UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

(Mark One)

☒      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the quarterly period ended June 30, 2021

OR

☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to

Commission File Number: 001-38979

BRIGHTSPHERE
Investment Group Inc.

(Exact name of registrant as specified in its charter) 

Delaware		47-1121020
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
200 Clarendon Street, 53rd Floor		02116
Boston,	Massachusetts
(Address of principal executive offices)		(Zip Code)

(617)-369-7300

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Ticker Symbol	Name of each exchange on which registered
Common stock, par value $0.001 per share	BSIG	New York Stock Exchange
4.800% Notes due 2026	BSIG 26	New York Stock Exchange
5.125% Notes due 2031	BSA	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý 

The number of shares of the registrant’s common stock, $0.001 per share, outstanding as of August 6, 2021 was 79,390,490.

TABLE OF CONTENTS

		Page
Part I	Financial Information	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020	4
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended June 30, 2021 and 2020	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2021 and 2020	7
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	82
Item 4.	Controls and Procedures	84
Part II	Other Information	85
Item 1.	Legal Proceedings	85
Item 1A.	Risk Factors	85
Item 6.	Exhibits	86

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

BrightSphere Investment Group Inc.

Condensed Consolidated Balance Sheets

(in millions, except for share and per share data, unaudited)

	June 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	1,175.4	$	371.3
Restricted cash	1.6		1.6
Investment advisory fees receivable	110.9		100.6
Income taxes receivable	—		9.3
Fixed assets, net	53.2		62.8
Right of use assets	67.4		78.6
Investments (includes balances reported at fair value of $60.5 and $88.0)	62.0		90.0
Acquired intangibles, net	0.2		0.2
Goodwill	20.3		20.3
Other assets	31.7		33.1
Deferred tax assets	89.1		170.3
Assets held for sale	136.7		326.8
Consolidated Funds’ assets held for sale	—		114.3
Total assets	$	1,748.5	$	1,379.2
Liabilities and stockholders’ equity
Accounts payable and accrued expenses	$	25.7	$	31.3
Accrued incentive compensation	47.9		78.3
Due to OM plc	1.9		3.4
Other compensation liabilities	81.9		73.8
Accrued income taxes	79.6		4.1
Operating lease liabilities	79.7		94.8
Other liabilities	0.2		1.5
Debt:
Revolving credit facility	53.9		—
Third party borrowings	394.6		394.3
Liabilities held for sale	119.2		313.3
Total liabilities	884.6		994.8
Commitments and contingencies
Equity:
Common stock (par value $0.001; 79,387,490 and 79,387,961 shares, respectively, issued)	0.1		0.1
Additional paid-in capital	493.4		492.4
Retained earnings (deficit)	381.6		(176.5)
Accumulated other comprehensive loss	(11.2)		(13.6)
Non-controlling interests	—		1.7
Non-controlling interests in consolidated Funds	—		80.3
Total equity and non-controlling interests	863.9		384.4
Total liabilities and equity	$	1,748.5	$	1,379.2

See Notes to Condensed Consolidated Financial Statements

3

BrightSphere Investment Group Inc.

Condensed Consolidated Statements of Operations

(in millions except for per share data, unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue:
Management fees	$	111.6	$	118.6	$	215.4	$	243.1
Performance fees	20.4		0.3		25.0		1.3
Other revenue	1.3		2.0		2.6		3.6
Consolidated Funds’ revenue	—		1.7		—		3.2
Total revenue	133.3		122.6		243.0		251.2
Operating expenses:
Compensation and benefits	73.4		67.2		126.0		111.2
General and administrative expense	18.0		20.4		37.1		42.8
Impairment of goodwill	—		—		—		16.4
Amortization of acquired intangibles	—		0.3		—		0.3
Depreciation and amortization	5.8		4.7		11.3		9.8
Consolidated Funds’ expense	—		0.1		—		0.1
Total operating expenses	97.2		92.7		174.4		180.6
Operating income	36.1		29.9		68.6		70.6
Non-operating income and (expense):
Investment income (loss)	4.7		6.6		7.3		(7.1)
Interest income	0.1		0.2		0.1		0.5
Interest expense	(6.3)		(7.4)		(12.5)		(15.2)
Loss on sale of subsidiary	—		—		(1.3)		—
Net consolidated Funds’ investment gains (losses)	—		6.7		—		(10.5)
Total non-operating income (loss)	(1.5)		6.1		(6.4)		(32.3)
Income from continuing operations before taxes	34.6		36.0		62.2		38.3
Income tax expense	9.9		8.8		19.0		12.3
Income from continuing operations	24.7		27.2		43.2		26.0
Income from discontinued operations, net of tax	53.4		26.7		75.3		50.0
Gain on disposal of discontinued operations, net of tax	509.2		—		509.2		—
Net income	587.3		53.9		627.7		76.0
Net income attributable to non-controlling interests in consolidated Funds	54.6		35.0		68.0		24.5
Net income attributable to controlling interests	$	532.7	$	18.9	$	559.7	$	51.5
Earnings per share (basic) attributable to controlling interests	$	6.71	$	0.23	$	7.05	$	0.62
Earnings per share (diluted) attributable to controlling interests	6.42		0.23		6.77		0.62
Continuing operations earnings per share (basic) attributable to controlling interests	0.31		0.26		0.54		0.37
Continuing operations earnings per share (diluted) attributable to controlling interests	0.29		0.26		0.52		0.37
Weighted average common stock outstanding	79.4		80.4		79.3		82.8
Weighted average diluted common stock outstanding	82.9		80.4		82.6		82.8

See Notes to Condensed Consolidated Financial Statements

4

BrightSphere Investment Group Inc.

Condensed Consolidated Statements of Comprehensive Income

(in millions, unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	587.3	$	53.9	$	627.7	$	76.0
Other comprehensive income (loss):
Amortization related to derivative securities, net of tax	0.6		0.6		1.2		1.1
Foreign currency translation adjustment	0.1		0.3		1.2		(1.8)
Total other comprehensive income (loss)	0.7		0.9		2.4		(0.7)
Comprehensive income attributable to non-controlling interests in consolidated Funds	54.6		35.0		68.0		24.5
Total comprehensive income attributable to controlling interests	$	533.4	$	19.8	$	562.1	$	50.8

See Notes to Condensed Consolidated Financial Statements

5

BrightSphere Investment Group Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended June 30, 2021 and 2020

($ in millions except share data, unaudited)

	Common stock (millions)	Common stock,  par value		Additional paid-in capital		Retained earnings (deficit)		Accumulated other comprehensive income (loss)		Total stockholders’ equity		Non- controlling interests		Non-controlling interests in consolidated Funds		Total  equity		Redeemable non-controlling interests in consolidated  Funds		Total equity and redeemable non-controlling interests in consolidated Funds
March 31, 2020	82.5	$	0.1	$	516.2	$	(428.3)	$	(19.1)	$	68.9	$	1.3	$	49.1	$	119.3	$	74.5	$	193.8
Issuance of common stock	0.1	—		—		—		—		—		—		—		—		—		—
Repurchase of common stock	(2.5)	—		(16.1)		—		—		(16.1)		—		—		(16.1)		—		(16.1)
Capital contributions (redemptions)	—	—		—		—		—		—		—		0.9		0.9		(0.8)		0.1
Equity-based compensation	—	—		0.5		—		—		0.5		—		—		0.5		—		0.5
Foreign currency translation adjustment	—	—		—		—		0.3		0.3		—		—		0.3		—		0.3
Amortization related to derivatives securities, net of tax	—	—		—		—		0.6		0.6		—		—		0.6		—		0.6
Other changes in non-controlling interests	—	—		—		—		—		—		0.1		—		0.1		—		0.1
Dividends ($0.01 per share)	—	—		—		(0.7)		—		(0.7)		—		—		(0.7)		—		(0.7)
Net income	—	—		—		18.9		—		18.9		—		28.8		47.7		6.2		53.9
June 30, 2020	80.1	$	0.1	$	500.6	$	(410.1)	$	(18.2)	$	72.4	$	1.4	$	78.8	$	152.6	$	79.9	$	232.5
March 31, 2021	79.4	$	0.1	$	492.8	$	(150.3)	$	(11.9)	$	330.7	$	5.6	$	93.7	$	430.0	$	—	$	430.0
Issuance of common stock	—	—		0.1		—		—		0.1		—		—		0.1		—		0.1
Capital contributions	—	—		—		—		—		—		—		29.7		29.7		—		29.7
Equity-based compensation	—	—		0.5		—		—		0.5		—		—		0.5		—		0.5
Foreign currency translation adjustment	—	—		—		—		0.1		0.1		—		—		0.1		—		0.1
Amortization related to derivatives securities, net of tax	—	—		—		—		0.6		0.6		—		—		0.6		—		0.6
Other changes in non-controlling interests	—	—		—		—		—		—		(5.6)		—		(5.6)		—		(5.6)
Net de-consolidation of Funds	—	—				—		—		—		—		(178.0)		(178.0)		—		(178.0)
Dividends ($0.01 per share)	—	—		—		(0.8)		—		(0.8)		—		—		(0.8)		—		(0.8)
Net income	—	—		—		532.7		—		532.7		—		54.6		587.3		—		587.3
June 30, 2021	79.4	$	0.1	$	493.4	$	381.6	$	(11.2)	$	863.9	$	—	$	—	$	863.9	$	—	$	863.9

See Notes to Condensed Consolidated Financial Statements

6

BrightSphere Investment Group Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the six months ended June 30, 2021 and 2020

($ in millions except share data, unaudited)

	Common stock (millions)	Common stock,  par value		Additional paid-in capital		Retained earnings (deficit)		Accumulated other comprehensive income (loss)		Total stockholders’ equity		Non- controlling interests		Non-controlling interests in consolidated Funds		Total  equity		Redeemable non-controlling interests in consolidated  Funds		Total equity and redeemable non-controlling interests in consolidated Funds
December 31, 2019	85.9	$	0.1	$	534.3	$	(452.5)	$	(17.5)	$	64.4	$	1.3	$	48.8	$	114.5	$	83.9	$	198.4
Issuance of common stock	0.1	—		—		—		—		—		—		—		—		—		—
Retirement of common stock	(0.2)	—		—		—		—		—		—		—		—		—		—
Repurchase of common stock	(5.7)	—		(35.3)		—		—		(35.3)		—		—		(35.3)		—		(35.3)
Capital contributions	—	—		—		—		—		—		—		1.1		1.1		0.4		1.5
Equity-based compensation	—	—		1.6		—		—		1.6		—		—		1.6		—		1.6
Foreign currency translation adjustment	—	—		—		—		(1.8)		(1.8)		—		—		(1.8)		—		(1.8)
Amortization related to derivatives securities, net of tax	—	—		—		—		1.1		1.1		—		—		1.1		—		1.1
Other changes in non-controlling interests	—	—		—		—		—		—		0.1		—		0.1		—		0.1
Dividends ($0.11 per share)	—	—		—		(9.1)		—		(9.1)		—		—		(9.1)		—		(9.1)
Net income (loss)	—	—		—		51.5		—		51.5		—		28.9		80.4		(4.4)		76.0
June 30, 2020	80.1	$	0.1	$	500.6	$	(410.1)	$	(18.2)	$	72.4	$	1.4	$	78.8	$	152.6	$	79.9	$	232.5
December 31, 2020	79.4	$	0.1	$	492.4	$	(176.5)	$	(13.6)	$	302.4	$	1.7	$	80.3	$	384.4	$	—	$	384.4
Issuance of common stock	—	—		0.1		—		—		0.1		—		—		0.1		—		0.1
Capital contributions	—	—		—		—		—		—		3.8		29.7		33.5		—		33.5
Equity-based compensation	—	—		0.9		—		—		0.9		—		—		0.9		—		0.9
Foreign currency translation adjustment	—	—		—		—		1.2		1.2		—		—		1.2		—		1.2
Amortization related to derivative securities, net of tax	—	—		—		—		1.2		1.2		—		—		1.2		—		1.2
Other changes in non-controlling interests	—	—		—		—		—		—		(5.5)		—		(5.5)		—		(5.5)
Net de-consolidation of Funds	—	—		—		—		—		—		—		(178.0)		(178.0)		—		(178.0)
Dividends ($0.02 per share)	—	—		—		(1.6)		—		(1.6)		—		—		(1.6)		—		(1.6)
Net income (loss)	—	—		—		559.7		—		559.7		—		68.0		627.7		—		627.7
June 30, 2021	79.4	$	0.1	$	493.4	$	381.6	$	(11.2)	$	863.9	$	—	$	—	$	863.9	$	—	$	863.9

See Notes to Condensed Consolidated Financial Statements

7

BrightSphere Investment Group Inc. Condensed Consolidated Statements of Cash Flows (in millions, unaudited)
	Six Months Ended June 30,
	2021	2020
Cash flows from operating activities:
Net income	627.7	76.0
Less: Income from discontinued operations, net of tax	(75.3)	(50.0)
Less: Net (income) loss attributable to non-controlling interests in consolidated Funds from continuing operations	—	4.5
Adjustments to reconcile net income to net cash flows from operating activities from continuing operations:
Impairment of goodwill	—	16.4
Amortization of acquired intangibles	—	0.3
Gain on sale of discontinued operations, net of tax	(509.2)	—
Loss on sale of subsidiary	1.3	—
Depreciation and other amortization	11.3	9.9
Amortization of debt-related costs	2.2	2.1
Amortization and revaluation of non-cash compensation awards	13.3	(15.6)
Net earnings from Affiliate accounted for using the equity method	(2.4)	(1.2)
Distributions received from equity method Affiliate	2.9	1.5
Distributions from discontinued operations	46.4	37.3
Deferred income taxes	(4.1)	24.3
(Gains) losses on other investments	(2.8)	13.5
Changes in operating assets and liabilities (excluding discontinued operations):
(Increase) decrease in investment advisory fees receivable	(31.8)	23.5
(Increase) decrease in other receivables, prepayments, deposits and other assets	9.7	(15.4)
Decrease in accrued incentive compensation, operating lease liabilities and other liabilities	(21.6)	(38.3)
Decrease in accounts payable, accrued expenses and accrued income taxes	(20.6)	(16.9)
Net cash flows from operating activities of continuing operations, excluding consolidated Funds	47.0	71.9
Net income (loss) attributable to non-controlling interests in consolidated Funds from continuing operations	—	(4.5)
Adjustments to reconcile net income (loss) attributable to non-controlling interests of consolidated Funds to net cash flows from operating activities from continuing operations of consolidated Funds:
Losses on other investments	—	7.5
Purchase of investments	—	(46.1)
Sale of investments	—	45.5
(Increase) decrease in receivables and other assets	—	(0.7)
Increase (decrease) in accounts payable and other liabilities	—	(2.2)
Net cash flows from operating activities of continuing operations of consolidated Funds	—	(0.5)
Net cash flows from operating activities of continuing operations	47.0	71.4
Net cash flows from operating activities of discontinued operations	(1.6)	(9.4)
Total net cash flows from operating activities	45.4	62.0
Cash flows from investing activities:
Additions of fixed assets, excluding discontinued operations	(7.4)	(15.2)
Cash proceeds from sale of discontinued operations	713.7	—
Purchase of investment securities	(2.5)	(8.8)
Sale of investment securities	8.4	36.3
Net cash flows from investing activities of continuing operations	712.2	12.3

See Notes to Condensed Consolidated Financial Statements

8

BrightSphere Investment Group Inc. Condensed Consolidated Statements of Cash Flows (in millions, unaudited)
	Six Months Ended June 30,
	2021		2020
Net cash flows from investing activities of discontinued operations	11.7		(3.2)
Total net cash flows from investing activities	723.9		9.1
Cash flows from financing activities:
Proceeds from third party and non-recourse borrowings	132.0		80.0
Repayment of third party and non-recourse borrowings	(78.1)		(103.3)
Payment for debt issuance costs	(0.4)		—
Payment to OM plc for co-investment redemptions	(1.3)		(0.3)
Dividends paid to stockholders	(1.1)		(6.3)
Dividends paid to related parties	(0.6)		(3.0)
Repurchases of common stock	—		(35.3)
Cash flows from financing activities of consolidated Funds
Redeemable non-controlling interest capital raised	—		1.2
Redeemable non-controlling interest capital redeemed	—		(0.8)
Net cash flows from financing activities of continuing operations	50.5		(67.8)
Net cash flows from financing activities of discontinued operations	(28.4)		1.0
Total net cash flows from financing activities	22.1		(66.8)
Effect of foreign exchange rate changes on cash and cash equivalents	—		—
Net increase in cash and cash equivalents	791.4		4.3
Cash and cash equivalents at beginning of period (including restricted cash)	372.9		82.1
Cash and cash equivalents at beginning of period classified within assets held for sale	$	31.2	$	38.9
Cash and cash equivalents at end of period	$	1,195.5	$	125.3
Less: cash and cash equivalents at end of period classified within assets held for sale	(18.5)		(27.2)
Cash and cash equivalents at end of period from continuing operations (including restricted cash)	$	1,177.0	98.1
Supplemental disclosure of cash flow information:
Interest paid (excluding consolidated Funds)	$	9.8	$	13.3
Income taxes paid	31.9		2.4
Supplemental disclosure of non-cash investing and financing transactions:
Payable for securities purchased by a consolidated Fund	$	—	$	0.5

See Notes to Condensed Consolidated Financial Statements

9

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1) Organization and Description of the Business

BrightSphere Investment Group Inc. (“BrightSphere”, “BSIG” or the “Company”), through its subsidiaries, is a global asset management company. The Company provides investment management services globally to predominantly institutional investors. The Company historically held interests in a group of investment management firms (the “Affiliates”) individually headquartered in the United States. The Company has completed the disposition of certain Affiliates and currently operates the business through its Quant & Solutions segment.

The Company’s Affiliates are organized as limited liability companies. Fees for services are largely asset-based and, as a result, the Company’s revenue fluctuates based on the performance of financial markets and investors’ asset flows in and out of the Company’s products. The Company generally utilizes a profit-sharing model in structuring its compensation and ownership arrangements with its Affiliates. The Affiliates’ variable compensation is generally based on each firm’s profitability. BSIG and Affiliate key employees share in profits after variable compensation according to their respective ownership interests. The profit-sharing model results in the alignment of BSIG and Affiliate key employee economic interests, which is critical to the Company’s talent management strategy and long-term growth of the business. The Company currently conducts its operations through the following reportable segment(1)(2):

•Quant & Solutions—comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies. This segment is comprised of the Company’s interest in Acadian Asset Management LLC (“Acadian”).    

Campbell Global, LLC (“Campbell Global”), Investment Counselors of Maryland (“ICM”) and the corporate head office are included within the Other(1)(2) category.

(1)Prior to March 31, 2021, the Company had an Alternatives reportable segment which was comprised of Landmark Partners, LLC (“Landmark”) and Campbell Global operating segments. On March 30, 2021, the Company entered into an agreement to sell all of the Company’s interests in Landmark. As a result of this transaction, Landmark was reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment of the Company. The reportable segments for all periods presented have been recast to reflect the reporting of Landmark within discontinued operations and the reclassification of Campbell Global to “Other”. On June 21, 2021, the Company entered into an agreement to sell all of the Company’s interests in Campbell Global. See Note 3, Divestitures, Held for Sale and Discontinued Operations and Note 15, Segments for further discussion.

(2)Prior to June 30, 2021, the Company had a Liquid Alpha reportable segment which was comprised of Thompson, Siegel & Walmsley LLC (“TSW”) and ICM. On February 6, 2021, the Company entered into an agreement to sell all of the Company’s interests in ICM, an equity-accounted Affiliate. On May 9, 2021, the Company entered into an agreement to sell all of the Company’s interests in TSW. As a result of this transaction, TSW has been reclassified to discontinued operations and the Liquid Alpha no longer constitutes a reportable segment of the Company. The reportable segments for all periods presented have been recast to reflect the reporting of TSW within discontinued operations. Also, the ICM operating segment has been reclassified to “Other” within the Company’s segment reporting for the three and six months ended June 30, 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations and Note 15, Segments for further discussion.

10

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1) Organization and Description of the Business (cont.)

Prior to 2014, the Company was a wholly-owned subsidiary of Old Mutual plc (“OM plc”), an international long-term savings, protection and investment group, listed on the London Stock Exchange. On October 15, 2014, the Company completed the initial public offering (the “Offering”) by OM plc pursuant to the Securities Act of 1933, as amended. Additionally, between the Offering and February 25, 2019, the Company, OM plc and/or HNA Capital U.S. (“HNA”) completed a series of transactions in the Company’s shares, including a two-step transaction announced on March 25, 2017 for a sale by OM plc of a 24.95% shareholding in the Company to HNA and a two-step transaction announced on November 19, 2018 for a sale of the substantial majority of the shares held by HNA of the Company to Paulson & Co. (“Paulson”). On February 25, 2019, this transaction was completed and Paulson held approximately 21.7% of the shares of the Company. The remaining shares held by HNA were bought back by the Company in the first quarter of 2019.

For the three and six months ended June 30, 2021, the Company did not repurchase any shares of common stock. For the three months ended June 30, 2020, the Company repurchased 2,437,700 shares of common stock at an average price of $6.56 per share, or approximately $16 million in total, including commissions. For the six months ended June 30, 2020, the Company repurchased 5,667,962 shares of common stock at an average price of $6.20 per share, or approximately $35.3 million in total, including commissions.

2) Basis of Presentation and Significant Accounting Policies

The Company’s significant accounting policies are as follows:

Basis of presentation

These unaudited Condensed Consolidated Financial Statements reflect the historical balance sheets, statements of operations and of comprehensive income, statements of changes in stockholders’ equity and statements of cash flows of the Company. Within these Condensed Consolidated Financial Statements, Paulson and its related entities, as defined above, are referred to as “related parties.”

The Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of the Company’s Condensed Consolidated Financial Statements have been included. All dollar amounts, except per-share data in the text and tables herein, are stated in millions unless otherwise indicated. Transactions between the Company and its related parties are included in the Condensed Consolidated Financial Statements, however, material intercompany balances and transactions among the Company, its consolidated Affiliates and consolidated Funds are eliminated in consolidation.

On February 6, 2021 the Company entered into a definitive agreement to sell all of the Company’s interests in ICM, an equity-accounted Affiliate. The criteria for discontinued operations were not met for this divestiture. The transaction closed on July 19, 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

11

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

2) Basis of Presentation and Significant Accounting Policies (cont.)

On March 30, 2021, the Company entered into a definitive agreement with Ares Holdings L.P. (“Ares”), pursuant to which Ares agreed to purchase all of the Company’s interests in Landmark and the Company’s carried interest and co-investments in Landmark Funds. The transaction closed on June 2, 2021. The divestiture of Landmark met the discontinued operations criteria as it represented a strategic shift that had a major effect on the Company’s operations and financial results. As a result, the Company has reclassified the financial results of Landmark and consolidated Landmark Funds to income from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and June 30, 2020. The assets and liabilities of Landmark and consolidated Landmark Funds have been reflected as assets and liabilities held for sale in the Condensed Consolidated Balance Sheet as of December 31, 2020. Cash flows from discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020.

On May 9, 2021, the Company entered into a definitive agreement with Pendal Group Limited (“Pendal”), pursuant to which Pendal agreed to purchase all of the Company’s interests in TSW and the Company’s seed investments in TSW strategies. The transaction closed on July 22, 2021. The divestiture of TSW met the discontinued operations criteria as it represented a strategic shift that had a major effect on the Company’s operations and financial results. As a result, the Company has reclassified the financial results of TSW to income from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and June 30, 2020. The assets and liabilities of TSW have been reflected as assets and liabilities held for sale in the Condensed Consolidated Balance Sheet as of June 30, 2021 and December 31, 2020. Cash flows from discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020.

On June 21, 2021, the Company entered into a definitive agreement to sell all of the Company’s interests in Campbell Global and the Company’s co-investments in Campbell Global’s Funds. The transaction is expected to close in the third quarter of 2021. The pending divestiture of Campbell Global did not meet the discontinued operations criteria as it did not represent a strategic shift that has a major effect on the Company’s operations and financial results. The assets and liabilities of Campbell Global and Campbell Global Funds have been reflected as assets and liabilities held for sale in the Condensed Consolidated Balance Sheet as of June 30, 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

The Notes to the Condensed Consolidated Financial Statements are presented on a continuing operations basis unless otherwise noted. See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

Certain disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (annual report on Form 10-K) are not required to be included on an interim basis in the Company’s quarterly reports on Form 10-Q. The Company has condensed or omitted these disclosures. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 1, 2021. The Company’s significant accounting policies, which have been consistently applied, are summarized in those financial statements.

12

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

2) Basis of Presentation and Significant Accounting Policies (cont.)

Use of estimates

The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. The three and six months ended June 30, 2021 were characterized by continued uncertainty due to the COVID-19 pandemic which could impact estimates and assumptions made by management. Actual results could differ from such estimates, and the differences may be material to the Condensed Consolidated Financial Statements.

Recently adopted accounting standards

In December 2019, the FASB issued Accounting Standard Update (“ASU”) 2019-12, ASC 740, “Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes.” ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. The guidance is effective for all public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. The Company adopted the standard on January 1, 2020. The Company has determined that the adoption of this standard did not have a material impact on its Condensed Consolidated Financial Statements and related disclosures.

New accounting standards not yet adopted

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or other reference rates expected to be discontinued because of reference rate reform. This ASU is effective as of March 12, 2020 through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions as of June 30, 2021, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period to determine the impact on its Condensed Consolidated Financial Statements and related disclosures.

The Company has considered all other newly issued accounting guidance that is applicable to the Company’s operations and the preparation of the unaudited Condensed Consolidated Financial Statements, including those that have not yet been adopted. The Company does not believe that any such guidance has or will have a material effect on its Condensed Consolidated Financial Statements and related disclosures.

13

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

3) Divestitures, Held for Sale and Discontinued Operations

Landmark Partners

On March 30, 2021, the Company entered into a definitive agreement with Ares, pursuant to which Ares agreed to purchase all of the Company’s interests in Landmark and the Company’s co-investments in Landmark funds. On June 2, 2021, the Company completed the sale of all its interests in Landmark to Ares for cash consideration of $690 million, adjusted for customary closing adjustments. The Company recognized a gain on disposal of discontinued operations of $509.2 million, net of tax of $176.6 million for the three and six months ended June 30, 2021. The divestiture of Landmark met the discontinued operations criteria as it represented a strategic shift that had a major effect on the Company’s operations and financial results. The Company also redeemed co-investments of $31.5 million in Landmark’s funds as of June 2, 2021 upon consummation of the sale.

Thompson Siegel & Walmsley, LLC

On May 9, 2021, the Company entered into an agreement to sell all of the Company’s interests in TSW to Pendal for cash consideration totaling approximately $240 million, adjusted for customary closing adjustments. The Company also agreed to redeem its seed investments in TSW strategies post-close for approximately $14 million, subject to adjustment for certain related cashflow. The divestiture of TSW met the discontinued operations criteria as it represents a strategic shift that has a major effect on the Company’s operations and financial results. On July 22, 2021, the Company completed the sale of TSW to Pendal.

Campbell Global

On June 21, 2021, the Company entered into a definitive agreement to sell all of the Company’s interests in Campbell Global, an Affiliate included within “Other” category, to J.P. Morgan Asset Management. The assets and liabilities of Campbell Global have been classified as held for sale as the criteria for held for sale accounting treatment was met. The criteria for discontinued operations were not met for this pending divestiture. The transaction is expected to close in the third quarter of 2021.

14

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

3) Divestitures, Held for Sale and Discontinued Operations (cont.)

The major classes of assets and liabilities held for sale in the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 are as follows (in millions):

	June 30, 2021		December 31, 2020
Cash and cash equivalents	$	12.8	$	30.6
Investment advisory fees receivable	12.8		12.2
Fixed assets, net	1.8		8.8
Right of use assets	3.6		12.1
Investments	28.7		25.1
Intangible assets, net	—		58.2
Goodwill	13.7		161.8
Other assets	0.8		17.5
Deferred tax assets	—		0.5
Assets of discontinued operations classified as held for sale(1)	$	74.2	$	326.8
Other assets held for sale(2)	62.5		—
Assets held for sale	$	136.7	$	326.8
Accounts payable and accrued expenses	$	1.1	$	2.2
Accrued incentive compensation	11.6		42.5
Other compensation liabilities	75.8		254.2
Operating lease liabilities	3.9		13.1
Other liabilities	$	—	$	1.3
Liabilities of discontinued operations classified as held for sale(1)	$	92.4	$	313.3
Other liabilities held for sale(3)	26.8		—
Liabilities held for sale	$	119.2	$	313.3

(1)Includes assets and liabilities of discontinued operations of TSW that are classified as held for sale as of June 30, 2021 and of Landmark and TSW as of December 31, 2020.

(2)Includes assets of Campbell Global, the Company's co-investments in Campbell Global Funds and seed investments in TSW strategies as of June 30, 2021.

(3)Includes liabilities of Campbell Global as of June 30, 2021.

15

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

3) Divestitures, Held for Sale and Discontinued Operations (cont.)

The major classes of revenue and expenses constituting net income from discontinued operations attributable to controlling interests for Landmark and TSW in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 are as follows (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues	$	51.3	$	52.1	$	109.5	$	106.1
Operating expenses:
Compensation and benefits	43.8		49.7		87.6		63.1
General and administrative expenses	3.3		4.1		7.7		9.4
Amortization of intangibles	1.1		1.6		2.7		3.2
Depreciation and amortization	0.2		0.4		0.5		0.6
Consolidated Funds’ expense	—		—		0.1		0.1
Total operating expenses	48.4		55.8		98.6		76.4
Operating income (loss)	2.9		(3.7)		10.9		29.7
Investment gains of consolidated Funds	51.5		28.9		68.1		28.9
Income from discontinued operations before taxes	54.4		25.2		79.0		58.6
Income tax expense (benefit)	1.0		(1.5)		3.7		8.6
Income from discontinued operations, net of tax	53.4		26.7		75.3		50.0
Gain on disposal, net of tax of $176.6, and $176.6	509.2		—		509.2		—
Total discontinued operations	562.6		26.7		584.5		50.0
Income from discontinued operations attributable to non-controlling interests	54.6		28.9		68.0		29.0
Net income from discontinued operations attributable to controlling interests	$	508.0	$	(2.2)	$	516.5	$	21.0

Consolidated Funds

In connection with the sale of Landmark on June 2, 2021, the Company transferred its co-investment interests in Landmark funds to Ares for $31.5 million. The redemption resulted in the de-consolidation of consolidated Funds that were considered to be variable interest entities (“VIEs”) as of June 2, 2021 upon consummation of the sale. The assets and liabilities of the consolidated Funds have been classified as held for sale as the criteria for held for sale and discontinued operations accounting treatment were met and are therefore presented separately in the Company’s Condensed Consolidated Balance Sheet as of December 31, 2020. The consolidated Funds’ investments gains/(losses) from discontinued operations, net of tax, attributable to controlling interests was $(3.1) million and $0.0 million in the Company’s Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2021, respectively. The consolidated Funds’ investments gains/(losses) from discontinued operations, net of tax, attributable to controlling interests was $0.0 million and $(0.2) million in the Company’s Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2020, respectively.

The major classes of assets comprising the consolidated Funds classified as held for sale are as follows at June 30, 2021 and December 31, 2020 (in millions):

16

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

3) Divestitures, Held for Sale and Discontinued Operations (cont.)

	June 30, 2021		December 31, 2020
Cash and cash equivalents	$	—	$	0.6
Equity-accounted investments(1)	—		113.7
Consolidated Funds’ assets held for sale	$	—	$	114.3

(1)Equity-accounted investments in consolidated Funds is comprised of Investments in partnership interests where a portion of return includes carried interest. These investments are accounted for within the scope of ASC 323, Investments - Equity Method and Joint Ventures because the Company has determined it has significant influence.

Other divestitures

Investment Counselors of Maryland

On February 6, 2021, the Company entered into a definitive agreement to sell all of the Company’s interests in ICM, an equity-accounted Affiliate within “Other” category. The criteria for discontinued operations were not met for this divestiture. On July 19, 2021, the Company completed the sale of all its interest in ICM to William Blair Investment Management for cash consideration totaling $18.5 million.

BrightSphere International Ltd.

On March 17, 2021, BrightSphere completed the sale of its subsidiary BrightSphere International Ltd. to Perpetual U.S. Holdings Company Inc. (“Perpetual”). The Company recognized a pre-tax loss on sale of subsidiary of $(1.3) million within the Condensed Consolidated Statement of Operations for the six months ended June 30, 2021.

4) Investments

Investments are comprised of the following as of the dates indicated (in millions):

	June 30, 2021	December 31, 2020
Other investments held at fair value	14.9	40.0
Investments related to long-term incentive compensation plans held at fair value	45.6	48.0
Total investments held at fair value	60.5	88.0
Equity-accounted investment in Affiliate	1.5	2.0
Total investments per Condensed Consolidated Balance Sheets	62.0	90.0

17

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

4) Investments (cont.)

Investment income is comprised of the following for the three and six months ended June 30 (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Realized and unrealized gains (losses) on other investments held at fair value	$	3.5	$	6.0	$	4.9	$	(8.3)
Earnings from equity-accounted investment in Affiliate	1.2		0.6		2.4		1.2
Total investment income (loss) per Condensed Consolidated Statements of Operations	$	4.7	$	6.6	$	7.3	$	(7.1)

18

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

5) Fair Value Measurements

The following table summarizes the Company’s assets that are measured at fair value on a recurring basis at June 30, 2021 (in millions):

	Quoted prices in active markets (Level I)		Significant other observable inputs (Level II)		Significant unobservable inputs (Level III)		Uncategorized		Total value, June 30, 2021
Assets of BSIG(1)
Investments in separate accounts(2)	9.3		—		—		—		9.3
Investments related to long-term incentive compensation plans(3)	45.6		—		—		—		45.6
Investments in unconsolidated Funds(4)	—		—		—		5.6		5.6
Total fair value assets	$	54.9	$	—	$	—	$	5.6	$	60.5

The following table summarizes the Company’s assets that are measured at fair value on a recurring basis at December 31, 2020 (in millions):

	Quoted prices in active markets (Level I)		Significant other observable inputs (Level II)		Significant unobservable inputs (Level III)		Uncategorized		Total value December 31, 2020
Assets of BSIG(1)
Investments in separate accounts(2)	9.7		11.6		—		—		21.3
Investments related to long-term incentive compensation plans(3)	48.0		—		—		—		48.0
Investments in unconsolidated Funds(4)	—		—		2.5		16.2		18.7
Total fair value assets	$	57.7	$	11.6	$	2.5	$	16.2	$	88.0

(1)Assets measured at fair value are comprised of financial investments managed by the Company's Affiliates.

Equity securities, including common and preferred stock and short-term investment funds which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. The securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.

The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Company has not made adjustments to the prices provided.

If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III. If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained. In either case, such securities are classified as Level III. The Company performs due diligence

19

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

5) Fair Value Measurements (cont.)

procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures.

(2)Investments in separate accounts of $9.3 million at June 30, 2021 consist of approximately 1% of cash equivalents and 99% of equity securities, fixed income securities, and other investments. Investments in separate accounts of $21.3 million at December 31, 2020 consist of approximately 11% of cash equivalents and 89% of equity securities, fixed income securities, and other investments. The Company values these using the published price of the underlying securities (classified as Level I) or quoted price supported by observable inputs as of the measurement date (classified as Level II).

(3)Investments related to long-term incentive compensation plans of $45.6 million and $48.0 million at June 30, 2021 and December 31, 2020, respectively, were investments in publicly registered daily redeemable funds (some managed by Affiliates), which the Company has classified as trading securities and valued using the published price as of the measurement dates. Accordingly, the Company has classified these investments as Level I.

(4)The uncategorized amounts of $5.6 million and $16.2 million at June 30, 2021 and December 31, 2020, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in Funds and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Condensed Consolidated Balance Sheets. These unconsolidated Funds consist primarily of real estate investment Funds, UCITS and other investment vehicles. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates. UCITS and other investment vehicles are not subject to redemption restrictions.

The real estate investment Funds of $4.9 million and $6.2 million at June 30, 2021 and December 31, 2020, respectively, are subject to longer than quarterly redemption restrictions, and due to their nature, distributions are received only as cash flows are generated from underlying assets over the life of the Funds. The range of time over which the underlying assets are expected to be liquidated by the investees is approximately one year to ten years from June 30, 2021. The valuation process for the underlying real estate investments held by the real estate investment Funds begins with each property or loan being valued by the investment teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, acquisitions, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. In connection with this process, changes in fair value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions.

Investments in unconsolidated Funds categorized as Level III of $0.0 million and $2.5 million at June 30, 2021 and December 31, 2020, respectively, related to investments in Forestry Funds advised by an Affiliate and are valued by the general partner of those Funds. Determination of estimated fair value involves subjective judgment because the actual fair value can be determined only through negotiation between parties in a sale transaction, and amounts ultimately realized may vary significantly from the fair value presented.

20

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

5) Fair Value Measurements (cont.)

The following table reconciles the opening balances of Level III financial assets to closing balances at the end of the period (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
Investments in unconsolidated Funds	2021		2020		2021		2020
Level III financial assets
At beginning of the period	$	2.5	$	3.0	$	2.5	$	3.0
Additions (redemptions)	(0.1)		—		(0.1)		—
Transfers to held for sale (see Note 3)	(2.7)		—		(2.7)		—
Total net fair value gains/losses recognized in net income	0.3		—		0.3		—
Total Level III financial assets	$	—	$	3.0	$	—	$	3.0

There were no significant transfers of financial assets or liabilities between Levels II or III during the three and six months ended June 30, 2021 and 2020, respectively.

21

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

6) Variable Interest Entities

The Company, through its Affiliates, sponsors the formation of various entities considered to be VIEs. These VIEs are primarily Funds managed by Affiliates and other partnership interests typically owned entirely by third party investors. Certain Funds may be capitalized with seed capital investments from the Company and may be owned partially by Affiliate key employees and/or individuals that own non-controlling interests in an Affiliate.

The Company’s determination of whether it is the primary beneficiary of a Fund that is a VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to absorb more than an insignificant amount of the risks and rewards of the entity. Typically, the Fund’s investors are entitled to substantially all of the economics of these VIEs with the exception of the management fees and performance fees, if any, earned by the Company or any investment the Company has made into the Funds. The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest, including interests of related parties, is substantial.

The following table presents the assets of Funds that are VIEs and consolidated by the Company (in millions):

	June 30, 2021		December 31, 2020
Assets
Consolidated Funds’ assets held for sale (Note 3)	—		114.3
Total Assets	$	—	$	114.3

In connection with the sale of Landmark on June 2, 2021, the Company transferred its co-investment interests in Landmark funds to Ares for $31.5 million. The redemption resulted in the de-consolidation of consolidated Funds that were considered to be VIEs as of June 2, 2021 upon consummation of the sale. The Company reclassified assets of consolidated Funds as “Consolidated Funds’ assets held for sale” in the Condensed Consolidated Balance Sheet as of December 31, 2020. See Note 3, Divestitures, Held for Sale and Discontinued Operations, in these Notes for additional information. To the extent the Company has consolidated Funds that are not VIEs, the assets and liabilities of those Funds are not included in the table above.

The assets of consolidated VIEs presented in the table above belong to the investors in those Funds, are available for use only by the Fund to which they belong, and are not available for use by the Company to the extent they are held by non-controlling interests.

The Company’s involvement with Funds that are VIEs and not consolidated by the Company is generally limited to that of an investment manager and its investment in the unconsolidated VIE, if any. The Company’s investment in any unconsolidated VIE generally represents an insignificant interest of the Fund’s net assets and assets under management, such that the majority of the VIEs results are attributable to third parties. The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors.

22

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

6) Variable Interest Entities (cont.)

The following information pertains to unconsolidated VIEs for which the Company holds a variable interest (in millions):

	June 30, 2021		December 31, 2020
Unconsolidated VIE assets	$	6,265.7	$	6,437.1
Unconsolidated VIE liabilities	$	4,417.1	$	4,332.1
Equity interests on the Condensed Consolidated Balance Sheets(2)	$	14.0	$	14.3
Maximum risk of loss(1)(2)	$	19.3	$	19.3

(1)Includes equity investments the Company has made or is required to make and any earned but uncollected management and incentive fees. The Company does not record performance or incentive allocations until the respective measurement period has ended.

(2)Includes co-investment interests in Campbell Funds classified as “assets held for sale” as of June 30, 2021 in connection with the pending divestiture of Campbell Global. See Note 3, Divestitures, Held for Sale and Discontinued Operations, in these Notes for additional information.

23

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

7) Borrowings and Debt

The Company’s borrowings and long-term debt was comprised of the following as of the dates indicated (in millions):

	June 30, 2021					December 31, 2020
(in millions)	Carrying Value		Fair Value		Fair Value Level	Carrying Value		Fair Value		Fair Value Level
Revolving credit facility:
$125 million revolving credit facility expiring August 22, 2022(1)(2)	$	53.9	$	53.9	2	$	—	$	—
Total revolving credit facility	$	53.9	$	53.9		$	—	$	—
Third party borrowings:
$275 million 4.80% Senior Notes Due July 27, 2026(3)	$	272.9	$	296.3	2	$	272.8	$	298.9	2
$125 million 5.125% Senior Notes Due August 1, 2031(3)	121.7		129.7		2	121.5		126.0		2
Total third party borrowings	$	394.6	$	426.0		$	394.3	$	424.9

(1)Fair value approximates carrying value because the credit facility has variable interest rates based on selected short term market rates.

(2)On February 23, 2021, the Company’s $150 million revolving credit facility was assigned to Acadian and amended to reduce the facility to $125 million.

(3)The difference between the principal amounts and the carrying values of the senior notes in the table above reflects the unamortized debt issuance costs and discounts.

Revolving Credit Facility

On September 3, 2020, the Company, Royal Bank of Canada, BMO Harris Bank, N.A., Bank of China, New York Branch, Wells Fargo Bank, National Association, Barclays Bank PLC, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into an amendment (the “Amendment") to the Revolving Credit Agreement dated as of August 20, 2019 (the “Original Credit Agreement”, and as amended by the Amendment, the “Amended Credit Agreement”).

On February 23, 2021, the Company, along with the Lenders, entered into an assignment and assumption and amendment agreement (the “Assignment”) to the Amended Credit Agreement. Pursuant to the Assignment, the Amended Credit Agreement was assigned to and assumed by Acadian and the Amended Credit Agreement was amended (the Amended Credit Agreement, as amended by the Assignment, the “Acadian Credit Agreement”) to, among other things, reduce the Lenders’ commitments thereunder to $125 million. The Acadian Credit Agreement has a maturity date of August 22, 2022.

Borrowings under the Acadian Credit Agreement bear interest, at Acadian’s option, at either the per annum rate equal to (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5% and (iii) the one month Adjusted LIBOR Rate plus 1.0%, plus, in each case an additional amount based on its credit rating or (b) the London interbank offered rate for a period, at the Company’s election equal to one, three or six months plus an additional amount ranging from 1.5% to 2.0%, with such additional amount based on Acadian’s Leverage Ratio (as defined

24

BrightSphere Investment Group Inc.

Notes to Consolidated Financial Statements

(unaudited)

7) Borrowings and Debt (cont.)

below). In addition, Acadian is charged a commitment fee based on the average daily unused portion of the revolving credit facility under the Acadian Credit Agreement at a per annum rate ranging from 0.25% to 0.375%, with such amount based on Acadian’s Leverage Ratio.

Under the Acadian Credit Agreement, the ratio of Acadian’s third-party borrowings to Acadian’s trailing twelve months Adjusted EBITDA, as defined by the Acadian Credit Agreement (the “Leverage Ratio”), cannot exceed 2.5x and the Acadian interest coverage ratio must not be less than 4.0x.

25

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

8) Leases

The Company has operating leases for corporate offices, data centers, vehicles and certain equipment. The operating leases have remaining lease terms of 1 year to 13 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

The following table summarizes information about the Company’s operating leases for the three and six months ended June 30, (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Operating lease cost	$	2.9	$	3.4	$	5.9	$	6.6
Variable lease cost	—		—		—		0.1
Total operating lease expense	$	2.9	$	3.4	$	5.9	$	6.7
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3.5	$	3.0	$	6.1	$	6.1
Right of use assets obtained in exchange for new operating lease liabilities	1.5		4.4		1.6		74.5

In determining the incremental borrowing rate, the Company considered the interest rate yield for the specific interest rate environment and the Company’s credit spread at the inception of the lease. For the six months ended June 30, 2021 and 2020, the weighted average remaining lease term was 11.7 years and 12.4 years, respectively, and the weighted average discount rate was 3.35% and 3.34%, respectively.

Maturities of operating lease liabilities were as follows (in millions):

	Operating Leases
Year Ending December 31,
2021 (excluding the six months ended June 30, 2021)	$	4.8
2022	5.9
2023	8.0
2024	7.5
2025	7.6
Thereafter	64.0
Total lease payments	$	97.8
Less imputed interest	(18.1)
Total	$	79.7

26

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

9) Goodwill and Intangible Assets

In connection with the divestiture of Landmark, the Company reclassified $148.1 million of goodwill to “Assets held for sale” in the Condensed Consolidated Balance Sheet as of December 31, 2020. The Landmark divestiture was consummated on June 2, 2021. In connection with the pending divestiture of TSW, the Company reclassified $13.7 million of goodwill to “Assets held for sale” in the Condensed Consolidated Balance Sheet as of June 30, 2021 and December 31, 2020. See Note 3, Divestitures, Held for Sale and Discontinued Operations, in these Notes for additional information.

10) Commitments and Contingencies

Operational commitments

The Company had unfunded commitments to invest up to approximately $4 million in co-investments at Campbell as of June 30, 2021. These commitments will be funded as required through the end of the respective investment periods ranging through fiscal 2022. On June 21, 2021, the Company announced the divestiture of all of the Company’s interests in Campbell. The pending divestiture of Campbell met the held for sale criteria. The commitments will be funded as required through the disposition date, which is expected to occur in the third quarter of 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

On March 30, 2021, the Company announced the divestiture of all of the Company’s interest in Landmark and funded its commitments as required through the disposition, which consummated on June 2, 2021. As a result of the disposition, the Company no longer had any unfunded commitments to Landmark as of June 30, 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

Certain Affiliates operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any violations of such financial requirements occurring during the period.

Guaranty

The Company entered into a guaranty for an office space security deposit on behalf of an Affiliate in the amount of $2.5 million in January 2020. This represents the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guaranty in the event of default by the guaranteed parties. This guaranty expires in 2022. There are no liabilities recorded on the Condensed Consolidated Balance Sheet as of June 30, 2021 related to this guaranty.

Litigation

The Company and its Affiliates are subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals for matters for which the outcome is probable and can be reasonably estimated. If an insurance claim or other indemnification for a litigation accrual is available to the Company, the associated gain will not be recognized until all contingencies related to the gain have been resolved. As of June 30, 2021, there were no material accruals for claims, legal proceedings or other contingencies.

27

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

10) Commitments and Contingencies (cont.)

Indemnifications

In the normal course of business, such as through agreements to enter into business combinations and divestitures of Affiliates, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred.

Foreign tax contingency

The Company has clients in non-U.S. jurisdictions which require entities that are conducting certain business activities in such jurisdictions to collect and remit tax assessed on certain fees paid for goods and services provided. The Company does not believe this requirement is applicable based on its limited business activities in these jurisdictions. However, given the fact that uncertainty exists around the requirement, the Company has chosen to evaluate its potential exposure related to non-collection and remittance of these taxes. At June 30, 2021, management of the Company has estimated the potential maximum exposure and concluded that it is not material. No accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at June 30, 2021.

Considerations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, restricted cash and investments. The Company maintains cash and cash equivalents and short term investments with various financial institutions. These financial institutions are typically located in cities in which the Company and its Affiliates operate. For the Company and certain Affiliates, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits. The majority of the Company’s cash equivalents consists of money market funds. At June 30, 2021, approximately $1.1 billion of the Company’s cash and cash equivalents were invested in money market funds. Additionally, the Company holds insurance policies which cover historical and future tax benefits relating to certain of its deferred tax assets. The insurers of the policies are considered a significant counterparty to the Company.

28

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

11) Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to controlling interests by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is similar to basic earnings per share, but is adjusted for the effect of potentially issuable common stock, except when inclusion is antidilutive.

The calculation of basic and diluted earnings per share of common stock is as follows (dollars in millions, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Numerator:
Income from continuing operations attributable to controlling interests	$	24.7	$	21.1	$	43.2	$	30.5
Income from discontinued operations attributable to controlling interests (Note 3)	508.0		$	(2.2)	$	516.5	$	21.0
Net income attributable to controlling interests	$	532.7	$	18.9	$	559.7	$	51.5
Less: Total income available to participating unvested securities(1)	—		—		(0.1)		—
Net income attributable to common stock	$	532.7	$	18.9	$	559.6	$	51.5
Denominator:
Weighted-average shares of common stock outstanding—basic	79,351,567		80,435,389		79,335,650		82,758,277
Potential shares of common stock:
Restricted stock units	23,323		13,735		29,472		15,814
Employee stock options	3,551,234		—		3,258,363		—
Weighted-average shares of common stock outstanding—diluted	82,926,124		80,449,124		82,623,485		82,774,091
Earnings per share of common stock attributable to controlling interests:
Basic
Continuing operations	$	0.31	$	0.26	$	0.54	$	0.37
Discontinued operations	6.40		(0.03)		6.51		0.25
Basic earnings per share of common stock attributable to controlling interests	$	6.71	$	0.23	$	7.05	$	0.62
Diluted
Continuing operations	$	0.29	$	0.26	$	0.52	$	0.37
Discontinued operations	6.13		(0.03)		6.25		0.25
Diluted earnings per share of common stock attributable to controlling interests	$	6.42	$	0.23	$	6.77	$	0.62

(1)Income available to participating unvested securities includes dividends paid on unvested restricted shares and their proportionate share of undistributed earnings.

29

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

11) Earnings Per Share (cont.)

Employee options to purchase 7,474,000 shares were not included in the computation of diluted EPS for the three and six months ended June 30, 2020 because the assumed proceeds from exercising such options exceed the average price of the shares of common stock for the period and, therefore, the options are deemed antidilutive.

12) Revenue

Management fees

The Company’s management fees are a function of the fee rates the Affiliates charge to their clients, which are typically expressed in basis points, and the levels of the Company’s assets under management. The most significant driver of increases or decreases in this average fee rate is changes in the mix of the Company’s assets under management caused by net inflows or outflows in certain asset classes or disproportionate market movements.

Performance fees

The Company’s products subject to performance fees earn these fees upon exceeding high-water mark performance thresholds or outperforming a hurdle rate. Performance fees are recorded in revenues when the contractual performance criteria have been met and when it is probable that a significant reversal of revenue recognized will not occur in future reporting periods.

Other revenue

Included in other revenue are certain payroll and benefits costs and expenses paid on behalf of Funds by the Company’s Affiliates. In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, the Company is acting as a principal and the reimbursement is accrued on a gross basis at cost as the corresponding reimbursable expenses are incurred. Revenue from expense reimbursements amounted to $1.2 million and $1.1 million for the three months ended June 30, 2021 and 2020, respectively. Revenue from expense reimbursements amounted to $2.2 million and $2.2 million for the six months ended June 30, 2021 and 2020, respectively, and is recorded in other revenue in the Company’s Condensed Consolidated Statements of Operations. Other revenue may also consist of other miscellaneous revenue, consisting primarily of administration and consulting services.

30

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

12) Revenue (cont.)

Disaggregation of management fee revenue

The geographic disaggregation of management fee revenue for the three and six months ended June 30 (in millions) are presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Quant & Solutions
U.S.	$	80.0	$	58.9	$	154.4	$	120.2
Non-U.S.	26.0		23.3		50.5		47.2
Liquid Alpha(1)
U.S.	$	—	$	22.9	$	—	$	47.9
Non-U.S.	—		7.5		—		16.3
Other(2)
U.S.	4.1		4.3		7.8		7.9
Non-U.S.	1.5		1.7		2.7		3.6
Management fee revenue	$	111.6	$	118.6	$	215.4	$	243.1

(1)Prior to March 31, 2021, the Company had the Alternatives reportable segment which consisted of Landmark and Campbell Global operating segments. On March 30, 2021, the Company entered into an agreement to sell of all of the Company’s interests in Landmark. As a result of this transaction, Landmark was reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment of the Company. The Campbell Global operating segment was reclassified to “Other” within the Company’s segment reporting. On June 21, 2021 the Company entered into an agreement to sell all of our equity interests in Campbell Global. See Note 3, Divestitures, Held for Sale and Discontinued Operations and Note 15, Segments for further discussion.

(2)Prior to June 30, 2021, the Company had a Liquid Alpha reportable segment which was comprised of TSW and ICM. On February 6, 2021, the Company entered into an agreement to sell all of the Company’s interests in ICM, an equity-accounted Affiliate. On May 9, 2021, the Company entered into an agreement to sell all of the Company’s interests in TSW. As a result of this transaction, TSW was reclassified to discontinued operations and the Liquid Alpha no longer constitutes a reportable segment of the Company. The ICM operating segment was reclassified to “Other” within the Company’s segment reporting for the three and six months ended June 30, 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations for further discussion and Note 15, Segments for further discussion.

31

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

13) Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), net of tax, for the three months ended June 30, 2021 and 2020 are as follows (in millions):

	Foreign currency translation adjustment		Valuation and amortization of derivative securities		Total
Balance, as of March 31, 2021	$	5.5	$	(17.4)	$	(11.9)
Foreign currency translation adjustment	0.1		—		0.1
Amortization related to derivatives securities, before tax	—		0.8		0.8
Tax impact	—		(0.2)		(0.2)
Other comprehensive income	0.1		0.6		0.7
Balance, as of June 30, 2021	$	5.6	$	(16.8)	$	(11.2)

	Foreign currency translation adjustment		Valuation and amortization of derivative securities		Total
Balance, as of March 31, 2020	$	0.7	$	(19.8)	$	(19.1)
Foreign currency translation adjustment	0.3		—		0.3
Amortization related to derivatives securities, before tax	—		0.8		0.8
Tax impact	—		(0.2)		(0.2)
Other comprehensive income	0.3		0.6		0.9
Balance, as of June 30, 2020	$	1.0	$	(19.2)	$	(18.2)

For each of the three months ended June 30, 2021 and 2020, the Company reclassified $0.8 million from accumulated other comprehensive income (loss) to interest expense on the Condensed Consolidated Statements of Operations.

The components of accumulated other comprehensive income (loss), net of tax, for the six months ended June 30, 2021 and 2020 are as follows (in millions):

	Foreign currency translation adjustment		Valuation and amortization of derivative securities		Total
Balance, as of December 31, 2020	$	4.4	$	(18.0)	$	(13.6)
Foreign currency translation adjustment	1.2		—		1.2
Amortization related to derivatives securities, before tax	—		1.6		1.6
Tax impact	—		(0.4)		(0.4)
Other comprehensive income	1.2		1.2		2.4
Balance, as of June 30, 2021	$	5.6	$	(16.8)	$	(11.2)

32

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

13) Accumulated Other Comprehensive Income (Loss) (cont.)

	Foreign currency translation adjustment		Valuation and amortization of derivative securities		Total
Balance, as of December 31, 2019	$	2.8	$	(20.3)	$	(17.5)
Foreign currency translation adjustment	(1.8)		—		(1.8)
Amortization related to derivatives securities, before tax	—		1.5		1.5
Tax impact	—		(0.4)		(0.4)
Other comprehensive income (loss)	(1.8)		1.1		(0.7)
Balance, as of June 30, 2020	$	1.0	$	(19.2)	$	(18.2)

For the six months ended June 30, 2021 and 2020, the Company reclassified $1.6 million and $1.5 million, respectively, from accumulated other comprehensive income (loss) to interest expense on the Condensed Consolidated Statements of Operations.

14) Derivatives and Hedging

Cash flow hedge

In July 2015, the Company entered into a series of $300.0 million notional Treasury rate lock contracts which were designated and qualified as cash flow hedges. The Company documented its hedging strategy and risk management objective for this contract in anticipation of a future debt issuance. The Treasury rate lock contract eliminated the impact of fluctuations in the underlying benchmark interest rate for future forecasted debt issuances. The Company assessed the effectiveness of the hedging contract at inception and on a quarterly basis thereafter. The forecasted debt issuances occurred in July 2016 and the Treasury rate lock, which had an accumulated fair value of $(34.4) million, was settled. Refer to Note 7, Borrowings and Debt, for additional information on the debt issuances.

As of June 30, 2021, the balance recorded in accumulated other comprehensive income (loss) was $(16.8) million, net of tax. This balance will be reclassified to earnings through interest expense over the life of the issued debt. The Company reclassified $0.8 million for each of the three months ended June 30, 2021 and 2020, respectively. Amounts of $1.6 million and $1.5 million have been reclassified for the six months ended June 30, 2021. During the next twelve months the Company expects to reclassify approximately $3.4 million to interest expense.

33

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

15) Segments

The Company has the following reportable segment(1)(2):

•Quant & Solutions—comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies. This segment is comprised of the Company’s interest in Acadian.

Campbell Global, ICM and the corporate head office are included within Other(1)(2) category. The corporate head office expenses are not allocated to the Company’s business segment but the Chief Operating Decision Maker (“CODM”) does consider the cost structure of the corporate head office when evaluating the financial performance of the segment.

(1)Prior to March 31, 2021, the Company had an Alternatives reportable segment which was comprised of Landmark and Campbell Global operating segments. On March 30, 2021, the Company entered into an agreement to sell all of the Company’s interests in Landmark. As a result of this transaction, Landmark has been reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment of the Company. The reportable segments for all periods presented have been recast to reflect the reporting of Landmark within discontinued operations and the reclassification of Campbell Global to “Other” category. On June 21, 2021, the Company entered into an agreement to sell all of the Company’s interests in Campbell Global. See Note 3, Divestitures, Held for Sale and Discontinued Operations for further discussion.

(2)Prior to June 30, 2021, the Company had a Liquid Alpha reportable segment which was comprised of TSW and ICM. On February 6, 2021, the Company entered into an agreement to sell all of the Company’s interests in ICM, an equity-accounted Affiliate. On May 9, 2021, the Company entered into an agreement to sell all of the Company’s interests in TSW. As a result of this transaction, TSW has been reclassified to discontinued operations and Liquid Alpha no longer constitutes a reportable segment of the Company. The ICM operating segment was reclassified to “Other” category within the Company’s segment reporting for the three and six months ended June 30, 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations for further discussion.

Performance Measure

The primary measure used by the CODM in measuring performance and allocating resources to the segments is Economic Net Income (“ENI”). The Company defines ENI for the segments as ENI revenue less (i) ENI operating expenses, (ii) variable compensation and (iii) key employee distributions. The ENI adjustments to U.S. GAAP include both reclassifications of U.S. GAAP revenue and expense items, as well as adjustments to U.S. GAAP results, primarily to exclude non-cash, non-economic expenses, or to reflect cash benefits not recognized under U.S. GAAP. This measure supplements and should be considered in addition to, and not in lieu of, the Condensed Consolidated Statements of Operations prepared in accordance with U.S. GAAP. The Company does not disclose total asset information for its reportable segment as the information is not reviewed by the CODM.

ENI revenue includes management fees, performance fees and other revenue under U.S. GAAP, adjusted to include management fees paid to Affiliates by consolidated Funds and the Company’s share of earnings from equity-accounted Affiliate. ENI revenue is also adjusted to exclude the separate revenues recorded under U.S. GAAP for certain Fund expenses reimbursed to our Affiliates.

34

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

15) Segments (cont.)

ENI operating expenses include compensation and benefits, general and administrative expense, and depreciation and amortization under U.S. GAAP, adjusted to exclude non-cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees, goodwill impairment and amortization of acquired intangible assets, capital transaction costs, restructuring costs, and the separate expenses recorded under U.S. GAAP for certain Fund expenses reimbursed to Affiliates. Additionally, variable compensation and Affiliate key employee distributions are segregated from ENI operating expenses.

ENI segment results are also adjusted to exclude the portion of consolidated Fund revenues, expenses and investment return recorded under U.S. GAAP.

Segment Presentation

The following tables set forth summarized operating results for the Company's segments and related adjustments necessary to reconcile the segment economic net income to arrive at the Company's consolidated U.S. GAAP net income (loss):

The following table presents the financial data for the Company’s segment for the three months ended June 30, 2021 (in millions):

	Three Months Ended June 30, 2021
	Quant & Solutions		Other		Reconciling Adjustments			Total U.S. GAAP(1)
ENI revenue	$	111.1	$	22.3	$	(0.1)	(a)	$	133.3
ENI operating expenses	38.3		9.5		13.5		(b)	61.3
Earnings before variable compensation	72.8		12.8		(13.6)			72.0
Variable compensation	22.0		10.4		0.3		(c)	32.7
ENI operating earnings (after variable comp)	50.8		2.4		(13.9)			39.3
Affiliate key employee distributions	3.1		0.1		—			3.2
Earnings after Affiliate key employee distributions	47.7		2.3		(13.9)			36.1
Net interest expense	—		(5.4)		(0.8)		(d)	(6.2)
Net investment income	—		—		4.7		(e)	4.7
Net income attributable to non-controlling interests in consolidated Funds	—		—		(54.6)		(e)	(54.6)
Income tax (expense) benefit	—		(11.7)		1.8		(f)	(9.9)
Income from discontinued operations, net of tax	—		—		53.4		(g)	53.4
Gain on disposal of discontinued operations, net of tax	—		—		509.2		(h)	509.2
Economic net income	$	47.7	$	(14.8)	$	499.8		$	532.7

The following table presents the financial data for the Company’s segments for the three months ended June 30, 2020 (in millions):

35

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

15) Segments (cont.)

	Three Months Ended June 30, 2020
	Quant & Solutions		Liquid Alpha		Other		Reconciling Adjustments			Total U.S. GAAP(1)
ENI revenue	$	82.8	$	30.8	$	6.8	$	2.2	(a)	$	122.6
ENI operating expenses	35.0		11.7		10.9		2.7		(b)	60.3
Earnings before variable compensation	47.8		19.1		(4.1)		(0.5)			62.3
Variable compensation	17.7		7.6		1.5		3.0		(c)	29.8
ENI operating earnings (after variable comp)	30.1		11.5		(5.6)		(3.5)			32.5
Affiliate key employee distributions	1.3		1.1		0.2		—			2.6
Earnings after Affiliate key employee distributions	28.8		10.4		(5.8)		(3.5)			29.9
Net interest expense	—		—		(5.6)		(1.6)		(d)	(7.2)
Net investment income	—		—		—		13.3		(e)	13.3
Net income attributable to non-controlling interests in consolidated Funds	—		—		—		(35.0)		(e)	(35.0)
Income tax expense	—		—		(8.2)		(0.6)		(f)	(8.8)
Income from discontinued operations, net of tax	—		—		—		26.7		(g)	26.7
Economic net income	$	28.8	$	10.4	$	(19.6)	$	(0.7)		$	18.9

The following table presents the financial data for the Company’s segment for the six months ended June 30, 2021 (in millions):

	Six Months Ended June 30, 2021
	Quant & Solutions		Other		Reconciling Adjustments			Total U.S. GAAP(1)
ENI revenue	$	214.6	$	28.6	$	(0.2)	(a)	$	243.0
ENI operating expenses	77.4		19.2		16.6		(b)	113.2
Earnings before variable compensation	137.2		9.4		(16.8)			129.8
Variable compensation	44.6		11.3		0.8		(c)	56.7
ENI operating earnings (after variable comp)	92.6		(1.9)		(17.6)			73.1
Affiliate key employee distributions	4.6		(0.1)		—			4.5
Earnings after Affiliate key employee distributions	88.0		(1.8)		(17.6)			68.6
Net interest expense	—		(10.8)		(1.6)		(d)	(12.4)
Net investment income	—		—		7.3		(e)	7.3
Loss on sale of subsidiary	—		—		(1.3)		(e)	(1.3)
Net loss attributable to non-controlling interests in consolidated Funds	—		—		(68.0)		(e)	(68.0)
Income tax (expense) benefit	—		(20.0)		1.0		(f)	(19.0)
Income from discontinued operations, net of tax	—		—		75.3		(g)	75.3
Gain on disposal of discontinued operations, net of tax	—		—		509.2		(h)	509.2
Economic net income	$	88.0	$	(32.6)	$	504.3		$	559.7

36

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

15) Segments (cont.)

The following table presents the financial data for the Company’s segments for the six months ended June 30, 2020 (in millions):

	Six Months Ended June 30, 2020
	Quant & Solutions		Liquid Alpha		Other		Reconciling Adjustments			Total U.S. GAAP(1)
ENI revenue	$	168.9	$	65.2	$	12.9	$	4.2	(a)	$	251.2
ENI operating expenses	72.1		24.7		23.9		(2.2)		(b)	118.5
Earnings before variable compensation	96.8		40.5		(11.0)		6.4			132.7
Variable compensation	34.7		16.4		2.9		3.4		(c)	57.4
ENI operating earnings (after variable comp)	62.1		24.1		(13.9)		3.0			75.3
Affiliate key employee distributions	2.1		2.4		0.2		—			4.7
Earnings after Affiliate key employee distributions	60.0		21.7		(14.1)		3.0			70.6
Net interest expense	—		—		(11.2)		(3.5)		(d)	(14.7)
Net investment income (loss)	—		—		—		(17.6)		(e)	(17.6)
Net income attributable to non-controlling interests in consolidated Funds	—		—		—		(24.5)		(e)	(24.5)
Income tax (expense) benefit	—		—		(15.1)		2.8		(f)	(12.3)
Income from discontinued operations, net of tax	—		—		—		50.0		(g)	50.0
Economic net income	$	60.0	$	21.7	$	(40.4)	$	10.2		$	51.5

(1)The most directly comparable U.S. GAAP measure of ENI revenue is U.S. GAAP revenue. The most directly comparable U.S. GAAP measure of ENI operating expenses is U.S. GAAP operating expenses, which is comprised of ENI operating expenses, variable compensation and Affiliate key employee distributions above. The most directly comparable U.S. GAAP measure of earnings after Affiliate key employee distributions is U.S. GAAP operating income. The most directly comparable U.S. GAAP measure of ENI is U.S. GAAP net income attributable to controlling interests.

Reconciling Adjustments:

(a)Adjusted to exclude earnings from equity-accounted Affiliate, which are included in U.S. GAAP investment income, and to include consolidated Funds revenues and the separate revenues recorded for certain Fund expenses reimbursed by customers, which are included in U.S. GAAP revenue.

(b)Adjusted to include non-cash expenses for key employee equity and profit interest revaluations, capital transaction costs, goodwill impairment and amortization of acquired intangible assets, restructuring costs, consolidated Funds’ operating expenses and the Fund expenses reimbursed by customers, each of which are included in U.S. GAAP operating expenses.

(c)Adjusted to include restructuring costs which are included in U.S. GAAP compensation expense.

(d)Adjusted to include the cost of seed financing, which is included in U.S. GAAP interest expense.

(e)Adjusted to include net investment income (loss), net income (loss) attributable to non-controlling interests in consolidated Funds, and the loss on sale of subsidiary, all of which are included in U.S. GAAP net income attributable to controlling interests.

37

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

15) Segments (cont.)

(f)Adjusted to include the impact of deferred tax attributable to the amortization of goodwill and acquired intangibles. Also adjusted to include the tax impact of certain ENI adjustments; exclude the tax expense or benefits relating to uncertain tax positions, and exclude the tax impact of other unusual items that are not related to current operating results for ENI purposes.

(g)Adjusted to include the results of discontinued operations, net of tax, which is included in U.S. GAAP net income attributable to controlling interests.

(h)Adjusted to include the gain on disposal of discontinued operations, net of tax, which is included in U.S. GAAP net income attributable to controlling interests.

16) Related Party Transactions

Landmark has provided loans to its employees. At December 31, 2020, the balance of the loans to Affiliate employees was $8.4 million.

On March 30 2021, the Company announced the divestiture of all of the Company’s interest in Landmark, which occurred on June 2, 2021. As a result of the disposition, the Company no longer had any related party transactions with Landmark as of June 30, 2021. See Note 3, Divestitures, Held for Sale and Discontinued Operations for additional information.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless we state otherwise or the context otherwise requires, references in this Quarterly Report on Form 10-Q to “BrightSphere” or “BSIG” refer to BrightSphere Investment Group Inc., references to the “Company” refer to BSIG, and references to “we,” “our” and “us” refer to BSIG and its consolidated subsidiaries and equity-accounted Affiliate, excluding discontinued operations. References to the holding company or “Center” excluding the Affiliates refer to BrightSphere Inc., or “BSUS,” a Delaware corporation and wholly owned subsidiary of BSIG. Unless we state otherwise or the context otherwise requires, references in this Quarterly Report on Form 10-Q to “Affiliates” or an “Affiliate” refer to the asset management firms in which we have an ownership interest. References in this Quarterly Report on Form 10-Q to “OM plc” refer to Old Mutual plc, our former parent. None of the information in this Quarterly Report on Form 10-Q constitutes either an offer or a solicitation to buy or sell any of our Affiliates’ products or services, nor is any such information a recommendation for any of our Affiliates’ products or services.

The following discussion of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes which appear elsewhere in this Quarterly Report on Form 10-Q.

This discussion contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements” at the end of this Item 2 for more information. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

Our MD&A is presented in five sections:

•Overview provides a brief description of our business. It includes information on our reporting segment and underlying Affiliates, a summary of The Economics of Our Business and an explanation of How We Measure Performance using a non-GAAP measure which we refer to as economic net income, or ENI. This section also provides a Summary Results of Operations and information regarding our Assets Under Management by Affiliate, strategy, client type and location, and net flows by segment, client type and client location.

•U.S. GAAP Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020 includes an explanation of changes in our U.S. GAAP revenue, expense and other items for the three and six months ended June 30, 2021 and 2020, as well as key U.S. GAAP operating metrics.

•Non-GAAP Supplemental Performance Measure — Economic Net Income and Segment Analysis includes an explanation of the key differences between U.S. GAAP net income and ENI, the key measure management uses to evaluate our performance. This section also provides a reconciliation between U.S. GAAP net income attributable to controlling interests and ENI for the three and six months ended June 30, 2021 and 2020 as well as a reconciliation of key ENI operating items including ENI revenue and ENI operating expenses. This section also provides key non-GAAP operating metrics. In addition, this section provides segment analysis for our business segments.

•Capital Resources and Liquidity discusses our key balance sheet data. This section discusses Cash Flows from the business; Adjusted EBITDA; Future Capital Needs; Borrowings and Long-Term Debt. The discussion of Adjusted EBITDA includes an explanation of how we calculate Adjusted EBITDA and a reconciliation of U.S. GAAP net income attributable to controlling interests to Adjusted EBITDA.

•Critical Accounting Policies and Estimates provides a discussion of the key accounting policies and estimates that we believe are the most critical to an understanding of our results of operations and financial condition. These accounting policies and estimates require complex management judgment regarding matters that are highly uncertain at the time the policies were applied and estimates were made.

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Overview

We are a global asset management company headquartered in Boston, Massachusetts. We historically held interests in a group of investment management firms (the “Affiliates”) individually headquartered in the United States. We have completed the disposition of certain Affiliates and currently operate our business through the following segment:

•Quant & Solutions—comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies. This segment is comprised of our interest in Acadian Asset Management LLC (“Acadian”).

Campbell Global, LLC (“Campbell Global”), Investment Counselors of Maryland (“ICM”) and the corporate head office are included within the Other category. The corporate head office expenses are not allocated to the Company’s business segment but the Chief Operating Decision Maker (“CODM”) does consider the cost structure of the corporate head office when evaluating the financial performance of our segment.

Through Acadian, we offer a diverse range of actively-managed investment strategies and products to institutional investors around the globe. While Acadian maintains autonomy in the investment process and the day-to-day management of their business, our strategy is to work with Acadian to accelerate the growth and profitability of their firm.

As of December 31, 2020, we had three reportable segments that were comprised of five Affiliates. We entered into agreements to divest our equity interests in four Affiliates during the six months ended June 30, 2021. Prior to March 31, 2021, we had an Alternatives reportable segment which was comprised of Landmark Partners, LLC (“Landmark”) and Campbell Global operating segments. On March 30, 2021, we entered into an agreement to sell all of our interests in Landmark. As a result of this transaction, Landmark was reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment. The Campbell Global operating segment was reclassified to the “Other” category within our segment reporting. On June 21, 2021, we entered into an agreement to sell all of our interests in Campbell Global. See “Recent Developments” herein.

Prior to June 30, 2021,we had a Liquid Alpha reportable segment which was comprised of Thompson, Siegel & Walmsley LLC (“TSW”) and ICM. On February 6, 2021, we entered into an agreement to sell all of our interests in ICM. On May 9, 2021, we entered into an agreement to sell all of our interests in TSW. As a result of this transaction, TSW has been reclassified to discontinued operations and the Liquid Alpha segment no longer constitutes a reportable segment of the Company. The ICM operating segment was reclassified to the “Other” category within our segment reporting for the three and six months ended June 30, 2021. See “Recent Developments” herein.

Upon closing of the pending Campbell Global sale, which is expected to be in the third quarter, Acadian will be our sole Affiliate.

Under U.S. GAAP, an Affiliate may be consolidated into operations or may be accounted for under the equity method of accounting. We may also be required to consolidate certain of our Affiliates’ sponsored investment entities, or Funds, due to the nature of our decision-making rights, our economic interests in these Funds or the rights of third party clients in those Funds.

40

    Recent Developments

Divestiture of Landmark, Campbell Global, ICM and TSW

On June 2, 2021, we sold all of our equity interests in Landmark to Ares Management Corporation. The transaction resulted in a $509.2 million gain on disposal of discontinued operations, net of tax which is reflected in our Consolidated Statement of Operations.

On June 21, 2021, we entered into a definitive agreement to sell all of our interests in Campbell Global to J.P. Morgan Asset Management. The transaction is expected to close during the third quarter of 2021.

On July 19, 2021, we completed the sale of all our interests in ICM, an equity-accounted Affiliate, to William Blair Investment Management.

On July 22, 2021, we completed the sale of all of our interests in TSW to Pendal Group Limited (“Pendal”) in exchange for approximately $240 million.

COVID-19 Impact

Beginning in the first quarter of 2020, the outbreak of COVID-19 had a significant impact on the global economy and the financial and securities markets, which may continue for months to come. The overall extent and duration of COVID-19 on businesses and economic activity generally remains unclear. We continue to monitor the economic uncertainty and market volatility related to COVID-19, which has impacted the investment management industry in which we and our Affiliates operate. The extent of the impact on our business operations and financial results will depend on a number of factors and future developments, including the spread of variants of COVID-19, which are uncertain and cannot be predicted. See Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities Exchange Commission on March 1, 2021.

    The Economics of Our Business

Our profitability is affected by a variety of factors including the level and composition of our average assets under management, or AUM, fee rates charged on AUM and our expense structure. Our Affiliates earn management fees based on assets under management. Approximately 80% of our management fees for the three months ended June 30, 2021 were calculated based on average AUM (calculated on either a daily or monthly basis) with the remainder of our management fees calculated based on period-end AUM or other measuring methods. Changes in the levels of our AUM are driven by our investment performance and net client cash flows. Our Affiliates may also earn performance fees, or adjust management fees, when certain accounts differ in relation to relevant benchmarks or exceed or fail to exceed required returns. Approximately $19.5 billion, or 15%, of our AUM in consolidated Affiliates, are in accounts with incentive fee in which we participate in the performance fee. The majority of these incentive fees are calculated based on value added over the relevant benchmarks on a rolling one-year and three-year basis.

Our largest expense item is compensation and benefits paid to our and our Affiliates’ employees, which consists of both fixed and variable components. Fixed compensation and benefits represents base salaries and wages, payroll taxes and the costs of our employee benefit programs. Variable compensation, calculated as described below, may be awarded in cash, equity or profit interests.

The arrangements in place with our Affiliates result in the sharing of economics between BSUS and each Affiliate’s key management personnel using a profit-sharing model, except for ICM, which used a revenue share model as a result of a legacy economic arrangement that has not been restructured. Profit sharing affects two elements within

41

our earnings: (i) the calculation of variable compensation and (ii) the level of each Affiliate’s equity or profit interests distribution to its employees.

Variable compensation is the portion of earnings that is contractually allocated to Affiliate employees as a bonus pool, typically representing a fixed percentage of earnings before variable compensation, which is measured as revenues less fixed compensation and benefits and other operating and administrative expenses. Profits after variable compensation are shared between us and Affiliate key employee equity holders according to our respective equity or profit interests ownership. The sharing of profits in this manner ensures that the economic interests of Affiliate key employees and those of BSUS are aligned, both in terms of generating strong annual earnings as well as investing those earnings back into the business in order to generate growth over the long term. We view profit sharing as an attractive operating model, as it allows us to share in the benefits of operating leverage as the business grows, and ensures all equity and profit interests holders are incentivized to achieve that growth.

Equity or profit interests owned by Affiliate key employees are awarded as part of their variable compensation arrangements. Over time, Affiliate key employee-owned equity or profit interests are recycled from one generation of employee-owners to the next, either by the next generation purchasing equity or profit interests directly from retiring principals, or by Affiliate key employees forgoing cash bonuses in exchange for the equivalent value in Affiliate equity or profit interests. The recycling of equity or profit interests is often facilitated by BSUS; see “—U.S. GAAP Results of Operations—U.S. GAAP Expenses—Compensation and Benefits Expense” for a further discussion.

How We Measure Performance

We manage our business based on one business segment, reflecting how our management assesses the performance of our business.

In measuring and monitoring the key components of our earnings, our management uses a non-GAAP financial measure, ENI, to evaluate the financial performance of, and to make operational decisions for, our business. We also use ENI to make resource allocation decisions, determine appropriate levels of investment or dividend payout, manage balance sheet leverage, determine Affiliate variable compensation and equity distributions, and incentivize management. It is an important measure in evaluating our financial performance because we believe it most accurately represents our operating performance and cash generation capability.

ENI differs from net income determined in accordance with U.S. GAAP as a result of both the reclassification of certain income statement items and the exclusion of certain non-cash or non-recurring income statement items. In particular, ENI excludes non-cash charges representing the changes in the value of Affiliate equity and profit interests held by Affiliate key employees, the results of discontinued operations which are no longer part of our business, restructuring costs, capital transaction costs, seed capital and co-investment gains, losses and related financing costs and that portion of consolidated Funds which are not attributable to our stockholders.

ENI revenue is primarily comprised of the fee revenues paid to us by our clients for our advisory services and earnings from our equity-accounted Affiliate. Revenue included within ENI differs from U.S. GAAP revenue in that it excludes amounts from consolidated Funds which are not attributable to our stockholders, it excludes reimbursement of certain costs we paid on behalf of our customers and includes our share of earnings from our equity-accounted Affiliate.

ENI expenses are calculated to reflect all usual expenses from ongoing continuing operations attributable to our stockholders. Expenses included within ENI differ from U.S. GAAP expenses in that they exclude amounts from consolidated Funds which are not attributable to our stockholders, revaluations of Affiliate key employee owned equity and profit interests, amortization and impairment of acquired intangibles and other acquisition-related items, costs we paid on behalf of our customers which were subsequently reimbursed and certain other non-cash expenses.

“Non-controlling interests” is a concept under U.S. GAAP that identifies net components of revenues and expenses that are not attributable to our stockholders. For example, the portion of the net income (loss) of any consolidated

42

Fund that is attributable to the outside investors or clients of the consolidated Fund is included in “Non-controlling interests” in our Condensed Consolidated Financial Statements. Conversely, “controlling interests” is the portion of revenue or expense that is attributable to our stockholders.

For a more detailed discussion of the differences between U.S. GAAP net income and economic net income, see “—Non-GAAP Supplemental Performance Measure — Economic Net Income and Segment Analysis.”

Summary Results of Operations

The following table summarizes our unaudited results of operations for the three and six months ended June 30, 2021 and 2020: 

($ in millions, unless otherwise noted)	Three Months Ended June 30,								Six Months Ended June 30,
	2021			2020			2021 vs. 2020		2021			2020			2021 vs. 2020
U.S. GAAP Basis
Revenue	$	133.3		$	122.6		$	10.7	$	243.0		$	251.2		$	(8.2)
Pre-tax income from continuing operations attributable to controlling interests	34.6			29.9			4.7		62.2			42.8			19.4
Net income from continuing operations attributable to controlling interests	24.7			21.1			3.6		43.2			30.5			12.7
Net income attributable to controlling interests	532.7			18.9			513.8		559.7			51.5			508.2
U.S. GAAP operating margin(1)	27.1		%	24.4		%	269 bps		28.2		%	28.1		%	13 bps
Earnings per share, basic ($)	$	6.71		$	0.23		$	6.48	$	7.05		$	0.62		$	6.43
Earnings per share, diluted ($)	$	6.42		$	0.23		$	6.19	$	6.77		$	0.62		$	6.15
Basic shares outstanding (in millions)	79.4			80.4			(1.0)		79.3			82.8			(3.5)
Diluted shares outstanding (in millions)	82.9			80.4			2.5		82.6			82.8			(0.2)
Economic Net Income Basis(2)(3)
(Non-GAAP measure used by management)
ENI revenue(4)	$	133.4		$	120.4		$	13.0	$	243.2		$	247.0		$	(3.8)
Pre-tax economic net income(5)	44.6			27.8			16.8		75.4			56.4			19.0
Adjusted EBITDA	56.3			38.8			17.5		98.4			79.1			19.3
ENI operating margin(6)	39.9		%	29.9		%	998 bps		37.3		%	29.3		%	802 bps
Economic net income(7)	32.9			19.6			13.3		55.4			41.3			14.1
ENI diluted EPS ($)	$	0.40		$	0.24		$	0.16	$	0.67		$	0.50		$	0.17
Other Operational Information
Assets under management (AUM) at period end (in billions)	$	126.9		$	145.1		$	(18.2)	$	126.9		$	145.1		$	(18.2)
Net client cash flows (in billions)	(0.9)			(1.8)			0.9		(4.4)			(0.5)			(3.9)
Annualized revenue impact of net flows(8)	(0.9)			(14.0)			13.1		(8.8)			(14.2)			5.4

(1)U.S. GAAP operating margin equals operating income from continuing operations divided by total revenue.

(2)Economic net income is a non-GAAP measure we use to evaluate the performance of our business. For a reconciliation to U.S. GAAP financial information and a further discussion of economic net income refer to “—Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis.”

(3)Excludes income from discontinued operations attributable to controlling interests, as well as restructuring costs at the Center and Affiliates of $2.0 million and costs associated with the transfer of an insurance policy from our former parent of $0.3 million for the three months ended June 30, 2021. Excludes income from discontinued operations attributable to controlling interests, as well as restructuring costs at the Center and Affiliates of $3.5 million, costs associated with the transfer of an insurance policy from our former parent of $0.6 million and the loss on sale of subsidiary of $1.3 million for the six months ended June 30, 2021. Excludes income from

43

discontinued operations attributable to controlling interests, as well as restructuring costs at the Center of $3.0 million and costs associated with the transfer of an insurance policy from our former parent of $0.3 million for the three months ended June 30, 2020. Excludes income from discontinued operations attributable to controlling interests, as well as restructuring costs at the Center of $3.4 million and costs associated with the transfer of an insurance policy from our former parent of $0.6 million for the six months ended June 30, 2020.

(4)ENI revenue is the ENI measure which corresponds to U.S. GAAP revenue.

(5)Pre-tax economic net income is the ENI measure which corresponds to U.S. GAAP pre-tax income from continuing operations attributable to controlling interests.

(6)ENI operating margin is a non-GAAP efficiency measure, calculated based on ENI operating earnings divided by ENI revenue. ENI operating earnings is calculated as ENI revenue, less ENI operating expense, less ENI variable compensation. The ENI operating margin corresponds to our U.S. GAAP operating margin, excluding the effect of consolidated Funds.

(7)Economic net income is the ENI measure which is most directly comparable to U.S. GAAP net income from continuing operations attributable to controlling interests.

(8)Annualized revenue impact of net flows represents annualized management fees expected to be earned on new accounts and net assets contributed to existing accounts (inflows), less the annualized management fees lost on terminated accounts or net assets withdrawn from existing accounts (outflows), plus revenue impact from reinvested income and distribution. Annualized management fee for client flow is calculated by multiplying the annual gross fee rate for the relevant account with the inflow or the outflow, including our equity-accounted Affiliate. In addition, reinvested income and distribution for each segment is multiplied by average fee rate for the respective segment to compute the revenue impact. For a further discussion of the uses and limitations of the annualized revenue impact of net flows, see “Assets Under Management” herein.

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Assets Under Management

In June 2021, we completed the sale of Landmark. As a result, Landmark is reported within discontinued operations and the Alternatives segment no longer constitutes a reportable segment. In May 2021, we entered into a definitive agreement to sell our equity interests in TSW. We completed the sale in July 2021. As a result, TSW is reported within discontinued operations and the Liquid Alpha segment no longer constitutes a reportable segment. AUM and flow information from Landmark and TSW is excluded from all periods presented.

The following table presents our assets under management by Affiliate as of each of the dates indicated: 

($ in billions)	June 30, 2021			December 31, 2020
Acadian Asset Management	$	117.8		$	108.1
Campbell Global(1)	4.6			4.7
Investment Counselors of Maryland(2)	4.5			3.2
Total assets under management excluding discontinued operations	126.9		*	116.0
Landmark Partners(3)	—			18.4
Thompson, Siegel & Walmsley(4)	24.6			22.3
Total assets under management including discontinued operations	$	151.5		$	156.7	*

*Reported AUM.

(1)In June 2021, we entered into a definitive agreement to sell all our interests in Campbell Global, which is expected to close in the third quarter of 2021, see “Recent Developments” herein.

(2)In February 2021, we announced the divestiture of ICM. On July 19, 2021, we completed the sale of ICM, see “Recent Developments” herein.

(3)On June 2, 2021, we completed the sale of Landmark, see “Recent Developments” herein.

(4)In May 2021, we entered into a definitive agreement to sell all our equity interests in TSW. On July 22, 2021, we completed the sale of TSW, see “Recent Developments” herein.

Our strategies include:

i.Developed Markets equity, which includes Quant & Solutions U.S., global and international equities;

ii.Emerging Markets equity, which includes Quant & Solutions equity investments in the emerging and frontier markets; and

iii.Other, which is mainly comprised of forestry and U.S. small cap equities.

The following table presents our assets under management by strategy as of each of the dates indicated: 

($ in billions)	June 30, 2021		December 31, 2020
Developed Markets	88.4		81.1
Emerging Markets	29.4		27.0
Other	9.1		7.9
Total assets under management	$	126.9	$	116.0

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The following table shows assets under management by client type as of each of the dates indicated:

($ in billions)	June 30, 2021				December 31, 2020
	AUM		% of total		AUM		% of total
Sub-advisory	$	13.6	10.7	%	$	11.5	9.9	%
Corporate/Union	17.6		13.9	%	16.9		14.6	%
Public/Government	58.6		46.2	%	54.3		46.8	%
Endowment/Foundation	2.5		2.0	%	2.5		2.2	%
Commingled Trust/UCITS	26.8		21.1	%	24.1		20.8	%
Mutual Fund	3.2		2.5	%	2.8		2.4	%
Other	4.6		3.6	%	3.9		3.3	%
Total assets under management	$	126.9			$	116.0

The following table shows assets under management by client location as of each of the dates indicated:

($ in billions)	June 30, 2021				December 31, 2020
	AUM		% of total		AUM		% of total
U.S.	$	85.9	67.7	%	$	77.4	66.7	%
Europe	18.9		14.9	%	18.3		15.8	%
Asia	5.2		4.1	%	4.5		3.9	%
Australia	8.7		6.9	%	8.1		7.0	%
Other	8.2		6.4	%	7.7		6.5	%
Total assets under management	$	126.9			$	116.0

AUM flows and the annualized revenue impact of net flows

Net client cash flows and revenue impact of net client cash flows for all periods include reinvested income and distributions, and exclude realizations. Reinvested income and distributions represent investment yield that is reinvested back into the portfolios as opposed to distributed as cash.

In the following table, we present our asset flows and market appreciation (depreciation) by segment. We also present a key metric used to better understand our asset flows, the annualized revenue impact of net client cash flows. Annualized revenue impact of net flows represents annualized management fees expected to be earned on new accounts and net assets contributed to existing accounts (inflows), less the annualized management fees lost on terminated accounts or net assets withdrawn from existing accounts (outflows), plus revenue impact from reinvested income and distributions. Annualized management fee for client flow is calculated by multiplying the annual gross fee rate for the relevant account with the inflow or the outflow, including our equity-accounted Affiliate. In addition, reinvested income and distributions for each segment is multiplied by average fee rate for the respective segment to compute the revenue impact.

The annualized revenue impact of net flows metric is designed to provide investors with a better indication of the potential financial impact of net client cash flows, however it has certain limitations. For instance, it does not include assumptions for the next twelve months' market appreciation or depreciation and investment performance associated with the assets gained or lost. Nor does it account for factors such as future client terminations or additional contributions or withdrawals over the next twelve months. Additionally, the basis points reported are fee rates based on the asset levels at the time of the transactions and do not consider the fact that client fee rates may change over the next twelve months.

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The following table summarizes our asset flows and market appreciation (depreciation) by segment for each of the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in billions, unless otherwise noted)	2021		2020		2021		2020
Quant & Solutions
Beginning balance	$	111.5	$	78.7	$	107.0	$	101.6
Gross inflows	2.7		3.3		4.9		7.0
Gross outflows	(4.7)		(3.7)		(11.1)		(6.8)
Reinvested income and distributions	0.7		0.7		1.3		1.5
Net flows	(1.3)		0.3		(4.9)		1.7
Market appreciation (depreciation)	7.6		12.7		14.6		(11.6)
Other(1)	—		—		1.1		—
Ending balance	$	117.8	$	91.7	$	117.8	$	91.7
Average AUM(2)	$	115.9	$	86.7	$	112.8	$	91.2
Liquid Alpha
Beginning balance	$	—	$	43.7	$	3.2	$	57.9
Gross inflows	—		1.6		—		3.9
Gross outflows	—		(4.0)		—		(7.1)
Reinvested income and distributions	—		0.3		—		0.7
Net flows	—		(2.1)		—		(2.5)
Market appreciation (depreciation)	—		6.2		—		(7.6)
Other(3)	—		—		(3.2)		—
Ending balance	$	—	$	47.8	$	—	$	47.8
Average AUM	$	—	$	46.8	$	—	$	50.6
Average AUM of consolidated Affiliates	$	—	$	45.0	$	—	$	48.6
Other(3)
Beginning balance	$	8.7	$	5.7	$	5.8	$	5.4
Gross inflows	0.5		0.1		0.7		0.5
Gross outflows	(0.1)		(0.1)		(0.2)		(0.2)
Reinvested income and distributions	—		—		—		—
Net flows	0.4		—		0.5		0.3
Market appreciation (depreciation)	0.1		(0.1)		0.8		(0.1)
Other	(0.1)		—		2.0		—
Ending balance	$	9.1	$	5.6	$	9.1	$	5.6
Average AUM	$	9.0	$	5.7	$	8.6	$	5.6
Average AUM of consolidated Affiliates	$	4.7	$	5.7	$	4.7	$	5.6
Total
Beginning balance	$	120.2	$	128.1	$	116.0	$	164.9
Gross inflows	3.2		5.0		5.6		11.4
Gross outflows	(4.8)		(7.8)		(11.3)		(14.1)
Reinvested income and distributions	0.7		1.0		1.3		2.2
Net flows	(0.9)		(1.8)		(4.4)		(0.5)
Market appreciation (depreciation)	7.7		18.8		15.4		(19.3)
Other	(0.1)		—		(0.1)		—
Ending balance continuing operations	$	126.9	$	145.1	$	126.9	$	145.1
Discontinued operations(3)	$	24.6	$	35.9	$	24.6	$	35.9
Ending balance including discontinued operations	$	151.5	$	181.0	$	151.5	$	181.0
Average AUM	$	124.9	$	139.2	$	121.4	$	147.4
Average AUM of consolidated Affiliates	$	120.6	$	137.4	$	117.5	$	145.4
Annualized basis points: inflows	48.2		32.6		48.6		33.2
Annualized basis points: outflows	39.0		43.5		36.1		42.4
Annualized revenue impact of net flows ($ in millions)	$	(0.9)	$	(14.0)	$	(8.8)	$	(14.2)

(1)AUM representing liquid alternative strategies previously excluded from the Quant & Solutions segment has been reclassified in the three and six months ended June 30, 2021 and are included in the current period metrics above.

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(2)Average AUM equals average AUM of consolidated Affiliates.

(3)Our reportable segments reflect the sale of Landmark and announced divestiture of TSW. As a result of the sale, Landmark, previously included in the Alternatives segment, is reported within discontinued operations and Alternatives no longer constitutes a reportable segment. The remaining portion of the Alternatives segment, including Campbell Global, has been reclassified to “Other” for all periods presented. TSW, previously included in the Liquid Alpha segment, is now reported within discontinued operations and Liquid Alpha no longer constitutes a reportable segment in the current period. The remaining portion of the Liquid Alpha segment, including ICM, has been reclassified to “Other” as of the beginning of the first quarter of 2021.

We also analyze our asset flows by client type and client location. Our client types include:

i.Sub-advisory, which includes assets managed for underlying mutual fund and variable insurance products which are sponsored by insurance companies and mutual fund platforms, where the end client is typically retail;

ii.Institutional, which includes assets managed for public/government pension funds, including U.S. state and local government funds and non-U.S. sovereign wealth, local government and national pension funds; also includes corporate and union-sponsored pension plans; and

iii.Retail/other, which includes assets managed for mutual funds sponsored by our Affiliates, defined contribution plans and accounts managed for high net worth clients.

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The following table summarizes our asset flows by client type for each of the periods indicated: 

($ in billions)	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Sub-advisory
Beginning balance	$	12.2	$	22.1	$	11.5	$	29.4
Gross inflows	1.4		1.1		1.9		2.7
Gross outflows	(0.8)		(1.7)		(1.3)		(3.6)
Reinvested income and distributions	0.1		0.2		0.1		0.4
Net flows	0.7		(0.4)		0.7		(0.5)
Market appreciation (depreciation)	0.7		3.0		1.4		(4.2)
Ending balance	$	13.6	$	24.7	$	13.6	$	24.7
Institutional
Beginning balance	$	100.4	$	100.0	$	97.8	$	127.4
Gross inflows	1.7		3.0		3.0		7.4
Gross outflows	(3.6)		(5.3)		(9.2)		(9.4)
Reinvested income and distributions	0.5		0.8		1.1		1.7
Net flows	(1.4)		(1.5)		(5.1)		(0.3)
Market appreciation (depreciation)	6.6		14.7		12.9		(13.9)
Other(1)	(0.1)		—		(0.1)		—
Ending balance	$	105.5	$	113.2	$	105.5	$	113.2
Retail/Other
Beginning balance	$	7.6	$	6.0	$	6.7	$	8.1
Gross inflows	0.1		0.9		0.7		1.3
Gross outflows	(0.4)		(0.8)		(0.8)		(1.1)
Reinvested income and distributions	0.1		—		0.1		0.1
Net flows	(0.2)		0.1		—		0.3
Market appreciation (depreciation)	0.4		1.1		1.1		(1.2)
Ending balance	$	7.8	$	7.2	$	7.8	$	7.2
Total
Beginning balance	$	120.2	$	128.1	$	116.0	$	164.9
Gross inflows	3.2		5.0		5.6		11.4
Gross outflows	(4.8)		(7.8)		(11.3)		(14.1)
Reinvested income and distributions	0.7		1.0		1.3		2.2
Net flows	(0.9)		(1.8)		(4.4)		(0.5)
Market appreciation (depreciation)	7.7		18.8		15.4		(19.3)
Other(1)	(0.1)		—		(0.1)		—
Ending balance continuing operations	126.9		145.1		126.9		145.1
Discontinued operations(2)	24.6		35.9		24.6		35.9
Ending balance including discontinued operations	$	151.5	$	181.0	$	151.5	$	181.0

(1)Other movements related to billable assets adjustment.

(2)Reflects the sales of Landmark and TSW. As a result of the transactions, Landmark and TSW are reported within discontinued operations.

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It is a strategic objective to increase our percentage of assets under management sourced from non-U.S. clients. Our categorization by client location includes:

i. U.S.-based clients, where the client is based in the United States, and

ii. Non-U.S.-based clients, where the client is based outside the United States.

The following table summarizes asset flows by client location for each of the periods indicated:

($ in billions)	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
U.S.
Beginning balance	$	81.5	$	88.8	$	77.4	$	113.4
Gross inflows	1.6		3.5		3.3		8.0
Gross outflows	(3.0)		(5.7)		(6.7)		(9.4)
Reinvested income and distributions	0.5		0.7		0.9		1.5
Net flows	(0.9)		(1.5)		(2.5)		0.1
Market appreciation (depreciation)	5.3		13.1		11.0		(13.1)
Ending balance	$	85.9	$	100.4	$	85.9	$	100.4
Non-U.S.
Beginning balance	$	38.7	$	39.3	$	38.6	$	51.5
Gross inflows	1.6		1.5		2.3		3.4
Gross outflows	(1.8)		(2.1)		(4.6)		(4.7)
Reinvested income and distributions	0.2		0.3		0.4		0.7
Net flows	—		(0.3)		(1.9)		(0.6)
Market appreciation (depreciation)	2.4		5.7		4.4		(6.2)
Other(1)	(0.1)		—		(0.1)		—
Ending balance	$	41.0	$	44.7	$	41.0	$	44.7
Total
Beginning balance	$	120.2	$	128.1	$	116.0	$	164.9
Gross inflows	3.2		5.0		5.6		11.4
Gross outflows	(4.8)		(7.8)		(11.3)		(14.1)
Reinvested income and distributions	0.7		1.0		1.3		2.2
Net flows	(0.9)		(1.8)		(4.4)		(0.5)
Market appreciation (depreciation)	7.7		18.8		15.4		(19.3)
Other(1)	(0.1)		—		(0.1)		—
Ending balance continuing operations	126.9		145.1		126.9		145.1
Discontinued operations(2)	24.6		35.9		24.6		35.9
Adjusted ending balance including discontinued operations	$	151.5	$	181.0	$	151.5	$	181.0

(1)Other movements related to billable assets adjustment.

(2)Reflects the sales of Landmark and TSW. As a result of the transactions, Landmark and TSW are reported within discontinued operations.

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At June 30, 2021, our total assets under management were $126.9 billion, an increase of $6.7 billion, or 5.6%, compared to $120.2 billion at March 31, 2021 and a decrease of $(18.2) billion, or (12.5)%, compared to $145.1 billion at June 30, 2020. The decrease in assets under management compared to June 30, 2020 is a result of the Barrow, Hanley, Mewhinney & Strauss, LLC ("Barrow Hanley") and Copper Rock Capital Partners ("Copper Rock") dispositions that occurred in the second half of 2020. The change in assets under management during the three months ended June 30, 2021 reflects net market appreciation of $7.7 billion from continued market recovery, partially offset by net outflows of $(0.9) billion. The change in assets under management during the six months ended June 30, 2021 reflects net market appreciation of $15.4 billion, realizations and other of $(0.1) billion, and net flows of $(4.4) billion including reinvested income and distributions of $1.3 billion.

For the three months ended June 30, 2021, our net flows were $(0.9) billion compared to $(3.5) billion for the three months ended March 31, 2021 and $(1.8) billion for the three months ended June 30, 2020. The change in net flows during the three months ended June 30, 2021 compared to the three months ended June 30, 2020 was primarily due to robust sales for non-U.S. and multi-asset strategies. Reinvested income and distributions of $0.7 billion, $0.6 billion and $1.0 billion are reflected in the net flows for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively. For the three months ended June 30, 2021, the annualized revenue impact of the net flows was $(0.9) million. This is compared to the annualized revenue impact of net flows of $(7.9) million for the three months ended March 31, 2021 and $(14.0) million for the three months ended June 30, 2020. Gross inflows of $3.2 billion during the three-month period yielded approximately 48 bps compared to $5.0 billion yielding approximately 33 bps in the year-ago period, and gross outflows in the same period of $(4.8) billion yielded approximately 39 bps compared to (7.8) yielding approximately 44 bps in the year-ago period.

For the six months ended June 30, 2021, our net flows were $(4.4) billion compared to $(0.5) billion for the six months ended June 30, 2020. The change in net flows during the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to re-balancing and asset reallocation in select Quant & Solutions strategies. Reinvested income and distributions of $1.3 billion and $2.2 billion are reflected in the net flows for the six months ended June 30, 2021 and June 30, 2020, respectively. For the six months ended June 30, 2021, the annualized revenue impact of the net flows was $(8.8) million compared to $(14.2) million for the six months ended June 30, 2020. Gross inflows of $5.6 billion in the six months ended June 30, 2021 yielded approximately 49 bps compared to $11.4 billion yielding approximately 33 bps in the year-ago period. Gross outflows of $(11.3) billion yielded approximately 36 bps in the six months ended June 30, 2021 compared to $(14.1) billion yielding approximately 42 bps in the year-ago period.

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U.S. GAAP Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020

Our U.S. GAAP results of operations were as follows for the three and six months ended June 30, 2021 and 2020: 

	Three Months Ended June 30,								Six Months Ended June 30,
($ in millions, unless otherwise noted)	2021			2020			Increase (Decrease)		2021			2020			Increase (Decrease)
U.S. GAAP Statement of Operations
Management fees	$	111.6		$	118.6		$	(7.0)	$	215.4		$	243.1		$	(27.7)
Performance fees	20.4			0.3			20.1		25.0			1.3			23.7
Other revenue	1.3			2.0			(0.7)		2.6			3.6			(1.0)
Consolidated Funds’ revenue	—			1.7			(1.7)		—			3.2			(3.2)
Total revenue	133.3			122.6			10.7		243.0			251.2			(8.2)
Compensation and benefits	73.4			67.2			6.2		126.0			111.2			14.8
General and administrative expense	18.0			20.4			(2.4)		37.1			42.8			(5.7)
Impairment of goodwill	—			—			—		—			16.4			(16.4)
Amortization of acquired intangibles	—			0.3			(0.3)		—			0.3			(0.3)
Depreciation and amortization	5.8			4.7			1.1		11.3			9.8			1.5
Consolidated Funds’ expense	—			0.1			(0.1)		—			0.1			(0.1)
Total operating expenses	97.2			92.7			4.5		174.4			180.6			(6.2)
Operating income	36.1			29.9			6.2		68.6			70.6			(2.0)
Investment income (loss)	4.7			6.6			(1.9)		7.3			(7.1)			14.4
Interest income	0.1			0.2			(0.1)		0.1			0.5			(0.4)
Interest expense	(6.3)			(7.4)			1.1		(12.5)			(15.2)			2.7
Loss on sale of Affiliate	—			—			—		(1.3)			—			(1.3)
Net consolidated Funds’ investment gains (losses)	—			6.7			(6.7)		—			(10.5)			10.5
Income from continuing operations before taxes	34.6			36.0			(1.4)		62.2			38.3			23.9
Income tax expense	9.9			8.8			1.1		19.0			12.3			6.7
Income from continuing operations	24.7			27.2			(2.5)		43.2			26.0			17.2
Income from discontinued operations, net of tax	53.4			26.7			26.7		75.3			50.0			25.3
Gain (loss) on disposal of discontinued operations, net of tax	509.2			—			509.2		509.2			—			509.2
Net income	587.3			53.9			533.4		627.7			76.0			551.7
Net income (loss) attributable to non-controlling interests in consolidated Funds	54.6			35.0			19.6		68.0			24.5			43.5
Net income attributable to controlling interests	$	532.7		$	18.9		$	513.8	$	559.7		$	51.5		$	508.2
Basic earnings per share ($)	$	6.71		$	0.23		$	6.48	$	7.05		$	0.62		$	6.43
Diluted earnings per share ($)	6.42			0.23			6.19		6.77			0.62			6.15
Weighted average shares of common stock outstanding—basic	79.4			80.4			(1.0)		79.3			82.8			(3.5)
Weighted average shares of common stock outstanding—diluted	82.9			80.4			2.5		82.6			82.8			(0.2)
U.S. GAAP operating margin(1)	27.1		%	24.4		%			28.2		%	28.1		%

(1) The U.S. GAAP operating margin equals operating income from continuing operations divided by total revenue.

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The following table reconciles our net income attributable to controlling interests to our pre-tax income from continuing operations attributable to controlling interests: 

($ in millions)	Three Months Ended June 30,				Six Months Ended June 30,
U.S. GAAP Statement of Operations	2021		2020		2021		2020
Net income attributable to controlling interests	$	532.7	$	18.9	$	559.7	$	51.5
Exclude: (Income) loss on discontinued operations attributable to controlling interests, net of tax	(508.0)		2.2		(516.5)		(21.0)
Net income from continuing operations attributable to controlling interests	24.7		21.1		43.2		30.5
Add: Income tax expense	9.9		8.8		19.0		12.3
Pre-tax income from continuing operations attributable to controlling interests	$	34.6	$	29.9	$	62.2	$	42.8

U.S. GAAP Revenues

Our U.S. GAAP revenues principally consist of:

i.management fees earned based on our overall weighted average fee rate charged to our clients and the level of assets under management;

ii.performance fees earned when our Affiliates’ investment performance over agreed time periods for certain clients has differed from pre-determined hurdles;

iii.other revenue, consisting primarily of consulting services as well as reimbursement of certain Fund expenses our Affiliates paid on behalf of our Funds; and

iv.revenue from consolidated Funds, a portion of which is attributable to the holders of non-controlling interests in consolidated Funds.

Management Fees

Our management fees are a function of the fee rates our Affiliates charge to their clients, which are typically expressed in basis points, and the levels of our assets under management.

Excluding assets managed by our equity-accounted Affiliate, average basis points earned on average assets under management were 37.2 bps and 37.0 bps for the three and six months ended June 30, 2021, and 34.7 bps and 33.6 bps for the three and six months ended June 30, 2020. The overall weighted average fee rate increased for the three and six months ended June 30, 2021 primarily due to an increase in U.S. client domicile average fee rates. The most significant driver of the higher average fee rate in 2021 is the result of changes in the mix of U.S. client domicile assets under management caused by the Barrow Hanley disposition that occurred in the second half of 2020.

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Management fees decreased $(7.0) million, or (5.9)%, from $118.6 million for the three months ended June 30, 2020 to $111.6 million for the three months ended June 30, 2021. The decrease was primarily due to a decrease in average assets under management driven by the Barrow Hanley disposition, partially offset by positive market returns at Acadian. Average assets under management excluding our equity-accounted Affiliate decreased (12.2)%, from $137.4 billion for the three months ended June 30, 2020 to $120.6 billion for the three months ended June 30, 2021, mainly due to the dispositions of Barrow Hanley and Copper Rock in the second half of 2020.

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Six months ended June 30, 2021 compared to six months ended June 30, 2020: Management fees decreased $(27.7) million, or (11.4)%, from $243.1 million for the six months ended June 30, 2020 to $215.4 million for the six months ended June 30, 2021. The decrease was primarily attributable to a decrease in average assets under management driven by the Barrow Hanley disposition, partially offset by positive market returns at Acadian. Average assets under management excluding equity-accounted Affiliate decreased (19.2)%, from $145.4 billion for the six months ended June 30, 2020 to $117.5 billion for the six months ended June 30, 2021, mainly due to the dispositions of Barrow Hanley and Copper Rock in the second half of 2020.

Performance Fees

Approximately $19.5 billion, or 15% of our AUM in consolidated Affiliates, were in accounts with incentive fee features in which we participate. Performance fees are typically shared with our Affiliate key employees through various contractual compensation and profit-sharing arrangements.

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Performance fees improved $20.1 million, from $0.3 million for the three months ended June 30, 2020 to $20.4 million for the three months ended June 30, 2021 due to out-performance in certain timber and non-U.S. strategies. Performance fees can be variable and are contractually triggered based on investment performance results over agreed upon time periods.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Performance fees improved $23.7 million, from $1.3 million for the six months ended June 30, 2020 to $25.0 million for the six months ended June 30, 2021 due to out-performance in certain timber and non-U.S. strategies. Performance fees are variable and are contractually triggered based on investment performance results over agreed upon time periods.

The liquidation of an alternative product may result in the recognition of a performance fee. With respect to liquidations likely to occur in the near term, we do not expect to receive any net performance fees that would be material to our operating results. These projections are based on market conditions and investment performance as of June 30, 2021.

Other Revenue

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Other revenue decreased $(0.7) million, from $2.0 million for the three months ended June 30, 2020 to $1.3 million for the three months ended June 30, 2021. The decrease was primarily attributable to a decrease in consulting fees earned by an Affiliate for the three months ended June 30, 2021.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Other revenue decreased $(1.0) million, from $3.6 million for the six months ended June 30, 2020 to $2.6 million for the six months ended June 30, 2021. The decrease was primarily attributable to a decrease in consulting fees earned by an Affiliate for the six months ended June 30, 2021.

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U.S. GAAP Expenses

Our U.S. GAAP expenses principally consist of:

i.compensation paid to our investment professionals and other employees, including base salary, benefits, sales-based compensation, variable compensation, Affiliate distributions, and revaluation of key employee owned Affiliate equity and profit interests;

ii.general and administrative expenses;

iii.impairment of goodwill; and

iv.depreciation and amortization charges.

Compensation and Benefits Expense

Our most significant category of expense is compensation and benefits awarded to our and our Affiliates’ employees. The following table presents the components of U.S. GAAP compensation expense for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
Fixed compensation and benefits(1)	$	25.4	$	32.2	$	50.6	$	67.4
Sales-based compensation(2)	1.9		1.9		3.5		3.8
Variable compensation(3)	32.7		29.8		56.7		57.4
Affiliate key employee distributions(4)	3.2		2.6		4.5		4.7
Non-cash Affiliate key employee equity revaluations(5)	10.2		0.7		10.7		(22.1)
Total U.S. GAAP compensation and benefits expense	$	73.4	$	67.2	$	126.0	$	111.2

(1)Fixed compensation and benefits include base salaries, payroll taxes and the cost of benefit programs provided. For the three and six months ended June 30, 2021, $24.2 million and $48.5 million, respectively, of fixed compensation and benefits (of the $25.4 million and $50.6 million above) are included within economic net income, which excludes Fund expenses initially paid by our Affiliates on the Fund’s behalf and subsequently reimbursed. For the three and six months ended June 30, 2020, $31.1 million and $65.3 million, respectively, of fixed compensation and benefits (of the $32.2 million and $67.4 million above) are included within economic net income, which excludes Fund expenses initially paid by our Affiliates on the Fund’s behalf and subsequently reimbursed.

(2)Sales-based compensation is paid to our Affiliates’ sales and distribution teams and represents compensation earned by our sales professionals, paid over a multi-year period, related to revenue earned on new sales. Its variability is based upon the structure of sales-based compensation due on inflows of assets under management and market-based movement in both current and prior periods.

(3)Variable compensation is contractually set and calculated individually at each Affiliate, plus Center bonuses and compensation paid by our Affiliates on behalf of their Funds that are subsequently reimbursed. Variable compensation is usually awarded based on a contractual percentage of each Affiliate’s ENI profits before variable compensation and may be paid in the form of cash or non-cash Affiliate equity or profit interests. In Affiliates with an agreed split of performance fees between Affiliate employees and BSUS, the Affiliates’ share of performance fees is allocated entirely to variable compensation. Center variable compensation includes cash and our equity. Non-cash variable compensation awards typically vest over several years and are recognized as compensation expense over that service period. The variable compensation ratio at each Affiliate, calculated as variable compensation divided by ENI earnings before variable compensation, will typically be between 25% and 35%.

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	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
Cash variable compensation	$	31.3	$	26.3	$	54.3	$	50.4
Non-cash equity-based award amortization	1.4		3.5		2.4		7.0
Total variable compensation(a)	$	32.7	$	29.8	$	56.7	$	57.4

(a)For the three and six months ended June 30, 2021, $32.4 million and $55.9 million, respectively, of variable compensation expense (of the $32.7 million and $56.7 million above) are included within economic net income, which excludes $0.3 million and $0.8 million of variable compensation associated with restructuring at an Affiliate. For the three and six months ended June 30, 2020, $26.8 million and $54.0 million, respectively, of variable compensation expense (of the $29.8 million and $57.4 million above) are included within economic net income, which excludes $3.0 million and $3.4 million, respectively, of variable compensation associated with restructuring at an Affiliate and the Center.

(4)Affiliate key employee distributions represent the share of Affiliate profits after variable compensation that is attributable to Affiliate key employee equity and profit interests holders, according to their ownership interests. The Affiliate key employee distribution ratio at each Affiliate is calculated as Affiliate key employee distributions divided by ENI operating earnings at that Affiliate. At certain Affiliates with tiered equity structures, BSUS and other classes of employee equity holders are entitled to an initial proportionate preference over profits after variable compensation, structured such that before a preference threshold is reached, there would be no required key employee distributions to the tiered equity holders, whereas for profits above the threshold, the key employee distribution amount to the tiered equity holders would be calculated based on the tiered key employee ownership percentages. Based on current economic arrangements, employee distributions range from approximately 20% to 25% of marginal ENI operating earnings at each of our consolidated Affiliates.

(5)Non-cash Affiliate key employee equity revaluations represent changes in the value of Affiliate equity and profit interests held by Affiliate key employees. These ownership interests may in certain circumstances be repurchased by BSUS at a value based on a pre-determined fixed multiple of twelve-month earnings and as such a liability is carried on our balance sheet based on the expected cash to be paid. However, any equity or profit interests repurchased by BSUS can be used to fund a portion of future variable compensation awards, resulting in savings in cash variable compensation that offset the negative cash effect of repurchasing the equity. Our Affiliate equity and profit interest plans have been designed to ensure BSUS is not required to repurchase more equity than we can reasonably recycle through variable compensation awards in any given twelve month period.

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Fluctuations in compensation and benefits expense for the periods presented are discussed below.

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Compensation and benefits expense increased $6.2 million, or 9.2%, from $67.2 million for the three months ended June 30, 2020 to $73.4 million for the three months ended June 30, 2021. Fixed compensation and benefits decreased $(6.8) million, or (21.1)%, from $32.2 million for the three months ended June 30, 2020 to $25.4 million for the three months ended June 30, 2021, primarily reflecting dispositions of Affiliates and cost savings from the restructuring at the Center and the Affiliates. Variable compensation increased $2.9 million, or 9.7%, from $29.8 million for the three months ended June 30, 2020 to $32.7 million for the three months ended June 30, 2021. The increase was attributable to higher performance fees and earnings before variable compensation. Sales-based compensation remained unchanged at $1.9 million for the three months ended June 30, 2020 and June 30, 2021, as a result of the structure of sales-based compensation programs, driven by the timing of asset inflows which trigger sales-based compensation in both current and prior periods. Affiliate key employee distributions increased $0.6 million, or 23.1%, from $2.6 million for the three months ended June 30, 2020 to $3.2 million for the three months ended June 30, 2021 as a result of higher underlying operating earnings at the consolidated Affiliates. Revaluations of Affiliate equity increased by $9.5 million reflecting revaluations of key employee ownership interests at our consolidated Affiliates as the value of Affiliate equity increased $0.7 million for the three months ended June 30, 2020 and increased $10.2 million for the three months ended June 30, 2021.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Compensation and benefits expense increased $14.8 million, or 13.3%, from $111.2 million for the six months ended June 30, 2020 to $126.0 million for the six months ended June 30, 2021. Fixed compensation and benefits decreased $(16.8) million, or (24.9)%, from $67.4 million for the six months ended June 30, 2020 to $50.6 million for the six months ended June 30, 2021, primarily reflecting disposition of Affiliates and cost savings from the restructuring at the Center and Affiliates. Variable compensation decreased $(0.7) million, or (1.2)%, from $57.4 million for the six months ended June 30, 2020 to $56.7 million for the six months ended June 30, 2021. The decrease was attributable to lower restructuring costs in the current year, offset partially by higher pre-variable compensation earnings. Sales-based compensation decreased $(0.3) million, or (7.9)%, from $3.8 million for the six months ended June 30, 2020 to $3.5 million for the six months ended June 30, 2021, as a result of the structure of sales-based compensation programs, driven by the timing of asset inflows which trigger sales-based compensation in both current and prior periods. Affiliate key employee distributions decreased $(0.2) million, or (4.3)%, from $4.7 million for the six months ended June 30, 2020 to $4.5 million for the six months ended June 30, 2021, primarily as a result of the mix of earnings at the consolidated Affiliates. Revaluations of Affiliate equity increased by $32.8 million reflecting the increase in value of of key employee ownership interests at our consolidated Affiliates, as the value of Affiliate equity decreased $(22.1) million for the six months ended June 30, 2020 and increased $10.7 million for the six months ended June 30, 2021.

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General and Administrative Expense

Three months ended June 30, 2021 compared to three months ended June 30, 2020: General and administrative expense decreased $(2.4) million, or (11.8)%, from $20.4 million for the three months ended June 30, 2020 to $18.0 million for the three months ended June 30, 2021. The decrease was primarily due to cost saving initiatives at the Center and Affiliates and the dispositions of Barrow Hanley and Copper Rock in 2020.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: General and administrative expense decreased $(5.7) million, or (13.3)%, from $42.8 million for the six months ended June 30, 2020 to $37.1 million for the six months ended June 30, 2021. The decrease was primarily due to cost saving initiatives at the Center and Affiliates and the dispositions of Barrow Hanley and Copper Rock in 2020.

Impairment of Goodwill

Three months ended June 30, 2021 compared to three months ended June 30, 2020: No goodwill impairment charge was recorded in either the three months ended June 30, 2020 or 2021.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Impairment of goodwill was $16.4 million for the six months ended June 30, 2020 and no impairment for the six months ended June 30, 2021. The change was the result of the impairment charge recorded for the Copper Rock reporting unit in the six months ended June 30, 2020, which was included within the Liquid Alpha segment prior to its disposition in the third quarter of 2020.

Depreciation and Amortization Expense

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Depreciation and amortization expense increased $1.1 million, or 23.4%, from $4.7 million for the three months ended June 30, 2020 to $5.8 million for the three months ended June 30, 2021. The increase was primarily due to additional software and technology investments in the business.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Depreciation and amortization expense increased $1.5 million, or 15.3%, from $9.8 million for the six months ended June 30, 2020 to $11.3 million for the six months ended June 30, 2021. The increase was primarily due to additional software and technology investments in the business.

U.S. GAAP Other Non-Operating Items of Income and Expense

Other non-operating items of income and expense consist of:

i.investment income;

ii.interest income;

iii.interest expense; and

iv.gain (loss) on sale of subsidiary.

Investment Income

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Investment income decreased $(1.9) million, from $6.6 million for the three months ended June 30, 2020 to $4.7 million for the three months ended June 30, 2021, reflecting a decrease in the average balance of seed capital investments as a result of the redemptions of seed capital in 2020.

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Six months ended June 30, 2021 compared to six months ended June 30, 2020: Investment income increased $14.4 million, from $(7.1) million for the six months ended June 30, 2020 to $7.3 million for the six months ended June 30, 2021. The increase is primarily due to an increase in returns generated by seed capital investments driven by continued market recovery in 2021 compared to the six months ended June 30, 2020, which included the negative impact of the market decline in the first quarter of 2020.

Interest Income

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Interest income decreased $(0.1) million, from $0.2 million for the three months ended June 30, 2020 to $0.1 million for the three months ended June 30, 2021. The decrease was due to decreases in short-term investment returns in the quarter.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Interest income decreased $(0.4) million, from $0.5 million for the six months ended June 30, 2020 to $0.1 million for the six months ended June 30, 2021. The decrease was due to decreases in short-term investment returns in 2021.

Interest Expense

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Interest expense decreased $(1.1) million, or (14.9)%, from $7.4 million for the three months ended June 30, 2020 to $6.3 million for the three months ended June 30, 2021, primarily reflecting a lower balance drawn on the revolving credit facility in 2021 and the pay down of the non-recourse seed capital facility during the third quarter of 2020.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Interest expense decreased $(2.7) million, or (17.8)%, from $15.2 million for the six months ended June 30, 2020 to $12.5 million for the six months ended June 30, 2021, primarily reflecting a lower balance drawn on the revolving credit facility in 2021 and the pay down of the non-recourse seed capital facility during the third quarter of 2020.

Loss on Sale of Subsidiary

Three months ended June 30, 2021 compared to three months ended June 30, 2020: No gain or loss on sale of Affiliate was recorded in either the three months ended June 30, 2020 or 2021.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: No gain or loss on sale of a subsidiary was recorded in the six months ended June 30, 2020. Loss on sale of a subsidiary was $(1.3) million for the six months ended June 30, 2021, representing the loss on disposition of a business unit during the six months ended June 30, 2021.

U.S. GAAP Income Tax Expense (Benefit)

Our effective tax rate has been impacted by changes in liabilities for uncertain tax positions, tax effects of stock-based compensation, limitations on executive compensation, the mix of income earned in the United States versus lower-taxed foreign jurisdictions. Our effective tax rate could be impacted in the future by these items as well as further changes in tax laws and regulations in jurisdictions in which we operate.

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Income tax expense increased $1.1 million, from $8.8 million for the three months ended June 30, 2020 to $9.9 million for the three months ended June 30, 2021. The increase in income tax expense relates to an increase in income from continuing operations and deferred tax expense in the three months ended June 30, 2021 resulting from the reduction in state tax rates due to the disposition of Landmark.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Income tax expense increased $6.7 million, from $12.3 million for the six months ended June 30, 2020 to $19.0 million for the six months ended June 30, 2021. The increase in income tax expense relates to an an increase in income from continuing operations

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and deferred tax expense during the six months ended June 30, 2021 resulting from the reduction in state tax rates due to the disposition of Landmark.

U.S. GAAP Consolidated Funds

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Consolidated Funds’ revenue was $1.7 million for the three months ended June 30, 2020. There was no consolidated Funds’ revenue for the three months ended June 30, 2021. Net consolidated Funds’ investment gain (loss) was $6.7 million for the three months ended June 30, 2020. There was no net consolidated Funds’ investment loss for the three months ended June 30, 2021. The net income or loss of all consolidated Funds, excluding any income or loss attributable to seed capital or co-investments we make in the Funds, is included in non-controlling interests in our Condensed Consolidated Financial Statements and is not included in net income attributable to controlling interests or in management fees. As a result of the sale of Landmark during the three months ended June 30, 2021, consolidated Funds of Landmark are included in discontinued operations for the three months ended June 30, 2021 and 2020.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Consolidated Funds’ revenue was $3.2 million for the six months ended June 30, 2020. There was no consolidated Funds’ revenue for the six months ended June 30, 2021. Net consolidated Funds’ investment loss was $(10.5) million for the six months ended June 30, 2020. There was no net consolidated Funds’ investment loss for the six months ended June 30, 2021. The net income or loss of all consolidated Funds, excluding any income or loss attributable to seed capital or co-investments we make in the Funds, is included in non-controlling interests in our Condensed Consolidated Financial Statements and is not included in net income attributable to controlling interests or in management fees. As a result of the sale of Landmark during the six months ended June 30, 2021, consolidated Funds of Landmark are included in discontinued operations for the six months ended June 30, 2021 and 2020.

Discontinued Operations

In May 2021, we entered into a definitive agreement to sell our equity interests in TSW to Pendal. We completed the sale in July 2021. On June 2, 2021, we completed the sale of Landmark to Ares Management Corporation. As a result, Landmark and TSW are reported within discontinued operations.

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Income from discontinued operations increased $26.7 million from $26.7 million for the three months ended June 30, 2020 to $53.4 million for the three months ended June 30, 2021. Income from discontinued operations represents the income from TSW and Landmark including consolidated Landmark Funds. The increase is driven by the increase in investment gains from the consolidated Landmark Funds attributable to non-controlling interests. The gain on disposal of discontinued operations was $509.2 million for the three months ended June 30, 2021 representing the gain on sale of Landmark. There was no gain on disposal of discontinued operations for the three months ended June 30, 2020.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Income from discontinued operations increased $25.3 million from $50.0 million for the six months ended June 30, 2020 to $75.3 million for the six months ended June 30, 2021. Income from discontinued operations represents the income from TSW and Landmark including consolidated Landmark Funds. The increase is driven by the increase in investment gains from the consolidated Landmark Funds attributable to non-controlling interests in the current year. The gain on disposal of discontinued operations was 509.2 million for the six months ended June 30, 2021 representing the gain on sale of Landmark in June 2021. There was no gain on disposal for the six months ended June 30, 2020.

Key U.S. GAAP Operating Metrics

The following table shows our key U.S. GAAP operating metrics for the three and six months ended June 30, 2021 and 2020. The second, third and fourth metrics below have each been adjusted to eliminate the effect of consolidated Funds to more accurately reflect the economics of our Company.

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	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2021			2020			2021			2020
Numerator: Operating income	$	36.1		$	29.9		$	68.6		$	70.6
Denominator: Total revenue	$	133.3		$	122.6		$	243.0		$	251.2
U.S. GAAP operating margin(1)	27.1		%	24.4		%	28.2		%	28.1		%
Numerator: Total operating expenses(2)	$	97.2		$	92.6		$	174.4		$	180.5
Denominator: Management fee revenue	$	111.6		$	118.6		$	215.4		$	243.1
U.S. GAAP operating expense / management fee revenue(3)	87.1		%	78.1		%	81.0		%	74.2		%
Numerator: Variable compensation	$	32.7		$	29.8		$	56.7		$	57.4
Denominator: Operating income before variable compensation and Affiliate key employee distributions(2)(4)(5)	$	72.0		$	60.7		$	129.8		$	129.6
U.S. GAAP variable compensation ratio(3)	45.4		%	49.1		%	43.7		%	44.3		%
Numerator: Affiliate key employee distributions	$	3.2		$	2.6		$	4.5		$	4.7
Denominator: Operating income before Affiliate key employee distributions(2)(4)(5)	$	39.3		$	30.9		$	73.1		$	72.2
U.S. GAAP Affiliate key employee distributions ratio(3)	8.1		%	8.4		%	6.2		%	6.5		%

(1)Excluding the effect of Funds consolidation in the applicable periods, the U.S. GAAP operating margin is 27.1% for the three months ended June 30, 2021, 23.4% for the three months ended June 30, 2020, 28.2% for the six months ended June 30, 2021 and 27.2% for the six months ended June 30, 2020.

(2)There was no consolidated Funds’ revenue excluded for both the three and six months ended June 30, 2021. Excludes consolidated Funds expenses of $0.1 million for both the three and six months ended June 30, 2020.

(3)Excludes the effect of Funds consolidation for the three and six months ended June 30, 2021 and 2020.

(4)There was no consolidated Funds’ revenue excluded for both the three and six months ended June 30, 2021. Excludes $1.7 million and $3.2 million for the three and six months ended June 30, 2020, respectively.

(5)The following table identifies the components of operating income before variable compensation and Affiliate key employee distributions, as well as operating income before Affiliate key employee distributions:

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	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
Operating income	$	36.1	$	29.9	$	68.6	$	70.6
Affiliate key employee distributions	3.2		2.6		4.5		4.7
Operating (income) loss of consolidated Funds	—		(1.6)		—		(3.1)
Operating income before Affiliate key employee distributions	39.3		30.9		73.1		72.2
Variable compensation	32.7		29.8		56.7		57.4
Operating income before variable compensation and Affiliate key employee distributions	$	72.0	$	60.7	$	129.8	$	129.6

Effects of Inflation

For the three and six months ended June 30, 2021 and 2020, inflation did not have a material effect on our consolidated results of operations.

Non-GAAP Supplemental Performance Measure — Economic Net Income and Segment Analysis

As supplemental information, we provide a non-GAAP performance measure that we refer to as economic net income, or ENI, which represents our management’s view of the underlying economic earnings generated by us. We define economic net income as ENI revenue less (i) ENI operating expenses, (ii) variable compensation, (iii) key employee distributions, (iv) net interest and (v) taxes, each as further discussed in this section. ENI adjustments to U.S. GAAP include both reclassifications of U.S. GAAP revenue and expense items, as well as adjustments to U.S. GAAP results, primarily to exclude non-cash, non-economic expenses, or to reflect cash benefits not recognized under U.S. GAAP.

ENI is an important measure to investors because it is used by us to make resource allocation decisions, determine appropriate levels of investment or dividend payout, manage balance sheet leverage, determine Affiliate variable compensation and equity distributions, and incentivize management. It is also an important measure because it assists management in evaluating our operating performance and is presented in a way that most closely reflects the key elements of our profit share operating model with our Affiliates. For a further discussion of how we use ENI and why ENI is useful to investors, see “—Overview—How We Measure Performance.”

To calculate economic net income, we re-categorize certain line items on our Condensed Consolidated Statements of Operations to reflect the following:

•We exclude the effect of Funds consolidation by removing the portion of Fund revenues, expenses and investment return which were not attributable to our stockholders.

•We include within management fee revenue any fees paid to Affiliates by consolidated Funds, which are viewed as investment income under U.S. GAAP.

•We include our share of earnings from our equity-accounted Affiliate within other income in ENI revenue, rather than investment income.

•We treat sales-based compensation as a general and administrative expense, rather than part of fixed compensation and benefits.

•We identify separately from operating expenses variable compensation and Affiliate key employee distributions, which represent Affiliate earnings shared with Affiliate key employees.

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•We net the separate revenues and expenses under U.S. GAAP for certain Fund expenses initially paid by our Affiliates on the Funds’ behalf and subsequently reimbursed, to better reflect the economics of our business.

We also make the following adjustments to U.S. GAAP results to more closely reflect our economic results:

i.We exclude non-cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees. These ownership interests may in certain circumstances be repurchased by BSUS at a value based on a pre-determined fixed multiple of trailing earnings and as such this value is carried on our balance sheet as a liability. Non-cash movements in the value of this liability are treated as compensation expense under U.S. GAAP. However, any equity or profit interests repurchased by BSUS can be used to fund a portion of future variable compensation awards, resulting in savings in cash variable compensation that offset the negative cash effect of repurchasing the equity. Our Affiliate equity and profit interest plans have been designed to ensure BSUS is never required to repurchase more equity than we can reasonably recycle through variable compensation awards in any given twelve-month period.

ii.We exclude non-cash amortization or impairment expenses related to acquired goodwill and other intangibles as these are non-cash charges that do not result in an outflow of tangible economic benefits from the business.

iii.We exclude capital transaction costs, including the costs of raising debt or equity, gains or losses realized as a result of redeeming debt or equity and direct incremental costs associated with acquisitions of businesses or assets.

iv.We exclude seed capital and co-investment gains, losses and related financing costs. The net returns on these investments are considered and presented separately from ENI because ENI is primarily a measure of our earnings from managing client assets, which therefore differs from earnings generated by our investments in Affiliate products, which can be variable from period to period.

v.We include cash tax benefits associated with deductions allowed for acquired intangibles and goodwill that may not be recognized or have timing differences compared to U.S. GAAP.

vi.We exclude the results of discontinued operations attributable to controlling interests since they are not part of our ongoing business and restructuring costs incurred in continuing operations.

vii.We exclude deferred tax resulting from changes in tax law and expiration of statutes, adjustments for uncertain tax positions, deferred tax attributable to intangible assets and other unusual items not related to current operating results to reflect ENI tax normalization.

We also adjust our income tax expense to reflect any tax impact of our ENI adjustments.

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Reconciliation of U.S. GAAP Net Income to Economic Net Income for the Three and Six Months Ended June 30, 2021 and 2020

The following table reconciles net income attributable to controlling interests to economic net income for the three and six months ended June 30, 2021 and 2020: 

		Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)		2021		2020		2021		2020
U.S. GAAP net income attributable to controlling interests		$	532.7	$	18.9	$	559.7	$	51.5
Adjustments to reflect the economic earnings of the Company:
i.	Non-cash key employee-owned equity and profit interest revaluations	10.3		0.7		10.7		(22.1)
ii.	Goodwill impairment and amortization of acquired intangible assets and pre-acquisition employee equity	—		0.2		—		16.7
iii.	Capital transaction costs	0.2		0.3		0.7		0.5
iv.	Seed/Co-investment (gains) losses and financings(1)	0.2		(6.7)		(3.7)		14.6
v.	Tax benefit of goodwill and acquired intangibles deductions	0.2		0.3		0.5		0.7
vi.	Discontinued operations and restructuring(2)	(508.7)		5.6		(511.0)		(17.1)
vii.	ENI tax normalization	1.6		0.3		2.1		(5.5)
Tax effect of above adjustments, as applicable(3)		(3.6)		—		(3.6)		2.0
Economic net income		$	32.9	$	19.6	$	55.4	$	41.3

(1)The net return on seed/co-investment (gains) losses and financings for the three and six months ended June 30, 2021 and 2020 is shown in the following table:

	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2021			2020			2021			2020
Seed/Co-investment (gains) losses	$	(0.3)		$	(8.2)		$	(4.9)		$	11.4
Financing costs:
Seed/Co-investment average balance	25.8			105.2			42.1			113.9
Blended interest rate*	3.9		%	5.7		%	5.7		%	5.7		%
Financing costs	0.5			1.5			1.2			3.2
Net seed/co-investment (gains) losses and financing	$	0.2		$	(6.7)		$	(3.7)		$	14.6

* The blended rate is based first on the interest rate paid on our non-recourse seed capital facility up to the average amount drawn, and thereafter on the weighted average rate of the long-term debt.

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(2)The three months ended June 30, 2021 includes income from discontinued operations attributable to controlling interests of $511.1 million, restructuring costs at the Center and Affiliates of $2.0 million, and costs associated with the transfer of an insurance policy from our former parent of $0.3 million. The three months ended June 30, 2020 includes loss from discontinued operations attributable to controlling interests of $(2.2) million, restructuring costs at the Center of $3.0 million and costs associated with the redomicile to the U.S. of $0.3 million. The six months ended June 30, 2021 includes income from discontinued operations attributable to controlling interests of $516.5 million,restructuring costs at the Center and Affiliates of $3.5 million, costs associated with the transfer of an insurance policy from our former parent of $0.6 million, and the loss on sale of subsidiary of $1.3 million. The six months ended June 30, 2020 includes income from discontinued operations attributable to controlling interests of $21.2 million, restructuring costs at the Center of $3.4 million and costs associated with the transfer of an insurance policy from our former parent of $0.6 million. Seed/Co-investment (gains) losses from discontinued operations are included in item iv. above for all periods.

(3)Reflects the sum of lines (i), (ii), (iii), (iv) and the restructuring component of line (vi) multiplied by the 27.3% U.S. statutory tax rate (including state tax).

Limitations of Economic Net Income

Economic net income is the key measure our management uses to evaluate the financial performance of, and make operational decisions for, our business. Economic net income is not audited and is not a substitute for net income or other performance measures that are derived in accordance with U.S. GAAP. Furthermore, our calculation of economic net income may differ from similarly titled measures provided by other companies.

Because the calculation of economic net income excludes certain ongoing expenses, including amortization expense and certain compensation costs, it has certain material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures of earnings.

    ENI Revenues

The following table reconciles U.S. GAAP revenue to ENI revenue for the three and six months ended June 30, 2021 and 2020: 

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
U.S. GAAP revenue	$	133.3	$	122.6	$	243.0	$	251.2
Include investment return on equity-accounted Affiliate	1.3		0.6		2.4		1.2
Exclude revenue from consolidated Funds attributable to non-controlling interests	—		(1.7)		—		(3.2)
Exclude Fund expenses reimbursed by customers	(1.2)		(1.1)		(2.2)		(2.2)
ENI revenue	$	133.4	$	120.4	$	243.2	$	247.0

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The following table identifies the components of ENI revenue:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
Management fees(1)	$	111.6	$	118.6	$	215.4	$	243.1
Performance fees(2)	20.4		0.3		25.0		1.3
Other income, including equity-accounted Affiliate(3)	1.4		1.5		2.8		2.6
ENI revenue	$	133.4	$	120.4	$	243.2	$	247.0

(1)ENI management fees correspond to U.S. GAAP management fees.

(2)ENI performance fees correspond to U.S. GAAP performance fees.

(3)ENI other income is comprised primarily of other revenue under U.S. GAAP, plus our earnings from our equity-accounted Affiliate of $1.3 million and $0.6 million for the three months ended June 30, 2021 and June 30, 2020, respectively. For the six months ended June 30, 2021 and June 30, 2020, our earnings from our equity-accounted Affiliate were $2.4 million and $1.2 million, respectively. As further described in “—Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis,” ENI other income also excludes certain Fund expenses initially paid by our Affiliates on the Funds’ behalf and subsequently reimbursed.

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
U.S. GAAP other revenue	$	1.3	$	2.0	$	2.6	$	3.6
Earnings from equity-accounted Affiliate	1.3		0.6		2.4		1.2
Exclude Fund expenses reimbursed by customers	(1.2)		(1.1)		(2.2)		(2.2)
ENI other income	$	1.4	$	1.5	$	2.8	$	2.6

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    ENI Operating Expenses

The largest difference between U.S. GAAP operating expense and ENI operating expense relates to compensation. As shown in the following reconciliation, we exclude the impact of key employee equity revaluations. Variable compensation and Affiliate key employee distributions are also segregated out of U.S. GAAP operating expense in order to align with the manner in which these items are contractually calculated at the Affiliate level.

The following table reconciles U.S. GAAP operating expense to ENI operating expense for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
U.S. GAAP operating expense	$	97.2	$	92.7	$	174.4	$	180.6
Less: items excluded from economic net income
Non-cash key employee equity and profit interest revaluations	(10.3)		(0.7)		(10.7)		22.1
Goodwill impairment and amortization of acquired intangible assets	—		(0.2)		—		(16.6)
Capital transaction costs	—		(0.2)		(0.4)		(0.2)
Restructuring costs(1)	(2.3)		(3.4)		(4.1)		(4.1)
Fund expenses reimbursed by customers	(1.2)		(1.1)		(2.2)		(2.2)
Funds’ operating expense	—		(0.1)		—		(0.2)
Less: items segregated out of U.S. GAAP operating expense
Variable compensation	(32.4)		(26.8)		(55.9)		(54.0)
Affiliate key employee distributions	(3.2)		(2.6)		(4.5)		(4.7)
ENI operating expense	$	47.8	$	57.6	$	96.6	$	120.7

(1)The three months ended June 30, 2021 includes $2.0 million of restructuring costs at the Center and Affiliates and $0.3 million costs associated with the transfer of an insurance policy from our former parent. The three months ended June 30, 2020 includes $3.0 million of restructuring costs at the Center and $0.3 million costs associated with the transfer of an insurance policy from our former parent. The six months ended June 30, 2021 includes $3.5 million of restructuring costs at the Center and Affiliates and $0.6 million costs associated with the transfer of an insurance policy from our former parent. The six months ended June 30, 2020 includes $3.4 million of restructuring costs and costs associated with the transfer of an insurance policy from our former parent of $0.6 million.

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The following table identifies the components of ENI operating expense:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
Fixed compensation & benefits(1)	$	24.2	$	31.1	$	48.5	$	65.3
General and administrative expenses(2)	17.8		21.8		36.8		45.6
Depreciation and amortization	5.8		4.7		11.3		9.8
ENI operating expense	$	47.8	$	57.6	$	96.6	$	120.7

(1)Fixed compensation and benefits include base salaries, payroll taxes and the cost of benefit programs provided. The following table reconciles U.S. GAAP compensation and benefits expense for the three and six months ended June 30, 2021 and 2020 to ENI fixed compensation and benefits expense:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
Total U.S. GAAP compensation and benefits expense	$	73.4	$	67.2	$	126.0	$	111.2
Non-cash key employee equity and profit interest revaluations excluded from ENI	(10.3)		(0.7)		(10.7)		22.1
Sales-based compensation reclassified to ENI general & administrative expenses	(1.9)		(1.9)		(3.5)		(3.8)
Affiliate key employee distributions	(3.2)		(2.6)		(4.5)		(4.7)
Restructuring expenses	(0.2)		(3.0)		(0.7)		(3.3)
Variable compensation	(32.4)		(26.8)		(55.9)		(54.0)
Fund expenses reimbursed by customers	(1.2)		(1.1)		(2.2)		(2.2)
ENI fixed compensation and benefits	$	24.2	$	31.1	$	48.5	$	65.3

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(2)The following table reconciles U.S. GAAP general and administrative expense to ENI general and administrative expense:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
U.S. GAAP general and administrative expense	$	18.0	$	20.4	$	37.1	$	42.8
Sales-based compensation	1.9		1.9		3.5		3.8
Capital transaction costs	—		(0.2)		(0.4)		(0.2)
Restructuring costs	(2.1)		(0.3)		(3.4)		(0.8)
ENI general and administrative expense	$	17.8	$	21.8	$	36.8	$	45.6

Key Non-GAAP Operating Metrics

The following table shows our key non-GAAP operating metrics for the three and six months ended June 30, 2021 and 2020. We present these metrics because they are the measures our management uses to evaluate the profitability of our business and are useful to investors because they represent the key drivers and measures of economic performance within our business model. Please see the footnotes below for an explanation of each ratio, its usefulness in measuring the economics and operating performance of our business, and a reference to the most closely related U.S. GAAP measure:

	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2021			2020			2021			2020
Numerator: ENI operating earnings(1)	$	53.2		$	36.0		$	90.7		$	72.3
Denominator: ENI revenue	$	133.4		$	120.4		$	243.2		$	247.0
ENI operating margin(2)	39.9		%	29.9		%	37.3		%	29.3		%
Numerator: ENI operating expense	$	47.8		$	57.6		$	96.6		$	120.7
Denominator: ENI management fee revenue(3)	$	111.6		$	118.6		$	215.4		$	243.1
ENI operating expense ratio(4)	42.8		%	48.6		%	44.8		%	49.7		%
Numerator: ENI variable compensation	$	32.4		$	26.8		$	55.9		$	54.0
Denominator: ENI earnings before variable compensation(1)(5)	$	85.6		$	62.8		$	146.6		$	126.3
ENI variable compensation ratio(6)	37.9		%	42.7		%	38.1		%	42.8		%
Numerator: Affiliate key employee distributions	$	3.2		$	2.6		$	4.5		$	4.7
Denominator: ENI operating earnings(1)	$	53.2		$	36.0		$	90.7		$	72.3
ENI Affiliate key employee distributions ratio(7)	6.0		%	7.2		%	5.0		%	6.5		%

(1)ENI operating earnings represents ENI earnings before Affiliate key employee distributions and is calculated as ENI revenue, less ENI operating expense, less ENI variable compensation. It differs from economic net income because it does not include the effects of Affiliate key employee distributions, net interest expense or income tax expense.

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The following table reconciles U.S. GAAP operating income to ENI operating earnings:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
U.S. GAAP operating income	$	36.1	$	29.9	$	68.6	$	70.6
Include earnings from equity-accounted Affiliate	1.3		0.6		2.4		1.2
Exclude the impact of:
Affiliate key employee-owned equity and profit interest revaluations	10.3		0.7		10.7		(22.1)
Goodwill impairment and amortization of acquired intangible assets and pre-acquisition employee equity	—		0.2		—		16.7
Capital transaction costs	—		0.2		0.4		0.2
Restructuring costs(a)	2.3		3.4		4.1		4.1
Affiliate key employee distributions	3.2		2.6		4.5		4.7
Variable compensation	32.4		26.8		55.9		54.0
Funds’ operating (income) loss	—		(1.6)		—		(3.1)
ENI earnings before variable compensation	85.6		62.8		146.6		126.3
Less: ENI variable compensation	(32.4)		(26.8)		(55.9)		(54.0)
ENI operating earnings	53.2		36.0		90.7		72.3
Less: ENI Affiliate key employee distributions	(3.2)		(2.6)		(4.5)		(4.7)
ENI earnings after Affiliate key employee distributions	$	50.0	$	33.4	$	86.2	$	67.6

(a)The three months ended June 30, 2021 includes $2.0 million of restructuring costs at the Center and Affiliates and $0.3 million costs associated with the transfer of an insurance policy from our former parent. The three months ended June 30, 2020 includes $3.0 million of restructuring costs at the Center and $0.3 million costs associated with the transfer of an insurance policy from our former parent. The six months ended June 30, 2021 includes $3.5 million of restructuring costs at the Center and Affiliates and $0.6 million of costs associated with the transfer of an insurance policy from our former parent. The six months ended June 30, 2020 includes $3.4 million of restructuring costs and costs associated with the transfer of an insurance policy from our former parent of $0.6 million.

(2)The ENI operating margin, which is calculated before Affiliate key employee distributions, is used by management and is useful to investors to evaluate the overall operating margin of the business without regard to our various ownership levels at each of the Affiliates. The ENI operating margin is most comparable to our U.S. GAAP operating margin. Our U.S. GAAP operating margin, excluding the effect of consolidated Funds, is 27.1% for the three months ended June 30, 2021, 23.4% for the three months ended June 30, 2020, 28.2% for the six months ended June 30, 2021, and 27.2% for the six months ended June 30, 2020.

The ENI operating margin is important because it gives investors an understanding of the profitability of the total business relative to revenue, irrespective of the ownership position which we have in each of our Affiliates. Management and investors use this ratio when comparing our profitability relative to our peer group and evaluating our ability to manage the cost structure and profitability of our business under different operating environments.

(3)ENI management fee revenue corresponds to U.S. GAAP management fee revenue.

(4)The ENI operating expense ratio is used by management and is useful to investors to evaluate the level of operating expense as measured against our recurring management fee revenue. We have provided this ratio

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since many operating expenses, including fixed compensation and benefits and general and administrative expense, are generally linked to the overall size of the business. We track this ratio as a key measure of scale economies because in our profit sharing economic model, scale benefits both the Affiliate employees and our stockholders. The ENI operating expense ratio is most comparable to the U.S. GAAP operating expense / management fee revenue ratio.

(5)ENI earnings before variable compensation is calculated as ENI revenue, less ENI operating expense.

(6)The ENI variable compensation ratio is used by management and is useful to investors to evaluate consolidated variable compensation as measured against our ENI earnings before variable compensation. Variable compensation is contractually set and calculated individually at each Affiliate, plus Center bonuses. Variable compensation is usually awarded based on a contractual percentage of each Affiliate’s ENI earnings before variable compensation and may be paid in the form of cash or non-cash Affiliate equity or profit interests. Center variable compensation includes cash and our equity. Non-cash variable compensation awards typically vest over several years and are recognized as compensation expense over that service period. The variable compensation ratio at each Affiliate, calculated as variable compensation divided by ENI earnings before variable compensation, will typically be between 25% and 35%. The ENI variable compensation ratio is most comparable to the U.S. GAAP variable compensation ratio.

(7)The ENI Affiliate key employee distribution ratio is used by management and is useful to investors to evaluate Affiliate key employee distributions as measured against our ENI operating earnings. Affiliate key employee distributions represent the share of Affiliate profits after variable compensation that is attributable to Affiliate key employee equity and profit interests holders, according to their ownership interests. The Affiliate key employee distribution ratio at each Affiliate is calculated as Affiliate key employee distributions divided by ENI operating earnings at that Affiliate. At certain Affiliates, with tiered equity structures, BSUS and other classes of employee equity holders are entitled to an initial proportionate preference over profits after variable compensation, structured such that before a preference threshold is reached, there would be no required key employee distributions to the tiered equity holders, whereas for profits above the threshold the key employee distribution amount to the tiered equity holders would be calculated based on the tiered key employee ownership percentages. Based on current economic arrangements, employee distributions range from approximately 20% to 30% of marginal ENI operating earnings at each of our consolidated Affiliates. The ENI Affiliate key employee distributions ratio is most comparable to the U.S. GAAP Affiliate key employee distributions ratio.

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Tax on Economic Net Income

The following table reconciles the United States statutory tax to tax on economic net income:

	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2021			2020			2021			2020
Pre-tax economic net income(1)	$	44.6		$	27.8		$	75.4		$	56.4
Taxes at the U.S. federal and state statutory rates(2)	(12.2)			(10.2)			(20.6)			(19.2)
Other reconciling tax adjustments	0.5			2.0			0.6			4.1
Tax on economic net income	(11.7)			(8.2)			(20.0)			(15.1)
Economic net income	$	32.9		$	19.6		$	55.4		$	41.3
Economic net income effective tax rate(3)	26.2		%	29.5		%	26.5		%	26.8		%

(1)Includes interest income and third party ENI interest expense, as shown in the following table:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
U.S. GAAP interest income	$	0.1	$	0.2	$	0.1	$	0.5
U.S. GAAP interest expense	(6.3)		(7.4)		(12.5)		(15.2)
U.S. GAAP net interest expense	(6.2)		(7.2)		(12.4)		(14.7)
Other ENI interest expense exclusions(a)	0.8		1.6		1.6		3.5
ENI net interest expense	(5.4)		(5.6)		(10.8)		(11.2)
ENI earnings after Affiliate key employee distributions(b)	50.0		33.4		86.2		67.6
Pre-tax economic net income	$	44.6	$	27.8	$	75.4	$	56.4

(a)Other ENI interest expense exclusions represent cost of financing on seed capital and co-investments and amortization of debt issuance costs.

(b)ENI earnings after Affiliate key employee distributions is calculated as ENI operating income (ENI revenue, less ENI operating expense, less ENI variable compensation), less Affiliate key employee distributions. Refer to “—Key Non-GAAP Operating Metrics” for a reconciliation from U.S. GAAP operating income (loss) to ENI earnings after Affiliate key employee distributions.

(2)Taxed at U.S. Federal and State statutory rate of 27.3%.

(3)The economic net income effective tax rate is calculated by dividing the tax on economic net income by pre-tax economic net income.

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    Segment Analysis

We operate our business through the following reportable segment(1)(2):

•Quant & Solutions—comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies. This segment is comprised of our interest in Acadian.    

Campbell Global, ICM and the corporate head office are included within Other(1)(2) category. The corporate head office expenses are not allocated to the Company’s business segment but the CODM does consider the cost structure of the corporate head office when evaluating the financial performance of our segment.

(1)Prior to March 31, 2021, we had an Alternatives reportable segment which was comprised of Landmark and Campbell Global operating segments. On March 30, 2021, we entered into an agreement to sell all of our interests in Landmark. As a result of this transaction, Landmark has been reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment. The reportable segments for all periods presented have been recast to reflect the reporting of Landmark within discontinued operations and the reclassification of Campbell Global to “Other”.

(2)Prior to June 30, 2021, we had a Liquid Alpha reportable segment which was comprised of TSW and ICM. On February 6, 2021, we entered into an agreement to sell all of the our interests in ICM, an equity-accounted Affiliate. On May 9, 2021, we entered into an agreement to sell all of the our interests in TSW. As a result of this transaction, TSW has been reclassified to discontinued operations and Liquid Alpha no longer constitutes a reportable segment. The ICM operating segment was reclassified to “Other” within our segment reporting for the three and six months ended June 30, 2021.

The primary measure used by the CODM in measuring performance and allocating resources to the segments is ENI. We define economic net income for the segments as ENI revenue less (i) ENI operating expenses, (ii) variable compensation and (iii) key employee distributions. The ENI adjustments to U.S. GAAP include both reclassifications of U.S. GAAP revenue and expense items, as well as adjustments to U.S. GAAP results, primarily to exclude non-cash, non-economic expenses, or to reflect cash benefits not recognized under U.S. GAAP.

ENI revenue includes management fees, performance fees and other revenue under U.S. GAAP, adjusted to include management fees paid to Affiliates by consolidated Funds and our share of earnings from our equity-accounted Affiliate. ENI revenue is also adjusted to exclude the separate revenues recorded under U.S. GAAP for certain Fund expenses reimbursed to our Affiliates.

ENI operating expenses include compensation and benefits, general and administrative expense, and depreciation and amortization under U.S. GAAP, adjusted to exclude non-cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees, impairment of goodwill, and the separate expenses recorded under U.S. GAAP for certain Fund expenses reimbursed to our Affiliates. Additionally, variable compensation and Affiliate key employee distributions are segregated from ENI operating expenses.

ENI segment results are also adjusted to exclude the portion of consolidated Funds’ revenues, expenses and investment return recorded under U.S. GAAP.

Refer to the reconciliations of U.S. GAAP revenue to ENI revenue, U.S. GAAP Operating expense to ENI Operating expense, variable compensation and Affiliate key employee distributions disclosed previously within this section.

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    Segment ENI Revenue

The following table identifies the components of segment ENI revenue for the three months ended June 30, 2021 and 2020:

	Three Months Ended June 30,
($ in millions)	2021						2020
	Quant & Solutions		Other		Total		Quant & Solutions		Liquid Alpha		Other		Total
Management fees	$	106.0	$	5.6	$	111.6	$	82.2	$	30.4	$	6.0	$	118.6
Performance fees	5.1		15.3		20.4		0.5		(0.2)		—		0.3
Other income, including equity-accounted affiliate	—		1.4		1.4		0.1		0.6		0.8		1.5
ENI revenue	$	111.1	$	22.3	$	133.4	$	82.8	$	30.8	$	6.8	$	120.4

The following table identifies the components of segment ENI revenue for the six months ended June 30, 2021 and 2020:

	Six Months Ended June 30,
($ in millions)	2021						2020
	Quant & Solutions		Other		Total		Quant & Solutions		Liquid Alpha		Other		Total
Management fees	$	204.9	$	10.5	$	215.4	$	167.4	$	64.2	$	11.5	$	243.1
Performance fees	9.7		15.3		25.0		1.5		(0.2)		—		1.3
Other income, including equity-accounted affiliate	—		2.8		2.8		—		1.2		1.4		2.6
ENI revenue	$	214.6	$	28.6	$	243.2	$	168.9	$	65.2	$	12.9	$	247.0

Quant & Solutions Segment ENI Revenue

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Quant & Solutions ENI revenue increased $28.3 million, or 34.2%, from $82.8 million for three months ended June 30, 2020 to $111.1 million for the three months ended June 30, 2021. The increase was attributable to 29.0% higher management fees driven by higher average AUM primarily resulting from the equity market increase in the last twelve months, as well as an increase in performance fees.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Quant & Solutions ENI revenue increased $45.7 million, or 27.1%, from $168.9 million for the six months ended June 30, 2020 to $214.6 million for the six months ended June 30, 2021. The increase was attributable to 22.4% higher management fees, driven by higher average AUM primarily resulting from the equity market increase over the last twelve months, as well as increase in performance fees.

Liquid Alpha Segment ENI Revenue

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Liquid Alpha ENI revenue was $30.8 million for three months ended June 30, 2020 and was comprised of the ENI revenue from Barrow Hanley, Copper Rock and ICM. There was no Liquid Alpha ENI revenue for the three months ended June 30, 2021 as the Liquid Alpha segment no longer constitutes a reportable segment of the Company in the current period.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Liquid Alpha ENI revenue was $65.2 million for the six months ended June 30, 2020 and was comprised of the ENI revenue from Barrow Hanley, Copper Rock and ICM. There was no Liquid Alpha ENI revenue six months ended June 30, 2021 as the Liquid Alpha segment no longer constitutes a reportable segment of the Company in the current period.

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Other ENI Revenue

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Other ENI revenue increased $15.5 million, or 227.9%, from $6.8 million for the three months ended June 30, 2020 to $22.3 million for the for the three months ended June 30, 2021. The increase was primarily driven by a large incentive fee reported in the second quarter of 2021.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Other ENI revenue increased $15.7 million, or 121.7%, from $12.9 million for the six months ended June 30, 2020 to $28.6 million for the six months ended June 30, 2021. The increase was primarily driven by a large incentive fee reported in the second quarter of 2021.

    Segment ENI Expense

The following table identifies the components of segment ENI expense for the three months ended June 30, 2021 and 2020:

	Three Months Ended June 30,
($ in millions)	2021						2020
	Quant & Solutions		Other		Total		Quant & Solutions		Liquid Alpha		Other		Total
Fixed compensation & benefits	$	19.1	$	5.1	$	24.2	$	17.3	$	7.9	$	5.9	$	31.1
General and administrative expense	13.8		4.0		17.8		13.1		3.8		4.9		21.8
Depreciation and amortization	5.4		0.4		5.8		4.6		—		0.1		4.7
Total ENI Operating Expenses	$	38.3	$	9.5	$	47.8	$	35.0	$	11.7	$	10.9	$	57.6
Variable compensation	22.0		10.4		32.4		17.7		7.6		1.5		26.8
Affiliate key employee distributions	3.1		0.1		3.2		1.3		1.1		0.2		2.6
Total Expenses	$	63.4	$	20.0	$	83.4	$	54.0	$	20.4	$	12.6	$	87.0

The following table identifies the components of segment ENI expense for the six months ended June 30, 2021 and 2020:

	Six Months Ended June 30,
($ in millions)	2021						2020
	Quant & Solutions		Other		Total		Quant & Solutions		Liquid Alpha		Other		Total
Fixed compensation & benefits	$	37.7	$	10.8	$	48.5	$	35.6	$	16.4	$	13.3	$	65.3
General and administrative expense	29.1		7.7		36.8		27.2		8.3		10.1		45.6
Depreciation and amortization	10.6		0.7		11.3		9.3		—		0.5		9.8
Total ENI Operating Expenses	$	77.4	$	19.2	$	96.6	$	72.1	$	24.7	$	23.9	$	120.7
Variable compensation	44.6		11.3		55.9		34.7		16.4		2.9		54.0
Affiliate key employee distributions	4.6		(0.1)		4.5		2.1		2.4		0.2		4.7
Total Expenses	$	126.6	$	30.4	$	157.0	$	108.9	$	43.5	$	27.0	$	179.4

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Quant & Solutions Segment ENI Expense

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Quant & Solutions ENI operating expense increased $3.3 million, or 9.4%, from $35.0 million for the three months ended June 30, 2020 to $38.3 million for the three months ended June 30, 2021. The increase was driven by 10.4% higher ENI fixed compensation and benefits expense resulting from higher headcount and payroll taxes and 5.3% higher ENI general and administrative expense resulting from higher portfolio administrative and systems costs. Quant & Solutions ENI variable compensation expense, which is based on contractual arrangements, increased 24.3%, as a result of higher profit before variable compensation. Affiliate key employee distributions attributable to Quant & Solutions increased 138.5%, primarily due to higher ENI earnings after variable compensation and the leveraged nature of the profit-sharing agreement.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Quant & Solutions ENI operating expense increased $5.3 million, or 7.4%, from $72.1 million for the six months ended June 30, 2020 to $77.4 million for the six months ended June 30, 2021. The increase was driven by 5.9% higher ENI fixed compensation and benefits expense resulting from higher headcount and 7.0% higher ENI general and administrative expense primarily due to increased portfolio administrative and systems costs. Quant & Solutions ENI variable compensation expense, which is based on contractual arrangements, increased 28.5%, as a result of higher earnings before variable compensation. Affiliate key employee distributions attributable to Quant & Solutions increased 119.0%, primarily due to higher ENI earnings after variable compensation.

Liquid Alpha Segment ENI Expense

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Liquid Alpha ENI expense was $20.4 million for the three months ended June 30, 2020 and was comprised of the ENI expense from Barrow Hanley and Copper Rock. There was no Liquid Alpha ENI expense for the three months ended June 30, 2021 as the Liquid Alpha no longer constitutes a reportable segment of the Company in the current period.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Liquid Alpha ENI expense was $43.5 million for the six months ended June 30, 2020, and was comprised of the ENI expense from Barrow Hanley and Copper Rock. There was no Liquid Alpha ENI expense for the six months ended June 30, 2021 as the Liquid Alpha no longer constitutes a reportable segment of the Company in the current period.

Other ENI Expense

Three months ended June 30, 2021 compared to three months ended June 30, 2020: Other ENI operating expense decreased $(1.4) million, or (12.8)%, from $10.9 million for the three months ended June 30, 2020 to $9.5 million for the three months ended June 30, 2021. The decrease was driven by (13.6)% lower fixed compensation and benefit expense resulting from a reduction in headcount and (18.4)% lower general and administrative expense resulting from cost-saving initiatives at the Center. Other ENI variable compensation expense increased 593.3% which was driven by the variable compensation earned on the Campbell Global performance fee in the second quarter of 2021.

Six months ended June 30, 2021 compared to six months ended June 30, 2020: Other ENI operating expense decreased $(4.7) million, or (19.7)%, from $23.9 million for the six months ended June 30, 2020 to $19.2 million for the six months ended June 30, 2021. The decrease was driven by (18.8)% lower fixed compensation and benefit expense and (23.8)% lower general and administrative expense resulting from restructuring at the Center in the first half of 2020. Other ENI variable compensation expense increased 289.7% due to the variable compensation earned on the Campbell Global performance fee in the second quarter of 2021.

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Capital Resources and Liquidity

    Cash Flows

The following table summarizes certain key financial data relating to cash flows. All amounts presented exclude consolidated Funds: 

	Six Months Ended June 30,
($ in millions)	2021		2020
Cash provided by (used in)(1)(2)
Operating activities	$	47.0	$	71.9
Investing activities	712.2		12.3
Financing activities	50.5		(68.2)

(1)Excludes consolidated Funds.

(2)Cash flow data shown only includes cash flows from continuing operations.

Comparison for the six months ended June 30, 2021 and 2020

Net cash from operating activities from continuing operations decreased $(24.9) million, from net cash provided of $71.9 million for the six months ended June 30, 2020 to net cash provided of $47.0 million for the six months ended June 30, 2021, driven by changes in net income offset by changes in operating assets and liabilities period over period. In the six months ended June 30, 2021, net cash provided by investing activities of continuing operations increased $699.9 million, from $12.3 million provided in the six months ended June 30, 2020 to $712.2 million provided in the six months ended June 30, 2021, driven by proceeds from the sale of Landmark in the six months ended June 30, 2021. Net cash provided by financing activities from continuing operations increased $118.7 million, from $68.2 million used in the six months ended June 30, 2020 to $50.5 million provided in the six months ended June 30, 2021, primarily due to higher drawdowns on the revolving credit facility in the six months ended June 30, 2021 compared to a net repayment on the revolving credit facility and share repurchases in the six months ended June 30, 2020.

    Supplemental Liquidity Measure — Adjusted EBITDA

As supplemental information, we provide information regarding Adjusted EBITDA, which we define as economic net income before net interest, income taxes, depreciation and amortization. Adjusted EBITDA is a non-GAAP liquidity measure that we provide in addition to, but not as a substitute for, cash flows from operating activities. It should be noted that our calculation of Adjusted EBITDA may not be consistent with Adjusted EBITDA as calculated by other companies. We believe Adjusted EBITDA is a useful liquidity metric because it indicates our ability to make further investments in our business, service debt and meet working capital requirements.

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The following table reconciles our U.S. GAAP net income attributable to controlling interests to EBITDA to Adjusted EBITDA to economic net income for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2021		2020		2021		2020
Net income attributable to controlling interests	$	532.7	$	18.9	$	559.7	$	51.5
Net interest expense to third parties	6.2		7.2		12.4		14.7
Income tax expense (including tax expenses related to discontinued operations)	187.7		7.3		199.4		20.9
Depreciation and amortization (including intangible assets and discontinued operations) and goodwill impairment	7.0		7.0		14.5		30.3
EBITDA	$	733.6	$	40.4	$	786.0	$	117.4
Non-cash compensation costs, including revaluation of Affiliate key employee-owned equity and profit interests	10.8		1.4		11.6		(20.4)
EBITDA of discontinued operations attributable to controlling interests	(690.0)		1.6		(700.0)		(33.6)
(Gain) loss on seed and co-investments	(0.3)		(8.2)		(4.9)		11.4
Restructuring expenses(1)	2.2		3.4		5.3		4.1
Capital transaction costs	—		0.2		0.4		0.2
Adjusted EBITDA	$	56.3	$	38.8	$	98.4	$	79.1
ENI net interest expense to third parties	(5.4)		(5.6)		(10.8)		(11.2)
Depreciation and amortization(2)	(6.3)		(5.4)		(12.2)		(11.5)
Tax on economic net income	(11.7)		(8.2)		(20.0)		(15.1)
Economic net income	$	32.9	$	19.6	$	55.4	$	41.3

(1)The three months ended June 30, 2021 includes $2.0 million of restructuring costs at the Center and Affiliates and $0.3 million costs associated with the transfer of an insurance policy from our former parent. The six months ended June 30, 2021 includes $3.5 million of restructuring costs at the Center and Affiliates, $0.6 million costs associated with the transfer of an insurance policy from our former parent, and the loss on sale of subsidiary of $1.3 million. The three months ended June 30, 2020 includes $3.0 million of restructuring costs and costs associated with the transfer of an insurance policy from our former parent of $0.3 million. The six months ended June 30, 2020 includes $3.4 million of restructuring costs and costs associated with the transfer of an insurance policy from our former parent of $0.6 million.

(2)Includes non-cash equity-based award amortization expense.

Limitations of Adjusted EBITDA

As a non-GAAP, unaudited liquidity measure and derivation of EBITDA, Adjusted EBITDA has certain material limitations. It does not include cash costs associated with capital transactions and excludes certain U.S. GAAP expenses that fall outside the definition of EBITDA. Each of these categories of expense represents costs to us of doing business, and therefore any measure that excludes any or all of these categories of expense has material limitations.

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    Future Capital Needs

We believe that our available cash and cash equivalents to be generated from operations, supplemented by short-term and long-term financing, as necessary, will be sufficient to fund current operations and capital requirements for at least the next twelve months, as well as our day-to-day operations and future investment requirements. Following the end of the second quarter of 2021, we received proceeds from the sales of our equity interest in TSW and ICM and we also expect to realize future proceeds from the sale of our equity interests in Campbell Global during the third quarter of 2021, as well as make tax payments on the associated gains in the second half of the year. Our ability to secure short-term and long-term financing in the future will depend on several factors, including our future profitability, our relative levels of debt and equity and the overall condition of the credit markets.

    Borrowings and Long-Term Debt

The following table summarizes our financing arrangements as of the dates indicated: 

($ in millions)	June 30, 2021		December 31, 2020		Interest rate	Maturity
Revolving credit facility:
Revolving credit facility(1)	$	53.9	$	—	LIBOR + 1.0% plus 0.25% commitment fee	August 22, 2022
Total revolving credit facility	$	53.9	$	—
Third party borrowings:
4.80% Senior Notes Due 2026	$	272.9	$	272.8	4.80%	July 27, 2026
5.125% Senior Notes Due 2031	121.7		121.5		5.125%	August 1, 2031
Total third party borrowings	$	394.6	$	394.3

(1)On February 23, 2021, the Company’s $150 million revolving credit facility was assigned to Acadian and amended to reduce the facility to $125 million.

Revolving Credit Facility

On September 3, 2020, the Company, Royal Bank of Canada, BMO Harris Bank, N.A., Bank of China, New York Branch, Wells Fargo Bank, National Association, Barclays Bank PLC, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into an amendment (the “Amendment”) to the Revolving Credit Agreement dated as of August 20, 2019 (the “Original Credit Agreement”, and as amended by the Amendment, the “Amended Credit Agreement”).

On February 23, 2021, we along with the Lenders, entered into an assignment and assumption and amendment agreement (the “Assignment”) to the Amended Credit Agreement. Pursuant to the Assignment, the Amended Credit Agreement was assigned to and assumed by Acadian and the Amended Credit Agreement was amended (the Amended Credit Agreement, as amended by the Assignment, the “Acadian Credit Agreement”) to, among other things, reduce the Lenders’ commitments thereunder to $125 million. The Acadian Credit Agreement has a maturity date of August 22, 2022.

Borrowings under the Acadian Credit Agreement bear interest, at Acadian’s option, at either the per annum rate equal to (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5% and (iii) the one month Adjusted LIBO Rate plus 1.0%, plus, in each case, an additional amount based on its credit rating or (b) the London interbank offered rate for a period, at our election equal to one, three or six months plus an additional amount ranging from 1.5% to 2.0%, with such additional amount based on Acadian’s Leverage Ratio (as defined below). In addition, Acadian is charged a commitment fee based on the average daily unused portion of the revolving credit facility under the Acadian Credit Agreement at a per annum rate ranging from 0.25% to 0.375%, with such amount based on Acadian’s Leverage Ratio.

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Under the Acadian Credit Agreement, the ratio of Acadian’s third-party borrowings to Acadian’s trailing twelve months Adjusted EBITDA, as defined by the Acadian Credit Agreement (the “Leverage Ratio”), cannot exceed 2.5x and the ratio of Acadian’s trailing twelve months Adjusted EBITDA to Acadian’s interest expense (the “Interest Coverage Ratio”) must be not less than 4.0x. At June 30, 2021, Acadian’s Leverage Ratio was 0.4x and Acadian’s Interest Coverage Ratio was 235.6x.

Other Compensation Liabilities

Other compensation liabilities principally consist of cash-settled Affiliate equity and profit interests liabilities held by certain Affiliate key employees, and voluntary deferred compensation plans. The following table summarizes our other long-term liabilities:

	June 30, 2021		December 31, 2020
($ in millions)
Share-based payments liability	$	24.3	$	25.0
Affiliate profit interests liability	12.1		0.8
Employee equity	36.4		25.8
Voluntary deferral plan liability	45.5		48.0
Total(1)	$	81.9	$	73.8

(1)Total other compensation liabilities excludes balance of Affiliate other compensation liabilities classified as held for sale on the Condensed Consolidated Balance Sheet. See discussion of Divestitures, Held for Sale and Discontinued Operations in Note 3 of the accompanying Condensed Consolidated Financial Statements.

Share-based payments liability represents the value of Affiliate key employee-owned equity that may under certain circumstances be repurchased by us that is considered an equity award under U.S. GAAP based on the terms and conditions attached to these interests. Affiliate profit interests liability represents the value of Affiliate key employee-owned equity that may under certain circumstances be repurchased by us that is not considered an equity award under U.S. GAAP, but rather a form of compensation arrangement, based on the terms and conditions attached to these interests. Our obligation in any given period in respect of funding these potential repurchases of Affiliate equity is limited to only that portion that may be put to us by Affiliate key employees, which is typically capped annually under the terms of these arrangements such that we are not required to repurchase more than we can reasonably recycle by re-granting the interests in lieu of cash variable compensation owed to Affiliate key employees.

Certain of our and our Affiliates’ key employees are eligible to participate in our voluntary deferral plan, or VDP, which provides our senior personnel the opportunity to voluntarily defer a portion of their compensation. There is a voluntary deferral plan investment balance included in investments on the Consolidated Balance Sheets that corresponds to this deferral liability.

Critical Accounting Policies and Estimates

There have been no significant changes to the critical accounting policies and estimates disclosed in our most recent Form 10-K for the year ended December 31, 2020. Critical accounting policies and estimates are those that require management’s most difficult, subjective or complex judgments and would therefore be deemed the most critical to an understanding of our results of operations and financial condition.

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    Recent Accounting Developments

See discussion of Recent Accounting Developments in Note 2 of the accompanying Condensed Consolidated Financial Statements.

Forward Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements, including information relating to our pending divestiture of Campbell Global, including the expected timing for the closing of the divestiture, anticipated revenues, margins, cash flows or earnings, anticipated future performance of our business and our Affiliate, our expected future net cash flows, our anticipated expense levels, capital management, expected impact of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows,and/or expectations regarding market conditions. The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “can be,” “may be,” “aim to,” “may affect,” “may depend,” “intends,” “expects,” “believes,” “estimate,” “project,” and other similar expressions are intended to identify such forward-looking statements. Such statements are subject to various known and unknown risks and uncertainties and we caution readers that any forward-looking information provided by or on behalf of us is not a guarantee of future performance.

Actual results may differ materially from those in forward-looking information as a result of various factors, some of which are beyond our control, including but not limited to those discussed above and elsewhere in this Quarterly Report on Form 10-Q, in our most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 1, 2021, and subsequent SEC filings. Due to such risks and uncertainties and other factors, we caution each person receiving such forward-looking information not to place undue reliance on such statements. Further, such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and we undertake no obligations to update any forward looking statement to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

Our exposure to market risk is directly related to the role of our Affiliates as asset managers. Substantially all of our investment management revenues are derived from our Affiliates’ agreements with their clients. Under these agreements, the revenues we receive are based on the value of our assets under management or the investment performance on client accounts for which we earn performance fees. Accordingly, our revenues and net income may decline as a result of our assets under management decreasing due to depreciation of our investment portfolios. In addition, such depreciation could cause our clients to withdraw their funds in favor of investments offering higher returns or lower risk, which would cause our revenues and net income to decline further.

Our model for assessing the impact of market risk on our results uses June 30, 2021 ending AUM and management fee rates as the basis for management fee revenue calculations. In February 2021 we announced the divestiture of ICM, which we completed in July 2021. ICM was included in our AUM until the date the transaction closed. In June 2021 we announced the divestiture of Campbell, expected to close during third quarter of 2021. Campbell will be included in our AUM until the transaction closes. In June 2021, we completed the sale of Landmark. In May 2021 we entered into a definitive agreement to sell our equity interests in TSW. We completed the sale in July 2021. TSW was included in our AUM until the date the transaction closed. As a result, Landmark and TSW are reported within discontinued operations and excluded from AUM. With respect to performance fee revenue, we assume that relative investment performance is the same as in the past four quarters ended June 30, 2021. Therefore, market-driven changes in performance fees, which are typically based on relative performance versus market indices, reflect changes in the underlying AUM used in the calculation rather than differences in relative performance as a result of a changed market environment. The basis for the analysis is performance fees earned for the twelve months ended June 30, 2021.

Our profit sharing economic structure results in a sharing of market risk between us and our employees. Approximately 40% of our ENI cost structure is variable, representing variable compensation and key employee distributions for the Affiliates. These variable expenses generally are linked in a formulaic manner to the profitability of the business after covering operating expenses, which include base compensation and benefits, general and administrative expenses, and depreciation and amortization. In modeling the impact of market risk, we assume that these operating expenses remain unchanged, but the resulting impact on profit driven by increases or decreases in revenue will change variable compensation and Affiliate key employee distributions in line with their formulaic calculations. Any change in pre-tax profit is tax-affected at our statutory combined state and federal rate of approximately 27% to calculate profit after tax.

The value of our assets under management was $126.9 billion as of June 30, 2021. A 10% increase or decrease in the value of our assets under management, if proportionally distributed over all of our investment strategies, asset classes and client relationships, would cause an annualized increase or decrease in our gross management fee revenues of approximately $48.1 million based on our current weighted average fee rate of approximately 38 basis points, including our equity-accounted Affiliate. Approximately $20.0 billion, or 15%, of our AUM, including our equity-accounted Affiliate, are in accounts subject to performance fees. Of these assets, approximately 70% are in accounts for which performance fees, or management fee adjustments, are calculated based on investment return that differs from the relative benchmark returns. Assuming the market change does not impact our relative performance, a 10% increase or decrease in AUM would have a $3.2 million impact to our gross performance fees based on our trailing twelve month performance fees of $31.5 million as of June 30, 2021. The combined impact on our management fees and performance fees would have a direct impact on our earnings and result in an annual change of approximately $18.9 million in our post-tax economic net income, given our current cost structure and operating model.

Equity market risk, interest rate risk, and foreign currency risk are the market risks that could have the greatest impact on our management fees, performance fees and our business profitability. Impacts on our management and performance fees can be calculated based on the percentage of AUM constituting equity investments, fixed income

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investments, or foreign currency denominated investments, respectively, multiplied by the relevant weighted average management fee and performance fee attributable to that asset class.

•Our equity markets-based AUM includes U.S. equities (including small cap through large cap securities and substantially value or blended investment styles) and global/non-U.S. equities (including global, non-U.S. and emerging markets securities). A 10% increase or decrease in equity markets would cause our $120.3 billion of equity assets under management to increase or decrease by $12.0 billion, resulting in a change in annualized management fee revenue of $45.3 million and an annual change in post-tax economic net income of approximately $17.0 million, given our current cost structure, operating model, and weighted average fee rate of 38 basis points at the mix of strategies as of June 30, 2021. Approximately $15.0 billion, or 12%, of our equity markets-based AUM are in accounts subject to performance fees. Of these assets, approximately 99% are in accounts for which performance fees, or management fee adjustments, are calculated based on investment return that differs from the relative benchmark returns. Assuming the market change does not impact our relative performance, a 10% change in equity markets would not have a material impact from performance fees on our post-tax economic net income, given our current cost structure and operating model.

•Foreign currency AUM includes equity and alternative assets denominated in foreign currencies. A 10% increase or decrease in foreign exchange rates against the U.S. dollar would cause our $93.6 billion of foreign currency denominated AUM to increase or decrease by $9.4 billion, resulting in a change in annualized management fee revenue of $37.3 million and an annual change in post-tax economic net income of $14.5 million, based on weighted average fees earned on our foreign currency denominated AUM of 39 basis points at the mix of strategies as of June 30, 2021. Approximately $14.0 billion, or 14%, of our foreign currency denominated AUM are in accounts subject to performance fees. Of these assets, approximately 90% are in accounts for which performance fees, or management fee adjustments, are calculated based on investment return that differs from the relative benchmark returns. Assuming the market change does not impact our relative performance, a 10% change in foreign currency exchange rates would not have a material impact from performance fees on our post-tax economic net income, given our current cost structure and operating model.

While the analysis above assumes that market changes occur in a uniform manner across the relevant portfolio, because of our declining fee rates for larger relationships and differences in our fee rates across asset classes, a change in the composition of our assets under management, in particular an increase in the proportion of our total assets under management attributable to strategies, clients or relationships with lower effective fee rates, could have a material negative impact on our overall weighted average fee rate.

As is customary in the asset management industry, clients invest in particular strategies to gain exposure to certain asset classes, which exposes their investment to the benefits and risks of such asset classes. We have not adopted a corporate-level risk management policy regarding client assets, nor have we attempted to hedge at the corporate level or within individual strategies the market risks that would affect the value of our overall assets under management and related revenues. Any reduction in the value of our assets under management would result in a reduction in our revenues.

Interest Rate Risk

We are exposed to interest rate risks primarily through borrowings under the Acadian Credit Facility. Interest on borrowings under the Acadian Credit Facility is based upon variable interest rates. Borrowings under the Credit Facility were $53.9 million as of June 30, 2021. We currently do not hedge against interest rate risk. As of June 30, 2021, a hypothetical 10% change in interest rates would have resulted in an immaterial change to our interest expense during the six months ended June 30, 2021.

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Item 4.  Controls and Procedures.

Controls and Procedures

Our management, including our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) at June 30, 2021. Based on this evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures are effective.

Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the quarter ended June 30, 2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.         Legal Proceedings.

From time to time, we and our Affiliates may be parties to various claims, suits and complaints in the ordinary course of our business. Although the amount of liability that may result from these matters cannot be ascertained, we do not currently believe that, in the aggregate, they will result in liabilities material to our consolidated financial condition, future results of operations or cash flow.

Item 1A.  Risk Factors.

There have been no material changes in the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Item 5.         Other Events.

At the Annual Meeting of Stockholder held on June 23, 2021, the Company's stockholders voted, on an advisory basis, in favor of holding an annual advisory vote on the compensation of our named executives officers, or Say-on-Pay Vote, as previously reported in the Form 8-K filed by the Company on June 25, 2021. Based on these results, and consistent with its recommendation, the Board has determined that the Company will hold an annual Say-on-Pay Vote unless changed as a result of a subsequent vote on the frequency of future Say-on-Pay votes.

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Item 6.         Exhibits.

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation of BrightSphere Investment Group Inc., adopted as of July 12, 2019, incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K12B filed on July 15, 2019.
3.2	Amended and Restated Bylaws of BrightSphere Investment Group Inc., adopted as of July 12, 2019, incorporated herein by reference to Exhibit 3.2 to the Current Report on Form 8-K12B filed on July 15, 2019.
10.1*	Equity Purchase Agreement, dated as of May 9, 2021, by and among BrightSphere Inc., TS&W Investment Holdings LP, Thompson, Siegel & Walmsley LLC, WS&T Investment Holdings GP LLC, Pendal USA Inc. and (solely for purposes of Sections 2.3.2(c), Article 7 and Section 11.17 thereof) Pendal Group Limited.
10.2*	Amendment to Equity Purchase Agreement, dated as of July 22, 2021, by and among Pendal USA Inc., BrightSphere Inc. and TS&W Investment Holdings LP.
31.1*	Certification of the Company’s principal executive officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Company’s principal financial officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of the Company’s principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Company’s principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, (ii) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020, (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended June 30, 2021 and 2020, (v) the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2021 and 2020, (vi) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, and (vii) the Notes to Financial Statements.
104*	The cover page of this Quarterly Report on Form 10-Q, formatted in Inline eXtensible Business Reporting Language

* Filed herewith

** Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		BrightSphere Investment Group Inc.
Dated:	August 9, 2021
		By:	/s/ Suren Rana
			Suren Rana President and Chief Executive Officer (principal executive officer)
			/s/ Christina Wiater
			Christina Wiater Senior Vice President and Principal Financial Officer (principal financial officer and principal accounting officer)

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