What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2021-11-05 · 171 added, 202 removed, 219 unchanged (63% of the section changed)

4 unchanged sentences

Such statements are subject to certain risks and uncertainties, including, among others, the factors discussed under the caption “Item 1A.

Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.

Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and also under “Item 1A.

Risk Factors” in this Quarterly Report on Form 10-Q.

These factors (among others) could affect our financial condition, business activities, results of operations, cash flows, or overall financial performance and cause actual results and business activities to differ materially from historical periods and those presently anticipated and projected.

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We are a leading partner to independent active investment management firms globally.

Our strategy is to generate long-term value by investing in a diverse array of high-quality partner-owned investment firms, referred to as “Affiliates,” through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return.

Our strategy is to generate long-term value by investing in a diverse array of high-quality independent partner-owned firms, referred to as “Affiliates,” through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return.

Our innovative partnership approach enables each Affiliate’s management team to own significant equity in their firm while maintaining operational and investment autonomy.

In addition, we offer our Affiliates growth capital, global distribution, and other strategic value-added capabilities, which enhance the long-term growth of these independent businesses, and enable them to align equity incentives across generations of principals to build enduring franchises.

As of September 30, 2021, our aggregate assets under management were $747.8 billion across a broad range of return-oriented strategies.

In the first quarter of 2021, we completed a minority investment in Boston Common Asset Management LLC, a women-owned leader in global sustainable and impact investing.

In the second quarter of 2021, we completed a minority investment in OCP Asia Limited, a leading alternative manager in private markets, providing customized secured lending solutions across the Asia-Pacific region.

In the third quarter of 2021, we entered into a definitive agreement to acquire a majority equity interest in Parnassus Investments (“Parnassus”), an ESG-dedicated fund manager, and on October 1, 2021, we completed our investment.

Following the close of the transaction, Parnassus partners continue to hold a substantial portion of the equity of the business and direct its day-to-day operations.

In the third quarter of 2021, we entered into a definitive agreement to acquire a majority equity interest in Abacus Capital Group LLC (“Abacus”), a real estate investment manager focused on the U.S.

multifamily sector.

Following the close of the transaction, Abacus partners will continue to hold a substantial portion of the equity of the business and direct its day-to-day operations.

The transaction, which is expected to close during the fourth quarter of 2021, is subject to customary closing conditions and regulatory approvals.

As of March 31, 2022, our aggregate assets under management were approximately $777 billion across a broad range of return-oriented strategies.

On January 14, 2022, we completed an additional investment in Systematica Investments (“Systematica”), an innovative technology-driven systematic manager.

Following the close of the transaction, our investment continues to be accounted for under the equity method of accounting and Systematica partners continue to hold a majority of the equity of the business and direct its day-to-day operations.

On March 16, 2022, we and other parties entered into a Securities Purchase and Merger Agreement with EQT AB (“EQT”), a public company listed on Nasdaq Stockholm (EQT.ST), under which we and each of the other owners agreed to sell our respective equity interests in Baring Private Equity Asia (“BPEA”), our Affiliate, in connection with the announced strategic combination of BPEA and EQT.

Pursuant to the terms of the agreement, we will receive $240.0 million in cash and 28.68 million EQT ordinary shares (25% of which are subject to a six-month lock-up), and will retain a portion of future carry in certain existing funds.

We acquired our interest in BPEA for $187.5 million in 2016.

BPEA will continue to be included in our results until closing of the transaction, which is expected to occur in the fourth quarter of 2022, subject to customary closing conditions.

Our gain on the transaction will be taxable at closing.

Operating Performance Measures

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The following table presents our key aggregate operating performance measures:

As of and for the Three Months Ended September 30, As of and for the Nine Months Ended September 30,

(in billions, except as noted) 2020 2021 % Change 2020 2021 % Change

As of and for the Three Months Ended March 31,

(in billions, except as noted) 2021 2022 % Change

Assets under management $ 738.0 $ 776.7 5 %

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Through our Affiliates, we provide a comprehensive and diverse range of return-oriented strategies designed to assist institutional, retail, and high net worth clients worldwide in achieving their investment objectives.

We continue to see demand for return-oriented strategies, particularly in illiquid alternative and multi-asset and fixed income strategies where we have been experiencing net inflows, reflecting continued investor demand for returns that are less correlated to traditional equity markets.

We continue to see demand for return-oriented strategies, and have been experiencing net inflows in areas of secular growth, including private markets, liquid alternatives, Asia, wealth management, and ESG.

In addition, investor demand for passively-managed products, including exchange traded funds, has continued, and we have experienced outflows in certain equity strategies consistent with this industry-wide trend.

However, we believe the best performing active equity managers (whether global-, regional-, or country-specific) will continue to have significant opportunities to grow as a result of net client cash inflows.

However, we believe the best performing and most differentiated active equity managers (whether global-, regional-, or country-specific) will continue to have significant opportunities to grow as a result of performance and client demand trends.

We believe we are well-positioned to benefit from these trends.

In some cases, if product returns exceed certain performance threshold, we will participate in performance-based fees;

however, we do not anticipate these fees will be a significant component of our Consolidated revenue as these fees are predominantly earned by our Affiliates accounted for under the equity method.

We also anticipate that independent investment firms will continue to seek access to an evolving range of partnership solutions, and that we have a significant opportunity to invest in outstanding firms across the global asset management industry.

The following charts present information regarding the composition of our assets under management by strategy and client type as of September 30, 2021:

The following charts present information regarding the composition of our assets under management by strategy and client type as of March 31, 2022:

Assets Under Management

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(1) Alternatives include illiquid alternative strategies, which accounted for 15% of our assets under management as of September 30, 2021.

(2) Global equities include emerging markets strategies, which accounted for 7% of our assets under management as of September 30, 2021.

The following tables present changes in our assets under management by strategy and client type for the three and nine months ended September 30, 2021:

(1) Alternatives include illiquid alternative strategies, which accounted for 16% of our assets under management as of March 31, 2022.

(2) Global equities include emerging markets strategies, which accounted for 5% of our assets under management as of March 31, 2022.

The following tables present changes in our assets under management by strategy and client type for the three months ended March 31, 2022:

By Strategy - Quarter to Date

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Equities Multi-Asset & Fixed Income Total

June 30, 2021 $ 223.7 $ 291.1 $ 115.5 $ 125.4 $ 755.7

December 31, 2021 $ 238.2 $ 277.5 $ 170.7 $ 127.4 $ 813.8

Client cash inflows and commitments 10.6 6.7 8.5 5.2 31.0

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0.1 (0.2) — (0.2) (0.3)

September 30, 2021 $ 230.0 $ 279.7 $ 112.1 $ 126.0 $ 747.8

March 31, 2022 $ 246.1 $ 250.2 $ 159.0 $ 121.4 $ 776.7

By Client Type - Quarter to Date

(in billions) Institutional Retail High Net Worth Total

June 30, 2021 $ 409.6 $ 207.5 $ 138.6 $ 755.7

Client cash inflows and commitments 17.1 8.5 5.6 31.2

Client cash outflows (12.6) (11.4) (3.9) (27.9)

Net client cash flows 4.5 (2.9) 1.7 3.3

Market changes (3.7) (1.8) 0.3 (5.2)

Foreign exchange (1)

(2.0) (1.9) (0.3) (4.2)

Realizations and distributions (net) (1.0) (0.2) — (1.2)

(0.9) 0.1 0.2 (0.6)

September 30, 2021 $ 406.5 $ 200.8 $ 140.5 $ 747.8

By Strategy - Year to Date

Alternatives Global Equities U.S.

Equities Multi-Asset & Fixed Income Total

December 31, 2021 $ 413.8 $ 252.5 $ 147.5 $ 813.8

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Net client cash flows 0.0 (2.7) 0.5 (2.2)

New investments 2.6 2.9 1.1 — 6.6

Market changes (8.3) (15.4) (7.5) (31.2)

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1.3 (2.6) 1.0 (0.3)

September 30, 2021 $ 230.0 $ 279.7 $ 112.1 $ 126.0 $ 747.8

By Client Type - Year to Date

Institutional Retail High Net Worth Total

December 31, 2020 $ 401.0 $ 189.3 $ 125.9 $ 716.2

Client cash inflows and commitments 38.6 38.3 18.8 95.7

Client cash outflows (49.4) (43.8) (14.8) (108.0)

Net client cash flows (10.8) (5.5) 4.0 (12.3)

New investments 4.5 1.0 1.1 6.6

Market changes 25.2 16.9 9.7 51.8

Foreign exchange (1)

(0.7) (1.0) — (1.7)

Realizations and distributions (net) (10.2) (0.3) (0.3) (10.8)

(2.5) 0.4 0.1 (2.0)

September 30, 2021 $ 406.5 $ 200.8 $ 140.5 $ 747.8

March 31, 2022 $ 404.9 $ 230.6 $ 141.2 $ 776.7

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(2) Other includes assets under management attributable to product transitions and reclassifications.

The following tables present performance of our investment strategies, where available, measured by the percentage of assets under management ahead of their relevant benchmark:

AUM Weight % of AUM Ahead of Benchmark (1)

3-year 5-year 10-year

Liquid alternatives (2)

16 % 77 % 70 % 80 %

Global equity (2)

32 % 43 % 43 % 70 %

20 % 70 % 72 % 75 %

Multi-asset and fixed income (3)

16 % N/A N/A N/A

AUM Weight % of AUM Ahead of Benchmark (1)

IRR Latest Vintage IRR Last Three Vintages

Illiquid alternatives (4)

16 % 81 % 83 %

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(1) Past performance is not indicative of future results.

Performance and AUM information is as of March 31, 2022 and is based on data available at the time of calculation.

Product returns are sourced from Affiliates while benchmark returns are generally sourced via third-party subscriptions.

(2) For liquid alternative, global equity, and U.S.

equity products, performance is reported as the percentage of assets that have outperformed benchmarks across the indicated periods, and excludes market-hedging products.

For purposes of investment performance comparisons, products are an aggregation of portfolios (separate accounts, investment funds, and other products) that each represent a particular investment objective, using the most representative portfolio for the performance comparison.

Performance is presented for products with a three-, five-, and/or ten-year track record and is measured on a consistent basis relative to the most appropriate benchmarks.

Benchmark appropriateness is generally reviewed annually to reflect any changes in how underlying portfolios/mandates are managed.

Product and benchmark performance is reflected as total return and is annualized.

Reported product performance is gross-of-fees for institutional and high-net-worth separate accounts, and generally net-of-fees across retail funds and other commingled vehicles such as hedge funds.

(3) Multi-asset and fixed income products are mainly our wealth management and solutions offerings.

These investment products are primarily customized toward wealth preservation, estate planning, and liability and tax management, and therefore are typically not measured against a benchmark.

(4) For illiquid alternative products, performance is reported as the percentage of assets that have outperformed benchmarks on a since-inception internal rate of return basis.

Benchmarks utilized include a combination of public market equivalents, peer medians, and absolute returns where benchmarks are not available.

For purposes of investment performance comparisons, the latest vintage comparison includes the most recent vehicles and strategies (traditional long-duration investment funds, customized vehicles, and other evergreen vehicles and product structures) where meaningful performance is available and calculable.

In order to illustrate the performance of our illiquid product category over a longer period of history, the last three vintages comparison incorporates the latest vintage vehicles and the prior two vintages for traditional long-duration investment funds, as well as additional vehicles and strategies launched during the equivalent time period as the last three vintages of traditional long duration investment funds.

Due to the nature of these investments and vehicles, reported performance is typically on a three- to six-month lag basis.

Aggregate Fees

Aggregate fees consist of asset- and performance-based fees of our consolidated and equity method Affiliates.

Asset-based fees include advisory and other fees earned by our Affiliates for services provided to their clients and are typically determined as a percentage of the value of a client’s assets under management.

Performance-based fees are based on investment performance, typically on an absolute basis or relative to a benchmark or a hurdle rate, and are generally recognized when it is improbable that there will be a significant reversal in the amount of revenue recognized.

Performance-based fees are generally billed less frequently than asset-based fees, and although performance-based fees inherently depend on investment performance and will vary from period to period, we anticipate performance-based fees will be a recurring component of our aggregate fees.

As of March 31, 2022, approximately 26% of our total assets under management could potentially earn performance-based fees.

These percentages were approximately 12% and 48% of our assets under management for our consolidated Affiliates and Affiliates account for under the equity method, respectively.

Aggregate fees are generally determined by the level of our average assets under management and the composition of these assets across our strategies that realize different asset-based fee ratios and performance-based fees.

Our asset-based fee ratio is calculated as asset-based fees divided by average assets under management.

Aggregate fees were $1,076.2 million for the three months ended September 30, 2021, an increase of $114.5 million or 12% as compared to the three months ended September 30, 2020.

The increase in our aggregate fees was primarily due to a $115.3 million or 12% increase from asset-based fees.

The increase in asset-based fees was due to an increase in our average assets under management, primarily driven by strong Affiliate investment performance and market appreciation.

Aggregate fees were $3,676.2 million for the nine months ended September 30, 2021, an increase of $500.5 million or 16% as compared to the nine months ended September 30, 2020.

The increase in our aggregate fees was due to a $287.4 million or 9% increase from asset-based fees and a $213.1 million or 7% increase from performance-based fees.

The increase in asset-based fees was due to an increase in our average assets under management, primarily driven by strong Affiliate investment performance and market appreciation.

Aggregate fees were $1,330.5 million for the three months ended March 31, 2022, a decrease of $83.9 million or 6% as compared to the three months ended March 31, 2021.

The decrease in our aggregate fees was primarily due to a $179.2 million or 13% decrease from performance-based fees, primarily in liquid alternative strategies.

The decrease was partially offset by a $95.3 million or 7% increase in asset-based fees.

The increase in asset-based fees was due to an increase in our average assets under management, primarily in our U.S.

equity strategies, driven by investments in new Affiliates, and partially offset by net client cash outflows.

Financial and Supplemental Financial Performance Measures

The following table presents our key financial and supplemental financial performance measures:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

(in millions) 2020 2021 % Change 2020 2021 % Change

Net income (controlling interest) $ 71.3 $ 128.4 80 % $ 86.3 $ 387.3 N.M.

For the Three Months Ended March 31,

(in millions) 2021 2022 % Change

Net income (controlling interest) $ 149.9 $ 146.0 (3) %

Adjusted EBITDA (controlling interest) (1)

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(1) Percentage change is not meaningful.

(1) Adjusted EBITDA (controlling interest) and Economic net income (controlling interest) are non-GAAP performance measures and are discussed in “Supplemental Financial Performance Measures.”

For the three months ended September 30, 2021, our Adjusted EBITDA (controlling interest) increased $46.5 million or 26%, primarily due to a $114.5 million or 12% increase in aggregate fees.

Adjusted EBITDA (controlling interest) increased more than aggregate fees on a percentage basis primarily due to the recognition of asset- and performance-based fees at Affiliates in which we hold a greater economic interest and net gains on strategic investments.

For the nine months ended September 30, 2021, our Adjusted EBITDA (controlling interest) increased $158.2 million or 29%, primarily due to a $500.5 million or 16% increase in aggregate fees.

Adjusted EBITDA (controlling interest) increased more than aggregate fees on a percentage basis due to the recognition of performance-based fees at Affiliates in which we hold a greater economic interest and net gains on strategic investments.

For the three months ended September 30, 2021, our Net income (controlling interest) increased $57.1 million or 80%.

The increase in Net income (controlling interest) was greater than the increase in Adjusted EBITDA (controlling interest) primarily due to a $23.5 million decrease in intangible amortization and impairments attributable to the controlling interest, partially offset by a $10.1 million increase in Income tax expense attributable to the controlling interest and a $4.7 million increase in Interest expense attributable to the controlling interest.

For the nine months ended September 30, 2021, our Net income (controlling interest) increased $301.0 million.

The increase in Net income (controlling interest) was greater than the increase in Adjusted EBITDA (controlling interest) primarily due to a $229.4 million decrease in intangible amortization and impairments attributable to the controlling interest, partially offset by a $119.5 million increase in Income tax expense attributable to the controlling interest and a $17.2 million increase in Interest expense attributable to the controlling interest.

For the three months ended March 31, 2022, our Adjusted EBITDA (controlling interest) increased $8.5 million or 3%, primarily from new investments and Affiliate investment performance.

These increases were partially offset by a net decline from performance fees and mark to market adjustments on strategic investments.

For the three months ended March 31, 2022, our Net income (controlling interest) decreased $3.9 million or 3%.

The decrease in Net income (controlling interest) was primarily due to an $8.4 million decrease in Investment and other income attributable to the controlling interest and a $3.1 million decrease in Equity method income (net).

These decreases were partially offset by a decrease in Other expenses (net) attributable to the controlling interest, primarily related to changes in the values of contingent payment and Affiliate equity purchase obligations of $7.9 million.

We believe Economic net income (controlling interest) is an important supplemental financial performance measure because it represents our performance before non-cash expenses relating to the acquisition of interests in Affiliates and improves comparability of performance between periods.

For the three months ended September 30, 2021, our Economic net income (controlling interest) increased $16.4 million or 11%, primarily due to a $46.5 million increase in Adjusted EBITDA (controlling interest), partially offset by a $25.1 million increase in current and other deferred taxes, attributable to the controlling interest and a $4.7 million increase in Interest expense attributable to the controlling interest.

For the nine months ended September 30, 2021, our Economic net income (controlling interest) increased $91.5 million or 21%, primarily due to a $158.2 million increase in Adjusted EBITDA (controlling interest), partially offset by a $60.5 million increase in current and other deferred taxes, attributable to the controlling interest and a $17.2 million increase in Interest expense attributable to the controlling interest.

For the three months ended March 31, 2022, our Economic net income (controlling interest) increased $5.2 million or 3%, primarily due to an $8.5 million increase in Adjusted EBITDA (controlling interest), partially offset by a $2.1 million increase in Income tax expense attributable to the controlling interest.

Results of Operations

The following discussion includes the key operating performance measures and financial results of our consolidated and equity method Affiliates.

Our consolidated Affiliates’ financial results are included in our Consolidated revenue, Consolidated expenses, and Investment and other income, and our share of our equity method Affiliates’ financial results is reported, net of intangible amortization and impairments, in Equity method income (loss) (net).

Consolidated Revenue

The following table presents our consolidated Affiliate average assets under management and Consolidated revenue:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

(in millions, except as noted) 2020 2021 % Change 2020 2021 % Change

For the Three Months Ended March 31,

(in millions, except as noted) 2021 2022 % Change

Consolidated Affiliate average assets under management (in billions) $ 422.1 $ 474.2 12 %

Consolidated revenue $ 559.1 $ 607.3 9 %

Our Consolidated revenue increased $80.4 million or 16% for the three months ended September 30, 2021, primarily due to a $79.1 million or 16% increase from asset-based fees.

The increase in asset-based fees was due to an increase in consolidated Affiliate average assets under management, primarily driven by strong Affiliate investment performance and market appreciation.

Our Consolidated revenue increased $247.4 million or 17% for the nine months ended September 30, 2021, due to a $239.0 million or 16% increase from asset-based fees and an $8.4 million or 1% increase from performance-based fees.

The increase in asset-based fees was due to an increase in consolidated Affiliate average assets under management, primarily driven by strong Affiliate investment performance and market appreciation.

This increase was partially offset by a change in the composition of our assets under management.

Our Consolidated revenue increased $48.2 million or 9% for the three months ended March 31, 2022, due to a $48.4 million or 9% increase in asset-based fees.

The increase in asset-based fees was due to an increase in consolidated Affiliate average assets under management, primarily in our U.S.

equity strategies, driven by investments in new Affiliates, and partially offset by net client cash outflows.

Consolidated Expenses

Our Consolidated expenses are primarily attributable to the non-controlling interests of our consolidated Affiliates in which we share in revenue without regard to expenses.

For these Affiliates, the amount of expenses attributable to the non-controlling interests, including compensation, is generally determined by the percentage of revenue allocated to expenses as part of the structured partnership interests in place at the respective Affiliate.

Accordingly, increases in revenue generally will increase a consolidated Affiliate’s expenses attributable to the non-controlling interests and decreases in revenue generally will decrease a consolidated Affiliate’s expenses attributable to the non-controlling interests.

For these Affiliates, the amount of expenses attributable to the non-controlling interests, primarily compensation, is generally determined by the percentage of revenue allocated to expenses as part of the structured partnership interests in place at the respective Affiliate.

Accordingly, increases in revenue generally will increase a

consolidated Affiliate’s expenses attributable to the non-controlling interests and decreases in revenue generally will decrease a consolidated Affiliate’s expenses attributable to the non-controlling interests.

The following table presents our Consolidated expenses:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

% Change % Change

For the Three Months Ended March 31,

(in millions) 2021 2022

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Total consolidated expenses $ 378.5 $ 395.1 4 %

Compensation and related expenses increased $43.9 million or 21% for the three months ended September 30, 2021, primarily due to a $36.2 million increase in compensation correlated to the increase in Consolidated revenue, a $5.5 million increase in share-based compensation expense, primarily due to an increase in the vesting assumptions of certain performance-based awards, and a $2.2 million increase in Affiliate equity compensation expense.

Compensation and related expenses increased $115.3 million or 18% for the nine months ended September 30, 2021, primarily due to a $107.0 million increase in compensation correlated to the increase in Consolidated revenue and a $10.1 million increase in Affiliate equity compensation expense.

Selling, general and administrative expenses increased $8.8 million or 12% for the three months ended September 30, 2021, primarily due to an $8.1 million increase in distribution and investment-related expenses principally as a result of an increase in average assets under management on which these expenses are incurred.

Selling, general and administrative expenses increased $12.4 million or 5% for the nine months ended September 30, 2021, primarily due to a $16.4 million increase in distribution and investment-related expenses principally as a result of an increase in average assets under management on which these expenses are incurred, and an $11.7 million increase in professional fees.

These increases were partially offset by a $7.1 million decrease in travel-related expenses as a result of reduced travel during the COVID-19 pandemic, a $3.8 million decrease in sub-advisory expenses related to the previously announced changes to our distribution platform in 2021, and a $3.1 million decrease in reserves on notes receivable.

Intangible amortization and impairments decreased $23.0 million or 72% for the three months ended September 30, 2021, primarily due to a $24.9 million decrease in expenses to reduce the carrying value of acquired client relationships at certain of our Affiliates to fair value.

See Note 10 of our Consolidated Financial Statements.

Intangible amortization and impairments decreased $108.1 million or 81% for the nine months ended September 30, 2021, primarily due to an $85.2 million decrease in expenses to reduce the carrying value of acquired client relationships at certain of our Affiliates to fair value.

See Note 10 of our Consolidated Financial Statements.

The decrease was also due to a $27.1 million reduction in amortization expense related to certain definite-lived assets being fully amortized.

Interest expense increased $4.7 million or 20% for the three months ended September 30, 2021, primarily due to a $4.8 million increase from our junior subordinated notes issued in 2020 and 2021.

Interest expense increased $17.2 million or 26% for the nine months ended September 30, 2021, primarily due to a $16.5 million increase from our debt securities issued in 2020 and 2021, and a $2.8 million increase from the termination of our pound sterling-denominated forward foreign currency contracts, which occurred in the first quarter of 2020.

These increases were partially offset by a $2.1 million decrease from lower interest rates and lower borrowings on our senior unsecured term loan facility (the “term loan”).

There were no significant changes in Depreciation and other amortization for the three and nine months ended September 30, 2021.

There were no significant changes in Other expenses (net) for the three months ended September 30, 2021.

Other expenses (net) increased $6.0 million or 17% for the nine months ended September 30, 2021, primarily due to a $6.0 million decrease in gains related to changes in the value of Affiliate equity purchase obligations.

Equity Method Income (Loss) (Net)

Compensation and related expenses increased $8.1 million or 3% for the three months ended March 31, 2022, primarily due to a $12.3 million increase in compensation correlated to the increase in Consolidated revenue and a $5.0 million increase in share-based compensation expense.

These increases were partially offset by a $9.0 million decrease in Affiliate equity compensation expense.

Selling, general and administrative expenses increased $10.6 million or 13% for the three months ended March 31, 2022, primarily due to a $12.1 million increase in distribution and investment-related expenses principally as a result of an increase in average assets under management on which these expenses are incurred, a $1.9 million increase in non-income based and other taxes, and a $1.6 million increase in travel-related expenses.

These increases were partially offset by a $6.3 million decrease in sub-advisory expenses related to the changes to our distribution platform and a $1.7 million decrease in professional fees.

Intangible amortization and impairments increased $5.1 million or 68% for the three months ended March 31, 2022, primarily due to a $5.1 million increase in amortization expense due to investments in new Affiliates.

Interest expense increased $1.6 million or 6% for the three months ended March 31, 2022, primarily due to a $2.1 million increase from our debt securities issued in 2021.

Other expenses (net) decreased $7.9 million or 59% for the three months ended March 31, 2022, primarily due to a $10.1 million decrease in expenses related to the changes in the values of contingent payment and Affiliate equity purchase obligations.

There were no significant changes in Depreciation and other amortization for the three months ended March 31, 2022.

Equity Method Income (Net)

For our Affiliates accounted for under the equity method, we use structured partnership interests in which we contractually share in the Affiliate’s revenue or revenue less agreed-upon expenses.

Our share of earnings or losses from Affiliates accounted for under the equity method, net of amortization and impairments, is included in Equity method income (loss) (net).

The following table presents equity method Affiliate average assets under management and equity method revenue, as well as equity method earnings and equity method intangible amortization and impairments, which in aggregate form Equity method income (loss) (net):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

(in millions, except as noted) 2020 2021 % Change 2020 2021 % Change

Our share of earnings or losses from Affiliates accounted for under the equity method, net of amortization and impairments, is included in Equity method income (net).

For the Three Months Ended March 31,

(in millions, except as noted) 2021 2022 % Change

Operating Performance Measures

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Equity method earnings $ 86.9 $ 71.9 (17) %

Equity method intangible amortization and impairments (34.3) (29.3) (15) % (250.5) (93.8) (63) %

Equity method income (loss) (net) $ 17.0 $ 35.9 N.M.

$ (78.8) $ 125.1 N.M.

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(1) Percentage change is not meaningful.

Our equity method revenue increased $34.1 million or 7% for the three months ended September 30, 2021, primarily due to a $36.2 million or 7% increase from asset-based fees.

The increase in asset-based fees was due to an increase in equity method Affiliate average assets under management, primarily driven by strong Affiliate investment performance and market appreciation, and investments in new Affiliates, partially offset by net client cash outflows.

For the three months ended September 30, 2021, equity method earnings increased $13.9 million or 27%, primarily due to a $34.1 million or 7% increase in equity method revenue.

Equity method earnings increased more than equity method revenue on a percentage basis, primarily due to an increase in investment and other income at our equity method Affiliates and the contribution from our investments in new Affiliates, partially offset by a decline in earnings at certain Affiliates in which we share in revenue less agreed-upon expenses.

Equity method intangible amortization and impairments decreased $5.0 million or 15% for the three months ended September 30, 2021, primarily due to a $12.8 million decrease in amortization expense related to certain definite-lived assets being fully amortized.

This decrease was partially offset by a $5.2 million increase in amortization expense due to an increase in actual and expected client attrition for certain definite-lived acquired client relationships, and a $2.6 million increase in amortization expense due to investments in new Affiliates.

Our equity method revenue increased $253.1 million or 15% for the nine months ended September 30, 2021, due to a $204.7 million or 12% increase from performance-based fees and a $48.4 million or 3% increase from asset-based fees.

increase in asset-based fees was due to an increase in equity method Affiliate average assets under management, primarily driven by strong Affiliate investment performance and market appreciation, and investments in new Affiliates, partially offset by net client cash outflows.

For the nine months ended September 30, 2021, equity method earnings increased $47.2 million or 27%, primarily due to a $253.1 million or 15% increase in equity method revenue.

Equity method earnings increased more than equity method revenue on a percentage basis, primarily due to the recognition of performance-based fees at Affiliates in which we hold more of an economic interest, partially offset by a decline in earnings at certain Affiliates in which we share in revenue less agreed-upon expenses.

Equity method intangible amortization and impairments decreased $156.7 million or 63% for the nine months ended September 30, 2021, primarily due to a $140.0 million decrease in expenses to reduce the carrying value of an Affiliate to fair value (see Note 11 of our Consolidated Financial Statements) and a $40.0 million decrease in amortization expense related to certain definite-lived assets being fully amortized.

These decreases were partially offset by a $15.3 million increase in amortization expense due to an increase in actual and expected client attrition for certain definite-lived acquired client relationships, and an $8.0 million increase in amortization expense due to investments in new Affiliates.

Equity method intangible amortization (35.2) (23.3) (34) %

Equity method intangible impairments — — — %

Equity method income (net) $ 51.7 $ 48.6 (6) %

Our equity method revenue decreased $132.1 million or 15% for the three months ended March 31, 2022, primarily due to a $179.0 million or 21% decrease in performance-based fees, primarily in liquid alternative strategies.

The decrease was partially offset by a $46.9 million or 6% increase in asset-based fees, primarily due to a change in the composition of our assets under management and investments in new Affiliates.

For the three months ended March 31, 2022, equity method earnings decreased $15.0 million or 17%, primarily due to a $132.1 million or 15% decrease in equity method revenue.

Equity method earnings decreased more than equity method revenue on a percentage basis, primarily due to the decrease in performance-based fees at Affiliates in which we hold more of an economic interest.

Equity method intangible amortization decreased $11.9 million or 34% for the three months ended March 31, 2022, primarily due to a $16.5 million decrease in amortization expense related to certain definite-lived assets being fully amortized, partially offset by a $4.0 million increase in amortization expense due to investments in new Affiliates.

Investment and Other Income

The following table presents our Investment and other income:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

(in millions) 2020 2021 % Change 2020 2021 % Change

Investment and other income $ 12.7 $ 37.5 N.M.

$ 2.9 $ 91.1 N.M.

___________________________

(1) Percentage change is not meaningful.

Investment and other income increased $24.8 million for the three months ended September 30, 2021, primarily due to a $26.6 million net increase from the valuation and realized gains on sales of Other investments.

Investment and other income increased $88.2 million for the nine months ended September 30, 2021, primarily due to an $87.5 million net increase from the valuation and realized gains on sales of Other investments.

For the Three Months Ended March 31,

(in millions) 2021 2022 % Change

Investment and other income $ 32.3 $ 13.6 (58) %

Investment and other income decreased $18.7 million or 58% for the three months ended March 31, 2022, primarily due to a $21.2 million decrease from net unrealized gains on Other investments.

Income Tax Expense

The following table presents our Income tax expense:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

(in millions) 2020 2021 % Change 2020 2021 % Change

Income tax expense $ 37.5 $ 44.9 20 % $ 43.0 $ 166.4 N.M.

___________________________

(1) Percentage change is not meaningful.

Income tax expense increased $7.4 million or 20% for the three months ended September 30, 2021, primarily due to a $67.2 million increase in income before income taxes attributable to the controlling interest, partially offset by a $10.1 million increase in the deferred tax expense resulting from the revaluation of certain deferred tax liabilities due to an increase in the UK tax rate enacted during the third quarter of 2020 that did not reoccur.

Income tax expense increased $123.4 million for the nine months ended September 30, 2021, primarily due to a $420.5 million increase in income before income taxes attributable to the controlling interest and a $15.0 million deferred tax expense resulting from the revaluation of certain deferred tax liabilities due to an increase in the UK tax rate enacted during the second quarter of 2021.

For the Three Months Ended March 31,

(in millions) 2021 2022 % Change

Income tax expense $ 50.5 $ 55.7 10 %

Income tax expense increased $5.2 million or 10% for the three months ended March 31, 2022, primarily due to a $3.1 million increase in income taxes attributable to the non-controlling interest, a $1.2 million increase in U.S.

income tax on Global Intangible Low-Taxed Income (“GILTI”), and a $0.8 million increase in unrecognized tax benefits.

The following table presents Net income, Net income (non-controlling interests), and Net income (controlling interest):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

(in millions) 2020 2021 % Change 2020 2021 % Change

Net income $ 127.8 $ 208.4 63 % $ 231.2 $ 606.7 N.M.

For the Three Months Ended March 31,

(in millions) 2021 2022 % Change

Net income $ 214.1 $ 218.7 2 %

Net income (non-controlling interests) 64.2 72.7 13 %

Net income (controlling interest) 71.3 128.4 80 % 86.3 387.3 N.M.

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(1) Percentage change is not meaningful.

Net income (controlling interest) increased $57.1 million or 80% for the three months ended September 30, 2021, primarily due to an increase in Consolidated revenue, an increase in Investment and other income attributable to the controlling interest, an increase in Equity method income (net), and a decrease in Intangible amortization and impairments attributable to the controlling interest.

These increases were partially offset by an increase in Income tax expense attributable to the controlling interest.

Net income (controlling interest) increased $301.0 million for the nine months ended September 30, 2021, primarily due to an increase in Equity method income (net), an increase in Consolidated revenue, a decrease in Intangible amortization and impairments attributable to the controlling interest, and an increase in Investment and other income attributable to the controlling interest.

These increases were partially offset by an increase in Income tax expense attributable to the controlling interest.

Net income (controlling interest) 149.9 146.0 (3) %

Net income (controlling interest) decreased $3.9 million or 3% for the three months ended March 31, 2022, primarily due to a decrease in Investment and other income attributable to the controlling interest and a decrease in Equity method income (net).

Supplemental Financial Performance Measures

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As supplemental information, we provide a non-GAAP measure that we refer to as Adjusted EBITDA (controlling interest).

Adjusted EBITDA (controlling interest) is an important supplemental financial performance measure for management as it provides a comprehensive view of our share of the financial performance of our business before interest, taxes, depreciation, amortization, impairments, certain Affiliate equity expenses, gains and losses on general partner and seed capital investments, and adjustments to our contingent payment arrangements.

Adjusted EBITDA (controlling interest) is an important supplemental financial performance measure for management as it provides a comprehensive view of our share of the financial performance of our business before interest, income taxes, depreciation, amortization, impairments, certain Affiliate equity expenses, certain gains and losses, including on general partner and seed capital investments, certain non-income based taxes, and adjustments to our contingent payment obligations.

We believe that many investors use this measure when assessing the financial performance of companies in the investment management industry.

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The following table presents a reconciliation of Net income (controlling interest) to Adjusted EBITDA (controlling interest):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in millions) 2021 2022

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Intangible amortization and impairments (1)

59.1 35.6 341.1 111.7

Other items (2)

(5.5) (7.4) 16.9 (33.2)

Adjusted EBITDA (controlling interest) $ 246.8 $ 255.3

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(1) Intangible amortization and impairments in our Consolidated Statement of Income include amortization attributable to the non-controlling interests of our consolidated Affiliates.

(1) Intangible amortization and impairments in our Consolidated Statements of Income include amortization attributable to the non-controlling interests of our consolidated Affiliates.

For our Affiliates accounted for under the equity method, we do not separately report intangible amortization and impairments in our Consolidated Statements of Income.

Our share of these Affiliates’ amortization is reported in Equity method income (loss) (net).

The following table presents the Intangible

amortization and impairments shown above:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

Our share of these Affiliates’ amortization and impairments is reported in Equity method income (net).

The following table presents the Intangible amortization and impairments shown above:

For the Three Months Ended March 31,

(in millions) 2021 2022

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Total $ 40.6 $ 31.9

(2) Other items includes depreciation, adjustments to contingent payment arrangements, certain Affiliate equity expenses, and gains and losses on general partner and seed capital investments.

(2) Other items includes depreciation, adjustments to contingent payment obligations, certain Affiliate equity expenses, certain gains and losses, including on general partner and seed capital investments, and certain non-income based taxes.

Economic Net Income (controlling interest) and Economic Earnings Per Share

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Economic earnings per share represents Economic net income (controlling interest) divided by the Average shares outstanding (adjusted diluted).

In this calculation, the potential share issuance in connection with our junior convertible securities is measured using a “treasury stock” method.

In this calculation, we exclude the potential shares issued upon settlement of Redeemable non-controlling interests from Average shares outstanding (adjusted diluted) because we intend to settle those obligations without issuing shares, consistent with all prior Affiliate equity purchase transactions.

The potential share issuance in connection with our junior convertible securities is measured using a “treasury stock” method.

Under this method, only the net number of shares of common stock equal to the value of these junior convertible securities in excess of par, if any, is deemed to be outstanding.

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The following table presents a reconciliation of Net income (controlling interest) to Economic net income (controlling interest) and Economic earnings per share:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in millions, except per share data) 2021 2022

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Intangible amortization and impairments (1)

59.1 35.6 341.1 111.7

Intangible-related deferred taxes 8.9 15.7

Other economic items (2)

(5.3) (7.5) 12.7 (26.4)

Economic net income (controlling interest) $ 184.8 $ 190.0

Average shares outstanding (diluted) 45.4 46.9

Hypothetical issuance of shares to settle Redeemable non-controlling interests — (4.0)

Assumed issuance of junior convertible securities shares (2.2) (2.0)

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(1) See note (1) to the table in “Adjusted EBITDA (controlling interest).”

(2) Other economic items includes non-cash imputed interest (principally related to the accounting for convertible securities and contingent payment arrangements), tax windfalls and shortfalls from share-based compensation, certain Affiliate equity expenses, and gains and losses on general partner and seed capital investments.

For the three and nine months ended September 30, 2020 and 2021, other economic items were net of income tax expense (benefit) of $2.3 million and $(0.8) million, respectively, and $3.0 million and $13.1 million, respectively.

(2) Other economic items includes non-cash imputed interest (principally related to the accounting for convertible securities and contingent payment obligations), tax windfalls and shortfalls from share-based compensation, certain Affiliate equity expenses, and certain gains and losses, including on general partner and seed capital investments.

For the three months ended March 31, 2021 and 2022, other economic items were net of income tax expense of $6.9 million and income tax benefit of $1.6 million, respectively.

Liquidity and Capital Resources

We generate long-term value by investing in new Affiliate partnerships, investing in existing Affiliates, and investing in centralized capabilities through which we can leverage our scale and resources to benefit our Affiliates and enhance their long-term growth prospects.

Given our annual cash generation from operations, in addition to investing for growth in our business, we are also able to return excess capital to shareholders primarily through share repurchases.

Given our annual cash generation from operations, in addition to investing for growth in our business,

we are also able to return excess capital to shareholders primarily through share repurchases.

We continue to manage our capital structure consistent with an investment grade company and are currently rated A3 by Moody’s Investor Services and BBB+ by S&P Global Ratings.

Cash and cash equivalents were $1,128.0 million as of September 30, 2021 and were attributable to both our controlling and the non-controlling interests.

In the nine months ended September 30, 2021, we met our cash requirements primarily through cash generated by operating activities.

Our principal uses of cash in the nine months ended September 30, 2021 were for share repurchases, investments in existing Affiliates through purchases of Affiliate equity interests, and investments in new Affiliates.

Cash and cash equivalents were $501.0 million as of March 31, 2022 and were attributable to both our controlling and the non-controlling interests.

In the three months ended March 31, 2022, we met our cash requirements primarily through cash generated by operating activities.

Our principal uses of cash in the three months ended March 31, 2022 were for share repurchases and investments in existing Affiliates through purchases of Affiliate equity interests, including our additional investment in Systematica.

We expect investments in new Affiliates, investments in existing Affiliates, primarily through purchases of Affiliate equity interests and general partner and seed capital investments, the return of capital through share repurchases and the payment of cash dividends on our common stock, repayment of debt, distributions to Affiliate equity holders, and general working capital to be the primary uses of cash on a consolidated basis for the foreseeable future.

We anticipate that our current cash balance, cash flows from operations, and borrowings under our revolver will be sufficient to support our uses of cash for the foreseeable future.

We anticipate that our current cash balance, cash flows from operations, and borrowings under our senior unsecured multicurrency revolving credit facility (the “revolver”) will be sufficient to support our uses of cash for the foreseeable future.

In addition, we may draw funding from the debt and equity capital markets, and our credit ratings, among other factors, allow us to access these sources of funding on favorable terms.

Pursuant to the terms of the Securities Purchase and Merger Agreement regarding the sale of our equity interest in BPEA to EQT, we will receive $240.0 million in cash and 28.68 million EQT ordinary shares (25% of which are subject to a six-month lock-up).

The transaction is expected to close in the fourth quarter of 2022, subject to customary closing conditions.

Following the closing, we expect to use approximately 40% of our gross proceeds to pay taxes, transaction expenses, and debt repayment, and to deploy the remaining 60% in line with our capital allocation strategy, across a combination of growth investments and share repurchases over time.

The following table presents operating, investing, and financing cash flow activities:

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in millions) 2021 2022

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Operating cash flows are calculated by adjusting Net income for other significant sources and uses of cash, significant non-cash items, and timing differences in the cash settlement of assets and liabilities.

For the nine months ended September 30, 2021, Cash flows from operating activities were $897.3 million, primarily from Net income of $606.7 million adjusted for non-cash items of $22.1 million, $288.1 million of distributions of earnings received from equity method investments, and timing differences in the cash settlement of receivables, other assets, and payables, accrued liabilities, and other liabilities of $21.6 million.

These items were partially offset by net purchases of securities by consolidated sponsored investment products of $41.2 million.

For the nine months ended September 30, 2021, operating cash flows were primarily attributable to the controlling interest.

For the three months ended March 31, 2022, Cash flows from operating activities were $145.0 million, primarily from Net income of $218.7 million adjusted for non-cash items of $5.2 million, and $173.1 million of distributions of earnings received from equity method investments.

These items were partially offset by timing differences in the cash settlement of receivables, other assets, and payables, accrued liabilities, and other liabilities of $250.5 million.

For the three months ended March 31, 2022, operating cash flows were attributable to the controlling interest.

Investing Cash Flow

For the nine months ended September 30, 2021, Cash flows used in investing activities were $177.8 million, primarily due to $144.9 million of investments in new Affiliates and $31.4 million of net purchases of investments securities.

For the nine months ended September 30, 2021, investing cash flows were primarily attributable to the controlling interest.

For the three months ended March 31, 2022, Cash flows used in investing activities were $157.4 million, primarily due to $147.8 million of investments in existing Affiliates and $5.9 million of net purchases of investments securities.

For the three months ended March 31, 2022, investing cash flows were primarily attributable to the controlling interest.

Financing Cash Flow

For the nine months ended September 30, 2021, Cash flows used in financing activities were $625.5 million, primarily due to the return of $496.0 million of capital to shareholders, principally through share repurchases of our common stock, $260.9

million of distributions to non-controlling interests, $47.8 million of Affiliate equity purchases, net of issuances, $26.1 million of repurchases of our junior convertible securities, and $18.8 million of taxes paid from shares withheld related to issuances of our common stock.

Cash flows used in financing activities were partially offset by $200.0 million of proceeds from borrowings of junior debt and receipt of $33.2 million of subscriptions to consolidated funds, net of redemptions.

For the three months ended March 31, 2022, Cash flows used in financing activities were $388.9 million, primarily due to the return of $201.3 million of capital to shareholders, through share repurchases of our common stock, $122.5 million of distributions to non-controlling interests, $45.0 million of settlement of contingent and deferred payment obligations, $16.5 million of repurchases of our junior convertible securities, and $13.3 million of taxes paid from shares withheld related to issuances of our common stock.

Cash flows used in financing activities were partially offset by $6.3 million of proceeds from Affiliate equity issuances, net of purchases, and $4.4 million of subscriptions to consolidated funds, net of redemptions.

Affiliate Equity

We periodically purchase Affiliate equity from and issue Affiliate equity to our consolidated Affiliate partners and our officers, under agreements that provide us with a conditional right to call and Affiliate equity holders with a conditional right to put their Affiliate equity interests to us at certain intervals.

We periodically purchase Affiliate equity from and issue Affiliate equity to our consolidated Affiliate partners and other parties, under agreements that provide us with a conditional right to call and Affiliate equity holders with a conditional right to put their Affiliate equity interests to us at certain intervals.

We have the right to settle a portion of these purchases in shares of our common stock.

For Affiliates accounted for under the equity method, we do not typically have such put and call arrangements.

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Affiliate equity holders are also permitted to sell their equity interests to other individuals or entities in certain cases, subject to our approval or other restrictions.

As of September 30, 2021, our current redemption value of $748.9 million for Affiliate equity interests (including $18.3 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors) has been presented as Redeemable non-controlling interests.

Although the timing and amounts of these purchases are difficult to predict, we paid $47.8 million for Affiliate equity purchases, net of issuances during the nine months ended September 30, 2021, and we expect net purchases of approximately $60 million of Affiliate equity during the remainder of 2021.

As of March 31, 2022, the current redemption value of Affiliate equity interests was $686.4 million, of which $638.8 million was presented as Redeemable non-controlling interests (including $25.4 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors), and $47.6 million was presented as Other liabilities.

Although the timing and amounts of these purchases are difficult to predict, we paid $5.3 million for Affiliate equity purchases and received $11.6 million for Affiliate equity issuances during the three months ended March 31, 2022, and we expect net purchases of approximately $100 million of Affiliate equity during the remainder of 2022.

In the event of a purchase, we become the owner of the cash flow associated with the purchased equity.

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Share Repurchases

Our Board of Directors authorized share repurchase programs in January 2021 and October 2019 to repurchase up to 5.0 million and 6.0 million shares of our common stock, respectively, and these authorizations have no expiry.

Our Board of Directors authorized share repurchase programs in January 2022 and January 2021 to repurchase up to 2.0 million and 5.0 million shares of our common stock, respectively, and these authorizations have no expiry.

Purchases may be made from time to time, at management’s discretion, in the open market or in privately negotiated transactions, including through the use of trading plans, as well as pursuant to accelerated share repurchase programs or other share repurchase strategies that may include derivative financial instruments.

During the three and nine months ended September 30, 2021, we repurchased 0.6 million and 2.8 million shares of our common stock, respectively, at an average price per share of $161.02 and $141.58, respectively.

As of September 30, 2021, we had repurchased all of the shares of the October 2019 authorized amount, and there were a total of 4.2 million shares available for repurchase under our January 2021 share repurchase program.

During the three months ended March 31, 2022, we repurchased 1.3 million shares of our common stock at an average price per share of $144.42.

As of March 31, 2022, there were a total of 4.2 million shares available for repurchase under our January 2022 and 2021 share repurchase programs.

The following table presents the carrying value of our outstanding indebtedness.

See Note 7 of our Consolidated Financial Statements:

(in millions) December 31, 2020 September 30, 2021

(in millions) December 31, 2021 March 31, 2022

Senior bank debt $ 350.0 $ 350.0

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The carrying value of our debt differs from the amount reported in the notes to our Consolidated Financial Statements, as the carrying value of our debt in the table above is not reduced for debt issuance costs.

Effective January 1, 2022, we adjusted the carrying value of our junior convertible securities (see Note 2 of our Consolidated Financial Statements).

Senior Bank Debt

We have a $1.25 billion senior unsecured multicurrency revolving credit facility (the “revolver”) and a $350.0 million term loan (together with the revolver, the “credit facilities”).

We amended and restated the revolver in October 2021, extending the maturity from January 18, 2024 to October 23, 2026, and amended the term loan in January 2021 and June 2021, and further amended the restated the term loan in October 2021, extending the maturity from January 18, 2023 to October 23, 2026.

Through these amendments, we also reduced applicable rates for the revolver and the term loan, and provided for customary LIBOR succession provisions.

The commercial terms of the revolver and the term loan otherwise remain the same.

We have a $1.25 billion revolver and a $350.0 million senior unsecured term loan facility (the “term loan”) (together with the revolver, the “credit facilities”).

Both the revolver and the term loan mature on October 23, 2026.

Subject to certain conditions, we may increase the commitments under the revolver by up to an additional $500.0 million and may borrow up to an additional $75.0 million under the term loan.

As of September 30, 2021, we had no outstanding borrowings under the revolver, and could borrow all capacity and remain in compliance with our credit facilities.

As of September 30, 2021, we had the following senior notes outstanding, the respective principal terms of which are presented below:

As of March 31, 2022, we had no outstanding borrowings under the revolver, and could borrow all capacity and remain in compliance with our credit facilities.

As of March 31, 2022, we had the following senior notes outstanding, the respective principal terms of which are presented below:

Senior Notes 2025

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Junior Subordinated Notes

As of September 30, 2021, we had the following junior subordinated notes outstanding, the respective principal terms of which are presented below:

As of March 31, 2022, we had the following junior subordinated notes outstanding, the respective principal terms of which are presented below:

Junior Subordinated Notes 2060

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Listing NYSE NYSE NYSE

In July 2021, we issued $200.0 million of junior subordinated notes with a maturity date of September 30, 2061.

We intend to use the net proceeds from the 2061 junior subordinated notes for general corporate purposes, which may include the repayment of indebtedness, share repurchases, and investments in new and existing Affiliates.

Junior Convertible Securities

As of September 30, 2021, we had 5.15% junior convertible trust preferred securities outstanding (the “junior convertible securities”) with a carrying value of $301.4 million.

As of March 31, 2022, we had $386.3 million of principal outstanding in our 5.15% junior convertible trust preferred securities (the “junior convertible securities”), maturing in 2037.

The junior convertible securities were issued by AMG Capital Trust II, a Delaware statutory trust, in October 2007.

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We do not consolidate the trust’s financial results into our Consolidated Financial Statements.

The carrying value of the junior convertible securities is accreted to the principal amount at maturity ($404.7 million) over a remaining life of approximately 16 years.

Holders of the junior convertible securities have no rights to put these securities to us.

Upon conversion, holders will receive cash or shares of our common stock, or a combination thereof, at our election.

We may redeem the junior convertible securities, subject to our stock trading at or above certain specified levels over specified times periods, and may also repurchase junior convertible securities in the open market or in privately negotiated transactions from time to time at management’s discretion.

During the nine months ended September 30, 2021, we paid $28.7 million to repurchase a portion of our junior convertible securities, resulting in reductions of $26.1 million and $6.1 million in Debt and Additional paid-in capital, respectively.

As a result of these repurchases, we also reduced our Deferred income tax liability (net) by $6.2 million.

Equity Distribution Program

We have equity distribution and forward equity agreements with several major securities firms under which we may, from time to time, issue and sell shares of our common stock (immediately or on a forward basis) having an aggregate sales price of up to $500.0 million (the “equity distribution program”).

As of September 30, 2021, no sales had occurred under the equity distribution program.

See Note 8 of our Consolidated Financial Statements.

We may redeem the junior convertible securities, subject to our stock trading at or above certain specified levels over specified periods, and may also repurchase junior convertible securities in the open market or in privately negotiated transactions from time to time at management’s discretion.

During the three months ended March 31, 2022, we paid $16.5 million to repurchase a portion of our junior convertible securities.

As a result of these repurchases, we reduced our Deferred income tax liability (net) by $2.7 million.

See Note 8 of our Consolidated Financial Statements.

As of September 30, 2021, our lease obligations were $9.7 million for the remainder of 2021, $72.8 million from 2022 through 2023, $59.6 million from 2024 through 2025, and $97.9 million thereafter.

Other Contingent Commitments

See Notes 5, 8, and 10 of our Consolidated Financial Statements.

As of March 31, 2022, our lease obligations were $28.9 million for the remainder of 2022, $73.3 million from 2023 through 2024, $51.6 million from 2025 through 2026, and $80.9 million thereafter.

The portion of these lease obligations attributable to the controlling interest were $6.5 million for the remainder of 2022, $19.1 million from 2023 through 2024, $13.2 million from 2025 through 2026, and $11.6 million thereafter.

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Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our Quantitative and Qualitative Disclosures About Market Risk for the three months ended September 30, 2021.

There have been no material changes to our Quantitative and Qualitative Disclosures About Market Risk for the three months ended March 31, 2022.

Please refer to Item 7A of our 2021 Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis