XML 15 R43.htm IDEA: XBRL DOCUMENT

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

12 Months Ended

Dec. 31, 2019

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, 2019 and 2018:


	Assets at Fair Value as of December 31, 2019
	Level 1			Level 2			Level 3			Total
				(dollars in thousands)
Operating Entities
Securities owned, at fair value
Government bonds	$	15,916		$	—		$	—		$	15,916
Preferred stock	4,821			—			7,835			12,656
Common stock	1,527,769			1,249			17,466			1,546,484
Convertible bonds	—			—			2,500			2,500
Corporate bonds	—			23,079			2,421			25,500
Trade claims	—			—			7,320			7,320
Term loan	—			1,067			—			1,067
Warrants and rights	21,515			—			594			22,109

Receivable on derivative contracts, at fair value


Swaps	—			2,911			—			2,911
Options	59,730			—			336			60,066

Consolidated Funds
Securities owned, at fair value
Government bonds	161,607			—			—			161,607
Preferred stock	—			—			4,393			4,393
Common stock	200,306			—			—			200,306
Corporate bonds	—			3,405			—			3,405
Warrants and rights	—			—			5,567			5,567

Receivable on derivative contracts, at fair value
Currency forwards	—			3,302			—			3,302
Equity swaps	—			927			—			927
Options	1,604			—			—			1,604
	$	1,993,268		$	35,940		$	48,432		$	2,077,640
Percentage of total assets measured at fair value on a recurring basis	95.9		%	1.7		%	2.3		%
Portfolio Funds measured at net asset value (a)										114,504
Carried interest (a)										30,360
Consolidated Funds' Portfolio Funds measured at net asset value (a)										175,769
Equity method investments										40,858
Total investments										$	2,439,131


	Liabilities at Fair Value as of December 31, 2019
	Level 1			Level 2			Level 3			Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased, at fair value
Government bonds	$	—		$	—		$	1,950		$	1,950
Common stock	425,448			—			—			425,448
Corporate bonds	—			4,933			1,000			5,933
Preferred stock	3,686			—			—			3,686
Warrants and rights	14,819			—			—			14,819
Payable for derivative contracts, at fair value
Futures	217			—			—			217
Currency forwards	—			851			—			851
Swaps	—			23,169			—			23,169
Options	33,604			—			2,920			36,524
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—			—			30,896			30,896
Consolidated Funds



Payable for derivative contracts, at fair value
Currency forwards	—			88			—			88
Options	750			—			—			750
Equity swaps	—			3,931			—			3,931
	$	478,524		$	32,972		$	36,766		$	548,262
Percentage of total liabilities measured at fair value	87.3		%	6.0		%	6.7		%

(a) In accordance with US GAAP, certain investments are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient. Carried interest in portfolio funds 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 second quarter of 2016 and the first quarter of 2019, the Company is required to pay to the sellers a portion of future net income and/or revenues of the acquired businesses, if certain targets are achieved through the periods ended December 31, 2019 and December 31, 2023, respectively. For the acquisition that closed during 2016, 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. For the acquisition that closed during 2019, the Company estimated the contingent consideration liability using the present value of the Monte Carlo simulated revenue. Changes in these estimates and assumptions could have a significant impact on the amounts recognized. The undiscounted amounts as of December 31, 2019 can range from $1.3 million to $40.0 million.


	Assets at Fair Value as of December 31, 2018
	Level 1			Level 2			Level 3			Total
				(dollars in thousands)
Operating Entities
Securities owned, at fair value
Government bonds	$	13,398		$	—		$	—		$	13,398
Preferred stock	449			—			5,168			5,617
Common stock	459,601			2,848			9,850			472,299
Convertible bonds	—			—			3,000			3,000
Corporate bonds	—			13,041			—			13,041
Trade claims	—			—			5,543			5,543
Warrants and rights	6,324			—			1,666			7,990

Receivable on derivative contracts, at fair value
Futures	334			—			—			334
Currency forwards	—			1			—			1
Swaps	—			917			—			917
Options	23,130			—			—			23,130
Pay to hold	—			743			—			743


Consolidated Funds
Securities owned, at fair value
Government bonds	38,377			—			—			38,377
Preferred stock	—			—			24,314			24,314
Common stock	95,471			—			94			95,565
Corporate bonds	—			24,098			—			24,098
Warrants and rights	—			—			5,279			5,279

Receivable on derivative contracts, at fair value
Currency forwards	—			186			—			186
Equity swaps	—			2,477			—			2,477
Options	1,753			—			—			1,753
	$	638,837		$	44,311		$	54,914		$	738,062
Percentage of total assets measured at fair value on a recurring basis	86.6		%	6.0		%	7.4		%
Portfolio Funds measured at net asset value (a)										124,741
Carried interest (a)										17,995
Consolidated Funds' Portfolio Funds measured at net asset value (a)										186,395
Equity method investments										38,671
Total investments										$	1,105,864


	Liabilities at Fair Value as of December 31, 2018
	Level 1			Level 2			Level 3			Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased, at fair value

Common stock	$	194,305		$	—		$	—		$	194,305
Corporate bonds	—			750			—			750
Preferred stock	199			—			—			199
Warrants and rights	53			—			—			53
Payable for derivative contracts, at fair value

Currency forwards	—			709			—			709
Swaps	—			2,162			—			2,162
Options	11,115			—			2,096			13,211
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—			—			3,070			3,070
Consolidated Funds



Payable for derivative contracts, at fair value
Currency forwards	—			96			—			96
Options	854			—			—			854
Equity swaps	—			713			—			713
	$	206,526		$	4,430		$	5,166		$	216,122
Percentage of total liabilities measured at fair value	95.6		%	2.0		%	2.4		%

(b) In accordance with the terms of the purchase agreements for the acquisition that closed during 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 business, if certain targets are achieved through the periods ended December 31, 2020. 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, 2018 can range from $2.8 million to $3.4 million.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table includes a roll forward of the amounts for the years ended December 31, 2019 and 2018 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, 2019
	Balance at December 31, 2018		Transfers in			Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at December 31, 2019		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	5,168	$	—		$	(1,000)	(e)	$	3,513	$	(1,270)	$	1,424	$	7,835	$	2,285
Common stock	9,850		10,242		(d)(g)	(3)		(f)	11,477		(11,002)		(3,098)		17,466		(3,098)
Convertible bonds	3,000		—			(4,826)		(b) (e)	11,354		(7,072)		44		2,500		(25)
Corporate bond	—		4		(d)	—			2,811		(533)		139		2,421		140
Options, asset	—		330		(g)	—			—		—		6		336		6
Options, liability	2,096		—			—			—		(4)		828		2,920		828
Warrants and rights	1,666		—			—			—		(189)		(883)		594		31

Trade claims	5,543		—			—			7,205		(5,506)		78		7,320		76
Corporate bond, liability	—		2,525		(d)	—			—		—		(1,525)		1,000		(1,525)
Government bonds, liability	—		4,681		(d)	—			—		—		(2,731)		1,950		(2,731)
Contingent consideration liability	3,070		—			—			27,700		(1,234)		1,360		30,896		1,360
Consolidated Funds
Preferred stock	24,314		—			(19,929)		(e)	—		—		8		4,393		—
Common stock	94		—			(94)		(e)	407		(958)		551		—		—

Warrants and rights	$	5,279	$	—		$	—		$	—	$	(1,758)	$	2,046	$	5,567	$	289


	Year Ended December 31, 2018
	Balance at December 31, 2017		Transfers in		Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at December 31, 2018		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	8,115	$	—	$	(1,141)	(b)	$	1,415	$	(695)	$	(2,526)	$	5,168	$	860
Common stock	7,570		—		(569)			3,324		(1,416)		941		9,850		1,797
Convertible bonds	282		—		—			3,000		(307)		25		3,000		—


Options, asset	1,455		—		—			—		(1,455)		—		—		—
Options, liability	22,401		—		(28,973)		(c)	—		(259)		8,927		2,096		8,927
Warrants and rights	2,517		—		—			—		(143)		(708)		1,666		(850)



Trade claim	5,950		—		—			44		(536)		85		5,543		—
Lehman claim	301		—		—			—		(234)		(67)		—		—
Contingent consideration liability	3,440		—		—			427		(797)		—		3,070		—
Consolidated Funds
Preferred stock	50,445		—		(38,552)		(a)	3,066		—		9,355		24,314		9,355
Common stock	50		—		—			—		—		44		94		44
Warrants and rights	$	3,568	$	—	$	(20)	(a)	$	—	$	(1,340)	$	3,071	$	5,279	$	1,730

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

(a) The Company deconsolidated an investment fund.

(b) The investments were converted to common stock.

(c) On June 26, 2018, the Company received shareholder approval which allows the Company to settle its convertible note (see Note 23) entirely in class A common shares. Upon receiving shareholder approval, the Company reclassified the embedded conversion option, associated with the convertible debt, to equity (see Note 24).

(d) The investments had a change of valuation methodology due to increased activity in foreign market.

(e) The entity in which the Company is invested completed an initial public offering.

(f) Shares of common stock were exchanged for liquid warrants and rights of an acquired company.

(g) The holding Company which held common stock and options was liquidated.

Fair Value Inputs, Assets, Quantitative Information

The following table includes quantitative information as of December 31, 2019 and 2018 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
December 31, 2019

Valuation Techniques

Unobservable Inputs

Range

Weighted Average

Level 3 Assets

(dollars in thousands)

Common and preferred stocks

10,876

Discounted cash flows
Guideline companies

Discount rate
Market Multiples

8% - 11.25%
6.5x - 7x

10.4%
6.75x

Options

336

Discounted cash flows
Guideline companies

Discount rate
Market Multiples

9.75% - 11.25%
6.5x - 7x

10.5%
6.75x

Trade claims

Discounted cash flows

Discount rate

20%

Warrants and rights

6,162

Model based Discounted cash flows

Volatility
Discount rate

30%
6% to 7%

0%
6.1%

Corporate and convertible bonds

311

Discounted cash flows
Recovery

Discount rate
Probability of recovery

20%
1% to 3%

20%
2.3%

Other level 3 assets (a)

30,723

Total level 3 assets

48,432

Level 3 Liabilities

Options

2,920

Option pricing models

Volatility

35% to 40%

35%

Contingent consideration liability

30,896

Discounted cash flows Monte Carlo simulation

Discount rate
Volatility

15%-22%
17%

15%
17%

Other level 3 liabilities (a)

2,950

Total level 3 liabilities

36,766

Quantitative Information about Level 3 Fair Value Measurements

Fair Value at
December 31, 2018

Valuation Techniques

Unobservable Inputs

Range

Weighted Average

Level 3 Assets

(dollars in thousands)

Common and preferred stocks

4,323

Discounted cash flows / Guideline companies

Discount rate
Market multiples

8%-14%
6.5x to 7x

8%
6.75x

Trade claims

Discounted cash flows

Discount rate

20%

Warrants and rights

1,666

Model based Discounted cash flows

Discount rate

7% to 9%

7.8%

Other level 3 assets (a)

48,900

Total level 3 assets

54,914

Level 3 Liabilities

Options

2,096

Option pricing models

Volatility

35% to 40%

35%

Contingent consideration liability

3,070

Discounted cash flows

Projected cash flow and discount rate

21% to 23%

23%

Total level 3 liabilities

5,166

(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, 2019 and 2018, 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 2f).


	December 31, 2019									December 31, 2018				Fair Value Hierarchy
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
				(dollars in thousands)
Financial Assets
Operating companies
Cash and cash equivalents	$	301,123		$	301,123		$	259,148		$	259,148		Level 1
Cash collateral pledged	6,563			6,563			6,318			6,318			Level 2
Segregated cash	107,328			107,328			176,647			176,647			Level 1
Securities borrowed	754,441			754,441			407,795			407,795			Level 2
Loans receivable	42,830			42,830		(d)	36,021			36,021		(d)	Level 3
Consolidated Funds
Cash and cash equivalents	30,874			30,874			38,118			38,118			Level 1
Financial Liabilities
Securities sold under agreements to repurchase	23,244			27,384			—			—			Level 2
Securities loaned	1,601,866			1,601,866			414,852			414,852			Level 2
Convertible debt	118,688		(a)	148,786		(b)	134,489		(a)	157,433		(b)	Level 2
Notes payable and other debt	345,451		(e)	372,591		(c)	262,965			258,546		(c)	Level 2

(a)The carrying amount of the convertible debt includes an unamortized discount of $14.9 million and $19.5 million as of December 31, 2019 and 2018, respectively.

(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 where applicable.

(e)The carrying amount of the notes payable and other debt includes an unamortized premium of $0.5 million as of December 31, 2019.