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 (ii) excludes goodwill and intangible impairment (iii) excludes certain other acquisition-related adjustments and/or reorganization expenses and (iv) excludes preferred stock dividends. 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, 2016
										Adjustments
	Alternative Investment			Broker-Dealer			Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	—		$	133,279		$	133,279		$	—		$	—			$	133,279
Brokerage	—			207,040			207,040			—			(7,860		)		199,180
Management fees	64,086			3,162			67,248			(1,665		)	(24,971		)	(a)	40,612
Incentive income (loss)	26,274			—			26,274			(714		)	(17,226		)	(a)	8,334
Investment income (loss)	3,015			1,008			4,023			—			(4,023		)	(c)	—
Interest and dividends	—			—			—			—			14,732			(c)	14,732
Aircraft lease revenue	—			—			—			—			4,161			(f)	4,161
Reimbursement from affiliates	—			—			—			(303		)	10,807			(e)	10,504
Reinsurance premiums	—			—			—			—			32,459			(h)	32,459
Other revenue	29,202			565			29,767			—			(7,412		)	(f) (h) (c)	22,355
Consolidated Funds revenues	—			—			—			5,949			—				5,949
Total revenues	122,577			345,054			467,631			3,267			667				471,565
Expenses
Non interest expense	102,163			369,188			471,351			(429		)	37,824			(b)(c)(d)	508,746
Interest and dividends	12,827			4,363			17,190			—			12,118			(c)	29,308
Consolidated Funds expenses	—			—			—			9,064			—				9,064
Total expenses	114,990			373,551			488,541			8,635			49,942				547,118
Total other income (loss)	—			—			—			8,532			35,534			(c)	44,066
Income taxes expense / (benefit)	—			—			—			—			(19,092		)	(b)	(19,092		)
(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries and funds	(7,821		)	—			(7,821		)	(3,164		)	4,103				(6,882		)
Economic Income (Loss) / Net Income (loss) attributable to Cowen Group, Inc.	$	(234	)	$	(28,497	)	$	(28,731	)	$	—		$	9,454			$	(19,277	)



	Year Ended December 31, 2015
									Adjustments
	Alternative Investment			Broker-Dealer		Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	—		$	222,781	$	222,781		$	—		$	—			$	222,781
Brokerage	—			160,436		160,436			—			(2,714		)		157,722
Management fees	68,989			1,026		70,015			(1,307		)	(26,802		)	(a)	41,906
Incentive income (loss)	(1,544		)	—		(1,544		)	(736		)	3,746			(a)	1,466
Investment income (loss)	49,244			13,352		62,596			—			(62,596		)	(c)	—
Interest and dividends	—			—		—			—			13,796			(c)	13,796
Reimbursement from affiliates	—			—		—			(190		)	21,747			(e)	21,557
Other revenue	14,492			890		15,382			—			(11,656		)	(c)	3,726
Consolidated Funds revenues	—			—		—			1,613			—				1,613
Total revenues	131,181			398,485		529,666			(620		)	(64,479		)		464,567
Expenses
Non interest expense	107,291			362,463		469,754			—			6,090			(b)(c)(d)	475,844
Interest and dividends	11,839			4,745		16,584			—			9,636			(c)	26,220
Consolidated Funds expenses	—			—		—			2,310			—				2,310
Total expenses	119,130			367,208		486,338			2,310			15,726				504,374
Total other income (loss)	—			—		—			8,781			42,505			(c)	51,286
Income taxes expense / (benefit)	—			—		—			—			(47,496		)	(b)	(47,496		)
(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries and funds	(8,796		)	—		(8,796		)	(5,851		)	(599		)		(15,246		)
Economic Income (Loss) / Net Income (loss) attributable to Cowen Group, Inc.	$	3,255		$	31,277	$	34,532		$	—		$	9,197			$	43,729



	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		)		140,132
Management fees	64,774			—		64,774			(963		)	(23,184		)	(a)	40,627
Incentive income (loss)	45,708			—		45,708			(281		)	(42,642		)	(a)	2,785
Investment income (loss)	45,193			20,022		65,215			—			(65,215		)	(c)	—
Interest and dividends	—			—		—			—			48,870			(c)	48,870
Reimbursement from affiliates	—			—		—			(342		)	12,837			(e)	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			(b)(c)(d)	443,471
Goodwill impairment	—			—		—			—			2,334			(g)	2,334
Interest and dividends	7,804			1,994		9,798			—			32,954			(c)	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

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 and acquisition related adjustments as management does not consider

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

revenues under US GAAP.

(f) Aircraft lease revenue is shown net of expenses in other revenue for Economic Income (Loss).

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

(h) Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities net of

expenses.

For the year ended December 31, 2016 and 2015, there was no one fund or other customer which represented more than 10% of the Company's total revenues.