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Market risk represents the risk of financial loss from adverse movement in market prices.
−Removed: The primary sources of market risk are interest rates, foreign currency rates, equity prices and commodity prices.
+Added: The primary sources of market risk are interest rates, foreign currency rates and equity prices.
Our business is exposed primarily to the effect of market risk on our fee revenue, principal investment income and net carried interest allocation, foreign currency risk on non-U.S.
−Removed: investment management business and foreign denominated warehoused investments (if any), interest rate risk on our VFN and other variable rate debt financing warehoused investments (if any), and, equity price risk on marketable equity securities, held primarily by consolidated investment vehicles.
+Added: investment management business, interest rate risk on our VFN, and, equity price risk on marketable equity securities, held primarily by consolidated investment vehicles.
Market Risk Effect on Fee Revenue, Principal Investment Income and Net Carried Interest Allocation
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To a lesser extent, management fees are based upon the NAV of vehicles in our Liquid Strategies or GAV for certain InfraBridge vehicles, measured at fair value.
−Removed: At September 30, 2024, vehicles with NAV or GAV fee basis made up 5% of our $34.1 billion FEEUM.
+Added: At March 31, 2025, vehicles with NAV or GAV fee basis made up 5% of our $37.3 billion FEEUM and accounted for $2.8 million of management fees for the three months ended March 31, 2025.
Accordingly, most of our management fee revenue will not be directly affected by changes in investment fair values.
Principal Investment Income (Loss) —This is our share of income (loss) from equity interests in our sponsored funds, which in turn is largely driven by fair value changes in the underlying investments of the funds.
−Removed: A hypothetical 10% decline in the fair value of fund investments at September 30, 2024 would decrease the OP's share of principal investment income by approximately $124 million.
+Added: A hypothetical 10% decline in the fair value of fund investments at March 31, 2025 would decrease the OP's share of principal investment income by approximately $123 million.
Incentive Fees and Carried Interest —Incentive fees and carried interest, net of management allocations, are earned based upon the financial performance of a vehicle above a specified return threshold, which is largely driven by appreciation in value of underlying investments.
The amount of carried interest allocation recognized is based upon the cumulative performance of the fund if it were liquidated as of the reporting date.
−Removed: Carried interest is subject to reversal until such time it is distributed.
The extent of the effect of fair value changes to the amount of incentive fees and carried interest earned will depend upon the cumulative performance of an investment vehicle relative to its return threshold, the performance measurement period used to calculate incentives and carried interest, and the stage of the vehicle's lifecycle.
−Removed: A hypothetical 10% decline in the fair value of fund investments at September 30, 2024 would decrease carried interest by approximately $168 million, representing the OP's share of carried interest net of allocations to employees, former employees and Wafra.
−Removed: In the same scenario, generally no incentive fees would be realized.
+Added: A hypothetical 10% decline in the fair value of fund investments at March 31, 2025 would decrease carried interest by approximately $135 million, representing the OP's share of carried interest net of allocations to employees, former employees and Wafra.
+Added: Generally, our incentive fees are recognized when it is probable that a significant reversal of the cumulative incentive fees will not occur, which is typically when the fees become realizable or realized at the end of the performance measurement period.
+Added: At March 31, 2025, there were no incentive fees recorded that have not been fully realized.
Foreign Currency Risk
−Removed: As of September 30, 2024, we have limited direct foreign currency exposure from our foreign operations and foreign currency denominated investments warehoused on the balance sheet for future sponsored vehicles.
+Added: As of March 31, 2025, we have limited direct foreign currency exposure from our foreign operations and foreign currency denominated investments warehoused on the balance sheet for future sponsored vehicles.
Changes in foreign currency rates can adversely affect earnings and the value of our foreign currency denominated investments, including investments in our foreign subsidiaries.
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dollars but incur operating costs in Pound Sterling.
−Removed: We may have foreign currency denominated investments held by our U.S.
−Removed: subsidiaries that are temporarily warehoused on the balance sheet.
−Removed: At September 30, 2024, our foreign currency exposure is limited to only one AUD equity investment (cost of investment at AUD 35 million).
−Removed: Based upon book value of the investment (which is lower than cost), a hypothetical 100 basis point decline in the AUD/USD rate at September 30, 2024 would have an immaterial effect on earnings.
Interest Rate Risk
Instruments bearing variable interest rates include debt obligations, which are subject to interest rate fluctuations that will affect future cash flows, specifically interest expense.
−Removed: Our corporate debt exposure to variable interest rates is limited to our VFN revolver, which had no outstanding balance as of September 30, 2024.
+Added: Our corporate debt exposure to variable interest rates is limited to our VFN revolver, which had no outstanding balance at March 31, 2025.
Equity Price Risk
−Removed: At September 30, 2024, we had $91 million of long positions and $47 million of short positions in marketable equity securities, held predominantly by our consolidated sponsored liquid funds.
+Added: At March 31, 2025, we had $87 million of long positions and $54 million of short positions in marketable equity securities, held by our consolidated sponsored liquid funds.
Realized and unrealized gains and losses from marketable equity securities are recorded in other gain (loss) on the consolidated statement of operations.
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Therefore the level of volatility and price fluctuations are unpredictable.
−Removed: Our funds constantly rebalance their investment portfolio to take advantage of market opportunities and to manage risk.
+Added: Our funds constantly rebalance their
+Added: investment portfolio to take advantage of market opportunities and to manage risk.
Additionally, one of our funds employs a long/short equity strategy, taking long positions that serve as collateral for short positions, which in combination, reduces its market risk exposure.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.