What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-06 · 123 added, 84 removed, 497 unchanged (29% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data) March 31,

(in thousands, except share data) June 30,

2021 December 31,

28 unchanged sentences

Common stock, $ 0.01 par value, 1,000,000,000 shares authorized;

11,876,994 shares issued and 7,649,679 shares outstanding at March 31, 2021, respectively, and 11,790,869 shares issued and 7,583,466 shares outstanding at December 31, 2020, respectively

11,905,842 shares issued and 7,651,606 shares outstanding at June 30, 2021, respectively, and 11,790,869 shares issued and 7,583,466 shares outstanding at December 31, 2020, respectively

Additional paid-in capital 1,280,667 1,298,002

1 unchanged sentence

Accumulated other comprehensive income (loss) 35 29

Treasury stock, at cost, 4,227,315 and 4,207,403 shares at March 31, 2021 and December 31, 2020, respectively

Treasury stock, at cost, 4,254,236 and 4,207,403 shares at June 30, 2021 and December 31, 2020, respectively

( 464,248 ) ( 451,749 )

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2021 2020 2021 2020

9 unchanged sentences

Operating expenses of consolidated investment products ("CIP") 659 2,179 1,218 8,928

Restructuring and severance — 420 — 420

Depreciation expense 981 1,196 2,079 2,454

17 unchanged sentences

Noncontrolling interests ( 13,130 ) ( 4,930 ) ( 28,756 ) ( 10,221 )

Net Income (Loss) Attributable to Common Stockholders $ 36,588 $ ( 4,285 )

Net Income (Loss) Attributable to Virtus Investment Partners, Inc.

$ 62,967 $ 11,279 $ 99,555 $ 6,994

Earnings (Loss) per Share—Basic $ 8.18 $ 1.46 $ 12.97 $ 0.92

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2021 2020 2021 2020

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment, net of tax of $ 0 and $ 9 for the three months ended March 31, 2021 and 2020, respectively

Foreign currency translation adjustment, net of tax of $( 2 ) and $ 0 for the three months ended June 30, 2021 and 2020, respectively, and $( 2 ) and $ 9 for the six months ended June 30, 2021 and 2020, respectively

0 ( 1 ) 6 ( 26 )

Other comprehensive income (loss) 0 ( 1 ) 6 ( 26 )

1 unchanged sentence

Comprehensive (income) loss attributable to noncontrolling interests ( 13,130 ) ( 4,930 ) ( 28,756 ) ( 10,221 )

Comprehensive Income (Loss) Attributable to Stockholders $ 36,594 $ ( 4,310 )

Comprehensive Income (Loss) Attributable to Virtus Investment Partners, Inc.

$ 62,967 $ 11,278 $ 99,561 $ 6,968

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(in thousands) 2021 2020

9 unchanged sentences

Realized and unrealized (gains) losses on investments, net ( 3,381 ) 431

Distributions from equity method investments 1,908 726

Sales (purchases) of investments, net ( 3,395 ) 4,703

39 unchanged sentences

Conversion of preferred stock to common stock $ — $ 115,000

(in thousands) March 31,

(in thousands) June 30,

2021 December 31, 2020

8 unchanged sentences

Permanent Equity Temporary Equity

Common Stock Additional

Capital Retained Earnings (Accumulated

Deficit) Accumulated

Comprehensive

Income (Loss) Treasury Stock Total

Attributed To

Stockholders Non-

Interests Total

Equity Redeemable

(in thousands, except per share data) Shares Par Value Shares Amount

Balances at March 31, 2020 7,695,413 $ 117 $ 1,304,868 $ ( 219,501 ) $ ( 16 ) 4,038,563 $ ( 429,249 ) $ 656,219 $ 10,247 $ 666,466 $ 87,115

Net income (loss) — — — 11,279 — — — 11,279 ( 1,378 ) 9,901 6,308

Foreign currency translation adjustments — — — — ( 1 ) — — ( 1 ) — ( 1 ) —

Net subscriptions (redemptions) and other — — ( 167 ) — — — — ( 167 ) ( 524 ) ( 691 ) ( 2,736 )

Cash dividends declared ($ 0.67 per common share)

— — ( 5,496 ) — — — — ( 5,496 ) — ( 5,496 ) —

Repurchases of common shares ( 74,897 ) — — — — 74,897 ( 7,500 ) ( 7,500 ) — ( 7,500 ) —

Issuance of common shares related to employee stock transactions 43,756 1 12 — — — — 13 — 13 —

Taxes paid on stock-based compensation — — ( 2,019 ) — — — — ( 2,019 ) — ( 2,019 ) —

Stock-based compensation — — 5,838 — — — — 5,838 — 5,838 —

Balances at June 30, 2020 7,664,272 $ 118 $ 1,303,036 $ ( 208,222 ) $ ( 17 ) 4,113,460 $ ( 436,749 ) $ 658,166 $ 8,345 $ 666,511 $ 90,687

Balances at March 31, 2021 7,649,679 $ 119 $ 1,284,643 $ ( 98,671 ) $ 35 4,227,315 $ ( 456,748 ) $ 729,378 $ 9,317 $ 738,695 $ 112,482

Net income (loss) — — — 62,967 — — — 62,967 270 63,237 12,860

Foreign currency translation adjustments — — — — 0 — — 0 — 0 —

Net subscriptions (redemptions) and other — — — — — — — — ( 619 ) ( 619 ) 6,183

Cash dividends declared ($ 0.82 per common share)

— — ( 6,604 ) — — — — ( 6,604 ) — ( 6,604 ) —

Repurchases of common shares ( 26,921 ) — — — — 26,921 ( 7,500 ) ( 7,500 ) — ( 7,500 ) —

Issuance of common shares related to employee stock transactions 28,848 — — — — — — — — — —

Taxes paid on stock-based compensation — — ( 4,117 ) — — — — ( 4,117 ) ( 4,117 ) —

Stock-based compensation — — 6,745 — — — — 6,745 — 6,745 —

Balances at June 30, 2021 7,651,606 $ 119 $ 1,280,667 $ ( 35,704 ) $ 35 4,254,236 $ ( 464,248 ) $ 780,869 $ 8,968 $ 789,837 $ 131,525

Permanent Equity Temporary Equity

Common Stock Preferred Stock Additional

12 unchanged sentences

Net subscriptions (redemptions) and other — — — — ( 167 ) — — — — ( 167 ) ( 1,090 ) ( 1,257 ) 15,498

Conversion of preferred stock 912,806 9 ( 1,150,000 ) ( 110,843 ) 110,834 — — — — — — — —

Cash dividends declared ($ 1.34 per common share)

1 unchanged sentence

Repurchases of common shares ( 185,853 ) — — — — — — 185,853 ( 17,500 ) ( 17,500 ) — ( 17,500 ) —

Conversion of preferred stock 912,806 9 ( 1,150,000 ) ( 110,843 ) 110,834 — — — — — — — —

Issuance of common shares related to employee stock transactions 128,039 2 — — 112 — — — — 114 — 114 —

1 unchanged sentence

Stock-based compensation — — — — 10,297 — — — — 10,297 — 10,297 —

Balances at March 31, 2020 7,695,413 $ 117 — $ — $ 1,304,868 $ ( 219,501 ) $ ( 16 ) 4,038,563 $ ( 429,249 ) $ 656,219 $ 10,247 $ 666,466 $ 87,115

Balances at June 30, 2020 7,664,272 $ 118 — $ — $ 1,303,036 $ ( 208,222 ) $ ( 17 ) 4,113,460 $ ( 436,749 ) $ 658,166 $ 8,345 $ 666,511 $ 90,687

Balances at December 31, 2020 7,583,466 $ 118 — $ — $ 1,298,002 $ ( 135,259 ) $ 29 4,207,403 $ ( 451,749 ) $ 711,141 $ 9,799 $ 720,940 $ 115,513

8 unchanged sentences

Stock-based compensation — — — — 15,180 — — — — 15,180 — 15,180 —

Balances at March 31, 2021 7,649,679 $ 119 — $ — $ 1,284,643 $ ( 98,671 ) $ 35 4,227,315 $ ( 456,748 ) $ 729,378 $ 9,317 $ 738,695 $ 112,482

Balances at June 30, 2021 7,651,606 $ 119 — $ — $ 1,280,667 $ ( 35,704 ) $ 35 4,254,236 $ ( 464,248 ) $ 780,869 $ 8,968 $ 789,837 $ 131,525

The accompanying notes are an integral part of these condensed consolidated financial statements.

12 unchanged sentences

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information.

Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, these financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial condition and results of operations.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 ("2020 Annual Report on Form 10-K") filed with the Securities and Exchange Commission (the "SEC").

7 unchanged sentences

Simplifying the Accounting for Income Taxes .

This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, Income Taxes, and also improves consistent application by clarifying and amending existing guidance.

This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, Income Taxes, and improves consistent application by clarifying and amending existing guidance.

The Company adopted this standard on January 1, 2021.

6 unchanged sentences

Revenue Disaggregated by Source

The following table summarizes revenue by source:

The following table summarizes investment management fees by source:

Three Months Ended

June 30, Six Months Ended

(in thousands) 2021 2020 2021 2020

7 unchanged sentences

Total investment management fees $ 193,510 $ 110,550 $ 366,779 $ 230,838

Distribution and service fees 20,348 9,460

Administration and shareholder service fees 22,560 14,653

Other income and fees 720 165

Total revenues $ 216,897 $ 144,566

AllianzGI Strategic Partnership

On February 1, 2021, the Company completed the actions necessary to finalize its strategic partnership with Allianz Global Investors ("AllianzGI"), announced in July 2020, pursuant to which the Company became the investment adviser, distributor and/or administrator of certain of AllianzGI's open-end, closed-end and retail separate account assets.

Additionally, as part of the strategic partnership, AllianzGI’s Dallas-based Value Equity team joined the Company as a newly established affiliated manager, NFJ Investment Group.

Assets acquired in connection with the transaction primarily consisted of definite-lived intangible assets representing open-end, closed-end and retail separate account investment contracts as well as indefinite-lived assets consisting of goodwill related to the NFJ Investment Group.

The NFJ Investment Group revenues and operating income was not material to the Company's results of operations for the three months ended March 31, 2021.

On February 1, 2021, the Company completed the actions necessary to finalize its strategic partnership with Allianz Global Investors ("AllianzGI"), pursuant to which the Company became the investment adviser, distributor and/or administrator of certain of AllianzGI's open-end, closed-end and retail separate account assets.

Additionally, as part of the strategic partnership, AllianzGI’s Dallas-based Value Equity team joined the Company as a newly established affiliated manager, NFJ Investment Group ("NFJ").

The revenues and operating income of NFJ were not material to the Company's results of operations for the three and six months ended June 30, 2021.

Transaction consideration consists of variable cash payments based on a percentage of the investment management fees earned on certain open-end, closed-end and retail separate account assets adopted under the transaction.

Payments are to be made annually around the anniversary of the closing date of the transaction over the next seven years .

The transaction consideration is being accounted for as contingent consideration with the estimated future payments of $ 137.7 million as of March 31, 2021 being recorded as a liability on the Company's Condensed Consolidated Balance Sheet.

The estimate of these future revenue participation payments of $ 137.7 million at June 30, 2021 have been recorded as a liability and included as Contingent Consideration on the Company's Condensed Consolidated Balance Sheet.

In addition, the Company capitalized $ 7.7 million of costs associated with certain assets acquired.

11 unchanged sentences

Below is a summary of intangible assets, net:

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

Definite-lived intangible assets:

4 unchanged sentences

Total intangible assets, net $ 380,824 $ 280,264

Activity in goodwill and intangible assets, net was as follows:

Three Months Ended March 31,

Activity in intangible assets, net was as follows:

Six Months Ended June 30,

(in thousands) 2021 2020

9 unchanged sentences

2026 and thereafter 168,804

Total $ 337,308

Investments consist primarily of investments in the Company's sponsored products.

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 16, at March 31, 2021 and December 31, 2020 were as follows:

(in thousands) March 31, 2021 December 31, 2020

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 16, at June 30, 2021 and December 31, 2020 were as follows:

(in thousands) June 30, 2021 December 31, 2020

Investment securities - fair value $ 54,448 $ 39,990

7 unchanged sentences

The composition of the Company’s investment securities - fair value was as follows:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(in thousands) Cost Fair Value Cost Fair Value

4 unchanged sentences

Total investment securities - fair value $ 50,434 $ 54,448 $ 31,999 $ 39,990

For the three months ended March 31, 2021, the Company recognized realized gains of $ 0.8 million on the sale of its investment securities - fair value.

For the three months ended March 31, 2020, the Company recognized realized losses of $ 0.3 million on the sale of its investment securities - fair value.

For the three and six months ended June 30, 2021, the Company recognized realized gains of $ 1.0 million and $ 1.8 million on the sale of its investment securities - fair value, respectively.

For the three and six months ended June 30, 2020, the Company recognized realized gains of less than $ 0.1 million and realized losses of $ 0.3 million on the sale of its investment securities - fair value, respectively.

Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 16, as of March 31, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

March 31, 2021

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 16, as of June 30, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

June 30, 2021

(in thousands) Level 1 Level 2 Level 3 Total

26 unchanged sentences

Cash, accounts receivable, accounts payable and accrued liabilities equal or approximate fair value based on the short-term nature of these instruments.

The Company had no Level 3 investments for the three-month periods ended March 31, 2021 and 2020, respectively.

The Company had no Level 3 investments for the three- and six-month periods ended June 30, 2021 and 2020, respectively.

Equity Transactions

Dividends Declared

On February 24, 2021, the Company declared a quarterly cash dividend of $ 0.82 per common share to be paid on May 14, 2021 to stockholders of record at the close of business on April 30, 2021.

On May 13, 2021, the Company declared a quarterly cash dividend of $ 0.82 per common share to be paid on August 13, 2021 to stockholders of record at the close of business on July 30, 2021.

Common Stock Repurchases

During the three months ended March 31, 2021, the Company repurchased 19,912 common shares at a weighted average price of $ 251.07 per share, for a total cost, including fees and expenses, of $ 5.0 million under its share repurchase program.

As of March 31, 2021, 702,730 shares remained available for repurchase.

During the three and six months ended June 30, 2021, the Company repurchased 26,921 and 46,833 common shares, respectively, at a weighted average price of $ 278.56 and $ 266.87 per share, respectively, for a total cost, including fees and expenses, of $ 7.5 million and $ 12.5 million, respectively, under its share repurchase program.

As of June 30, 2021, 675,809 shares remained available for repurchase.

Under the terms of the program, the Company may repurchase shares of its common stock from time to time at its discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price and prevailing market and business conditions.

1 unchanged sentence

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2021 and 2020 were as follows:

The changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2021 and 2020 were as follows:

(in thousands) Foreign

2 unchanged sentences

Net current-period other comprehensive income (loss) 6

Balance at March 31, 2021 $ 35

Balance at June 30, 2021 $ 35

(in thousands) Foreign

2 unchanged sentences

Net current-period other comprehensive income (loss) ( 26 )

Balance at March 31, 2020 $ ( 16 )

Balance at June 30, 2020 $ ( 17 )

Stock-Based Compensation

Pursuant to the Company's Omnibus Incentive and Equity Plan (the "Plan"), officers, employees and directors may be granted equity-based awards, including restricted stock units ("RSUs"), performance stock units ("PSUs"), stock options and unrestricted shares of common stock.

At March 31, 2021, 271,890 shares of common stock remained available for issuance of the 2,820,000 shares that are authorized for issuance under the Plan.

At June 30, 2021, 814,812 shares of common stock remained available for issuance of the 3,370,000 shares that are authorized for issuance under the Plan.

Stock-based compensation expense is summarized as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(in thousands)

4 unchanged sentences

Shares that are issued upon vesting are newly issued shares from the Plan and are not issued from treasury stock.

RSU activity, inclusive of PSUs, for the three months ended March 31, 2021 is summarized as follows:

RSU activity, inclusive of PSUs, for the six months ended June 30, 2021 is summarized as follows:

of Shares Weighted Average

3 unchanged sentences

Settled ( 183,473 ) $ 123.13

Outstanding at March 31, 2021 461,321 $ 129.09

For the three months ended March 31, 2021 and 2020, a total of 57,885 and 41,426 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 15.2 million and $ 3.6 million for the three months ended March 31, 2021 and 2020, respectively, in minimum employee tax withholding obligations related to RSUs withheld for net share settlements.

These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have been otherwise issued as a result of the vesting.

During the three months ended March 31, 2021, the Company granted 24,798 PSUs that contain performance-based metrics in addition to a service condition.

Outstanding at June 30, 2021 425,239 $ 133.39

For the six months ended June 30, 2021 and 2020, a total of 72,324 and 62,899 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 19.3 million and $ 5.5 million for the six months ended June 30, 2021 and 2020, respectively, in minimum employee tax withholding obligations related to RSUs withheld for the net share settlements.

During the six months ended June 30, 2021, the Company granted 24,798 PSUs that contain performance-based metrics in addition to a service condition.

Compensation expense for PSUs is generally recognized over a three-year service period based upon the value determined using a combination of (i) the intrinsic value method, for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718, and (ii) the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric under ASC 718.

1 unchanged sentence

Compensation expense for PSU awards with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the end of the performance period.

As of March 31, 2021, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 35.2 million, with a weighted-average remaining contractual life of 1.5 years.

As of June 30, 2021, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 33.2 million,

with a weighted-average remaining contractual life of 1.4 years.

Earnings (Loss) Per Share

Earnings (loss) per share ("EPS") is calculated in accordance with ASC 260, Earnings per Share.

Basic EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock,

Basic EPS is computed by dividing net income (loss) attributable to Virtus Investment Partners, Inc.

by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, including:

(i) shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock method and (ii) shares issuable upon the conversion of the Company's previously outstanding mandatory convertible preferred stock ("MCPS"), as determined under the if-converted method.

1 unchanged sentence

The computation of basic and diluted EPS is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended

(in thousands, except per share amounts) 2021 2020 2021 2020

1 unchanged sentence

Noncontrolling interests ( 13,130 ) ( 4,930 ) ( 28,756 ) ( 10,221 )

Net Income (Loss) Attributable to Common Stockholders $ 36,588 $ ( 4,285 )

Net Income (Loss) Attributable to Virtus Investment Partners, Inc.

$ 62,967 $ 11,279 $ 99,555 $ 6,994

Weighted-average number of shares outstanding 7,698 7,720 7,674 7,572

4 unchanged sentences

The following table details the securities that have been excluded from the above computation of weighted-average number of shares for diluted EPS, because the effect would be anti-dilutive.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2021 2020 2021 2020

Restricted stock units and options 5 35 6 1

Preferred stock — 321

Total anti-dilutive securities 5 35 6 1

2 unchanged sentences

The provision for income taxes reflected U.S.

federal, state and local taxes at an estimated effective tax rate of 22.5 % and 91.1 % for the three months ended March 31, 2021 and 2020, respectively.

The comparatively lower estimated effective tax rate for the three months ended March 31, 2021 was primarily due to valuation allowances recorded in the prior year period for the tax effects of unrealized losses on certain Company investments.

federal, state and local taxes at an estimated effective tax rate of 22.6 % and 50.9 % for the six months ended June 30, 2021 and 2020, respectively.

The comparatively lower estimated effective tax rate for the six months ended June 30, 2021 was primarily due to valuation allowances recorded in the prior year period for the tax effects of unrealized losses on certain Company investments.

C redit Agreement

The Company's credit agreement, as amended (the "Credit Agreement"), is comprised of (i) $ 365.0 million of seven-year term debt (the "Term Loan") expiring in June 2024 and (ii) a $ 100.0 million five-year revolving credit facility (the "Credit Facility") expiring in June 2022.

During the three months ended March 31, 2021, the Company repaid $ 5.9 million outstanding under its Term Loan.

At March 31, 2021, $ 199.8 million remained outstanding under the Term Loan, and the Company had no outstanding borrowings under its Credit Facility.

In accordance with ASC 835, Interest, the amounts outstanding under the Company's Term Loan are presented on the Condensed Consolidated Balance Sheet net of related debt issuance costs, which were $ 4.1 million as of March 31, 2021.

During the six months ended June 30, 2021, the Company repaid $ 11.8 million outstanding under its Term Loan.

At June 30, 2021, $ 193.8 million remained outstanding under the Term Loan, and the Company had no outstanding borrowings under its Credit Facility.

Commitments and Contingencies

17 unchanged sentences

Minority interests in an affiliate are recorded at estimated redemption value within redeemable noncontrolling interests in the Company's Condensed Consolidated Balance Sheets, and any changes in the estimated redemption value are recorded in the Condensed Consolidated Statements of Operations within noncontrolling interests.

Redeemable noncontrolling interests for the three months ended March 31, 2021 included the following amounts:

Redeemable noncontrolling interests for the six months ended June 30, 2021 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

4 unchanged sentences

Net subscriptions (redemptions) and other ( 6,393 ) ( 6,006 ) ( 12,399 )

Balances at March 31, 2021 $ 14,423 $ 98,059 $ 112,482

Balances at June 30, 2021 $ 22,586 $ 108,939 $ 131,525

(1) Relates to noncontrolling interests redeemable at other than fair value.

13 unchanged sentences

The Company has no right to the benefits from, and does not bear the risks associated with, these investment products beyond the Company’s investments in, and fees generated from, these products.

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

VOEs VIEs VOEs VIEs

9 unchanged sentences

The majority of the Company's CIP that are VIEs are CLOs.

At March 31, 2021, the Company consolidated six CLOs.

At June 30, 2021, the Company consolidated six CLOs.

The financial information of certain CLOs is included on the Company's condensed consolidated financial statements on a one-month lag based upon the availability of the fund's financial information.

1 unchanged sentence

Investments of CLOs

The CLOs held investments of $ 2.2 billion at March 31, 2021 consisting of bank loan investments, which comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across a variety of industries.

The CLOs held investments of $ 2.2 billion at June 30, 2021 consisting of bank loan investments, which comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across a variety of industries.

These bank loan investments mature at various dates between 2022 and 2029 and pay interest at LIBOR plus a spread of up to 10.00 %.

1 unchanged sentence

Generally, subsequent prepayments received after the reinvestment period must be used to pay down the note obligations.

At March 31, 2021, the fair value of the senior bank loans was less than the unpaid principal

balance by $ 39.2 million.

At March 31, 2021, there were no material collateral assets in default.

At June 30, 2021, the fair value of the senior bank loans was less than the unpaid principal balance by $ 35.5 million.

At June 30, 2021, there were no material collateral assets in default.

Notes Payable of CLOs

The CLOs held notes payable with a total value, at par, of $ 2.4 billion at March 31, 2021, consisting of senior secured floating rate notes payable with a par value of $ 2.2 billion and subordinated notes with a par value of $ 225.9 million.

The CLOs held notes payable with a total value, at par, of $ 2.3 billion at June 30, 2021, consisting of senior secured floating rate notes payable with a par value of $ 2.1 billion and subordinated notes with a par value of $ 225.9 million.

These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 0.8 % to 8.7 %.

2 unchanged sentences

The secured notes of the consolidated CLOs have contractual recourse only to the related assets of the CLO and are classified as financial liabilities.

Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative prescribed by ASU 2014-13, Consolidation (Topic 810) ("ASU 2014-13"), results in the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by the Company at March 31, 2021, as shown in the table below:

(in thousands)

3 unchanged sentences

The following table represents income and expenses of the consolidated CLOs included on the Company’s Condensed Consolidated Statements of Operations for the period indicated:

(in thousands) Three Months Ended March 31, 2021

(in thousands) Six Months Ended June 30, 2021

Realized and unrealized gain (loss), net $ ( 4,646 )

7 unchanged sentences

As summarized in the table below, the application of the measurement alternative as prescribed by ASU 2014-13 results in the consolidated net income summarized above to be equivalent to the Company’s own economic interests in the consolidated CLOs, which are eliminated upon consolidation:

(in thousands) Three Months Ended March 31, 2021

Distributions received and unrealized gains (losses) on the subordinated notes held by the Company $ 1,411

(in thousands) Six Months Ended June 30, 2021

Distributions received and unrealized gains (losses) on the subordinated notes $ 5,054

Investment management fees 4,637

1 unchanged sentence

Fair Value Measurements of CIP

The assets and liabilities of CIP measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

As of March 31, 2021

The assets and liabilities of CIP measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

As of June 30, 2021

(in thousands) Level 1 Level 2 Level 3 Total

22 unchanged sentences

Equity investments are valued at the official closing price on the exchange on which the securities are traded and are generally categorized within Level 1.

Level 2 investments represent most debt securities, including bank loans and certain equity securities (including non-U.S.

Level 2 investments represent most debt securities, including bank loans and certain equity securities (including non-

securities), for which closing prices are not readily available or are deemed to not reflect readily available market prices, and are valued using an independent pricing service.

5 unchanged sentences

Level 3 investments include debt and equity securities that are not widely traded, are illiquid or are priced by dealers based on pricing models used by market makers in the security.

Derivative assets and liabilities represent futures contracts, swaps contracts, option contracts and forward contracts

Derivative assets and liabilities represent futures contracts, swaps contracts, option contracts and forward contracts held in CIP.

Derivative instruments in an asset position are classified as other assets of CIP on the Condensed Consolidated Balance Sheets.

5 unchanged sentences

The fair value of such derivatives at December 31, 2020, was immaterial.

There were no derivative assets or liabilities held at June 30, 2021.

Notes payable represent notes issued by CIP CLOs and are measured using the measurement alternative in ASU 2014-13.

3 unchanged sentences

Short sales are recorded on the Condensed Consolidated Balance Sheets within other liabilities of CIP and are classified as Level 1 based on the underlying equity security.

The securities purchase payable at March 31, 2021 and December 31, 2020 approximated fair value due to the short-term nature of the instruments.

The securities purchase payable at June 30, 2021 and December 31, 2020 approximated fair value due to the short-term nature of the instruments.

The following table is a reconciliation of assets of CIP for Level 3 investments for which significant unobservable inputs were used to determine fair value:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

14 unchanged sentences

The Company has determined that the investment management fees it receives for serving as collateral manager for these CDOs did not represent a variable interest since (i) the fees the Company earns are compensation for services provided and are commensurate with the level of effort required to provide the investment management services, (ii) the Company does not hold other interests in the CDOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CDOs' expected losses or receive more than an insignificant amount of the CDOs' expected residual return, and (iii) the investment management arrangement only includes terms, conditions and amounts that are customarily present in arrangements for similar services negotiated at arm's length.

The Company has interests in certain other VIEs that the Company does not consolidate as it is not the primary beneficiary since its interest in these entities does not provide the Company with the power to direct the activities that most

significantly impact the entities' economic performance.

At March 31, 2021, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 30.6 million.

At June 30, 2021, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 30.8 million.

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 1. Financial Statements