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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.
−Removed: Our model for assessing the impact of market risk on our results uses June 30, 2025 ending AUM and management fee rates as the basis for management fee revenue calculations.
−Removed: With respect to performance fee revenue, we assume that relative investment performance is the same as in the past four quarters ended June 30, 2025.
+Added: Our model for assessing the impact of market risk on our results uses September 30, 2025 ending AUM and management fee rates as the basis for management fee revenue calculations.
+Added: With respect to performance fee revenue, we assume that relative investment performance is the same as in the past four quarters ended September 30, 2025.
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.
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Changes in performance fee revenues could be significant in each period.
−Removed: The basis for the analysis is performance fees earned for the twelve months ended June 30, 2025.
+Added: The basis for the analysis is performance fees earned for the twelve months ended September 30, 2025.
Our profit sharing economic structure, described more fully in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—The Economics of Our Business,” results in a sharing of market risk between us and our employees.
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Any change in pre-tax profit is tax-affected to calculate profit after tax.
−Removed: The value of our assets under management was $151.1 billion as of June 30, 2025.
+Added: The value of our assets under management was $166.4 billion as of September 30, 2025.
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 $57 million based on our effective weighted average fee rate of approximately 35 basis points in the most recent quarter.
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Of these assets, the majority are in accounts for which performance fees are calculated based on investment return that differs from the relative benchmark returns.
−Removed: Assuming the market change does not impact our relative performance, a 10% increase or decrease in AUM would have a $7 million impact to our gross performance fees based on our trailing twelve-month performance fees of $73 million as of June 30, 2025.
+Added: Assuming the market change does not impact our relative performance, a 10% increase or decrease in AUM would have a $6 million impact to our gross performance fees based on our trailing twelve-month performance fees of $64 million as of September 30, 2025.
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 $24 million in our post-tax economic net income.
−Removed: The analysis is based on our operating model, effective cost and fee structure in the quarter ended June 30, 2025.
+Added: The analysis is based on our operating model, effective cost and fee structure in the quarter ended September 30, 2025.
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.
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and emerging markets equities (including small cap through large cap securities).
−Removed: A 10% increase or decrease in equity markets would cause our approximately $151 billion of equity assets under management to increase or decrease by $15 billion, resulting in a change in annualized management fee revenue of $55 million and an annual change in post-tax economic net income of approximately $22 million given our cost structure, operating model, and effective weighted average fee rate of 37 basis points at the current mix of strategies as of June 30, 2025.
+Added: A 10% increase or decrease in equity markets would cause our approximately $166 billion of equity assets under management to increase or decrease by $17 billion, resulting in a change in annualized management fee revenue of $57 million and an annual change in post-tax economic net income of approximately $22 million given our cost structure, operating model, and effective weighted average fee rate of 35 basis points at the current mix of strategies as of September 30, 2025.
Approximately $22 billion, or 13%, of our equity markets-based AUM are in accounts subject to performance fees.
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Assuming the market change does not impact our relative performance, a 10% change in equity markets would have an approximate incremental $2 million impact from performance fees on our post-tax economic net income.
−Removed: The analysis is based on our operating model, effective cost and fee structure in the quarter ended June 30, 2025.
+Added: The analysis is based on our operating model, effective cost and fee structure in the quarter ended September 30, 2025.
• Foreign currency AUM includes equity and alternative assets denominated in foreign currencies.
Assuming that all other factors remain constant, including client activity and asset flows and pricing, we estimate that a 10% increase or decrease in foreign exchange rates against the U.S.
−Removed: dollar would cause our $108 billion of foreign currency denominated AUM to increase or decrease by $11 billion, resulting in a change in annualized management fee revenue of $45 million and an annual change in post-tax economic net income of $18 million, based on effective weighted average fees earned on our foreign currency denominated AUM of 42 basis points at the mix of strategies as of June 30, 2025.
+Added: dollar would cause our $117 billion of foreign currency denominated AUM to increase or decrease by $12 billion, resulting in a change in annualized management fee revenue of $46 million and an annual change in post-tax economic net income of $18 million, based on effective weighted average fees earned on our foreign currency denominated AUM of 39 basis points at the mix of strategies as of September 30, 2025.
Approximately $15 billion, or 13%, of our foreign currency denominated AUM are in accounts subject to performance fees.
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Assuming the market change does not impact our relative performance, a 10% change in foreign currency exchange rates would have an approximate incremental $1 million impact from performance fees on our post-tax economic net income.
−Removed: The analysis is based on our operating model, effective cost and fee structure in the quarter ended June 30, 2025.
+Added: The analysis is based on our operating model, effective cost and fee structure in the quarter ended September 30, 2025.
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.
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Interest on borrowings under the revolving credit facility is based upon variable interest rates.
−Removed: There were no borrowings under our revolving credit facility as of June 30, 2025.
+Added: There were no borrowings under our revolving credit facility as of September 30, 2025.
We currently do not hedge against interest rate risk.
−Removed: As of June 30, 2025, 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, 2025.
+Added: As of September 30, 2025, a hypothetical 10% change in interest rates would have resulted in an immaterial change to our interest expense during the nine months ended September 30, 2025.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.