Quantitative and Qualitative Disclosures About Market Risk
−Removed: Substantially all of our revenues are derived from investment management, fund administration and distribution fees, which are primarily based on the market value of our AUM.
+Added: Market Risk – Substantially all of our revenues are derived from investment management, fund administration and distribution fees, which are primarily based on the market value of our AUM.
Accordingly, our revenues and net income may decline as a result of our AUM decreasing due to depreciation of our investment portfolios.
In addition, such depreciation could cause our clients to withdraw their assets in favor of other investment alternatives that they perceive to offer higher returns or lower risk, which could cause our revenues and net income to decline further.
−Removed: The value of our AUM was approximately $178 billion at March 31, 2022.
−Removed: A 10% increase or decrease in the value of our AUM, if proportionately distributed over all of our strategies, products and client relationships, would cause an annualized increase or decrease in our revenues of approximately $94.3 million at our weighted-average fee rate of 53 basis points for the quarter ended March 31, 2022.
+Added: The value of our AUM was approximately $155 billion at June 30, 2022.
+Added: A 10% increase or decrease in the value of our AUM, if proportionately distributed over all of our strategies, products and client relationships, would cause an annualized increase or decrease in our revenues of approximately $80.6 million at our weighted-average fee rate of 52 basis points for the quarter ended June 30, 2022.
Because of declining fee rates from larger relationships and differences in our fee rates across investment strategies, a change in the composition of our AUM, in particular, an increase in the proportion of our total AUM attributable to strategies, clients or relationships with lower effective fee rates, could have a material negative impact on our overall weighted-average fee rate.
−Removed: The same 10% increase or decrease in the value of our total AUM, if attributed entirely to a proportionate increase or decrease in the AUM of the Victory Funds and USAA Funds, to which we provide a range of services in addition to those provided to institutional separate accounts, would cause an annualized increase or decrease in our revenues of approximately $108.6 million at the Victory Funds’ and USAA Funds’ aggregate weighted-average fee rate of 61 basis points for the quarter ended March 31, 2022.
−Removed: If the same 10% increase or decrease in the value of our total AUM was attributable entirely to a proportionate increase or decrease in the assets of our institutional separate accounts, it would cause an annualized increase or decrease in our revenues of approximately $58.7 million at the weighted-average fee rate across all of our institutional separate accounts of 33 basis points for the quarter ended March 31, 2022.
+Added: The same 10% increase or decrease in the value of our total AUM, if attributed entirely to a proportionate increase or decrease in the AUM of the Victory Funds and USAA Funds, to which we provide a range of services in addition to those provided to institutional separate accounts, would cause an annualized increase or decrease in our revenues of approximately $94.6 million at the Victory Funds’ and USAA Funds’ aggregate weighted-average fee rate of 61 basis points for the quarter ended June 30, 2022.
+Added: If the same 10% increase or decrease in the value of our total AUM was attributable entirely to a proportionate increase or decrease in the assets of our institutional separate accounts, it would cause an annualized increase or decrease in our revenues of approximately $49.6 million at the weighted-average fee rate across all of our institutional separate accounts of 32 basis points for the quarter ended June 30, 2022.
As is customary in the investment management industry, clients invest in particular strategies to gain exposure to certain asset classes, which exposes their investment to the benefits and risks of those asset classes.
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While negative returns in our strategies and net client cash outflows do not directly reduce the assets on our balance sheet (because the assets we manage are owned by our clients, not us), any reduction in the value of our AUM would result in a reduction in our revenues.
−Removed: Exchange Rate Risk
−Removed: A portion of the accounts that we advise hold investments that are denominated in currencies other than the U.S.
−Removed: To the extent our AUM are denominated in currencies other than the U.S.
+Added: Exchange Rate Risk – A portion of the accounts that we advise hold investments that are denominated in currencies other than the U.S.
+Added: To the extent our AUM is denominated in currencies other than the U.S.
dollar, the value of that AUM will decrease with an increase in the value of the U.S.
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dollar and excluding the impact of any hedging arrangement, a 10% increase or decrease in the value of the U.S.
−Removed: dollar would decrease or increase the fair value of our AUM by approximately $1.8 billion, which would cause an annualized increase or decrease in revenues of approximately $9.5 million at our weighted-average fee rate for the business of 53 basis points for the quarter ended March 31, 2022.
+Added: dollar would decrease or increase the fair value of our AUM by approximately $1.4 billion, which would cause an annualized increase or decrease in revenues of approximately $7.3 million at our weighted-average fee rate for the business of 52 basis points for the quarter ended June 30, 2022.
We operate in several foreign countries and incur operating expenses associated with these operations.
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We do not believe foreign currency fluctuations materially affect our results of operations.
−Removed: Interest Rate Risk
−Removed: Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
+Added: Interest Rate Risk – Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
On March 27, 2020, the Company executed the Swap, a floating-to-fixed interest rate swap transaction, to effectively fix the interest rate at 3.465% on $450 million of its outstanding Original Term Loan through the Original Term Loan maturity date of July 2026.
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Refer to Note 14, Derivatives, for further information on the Swap.
−Removed: At March 31, 2022, we were exposed to interest rate risk as a result of the unhedged amounts outstanding under the 2019 Credit Agreement, as amended.
+Added: At June 30, 2022, we were exposed to interest rate risk as a result of the unhedged amounts outstanding under the 2019 Credit Agreement, as amended.
Refer to Note 9, Debt, for a description of the amounts outstanding as of such date and the applicable interest rate.
+Added: Cont rols and Procedures
+Added: Disclosure Controls and Procedures
+Added: We maintain disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow for timely decisions regarding required disclosure.
+Added: Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) at June 30, 2022.
+Added: Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.
+Added: Changes in Internal Control over Financial Reporting
+Added: There has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
+Added: PART II—OTHER INFORMATION
+Added: Legal Proceedings
+Added: From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business.
+Added: The Company is not currently a party to any material legal proceedings.
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.