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Item 1. Business

2022-02-28 compared with 2021-03-01 · 132 added, 254 removed, 32 unchanged (92% of the section changed)

We are a global, diversified asset management company with $156.7 billion of assets under management as of December 31, 2020.

We operate our business through our five Affiliates.

We ensure that key management professionals at each Affiliate retain meaningful levels of equity in their own businesses to maintain strong alignment of interests between us, our Affiliates, their clients, and our shareholders.

Our approach to investing in Affiliates includes a profit-sharing arrangement to provide incentives for growth and prudent business management across multiple generations of Affiliate partners.

We have broad and deep experience in working with asset managers.

Our collaboration with our Affiliates extends to the commitment of seed and co-investment capital to launch new products and investment capital to financially support new growth initiatives.

Currently, our business comprises interests in the following Segments:

(1) On July 24, 2020, we sold all of our equity interests in Copper Rock, a former Affiliate in the Liquid Alpha segment, to Spouting Rock Asset Management LLC.

On November 17, 2020, we completed the sale of all of our equity interests in Barrow Hanley, a former Affiliate in the Liquid Alpha segment, to Perpetual U.S.

Holdings Company Inc.

(“Perpetual”).

On February 6, 2021, we entered into a definitive agreement to sell all our interests in ICM, an Affiliate in the Liquid Alpha segment.

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

Our diversification, by Affiliate, asset class, geography and investment strategy, enhances relative earnings stability and provides multiple sources of growth for us.

Collectively, our Affiliates offer 64 distinct, active investment strategies in U.S., global, international and emerging markets equities;

fixed income;

and alternative investments, including forestry and secondary strategies.

In addition, there is significant diversification within each of our Affiliate firms through the breadth of their respective investment capabilities.

We believe our Affiliates have generated competitive absolute and relative performance returns.

Through our Affiliates, we serve a diverse investor base in the institutional and sub-advisory channels in the U.S.

and around the world.

These clients are highly sophisticated, value the stability and equity ownership of our Affiliates, and typically reward our Affiliates’ strong process-driven investment performance with long-term relationships and asset flows.

Our sub-advisory clients also provide access to the retail and defined-contribution marketplace where decision makers take a more institutional approach to choosing asset management providers.

Our Affiliates currently manage assets for non-U.S.

clients in approximately 29 countries, including Australia, Canada, Ireland,, Denmark, the Netherlands, China and the United Kingdom.

Competitive Strengths

We believe our success as an asset management company is driven by the following competitive strengths:

Well-Established, Diverse Affiliates.

Through our five current Affiliates, we are well-diversified by brand, strategy and asset class, providing multiple sources of revenue and growth opportunities for our business across global market cycles, while limiting downside risk.

Each Affiliate has its own brand and investment processes and generally operates in distinct asset classes.

Our assets under management across Affiliates are invested in both global/non-U.S.

equities (75.9% and 7.4%, respectively) and alternative assets including forestry and secondary strategies focused in real estate, infrastructure, and private equity, as well as fixed income.

We are also well-diversified by investment strategy within each asset class, with 64 distinct investment strategy composites.

The breadth of our investment capabilities and distinct brand identities appeal to a wide range of clients.

We have a well-diversified client base with low levels of client concentration.

Our business serves over 550 institutional and sub-advisory clients, with our top 25 client relationships representing approximately 25% of run rate gross management fee revenue, including our equity-accounted Affiliate, as of December 31, 2020.

Total run rate gross management fee revenue reflects the sum for each account at each of our five Affiliates, of the product of (a) assets under management in each account at December 31, 2020, multiplied by (b) the relevant management fee rate on that account.

This calculation includes all accounts at our equity-accounted Affiliate.

Differentiated Model Drives Growth.

We have a two-pronged approach for successfully collaborating with our Affiliate firms.

First, we align our interests with those of our Affiliates by providing Affiliate partners with equity in their own firms and through a profit-sharing structure that sets bonuses as a percentage of pre-bonus profit.

This structure gives our Affiliate partners meaningful wealth creation opportunities through equity ownership and encourages investments in long-term growth while maintaining an appropriate focus on profitability, efficient capital management and risk control.

Second, we offer our Affiliates financial support to grow and enhance their businesses through the investment of seed and co-investment capital to help launch new investment strategies.

Track Record of Competitive Investment Performance Across Market Cycles.

Our Affiliates have produced competitive long-term investment performance across their product offerings, generating outperformance relative to benchmarks across market cycles.

Through December 31, 2020, 46 of our Affiliates’ 59 strategies that have performance benchmarks have outperformed their relevant benchmarks since inception.

These strategies represent 94% of the total assets in the 59 strategies that have performance benchmarks.

Investment performance is calculated on a gross basis, excluding the impact of management, administration, and performance fees.

Based on our current average management fee rate, investment returns net of fees would be on average approximately 40 bps lower than gross returns (excluding products which are not benchmarked).

For the rolling 10-year period ending December 31, 2020, approximately 88% of benchmarked assets have outperformed their relevant benchmarks.

Our Affiliates’ four largest benchmarked investment strategie s, Acadian Asset Management (AAM) Emerging Markets Equity , AAM Global Equity, Thompson, Siegel & Walmsley LLC (TSW) International, and AAM Global Managed Volatility, have each outperformed their relevant benchmarks since inception by 2.2%, 1.5%, 1.4%, and 0.2%, respectively, on an annualized basis.

Attractive Financial Model.

Our model has generated strong, recurring free cash flow to our business that we can use for growth initiatives on behalf of our Affiliates, return to shareholders through dividends and stock repurchases, repay outstanding debt obligations or in certain circumstances, use to make investments in new Affiliates.

We are a global, diversified asset management company with approximately $117 billion of assets under management as of December 31, 2021.

We provide investment management services globally, predominantly to institutional investors.

We historically held ownership interests in a group of investment management firms (the “Affiliates”).

We have completed the disposition of certain Affiliates which resulted in a differentiated investment management business operating through our majority owned subsidiary, Acadian Asset Management LLC (“Acadian”), a leading systematic manager of active global and international equity, multi-asset and alternative strategies.

The ownership structure of Acadian provides incentives for growth and prudent business management across multiple generations of Acadian partners, who retain meaningful levels of equity in their own business to preserve strong alignment of interests between us, Acadian, their clients and our shareholders.

Acadian comprises our Quant & Solutions reportable segment.

We have generated strong, recurring free cash flow to our business that we can use for growth initiatives, return to shareholders through dividends and stock repurchases and to repay outstanding debt obligations.

Our revenue consists largely of recurring management fees on assets under management and is not heavily dependent upon more volatile performance fees.

We earn an attractive margin on revenue enhanced by our profit-sharing model that enables us to participate directly in margin expansion as our Affiliates grow.

GAAP operating margin was 23% for 2016 (23% excluding consolidated Funds) and 25% for 2020 (24% excluding consolidated Funds).

Our comparable ENI operating margin (calculated before Affiliate key employee distributions) was 35% in 2016 and 35% in 2020 as we continued to invest in the business.

Growth Strategy

We strive to maintain and enhance the characteristics which have made our Affiliates market leaders in their areas of expertise.

Growth initiatives are primarily driven by our Affiliates, who by virtue of their day to day management of their operations are able to identify new products and business opportunities.

We seek to support their growth through capital deployment and strategic guidance.

Our Affiliates are strong investment management firms with highly-defined and rigorous investment strategies for which there is real demand in the institutional marketplace.

Our Affiliates have excellent long-term performance records and have generated strong growth through net client revenue flows.

See “—Overview of Current Affiliates.”

Our Operating Model and Holding Company Activities

We manage our business through five Affiliates, each of which operates autonomously and employs its own distinct investment processes.

Our collaboration with our Affiliates primarily extends to the commitment of seed and co-investment capital to launch new products and investment capital to financially support new growth initiatives.

We also encourage our Affiliates to pursue inorganic growth opportunities such as team lift outs and bolt-on acquisitions and are willing to provide strategic advice and capital support in these endeavors.

We align incentives with our Affiliates through our partnership structure, which provides employee partners of our Affiliates with equity in their respective firms through an equity recycling program, and participation in established profit-sharing arrangements.

Affiliate Partnership Model

We are a partner dedicated to providing our Affiliates with operational autonomy in a structure that aligns our common economic interests.

By offering Affiliate management direct participation in the growth and profitability of their businesses through equity ownership and a profit-share-based bonus pool, we provide our Affiliates with a strong incentive to manage their businesses for the long-term, investing with us to build equity value over time.

• Affiliate Operating Autonomy.

Affiliates retain day-to-day operating autonomy over their businesses, including decisions related to hiring, compensation, investment processes, product distribution and branding.

We retain oversight through Affiliate board representation, remuneration committee participation, and certain approval rights, including approval of each Affiliate’s annual business plan.

• Affiliate Partners Have Retained Equity in their Own Firms.

Partners in each of our Affiliates own meaningful equity positions in their respective businesses.

Among our consolidated Affiliates, their equity stakes generally range from approximately 20% to 40%, in some cases following a distribution preference to BSIG.

We may facilitate the recycling of Affiliate equity to the next generation of Affiliate partners.

When this occurs, the impact to us is generally cash-neutral.

• Profit-Share Economics.

Rather than invest in a fixed percentage of Affiliate revenues (a “revenue-share” model), Affiliate partners and we each invest in the underlying profits of their respective businesses, a model we refer to as a “profit-share” model (with the exception of ICM, which has a legacy revenue-share model that was not restructured).

Distributions of profit to the Affiliate equity-holders are based on their proportionate ownership of their businesses, in some cases following a preferred return to us.

In addition, bonus pools for Affiliates are typically contractually set at 25% to 35% of Affiliate pre-bonus profit.

This enables us to participate in the margin increases of our Affiliates, while incentivizing Affiliate management and us to jointly support growth initiatives.

For additional information on our profit-sharing model, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—The Economics of Our Business.”

Collaborative Growth Initiatives

Our collaboration with Affiliates generally consists of the following:

• Seed Capital.

As of December 31, 2020, we have approximately $24 million committed to seed capital, which is currently invested in six products across four different asset classes.

Our Affiliates’ use of seed capital generally falls into two categories:

incubation capital and scale capital.

Incubation capital is used to establish a track record for a new investment strategy.

These new strategies generally take three to five years to season to the point where they are recommended by consultants or become attractive for clients.

Alternatively, scale capital is used to extend a product with an established track record into a co-mingled fund, and is generally outstanding for a shorter period of time.

Scale capital allows third-party clients to invest in the new fund without individually representing too substantial a percentage of the vehicle.

Over $9 billion of our current AUM are in products which have been seeded by us since 2004, and our seeding program has generated an annualized internal rate of return of approximately 24% over this period, including investment returns on the seeded products and the incremental value generated by third party assets raised, including annual profits and a terminal value.

• Co-Investment Capital.

We also provide co-investment capital to support the formation of closed-end, long-term partnerships managed by our Affiliates.

These fixed-life partnerships typically require us and/or the Affiliate or its employees to invest 1% to 3% of the product’s capital to align interests with those of their clients.

Of our current $46 million portfolio of co-investments at fair value, 15% is managed by Campbell Global (investing in forestry), 75% is managed by Landmark Partners (investing in secondary strategies), and 11% remains managed by Heitman LLC (“Heitman”), a former Affiliate (investing in real estate).

As part of the sale of our interest in Heitman to its management, we retained our co-investment interests in Heitman-managed funds as well as any carried interest associated with these investments.

In consideration for providing co-investment capital, which is typically illiquid for approximately seven to ten years, we receive returns on our underlying partnership investment, our proportionate share of profits on assets in the fund, and the potential for fund incentive fee allocations.

• Inorganic Growth Opportunities.

We provide strategic advice and capital support to our Affiliates in pursuing inorganic growth opportunities such as team lift outs and bolt-on acquisitions when such opportunities emerge.

Capital Management

Our asset management business generates significant, recurring free cash flow that can be re-invested in the growth-oriented strategies described above to create value for our shareholders.

Strategic and efficient management of our capital underpins our approach to investing in these strategies.

In particular, we believe we can generate strong returns on allocated capital by (i) providing seed capital to fund new products and strategies;

(ii) committing co-investment capital to launch new fund partnerships in which our Affiliates act as the general partner;

(iii) providing investment capital to support organic growth;

and (iv) implementing opportunistic share repurchase programs.

Management undertakes detailed business case analyses with respect to all growth opportunities, and only considers those that yield an acceptable return while operating within the parameters of our risk appetite.

For the period January 1, 2016 to December 31, 2020, we have repurchased approximately 36% of our shares.

Overview of Current Affiliates

Acadian Asset Management LLC , or Acadian ($108.1 billion in AUM as of December 31, 2020), founded in 1986, is a leading quantitative investment manager of active global, international equity, and alternative strategies.

The firm pursues a fundamentally-grounded, data rich and highly structured approach to investing that seeks to identify and exploit systematic and structural inefficiencies in the markets.

Acadian applies a range of investment and risk considerations to a universe of over 43,000 securities taken from 200 global markets.

Managed strategies include global, international and emerging markets equities, long/short strategies, and managed volatility strategies.

Its flagship Emerging Markets Equity strategy has outperformed its benchmark, MSCI Emerging Markets (Net), by 2.2% (USD, gross of fees) on an annualized basis since its inception in 1994 through December 31, 2020.

Our profit-sharing model enables us to participate directly in margin expansion as Acadian grows.

Acadian, founded in 1986, is a leading systematic investment manager of active global, international equity, and alternative strategies with approximately $117 billion in AUM as of December 31, 2021.

Acadian pursues a fundamentally grounded, data-rich and highly structured approach to investing that seeks to identify and exploit systematic and structural inefficiencies in the markets.

Acadian applies a range of investment and risk considerations to a universe of over 43,000 securities taken from over 150 global markets.

Acadian manages strategies in developed and emerging markets, including global, international and small-cap equities, as well as managed volatility, ESG, multi-asset and other equity alternative strategies.

Acadian invests on behalf of a wide range of institutional clients across the globe, including public and private funds, endowments and foundations, and retail clients through sub-advisory channels.

The firm’s clients are domiciled in 19 countries across Asia, Australia, Europe and North America.

The firm’s clients were domiciled in 20 countries across Asia, Australia, Europe and North America as of December 31, 2021.

Acadian’s management team is led by Co-Chief Executive Officers Ross Dowd and John Chisholm and Acadian’s Chief Investment Officer, Brendan Bradley.

The firm has over 100 investment and research professionals and manages over 70 distinct investment products and strategies.

Campbell Global LLC , or Campbell Global ($4.7 billion in AUM as of December 31, 2020), is a global investment manager focused on forestland.

They are widely recognized as an authority on both forest management and investing.

Based in Portland, Oregon, Campbell Global has more than three decades of experience in timberland management and value creation.

A pioneer in the field, over the last 35 years they have managed more than 5.3 million acres (2.1 million hectares) worldwide for pension funds, endowments, foundations and other global institutional investors.

At Campbell Global, responsible investing is not a box they check.

It is a fundamental belief and a core practice.

They remain true to the values they live by while creating exceptional value for their clients.

Campbell Global takes an innovative approach to responsible investing, including developing strategies for carbon sequestration and forest restoration.

Campbell Global combines ingenuity, data-supported decision making and a passion for responsible investing to deliver the best possible performance to their clients.

As of December 31, 2020, the firm employed 159 individuals and managed nearly 1.7 million acres (0.7 million hectares) in North America, Australasia, and Latin America.

Campbell Global’s management team is led by Chief Executive Officer and Chairman John Gilleland and Angie Davis, President and Managing Director.

The firm has 32 investment professionals managing its investment portfolios.

Overview of Current Affiliates (cont.)

Investment Counselors of Maryland, LLC , (1) or ICM ($3.2 billion in AUM as of December 31, 2020), founded in 1972, focuses on value-driven equities and invests through a well-established, bottom-up investment process that it applies with an emphasis on small- and mid-cap companies.

The firm employs a team orientation in making investment decisions.

Each member of ICM’s investment team has a sector focus and is responsible for generating and analyzing ideas within that sector.

The most promising investment ideas are reviewed by the entire team, and the ultimate buy/sell decisions are made by the respective portfolio manager teams.

For over four decades, ICM has been managing assets for institutional clients and high net worth individuals through separate accounts and an institutional mutual fund, and has generated excellent results for its clients over this time.

ICM’s management team is led by Managing Partner and Chief Investment Officer, William V.

The firm has eight investment professionals managing three distinct investment strategies.

(1) Accounted for under the equity method of accounting.

On February 6, 2021, we entered into a definitive agreement to sell all our interests in ICM.

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

Landmark Partners, LLC , or Landmark ($18.4 billion in AUM as of December 31, 2020), founded in 1989 and acquired by us in August 2016, specializes in secondary market transactions of private equity, real estate and infrastructure investments.

The firm has one of the longest track records in the industry and is a leading source of liquidity to owners of interests in real estate, real asset, venture, mezzanine and buyout limited partnerships.

Landmark has formed 34 funds over the last 31 years.

These funds have been capitalized at more than $28.6 billion, which has been deployed across over 2,420 partnership interests that comprise over 29,100 underlying company and property investments.

Landmark’s investor base is mostly comprised of institutional investors including:

sovereign wealth funds, public pensions, corporate pensions, insurance companies, asset managers and foundations located globally.

Landmark is led by President and Managing Partner, Timothy Haviland and Chairman and Managing Partner, Francisco Borges, supported by a team of eighteen Partners.

As of December 31, 2020, Landmark employed 150 individuals across six offices in Simsbury, CT;

New York, NY;

and Dallas, TX in the United States, together with London in the United Kingdom and a newly opened office in Hong Kong China.

Overview of Current Affiliates (cont.)

Thompson, Siegel & Walmsley LLC , or TSW ($22.3 billion in AUM as of December 31, 2020), founded in 1969, applies a value-oriented investment approach across a range of products in U.S.

and international equities, fixed income and alternative investments.

TSW’s singular investment objective is to outperform its benchmarks, net of fees, over rolling three- to five-year periods.

TSW employs a proprietary screening process to generate focused lists of companies that are most attractive within different market capitalization ranges.

The firm’s investment teams then use fundamental analysis to construct portfolios, which they believe possess catalysts that can unlock value.

TSW has a diverse client base that includes corporations, public pensions, high-net-worth families and individuals, and sub-advisory clients and has a history of providing investors with strong long-term results.

The firm’s management team is led by Chief Executive Officer Frank Reichel, President John Reifsnider, and Director of Operations, Lori Anderson.

The firm has 21 investment professionals managing approximately fifteen investment strategy composites.

Competitive Strengths

As a pioneer in systematic investing, Acadian has been managing systematic equity portfolios since the 1980s.

This experience affords us a broad perspective and data history.

Guided by the economic intuition and insights of a talented, experienced, and diverse investment team, Acadian has been at the forefront of systematic research, signal development, and portfolio construction for 35 years.

Acadian uses a disciplined and objective process, underpinned by rich data and powerful technological tools.

An extensive data repository, continually supplemented by an active alternative scouting effort, provides an extensive source for exploring new investment ideas.

Given the size, breadth, and complexity of global equity markets, we believe that such an empirical approach is essential to exploiting behaviorally based mispricings and deliver superior risk-adjusted returns for our clients.

Acadian is a research-focused firm.

Its scientific approach to innovation is driven by research across signal generation, portfolio construction, implementation, and risk management.

Research is data-dependent, and Acadian’s process benefits from its objectivity, breadth, and computational power.

We recognize that markets are dynamic and that a robust culture of investment research is essential to maintaining a competitive edge.

Capital Management

Our asset management business generates significant, recurring free cash flow that can be accessed to create value for our shareholders.

In particular, we believe we can generate strong returns on allocated capital by, among other things, (i) providing seed capital to fund new products and strategies;

(ii) providing investment capital to support strategic growth;

and (iii) implementing opportunistic share repurchases.

For the period January 1, 2016 to December 31, 2021, we repurchased approximately 66% of our shares.

Distribution Model and Client Base

Our distribution is focused on the institutional and sub-advisory channels, reached through Affiliate-led sales efforts.

During the year ended December 31, 2020 we repositioned our distribution strategy and discontinued supplemental distribution efforts from the Center.

As a result all distribution activities are concentrated at the Affiliate level.

Our Affiliates have teams of established sales and client service professionals with broad and deep relationships across the major segments of the institutional investor community.

In aggregate, our Affiliates service over 550 institutional and sub-advisory clients.

The institutional channel accounts for 79% of our AUM.

Within this channel, we have strong relationships in the public/government pension market (43% of our AUM) and the corporate plan market (14% of our AUM), which comprise a substantial portion of the institutional investment market overall, particularly in the U.S.

Our institutional marketplace clients are highly diverse across segments and geographies and have various growth characteristics.

While our Affiliates market primarily to institutional investors, we participate in the individual investor market through the sub-advisory channel, which represents 15% of our AUM.

Within this channel, we manage assets for mutual funds, giving us exposure to a retail investor base and the defined contribution market.

We have approximately 55 sub-advisory mandates on approximately 30 leading platforms, including Transamerica, SEI, and Strategic Advisors Inc (SAI).

Our top ten sub-advisory relationships account for approximately 14% of AUM and 8% of run rate gross management fee revenue, including our equity-accounted Affiliate, and have an average tenure of over ten years.

Across our Affiliates, our client base is highly diverse with no significant concentration in our portfolio, though some Affiliates may have client exposures that are meaningful to their individual businesses.

As of December 31, 2020, our Affiliates’ top five client relationships represented 10% of total run rate gross management fee revenue, including our equity-accounted Affiliate, and our Affiliates’ top 25 clients represented 25% of run rate gross management fee revenue, including our equity-accounted Affiliate.

Our distribution is focused on the institutional and sub-advisory channels.

The institutional channel accounts for approximately 80% of our AUM.

Within this channel, we have strong relationships in the public/government pension market (45% of our AUM as of December 31, 2021) and the corporate plan market (14% of our AUM as of December 31, 2021), which comprise a substantial portion of the institutional investment market overall, particularly in the U.S.

Our institutional marketplace clients are highly diverse across industry segments and geographies and have various growth characteristics.

Our institutional distribution channel includes institutional clients from across the globe, including, but not limited to, pension funds, state and local governments;

employee benefit plans and foundations and endowments.

We offer our investment products to institutional clients directly and by marketing our services to the investment consultants and advisors that advise them.

We maintain relationships with a number of insurance companies, private banks, Outsourced Chief Investment Officers (“OCIOs”) and Fund of Funds (“FoFs”).

While we market primarily to institutional investors, we participate in the individual investor market through the sub-advisory channel, which represented 12% of our AUM as of December 31, 2021.

We manage assets for mutual funds, and other commingled products including UCITs and Collective Investment Trusts, which gives us exposure to a retail investor base and the defined contribution market.

Our clients can access our investment strategies through a range of investment vehicles:

• Separate Account :

We manage separate account assets within most of our investment strategies.

Our separate account clients span the broad spectrum of institutional investors.

The fees we charge on separate accounts vary by client, investment strategy and the size of the account.

• Commingled Vehicle :

We also offer access to a number of our strategies through Acadian-branded commingled vehicles both within and outside the U.S.

Investors that do not meet our minimum account size for a separate account, or who otherwise prefer to invest through a fund, can invest in our pooled funds.

The goal of our marketing, distribution and client service efforts is to grow and maintain a client base that is diversified by investment strategy, investment vehicle, distribution channel, and geographic region.

We focus our distribution and marketing efforts on sophisticated investors and asset allocators.

Our client service and distribution teams comprise knowledgeable, seasoned professionals, experienced in working across the investment spectrum of investors.

Our client base is highly diverse without significant concentration.

As of December 31, 2021, our top five client relationships represented approximately 13% of total run rate gross management fee revenue, and our top 25 clients represented approximately 34% of run rate gross management fee revenue.

The below graphic shows the breakdown of our assets under management as of December 31, 2021 by client type and location.

Data as of December 31, 2021

We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact its reportable segments.

Our segment reporting structure is based on our various investment strategies.

We have the following 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 and managed volatility products.

• Alternatives —comprised of illiquid and differentiated liquid investment strategies that include private equity, real estate and real assets, including forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.

• Liquid Alpha (1) —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) On July 24, 2020, we sold all of our equity interests in Copper Rock, a former Affiliate in the Liquid Alpha segment, to Spouting Rock Asset Management LLC.

On November 17, 2020, we completed the sale of all of our equity interests in Barrow Hanley, a former Affiliate in the Liquid Alpha segment, to Perpetual U.S.

Holdings Company Inc.

(“Perpetual”).

On February 6, 2021, we entered into a definitive agreement to sell all our interests in ICM, an Affiliate in the Liquid Alpha segment.

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

Products and Investment Performance

Our Affiliates offer leading products in U.S., global, international and emerging markets equities;

fixed income;

and alternative investments, including forestry and secondary strategies.

The chart below presents our assets under management by asset class and illustrates the diversification benefits of our business model.

Each of the five major asset classes provides a balanced earnings stream to our business.

Moreover, within our three largest asset classes of revenue — international equity, global equity and emerging markets equity — we offer a range of strategies which provide further stability to our earnings.

Data as of December 31, 2020

* Excludes equity-accounted Affiliate

We believe our Affiliates’ product offerings are well-positioned in areas of investor demand, and the diversity of investment style and asset class enables us to participate in growing segments of the industry in multiple investing environments.

The chart below illustrates the diversity of our assets under management by asset class and Affiliate.

In total, our Affiliates manage 64 strategy composites.

We offer leading products in global, international, U.S.

and emerging markets equities, in addition to alternative investments and responsible investing.

The chart below presents our wide range of product offerings.

Each of these areas provides a balanced earnings stream to our business.

We believe our product offerings are well-positioned in areas of investor demand, and the diversity of investment style and asset class enables us to participate in growing segments of the industry, through a range of investing environments.

Equities Equity strategies apply insights from over 35 years of systematic investing experience combined with the power of data to deliver results for our clients.

Global, Emerging Markets, Non-U.S., Regional, Managed Volatility

Equity Alternatives Systematic macro capabilities designed to generate absolute returns uncorrelated with major asset classes and regardless of market conditions;

equity alternatives capabilities systematically apply new signals, alternative data, and portfolio construction techniques.

Multi-Asset Absolute Return, Commodities Absolute Return Multi-strategy, Equity Long/Short, Market Neutral

Responsible Investing Responsible investing capabilities integrate throughout all strategies and provide a platform for client-specific solutions and innovative engagement.

Alpha Signals, Portfolio Customization, Net Zero Glidepaths

Investment Performance

While each of our segments have distinct investment processes and generally operate in different asset classes, our unifying mission is to produce risk-adjusted performance, or alpha, for our clients.

For our Quant & Solutions and Liquid Alpha segments, we measure alpha generation relative to the specific benchmarks our clients use to evaluate our performance in these strategies.

Our Alternative segment strategies are generally not measured relative to benchmarks.

Looking at this measure on a consolidated basis, our segments have competitive near- and long-term performance records and are well-positioned for continued growth.

Investment performance is calculated on a gross basis, excluding the impact of management, administration, and performance fees.

In the chart below, which measures revenue-weighted performance relative to benchmarks for the Quant & Solutions and Liquid Alpha segments over the last five years, we typically derive between 45% and 90% of our revenue from benchmarked products (which represented approximately 76% of our total AUM as of December 31, 2020) performing ahead of their respective benchmarks on a three-, five- and ten-year basis.

Data as of December 31 for the years 2016 to 2020

* Quant & Solutions assets representing 82%, 82%, 32%, 11%, and 47% of revenue were outperforming benchmarks on a 1- year basis as of December 31, 2016, 2017, 2018, 2019, and 2020, respectively.

Data as of December 31 for the years 2016 to 2020

* Liquid Alpha assets representing 23%, 53%, 34%, 43%, and 2% of revenue were outperforming benchmarks on a 1- year basis as of December 31, 2016, 2017, 2018, 2019, and 2020, respectively.

In addition to analyzing our segment performance on a revenue-weighted basis, which gives us a perspective on product performance with respect to our segments’ existing client base, we also consider the number of our segments’ at-scale product strategies (defined as strategies with greater than $100 million of AUM) beating benchmarks.

Our mission is to produce risk-adjusted performance, or alpha, for our clients.

Acadian has competitive near- and long-term alpha performance records and is well-positioned for continued growth.

In addition to analyzing our performance on a revenue-weighted basis, which gives us a perspective on product performance with respect to our existing client base, we also consider the number of our at-scale product strategies (defined as strategies with greater than $100 million of AUM) beating benchmarks.

This latter measure, labeled as “equal-weighted,” indicates the opportunity we have to generate sales in a variety of market environments.

For instance, strong performance in a newer, smaller product such as small-cap emerging markets may not affect revenue-weighted performance, but it can have a meaningful effect on revenue growth given client demand for this higher fee product.

The charts below indicate that performance on a revenue-weighted basis relative to benchmark over the last five years have performed ahead of their respective benchmarks on a three-, five- and ten-year basis.

Data as of December 31 for the years 2017 to 2021

* Acadian assets representing 82%, 32%, 11%, 47% and 89% of revenue were outperforming benchmarks on a 1- year basis as of December 31, 2017, 2018, 2019, 2020 and 2021, respectively.

The chart below indicates performance on a revenue-weighted and equal-weighted (by product) basis relative to benchmark, as at December 31, 2021.

3 unchanged sentences

Data as of December 31, 2021 *

* As of December 31, 2020, Quant & Solutions assets representing 47% of revenue were outperforming benchmarks on a 1- year basis.

Liquid Alpha Investment Performance*

Data as of December 31, 2020 *

* As of December 31, 2020, Liquid Alpha assets representing 2% of revenue were outperforming benchmarks on a 1- year basis.

We and our Affiliates face competition from many segments in the asset management industry.

We compete with other investment management firms, including investment management holding companies, insurance companies, banks and private equity firms.

Our Affiliates compete globally with international and domestic investment management firms, hedge funds and other subsidiaries of financial institutions for institutional assets.

Many of the organizations our Affiliates compete with offer investment strategies similar to those offered by our firms, and these organizations may have greater financial resources and distribution capabilities than we or our Affiliates are able to offer.

Some of these firms offer other products and services in particular investment strategies such as passively-managed products, including exchange traded funds, that typically carry lower fee rates, as well as environmental, social, and governance (“ESG”) strategies and other developing strategies or trends.

* As of December 31, 2021, Acadian assets representing 89% of revenue were outperforming benchmarks on a 1- year basis.

We face competition from many segments in the asset management industry.

We compete with other investment management firms, including investment management holding companies, insurance companies, and banks.

We compete globally with international and domestic investment management firms, hedge funds, and other subsidiaries of financial institutions for institutional assets.

Many of the organizations we compete with offer investment strategies similar to those offered by Acadian, and these organizations may have greater financial resources and distribution capabilities than we offer.

Some of these firms offer other products and services—in particular investment strategies such as passively managed products, including exchange traded funds, that typically carry lower fee rates.

Additionally, there are limited barriers to entry for new investment managers.

Our Affiliates compete with these organizations to attract and retain institutional clients and their assets based on the following primary factors:

• the investment performance records of our Affiliates’ investment strategies;

• the breadth of active investment strategies offered by our Affiliates in the asset classes in which they specialize;

• the alignment of our Affiliates’ investment strategies to the current market conditions and investment preferences of potential clients;

• the quality and reputation of the investment teams that execute the investment strategies at our Affiliates;

• the strength of our Affiliates’ and our distribution teams;

• the strength of our Affiliates’ client service and long-term client relationships.

Business History

We compete with these organizations to attract and retain institutional clients and their assets based on the following primary factors:

• the investment performance records of Acadian’s strategies;

• the breadth of active investment strategies and vehicle options offered by Acadian;

• the alignment of Acadian’s investment strategies to the current market conditions and investment preferences and needs of potential clients;

• the quality, depth, and reputation of the investment teams that executes Acadian’s strategies;

• the continuity of our investment and distribution teams;

• the caliber of service we provide our clients;

• Acadian brand recognition and reputation within the investment community

Our History and Organizational Structure

The predecessor of BSIG was formed in 1980.

We were incorporated on May 29, 2014 as a private limited company under the laws of England and Wales.

At the time of our initial public offering of our ordinary shares, or the Offering, we changed our name to OM Asset Management plc.

From the Offering until May 2017, we were a majority-owned subsidiary of OM Group (UK) Limited, or OMGUK, which was in turn wholly owned by OM plc.

The board of directors of OM plc elected to undertake the Offering which was priced on October 8, 2014.

On October 9, 2014, we began trading on the New York Stock Exchange under the ticker symbol “OMAM.” On March 2, 2018, we announced the change of our name to BrightSphere Investment Group plc and on March 26, 2018, our ticker symbol changed to “BSIG.” On July 12, 2019, we completed a redomestication process to change our publicly traded parent company from a company incorporated under the laws of England and Wales to a Delaware corporation.

Effective as of the close of business on July 12, 2019, all issued ordinary shares of BrightSphere Investment Group plc were exchanged on a one-for-one basis for newly issued shares of common stock of BrightSphere Investment Group Inc.

At the time of our initial public offering of our ordinary shares in 2014, we changed our name to OM Asset Management plc.

On March 2, 2018, we announced the change of our name to BrightSphere Investment Group plc and on March 26, 2018, our ticker symbol changed to “BSIG.” On July 12, 2019, we completed a redomestication process to change from a company incorporated under the laws of England and Wales to a Delaware corporation.

The common stock of BrightSphere Investment Group Inc.

began trading on July 15, 2019, and our trading symbol on the NYSE remained unchanged as “BSIG.”

Between the time of the Offering and November 2017, OM plc implemented a plan to dispose of our shares in an orderly manner which balanced value, cost, time and risk.

A series of transactions were executed to dispose of OM plc’s shareholdings, including secondary offerings on the public market, sales of shares from OM plc to HNA Capital U.S., or HNA, and our repurchase and retirement of shares held by OM plc.

Following these transactions, at December 31, 2017, HNA owned 24.95% of our outstanding ordinary shares and OM plc held 1,000 of our ordinary shares.

On November 18, 2018, HNA notified us that it had agreed to sell the substantial majority of its ordinary shares to Paulson & Co (“Paulson”).

On February 25, 2019, this transaction was completed and Paulson held approximately 21.7% of our ordinary shares and we bought back the remaining shares held by HNA in the first quarter of 2019.

See Note 1, “Organization and Description of the Business” in our Consolidated Financial Statements included in Item 8 herein for a further description of these transactions.

In August 2016, we completed the acquisition of Landmark Partners and in January 2018, we completed the sale of our stake in Heitman LLC (“Heitman”) to members of Heitman’s management.

In July 2020, we completed the sale of Copper Rock Capital Partners LLC and in November 2020 we completed the sale of Barrow Hanley Mewhinney & Strauss, LLC.

In February 2021, we entered into a definitive agreement to sell all our interests in ICM.

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

We believe these acquisitions and divestitures have resulted in a mix of Affiliates well positioned to meet the ever changing needs of asset management clients.

We are subject to U.S.

federal securities laws, state securities and corporate laws, and the rules and regulations of U.S.

regulatory and self-regulatory organizations.

Acadian is also subject to regulation in the U.S.

through its primary regulator, the SEC, under the Investment Advisers Act of 1940, as amended.

To the extent Acadian acts as investment adviser or sub-adviser to registered investment companies, it must also comply with the terms of the Investment Company Act of 1940, as amended and the rules thereunder.

The Advisers Act of 1940 imposes numerous obligations on registered investment advisers, including fiduciary, record keeping, advertising and operational requirements, disclosure obligations, and prohibitions on fraudulent activities.

The Investment Company Act of 1940 regulates the structure and operations of registered investment companies and imposes additional obligations on advisers to registered investment companies, including detailed disclosure and regulatory requirements applicable to the registered investment companies and additional compliance responsibilities which must strictly be adhered to by the funds and their advisers.

Acadian is also subject to the rules and regulations adopted by the Commodity Futures Trading Commission, under the Commodity Exchange Act;

and may also be subject to the rules and regulations adopted by the Department of Labor, under ERISA;

the Financial Industry Regulatory Authority, Inc., or FINRA;

and state regulators.

Acadian may also be registered from time to time in jurisdictions outside of the U.S.

and will be subject to applicable regulation in those jurisdictions.

Acadian is also subject to regulation relating to the offer and sale of financial products in each of the European Union countries in which Acadian operates.

As Acadian expands distribution efforts into non-U.S.

jurisdictions, including other member countries of the European Union, Latin America, the Middle East and Asian countries, Acadian may be required to register with additional foreign regulatory authorities or otherwise comply with non-U.S.

rules and regulations that currently are not applicable to our business.

Through wholly owned affiliates, Acadian is also subject to the regulatory environments of the non-U.S.

jurisdictions in which Acadian operates.

Acadian’s U.K.

affiliate is subject to regulation by the Financial Conduct Authority, or FCA., Acadian’s Singapore affiliate is subject to regulation by the Monetary Authority of Singapore, or MAS.

Acadian Australia is subject to regulation by the Australian Securities and Investment Commission, or ASIC.

Each regulatory body imposes a comprehensive system of regulation on investment advisers and the manner in which we conduct our business in that country.

Employees and Human Capital

As of December 31, 2020, we had 800 full-time equivalent employees, of which 30 were employees of the Company and 770 were employees of our Affiliates.

Neither the Company’s employees nor our Affiliates’ employees are represented by any collective bargaining agreements.

Management considers its employee relations to be good.

We believe our ability and the ability of our Affiliates to attract and retain employees is a key to our success.

Accordingly, the Company and our Affiliates each strive to offer competitive compensation and employee benefits and monitor compensation and benefits to the competitive market.

BrightSphere and our Affiliates are committed to pay equity for employees doing similar work, regardless of gender, race or ethnicity and comply with applicable local regulations.

We believe our ability to attract and retain employees is a key to our success.

Accordingly, we strive to offer competitive compensation and employee benefits and monitor compensation and benefits to the competitive market.

Our total rewards philosophy includes competitive compensation, talent development and a comprehensive benefits package that includes extensive health and welfare benefits.

In addition, we provide a Profit Sharing and 401(k) Plan for all employees and contribute a percentage of compensation to this plan on a discretionary basis, subject to regulatory limits.

We recognize the value of a diverse and skilled workforce and are committed to creating and maintaining an inclusive and collaborative workplace culture that leverages the unique contributions of people with diverse backgrounds, experiences, and perspectives.

We are committed to pay equity for employees doing similar work, regardless of gender, race or ethnicity and comply with applicable local regulations.

As of December 31, 2021, we had 350 full-time equivalent employees, of which 24 were employees of BrightSphere Investment Group Inc.

and 326 were employees of Acadian.

None of these employees are represented by any collective bargaining agreements.

Operations, Systems and Technology

We generally use both third-party commercial technology solutions and services to support investment management and operational activities, including functions such as portfolio management, trading, investment accounting, client reporting and financial reporting.

Certain Affiliates have built proprietary systems to support the investment process where competitive advantages to do so exist.

Systems and processes are customized as necessary to support our investment processes and operations.

Information security, business continuity and data privacy programs have been implemented to help mitigate risks.

Our advanced technological capabilities are one of our core strengths.

Our investment process is systematically driven and is supported by a sophisticated systems environment.

A key tenet of our investment philosophy is that it is crucial to examine as much relevant information about as many companies as possible.

Our systems allow us to evaluate a broad array of investment opportunities on a daily basis.

Important aspects of our systems environment include powerful servers that receive fundamental data on a continuous basis;

proprietary software that transforms the data into stock-specific, macro, and peer forecasts;

portfolio optimization software that assists in the creation of customized client portfolios;

and a fully automated trading and compliance system.

Beyond the investment process infrastructure, we use a number of sophisticated systems to help maximize back-office efficiencies across functions such as operations, accounting, and client reporting.

Available Information

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What changed 10-K

Item 1. Business