NOTE 8 - VARIABLE INTEREST ENTITIES

In general, a VIE is an entity that does not have sufficient equity to finance its operations without additional subordinated financial support, or an entity for which the risks and rewards of ownership are not directly linked to voting interests. The Company has variable interests in VIEs through its management contracts and investments in various securitization entities, including CLO and CDO issuers and through equity interests. The Company serves as the asset manager for the investment entities it sponsored and manages. The management fees the Company earns are excluded from its VIE determination as long as the fees are commensurate with the level of effort provided, are market based and similar to what a third party would charge for similar services, and the Company's other interests in the VIE are not significant. If the entity is deemed to be a VIE, the Company must then evaluate whether it is the primary beneficiary of the entity.

Trading Portfolio

From time to time, the Company may have an interest in a VIE through the investments it makes as part of its trading activities. Because of the high volume of trading activity the Company experiences, the Company does not perform a formal assessment of each individual investment within its trading portfolio to determine if the investee is a VIE and if the Company is a primary beneficiary. Even if the Company were to obtain a variable interest in a VIE through its trading portfolio, the Company would not typically be deemed to be the primary beneficiary as it does not usually obtain the power to direct activities that most significantly impact the investee’s financial performance. In the extremely unlikely case that the Company obtained the power to direct and held a significant variable interest in an investee in its trading portfolio that was a VIE, any such control would be temporary due to the rapid turnover within the trading portfolio.

Consolidated VIE - Pelium

Pelium is a VIE that the Company manages and in which it has invested $5.0 million for a 20% limited partner interest. Based on its evaluation, the Company concluded that it is the primary beneficiary and, as such, consolidates Pelium. However, the assets of Pelium are held solely to satisfy Pelium's obligations and the creditors of Pelium have no recourse against the assets of the Company. The following are the carrying amounts of the assets and liabilities of Pelium that are reflected in the Company's consolidated balance sheets (in thousands):



Balance Sheet Account - Pelium	June 30, 2016		December 31, 2015
Cash	$	4,418	$	377
Receivables	713		2,345
Investment securities, at fair value	24,552		24,712
Other assets	89		98
	$	29,772	$	27,532

Accrued expenses and other liabilities	$	193	$	99

VIEs not consolidated

In addition, the Company has investments in and manages the structured finance entities that hold investments in asset-backed securities (“Ischus entities”) and trust preferred assets (“Trapeza entities”). All of these entities were determined to be VIEs that the Company does not consolidate as it does not have the obligation of, or right to, losses or earnings that would be significant to those entities. The Company has not provided financial or other support to these VIEs and has no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at June 30, 2016.

The following table presents the carrying amounts of the assets in the consolidated balance sheets that relate to the Company's variable interests in identified nonconsolidated VIEs that it manages as well as the Company's maximum potential exposure to losses associated with these managed VIEs in which it holds variable interests at June 30, 2016 (in thousands):



	Receivables from Managed Entities and Related Parties, Net		Investments		Maximum Exposure to Loss in Non-consolidated VIEs
Ischus entities	$	—	$	—	$	—
Trapeza entities	—		596		596
	$	—	$	596	$	596