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

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

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 March 31, 2022 and December 31, 2021:

	Assets at Fair Value as of March 31, 2022
	Level 1		Level 2		Level 3		Netting (c)		Total
			(dollars in thousands)
Operating Entities
Securities owned, at fair value
Government bonds	$	11,992	$	—	$	—	$	—	$	11,992
Preferred stock	20,483		—		169,701		—		190,184
Common stock	2,304,895		3,517		39,831		—		2,348,243
Convertible bonds	—		—		5,250		—		5,250
Corporate bonds	28,892		115,680		2,426		—		146,998
Trade claims	—		—		4,840		—		4,840
Term loan	—		2,375		—		—		2,375
Warrants and rights	34,525		—		18,557		—		53,082
Private investments	—		—		550		—		550
Receivable on derivative contracts, at fair value
Currency forwards	—		109		—		—		109
Equity swaps	—		388,875		—		(115,912)		272,963
Options	49,573		—		228		—		49,801
Interest rate swap	—		19,839		—		—		19,839
	$	2,450,360	$	530,395	$	241,383	$	(115,912)	$	3,106,226
Portfolio funds measured at net asset value (a)									131,766
Consolidated Funds' portfolio funds measured at net asset value (a)									97,182
Carried interest (a)									70,281
Equity method investments (a)									35,581
Total investments									$	3,441,036

	Liabilities at Fair Value as of March 31, 2022
	Level 1		Level 2		Level 3		Netting (c)		Total
	(dollars in thousands)
Operating Entities
Securities sold, not yet purchased, at fair value
Common stock	$	858,685	$	97,543	$	—	$	—	$	956,228
Corporate bonds	—		1,349		—		—		1,349
Preferred stock	17,278		—		—		—		17,278
Warrants and rights	12		—		—		—		12
Payable for derivative contracts, at fair value
Futures	53		—		—				53
Currency forwards	—		1,084		—		—		1,084
Equity swaps	—		152,265		—		(131,802)		20,463
Options	22,135		—		3,079		—		25,214
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—		—		57,339		—		57,339
	$	898,163	$	252,241	$	60,418	$	(131,802)	$	1,079,020

(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 (the acquisition of Quarton International AG "Quarton"), the fourth quarter of 2020 (the acquisition of MHT Partners, LP "MHT") and the fourth quarter of 2021 (the acquisition of Portico Capital Advisors "Portico"), 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 through December 31, 2024. For all acquisitions 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 $12.5 million to $14.9 million. The undiscounted amounts for the MHT acquisition have no minimum or maximum as it is calculated based on revenue. The undiscounted amounts for the Portico acquisition can range from zero to $58.0 million.

(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, 2021
	Level 1		Level 2		Level 3		Netting (c)		Total
			(dollars in thousands)
Operating Entities
Securities owned, at fair value
Government bonds	$	16,002	$	—	$	—	$	—	$	16,002
Preferred stock	12,299		—		122,631		—		134,930
Common stock	2,396,041		121		32,658		—		2,428,820
Convertible bonds	—		—		5,250		—		5,250
Corporate bonds	—		19,049		2,419		—		21,468
Trade claims	—		—		3,496		—		3,496
Term loan	—		3,907		—		—		3,907
Private investments	—		—		410		—		410
Warrants and rights	31,056		—		15,403		—		46,459
Receivable on derivative contracts, at fair value
Currency forwards	—		80		—		—		80
Equity swaps	—		305,370		—		(81,742)		223,628
Options	60,985		—		234		—		61,219
Interest rate swap	—		1,208		—				1,208
	$	2,516,383	$	329,735	$	182,501	$	(81,742)	$	2,946,877
Portfolio funds measured at net asset value (a)									137,986
Consolidated Funds' portfolio funds measured at net asset value (a)									99,067
Carried interest (a)									88,925
Equity method investments (a)									47,200
Total investments									$	3,320,055

	Liabilities at Fair Value as of December 31, 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	$	1,192,396	$	—	$	—	$	—	$	1,192,396
Corporate bonds	—		37		—		—		37
Preferred stock	9,009		—		—		—		9,009
Warrants and rights	6		—		—		—		6
Payable for derivative contracts, at fair value
Futures	266		—		—		—		266
Currency forwards	—		1,346		—		—		1,346
Equity swaps	—		114,689		—		(92,330)		22,359
Options	32,773		—		3,419		—		36,192
Accounts payable, accrued expenses and other liabilities
Contingent consideration liability (b)	—		—		62,223		—		62,223
	$	1,234,450	$	116,072	$	65,642	$	(92,330)	$	1,323,834

(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 (the Quarton acquisition), the fourth quarter of 2020 (the MHT acquisition) and the fourth quarter of 2021 (the Portico acquisition), 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 through December 31, 2024. For all acquisitions 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. The undiscounted amounts for the Portico acquisition can range from zero  to $58.0 million. (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 months ended March 31, 2022 and 2021 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 March 31, 2022
	Balance at December 31, 2021		Transfers in		Transfers out		Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at March 31, 2022		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	122,631	$	—	$	—	$	3,441	$	(1,100)	$	44,729	$	169,701	$	44,729
Common stock	32,658		—		—		2,018		(33)		5,188		39,831		5,188
Convertible bonds	5,250		—		—		—		—		—		5,250		—
Corporate bond	2,419		—		—		—		—		7		2,426		7
Options, asset	234		—		—		—		—		(6)		228		(6)
Options, liability	3,419		—		—		—		—		(340)		3,079		(340)
Warrants and rights	15,403		—		—		414		—		2,740		18,557		2,740
Trade claims	3,496		—		—		1,666		(615)		293		4,840		293
Private investments	410		—		—		353		(250)		37		550		37
Contingent consideration liability	62,223		—		—		—		(10,076)		5,192		57,339		5,192

	Three Months Ended March 31, 2021
	Balance at December 31, 2020		Transfers in		Transfers out			Purchases/(covers)		(Sales)/shorts		Realized and Unrealized gains/losses		Balance at March 31, 2021		Change in unrealized gains/losses relating to instruments still held (1)
	(dollars in thousands)
Operating Entities
Preferred stock	$	59,967	$	—	$	—		$	1,859	$	(4,651)	$	(698)	$	56,477	$	(698)
Common stock	23,786		—		(5,353)		(a)	3,226		(1,387)		2,434		22,706		1,679
Convertible bonds	6,040		—		—			1,050		(3,930)		(23)		3,137		(23)
Corporate Bond, asset	135		—		—			70		(49)		(20)		136		(49)
Options, asset	251		—		—			—		—		(10)		241		(10)
Options, liability	3,915		—		—			—		—		(618)		3,297		(618)
Warrants and rights	6,547		—		—			3,406		(1,206)		(823)		7,924		(895)
Term Loan	12,623		—		—			322		—		(521)		12,424		(521)
Trade claim	8,713		—		—			1,378		(4,216)		30		5,905		(1,021)
Private investments	642		—		—			443		—		—		1,085		—
Corporate bond, liability	704		—		—			—		(289)		—		415		—
Government bonds, liability	1,500		—		—			—		(1,278)		300		522		87
Contingent consideration liability	37,952		—		—			(11,312)		—		(7,061)		19,579		(7,061)
Consolidated Funds
Common stock	2,951		—		—			—		—		—		2,951		—
Warrants and rights	5,806		—		—			—		(670)		193		5,329		(477)

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

(a) 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 March 31, 2022 and December 31, 2021 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 March 31, 2022		Valuation Techniques	Unobservable Inputs	Range	Weighted Average
Level 3 Assets	(dollars in thousands)
Common and preferred stocks	$	75,253	Discounted cash flows Guideline companies	Discount rate EBITDA Market Multiples	12.5% - 20% 6.25x - 6.75x	13% 6.5x
Options	228		Discounted cash flows Guideline companies	Discount rate EBITDA Market Multiples	12.5% - 13.5% 6.25x - 6.75x	13% 6.5x
Trade claims	2,138		Discounted cash flows	Discount rate	50%	50%
Warrants and rights	5,986		Discounted cash flows Guideline companies Option pricing model	Discount rate EBITDA Market Multiples Volatility	12.5% - 13.5% 6.25x - 6.75x 73% - 103%	13.0% 6.5x 97.2%
Other level 3 assets (a)	157,778
Total level 3 assets	$	241,383
Level 3 Liabilities
Options	3,079		Discounted cash flows Option pricing model	Discount rate Volatility	2.29% 35%	2.29% 35%
Contingent consideration liability	57,339		Discounted cash flows Monte Carlo simulation	Discount rate Volatility	8.6% - 16% 20% - 22%	12.3% 20.9%
Total level 3 liabilities	$	60,418

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2021		Valuation Techniques	Unobservable Inputs	Range	Weighted Average
Level 3 Assets	(dollars in thousands)
Common and preferred stocks	$	76,491	Discounted cash flows Guideline companies	Discount rate EBITDA Market Multiples	12.5% - 20% 6.25x - 6.75x	13% 6.5x
Trade claims	2,376		Discounted cash flows	Discount rate	40%	40%
Warrants and rights	4,483		Discounted cash flows Guideline companies Option pricing model	Discount rate EBITDA Market Multiples Volatility	12.5% - 13.5% 6.25x - 6.75x 90% - 100%	13% 6.5x 95%
Options	234		Discounted cash flows Guideline companies	Discount rate EBITDA Market Multiples	12.5% - 13.5% 6.25x - 6.75x	13% 6.5x
Other level 3 assets (a)	98,917
Total level 3 assets	$	182,501
Level 3 Liabilities
Options	3,419		Option pricing model	Volatility	35%	35%
Contingent consideration liability	62,223		Discounted cash flows Monte Carlo simulation	Discount rate Volatility	7% - 15% 20% - 24%	12% 22%
Total level 3 liabilities	$	65,642

(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).

	March 31, 2022						December 31, 2021						Fair Value Hierarchy
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
				(dollars in thousands)
Financial Assets
Operating companies
Cash and cash equivalents	$	512,978		$	512,978		$	914,343		$	914,343		Level 1
Cash collateral pledged	52,865			52,865			47,494			47,494			Level 2
Segregated cash	220,882			220,882			194,701			194,701			Level 1
Securities purchased under agreements to resell	19,621			19,621			—			—			Level 2
Securities borrowed	1,761,146			1,761,146			1,704,603			1,704,603			Level 2
Loans receivable	5,041			5,041		(b)	4,858			4,858		(b)	Level 3
Consolidated Funds
Cash and cash equivalents	23			23			296			296			Level 1
Financial Liabilities
Securities sold under agreements to repurchase	229,192			229,192			63,469			63,469			Level 2
Securities loaned	1,735,852			1,735,852			1,586,572			1,586,572			Level 2
Notes payable and other debt	625,766		(c)	644,238		(a)	623,371		(c)	655,229		(a)	Level 2

(a)Notes payable and other debt are based on the last broker quote available.(b)The fair market value of level 3 loans is calculated using discounted cash flows where applicable. (c)The carrying amount of the notes payable and other debt includes an unamortized discount and unamortized premium of $2.7 million and $0.2 million as of March 31, 2022, respectively, and unamortized discount and unamortized premium of $2.8 million and $0.3 million as of December 31, 2021, respectively.