Investments of Operating Entities and Consolidated Funds - (Tables)

9 Months Ended

Sep. 30, 2019

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.

Marketable Securities

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.

Schedule of Derivative Instruments

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.

Schedule of 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

Schedule of Other Investments, Portfolio Funds

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.

Schedule Equity Method Investments

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

Schedule of Securities Sold, Not yet Purchased

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%.

Schedule of Assets and Associated Liabilities Accounted for as Secured Borrowings

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.

Investments Classified by Contractual Maturity Date

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

Fair Value, Concentration of Risk

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

Consolidated Funds

Investment Holdings [Line Items]

Marketable Securities

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%.

Schedule of Derivative Instruments

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

Schedule of Other Investments, Portfolio Funds

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

Enterprise Master

Investment Holdings [Line Items]

Marketable Securities

Securities owned by Enterprise Master, at fair value



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

Schedule of Other Investments, Portfolio Funds

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

Investment Holdings [Line Items]

Marketable Securities

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

Schedule of Derivative Instruments

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