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Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-02-28 · 172 added, 214 removed, 1114 unchanged (26% of the section changed)

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This discussion contains forward-looking statements that involve risks and uncertainties.

See “Special Note Regarding Forward-Looking Statements” for more information.

See “Forward-Looking Statements” for more information.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K.

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It includes information on our reporting segment and underlying Affiliate, a summary of The Economics of Our Business and an explanation of How We Measure Performance using a non-GAAP measure which we refer to as economic net income, or ENI.

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

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

GAAP Results of Operations for the years ended December 31, 2023, 2022 and 2021 includes an explanation of changes in our U.S.

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This section also provides a reconciliation between U.S.

GAAP net income and ENI for the years ended December 31, 2022, 2021 and 2020, as well as a reconciliation of key ENI operating items including ENI revenue and ENI operating expenses.

This section also provides key Non-GAAP operating metrics and a calculation of tax on economic net income.

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

GAAP net income attributable to controlling interests and ENI for the years ended December 31, 2023, 2022 and 2021, 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 segment.

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

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• Critical Accounting Policies and Estimates provides a discussion of the key accounting policies and estimates that we believe are the most critical to an understanding of our results of operations and financial condition.

These accounting policies and estimates require complex management judgment regarding matters that are highly uncertain at the time policies were applied and estimates were made.

These accounting policies and estimates require complex management judgment regarding matters that are highly uncertain at the time the policies were applied and estimates were made.

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

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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, systematic macro, equity alternatives, and credit strategies.

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

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 Affiliate, Campbell Global, LLC (“Campbell Global”) for the years ended December 31, 2021 and 2020.

The corporate head office is included within the Other category, along with our previously disposed Affiliate, Campbell Global, LLC (“Campbell Global”) for the year ended December 31, 2021.

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

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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.

The following previously divested Affiliates are included in the Liquid Alpha segment for the year ended December 31, 2020:

Barrow Hanley, Mewhinney & Strauss LLC (“Barrow”), Copper Rock Capital Partners (“Copper Rock”) and ICM.

GAAP, Acadian is consolidated into our financial statements.

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The Economics of Our Business

Our profitability is affected by a variety of factors including the level and composition of our average assets under

management, or AUM, fee rates charged on AUM and our expense structure.

Our profitability is affected by a variety of factors including the level and composition of our average assets under management, or AUM, fee rates charged on AUM and our expense structure.

We earn management fees based on assets under management.

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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.

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

Approximately $14.0 billion, or 14%, of our AUM are in accounts with incentive fee features in which we participate in the performance fee.

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Variable compensation, calculated as described below, may be awarded in cash, equity or profit interests.

The arrangements in place with Acadian result in the sharing of economics between BSUS and Acadian’s key management personnel using a profit-sharing model.

The arrangement in place with Acadian results in the sharing of economics between BSUS and Acadian’s key management personnel using a profit-sharing model.

Profit sharing affects two elements within our earnings:

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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.

We also use ENI to make resource allocation decisions, determine appropriate levels of investment or dividend payout, manage balance sheet leverage, determine Affiliate variable compensation and equity distributions, and incentivize management.

We also use ENI to make resource allocation decisions, determine appropriate levels of investment or dividend payout, manage balance sheet leverage, determine variable compensation and Affiliate equity distributions, and incentivize management.

It is an important measure in evaluating our financial performance because we believe it most accurately represents our operating performance and cash generation capability.

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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.

Revenue included within ENI differs from U.S.

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GAAP that identifies net components of revenues and expenses that are not attributable to our stockholders.

For example, the portion of the net income (loss) of any consolidated Funds that is attributable to the outside investors or clients of the consolidated Funds is included in “Non-controlling interests” in our Consolidated Financial Statements.

For example, the portion of the net income (loss) of any consolidated Fund that is attributable to the outside investors or clients of the consolidated Fund is included in “Non-controlling interests” in our Consolidated Financial Statements.

Conversely, “controlling interests” is the portion of revenue or expense that is attributable to our stockholders.

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For a reconciliation to U.S.

GAAP financial information and a further discussion of economic net income refer to “—Non-GAAP Supplemental Performance Measures—Economic Net Income and Segment Analysis.”

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 severance costs at Acadian of $7.3 million, legal-related restructuring costs at the Center of $0.9 million and costs associated with the transfer of an insurance policy from our former Parent of $1.3 million for the year ended December 31, 2023.

Excludes restructuring costs of $0.1 million and costs associated with the transfer of an insurance policy from our former Parent of $1.2 million for the year ended December 31, 2022.

Excludes income from discontinued operations attributable to controlling interests, as well as restructuring at the Center and Affiliate of $3.8 million, costs associated with the transfer of an insurance policy from our former Parent of $1.2 million, and the gain on sale of subsidiaries of $48.6 million for the year ended December 31, 2021.

Excludes income from discontinued operations attributable to controlling interests, as well as restructuring costs at the Center and subsidiaries of $9.4 million, costs associated with the transfer of an insurance policy from our former Parent of $1.6 million, and the gain on sale of subsidiaries of $241.3 million for the year ended December 31, 2020.

Excludes income from discontinued operations attributable to controlling interests, as well as restructuring costs at the Center and Affiliates of $3.8 million, costs associated with the transfer of an insurance policy from our former Parent of $1.2 million, and the gain on sale of subsidiaries of $48.6 million for the year ended December 31, 2021.

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

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GAAP operating margin (excluding the effect of consolidated Funds).

(7) Economic net income is the ENI measure which corresponds to U.S.

(7) Economic net income is the non-GAAP 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 the difference between 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 distributions, including our equity-accounted Affiliate.

(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 distributions, including our equity-accounted Affiliate.

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 distributions for the segment is multiplied by average fee rate for the segment to compute the revenue impact.

In addition, reinvested income and distributions are multiplied by the average fee rate 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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Our total assets under management as of December 31, 2023 were $103.7 billion.

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

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

($ in billions) December 31, 2023 December 31, 2022 December 31, 2021

Acadian Asset Management $ 103.7 $ 93.6 $ 117.2

Campbell Global (1)

Investment Counselors of Maryland (2)

Total assets under management excluding discontinued operations 93.6 117.2 116.0

Landmark Partners (3)

Thompson, Siegel & Walmsley (4)

Total assets under management $ 93.6 $ 117.2 $ 156.7

(1) On August 31, 2021, we completed the sale of all our interests in Campbell Global.

(2) On July 19, 2021, we completed the sale of all our interests in ICM.

(3) On June 2, 2021, we completed the sale of all our interests in Landmark Partners (“Landmark”).

(4) On July 22, 2021, we completed the sale of all our equity interests in Thompson, Siegel & Walmsley LLC (“TSW”).

Our strategies include:

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

Other, which is mainly comprised of forestry and equities managed by our previous Affiliates.

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

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Emerging Markets 23.0 20.4 27.9

Other — — 7.9

Total assets under management $ 103.7 $ 93.6 $ 117.2

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Public/Government

$ 43.7 42.1 % $ 39.3 42.0 % $ 52.6 44.9 %

Commingled Trust/UCITS 25.2 24.3 % 21.7 23.2 % 26.1 22.3 %

Corporate/Union

12.0 11.6 % 13.1 14.0 % 15.8 13.5 %

Sub-advisory 12.8 12.3 % 11.8 12.6 % 14.1 12.0 %

Endowment/Foundation

3.4 3.3 % 3.1 3.3 % 3.3 2.8 %

Mutual Fund 0.7 0.7 % 0.6 0.6 % 1.0 0.9 %

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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 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 is multiplied by average fee rate for the respective segment to compute the revenue impact.

In addition, reinvested income and distributions is multiplied by the average fee rate for the respective segment 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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Net flows — — —

Market depreciation — — (0.7)

Market appreciation (depreciation) — — —

Ending balance $ — $ — $ —

Average AUM $ — $ — $ —

Average AUM of consolidated Affiliates $ — $ — $ 40.0

Beginning balance $ — $ — $ 5.8

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Net flows — — 0.5

Market appreciation (depreciation) — 0.6 (0.3)

Market appreciation

Other (1)(3)(4)

Ending balance $ — $ — $ —

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Market appreciation (depreciation) 12.4 (20.5) 16.1

Ending balance continuing operations 93.6 117.2 116.0

Discontinued operations (3)

Ending balance including discontinued operations $ 93.6 $ 117.2 $ 156.7

Ending balance

$ 103.7 $ 93.6 $ 117.2

Average AUM $ 98.4 $ 98.7 $ 119.3

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Annualized revenue impact of net flows ($ in millions)

$ (4.8) $ (5.0) $ (10.3)

(1) AUM representing liquid alternative strategies previously excluded from the Quant & Solutions segment has been reclassified as of January 1, 2021.

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

(3) Our reportable segments reflect the sale of Landmark and TSW and the reclassification of their AUM, asset flows and market appreciation (depreciation) to discontinued operations.

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

The Other category includes movements of our previously disposed affiliates, Campbell Global and ICM, for the years ended December 31, 2021 and 2020.

The Other category includes movements of our previously disposed affiliates, Campbell Global and ICM, for the year ended December 31, 2021.

(4) Other movements related to billable assets adjustment for our previous Affiliate.

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Market appreciation (depreciation) 12.4 (20.5) 16.1

Ending balance continuing operations 93.6 117.2 116.0

Discontinued operations (2)

Ending balance including discontinued operations $ 93.6 $ 117.2 $ 156.7

Ending balance

$ 103.7 $ 93.6 $ 117.2

(1) Other movements related to billable assets adjustment for our previous Affiliate.

(2) Reflects the sale of Landmark and TSW.

As a result of the transactions, Landmark and TSW are reported within discontinued operations.

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

Our categorization by client location includes:

Our categorization of assets under management by client location includes:

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

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Market appreciation (depreciation) 12.4 (20.5) 16.1

Ending balance continuing operations 93.6 117.2 116.0

Discontinued operations (2)

Ending balance including discontinued operations $ 93.6 $ 117.2 $ 156.7

Ending balance

$ 103.7 $ 93.6 $ 117.2

(1) Other movements related to billable assets adjustment for our previous Affiliate.

(2) Reflects the sale of Landmark and TSW.

As a result of the transactions, Landmark and TSW are reported within discontinued operations.

At December 31, 2022, our total assets under management were $93.6 billion, a decrease of $(23.6) billion or (20.1)%, compared to $117.2 billion at December 31, 2021.

The assets under management at December 31, 2021 represented an increase of $1.2 billion or 1.0% compared to $116.0 billion excluding discontinued operations at December 31, 2020.

At December 31, 2023, our total assets under management were $103.7 billion, an increase of $10.1 billion or 10.8%, compared to $93.6 billion at December 31, 2022.

The assets under management at December 31, 2022 represented a decrease of $(23.6) billion or (20.1)% compared to $117.2 billion at December 31, 2021.

The change in assets under management during the year ended December 31, 2023 reflects net market appreciation of $12.4 billion and net flows of $(2.3) billion, including reinvested income and distributions of $3.6 billion.

The change in assets under management during the year ended December 31, 2022 reflects net market depreciation of $(20.5) billion and net flows of $(3.1) billion, including reinvested income and distributions of $3.8 billion.

The change in assets under management during the year ended December 31, 2021 reflects the sale of Campbell Global and ICM of $(8.9) billion, net flows of $(5.9) billion, including reinvested income and distributions of $2.7 billion, and realizations and other of $(0.1) billion, offset by net market appreciation of $16.1 billion.

The change in assets under management during the year ended December 31, 2020 reflects the sale of Barrow and Copper Rock of $(50.3) billion, net flows of $(4.9) billion, including reinvested income and distributions of $3.9 billion, partially offset by net market appreciation of $6.2 billion.

For the year ended December 31, 2023, our net outflows were $(2.3) billion compared to net outflows of $(3.1) billion for the year ended December 31, 2022 and net outflows of $(5.9) billion for the year ended December 31, 2021.

The change in net outflows for the year ended December 31, 2023 was primarily due to lower outflows in certain Acadian strategies, partly as a result of less sizeable client-driven asset re-allocation.

The change in net outflows for the year ended December 31, 2022 was primarily due to lower outflows in certain Acadian strategies, partly as the result of improved relative investment performance in the year ended December 31, 2022.

The change in net outflows for the year ended December 31, 2021 was primarily due to re-balancing and asset reallocation in certain Quant & Solutions strategies.

Reinvested income and distributions of $3.6 billion, $3.8 billion, and $2.7 billion are reflected in the net flows for the years ended December 31, 2023, 2022 and 2021, respectively.

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General and administrative expense 82.6 71.1 71.2 11.5 (0.1)

Impairment of goodwill — — 16.4 — (16.4)

Amortization of acquired intangibles

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Operating income 106.0 167.9 145.8 (61.9) 22.1

Investment income 0.2 8.3 4.9 (8.1) 3.4

Investment income (loss)

(0.1) 0.2 8.3 (0.3) (8.1)

Interest income 6.1 0.8 0.2 5.3 0.6

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Gain on sale of subsidiaries — — 48.6 — (48.6)

Net consolidated Funds’ investment loss (0.4) — (5.2) (0.4) 5.2

Net consolidated Funds’ investment gains (losses)

4.1 (0.4) — 4.5 (0.4)

Income from continuing operations before taxes

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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.

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 37.9 bps for the year ended December 31, 2023, 37.2 bps for the year ended December 31, 2022 and 37.1 bps for the year ended December 31, 2021.

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Year ended December 31, 2023 compared to year ended December 31, 2022:

Management fees decreased $(65.9) million, or (15.2)%, from $433.3 million for the year ended December 31, 2021 to $367.4 million for the year ended December 31, 2022.

The decrease was primarily due to a decrease in average assets under management, a decrease in performance fees, as well as the disposition of Campbell Global in the third quarter of 2021.

Average assets under management excluding our previous equity-accounted Affiliate decreased (15)%, from $116.8 billion for the year ended December 31, 2021 to $98.7 billion for the year ended December 31, 2022, primarily due to the negative market and net outflows over the past twelve months, as well as the disposition of Campbell Global in the third quarter of 2021.

Management fees increased $5.8 million, or 1.6%, from $367.4 million for the year ended December 31, 2022 to $373.2 million for the year ended December 31, 2023.

The increase was primarily due to the improvement in blended average basis points on assets under management, due to fee rates from inflows being higher than outflows in 2022 and 2023.

Average assets under management decreased (0.3)%, from $98.7 billion for the year ended compared to $98.4 billion for the year ended December 31, 2023, mainly due to large equity market declines in 2022 that reduced the beginning of 2023 assets under management to $93.6 billion.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Management fees decreased $(65.9) million, or (15.2)%, from $433.3 million for the year ended December 31, 2021 to $367.4 million for the year ended December 31, 2022.

The decrease was primarily due to the disposition of Barrow, which was included for the majority of 2020, but had no impact on 2021, and lower overall level of average assets under management.

Average assets under management excluding our previous equity-accounted Affiliate decreased (16.7)%, from $140.2 billion for the year ended December 31, 2020 to $116.8 billion for the year ended December 31, 2021, primarily due to the sale of Campbell Global in the third quarter of 2021 and the sale of Barrow that occurred in the fourth quarter of 2020.

The decrease was primarily due to a decrease in average assets under management, a decrease in performance fees, as well as the disposition of Campbell Global in the third quarter of 2021.

Average assets under management excluding our previous equity-accounted Affiliate decreased (15.0)%, from $116.8 billion for the year ended December 31, 2021 to $98.7 billion for the year ended December 31, 2022, primarily due to the negative market and net outflows over the previous twelve months, as well as the disposition of Campbell Global in the third quarter of 2021.

Performance Fees

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Year ended December 31, 2023 compared to year ended December 31, 2022:

Performance fees decreased $(35.4) million, from $84.8 million for the year ended December 31, 2021 to $49.4 million for the year ended December 31, 2022.

The decrease is partially driven by the reduction in assets under management, changes in outperformance during the year, and the disposition of Campbell Global in the third quarter of 2021.

Performance fees increased $1.0 million, or 2.0%, from $49.4 million for the year ended December 31, 2022 to $50.4 million for the year ended December 31, 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.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Performance fees increased $77.0 million, from $7.8 million for the year ended December 31, 2020 to $84.8 million for the year ended December 31, 2021.

Included in the increase is $16 million of performance fees earned by a timber investment from our previously divested Affiliate, Campbell Global.

Acadian contributed approximately $61 million of the increase due to out-performance in a wide range of strategies in 2021, such as long/short and emerging markets equities.

Many of Acadian’s performance fee-eligible accounts posted strong absolute and relative returns and crystallized performance fees during 2021.

Performance fees decreased $(35.4) million, or (41.7)%, from $84.8 million for the year ended December 31, 2021 to $49.4 million for the year ended December 31, 2022.

The decrease is partially driven by the reduction in assets under management, changes in outperformance during the year, and the disposition of Campbell Global in the third quarter of 2021.

Other Revenue

Year ended December 31, 2023 compared to year ended December 31, 2022:

There was no other revenue for the year ended December 31, 2023 and the year ended December 31, 2022.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Other revenue was $5.7 million for the year ended December 31, 2021.

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The decrease was attributable to the sale of Campbell Global during the year ended December 31, 2021.

Year ended December 31, 2021 compared to year ended December 31, 2020:

Other revenue decreased $(1.6) million, or (21.9)%, from $7.3 million for the year ended December 31, 2020 to $5.7 million for the year ended December 31, 2021.

The decrease was primarily attributable to the sale of Campbell Global during the year ended December 31, 2021.

GAAP Expenses

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general and administrative expenses;

impairment of goodwill;

amortization of acquired intangible assets;

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For the year ended December 31, 2023, $93.1 million of fixed compensation and benefits (of the $93.1 million above) is included within economic net income.

For the year ended December 31, 2021, $97.2 million of fixed compensation and benefits (of the $100.2 million above) is included within economic net income, which excludes Fund expenses initially paid by our Affiliates on the Fund’s behalf and subsequently reimbursed.

For the year ended December 31, 2022, $86.1 million of fixed compensation and benefits (of the $86.1 million above) is included within economic net income.

The years ended December 31, 2021 and 2020 reflect the recategorization of Fund expenses reimbursed by customers of Campbell Global, a former Affiliate that was divested in August 2021.

This recategorization is not applicable for the year ended December 31, 2022.

The year ended December 31, 2021 reflects the recategorization of Fund expenses reimbursed by customers of Campbell Global, a former Affiliate that was divested in August 2021.

This recategorization is not applicable for the years ended December 31, 2023 and 2022.

(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.

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$ 112.2 $ 100.3 $ 130.5

(a) For the year ended December 31, 2022, $100.3 million of variable compensation expense (of the $100.3 million above) is included within economic net income.

For the year ended December 31, 2021, $129.6 million of variable compensation expense (of the $130.5 million above) is included within economic net income, which excludes $0.9 million of variable compensation associated with restructuring at an Affiliate.

For the year ended December 31, 2020, $107.9 million of variable compensation expense (of the $112.1 million above) is included within economic net income, which excludes the variable compensation associated with restructuring at the Center and the Affiliates of $3.8 million, and variable compensation subsequently reimbursed by Funds of $0.3 million.

The year ended December 31, 2020 reflects the recategorization of variable compensation reimbursed by customers of Campbell Global, a former Affiliate that was divested in August 2021.

This recategorization is not applicable for the year ended December 31, 2022.

(a) For the year ended December 31, 2023, $104.9 million of variable compensation expense (of the $112.2 million above) is included within economic net income, which excludes the variable compensation associated with restructuring at Acadian of $7.3 million.

For the year ended December 31, 2022, $100.3 million of variable compensation expense (of the $100.3 million above) is included within economic net income.

For the year ended December 31, 2021, $129.6 million of variable compensation expense (of the $130.5 million above) is included within economic net income, which excludes the variable compensation associated with restructuring at an Affiliate of $0.9 million.

(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.

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Year ended December 31, 2023 compared to year ended December 31, 2022:

Compensation and benefits expense increased $58.7 million, or 36.9%, from $159.2 million for the year ended December 31, 2022 to $217.9 million for the year ended December 31, 2023.

Fixed compensation and benefits increased $7.0 million, or 8.1%, from $86.1 million for the year ended December 31, 2022 to $93.1 million for the year ended December 31, 2023, primarily reflecting cost of living increases and the new hires to support our growth initiatives.

Variable compensation increased $11.9 million, or 11.9%, from $100.3 million for the year ended December 31, 2022 to $112.2 million for the year ended December 31, 2023.

The increase was primarily attributable to severance-related costs at Acadian in the year ended December 31, 2023 and the inclusion of deferred compensation expense earned on current and prior year performance fee revenues, of which Acadian’s share is determined by a contractual split and recognized as compensation expense over a vesting period.

Sales-based compensation decreased $(0.1) million, or (1.3)%, from $7.7 million for the year ended December 31, 2022 to $7.6 million for the year ended December 31, 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 were unchanged at $5.1 million for each of the years ended December 31, 2023 and 2022, respectively.

Revaluations of Affiliate key employee equity changed $39.9 million in 2023, reflecting revaluations of key employee ownership interests at Acadian, as the value of the equity plan liability decreased $(40.0) million for the year ended December 31, 2022, and decreased $(0.1) million for the year ended December 31, 2023.

The changes in value year over year reflect changes in earnings, as well as changes in inputs used in the valuation model, including market risk assumptions and discount rates.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Compensation and benefits expense decreased $(125.4) million, or (44.1)%, from $284.6 million for the year ended December 31, 2021 to $159.2 million for the year ended December 31, 2022.

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The 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 increased $0.1 million, or 1.3%, from $7.6 million for the year ended December 31, 2021 to $7.7 million for the year ended December 31, 2022.

Sales-based compensation increased $0.1 million, or 1.3%, from $7.6 million for the years ended December 31, 2021 to $7.7 million for the year ended December 31, 2022.

Affiliate key employee distributions decreased $(8.3) million, or (61.9)%, from $13.4 million for the year ended December 31, 2021 to $5.1 million for the year ended December 31, 2022 as a result of lower underlying operating earnings at the consolidated Affiliates.

Revaluations of Affiliate key employee equity changed $(72.9) million in 2022, reflecting revaluations of key employee ownership interests at our consolidated Affiliates, as the value of Affiliate equity increased $32.9 million for the year ended December 31, 2021 and decreased $(40.0) million for the year ended December 31, 2022.

Revaluations of Affiliate key employee equity changed by $(72.9) million in 2022, reflecting revaluations of key employee ownership interests at our consolidated Affiliates, as the value of Affiliate equity increased $32.9 million for the year ended December 31, 2021, and decreased $(40.0) million for the year ended December 31, 2022.

The changes in value year over year reflect changes in earnings, as well as changes in inputs used in the valuation model, including market risk assumptions and discount rates.

Year ended December 31, 2021 compared to year ended December 31, 2020:

Compensation and benefits expense increased $41.5 million, from $243.1 million for the year ended December 31, 2020 to $284.6 million for the year ended December 31, 2021.

Fixed compensation and benefits decreased $(29.8) million, or (22.9)%, from $130.0 million for the year ended December 31, 2020 to $100.2 million for the year ended December 31, 2021, primarily reflecting the disposition of Affiliates and cost savings from the restructuring at the Center and Affiliates.

Variable compensation increased $18.4 million, or 16.4%, from $112.1 million for the year ended December 31, 2020 to $130.5 million for the year ended December 31, 2021.

The increase was primarily attributable to higher performance fee revenues in 2021, of which the Affiliates’ share is determined by a contractual split and recognized as compensation over their respective vesting periods.

Sales-based compensation remained at $7.6 million for the years ended December 31, 2020 and 2021, respectively.

Affiliate key employee distributions increased $4.9 million, or 57.6%, from $8.5 million for the year ended December 31, 2020 to $13.4 million for the year ended December 31, 2021 as a result of higher post-variable compensation earnings and the change in the mix of earnings at the consolidated Affiliates.

Revaluations of Affiliate key employee equity changed by $48.0 million in 2021, reflecting revaluations of key employee ownership interests at our consolidated Affiliates, as the value of Affiliate equity decreased $(15.1) million for the year ended December 31, 2020 and increased $32.9 million for the year ended December 31, 2021.

General and Administrative Expense

Year ended December 31, 2023 compared to year ended December 31, 2022:

General and administrative expense decreased $(0.1) million, or (0.1)%, from $71.2 million for the year ended December 31, 2021 to $71.1 million for the year ended December 31, 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 year ended December 31, 2022.

General and administrative expense increased $11.5 million, or 16.2%, from $71.1 million for the year ended December 31, 2022 to $82.6 million for the year ended December 31, 2023.

The increase was primarily due to higher systems, consultant and portfolio costs, as well as the impact of inflation and changes in foreign currency.

Year ended December 31, 2022 compared to year ended December 31, 2021:

General and administrative expense decreased $(0.1) million, or (0.1)%, from $71.2 million for the year ended December 31, 2021 to $71.1 million for the year ended December 31, 2022.

The decrease was primarily due to cost saving initiatives at the Center and Affiliates and the disposition of Campbell Global in the third quarter of 2021 and Barrow in the fourth quarter of 2020.

Impairment of Goodwill

Year ended December 31, 2022 compared to year ended December 31, 2021:

There was no impairment of goodwill recorded for the year ended December 31, 2022 or for the year ended December 31, 2021.

Year ended December 31, 2021 compared to year ended December 31, 2020:

Impairment of goodwill was $16.4 million for the year ended December 31, 2020 and there was no impairment for the year ended December 31, 2021.

The change was the result of the impairment charge recorded for the Copper Rock reporting unit during the year ended December 31, 2020, which was included within the Liquid Alpha segment prior to its disposition in the third quarter of 2020.

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 year ended December 31, 2022.

Amortization of Acquired Intangibles Expense

Year ended December 31, 2023 compared to year ended December 31, 2022:

Amortization of acquired intangibles expense was unchanged at $0.1 million for the years ended December 31, 2021 and 2022, respectively.

Amortization of acquired intangibles expense was $0.1 million for the year ended December 31, 2022.

There was no amortization of acquired intangibles expense for the year ended December 31, 2023.

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

Year ended December 31, 2022 compared to year ended December 31, 2021:

Amortization of acquired intangibles expense decreased $(0.2) million, or (66.7)%, from $0.3 million for the year ended December 31, 2020 to $0.1 million for the year ended December 31, 2021.

The change is due to the disposition of Copper Rock in 2020.

Amortization of acquired intangibles expense was unchanged at $0.1 million for the years ended December 31, 2022 and 2021, respectively.

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

Depreciation and Amortization Expense

1 unchanged sentence

Depreciation and amortization expense decreased $(1.2) million, or (6.5)%, from $18.5 million for the year ended December 31, 2022 to $17.3 million for the year ended December 31, 2023.

The decrease was primarily attributable to the effect of certain assets becoming fully depreciated and the disposition of Affiliates in 2021.

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

Year ended December 31, 2022 compared to year ended December 31, 2021:

Depreciation and amortization expense increased $2.3 million, or 11.6%, from $19.8 million for the year ended December 31, 2020 to $22.1 million for the year ended December 31, 2021.

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

Depreciation and amortization expense decreased $(3.6) million, or (16.3)%, from $22.1 million for the year ended December 31, 2021 to $18.5 million for the year ended December 31, 2022.

The decrease was primarily attributable to the effect of certain assets becoming fully depreciated and the disposition of Affiliates in 2021.

GAAP Other Non-Operating Items of Income and Expense

Other non-operating items of income and expense consist of:

investment income;

investment income (loss);

interest income;

5 unchanged sentences

Investment income decreased $(0.3) million, or (150.0)%, from $0.2 million for the year ended December 31, 2022 to $(0.1) million for the year ended December 31, 2023.

The decrease is due to lower returns generated by seed capital investments in the current year driven by the market decline in the year ended December 31, 2022.

The decrease is due to a decrease in returns generated by seed capital investments in the year ended December 31, 2023.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Investment income increased $3.4 million, or 69.4%, from $4.9 million for the year ended December 31, 2020 to $8.3 million for the year ended December 31, 2021.

The increase is primarily due to an increase in returns generated by seed capital investments driven by continued market recovery in 2021 compared to 2020, which included the negative impact of the market decline in the first quarter of 2020.

Investment income decreased $(8.1) million, or (97.6)%, from $8.3 million for the year ended December 31, 2021 to $0.2 million for the year ended December 31, 2022.

The decrease is due to lower returns generated by seed capital investments in the current year driven by the market decline in the year ended December 31, 2022.

Interest Income

Year ended December 31, 2023 compared to year ended December 31, 2022:

Interest income increased $0.6 million, or 300.0%, from $0.2 million for the year ended December 31, 2021 to $0.8 million for the year ended December 31, 2022.

The increase was due to an increase in short-term investment returns in 2022.

Interest income increased $5.3 million, from $0.8 million for the year ended December 31, 2022 to $6.1 million for the year ended December 31, 2023.

The increase was due to higher average cash balances and an increase in short-term investment returns in 2023.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Interest income decreased $(0.4) million, or (66.7)%, from $0.6 million for the year ended December 31, 2020 to $0.2 million for the year ended December 31, 2021, principally due to a decrease in short-term investment returns in 2021.

Interest income increased $0.6 million, from $0.2 million for the year ended December 31, 2021 to $0.8 million for the year ended December 31, 2022.

The increase was due to an increase in short-term investment returns in 2022.

Interest Expense

Year ended December 31, 2023 compared to year ended December 31, 2022:

Interest expense decreased $4.3 million, or 17.3%, from $24.8 million for the year ended December 31, 2021 to $20.5 million for the year ended December 31, 2022, primarily reflecting a 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.

Interest expense decreased $0.9 million, or 4.4%, from $20.5 million for the year ended December 31, 2022 to $19.6 million for the year ended December 31, 2023, primarily due to the $1.3 million of additional interest expense incurred for the year ended December 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.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Interest expense decreased $(3.7) million, or (13.0)%, from $28.5 million for the year ended December 31, 2020 to $24.8 million for the year ended December 31, 2021, primarily reflecting a lower balance drawn on our revolving credit facilities during 2021.

We paid down the balance in full on our revolving credit facility in the year ended December 31, 2021.

Interest expense decreased $(4.3) million, or (17.3)%, from $24.8 million for the year ended December 31, 2021 to $20.5 million for the year ended December 31, 2022, primarily reflecting a 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.

Loss on Extinguishment of Debt

3 unchanged sentences

Year ended December 31, 2022 compared to year ended December 31, 2021:

There was no loss on extinguishment of debt for the year ended December 31, 2021 or for the year ended December 31, 2020.

There was no loss on extinguishment of debt for the year ended December 31, 2021.

Loss on extinguishment of debt was $3.2 million for the year ended December 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.

Gain on Sale of Subsidiaries

Year ended December 31, 2023 compared to year ended December 31, 2022:

There was no gain on sale of subsidiaries in the years ended December 31, 2023 and 2022.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Gain on sale of subsidiaries was $48.6 million for the year ended December 31, 2021, representing our gain on sale of our equity interest in ICM and Campbell Global, slightly offset by the loss on disposition of a business unit during the year ended December 31, 2021.

There was no gain on sale of subsidiaries in the year ended December 31, 2022.

Year ended December 31, 2021 compared to year ended December 31, 2020:

Gain on sale of subsidiaries decreased $(192.7) million from $241.3 million for the year ended December 31, 2020 to $48.6 million for the year ended December 31, 2021, representing our gain on sale of our equity interest in ICM and Campbell Global, slightly offset by the loss on disposition of a business unit during the year ended December 31, 2021.

Included in the balance for the year ended December 31, 2020 is a gain of $7.2 million on the sale of our equity interests in Copper Rock, a gain of $231.2 million on the sale of our equity interests in Barrow and a gain of $2.9 million on a previously disposed Affiliate.

GAAP Income Tax Expense

6 unchanged sentences

Income tax expense decreased $(5.8) million, from $50.0 million for the year ended December 31, 2021 to $44.2 million for the year ended December 31, 2022.

The decrease in income tax expense is primarily related to the decrease in the income from continuing operations before taxes for the year ended December 31, 2021, driven by the sale of certain Affiliates that occurred during 2021.

The decrease in income tax expense from the sale was partially offset by an increase to the permanent disallowance of executive compensation in 2021, a lower tax benefit recognized in 2021 from changes in uncertain tax positions that resulted from the lapse in statute of limitations, and an increase of state tax obligations.

The decrease in income tax expense is primarily related to the decrease in the income from continuing operations for the year ended December 31, 2022.

GAAP Consolidated Funds

1 unchanged sentence

Year ended December 31, 2023 compared to year ended December 31, 2022:

Consolidated Funds’ revenue was $0.4 million for the year ended December 31, 2022.

Consolidated Funds’ expense was $0.4 million for the year ended December 31, 2022.

There were no consolidated Funds during the year ended December 31, 2021.

Consolidated Funds’ revenue increased $2.6 million, from $0.4 million for the year ended December 31, 2022 to $3.0 million for the year ended December 31, 2023.

Consolidated Funds’ expense increased $2.4 million, from $0.4 million for the year ended $0.4 million to $2.8 million for the year ended December 31, 2023.

The increase in Consolidated Funds’ revenue and increase in Consolidated Funds’ expense is due to changes in the population of Consolidated Funds during the year ended December 31, 2023.

Year ended December 31, 2022 compared to year ended December 31, 2021:

There were no consolidated Funds during the year ended December 31, 2021.

Consolidated Funds’ revenue was $0.4 million for the year ended December 31, 2022.

Consolidated Funds’ expense was $0.4 million for the year ended December 31, 2022.

The decrease in consolidated Funds’ revenue and decrease in consolidated Funds’ expense is due to the deconsolidation of Funds due to redemption of seed investments in Barrow consolidated Funds following the sale of our equity interests in Barrow in November 2020.

There were no consolidated Funds during the year ended December 31, 2021.

Discontinued Operations

2 unchanged sentences

Year ended December 31, 2023 compared to year ended December 31, 2022:

There was no income from discontinued operations for the years ended December 31, 2023 and 2022.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Income from discontinued operations was $77.3 million for the year ended December 31, 2021, representing the income from TSW and Landmark, including consolidated Landmark Funds.

2 unchanged sentences

There was no gain on disposal of discontinued operations for the year ended December 31, 2022.

Year ended December 31, 2021 compared to year ended December 31, 2020:

Income from discontinued operations increased $9.5 million from $67.8 million for the year ended December 31, 2020 to $77.3 million for the year ended December 31, 2021.

Income from discontinued operations represents the income from TSW and Landmark, including consolidated Landmark Funds.

The increase is driven by the increase in investment gains from the consolidated Landmark Funds attributable to non-controlling interests in the current year.

The gain on disposal of discontinued operations, net of tax was $691.0 million for the year ended December 31, 2021 representing our gain on sale of our equity interests in Landmark and TSW.

There was no gain on disposal of discontinued operations for the year ended December 31, 2020.

GAAP Operating Metrics

30 unchanged sentences

GAAP operating margin would be 25.0% for the year ended December 31, 2023, 40.3% for the year ended December 31, 2022 and 27.8% for the year ended December 31, 2021.

(2) Excludes consolidated Funds’ expense of $0.4 million for the year ended December 31, 2022, $0.0 million for the year ended December 31, 2021 and $0.2 million for the year ended December 31, 2020.

(2) Excludes consolidated Funds’ expense of $2.8 million for the year ended December 31, 2023 and $0.4 million for the year ended December 31, 2022.

(3) Excludes the effect of Funds’ consolidation for the years ended December 31, 2023 and 2022.

(4) Excludes consolidated Funds’ revenue of $0.4 million for the year ended December 31, 2022, $0.0 million for the year ended December 31, 2021, and $5.5 million for the year ended December 31, 2020.

(4) Excludes consolidated Funds’ revenue of $3.0 million for the year ended December 31, 2023 and $0.4 million for the year ended December 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:

60 unchanged sentences

Tax effect of above adjustments, as applicable (4)

(2.2) 9.0 3.5

Economic net income $ 75.7 $ 81.6 $ 118.3

9 unchanged sentences

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

(2) For the year ended December 31, 2023, includes severance costs at Acadian of $7.3 million, legal-related restructuring costs at the Center of $0.9 million, and costs associated with the transfer of an insurance policy from our former Parent of $1.3 million.

For the year ended December 31, 2022, includes restructuring costs of $0.1 million and costs associated with the transfer of an insurance policy from our former Parent of $1.2 million.

For the year ended December 31, 2021, includes net income from discontinued operations attributable to controlling interest of $700.3 million, restructuring costs at the Center and Affiliates of $3.8 million, costs associated with the transfer of an insurance policy from our former Parent of $1.2 million, and the gain on sale of subsidiaries of $48.6 million.

For the year ended December 31, 2020, includes net income from discontinued operations attributable to controlling interest of $39.4 million, restructuring costs at the Center and Affiliates of $9.4 million, costs associated with the transfer of an insurance policy from our former Parent of $1.6 million, and the gain on sale of subsidiaries of $241.3 million.

(3) Includes adjustments of $0.2 million, $3.0 million and $8.7 million to remove the tax benefit resulting from the reduction in liabilities for uncertain tax positions recorded during the years ended December 31, 2022, 2021 and 2020, respectively.

(3) Includes adjustments of $(0.2) million, $0.2 million and $3.0 million to remove the tax benefit (expense) resulting from the change in liabilities for uncertain tax positions recorded during the years ended December 31, 2023, 2022 and 2021, respectively.

(4) Reflects the sum of line items (i), (ii), (iii), (iv) and the restructuring portion of line item (vi) taxed at the 27.3% U.S.

30 unchanged sentences

Exclude Fund expenses reimbursed by customers (1)

— (2.9) (4.6)

ENI Revenue $ 423.6 $ 416.8 $ 523.5

(1) Reflects the recategorization of fund expenses reimbursed by customers of Campbell Global, a former Affiliate that was divested in August 2021.

This recategorization is not applicable for the year ended December 31, 2022.

This recategorization is not applicable for the years ended December 31, 2023 and 2022.

The following table identifies the components of ENI revenue:

12 unchanged sentences

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

GAAP, plus our earnings from our equity-accounted Affiliate of $2.6 million for the year ended December 31, 2021 and $2.9 million for the year ended December 31, 2020.

For the years ended December 30, 2021 and 2020, other income excludes certain Fund expenses initially paid by our previously divested Affiliate, Campbell Global, on the Funds’ behalf that are subsequently reimbursed.

This recategorization is not applicable for the year ended December 31, 2022.

GAAP, plus our earnings from our equity-accounted Affiliate of $2.6 million for the year ended December 31, 2021.

For the year ended December 31, 2021, other income excludes certain Fund expenses initially paid by our previously divested Affiliate, Campbell Global, on the Funds’ behalf that are subsequently reimbursed.

This recategorization is not applicable for the years ended December 31, 2023 and 2022.

Refer to “—Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis” for a full discussion regarding the items excluded from the calculation of economic net income.

4 unchanged sentences

Exclude Fund expenses reimbursed by customers (1)

— (2.9) (4.6)

ENI other income $ — $ — $ 5.4

(1) Reflects the recategorization of fund expenses reimbursed by customers of Campbell Global, a former Affiliate that was divested in August 2021.

This recategorization is not applicable for the year ended December 31, 2022.

This recategorization is not applicable for the years ended December 31, 2023 and 2022.

ENI Operating Expenses

11 unchanged sentences

Non-cash key employee equity and profit interest revaluations 0.1 40.0 (32.9)

Goodwill impairment and amortization of acquired intangible assets (0.1) (0.1) (16.8)

Amortization of acquired intangible assets

— (0.1) (0.1)

Capital transaction costs — — (1.2)

2 unchanged sentences

Fund expenses reimbursed by customers (2)

— (2.9) (4.6)

Funds’ operating expenses (2.8) (0.4) —

5 unchanged sentences

ENI operating expense $ 198.4 $ 182.1 $ 192.8

(1) For the year ended December 31, 2023, includes $7.3 million of severance costs at Acadian, $0.9 million of legal-related restructuring costs at the Center and $1.3 million costs associated with the transfer of an insurance policy from our former Parent.

For the year ended December 31, 2022, includes $0.1 million of restructuring costs and $1.2 million costs associated with the transfer of an insurance policy from our former Parent.

For the year ended December 31, 2021, includes $3.8 million of restructuring costs at the Center and Affiliates and $1.2 million costs associated with the transfer of an insurance policy from our former Parent.

For the year ended December 31, 2021, includes restructuring costs at the Center and the Affiliates of $3.8 million and $1.2 million costs associated with the transfer of an insurance policy from our former Parent.

(2) Reflects the recategorization of fund expenses reimbursed by customers of Campbell Global, a former Affiliate that was divested in August 2021.

This recategorization is not applicable for the year ended December 31, 2022.

This recategorization is not applicable for the years ended December 31, 2023 and 2022.

(3) For the year ended December 31, 2023, excludes variable compensation related to severance at Acadian of $7.3 million that is included within restructuring costs.

For the year ended December 31, 2021, excludes variable compensation related to restructuring at the Center and the Affiliates of $0.9 million that is included within restructuring costs.

For the year ended December 31, 2020, excludes variable compensation related to restructuring at the Center and the Affiliates of $3.8 million that is included within Restructuring costs, and Fund expenses reimbursed by customers of a previously divested Affiliate, Campbell Global, of $0.3 million.

The following table identifies the components of ENI operating expense:

21 unchanged sentences

Fund expenses reimbursed by customers (a)

— (3.0) (4.6)

ENI fixed compensation and benefits $ 93.1 $ 86.1 $ 97.2

(a) Reflects the recategorization of fund expenses reimbursed by customers of Campbell Global, a former Affiliate that was divested in August 2021.

This recategorization is not applicable for the year ended December 31, 2022.

This recategorization is not applicable for the years ended December 31, 2023 and 2022.

(2) The following table reconciles U.S.

7 unchanged sentences

(2.2) (1.3) (4.1)

Additional ENI adjustments — — (0.1)

ENI general and administrative expense $ 88.0 $ 77.5 $ 73.5

(a) Reflects $0.1 million related to restructuring and $1.2 million of costs associated with the transfer of an insurance policy from our former Parent for the year ended December 31, 2022.

Reflects $2.9 million related to restructuring at the Center and Affiliates, and $1.2 million of costs associated with the transfer of an insurance policy from our former Parent in the year ended December 31, 2021.

(a) Reflects $0.9 million related to restructuring at the Center and $1.3 million of costs associated with the transfer of an insurance policy from our former Parent for the year ended December 31, 2023.

Reflects $0.1 million related to restructuring and $1.2 million of costs associated with the transfer of an insurance policy from our former Parent in the year ended December 31, 2022.

54 unchanged sentences

$ 115.2 $ 129.3 $ 187.7

(a) For the year ended December 31, 2022, includes $1.2 million associated with the transfer of an insurance policy from our former Parent and $0.1 million of restructuring costs.

For the year ended December 31, 2021, includes restructuring costs of $1.2 million associated with the transfer of an insurance policy from our former Parent and $3.8 million of restructuring costs at the Center and Affiliates.

For the year ended December 31, 2020, includes restructuring costs of $1.6 million associated with the transfer of an insurance policy from our former Parent and $9.4 million of restructuring costs at the Center and the Affiliates.

(a) For the year ended December 31, 2023, includes $7.3 million of severance costs at Acadian, $0.9 million of legal-related restructuring costs at the Center, and $1.3 million associated with the transfer of an insurance policy from our former Parent.

For the year ended December 31, 2022, includes $0.1 million of restructuring costs at the Center and Affiliates, and $1.2 million associated with the transfer of an insurance policy from our former Parent.

For the year ended December 31, 2021, includes $3.8 million of restructuring costs at the Center and the Affiliates, and $1.2 million 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.

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

GAAP operating margin (excluding the effect of consolidated Funds) of 40.3% for the year ended December 31, 2022, 27.8% for the year ended December 31, 2021 and 25.6% for the year ended December 31, 2020.

GAAP operating margin.

GAAP operating margin, excluding the effect of consolidated Funds, was 25.0% for the year ended December 31, 2023, 40.3% for the year ended December 31, 2022 and 27.8% for the year ended December 31, 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 BSIG has in each of its Affiliates.

58 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 $41.4 million as of December 31, 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 Consolidated Balance Sheets to the total value of our seed capital investments as of each of the dates indicated:

($ in millions) December 31,

2023 December 31,

Investments per Consolidated Balance Sheets $ 64.7 $ 48.4

Seed capital investment in consolidated Funds 21.4 14.5

Investments related to long-term incentive compensation plans (44.7) (40.0)

Total seed capital investments $ 41.4 $ 22.9

Segment Analysis

1 unchanged sentence

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, systematic macro, equity alternatives, and credit strategies.

This segment is comprised of our interest in Acadian.

The corporate head office is included within the Other category, along with our previously disposed Affiliate, Campbell Global for the years ended December 31, 2021 and 2020.

The corporate head office is included within the Other category, along with our previously disposed Affiliate, Campbell Global, for the year ended December 31, 2021.

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

2 unchanged sentences

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.

Prior to June 30, 2021, we had a Liquid Alpha reportable segment which was comprised of TSW and ICM.

ICM is included in the Liquid Alpha segment for the year ended December 31, 2020.

On July 19, 2021, we completed the sale of our equity interests in TSW.

As a result of this transaction, TSW has been reclassified to discontinued operations and Liquid Alpha no longer constitutes a reportable segment of the Company.

The primary measure used by the CODM in measuring performance and allocating resources to the segments is ENI.

7 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 the 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 amortization of acquired intangible assets, capital transaction costs, and restructuring costs.

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

ENI segment results are also adjusted to exclude the portion of consolidated Fund revenues, expenses and investment return recorded under U.S.

ENI segment results are also adjusted to exclude the portion of consolidated Funds’ revenues, expenses and investment return recorded under U.S.

Refer to the reconciliations of U.S.

5 unchanged sentences

($ in millions) 2023 2022

Quant & Solutions Total Quant & Solutions Other Total

Quant & Solutions Total Quant & Solutions Total

Management fees $ 373.2 $ 373.2 $ 367.4 $ 367.4

1 unchanged sentence

50.4 50.4 49.4 49.4

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

ENI revenue $ 423.6 $ 423.6 $ 416.8 $ 416.8

1 unchanged sentence

($ in millions) 2021

Quant & Solutions Liquid Alpha Other Total

Quant & Solutions Other Total

Management fees $ 419.4 $ 13.9 $ 433.3

5 unchanged sentences

Year ended December 31, 2023 compared to year ended December 31, 2022:

Quant & Solutions ENI revenue decreased $(71.3) million, or (14.6)%, from $488.1 million for the year ended December 31, 2021 to $416.8 million for the year ended December 31, 2022.

The decrease was due to (28.1)% lower performance fees in the year ended December 31, 2022, as well as (12.4)% lower management fees driven by lower average AUM resulting from equity market decline and net outflows in the last twelve months.

Year ended December 31, 2021 compared to year ended December 31, 2020:

Quant & Solutions ENI revenue increased $6.8 million, or 1.6%, from $416.8 million for the year ended December 31, 2022 to $423.6 million for the year ended December 31, 2023.

The $61 million increase in performance fees was primarily due to significant out-performance in a wide range of strategies in 2021, such as long/short and emerging markets equities.

The 20.9% increase in management fees was driven by higher average AUM primarily resulting from the equity market increase in 2021.

Liquid Alpha Segment ENI Revenue

The increase was due to 2.0% higher performance fees in the year ended December 31, 2023, as well as 1.6% higher management fees due to improvement in blended average basis points on assets under management, due to fee rates from inflows being higher than outflows in the years ended December 31, 2023 and 2022.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Liquid Alpha ENI revenue was $111.1 million for the year ended December 31, 2020 and was comprised of the ENI revenue from Barrow, Copper Rock and ICM.

There was no Liquid Alpha ENI revenue for the year ended December 31, 2021 as the Liquid Alpha segment no long constituted a reportable segment.

Quant & Solutions ENI revenue decreased $(71.3) million, or (14.6)%, from $488.1 million for the year ended December 31, 2021 to $416.8 million for the year ended December 31, 2022.

Segment ENI Expense

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($ in millions) 2021

Quant & Solutions Liquid Alpha Other Total

Quant & Solutions Other Total

Fixed compensation & benefits

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Quant & Solutions ENI operating expense increased $18.7 million, or 11.3%, from $165.5 million for the year ended December 31, 2022 to $184.2 million for the year ended December 31, 2023.

The increase was driven by 13.1% higher ENI general and administrative expense primarily due to higher travel and entertainment, consultant, and system costs.

The increase was driven by 17.4% higher ENI general and administrative expense primarily due to higher systems, consultant and portfolio costs, as well as the impact of inflation and changes in foreign currency.

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 (4.8)% as a result of lower earnings before variable compensation, including performance fees.

Affiliate key employee distributions attributable to Quant & Solutions decreased (58.9)%, impacted by lower ENI earnings after variable compensation and the leveraged nature of the distribution share.

Quant & Solutions ENI variable compensation expense increased 6.5%, driven by the inclusion of deferred compensation expense earned on current and prior year performance fee revenues.

Affiliate key employee distributions attributable to Quant & Solutions was unchanged.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Quant & Solutions ENI operating expense increased $4.7 million, or 2.9%, from $160.8 million for the year ended December 31, 2021 to $165.5 million for the year ended December 31, 2022.

The increase was driven by 7.3% higher ENI fixed compensation and benefits expense resulting from higher headcount and 6.3% higher ENI general and administrative expense primarily due to increased portfolio administrative and systems costs.

The increase was driven by 13.1% higher ENI general and administrative expense primarily due to higher travel and entertainment, consultant, and system costs.

Quant & Solutions ENI variable compensation expense, which is based on contractual arrangements, increased 38.5%, as a result of higher earnings before variable compensation.

Affiliate key employee distributions attributable to Quant & Solutions increased 188.4%, primarily due to higher Quant & Solutions ENI earnings after variable compensation as well as the leveraged nature of the sharing agreement.

Liquid Alpha Segment ENI Expense

Year ended December 31, 2021 compared to year ended December 31, 2020:

Liquid Alpha ENI operating expense was $39.4 million for the year ended December 31, 2020 and was comprised of the ENI expense from Barrow and Copper Rock.

There was no Liquid Alpha ENI expense for the year ended December 31, 2021 as the Liquid Alpha segment no longer constituted as a reportable segment.

Quant & Solutions ENI variable compensation expense decreased (4.8)%, as a result of lower earnings before variable compensation, including performance fees.

Other ENI Expense

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Other ENI operating expense decreased $(2.4) million, or (14.5)%, from $16.6 million for the year ended December 31, 2022 to $14.2 million for the year ended December 31, 2023.

The decrease was driven by (60.8)% lower ENI fixed compensation and benefits and (30.0)% lower ENI general and administrative expense, both driven by the disposition of Affiliates during 2021.

Other ENI variable compensation expense decreased (85.1)%, primarily due to the disposition of Campbell Global in 2021.

The decrease was driven by (8.5)% lower ENI fixed compensation and benefits due to lower headcount at the corporate head office and (15.4)% lower ENI general and administrative expense resulting from cost-saving initiatives.

Other ENI variable compensation expense decreased (37.2)% due to lower non-cash equity compensation amortization at the corporate head office.

Year ended December 31, 2022 compared to year ended December 31, 2021:

Other ENI operating expense decreased $(15.4) million, or (48.1)%, from $32.0 million for the year ended December 31, 2021 to $16.6 million for the year ended December 31, 2022.

The decrease was driven by (27.9)% lower ENI fixed compensation and benefits expense resulting from dispositions, and (30.5)% lower ENI general and administrative expense resulting from cost-saving initiatives.

Other ENI variable compensation expense increased 372.1% due to an increase in variable compensation at Campbell Global as a result of higher earnings, and an increase in Center variable compensation.

The decrease was driven by (60.8)% lower ENI fixed compensation and benefits and (30.0)% lower ENI general and administrative expense, both driven by the disposition of Affiliates during 2021.

Other ENI variable compensation expense decreased (85.1)% primarily due to the disposition of Campbell Global in 2021.

Capital Resources and Liquidity

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Comparison for the Years Ended December 31, 2023, 2022 and 2021

Net cash provided by operating activities of continuing operations excluding consolidated Funds decreased $(41.3) million, from net cash provided of $119.0 million during the year ended December 31, 2022 to net cash provided of $77.7 million during the year ended December 31, 2023.

The decrease was driven by changes in operating asset and liabilities period-over-period, including changes in investment advisory fees receivable and accrued incentive compensation balances, as well as changes in net income period over period.

Net cash provided by operating activities of continuing operations excluding consolidated Funds increased $123.4 million, from net cash used of $(4.4) million during the year ended December 31, 2021 to net cash provided of $119.0 million during the year ended December 31, 2022.

The increase was primarily driven by taxes paid on the gain on sales of Affiliates and discontinued operations of $163.0 million in 2021, as well as changes in operating assets and liabilities offset by changes in net income period over period.

Net cash provided by operating activities of continuing operations excluding consolidated Funds decreased $(175.0) million, from net cash provided of $170.6 million during the year ended December 31, 2020 to net cash used of $(4.4) million during the year ended December 31, 2021.

The decrease was primarily driven by taxes paid on the gain on sales of Affiliates and discontinued operations of $163.0 million in 2021, as well as changes in operating assets and liabilities offset by changes in net income period over period.

Net cash provided by (used in) investing activities of continuing operations was $(13.0) million, $1,036.0 million and $361.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Fluctuations are principally due to the timing of sale proceeds received from the sales of Landmark, TSW, Campbell Global and ICM totaling $1,010.9 million in 2021 and the sale of Barrow totaling $295.2 million in 2020.

Net cash provided by (used in) investing activities of continuing operations, excluding consolidated Funds, was $(31.4) million, $(13.0) million and $1,036.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Fluctuations are principally due to the timing of sale proceeds received from the sales of Landmark, TSW, Campbell Global and ICM totaling $1,010.9 million in 2021.

Fluctuations are also impacted by the timing of investments or redemptions of seed capital.

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Net cash used in financing activities was $(8.1) million, $(233.7) million and $(1,152.4) million for the years ended December 31, 2023, 2022 and 2021, respectively.

Share repurchases and third party borrowing activity were the drivers of the changes in financing activities year over year.

Share repurchases, revolving credit facility borrowing activity and third party borrowing activity were the drivers of the changes in financing activities year over year.

We paid $(3.3) million for share repurchases in 2023 compared to $(103.2) million in 2022 and $(1,121.7) million in 2021.

In 2022, we paid down net $(125.0) million against third party borrowings compared to $0.0 million in 2021 and $(175.0) million in 2020.

In 2022, we paid down net $(125.0) million against third party and revolving credit facility borrowings compared to $0.0 million in 2023 and $0.0 million in 2021.

Working Capital and Long-Term Debt

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Accrued compensation expense has primarily consisted of variable compensation accruals made throughout the year based on contractual arrangements.

Our cash management practices generally require that working capital be maintained at a sufficient level to meet short-term operational needs at both Acadian and BSUS.

Our cash management practices generally require that working capital be maintained at an appropriate level to meet short-term operational needs at both Acadian and BSUS.

Periodic distributions of Acadian earnings to BSUS and Acadian key employee equity holders are made according to our distribution policies, with BSUS having the ability to access any surplus cash at Acadian as necessary during interim periods.

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Revolving credit facility:

Revolving credit facility $ — $ — Variable rate March 7, 2025

$125 million revolving credit facility

$ — $ — Variable rate March 7, 2025

Total revolving credit facility $ — $ —

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As a result of this transaction, we recorded $3.2 million of loss on extinguishment of debt within the Consolidated Statements of Operations for the year ended December 31, 2022.

Third party borrowings

Revolving Credit Facility

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 (the “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”).

On March 7, 2022, Acadian, 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 (the “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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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 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.

Certain of our and Acadian’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 Consolidated Balance Sheets that corresponds to this deferral liability.

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Income tax expense (including tax expenses related to discontinued operations) 29.4 44.2 306.7

Depreciation and amortization (including intangible assets and discontinued operations) and goodwill impairment 18.6 25.4 44.1

Depreciation and amortization (including intangible assets and discontinued operations)

17.3 18.6 25.4

EBITDA $ 126.0 $ 183.1 1,185.1

4 unchanged sentences

9.5 1.3 (43.5)

Custody fees on seed portfolio — — 0.1

Capital transaction costs — 3.2 1.2

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Economic net income $ 75.7 $ 81.6 118.3

(1) Included in restructuring for the year ended December 31, 2023 are $7.3 million of severance costs at Acadian, $0.9 million of legal-related restructuring costs at the Center and $1.3 million costs associated with the transfer of an insurance policy from our former Parent.

Included in restructuring for the year ended December 31, 2022 are $0.1 million of restructuring costs and $1.2 million costs associated with the transfer of an insurance policy from our former Parent.

Included in restructuring for the year ended December 31, 2021 are $3.8 million of restructuring costs at the Center and Affiliates, $1.2 million costs associated with the transfer of an insurance policy from our former Parent and the gain on sale of Affiliates of $48.6 million.

Included in restructuring for the year ended December 31, 2021 are $3.8 million of restructuring costs at the Center and Affiliates and $1.2 million of costs associated with the transfer of an insurance policy from our former Parent and the gain on sale of Affiliates of $48.6 million.

68 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-K

Item 7. Management’s Discussion and Analysis