What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-18 compared with 2021-02-19 · 50 added, 45 removed, 211 unchanged (31% of the section changed)

20 unchanged sentences

• a decline in the market value of our assets under management, due to declines or heightened volatility in the capital markets, fluctuations in foreign currency exchange rates and interest rates, inflation rates or the yield curve, and other market factors;

• changes in investor risk tolerance or investment preferences, which could result in investor allocations away from active, return-oriented strategies offered by our Affiliates;

• our Affiliates’ ability to attract and retain client assets and market products and services, which may be impacted by investment performance, client relationships, demand for product and service offerings, and the prices of securities generally;

• changes in investor risk tolerance or investment preferences, which could result in investor allocations away from return-oriented strategies offered by our Affiliates;

• global economic conditions, which may be exacerbated by changes in the equity or debt markets;

• financial crises, political or diplomatic developments, public health crises, such as pandemics, trade wars, social or civil unrest, insurrection, war, terrorism, or natural disasters;

• financial crises, political or diplomatic developments, public health crises, such as pandemics, trade wars, social or civil unrest, insurrection, war, terrorism, natural disasters, or risks associated with global climate change;

• other factors that are difficult to predict.

3 unchanged sentences

Our and our Affiliates’ reputations are critical to our business and could be impacted by events that may be difficult or impossible to control, and costly or impossible to remediate.

For example, alleged or actual failures by us, our Affiliates or our respective employees to comply with applicable laws, rules or regulations, errors in our public reports, cyber-attack or data breach incidents, expectations and perceptions of our or our Affiliates’ ESG practices, threatened or actual litigation against us, any of our Affiliates or our respective employees, or the public announcement and potential publicity surrounding any of these issues, even if inaccurate, satisfactorily addressed, or if no violation or wrongdoing actually occurred, could adversely impact our or our Affiliates’ reputations and their relationships with clients, our relationships with our Affiliates, and our ability to negotiate agreements with new independent investment firms, any of which could have an adverse effect on our financial condition and results of operations.

For example, alleged or actual failures by us, our Affiliates or our respective employees to comply with applicable laws, rules or regulations, errors in our public reports, cyber-attack or data breach incidents, expectations and perceptions of our or our Affiliates’ ESG practices or human capital management, threatened or actual litigation against us, any of our Affiliates or our respective employees, or the public announcement and potential publicity surrounding any of these issues, even if inaccurate, satisfactorily addressed, or if no violation or wrongdoing actually occurred, could adversely impact our or our Affiliates’ reputations and their relationships with clients, our relationships with our Affiliates, and our ability to negotiate agreements with new independent investment firms, any of which could have an adverse effect on our financial condition and results of operations.

The asset management industry is highly competitive.

Our Affiliates compete with a broad range of domestic and foreign investment management firms, including public, private and client-owned investment advisers;

firms managing passively-managed products, including exchange traded funds, as well as other firms managing active, return-oriented strategies;

firms managing passively-managed products, including exchange traded funds, as well as other firms managing return-oriented strategies;

firms associated with securities broker-dealers, financial institutions, insurance companies, private equity firms, sovereign wealth funds;

and other entities.

These firms may have significantly greater financial, technological and marketing resources, captive distribution and assets under management, and many of these firms offer an even broader array of products and services in particular investment strategies, including ESG strategies and other developing strategies and trends.

These firms may have significantly greater financial, technological, and marketing resources, captive distribution and assets under management, and many of these firms offer an even broader array of products and services in particular investment strategies.

These firms may also compete by seeking to capitalize on a trend towards institutions consolidating the number of investment managers they work with.

Competition from these firms may reduce the fees that our Affiliates can obtain for investment management services, or could impair our Affiliates’ ability to attract and retain client assets.

We believe that our Affiliates’ ability to compete effectively with other firms depends upon our Affiliates’ strategies, investment performance, reputations, client relationships, fee structures, client-servicing capabilities, and the marketing and distribution of their investment strategies, among other factors.

We believe that our Affiliates’ ability to compete effectively with other firms depends upon our Affiliates’ strategies, including ESG strategies or products addressing other developing trends, investment performance, reputations, client relationships, fee structures, client-servicing capabilities, and the marketing and distribution of their investment strategies, among other factors.

See “Competition” in Item 1.

9 unchanged sentences

While we believe that our existing cash resources and cash flow from operations will be sufficient to meet our working capital needs for normal operations for the foreseeable future, our continuing acquisitions of interests in independent investment firms and our other strategic initiatives may require additional capital.

Further, we have significant repurchase obligations relating to Affiliate equity interests, and it is difficult to predict the frequency and magnitude of these repurchases.

As of December 31, 2020, the current redemption value relating to Affiliate equity repurchase obligations was presented within Redeemable non-controlling interests on our Consolidated Balance Sheets and was $671.5 million, which includes $35.4 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors.

Further, we have significant purchase obligations relating to Affiliate equity interests, and it is difficult to predict the frequency and magnitude of these purchases.

As of December 31, 2021, the current redemption value relating to Affiliate equity purchase obligations was presented within Redeemable non-controlling interests on our Consolidated Balance Sheets and was $673.9 million, which includes $25.0 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors.

See “Liquidity and Capital Resources-Affiliate Equity” in Item 7 and Notes 18 and 19 of the Consolidated Financial Statements.

30 unchanged sentences

For example, if our or our Affiliates’ counterparties fail to honor their obligations in a timely manner, including any obligations to return posted collateral, our liquidity and results of operations could be adversely impacted.

The anticipated replacement of the London Interbank Offered Rate (“LIBOR”) introduces a number of risks for us, our Affiliates and their clients, and for the global asset management industry more broadly.

LIBOR and other financial benchmarks are currently the subject of national, international, and other regulatory guidance and proposals for reform.

Currently, LIBOR is expected to be discontinued, but there remains uncertainty as to such timing, as well as the nature of any replacement rate.

These reforms may have consequences that create uncertainties, including changes in the valuation of financial instruments linked to benchmark indices, which could impact Affiliate sponsored investment products, investments, derivatives or other instruments, and may result in pricing, operational and legal implementation risks.

Further, the proposed reforms could result in an increase in our or our Affiliates’ debt service costs.

While it is not currently possible to determine precisely how, or to what extent, the withdrawal and replacement of LIBOR or the alteration of any other financial benchmarks would affect us and our Affiliates, the changes may have an adverse effect on our financial condition and results of operations.

The replacement of benchmark indices, including the London Interbank Offered Rate (“LIBOR”), introduces a number of risks for us, our Affiliates and their clients, and for the global asset management industry more broadly.

Financial benchmarks have been the subject of national, international, and other regulatory guidance and reforms.

As of the end of 2021, LIBOR has been discontinued for certain currency settings, including all sterling and euro settings, and is expected to be discontinued for U.S.

dollar settings by June 2023 and replaced with the Secured Overnight Financing Rate.

There remains uncertainty as to the timing of the remaining transition, the performance of replacement rates, and the performance of LIBOR during the transition period.

These changes and uncertainties, including potential changes in the valuation of financial instruments linked to benchmark indices, could impact Affiliate sponsored investment products, investments, derivatives or other instruments, and may result in pricing, operational and legal implementation risks.

Further, the changes could result in an increase in our or our Affiliates’ debt service costs.

These changes and uncertainties in benchmark indices may have an adverse effect on our financial condition and results of operations.

The ongoing COVID-19 pandemic, or an outbreak of another highly infectious or contagious disease, could adversely affect our business, financial condition and results of operations.

1 unchanged sentence

This pandemic has adversely impacted the global economy and contributed to significant volatility in equity and debt markets.

Many jurisdictions continue to institute quarantines, limitations on travel, and restrictions on access to schools, offices, and other public venues.

Businesses have implemented similar precautionary measures, many of which remain in effect.

Over the course of the pandemic, many jurisdictions instituted quarantines, imposed limitations on travel, and restricted access to offices and public venues, some of which are ongoing or may reoccur, and many businesses implemented similar precautionary measures.

Such measures, as well as the general uncertainty surrounding the containment and impact of COVID-19, have created significant disruption in economic activity.

These developments, including the duration and spread of the pandemic, the timing and effectiveness of vaccines, the terms and duration of mandated shut downs and other restrictions, and the impact on the global economy and financial markets, as well as the extent of the impact on us and our Affiliates, remain difficult to predict and will depend on a number of factors, including actions taken by governmental authorities and other third parties that are not within our control.

If financial markets become depressed for a prolonged period as a result of the COVID-19 or another pandemic or public health crisis, our assets under management, aggregate fees, and earnings could be adversely affected and our intangible assets could become impaired.

These developments could also increase our costs of capital or reduce the availability of credit, or adversely change the interest rates or credit ratings applicable to us.

Further, our growth strategy depends in part upon our ability to make investments in independent investment firms and to pursue other strategic partnerships.

Our ability to pursue these transactions could be impacted during the period of market and economic disruption relating to COVID-19 or another pandemic or public health crisis, as a result of the availability of capital or other factors.

These developments, including the duration, spread, and severity of the pandemic, the effectiveness of vaccines, the terms and duration of restrictions or limitations on travel and access to offices and public venues, and the impact on the global economy and financial markets, as well as the extent of the impact on us and our Affiliates, remain difficult to predict and will depend on a number of factors, including actions taken by governmental authorities and other third parties that are not within our control.

If financial markets become depressed for a prolonged period as a result of COVID-19 or another pandemic or public health crisis, our assets under management, aggregate fees, and earnings could be adversely affected and our intangible assets could become impaired.

These developments could also increase our costs of capital or reduce the availability of credit, adversely change the interest rates or credit ratings applicable to us, or adversely impact our ability to make investments in independent investment firms and to pursue other strategic partnerships.

Additionally, although we maintain contingency plans for pandemics and we and our Affiliates have remained fully operational throughout the pandemic, the further spread of COVID-19, or an outbreak of another contagious disease, could also impact the availability of key personnel necessary to conduct our or our Affiliates’ businesses or the business and operations of third parties that perform critical services for our or our Affiliates’ businesses.

2 unchanged sentences

Our growth strategy depends in part upon our ability to make investments in independent investment firms and to pursue other strategic partnerships.

Our continued success in investing in independent investment firms will depend upon our ability to find suitable firms in which to invest or make additional investments in our existing Affiliates, our ability to negotiate agreements with such firms on acceptable terms, and our ability to raise the capital necessary to finance such transactions.

Our continued success in investing in independent investment firms will depend upon our ability to find suitable firms in which to invest or make additional investments in our existing Affiliates, our ability to negotiate agreements with such firms on acceptable terms, maintaining our relationships with prospects and our reputation as a leading partner to these firms, and our ability to raise the capital necessary to finance such transactions.

The market for acquisitions of interests in these firms is highly competitive.

Many other public and private financial services companies, including commercial and investment banks, private equity firms, sovereign wealth funds, insurance companies and investment management firms, also invest in boutique investment firms and may have significantly greater resources than we do.

Many other public and private financial services companies, including commercial and investment banks, private equity firms, sovereign wealth funds, insurance companies, and investment management firms, also invest in independent investment firms and may have significantly greater resources than we do.

In addition to direct competition on particular prospects, these firms can also negatively impact the volume and value of transactions more broadly.

19 unchanged sentences

Any of these developments could have an adverse effect on our financial condition generally, and on our results of operations for the applicable reporting period.

Additionally, regardless of the particular structure, we may elect to defer or forgo the receipt of our share of an Affiliate’s revenue or earnings, or to adjust any expenses allocated to us, to permit the Affiliate to fund expenses in light of unanticipated changes in revenue or operating expenses, with the aim of maximizing the long-term benefits.

These types of activities could increase during periods where an Affiliate’s revenues decline rapidly or other events occur that impact the Affiliate’s expenses or operations.

We cannot be certain that any such deferral or forbearance would be of any greater long-term benefit to us, and such a deferral or forbearance may have an adverse effect on our near- or long-term financial condition and results of operations.

1 unchanged sentence

From time to time, we may reposition our relationships with our Affiliates, which could, among other things, include changes to our structured partnership interests, including changes in our ownership level and in the calculation of our share of revenue and/or operating expenses.

Such repositioning may be done in order to address an Affiliate’s succession planning, changes in its revenue or operating expense base, strategic planning or other developments.

Any repositioning of our interest in an Affiliate may result in increased exposure to changes in the Affiliate’s revenue and/or operating expenses, or in additional investments or commitments from us, or could increase or reduce our interest in the Affiliate.

Such repositioning may be done in order to address an Affiliate’s succession planning, changes in its revenue or operating expense base, our or the Affiliate’s strategic planning, or other developments.

In some cases, this could result in the full divestment of our interest to Affiliate management or to a third-party, or in our acquisition of all of the equity interests of the Affiliate.

In addition, certain of our Affiliates accounted for under the equity method have customary rights in certain circumstances to sell a majority interest in their firm to a third party and to cause us to participate in such sale.

In addition, certain of our Affiliates accounted for under the equity method have customary rights in certain circumstances to restructure or sell a majority interest in their firm

to a third-party and to cause us to participate in such restructuring or sale.

Any such changes could have an adverse impact on our financial condition and results of operations.

18 unchanged sentences

We also have exercisable options outstanding and unvested restricted stock that have been awarded under our share-based incentive plans.

Additionally, we have the right to settle certain Affiliate equity repurchase obligations with shares of our common stock.

Additionally, we have the right to settle certain Affiliate equity purchase obligations with shares of our common stock.

Moreover, in connection with future financing activities, we may issue additional convertible securities or shares of our common stock, including through forward equity transactions.

25 unchanged sentences

Further, this regulatory environment may be altered without notice by new laws or regulations, revisions to existing laws or regulations, or new or revised interpretations, guidance or enforcement priorities.

Any determination of a failure to comply with applicable laws, rules or regulations could expose us, our Affiliates, or our respective employees to civil liability, criminal liability, or disciplinary or enforcement action, with penalties that could include the disgorgement of fees, fines, sanctions, suspensions, termination of adviser status, or censure of individual employees or revocation or limitation of business activities or registration, any of which could have an adverse impact on our stock price, financial condition, and results of operations.

Further, if we, any of our Affiliates or our respective employees were to fail to comply with applicable laws, rules, or regulations, or be named as a subject of an investigation or other regulatory action, the public announcement and potential publicity surrounding any such investigation or action could have an adverse effect on our stock price and result in increased costs, even if we, our Affiliates, or our respective employees were found not to have violated such laws, rules or regulations.

Any determination of a failure to comply with applicable laws, rules or regulations could expose us, our Affiliates, or our respective employees to civil liability, criminal liability, or disciplinary or enforcement action, with penalties that could include the disgorgement of fees, fines, sanctions, suspensions, termination of adviser status, or censure of individual employees or revocation or limitation of business activities or registration, and may result in monetary losses that are not covered by insurance in adequate amounts or at all, any of which could have an adverse impact on our stock price, financial condition, and results of operations.

Further, if we, any of our Affiliates or our respective employees were to fail to comply with applicable laws, rules, or regulations, or be named as a subject of an investigation or other regulatory action, the public announcement and potential publicity surrounding any such investigation or action could have an adverse effect on our or our Affiliates’ reputations and on our stock price and result in increased costs, even if we, our Affiliates, or our respective employees were found not to have violated such laws, rules or regulations.

Recently implemented and proposed regulations globally have called for more stringent oversight of the financial services industry in which we and our Affiliates operate.

In the U.S., the new presidential administration may shift enforcement priorities under existing regulations, alter existing regulations or pursue additional rulemaking impacting the financial services industry.

In the U.S., the new presidential administration has shifted enforcement

priorities under existing regulations, and has been pursuing additional rulemaking, impacting public companies and the financial services industry, including private and public funds, in areas relating to ESG matters and disclosures, data security, and additional asset management disclosure and compliance requirements.

These regulatory developments could adversely affect our and our Affiliates’ businesses, increase compliance costs, require that we or our Affiliates curtail operations or investment offerings, or impact our and our Affiliates’ access to capital and the market for our common stock.

4 unchanged sentences

These risks may include difficulties in staffing and managing foreign operations, longer payment cycles, difficulties in collecting investment advisory fees receivable, different (and in some cases less stringent) legal, regulatory and accounting regimes, political instability, exposure to fluctuations in currency exchange rates, expatriation controls, expropriation risks, and potential adverse tax consequences.

For example, our and our Affiliates’ businesses may be impacted by the terms of trade agreements negotiated by the UK in connection with its exit from the European Union, which could result in fluctuations in exchange rates, disruptions in the capital markets, changes in investor risk tolerance or investment preferences, potential regulatory shifts resulting from the UK’s status as a third-country with the European Union, increased compliance and administrative costs, or other impacts.

Further, as part of our and certain of our Affiliates’ response to the UK’s exit from the European Union, we and such Affiliates have implemented changes to our business operations and, while we do not expect these changes to have a significant impact on our or our Affiliates’ businesses, these changes could result in increased compliance and administrative outsourcing and costs.

Additionally, regulations in the European Union pertaining to integrating ESG topics may materially impact the asset management industry in member states that adopt such legislation.

For example, the European Union’s recent action plan on financing sustainable growth includes initiatives to integrate ESG into the financial system, including such areas as MiFID2, UCITS and AIFMD regulations.

For example, our and our Affiliates’ businesses may be impacted by the terms of trade agreements negotiated by the UK in connection with its exit from the European Union (the “EU”), which could result in fluctuations in exchange rates, disruptions in the capital markets, changes in investor risk tolerance or investment preferences, potential regulatory shifts resulting from the UK’s status as a third-country with the EU, increased compliance and administrative costs, or other impacts.

These potential impacts are driven in part by ongoing uncertainty that has accompanied the process around the UK’s exit from the EU, including the extent to which the EU will permit reciprocal access to UK firms in the sphere of financial services under so-called “equivalence” arrangements.

Further, regulations in the EU pertaining to integrating ESG topics may materially impact the asset management industry in member states that adopt such legislation.

For example, the EU’s new Sustainable Finance Disclosure Regulation (“SFDR”) requires MiFID firms and AIFMs to take ESG factors into account in their organizational, risk and governance arrangements and are designed to, among other things, establish EU labels for green financial products, clarify managers’ duties regarding sustainability in their investment decisions, and increase disclosure requirements relating to ESG matters including those relating to “greenwashing” (i.e., the holding out of a product as having green or sustainable characteristics where this is not, in fact, the case).

Similar regulatory measures may be introduced in other jurisdictions in which we or our Affiliates currently have investments or plan to invest in the future, including in the U.S.

These types of ESG-related regulations could impact our or our Affiliates’ businesses, increases regulatory and compliance costs, and adversely affect our profitability.

In addition, as a result of operating internationally, certain of our Affiliates and our global distribution subsidiaries are subject to requirements under foreign regulations to maintain minimum levels of capital, and such capital requirements may be increased from time to time, which may have the effect of limiting withdrawals of capital and the payment of distributions to us.

Such capital requirements may be increased from time to time, which may have the effect of limiting withdrawals of capital and the payment of distributions to us or, if there were a significant change in the required capital or an extraordinary loss or charge against net capital at a particular Affiliate, could adversely impact such Affiliate’s ability to expand or maintain operations.

These or other risks related to our and our Affiliates’ international operations may have an adverse effect on our business, financial condition, and results of operations.

4 unchanged sentences

Our and our Affiliates’ effective tax rates could be affected by a change in the mix of earnings with differing statutory tax rates, changes to our or their existing businesses, and changes in relevant tax, accounting or other laws, regulations, administrative practices, and interpretations.

In the U.S., the new presidential administration has indicated that it may raise the corporate tax rate and may pursue other tax reforms.

If any such proposals are ultimately enacted into legislation, they could materially impact our tax provision, deferred tax assets, tax liabilities and effective tax rate.

In the U.S., several tax reform bills and legislative proposals have been introduced under the current presidential administration that would raise the corporate tax rate and implement other reforms.

If these or other similar proposals are ultimately enacted into legislation, they could materially impact our tax provision, deferred tax assets, tax liabilities and effective tax rate.

Further, a portion of our earnings is from outside of the U.S., and the foreign government agencies in jurisdictions in which we and our Affiliates do business continue to focus on the taxation of multinational companies, and could implement changes to their tax laws.

For example, changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting (“BEPS”) project undertaken by the Organization for Economic Co-operation and Development (“OECD”), which includes recommendations that may be adopted in various jurisdictions in which we and our Affiliates do business.

that may be adopted in various jurisdictions in which we and our Affiliates do business.

Any changes to federal, state or foreign tax laws, regulations, accounting standards or administrative practices, or the release of additional guidance, interpretations or other information, could impact our estimated effective tax rate and overall tax expense, as well as our earnings estimates, and could result in adjustments to our treatment of deferred taxes, including the realization or value thereof, or in unanticipated additional tax liabilities, any of which could have an adverse effect on our business, financial condition, and results of operations.

1 unchanged sentence

We regularly assess the likely outcomes of examinations that we are subject to, in order to determine the appropriateness of our tax provision;

however, tax authorities may disagree with certain positions we have taken or may take, and may assess

additional taxes and/or penalties and interest.

however, tax authorities may disagree with certain positions we have taken or may take, and may assess additional taxes and/or penalties and interest.

There can be no assurance that we will accurately predict the outcomes of any examinations and the actual outcomes could have an adverse impact on our financial condition and results of operations.

18 unchanged sentences

Additionally, although we and our Affiliates have systems and practices in place to monitor third-party service providers, such third parties are subject to similar risks.

We and our Affiliates, as well as our respective service providers, are also subject to the risk that employees or contractors, or other third parties, may deliberately seek to circumvent established controls to commit fraud or act in ways that are inconsistent with our or their controls, policies and procedures.

are inconsistent with our or their controls, policies, and procedures, and which may be harder to monitor in remote work environments.

The financial and reputational impact of control failures can be significant.

9 unchanged sentences

Despite efforts to ensure the integrity of systems and networks, it is possible that we, our Affiliates or our respective third-party service providers may not be able to anticipate or to implement effective preventive measures against all threats, especially because the techniques used change frequently and can originate from a wide variety of sources.

The recent shift to work-from-home environments has increased exposures to these security-related risks.

Further, human errors may occur from time to time at our third-party service providers’ staff or among our or our Affiliates’ employees, which can lead to or exacerbate security vulnerabilities or attacks.

The increasing frequency and sophistication of these cyber threats, along with the recent shift to work-from-home environments and the increased use of personal mobile and computing technologies and third-party web conferencing services, have increased exposures to these security-related risks.

As a result, we or our Affiliates could experience disruption, significant losses, increased costs, reputational harm, regulatory actions, or legal liability, any of which could have an adverse effect on our financial condition and results of operations.

We or our Affiliates may be required to spend significant additional resources to modify protective measures or to investigate and remediate vulnerabilities or other exposures, and may be subject to litigation, regulatory investigations, and potential fines, and financial losses that are either not insured against fully or not fully covered through any insurance that we or our Affiliates maintain.

Further, government and regulatory oversight of data privacy in particular has been growing in recent years, including through the European Union’s General Data Protection Regulation and the California Consumer Privacy Act, resulting in heightened data security and handling requirements, increased fines, and expanded incident response and reporting obligations.

Further, government and regulatory oversight of data privacy in particular has been growing in recent years, including through the EU’s General Data Protection Regulation and the California Consumer Privacy Act, resulting in heightened data security and handling requirements, increased fines, and expanded incident response and reporting obligations.

Recent well-publicized security breaches at other companies have exemplified security-related vulnerabilities, and may lead to further government and regulatory scrutiny and heightened security requirements.

1 unchanged sentence

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 1A. Risk Factors