Investments of Operating Entities and Consolidated Funds


a.	Operating Entities

Securities owned, at fair value

Securities owned, at fair value are held by the Company and are considered held for trading. Substantially all equity securities, which are not part of the Company's self-clearing securities finance activities, are pledged to external clearing brokers under terms which permit the external clearing broker to sell or re-pledge the securities to others subject to certain limitations.

As of September 30, 2019 and December 31, 2018, securities owned, at fair value consisted of the following:



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Common stock (*)	$	853,786	$	472,299
Preferred stock (*)	16,585		5,617
Warrants and rights (*)	19,865		7,990
Government bonds (a)	2,905		13,398
Corporate bonds (c)	18,366		13,041
Convertible bonds (b) (*)	2,541		3,000
Term loan (*)	1,054		—
Trade claims (*)	7,062		5,543
	$	922,164	$	520,888


(a)	As of September 30, 2019, maturities range from October 2019 to March 2020 with an interest rate of 0%. As of December 31, 2018, maturities ranged from April 2019 to August 2019 with an interest rate of 0%.


(b)	As of September 30, 2019, maturities range from April 2020 to March 2022 with an interest rate of 8%. As of December 31, 2018, the maturity was June 2020 with an interest rate of 8%.


(c)	As of September 30, 2019, maturities ranged from December 2019 to August 2044 and interest rates ranged from 0.00% to 15.00%. As of December 31, 2018, maturities ranged from April 2019 to April 2049 and interest rates ranged from 2% to 15.50%.

* The Company has elected the fair value option for securities owned, at fair value with a fair value of $18.3 million and $9.4 million, respectively, at September 30, 2019 and December 31, 2018.

Receivable on and Payable for derivative contracts, at fair value

The Company's direct involvement with derivative financial instruments includes total return swaps, futures, currency forwards, equity swaps, credit default swaps and options. The Company's derivatives trading activities exposes the Company to certain risks, such as price and interest rate fluctuations, volatility risk, credit risk, counterparty risk, foreign currency movements and changes in the liquidity of markets.

The Company's long and short exposure to derivatives is as follows:



Receivable on derivative contracts	As of September 30, 2019				As of December 31, 2018
	Number of contracts / Notional Value		Fair value		Number of contracts / Notional Value		Fair value
	(dollars in thousands)
Futures	$	33,474	$	103	$	42,288	$	334
Currency forwards	$	79,804	640		$	395	1
Swaps	$	103,591	4,242		$	13,702	917
Options other (a)	349,434		34,769		654,506		23,130
Pay to hold	$	—	—		$	—	743
			$	39,754			$	25,125

(a) Includes index, equity, commodity future and cash conversion options.



Payable for derivative contracts	As of September 30, 2019				As of December 31, 2018
	Number of contracts / Notional Value		Fair value		Number of contracts / Notional Value		Fair value
	(dollars in thousands)
Currency forwards	$	24,636	91		$	96,406	709
Swaps	$	164,056	6,502		$	52,905	2,162
Options other (a)	190,321		26,162		90,730		13,211
			$	32,755			$	16,082

(a) Includes index, equity, commodity future and cash conversion options.

The following tables present the gross and net derivative positions and the related offsetting amount, as of September 30, 2019 and December 31, 2018. This table does not include the impact of over-collateralization.



							Gross amounts not offset in the Condensed Consolidated Statement of Financial Condition
	Gross amounts recognized		Gross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)		Net amounts included on the Condensed Consolidated Statements of Financial Condition		Financial instruments		Cash Collateral pledged (b)		Net amounts
	(dollars in thousands)
As of September 30, 2019
Receivable on derivative contracts, at fair value	$	39,754	$	—	$	39,754	$	—	$	4,882	$	34,872
Payable for derivative contracts, at fair value	32,755		—		32,755		—		6,592		26,163

As of December 31, 2018
Receivable on derivative contracts, at fair value	$	25,125	$	—	$	25,125	$	—	$	1,662	$	23,463
Payable for derivative contracts, at fair value	16,082		—		16,082		—		2,871		13,211


(a)	Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.


(b)	Includes the amount of collateral held or posted.

The realized and unrealized gains/(losses) related to derivatives trading activities were $7.1 million and $(7.5) million for the three months ended September 30, 2019 and 2018 and $2.3 million and $6.4 million for the nine months ended September 30, 2019 and 2018, respectively, and are included in other income in the accompanying condensed consolidated statements of operations.

Pursuant to the various derivatives transactions discussed above, except for exchange traded derivatives and certain options, the Company is required to post/receive collateral. As of September 30, 2019 and December 31, 2018, collateral consisting of $8.2 million and $11.2 million of cash is included in receivable from brokers, dealers and clearing organizations and payable to brokers, dealers and clearing organizations, respectively, on the accompanying condensed consolidated statements of financial condition. As of September 30, 2019 and December 31, 2018, all derivative contracts were with multiple major financial institutions.

Other investments

As of September 30, 2019 and December 31, 2018, other investments included the following:



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Portfolio funds, at fair value (1)	$	131,740	$	123,241
Carried interest (2)	25,186		17,995
Equity method investments (3)	47,242		40,171
	$	204,168	$	181,407

(1) Portfolio Funds, at fair value

The Portfolio Funds, at fair value as of September 30, 2019 and December 31, 2018, included the following:



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Starboard Value and Opportunity Fund LP (c)(*)	$	36,566	$	32,579
Formation8 Partners Fund I, L.P. (f)	33,613		34,099
RCG Longview Debt Fund V, L.P. (g)(*)	1,909		4,394
RCG Longview II LP (g) (*)	3,734		4,400
Cowen Healthcare Investments II LP (i) (*)	18,036		14,939
Eclipse Ventures Fund I, L.P. (b)	4,901		4,412
HealthCare Royalty Partners LP (a)(*)	1,367		1,833
Lagunita Biosciences, LLC (d)	4,868		3,833
Starboard Leaders Fund LP (e)(*)	1,511		1,230
Eclipse SPV I, LP (j)(*)	1,446		1,447
RCG Longview Equity Fund, LP (g) (*)	713		802
RCG Longview Debt Fund VI, LP (g) (*)	1,895		1,586
RCG Park Liberty GP Member LLC (g) (*)	952		1,023
HealthCare Royalty Partners II LP (a)(*)	1,681		1,037
RCGL PE MPA, LLC (g)(*)	—		618
RCG LPP2 PNW5 Co-Invest, L.P. (h)(*)	10		296
Difesa Partners, LP (c) (*)	500		—
Other private investment (k)(*)	14,711		11,625
Other affiliated funds (l)(*)	3,327		3,088
	$	131,740	$	123,241

* These Portfolio Funds are affiliates of the Company.

The Company has no unfunded commitments regarding the Portfolio Funds held by the Company except as noted in Note 17.


(a)	HealthCare Royalty Partners, L.P. and HealthCare Royalty Partners II, L.P. are private equity funds and therefore distributions will be made when cash flows are received from the underlying investments, typically on a quarterly basis.


(b)	Eclipse Ventures Fund I, L.P. is a private equity fund which invests in early stage and growth hardware companies. Distributions will be made when the underlying investments are liquidated.


(c)	Starboard Value and Opportunity Fund LP and Difesa Partners, LP permits quarterly withdrawals upon 90 days' notice.


(d)	Lagunita Biosciences, LLC, is a healthcare investment company that creates and grows early stage companies to commercialize impactful translational science that addresses significant clinical needs, is a private equity structure and therefore distributions will be made when the underlying investments are liquidated.


(e)	Starboard Leaders Fund LP does not permit withdrawals, but instead allows terminations with respect to capital commitments upon 30 days' prior written notice at any time following the first anniversary of an investor's initial capital contribution.


(f)	Formation8 Partners Fund I, L.P. is a private equity fund which invests in early stage and growth transformational information and energy technology companies. Distributions will be made when the underlying investments are liquidated.


(g)	RCG Longview Debt Fund V, L.P., RCG Longview II LP, RCG Park Liberty GP Member LLC, RCG Longview Equity Fund, LP, RCGL PE MPA, LLC and RCG Longview Debt Fund VI, LP are real estate private equity structures. The timing of distributions depends on the nature of the underlying investments and therefore will be made either quarterly or when the underlying investments are liquidated.


(h)	RCG LPP2 PNW5 Co-Invest, L.P. is a single purpose entity formed to participate in a joint venture which acquired five multi-unit residential rental properties located in the Pacific Northwest. RCG LPP2 PNW5 Co-Invest, L.P. is a private equity structure and therefore distributions will be made when the underlying investments are liquidated.


(i)	Cowen Healthcare Investments II LP are private equity funds. Distributions are made from these funds when cash flows or securities are received from the underlying investments. Investors do not have redemption rights.


(j)	Eclipse SPV I, L.P. is a co-investment vehicle organized to invest in a private company focused on software-driven automation projects. Distributions will be made when the underlying investments are liquidated.


(k)	Other private investment represents the Company's closed end investment in a Portfolio Fund that invests in a wireless broadband communication provider in Italy.


(l)	The majority of these investment funds are affiliates of the Company or are managed by the Company and the investors can redeem from these funds as investments are liquidated.


(2)	Carried interest

The Company applies an accounting policy election to recognize incentive income allocated to the Company under an equity ownership model as other investments in the accompanying condensed consolidated statements of financial condition (see Note 2m). Carried interest allocated to the Company from certain portfolio funds represents Cowen's general partner capital accounts from those funds. These balances are subject to change upon cash distributions, additional allocations or reallocations back to limited partners within the respective funds.

A portion of the Company's carried interest is granted to employees through profit sharing awards designed to more closely align compensation with the overall realized performance of the Company. These arrangements enable certain employees to earn compensation based on performance revenue earned by the Company are recorded within compensation payable in the accompanying condensed consolidated statements of financial condition.

The carried interest as of September 30, 2019 and December 31, 2018, included the following:



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Cowen Healthcare Investments II LP (*)	19,365		6,778
Other private investment (a) (*)	4,388		4,273
RCG IO Renergys Sarl	863		6,369
Ramius Multi-Strategy Fund LP (*)	570		575
	$	25,186	$	17,995


(a)	Other private investment represents the Company's closed end investment in a Portfolio Fund that invests in a wireless broadband communication provider in Italy.

* These carried interest balances are earned from affiliates of the Company.


(3)	Equity method investments

Equity method investments include investments held by the Company in several operating companies whose operations primarily include the day to day management of a number of real estate funds, including the portfolio management and administrative services related to the acquisition, disposition, and active monitoring of the real estate funds' underlying debt and equity investments. The Company's ownership interests in these equity method investments range from 1% to 56%. The Company holds a majority of the outstanding ownership interest (i.e., more than 50%) in RCG Longview Partners II, LLC and 40% in Surf House Ocean Views Holdings, LLC (which is a joint venture in a real estate development project). The operating agreement that governs the management of day-to-day operations and affairs of these entities stipulates that certain decisions require support and approval from other members in addition to the support and approval of the Company. As a result, all operating decisions made in these entities requires the support of both the Company and an affirmative vote of a majority of the other managing members who are not affiliates of the Company. As the Company does not possess control over any of these entities, the presumption of consolidation has been overcome pursuant to current Accounting Standards and the Company accounts for these investments under the equity method of accounting. Also included in equity method investments are the investments in (a) HealthCare Royalty Partners General Partners and (b) Starboard Value (and certain related parties) which serves as an operating company whose operations primarily include the day to day management (including portfolio management) of several activist investment funds and related managed accounts. The Company completed the sale of its interests in RCG Longview Management, the management company for certain real estate investment funds which the Company was invested. The Company also entered into a transaction to sell some of the real estate assets held by the Company for which an impairment charge was recognized at September 30, 2019. The transactions resulted in the recognition of a $0.2 million loss for the three and nine months ended September 30, 2019.

During the third quarter of 2018, the Company completed an assessment of the recoverability of the Company's equity method investments and determined that the carrying value of the investment in Surf House Ocean View Holdings, LLC exceeded the estimated fair value of the Company's interest, which was other than temporary. Accordingly, an impairment charge of $7.1 million was recognized to reduce the carrying value of the investment to fair value at September 30, 2018.

The Company elected to use the cumulative earnings approach for the distributions it receives from its equity method investments. Under the cumulative earnings approach, any distributions received up to the amount of cumulative earnings are treated as return on investment and classified in operating activities within the cash flows. Any excess distributions would be considered as return of investments and classified in investing activities.

The following table summarizes equity method investments held by the Company:




	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Surf House Ocean Views Holdings, LLC	$	9,946	$	7,589
Starboard Value LP	22,627		12,699
RCG Longview Debt Fund V Partners, LLC	3,827		11,000
RCG Longview Management, LLC	2,474		1,167
RCG Longview Debt Fund VI Partners LLC	449		1,254
HealthCare Royalty GP, LLC	111		149
HealthCare Royalty GP II, LLC	285		176
RCG Longview Debt Fund IV Management, LLC	331		331
HealthCare Royalty GP III, LLC	2,190		1,573
TriArtisan ES Partners LLC	1,026		1,500
TriArtisan PFC Partners LLC	999		—
RCG Kennedy House, LLC	65		131
RCG Longview Equity Management, LLC	105		114
RCG LPP II GP, LLC	30		272
RCG Park Liberty GP Member Manager, LLC	1,014		1,248
HCR Stafford Fund GP, LLC	682		—
Other	1,081		968
	$	47,242	$	40,171

For the period ended September 30, 2019, one equity method investment has met the significance criteria as defined under Regulation S-X Rule 4-08(g) of the SEC guidance ("Reg S-X 4-08(g)"). As such, the Company is presenting the following summarized financial information for the significant investee for the periods ended September 30, 2019 and December 31, 2018, and three and nine months ended September 30, 2019 and 2018, and such information is as follows:



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Assets
Cash	$	2,553	$	37
Performance & management fee receivable	68,052		16,594
Investments	4,266		3,599
Liabilities	—		—
Equity	$	74,871	$	20,230



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019		2018
	(dollars in thousands)
Revenues	$	4,564	$	(1,843	)	$	83,287	$	24,083
Expenses	—		—			—		—
Net realized and unrealized gains (losses)	55		29			717		271
Net Income	$	4,619	$	(1,814	)	$	84,004	$	24,354

As of September 30, 2019 and December 31, 2018, the Company's share of losses in its equity method investment in RCG Longview Partners II, LLC has exceeded the carrying amount recorded in this investee. These amounts are included in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated statements of financial condition. RCG Longview Partners II, LLC, as general partner to a real estate fund, has reversed previously recorded incentive income allocations and has recorded a current clawback obligation to the limited partners in such fund. This obligation is due to a change in unrealized value of the real estate fund on which there have previously been distributed carried interest realizations; however, the settlement of a potential obligation is not due until the end of the life of the respective real estate fund. As the Company is obligated to return previous distributions it received from RCG Longview Partners II, LLC, it has continued to record its share of gains/losses in the investee including reflecting its share of the clawback obligation in the amount of $6.5 million and $6.5 million as of September 30, 2019 and December 31, 2018, respectively.

The Company's income (loss) from equity method investments was $2.7 million and $(4.7) million for the three months ended September 30, 2019 and 2018, and $23.1 million and $7.2 million for the nine months ended September 30, 2019 and 2018, respectively, and is included in net gains (losses) on securities, derivatives and other investments on the accompanying condensed consolidated statements of operations.

Securities sold, not yet purchased, at fair value

Securities sold, not yet purchased, at fair value represent obligations of the Company to deliver a specified security at a contracted price and, thereby, create a liability to purchase that security at prevailing prices. The Company's liability for securities to be delivered is measured at their fair value as of the date of the condensed consolidated financial statements. However, these transactions result in off-balance sheet risk, as the Company's ultimate cost to satisfy the delivery of securities sold, not yet purchased, at fair value may exceed the amount reflected in the accompanying condensed consolidated statements of financial condition. Substantially all equity securities and options are pledged to the clearing broker under terms which permit the clearing broker to sell or re-pledge the securities to others subject to certain limitations. As of September 30, 2019 and December 31, 2018, securities sold, not yet purchased, at fair value consisted of the following:



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)

Common stock	$	349,408	$	194,305
Corporate bonds (a)	1,281		750
Government bonds (b)	2,250		—
Preferred stock	4,394		199
Warrants and rights	7,409		53
	$	364,742	$	195,307


(a)	As of September 30, 2019, the maturities ranged from February 2024 to April 2037 and interest rates ranged from 5.00% to 5.50%. As of December 31, 2018, the maturities ranged from October 2022 to January 2034 and interest rates ranged from 2.25% to 9.38%.


(b)	As of September 30, 2019, the maturities ranged from October 2019 to March 2038 and interest rates ranged from 7.00% to 8.25%.

Securities sold under agreements to repurchase and securities lending and borrowing transactions

The following tables present the contractual gross and net securities borrowing and lending agreements and securities sold under agreements to repurchase and the related offsetting amount as of September 30, 2019 and December 31, 2018.



							Gross amounts not offset on the Condensed Consolidated Statement of Financial Condition
	Gross amounts recognized		Gross amounts offset on the Condensed Consolidated Statements of Financial Condition (a)		Net amounts included on the Condensed Consolidated Statements of Financial Condition		Additional Amounts Available		Financial instruments		Cash Collateral pledged (b)		Net amounts
	(dollars in thousands)
As of September 30, 2019
Securities borrowed	$	1,228,036	$	—	$	1,228,036	$	—	$	1,209,672	$	—	$	18,364
Securities loaned	1,339,647		—		1,339,647		—		1,282,340		—		57,307
Securities sold under agreements to repurchase	23,772		—		23,772		—		25,635		—		(1,863		)

As of December 31, 2018
Securities borrowed	$	407,795	$	—	$	407,795	$	—	$	383,593	$	—	$	24,202
Securities loaned	414,852		—		414,852		—		391,310		—		23,542


(a)	Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.


(b)	Includes the amount of cash collateral held/posted.

The following tables present gross obligations for securities loaned and securities sold under agreements to repurchase by remaining contractual maturity and class of collateral pledged as of September 30, 2019 and December 31, 2018:



	Open and Overnight		Up to 30 days		31 - 90 days		Greater than 90 days		Total
	(dollars in thousands)
As of September 30, 2019
Securities loaned
Common stock	$	1,024,436	$	—	$	—	$	—	$	1,024,436
Corporate bonds	315,211		—		—		—		315,211
Securities sold under agreements to repurchase	—		15,951		7,821		—		23,772
As of December 31, 2018
Securities loaned
Common stock	$	414,852	$	—	$	—	$	—	$	414,852

Variable Interest Entities

The total assets and liabilities of the variable interest entities for which the Company has concluded that it holds a variable interest, but for which it is not the primary beneficiary, are $5.6 billion and $258.5 million as of September 30, 2019 and $5.1 billion and $157.6 million as of December 31, 2018, respectively. The carrying value of the Company's exposure to loss for these variable interest entities as of September 30, 2019 was $241.1 million, and as of December 31, 2018 was $301.4 million, all of which is included in other investments, at fair value in the accompanying condensed consolidated statements of financial condition. The exposure to loss primarily relates to the Consolidated Fund's investment in their Unconsolidated Master Fund and the Company's investment in unconsolidated investment companies. Additionally, the Company’s maximum exposure to loss for the variable interest entities noted above as of September 30, 2019 and December 31, 2018, was $264.3 million and $332.4 million, respectively. The maximum exposure to loss often differs from the carrying value of exposure to loss of the variable interests. The maximum exposure to loss is dependent on the nature of the variable interests in the VIEs and is limited to the notional amounts of certain commitments and guarantees.


b.	Consolidated Funds

Securities owned, at fair value

As of September 30, 2019 and December 31, 2018, securities owned, at fair value, held by the Consolidated Funds consisted of the following:



	As of September 30, 2019		As of December 31, 2018

	(dollars in thousands)
Preferred stock	$	46,268	$	24,314
Common stock	202,017		95,565
Government bonds (a)	100,724		38,377
Corporate bonds (b)	14,717		24,098
Warrants and rights	5,465		5,279
	$	369,191	$	187,633


(a)	As of September 30, 2019, maturities ranged from November 2019 to December 2019 and interest rates were 0%. As of December 31, 2018, maturities ranged from January 2019 to April 2019 and interest rates were 0%.


(b)	As of September 30, 2019, maturities ranged from May 2022 to May 2026 and interest rates ranged from 4.87% to 6.50%. As of December 31, 2018, maturities ranged from August 2020 to March 2026 and interest rates ranged from 5.88% to 7.63%.

Receivable on derivative contracts

As of September 30, 2019 and December 31, 2018, receivable on derivative contracts, at fair value, held by the Consolidated Funds are comprised of:



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Currency forwards	$	31	$	186
Equity swaps	1,296		2,477
Options	2,558		1,753
	$	3,885	$	4,416

Payable for derivative contracts

As of September 30, 2019 and December 31, 2018, payable for derivative contracts, at fair value, held by the Consolidated Funds are comprised of:



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Currency forwards	$	2,341	$	96
Equity swaps	5,022		713
Options	415		854
	$	7,778	$	1,663

Other investments, at fair value

Investments in Portfolio Funds, at fair value

As of September 30, 2019 and December 31, 2018, investments in Portfolio Funds, at fair value, included the following:



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Investments of Enterprise LP	$	96,308	$	97,656
Investments of Merger Fund	74,878		88,739
	$	171,186	$	186,395

Consolidated portfolio fund investments of Enterprise LP

On May 12, 2010, the Company announced its intention to close Enterprise Master. Enterprise LP operated under a “master-feeder” structure up until January 1, 2019, when Enterprise Master distributed its capital to each feeder and was liquidated. As of September 30, 2019, the consolidated investments in Portfolio Funds include Enterprise LP's investment in RCG Special Opportunities Fund, Ltd which is a portfolio fund that invests in a limited number of private equity investment directly as well as through affiliated portfolio funds. As of December 31, 2018, the consolidated investments in Portfolio Funds included Enterprise LP's investment of $97.7 million in Enterprise Master. Prior to liquidation, strategies utilized by Enterprise Master included merger arbitrage and activist investing, investments in distressed securities, convertible hedging, capital structure arbitrage, equity market neutral, investments in private placements of convertible securities, proprietary mortgages, structured credit investments, investments in mortgage backed securities and other structured finance products, investments in real estate and real property interests, structured private placements and other relative value strategies. Enterprise Master had broad investment powers and maximum flexibility in seeking to achieve its investment objective. Enterprise Master was permitted to invest in equity securities, debt instruments, options, futures, swaps, credit default swaps and other derivatives. There are no unfunded commitments at Enterprise LP.

Consolidated portfolio fund investments of Merger Fund

The Merger Fund operates under a “master-feeder” structure, whereby Ramius Merger Master Ltd.'s ("Merger Master") shareholders are Merger Fund and Ramius Merger Fund Ltd. The consolidated investments in Portfolio Funds include Merger Fund's investment of $74.9 million and $88.7 million in Merger Master as of September 30, 2019 and December 31, 2018, respectively. The Merger Master’s investment objective is to achieve consistent absolute returns while emphasizing the preservation of investor capital. The Merger Master seeks to achieve these objectives by taking a fundamental, research-driven approach to investing, primarily in the securities of issuers engaged in, or subject to, announced (or unannounced but otherwise anticipated) extraordinary corporate transactions, which may include, but are not limited to, mergers, acquisitions, leveraged buyouts, tender offers, hostile takeover bids, sale processes, exchange offers, and recapitalizations. Merger Master invests in the securities of one or more issuers engaged in or subject to such extraordinary corporate transactions. Merger Master typically seeks to derive a profit by realizing the price differential, or “spread,” between the market price of securities purchased or sold short and the market price or value of securities realized in connection with the completion or termination of the extraordinary corporate transaction, or in connection with the adjustment of market prices in anticipation thereof, while seeking to minimize the market risk associated with the aforementioned investment activities. Merger Master will, depending on market conditions, generally focus the majority of its investment program on announced transactions. If the investment manager of Merger Master considers it necessary, it may either alone or as part of a group, also initiate shareholder actions seeking to maximize value. Such shareholder actions may include, but are not limited to, re-orienting management’s focus or initiating the sale of the company (or one or more of its divisions) to a third party. There are no unfunded commitments at Merger Fund.

Indirect Concentration of the Underlying Investments Held by Consolidated Funds

From time to time, either directly or indirectly through its investments in the Consolidated Funds, the Company may maintain exposure to a particular issue or issuer (both long and/or short) which may account for 5% or more of the Company's equity. Based on information that is available to the Company as of September 30, 2019 and December 31, 2018, the Company assessed whether or not its interests in an issuer for which the Company's pro-rata share exceeds 5% of the Company's equity. There was one indirect concentration that exceeded 5% of the Company's equity as of September 30, 2019 and one at December 31, 2018.

Through its investments in a Consolidated Fund and combined with direct Company investments, the Company maintained exposure to a particular investment which accounted for 5% or more of the Company's equity.

Investment's percentage of the Company's stockholders' equity

Issuer

Security Type

Country

Industry

Percentage of Stockholders' Equity

Market Value

(dollars in thousands)

As of September 30, 2019

Linkem

Equity

Italy

Wireless Broadband

8.56

69,927

As of December 31, 2018

Linkem

Equity

Italy

Wireless Broadband

8.36

66,439

Underlying Investments of Unconsolidated Funds Held by Consolidated Funds

Enterprise Master and Merger Master

At December 31, 2018, Enterprise LP's investment in Enterprise Master represented Enterprise LP's proportionate share of Enterprise Master's net assets; as a result, the investment balances of Enterprise Master reflected below may exceed the net investment which Enterprise LP has recorded. Merger Fund's investment in Merger Master represents Merger Fund's proportionate share of Merger Master's net assets; as a result, the investment balances of Merger Master reflected below may exceed the net investment which Merger Fund has recorded. The following tables present summarized investment information for the underlying investments and derivatives held by Enterprise Master and Merger Master as of September 30, 2019 and December 31, 2018:

Securities owned by Enterprise Master, at fair value



	As of December 31, 2018
	(dollars in thousands)
Common stock	$	469
	$	469

Portfolio Funds, owned by Enterprise Master, at fair value



		As of December 31, 2018
	Strategy	(dollars in thousands)
RCG Special Opportunities Fund, Ltd*	Multi-Strategy	$	111,548
Other Private Investments	Various	846
		$	112,394


*	Affiliates of the Company.

Merger Master



	As of September 30, 2019		As of December 31, 2018
	(dollars in thousands)
Securities owned by Merger Master, at fair value
Common stock	$	166,669	$	162,811
Corporate bonds	10,343		116,488
	$	177,012	$	279,299

Securities sold, not yet purchased, by Merger Master, at fair value
Common stock	$	58,444	$	9,610
	$	58,444	$	9,610

Receivable on derivative contracts, at fair value, owned by Merger Master



	As of September 30, 2019		As of December 31, 2018

Description	(dollars in thousands)
Options	$	2,691	$	3,450
Equity swaps	99		5,320
	$	2,790	$	8,770

Payable for derivative contracts, at fair value, owned by Merger Master



	As of September 30, 2019		As of December 31, 2018
Description	(dollars in thousands)
Options	$	856	$	1,430
Currency forwards	13,936		270
Equity swaps	49		28
	$	14,841	$	1,728