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Item 2. Management’s Discussion and Analysis

2023-05-08 compared with 2022-11-04 · 204 added, 473 removed, 676 unchanged (50% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless we state otherwise or the context otherwise requires, references in this Quarterly Report on Form 10-Q to “BrightSphere” or “BSIG” refer to BrightSphere Investment Group Inc., references to the “Company” refer to BSIG, and references to “we,” “our” and “us” refer to BSIG and its consolidated subsidiaries and equity-accounted Affiliate, excluding discontinued operations.

Unless we state otherwise or the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company”, “BrightSphere” or “BSIG” refer to BrightSphere Investment Group Inc., and references to “we,” “our” and “us” refer to BSIG and its consolidated subsidiaries, excluding discontinued operations.

References to the holding company or “Center” excluding the Affiliates refer to BrightSphere Inc., or “BSUS,” a Delaware corporation and wholly owned subsidiary of BSIG.

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References in this Quarterly Report on Form 10-Q to “OM plc” refer to Old Mutual plc, our former parent.

None of the information in this Quarterly Report on Form 10-Q constitutes either an offer or a solicitation to buy or sell any of our Affiliates’ products or services, nor is any such information a recommendation for any of our Affiliates’ products or services.

None of the information in this Quarterly Report on Form 10-Q constitutes either an offer or a solicitation to buy or sell any of our Affiliate’s products or services, nor is any such information a recommendation for any of our Affiliate’s products or services.

The following discussion of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes which appear elsewhere in this Quarterly Report on Form 10-Q.

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This section also provides a Summary Results of Operations and information regarding our Assets Under Management by strategy, client type and location, and net flows by segment, client type and client location.

GAAP Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 includes an explanation of changes in our U.S.

GAAP revenue, expense and other items for the three and nine months ended September 30, 2022 and 2021, as well as key U.S.

GAAP Results of Operations for the Three Months Ended March 31, 2023 and 2022 includes an explanation of changes in our U.S.

GAAP revenue, expense and other items for the three months ended March 31, 2023 and 2022, 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 and nine months ended September 30, 2022 and 2021 as well as a reconciliation of key ENI operating items including ENI revenue and ENI operating expenses.

GAAP net income attributable to controlling interests and ENI for the three months ended March 31, 2023 and 2022, 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.

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

• Capital Resources and Liquidity discusses our key balance sheet data.

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

The corporate head office is included within the Other category, along with our previously disposed Affiliates, Campbell Global, LLC (“Campbell Global”) and Investment Counselors of Maryland, LLC (“ICM”), for the three and nine months ended September 30, 2021.

We completed the sale of our equity interests in ICM in July 2021.

We completed the sale of our equity interest in Campbell Global in August 2021.

The corporate head office is 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.

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We may also be required to consolidate Acadian’s 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.

Recent Developments

Russia Invasion of Ukraine

Russia’s military invasion of Ukraine in February 2022, the resulting responses by the U.S.

and other countries (including the imposition of broad-ranging economic sanctions), and the potential for wider conflict has increased volatility and uncertainty in global financial markets and adversely affected regional and global economies.

Although our overall exposure to Russian securities is limited, the extent and duration of Russia’s military actions and the repercussions of such actions (including any retaliatory actions or countermeasures that may be taken by those subject to sanctions, such as cyber attacks) are impossible to predict, but could result in significant market disruptions, including in certain industries or sectors, and may negatively affect global supply chains, inflation and global growth.

The Economics of Our Business

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We earn management fees based on assets under management.

Approximately 80% of our management fees for the three months ended September 30, 2022 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.

Approximately 80% of our management fees for the three months ended March 31, 2023 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.

Changes in the levels of our AUM are driven by market investment performance and net client cash flows.

We may also earn performance fees, or adjust management fees, when certain accounts differ in relation to relevant benchmarks or exceed or fail to exceed required returns.

Approximately $11 billion, or 13%, of our AUM are in accounts in which we participate in the performance fee.

Approximately $13 billion, or 13%, of our AUM are in accounts with incentive fee features in which we participate in the performance fee.

The majority of these performance fees are calculated based on value added over the relevant benchmarks on a rolling one-year basis.

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How We Measure Performance

We manage our business based on one business segment, reflecting how our management assesses the performance of our business.

We manage our business based on one 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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In particular, ENI excludes non-cash charges representing the changes in the value of Affiliate equity and profit interests held by Affiliate key employees, the results of discontinued operations which are no longer part of our business, restructuring costs, capital transaction costs, seed capital and co-investment gains, losses and related financing costs and that portion of consolidated Funds which are not attributable to our stockholders.

ENI revenue is primarily comprised of the fee revenues paid to us by our clients for our advisory services and earnings from our former equity-accounted Affiliate.

ENI revenue is primarily comprised of the fee revenues paid to us by our clients for our advisory services and earnings from our equity-accounted Affiliate.

Revenue included within ENI differs from U.S.

GAAP revenue in that it excludes amounts from consolidated Funds which are not attributable to our stockholders, it excludes reimbursement of certain costs we paid on behalf of our customers and includes our share of earnings from our former equity-accounted Affiliate.

GAAP revenue in that it excludes amounts from consolidated Funds which are not attributable to our stockholders and it includes our share of earnings from our equity-accounted Affiliate.

ENI expenses are calculated to reflect all usual expenses from ongoing continuing operations attributable to our stockholders.

Expenses included within ENI differ from U.S.

GAAP expenses in that they exclude amounts from consolidated Funds which are not attributable to our stockholders, revaluations of Affiliate key employee owned equity and profit interests, amortization and impairment of acquired intangibles and other acquisition-related items, costs we paid on behalf of our customers which were subsequently reimbursed and certain other non-cash expenses.

“Non-controlling interests” is a concept under U.S.

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Summary Results of Operations

The following table summarizes our unaudited results of operations for the three and nine months ended September 30, 2022 and 2021:

($ in millions, unless otherwise noted) Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 vs.

The following table summarizes our unaudited results of operations for the three months ended March 31, 2023 and 2022:

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

2023 2022 2023 vs.

Revenue $ 91.8 $ 112.2 $ (20.4)

Pre-tax income from continuing operations attributable to controlling interests

25.3 57.4 (32.1) 100.0 119.6 (19.6)

Net income from continuing operations attributable to controlling interests

17.8 42.9 (25.1) 70.2 86.1 (15.9)

Pre-tax income attributable to controlling interests 17.1 33.4 (16.3)

Net income attributable to controlling interests 12.0 23.8 (11.8)

GAAP operating margin (1)

34.7 % 24.3 % 1033 bps 40.7 % 27.0 % 1379 bps

21.6 % 38.5 % (1693) bps

Earnings per share, basic ($) $ 0.29 $ 0.54 $ (0.25)

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ENI operating margin (6)

25.9 % 37.0 % (1105) bps 30.5 % 37.2 % (666) bps

22.8 % 34.5 % (1166) bps

Economic net income (7)

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1.0 (1.1) 2.1

GAAP operating margin equals operating income from continuing operations divided by total revenue.

GAAP operating margin equals operating income divided by total revenue.

(2) Economic net income is a non-GAAP measure we use to evaluate the performance of our business.

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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 restructuring costs of $0.1 million and costs associated with the transfer of an insurance policy from our former parent of $0.3 million for the three months ended September 30, 2022.

Excludes restructuring costs of $0.2 million and costs associated with the transfer of an insurance policy from our former parent of $0.9 million for the nine months ended September 30, 2022.

Excludes income from discontinued operations attributable to controlling interests, as well as restructuring costs at the Center and Affiliates of $0.5 million and costs associated with the transfer of an insurance policy from our former parent of $0.3 million and the gain on sale of subsidiaries of $34.6 million for the three months ended September 30, 2021.

Excludes income from discontinued operations attributable to controlling interests, as well as restructuring costs at the Center and Affiliates of $4.0 million, costs associated with the transfer of an insurance policy from our former parent of $0.9 million and the gain on sale of subsidiaries of $33.3 million for the nine months ended September 30, 2021.

(3) Excludes costs associated with the transfer of an insurance policy from our former Parent of $0.4 million for the three months ended March 31, 2023.

Excludes restructuring costs at Acadian of $0.1 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, 2022.

(4) ENI revenue is the ENI measure which corresponds to U.S.

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(5) Pre-tax economic net income is the ENI measure which corresponds to U.S.

GAAP pre-tax income from continuing operations attributable to controlling interests.

GAAP pre-tax income attributable to controlling interests.

(6) ENI operating margin is a non-GAAP efficiency measure, calculated based on ENI operating earnings divided by ENI revenue.

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(7) Economic net income is the ENI measure which is most directly comparable to U.S.

GAAP net income from continuing operations attributable to controlling interests.

(8) Annualized revenue impact of net flows represents annualized management fees expected to be earned on new accounts and net assets contributed to existing accounts (inflows), less the annualized management fees lost on terminated accounts or net assets withdrawn from existing accounts (outflows), plus revenue impact from reinvested income and distribution.

Annualized management fee for client flow is calculated by multiplying the annual gross fee rate for the relevant account by the net assets gained in the account in the event of a positive flow, excluding any current or future market appreciation or depreciation, or the net assets lost in the account in the event of an outflow, excluding any current or future market appreciation or depreciation.

In addition, reinvested income and distribution for each segment is multiplied by average fee rate for the respective segment to compute the revenue impact.

GAAP net income attributable to controlling interests.

(8) Annualized revenue impact of net flows represents annualized management fees expected to be earned on new accounts and net assets contributed to existing accounts, less the annualized management fees lost on terminated accounts or net assets withdrawn from existing accounts, plus revenue impact from reinvested income and distribution.

The annualized management fees are calculated by multiplying the annual gross fee rate for the relevant account by the net assets gained in the account in the event of a positive flow, excluding any current or future market appreciation or depreciation, or the net assets lost in the account in the event of an outflow, excluding any current or future market appreciation or depreciation.

In addition, reinvested income and distribution for the segment is multiplied by average fee rate for the segment to compute the revenue impact.

For a further discussion of the uses and limitations of the annualized revenue impact of net flows, see “Assets Under Management” herein.

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The following table presents our assets under management as of each of the dates indicated:

($ in billions) September 30, 2022 December 31, 2021

($ in billions) March 31, 2023 December 31, 2022

Acadian Asset Management $ 97.5 $ 93.6

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The following table presents our assets under management by strategy as of each of the dates indicated:

($ in billions) September 30, 2022 December 31, 2021

($ in billions) March 31, 2023 December 31, 2022

Developed Markets 76.0 73.2

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

($ in billions) September 30, 2022 December 31, 2021

($ in billions) March 31, 2023 December 31, 2022

AUM % of total AUM % of total

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

($ in billions) September 30, 2022 December 31, 2021

($ in billions) March 31, 2023 December 31, 2022

AUM % of total AUM % of total

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AUM flows and the annualized revenue impact of net flows

Net client cash flows and revenue impact of net client cash flows for all periods include reinvested income and distributions, and exclude realizations.

Net client cash flows and revenue impact of net client cash flows for all periods include reinvested income and distributions.

Reinvested income and distributions represent investment yield that is reinvested back into the portfolios as opposed to distributed as cash.

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Annualized revenue impact of net flows represents annualized management fees expected to be earned on new accounts and net assets contributed to existing accounts (inflows), less the annualized management fees lost on terminated accounts or net assets withdrawn from existing accounts (outflows), plus revenue impact from reinvested income and distributions.

Annualized management fee for client flow is calculated by multiplying the annual gross fee rate for the relevant account with the inflow or the outflow, including our equity-accounted Affiliate.

In addition, reinvested income and distributions for each segment is multiplied by average fee rate for the respective segment to compute the revenue impact.

Annualized management fee for client flow is calculated by multiplying the annual gross fee rate for the relevant account with the inflow or the outflow.

In addition, reinvested income and distributions is multiplied by the average fee rate to compute the revenue impact.

The annualized revenue impact of net flows metric is designed to provide investors with a better indication of the potential financial impact of net client cash flows, however it has certain limitations.

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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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in billions, unless otherwise noted) 2023 2022

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Market appreciation (depreciation) 3.8 (4.8)

Other — — — 1.1

Ending balance $ 97.5 $ 110.2

Average AUM $ 96.4 $ 111.3

$ 90.3 $ 116.8 $ 100.9 $ 113.9

Beginning balance $ — $ — $ — $ 3.2

Sale of Affiliate — — — —

Gross inflows — — — —

Gross outflows — — — —

Reinvested income and distributions — — — —

Net flows — — — —

Market appreciation — — — —

Ending balance $ — $ — $ — $ —

Average AUM $ — $ — $ — $ —

Average AUM of consolidated Affiliates $ — $ — $ — $ —

Beginning balance $ — $ 9.1 $ — $ 5.8

Sale of Affiliates — (8.9) — (8.9)

Gross inflows — — — 0.7

Gross outflows — — — (0.2)

Net flows — — — 0.5

Market appreciation — (0.2) — 0.6

Other — — — 2.0

Ending balance $ — $ — $ — $ —

Average AUM $ 5.1 $ — $ 7.4

Average AUM of consolidated Affiliates $ — $ 3.1 $ — $ 4.2

Beginning balance $ 90.5 $ 126.9 $ 117.2 $ 116.0

Sale of Affiliate — (8.9) — (8.9)

Gross inflows 2.0 2.8 8.0 8.4

Gross outflows (2.3) (4.2) (15.2) (15.5)

Reinvested income and distributions 0.9 0.7 2.8 2.0

Net flows 0.6 (0.7) (4.4) (5.1)

Market appreciation (depreciation) (7.8) (3.6) (29.5) 11.8

Other — — — (0.1)

Ending balance $ 83.3 $ 113.7 $ 83.3 $ 113.7

Average AUM $ 90.3 $ 121.9 $ 100.9 $ 121.3

Average AUM of consolidated Affiliates $ 90.3 $ 119.9 $ 100.9 $ 118.1

Annualized basis points:

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Annualized revenue impact of net flows ($ in millions) $ 1.0 $ (1.1)

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

(2) ICM has been reclassified to the Other category as of the beginning of the first quarter of 2021.

The Other category consists of our previously disposed affiliates, Campbell Global and ICM, for the three and nine months ended September 30, 2021.

We also analyze our asset flows by client type and client location.

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also includes corporate and union-sponsored pension plans;

Retail/other, which includes assets managed for mutual funds sponsored by our Affiliates, defined contribution plans and accounts managed for high net worth clients.

Retail/other, which includes assets managed for mutual funds sponsored by our Affiliate, defined contribution plans and accounts managed for high net worth clients.

The following table summarizes our asset flows by client type for each of the periods indicated:

($ in billions) Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

($ in billions) Three Months Ended March 31,

Beginning balance $ 11.8 $ 14.1

Sale of Affiliate — (0.4) — (0.4)

Gross inflows 0.4 0.5

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Beginning balance $ 77.2 $ 97.8

Sale of Affiliate — (6.0) — (6.0)

Gross inflows 1.7 2.6

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Beginning balance $ 4.6 $ 5.3

Sale of Affiliate — (2.5) — (2.5)

Gross inflows 0.1 0.4

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Beginning balance $ 93.6 $ 117.2

Sale of Affiliate — (8.9) — (8.9)

Gross inflows 2.2 3.5

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Ending balance 97.5 110.2

(1) Other movements related to billable assets adjustment.

Our categorization by client location includes:

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The following table summarizes asset flows by client location for each of the periods indicated:

($ in billions) Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

($ in billions) Three Months Ended March 31,

Beginning balance $ 62.7 $ 77.1

Sale of Affiliate — (7.9) — (7.9)

Gross inflows 1.2 2.4

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Beginning balance $ 30.9 $ 40.1

Sale of Affiliate — (1.0) — (1.0)

Gross inflows 1.0 1.1

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Beginning balance $ 93.6 $ 117.2

Sale of Affiliate — (8.9) — (8.9)

Gross inflows 2.2 3.5

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Ending balance $ 97.5 $ 110.2

(1) Other movements related to billable assets adjustment.

At September 30, 2022, our total assets under management were $83.3 billion, a decrease of $(7.2) billion, or (8.0)%, compared to $90.5 billion at June 30, 2022 and a decrease of $(30.4) billion, or (26.7)%, compared to $113.7 billion at September 30, 2021.

The decrease in assets under management compared to September 30, 2021 is a result of market depreciation and net outflows in the last twelve months.

The change in assets under management during the three months ended September 30, 2022 reflects net market depreciation of $(7.8) billion, slightly offset by net inflows of $0.6 billion.

The change in assets under management during the nine months ended September 30, 2022 reflects net market deprecation of $(29.5) billion, and net outflows of $(4.4) billion.

At March 31, 2023, our total assets under management were $97.5 billion, an increase of $3.9 billion, or 4.2%, compared to $93.6 billion at December 31, 2022 and a decrease of $(12.7) billion, or (11.5)%, compared to $110.2 billion at March 31, 2022.

The decrease in assets under management compared to March 31, 2022 is a result of equity market and currency depreciation, and net outflows in the last twelve months.

The change in assets under management during the three months ended March 31, 2023 reflects net market appreciation of $3.8 billion.

Market appreciation or depreciation reported in current and prior periods includes changes in equity prices, as well as the impact from exchange rate fluctuations on our foreign-denominated AUM.

Given a substantial portion of our AUM is denominated in foreign currencies, foreign exchange rate movements in 2022 had a more pronounced negative impact on AUM, as a result of the strengthening of the U.S.

dollar relative to other currencies in the current quarter.

For the three months ended September 30, 2022, our net flows were $0.6 billion compared to $(2.8) billion for the three months ended June 30, 2022 and $(0.7) billion for the three months ended September 30, 2021.

The change in net flows during the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to a reduction in large terminations and withdrawals in the three months ended September 30, 2022.

Reinvested income and distributions of $0.9 billion, $1.0 billion, and $0.7 billion are reflected in the net flows for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

For the three months ended September 30, 2022, the annualized revenue impact of the net flows was $0.3 million.

This is compared to the annualized revenue impact of net flows of $(7.4) million for the three months ended June 30, 2022 and $(1.6) million for the three months ended September 30, 2021.

Gross inflows of $2.0 billion during the three-month period yielded approximately 44 bps compared to $2.8 billion yielding approximately 47 bps in the year-ago period, and gross outflows in the same period of $(2.3) billion yielded approximately 52 bps compared to $(4.2) billion yielding approximately 41 bps in the year-ago period.

For the nine months ended September 30, 2022, our net flows were $(4.4) billion compared to $(5.1) billion for the nine months ended September 30, 2021.

The change in net flows during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily driven by lower outflows in the nine months ended September 30, 2022.

Reinvested income and distributions of $2.8 billion and $2.0 billion are reflected in the net flows for the nine months ended September 30, 2022 and September 30, 2021, respectively.

For the nine months ended September 30, 2022, the annualized revenue impact of the net flows was $(8.2) million compared to $(10.4) million for the nine months ended September 30, 2021.

Gross inflows of $8.0 billion in the nine months ended September 30, 2022 yielded approximately 49 bps compared to $8.4 billion yielding approximately 48 bps in the year-ago period.

Gross outflows of $(15.2) billion yielded approximately 38 bps in the nine months ended September 30, 2022 compared to $(15.5) billion yielding approximately 38 bps in the year-ago period.

GAAP Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

GAAP results of operations were as follows for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, Nine Months Ended September 30,

Given a substantial portion of our AUM is denominated in foreign currencies, foreign exchange rate movements during the period can impact AUM when the strength of the U.S.

dollar changes relative to other currencies.

For the three months ended March 31, 2023, our net flows were $0.1 billion compared to $(2.2) billion for the three months ended March 31, 2022.

The change in net flows during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily driven by lower outflows in the three months ended March 31, 2023.

Reinvested income and distributions of $0.9 billion and $0.9 billion are reflected in the net flows for the three months ended March 31, 2023 and March 31, 2022, respectively.

For the three months ended March 31, 2023, the annualized revenue impact of the net flows was $1.0 million compared to $(1.1) million for the three months ended March 31, 2022.

Gross inflows of $2.2 billion in the three months ended March 31, 2023 yielded approximately 41 bps compared to $3.5 billion yielding approximately 50 bps in the year-ago period.

Gross outflows of $(3.0) billion yielded approximately 39 bps in the three months ended March 31, 2023 compared to $(6.6) billion yielding approximately 33 bps in the year-ago period.

GAAP Results of Operations for the Three Months Ended March 31, 2023 and 2022

GAAP results of operations were as follows for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

($ in millions, unless otherwise noted) 2023 2022 Increase

(Decrease) 2022 2021 Increase

GAAP Statement of Operations

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Performance fees 0.5 10.0 (9.5)

Other revenue — 3.1 (3.1) — 5.7 (5.7)

Consolidated Funds’ revenue 0.7 — 0.7

Total revenue 91.8 112.2 (20.4)

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General and administrative expense 18.4 16.9 1.5

Amortization of acquired intangibles

0.1 0.1 — 0.1 0.1 —

Depreciation and amortization 3.8 5.3 (1.5)

Consolidated Funds’ expense 0.7 — 0.7

Total operating expenses 72.0 69.0 3.0

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Loss on extinguishment of debt — (3.2) 3.2

Gain on sale of subsidiaries — 34.6 (34.6) — 33.3 (33.3)

Income from continuing operations before taxes

25.3 57.4 (32.1) 100.0 119.6 (19.6)

Net consolidated Funds’ investment gains 0.8 — 0.8

Income before income taxes 17.1 33.4 (16.3)

Income tax expense 5.1 9.6 (4.5)

Income from continuing operations 17.8 42.9 (25.1) 70.2 86.1 (15.9)

Income from discontinued operations, net of tax — 1.2 (1.2) — 76.5 (76.5)

Gain (loss) on disposal of discontinued operations, net of tax

12.0 23.8 (11.8)

17.8 229.5 (211.7) 70.2 857.2 (787.0)

Net income (loss) attributable to non-controlling interests in consolidated Funds — — —

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21.6 % 38.5 %

GAAP operating margin equals operating income from continuing operations divided by total revenue.

The following table reconciles our net income attributable to controlling interests to our pre-tax income from continuing operations attributable to controlling interests:

GAAP operating margin equals operating income divided by total revenue.

The following table reconciles our net income attributable to controlling interests to our pre-tax income attributable to controlling interests:

($ in millions) Three Months Ended

September 30, Nine Months Ended

September 30,

GAAP Statement of Operations 2023 2022

Net income attributable to controlling interests $ 12.0 $ 23.8

(Income) on discontinued operations attributable to controlling interests, net of tax — (186.6) — (703.1)

Net income from continuing operations attributable to controlling interests

17.8 42.9 70.2 86.1

Income tax expense 5.1 9.6

Pre-tax income from continuing operations attributable to controlling interests

$ 25.3 $ 57.4 $ 100.0 $ 119.6

Pre-tax income attributable to controlling interests $ 17.1 $ 33.4

GAAP Revenues

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management fees earned based on our overall weighted average fee rate charged to our clients and the level of assets under management;

performance fees earned when our Affiliates’ investment performance over agreed time periods for certain clients has differed from pre-determined hurdles;

other revenue, consisting primarily of consulting services as well as reimbursement of certain Fund expenses our Affiliates paid on behalf of our Funds.

performance fees earned when our Affiliate’s investment performance over agreed time periods for certain clients has differed from pre-determined hurdles;

revenue from consolidated Funds, a portion of which is attributable to the holders of non-controlling interests in Consolidated Funds.

Management Fees

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 37.6 bps and 37.1 bps for the three and nine months ended September 30, 2022, respectively, and 36.8 and 37.0 bps bps for the three and nine months ended September 30, 2021, respectively.

The overall weighted average fee rate increase for the three and nine months ended September 30, 2022 is the result of changes in the mix of assets under management caused by market movements and client flows.

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Management fees decreased $(25.7) million, or (23.1)%, from $111.4 million for the three months ended September 30, 2021 to $85.7 million for the three months ended September 30, 2022.

The decrease was primarily due to a decrease in average assets under management, as well as the disposition of Campbell Global.

Average assets under management excluding our equity-accounted Affiliate decreased (25)%, from $119.9 billion for the three months ended September 30, 2021 to $90.3 billion for the three months ended September 30, 2022, mainly due to the negative market and net outflows over the past twelve months, as well as the disposition of Campbell Global in August 2021.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Management fees decreased $(45.4) million, or (13.9)%, from $326.8 million for the nine months ended September 30, 2021 to $281.4 million for the nine months ended September 30, 2022.

The decrease was primarily attributable to the equity market decline and net outflows over the past twelve months, as well as the disposition of Campbell Global.

Average assets under management excluding equity-accounted Affiliate decreased (15)%, from $118.1 billion for the nine months ended September 30, 2021 to $100.9 billion for the nine months ended September 30, 2022, mainly due to the equity market decline and net outflows over the past twelve months, as well as the disposition of Campbell Global in August 2021.

Our management fees are a function of the fee rates charged to our clients, which are typically expressed in basis points, and the levels of our assets under management.

Average basis points earned on average assets under management were 38.1 bps for the three months ended March 31, 2023, and 37.3 bps for the three months ended March 31, 2022, respectively.

The overall weighted average fee rate increase for the three months ended March 31, 2023 is the result of changes in the mix of assets under management caused by market movements and client flows.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Management fees decreased $(11.6) million, or (11.4)%, from $102.2 million for the three months ended March 31, 2022 to $90.6 million for the three months ended March 31, 2023.

The decrease was primarily attributable to the equity market decline and net outflows over the past twelve months.

Average assets under management decreased (13)%, from $111.3 billion for the three months ended March 31, 2022 to $96.4 billion for the three months ended March 31, 2023, mainly due to the equity market decline and net outflows over the past twelve months.

Performance Fees

Approximately $11.0 billion, or 13% of our AUM in consolidated Affiliates, were in accounts with performance fee features in which we participate.

Approximately $12.7 billion, or 13% of our AUM, were in accounts with performance fee features in which we participate.

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

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Performance fees decreased $(2.3) million, from $3.4 million for the three months ended September 30, 2021 to $1.1 million for the three months ended September 30, 2022, primarily due to the decline in performance fee eligible assets.

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

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Performance fees decreased $(15.3) million, from $28.4 million for the nine months ended September 30, 2021 to $13.1 million for the nine months ended September 30, 2022, primarily due to the disposition of Campbell Global, which contributed $15.3 million to the first half of 2021 performance fees.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Performance fees decreased $(9.5) million, from $10.0 million for the three months ended March 31, 2022 to $0.5 million for the three months ended March 31, 2023.

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

Other Revenue

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Other revenue was $3.1 million for the three months ended September 30, 2021.

There was no other revenue for the three months ended September 30, 2022.

The decrease was attributable to the disposition of Campbell Global in August 2021.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Other revenue was $5.7 million for the nine months ended September 30, 2021.

There was no other revenue for the nine months ended September 30, 2022.

The decrease was attributable to the disposition of Campbell Global in August 2021.

GAAP Expenses

2 unchanged sentences

general and administrative expenses;

amortization of acquired intangibles;

depreciation and amortization charges;

expenses of consolidated Funds, a portion of which is attributable to the holders of non-controlling interests in consolidated Funds.

Compensation and Benefits Expense

Our most significant category of expense is compensation and benefits awarded to our and our Affiliates’ employees.

Our most significant category of expense is compensation and benefits awarded to our and our Affiliate’s employees.

The following table presents the components of U.S.

GAAP compensation expense for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, Nine Months Ended September 30,

GAAP compensation expense for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

($ in millions) 2023 2022

2 unchanged sentences

Sales-based compensation (2)

1.7 1.9 5.7 5.4

Variable compensation (3)

19.8 27.1 70.4 83.8

Affiliate key employee distributions (4)

1.1 5.0 3.5 9.5

Non-cash Affiliate key employee equity revaluations (5)

(9.2) 8.7 (34.8) 19.4

GAAP compensation and benefits expense

1 unchanged sentence

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

For the three and nine months ended September 30, 2022, $21.5 million and $63.9 million, respectively, of fixed compensation and benefits (of the $21.5 million and $63.9 million above) are included within economic net income.

Fixed compensation and benefits includes base salaries, payroll taxes and the cost of benefit programs provided.

For the three and nine months ended September 30, 2021, $23.6 million and $72.1 million, respectively, of fixed compensation and benefits (of the $24.5 million and $75.1 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.

For the three months ended March 31, 2023 and 2022, $23.4 million and $21.9 million, respectively, of fixed compensation and benefits (of the $23.4 million and $21.9 million above) are included within economic net income.

(2) Sales-based compensation is paid to our Affiliate’s 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.

Its variability is based upon the structure of sales-based compensation due on inflows of assets under management and market-based movement in both current and prior periods.

(3) Variable compensation is contractually set and calculated individually at each Affiliate, plus Center bonuses and compensation paid by our Affiliates on behalf of their Funds that are subsequently reimbursed.

(3) Variable compensation is contractually set and calculated individually for our Affiliate, plus Center bonuses.

Variable compensation is awarded based on a contractual percentage of Affiliate ENI profits before variable compensation and may be paid in the form of cash or non-cash Affiliate equity or profit interests.

In Affiliates with an agreed split of performance fees between Affiliate employees and BSUS, the Affiliates’ share of performance fees, which ranges from 60%-75% of the total, is allocated entirely to variable compensation.

With our Affiliate, we have a contractual split of performance fees between Affiliate employees and BSUS.

The Affiliate’s share of performance fees, which ranges from 60%-75% of the total, is allocated entirely to variable compensation.

The variable compensation earned on performance fees vests over three-years and compensation is recognized over that service period.

Center variable compensation includes cash and our equity.

Non-cash variable compensation awards typically vest over several years and are recognized as compensation expense over that service period.

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

3 unchanged sentences

$ 23.2 $ 27.9

(a) For the three and nine months ended September 30, 2022, $19.8 million and $70.4 million, respectively, of variable compensation expense (of the $19.8 million and $70.4 million above) are included within economic net income.

For the three and nine months ended September 30, 2021, $27.0 million and $82.9 million, respectively, of variable compensation expense (of the $27.1 million and $83.8 million above) are included within economic net income, which excludes $0.1 million and $0.9 million of variable compensation associated with restructuring at an Affiliate.

(a) For the three months ended March 31, 2023, $23.2 million of variable compensation expense (of the $23.2 million above) is included within economic net income.

For the three months ended March 31, 2022, $27.9 million of variable compensation expense (of the $27.9 million above) is included within economic net income.

(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.

The Affiliate key employee distribution ratio at each Affiliate is calculated as Affiliate key employee distributions divided by ENI operating earnings at that Affiliate.

At certain Affiliates with tiered equity structures, BSUS and other classes of employee equity holders are entitled to an initial proportionate preference over profits after variable compensation, structured such that before a preference threshold is reached, there would be no required key employee distributions to the tiered equity holders, whereas for profits above the threshold, the key employee distribution amount to the tiered equity holders would be calculated based on the tiered key employee ownership percentages.

The Affiliate key employee distribution ratio at our Affiliate is calculated as Affiliate key employee distributions divided by ENI operating earnings at the Affiliate.

Within our Affiliate we have a tiered equity structure, where BSUS and other classes of employee equity holders are entitled to an initial proportionate preference over profits after variable compensation, structured such that before a preference threshold is reached, there would be no required key employee distributions to the tiered equity holders, whereas for profits above the threshold, the key employee distribution amount to the tiered equity holders would be calculated based on the tiered key employee ownership percentages.

(5) Non-cash Affiliate key employee equity revaluations represent changes in the value of Affiliate equity and profit interests held by Affiliate key employees.

3 unchanged sentences

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

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Compensation and benefits expense decreased $(32.3) million, or (48.1)%, from $67.2 million for the three months ended September 30, 2021 to $34.9 million for the three months ended September 30, 2022.

Fixed compensation and benefits decreased $(3.0) million, or (12.2)%, from $24.5 million for the three months ended September 30, 2021 to $21.5 million for the three months ended September 30, 2022, primarily reflecting disposition of Affiliates.

Variable compensation decreased $(7.3) million, or (26.9)%, from $27.1 million for the three months ended September 30, 2021 to $19.8 million for the three months ended September 30, 2022.

The decrease was primarily attributable to lower pre-bonus profits in the current year, as well as the disposition of Campbell Global.

This decrease was partially offset by the inclusion of deferred compensation expense earned on prior year performance fee revenues, of which the Affiliate’s share is determined by a contractual split and recognized as compensation expense over a vesting period.

Sales-based compensation decreased $(0.2) million, or (10.5)%, from $1.9 million for the three months ended September 30, 2021 to $1.7 million for the three months ended September 30, 2022, 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 $(3.9) million, or (78.0)%, from $5.0 million for the three months ended September 30, 2021 to $1.1 million for the three months ended September 30, 2022 as a result of lower underlying operating earnings at the consolidated Affiliates.

Revaluations of Affiliate equity decreased by $(17.9) million reflecting revaluations of key employee ownership interests at our consolidated Affiliates as the value of Affiliate equity increased $8.7 million for the three months ended September 30, 2021 and decreased $(9.2) million for the three months ended September 30, 2022.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Compensation and benefits expense decreased $(84.5) million, or (43.7)%, from $193.2 million for the nine months ended September 30, 2021 to $108.7 million for the nine months ended September 30, 2022.

Fixed compensation and benefits decreased $(11.2) million, or (14.9)%, from $75.1 million for the nine months ended September 30, 2021 to $63.9 million for the nine months ended September 30, 2022, primarily reflecting Affiliate dispositions.

Variable compensation decreased $(13.4) million, or (16.0)%, from $83.8 million for the nine months ended September 30, 2021 to $70.4 million for the nine months ended September 30, 2022.

The decrease was primarily attributable to lower pre-bonus profits in the current year, as well as the disposition of Campbell Global.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Compensation and benefits expense increased $2.3 million, or 4.9%, from $46.8 million for the three months ended March 31, 2022 to $49.1 million for the three months ended March 31, 2023.

Fixed compensation and benefits increased $1.5 million, or 6.8%, from $21.9 million for the three months ended March 31, 2022 to $23.4 million for the three months ended March 31, 2023, primarily reflecting cost of living increases and the cost of new hires supporting our growth initiatives.

Variable compensation decreased $(4.7) million, or (16.8)%, from $27.9 million for the three months ended March 31, 2022 to $23.2 million for the three months ended March 31, 2023.

The decrease was primarily attributable to lower pre-bonus profits in the current year.

Sales-based compensation increased $0.3 million, or 5.6%, from $5.4 million for the nine months ended September 30, 2021 to $5.7 million for the nine months ended September 30, 2022, 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 $(6.0) million, or (63.2)%, from $9.5 million for the nine months ended September 30, 2021 to $3.5 million for the nine months ended September 30, 2022, primarily as a result of lower underlying operating earnings at the consolidated Affiliates.

Revaluations of Affiliate equity decreased by $(54.2) million reflecting the change in value of key employee ownership interests at our consolidated Affiliates, as the value of Affiliate equity increased $19.4 million for the nine months ended September 30, 2021 and decreased $(34.8) million for the nine months ended September 30, 2022.

Sales-based compensation remained at $1.9 million for the three months ended March 31, 2023 and 2022.

Affiliate key employee distributions decreased $(0.7) million, or (36.8)%, from $1.9 million for the three months ended March 31, 2022 to $1.2 million for the three months ended March 31, 2023, primarily as a result of lower underlying operating earnings at the consolidated Affiliate.

Revaluations of Affiliate equity changed $6.2 million reflecting the change in value of key employee ownership interests at our consolidated Affiliate, as the value of Affiliate equity decreased $(6.8) million for the three months ended March 31, 2022 and decreased $(0.6) million for the three months ended March 31, 2023.

General and Administrative Expense

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

General and administrative expense increased $1.0 million, or 6.1%, from $16.5 million for the three months ended September 30, 2021 to $17.5 million for the three months ended September 30, 2022.

The increase was primarily due to increased travel and entertainment, consulting, and system costs.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

General and administrative expense decreased $(2.7) million, or (5.0)%, from $53.6 million for the nine months ended September 30, 2021 to $50.9 million for the nine months ended September 30, 2022.

The decrease was primarily due to the disposition of Affiliates, offset partially by an increase in travel and entertainment, consulting, and system costs in the current period.

Amortization of Acquired Intangibles Expense

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Amortization of

acquired intangibles expense was unchanged at $0.1 million for the three months ended September 30, 2021 and $0.1 million for the three months ended September 30, 2022.

This account reflects the amortization of intangible assets acquired by Acadian.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Amortization of

acquired intangibles expense was unchanged, at $0.1 million for the nine months ended September 30, 2021 and $0.1 million nine months ended September 30, 2022.

This account reflects the amortization of intangible assets acquired by Acadian.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

General and administrative expense increased $1.5 million, or 8.9%, from $16.9 million for the three months ended March 31, 2022 to $18.4 million for the three months ended March 31, 2023.

The increase was primarily due to an increase in travel and entertainment, consulting, and system costs in the current period.

Depreciation and Amortization Expense

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Depreciation and amortization expense decreased $(1.2) million, or (22.2)%, from $5.4 million for the three months ended September 30, 2021 to $4.2 million for the three months ended September 30, 2022.

The decrease was primarily attributable to the effect of certain assets becoming fully depreciated and the disposition of Affiliates.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Depreciation and amortization expense decreased $(1.9) million, or (11.4)%, from $16.7 million for the nine months ended September 30, 2021 to $14.8 million for the nine months ended September 30, 2022.

The decrease was primarily attributable to the effect of certain assets becoming fully depreciated and the disposition of Affiliates.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Depreciation and amortization expense decreased $(1.5) million, or (28.3)%, from $5.3 million for the three months ended March 31, 2022 to $3.8 million for the three months ended March 31, 2023.

The decrease was primarily attributable to the effect of certain assets becoming fully depreciated.

GAAP Other Non-Operating Items of Income and Expense

3 unchanged sentences

loss on extinguishment of debt.

gain on sale of subsidiaries.

Investment Income

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Investment income decreased $(0.7) million, from $0.3 million for the three months ended September 30, 2021 to $(0.4) million for the three months ended September 30, 2022.

The decrease was driven primarily by lower returns on seed capital investments due to the market decline in the three months ended September 30, 2022.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Investment income decreased $(8.8) million, from $7.6 million for the nine months ended September 30, 2021 to $(1.2) million for the nine months ended September 30, 2022.

The decrease was driven primarily by lower returns on seed capital investments due to the market decline in the nine months ended September 30, 2022.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Investment income increased $0.4 million, from $(0.1) million for the three months ended March 31, 2022 to $0.3 million for the three months ended March 31, 2023.

The increase was driven primarily by higher returns on seed capital investments due to market appreciation in the three months ended March 31, 2023.

Interest Income

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Interest income was $0.2 million for the three months ended September 30, 2022.

There was no interest income for the three months ended September 30, 2021.

The increase was due to an increase in short-term investment returns.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Interest income increased $0.2 million, from $0.1 million for the nine months ended September 30, 2021 compared to $0.3 million for the nine months ended September 30, 2022.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Interest income increased $1.1 million, from $0.0 million for the three months ended March 31, 2022 compared to $1.1 million for the three months ended March 31, 2023.

The increase was due to an increase in short-term investment returns.

Interest Expense

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Interest expense decreased $(1.6) million, or (25.8)%, from $6.2 million for the three months ended September 30, 2021 to $4.6 million for the three months ended September 30, 2022, primarily reflecting a lower balance of third party borrowings following the redemption of our 5.125% Senior Notes due August 1, 2031 in January 2022.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Interest expense decreased $(2.8) million, or (15.0)%, from $18.7 million for the nine months ended September 30, 2021 to $15.9 million for the nine months ended September 30, 2022, primarily reflecting the lower balance of third party borrowings in 2022, slightly offset by $1.3 million of additional interest expense related to the amortization of the cash flow hedge associated with the $125 million aggregate principal amount outstanding of our 5.125% Senior Notes due August 1, 2031 that we redeemed in January 2022.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Interest expense decreased $(1.6) million, or (24.6)%, from $6.5 million for the three months ended March 31, 2022 to $4.9 million for the three months ended March 31, 2023, primarily due to the $1.3 million of additional interest expense incurred for the three months ended March 31, 2022 related to the amortization of the cash flow hedge associated with the $125 million aggregate principal amount outstanding of our 5.125% Senior Notes due August 1, 2031 that we redeemed in January 2022.

Loss on Extinguishment of Debt

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

There was no loss on extinguishment of debt in the three months ended September 30, 2021 or the three months ended September 30, 2022.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

There was no loss on extinguishment of debt in the nine months ended September 30, 2021.

Loss on extinguishment of debt was $(3.2) million for the nine months ended September 30, 2022 as a result of the full redemption of the $125 million aggregate principal amount outstanding of our 5.125% Senior Notes due August 1, 2031 that we redeemed in January 2022.

Gain on Sale of Subsidiaries

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Gain on sale of subsidiaries was $34.6 million for the three months ended September 30, 2021.

Included in the balance for the three months ended September 30, 2021 is our gain on the sale of our equity interests in ICM and Campbell Global.

There was no gain on sale of subsidiaries in the three months ended September 30, 2022.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Gain on sale of subsidiaries was $33.3 million for the nine months ended September 30, 2021.

Included in the balance for the nine months ended September 30, 2021 is our gain on the sale of our equity interests in ICM and Campbell Global, slightly offset by the loss on disposition of a business unit during the nine months ended September 30, 2021.

There was no gain on sale of subsidiaries in the nine months ended September 30, 2022.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

There was $(3.2) million loss on extinguishment of debt in the three months ended March 31, 2022 as a result of the full redemption of the $125 million aggregate principal amount outstanding of our 5.125% Senior Notes due August 1, 2031 that we redeemed in January 2022.

There was no loss on extinguishment of debt incurred for the three months ended March 31, 2023.

GAAP Income Tax Expense (Benefit)

Our effective tax rate has been impacted by changes in liabilities for uncertain tax positions, tax effects of stock-based compensation, limitations on executive compensation, the mix of income earned in the United States versus lower-taxed foreign jurisdictions.

Our effective tax rate has been impacted by changes in liabilities for uncertain tax positions, tax effects of stock-based compensation, limitations on executive compensation, and the mix of income earned in the United States versus foreign jurisdictions.

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 September 30, 2022 compared to three months ended September 30, 2021:

Income tax expense decreased $(7.0) million, from $14.5 million for the three months ended September 30, 2021 to $7.5 million for the three months ended September 30, 2022.

The decrease in income tax expense primarily relates to a decrease in income from continuing operations in the three months ended September 30, 2022.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 :

Income tax expense decreased $(3.7) million, from $33.5 million for the nine months ended September 30, 2021 to $29.8 million for the nine months ended September 30, 2022.

The decrease in income tax expense primarily relates to a decrease in income from continuing operations during the nine months ended September 30, 2022.

Three months ended March 31, 2023 compared to three months ended March 31, 2022 :

Income tax expense decreased $(4.5) million, from $9.6 million for the three months ended March 31, 2022 to $5.1 million for the three months ended March 31, 2023.

The decrease in income tax expense primarily relates to a decrease in income before income taxes during the three months ended March 31, 2023.

GAAP Consolidated Funds

As discussed further in Note 3 of our accompanying Consolidated Financial Statements, we sold our equity interests in Landmark on June 2, 2021, which resulted in the de-consolidation of all Landmark Funds as of June 2, 2021, the consummation of the sale.

There were no consolidated Funds for the three and nine months ended September 30, 2022.

As previously noted, consolidated Landmark Funds are included in discontinued operations for the nine months ended September 30, 2021.

Discontinued Operations

As discussed further in Note 3 of our accompanying Consolidated Financial Statements, we completed the sale of all our equity interests in TSW on July 19, 2021, and we completed the sale of all our equity interests in Landmark on June 2, 2021.

As a result, Landmark and TSW are reported within discontinued operations for the three and nine months ended September 30, 2021.

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Income from discontinued operations was $1.2 million for the three months ended September 30, 2021, representing the income from TSW and Landmark including consolidated Landmark Funds.

There was no income from discontinued operations for the three months ended September 30, 2022.

The gain on disposal of discontinued operations was $185.4 million for the three months ended September 30, 2021, representing the gain on sale of our equity interests in TSW.

There was no gain on disposal of discontinued operations for the three months ended September 30, 2022.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Income from discontinued operations was $76.5 million for the nine months ended September 30, 2021, representing the net income from TSW and Landmark, including consolidated Landmark Funds.

There was no income from discontinued operations for the nine months ended September 30, 2022.

The gain on disposal of discontinued operations was $694.6 million for the nine months ended September 30, 2021, representing the gain on sales of Landmark and TSW.

There was no gain on disposal of discontinued operations for the nine months ended September 30, 2022.

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 Consolidated Financial Statements and is not included in net income attributable to controlling interests or in management fees.

Three months ended March 31, 2023 compared to three months ended March 31, 2022 :

There were no consolidated Funds for the three months ended March 31, 2022.

Consolidated Funds’ revenue was $0.7 million for the three months ended March 31, 2023.

Consolidated Funds’ expense was $0.7 million for the three months ended March 31, 2023.

GAAP Operating Metrics

The following table shows our key U.S.

GAAP operating metrics for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended September 30, Nine Months Ended September 30,

GAAP operating metrics for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

($ in millions) 2023 2022

2 unchanged sentences

GAAP operating margin (1)

21.6 % 38.5 %

Total operating expenses (2)

$ 71.3 $ 69.0

Management fee revenue $ 90.6 $ 102.2

GAAP operating expense / management fee revenue (3)

78.7 % 67.5 %

Variable compensation $ 23.2 $ 27.9

2 unchanged sentences

GAAP variable compensation ratio (3)

52.5 % 38.2 %

Affiliate key employee distributions $ 1.2 $ 1.9

2 unchanged sentences

GAAP Affiliate key employee distributions ratio (3)

(1) Excluding the effect of Funds’ consolidation in the applicable periods, the U.S.

GAAP operating margin would be 21.7% for the three months ended March 31, 2023 and 38.5% for the three months ended March 31, 2022.

(2) Excludes consolidated Funds’ expense of $0.7 million for the three months ended March 31, 2023 and $0.0 million for the three months ended March 31, 2022.

(3) Excludes the effect of Funds consolidation for the three months ended March 31, 2023 and 2022.

(4) Excludes consolidated Funds’ revenue of $0.7 million for the three months ended March 31, 2023 and $0.0 million for the three months ended March 31, 2022.

(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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

2 unchanged sentences

Affiliate key employee distributions

1.1 5.0 3.5 9.5

Operating income before Affiliate key employee distributions

31.2 33.7 123.5 106.8

Variable compensation 23.2 27.9

1 unchanged sentence

$ 44.2 $ 73.0

Effects of Inflation

Our financial results may be impacted by changes in the total level of our assets under management.

The value of the assets that we manage may be negatively impacted when inflationary expectations result in a rising interest rate environment.

Declines in the values of these AUM could lead to reduced revenues as management fees are generally calculated based upon the size of AUM.

Non-GAAP Supplemental Performance Measure — Economic Net Income and Segment Analysis

14 unchanged sentences

• We identify separately from operating expenses variable compensation and Affiliate key employee distributions, which represent Affiliate earnings shared with Affiliate key employees.

• We net the separate revenues and expenses under U.S.

GAAP for certain Fund expenses initially paid by our Affiliates on the Funds’ behalf and subsequently reimbursed, to better reflect the economics of our business.

We also make the following adjustments to U.S.

14 unchanged sentences

Reconciliation of U.S.

GAAP Net Income to Economic Net Income for the Three and Nine Months Ended September 30, 2022 and 2021

The following table reconciles net income attributable to controlling interests to economic net income for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, Nine Months Ended September 30,

GAAP Net Income to Economic Net Income for the Three Months Ended March 31, 2023 and 2022

The following table reconciles net income attributable to controlling interests to economic net income for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

($ in millions) 2023 2022

4 unchanged sentences

Capital transaction costs

0.1 0.1 5.1 0.8

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

0.4 0.2 1.4 (3.5)

Tax benefit of goodwill and acquired intangibles deductions 0.4 0.3

Discontinued operations attributable to controlling interests and restructuring (2)

0.4 (220.5) 1.1 (731.5)

ENI tax normalization

0.4 (1.6) 1.7 0.5

Tax effect of above adjustments, as applicable (3)

2.2 6.8 7.4 3.2

Economic net income

$ 11.8 $ 23.4

(1) The net return on seed/co-investment (gains) losses and financings for the three and nine months ended September 30, 2022 and 2021 is shown in the following table:

Three Months Ended September 30, Nine Months Ended September 30,

(1) The net return on seed/co-investment (gains) losses and financings for the three months ended March 31, 2023 and 2022 is shown in the following table:

Three Months Ended March 31,

($ in millions) 2023 2022

6 unchanged sentences

* The blended rate is based on the weighted average rate of the long-term debt.

(2) The three months ended September 30, 2022 includes restructuring costs of $0.1 million and costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

The three months ended September 30, 2021 includes income from discontinued operations attributable to controlling interests of $(186.6) million, restructuring costs at the Center and Affiliate of $0.5 million, and costs associated with the transfer of an insurance policy from our former parent of of $0.3 million, and the gain on sale of subsidiaries of $34.6 million.

The nine months ended September 30, 2022 includes restructuring costs of $0.2 million, and costs associated with the transfer of an insurance policy from our former parent of $0.9 million.

The nine months ended September 30, 2021 includes income from discontinued operations attributable to controlling interests of $703.1 million, restructuring costs at the Center and Affiliates of $4.0 million, costs associated with the transfer of an insurance policy from our former parent of $0.9 million, and the gain on sale of subsidiaries of $33.3 million.

(2) The three months ended March 31, 2023 includes costs associated with the transfer of an insurance policy from our former parent of $0.4 million.

The three months ended March 31, 2022 includes restructuring costs at the Affiliate of $0.1 million and costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

(3) Reflects the sum of lines (i), (ii), (iii), (iv) and the restructuring component of line (vi) multiplied by the 27.3% U.S.

7 unchanged sentences

The following table reconciles U.S.

GAAP revenue to ENI revenue for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, Nine Months Ended September 30,

GAAP revenue to ENI revenue for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

($ in millions) 2023 2022

GAAP revenue $ 91.8 $ 112.2

Include investment return on equity-accounted Affiliate

Exclude Fund expenses reimbursed by customers

— (0.7) — (2.9)

Exclude revenue from consolidated Funds attributable to non-controlling interests

ENI revenue $ 91.1 $ 112.2

The following table identifies the components of ENI revenue:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

2 unchanged sentences

Performance fees (2)

1.1 3.4 13.1 28.4

Other income, including equity-accounted Affiliate (3)

ENI revenue $ 91.1 $ 112.2

3 unchanged sentences

GAAP performance fees.

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

GAAP, plus our earnings from our previously disposed equity-accounted Affiliate of $0.2 million and $2.6 million for the three and nine months ended September 30, 2021, 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 September 30, Nine Months Ended September 30,

($ in millions) 2022 2021 2022 2021

GAAP other revenue $ — $ 3.1 $ — $ 5.7

Earnings from equity-accounted Affiliate — 0.2 — 2.6

Exclude Fund expenses reimbursed by customers

— (0.7) — (2.9)

ENI other income $ — $ 2.6 $ — $ 5.4

ENI Operating Expenses

5 unchanged sentences

The following table reconciles U.S.

GAAP operating expense to ENI operating expense for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended September 30, Nine Months Ended September 30,

GAAP operating expense to ENI operating expense for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

($ in millions) 2023 2022

2 unchanged sentences

Non-cash key employee equity and profit interest revaluations

9.2 (8.7) 34.8 (19.4)

Goodwill impairment and amortization of acquired intangible assets (0.1) (0.1) (0.1) (0.1)

Capital transaction costs — 0.1 — (0.3)

Restructuring costs (1)

(0.4) (0.8) (1.1) (4.9)

Fund expenses reimbursed by customers — (0.7) — (2.9)

Funds’ operating expense (0.7) —

items segregated out of U.S.

3 unchanged sentences

ENI operating expense $ 47.1 $ 45.6

(1) The three months ended September 30, 2022 includes $0.1 million of restructuring costs and $0.3 million costs associated with the transfer of an insurance policy from our former parent.

The three months ended September 30, 2021 includes $0.5 million of restructuring costs at the Center and Affiliate and $0.3 million costs associated with the transfer of an insurance policy from our former parent.

The nine months ended September 30, 2022 includes $0.2 million of restructuring costs and $0.9 million of costs associated with the transfer of an insurance policy from our former parent.

The nine months ended September 30, 2021 includes $4.0 million of restructuring costs at the Center and Affiliates and $0.9 million costs associated with the transfer of an insurance policy from our former parent.

(1) The three months ended March 31, 2023 includes $0.4 million of costs associated with the transfer of an insurance policy from our former parent.

The three months ended March 31, 2022 includes $0.1 million of restructuring costs at the Affiliate and $0.3 million costs associated with the transfer of an insurance policy from our former parent.

The following table identifies the components of ENI operating expense:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

2 unchanged sentences

General and administrative expenses (2)

18.8 18.0 55.5 54.8

Depreciation and amortization 3.8 5.3

2 unchanged sentences

The following table reconciles U.S.

GAAP compensation and benefits expense for the three and nine months ended September 30, 2022 and 2021 to ENI fixed compensation and benefits expense:

Three Months Ended September 30, Nine Months Ended September 30,

GAAP compensation and benefits expense for the three months ended March 31, 2023 and 2022 to ENI fixed compensation and benefits expense:

Three Months Ended March 31,

($ in millions) 2023 2022

1 unchanged sentence

Non-cash key employee equity and profit interest revaluations excluded from ENI

9.2 (8.7) 34.8 (19.4)

Sales-based compensation reclassified to ENI general & administrative expenses

(1.7) (1.9) (5.7) (5.4)

Affiliate key employee distributions

(1.1) (5.0) (3.5) (9.5)

Restructuring expenses — (0.2) — (0.9)

Variable compensation

(23.2) (27.9)

Fund expenses reimbursed by customers

— (0.8) — (3.0)

ENI fixed compensation and benefits $ 23.4 $ 21.9

1 unchanged sentence

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

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

2 unchanged sentences

Sales-based compensation 1.9 1.9

Capital transaction costs — 0.1 — (0.3)

Restructuring costs (0.4) (0.4)

1 unchanged sentence

Key Non-GAAP Operating Metrics

The following table shows our key non-GAAP operating metrics for the three and nine months ended September 30, 2022 and 2021.

The following table shows our key non-GAAP operating metrics for the three months ended March 31, 2023 and 2022.

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

17 unchanged sentences

Affiliate key employee distributions

$ 1.1 $ 5.0 $ 3.5 $ 9.5

ENI operating earnings (1)

1 unchanged sentence

ENI Affiliate key employee distributions ratio (7)

4.9 % 11.5 % 3.9 % 7.1 %

(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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

GAAP operating income $ 19.8 $ 43.2

Include earnings from equity-accounted Affiliate — 0.2 — 2.6

Exclude the impact of:

Affiliate key employee-owned equity and profit interest revaluations (0.6) (6.8)

Goodwill impairment and amortization of acquired intangible assets and pre-acquisition employee equity 0.1 0.1 0.1 0.1

Capital transaction costs — (0.1) — 0.3

Restructuring costs (a)

0.4 0.8 1.1 4.9

Affiliate key employee distributions 1.2 1.9

5 unchanged sentences

ENI earnings after Affiliate key employee distributions $ 19.6 $ 36.8

(a) The three months ended September 30, 2022 includes $0.1 million of restructuring costs and $0.3 million costs associated with the transfer of an insurance policy from our former parent.

The three months ended September 30, 2021 includes $0.5 million of restructuring costs at the Center and Affiliates and $0.3 million of costs associated with the transfer of an insurance policy from our former parent.

The nine months ended September 30, 2022 includes $0.2 million of restructuring costs and $0.9 million of costs associated with the transfer of an insurance policy from our former parent.

The nine months ended September 30, 2021 includes $4.0 million of restructuring costs at the Center and Affiliates and $0.9 million of costs associated with the transfer of an insurance policy from our former parent.

(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.

(a) The three months ended March 31, 2023 includes $0.4 million of costs associated with the transfer of an insurance policy from our former parent.

The three months ended March 31, 2022 includes $0.1 million of restructuring costs at our Affiliate and $0.3 million of costs associated with the transfer of an insurance policy from our former parent.

The ENI operating margin is most comparable to our U.S.

GAAP operating margin.

GAAP operating margin, excluding the effect of consolidated Funds, is 34.7% for the three months ended September 30, 2022 and 24.3% for the three months ended September 30, 2021, 40.7% for the nine months ended September 30, 2022, and 27.0% for the nine months ended September 30, 2021.

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.

GAAP operating margin, excluding the effect of consolidated Funds, is 21.7% for the three months ended March 31, 2023, and 38.5% for the three months ended March 31, 2022.

Management and investors use this ratio when comparing our profitability relative to our peer group and evaluating our ability to manage the cost structure and profitability of our business under different operating environments.

8 unchanged sentences

(6) The ENI variable compensation ratio is used by management and is useful to investors to evaluate consolidated variable compensation as measured against our ENI earnings before variable compensation.

Variable compensation is contractually set and calculated individually at each Affiliate, plus Center bonuses.

Variable compensation is usually awarded based on a contractual percentage of each Affiliate’s ENI earnings before variable compensation and may be paid in the form of cash or non-cash Affiliate equity or profit interests.

Variable compensation is contractually set and calculated individually at our Affiliate, plus Center bonuses.

Variable compensation is usually awarded based on a contractual percentage of our Affiliate’s ENI earnings before variable compensation and may be paid in the form of cash or non-cash Affiliate equity or profit interests.

Center variable compensation includes cash and our equity.

Non-cash variable compensation awards typically vest over several years and are recognized as compensation expense over that service period.

The variable compensation ratio at each Affiliate is calculated as variable compensation divided by ENI earnings before variable compensation.

The variable compensation ratio at our Affiliate is calculated as variable compensation divided by ENI earnings before variable compensation.

The ENI variable compensation ratio is most comparable to the U.S.

2 unchanged sentences

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.

The Affiliate key employee distribution ratio at each Affiliate is calculated as Affiliate key employee distributions divided by ENI operating earnings at that Affiliate.

At certain Affiliates, with tiered equity structures, BSUS and other classes of employee equity holders are entitled to an initial proportionate preference over profits after variable compensation, structured such that before a preference threshold is reached, there would be no required key employee distributions to the tiered equity holders, whereas for profits above the threshold the key employee distribution amount to the tiered equity holders would be calculated based on the tiered key employee ownership percentages.

The Affiliate key employee distribution ratio at our Affiliate is calculated as Affiliate key employee distributions divided by ENI operating earnings at that Affiliate.

Within our Affiliate, we have a tiered equity structure, where BSUS and other classes of employee equity holders are entitled to an initial proportionate preference over profits after variable compensation, structured such that before a preference threshold is reached, there would be no required key employee distributions to the tiered equity holders, whereas for profits above the threshold the key employee distribution amount to the tiered equity holders would be calculated based on the tiered key employee ownership percentages.

The ENI Affiliate key employee distributions ratio is most comparable to the U.S.

2 unchanged sentences

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

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

3 unchanged sentences

federal and state statutory rates (2)

(4.7) (8.9) (19.9) (29.5)

Other reconciling tax adjustments 0.1 (0.1) 0.2 0.5

Tax on economic net income (4.6) (9.0) (19.7) (29.0)

Economic net income $ 11.8 $ 23.4

2 unchanged sentences

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

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

3 unchanged sentences

Other ENI interest expense exclusions (a)

0.1 0.4 2.1 2.0

ENI net interest expense (3.4) (4.6)

ENI earnings after Affiliate key employee distributions (b)

21.4 38.4 86.4 124.6

Pre-tax economic net income $ 16.2 $ 32.2

11 unchanged sentences

This segment is comprised of our interest in Acadian.

The corporate head office is included within the Other category, along with our previously disposed Affiliates, Campbell Global and ICM, for the three and nine months ended September 30, 2021.

We completed the sale of our equity interests in ICM in July 2021.

We completed the sale of our equity interest in Campbell Global in August 2021.

The corporate head office is included within the Other 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.

7 unchanged sentences

GAAP, adjusted to include management fees paid to Affiliates by consolidated Funds and our share of earnings from our equity-accounted Affiliate.

ENI revenue is also adjusted to exclude the separate revenues recorded under U.S.

GAAP for certain Fund expenses reimbursed to our Affiliates.

ENI operating expenses include compensation and benefits, general and administrative expense, and depreciation and amortization under U.S.

GAAP, adjusted to exclude non-cash expenses representing changes in the value of

Affiliate equity and profit interests held by Affiliate key employees, impairment of goodwill, and the separate expenses recorded under U.S.

GAAP for certain Fund expenses reimbursed to our Affiliates.

GAAP, adjusted to exclude non-cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees and impairment of goodwill.

Additionally, variable compensation and Affiliate key employee distributions are segregated from ENI operating expenses.

4 unchanged sentences

Segment ENI Revenue

The following table identifies the components of segment ENI revenue for the three months ended September 30, 2022 and 2021:

Three Months Ended September 30,

($ in millions) 2022 2021

Quant & Solutions Other Total Quant & Solutions Other Total

Management fees $ 85.7 $ — $ 85.7 $ 108.0 $ 3.4 $ 111.4

Performance fees

1.1 — 1.1 2.6 0.8 3.4

Other income, including equity-accounted affiliate — — — — 2.6 2.6

ENI revenue $ 86.8 $ — $ 86.8 $ 110.6 $ 6.8 $ 117.4

The following table identifies the components of segment ENI revenue for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

The following table identifies the components of segment ENI revenue for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

($ in millions) 2023 2022

Quant & Solutions Total Quant & Solutions Other Total

Quant & Solutions Total Quant & Solutions Total

Management fees $ 90.6 $ 90.6 $ 102.2 $ 102.2

1 unchanged sentence

0.5 0.5 10.0 10.0

Other income, including equity-accounted affiliate — — — 5.4 5.4

ENI revenue $ 91.1 $ 91.1 $ 112.2 $ 112.2

Quant & Solutions Segment ENI Revenue

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Quant & Solutions ENI revenue decreased $(23.8) million, or (21.5)%, from $110.6 million for the three months ended September 30, 2021 to $86.8 million for the three months ended September 30, 2022.

The decrease was mainly attributable to (20.6)% lower management fees driven by lower average AUM resulting from equity market decline and net outflows over the past twelve months.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Quant & Solutions ENI revenue decreased $(30.7) million, or (9.4)%, from $325.2 million for the nine months ended September 30, 2021 to $294.5 million for the nine months ended September 30, 2022.

The decrease was attributable to (10.1)% lower management fees, driven by lower average AUM.

Other ENI Revenue

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Other ENI revenue was $6.8 million for the three months ended September 30, 2021 representing the revenue from our previously disposed Affiliates, Campbell Global and ICM.

The sales of Campbell Global and ICM were completed in 2021.

There was no Other ENI revenue for the for the three months ended September 30, 2022.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Other ENI revenue was $35.4 million for the nine months ended September 30, 2021 representing the revenue from our previously disposed Affiliates, Campbell Global and ICM.

The sales of Campbell Global and ICM were completed in 2021.

There was no Other ENI revenue for the nine months ended September 30, 2022.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Quant & Solutions ENI revenue decreased $(21.1) million, or (18.8)%, from $112.2 million for the three months ended March 31, 2022 to $91.1 million for the three months ended March 31, 2023.

The decrease was attributable to (11.4)% lower management fees, driven by lower average AUM and lower performance fees that are variable and are contractually triggered based on investment performance results over agreed upon time periods.

Segment ENI Expense

The following table identifies the components of segment ENI expense for the three months ended September 30, 2022 and 2021:

Three Months Ended September 30,

($ in millions) 2022 2021

Quant & Solutions Other Total Quant & Solutions Other Total

Fixed compensation & benefits

$ 19.9 $ 1.6 $ 21.5 $ 19.3 $ 4.3 $ 23.6

General and administrative expense 16.4 2.4 18.8 14.9 3.1 18.0

Depreciation and amortization

4.1 0.1 4.2 5.2 0.2 5.4

Total ENI Operating Expenses

$ 40.4 $ 4.1 $ 44.5 $ 39.4 $ 7.6 $ 47.0

Variable compensation

18.9 0.9 19.8 23.5 3.5 27.0

Affiliate key employee distributions

1.1 — 1.1 3.8 1.2 5.0

Total Expenses $ 60.4 $ 5.0 $ 65.4 $ 66.7 $ 12.3 $ 79.0

The following table identifies the components of segment ENI expense for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

The following table identifies the components of segment ENI expense for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

($ in millions) 2023 2022

12 unchanged sentences

Quant & Solutions Segment ENI Expense

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Quant & Solutions ENI operating expense increased $1.0 million, or 2.5%, from $39.4 million for the three months ended September 30, 2021 to $40.4 million for the three months ended September 30, 2022.

The increase was driven by 10.1% higher ENI general and administrative expense resulting from higher travel and entertainment, consultant, and system costs.

Quant & Solutions ENI fixed compensation and benefits expense increased 3.1% due to higher salaries and new hires.

Quant & Solutions ENI variable compensation expense is based on contractual percentage of earnings before variable compensation, and also includes a formulaic split of performance fee revenue that gets deferred and recognized as variable compensation expense over a three-year vesting period.

Quant & Solutions ENI variable compensation expense decreased (19.6)% as a result of lower earnings before variable compensation in the current period, partially offset by the inclusion of deferred compensation expense earned on prior year performance fee revenues.

Affiliate key employee distributions attributable to Quant & Solutions decreased (71.1)%, impacted by lower ENI earnings after variable compensation and the leveraged nature of the distribution share.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Quant & Solutions ENI operating expense increased $4.4 million, or 3.8%, from $116.8 million for the nine months ended September 30, 2021 to $121.2 million for the nine months ended September 30, 2022.

The increase was driven by 2.3% higher ENI fixed compensation and benefits expense resulting from higher salaries and new hires and 10.0% higher ENI general and administrative expense primarily due to higher travel and entertainment, consultant, and systems costs.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Quant & Solutions ENI operating expense increased $2.5 million, or 6.1%, from $41.1 million for the three months ended March 31, 2022 to $43.6 million for the three months ended March 31, 2023.

The increase was driven by 9.1% higher ENI fixed compensation and benefits expense resulting from cost of living increases and the cost of new hires supporting Acadian’s growth initiatives and 13.0% higher ENI general and administrative expense primarily due to higher travel and entertainment, consultant, and systems costs.

2 unchanged sentences

Other ENI Expense

Three months ended September 30, 2022 compared to three months ended September 30, 2021:

Other ENI operating expense decreased $(3.5) million, or (46.1)%, from $7.6 million for the three months ended September 30, 2021 to $4.1 million for the three months ended September 30, 2022.

The decrease was driven by (62.8)% lower fixed compensation and benefit expense, and (22.6)% lower general and administrative expense resulting from disposition of Affiliates in 2021.

Other ENI variable compensation expense decreased (74.3)% due to the disposition of Campbell Global.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021:

Other ENI operating expense decreased $(13.8) million, or (51.5)%, from $26.8 million for the nine months ended September 30, 2021 to $13.0 million for the nine months ended September 30, 2022.

The decrease was driven by (62.9)% lower fixed compensation and benefit expense and (34.3)% lower general and administrative expense resulting from disposition of Affiliates in 2021.

Other ENI variable compensation expense decreased (76.4)% due to the disposition of Campbell Global.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Other ENI operating expense decreased $(1.0) million, or (22.2)%, from $4.5 million for the three months ended March 31, 2022 to $3.5 million for the three months ended March 31, 2023.

The decrease was driven by (14.3)% lower fixed compensation and benefit expense due to lower payroll taxes and lower headcount at the corporate head office and (26.1)% lower general and administrative expense resulting from cost-saving initiatives.

Other ENI variable compensation expense decreased (56.3)% due to lower non-cash equity compensation amortization at the corporate head office.

Capital Resources and Liquidity

1 unchanged sentence

All amounts presented exclude consolidated Funds:

Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) 2023 2022

3 unchanged sentences

Financing activities 85.5 (144.9)

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

Comparison for the nine months ended September 30, 2022 and 2021

Net cash from operating activities from continuing operations increased $41.0 million, from net cash provided of $22.3 million for the nine months ended September 30, 2021 to net cash provided of $63.3 million for the nine months ended September 30, 2022, driven by changes in net income offset by changes in operating assets and liabilities period over period, including the collection of 2021 revenue in the first quarter of 2022 and taxes paid in the nine months ended September 30, 2021.

In the nine months ended September 30, 2022, net cash from investing activities of continuing operations decreased $(1,018.3) million, from $1,009.0 million provided in the nine months ended September 30, 2021 to $9.3 million used in the nine months ended September 30, 2022, driven by proceeds from the sale of Landmark, TSW, Campbell Global and ICM in the nine months ended September 30, 2021.

Net cash from financing activities from continuing operations decreased $224.7 million, from $20.0 million provided in the nine months ended September 30, 2021 to $204.7 million used in the nine months ended September 30, 2022, primarily due to the repayment of third party borrowings and the revolving credit facility, as well as higher share repurchases in the nine months ended September 30, 2022.

Comparison for the three months ended March 31, 2023 and 2022

Net cash from operating activities decreased $(19.9) million, from net cash used of $14.4 million for the three months ended March 31, 2022 to net cash used of $34.3 million for the three months ended March 31, 2023, driven by changes in net income offset by changes in operating assets and liabilities in the three months ended March 31, 2022.

In the three months ended March 31, 2023, net cash from investing activities decreased $(1.6) million, from $(4.0) million used in the three months ended March 31, 2022 to $(5.6) million used in the three months ended March 31, 2023, driven by higher net purchases of investment securities in the three months ended March 31, 2023.

Net cash from financing activities increased $230.4 million, from $(144.9) million used in the three months ended March 31, 2022 to $85.5 million provided in the three months ended March 31, 2023, primarily due to the repayment of third party borrowings and higher share repurchases in the three months ended March 31, 2022.

Supplemental Liquidity Measure — Adjusted EBITDA

4 unchanged sentences

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 and nine months ended September 30, 2022 and 2021.

Three Months Ended September 30, Nine Months Ended September 30,

GAAP net income attributable to controlling interests to EBITDA to Adjusted EBITDA to economic net income for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

($ in millions) 2023 2022

1 unchanged sentence

Net interest expense to third parties 3.8 6.5

Income tax expense (including tax expenses related to discontinued operations)

7.5 89.0 29.8 288.4

Depreciation and amortization (including intangible assets and discontinued operations) and goodwill impairment 4.3 5.4 14.9 19.9

Income tax expense 5.1 9.6

Depreciation and amortization (including intangible assets) 3.8 5.4

EBITDA $ 24.7 $ 45.3

Non-cash compensation costs, including revaluation of Affiliate key employee-owned equity and profit interests

(8.8) 9.1 (33.0) 20.7

EBITDA of discontinued operations attributable to controlling interests — (261.1) — (961.1)

(Gain) loss on seed and co-investments (1.1) 0.1

Restructuring expenses (1)

0.4 (33.7) 1.1 (28.4)

Capital transaction costs — 3.2

3 unchanged sentences

Depreciation and amortization (2)

(4.6) (5.8) (16.6) (18.0)

Tax on economic net income (4.4) (8.8)

1 unchanged sentence

$ 11.8 $ 23.4

(1) The three months ended September 30, 2022 includes $0.1 million of restructuring costs and $0.3 million of costs associated with the transfer of an insurance policy from our former parent.

The nine months ended September 30, 2022 includes $0.2 million of restructuring costs and $0.9 million of costs associated with the transfer of an insurance policy from our former parent.

The three months ended September 30, 2021 includes $0.5 million of restructuring costs at the Center and Affiliates and costs associated with the transfer of an insurance policy from our former parent of $0.3 million, and the gain on sale of subsidiaries of $34.6 million.

The nine months ended September 30, 2021 includes $4.0 million of restructuring costs at the Center and Affiliates and costs associated with the transfer of an insurance policy from our former parent of $0.9 million, and the gain on sale of subsidiaries of $33.3 million.

(1) The three months ended March 31, 2023 includes $0.4 million of costs associated with the transfer of an insurance policy from our former parent.

The three months ended March 31, 2022 includes $0.1 million of restructuring costs at our Affiliate and costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

(2) Includes non-cash equity-based award amortization expense.

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

($ in millions) September 30,

($ in millions) March 31,

2023 December 31,

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(1) On January 18, 2022, the Company completed the full redemption of the $125 million aggregate principal amount outstanding of its 5.125% Senior Notes due August 1, 2031.

As a result of this transaction, the Company recorded $3.2 million of loss on extinguishment of debt within the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022.

As a result of this transaction, the Company recorded $3.2 million of loss on extinguishment of debt within the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022.

Revolving Credit Facility

On March 7, 2022, the Company, Royal Bank of Canada, BMO Harris Bank, N.A., Goldman Sachs Bank USA, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into a new revolving credit facility agreement (“Acadian Credit Agreement”), which replaced the Company’s revolving credit facility dated as of August 20, 2019 (as amended by an amendment dated September 3, 2020 and an assignment and assumption and amendment agreement dated February 23, 2021, the “Original Credit Agreement”).

On March 7, 2022, we, Royal Bank of Canada, BMO Harris Bank, N.A., Goldman Sachs Bank USA, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into a new revolving credit facility agreement (“Acadian Credit Agreement”), which replaced our revolving credit facility dated as of August 20, 2019 (as amended by an amendment dated September 3, 2020 and an assignment and assumption and amendment agreement dated February 23, 2021, the “Original Credit Agreement”).

The maturity date of the Original Credit Agreement was August 22, 2022, and the maturity date of the Acadian Credit Agreement is March 7, 2025.

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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 September 30, 2022, Acadian’s Leverage Ratio was 0.1x and Acadian’s Interest Coverage Ratio was 156x.

At March 31, 2023, Acadian’s Leverage Ratio was 0.6x and Acadian’s Interest Coverage Ratio was 74.5x.

Other Compensation Liabilities

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The following table summarizes our other long-term liabilities:

September 30,

2023 December 31,

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Our obligation in any given period in respect of funding these potential repurchases of Affiliate equity is limited to only that portion that may be put to us by Affiliate key employees, which is typically capped annually under the terms of these arrangements such that we are not required to repurchase more than we can reasonably recycle by re-granting the interests in lieu of cash variable compensation owed to Affiliate key employees.

Certain of our and our Affiliates’ key employees are eligible to participate in our voluntary deferral plan, or VDP, which provides our senior personnel the opportunity to voluntarily defer a portion of their compensation.

There is a voluntary deferral plan investment balance included in investments on the Consolidated Balance Sheets that corresponds to this deferral liability.

Additionally, we have recorded accrued incentive compensation of $64.6 million and $117.4 million on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, respectively.

Certain of our and our Affiliate’s key employees are eligible to participate in our voluntary deferral plan, or VDP, which provides our senior personnel the opportunity to voluntarily defer a portion of their compensation.

There is a voluntary deferral plan investment balance included in investments on the Condensed Consolidated Balance Sheets that corresponds to this deferral liability.

Additionally, we have recorded accrued incentive compensation of $24.0 million and $92.5 million on the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, respectively.

Included within the accrued incentive compensation balance is the vested portion of Acadian’s deferred compensation pool.

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Compensation expense is recognized over the requisite service period.

Unamortized compensation expense related to the unvested portion of the deferred compensation pool of $17.6 million, $10.7 million and $0.1 million is expected to be recognized in the years ending December 31, 2023, 2024 and 2025, respectively.

Critical Accounting Policies and Estimates

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Forward Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements, which may include, from time to time, 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, 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.

This Quarterly Report on Form 10-Q includes forward-looking statements, which may include, from time to time, anticipated revenues, margins, cash flows or earnings, anticipated future performance of our business, our expected future net cash flows, our anticipated expense levels, capital management, 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,” “plan,” “project,” and other similar expressions are intended to identify such forward-looking statements.

Such statements are subject to various known and unknown risks and uncertainties and we caution readers that any forward-looking information provided by or on behalf of us is not a guarantee of future performance.

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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