What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-07 · 463 added, 286 removed, 806 unchanged (48% of the section changed)

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Our MD&A is presented in five sections:

• Overview provides a brief description of our segments 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.

• 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.

GAAP Results of Operations for the Three Months Ended March 31, 2021 and 2020 includes an explanation of changes in our U.S.

GAAP revenue, expense and other items for the three months ended March 31, 2021 and 2020, as well as key 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.

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This section also provides a reconciliation between U.S.

GAAP net income attributable to controlling interests and ENI for the three months ended March 31, 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 and a calculation of tax on economic net income.

In addition, this section provides segment analysis for each of our business segments.

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.

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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.

We are a diversified, global asset management company headquartered in Boston, Massachusetts.

We operate our business through the following business segments (1) :

• 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 and geographies, including Global, non-U.S., and emerging markets equities, as well as multi-asset products.

• Liquid Alpha —comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S.

equities, as well as fixed income.

Within our segments, we have three affiliate firms (2) to whom we refer in this Quarterly Report as our Affiliates.

Through our Affiliates, we offer a diverse range of actively-managed investment strategies and products to institutional investors around the globe.

While our Affiliates maintain autonomy in the investment process and the day-to-day management of their businesses, our strategy is to work with them to accelerate the growth and profitability of their firms.

GAAP, our Affiliates may be consolidated into our 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.

Our Affiliates (2) and their principal strategies include:

• Acadian Asset Management LLC (“Acadian”) —a leading quantitatively-oriented manager of active global and international equity, and alternative strategies.

Acadian is included within the Quant & Solutions segment.

• Campbell Global, LLC (“Campbell Global”) —a leading sustainable forestry and natural resource investment manager that seeks to deliver superior investment performance by focusing on unique acquisition opportunities, client objectives and disciplined management.

Campbell Global is included within the Other segment.

• Thompson, Siegel & Walmsley LLC (“TSW”) —a value-oriented investment manager focused on small- and mid-cap U.S.

equity, international equity and fixed income strategies.

TSW is included within the Liquid Alpha segment.

(1) In March 2021, we announced the divestiture of Landmark Partners, LLC (“Landmark”), which is expected to close in the second quarter of 2021.

As a result, Landmark is reported within discontinued operations and the Alternatives segment no longer constitutes a reportable segment.

The remaining portion of the Alternatives segment, including Campbell Global, has been reclassified to “Other”.

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.

(2) In the first quarter of 2021, BrightSphere announced the divestitures of Investment Counselors of Maryland (“ICM”) and Landmark.

These transactions are expected to close in the second quarter of 2021.

This information gives effect to these divestitures.

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.

GAAP, an Affiliate may be consolidated into operations or may be accounted for under the equity method of accounting.

Recent Developments

Divestiture of Landmark Partners and Investment Counselors of Maryland

On March 30, 2021, we entered into an agreement to sell all of our equity interests in Landmark, an Affiliate formerly included in the Alternatives segment, to Ares Management Corporation in exchange for approximately $690 million in cash.

Ares has also agreed to acquire our co-investments in Landmark’s funds for approximately $34 million, subject to adjustment for certain related cashflow.

As a result, Landmark is reported within discontinued operations and the Alternatives segment no longer constitutes a reportable segment.

The transaction is expected to close during the second quarter of 2021.

On February 6, 2021, we entered into a definitive agreement to sell all of our interests in ICM, an equity-accounted Affiliate within the Liquid Alpha segment, in exchange for approximately $19 million of cash consideration, subject to certain customary closing and post-closing adjustments.

The transaction is expected to close during the second quarter of 2021.

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 will likely to continue for months to come.

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, which are uncertain and cannot be predicted.

See Item 1A to our Quarterly Report on Form 10-Q filed with the Securities Exchange Commission on May 11, 2020.

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

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Our Affiliates earn management fees based on assets under management.

Approximately 80% of our management fees for the three months ended March 31, 2021 are 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.

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.

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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 uses a revenue share model as a result of a legacy economic arrangement that has not been restructured.

Profit sharing affects two elements within our earnings:

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

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.

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.

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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 either awarded as part of their variable compensation arrangements, or alternatively, may have originally resulted from BSUS acquiring less than 100% of the Affiliate.

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.

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How We Measure Performance

We manage our business based on two business segments, reflecting how our management assesses the performance of our business.

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.

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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 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.

For example, the portion of the net income (loss) of any consolidated

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.

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Summary Results of Operations

The following table summarizes our unaudited results of operations for the three months ended March 31, 2021 and 2020:

($ in millions, unless otherwise noted) Three Months Ended March 31,

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.

Revenue $ 133.3 $ 122.6 $ 10.7 $ 243.0 $ 251.2 $ (8.2)

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GAAP operating margin (1)

28.3 % 35.1 % (683) bps

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

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ENI operating margin (6)

36.5 % 30.4 % 607 bps

39.9 % 29.9 % 998 bps 37.3 % 29.3 % 802 bps

Economic net income (7)

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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, as well as restructuring costs at the Center and Affiliates of $1.5 million, costs associated with the transfer of an insurance policy from our former parent of $0.3 million, and the loss on sale of subsidiary of $1.3 million for the three months ended March 31, 2021.

Excludes income from discontinued operations, as well as restructuring costs at the Center of $0.4 million and costs associated with the transfer of an insurance policy from our former parent of $0.3 million for the three months ended March 31, 2020.

(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

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.

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Assets Under Management

In March 2021, we announced the divestiture of Landmark.

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.

AUM and flow information from Landmark is excluded from all periods presented.

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) March 31, 2021 December 31, 2020

($ in billions) June 30, 2021 December 31, 2020

Acadian Asset Management $ 117.8 $ 108.1

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Investment Counselors of Maryland (2)

Thompson, Siegel & Walmsley 24.9 22.3

Total assets under management excluding discontinued operations 126.9 * 116.0

Landmark Partners (3)

Thompson, Siegel & Walmsley (4)

Total assets under management including discontinued operations $ 151.5 $ 156.7 *

*Reported AUM.

(1) In February 2021, we announced the divestiture of ICM, which is expected to close in the second quarter of 2021, see “Recent Developments” herein.

(2) In March 2021, we announced the divestiture of Landmark, which is expected to close in the second quarter of 2021, see “Recent Developments” herein.

(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:

equity, which includes small cap through large cap securities and substantially value or blended investment styles;

Global / non-U.S.

equity, which includes global and international equities including emerging markets;

Fixed income, which includes government bonds, corporate bonds and other fixed income investments in the United States;

Alternatives, which consist of illiquid and differentiated liquid investment strategies that include forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.

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

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

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) March 31, 2021 December 31, 2020

equity, small/smid cap value $ 5.3 $ 4.4

equity, mid cap value 4.5 4.0

equity, large cap value 0.2 0.2

equity, core/blend 3.3 2.9

equity 13.3 11.5

Global equity 31.5 32.1

International equity 64.8 59.9

Emerging markets equity 27.7 27.0

Total global / non-U.S.

equity 124.0 119.0

Fixed income 1.8 1.9

Alternatives 6.0 5.9

($ 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

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

($ in billions) March 31, 2021 December 31, 2020

($ in billions) June 30, 2021 December 31, 2020

AUM % of total AUM % of total

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Endowment/Foundation 2.5 2.0 % 2.5 2.2 %

OM plc Group 1.7 1.2 % 1.6 1.2 %

Commingled Trust/UCITS 26.8 21.1 % 24.1 20.8 %

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

($ in billions) March 31, 2021 December 31, 2020

($ in billions) June 30, 2021 December 31, 2020

AUM % of total AUM % of total

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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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in billions, unless otherwise noted) 2021 2020 2021 2020

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Gross outflows (0.1) (0.1) (0.2) (0.2)

Reinvested income and distributions — — — —

Net flows 0.4 — 0.5 0.3

Market appreciation — 0.1

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

Beginning balance $ 120.2 $ 128.1 $ 116.0 $ 164.9

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Market appreciation (depreciation) 7.7 18.8 15.4 (19.3)

Ending balance excluding discontinued operations $ 145.1 $ 143.3

Other (0.1) — (0.1) —

Ending balance continuing operations $ 126.9 $ 145.1 $ 126.9 $ 145.1

Discontinued operations (3)

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Annualized revenue impact of net flows ($ in millions) $ (0.9) $ (14.0) $ (8.8) $ (14.2)

(1) AUM representing liquid alternative and solution strategies previously excluded from the Quant & Solutions segment have been reclassified in the three months ended March 31, 2021.

(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.

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

(3) Our reportable segments reflect the announced divestiture of Landmark.

As a result of this divestiture, Landmark, previously included in the Alternatives segment, is now reported within discontinued operations and the Alternatives segment no longer constitutes a reportable segment.

The remaining portion of the Alternatives segment, including Campbell Global, has been reclassified to “Other.”

(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.

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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 March 31,

($ in billions) Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Beginning balance $ 12.2 $ 22.1 $ 11.5 $ 29.4

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Market appreciation (depreciation) 6.6 14.7 12.9 (13.9)

(0.1) — (0.1) —

Ending balance $ 105.5 $ 113.2 $ 105.5 $ 113.2

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Market appreciation (depreciation) 7.7 18.8 15.4 (19.3)

Ending balance excluding discontinued operations 145.1 143.3

(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) Reflects the announced divestiture of Landmark.

As a result of this divestiture, Landmark is reported within discontinued operations.

(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.

It is a strategic objective to increase our percentage of assets under management sourced from non-U.S.

Our categorization by client location includes:

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

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

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

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 March 31,

($ in billions) Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Beginning balance $ 81.5 $ 88.8 $ 77.4 $ 113.4

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Market appreciation (depreciation) 2.4 5.7 4.4 (6.2)

(0.1) — (0.1) —

Ending balance $ 41.0 $ 44.7 $ 41.0 $ 44.7

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Market appreciation (depreciation) 7.7 18.8 15.4 (19.3)

Ending balance excluding discontinued operations 145.1 143.3

(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) Reflects the announced divestiture of Landmark.

As a result, Landmark is included in discontinued operations.

At March 31, 2021, our total assets under management were $145.1 billion, an increase of $6.8 billion, or 4.9%, compared to $138.3 billion at December 31, 2020 and an increase of $1.8 billion, or 1.3%, compared to $143.3 billion at March 31, 2020.

The change in assets under management during the three months ended March 31, 2021 reflects net market appreciation of $9.2 billion from continued market recovery, partially offset by net outflows of $(2.4) billion.

For the three months ended March 31, 2021, our net flows were $(2.4) billion compared to $0.7 billion for the three months ended March 31, 2020.

The change in net flows during the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily due to re-balancing and asset reallocation in select Quant & Solutions strategies.

Reinvested income and distributions of $0.7 billion and $1.3 billion are reflected in the net flows for the three months ended March 31, 2021 and March 31, 2020, respectively.

For the three months ended March 31, 2021, the annualized revenue impact of the net flows was $(4.6) million compared to $(2.9) million for the three months ended March 31, 2020 due to an increase in Quant & Solutions net outflows in select strategies.

Gross inflows of $3.9 billion in the three months ended March 31, 2021 yielded approximately 44 bps compared to $6.9 billion yielding approximately 34 bps in the year-ago period.

Gross outflows of $(7.0) billion yielded approximately 35 bps in the three months ended March 31, 2021 compared to $(7.5) billion yielding approximately 41 bps in the year-ago period.

GAAP Results of Operations for the Three Months Ended March 31, 2021 and 2020

GAAP results of operations were as follows for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(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.

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.

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

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

GAAP Statement of Operations

8 unchanged sentences

— — — — 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)

10 unchanged sentences

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

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

12 unchanged sentences

($ in millions) Three Months Ended

June 30, Six Months Ended

GAAP Statement of Operations 2021 2020 2021 2020

2 unchanged sentences

Net income from continuing operations attributable to controlling interests

24.7 21.1 43.2 30.5

Income tax expense 9.9 8.8 19.0 12.3

9 unchanged sentences

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 36.9 bps for the three months ended March 31, 2021, and 34.3 bps for the three months ended March 31, 2020.

The most significant driver of increases or decreases in this average fee rate is changes in the mix of our assets under management caused by net inflows or outflows in certain segments, disproportionate market movements, and dispositions of Affiliates.

Our average basis points by segment (including only consolidated Affiliates that are included in management fee revenue, unless indicated) over each of the periods indicated were:

($ in millions,

except AUM data in billions) Three Months Ended March 31,

Revenue Basis Pts Revenue Basis Pts

Quant & Solutions $ 98.9 37 $ 85.2 37

Liquid Alpha 21.5 37 51.9 30

Other 4.9 42 5.5 40

GAAP management fee revenue & weighted average fee rate on average AUM of consolidated Affiliates (1)

$ 125.3 36.9 $ 142.6 34.3

Average AUM excluding equity-accounted Affiliate $ 137.6 $ 167.5

Average AUM including equity-accounted Affiliate & weighted average fee rate $ 141.1 37.5 $ 169.6 34.5

(1) Amounts shown are equivalent to ENI management fee revenue.

(See “ENI Revenues”)

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

Management fees decreased $(17.3) million, or (12.1)%, from $142.6 million for the three months ended March 31, 2020 to $125.3 million for the three months ended March 31, 2021.

The decrease was primarily attributable to a decrease in average assets under management, partially offset by positive market returns.

Average assets under management excluding equity-accounted Affiliate decreased (17.9)%, from $167.5 billion for the three months ended March 31, 2020 to $137.6 billion for the three months ended March 31, 2021, mainly due to the dispositions of Barrow Hanley and Copper Rock in the second half of 2020.

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.

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

1 unchanged sentence

Performance fees are typically shared with our Affiliate key employees through various contractual compensation and profit-sharing arrangements.

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

Performance fees improved $3.6 million, from $1.0 million for the three months ended March 31, 2020 to $4.6 million for the three months ended March 31, 2021 due to out-performance in certain non-U.S.

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.

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.

Performance fees are variable and are contractually triggered based on investment performance results over agreed upon time periods.

1 unchanged sentence

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 March 31, 2021.

These projections are based on market conditions and investment performance as of June 30, 2021.

Other Revenue

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

Other revenue decreased $(0.3) million, from $1.6 million for the three months ended March 31, 2020 to $1.3 million for the three months ended March 31, 2021.

The decrease was primarily attributable to the decrease in revenue recorded for certain Fund expenses paid by our Affiliates and subsequently reimbursed by the Fund for the three months ended March 31, 2021.

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.

GAAP Expenses

7 unchanged sentences

The following table presents the components of U.S.

GAAP compensation expense for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

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

2 unchanged sentences

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)

GAAP compensation and benefits expense

1 unchanged sentence

(1) Fixed compensation and benefits include base salaries, payroll taxes and the cost of benefit programs provided.

For the three months ended March 31, 2021 , $28.8 million of fixed compensation and benefits (of the $29.8 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 months ended March 31, 2020, $38.8 million of fixed compensation and benefits (of the $39.8 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, 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.

6 unchanged sentences

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%.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

1 unchanged sentence

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 months ended March 31, 2021, $27.9 million of variable compensation expense (of the $28.4 million above) are included within economic net income, which excludes $0.5 million of variable compensation associated with restructuring at the Affiliates.

For the three months ended March 31, 2020, $30.9 million of variable compensation expense (of the $31.3 million above) are included within economic net income, which excludes $0.4 million of variable compensation associated with restructuring at an Affiliate.

(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.

7 unchanged sentences

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

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

Compensation and benefits expense increased $18.5 million, or 37.4%, from $49.4 million for the three months ended March 31, 2020 to $67.9 million for the three months ended March 31, 2021.

Fixed compensation and benefits decreased $(10.0) million, or (25.1)%, from $39.8 million for the three months ended March 31, 2020 to $29.8 million for the three months ended March 31, 2021, primarily reflecting disposition of Affiliates and cost savings from the restructuring at the Center and Affiliates.

Variable compensation decreased $(2.9) million, or (9.3)%, from $31.3 million for the three months ended March 31, 2020 to $28.4 million for the three months ended March 31, 2021.

The decrease was attributable to lower pre-variable compensation earnings, which in turn was primarily attributable to the decrease in management fee revenue, as well as a lower cost structure at the Center and Affiliates.

Sales-based compensation increased $0.1 million, or 4.8%, from $2.1 million for the three months ended March 31, 2020 to $2.2 million for the three months ended March 31, 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 $(0.1) million, or (2.5)%, from $4.0 million for the three months ended March 31, 2020 to $3.9 million for the three months ended March 31, 2021, primarily as a result of lower earnings before Affiliate key employee distributions at the consolidated Affiliates.

Revaluations of Affiliate equity reflect the revaluations of key employee ownership interests at our consolidated Affiliates, as the value of Affiliate equity decreased $(27.8) million for the three months ended March 31, 2020 and increased $3.6 million for the three months ended March 31, 2021.

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.

General and Administrative Expense

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

General and administrative expense decreased $(3.7) million, or (15.2)%, from $24.3 million for the three months ended March 31, 2020 to $20.6 million for the three months ended March 31, 2021.

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 March 31, 2021 compared to three months ended March 31, 2020:

Impairment of goodwill was $16.4 million for the three months ended March 31, 2020.

No goodwill impairment charge was recorded in the three months ended March 31, 2021.

The change was the result of the impairment charge recorded in the first quarter of 2020 for the Copper Rock reporting unit which was included within the Liquid Alpha segment prior to its disposition in the third quarter of 2020.

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 March 31, 2021 compared to three months ended March 31, 2020:

Depreciation and amortization expense increased $0.5 million, or 9.8%, from $5.1 million for the three months ended March 31, 2020 to $5.6 million for the three months ended March 31, 2021.

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.

GAAP Other Non-Operating Items of Income and Expense

5 unchanged sentences

Investment Income

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

Investment income increased $16.3 million, from $(13.7) million for the three months ended March 31, 2020 to $2.6 million for the three months ended March 31, 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 market decline in the three months ended March 31, 2020.

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.

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 March 31, 2021 compared to three months ended March 31, 2020:

Interest income decreased $(0.3) million, from $0.3 million for the three months ended March 31, 2020 to $0.0 million for the three months ended March 31, 2021.

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 March 31, 2021 compared to three months ended March 31, 2020:

Interest expense decreased $(1.6) million, or (20.5)%, from $7.8 million for the three months ended March 31, 2020 to $6.2 million for the three months ended March 31, 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.

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 March 31, 2021 compared to three months ended March 31, 2020:

No loss on sale of a subsidiary was recorded in the three months ended March 31, 2020.

Loss on sale of a subsidiary was $(1.3) million for the three months ended March 31, 2021, representing the loss on disposition of a business unit during the three months ended March 31, 2021.

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.

GAAP Income Tax Expense (Benefit)

1 unchanged sentence

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 March 31, 2021 compared to three months ended March 31, 2020 :

Income tax expense increased $3.9 million, from $6.4 million for the three months ended March 31, 2020 to $10.3 million for the three months ended March 31, 2021.

The increase in income tax expense relates to an increase in income from continuing operations during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 as well as an increase in state tax obligations.

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

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.

GAAP Consolidated Funds

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

Consolidated Funds’ revenue was $1.5 million for the three months ended March 31, 2020.

There was no consolidated Funds’ revenue for the three months ended March 31, 2021.

Net consolidated Funds’ investment loss was $(17.2) million for the three months ended March 31, 2020.

There was no net consolidated Funds’ investment loss for the three months ended March 31, 2021.

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 announced divestiture of Landmark during the three months ended March 31, 2021, consolidated Funds of Landmark are included in discontinued operations for the three months ended March 31, 2021 and 2020.

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.

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

On March 30, 2021, we entered into an agreement with Landmark to sell all our equity interest in Landmark to Ares Management Corporation.

The transaction is expected to close in the second quarter of 2021.

As a result, Landmark is reported within discontinued operations and the Alternatives segment no longer constitutes a reportable segment.

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

Income from discontinued operations was $15.4 million for the three months ended March 31, 2020 representing the income from Landmark including consolidated Landmark Funds.

Income from discontinued operations was $18.5 million for the three months ended March 31, 2021, representing the income from Landmark including consolidated Landmark Funds.

The increase is driven by the increase in investment gains from the consolidated Landmark Funds in the current year.

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.

GAAP Operating Metrics

The following table shows our key U.S.

GAAP operating metrics for the three months ended March 31, 2021 and 2020.

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.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

6 unchanged sentences

Total operating expenses (2)

$ 97.2 $ 92.6 $ 174.4 $ 180.5

Management fee revenue

9 unchanged sentences

Affiliate key employee distributions

$ 3.2 $ 2.6 $ 4.5 $ 4.7

Operating income before Affiliate key employee distributions (2)(4)(5)

1 unchanged sentence

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 28.3% for the three months ended March 31, 2021 and 34.4% for the three months ended March 31, 2020.

(2) Excludes the effect of Funds consolidation for the three months ended March 31, 2021 and 2020.

(3) Excludes consolidated Funds’ revenue of $1.5 million for the three months ended March 31, 2020.

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:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

2 unchanged sentences

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

2 unchanged sentences

Effects of Inflation

For the three months ended March 31, 2021 and 2020, inflation did not have a material effect on our consolidated results of operations.

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

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Reconciliation of U.S.

GAAP Net Income to Economic Net Income for the Three Months Ended March 31, 2021 and 2020

The following table reconciles net income attributable to controlling interests to economic net income for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

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

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Capital transaction costs

0.2 0.3 0.7 0.5

Seed/Co-investment (gains) losses and financings (1)

0.2 (6.7) (3.7) 14.6

Tax benefit of goodwill and acquired intangibles deductions 0.2 0.3 0.5 0.7

Discontinued operations and restructuring (2)

(508.7) 5.6 (511.0) (17.1)

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 months ended March 31, 2021 and 2020 is shown in the following table:

Three Months Ended March 31,

(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

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* 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.

(2) The three months ended March 31, 2021 includes income from discontinued operations attributable to controlling interests of $(2.0) million, as well as $1.5 million of restructuring costs at the Center and Affiliates, $0.3 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 March 31, 2020 includes income from discontinued operations attributable to controlling interests of $(15.5) million, as well as $0.4 million of restructuring costs at the Center and $0.3 million costs associated with the transfer of an insurance policy from our former parent.

(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.

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The following table reconciles U.S.

GAAP revenue to ENI revenue for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

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

1 unchanged sentence

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

The following table identifies the components of ENI revenue:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

2 unchanged sentences

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

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(3) ENI other income is comprised primarily of other revenue under U.S.

GAAP, plus our earnings from our equity-accounted Affiliate of $1.1 million and $0.6 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

2 unchanged sentences

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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The following table reconciles U.S.

GAAP operating expense to ENI operating expense for the three months ended March 31, 2021 and 2020.

Three Months Ended March 31,

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

2 unchanged sentences

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)

1 unchanged sentence

Restructuring costs (1)

(2.3) (3.4) (4.1) (4.1)

Fund expenses reimbursed by customers (1.2) (1.1) (2.2) (2.2)

5 unchanged sentences

ENI operating expense $ 47.8 $ 57.6 $ 96.6 $ 120.7

(1) The three months ended March 31, 2021 includes $1.5 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 March 31, 2020 includes $0.4 million of restructuring costs and costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

(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.

The following table identifies the components of ENI operating expense:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

2 unchanged sentences

General and administrative expenses (2)

17.8 21.8 36.8 45.6

Depreciation and amortization 5.8 4.7 11.3 9.8

2 unchanged sentences

The following table reconciles U.S.

GAAP compensation and benefits expense for the three months ended March 31, 2021 and 2020 to ENI fixed compensation and benefits expense:

Three Months Ended March 31,

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

2 unchanged sentences

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

Restructuring expenses (a)

(3.2) (2.6) (4.5) (4.7)

Restructuring expenses (0.2) (3.0) (0.7) (3.3)

Variable compensation

1 unchanged sentence

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

(a) The three months ended March 31, 2021 includes $0.5 million of restructuring costs at the Affiliates.

The three months ended March 31, 2020 includes $0.4 million of restructuring costs at the Center and Affiliates.

(2) The following table reconciles U.S.

GAAP general and administrative expense to ENI general and administrative expense:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

6 unchanged sentences

Key Non-GAAP Operating Metrics

The following table shows our key non-GAAP operating metrics for the three months ended March 31, 2021 and 2020.

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.

1 unchanged sentence

GAAP measure:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

17 unchanged sentences

Affiliate key employee distributions

$ 3.2 $ 2.6 $ 4.5 $ 4.7

ENI operating earnings (1)

1 unchanged sentence

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.

2 unchanged sentences

GAAP operating income to ENI operating earnings:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

1 unchanged sentence

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

1 unchanged sentence

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

ENI variable compensation (32.4) (26.8) (55.9) (54.0)

1 unchanged sentence

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 March 31, 2021 includes $1.5 million of restructuring costs at the Center and Affiliates, $0.3 million costs associated with the transfer of an insurance policy from our former parent.

The three months ended March 31, 2020 includes $0.4 million of restructuring costs and costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

(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.

1 unchanged sentence

GAAP operating margin.

GAAP operating margin, excluding the effect of consolidated Funds, is 28.3% for the three months ended March 31, 2021, and 34.4% for the three months ended March 31, 2020.

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.

3 unchanged sentences

(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 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 have provided this ratio

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.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

1 unchanged sentence

$ 44.6 $ 27.8 $ 75.4 $ 56.4

Intercompany interest expense deductible for U.S.

Taxable economic net income 38.6 34.4

Taxes at the U.S.

3 unchanged sentences

Tax on economic net income (11.7) (8.2) (20.0) (15.1)

Add back intercompany interest expense previously excluded

Economic net income $ 32.9 $ 19.6 $ 55.4 $ 41.3

$ 28.2 $ 25.9

Economic net income effective tax rate (3)

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2021 2020 2021 2020

3 unchanged sentences

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)

Pre-tax economic net income

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.

6 unchanged sentences

Segment Analysis

We conduct our operations through two (1) business segments:

• 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 and geographies, including Global, non-U.S., and emerging markets equities, as well as multi-asset products.

• Liquid Alpha (2) —comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S.

equities, as well as fixed income.

(1) In March 2021, we announced the divestiture of Landmark, expected to close in the second quarter of 2021.

As a result, Landmark is reported within discontinued operations and the Alternatives segment no longer constitutes a reportable segment.

The remaining portion of the Alternatives segment, including Campbell Global, has been reclassified to “Other.” See “Recent Developments” herein.

(2) In February 2021 we entered into a definitive agreement to sell all of our interests in ICM, an equity-accounted Affiliate within the Liquid Alpha segment.

The transaction is expected to close during second quarter of 2021.

See “Recent Developments” herein.

We also have a corporate head office that is included in “Other”.

The corporate head office supports the segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, strategy and relationship management, legal, compliance and human resources.

The corporate head office expenses are not allocated to our two reportable segments but the CODM does consider the cost structure of the corporate head office when evaluating the financial performance of the segments

The primary measure used by the CODM in measuring performance and allocating resources to the segments is Economic Net Income (“ENI”).

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.

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Segment ENI Revenue

The following table identifies the components of segment ENI revenue for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

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 Liquid Alpha Other Total Quant & Solutions Liquid Alpha Other Total

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

1 unchanged sentence

5.1 15.3 20.4 0.5 (0.2) — 0.3

Other income, including equity-accounted subsidiary — 1.1 0.3 1.4 (0.1) 0.6 0.6 1.1

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 March 31, 2021 compared to three months ended March 31, 2020:

Quant & Solutions ENI revenue increased $17.4 million, or 20.2%, from $86.1 million for the three months ended March 31, 2020 to $103.5 million for the three months ended March 31, 2021.

The increase was attributable to 16.1% higher management fees, driven by higher average AUM primarily resulting from the equity market increase over the last twelve months.

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 March 31, 2021 compared to three months ended March 31, 2020:

Liquid Alpha ENI revenue decreased $(29.9) million, or (57.0)%, from $52.5 million for the three months ended March 31, 2020 to $22.6 million for the three months ended March 31, 2021.

The decrease was attributable to (58.6)% lower management fees, driven by lower average AUM caused by the disposition of Barrow Hanley in the fourth quarter of 2020.

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.

Other ENI Revenue

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

Other ENI revenue decreased $(0.9) million, or (14.8)%, from $6.1 million for the three months ended March 31, 2020 to $5.2 million for the three months ended March 31, 2021.

The decrease was driven by (10.9)% lower management fees.

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 March 31, 2021 and 2020:

Three Months Ended March 31,

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 Liquid Alpha Other Total Quant & Solutions Liquid Alpha Other Total

Quant & Solutions Other Total Quant & Solutions Liquid Alpha Other Total

Fixed compensation & benefits

10 unchanged sentences

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

Quant & Solutions Segment ENI Expense

Three months ended March 31, 2021 compared to three months ended March 31, 2020:

Quant & Solutions ENI operating expense increased $2.0 million, or 5.4%, from $37.1 million for the three months ended March 31, 2020 to $39.1 million for the three months ended March 31, 2021.

The increase was driven by 1.6% higher ENI fixed compensation and benefits expense driven by higher costs related to employee benefits and 8.5% higher ENI general and administrative expense primarily resulting from increased portfolio administrative and foreign currency exchange impact.

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 87.5%, primarily due to higher Quant & Solutions ENI earnings after 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 March 31, 2021 compared to three months ended March 31, 2020:

Liquid Alpha ENI operating expense decreased $(13.0) million, or (65.7)%, from $19.8 million for the three months ended March 31, 2020 to $6.8 million for the three months ended March 31, 2021.

The decrease was driven by (64.9)% lower ENI fixed compensation and benefits and (68.2)% lower ENI general and administrative expense resulting from the Barrow Hanley and Copper Rock dispositions in the second half of 2020.

Liquid Alpha ENI variable compensation expense, which is based on contractual arrangements, decreased (64.8)%, as a result of lower pre-variable compensation earnings due to dispositions.

Affiliate key employee distributions attributable to Liquid Alpha decreased (18.8)%, primarily driven by lower Liquid Alpha ENI earnings after variable compensation due to dispositions.

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 March 31, 2021 compared to three months ended March 31, 2020:

Other ENI operating expense decreased $(3.3) million, or (25.6)%, from $12.9 million for the three months ended March 31, 2020 to $9.6 million for the three months ended March 31, 2021.

The decrease was driven by (24.3)% lower fixed compensation and benefit expense and (28.8)% lower general and administrative expense resulting from adjustments.

Other ENI variable compensation expense decreased (35.7)% due to lower pre-variable compensation earnings.

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.

Capital Resources and Liquidity

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All amounts presented exclude consolidated Funds:

Three Months Ended March 31,

Six Months Ended June 30,

($ in millions) 2021 2020

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

Comparison for the three months ended March 31, 2021 and 2020

Net cash from operating activities from continuing operations increased $7.1 million, from net cash used of $27.3 million for the three months ended March 31, 2020 to net cash used of $20.2 million for the three months ended March 31, 2021, driven by net income offset by changes in operating assets and liabilities period over period.

The payout of annual accrued incentive compensation balances in the first quarter of each year is the driver of the cash used in operating activities for both years.

In the three months ended March 31, 2021, net cash provided by investing activities of continuing operations decreased $(0.4) million, from $1.4 million provided in the three months ended March 31, 2020 to $1.0 million provided in the three months ended March 31, 2021, driven primarily by decreased sales of investment securities in the three months ended March 31, 2021.

Net cash provided by financing activities of continuing operations increased $37.3 million, from $41.1 million provided in the three months ended March 31, 2020 to $78.4 million provided in the three months ended March 31, 2021, primarily due to a higher drawdown on the revolving credit facility and fewer share repurchases in the three months ended March 31, 2021 compared to 2020.

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

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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 months ended March 31, 2021 and 2020.

Three Months Ended March 31,

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

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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

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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)

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Restructuring expenses (1)

2.2 3.4 5.3 4.1

Capital transaction costs — 0.2 0.4 0.2

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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)

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$ 32.9 $ 19.6 $ 55.4 $ 41.3

(1) The three months ended March 31, 2021 includes $1.5 million of restructuring costs at the Center and Affiliates, $0.3 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 March 31, 2020 includes $0.4 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, 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.

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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.

We also expect to realize future proceeds from the sale of our equity interests in Landmark and ICM during the second quarter of 2021.

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.

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

($ in millions) March 31,

($ in millions) June 30,

2021 December 31,

2020 Interest rate Maturity

Third party borrowings:

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 borrowings $ 475.5 $ 394.3

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.

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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 March 31, 2021, Acadian’s Leverage Ratio was 0.6x and Acadian’s Interest Coverage Ratio was 184.2x.

At June 30, 2021, Acadian’s Leverage Ratio was 0.4x and Acadian’s Interest Coverage Ratio was 235.6x.

Other Compensation Liabilities

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Forward Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements, including information relating to our pending divestitures of Landmark Partners and Investment Counselors of Maryland, including the expected timing for the closing of the divestitures, anticipated revenues, margins, cash flows or earnings, anticipated future performance of our business and our Affiliates or particular segments, 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.

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.

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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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis