XML 49 R39.htm IDEA: XBRL DOCUMENT

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

9 Months Ended

Sep. 30, 2020

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 condensed consolidated statements of financial condition by caption and by level within the valuation hierarchy as of September 30, 2020 and December 31, 2019:


	Assets at Fair Value as of September 30, 2020
	Level 1			Level 2			Level 3			Total
				(dollars in thousands)
Operating Entities
Securities owned, at fair value
Government bonds	$	20,324		$	—		$	—		$	20,324
Preferred stock	10,187			—			53,418			63,605
Common stock	900,885			508			19,456			920,849
Convertible bonds	—			—			5,081			5,081
Corporate bonds	—			36,181			520			36,701
Trade claims	—			—			9,390			9,390
Term loan	—			—			12,111			12,111
Warrants and rights	15,522			—			4,983			20,505

Receivable on derivative contracts, at fair value

Currency forwards	—			870			—			870
Swaps	—			4,644			—			4,644
Options	52,329			—			351			52,680

Consolidated Funds
Securities owned, at fair value


Common stock	3,598			—			102,951			106,549

Warrants and rights	—			—			5,904			5,904
Convertible bonds	—			—			75,538			75,538




	$	1,002,845		$	42,203		$	289,703		$	1,334,751
Percentage of total assets measured at fair value on a recurring basis	75.1		%	3.2		%	21.7		%
Portfolio Funds measured at net asset value (a)										123,787
Carried interest (a)										47,343
Consolidated Funds' Portfolio Funds measured at net asset value (a)										98,267
Equity method investments										33,480
Total investments										$	1,637,628


	Liabilities at Fair Value as of September 30, 2020
	Level 1			Level 2			Level 3			Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased, at fair value
Government bonds	$	—		$	—		$	1,500		$	1,500
Common stock	404,409			—			—			404,409
Corporate bonds	—			14,524			800			15,324
Preferred stock	10,767			—			—			10,767
Warrants and rights	8,930			—			—			8,930
Payable for derivative contracts, at fair value
Futures	123			—			—			123
Currency forwards	—			717			—			717
Swaps	—			7,514			—			7,514
Options	50,746			—			2,954			53,700
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—			—			30,024			30,024








	$	474,975		$	22,755		$	35,278		$	533,008
Percentage of total liabilities measured at fair value	89.1		%	4.3		%	6.6		%

(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 condensed 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 September 30, 2020 can range from $0.9 million to $35.1 million.


	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
US Government securities	$	—		$	—		$	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		%

(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.

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

The following table includes a roll forward of the amounts for the three and nine months ended September 30, 2020 and 2019 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.



	Three Months Ended September 30, 2020
	Balance at June 30, 2020		Transfers in			Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at September 30, 2020		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	51,480	$	—		$	(7,744)	(b)	$	5,282	$	(3,770)	$	8,170	$	53,418	$	2,926
Common stock	14,816		—			(3)		(e)	4,000		—		643		19,456		562
Convertible bonds	5,081		—			—			—		—		—		5,081		—
Corporate bonds	758		—			(312)		(b)	72		—		2		520		22
Options, asset	337		—			—			—		—		14		351		14
Options, liability	2,177		—			—			—		—		777		2,954		777
Term Loan	11,359		—			—			245		—		507		12,111		506
Warrants and rights	4,625		3		(e)	—			—		—		355		4,983		337
Trade claims	7,587		—			—			2,690		(648)		(239)		9,390		(239)
Corporate bond, liability	800		—			—			—		—		—		800		—
Government bonds, liability	1,500		—			—			—		—		—		1,500		—
Contingent consideration liability	27,001		—			—			—		—		3,023		30,024		3,023
Consolidated Funds

Common stock	102,951		—			—			—		—		—		102,951		—
Warrants and rights	5,858		—			—			—		—		46		5,904		46
Convertible bonds	—		—			—			75,000		—		538		75,538		538



	Three Months Ended September 30, 2019
	Balance at June 30, 2019		Transfers in			Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at September 30, 2019		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	7,401	$	—		$	(1,000)	(f)	$	—	$	—	$	1,434	$	7,835	$	2,295
Common stock	11,006		—			—			2,579		(480)		208		13,313		210
Convertible bonds	6,318		—			(2,801)		(f)	1,049		(2,072)		47		2,541		4
Corporate bonds	775		20		(e)	—			1,117		—		161		2,073		161

Options, liability	2,779		—			—			—		—		(279)		2,500		(279)
Warrants and rights	595		—			—			—		(72)		61		584		(12)
Trade claims	10,488		—			—			1,871		(5,354)		57		7,062		57



Corporate bond, liability	—		2,525		(e)	—			—		—		(1,325)		1,200		(1,325)
Government bonds, liability	—		4,681		(e)	—			—		—		(2,431)		2,250		(2,431)
Contingent consideration liability	29,536		—			—			—		—		298		29,834		298
Consolidated Funds
Preferred stock	24,322		—			(19,929)		(f)	—		—		—		4,393		—
Common stock	1,017		—			(94)		(f)	—		(957)		34		—		—
Warrants and rights	6,274		—			—			—		(670)		(139)		5,465		(809)


	Nine Months Ended September 30, 2020
	Balance at December 31, 2019		Transfers in			Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at September 30, 2020		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	7,835	$	45,530	(c)	$	(7,744)	(b)	$	5,647	$	(5,870)	$	8,020	$	53,418	$	5,337
Common stock	17,466		—			(29)		(a)(e)	5,798		(3,712)		(67)		19,456		(1,023)
Convertible bonds	2,500		—			—			2,581		—		—		5,081		—
Corporate bond	2,421		—			(312)		(b)	592		(1,938)		(243)		520		(180)
Options, asset	336		—			—			—		—		15		351		15
Options, liability	2,920		—			—			—		—		34		2,954		35
Term loan	—		11,149		(c)	—			245		—		717		12,111		717
Warrants and rights	594		3,636		(a)(c)	—			—		—		753		4,983		753

Trade claims	7,320		1,044		(a)(e)	—			4,663		(2,863)		(774)		9,390		(795)
Corporate bond, liability	1,000		—			—			—		—		(200)		800		(200)
Government bonds, liability	1,950		—			—			—		—		(450)		1,500		(450)
Contingent consideration liability	30,896		—			—			—		(5,653)		4,781		30,024		4,781
Consolidated Funds
Preferred stock	4,393		—			(4,000)		(d)	—		—		(393)		—		—
Common stock	—		4,000		(d)	—			100,000		—		(1,049)		102,951		(1,049)

Warrants and rights	5,567		—			—			—		—		337		5,904		337
Convertible bonds	$	—	$	—		$	—		$	75,000	$	—	$	538	$	75,538	$	538


	Nine Months Ended September 30, 2019
	Balance at December 31, 2018		Transfers in			Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at September 30, 2019		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	5,168	$	—		$	(1,000)	(f)	$	3,243	$	(1,000)	$	1,424	$	7,835	$	2,285
Common stock	9,850		—			—			16,737		(12,952)		(322)		13,313		(122)
Convertible bonds	3,000		—			(4,826)		(b)(f)	16,021		(11,764)		110		2,541		41

Corporate bond	—		20		(e)	—			1,892		—		161		2,073		161

Options, liability	2,096		—			—			—		(4)		408		2,500		408
Warrants and rights	1,666		—			—			—		(188)		(894)		584		20



Trade claim	5,543		—			—			6,965		(5,506)		60		7,062		57
Corporate bond, liability	—		2,525		(e)	—			—		—		(1,325)		1,200		(1,325)
Government bonds, liability	—		4,681		(e)	—			—		—		(2,431)		2,250		(2,431)
Contingent consideration liability	3,070		—			—			27,700		(1,234)		298		29,834		298
Consolidated Funds
Preferred stock	24,314		—			(19,929)		(f)	—		—		8		4,393		8
Common stock	94		—			(94)		(f)	407		(958)		551		—		—
Warrants and rights	$	5,279	$	—		$	—		$	—	$	(1,758)	$	1,944	$	5,465	$	190

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

(a) The security stopped trading on an open market.

(b) The investments were converted to common stock.

(d) The investment was involved in a reverse merger and preferred stock was converted to common shares.

(e) The transfers between level 1 and level 3 are due to the change in the availability of observable inputs.

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

Fair Value Inputs, Assets, Quantitative Information

The following table includes quantitative information as of September 30, 2020 and December 31, 2019 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

September 30, 2020

Valuation Techniques

Unobservable Inputs

Range

Weighted Average

Level 3 Assets

(dollars in thousands)

Common and preferred stocks

61,220

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

10% - 12%

6.25x - 6.75x

11%

6.5x

Options

352

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

10% - 12%

6.25x - 6.75x

11%

6.5x

Trade claims

3,446

Discounted cash flows

Discount rate

15%

Warrants and rights

10,865

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

4% - 11%

6.25x - 6.75x

7.0%

6.5x

Corporate, convertible bonds and term loan

12,110

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

10% - 12%

6.25x - 6.75x

11%

6.5x

Other level 3 assets (a)

201,710

Total level 3 assets

289,703

Level 3 Liabilities

Options

2,954

Option pricing models

Volatility

35%

Contingent consideration liability

30,024

Discounted cash flows

Monte Carlo simulation

Discount rate

Volatility

15% - 22%

22%

15%

22%

Other level 3 liabilities (a)

2,300

Total level 3 liabilities

35,278

Quantitative Information about Level 3 Fair Value Measurements

Fair Value at 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

EBITDA Market Multiples

8% - 11.25%

6.5x - 7x

10.4%

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% - 7%

—%

6.1%

Options

336

Option pricing models

Discount rate

EBITDA Market Multiples

9.75% - 11.25%

6.5x - 7x

10.5%

6.75x

Corporate and convertible bonds

311

Discounted cash flows

Recovery

Discount rate

Probability of recovery

20%

1% - 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

Discount rate

Volatility

15% - 22%

17%

15%

17%

Other level 3 liabilities (a)

2,950

Total level 3 liabilities

36,766

(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

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 2e).


	September 30, 2020						December 31, 2019						Fair Value Hierarchy
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
				(dollars in thousands)
Financial Assets
Operating companies
Cash and cash equivalents	$	539,733	(f)	$	539,733	(f)	$	301,123		$	301,123		Level 1 & 2
Cash collateral pledged	110,666			110,666			6,563			6,563			Level 2
Segregated cash	139,152			139,152			107,328			107,328			Level 1
Securities borrowed	1,272,428			1,272,428			754,441			754,441			Level 2
Loans receivable	9,045			9,045		(d)	42,830			42,830		(d)	Level 3
Consolidated Funds
Cash and cash equivalents	946			946			30,874			30,874			Level 1
Financial Liabilities
Securities sold under agreements to repurchase	6,218			7,587			23,244			27,384			Level 2
Securities loaned	1,326,917			1,326,917			1,601,866			1,601,866			Level 2
Convertible debt	122,485		(a)	147,166		(b)	118,688		(a)	148,786		(b)	Level 2
Notes payable and other debt	383,722		(e)	406,309		(c)	345,451		(e)	372,591		(c)	Level 2

(a)The carrying amount of the convertible debt includes an unamortized discount of $11.4 million and $14.9 million as of September 30, 2020 and December 31, 2019, 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 $0.4 million and $0.5 million as of September 30, 2020 and December 31, 2019, respectively.

(f)As of September 30, 2020, cash and cash equivalents include Level 1 cash in the amount of $479.7 million and Level 2 certificates of deposit of $60.0 million.