Document and Entity Information - USD ($) |
12 Months Ended | ||
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Dec. 31, 2018 |
Feb. 26, 2019 |
Jun. 30, 2018 |
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Document and Entity Information | |||
Entity Registrant Name | BrightSphere Investment Group plc | ||
Entity Central Index Key | 0001611702 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 92,023,923 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 1,153,016,813 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Investments, fair value (in dollars) | $ 321.4 | $ 319.3 |
Consolidated Entity Excluding Consolidated Funds | ||
Investments, fair value (in dollars) | $ 196.6 | $ 182.6 |
Ordinary shares, nominal value (in dollars per share) | $ 0.001 | $ 0.001 |
Ordinary shares, issued shares (in shares) | 105,160,021 | 109,720,358 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Net income | $ 130.3 | $ 9.1 | $ 126.2 |
Other comprehensive income (loss): | |||
Valuation and amortization related to derivative securities, net of tax | 2.4 | 1.8 | (20.3) |
Foreign currency translation adjustment | (1.7) | 2.9 | (3.2) |
Total comprehensive income | 131.0 | 13.8 | 102.7 |
Total comprehensive income attributable to controlling interests | 137.1 | 8.9 | 102.9 |
Consolidated Funds | |||
Other comprehensive income (loss): | |||
Comprehensive income (loss) attributable to non-controlling interests in consolidated Funds | $ (6.1) | $ 4.9 | $ (0.2) |
Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares |
12 Months Ended | ||
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Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Statement of Stockholders' Equity [Abstract] | |||
Dividends (in dollars per share) | $ 0.39 | $ 0.36 | $ 0.32 |
Dividend to related party (in dollars per share) | $ 0.36 | $ 0.32 |
Organization and Description of the Business |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Description of the Business | (“BrightSphere”, “BSIG” or the “Company”), through its subsidiaries, is a global asset management business with interests in a diverse group of boutique investment management firms (the “Affiliates”) individually headquartered in the United States. The Company provides investment management services globally to predominantly institutional investors, in asset classes that include U.S. and global equities, fixed income, alternative assets, timber and secondary Funds focused in real estate and private equity. Fees for services are largely asset-based and, as a result, the Company’s revenue fluctuates based on the performance of financial markets and investors’ asset flows in and out of the Company’s products. The Company’s Affiliates are organized as limited liability companies. The Company generally utilizes a profit-sharing model in structuring its compensation and ownership arrangements with its Affiliates. The Affiliates’ variable compensation is generally based on each firm’s profitability. BSIG and Affiliate key employees share in profits after variable compensation according to their respective ownership interests. The profit-sharing model results in the alignment of BSIG and Affiliate key employee economic interests, which is critical to the Company’s talent management strategy and long-term growth of the business. Prior to 2014, the Company was a wholly-owned subsidiary of Old Mutual plc (“OM plc”), an international long-term savings, protection and investment group, listed on the London Stock Exchange. On October 15, 2014, the Company completed the initial public offering (the “Offering”) by OM plc pursuant to the Securities Act of 1933, as amended. Additionally, between the Offering and December 31, 2018, the Company, OM plc and/or HNA Capital US (“HNA”) completed the following transactions in the Company’s shares, including a two-step transaction announced on March 25, 2017 for a sale by OM plc of a 24.95% shareholding in the Company to HNA and a two-step transaction announced on November 19, 2018 for a sale of the substantial majority of the ordinary shares held by HNA of the Company to Paulson & Co. (“Paulson”). On February 25, 2019, this transaction was completed and Paulson holds approximately 21.7% of the ordinary shares of the Company.
On March 2, 2018, the Company announced the change of its name from OM Asset Management plc to BrightSphere Investment Group plc. Share Repurchase Program On February 3, 2016, the Company’s Board of Directors authorized a $150 million share repurchase program, which was approved by shareholders on March 15, 2016. On April 18, 2018, the Company’s Board of Directors approved an amendment to the existing share repurchase contract, to permit the repurchase of ordinary shares, from time to time, up to an aggregate limit of $600 million of ordinary shares. This amendment was subsequently approved by shareholders on June 19, 2018. In 2018, the Company purchased 5,549,861 shares on the open market at a weighted average price of $13.35/share. In 2017, the Company did not purchase shares on the open market. In 2016, the Company purchased 921,740 shares on the open market at a weighted average price of $13.22/share. On April 29, 2016, at the Company’s Annual General Meeting, shareholders (excluding OM plc) authorized a form of contract by which the Company would be permitted to repurchase shares directly from OM plc. The shareholder authorization does not contain a maximum dollar or share amount for such purchases individually or in aggregate from OM plc. On December 16, 2016 in connection with the secondary offering by OM plc, the Company repurchased 6,000,000 shares directly from OM plc at a price of $14.25/share. On May 19, 2017 in connection with the secondary offering by OM plc, the Company repurchased 5,000,000 shares directly from OM plc at a price of $14.55/share. In January and February of 2019, the Company purchased 5,343,669 shares on the open market at a weighted average price of $12.34/share. In February 2019, the Company announced and completed a repurchase of shares held by HNA. The Company repurchased 4,100,000 shares at a price of $13.89/share and 3,886,625 shares at a price of $13.95/share. This repurchase was conducted under the Company’s current share repurchase authorization and was funded with cash on hand and available debt capacity under the Company’s $350 million revolving credit facility. All shares repurchased by the Company were retired. Segment Information The Company operates one business segment that provides investment management services and products to predominantly institutional clients. The primary measure used by the Chief Operating Decision Maker (“CODM”) in measuring performance and allocating resources is economic net income. As of December 31, 2018 and 2017, all of the Company’s material long-lived assets were domiciled in the United States. For each of the years ended December 31, 2018, 2017 and 2016, the Company’s revenue from external customers was primarily attributable to the United States. |
Acquisitions |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | On August 18, 2016, the Company acquired a majority of the equity interests in Landmark Partners, LLC, (“Landmark”) a leading global secondary private equity, real estate and real asset investment firm. The Company acquired a 60% interest in Landmark in exchange for $242.7 million. An additional payment of $207.6 million was earned based on the growth of Landmark’s business and was paid in February 2019. The equity interests of Landmark purchased by the Company entitle the Company to participate in the earnings of Landmark. Certain key members of the management team of Landmark retained the remaining 40% interest in Landmark, subject to certain vesting conditions. The Company financed the acquisition through proceeds from multiple note offerings, including $275.0 million of 4.80% senior notes due July 27, 2026 and $125.0 million of 5.125% senior notes due August 1, 2031. (see Note 13) The Company accounted for the acquisition of Landmark as a business combination which requires assets acquired and liabilities assumed to be recorded at fair value. The following table presents a summary of the acquisition-date fair values of the assets acquired and liabilities assumed for BSIG’s acquisition of Landmark (in millions):
The primary aspects of the purchase price allocation relate to amortizable intangible asset management contracts, the indefinite-life trade name and goodwill, which is the amount by which the purchase price exceeds the fair value of the net assets acquired. Certain measurement period adjustments were recorded to the provisional values recorded as of December 31, 2016. These adjustments primarily related to updated estimates, which resulted in an increase to the total consideration paid of $0.3 million, a decrease to the fair value of the identifiable net assets acquired of $1.6 million and an increase to the amount recorded to goodwill of $1.9 million. The fair value of the amortizable intangible asset management contracts was determined using the excess earnings method, a form of the income approach. The principle behind the excess earnings method is that the value of the intangible asset is equal to the present value of the after-tax cash flows attributable to the intangible asset only. Excess earnings represent the earnings remaining after applying post-tax contributory asset charges to reflect the return required on other assets that contribute to the generation of the forecast cash flows of the intangible asset. The fair value of the trade name intangible asset was determined utilizing a relief-from-royalty method. The principle behind this method is that the value of the intangible asset is equal to the present value of the after-tax royalty savings attributable to owning the intangible asset. The fair value for all identifiable intangible assets was based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). This fair value estimate could include assets that are not intended to be used, may be sold or are intended to be used in a manner other than their best use. The fair value of the acquired amortizable intangible asset management contracts had a useful life estimate of approximately 13.4 years at acquisition. Purchase price allocated to intangible assets and goodwill is expected to be deductible for U.S. tax purposes over a period of 15 years. Goodwill was calculated as the excess of the fair value of the consideration paid and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. During the year ended December 31, 2016, the Company incurred $6.1 million of transaction costs related to the acquisition of Landmark. These costs are recognized within general and administrative expense in the Consolidated Statements of Operations. In conjunction with the acquisition, the Company entered into compensation arrangements with employees of Landmark where pre-acquisition equity units held by Landmark employees became subject to a service condition. These units are accounted for as stock-based compensation, were fair valued as of the closing date of the acquisition and vest over varying increments from December 31, 2018 through December 31, 2024. These units contain put rights that provide liquidity to the employees upon vesting and are remeasured at the end of each reporting period. The financial results of Landmark included in the Company’s consolidated financial results for the year ended December 31, 2016 include revenues of $28.4 million, with $(13.5) million of net loss included in net income (loss) attributable to the Company, which includes amortization of intangible assets recorded in purchase accounting and compensation expense for the arrangements with employees of Landmark noted above. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the combined financial results of BSIG and Landmark, as though the acquisition had occurred as of January 1, 2016. The unaudited pro forma financial information reflects certain adjustments for amortization expense related to the fair value of acquired intangible assets, interest expense related to debt incurred to finance the acquisition, amortization related to stock-based compensation arrangements entered into in conjunction with the acquisition, and the income tax impact of the pro forma adjustments. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the financial results that would have been achieved had the acquisition actually occurred as of January 1, 2016 (in millions, except per-share amounts):
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Basis of Presentation and Significant Accounting Policies |
12 Months Ended |
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Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | The Company’s significant accounting policies are as follows: Basis of presentation These Consolidated Financial Statements reflect the historical balance sheets; statements of operations; statements of comprehensive income; statements of changes in shareholders’ equity; and statements of cash flows of the Company. Within these Consolidated Financial Statements, entities that are part of OM plc’s consolidated results, but are not part of BSIG, as defined above, as well as HNA, Paulson and their related entities, are referred to as “related parties.” The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All dollar amounts, except per share data in the text and tables herein, are stated in millions unless otherwise indicated. Transactions between the Company and its related parties are included in the Consolidated Financial Statements, however material intercompany balances and transactions among the Company, its consolidated Affiliates and consolidated Funds are eliminated in consolidation. Revenue recognition Revenue from contracts with customers On January 1, 2018, the Company adopted the provisions of Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers,” (“ASC 606”), using the modified retrospective method applied to all contracts. Under ASC 606, the Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The Company applied the five step method outlined in ASC 606 to all revenue streams. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company’s management fee revenue is calculated based upon levels of assets under management multiplied by a fee rate. Management fee revenue is typically calculated on a monthly or quarterly basis, but is earned continuously as performance obligations are fulfilled. The transaction price is variable in contracts which calculate AUM on an average basis over a specified period and this variability is resolved at the end of the period, when the actual average AUM for the contract period may be calculated. The Company is able to resolve the variability and calculate the most likely amount to be recognized for any given period by estimating revenue based upon a daily average AUM. All of the Company’s performance obligations are satisfied ratably over time and there is no distinction in the methodology used to recognize management fee revenue in instances where there is more than one performance obligation. Typically, revenue is recognized over time using a time-based output measure to measure progress. Management fees are recognized monthly as services are rendered. Affiliates that manage tangible property may also earn transaction fees at the time the underlying property is bought and sold. Any fees collected in advance are deferred and recognized as income over the period earned. Dividend income received is recorded on the ex-dividend date. Performance fees are generally assessed as a percentage of the investment performance realized on a client’s account. Additionally, separate accounts or other products which primarily earn management fees are potentially subject to performance adjustments up or down based on investment performance versus benchmark. Performance fees, including those that are subject to clawback, are recognized when they (i) become billable to customers (based on contractual terms of agreements) and (ii) are not subject to contingent repayment. The Company is required to capitalize certain costs directly related to the acquisition or fulfillment of a contract with a customer. The Company has noted no instances where sales-based compensation or similar costs met the definition of an incremental cost to acquire a contract with a customer under ASC 606. There are no instances where the Company has incurred costs to fulfill a contract with a customer, therefore no intangible assets related to contract acquisition or fulfillment have been recognized. For each one of its contracts with customers, the Company identifies one or more performance obligations within the contract and then, for each performance obligation, determines if it is a principal (where the nature of its promise is to provide a specified good or service itself) or an agent (where the nature of its promise is to arrange for a good or service to be provided by another party). In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, if the Company is acting as a principal, the reimbursement is recorded on a gross basis and if the Company is acting as an agent, the reimbursement is recorded on a net basis. Certain Funds reimburse the Company’s Affiliates for certain expenses where the Affiliate is acting as a principal, primarily for compensation expense for field office personnel at several Timber Funds (as defined below). Revenue from expense reimbursement is accrued at cost as the corresponding reimbursable expenses are incurred and is recorded in other revenue in the Company’s Consolidated Statements of Operations. Revenue from other sources Other revenue also includes interest income on cash and cash equivalents and revenue from administration and consulting services. The revenue of consolidated Funds that invest in Timber (the “Timber Funds”) is recognized from log and fiber sales upon delivery to the customer. The Company is typically responsible for all logging and hauling costs. However, under pay-as-cut timber contracts, title and risk of loss from stumpage sales transfer to the buyer as the trees are cut. Revenue is recognized as timber is harvested. The buyer is typically responsible for all logging and hauling costs. Compensation arrangements The Company operates short term variable compensation arrangements where generally, a percentage of each Affiliate’s annual pre-variable compensation earnings, as defined in each arrangement, is allocated to a “pool” of each respective Affiliate’s key employees and subsequently distributed to individuals subject to recommendation and approval of a remuneration committee comprised of both the Company’s and each respective Affiliate’s management. Variable compensation expense is accrued and recognized in the Consolidated Statements of Operations as services are provided by individual employees. The Company operates longer term profit-interest plans whereby certain Affiliate key employees are granted (or have a right to purchase) awards representing a profits interest in their respective Affiliate, as distinct from an equity interest due to the lack of pari passu voting rights. Under these plans, the Company may award a portion of the aforementioned variable compensation arrangement through issuance of a profits interest in the Affiliate. The awards generally have a three- to five-year vesting period from the grant date, and the service period begins at the commencement of the financial period to which the variable compensation relates. Under these plans, Affiliate key employees are eligible to share in the profits of their respective Affiliates based on their respective percentage interest held. In addition, under certain circumstances, Affiliate key employees are eligible to receive repurchase payments upon exiting the plans based on a multiple of the last twelve months profits of their respective Affiliate, as defined. Profits allocated and movements in the potential repurchase value, determined based on a fixed multiple times trailing twelve month profits, as defined, are recognized as compensation expense. Profit interests compensation liabilities are re-measured at each reporting date at the twelve month earnings multiple, with movements treated as compensation expense in the Company’s Consolidated Statements of Operations. Share-based compensation plans The Company recognizes the cost of all share-based payments to directors, senior management and employees, including grants of restricted stock and stock options, as compensation expense in the Consolidated Statements of Operations over the respective vesting periods. Awards made previously under OM plc’s restricted stock and stock options plans are accounted for as equity settled, and the grant date fair value is recognized as compensation expense over the requisite service period, with a corresponding contribution to capital recorded. Awards made under the Company’s equity plans are accounted for as equity settled, and the grant date fair value is recognized as compensation expense over the requisite service period, with a corresponding contribution to capital recorded. Valuation of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) is determined based on the Company’s closing share price as quoted on the New York Stock Exchange on the measurement date. For performance-based awards and stock options, a Monte-Carlo simulation model is used to determine the fair value. Key inputs for the model include: assumed reinvestment of dividends, risk-free interest rate and expected volatility. All excess tax benefits and deficiencies on share-based payment awards are recognized as income tax expense or benefit in the Consolidated Statements of Operations. In addition, the tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur and excess tax benefits or deficiencies are classified with other income tax cash flows as an operating activity in the statement of cash flows. The Company recognizes forfeitures as they occur. Awards of equity made to Affiliate key employees are accounted for as cash settled, with the fair value recognized as compensation expense over the requisite service period, with a corresponding liability carried within other compensation liabilities on the Consolidated Balance Sheet until the award is settled by the Company. The fair value of the liability is based on the expected cash to be paid. The liability is revalued at each reporting period, with any movements recorded within compensation expense. Consolidation Affiliates The Company evaluates each of its Affiliates and other operating entities to determine the appropriate method of accounting. Generally, majority-owned entities or otherwise controlled investments in which the Company holds a controlling financial interest as the principal shareholder, managing member, or general partner are consolidated. Funds In the normal course of business, the Company’s Affiliates sponsor and manage certain investment vehicles (the “Funds”). The Company assesses consolidation requirements with respect to its Funds. In evaluating whether or not a legal entity must be consolidated, the Company determines if such entity is a variable interest entity (“VIE”) or a voting interest entity (“VOE”). A VOE is considered an entity in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders at risk have the obligation to absorb losses, the right to receive residual returns, and the right to direct the activities of the entity that most significantly impact the entity’s economic performance. A VIE is an entity that lacks one or more of the characteristics of a VOE. Assessing whether an entity is a VIE or VOE involves judgment and analysis. Factors considered in this assessment include the entity’s legal organization, the entity’s capital structure and equity ownership and any related party or de-facto agent implications of the Company’s involvement with the entity. Investments that are determined to be VIEs are consolidated if the Company or a consolidated Affiliate is the primary beneficiary of the investment. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties on a proportional basis. The primary beneficiary of the VIE is defined as the variable interest holder that has a controlling financial interest. A controlling financial interest is defined as (i) the power to direct the activities of the VIE that most significantly impacts its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. If no single party satisfies both criteria, but the Company and its related parties satisfy the criteria on a combined basis, then the primary beneficiary is the entity out of the related party group that is most closely associated to the VIE. The consolidation analysis can generally be performed qualitatively, however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed. The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest in the fund, including interests of related parties on a proportional basis, is substantial. The Company consolidates VOEs when it has control over significant operating, financial and investing decisions of the entity or holds the majority voting interest. Upon the occurrence of certain events (such as contributions and redemptions, either by the Company, its Affiliates, or third parties, or amendments to the governing documents of the Company’s investees or sponsored Funds) management reviews and reconsiders its previous conclusion regarding the status of an entity as a VIE or a VOE. Additionally, management continually reconsiders whether the Company is deemed to be a VIE’s primary beneficiary who consolidates such entity. Investments and Investment Transactions Valuation of investments held at fair value Valuation of Fund investments, including Timber Funds, is evaluated pursuant to the fair value methodology discussed below. Other investments are categorized as trading and recorded at estimated fair value. Realized and unrealized gains and losses arising from changes in fair value of investments are reported within investment income in the Consolidated Statements of Operations. See Note 5 for a summary of the fair value inputs utilized to determine the fair value of other investments held at fair value. Security transactions The Company generally records securities transactions on a trade-date basis. Realized gains and losses on securities transactions are generally determined on the average-cost method (net of foreign capital gain taxes) and for certain transactions determined based on the specific identification method. Income and expense recognition The Company records interest income on an accrual basis and includes amortization of premiums and accretion of discounts. Dividend income and expense on dividends sold short are recorded on the ex-dividend date, net of applicable withholding taxes. Expenses are recorded on an accrual basis. Short sales Certain Funds may sell a security they do not own in anticipation of a decline in the fair value of that security. When a Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. The short sales are secured by the long portfolio and available cash. The Fund records a gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, upon the termination of a short sale. The amount of the gain or loss will be equal to the proceeds received in entering into the short sale less the cost of buying back the short security to close the short position. While the transaction is open, the Fund will incur an expense for any accrued dividends or interest which is paid to the lender of the securities. These short sales may involve a level of risk in excess of the liability recognized in the accompanying Consolidated Balance Sheets. The extent of such risk cannot be quantified. Funds’ Derivatives Certain Funds may use derivative instruments. The Funds’ derivative instruments may include foreign currency exchange contracts, credit default swaps, interest rate swaps, financial futures contracts and warrants. The fair values of derivative instruments are recorded as other assets of consolidated Funds or other liabilities of consolidated Funds on the Company’s Consolidated Balance Sheets. The Company has used foreign exchange forwards to hedge the risk of movement in exchange rates on financial assets on a limited basis. The Company’s Funds have not designated any financial instruments for hedge accounting, as defined in the accounting literature, during the periods presented. The gains or losses on Fund’s derivative instruments not designated for hedge accounting are included as net consolidated Funds gains or losses in the Company’s Consolidated Statements of Operations. Foreign currency translation and transactions Assets and liabilities of non-U.S. entities for which the local currency is the functional currency are translated at current exchange rates as of the end of the accounting period. The related revenues and expenses are translated at average exchange rates in effect during the period. Net exchange gains and losses resulting from translation are excluded from income and are recorded as part of accumulated other comprehensive income (loss). Transactions denominated in a foreign currency are revalued at the current exchange rate at the transaction date and any related gains and losses are recognized in earnings. Equity method investments The Company uses the equity method of accounting for investments that provide the Company with the ability to exercise significant influence over an entity, but that do not meet the requirements for consolidation. Equity method investments include two Affiliates, Heitman LLC (through November 30, 2017) and Investment Counselors of Maryland, LLC, as well as all unconsolidated Funds over which the Company exercises significant influence. In August 2017, the Company agreed in principle to sell its stake in Heitman LLC to Heitman’s management. Pursuant to that term sheet, BSIG entered into a redemption agreement on November 17, 2017. Heitman continued to be recorded as an equity method investment through November 30, 2017, at which point the Company reclassified its investment in Heitman to a cost-method investment. The transaction closed on January 5, 2018. The Company’s share of earnings from equity method investments is included in investment income in the Consolidated Statements of Operations. The carrying amounts of equity method investments are reflected in Investments in the Consolidated Balance Sheets. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The difference between the carrying value and its estimated fair value is recognized as impairment when the loss is deemed other than temporary. Fair value measurements In accordance with the accounting standards for fair value measurement, fair value is the price that the Company expects to be paid upon the sale of an asset or expects to pay upon the transfer of a liability in an orderly transaction between market participants. There is a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect the Company’s own conclusions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories: •Level I—Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments. •Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies utilizing observable market inputs other than quoted prices. Investments which are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. •Level III—Pricing inputs are unobservable for the asset or liability and include assets and liabilities where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. Investments that are included in this category generally include general and limited partner interests in timber funds, corporate private equity, real estate funds, and funds of hedge funds. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. In cases in which the fair value of an investment is established using the net asset value (or its equivalent) as a practical expedient, the investment is not categorized within the fair value hierarchy. Use of estimates The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ significantly from those estimates. Operating segment The Company operates in one operating segment that provides investment management services and products primarily to institutional clients. The Company’s determination that it operates one business segment is based on the fact that the CODM reviews the Company’s financial performance on an aggregate level. Derivatives and Hedging The Company may utilize derivative financial instruments to hedge the risk of movement of interest rates and foreign currency on financial assets and liabilities. These derivative financial instruments may or may not qualify as hedges for accounting purposes. The Company records all derivative financial instruments as either assets or liabilities on its Consolidated Balance Sheets and measures these instruments at fair value. For a derivative financial instrument that qualifies as a hedge for accounting purposes and is designated as a hedging instrument, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently reclassified into earnings over the life of the hedge. The ineffective portion of the gain or loss is recognized in earnings immediately. Cash and cash equivalents The Company considers all highly liquid investments, including money market mutual funds, with original maturities of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value due to the short-term maturity of these investments. Cash held by consolidated Funds is not available to fund general liquidity needs of the Company and is therefore classified as restricted cash. Investment advisory fees receivable The Company earns management and performance fees which are billed monthly, quarterly and annually in arrears, according to the terms of the relevant investment management agreement. Management and performance fees that have been earned, but have not yet been collected are presented as investment advisory fees receivable on the Consolidated Balance Sheets. Due to the short-term nature and liquidity of these receivables, the carrying amounts approximate their fair values. The Company typically does not record an allowance for doubtful accounts or bad debt expense, or any amounts recorded have been immaterial. Fixed assets Fixed assets are recorded at historical cost and depreciated using the straight-line method over its estimated useful lives. The estimated useful lives of office equipment and furniture and fixtures range from three to five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining term of the lease. Computer software developed or obtained for internal use capitalized during the application development stage is amortized using the straight-line method over the estimated useful life of the software, which is generally five years or less. The estimated useful life of building assets is thirty-nine years. The costs of improvements that extend the life of a fixed asset are capitalized, while the costs of repairs and maintenance are expensed as incurred. Intangible assets Acquired Affiliates have identifiable intangible assets arising from contractual or other legal rights with their clients. In determining the value of acquired intangibles, the Company analyzes the net present value of each acquired Affiliate’s existing client relationships based on a number of factors. The Company analyzes the Affiliate’s historical and potential future operating performance, the Affiliate’s historical and potential future rates of attrition among existing clients, the stability and longevity of existing client relationships, the Affiliate’s recent and long-term investment performance, the characteristics of the firm’s products and investment styles, the stability and depth of the Affiliate’s management team and the Affiliate’s history and perceived franchise or brand value. The Company’s acquired intangible assets are predominately definite-life intangible assets and are generally amortized on a straight line basis over their estimated useful lives, ranging from five to sixteen years, reflecting the expected duration of such relationships. The Company also holds an indefinite-life intangible asset related to the trade name associated with the Landmark acquisition. The Company tests for the possible impairment of definite-life intangibles whenever events or changes in circumstances indicate that the carrying amount of the asset is not recoverable. If such indicators exist, the Company compares the undiscounted cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the undiscounted cash flows amount, an impairment charge is recorded in the Consolidated Statements of Operations for amounts necessary to reduce the carrying value of the asset to fair value. Indefinite-life intangible assets are tested for impairment annually as of the first business day of the fourth quarter or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill The Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the net total of tangible assets acquired, identifiable intangible assets acquired and liabilities assumed. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if events or circumstances occur that indicate impairment may exist. Factors that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, significant changes in the Company’s use of the acquired assets in a business combination or the strategy for the Company’s overall business, and significant negative industry or economic trends. The Company performs its assessment for impairment of goodwill annually as of the first business day of the fourth quarter, or as necessary, and the Company has determined that it has six reporting units, consisting of the six consolidated Affiliates. The Company first considers various qualitative factors to determine if it is more likely than not that the fair value of each of the reporting units is greater than its respective carrying amount, including goodwill. If based on the qualitative assessment it is determined that it is more likely than not that the fair value of any reporting unit is below its respective carrying amount, therefore indicating that impairment may exist, the impact would be determined at that point through a quantitative assessment. For purposes of assessing potential impairment, the fair value of the reporting unit is estimated and compared to the carrying value of the reporting unit. The fair value of a reporting unit is based on discounted estimated future cash flows. The assumptions used to estimate fair value include management’s estimates of future growth rates, operating cash flows, discount rates and terminal value. These assumptions and estimates can change in future periods based on market movement and factors impacting the expected business performance. Changes in assumptions or estimates could materially affect the determination of the fair value of a reporting unit. If it is determined that the carrying value of the reporting unit exceeds its fair value, an impairment charge is recognized in the amount equal to that excess; not to exceed the total amount of goodwill allocated to that reporting unit. Based on the Company’s most recent annual goodwill impairment test, the Company concluded that the fair value of each of its reporting units was more likely than not in excess of their carrying values. At the close of each year, management assessed whether there were any conditions present during the fourth quarter that would indicate impairment subsequent to the initial assessment date and concluded that no such conditions were present. During 2017, the Company changed the goodwill and indefinite life intangible assets impairment assessment date from the last day of the third quarter to the first business day of the fourth quarter of the fiscal year. The Company believes that changing the annual goodwill impairment assessment date did not result in a material change in the method of applying the accounting requirements. Leases The Company and its Affiliates currently lease office space and equipment under various leasing arrangements, classified as operating leases. Some lease agreements contain renewal options, rent escalation clauses or other inducements provided by the landlord. Rent expense is accrued to recognize lease escalation provisions and inducements provided by the landlord, if any, on a straight-line basis over the lease term. Earnings per share The Company calculates basic and diluted earnings per share (“EPS”) by dividing net income by its shares outstanding as outlined below. Basic EPS attributable to the Company’s shareholders is calculated by dividing “Net income attributable to controlling interests” by the weighted-average number of shares outstanding. Diluted EPS is similar to basic EPS, but adjusts for the effect of potential ordinary shares unless they are antidilutive. For periods with a net loss, potential ordinary shares are considered antidilutive. The Company considers two ways to measure dilution to earnings per share: (a) calculate the net number of shares that would be issued assuming any related proceeds are used to buy back outstanding shares (the treasury stock method), or (b) assume the gross number of shares are issued and calculate any related effects on net income available for shareholders (the if-converted or two-class method). As appropriate, the Company’s policy is to apply the more dilutive methodology upon issuance of such instruments. Deferred financing costs The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings as other assets until such financings are consummated. After consummation of the equity financing, these costs are recorded in total equity as a reduction of Shareholders’ equity generated as a result of the offering. At the time in which the equity financing is no longer considered probable of being consummated, the deferred financing costs are expensed immediately as a charge to operating expenses in the Consolidated Statements of Operations. The Company records debt issuance costs of term loans as a direct deduction from the carrying amount of the associated debt liability. For debt issuance costs of revolving credit loans, the Company presents debt issuance costs as an asset and subsequently amortizes the deferred costs ratably over the term of the agreement. Income taxes The Company uses the asset and liability method of accounting for income taxes on a “separate return” basis. Under this method, a subsidiary is assumed to file a separate return with the taxing authority, thereby reporting its taxable income or loss and paying the applicable tax to or receiving the appropriate refund from the subsidiary’s parent. The rules followed by the subsidiary in computing its tax or refund should be the same as those followed by a taxpayer filing directly with the taxing authority. The Company files tax returns directly with the U.K., U.S. and state tax authorities and therefore, the computations under the separate return method follow the Company’s filings. Deferred income taxes are recognized for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Financial Statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company’s deferred tax assets have been attributable to federal and state loss carry forwards, interest deductions, and accrued liabilities. Deferred income tax assets are subject to a valuation allowance if, in management’s opinion, it is not more-likely-than-not that these benefits will be realized. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including its past operating results, the existence of cumulative earnings or losses in the most recent years and its forecast of future taxable income. In estimating future taxable income, the Company develops assumptions including the amount of future pre-tax operating income and the reversal of temporary differences. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage the underlying businesses. The Company’s accounting policy is to treat the global intangible low-taxed income taxes which became effective January 1, 2018 as a result of the Tax Cuts and Jobs Act as period costs in the accounting and tax periods in which they are incurred. A tax benefit should only be recognized if it is more-likely-than-not that the position will be sustained based on its technical merits. The Company recognizes the financial statement benefit of a tax position only after considering the probability that a tax authority would uphold the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest amount of benefit greater than 50% likely of being sustained. The more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of the benefit. Unrecognized tax benefits and related interest and penalties, are adjusted periodically to reflect changing facts and circumstances. The Company’s accounting policy is to classify interest and related charges as a component of income tax expense. Non-controlling interests For certain entities that are consolidated, but not 100% owned, the Company reports non-controlling interests as equity on its Consolidated Balance Sheets. The Company's consolidated net income on the Consolidated Statements of Operations includes the income (loss) attributable to non-controlling interest holders of the Company's consolidated Affiliates and Funds. Ownership interests held by Affiliate key employees are categorized as liabilities on the Consolidated Balance Sheets and are revalued each reporting date, with movements treated as compensation expense in the Consolidated Statements of Operations. Non-controlling interests in consolidated Funds on the Consolidated Balance Sheets include undistributed income owned by the investors in the respective Funds. The Company’s consolidated net income on the Consolidated Statements of Operations includes the income (loss) attributable to non-controlling interest holders of these consolidated entities. Redeemable non-controlling interests The Company includes redeemable non-controlling interests related to certain consolidated Funds as temporary equity on the Consolidated Balance Sheets. Non-controlling interests in certain consolidated Funds are subject to monthly or quarterly redemption by the investors. When redeemable amounts become legally payable to investors, they are classified as a liability and included in total liabilities of consolidated Funds on the Consolidated Balance Sheets. Other comprehensive income (loss) Other comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. For the Company’s purposes, comprehensive income (loss) represents net income (loss), as presented in the accompanying Consolidated Statements of Operations, adjusted for net foreign currency translation adjustments and adjustments to the valuation and amortization of certain derivative securities, net of tax. Restructuring costs A liability for restructuring is recognized only after management has developed a formal plan, approved by the Board of Directors, to which it has committed. The costs included in a restructuring liability are those costs that are either incremental or incurred as a direct result of the plan, or are the result of a continuing contractual obligation with no continuing economic benefit to the Company, or a penalty incurred to cancel the contractual obligation. Refer to Note 23 for details of the Company’s restructuring activities. Recently adopted accounting standards On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09), which revised revenue accounting rules through the creation of ASC 606 and expanded the disclosure requirements. The Company adopted ASU 2014-09 using the modified retrospective method. Results for periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting. The implementation of the new standard had no material impact on the measurement or timing of revenue recognition in prior periods and therefore no cumulative impact adjustment was necessary to the Company’s opening retained earnings as of January 1, 2018. The most significant impact in implementing the standard has been related to the accounting for certain pass-through costs on a gross basis. Refer to Note 17 for details of accounting for pass-through costs. On January 1, 2018, the Company adopted the provisions of ASU2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” (“ASU 2016-01”). In adopting ASU 2016-01, the Company changed the methodology in how it records investments in unconsolidated Timber Funds, from historical cost less depletion to fair value, based upon the Company’s proportionate share of the underlying net asset value. See Note 5 for the re-categorization of unconsolidated investments in Timber Funds within the fair value measurements table. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements. On April 1, 2018, the Company adopted ASU 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). Under ASU 2017-04, a goodwill impairment is calculated as the amount by which a reporting unit’s carrying value exceeds its fair value. Pursuant to the standard, the Company applied ASU 2017-04 for the annual goodwill impairment test performed during the fourth quarter. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements. Accounting standards not yet adopted In January 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 changes existing U.S. GAAP by requiring the recognition of lease assets and lease liabilities by lessees for those leases previously classified as operating leases under previous U.S. GAAP. The lease asset would reflect a right-of-use asset and the lease liability would reflect the present value of the future lease payments. ASU 2016-02 is effective for public companies for fiscal years beginning after December 15, 2018 and the Company plans to elect a modified retrospective transition approach utilizing the transition option provided by ASU 2018-11, to apply ASU 2016-02 as of the adoption date, January 1, 2019 without restating prior comparative periods. The Company will also adopt certain available practical expedients that will alleviate complexities related to the implementation. The Company expects the total balance sheet impact resulting from the recognition of the right-of-use asset and lease liability to be approximately $46 - $51 million. The adoption will not have a material impact on our results of operations. The Company is implementing a lease accounting software tool to assist in the accounting for lease arrangements under the new accounting rules and has abstracted lease contract data as inputs into the lease accounting tool. As of the date of this report, the Company is completing its data validation and detailed testing of the outputs of the software tool. |
Investments |
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Investments | Investments are comprised of the following at December 31 (in millions):
(1) At December 31, 2017, $6.4 million of investments made by one of our Affiliates in timber and timberlands were recorded at cost. In 2018, the Company transitioned to fair value recognition and presentation and investments formerly carried at cost were reclassified from “other investments carried at cost” in this table as of December 31, 2017 to “other investments held at fair value” in this table as of December 31, 2018. Also see Note 2. In August 2017, the Company executed a non-binding term sheet to sell its stake in Heitman LLC to Heitman’s management for cash consideration totaling $110 million. Pursuant to this term sheet, BSIG entered into a redemption agreement on November 17, 2017 and the Company reclassified its investment in Heitman to a cost-method investment. This transaction closed on January 5, 2018. The carrying value of BSIG’s interest in Heitman as of December 31, 2017 was $53.8 million and is included in “Investments in Affiliates carried at cost” in the table above. BSIG has retained its co-investment interests in Heitman-managed funds as well as any carried interest associated with these investments. Investment income is comprised of the following for the years ended December 31 (in millions):
* As previously noted, the Company reclassified its investment in Heitman to a cost-method investment as of November 30, 2017, therefore earnings from Heitman as an equity-accounted investment are included in the table above for the first eleven months of 2017. |
Fair Value Measurements |
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Fair Value Measurements | The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2018 (in millions):
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2017 (in millions):
Equity securities, including common and preferred stock, short-term investment funds, other investments and derivatives which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. These securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II. The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Company has not made adjustments to the prices provided. Assets of consolidated Funds also include investments in bank loans. Interests in senior floating-rate loans for which reliable market participant quotations are readily available are valued at the average mid-point of bid and ask quotations obtained from a third-party pricing service. These assets are classified as Level II. If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III. If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained. In either case, such securities are classified as Level III. The Company performs due diligence procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures. The uncategorized amount of $38.8 million at December 31, 2018 represents investments made by consolidated Funds and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Consolidated Balance Sheets. These consolidated Funds consist of real estate and private equity investment Funds. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates.
These investments are subject to longer than monthly or quarterly redemption restrictions, and due to their nature, distributions are received only as cash flows are generated from underlying assets over the life of the Funds. The range of time over which the underlying assets are expected to be liquidated by the investees is approximately one to twelve years from December 31, 2018. The valuation process for the underlying real estate investments held by the real estate investment Funds begins with each property or loan being valued by the investment teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, acquisitions, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. In connection with this process, changes in fair-value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions. Investments in unconsolidated Funds categorized as Level III of $3.0 million at December 31, 2018 related to investments in Timber Funds advised by Affiliates and are valued by the general partner of those Funds. Determination of estimated fair value involves subjective judgment because the actual fair value can be determined only through negotiation between parties in a sale transaction and amounts ultimately realized may vary significantly from the fair value presented. Not included in the above is $60.2 million at December 31, 2017, of investments carried at cost, including the Company’s investment in Heitman at December 31, 2017. In January 2018, the Heitman sale transaction was completed and the Company recognized a pre-tax gain of $65.7 million during 2018 in the Consolidated Statement of Operations. On January 1, 2018, the Company adopted the provisions of ASU 2016-01, discussed further in Note 2, resulting in a re-categorization of certain unconsolidated investments in Timber Funds from historical cost less depletion to fair value. The following table reconciles the opening balances of Level III financial assets to closing balances at the end of the year (in millions):
During the year ended December 31, 2018, the Company transferred $26.5 million of consolidated Funds other assets into Level III. These investments were not previously classified on the fair value hierarchy. The Fund was subsequently de-consolidated in 2018. There were no other significant transfers of financial assets or liabilities among Levels I, II or III during the year ended December 31, 2018. |
Variable Interest Entities |
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Variable Interest Entities | The Company, through its Affiliates, sponsors the formation of various entities considered to be VIEs. These VIEs are primarily Funds managed by Affiliates and are investment vehicles typically owned entirely by third-party investors. Certain Funds may be capitalized with seed capital investments from the Company and may be owned partially by Affiliate key employees and/or individuals that own minority interests in an Affiliate. The Company’s determination of whether it is the primary beneficiary of a Fund that is a VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to absorb more than an insignificant amount of the risks and rewards of the entity. Typically the Fund’s investors are entitled to substantially all of the economics of these VIEs with the exception of the management fees and performance fees, if any, earned by the Company or any investment the Company has made into the Funds. The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest, including interests of related parties, is substantial. The following table presents the assets and liabilities of Funds that are VIEs and consolidated by the Company (in millions):
“Investments at fair value” consist of investments in timber or securities. To the extent the Company also has consolidated Funds that are not VIEs, the assets and liabilities of those Funds are not included in the table above. The assets of consolidated VIEs presented in the table above belong to the investors in those Funds, are available for use only by the Fund to which they belong, and are not available for use by the Company to the extent they are held by non-controlling interests. Any debt or liabilities held by consolidated Funds have no recourse to the Company's general credit. The Company’s involvement with Funds that are VIEs and not consolidated by the Company is generally limited to that of an investment manager and its investment in the unconsolidated VIE, if any. The Company’s investment in any unconsolidated VIE generally represents an insignificant interest of the Fund’s net assets and assets under management, such that the majority of the VIE’s results are attributable to third parties. The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors. The following information pertains to unconsolidated VIEs for which the Company holds a variable interest at December 31 (in millions):
In addition to the multiple unconsolidated VIE Funds, the Company determined that Heitman LLC, an Affiliate of the Company at December 31, 2017, was a VIE. The Company concluded that it was not the primary beneficiary of Heitman LLC because it did not hold the power to direct its most economically significant activities. The Company aggregated Heitman LLC with the Company’s other unconsolidated VIE Funds due to their similar risk profiles given that the risks and rewards are driven by changes in investment values and the Affiliates’ ability to manage those assets. On January 5, 2018, the Company closed a transaction to sell its stake in Heitman LLC to Heitman’s management for cash consideration totaling $110 million. At December 31, 2018, the Company no longer has a variable interest in Heitman. |
Equity Accounted Investees |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Accounted Investees | The following tables present summarized financial information for Affiliates and Funds accounted for under the equity method (in millions):
As disclosed in Note 4, as of November 30, 2017, the Company reclassified its investment in Heitman to a cost-method investment. Heitman contributed to the Company’s financial results of operations for the eleven-month period from January 1, 2017 through November 30, 2017. The financial results of operations from Heitman for this eleven-month period are therefore included in the summarized statements of income table above. |
Fixed Assets and Lease Commitments |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Assets and Lease Commitments | Fixed assets consisted of the following at December 31 (in millions):
Depreciation and amortization expense for continuing operations was $14.5 million, $11.7 million and $9.4 million for the years ended December 31, 2018, 2017 and 2016, respectively. The Company and its Affiliates lease office space for their operations. At December 31, 2018, the Company’s aggregate future minimum payments for operating leases having initial or non-cancelable lease terms greater than one year are (in millions):
The Company is responsible for other expenses under these leases as well. Such expenses include operating costs, insurance, taxes and broker fees. Consolidated rent and occupancy expenses for 2018, 2017 and 2016 were $13.1 million, $12.0 million and $11.6 million respectively. |
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | The following table presents the changes in goodwill in 2018 and 2017 (in millions):
Certain measurement period adjustments were recorded in 2017 that resulted in a $1.9 million increase in goodwill. Refer to Note 3 for additional information. The following table presents the change in definite-lived acquired intangible assets in 2018 and 2017, comprised of client relationships (in millions):
The Company’s definite-lived acquired intangibles are amortized over their expected useful lives. As of December 31, 2018, these assets were being amortized over remaining useful lives of five to eleven years. The Company recorded amortization expense of $6.6 million, $6.6 million and $2.6 million, respectively, for the years ended December 31, 2018, 2017 and 2016. The Company also acquired a $1.0 million indefinite-lived intangible trade name in the acquisition of Landmark, included in acquired intangibles, net, on the Company’s Consolidated Balance Sheet at December 31, 2018 and 2017. The Company estimates that its consolidated annual amortization expense, assuming no useful life changes or additional investments in new or existing Affiliates, for each of the next five fiscal years is as follows (in millions):
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Related Party Transactions |
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Related Party Transactions | Amounts due from related parties were comprised of the following at December 31 (in millions):
Investments in related parties consisted of the following at December 31 (in millions):
Related party transactions included in the Company’s Consolidated Statements of Operations for the years ended December 31 consisted of (in millions):
During 2016, the Company and OM plc agreed to amend the Deferred Tax Asset Deed (the “DTA Deed”). Under the terms of the DTA Deed, as amended, the Company agreed to make a payment of the net present value of the future tax benefits due to OM plc valued as of December 31, 2016. This payment, originally valued at $142.6 million, was to be made over three installments, on June 30, 2017, December 31, 2017 and June 30, 2018. The initial payment of $45.5 million was paid to OM plc on June 30, 2017. The reduction of the corporate tax rate and other provisions of the Tax Act resulted in a decrease to the value of the DTA Deed of approximately $51.8 million for the year ended December 31, 2017. In 2018, the Company agreed to terminate the DTA Deed with OM plc. The Company recorded a revaluation gain of $20.0 million in connection with the settlement of the DTA Deed for the year ended December 31, 2018. During 2014, the Company entered into a Seed Capital Management Agreement and a Co-Investment Deed with OM plc and/or OM plc’s subsidiaries. During 2016, the Company and OM plc agreed to amend the Seed Capital Management Agreement. As a result of the amendment, the Company purchased approximately $39.6 million of seed investments from OM plc in September 2016. The Company purchased the remaining seed capital investments covered by the Seed Capital Management Agreement valued at $63.4 million in July 2017, financed in part by borrowings under a non-recourse loan facility (see Note 13) and two promissory notes paid in the first quarter of 2018 in the amount of $4.5 million. Amounts owed to OM plc associated with the Co-investment Deed were $4.1 million at December 31, 2018, net of tax. As of December 31, 2018, the Company had recorded $5.5 million for redemptions and estimated taxes due under the Co-investment Deed. Amounts withheld in excess of the future tax liability will be payable to OM plc upon settlement. Other related party arrangements During 2016, the Company made a loan to an equity-method Affiliate that was used to make co-investments in Affiliate Funds. Amounts due to the Company in connection with this loan are included in other assets on the Company’s Consolidated Balance Sheet and was $3.6 million at December 31, 2017. On January 5, 2018, the Company closed a transaction to sell its stake in this Affiliate. The Company uses the equity-method to account for its interests in Affiliates where it exercises significant influence over their operations, but does not hold a controlling interest. During 2018, 2017 and 2016, the Company recorded earnings in respect of these investees of $2.7 million, $14.5 million and $15.1 million, respectively. The Company also exercises significant influence over unconsolidated Funds; however in order to report in a manner consistent with consolidated Funds, it has elected to apply the fair value option for its investments therein. Additional information with respect to equity-accounted investees is disclosed in Note 7. During the years ended December 31, 2017 and 2016, the Company paid dividends to OM plc of $8.8 million and $25.4 million, respectively. During the years ended December 31, 2018 and 2017, the Company paid dividends to HNA of $10.2 million and $2.5 million, respectively. During the year ended December 31, 2018, the Company paid dividends to Paulson of $0.5 million. As the Company is a member of a group of related businesses, it is possible that the terms of certain related party transactions are not the same as those that would result from transactions with wholly unrelated parties. |
Accounts Payable and Accrued Expenses |
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Accounts Payable and Accrued Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses consisted of the following at December 31 (in millions):
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Other Compensation Liabilities |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Compensation Liabilities | Other compensation liabilities consisted of the following at December 31 (in millions):
Profit interests compensation expense amounted to $(7.5) million in 2018, $41.5 million in 2017, and $16.2 million in 2016. Issuances of additional profit sharing interests to Affiliate key employees for cash amounted to $0.0 million in 2018, $0.0 million in 2017, and $0.4 million in 2016. Redemption of profit sharing interests by BSIG from Affiliate key employees for cash were $16.1 million in 2018, $5.7 million in 2017, and $12.7 million in 2016. The share-based payments liability includes the Landmark compensation arrangements and additional payment disclosed in Note 3 which combined amounted to $350.6 million at December 31, 2018 and $146.8 million at December 31, 2017. |
Borrowings and Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings and Debt | The Company’s long-term debt at December 31, 2018 was comprised of a revolving credit facility, non-recourse seed capital financing and long-term bonds. Revolving credit facility On October 15, 2014, the Company entered into a revolving credit facility with Citibank, as administrative agent and issuing bank, and Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint book runners (as amended, the “Credit Facility”). Pursuant to the terms of the Credit Facility, the Company may obtain loans on a revolving credit basis and procure the issuance of letters of credit in an aggregate amount at any time outstanding not in excess of $350 million. The Credit Facility has a maturity date of October 15, 2019. The Company intends to extend the Credit Facility beyond the maturity date. Borrowings under the Credit Facility bear interest, at BSIG’s option, at either the per annum rate equal to (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5% and (iii) the one month Adjusted LIBO Rate plus 1.0%, plus, in each case an additional amount ranging from 0.25% to 1.00%, based on its credit rating or (b) the London interbank offered rate for a period, at the Company’s election, equal to one, two, three or six months plus an additional amount ranging from 1.25% to 2.00%, with such additional amount based on its credit rating. In addition, the Company is charged a commitment fee based on the average daily unused portion of the Credit Facility at a per annum rate ranging from 0.20% to 0.50%, with such amount based on the Company’s credit rating. Moody’s Investor Service, Inc. and Standard & Poor’s have each assigned an investment-grade rating to the Company’s senior, unsecured long-term indebtedness. As a result of the assignment of the credit ratings, the Company’s interest rate on outstanding borrowings was set at LIBOR + 1.50% and the commitment fee on the unused portion of the revolving credit facility was set at 0.25%. Under the Credit Facility, the ratio of third-party borrowings to trailing twelve months Adjusted EBITDA cannot exceed 3.0x, and the interest coverage ratio must not be less than 4.0x. At December 31, 2018, the outstanding balance of the facility was $0.0 million ($350.0 million of undrawn revolving credit facility capacity). Per the terms of the revolving credit facility the Company’s ratio of debt (includes third-party borrowings and amounts owed under previously agreed acquisition agreement, see Note 3) to trailing twelve months Adjusted EBITDA was 2.1x, and interest coverage ratio was 11.7x. The fair value of borrowings on the revolving credit facility approximated the net cost basis as of December 31, 2018. The Company has drawn down $240.0 million on the Credit Facility subsequent to year-end to help fund the payment of the previously agreed acquisition agreement and additional share repurchases ($110.0 million of undrawn revolving credit facility capacity). At December 31, 2017 the outstanding balance of the facility was $0.0 million ($350.0 million of undrawn revolving credit facility capacity). The Company’s ratio of third-party borrowings to trailing twelve months Adjusted EBITDA was 1.4x and interest coverage ratio was 11.5x. Non-recourse seed capital facility In July 2017, the Company purchased all remaining seed capital investments covered by the Seed Capital Management Agreement from OM plc for $63.4 million. BSIG financed this purchase in part through borrowings under a non-recourse seed capital facility collateralized by its seed capital holdings. The Company entered into this facility as of July 17, 2017, and could borrow up to $65.0 million, so long as the borrowing does not represent more than 50% of the value of the permitted seed capital collateral. The non-recourse seed facility bears interest at LIBOR +1.55% with a commitment fee on the unused portion of this facility of 0.95%. The facility currently has a maturity date of January 17, 2020 and includes a six-month evergreen renewal option. At December 31, 2018, amounts outstanding under this non-recourse seed capital facility amounted to $0.0 million. Per the terms of the Company’s Credit Facility, drawdowns under this facility are excluded from the Company’s third party debt levels for purposes of calculating the Company’s credit ratio covenants. The fair value of borrowings on the non-recourse seed capital facility approximated the net cost basis as of December 31, 2018. Long-term bonds The Company’s long-term bonds were comprised of the following as of the dates indicated (in millions):
In July 2016, the Company issued $275.0 million of 4.80% Senior Notes due 2026 (the “2026 Notes”) and $125.0 million of 5.125% Senior Notes due 2031 (the “2031 Notes”). The Company used the net proceeds of these offerings to finance the acquisition of Landmark in August 2016, settle an outstanding interest rate lock, purchase seed capital from OM plc and pay down the balance of the Credit Facility. 4.80% Senior Notes Due July 2026 The $275.0 million 2026 Notes were sold at a discount of $(0.5) million and the Company incurred debt issuance costs of $(3.0) million, which are being amortized to interest expense over the ten-year term. The 2026 Notes can be redeemed at any time prior to the scheduled maturity in part or in aggregate, at the greater of the 100% principal amount at that time or the sum of the remaining scheduled payments discounted at the treasury rate (as defined) plus 0.5%, together with any related accrued and unpaid interest. 5.125% Senior Notes Due August 2031 The Company incurred debt issuance costs of $(4.3) million in connection with the issuance of the $125.0 million 2031 Notes, which are being amortized to interest expense over the fifteen-year term. The 2031 Notes can be redeemed at any time, on or after August 1, 2019 at a redemption price equal to 100.0% of the principal amount together with any related accrued and unpaid interest. The fair value of the long-term bonds was determined using broker quotes and any recent trading activity for each of the notes listed above, which are considered Level II inputs. Interest expense Interest expense incurred amounted to $24.9 million, $24.5 million and $11.3 million for the years ended December 31, 2018, 2017 and 2016 respectively. Interest expense consists of interest accrued on the long-term debt and lines of credit, commitment fees and amortization of debt-related costs. The weighted average interest rate on all debt obligations, excluding consolidated Funds, was 6.08%, 6.02% and 5.16% in each of 2018, 2017 and 2016, respectively. As of December 31, 2018, the aggregate maturities of debt commitments, based on their contractual terms, are as follows:
The Company was in compliance with the required covenants related to borrowings and debt facilities as of December 31, 2018. |
Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | The components of income tax expense from continuing operations for the years ended December 31 are as follows (in millions):
The Company has recognized income tax expense (benefit) related to derivative securities within other comprehensive income of $0.4 million, $0.8 million and $(4.3) million in the years ended December 31, 2018, 2017 and 2016, respectively. Included in gain (loss) on disposal of discontinued operations is income tax expense (benefit) of $0.0 million, $(0.1) million and $4.0 million in the years ended December 31, 2018, 2017 and 2016, respectively. The provision for income taxes in 2018, 2017 and 2016 included benefits of $0.4 million, $1.2 million and $4.7 million, respectively, related to the utilization of net operating loss carryforwards. The reconciliation of the difference between the Company’s U.S. Federal statutory income tax rate and the effective income tax rate for continuing operations for the years ended December 31 is as follows:
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted and became effective January 1, 2018. The Tax Act enacted various measures of domestic and international corporate tax reform that were impactful to the Company including reduction of the federal statutory corporate tax rate from 35% to 21%, new limitations on executive compensation and the deductibility of interest expense, a one-time tax on mandatory deemed repatriation of non-U.S. earnings, and new taxes assessed on foreign earnings. In accordance with SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), the Company was permitted to provide provisional amounts for recording the tax effects of the enacted tax law during a specified measurement period, ending one year after the enactment date. The Company’s accounting for the effect of the Tax Act is now complete under SAB 118 and accordingly, the Company has recorded a $1.0 million income tax benefit during the year ended December 31, 2018 related to refinement of the Section 965 toll charge tax liability on the mandatory deemed repatriation of foreign earnings. Additionally, the Company analyzed the impact of the international corporate tax reform measures which became effective January 1, 2018, including the new taxes on foreign earnings known as the global intangible low-taxed income (“GILTI”). The Company has elected to treat GILTI taxes as period costs in the accounting and tax periods in which they are incurred. The Company has recognized tax expense of $0.7 million during 2018 related to the GILTI tax. In 2018, the Deferred Tax Asset Deed was terminated resulting in a tax net impact of $1.6 million. In 2017 the deed was revalued due to the enactment of the Tax Act resulting in a tax impact of $18.1 million. On November 16, 2017, the U.K. Finance (No.2) Bill 2017 (the “Finance Bill”) received Royal Assent and enacted amendments to the hybrid mismatch rules which are effective from July 13, 2017. Accordingly, the Company’s benefits from its intercompany financing arrangements were reduced as of the effective date. The Company reduced its liability for uncertain tax positions by $47.9 million during the year ended December 31, 2018 as a result of a lapse of statute of limitations. During 2018, the Company wrote-off its $8.6 million deferred tax asset for state net operating loss carryforwards and released the corresponding $8.6 million valuation allowance, as management has concluded that the tax benefits associated with the state net operating loss carryforwards will not be recognized. Due to Pennsylvania legislation enacted during 2017 which limits the Company’s annual usage of net operating losses within the state, the Company recorded an additional $3.1 million valuation allowance in 2017 against its state net operating loss carryforwards as management concluded it is unlikely the tax benefits will be realized. In general, it is the practice and intention of the Company to reinvest earnings of its non-U.S. subsidiaries in those operations. Management has no intention of repatriating earnings of its non-U.S. subsidiaries in the foreseeable future. At December 31, 2018, the Company has not recorded any deferred tax liabilities relating to additional taxes such as foreign withholding and state taxes which could arise on the repatriation of unremitted earnings of its non-U.S. subsidiaries. It is not practical for the Company to determine the potential unrecognized deferred tax liability related to unremitted earnings due to numerous assumptions associated with the determination. Deferred tax assets and liabilities reflect the expected future tax consequences of temporary differences between the book carrying amounts and tax bases of the Company’s assets and liabilities. The significant components of deferred tax assets and deferred tax liabilities for the years ended December 31 are as follows (in millions):
At December 31, 2018, the Company has tax attributes that carry forward for varying periods. The Company’s federal net operating loss carryforward of $6.4 million originated during 2004 and 2006 and will expire over a six to eight-year period. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including the existence of cumulative income in the most recent fiscal years, changes in the business in which the Company operates, and the Company’s ability to forecast future taxable income. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence that is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed. The Company has three years of cumulative earnings as of December 31, 2018, 2017 and 2016. As of December 31, 2018, management believes it is more likely than not that the balance of the deferred tax asset will be realized based on forecasted taxable income. A reconciliation of the change in gross unrecognized tax benefits for the years ended December 31 is as follows (in millions):
The Company’s liability for uncertain tax positions includes unrecognized benefits of $46.7 million and $88.3 million at December 31, 2018 and 2017, respectively, that if recognized would affect the effective tax rate on income from continuing operations. The Company recognized $(1.9) million, $2.5 million, and $3.6 million in interest and penalties in its income tax provision for the years ended December 31, 2018, 2017, and 2016, respectively. The Company recognizes accrued interest and penalties relating to unrecognized tax benefits as income tax expense. The Company’s liability for uncertain tax benefits at December 31, 2018, 2017, and 2016 includes accrued interest and penalties of $6.7 million, $8.6 million and $6.1 million, respectively. The Company believes that it is reasonably possible that a decrease of up to $41.2 million in unrecognized tax benefits may be necessary within the next twelve months, as the result of a lapse of statute of limitations. The Company is periodically under examination by various taxing authorities. Examinations are inherently uncertain, may result in payment of additional taxes or the recognition of tax benefits and may be in process for extended periods of time. At December 31, 2018, there were no open examinations in process. The Company and its subsidiaries file tax returns in U.K., U.S. federal, state, local and other foreign jurisdictions. As of December 31, 2018, the Company is generally no longer subject to income tax examinations by U.K., U.S. federal, state, local, or foreign tax authorities for calendar years prior to 2008. |
Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Operational commitments The Company had unfunded commitments to invest up to approximately $69 million in co-investments as of December 31, 2018. These commitments will be funded as required through the end of the respective investment periods ranging through fiscal 2024. Certain Affiliates operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any violations of such financial requirements occurring during the period. Litigation The Company and its Affiliates are subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals for matters for which the outcome is probable and can be reasonably estimated. If an insurance claim or other indemnification for a litigation accrual is available to the Company, the associated gain will not be recognized until all contingencies related to the gain have been resolved. As of December 31, 2018, there were no material accruals for claims, legal proceedings or other contingencies. Indemnifications In the normal course of business, such as through agreements to enter into business combinations and divestitures of Affiliates, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. Foreign tax contingency The Company has clients in non-U.S. jurisdictions which require entities that are conducting certain business activities in such jurisdictions to collect and remit tax assessed on certain fees paid for goods and services provided. The Company does not believe this requirement is applicable based on its limited business activities in these jurisdictions. However, given the fact that uncertainty exists around the requirement, the Company has chosen to evaluate its potential exposure related to non-collection and remittance of these taxes. At December 31, 2018, management of the Company has estimated the potential maximum exposure and concluded that it is not material. No accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at December 31, 2018. Considerations of credit risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash investments. The Company maintains cash and cash equivalents and short term investments with various financial institutions. These financial institutions are typically located in cities in which the Company and its Affiliates operate. For the Company and certain Affiliates, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits. |
Earnings Per Share |
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Earnings Per Share | Basic earnings per share is calculated by dividing net income attributable to controlling interests by the weighted average number of shares outstanding. Diluted earnings per share is similar to basic earnings per share, but is adjusted for the effect of potentially issuable ordinary shares, except when inclusion is antidilutive. The calculation of basic and diluted earnings per ordinary share for the years ended December 31, 2018, 2017 and 2016 is as follows (dollars in millions, except per share data):
Employee options to purchase 6,900,000 shares were not included in the computation of diluted EPS for the year ended December 31, 2018 because the assumed proceeds from exercising such options exceed the average price of the common shares for the period and, therefore, the options are deemed antidilutive. |
Revenue |
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Revenue | Management fees The Company’s management fees are a function of the fee rates the Affiliates charge to their clients, which are typically expressed in basis points, and the levels of the Company’s assets under management. The greatest driver of increases or decreases in this average fee rate is changes in the mix of the Company’s assets under management caused by net inflows or outflows in certain asset classes or disproportionate market movements. Performance fees The Company’s alternative products subject to performance fees or carried interest earn these performance fees upon exceeding high-water mark performance thresholds or outperforming a hurdle rate. Conversely, the separate accounts / other products, which primarily earn management fees, are potentially subject to performance adjustments up or down based on investment performance versus benchmarks. Other revenue Included in other revenue are certain payroll and benefits costs and expenses paid on behalf of Funds by the Company’s Affiliates. In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, the Company is acting as a principal and the reimbursement is accrued on a gross basis at cost as the corresponding reimbursable expenses are incurred. Revenue from expense reimbursement amounted to $8.0 million, $0.0 million, and $0.0 million for the years ended December 31, 2018, 2017, and 2016, respectively, and is recorded in other revenue in the Company’s Consolidated Statements of Operations. Other revenue may also consist of other miscellaneous revenue, consisting primarily of administration and consulting services. Disaggregation of management fee revenue The Company classifies its revenue (including only consolidated Affiliates that are included in management fee revenue) among the following asset classes:
Revenue by asset class for the years ended December 31, 2018, 2017, and 2016 were (in millions):
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Employee Benefits |
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Dec. 31, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefits | The Company has various defined contribution plans covering substantially all of its full-time employees and several of its Affiliates. In addition to pre-tax contributions made by employees, the Company also makes contributions to the qualified plans annually. The Company also has non-qualified defined contribution plans covering certain senior employees. The Company has established a Deferred Compensation Plan under which the Board of Directors makes awards that may be invested by the recipient in investments deemed available under the plan. Vesting of awards under the Deferred Compensation Plan is based on the number of years of service already provided by the employee at the date of the grant. In addition, the Company has established a Voluntary Deferral Plan that provides officers of the Company the opportunity to voluntarily defer a portion of their compensation. The compensation deferred is deemed to be invested in one or more investment options available under the plan. These non-qualified plans are unfunded, although the Company does make contributions to a Rabbi Trust to hedge its risks in terms of providing returns to employees on their deemed investments held in the plan. As of December 31, 2018 and 2017, a total of $91.7 million and $95.1 million, respectively, had been recorded as long-term compensation liabilities and a total of $91.8 million and $95.2 million had been invested under the Deferred Compensation and Voluntary Deferral plans, respectively. The change in the fair value of long-term compensation liabilities and the change in fair value of the assets invested under the Deferred Compensation and Voluntary Deferral plans was $0.1 million and $0.2 million, respectively, for the year ended December 31, 2018, $9.0 million and $9.0 million, respectively, for the year ended December 31, 2017, and $2.4 million, and $2.4 million, respectively, for the year ended December 31, 2016. The Company recorded total expenses in relation to its qualified and non-qualified plans within compensation and benefits in its Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016 of $14.4 million, $14.8 million and $12.3 million, respectively. |
Equity-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based Compensation | Cash-settled Affiliate awards The Company has entered into compensation arrangements with certain of its Affiliates whereby in exchange for continued service, Affiliate equity is either purchased by or granted to Affiliate key employees subject to a limit imposed by the Company, and may be repurchased either by Affiliate key employees or by the Company at a future date at the then applicable fair value, subject to service requirements having been met. Compensation expense is recognized over the requisite service period equal to the cumulative vested fair value of the award at the end of each period up to vesting date. The Company accounts for these arrangements as “cash settled” share based payments, and accordingly a corresponding share-based payment liability is recorded. Vested share-based payment liabilities are revalued at each period end until settlement date, with changes in the liabilities included within compensation expense. As described within Note 3, in conjunction with the Landmark acquisition, BSIG entered into compensation arrangements with employees of Landmark where pre-acquisition equity units held by Landmark employees became subject to a service condition. These units are accounted for as stock-based compensation, were fair valued as of the closing date of the acquisition and vest over varying increments from December 31, 2018 through December 31, 2024. These units contain put rights that provide liquidity to the employees upon vesting and are remeasured at the end of each reporting period. An additional acquisition related payment of $207.6 million was earned based on the growth of Landmark’s business and was paid in February 2019. This arrangement was also accounted for as equity-based compensation, fair valued as of the closing date of the acquisition, and vested on December 31, 2018. The following table presents the changes in the share-based payments liability for the years ended December 31 (in millions):
Equity-settled corporate awards BrightSphere Investment Group equity incentive plan The Company has established various plans under which it is authorized to grant restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance based restricted stock awards (“Performance-based RSAs”), performance based restricted stock units (“Performance-based RSUs”) and stock option awards. These plans are maintained to provide equity based compensation arrangements to employees and non-executive directors. Equity ownership encourages employees and directors to act in the best long-term interests of the Company. A total of 18.9 million ordinary shares have been reserved for issuance under the various plans. Compensation expense recognized by the Company for the year ended December 31, 2018, 2017, and 2016 in relation to these awards was $7.1 million, $14.6 million, and $13.1 million respectively. The related income tax benefit recognized for years ended December 31, 2018, 2017 and 2016 was $1.3 million, $5.7 million and $5.1 million respectively. Unamortized compensation expense related to unvested RSAs, RSUs, Performance-based RSAs, Performance-based RSUs and stock options at December 31, 2018 of $12.5 million is expected to be recognized over a weighted-average period of 2.3 years. The service inception date for annual awards granted in 2018 is deemed to be January 1, 2017. It is anticipated that annual awards for 2018 with a fair value of $1.1 million will be granted during 2019 with a service inception date of January 1, 2018. The following summarizes the grant date fair value of the instruments granted by the Company during the year ended December 31:
Grants of restricted shares in BrightSphere Investment Group plc The following table summarizes the activity related to restricted share awards:
The grant date fair value per share, calculated based on the closing price as quoted on the New York Stock Exchange on the measurement date, is used to determine the fair value of restricted shares granted to employees. Restricted shares under the plan generally have a vesting period of one to three years. Grants of restricted stock units in BrightSphere Investment Group plc The following table summarizes the activity related to restricted stock units:
The grant date fair value per share, calculated based on the closing price as quoted on the New York Stock Exchange on the measurement date, is used to determine the fair value of restricted shares granted to employees. Restricted stock units under the plan generally have a vesting period of one to three years. Grants of Performance-based restricted stock awards in BrightSphere Investment Group plc The following table summarizes the activity related to performance-based restricted stock awards:
The Performance-based RSAs granted by the Company have a market vesting condition; therefore a Monte-Carlo simulation model was used to determine the fair value of the restricted units granted to employees. Significant assumptions utilized in the Monte-Carlo simulation model include assumed reinvestment of dividends, a risk-free interest rate of 2.39%, and an expected volatility of 26.57%. Performance-based RSAs under the plan have a vesting period of three years. Grants of Performance-based restricted stock units in BrightSphere Investment Group plc The following table summarizes the activity related to performance-based restricted stock units:
There were no performance-based RSUs granted by the Company during the year. Performance-based RSUs under the plan have a vesting period of three years. Grants of Stock Options in BrightSphere Investment Group plc The following table summarizes the activity related to the Company’s stock option awards:
The Company granted stock options with a fair value of $11.7 million during 2018. The total fair value of options vested during the year ended December 31, 2018 was $2.3 million. The fair value of the stock options grant was estimated on the grant date using a Monte-Carlo simulation valuation model. The weighted average fair value of stock options granted during the year ended December 31, 2018 was $1.69 per option, based on the grant date assumptions stated below.
(1) Dividend yield assumption represents the Company’s expected dividend yield based on its historical dividend payouts and the stock price at the date of grant. (2) Expected volatility is based upon historical BSIG stock price volatility. (3) The risk-free rate for period within the contractual life of the option is based on the U.S. Treasury yield curve at the time of grant. (4) Expected life of options is based on the contractual term and the expected exercise behavior. OM plc equity compensation plans OM plc maintained various equity-based compensation arrangements, including stock options and restricted stock awards, in which the Company’s employees participated in the periods presented. The cost of these equity-based programs is not material, and has been included in the Company’s financial results where applicable. The following table summarizes the activity related to the various equity compensation arrangements maintained by OM plc in which the Company’s employees participated.
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Accumulated Other Comprehensive Income |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | The following tables show the tax effects allocated to each component of other comprehensive income (in millions):
The components of accumulated other comprehensive income (loss) for the years ended December 31, 2018, 2017 and 2016 were as follows (in millions) including proportions attributable to non-controlling interests:
The Company reclassified $2.8 million, $2.6 million, and $1.1 million from accumulated other comprehensive income (loss) to interest expense on the Consolidated Statements of Operations for the twelve months ended December 31, 2018, 2017 and 2016 respectively. |
Non-controlling interests |
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Dec. 31, 2018 | |
Noncontrolling Interest [Abstract] | |
Non-controlling interests | Non-controlling interests on the Consolidated Balance Sheets include capital and undistributed profits of certain entities that are consolidated, but not 100% owned, which amounted to $1.6 million at December 31, 2018 and $1.3 million at December 31, 2017. Non-controlling interests in consolidated Funds Net income (loss) attributable to non-controlling interests in consolidated Funds in the Consolidated Statements of Operations is comprised of the net income or loss and net gains and losses allocated to equity-holders, other than BSIG, of consolidated Funds. For the years ended December 31, 2018, 2017 and 2016 this net income (loss) was $(6.1) million, $4.9 million, and $(0.2) million, respectively. Non-controlling interests in consolidated Funds on the Consolidated Balance Sheets represents the share of net assets of the Funds attributable to those equity holders who are restricted in their ability to redeem their interests, which amounted to $29.3 million at December 31, 2018, and $50.6 million at December 31, 2017. Redeemable non-controlling interests in consolidated Funds on the Consolidated Balance Sheets represents the share of net assets of the Funds attributable to those equity holders who are not restricted in their ability to redeem their interests, which amounted to $41.9 million at December 31, 2018, and $44.0 million at December 31, 2017. |
Derivatives and Hedging |
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Dec. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives and Hedging | Cash flow hedge In July 2015, the Company entered into a series of $300.0 million notional Treasury rate lock contracts which was designated and qualified as cash flow hedges. The Company documented its hedging strategy and risk management objective for this contract in anticipation of a future debt issuance. The Treasury rate lock contract eliminated the impact of fluctuations in the underlying benchmark interest rate for future forecasted debt issuances. The Company assessed the effectiveness of the hedging contract at inception and on a quarterly basis thereafter. The forecasted debt issuances occurred in July 2016 and the Treasury rate lock, which had an accumulated fair value of $(34.4) million, was settled. Refer to Note 13, Borrowings and Debt, for additional information on the debt issuances. Amounts recorded in accumulated other comprehensive income in connection with the settled Treasury rate lock were $2.8 million, net of tax of $(0.4) million for the year ended December 31, 2018. As of December 31, 2018, the balance in accumulated other comprehensive income (loss) in connection with the Treasury rate lock contract amounted to $(22.7) million, net of tax. This balance will be reclassified to earnings through interest expense over the life of the issued debt. Amounts of $2.8 million, $2.6 million and $1.1 million have been reclassified for the years ended December 31, 2018, 2017 and 2016, respectively. During the next twelve months the Company expects to reclassify approximately $3.0 million to interest expense. Derivatives of consolidated Funds In the normal course of business, the Company’s consolidated Funds may enter into transactions involving derivative financial instruments in connection with Funds’ investing activities. Derivative instruments may be used as substitutes for securities in which the Funds can invest; to hedge portfolio investments or to generate income or gain to the Funds. The Funds may also use derivatives to manage duration; sector and yield curve exposures and credit and spread volatility. Derivative financial instruments base their value upon an underlying asset, index or reference rate. These instruments are subject to various risks, including leverage, market, credit, liquidity and operational risks. The Funds manage the risks associated with derivatives on an aggregate basis, along with the risks associated with its trading and as part of its overall risk management policies. |
Discontinued Operations and Restructuring |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Restructuring | The Company recognized a gain (loss) on disposal, net of taxes, of $0.1 million, $(0.1) million, and $6.2 million, with basic and diluted discontinued operations earnings per share of $0.00, $0.00, and $0.07 for the years ended December 31, 2018, 2017 and 2016, respectively. Gains and losses on disposal of discontinued operations represent the Company’s rights or obligations related to contractual residual interests in previously discontinued operations. Liabilities associated with discontinued operations and restructuring included in other liabilities on the Company’s Consolidated Balance Sheets are summarized as follows as of December 31 (in millions):
No additional costs are expected to be incurred in connection with discontinued operations for the events described above. |
Selected Quarterly Financial Data (unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Quarterly Financial Data (unaudited) | The following is a summary of the quarterly results of operations of the Company for the years ended December 31, 2018 and 2017 ($ in millions, unless otherwise noted):
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Basis of Presentation and Significant Accounting Policies (Policies) |
12 Months Ended |
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Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation These Consolidated Financial Statements reflect the historical balance sheets; statements of operations; statements of comprehensive income; statements of changes in shareholders’ equity; and statements of cash flows of the Company. Within these Consolidated Financial Statements, entities that are part of OM plc’s consolidated results, but are not part of BSIG, as defined above, as well as HNA, Paulson and their related entities, are referred to as “related parties.” The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All dollar amounts, except per share data in the text and tables herein, are stated in millions unless otherwise indicated. Transactions between the Company and its related parties are included in the Consolidated Financial Statements, however material intercompany balances and transactions among the Company, its consolidated Affiliates and consolidated Funds are eliminated in consolidation. |
Revenue recognition | Revenue recognition Revenue from contracts with customers On January 1, 2018, the Company adopted the provisions of Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers,” (“ASC 606”), using the modified retrospective method applied to all contracts. Under ASC 606, the Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The Company applied the five step method outlined in ASC 606 to all revenue streams. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company’s management fee revenue is calculated based upon levels of assets under management multiplied by a fee rate. Management fee revenue is typically calculated on a monthly or quarterly basis, but is earned continuously as performance obligations are fulfilled. The transaction price is variable in contracts which calculate AUM on an average basis over a specified period and this variability is resolved at the end of the period, when the actual average AUM for the contract period may be calculated. The Company is able to resolve the variability and calculate the most likely amount to be recognized for any given period by estimating revenue based upon a daily average AUM. All of the Company’s performance obligations are satisfied ratably over time and there is no distinction in the methodology used to recognize management fee revenue in instances where there is more than one performance obligation. Typically, revenue is recognized over time using a time-based output measure to measure progress. Management fees are recognized monthly as services are rendered. Affiliates that manage tangible property may also earn transaction fees at the time the underlying property is bought and sold. Any fees collected in advance are deferred and recognized as income over the period earned. Dividend income received is recorded on the ex-dividend date. Performance fees are generally assessed as a percentage of the investment performance realized on a client’s account. Additionally, separate accounts or other products which primarily earn management fees are potentially subject to performance adjustments up or down based on investment performance versus benchmark. Performance fees, including those that are subject to clawback, are recognized when they (i) become billable to customers (based on contractual terms of agreements) and (ii) are not subject to contingent repayment. The Company is required to capitalize certain costs directly related to the acquisition or fulfillment of a contract with a customer. The Company has noted no instances where sales-based compensation or similar costs met the definition of an incremental cost to acquire a contract with a customer under ASC 606. There are no instances where the Company has incurred costs to fulfill a contract with a customer, therefore no intangible assets related to contract acquisition or fulfillment have been recognized. For each one of its contracts with customers, the Company identifies one or more performance obligations within the contract and then, for each performance obligation, determines if it is a principal (where the nature of its promise is to provide a specified good or service itself) or an agent (where the nature of its promise is to arrange for a good or service to be provided by another party). In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, if the Company is acting as a principal, the reimbursement is recorded on a gross basis and if the Company is acting as an agent, the reimbursement is recorded on a net basis. Certain Funds reimburse the Company’s Affiliates for certain expenses where the Affiliate is acting as a principal, primarily for compensation expense for field office personnel at several Timber Funds (as defined below). Revenue from expense reimbursement is accrued at cost as the corresponding reimbursable expenses are incurred and is recorded in other revenue in the Company’s Consolidated Statements of Operations. Revenue from other sources Other revenue also includes interest income on cash and cash equivalents and revenue from administration and consulting services. The revenue of consolidated Funds that invest in Timber (the “Timber Funds”) is recognized from log and fiber sales upon delivery to the customer. The Company is typically responsible for all logging and hauling costs. However, under pay-as-cut timber contracts, title and risk of loss from stumpage sales transfer to the buyer as the trees are cut. Revenue is recognized as timber is harvested. The buyer is typically responsible for all logging and hauling costs. |
Compensation arrangements | Compensation arrangements The Company operates short term variable compensation arrangements where generally, a percentage of each Affiliate’s annual pre-variable compensation earnings, as defined in each arrangement, is allocated to a “pool” of each respective Affiliate’s key employees and subsequently distributed to individuals subject to recommendation and approval of a remuneration committee comprised of both the Company’s and each respective Affiliate’s management. Variable compensation expense is accrued and recognized in the Consolidated Statements of Operations as services are provided by individual employees. The Company operates longer term profit-interest plans whereby certain Affiliate key employees are granted (or have a right to purchase) awards representing a profits interest in their respective Affiliate, as distinct from an equity interest due to the lack of pari passu voting rights. Under these plans, the Company may award a portion of the aforementioned variable compensation arrangement through issuance of a profits interest in the Affiliate. The awards generally have a three- to five-year vesting period from the grant date, and the service period begins at the commencement of the financial period to which the variable compensation relates. Under these plans, Affiliate key employees are eligible to share in the profits of their respective Affiliates based on their respective percentage interest held. In addition, under certain circumstances, Affiliate key employees are eligible to receive repurchase payments upon exiting the plans based on a multiple of the last twelve months profits of their respective Affiliate, as defined. Profits allocated and movements in the potential repurchase value, determined based on a fixed multiple times trailing twelve month profits, as defined, are recognized as compensation expense. Profit interests compensation liabilities are re-measured at each reporting date at the twelve month earnings multiple, with movements treated as compensation expense in the Company’s Consolidated Statements of Operations. |
Share-based compensation plans | Share-based compensation plans The Company recognizes the cost of all share-based payments to directors, senior management and employees, including grants of restricted stock and stock options, as compensation expense in the Consolidated Statements of Operations over the respective vesting periods. Awards made previously under OM plc’s restricted stock and stock options plans are accounted for as equity settled, and the grant date fair value is recognized as compensation expense over the requisite service period, with a corresponding contribution to capital recorded. Awards made under the Company’s equity plans are accounted for as equity settled, and the grant date fair value is recognized as compensation expense over the requisite service period, with a corresponding contribution to capital recorded. Valuation of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) is determined based on the Company’s closing share price as quoted on the New York Stock Exchange on the measurement date. For performance-based awards and stock options, a Monte-Carlo simulation model is used to determine the fair value. Key inputs for the model include: assumed reinvestment of dividends, risk-free interest rate and expected volatility. All excess tax benefits and deficiencies on share-based payment awards are recognized as income tax expense or benefit in the Consolidated Statements of Operations. In addition, the tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur and excess tax benefits or deficiencies are classified with other income tax cash flows as an operating activity in the statement of cash flows. The Company recognizes forfeitures as they occur. Awards of equity made to Affiliate key employees are accounted for as cash settled, with the fair value recognized as compensation expense over the requisite service period, with a corresponding liability carried within other compensation liabilities on the Consolidated Balance Sheet until the award is settled by the Company. The fair value of the liability is based on the expected cash to be paid. The liability is revalued at each reporting period, with any movements recorded within compensation expense. |
Consolidation | Consolidation Affiliates The Company evaluates each of its Affiliates and other operating entities to determine the appropriate method of accounting. Generally, majority-owned entities or otherwise controlled investments in which the Company holds a controlling financial interest as the principal shareholder, managing member, or general partner are consolidated. Funds In the normal course of business, the Company’s Affiliates sponsor and manage certain investment vehicles (the “Funds”). The Company assesses consolidation requirements with respect to its Funds. In evaluating whether or not a legal entity must be consolidated, the Company determines if such entity is a variable interest entity (“VIE”) or a voting interest entity (“VOE”). A VOE is considered an entity in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders at risk have the obligation to absorb losses, the right to receive residual returns, and the right to direct the activities of the entity that most significantly impact the entity’s economic performance. A VIE is an entity that lacks one or more of the characteristics of a VOE. Assessing whether an entity is a VIE or VOE involves judgment and analysis. Factors considered in this assessment include the entity’s legal organization, the entity’s capital structure and equity ownership and any related party or de-facto agent implications of the Company’s involvement with the entity. Investments that are determined to be VIEs are consolidated if the Company or a consolidated Affiliate is the primary beneficiary of the investment. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties on a proportional basis. The primary beneficiary of the VIE is defined as the variable interest holder that has a controlling financial interest. A controlling financial interest is defined as (i) the power to direct the activities of the VIE that most significantly impacts its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. If no single party satisfies both criteria, but the Company and its related parties satisfy the criteria on a combined basis, then the primary beneficiary is the entity out of the related party group that is most closely associated to the VIE. The consolidation analysis can generally be performed qualitatively, however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed. The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest in the fund, including interests of related parties on a proportional basis, is substantial. The Company consolidates VOEs when it has control over significant operating, financial and investing decisions of the entity or holds the majority voting interest. Upon the occurrence of certain events (such as contributions and redemptions, either by the Company, its Affiliates, or third parties, or amendments to the governing documents of the Company’s investees or sponsored Funds) management reviews and reconsiders its previous conclusion regarding the status of an entity as a VIE or a VOE. Additionally, management continually reconsiders whether the Company is deemed to be a VIE’s primary beneficiary who consolidates such entity. |
Investments and Investment Transactions | Investments and Investment Transactions Valuation of investments held at fair value Valuation of Fund investments, including Timber Funds, is evaluated pursuant to the fair value methodology discussed below. Other investments are categorized as trading and recorded at estimated fair value. Realized and unrealized gains and losses arising from changes in fair value of investments are reported within investment income in the Consolidated Statements of Operations. See Note 5 for a summary of the fair value inputs utilized to determine the fair value of other investments held at fair value. Security transactions The Company generally records securities transactions on a trade-date basis. Realized gains and losses on securities transactions are generally determined on the average-cost method (net of foreign capital gain taxes) and for certain transactions determined based on the specific identification method. Income and expense recognition The Company records interest income on an accrual basis and includes amortization of premiums and accretion of discounts. Dividend income and expense on dividends sold short are recorded on the ex-dividend date, net of applicable withholding taxes. Expenses are recorded on an accrual basis. Short sales Certain Funds may sell a security they do not own in anticipation of a decline in the fair value of that security. When a Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. The short sales are secured by the long portfolio and available cash. The Fund records a gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, upon the termination of a short sale. The amount of the gain or loss will be equal to the proceeds received in entering into the short sale less the cost of buying back the short security to close the short position. While the transaction is open, the Fund will incur an expense for any accrued dividends or interest which is paid to the lender of the securities. These short sales may involve a level of risk in excess of the liability recognized in the accompanying Consolidated Balance Sheets. The extent of such risk cannot be quantified. Funds’ Derivatives Certain Funds may use derivative instruments. The Funds’ derivative instruments may include foreign currency exchange contracts, credit default swaps, interest rate swaps, financial futures contracts and warrants. The fair values of derivative instruments are recorded as other assets of consolidated Funds or other liabilities of consolidated Funds on the Company’s Consolidated Balance Sheets. The Company has used foreign exchange forwards to hedge the risk of movement in exchange rates on financial assets on a limited basis. The Company’s Funds have not designated any financial instruments for hedge accounting, as defined in the accounting literature, during the periods presented. The gains or losses on Fund’s derivative instruments not designated for hedge accounting are included as net consolidated Funds gains or losses in the Company’s Consolidated Statements of Operations. |
Foreign currency transactions and translations | Foreign currency translation and transactions Assets and liabilities of non-U.S. entities for which the local currency is the functional currency are translated at current exchange rates as of the end of the accounting period. The related revenues and expenses are translated at average exchange rates in effect during the period. Net exchange gains and losses resulting from translation are excluded from income and are recorded as part of accumulated other comprehensive income (loss). Transactions denominated in a foreign currency are revalued at the current exchange rate at the transaction date and any related gains and losses are recognized in earnings. |
Equity method investments | Equity method investments The Company uses the equity method of accounting for investments that provide the Company with the ability to exercise significant influence over an entity, but that do not meet the requirements for consolidation. Equity method investments include two Affiliates, Heitman LLC (through November 30, 2017) and Investment Counselors of Maryland, LLC, as well as all unconsolidated Funds over which the Company exercises significant influence. In August 2017, the Company agreed in principle to sell its stake in Heitman LLC to Heitman’s management. Pursuant to that term sheet, BSIG entered into a redemption agreement on November 17, 2017. Heitman continued to be recorded as an equity method investment through November 30, 2017, at which point the Company reclassified its investment in Heitman to a cost-method investment. The transaction closed on January 5, 2018. The Company’s share of earnings from equity method investments is included in investment income in the Consolidated Statements of Operations. The carrying amounts of equity method investments are reflected in Investments in the Consolidated Balance Sheets. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The difference between the carrying value and its estimated fair value is recognized as impairment when the loss is deemed other than temporary. |
Fair value measurements | Fair value measurements In accordance with the accounting standards for fair value measurement, fair value is the price that the Company expects to be paid upon the sale of an asset or expects to pay upon the transfer of a liability in an orderly transaction between market participants. There is a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect the Company’s own conclusions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories: •Level I—Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments. •Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies utilizing observable market inputs other than quoted prices. Investments which are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. •Level III—Pricing inputs are unobservable for the asset or liability and include assets and liabilities where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. Investments that are included in this category generally include general and limited partner interests in timber funds, corporate private equity, real estate funds, and funds of hedge funds. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. In cases in which the fair value of an investment is established using the net asset value (or its equivalent) as a practical expedient, the investment is not categorized within the fair value hierarchy. |
Use of estimates | Use of estimates The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ significantly from those estimates. |
Operating segment | Operating segment The Company operates in one operating segment that provides investment management services and products primarily to institutional clients. The Company’s determination that it operates one business segment is based on the fact that the CODM reviews the Company’s financial performance on an aggregate level. |
Derivatives and Hedging | Derivatives and Hedging The Company may utilize derivative financial instruments to hedge the risk of movement of interest rates and foreign currency on financial assets and liabilities. These derivative financial instruments may or may not qualify as hedges for accounting purposes. The Company records all derivative financial instruments as either assets or liabilities on its Consolidated Balance Sheets and measures these instruments at fair value. For a derivative financial instrument that qualifies as a hedge for accounting purposes and is designated as a hedging instrument, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently reclassified into earnings over the life of the hedge. The ineffective portion of the gain or loss is recognized in earnings immediately. |
Cash and cash equivalents | Cash and cash equivalents The Company considers all highly liquid investments, including money market mutual funds, with original maturities of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value due to the short-term maturity of these investments. Cash held by consolidated Funds is not available to fund general liquidity needs of the Company and is therefore classified as restricted cash. |
Investment advisory fees receivable | Investment advisory fees receivable The Company earns management and performance fees which are billed monthly, quarterly and annually in arrears, according to the terms of the relevant investment management agreement. Management and performance fees that have been earned, but have not yet been collected are presented as investment advisory fees receivable on the Consolidated Balance Sheets. Due to the short-term nature and liquidity of these receivables, the carrying amounts approximate their fair values. The Company typically does not record an allowance for doubtful accounts or bad debt expense, or any amounts recorded have been immaterial. |
Fixed assets | Fixed assets Fixed assets are recorded at historical cost and depreciated using the straight-line method over its estimated useful lives. The estimated useful lives of office equipment and furniture and fixtures range from three to five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining term of the lease. Computer software developed or obtained for internal use capitalized during the application development stage is amortized using the straight-line method over the estimated useful life of the software, which is generally five years or less. The estimated useful life of building assets is thirty-nine years. The costs of improvements that extend the life of a fixed asset are capitalized, while the costs of repairs and maintenance are expensed as incurred. |
Intangible assets | Intangible assets Acquired Affiliates have identifiable intangible assets arising from contractual or other legal rights with their clients. In determining the value of acquired intangibles, the Company analyzes the net present value of each acquired Affiliate’s existing client relationships based on a number of factors. The Company analyzes the Affiliate’s historical and potential future operating performance, the Affiliate’s historical and potential future rates of attrition among existing clients, the stability and longevity of existing client relationships, the Affiliate’s recent and long-term investment performance, the characteristics of the firm’s products and investment styles, the stability and depth of the Affiliate’s management team and the Affiliate’s history and perceived franchise or brand value. The Company’s acquired intangible assets are predominately definite-life intangible assets and are generally amortized on a straight line basis over their estimated useful lives, ranging from five to sixteen years, reflecting the expected duration of such relationships. The Company also holds an indefinite-life intangible asset related to the trade name associated with the Landmark acquisition. The Company tests for the possible impairment of definite-life intangibles whenever events or changes in circumstances indicate that the carrying amount of the asset is not recoverable. If such indicators exist, the Company compares the undiscounted cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the undiscounted cash flows amount, an impairment charge is recorded in the Consolidated Statements of Operations for amounts necessary to reduce the carrying value of the asset to fair value. |
Goodwill | Goodwill The Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the net total of tangible assets acquired, identifiable intangible assets acquired and liabilities assumed. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if events or circumstances occur that indicate impairment may exist. Factors that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, significant changes in the Company’s use of the acquired assets in a business combination or the strategy for the Company’s overall business, and significant negative industry or economic trends. The Company performs its assessment for impairment of goodwill annually as of the first business day of the fourth quarter, or as necessary, and the Company has determined that it has six reporting units, consisting of the six consolidated Affiliates. The Company first considers various qualitative factors to determine if it is more likely than not that the fair value of each of the reporting units is greater than its respective carrying amount, including goodwill. If based on the qualitative assessment it is determined that it is more likely than not that the fair value of any reporting unit is below its respective carrying amount, therefore indicating that impairment may exist, the impact would be determined at that point through a quantitative assessment. For purposes of assessing potential impairment, the fair value of the reporting unit is estimated and compared to the carrying value of the reporting unit. The fair value of a reporting unit is based on discounted estimated future cash flows. The assumptions used to estimate fair value include management’s estimates of future growth rates, operating cash flows, discount rates and terminal value. These assumptions and estimates can change in future periods based on market movement and factors impacting the expected business performance. Changes in assumptions or estimates could materially affect the determination of the fair value of a reporting unit. If it is determined that the carrying value of the reporting unit exceeds its fair value, an impairment charge is recognized in the amount equal to that excess; not to exceed the total amount of goodwill allocated to that reporting unit. Based on the Company’s most recent annual goodwill impairment test, the Company concluded that the fair value of each of its reporting units was more likely than not in excess of their carrying values. At the close of each year, management assessed whether there were any conditions present during the fourth quarter that would indicate impairment subsequent to the initial assessment date and concluded that no such conditions were present. During 2017, the Company changed the goodwill and indefinite life intangible assets impairment assessment date from the last day of the third quarter to the first business day of the fourth quarter of the fiscal year. The Company believes that changing the annual goodwill impairment assessment date did not result in a material change in the method of applying the accounting requirements. |
Leases | Leases The Company and its Affiliates currently lease office space and equipment under various leasing arrangements, classified as operating leases. Some lease agreements contain renewal options, rent escalation clauses or other inducements provided by the landlord. Rent expense is accrued to recognize lease escalation provisions and inducements provided by the landlord, if any, on a straight-line basis over the lease term. |
Earnings per share | Earnings per share The Company calculates basic and diluted earnings per share (“EPS”) by dividing net income by its shares outstanding as outlined below. Basic EPS attributable to the Company’s shareholders is calculated by dividing “Net income attributable to controlling interests” by the weighted-average number of shares outstanding. Diluted EPS is similar to basic EPS, but adjusts for the effect of potential ordinary shares unless they are antidilutive. For periods with a net loss, potential ordinary shares are considered antidilutive. The Company considers two ways to measure dilution to earnings per share: (a) calculate the net number of shares that would be issued assuming any related proceeds are used to buy back outstanding shares (the treasury stock method), or (b) assume the gross number of shares are issued and calculate any related effects on net income available for shareholders (the if-converted or two-class method). As appropriate, the Company’s policy is to apply the more dilutive methodology upon issuance of such instruments. |
Deferred financing costs | Deferred financing costs The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings as other assets until such financings are consummated. After consummation of the equity financing, these costs are recorded in total equity as a reduction of Shareholders’ equity generated as a result of the offering. At the time in which the equity financing is no longer considered probable of being consummated, the deferred financing costs are expensed immediately as a charge to operating expenses in the Consolidated Statements of Operations. The Company records debt issuance costs of term loans as a direct deduction from the carrying amount of the associated debt liability. For debt issuance costs of revolving credit loans, the Company presents debt issuance costs as an asset and subsequently amortizes the deferred costs ratably over the term of the agreement. |
Income taxes | Income taxes The Company uses the asset and liability method of accounting for income taxes on a “separate return” basis. Under this method, a subsidiary is assumed to file a separate return with the taxing authority, thereby reporting its taxable income or loss and paying the applicable tax to or receiving the appropriate refund from the subsidiary’s parent. The rules followed by the subsidiary in computing its tax or refund should be the same as those followed by a taxpayer filing directly with the taxing authority. The Company files tax returns directly with the U.K., U.S. and state tax authorities and therefore, the computations under the separate return method follow the Company’s filings. Deferred income taxes are recognized for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Financial Statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company’s deferred tax assets have been attributable to federal and state loss carry forwards, interest deductions, and accrued liabilities. Deferred income tax assets are subject to a valuation allowance if, in management’s opinion, it is not more-likely-than-not that these benefits will be realized. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including its past operating results, the existence of cumulative earnings or losses in the most recent years and its forecast of future taxable income. In estimating future taxable income, the Company develops assumptions including the amount of future pre-tax operating income and the reversal of temporary differences. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage the underlying businesses. The Company’s accounting policy is to treat the global intangible low-taxed income taxes which became effective January 1, 2018 as a result of the Tax Cuts and Jobs Act as period costs in the accounting and tax periods in which they are incurred. A tax benefit should only be recognized if it is more-likely-than-not that the position will be sustained based on its technical merits. The Company recognizes the financial statement benefit of a tax position only after considering the probability that a tax authority would uphold the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest amount of benefit greater than 50% likely of being sustained. The more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of the benefit. Unrecognized tax benefits and related interest and penalties, are adjusted periodically to reflect changing facts and circumstances. The Company’s accounting policy is to classify interest and related charges as a component of income tax expense. |
Non-controlling interests | Non-controlling interests For certain entities that are consolidated, but not 100% owned, the Company reports non-controlling interests as equity on its Consolidated Balance Sheets. The Company's consolidated net income on the Consolidated Statements of Operations includes the income (loss) attributable to non-controlling interest holders of the Company's consolidated Affiliates and Funds. Ownership interests held by Affiliate key employees are categorized as liabilities on the Consolidated Balance Sheets and are revalued each reporting date, with movements treated as compensation expense in the Consolidated Statements of Operations. Non-controlling interests in consolidated Funds on the Consolidated Balance Sheets include undistributed income owned by the investors in the respective Funds. The Company’s consolidated net income on the Consolidated Statements of Operations includes the income (loss) attributable to non-controlling interest holders of these consolidated entities. |
Redeemable non-controlling interests | Redeemable non-controlling interests The Company includes redeemable non-controlling interests related to certain consolidated Funds as temporary equity on the Consolidated Balance Sheets. Non-controlling interests in certain consolidated Funds are subject to monthly or quarterly redemption by the investors. When redeemable amounts become legally payable to investors, they are classified as a liability and included in total liabilities of consolidated Funds on the Consolidated Balance Sheets. |
Other comprehensive income (loss) | Other comprehensive income (loss) Other comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. For the Company’s purposes, comprehensive income (loss) represents net income (loss), as presented in the accompanying Consolidated Statements of Operations, adjusted for net foreign currency translation adjustments and adjustments to the valuation and amortization of certain derivative securities, net of tax. |
Restructuring costs | Restructuring costs A liability for restructuring is recognized only after management has developed a formal plan, approved by the Board of Directors, to which it has committed. The costs included in a restructuring liability are those costs that are either incremental or incurred as a direct result of the plan, or are the result of a continuing contractual obligation with no continuing economic benefit to the Company, or a penalty incurred to cancel the contractual obligation. Refer to Note 23 for details of the Company’s restructuring activities. |
Recently adopted accounting standards and Accounting standards not yet adopted | Recently adopted accounting standards On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09), which revised revenue accounting rules through the creation of ASC 606 and expanded the disclosure requirements. The Company adopted ASU 2014-09 using the modified retrospective method. Results for periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting. The implementation of the new standard had no material impact on the measurement or timing of revenue recognition in prior periods and therefore no cumulative impact adjustment was necessary to the Company’s opening retained earnings as of January 1, 2018. The most significant impact in implementing the standard has been related to the accounting for certain pass-through costs on a gross basis. Refer to Note 17 for details of accounting for pass-through costs. On January 1, 2018, the Company adopted the provisions of ASU2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” (“ASU 2016-01”). In adopting ASU 2016-01, the Company changed the methodology in how it records investments in unconsolidated Timber Funds, from historical cost less depletion to fair value, based upon the Company’s proportionate share of the underlying net asset value. See Note 5 for the re-categorization of unconsolidated investments in Timber Funds within the fair value measurements table. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements. On April 1, 2018, the Company adopted ASU 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). Under ASU 2017-04, a goodwill impairment is calculated as the amount by which a reporting unit’s carrying value exceeds its fair value. Pursuant to the standard, the Company applied ASU 2017-04 for the annual goodwill impairment test performed during the fourth quarter. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements. Accounting standards not yet adopted In January 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 changes existing U.S. GAAP by requiring the recognition of lease assets and lease liabilities by lessees for those leases previously classified as operating leases under previous U.S. GAAP. The lease asset would reflect a right-of-use asset and the lease liability would reflect the present value of the future lease payments. ASU 2016-02 is effective for public companies for fiscal years beginning after December 15, 2018 and the Company plans to elect a modified retrospective transition approach utilizing the transition option provided by ASU 2018-11, to apply ASU 2016-02 as of the adoption date, January 1, 2019 without restating prior comparative periods. The Company will also adopt certain available practical expedients that will alleviate complexities related to the implementation. The Company expects the total balance sheet impact resulting from the recognition of the right-of-use asset and lease liability to be approximately $46 - $51 million. The adoption will not have a material impact on our results of operations. The Company is implementing a lease accounting software tool to assist in the accounting for lease arrangements under the new accounting rules and has abstracted lease contract data as inputs into the lease accounting tool. As of the date of this report, the Company is completing its data validation and detailed testing of the outputs of the software tool. |
Organization and Description of the Business (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Equity Shares Transactions | Prior to 2014, the Company was a wholly-owned subsidiary of Old Mutual plc (“OM plc”), an international long-term savings, protection and investment group, listed on the London Stock Exchange. On October 15, 2014, the Company completed the initial public offering (the “Offering”) by OM plc pursuant to the Securities Act of 1933, as amended. Additionally, between the Offering and December 31, 2018, the Company, OM plc and/or HNA Capital US (“HNA”) completed the following transactions in the Company’s shares, including a two-step transaction announced on March 25, 2017 for a sale by OM plc of a 24.95% shareholding in the Company to HNA and a two-step transaction announced on November 19, 2018 for a sale of the substantial majority of the ordinary shares held by HNA of the Company to Paulson & Co. (“Paulson”). On February 25, 2019, this transaction was completed and Paulson holds approximately 21.7% of the ordinary shares of the Company.
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Acquisitions (Tables) |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition date purchase price allocation | The following table presents a summary of the acquisition-date fair values of the assets acquired and liabilities assumed for BSIG’s acquisition of Landmark (in millions):
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Unaudited pro forma financial information | The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the financial results that would have been achieved had the acquisition actually occurred as of January 1, 2016 (in millions, except per-share amounts):
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Investments (Tables) |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of investments | Investments are comprised of the following at December 31 (in millions):
(1) At December 31, 2017, $6.4 million of investments made by one of our Affiliates in timber and timberlands were recorded at cost. In 2018, the Company transitioned to fair value recognition and presentation and investments formerly carried at cost were reclassified from “other investments carried at cost” in this table as of December 31, 2017 to “other investments held at fair value” in this table as of December 31, 2018. Also see Note 2. |
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Investment income including realized gain loss on investments | Investment income is comprised of the following for the years ended December 31 (in millions):
* As previously noted, the Company reclassified its investment in Heitman to a cost-method investment as of November 30, 2017, therefore earnings from Heitman as an equity-accounted investment are included in the table above for the first eleven months of 2017. |
Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the assets and liabilities that are measured at fair value on a recurring basis | The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2018 (in millions):
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2017 (in millions):
Equity securities, including common and preferred stock, short-term investment funds, other investments and derivatives which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. These securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II. The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Company has not made adjustments to the prices provided. Assets of consolidated Funds also include investments in bank loans. Interests in senior floating-rate loans for which reliable market participant quotations are readily available are valued at the average mid-point of bid and ask quotations obtained from a third-party pricing service. These assets are classified as Level II. If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III. If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained. In either case, such securities are classified as Level III. The Company performs due diligence procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures. The uncategorized amount of $38.8 million at December 31, 2018 represents investments made by consolidated Funds and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Consolidated Balance Sheets. These consolidated Funds consist of real estate and private equity investment Funds. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates.
These investments are subject to longer than monthly or quarterly redemption restrictions, and due to their nature, distributions are received only as cash flows are generated from underlying assets over the life of the Funds. The range of time over which the underlying assets are expected to be liquidated by the investees is approximately one to twelve years from December 31, 2018. The valuation process for the underlying real estate investments held by the real estate investment Funds begins with each property or loan being valued by the investment teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, acquisitions, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. In connection with this process, changes in fair-value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions. Investments in unconsolidated Funds categorized as Level III of $3.0 million at December 31, 2018 related to investments in Timber Funds advised by Affiliates and are valued by the general partner of those Funds. Determination of estimated fair value involves subjective judgment because the actual fair value can be determined only through negotiation between parties in a sale transaction and amounts ultimately realized may vary significantly from the fair value presented. |
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Level Three Investment Reconciliation | The following table reconciles the opening balances of Level III financial assets to closing balances at the end of the year (in millions):
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Variable Interest Entities (Tables) |
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Schedule of assets and liabilities and information pertains to VIEs | The following table presents the assets and liabilities of Funds that are VIEs and consolidated by the Company (in millions):
The following information pertains to unconsolidated VIEs for which the Company holds a variable interest at December 31 (in millions):
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Equity Accounted Investees (Tables) |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of financial information for Affiliates and Funds accounted for under the equity method | The following tables present summarized financial information for Affiliates and Funds accounted for under the equity method (in millions):
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Fixed Assets and Lease Commitments (Tables) |
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Schedule of property and equipment | Fixed assets consisted of the following at December 31 (in millions):
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Schedule of future minimum lease payments | At December 31, 2018, the Company’s aggregate future minimum payments for operating leases having initial or non-cancelable lease terms greater than one year are (in millions):
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Goodwill and Intangible Assets (Tables) |
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Schedule of changes in goodwill | The following table presents the changes in goodwill in 2018 and 2017 (in millions):
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Schedule of change in acquired intangible assets | The following table presents the change in definite-lived acquired intangible assets in 2018 and 2017, comprised of client relationships (in millions):
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Schedule of consolidated annual amortization expense | The Company estimates that its consolidated annual amortization expense, assuming no useful life changes or additional investments in new or existing Affiliates, for each of the next five fiscal years is as follows (in millions):
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Related Party Transactions (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions | Amounts due from related parties were comprised of the following at December 31 (in millions):
Investments in related parties consisted of the following at December 31 (in millions):
Related party transactions included in the Company’s Consolidated Statements of Operations for the years ended December 31 consisted of (in millions):
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Accounts Payable and Accrued Expenses (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accounts payable and accrued expenses | Accounts payable and accrued expenses consisted of the following at December 31 (in millions):
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Other Compensation Liabilities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other compensation liabilities | Other compensation liabilities consisted of the following at December 31 (in millions):
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Borrowings and Debt (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long term debt | The Company’s long-term bonds were comprised of the following as of the dates indicated (in millions):
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Schedule of aggregate maturities of debt commitments | As of December 31, 2018, the aggregate maturities of debt commitments, based on their contractual terms, are as follows:
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Income before Income Tax | Income (loss) from continuing operations before income taxes consisted of the following for the years ended December 31 (in millions):
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Components of income tax expense (benefit) from continuing operations | The components of income tax expense from continuing operations for the years ended December 31 are as follows (in millions):
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Reconciliation of effective income tax rate | The reconciliation of the difference between the Company’s U.S. Federal statutory income tax rate and the effective income tax rate for continuing operations for the years ended December 31 is as follows:
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Significant components of deferred tax assets and deferred tax liabilities | The significant components of deferred tax assets and deferred tax liabilities for the years ended December 31 are as follows (in millions):
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Reconciliation of change in gross unrecognized tax benefits | A reconciliation of the change in gross unrecognized tax benefits for the years ended December 31 is as follows (in millions):
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Earnings Per Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of calculation of pro forma basic and diluted earnings per share | The calculation of basic and diluted earnings per ordinary share for the years ended December 31, 2018, 2017 and 2016 is as follows (dollars in millions, except per share data):
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Revenue (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregation of Revenue | Revenue by asset class for the years ended December 31, 2018, 2017, and 2016 were (in millions):
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Equity-based Compensation (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the share-based payments liability | The following table presents the changes in the share-based payments liability for the years ended December 31 (in millions):
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Summary of activity of share-based compensation | The following table summarizes the activity related to performance-based restricted stock units:
The following table summarizes the activity related to performance-based restricted stock awards:
The following table summarizes the activity related to the Company’s stock option awards:
The following summarizes the grant date fair value of the instruments granted by the Company during the year ended December 31:
Grants of restricted shares in BrightSphere Investment Group plc The following table summarizes the activity related to restricted share awards:
The following table summarizes the activity related to restricted stock units:
The following table summarizes the activity related to the various equity compensation arrangements maintained by OM plc in which the Company’s employees participated.
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Schedule of Weighed Average Fair Value Valuation Inputs | The weighted average fair value of stock options granted during the year ended December 31, 2018 was $1.69 per option, based on the grant date assumptions stated below.
(1) Dividend yield assumption represents the Company’s expected dividend yield based on its historical dividend payouts and the stock price at the date of grant. (2) Expected volatility is based upon historical BSIG stock price volatility. (3) The risk-free rate for period within the contractual life of the option is based on the U.S. Treasury yield curve at the time of grant. (4) Expected life of options is based on the contractual term and the expected exercise behavior. |
Accumulated Other Comprehensive Income (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of accumulated other comprehensive income including proportions attributable to non-controlling interests | The following tables show the tax effects allocated to each component of other comprehensive income (in millions):
The components of accumulated other comprehensive income (loss) for the years ended December 31, 2018, 2017 and 2016 were as follows (in millions) including proportions attributable to non-controlling interests:
|
Discontinued Operations and Restructuring (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of gain (loss) from discontinued operations | Liabilities associated with discontinued operations and restructuring included in other liabilities on the Company’s Consolidated Balance Sheets are summarized as follows as of December 31 (in millions):
|
Selected Quarterly Financial Data (unaudited) (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the quarterly results of operations | The following is a summary of the quarterly results of operations of the Company for the years ended December 31, 2018 and 2017 ($ in millions, unless otherwise noted):
|
Acquisitions - Acquisition Date Purchase Price Allocation (Details) - USD ($) $ in Millions |
Aug. 18, 2016 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Identifiable assets and liabilities | ||||
Goodwill | $ 274.6 | $ 274.6 | $ 272.7 | |
Landmark | ||||
Purchase price | ||||
Cash | $ 239.2 | |||
Seller’s expenses | 3.5 | |||
Total consideration | 242.7 | |||
Identifiable assets and liabilities | ||||
Cash | 23.4 | |||
Receivables | 8.5 | |||
Indefinite-life trade name | 1.0 | |||
Amortizable intangible asset management contracts | 85.0 | |||
Fixed assets | 5.1 | |||
Other current assets (liabilities), net | (26.7) | |||
Assets (liabilities), net | (1.7) | |||
Total identifiable assets and liabilities | 94.6 | |||
Goodwill | $ 148.1 |
Acquisitions - Unaudited Pro Forma Financial Information (Details) - Landmark $ / shares in Units, $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2016
USD ($)
$ / shares
| |
Business Acquisition [Line Items] | |
Revenues | $ 713.5 |
Total operating expenses | 594.7 |
Income from continuing operations before taxes | 109.2 |
Net income attributable to BSIG | $ 91.7 |
Net income per share attributable to OMAM shareholder: | |
Basic (in dollars per share) | $ / shares | $ 0.77 |
Diluted (in dollars per share) | $ / shares | $ 0.77 |
Variable Interest Entities (Details) - USD ($) $ in Millions |
1 Months Ended | |||
---|---|---|---|---|
Jan. 05, 2018 |
Aug. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Assets | ||||
Investments, at fair value | $ 321.4 | $ 319.3 | ||
Consolidated VIEs | ||||
Assets | ||||
Investments, at fair value | 124.8 | 106.7 | ||
Other assets of consolidated Funds | 19.8 | 16.8 | ||
Total Assets | 144.6 | 123.5 | ||
Liabilities | ||||
Liabilities of consolidated Funds | 14.9 | 3.3 | ||
Total Liabilities | 14.9 | 3.3 | ||
Unconsolidated VIEs | ||||
Unconsolidated VIE [Abstract] | ||||
Unconsolidated VIE assets | 4,814.9 | 6,001.1 | ||
Unconsolidated VIE liabilities | 2,115.1 | 3,843.7 | ||
Equity interests on the Consolidated Balance Sheets | 22.5 | 54.4 | ||
Maximum risk of loss | $ 31.0 | $ 58.5 | ||
Heitman LLC | ||||
Unconsolidated VIE [Abstract] | ||||
Proceeds from sale of equity method investment | $ 110.0 | $ 110.0 |
Equity Accounted Investees (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Statement of Income | |||
Net revenues | $ 12.9 | $ 318.9 | $ 340.9 |
Operating income | 4.5 | 94.1 | 98.4 |
Other income, net | 0.0 | 197.4 | 161.9 |
Income before income taxes | 4.5 | 291.5 | 260.3 |
Less income tax expense | 0.0 | 5.5 | 8.2 |
Exclude: non-controlling interests income | 1.8 | 247.6 | 213.7 |
Net income attributable to controlling interests | 2.7 | 38.4 | 38.4 |
BSIG equity in net income of equity method investees | 2.7 | 16.3 | $ 16.3 |
Balance Sheets | |||
Total assets | 3.8 | 3.5 | |
Total liabilities | 1.7 | 1.6 | |
Non-controlling interests in subsidiaries | 0.2 | 0.3 | |
Members’ equity | 1.9 | 1.6 | |
BSIG equity investment and undistributed earnings of affiliated companies, before consolidating and reconciling adjustments | 1.9 | 1.6 | |
Consolidating and reconciling adjustments: | |||
Goodwill attributable to equity method investment | 0.0 | 0.0 | |
BSIG investment in equity method investees | $ 1.9 | $ 1.6 |
Goodwill and Intangible Assets (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Gross Book Value | ||
Beginning balance | $ 308.5 | $ 306.6 |
Additions | 0.0 | 1.9 |
Impairments | 0.0 | 0.0 |
Disposals | 0.0 | 0.0 |
Ending balance | 308.5 | 308.5 |
Accumulated Impairment | ||
Beginning balance | (33.9) | (33.9) |
Disposals | 0.0 | 0.0 |
Ending balance | (33.9) | (33.9) |
Net Book Value | ||
Beginning balance | 274.6 | 272.7 |
Additions | 0.0 | 1.9 |
Disposals | 0.0 | 0.0 |
Ending balance | $ 274.6 | $ 274.6 |
Related Party Transactions - Other Related Party Arrangements (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Related party transactions | |||
Earnings from equity method investees | $ 2.7 | $ 16.3 | $ 16.3 |
Parent Company | |||
Related party transactions | |||
Dividends paid to related parties | 8.8 | 25.4 | |
Affiliated Entity And Joint Ventures Of Affiliated Entity | |||
Related party transactions | |||
Earnings from equity method investees | 2.7 | 14.5 | $ 15.1 |
HNA Capital US | |||
Related party transactions | |||
Dividends paid to related parties | 10.2 | 2.5 | |
Paulson | |||
Related party transactions | |||
Dividends paid to related parties | $ 0.5 | ||
Loan to Equity-Method Affiliate | |||
Related party transactions | |||
Loan to related party | $ 3.6 |
Accounts Payable and Accrued Expenses (Details) - Consolidated Entity Excluding Consolidated Funds - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounts Payable And Accrued Expenses [Line Items] | ||
Accounts payable | $ 9.0 | $ 5.2 |
Accrued expenses | 36.8 | 39.9 |
Accrued interest payable | 6.8 | 7.6 |
Other | 1.7 | 2.2 |
Total accounts payable and accrued expenses | $ 54.3 | $ 54.9 |
Other Compensation Liabilities (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Business Acquisition [Line Items] | |||
Share-based payments liability | $ 386.1 | $ 188.8 | |
Long-term compensation payable | 0.0 | 0.1 | |
Profit interests compensation liability | 171.4 | 195.0 | |
Voluntary deferral plan liability | 91.7 | 95.1 | |
Total other compensation liabilities | 649.2 | 479.0 | |
Profit interests compensation expense including discontinued operations | (7.5) | 41.5 | $ 16.2 |
Issuances of additional profit sharing interests for cash | 0.0 | 0.0 | 0.4 |
Redemption of profit sharing interests for cash | 16.1 | 5.7 | $ 12.7 |
Landmark | |||
Business Acquisition [Line Items] | |||
Share-based compensation liability including contingent consideration | $ 350.6 | $ 146.8 |
Borrowings and Debt - Schedule of Long-Term Debt (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
Jul. 31, 2016 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Maturity amount | $ 400,000,000 | ||
Discount and debt issuance costs | (6,700,000) | ||
Carrying value | 393,300,000 | $ 392,800,000 | |
Fair Value | 368,300,000 | 410,300,000 | |
Senior notes | Senior Notes, 4.80%, due 2026 | |||
Debt Instrument [Line Items] | |||
Maturity amount | 275,000,000 | $ 275,000,000 | |
Discount and debt issuance costs | (2,800,000) | $ (3,000,000) | |
Carrying value | 272,200,000 | 271,900,000 | |
Fair Value | $ 266,000,000 | 285,700,000 | |
Interest rate (as a percent) | 4.80% | 4.80% | |
Senior notes | Senior Notes, 5.125%, due 2031 | |||
Debt Instrument [Line Items] | |||
Maturity amount | $ 125,000,000 | ||
Discount and debt issuance costs | $ (3,900,000) | $ (4,300,000) | |
Carrying value | 121,100,000 | 120,900,000 | |
Fair Value | $ 102,300,000 | $ 124,600,000 | |
Interest rate (as a percent) | 5.125% | 5.125% |
Borrowings and Debt - Maturities of Debt Commitments (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Aggregate maturities | |
2019 | $ 0.0 |
2020 | 0.0 |
2021 | 0.0 |
2022 | 0.0 |
2023 | 0.0 |
Thereafter | 400.0 |
Total | $ 400.0 |
Income Taxes Income Tax - Schedule of Income before Income Tax (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||||||||||
Domestic | $ 113.8 | $ 103.9 | $ 170.7 | ||||||||
Foreign | 21.4 | 38.1 | (9.9) | ||||||||
Income from continuing operations before taxes | $ 34.9 | $ 10.7 | $ 6.1 | $ 83.5 | $ 84.6 | $ 14.8 | $ 14.6 | $ 28.0 | $ 135.2 | $ 142.0 | $ 160.8 |
Income Taxes (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Current: | |||
Federal | $ 3.3 | $ 30.0 | $ 17.3 |
State | 19.9 | 5.9 | 2.6 |
Foreign | 11.0 | 3.6 | 1.4 |
Total current expense (benefit) | 34.2 | 39.5 | 21.3 |
Deferred: | |||
Federal | (24.7) | 102.7 | 19.6 |
State | (4.7) | (9.3) | (0.2) |
Foreign | 0.2 | (0.1) | 0.1 |
Total deferred expense (benefit) | (29.2) | 93.3 | 19.5 |
Total tax expense (benefit) | 5.0 | 132.8 | 40.8 |
Other comprehensive income (loss), tax | 0.4 | 0.8 | (4.3) |
Income tax expense (benefits) from discontinued operations | |||
Income tax expense (benefit) on gain (loss) disposal of discontinued operations | 0.0 | (0.1) | 4.0 |
Net operating loss carryforwards utilized | $ 0.4 | $ 1.2 | $ 4.7 |
Income Taxes - Significant Components of Deferred Tax Assets and Liabilities and Additional Information (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Deferred tax assets: | ||
Interest expense | $ 73.6 | $ 80.9 |
Federal net operating loss | 1.4 | 1.8 |
State net operating loss carry forwards | 0.0 | 8.6 |
Investment in partnerships | 182.0 | 140.3 |
Intangible assets | 0.5 | 0.9 |
Employee compensation | 6.2 | 8.9 |
Other | 2.0 | 2.6 |
Cash flow hedge | 4.7 | 5.1 |
Investments | 0.0 | 0.1 |
Total deferred tax assets | 270.4 | 249.2 |
Valuation allowance | 0.0 | (8.6) |
Deferred tax assets, net of valuation allowance | 270.4 | 240.6 |
Deferred tax liabilities: | ||
Investments | 0.3 | 0.0 |
Net deferred tax assets | 270.1 | $ 240.6 |
Federal | ||
Deferred tax liabilities: | ||
Operating loss carryforwards | $ 6.4 | |
Federal | Minimum | ||
Deferred tax liabilities: | ||
Expiration period of operating loss carryforwards | 6 years | |
Federal | Maximum | ||
Deferred tax liabilities: | ||
Expiration period of operating loss carryforwards | 8 years |
Income Taxes - Reconciliation of the Change in Gross Unrecognized Tax Benefits and Additional Information (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Reconciliation of the change in gross unrecognized tax benefits | |||
Balance as of January 1 | $ 88.7 | $ 91.3 | $ 93.5 |
Additions based on current year tax positions | 0.1 | 0.9 | 0.0 |
Reductions related to lapses of statutes of limitations | (0.9) | 0.0 | 0.0 |
Reductions related to lapses of statutes of limitations | (41.0) | (3.5) | (2.2) |
Balance as of December 31 | 46.9 | 88.7 | 91.3 |
Liability for unrecognized tax benefits that would affect the effective tax rate if recognized | 46.7 | 88.3 | |
Interest and penalties recognized in income tax provision | (1.9) | 2.5 | 3.6 |
Accrued interest and penalties relating to unrecognized tax benefits | 6.7 | $ 8.6 | $ 6.1 |
Amount of decrease to unrecognized tax benefits reasonably possible within next 12 months | $ 41.2 |
Commitments and Contingencies (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Commitments to invest with an Affiliate (up to) | $ 69 |
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Numerator: | |||||||||||
Net income attributable to controlling interests | $ 18.8 | $ 54.2 | $ 2.5 | $ 54.8 | $ (46.7) | $ 19.9 | $ 13.6 | $ 22.3 | $ 136.4 | $ 4.2 | $ 126.4 |
Less: Total income available to participating unvested securities | (0.4) | (0.2) | (0.9) | ||||||||
Total net income attributable to ordinary shares | $ 136.0 | $ 4.0 | $ 125.5 | ||||||||
Denominator: | |||||||||||
Weighted-average ordinary shares outstanding—basic (in shares) | 105,600,000 | 106,400,000 | 108,400,000 | 109,400,000 | 109,000,000 | 109,000,000 | 111,300,000 | 113,500,000 | 107,431,821 | 110,708,598 | 119,236,370 |
Restricted stock units (in shares) | 191,371 | 672,544 | 283,743 | ||||||||
Weighted-average ordinary shares outstanding—diluted (in shares) | 105,800,000 | 106,500,000 | 108,600,000 | 109,600,000 | 109,000,000 | 109,700,000 | 111,800,000 | 114,400,000 | 107,623,192 | 111,381,142 | 119,520,113 |
Earnings per ordinary share attributable to controlling interests: | |||||||||||
Earnings per ordinary share attributable to controlling interest - Basic (in dollars per share) | $ 0.22 | $ 0.51 | $ 0.02 | $ 0.52 | $ (0.45) | $ 0.17 | $ 0.12 | $ 0.19 | $ 1.27 | $ 0.04 | $ 1.05 |
Earnings per ordinary share attributable to controlling interests - Diluted (in dollars per share) | $ 0.22 | $ 0.51 | $ 0.02 | $ 0.52 | $ (0.45) | $ 0.17 | $ 0.11 | $ 0.19 | $ 1.26 | $ 0.04 | $ 1.05 |
Employee options excluded from computation of earnings per share (in shares) | 6,900,000 |
Revenue - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Revenue from Contract with Customer [Abstract] | |||
Revenue from expense reimbursement | $ 8.0 | $ 0.0 | $ 0.0 |
Revenue - Schedule of Disaggregation of Revenue (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Disaggregation of Revenue [Line Items] | |||
Management fee revenue | $ 905.0 | $ 858.0 | $ 659.9 |
U.S. equity | |||
Disaggregation of Revenue [Line Items] | |||
Management fee revenue | 179.6 | 192.9 | 187.7 |
Global / non-U.S. equity | |||
Disaggregation of Revenue [Line Items] | |||
Management fee revenue | 490.3 | 465.6 | 374.1 |
Fixed income | |||
Disaggregation of Revenue [Line Items] | |||
Management fee revenue | 26.8 | 27.8 | 29.1 |
Alternatives | |||
Disaggregation of Revenue [Line Items] | |||
Management fee revenue | $ 208.3 | $ 171.7 | $ 69.0 |
Employee Benefits (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Retirement Benefits [Abstract] | |||
Other compensation liabilities | $ 91.7 | $ 95.1 | |
Assets invested in defined contribution plans | 91.8 | 95.2 | |
Increase in deferred compensation liability | 0.1 | 9.0 | $ 2.4 |
Increase in defined contribution plan assets | 0.2 | 9.0 | 2.4 |
Expenses in relation to qualified & non-qualified plans | $ 14.4 | $ 14.8 | $ 12.3 |
Equity-based Compensation - Schedule of Share-based Payments Liability (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Deferred Compensation, Share-based Arrangements Rollforward [Roll Forward] | |||
Balance, beginning of period | $ 188.8 | ||
Balance, end of period | 386.1 | $ 188.8 | |
Cash Settled Awards | |||
Deferred Compensation, Share-based Arrangements Rollforward [Roll Forward] | |||
Balance, beginning of period | 188.8 | 53.7 | $ 38.5 |
Amortization and revaluation of granted awards | 199.9 | 135.8 | 15.6 |
Reclassification to profit interests award | 0.0 | 0.0 | 0.0 |
Repurchases (cash settled) | (2.6) | (0.7) | (0.4) |
Balance, end of period | $ 386.1 | $ 188.8 | $ 53.7 |
Equity-based Compensation - Schedule of Weighted Average Fair Value Valuation Inputs (Details) - Stock options |
12 Months Ended |
---|---|
Dec. 31, 2018
$ / shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighed average fair value (in dollars per share) | $ 1.69 |
Assumptions: | |
Dividend yield | 3.80% |
Expected volatility | 28.30% |
Risk-free interest rate | 2.50% |
Expected life of options | 5 years |
Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Foreign currency translation adjustment | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Other comprehensive income (loss), before tax | $ (1.7) | $ 2.9 | $ (3.2) |
Other comprehensive income (loss), tax | 0.0 | 0.0 | 0.0 |
Total other comprehensive income (loss), net of tax | (1.7) | 2.9 | (3.2) |
Valuation and amortization of derivative securities | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Other comprehensive income (loss), before tax | 2.8 | 2.6 | (24.6) |
Other comprehensive income (loss), tax | (0.4) | (0.8) | 4.3 |
Total other comprehensive income (loss), net of tax | 2.4 | 1.8 | (20.3) |
AOCI | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Other comprehensive income (loss), before tax | 1.1 | 5.5 | (27.8) |
Other comprehensive income (loss), tax | (0.4) | (0.8) | 4.3 |
Total other comprehensive income (loss), net of tax | $ 0.7 | $ 4.7 | $ (23.5) |
Non-controlling interests (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Consolidated Funds | |||
Noncontrolling Interest [Line Items] | |||
Redeemable non-controlling interests in consolidated Funds | $ 41.9 | $ 44.0 | |
Net income (loss) attributable to non-controlling interests in consolidated Funds | (6.1) | 4.9 | $ (0.2) |
Non-controlling interests | 29.3 | 50.6 | |
Consolidated Entity Excluding Consolidated Funds | |||
Noncontrolling Interest [Line Items] | |||
Non-controlling interests | $ 1.6 | $ 1.3 |
Derivatives and Hedging (Details) - USD ($) |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Jul. 31, 2016 |
Dec. 31, 2015 |
Jul. 31, 2015 |
|
Derivative fair values | ||||||
Other comprehensive loss | $ 134,200,000 | $ 127,300,000 | $ 165,000,000 | $ 165,900,000 | ||
Interest Expense | ||||||
Derivative fair values | ||||||
Hedge amount to be reclassified | 3,000,000 | |||||
AOCI | ||||||
Derivative fair values | ||||||
Other comprehensive income (loss), before tax | 1,100,000 | 5,500,000 | (27,800,000) | |||
Other comprehensive income (loss), tax | 400,000 | 800,000 | (4,300,000) | |||
Other comprehensive loss | (20,900,000) | (21,600,000) | (26,300,000) | $ (2,800,000) | ||
Treasury rate lock | Designated as a hedge | ||||||
Derivative fair values | ||||||
Derivative notional amount | $ 300,000,000 | |||||
Derivative securities | $ (34,400,000) | |||||
Reclassification out of Accumulated Other Comprehensive Income | AOCI | ||||||
Derivative fair values | ||||||
Interest expense | $ 2,800,000 | $ 2,600,000 | $ 1,100,000 |
Discontinued Operations and Restructuring (Details) - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Discontinued Operations and Restructuring | |||
Gain (loss) on disposal net of tax | $ 0.1 | $ (0.1) | $ 6.2 |
Basic and diluted discontinued operations earnings per share (in dollars per share) | $ 0.00 | $ 0.00 | $ 0.07 |
Discontinued Operations, Disposed of by Means Other than Sale | |||
Discontinued operation and restructuring liability rollforward | |||
Beginning balance at January 1 | $ 0.4 | $ 1.1 | |
Abandoned lease liability principal payments | (0.4) | (0.8) | |
Adjustment to sub-lease arrangement on abandoned lease | 0.0 | 0.1 | |
Ending balance at December 31 | $ 0.0 | $ 0.4 | $ 1.1 |
Selected Quarterly Financial Data (unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Revenue | $ 214.5 | $ 230.1 | $ 233.9 | $ 249.7 | $ 249.2 | $ 223.2 | $ 218.8 | $ 196.2 | $ 928.2 | $ 887.4 | $ 663.5 |
Operating income | 29.6 | 13.3 | 15.3 | 25.6 | 26.3 | 8.3 | 12.9 | 23.5 | 83.8 | 71.0 | 155.6 |
Income from continuing operations before income taxes | 34.9 | 10.7 | 6.1 | 83.5 | 84.6 | 14.8 | 14.6 | 28.0 | 135.2 | 142.0 | 160.8 |
Net income | 18.8 | 54.2 | 2.5 | 54.8 | (46.7) | 19.9 | 13.6 | 22.3 | $ 136.4 | $ 4.2 | $ 126.4 |
Net income attributable to controlling interests | $ 23.0 | $ 54.0 | $ 2.1 | $ 57.3 | $ (48.8) | $ 18.7 | $ 12.9 | $ 21.4 | |||
Earnings per share (basic) attributable to controlling interests (in dollars per share) | $ 0.22 | $ 0.51 | $ 0.02 | $ 0.52 | $ (0.45) | $ 0.17 | $ 0.12 | $ 0.19 | $ 1.27 | $ 0.04 | $ 1.05 |
Earnings per share (diluted) attributable to controlling interests (in dollars per share) | $ 0.22 | $ 0.51 | $ 0.02 | $ 0.52 | $ (0.45) | $ 0.17 | $ 0.11 | $ 0.19 | $ 1.26 | $ 0.04 | $ 1.05 |
Weighted average ordinary shares outstanding (in shares) | 105,600,000 | 106,400,000 | 108,400,000 | 109,400,000 | 109,000,000 | 109,000,000 | 111,300,000 | 113,500,000 | 107,431,821 | 110,708,598 | 119,236,370 |
Weighted average diluted ordinary shares outstanding (in shares) | 105,800,000 | 106,500,000 | 108,600,000 | 109,600,000 | 109,000,000 | 109,700,000 | 111,800,000 | 114,400,000 | 107,623,192 | 111,381,142 | 119,520,113 |