What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-08 · 221 added, 201 removed, 819 unchanged (34% of the section changed)

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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 Six Months Ended June 30, 2023 and 2022 includes an explanation of changes in our U.S.

GAAP revenue, expense and other items for the three and six months ended June 30, 2023 and 2022, as well as key U.S.

GAAP Results of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 includes an explanation of changes in our U.S.

GAAP revenue, expense and other items for the three and nine months ended September 30, 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 six months ended June 30, 2023 and 2022, 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 and nine months ended September 30, 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.

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• Quant & Solutions —comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S.

and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies.

and small-cap equities, as well as managed volatility, multi-asset, equity alternatives, and long/short strategies.

This segment is comprised of our interest in our sole Affiliate, Acadian Asset Management LLC (“Acadian”).

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We earn management fees based on assets under management.

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

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

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Summary Results of Operations

The following table summarizes our unaudited results of operations for the three and six months ended June 30, 2023 and 2022:

($ in millions, unless otherwise noted) Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes our unaudited results of operations for the three and nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 vs.

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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 costs associated with the transfer of an insurance policy from our former parent of $0.2 million for the three months ended June 30, 2023.

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

Excludes costs associated with the transfer of an insurance policy from our former Parent of $0.6 million for the six months ended June 30, 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 $0.6 million for the six months ended June 30, 2022.

(3) Excludes costs associated with the transfer of an insurance policy from our former parent of $0.3 million for the three months ended September 30, 2023.

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 costs associated with the transfer of an insurance policy from our former Parent of $0.9 million for the nine months ended September 30, 2023.

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.

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

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

($ in billions) June 30, 2023 December 31, 2022

($ in billions) September 30, 2023 December 31, 2022

Acadian Asset Management $ 97.4 $ 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) June 30, 2023 December 31, 2022

($ in billions) September 30, 2023 December 31, 2022

Developed Markets $ 75.5 $ 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) June 30, 2023 December 31, 2022

($ in billions) September 30, 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) June 30, 2023 December 31, 2022

($ in billions) September 30, 2023 December 31, 2022

AUM % of total AUM % of total

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The following table summarizes our asset flows and market appreciation (depreciation) by segment for each of the periods indicated:

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

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

($ in billions, unless otherwise noted) 2023 2022 2023 2022

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

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

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

2023 2022 2023 2022

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

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

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

2023 2022 2023 2022

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Ending balance $ 97.4 $ 83.3 $ 97.4 $ 83.3

At June 30, 2023, our total assets under management were $99.9 billion, an increase of $2.4 billion, or 2.5%, compared to $97.5 billion at March 31, 2023 and an increase of $9.4 billion, or 10.4%, compared to $90.5 billion at June 30, 2022.

The increase in assets under management compared to June 30, 2022 is a result of equity market appreciation in 2023.

The change in assets under management during the three months ended June 30, 2023 reflects net market appreciation of $2.3 billion, and net inflows of $0.1 billion.

The change in assets under management during the six months ended June 30, 2023 reflects net market appreciation of $6.1 billion and net inflows of $0.2 billion.

At September 30, 2023, our total assets under management were $97.4 billion, a decrease of $(2.5) billion, or (2.5)%, compared to $99.9 billion at June 30, 2023 and an increase of $14.1 billion, or 16.9%, compared to $83.3 billion at September 30, 2022.

The increase in assets under management compared to September 30, 2022 is a result of equity market appreciation in 2023.

The change in assets under management during the three months ended September 30, 2023 reflects net market depreciation of $(2.0) billion, and net outflows of $(0.5) billion.

The change in assets under management during the nine months ended September 30, 2023 reflects net market appreciation of $4.1 billion and net outflows of $(0.3) 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.

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dollar changes relative to other currencies.

For the three months ended June 30, 2023, our net flows were $0.1 billion compared to $(2.8) billion for the three months ended June 30, 2022.

The change in net flows during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was primarily due to reduced sizable outflows in the three months ended June 30, 2023.

Reinvested income and distributions of $0.9 billion and $1.0 billion are reflected in the net flows for the three months ended June 30, 2023 and June 30, 2022, respectively.

For the three months ended June 30, 2023, the annualized revenue impact of the net flows was $0.9 million compared to $(7.4) million for the three months ended June 30, 2022.

Gross inflows of $2.0 billion in the three months ended June 30, 2023 yielded approximately 46 bps compared to $2.5 billion yielding approximately 51 bps in the year-ago period.

Gross outflows of $(2.8) billion yielded approximately 43 bps in the three months ended June 30, 2023 compared to $(6.3) billion yielding approximately 38 bps in the year-ago period.

For the six months ended June 30, 2023, our net flows were $0.2 billion compared to $(5.0) billion for the six months ended June 30, 2022.

The change in net flows during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily driven by reduced sizable outflows in the six months ended June 30, 2023.

Reinvested income and distributions of $1.8 billion and $1.9 billion are reflected in the net flows for the six months ended June 30, 2023 and June 30, 2022, respectively.

For the six months ended June 30, 2023, the annualized revenue impact of the net flows was $1.9 million compared to $(8.5) million for the six months ended June 30, 2022.

Gross inflows of $4.2 billion in the six months ended June 30, 2023 yielded approximately 44 bps compared to $6.0 billion yielding approximately 51 bps in the year-ago period.

Gross outflows of $(5.8) billion yielded approximately 41 bps in the six months ended June 30, 2023 compared to $(12.9) billion yielding approximately 36 bps in the year-ago period.

GAAP Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022

GAAP results of operations were as follows for the three and six months ended June 30, 2023 and 2022:

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

For the three months ended September 30, 2023, our net flows were $(0.5) billion compared to $0.6 billion for the three months ended September 30, 2022.

The change in net flows during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily due to increased outflows in the three months ended September 30, 2023.

Reinvested income and distributions of $0.9 billion and $0.9 billion are reflected in the net flows for the three months ended September 30, 2023 and September 30, 2022, respectively.

For the three months ended September 30, 2023, the annualized revenue impact of the net flows was $(0.3) million compared to $0.3 million for the three months ended September 30, 2022.

Gross inflows of $2.5 billion in the three months ended September 30, 2023 yielded approximately 51 bps compared to $2.0 billion yielding approximately 44 bps in the year-ago period.

Gross outflows of $(3.9) billion yielded approximately 42 bps in the three months ended September 30, 2023 compared to $(2.3) billion yielding approximately 52 bps in the year-ago period.

For the nine months ended September 30, 2023, our net flows were $(0.3) billion compared to $(4.4) billion for the nine months ended September 30, 2022.

The change in net flows during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily driven by reduced sizable outflows in the nine months ended September 30, 2023.

Reinvested income and distributions of $2.7 billion and $2.8 billion are reflected in the net flows for the nine months ended September 30, 2023 and September 30, 2022, respectively.

For the nine months ended September 30, 2023, the annualized revenue impact of the net flows was $1.6 million compared to $(8.2) million for the nine months ended September 30, 2022.

Gross inflows of $6.7 billion in the nine months ended September 30, 2023 yielded approximately 46 bps compared to $8.0 billion yielding approximately 49 bps in the year-ago period.

Gross outflows of $(9.7) billion yielded approximately 41 bps in the nine months ended September 30, 2023 compared to $(15.2) billion yielding approximately 38 bps in the year-ago period.

GAAP Results of Operations for the Three and Nine Months Ended September 30, 2023 and 2022

GAAP results of operations were as follows for the three and nine months ended September 30, 2023 and 2022:

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

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

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General and administrative expense 18.8 17.5 1.3 59.0 50.9 8.1

Amortization of acquired intangibles

— 0.1 (0.1) — 0.1 (0.1)

Depreciation and amortization 4.5 4.2 0.3 12.7 14.8 (2.1)

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($ in millions) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

GAAP Statement of Operations 2023 2022 2023 2022

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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 and 38.1 bps for the three and six months ended June 30, 2023, respectively, and 37.2 bps and 37.1 bps for the three and six months ended June 30, 2022, respectively.

The overall weighted average fee rate increase for the three and six months ended June 30, 2023 is the result of changes in the mix of assets under management caused by market movements and client flows.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Management fees decreased $(0.7) million, or (0.7)%, from $93.5 million for the three months ended June 30, 2022 to $92.8 million for the three months ended June 30, 2023.

The decrease was due to lower levels of average assets under management.

Average assets under management decreased (2.9)%, from $100.8 billion for the three months ended June 30, 2022 to $97.9 billion for the three months ended June 30, 2023, mainly due to the equity market decline in 2022.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Management fees decreased $(12.3) million, or (6.3)%, from $195.7 million for the six months ended June 30, 2022 to $183.4 million for the six months ended June 30, 2023.

Average basis points earned on average assets under management were 37.6 bps and 37.9 bps for the three and nine months ended September 30, 2023, respectively, and 37.6 bps and 37.1 bps for the three and nine months ended September 30, 2022, respectively.

There was no change to the overall weighted average fee rate for the three months ended September 30, 2023.

The overall weighted average fee rate increase for the nine months ended September 30, 2023 is the result of changes in the mix of assets under management caused by market movements and client flows.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Management fees increased $9.6 million, or 11.2%, from $85.7 million for the three months ended September 30, 2022 to $95.3 million for the three months ended September 30, 2023.

The increase was due to higher levels of average assets under management.

Average assets under management increased 11.3%, from $90.3 billion for the three months ended September 30, 2022 to $100.5 billion for the three months ended September 30, 2023, mainly due to the positive market impact in 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Management fees decreased $(2.7) million, or (1.0)%, from $281.4 million for the nine months ended September 30, 2022 to $278.7 million for the nine months ended September 30, 2023.

The decrease was due to lower levels of average assets under management.

Average assets under management decreased (8.0)%, from $105.5 billion for the six months ended June 30, 2022 to $97.1 billion for the six months ended June 30, 2023, mainly due to the equity market decline in 2022.

Average assets under management decreased (2.7)%, from $100.9 billion for the nine months ended September 30, 2022 to $98.2 billion for the nine months ended September 30, 2023, mainly due to the equity market decline in 2022.

Performance Fees

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

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Performance fees increased $0.2 million, from $2.0 million for the three months ended June 30, 2022 to $2.2 million for the three months ended June 30, 2023.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Performance fees increased $10.1 million, from $1.1 million for the three months ended September 30, 2022 to $11.2 million for the three months ended September 30, 2023, primarily due to strong performance relative to market in certain strategies.

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

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Performance fees decreased $(9.3) million, from $12.0 million for the six months ended June 30, 2022 to $2.7 million for the six months ended June 30, 2023, primarily due to the decline in performance fee eligible assets in the first quarter of 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Performance fees increased $0.8 million, from $13.1 million for the nine months ended September 30, 2022 to $13.9 million for the nine months ended September 30, 2023, primarily due to strong performance relative to market in certain strategies.

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

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general and administrative expenses;

amortization of acquired intangibles expense;

depreciation and amortization charges;

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The following table presents the components of U.S.

GAAP compensation expense for the three and six months ended June 30, 2023 and 2022:

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

GAAP compensation expense for the three and nine months ended September 30, 2023 and 2022:

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

($ in millions) 2023 2022 2023 2022

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

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

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

($ in millions) 2023 2022 2023 2022

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

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Compensation and benefits expense increased $21.5 million, or 79.6%, from $27.0 million for the three months ended June 30, 2022 to $48.5 million for the three months ended June 30, 2023.

Fixed compensation and benefits increased $3.2 million, or 15.6%, from $20.5 million for the three months ended June 30, 2022 to $23.7 million for the three months ended June 30, 2023, primarily reflecting cost of living increases and the cost of new hires supporting our growth initiatives.

Variable compensation remained at $22.7 million for the three months ended June 30, 2023 and 2022.

Sales-based compensation decreased $(0.5) million, or (23.8)%, from $2.1 million for the three months ended June 30, 2022 to $1.6 million for the three months ended June 30, 2023, as a result of the structure of sales-based compensation programs, driven by the timing of asset inflows which trigger sales-based compensation in both current and prior periods.

Affiliate key employee distributions increased $0.7 million, or 140.0%, from $0.5 million for the three months ended June 30, 2022 to $1.2 million for the three months ended June 30, 2023, as a result of changes in underlying operating earnings at our consolidated Affiliate and the leveraged nature of the distribution share.

Revaluations of Affiliate equity changed by $18.1 million, reflecting fluctuations in the value of key employee ownership interests at our consolidated Affiliate, as the value of Affiliate equity decreased $(18.8) million for the three months ended June 30, 2022 and decreased $(0.7) million for the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Compensation and benefits expense increased $23.8 million, or 32.2%, from $73.8 million for the six months ended June 30, 2022 to $97.6 million for the six months ended June 30, 2023.

Fixed compensation and benefits increased $4.7 million, or 11.1%, from $42.4 million for the six months ended June 30, 2022 to $47.1 million for the six months ended June 30, 2023, primarily reflecting cost of living increases and the cost of new hires supporting our growth initiatives.

Variable compensation decreased $(4.7) million, or (9.3)%, from $50.6 million for the six months ended June 30, 2022 to $45.9 million for the six months ended June 30, 2023.

The decrease was primarily attributable to lower pre-variable compensation earnings.

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 $(0.5) million or (12.5)% from $4.0 million for the six months ended June 30, 2022 to $3.5 million for the six months ended June 30, 2023, 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 remained unchanged at $2.4 million for each of the six months ended June 30, 2023 and 2022.

Revaluations of Affiliate equity changed $24.3 million, reflecting fluctuations in the value of key employee ownership interests at our consolidated Affiliate, as the value of Affiliate equity decreased $(25.6) million for the six months ended June 30, 2022 and decreased $(1.3) million for the six months ended June 30, 2023.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Compensation and benefits expense increased $18.1 million, or 51.9%, from $34.9 million for the three months ended September 30, 2022 to $53.0 million for the three months ended September 30, 2023.

Fixed compensation and benefits increased $1.6 million, or 7.4%, from $21.5 million for the three months ended September 30, 2022 to $23.1 million for the three months ended September 30, 2023, primarily reflecting cost of living increases and the cost of new hires supporting our growth initiatives.

Variable compensation increased $8.7 million, or 43.9%, from $19.8 million for the three months ended September 30, 2022 to $28.5 million for the three months ended September 30, 2023.

The increase was primarily attributable to higher pre-variable compensation earnings and the inclusion of deferred compensation expense earned on current and 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 $(0.5) million, or (29.4)%, from $1.7 million for the three months ended September 30, 2022 to $1.2 million for the three months ended September 30, 2023, as a result of the structure of sales-based compensation programs, driven by the timing of asset inflows which trigger sales-based compensation in both current and prior periods.

Affiliate key employee distributions increased $0.4 million, or 36.4%, from $1.1 million for the three months ended September 30, 2022 to $1.5 million for the three months ended September 30, 2023, as a result of changes in underlying operating earnings at our consolidated Affiliate and the leveraged nature of the distribution share.

Revaluations of Affiliate equity changed by $7.9 million, reflecting fluctuations in the value of key employee ownership interests at our consolidated Affiliate, as the value of Affiliate equity decreased $(9.2) million for the three months ended September 30, 2022 and decreased $(1.3) million for the three months ended September 30, 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Compensation and benefits expense increased $41.9 million, or 38.5%, from $108.7 million for the nine months ended September 30, 2022 to $150.6 million for the nine months ended September 30, 2023.

Fixed compensation and benefits increased $6.3 million, or 9.9%, from $63.9 million for the nine months ended September 30, 2022 to $70.2 million for the nine months ended September 30, 2023, primarily reflecting cost of living increases and the cost of new hires supporting our growth initiatives.

Variable compensation increased $4.0 million, or 5.7%, from $70.4 million for the nine months ended September 30, 2022 to $74.4 million for the nine months ended September 30, 2023.

The increase was primarily attributable to the inclusion of deferred compensation expense earned on current and 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 $(1.0) million or (17.5)% from $5.7 million for the nine months ended September 30, 2022 to $4.7 million for the nine months ended September 30, 2023, as a result of the structure of sales-based compensation programs, driven by the timing of asset inflows which trigger sales-based compensation in both current and prior periods.

Affiliate key employee distributions increased $0.4 million, or 11.4%, from $3.5 million for the nine months ended September 30, 2022 to $3.9 million for the nine months ended September 30, 2023.

Revaluations of Affiliate equity changed $32.2 million, reflecting fluctuations in the value of key employee ownership interests at our consolidated Affiliate, as the value of Affiliate equity decreased $(34.8) million for the nine months ended September 30, 2022 and decreased $(2.6) million for the nine months ended September 30, 2023.

General and Administrative Expense

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

General and administrative expense increased $5.3 million, or 32.1%, from $16.5 million for the three months ended June 30, 2022 to $21.8 million for the three months ended June 30, 2023.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

General and administrative expense increased $1.3 million, or 7.4%, from $17.5 million for the three months ended September 30, 2022 to $18.8 million for the three months ended September 30, 2023.

The increase in general and administrative expenses primarily reflects an increase in inflation, the impact of foreign currency changes, and our investment in growth initiatives and capabilities.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

General and administrative expense increased $6.8 million, or 20.4%, from $33.4 million for the six months ended June 30, 2022 to $40.2 million for the six months ended June 30, 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

General and administrative expense increased $8.1 million, or 15.9%, from $50.9 million for the nine months ended September 30, 2022 to $59.0 million for the nine months ended September 30, 2023.

The increase in general and administrative expenses primarily reflects an increase in inflation, the impact of foreign currency changes, and our investment in growth initiatives and capabilities.

Amortization of Acquired Intangibles Expense

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Amortization of acquired intangibles expense was $0.1 million for the three months ended September 30, 2022.

There was no amortization of acquired intangible expense for the three months ended September 30, 2023.

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

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Amortization of acquired intangibles expense was $0.1 million for the nine months ended September 30, 2022.

There was no amortization of acquired intangible expense for the nine months ended September 30, 2023.

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

Depreciation and Amortization Expense

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Depreciation and amortization expense decreased $(0.9) million, or (17.0)%, from $5.3 million for the three months ended June 30, 2022 to $4.4 million for the three months ended June 30, 2023.

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

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Depreciation and amortization expense decreased $(2.4) million, or (22.6)%, from $10.6 million for the six months ended June 30, 2022 to $8.2 million for the six months ended June 30, 2023.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Depreciation and amortization expense increased $0.3 million, or 7.1%, from $4.2 million for the three months ended September 30, 2022 to $4.5 million for the three months ended September 30, 2023.

The increase was primarily due to additional software and technology investments in the business.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Depreciation and amortization expense decreased $(2.1) million, or (14.2)%, from $14.8 million for the nine months ended September 30, 2022 to $12.7 million for the nine months ended September 30, 2023.

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

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Investment Income

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Investment income increased $0.9 million, from $(0.7) million for the three months ended June 30, 2022 to $0.2 million for the three months ended June 30, 2023, reflecting an increase in returns generated by seed capital investments due to market appreciation.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Investment income increased $1.3 million, from $(0.8) million for the six months ended June 30, 2022 to $0.5 million for the six months ended June 30, 2023, reflecting an increase in returns generated by seed capital investments due to market appreciation.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Investment income (loss) decreased $0.1 million, from $(0.4) million for the three months ended September 30, 2022 to $(0.3) million for the three months ended September 30, 2023, reflecting the change in returns generated by seed capital investments..

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Investment income (loss) increased $1.4 million, from $(1.2) million for the nine months ended September 30, 2022 to $0.2 million for the nine months ended September 30, 2023, reflecting an increase in returns generated by seed capital investments due to market appreciation.

Interest Income

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Interest income increased $1.4 million from $0.1 million for the three months ended June 30, 2022 compared to $1.5 million for the three months ended June 30, 2023.

The increase was due to higher average cash balances and increases in short-term investment returns in the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Interest income increased $2.5 million, from $0.1 million for the six months ended June 30, 2022 compared to $2.6 million for the six months ended June 30, 2023.

The increase was due to higher average cash balances and increases in short-term investment returns in the six months ended June 30, 2023.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Interest income increased $1.5 million from $0.2 million for the three months ended September 30, 2022 compared to $1.7 million for the three months ended September 30, 2023.

The increase was due to higher average cash balances and increases in short-term investment returns in the three months ended September 30, 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Interest income increased $4.0 million, from $0.3 million for the nine months ended September 30, 2022 compared to $4.3 million for the nine months ended September 30, 2023.

The increase was due to higher average cash balances and increases in short-term investment returns in the nine months ended September 30, 2023.

Interest Expense

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Interest expense increased $0.6 million, or 12.5%, from $4.8 million for the three months ended June 30, 2022 to $5.4 million for the three months ended June 30, 2023, reflecting an increase in interest rates on the revolving credit facility, slightly offset by a lower balance drawn on the revolving credit facility in 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Interest expense decreased $(1.0) million, or (8.8)%, from $11.3 million for the six months ended June 30, 2022 to $10.3 million for the six months ended June 30, 2023, primarily due to the $1.3 million of additional interest expense incurred for the six months ended June 30, 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.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Interest expense increased $0.2 million, or 4.3%, from $4.6 million for the three months ended September 30, 2022 to $4.8 million for the three months ended September 30, 2023, reflecting an increase in interest rates on the revolving credit facility, slightly offset by a lower balance drawn on the revolving credit facility in 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Interest expense decreased $(0.8) million, or (5.0)%, from $15.9 million for the nine months ended September 30, 2022 to $15.1 million for the nine months ended September 30, 2023, primarily due to the $1.3 million of additional interest expense incurred for the nine months ended September 30, 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 June 30, 2023 compared to three months ended June 30, 2022:

There was no loss on extinguishment of debt in the three months ended June 30, 2022 or the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

There was $(3.2) million loss on extinguishment of debt in the six months ended June 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.

There was no loss on extinguishment of debt incurred for the six months ended June 30, 2023.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

There was no loss on extinguishment of debt in the three months ended September 30, 2022 or the three months ended September 30, 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

There was $(3.2) million loss on extinguishment of debt in 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.

There was no loss on extinguishment of debt incurred for the nine months ended September 30, 2023.

GAAP Income Tax Expense (Benefit)

1 unchanged sentence

Our effective tax rate could be impacted in the future by these items as well as further changes in tax laws and regulations in jurisdictions in which we operate.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Income tax expense decreased $(7.2) million, from $12.7 million for the three months ended June 30, 2022 to $5.5 million for the three months ended June 30, 2023.

The decrease in income tax expense primarily relates to a decrease in income before income taxes in the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022 :

Income tax expense decreased $(11.7) million, from $22.3 million for the six months ended June 30, 2022 to $10.6 million for the six months ended June 30, 2023.

The decrease in income tax expense primarily relates to a decrease in income before income taxes during the six months ended June 30, 2023.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Income tax expense increased $0.2 million, from $7.5 million for the three months ended September 30, 2022 to $7.7 million for the three months ended September 30, 2023.

The increase in income tax expense primarily relates to an increase in income before income taxes in the three months ended September 30, 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 :

Income tax expense decreased $(11.5) million, from $29.8 million for the nine months ended September 30, 2022 to $18.3 million for the nine months ended September 30, 2023.

The decrease in income tax expense primarily relates to a decrease in income before income taxes during the nine months ended September 30, 2023.

GAAP Consolidated Funds

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 June 30, 2023 compared to three months ended June 30, 2022:

There were no consolidated Funds for the three months ended June 30, 2022.

Consolidated Funds’ revenue was $1.3 million for the three months ended June 30, 2023.

Consolidated Funds’ expense was $1.2 million for the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022 :

There were no consolidated Funds for the six months ended June 30, 2022.

Consolidated Funds’ revenue was $2.0 million for the six months ended June 30, 2023.

Consolidated Funds’ expense was $1.9 million for the six months ended June 30, 2023.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

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

Consolidated Funds’ revenue was $0.8 million for the three months ended September 30, 2023.

Consolidated Funds’ expense was $0.8 million for the three months ended September 30, 2023.

Net consolidated Funds’ investment gain was $0.7 million for the three months ended September 30, 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 :

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

Consolidated Funds’ revenue was $2.8 million for the nine months ended September 30, 2023.

Consolidated Funds’ expense was $2.7 million for the nine months ended September 30, 2023.

Net consolidated Funds’ investment gain was $1.8 million for the nine months ended September 30, 2023.

GAAP Operating Metrics

The following table shows our key U.S.

GAAP operating metrics for the three and six months ended June 30, 2023 and 2022.

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

GAAP operating metrics for the three and nine months ended September 30, 2023 and 2022.

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

($ in millions) 2023 2022 2023 2022

19 unchanged sentences

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

GAAP operating margin is 21.4% for the three months ended June 30, 2023, 48.9% for the three months ended June 30, 2022, 21.5% for the six months ended June 30, 2023, and 43.3% for the six months ended June 30, 2022.

(2) Excludes consolidated Funds’ expense of $1.2 million and $1.9 million for the three and six months ended June 30, 2023, respectively.

We did not consolidate results from operations of any Funds in the three and six months ended June 30, 2022.

(3) Excludes the effect of Funds consolidation for the three and six months ended June 30, 2023.

We did not consolidate results from operations of any Funds in the three and six months ended June 30, 2022.

(4) Excludes consolidated Funds’ revenue of $1.3 million and $2.0 million for the three and six months ended June 30, 2023, respectively.

We did not consolidate results from operations of any Funds in the three and six months ended June 30, 2022.

GAAP operating margin is 28.4% for the three months ended September 30, 2023, 34.7% for the three months ended September 30, 2022, 24.0% for the nine months ended September 30, 2023, and 40.7% for the nine months ended September 30, 2022.

(2) Excludes consolidated Funds’ expense of $0.8 million and $2.7 million for the three and nine months ended September 30, 2023, respectively.

We did not consolidate results from operations of any Funds in the three and nine months ended September 30, 2022.

(3) Excludes the effect of Funds consolidation for the three and nine months ended September 30, 2023.

We did not consolidate results from operations of any Funds in the three and nine months ended September 30, 2022.

(4) Excludes consolidated Funds’ revenue of $0.8 million and $2.8 million for the three and nine months ended September 30, 2023, respectively.

We did not consolidate results from operations of any Funds in the three and nine months ended September 30, 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 June 30, Six Months Ended June 30,

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

($ in millions) 2023 2022 2023 2022

41 unchanged sentences

Reconciliation of U.S.

GAAP Net Income to Economic Net Income for the Three and Six Months Ended June 30, 2023 and 2022

The following table reconciles net income attributable to controlling interests to economic net income for the three and six months ended June 30, 2023 and 2022:

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

GAAP Net Income to Economic Net Income for the Three and Nine Months Ended September 30, 2023 and 2022

The following table reconciles net income attributable to controlling interests to economic net income for the three and nine months ended September 30, 2023 and 2022:

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

($ in millions) 2023 2022 2023 2022

16 unchanged sentences

$ 19.3 $ 12.5 $ 43.1 $ 53.2

(1) The net return on seed/co-investment (gains) losses and financings for the three and six months ended June 30, 2023 and 2022 is shown in the following table:

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

(1) The net return on seed/co-investment (gains) losses and financings for the three and nine months ended September 30, 2023 and 2022 is shown in the following table:

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

($ in millions) 2023 2022 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 June 30, 2023 includes costs associated with the transfer of an insurance policy from our former parent of $0.2 million.

The three months ended June 30, 2022 includes costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

The six months ended June 30, 2023 includes costs associated with the transfer of an insurance policy from our former parent of $0.6 million.

The six months ended June 30, 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 $0.6 million.

(2) The three months ended September 30, 2023 includes costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

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 nine months ended September 30, 2023 includes costs associated with the transfer of an insurance policy from our former parent of $0.9 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.

(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 six months ended June 30, 2023 and 2022:

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

GAAP revenue to ENI revenue for the three and nine months ended September 30, 2023 and 2022:

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

($ in millions) 2023 2022 2023 2022

4 unchanged sentences

The following table identifies the components of ENI revenue:

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

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

($ in millions) 2023 2022 2023 2022

15 unchanged sentences

The following table reconciles U.S.

GAAP operating expense to ENI operating expense for the three and six months ended June 30, 2023 and 2022.

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

GAAP operating expense to ENI operating expense for the three and nine months ended September 30, 2023 and 2022.

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

($ in millions) 2023 2022 2023 2022

3 unchanged sentences

1.3 9.2 2.6 34.8

Amortization of acquired intangible assets

— (0.1) — (0.1)

Restructuring costs (1)

6 unchanged sentences

ENI operating expense $ 47.4 $ 44.5 $ 145.7 $ 134.2

(1) The three months ended June 30, 2023 includes $0.2 million costs associated with the transfer of an insurance policy from our former parent.

The three months ended June 30, 2022 includes $0.3 million costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2023 includes $0.6 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2022 includes $0.1 million of restructuring costs at the Affiliate and $0.6 million costs associated with the transfer of an insurance policy from our former parent.

(1) The three months ended September 30, 2023 includes $0.3 million costs associated with the transfer of an insurance policy from our former parent.

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

The nine months ended September 30, 2023 includes $0.9 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 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 June 30, Six Months Ended June 30,

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

($ in millions) 2023 2022 2023 2022

7 unchanged sentences

The following table reconciles U.S.

GAAP compensation and benefits expense for the three and six months ended June 30, 2023 and 2022 to ENI fixed compensation and benefits expense:

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

GAAP compensation and benefits expense for the three and nine months ended September 30, 2023 and 2022 to ENI fixed compensation and benefits expense:

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

($ in millions) 2023 2022 2023 2022

11 unchanged sentences

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

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

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

($ in millions) 2023 2022 2023 2022

5 unchanged sentences

Key Non-GAAP Operating Metrics

The following table shows our key non-GAAP operating metrics for the three and six months ended June 30, 2023 and 2022.

The following table shows our key non-GAAP operating metrics for the three and nine months ended September 30, 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 June 30, Six Months Ended June 30,

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

($ in millions) 2023 2022 2023 2022

26 unchanged sentences

GAAP operating income to ENI operating earnings:

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

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

($ in millions) 2023 2022 2023 2022

2 unchanged sentences

Affiliate key employee-owned equity and profit interest revaluations (1.3) (9.2) (2.6) (34.8)

Goodwill impairment and amortization of acquired intangible assets

Restructuring costs (a)

8 unchanged sentences

ENI earnings after Affiliate key employee distributions $ 29.1 $ 21.4 $ 68.6 $ 86.4

(a) The three months ended June 30, 2023 includes $0.2 million costs associated with the transfer of an insurance policy from our former parent.

The three months ended June 30, 2022 includes $0.3 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2023 includes $0.6 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2022 includes $0.1 million of restructuring costs at our Affiliate and $0.6 million of costs associated with the transfer of an insurance policy from our former parent.

(a) The three months ended September 30, 2023 includes $0.3 million costs associated with the transfer of an insurance policy from our former parent.

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

The nine months ended September 30, 2023 includes $0.9 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.

(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.

1 unchanged sentence

GAAP operating margin.

GAAP operating margin, excluding the effect of consolidated Funds, is 21.4% for the three months ended June 30, 2023, 48.9% for the three months ended June 30, 2022, 21.5% for the six months ended June 30, 2023, and 43.3% for the six months ended June 30, 2022.

GAAP operating margin, excluding the effect of consolidated Funds, is 28.4% for the three months ended September 30, 2023, 34.7% for the three months ended September 30, 2022, 24.0% for the nine months ended September 30, 2023, and 40.7% for the nine months ended September 30, 2022.

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 our Affiliate.

24 unchanged sentences

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

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

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

($ in millions) 2023 2022 2023 2022

10 unchanged sentences

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

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

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

($ in millions) 2023 2022 2023 2022

15 unchanged sentences

(3) The economic net income effective tax rate is calculated by dividing the tax on economic net income by pre-tax economic net income.

The value of our seed capital investments was $25.0 million as of June 30, 2023 and $22.9 million as of December 31, 2022, including direct investments in consolidated Funds.

The value of our seed capital investments was $25.3 million as of September 30, 2023 and $22.9 million as of December 31, 2022, including direct investments in consolidated Funds.

Total seed capital investments represents our seed capital invested within our Affiliate’s investment products.

The following table reconciles the investments balance per our Condensed Consolidated Balance Sheets to the total value of our seed capital investments as of each of the dates indicated:

($ in millions) June 30,

($ in millions) September 30,

2023 December 31,

19 unchanged sentences

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 and impairment of goodwill.

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

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 June 30, 2023 and 2022:

Three Months Ended June 30,

The following table identifies the components of segment ENI revenue for the three months ended September 30, 2023 and 2022:

Three Months Ended September 30,

($ in millions) 2023 2022

3 unchanged sentences

11.2 11.2 1.1 1.1

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

ENI revenue $ 106.5 $ 106.5 $ 86.8 $ 86.8

The following table identifies the components of segment ENI revenue for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

The following table identifies the components of segment ENI revenue for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

($ in millions) 2023 2022

5 unchanged sentences

Quant & Solutions Segment ENI Revenue

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Quant & Solutions ENI revenue decreased $(0.5) million, or (0.5)%, from $95.5 million for the three months ended June 30, 2022 to $95.0 million for the three months ended June 30, 2023.

The decrease was mainly attributable to (0.7)% lower management fees driven by lower average AUM resulting from equity market decline in 2022.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Quant & Solutions ENI revenue decreased $(21.6) million, or (10.4)%, from $207.7 million for the six months ended June 30, 2022 to $186.1 million for the six months ended June 30, 2023.

The decrease was attributable to (6.3)% 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.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Quant & Solutions ENI revenue increased $19.7 million, or 22.7%, from $86.8 million for the three months ended September 30, 2022 to $106.5 million for the three months ended September 30, 2023.

The increase was mainly attributable to 11.2% higher management fees driven by higher average AUM resulting from positive markets in 2023, and higher performance fees due to strong performance relative to market in certain strategies.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Quant & Solutions ENI revenue decreased $(1.9) million, or (0.6)%, from $294.5 million for the nine months ended September 30, 2022 to $292.6 million for the nine months ended September 30, 2023.

The decrease was attributable to (1.0)% lower management fees, driven by lower average AUM, partially offset by higher 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 June 30, 2023 and 2022:

Three Months Ended June 30,

The following table identifies the components of segment ENI expense for the three months ended September 30, 2023 and 2022:

Three Months Ended September 30,

($ in millions) 2023 2022

12 unchanged sentences

Total expenses

The following table identifies the components of segment ENI expense for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

$ 73.3 $ 4.1 $ 77.4 $ 60.4 $ 5.0 $ 65.4

The following table identifies the components of segment ENI expense for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

($ in millions) 2023 2022

12 unchanged sentences

Quant & Solutions Segment ENI Expense

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Quant & Solutions ENI operating expense increased $7.6 million, or 19.1%, from $39.7 million for the three months ended June 30, 2022 to $47.3 million for the three months ended June 30, 2023.

The increase was driven by 31.4% higher ENI general and administrative expense resulting from increased consultant and portfolio costs driven by inflation, including the impact of changes in foreign currency.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Quant & Solutions ENI operating expense increased $3.6 million, or 8.9%, from $40.4 million for the three months ended September 30, 2022 to $44.0 million for the three months ended September 30, 2023.

The increase was driven by 9.8% higher ENI general and administrative expense resulting from increased system and portfolio costs driven by inflation, including the impact of changes in foreign currency.

Quant & Solutions ENI fixed compensation and benefits expense increased 8.0% due to higher salaries and new hires, and the investment in Acadian’s growth initiatives.

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 increased 1.4% as a result of the inclusion of deferred compensation expense earned on prior year performance fee revenues.

Quant & Solutions ENI variable compensation expense increased 47.1% as a result of higher earnings before variable compensation and the inclusion of deferred compensation expense earned on current and prior year performance fee revenues.

Affiliate key employee distributions attributable to Quant & Solutions increased 36.4%, impacted by the leveraged nature of the distribution share.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Quant & Solutions ENI operating expense increased $10.1 million, or 12.5%, from $80.8 million for the six months ended June 30, 2022 to $90.9 million for the six months ended June 30, 2023.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Quant & Solutions ENI operating expense increased $13.7 million, or 11.3%, from $121.2 million for the nine months ended September 30, 2022 to $134.9 million for the nine months ended September 30, 2023.

The increase was driven by 18.0% higher ENI general and administrative expense primarily due to higher systems, consultant and portfolio costs driven by inflation, including the impact of changes in foreign currency.

1 unchanged sentence

Quant & Solutions ENI variable compensation expense decreased (7.3)% as a result of lower earnings before variable compensation, partially offset by the inclusion of deferred compensation expense earned on prior year performance fee revenues.

Affiliate key employee distributions attributable to Quant & Solutions remained unchanged at $2.4 million.

Quant & Solutions ENI variable compensation expense increased 8.1% as a result of the inclusion of deferred compensation expense earned on current and prior year performance fee revenues.

Affiliate key employee distributions attributable to Quant & Solutions increased 11.4%, impacted by the leveraged nature of the distribution share.

Other ENI Expense

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Other ENI operating expense decreased $(0.5) million, or (11.4)%, from $4.4 million for the three months ended June 30, 2022 to $3.9 million for the three months ended June 30, 2023.

The decrease was driven by (10.5)% lower fixed compensation and benefit expense, and (8.3)% lower general and administrative expense resulting from cost-saving initiatives.

Three months ended September 30, 2023 compared to three months ended September 30, 2022:

Other ENI operating expense decreased $(0.7) million, or (17.1)%, from $4.1 million for the three months ended September 30, 2022 to $3.4 million for the three months ended September 30, 2023.

The decrease was driven by (25.0)% lower general and administrative expense resulting from cost-saving initiatives.

Other ENI variable compensation expense decreased (22.2)% due to lower non-cash equity compensation amortization at the corporate head office.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Other ENI operating expense decreased $(1.5) million, or (16.9)%, from $8.9 million for the six months ended June 30, 2022 to $7.4 million for the six months ended June 30, 2023.

The decrease was driven by (12.5)% lower fixed compensation and benefit expense due to lower payroll taxes and lower headcount at the corporate head office and (17.0)% lower general and administrative expense resulting from cost-saving initiatives.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Other ENI operating expense decreased $(2.2) million, or (16.9)%, from $13.0 million for the nine months ended September 30, 2022 to $10.8 million for the nine months ended September 30, 2023.

The decrease was driven by (8.9)% lower fixed compensation and benefit expense due to lower headcount at the corporate head office and (19.7)% lower general and administrative expense resulting from cost-saving initiatives.

Other ENI variable compensation expense decreased (40.0)% due to lower non-cash equity compensation amortization at the corporate head office.

2 unchanged sentences

All amounts presented exclude consolidated Funds:

Six Months Ended June 30,

Nine Months Ended September 30,

($ in millions) 2023 2022

4 unchanged sentences

(1) Excludes consolidated Funds.

Comparison for the six months ended June 30, 2023 and 2022

Net cash from operating activities decreased $(22.6) million, from net cash provided of $29.9 million for the six months ended June 30, 2022 to net cash provided of $7.3 million for the six months ended June 30, 2023, driven by changes in net income offset by changes in operating assets and liabilities period-over-period.

In the six months ended June 30, 2023, net cash from investing activities decreased $(4.3) million, from $(6.4) million used in the six months ended June 30, 2022 to $(10.7) million used in the six months ended June 30, 2023, driven by higher net purchases of investment securities in the six months ended June 30, 2023.

Net cash from financing activities increased $219.1 million, from $(183.4) million used in the six months ended June 30, 2022 to $35.7 million provided in the six months ended June 30, 2023, primarily due to the repayment of third party borrowings and higher share repurchases in the six months ended June 30, 2022.

Comparison for the nine months ended September 30, 2023 and 2022

Net cash from operating activities decreased $(27.5) million, from net cash provided of $63.3 million for the nine months ended September 30, 2022 to net cash provided of $35.8 million for the nine months ended September 30, 2023, driven by changes in net income offset by changes in operating assets and liabilities period-over-period.

In the nine months ended September 30, 2023, net cash from investing activities changed by $(1.9) million, from $(9.3) million used in the nine months ended September 30, 2022 to $(11.2) million used in the nine months ended September 30, 2023, driven by higher net purchases of investment securities in the nine months ended September 30, 2023.

Net cash from financing activities increased $214.9 million, from $(204.7) million used in the nine months ended September 30, 2022 to $10.2 million provided in the nine months ended September 30, 2023, primarily due to the repayment of third party borrowings and higher share repurchases in the nine months ended September 30, 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 six months ended June 30, 2023 and 2022.

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

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, 2023 and 2022.

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

($ in millions) 2023 2022 2023 2022

18 unchanged sentences

$ 19.3 $ 12.5 $ 43.1 $ 53.2

(1) The three months ended June 30, 2023 includes $0.2 million of costs associated with the transfer of an insurance policy from our former parent.

The three months ended June 30, 2022 includes $0.3 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2023 includes $0.6 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 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 $0.6 million.

(1) The three months ended September 30, 2023 includes $0.3 million of costs associated with the transfer of an insurance policy from our former parent.

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

The nine months ended September 30, 2023 includes $0.9 million of costs associated with the transfer of an insurance policy from our former parent.

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.

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

9 unchanged sentences

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

($ in millions) June 30,

($ in millions) September 30,

2023 December 31,

10 unchanged sentences

(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 six months ended June 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 nine months ended September 30, 2022.

Revolving Credit Facility

4 unchanged sentences

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 June 30, 2023, Acadian’s Leverage Ratio was 0.3x and Acadian’s Interest Coverage Ratio was 53.0x.

At September 30, 2023, Acadian’s Leverage Ratio was 0.1x and Acadian’s Interest Coverage Ratio was 54.3x.

Other Compensation Liabilities

1 unchanged sentence

The following table summarizes our other long-term liabilities as of each of the dates indicated:

September 30,

2023 December 31,

12 unchanged sentences

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 $45.0 million and $92.5 million on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively.

Additionally, we have recorded accrued incentive compensation of $71.8 million and $92.5 million on the Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022, respectively.

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

15 unchanged sentences

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