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

12 Months Ended

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



	Assets at Fair Value as of December 31, 2016
	Level 1			Level 2			Level 3			Total
				(dollars in thousands)
Operating Entities
Securities owned
US Government securities	$	3,780		$	—		$	—		$	3,780
Preferred stock	—			—			15,811			15,811
Common stocks	658,179			1,355			10,121			669,655
Convertible bonds	—			—			250			250
Corporate bonds	—			2,477			552			3,029
Trade claims	—			—			10			10
Warrants and rights	4,616			—			3,719			8,335
Mutual funds	6			—			—			6
Receivable on derivative contracts, at fair value
Futures	104			—			—			104
Currency forwards	—			592			—			592
Swaps	—			468			—			468
Options	6,662			322			14,753			21,737
Other investments
Lehman claim	—			—			265			265
Consolidated funds
Securities owned
US Government securities	6,994			—			—			6,994
Preferred stock	—			415			36,928			37,343
Common stocks	19,467			8,712			295			28,474
Corporate Bonds	—			4,214			—			4,214
Warrants and rights	—			—			3			3
Term loan	—			1,552			657			2,209
Receivable on derivative contracts, at fair value
Currency forwards	—			18			—			18
Futures	—			731			—			731
Options	132			12			—			144
	$	699,940		$	20,868		$	83,364		$	804,172
Percentage of total assets measured at fair value	87.0		%	2.6		%	10.4		%
Portfolio funds measured at net asset value (a)										120,023
Consolidated funds' portfolio funds measured at net asset value (a)										401,465
Equity method investments										36,991
Total investments										$	1,362,651



	Liabilities at Fair Value as of December 31, 2016
	Level 1			Level 2			Level 3			Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased
Common stocks	$	263,460		$	—		$	—		$	263,460
Corporate bonds	—			2,591			—			2,591
Warrants and rights	39			—			—			39
Payable for derivative contracts, at fair value
Futures	642			—			—			642
Swaps	—			181			—			181
Options	5,186			—			14,753			19,939
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—			—			5,997			5,997
Consolidated funds
Securities sold, not yet purchased
Common stocks	211			—			—			211
Corporate bonds	—			672			—			672
Payable for derivative contracts, at fair value
Currency forwards	—			10			—			10
Options	67			—			—			67
Futures	—			495			—			495
	$	269,605		$	3,949		$	20,750		$	294,304
Percentage of total liabilities measured at fair value	91.6		%	1.3		%	7.1		%

(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 consolidated statement of financial condition.

(b) In accordance with the terms of the purchase agreements for acquisitions that closed during 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 and/or revenues 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 December 31, 2016 can range from $0.1 million to $15.1 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			2,278			515,108
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		$	69,034		$	681,151
Percentage of total assets measured at fair value	79.8		%	10.1		%	10.1		%
Portfolio funds measured at net asset value (a)										114,281
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 year ended December 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.



	Year Ended December 31, 2016
	Balance at December 31, 2015		Transfers in			Transfers out				Purchases/(covers)		(Sales)/shorts			Realized and Unrealized gains/losses			Balance at December 31, 2016		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	12,872	$	—		$	(1,000	)	(a)	$	3,717	$	(218	)	$	440		$	15,811	$	34
Common stocks	2,278		—			—				7,099		(3,222		)	3,966			10,121		3,972
Convertible bonds	819		—			—				—		(569		)	—			250		—
Corporate bond	—		675		(c)	—				279		(325		)	(77		)	552		(111		)
Options, asset	18,194		—			—				—		—			(3,441		)	14,753		(3,441		)
Options, liability	18,194		—			—				—		—			(3,441		)	14,753		(3,441		)
Warrants and Rights	2,572		—			—				1,914		(817		)	50			3,719		79
Trade claims	—		—			—				10		—			—			10		—
Lehman claim	299		—			—				—		—			(34		)	265		(35		)
Contingent consideration liability	6,158		—			—				2,397		(4,697		)	2,139			5,997		—
Consolidated Funds
Preferred stock	32,000		—			(11,000		)	(a)	13,483		—			2,445			36,928		2,445
Common stocks	—		—			—				314		—			(19		)	295		(19		)
Warrants and rights	—		—			—				—		—			3			3		3
Term Loan	—		—			—				590		—			67			657		67



	Year Ended December 31, 2015
	Balance at December 31, 2014		Transfers in			Transfers out				Purchases/(covers)		(Sales)/shorts			Realized and Unrealized gains/losses			Balance at December 31, 2015		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	12,517	$	—		$	(11,322	)	(a) (b)	$	14,850	$	(6,665	)	$	3,492		$	12,872	$	217
Common stocks	412		—			—				2,398		(441		)	(91		)	2,278		90
Convertible bonds	900		—			—				250		—			(331		)	819		(331		)
Options, asset	36,807		—			—				—		—			(18,613		)	18,194		(18,613		)
Options, liability	36,807		—			—				—		—			(18,613		)	18,194		(18,613		)
Warrants and Rights, asset	1,322		—			—				824		(71		)	497			2,572		715
Lehman claim	380		—			—				—		—			(81		)	299		(81		)
Contingent consideration liability	4,083		—			—				3,600		(1,725		)	200			6,158		200
Consolidated Funds
Preferred Stock	—		7,000		(b)	—				25,000		—			—			32,000		—
Lehman claim	493		—			—				—		(739		)	246			—		—

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

operations.

(a) The investments were converted to common stock.

(b) The Company transferred investments to a consolidated fund.

Fair Value Inputs, Assets, Quantitative Information

The following table includes quantitative information as of December 31, 2016 and 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 December 31, 2016		Valuation techniques	Unobservable Inputs	Range
Level 3 Assets	(dollars in thousands)
Common and preferred stocks	$	10,917	Guideline companies/transaction price Option pricing method, discounted cash flow	Volatility Market multiples Discount rate	37% 0.8x to 9.3x 9.5% to 10%
Corporate and Convertible bonds	520		Discounted cash flows	Market multiples Discount rate	6x 20%
Warrants and rights, net	3,719		Model based	Volatility	30% to 85% (weighted average 73%)
Options	14,753		Option pricing models	Volatility	40%
Other level 3 assets (a)	53,455
Total level 3 assets	83,364
Level 3 Liabilities
Options	14,753		Option pricing models	Volatility	40%
Contingent consideration	5,997		Discounted cash flows	Projected cash flow and discount rate	8% - 25% (weighted average 23%)
Total level 3 liabilities	$	20,750



	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	38%
Other level 3 assets (a)	44,880
Total level 3 assets	69,034
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 recent transactions.

Fair Value Measurements, Nonrecurring

The following table presents the carrying values and fair values, at December 31, 2016 and 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.



	December 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	$	112,014		$	112,014		$	158,485		$	158,485		Level 1
Cash collateral pledged	13,342			13,342			10,085			10,085			Level 2
Loans receivable	31,088			31,088		(d)	65,612			65,612		(d)	Level 3
Consolidated funds
Cash and cash equivalents	17,761			17,761			13,934			13,934			Level 1
Financial Liabilities
Convertible debt	130,029		(a)	149,545		(b)	122,401		(a)	144,946		(b)	Level 2
Notes payable and other debt	77,030			80,817		(c)	68,565			71,945		(c)	Level 2


(a)	The carrying amount of the convertible debt includes an unamortized discount of $17.8 million and $24.7 million as of December 31, 2016 and 2015.


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


(c)	Notes payable and other debt are based on the last broker quote available.


(d)	The fair market value of level 3 loans is calculated using discounted cash flows.