Segments

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Segments

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.

The corporate head office is 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. On June 2, 2021, the Company completed the sale of all 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 August 31, 2021, the Company completed the sale of all its interests in Campbell Global. The financial results of Campbell Global are included in the “Other” category until August 30, 2021, the consummation of the sale. 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 May 9, 2021, the Company entered into an agreement to sell all of the Company’s interests in TSW. On July 19, 2021, the Company completed the sale of all the Company’s interest 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 nine months ended September 30, 2021. On July 19, 2021 the Company completed the sale of all its interests in ICM, an equity-accounted Affiliate. The financial results of ICM are included in the “Other” category until July 19, 2021, the consummation of the sale. 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.

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 September 30, 2021 (in millions):

	Three Months Ended September 30, 2021
	Quant & Solutions		Other		Reconciling Adjustments			Total U.S. GAAP(1)
ENI revenue	$	110.6	$	6.8	$	0.5	(a)	$	117.9
ENI operating expenses	39.4		7.6		10.1		(b)	57.1
Earnings before variable compensation	71.2		(0.8)		(9.6)			60.8
Variable compensation	23.5		3.5		0.1		(c)	27.1
ENI operating earnings (after variable comp)	47.7		(4.3)		(9.7)			33.7
Affiliate key employee distributions	3.8		1.2		—			5.0
Earnings after Affiliate key employee distributions	43.9		(5.5)		(9.7)			28.7
Net interest expense	—		(5.8)		(0.4)		(d)	(6.2)
Net investment income	—		—		0.3		(e)	0.3
Gain on sale of Affiliates	—		—		34.6		(e)	34.6
Income tax expense	—		(9.0)		(5.5)		(f)	(14.5)
Income from discontinued operations, net of tax	—		—		1.2		(g)	1.2
Gain on disposal of discontinued operations, net of tax	—		—		185.4		(h)	185.4
Economic net income	$	43.9	$	(20.3)	$	205.9		$	229.5

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

	Three Months Ended September 30, 2020
	Quant & Solutions		Liquid Alpha		Other		Reconciling Adjustments			Total U.S. GAAP(1)
ENI revenue	$	89.0	$	30.3	$	6.6	$	1.6	(a)	$	127.5
ENI operating expenses	37.2		10.0		10.9		5.5		(b)	63.6
Earnings before variable compensation	51.8		20.3		(4.3)		(3.9)			63.9
Variable compensation	18.0		8.4		1.4		0.1		(c)	27.9
ENI operating earnings (after variable comp)	33.8		11.9		(5.7)		(4.0)			36.0
Affiliate key employee distributions	0.8		0.8		0.2		—			1.8
Earnings after Affiliate key employee distributions	33.0		11.1		(5.9)		(4.0)			34.2
Net interest expense	—		—		(5.3)		(1.6)		(d)	(6.9)
Net investment income	—		—		—		6.7		(e)	6.7
Gain on sale of Affiliate	—		—		—		7.2		(e)	7.2
Net income attributable to non-controlling interests in consolidated Funds	—		—		—		3.2		(e)	3.2
Income tax expense	—		—		(9.0)		(0.3)		(f)	(9.3)
Income from discontinued operations, net of tax	—		—		—		2.1		(g)	2.1
Economic net income	$	33.0	$	11.1	$	(20.2)	$	13.3		$	37.2

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

	Nine Months Ended September 30, 2021
	Quant & Solutions		Other		Reconciling Adjustments			Total U.S. GAAP(1)
ENI revenue	$	325.2	$	35.4	$	0.3	(a)	$	360.9
ENI operating expenses	116.8		26.8		26.7		(b)	170.3
Earnings before variable compensation	208.4		8.6		(26.4)			190.6
Variable compensation	68.1		14.8		0.9		(c)	83.8
ENI operating earnings (after variable comp)	140.3		(6.2)		(27.3)			106.8
Affiliate key employee distributions	8.4		1.1		—			9.5
Earnings after Affiliate key employee distributions	131.9		(7.3)		(27.3)			97.3
Net interest expense	—		(16.6)		(2.0)		(d)	(18.6)
Net investment income	—		—		7.6		(e)	7.6
Gain on sale of Affiliates	—		—		33.3		(e)	33.3
Net loss attributable to non-controlling interests in consolidated Funds	—		—		(68.0)		(e)	(68.0)
Income tax expense	—		(29.0)		(4.5)		(f)	(33.5)
Income from discontinued operations, net of tax	—		—		76.5		(g)	76.5
Gain on disposal of discontinued operations, net of tax	—		—		694.6		(h)	694.6
Economic net income	$	131.9	$	(52.9)	$	710.2		$	789.2

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

	Nine Months Ended September 30, 2020
	Quant & Solutions		Liquid Alpha		Other		Reconciling Adjustments			Total U.S. GAAP(1)
ENI revenue	$	257.9	$	95.5	$	19.5	$	5.8	(a)	$	378.7
ENI operating expenses	109.3		34.7		34.8		3.3		(b)	182.1
Earnings before variable compensation	148.6		60.8		(15.3)		2.5			196.6
Variable compensation	52.7		24.8		4.3		3.5		(c)	85.3
ENI operating earnings (after variable comp)	95.9		36.0		(19.6)		(1.0)			111.3
Affiliate key employee distributions	2.9		3.2		0.4		—			6.5
Earnings after Affiliate key employee distributions	93.0		32.8		(20.0)		(1.0)			104.8
Net interest expense	—		—		(16.5)		(5.1)		(d)	(21.6)
Net investment income (loss)	—		—		—		(10.9)		(e)	(10.9)
Gain on sale of Affiliate	—		—		—		7.2		(e)	7.2
Net income attributable to non-controlling interests in consolidated Funds	—		—		—		(21.3)		(e)	(21.3)
Income tax (expense) benefit	—		—		(24.1)		2.5		(f)	(21.6)
Income from discontinued operations, net of tax	—		—		—		52.1		(g)	52.1
Economic net income	$	93.0	$	32.8	$	(60.6)	$	23.5		$	88.7

(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 gain on sale of Affiliates, all of which are included in U.S. GAAP net income attributable to controlling interests.

(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.