Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Assets Under Management Market Price Risk
Consolidated revenue and equity method revenue , net are derived primarily from asset-based fees that are typically
determined as a percentage of the value of a client’s assets under management. Such values are affected by changes in financial
markets (including declines in the capital markets, fluctuations in foreign currency exchange rates, inflation rates or the yield
curve, and other market factors) and, accordingly, declines in the financial markets may negatively impact Consolidated
revenue and equity method revenue, net.
As of December 31, 2025 , we estimate a proportional 1% change in the value of our assets under management would have
resulted in a $17.2 million annualized change in asset-based fees in Consolidated revenue for our consolidated Affiliates and a
$27.0 million annualized change in asset-based fees in equity method revenue, net for our Affiliates accounted for under the
equity method. This proportional increase or decrease excludes assets under management on which asset-based fees are
charged on committed capital.
Interest Rate Risk
We have fixed rates of interest on our senior notes and junior subordinated notes. While a change in market interest rates
would not affect the interest expense incurred on our fixed rate securities, such a change may affect the fair value of these
securities. We estimate that a 1% change in interest rates would have resulted in a $205.9 million net change in the fair value of
our fixed rate securities as of December 31, 2025 . We pay a variable rate of interest on any outstanding obligations under our
revolver at specified rates, based either on an applicable term Secured Overnight Financing Rate (“SOFR”) plus a SOFR
adjustment of 0.10% or prime rate, plus a marginal rate determined based on our credit rating. As of December 31, 2025 , we
had no outstanding borrowings under the revolver .
Foreign Currency Risk
The functional currency of most of our Affiliates is the U.S. dollar. Certain of our Affiliates have the pound sterling,
Canadian dollar, or the euro as their functional currency, and are, therefore, impacted by movements in pound sterling,
Canadian dollar, and euro to U.S. dollar foreign currency exchange rates. In addition, the valuations of our foreign Affiliates
with a non-U.S. dollar functional currency change based on fluctuations in foreign currency exchange rates, among other
factors. Changes due to fluctuations in foreign currency exchange rates are recorded as a component of stockholders’ equity.
To illustrate the effect of possible changes in foreign currency exchange rates, we estimate a 1% change in the pound
sterling, Canadian dollar, and euro to U.S. dollar exchange rates would have resulted in an $8.4 million , $1.9 million , and $4.8
million change to stockholders’ equity, respectively, primarily based on the December 31, 2025 carrying value of Affiliates
whose functional currency is the pound sterling, Canadian dollar, or the euro. For the year ended December 31, 2025 , we
estimate a 1% change in the pound sterling, Canadian dollar, and the euro to U.S. dollar exchange rates would have resulted in
$0.8 million , $0.3 million , and $0.3 million in annual changes to Income before income taxes (controlling interest),
respectively.
Derivative Risk
From time to time, we and our Affiliates seek to offset exposure to changes in interest rates, foreign currency exchange
rates, and markets by entering into derivative financial instruments. There can be no assurance that our or our Affiliates’
derivative financial instruments will meet their overall objective or that we or our Affiliates will be successful in entering into
such instruments in the future.
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