidated Funds
Lehman claim	493		—		—				—		—			1			494		1

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

operations.

(a) The investment was converted to equity.

Fair Value Inputs, Assets, Quantitative Information

The following table includes quantitative information as of March 31, 2016 and December 31, 2015 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 March 31, 2016		Valuation techniques	Unobservable Inputs	Range
Level 3 Assets	(dollars in thousands)
Common and preferred stocks	$	2,551	Market/transaction multiples and option pricing method Illiquidity discount	Volatility Market multiples Discount	35% 1x to 5x 90%
Warrants and rights, net	2,505		Model based	Volatility	18% to 61% (weighted average 46%)
Options	20,892		Option pricing models	Volatility	45%
Other level 3 assets (a)	45,903
Total level 3 assets	71,851
Level 3 Liabilities
Options	20,892		Option pricing models	Volatility	45%
Contingent consideration	8,293		Discounted cash flows	Projected cash flow and discount rate	0% - 24.5% (weighted average 9.58%)
Total level 3 liabilities	$	29,185



	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2015		Valuation techniques	Unobservable Inputs	Range
Level 3 Assets	(dollars in thousands)
Common and preferred stocks	$	2,569	Market multiples and option pricing method	Volatility Market multiples	34% 1x to 4.75x
Convertible bonds	819		Recovery analysis	Recovery rate	50%
Warrants and rights, net	2,572		Model based	Volatility	18% to 61% (weighted average 43%)
Options	18,194		Option pricing models	Volatility Credit spreads	38%
Other level 3 assets (a)	45,880
Total level 3 assets	70,034
Level 3 Liabilities
Options	18,194		Option pricing models	Volatility Credit spreads	38%
Contingent consideration	6,158		Discounted cash flows	Projected cash flow and discount rate	6.6% - 24.5% (weighted average 16.4%)
Total level 3 liabilities	$	24,352


(a)	The quantitative disclosures 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 fair values, at March 31, 2016 and December 31, 2015, of financial assets and liabilities and information on their classification within the fair value hierarchy which are not 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.



	March 31, 2016						December 31, 2015						Fair Value Hierarchy
	Carrying Amount			Fair Value			Carrying Amount			Fair Value			Fair Value Hierarchy
				(dollars in thousands)
Financial Assets
Operating companies
Cash and cash equivalents	$	67,046		$	67,046		$	158,485		$	158,485		Level 1
Cash collateral pledged	10,157			10,157			10,085			10,085			Level 2
Consolidated funds
Cash and cash equivalents	12,348			12,348			13,934			13,934			Level 1
Financial Liabilities
Convertible debt	124,251		(a)	139,546		(b)	122,401		(a)	144,946		(b)	Level 2
Notes payable and other debt	90,081			72,375			68,565			71,945			Level 2


(a)	The carrying amount of the convertible debt includes an unamortized discount of $23.1 million and $24.7 million as of March 31, 2016 and December 31, 2015.


(b)	The convertible debt include the conversion option and is based on the last broker quote available.