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

6 Months Ended

Jun. 30, 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 June 30, 2016 and December 31, 2015:



	Assets at Fair Value as of June 30, 2016
	Level 1			Level 2			Level 3			Total
				(dollars in thousands)
Operating Entities
Securities owned
US Government securities	$	3,773		$	—		$	—		$	3,773
Preferred stock	—			—			13,242			13,242
Common stocks	432,713			2,782			7,745			443,240
Convertible bonds	—			—			250			250
Corporate bonds	—			6,847			—			6,847
Warrants and rights	278			—			3,303			3,581
Mutual funds	821			—			—			821
Receivable on derivative contracts, at fair value
Futures	797			—			—			797
Currency forwards	—			160			—			160
Equity swaps	—			2,654			—			2,654
Options	7,953			4,860			8,547			21,360
Other investments
Lehman claim	—			—			270			270
Consolidated funds
Securities owned
Preferred stock	—			148			41,000			41,148
Common stocks	943			5,285			—			6,228
Corporate Bonds	—			4,726			—			4,726
Term Loan	—			1,426			—			1,426
Receivable on derivative contracts, at fair value
Currency forwards	—			18			—			18
Equity swaps	—			23			—			23
Options	8			11			—			19
	$	447,286		$	28,940		$	74,357		$	550,583
Percentage of total assets measured at fair value	81.2		%	5.3		%	13.5		%
Portfolio funds measured at net asset value (a)										116,079
Consolidated funds' portfolio funds measured at net asset value (a)										374,683
Equity method investments										42,629
Total investments										$	1,083,974



	Liabilities at Fair Value as of June 30, 2016
	Level 1			Level 2			Level 3			Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased
Common stocks	$	284,283		$	—		$	—		$	284,283
Corporate bonds	—			1,131			—			1,131
Payable for derivative contracts, at fair value
Futures	1,005			—			—			1,005
Currency forwards	—			403			—			403
Equity and credit default swaps	—			2,408			—			2,408
Options	2,493			—			8,547			11,040
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—			—			7,197			7,197
Consolidated funds
Securities sold, not yet purchased
Common stocks	358			—			—			358
Corporate bonds	—			1,195			—			1,195
	$	288,139		$	5,137		$	15,744		$	309,020
Percentage of total liabilities measured at fair value	93.2		%	1.7		%	5.1		%

(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 and the second quarter of 2016, 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 2018, December 2020, and June 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 June 30, 2016 can range from $0.1 million to $15.7 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 2018, and December 2020, 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 and six months ended June 30, 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 June 30, 2016
	Balance at March 31, 2016		Transfers in		Transfers out				Purchases/(covers)		(Sales)/shorts			Realized and Unrealized gains/losses			Balance at June 30, 2016		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	13,646	$	—	$	(1,000	)	(b)	$	200	$	—		$	396		$	13,242	$	394
Common stocks	6,265		—		—				1,204		(135		)	411			7,745		276
Convertible bonds	250		—		—				—		—			—			250		—
Options, asset	20,892		—		—				—		—			(12,345		)	8,547		(12,345		)
Options, liability	20,892		—		—				—		—			(12,345		)	8,547		(12,345		)
Warrants and rights	2,505		—		—				1,914		(817		)	(299		)	3,303		402
Lehman claim	293		—		—				—		—			(23		)	270		(23		)
Contingent consideration liability	8,293		—		—				2,397		(3,493		)	—			7,197		—
Consolidated Funds
Preferred stock	28,000		—		—				13,000		—			—			41,000		—



	Three Months Ended June 30, 2015
	Balance at March 31, 2015		Transfers in		Transfers out				Purchases/(covers)		(Sales)/shorts			Realized and Unrealized gains/losses			Balance at June 30, 2015		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	19,480	$	—	$	(6,823	)	(a)	$	10,875	$	—		$	(70	)	$	23,462	$	(70	)
Common stocks	411		—		—				—		(28		)	21			404		7
Convertible bonds	879		—		—				—		—			—			879		—
Options, asset	41,642		—		—				—		—			16,934			58,576		16,934
Options, liability	41,642		—		—				—		—			16,934			58,576		16,934
Warrants and rights	2,559		—		—				—		(57		)	(186		)	2,316		(212		)
Lehman claim	361		—		—				—		—			(14		)	347		(14		)
Contingent consideration liability	3,974		—		—				—		(1,616		)	—			2,358		—
Consolidated Funds
Lehman claim	494		—		—				—		—			250			744		250



	Six Months Ended June 30, 2016
	Balance at December 31, 2015		Transfers in		Transfers out				Purchases/(covers)		(Sales)/shorts			Realized and Unrealized gains/losses			Balance at June 30, 2016		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	12,872	$	—	$	(1,000	)	(b)	$	200	$	(218	)	$	1,388		$	13,242	$	960
Common stocks	3,278		—		—				2,273		(135		)	2,329			7,745		2,330
Convertible bonds	819		—		—				—		(569		)	—			250		—
Options, asset	18,194		—		—				—		—			(9,647		)	8,547		(9,647		)
Options, liability	18,194		—		—				—		—			(9,647		)	8,547		(9,647		)
Warrants and Rights	2,572		—		—				1,914		(817		)	(366		)	3,303		(353		)
Lehman claim	299		—		—				—		—			(29		)	270		(29		)
Contingent consideration liability	6,158		—		—				2,397		(3,493		)	2,135			7,197		2,135
Consolidated Funds
Preferred stock	32,000				(4,000		)	(a)	13,000		—			—			41,000		—



	Six Months Ended June 30, 2015
	Balance at December 31, 2014		Transfers in		Transfers out				Purchases/(covers)		(Sales)/shorts			Realized and Unrealized gains/losses			Balance at June 30, 2015		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	12,517	$	—	$	(6,823	)	(b)	$	18,250	$	—		$	(482	)	$	23,462	$	(483	)
Common stocks	412		—		—				—		(31		)	23			404		12
Convertible bonds	900		—		—				—		—			(21		)	879		(21		)
Options, asset	36,807		—		—				—		—			21,769			58,576		21,769
Options, liability	36,807		—		—				—		—			21,769			58,576		21,769
Warrants and Rights, asset	1,322		—		—				26		(71		)	1,039			2,316		985
Lehman claim	380		—		—				—		—			(33		)	347		(33		)
Contingent consideration liability	4,083		—		—				—		(1,725		)	—			2,358		—
Consolidated Funds
Lehman claim	493		—		—				—		—			251			744		250

(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.

(b) The investment completed an initial public offering.

Fair Value Inputs, Assets, Quantitative Information

The following table includes quantitative information as of June 30, 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 June 30, 2016		Valuation techniques	Unobservable Inputs	Range
Level 3 Assets	(dollars in thousands)
Common and preferred stocks	$	5,455	Market/transaction multiples and option pricing method Illiquidity discount, discounted cash flow	Volatility Market multiples Discount Discount rate	35% 1x to 9.5x 90% 9.5%
Warrants and rights, net	3,303		Model based	Volatility	18% to 105% (weighted average 86%)
Options	8,547		Option pricing models	Volatility	42%
Other level 3 assets (a)	57,052
Total level 3 assets	74,357
Level 3 Liabilities
Options	8,547		Option pricing models	Volatility	42%
Contingent consideration	7,197		Discounted cash flows	Projected cash flow and discount rate	0% - 31% (weighted average 21%)
Total level 3 liabilities	$	15,744



	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 June 30, 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.



	June 30, 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	$	57,783		$	57,783		$	158,485		$	158,485		Level 1
Cash collateral pledged	13,772			13,772			10,085			10,085			Level 2
Consolidated funds
Cash and cash equivalents	7,942			7,942			13,934			13,934			Level 1
Financial Liabilities
Convertible debt	126,138		(a)	137,280		(b)	122,401		(a)	144,946		(b)	Level 2
Notes payable and other debt	104,752			110,313			68,565			71,945			Level 2


(a)	The carrying amount of the convertible debt includes an unamortized discount of $21.4 million and $24.7 million as of June 30, 2016 and December 31, 2015.


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