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

9 Months Ended

Sep. 30, 2021

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, 2021 and December 31, 2020:


	Assets at Fair Value as of September 30, 2021
	Level 1		Level 2		Level 3		Netting (c)		Total
			(dollars in thousands)
Operating Entities
Securities owned, at fair value
Government bonds	$	21,936	$	—	$	—	$	—	$	21,936
Preferred stock	11,674		—		106,248		—		117,922
Common stock	3,592,861		79		41,350		—		3,634,290
Convertible bonds	—		—		7,363		—		7,363
Corporate bonds	—		120,307		83		—		120,390
Trade claims	—		—		5,681		—		5,681
Term loan	—		—		12,578		—		12,578
Warrants and rights	21,337		—		13,056		—		34,393
Private investments	—		—		361		—		361
Receivable on derivative contracts, at fair value

Currency forwards	—		1,241		—		—		1,241
Equity swaps	—		320,825		—		(154,015)		166,810
Options	44,132		—		238		—		44,370

Consolidated Funds
Securities owned, at fair value


Common stock	2,951		—		—		—		2,951







	$	3,694,891	$	442,452	$	186,958	$	(154,015)	$	4,170,286
Portfolio funds measured at net asset value (a)									138,023
Consolidated Funds' portfolio funds measured at net asset value (a)									100,252
Carried interest (a)									84,312
Equity method investments (a)									40,096
Total investments									$	4,532,969


	Liabilities at Fair Value as of September 30, 2021
	Level 1		Level 2		Level 3		Netting (c)		Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased, at fair value

Common stock	$	1,352,771	$	—	$	—	$	—	$	1,352,771
Corporate bonds	—		40		—		—		40
Preferred stock	6,624		—		—		—		6,624
Warrants and rights	2,288		—		—		—		2,288
Payable for derivative contracts, at fair value
Futures	261		—		—				261
Currency forwards	—		22		—		—		22
Equity swaps	—		146,837		—		(141,280)		5,557
Interest rate swaps	—		518		—		—		518
Options	37,180		—		3,334		—		40,514
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—		—		29,053		—		29,053








	$	1,399,124	$	147,417	$	32,387	$	(141,280)	$	1,437,648

(a) In accordance with US GAAP, portfolio funds are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not classified in the fair value hierarchy. Carried interest and equity method investments presented in the table above 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 first quarter of 2019 and the fourth quarter of 2020, 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, 2020 and December 31, 2023. For both the Quarton acquisition, completed during the first quarter of 2019, and the MHT acquisition, completed during the fourth quarter of 2020, the Company estimated the contingent consideration liabilities using a combination of Monte Carlo and Discounted Cash Flow methods which require 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 for the Quarton acquisition can range from $10.1 million to $25.0 million. The undiscounted amounts for the MHT acquisition have no minimum or maximum as it is calculated based on revenue.

(c) Derivatives are reported on a net basis, by counterparty, when a legal right of offset exists under an enforceable netting agreement as well as net of cash collateral received or posted under enforceable credit support agreements. See Note 2f for further information on offsetting of derivative financial instruments.


	Assets at Fair Value as of December 31, 2020
	Level 1		Level 2		Level 3		Netting (c)		Total
			(dollars in thousands)
Operating Entities
Securities owned, at fair value
Government bonds	$	19,721	$	—	$	—	$	—	$	19,721
Preferred stock	9,391		—		59,967		—		69,358
Common stock	1,746,407		108		23,786		—		1,770,301
Convertible bonds	—		—		6,040		—		6,040
Corporate bonds	—		86,368		135		—		86,503
Trade claims	—		—		8,713		—		8,713
Term loan	—		—		12,623		—		12,623
Private investments	—		—		642		—		642
Warrants and rights	21,154		—		6,547		—		27,701

Receivable on derivative contracts, at fair value

Currency forwards	—		15		—		—		15
Equity swaps	—		64,634		—		(62,269)		2,365
Options	48,851		—		251		—		49,102



Consolidated Funds
Securities owned, at fair value


Common stock	1,865		—		2,951		—		4,816

Warrants and rights	—		—		5,806		—		5,806





	$	1,847,389	$	151,125	$	127,461	$	(62,269)	$	2,063,706
Portfolio funds measured at net asset value (a)									133,454
Consolidated Funds' portfolio funds measured at net asset value (a)									192,670
Carried interest (a)									82,892
Equity method investments (a)									38,681
Total investments									$	2,511,403


	Liabilities at Fair Value as of December 31, 2020
	Level 1		Level 2		Level 3		Netting (c)		Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased, at fair value
US Government securities	$	—	$	—	$	1,500	$	—	$	1,500
Common stock	699,894		—		—		—		699,894
Corporate bonds	—		10,654		704		—		11,358
Preferred stock	6,589		—		—		—		6,589
Warrants and rights	8,774		—		—		—		8,774
Payable for derivative contracts, at fair value

Currency forwards	—		3,067		—		—		3,067
Equity swaps	—		43,560		—		(37,033)		6,527
Options	62,651		—		3,915		—		66,566
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—		—		36,718		—		36,718








	$	777,908	$	57,281	$	42,837	$	(37,033)	$	840,993

(b) In accordance with the terms of the purchase agreements for acquisitions that closed during the first quarter of 2019 and the fourth quarter of 2020, 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, 2020 and December 31, 2023. For both the Quarton acquisition, completed during the first quarter of 2019, and the MHT acquisition, completed during the fourth quarter of 2020, the Company estimated the contingent consideration liabilities using a combination of Monte Carlo and Discounted Cash Flow methods which require 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 for the Quarton acquisition can range from $10.1 million to $35.1 million. The undiscounted amounts for the MHT acquisition have no minimum or maximum as it is calculated based on revenue. (c) Derivatives are reported on a net basis, by counterparty, when a legal right of offset exists under an enforceable netting agreement as well as net of cash collateral received or posted under enforceable credit support agreements. See Note 2f for further information on offsetting of derivative financial instruments.

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, 2021 and 2020 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, 2021
	Balance at June 30, 2021		Transfers in		Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at September 30, 2021		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	105,470	$	—	$	(1,531)	(b)	$	5,880	$	(1,000)	$	(2,571)	$	106,248	$	(2,771)
Common stock	41,600		—		(4)		(b)	5,500		(2,928)		(2,818)		41,350		2,289
Convertible bonds	9,712		—		—			2,000		(4,025)		(324)		7,363		(1,174)
Corporate bonds	107		—		—			—		—		(24)		83		(2)
Options, asset	244		—		—			—		—		(6)		238		(6)
Options, liability	3,619		—		—			—		—		(285)		3,334		(285)
Term Loan	12,563		—		—			315		—		(300)		12,578		(300)
Warrants and rights	11,631		—		—			3,519		—		(2,094)		13,056		(147)
Trade claims	5,719		—		—			865		(950)		47		5,681		—
Private investments	666		—		—			14		(509)		190		361		(1)


Contingent consideration liability	24,810		—		—			—		—		4,243		29,053		4,243



	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)	(g)	$	5,282	$	(3,770)	$	8,170	$	53,418	$	2,926
Common stock	14,816		—			(3)		(f)	4,000		—		643		19,456		562
Convertible bonds	5,081		—			—			—		—		—		5,081		—
Corporate bonds	758		—			(312)		(g)	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		(f)	—			—		—		355		4,983		337
Trade claims	7,155		—			—			2,516		(648)		(18)		9,005		(18)
Private investments	432		—			—			174		—		(221)		385		(221)


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


	Nine Months Ended September 30, 2021
	Balance at December 31, 2020		Transfers in			Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at September 30, 2021		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	59,967	$	—		$	(1,531)	(b)	$	54,539	$	(5,651)	$	(1,076)	$	106,248	$	(2,107)
Common stock	23,786		3,409		(e)	(5,358)		(b)	14,972		(9,401)		13,942		41,350		13,680
Convertible bonds	6,040		—			—			7,827		(10,955)		4,451		7,363		3,771
Corporate bond	135		—			—			82		(103)		(31)		83		(31)
Options, asset	251		—			—			—		—		(13)		238		(13)
Options, liability	3,915		—			—			—		—		(581)		3,334		(581)
Term loan	12,623		—			—			638		—		(683)		12,578		(683)
Warrants and rights	6,548		2,928		(e)	—			6,925		(1,610)		(1,735)		13,056		(452)

Trade claims	8,713		—						3,056		(5,254)		(834)		5,681		(1,902)
Private investments	642		—			—			457		(929)		191		361		(1)
Corporate bond, liability	704		—			—			—		(399)		(305)		—		—
Government bonds, liability	1,500		—			—			—		(1,569)		69		—		—
Contingent consideration liability	37,952		—			—			—		(11,312)		2,413		29,053		2,413
Consolidated Funds

Common stock	2,951		(4,000)		(e)	—			—		—		1,049		—		—

Warrants and rights	5,806		—			—			—		(4,447)		(1,359)		—		—


	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)	(g)	$	5,647	$	(5,870)	$	8,020	$	53,418	$	5,337
Common stock	17,466		—			(29)		(a)(f)	5,798		(3,712)		(67)		19,456		(1,023)
Convertible bonds	2,500		—			—			2,581		—		—		5,081		—

Corporate Bond, asset	2,421		—			(312)		(g)	592		(1,938)		(243)		520		(180)
Options, asset	336		—			—			—		—		15		351		15
Options, liability	2,920		—			—			—		—		34		2,954		35
Warrants and rights	594		3,636		(a)(c)	—			—		—		753		4,983		753

Term Loan	—		11,149		(c)	—			245		—		717		12,111		717


Trade claim	7,083		1,044		(a)(f)	—			4,231		(2,863)		(490)		9,005		(511)
Private investments	237		—			—			432		—		(284)		385		(284)
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

(1) Unrealized gains/losses are reported in Investment income - Securities principal transactions, net in the accompanying condensed consolidated statements of operations.

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

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

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

(e) Fair market value derived using models and private transaction levels.

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

(g) The investments were converted to common stock.

Fair Value Inputs, Assets, Quantitative Information

The following table includes quantitative information as of September 30, 2021 and December 31, 2020 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, 2021

Valuation Techniques

Unobservable Inputs

Range

Weighted Average

Level 3 Assets

(dollars in thousands)

Common and preferred stocks

64,414

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

12% - 20%

6.25x - 6.75x

12.5%

6.5x

Options

238

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

10% - 13%

6.25x - 6.75x

12.5%

6.5x

Trade claims

2,639

Discounted cash flows

Discount rate

20%

Warrants and rights

4,512

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

12% - 13%

6.25x - 6.75x

12.5%

6.5x

Corporate, convertible bonds and term loan

12,578

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

12% - 13%

6.25x - 6.75x

12.5%

6.5x

Other level 3 assets (a)

102,577

Total level 3 assets

186,958

Level 3 Liabilities

Options

3,334

Option pricing models

Volatility

35%

Contingent consideration liability

29,053

Discounted cash flows

Monte Carlo simulation

Discount rate

Volatility

7% - 15%

19% - 20%

13%

20%

Total level 3 liabilities

32,387

Quantitative Information about Level 3 Fair Value Measurements

Fair Value at December 31, 2020

Valuation Techniques

Unobservable Inputs

Range

Weighted Average

Level 3 Assets

(dollars in thousands)

Common and preferred stocks

65,735

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

10% - 12%

6.25x - 6.75x

11%

6.5x

Trade claims

3,500

Discounted cash flows

Discount rate

15%

Warrants and rights

11,217

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

4% - 11%

6.25x - 6.75x

6.5x

Options

251

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

10% - 12%

6.25x - 6.75x

11%

6.5x

Corporate, convertible bonds and term loan

12,623

Discounted cash flows

Guideline companies

Discount rate

EBITDA Market Multiples

10% - 12%

6.25x - 6.75x

11%

6.5x

Other level 3 assets (a)

34,135

Total level 3 assets

127,461

Level 3 Liabilities

Options

3,915

Option pricing models

Volatility

35%

Contingent consideration liability

36,718

Discounted cash flows

Monte Carlo simulation

Discount rate

Volatility

9% - 16%

22% - 24%

15%

22%

Other level 3 liabilities (a)

2,204

Total level 3 liabilities

42,837

(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, 2021						December 31, 2020						Fair Value Hierarchy
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
				(dollars in thousands)
Financial Assets
Operating companies
Cash and cash equivalents	$	1,057,123		$	1,057,123		$	645,169		$	645,169		Level 1
Cash collateral pledged	48,996			48,996			110,743			110,743			Level 2
Segregated cash	177,693			177,693			185,141			185,141			Level 1
Securities purchased under agreements to resell	—			—			191			204			Level 2
Securities borrowed	2,169,056			2,169,056			1,908,187			1,908,187			Level 2
Loans receivable	3,479			3,479		(d)	7,682			7,682		(d)	Level 3
Consolidated Funds
Cash and cash equivalents	426			426			417			417			Level 1
Financial Liabilities
Securities sold under agreements to repurchase	53,839			56,121			5,036			5,544			Level 2
Securities loaned	3,352,456			3,352,456			2,476,414			2,476,414			Level 2
Convertible debt	—			—			80,808		(a)	135,444		(b)	Level 2
Notes payable and other debt	479,503		(e)	515,708		(c)	383,067		(e)	405,840		(c)	Level 2

(a)The carrying amount of the convertible debt includes an unamortized discount of $6.7 million as of December 31, 2020.

(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 discount and unamortized premium of $1.4 million and $0.3 million as of September 30, 2021, respectively and unamortized premium of $0.4 million as of December 31, 2020.