OM ASSET MANAGEMENT PLC, 10-K filed on 2/22/2017
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2016
Feb. 17, 2017
Jun. 30, 2016
Document and Entity Information
 
 
 
Entity Registrant Name
OM Asset Management 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, 2016 
 
 
Document Fiscal Year Focus
2016 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
114,704,674 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 525,482,139 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Assets
 
 
Cash and cash equivalents
 
$ 135.9 
Investments (includes balances reported at fair value of $126.1 and $97.0)
268.8 
202.6 
Goodwill
272.7 
126.5 
Deferred tax assets
332.7 
341.6 
Investments, at fair value
161.6 
97.0 
Total assets
1,294.3 
1,014.1 
Liabilities and shareholders’ equity
 
 
Other compensation liabilities
291.0 
260.8 
Total liabilities
1,123.8 
848.2 
Commitments and contingencies
   
   
Redeemable non-controlling interests in Consolidated Funds
5.5 
Equity:
 
 
Total equity and redeemable non-controlling interests in Consolidated Funds
170.5 
165.9 
Total liabilities and equity
1,294.3 
1,014.1 
Consolidated Entity Excluding Consolidated Funds
 
 
Assets
 
 
Cash and cash equivalents
101.9 
135.9 
Investment advisory fees receivable
163.7 
151.8 
Fixed assets, net
39.8 
30.7 
Investments (includes balances reported at fair value of $126.1 and $97.0)
233.3 
202.6 
Acquired intangibles, net
84.9 
1.5 
Goodwill
272.7 
126.5 
Other assets
29.0 
23.5 
Deferred tax assets
332.7 
341.6 
Investments, at fair value
126.1 
97.0 
Liabilities and shareholders’ equity
 
 
Accounts payable and accrued expenses
45.8 
45.7 
Accrued incentive compensation
132.3 
134.0 
Other amounts due to related parties
156.3 
222.9 
Other compensation liabilities
291.0 
260.8 
Accrued income taxes
90.2 
87.7 
Third party borrowings
392.3 
90.0 
Other liabilities
10.1 
7.1 
Equity:
 
 
Ordinary shares (nominal value $0.001; 114,157,765 and 120,558,278 shares, respectively, issued)
0.1 
0.1 
Shareholders’ equity
190.2 
168.6 
Accumulated other comprehensive income (loss)
(26.3)
(2.8)
Non-controlling interests in consolidated Funds
1.0 
Consolidated Funds
 
 
Assets
 
 
Other assets
0.4 
Cash and cash equivalents, restricted
0.4 
Investments, at fair value
35.5 
Liabilities and shareholders’ equity
 
 
Other liabilities
0.8 
Securities sold, not yet purchased, at fair value
5.0 
Redeemable non-controlling interests in Consolidated Funds
5.5 
Equity:
 
 
Non-controlling interests in consolidated Funds
$ 1.0 
$ 0 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Investments, fair value (in dollars)
$ 161.6 
$ 97.0 
Consolidated Entity Excluding Consolidated Funds
 
 
Investments, fair value (in dollars)
$ 126.1 
$ 97.0 
Ordinary shares, nominal value (in dollars per share)
$ 0.001 
$ 0.001 
Ordinary shares, issued shares (in shares)
114,157,765 
120,558,278 
Consolidated Statements of Operations (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Revenue:
 
 
 
Total revenue
$ 663.5 
$ 699.3 
$ 1,056.3 
Operating expenses:
 
 
 
Amortization of acquired intangibles
2.6 
0.1 
0.1 
Total operating expenses
507.9 
508.1 
1,123.5 
Operating income (loss)
155.6 
191.2 
(67.2)
Non-operating income and (expense):
 
 
 
Total non-operating income
5.2 
10.1 
35.0 
Income (loss) from continuing operations before taxes
160.8 
201.3 
(32.2)
Income tax expense
40.8 
46.6 
12.8 
Income (loss) from continuing operations
120.0 
154.7 
(45.0)
Gain (loss) from discontinued operations, net of tax
(1.1)
Gain on disposal of discontinued operations, net of tax
6.2 
0.8 
2.3 
Net income (loss)
126.2 
155.5 
(43.8)
Net income attributable to controlling interests
126.4 
155.5 
51.7 
Earnings Per Share, Basic and Diluted [Abstract]
 
 
 
Earnings per share (basic) attributable to controlling interests (in dollars per share)
$ 1.05 
$ 1.29 
 
Earnings per share (diluted) attributable to controlling interests (in dollars per share)
$ 1.05 
$ 1.29 
 
Continuing operations earnings per share (basic) attributable to controlling interests (in dollars per share)
$ 0.98 
$ 1.28 
 
Continuing operations earnings per share (diluted) attributable to controlling interests (in dollars per share)
$ 0.98 
$ 1.28 
 
Weighted average ordinary shares outstanding (in shares)
119,236,370 
120,000,000 
 
Weighted average diluted ordinary shares outstanding (in shares)
119,520,113 
120,497,997 
 
Pro forma
 
 
 
Earnings Per Share, Basic and Diluted [Abstract]
 
 
 
Earnings per share (basic) attributable to controlling interests (in dollars per share)
 
 
$ 0.43 
Earnings per share (diluted) attributable to controlling interests (in dollars per share)
 
 
$ 0.43 
Continuing operations earnings per share (basic) attributable to controlling interests (in dollars per share)
 
 
$ 0.46 
Continuing operations earnings per share (diluted) attributable to controlling interests (in dollars per share)
 
 
$ 0.46 
Weighted average ordinary shares outstanding (in shares)
 
 
120,000,000 
Weighted average diluted ordinary shares outstanding (in shares)
 
 
120,000,000 
Consolidated Entity Excluding Consolidated Funds
 
 
 
Revenue:
 
 
 
Management fees
659.9 
637.2 
569.7 
Performance fees
2.6 
61.8 
34.3 
Other revenue
0.9 
0.3 
1.6 
Operating expenses:
 
 
 
Compensation and benefits
397.4 
412.8 
429.4 
General and administrative expense
98.3 
88.2 
83.9 
Amortization of acquired intangibles
2.6 
0.2 
0.1 
Depreciation and amortization
9.4 
6.9 
6.1 
Non-operating income and (expense):
 
 
 
Investment income
17.2 
13.0 
12.2 
Interest income
0.4 
0.2 
0.2 
Interest expense
(11.3)
(3.1)
(50.6)
Consolidated Funds
 
 
 
Revenue:
 
 
 
Other revenue
0.1 
25.0 
Revenue from timber
425.7 
Operating expenses:
 
 
 
Interest and dividend expense
135.6 
Timber expense
257.7 
Depletion expense
128.4 
Other expense
0.2 
82.3 
Non-operating income and (expense):
 
 
 
Net Consolidated Funds gains (losses)
(1.1)
73.2 
Net loss attributable to non-controlling interests in Consolidated Funds
$ (0.2)
$ 0 
$ (95.5)
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Net income (loss)
$ 126.2 
$ 155.5 
$ (43.8)
Other comprehensive income (loss):
 
 
 
Valuation of derivative securities, net of tax
(20.3)
(6.6)
Foreign currency translation adjustment
(3.2)
(1.5)
(2.5)
Total comprehensive income (loss)
102.7 
147.4 
(46.3)
Total comprehensive income attributable to controlling interests
102.9 
147.4 
52.4 
Consolidated Funds
 
 
 
Other comprehensive income (loss):
 
 
 
Comprehensive income attributable to non-controlling interests, net of tax
$ (0.2)
$ 0 
$ (98.7)
Consolidated Statements of Changes in Shareholders' Equity (USD $)
In Millions, except Share data, unless otherwise specified
Total
USD ($)
Common stock
Shareholders’ equity (deficit)
USD ($)
Total shareholders’ equity (deficit)
USD ($)
Consolidated Entity Excluding Consolidated Funds
Common stock
USD ($)
Consolidated Entity Excluding Consolidated Funds
Shareholders’ equity (deficit)
USD ($)
Consolidated Entity Excluding Consolidated Funds
Accumulated other comprehensive income (loss)
USD ($)
Consolidated Entity Excluding Consolidated Funds
Total shareholders’ equity (deficit)
USD ($)
Consolidated Entity Excluding Consolidated Funds
Non-controlling interests
USD ($)
Consolidated Funds
USD ($)
Consolidated Funds
Non-controlling interests
USD ($)
Balance beginning at Dec. 31, 2013
$ 2,132.6 
 
 
 
$ 0 
$ (449.8)
$ 3.0 
$ (446.8)
$ 0.1 
 
$ 2,579.3 
Beginning balance (in shares) at Dec. 31, 2013
 
 
 
 
 
 
 
 
 
 
Beginning balance at Dec. 31, 2013
2,535.9 
 
 
 
 
 
 
 
 
 
 
Beginning balance at Dec. 31, 2013
 
 
 
 
 
 
 
 
 
403.3 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
Transfer of subsidiary to Parent
(14.4)
 
 
 
 
(16.0)
1.6 
(14.4)
 
 
 
Tax on gain from transfer of subsidiary to Parent
(3.2)
 
 
 
 
(3.2)
 
(3.2)
 
 
 
Issuance of ordinary shares (in shares)
 
 
 
 
120,000,000 
 
 
 
 
 
 
Issuance of ordinary shares
0.1 
 
 
 
0.1 
 
 
0.1 
 
 
 
Capital contributions (redemptions)
901.0 
 
 
 
 
973.1 
 
973.1 
 
 
(72.1)
Equity-based compensation
8.9 
 
 
 
 
8.9 
 
8.9 
 
 
 
Deferred tax asset revaluation
4.3 
 
 
 
 
4.3 
 
4.3 
 
 
 
Transfer of value incentive plan share award
1.8 
 
 
 
 
1.8 
 
1.8 
 
 
 
Foreign currency translation adjustment
(2.5)
 
 
 
 
 
0.7 
0.7 
 
 
(3.2)
Parent company corporate cost allocation
3.4 
 
 
 
 
3.4 
 
3.4 
 
 
 
Assignment of deferred tax assets and coinvestments to Parent
(304.3)
 
 
 
 
(304.3)
 
(304.3)
 
 
 
IPO costs charged to Parent
(23.1)
 
 
 
 
(23.1)
 
(23.1)
 
 
 
Valuation of derivative securities, net of tax
 
 
 
 
 
 
 
 
 
 
Repurchase of Affiliate equity
(3.8)
 
 
 
 
(3.7)
 
(3.7)
(0.1)
 
 
Net consolidation (de-consolidation) of Funds
60.2 
 
 
 
 
 
 
 
 
 
60.2 
Dividends to Parent
(212.0)
 
 
 
 
(212.0)
 
(212.0)
 
 
 
Net income (loss)
(53.5)
 
 
 
 
51.7 
 
51.7 
 
 
(105.2)
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
 
 
Tax on gain from transfer of subsidiary to Parent
 
 
 
 
 
 
 
 
 
(327.4)
 
Capital contributions (redemptions)
 
 
 
 
 
 
 
 
 
5.1 
 
Net consolidation (de-consolidation) of Funds
 
 
 
 
 
 
 
 
 
(28.8)
 
Net income (loss)
 
 
 
 
 
 
 
 
 
9.7 
 
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
 
 
Transfer of subsidiary to Parent
(341.8)
 
 
 
 
 
 
 
 
 
 
Tax on gain from transfer of subsidiary to Parent
(3.2)
 
 
 
 
 
 
 
 
 
 
Issuance of ordinary shares
0.1 
 
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
906.1 
 
 
 
 
 
 
 
 
 
 
Equity-based compensation
8.9 
 
 
 
 
 
 
 
 
 
 
Deferred tax asset revaluation
4.3 
 
 
 
 
 
 
 
 
 
 
Transfer of value incentive plan share award
1.8 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
(2.5)
 
 
 
 
 
 
 
 
 
 
Parent company corporate cost allocation
3.4 
 
 
 
 
 
 
 
 
 
 
Assignment of deferred tax assets and coinvestments to Parent
(304.3)
 
 
 
 
 
 
 
 
 
 
IPO costs charged to Parent
(23.1)
 
 
 
 
 
 
 
 
 
 
Repurchase of Affiliate equity
(3.8)
 
 
 
 
 
 
 
 
 
 
Net consolidation (de-consolidation) of Funds
31.4 
 
 
 
 
 
 
 
 
 
 
Dividends to Parent
(212.0)
 
 
 
 
 
 
 
 
 
 
Net income (loss)
(43.8)
 
 
 
 
 
 
 
 
 
 
Balance end at Dec. 31, 2014
2,495.5 
 
 
 
0.1 
31.1 
5.3 
36.5 
 
2,459.0 
Ending balance (in shares) at Dec. 31, 2014
 
 
 
 
120,000,000 
 
 
 
 
 
 
Ending balance at Dec. 31, 2014
2,557.4 
 
 
 
 
 
 
 
 
 
 
Ending balance at Dec. 31, 2014
 
 
 
 
 
 
 
 
 
61.9 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
Issuance of ordinary shares (in shares)
 
 
 
 
500,000 
 
 
 
 
 
 
Issuance of ordinary shares
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
(1.3)
 
 
 
 
(1.3)
 
(1.3)
 
 
 
Equity-based compensation
13.0 
 
 
 
 
13.0 
 
13.0 
 
 
 
Deferred tax asset revaluation
9.0 
 
 
 
 
9.0 
 
9.0 
 
 
 
Foreign currency translation adjustment
(1.5)
 
 
 
 
 
(1.5)
(1.5)
 
 
 
Valuation of derivative securities, net of tax
(6.6)
 
 
 
 
 
(6.6)
(6.6)
 
 
 
Net consolidation (de-consolidation) of Funds
(2,459.0)
 
 
 
 
 
 
 
 
 
(2,459.0)
Dividends to shareholders
(10.9)
 
 
 
 
(10.9)
 
(10.9)
 
 
 
Dividends to Parent
(27.8)
 
 
 
 
(27.8)
 
(27.8)
 
 
 
Net income (loss)
155.5 
 
 
 
 
155.5 
 
155.5 
 
 
 
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
 
 
Net consolidation (de-consolidation) of Funds
 
 
 
 
 
 
 
 
 
(61.9)
 
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
 
 
Issuance of ordinary shares
 
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
(1.3)
 
 
 
 
 
 
 
 
 
 
Equity-based compensation
13.0 
 
 
 
 
 
 
 
 
 
 
Deferred tax asset revaluation
9.0 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
(1.5)
 
 
 
 
 
 
 
 
 
 
IPO costs charged to Parent
(10.9)
 
 
 
 
 
 
 
 
 
 
Net consolidation (de-consolidation) of Funds
(2,520.9)
 
 
 
 
 
 
 
 
 
 
Valuation of derivative securities, net of tax
(6.6)
 
 
 
 
 
 
 
 
 
 
Dividends to Parent
(27.8)
 
 
 
 
 
 
 
 
 
 
Net income (loss)
155.5 
 
 
 
 
 
 
 
 
 
 
Balance end at Dec. 31, 2015
165.9 
 
 
 
0.1 
168.6 
(2.8)
165.9 
 
Ending balance (in shares) at Dec. 31, 2015
 
 
 
 
120,500,000 
 
 
 
 
 
 
Ending balance at Dec. 31, 2015
165.9 
 
 
 
 
 
 
 
 
 
 
Ending balance at Dec. 31, 2015
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
Issuance of ordinary shares (in shares)
 
 
 
 
500,000 
 
 
 
 
 
 
Issuance of ordinary shares
 
 
 
 
 
 
 
 
 
Repurchase of ordinary shares
(98.2)
 
(98.2)
(98.2)
 
 
 
 
 
 
 
Repurchase of ordinary shares (in shares)
 
(6,900,000)
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
(0.4)
 
 
 
 
(0.4)
 
(0.4)
 
 
 
Equity-based compensation
12.8 
 
 
 
 
12.8 
 
12.8 
 
 
 
Foreign currency translation adjustment
(3.2)
 
 
 
 
 
(3.2)
(3.2)
 
 
 
Valuation of derivative securities, net of tax
(20.3)
 
 
 
 
(20.3)
(20.3)
 
 
 
Amendment of Deferred Tax Asset Deed
19.8 
 
 
 
 
19.8 
 
19.8 
 
 
 
Business acquisitions
1.0 
 
 
 
 
 
 
 
1.0 
 
 
Dividends to shareholders
(13.4)
 
 
 
 
(13.4)
 
(13.4)
 
 
 
Dividends to related parties
(25.4)
 
(25.4)
(25.4)
 
 
 
 
 
 
 
Net income (loss)
126.4 
 
 
 
 
126.4 
 
126.4 
 
 
 
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
 
 
Net consolidation of Funds
 
 
 
 
 
 
 
 
 
5.5 
 
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
 
 
Issuance of ordinary shares
 
 
 
 
 
 
 
 
 
 
Repurchase of ordinary shares
(98.2)
 
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
(0.4)
 
 
 
 
 
 
 
 
 
 
Equity-based compensation
12.8 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
(3.2)
 
 
 
 
 
 
 
 
 
 
Valuation of derivative securities, net of tax
(20.3)
 
 
 
 
 
 
 
 
 
 
Net consolidation of Funds
5.5 
 
 
 
 
 
 
 
 
 
 
Dividends to Parent
(13.4)
 
 
 
 
 
 
 
 
 
 
Dividends to related parties
(25.4)
 
 
 
 
 
 
 
 
 
 
Net income (loss)
126.4 
 
 
 
 
 
 
 
 
 
 
Balance end at Dec. 31, 2016
165.0 
 
 
 
0.1 
190.2 
(26.3)
164.0 
1.0 
 
Ending balance (in shares) at Dec. 31, 2016
 
 
 
 
114,100,000 
 
 
 
 
 
 
Ending balance at Dec. 31, 2016
170.5 
 
 
 
 
 
 
 
 
 
 
Ending balance at Dec. 31, 2016
 
 
 
 
 
 
 
 
 
$ 5.5 
 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Cash flows from operating activities:
 
 
 
Net income (loss)
$ 126.2 
$ 155.5 
$ (43.8)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities from continuing operations:
 
 
 
Amortization of acquired intangibles
2.6 
0.1 
0.1 
Amortization of debt-related costs
1.3 
Net earnings from Affiliates accounted for using the equity method
(16.3)
(13.0)
(11.5)
Deferred income taxes
19.5 
(2.9)
(35.2)
Changes in operating assets and liabilities (excluding discontinued operations):
 
 
 
Net cash flows from operating activities of continuing operations
124.2 
255.7 
179.0 
Net cash flows from operating activities of discontinued operations
13.5 
(2.1)
(24.9)
Total net cash flows from operating activities
137.7 
253.6 
154.1 
Cash flows from investing activities:
 
 
 
Business acquisitions, net of cash acquired
(219.1)
Net cash flows from investing activities of continuing operations
(284.2)
(155.7)
(6.0)
Net cash flows from investing activities of discontinued operations
(7.1)
Total net cash flows from investing activities
(284.2)
(155.7)
(13.1)
Cash flows from financing activities:
 
 
 
Repurchase of ordinary shares
(98.6)
Net cash flows from financing activities of continuing operations
112.9 
(230.6)
(151.3)
Net cash flows from financing activities of discontinued operations
(1.2)
Total net cash flows from financing activities
112.9 
(230.6)
(152.5)
Effect of foreign exchange rate changes on cash and cash equivalents
(2.1)
Net increase (decrease) in cash and cash equivalents
(33.6)
(132.7)
(13.6)
Cash and cash equivalents at beginning of period
135.9 
268.6 
282.2 
Cash and cash equivalents at end of period (including cash at consolidated Funds classified as restricted)
102.3 
135.9 
268.6 
Supplemental disclosure of cash flow information:
 
 
 
Income taxes paid
23.5 
9.5 
6.1 
Net consolidation (de-consolidation) of Funds
5.5 
(2,520.9)
31.4 
Non-cash capital contribution to Parent
(0.1)
(14.4)
Non-cash capital contribution from Parent
258.6 
Consolidated Entity Excluding Consolidated Funds
 
 
 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities from continuing operations:
 
 
 
Net (income) loss from discontinued operations, excluding consolidated Funds
(6.2)
(0.8)
3.5 
Amortization of acquired intangibles
2.6 
0.2 
0.1 
Depreciation and amortization
9.4 
6.9 
6.1 
Loss on disposal of fixed assets
0.1 
0.4 
Amortization and revaluation of non-cash compensation awards
45.1 
44.4 
103.9 
Parent company corporate cost allocation
3.4 
Net earnings from Affiliates accounted for using the equity method
(15.1)
(12.7)
(9.6)
Distributions received from equity method Affiliates
13.5 
8.6 
7.7 
Deferred income taxes
13.3 
(11.1)
(35.3)
(Gains) losses on other investments
(3.0)
(2.6)
Changes in operating assets and liabilities (excluding discontinued operations):
 
 
 
(Increase) decrease in investment advisory fees receivable and other amounts due from related parties
(3.1)
12.8 
(26.9)
(Increase) decrease in other receivables, prepayments, deposits and other assets
(17.6)
(1.4)
(28.5)
Increase (decrease) in accrued incentive compensation and other liabilities and other amounts due to related parties
(14.0)
15.4 
(51.7)
Increase (decrease) in accounts payable and accruals and accrued income taxes
(28.8)
37.9 
34.7 
Net cash flows from operating activities of continuing operations
123.9 
255.7 
56.9 
Cash flows from investing activities:
 
 
 
Purchase of fixed assets, excluding discontinued operations
(13.5)
(13.0)
(7.6)
Payments for Affiliate and joint venture equity
(0.6)
(11.0)
Dispositions of Affiliates
(3.8)
Purchase of investment securities
(65.0)
(67.6)
(8.8)
Sale of investment securities
13.3 
18.5 
25.5 
Cash flows from financing activities:
 
 
 
Proceeds from borrowings
450.1 
174.5 
Repayment of third party borrowings
(148.0)
(87.0)
Repayment of related party borrowings
(37.0)
(37.0)
Payment to Parent for deferred tax arrangement
(41.4)
(53.6)
(12.3)
Payment to Parent for co-investment redemptions
(10.7)
(14.3)
Dividends paid to shareholders
(13.1)
(10.9)
Dividends paid to related parties
(25.4)
(27.8)
(175.0)
Cash and cash equivalents at beginning of period
135.9 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Interest paid (excluding consolidated Funds)
3.1 
3.7 
64.4 
Consolidated Funds
 
 
 
Cash flows from operating activities:
 
 
 
Net loss attributable to non-controlling interests in Consolidated Funds
0.2 
95.5 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities from continuing operations:
 
 
 
Net (income) loss from discontinued operations, excluding consolidated Funds
4.7 
Depletion
128.4 
(Gains) losses on other investments
0.1 
(4.6)
Changes in operating assets and liabilities (excluding discontinued operations):
 
 
 
(Increase) decrease in receivables and other assets
(0.1)
24.5 
Increase (decrease) in accounts payable and other liabilities
0.5 
64.6 
Net cash flows from operating activities of continuing operations
0.3 
122.1 
Cash flows from investing activities:
 
 
 
Purchase of investment securities
(11.6)
(105.1)
Redemption of investments
11.2 
87.5 
Change in restricted cash
31.5 
Consolidation (de-consolidation) of Funds
(0.5)
93.0 
14.2 
Cash flows from financing activities:
 
 
 
Proceeds from borrowings
4.1 
Repayment of debt
(4.7)
Non-controlling interest capital redeemed
(25.1)
Redeemable non-controlling interest capital raised
10.7 
Redeemable non-controlling interest capital redeemed
(6.9)
Distributions to non-controlling interests
(77.7)
Distributions to redeemable non-controlling interests
$ 0 
$ 0 
$ (1.9)
Organization and Description of the Business
Organization and Description of the Business
OM Asset Management plc (“OMAM” 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, real estate, timber and secondary Funds. 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 Affiliates. The Affiliates’ variable compensation is generally based on each firm’s profitability. OMAM 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 OMAM and Affiliate key employee economic interests, which is critical to the Company’s talent management strategy and long-term growth of the business.
The Company is a majority-owned subsidiary of Old Mutual plc (the “Parent”), an international long-term savings, protection and investment group, listed on the London Stock Exchange.
Reorganization
Prior to the initial public offering of the Company’s business (the “Offering”), the Company’s U.S. holding company, Old Mutual (US) Holdings Inc. (“OMUSH”) was a subsidiary of OM Group (UK) Limited (“OMGUK”) which was in turn wholly owned by the Parent. The board of directors of the Parent elected to undertake the Offering which was completed on October 15, 2014. The Company and the Parent determined that certain transactions (the “Reorganization”) should be undertaken in preparation for the Offering. Specifically, the pre-Offering restructuring steps described below were completed by the Company and the Parent prior to October 15, 2014:

1.
OMGUK incorporated OMAM in the United Kingdom as a direct, wholly-owned subsidiary of OMGUK.
2.
OMAM incorporated OMAM US, Inc. in the State of Delaware (“U.S. Sub”) as a direct, wholly-owned subsidiary of OMAM.
3.
U.S. Sub incorporated OMAM UK Limited in the United Kingdom (“U.K. Sub”) as a direct, wholly-owned subsidiary of U.S. Sub.
4.
The Company’s existing intercompany debt, which was owed by OMUSH to OMGUK, was refinanced with new intercompany debt.
5.
OMGUK contributed its shares in OMUSH and the new intercompany debt to OMAM in return for an issuance of shares by OMAM resulting in the elimination of existing intercompany debt of $1,003.5 million and the redemption of a $32.2 million intercompany receivable via a capital distribution back to OMGUK, for a net reduction of existing intercompany debt of $971.3 million.
6.
The OMUSH shares were transferred to U.K. Sub via a series of share exchanges, and the new intercompany debt was contributed among OMAM, U.S. Sub and U.K. Sub.
7.
OMAM underwent a reduction of share capital to maximize distributable reserves, re-registered in the United Kingdom as a public limited company, amended its articles of association to reflect the same and organized its share capital for purposes of the Offering.
8.
OMAM declared a $175.0 million pre-Offering dividend to OMGUK. OMAM also issued a non-interest bearing promissory note to OMGUK in the principal amount of $37.0 million which was fully repaid by June 30, 2015.
9.
OMAM entered into arrangements with OMGUK for the payment of future realizable benefits associated with certain deferred tax assets existing as of the date of the Offering, as well as co-investments made by the Company in real-estate and timber strategies of its Affiliates. The Deferred Tax Asset Deed was amended on June 13, 2016 to accelerate the repayment terms, with the remaining balance to be paid in three annual installments through June 30, 2018. Under the amended Deferred Tax Asset Deed, the Company will make three payments to OMGUK totaling $142.6 million, on each of June 30, 2017, December 31, 2017 and June 30, 2018. The liability associated with the co-investments have both a carrying value and fair value of $14.3 million at December 31, 2016. See Note 10 for more information.
10.
The Company made a payment of the $175.0 million pre-Offering dividend to OMGUK, funded by a new third party credit facility entered into at the closing of the Offering; and
11.
OMAM completed the purchase of additional ownership of an Affiliate for $60.0 million in cash, resulting in a reduction of liabilities for the same amount.
Secondary Public Offerings
On June 22, 2015, the Company completed a secondary public offering by its Parent of 13,300,000 ordinary shares of the Company pursuant to the Securities Act of 1933, as amended.  Additionally, the underwriters in the secondary public offering exercised their full overallotment option and purchased an additional 1,995,000 shares of the Company from the Parent.  On December 16, 2016, the Company completed a secondary public offering by the Parent of 13,000,000 ordinary shares of the Company pursuant to the Securities Act of 1933, as amended.  Additionally, the underwriters in the secondary public offering exercised their full overallotment option and purchased an additional 1,950,000 shares of the Company from the Parent.  At December 31, 2016, the Parent owned 51.1% of the Company’s outstanding ordinary shares.
On March 11, 2016, the Parent announced the results of a strategic review, which included a plan to separate its underlying businesses, including OMAM.  The Parent further announced on December 12, 2016 its intention to continue the reduction of its holdings in OMAM in an orderly manner which balances value, cost, time and risk.
Landmark Acquisition
In June 2016, the Company announced that it had signed a definitive agreement to acquire a 60% controlling interest in Landmark Partners, LLC, (“Landmark”) a leading global secondary private equity, real estate and real asset investment firm, for $242.4 million. On August 18, 2016 the Company closed this transaction and the results of Landmark have been included in the consolidated results of the Company from that date forward.
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. 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 the Parent) authorized a form of contract by which the Company would be permitted to repurchase shares directly from the Parent. The shareholder authorization does not contain a maximum dollar or share amount for such purchases individually or in aggregate from the Parent. On December 16, 2016 in connection with the secondary offering by the Parent, the Company repurchased 6,000,000 shares directly from the Parent at a price of $14.25/share.
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 each of December 31, 2016, and 2015, all of the Company’s material long-lived assets were domiciled in the United States. For each of the years ended December 31, 2016, 2015 and 2014, 100% of the Company’s revenue from external customers was attributed to the United States.
Basis of Presentation and Significant Accounting Policies
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 the Parent’s consolidated results, but are not part of OMAM are referred to as “related parties.” These historical Consolidated Financial Statements prepared prior to the Offering use the Parent’s historical basis in determining the assets and liabilities and the results of the Company. The financial information included herein may not reflect the consolidated financial position, operating results, changes in the Parent’s equity investment and cash flows of the Company in the future, and does not reflect what they would have been had the Company been a separate, stand-alone entity for the entirety of the periods presented.
The Company historically utilized the services of the Parent for certain functions. These services included providing working capital, as well as certain finance, internal audit, insurance, human resources, investor relations, risk, governance and other corporate functions and projects. The cost of these services was allocated to the Company and included in the Consolidated Financial Statements. The allocations were determined on the basis which the Parent and the Company considered to be reasonable reflections of the utilization of services provided by the Parent. Subsequent to the Offering, the Company assumed responsibility for the costs of these functions.
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 the Parent 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.
Consolidation
Affiliates
The Company evaluates each of its Affiliate 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 pursuant to Accounting Standards Codification (“ASC”) Topic 810, Consolidation, as amended by Accounting Standards Update 2015-02, Consolidation: Amendments to the Consolidation Analysis (“ASU 2015-02”) relating to the consolidation of VIEs.
The Company elected to implement ASU 2015-02 using the modified retrospective method, which resulted in an effective date of adoption of January 1, 2015 and did not require the restatement of prior period results. In adopting ASU 2015-02, the Company re-evaluated all of its Affiliates’ Funds for consolidation. All Funds consolidated prior to January 1, 2015 pursuant to consolidation guidance superseded by ASU 2015-02 were de-consolidated as of January 1, 2015.
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. VOEs are typically consolidated if the Company holds the majority voting interest or otherwise controls the entity.
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. 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, 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. For VOEs organized as limited partnerships or as an entity with governance structures similar to a limited partnership (e.g., limited liability company with a managing member), the Company consolidates an entity when it holds the controlling general partnership interest and the limited partners do not hold substantive participating rights or rights to remove and replace the general partner or rights that could provide the limited partners with the ability to impact the ongoing governance and operating activities of the entity.
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. In the third quarter of 2016, following the purchase of certain seed capital investments from its Parent, the Company began consolidating certain Funds pursuant to ASU 2015-02.
Prior guidance
Prior to the adoption of ASU 2015-02 on January 1, 2015, substantially all of the Funds managed by the Company qualified for the deferral granted under ASU 2010-10, “Amendments for Certain Investment Funds.” As such, the Company evaluated these Funds for consolidation pursuant to former guidance in Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R), Consolidation of Variable Interest Entities. These Funds have typically been owned entirely by third-party investors, however certain Funds are capitalized with seed capital investments from the Company or its related parties and may be owned partially by Affiliate key employees and/or individuals that own minority interests in an Affiliate.
Other than Funds holding investments in timber assets (the “Timber Funds”), the Company’s consolidated Funds were investment companies (the “Investment Funds”) and the Company retained their specialized investment company accounting in consolidation, pursuant to ASC 946, “Financial Services—Investment Companies.”
Timber Funds
Prior to the adoption of ASU 2015-02, the Company’s Timber Funds did not qualify for the deferral under ASU 2010-10. Following the adoption of ASU 2015-02, Timber Funds and Investment Funds are evaluated pursuant to the same revised consolidation guidance. All of the Company’s Timber Funds that were previously consolidated were de-consolidated on January 1, 2015 upon the adoption of ASU 2015-02 utilizing the modified retrospective method.
Timber assets and timber lease rights of consolidated Timber Funds are stated at historical cost less depletion for timber previously harvested and less accumulated amortization and depreciation for lease rights and roads. Timber investment values are adjusted for capital additions made to the property subsequent to the valuation date. All initial silviculture costs, including site preparation and planting costs are capitalized as stand establishment costs. Stand establishment costs are transferred to a merchantable timber classification as trees reach a certain size. Generally, costs incurred subsequent to two years after planting, such as fertilization, vegetation, insect control and pre-commercial thinning are considered to be maintenance and are expensed as incurred.
The Company estimates its timber inventory using statistical information and data obtained from physical measurements, site maps, photo-types and other information gathering techniques. These estimates are updated annually and may result in adjustments of timber volumes, including timber growth rates and depletion rates.
Depletion consists of costs attributed to harvesting timber and is recorded as an expense as timber is harvested. The depletion rate applied to the volume of timber sold is adjusted annually and is based on the relationship of incurred costs in the merchantable timber classification to estimated current merchantable volume.
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 reported in earnings immediately.
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 Chief Operating Decision Maker (“CODM”) reviews the Company’s financial performance on an aggregate level.
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.
Fair value measurements
In accordance with the provisions of FASB ASC 820, “Fair Value Measurement” (“ASC 820”), 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. Pursuant to ASC 820, 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 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. The Company has adopted the provisions of Accounting Standards Update 2015-07, “Fair Value Measurement” (“ASU 2015-07”) where, 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 will no longer be categorized within the fair value hierarchy.
Investments and Investment Transactions
Valuation of investments held at fair value
Valuation of Fund investments is evaluated pursuant to the fair value methodology discussed above. Other investments are categorized as trading and held at estimated fair value. Realized and unrealized gains and losses arising from changes in fair value of discretionary 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 discretionary investments held at fair value.
Security transactions
The Investment Funds generally record 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 Investment Funds record interest income on an accrual basis and include 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.
Foreign currency translation
The books and records of the Company and its Affiliates are maintained in U.S. dollars. Except for one Timber Fund in Australia consolidated prior to 2015, the books and records of consolidated Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars on the date of valuation. Income and expense transactions denominated in foreign currencies are translated into U.S. dollars using the average exchange rate over the period presented. The portion of realized or unrealized gains and losses resulting from changes in foreign exchange rates and from fluctuations arising from changes in the market prices of the underlying securities are included in the net realized and unrealized gain and loss on investments on the consolidated statement of operations. Net realized and unrealized gains and losses on foreign currency transactions represent net foreign exchange gains or losses from forward foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses between the trade and settlement date on security transactions, and the difference between the amount of the investment income and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent amounts actually received or paid.
Short sales
Certain Investment 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 sheet. The extent of such risk cannot be quantified.
Funds’ Derivatives
Certain Funds may use derivative instruments. The Funds’ derivative instruments 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.
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 and Investment Counselors of Maryland, LLC as well as all unconsolidated Funds over which the Company exercises significant influence. 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. Other investments, in which OMAM or an Affiliate do not exercise significant influence are accounted for under the cost method. Under the cost method, income is recognized as dividends are declared.
Revenue recognition
The Company’s consolidated revenue primarily represents management fees billed monthly, quarterly and annually by Affiliates for managing the assets of clients. Asset-based management fees are recognized monthly as services are rendered and are primarily based upon a percentage of the market value of client assets managed. 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 by Investment Funds 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 adjustment 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), (ii) are not subject to contingent repayment and (iii) when collection is reasonably assured. Other income and revenues include interest income on cash and cash equivalents of Investment Funds and the Company’s share of earnings from joint venture partners.
Timber Funds’ revenue 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.
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.
Allocated Costs from the Parent
The Company’s Parent has historically provided the Company with various services, including governance through the board of directors and executive committees, investor relations, procurement of insurance coverage, human resources, financial reporting, internal audit, treasury, systems, risk and tax services. Many of these services have been transitioned to the Company and therefore the cost charged by the Parent has decreased. The costs associated with the services which have been (i) directly attributable to the Company, (ii) have been charged directly to the Company by the Company’s Parent, and (iii) have been paid to the Company’s Parent by the Company have been reflected in the Company’s Consolidated Financial Statements. During the years ended December 31, 2016, 2015 and 2014, the amount of expenses charged directly to the Company from the Company’s Parent were $0.9 million, $1.8 million and $2.1 million, respectively.
With respect to the above services and benefits which are not directly attributable to the Company, costs were allocated to the Company and included in the Consolidated Financial Statements, based generally on the Company’s proportion of the total Parent’s consolidated, normalized revenues. During the year ended December 31, 2014, costs allocated to the Company from Parent were $3.4 million. Subsequent to the Offering (see Note 1), these general costs are no longer allocated and if required are borne directly by the Company.
These cost allocations were determined using a method that the Parent and the Company considered reasonably reflected the costs of such services attributable to the Company provided by the Parent. The Company believes the assumptions and allocations underlying the Consolidated Financial Statements are reasonable and the allocated amounts are representative of the amounts that would have been recorded in the Consolidated Financial Statements had the Company operated independent of the Parent for the historical periods presented prior to the Offering. A more detailed discussion of the relationship with the Parent, including a description of the costs that have been allocated to the Company, as well as the allocation methods, is included in Note 10, “Related Party Transactions.”
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 is amortized using the straight-line method over the estimated useful life of the software, which is generally three 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 acquired 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 flow 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. Intangible assets to be disposed of are reported at the lower of carrying value or fair value less cost to sell.
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 during the fourth quarter annually as of September 30, 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 the fair value of any reporting unit declines below its respective carrying amount, therefore indicating that impairment may exist, the impact would be determined at that point. 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, the Company determines the implied fair value of the goodwill in the same manner used to determine the amount of goodwill in a business combination. If the carrying value of goodwill exceeds the implied fair value of the goodwill, an impairment charge is recognized in the amount equal to that excess. Based on the Company’s most recent annual goodwill impairment test, the fair value of all its reporting units were in excess of their carrying value.
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 for the years ended December 31, 2016 and 2015 by its shares outstanding as outlined below. For periods prior to the Offering (described in Note 1), the Company is calculating pro forma basic and fully diluted EPS based upon 120 million pro forma shares, the number of shares outstanding following the Reorganization described in Note 1.
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.
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 a series of 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 current trailing 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 of its Parent and its Affiliates, as compensation expense in the Consolidated Statements of Operations over the respective vesting periods. Awards made previously under the Parent’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.
In connection with the Offering, certain unvested restricted shares of the Parent were exchanged for unvested restricted shares of the Company. 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 RSUs, 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.
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, as determined according to earnings multiples prescribed by each arrangement. The liability is revalued at each reporting period, with any movements recorded within compensation expense.
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 Statement of Operations.
Pursuant to ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” 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 follows the guidance of ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which permits presenting debt issuance costs as an asset and subsequently amortizing 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 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.
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 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 22 for details of the Company’s restructuring activities.
Recent accounting developments
Revenue from contracts with customers
In May 2014, the FASB issued ASU 2014-9, Revenue from Contracts with Customers. ASU 2014-9 modifies existing U.S. GAAP revenue recognition standards to more closely align with international accounting standards. Additionally, the guidance requires improved disclosures around the nature, amount, timing and uncertainty of revenue recognized. Under the standard, a company is required to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation. Since issuing the standard, the FASB has issued several amendments, including clarifying certain components of the standard as well as delaying the mandatory adoption date of ASU 2014-9 for public entities to annual reporting periods beginning after December 15, 2017. ASU 2014-9, as amended, will be effective for the Company on January 1, 2018.
The guidance permits two methods of adoption; a full retrospective adoption will apply the standard to each prior reporting period presented and a modified retrospective adoption, where the cumulative effect of initially applying the guidance recognized at the date of initial application. The Company currently anticipates adopting the standard using the modified retrospective method.
While the Company does not currently anticipate that the adoption of ASU 2014-09 will result in a material change to the timing of when revenue is recognized, the Company is continuing to evaluate other possible impacts of the standard, including potential changes to the accounting for customer acquisition costs and how to record certain fund expenses passed through to an investor in the fund. The Company is also continuing to evaluate and incorporate applicable industry guidance, including Asset Management Revenue Recognition Task Force papers published by the American Institute of Certified Public Accountants.
Leases
In January 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 changes existing GAAP by requiring the recognition of lease assets and lease liabilities by lessees for those leases previously classified as operating leases under previous GAAP. The lease asset would reflect a right-to-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 a modified retrospective transition approach is required where companies will have to recognize and measure leases at the beginning of the earliest period presented.
The Company has performed a preliminary assessment of ASU 2016-02 and has begun formulating an implementation plan. The Company is generally able to categorize its leases as either real estate leases (for office space) or as “all other” leases. Recording real estate leases under ASU 2016-02 is expected to create a category of “right-to-use” assets on the balance sheet of the Company to record the value of the leased office space in an amount equal to the net present value of future lease payments due (see Note 8), offset by a liability representing the total amounts due for the current value of future lease obligations. For all other leases, a roster must be assembled and evaluations must be performed, but the Company does not expect there to be a material impact to its Consolidated Financial Statements.
Acquisitions
Acquisitions
On August 18, 2016, the Company acquired a majority of the equity interests in Landmark Partners, LLC, a leading global secondary private equity, real estate and real asset investment firm. The Company acquired a 60% interest in Landmark in exchange for $242.4 million. There is also the potential for an additional payment of up to $225.0 million on or around December 31, 2018, subject to service and other conditions. 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)
OMAM accounted for the acquisition of Landmark as a business combination under ASC 805, “Business Combinations,” which requires assets 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 OMAM’s acquisition of Landmark:
 
 
Landmark
Purchase price
 
 
Cash
 
$
238.9

Seller’s expenses
 
3.5

Total consideration
 
242.4

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
 
(25.1
)
Assets (liabilities), net
 
(1.7
)
Total identifiable assets and liabilities
 
96.2

Goodwill
 
$
146.2


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. The amounts recorded for certain assets and liabilities are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the applicable acquisition date, as permitted under U.S. GAAP. The final values may also result in changes to the amortization expense related to intangible assets and will be recognized in the period of adjustment. Any potential adjustments made could be material in relation to the values presented in the table above.
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 estimate for all identifiable intangible assets is preliminary and is 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 preliminary 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 preliminary 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 is 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, there were $6.1 million of costs incurred in connection with the acquisition of Landmark. These costs are recorded within general and administrative expense in the Consolidated Statements of Operations.
In conjunction with the acquisition, OMAM 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. The aforementioned additional payment of up to $225.0 million could be paid based on the growth of Landmark’s business. This arrangement is also accounted for as stock-based compensation, fair valued as of the closing date of the acquisition, and vests on December 31, 2018. Both the pre-acquisition equity units and the potential future payment will be subsequently remeasured at the end of each reporting period.
The financial results of Landmark included in OMAM’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 attributable to OMAM, 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 OMAM and Landmark, as though the acquisition had occurred as of January 1, 2015. 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 at the beginning of the first period presented. Further, adjustments relating to asset management contract assets are preliminary, and subject to revision, as described above. (in millions, except for per-share data)
 
For the year ended December 31,
 
2016
 
2015*
Revenues
$
713.5

 
$
780.1

Total operating expenses
594.7

 
651.9

Income from continuing operations before taxes
109.2

 
114.8

Net income attributable to OMAM shareholders
91.7

 
97.6

Net income per share attributable to OMAM shareholders:
 
 
 
Basic
$0.77
 
$0.81
Diluted
$0.77
 
$0.81
* The preliminary pro forma financial information originally provided via Form 8-K/A filed with the U.S. Securities and Exchange Commission (“SEC”) on November 2, 2016 has been revised to include additional expense estimates that more accurately reflect the combined financial results of OMAM and Landmark. Thus, the pro forma information included in this Note 3 supersedes the pro forma information previously filed with the SEC.
Investments
Investments
Investments are comprised of the following at December 31 (in millions):
 
2016
 
2015
Investments of consolidated Funds held at fair value
35.5

 

Other investments held at fair value
17.5

 

Investments related to long-term incentive compensation plans held at fair value
78.1

 
66.9

Equity-accounted investments in unconsolidated Funds (Note 7)
30.5

 
30.1

Total investments held at fair value
161.6

 
97.0

Equity-accounted investments in Affiliates (Note 7)
55.2

 
54.0

Other investments*
52.0

 
51.6

Total investments per Consolidated Balance Sheets
$
268.8

 
$
202.6


Investment income is comprised of the following for the years ended December 31 (in millions):
 
2016
 
2015
 
2014
Investment return of equity-accounted investments in unconsolidated Funds (Note 7)
$
1.2

 
$
0.3

 
$
1.9

Realized and unrealized gains (losses) on other investments held at fair value
0.8

 

 
0.7

Investment return of held for sale investments
0.1

 

 

Total return on OMAM investments
2.1

 
0.3

 
2.6

Investment return of equity-accounted investments in Affiliates (Note 7)
15.1

 
12.7

 
9.6

Total investment income per Consolidated Statement of Operations
$
17.2

 
$
13.0

 
$
12.2


* Other investments represent cost-basis investments made by one of our Affiliates, including investments in timber and timberlands. At December 31, 2016, $50.1 million of these investments were recorded at the lower of cost or fair value less costs to sell, and subsequently sold in January 2017 for a net gain of approximately $1.7 million.
Fair Value Measurements
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, 2016 (in millions):
 
Quoted prices
in active
markets
(Level I)
 
Significant
other
observable
inputs
(Level II)
 
Significant
unobservable
inputs
(Level III)
 
Uncategorized
 
Total value,
December 31,
2016
Assets of OMAM and consolidated Funds(1)
 
 

 
 

 
 
 
 

Common and preferred stock
$
35.1

 
$

 
$

 
$

 
$
35.1

Short-term investment funds
0.4

 

 

 

 
0.4

Consolidated Funds total
35.5

 

 

 

 
35.5

Investments in separate accounts(2)
7.5

 

 

 

 
7.5

Investments related to long-term incentive compensation plans(3)
78.1

 

 

 

 
78.1

Investments in unconsolidated Funds(4)

 

 

 
40.5

 
40.5

OMAM total
85.6

 

 

 
40.5

 
126.1

Total fair value assets
$
121.1

 
$

 
$

 
$
40.5

 
$
161.6

 
 
 
 
 
 
 
 
 
 
Liabilities of OMAM and consolidated Funds(1)
 
 

 
 

 
 
 
 

Common stock
$
(5.0
)
 
$

 
$

 
$

 
$
(5.0
)
Consolidated Funds total
(5.0
)
 

 

 

 
(5.0
)
Derivative securities

 
(0.1
)
 

 

 
(0.1
)
OMAM total

 
(0.1
)
 

 

 
(0.1
)
Total fair value liabilities
$
(5.0
)
 
$
(0.1
)
 
$

 
$

 
$
(5.1
)

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2015 (in millions):
 
Quoted prices
in active
markets
(Level I)
 
Significant
other
observable
inputs
(Level II)
 
Significant
unobservable
inputs
(Level III)
 
Uncategorized
 
Total value,
December 31,
2015
Assets of OMAM(1)
 

 
 

 
 

 
 
 
 

Investments related to long-term incentive compensation plans(3)
$
66.9

 
$

 
$

 
$

 
$
66.9

Investments in unconsolidated Funds(4)

 

 

 
30.1

 
30.1

Total fair value assets
$
66.9

 
$

 
$

 
$
30.1

 
$
97.0

 
 
 
 
 
 
 
 
 
 
Liabilities of OMAM(1)
 

 
 

 
 

 
 
 
 

Derivative securities
$

 
$
(8.8
)
 
$

 
$

 
$
(8.8
)
Total fair value liabilities
$

 
$
(8.8
)
 
$

 
$

 
$
(8.8
)
 
 
(1)
Assets and liabilities measured at fair value are comprised of financial investments managed by the Company’s Affiliates. $35.5 million in assets and $5.0 million in liabilities at December 31, 2016 and $0.0 million in assets and $0.0 million in liabilities at December 31, 2015 are the result of the consolidation of Funds sponsored by the Company’s Affiliates. Pursuant to ASU 2015-07, collective investment funds are multi-strategy products, uncategorized because they are redeemable monthly and valued at net asset value per share of the fund without adjustment which the Company believes represents the fair value of the investments.
The fair value of other investments is estimated based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs and therefore classified within 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. 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.
Equity, short-term investment funds 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.
(2)
Investments in separate accounts of $7.5 million at December 31, 2016 consist of approximately 28% of cash equivalents and 72% of equity securities. The Company has valued these using the published price as of the measurement date. Accordingly, the Company has classified these investments as Level I.
(3)
Investments related to long-term compensation plans of $78.1 million and $66.9 million at December 31, 2016 and 2015, respectively, are investments in publicly registered daily redeemable funds (some managed by Affiliates), which the Company has classified as trading securities and valued using the published price as of the measurement dates. Accordingly, the Company has classified these investments as Level I.
(4)
The $40.5 million and $30.1 million at December 31, 2016 and December 31, 2015, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in Funds advised by Affiliates and are valued using NAV which the Company relies on to determine their fair value as a practical expedient. The Company has not classified these investments in the fair value hierarchy in accordance with ASU 2015-07. 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 unconsolidated Funds consist primarily of real estate investments Funds and UCITS. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates.
The Company’s investments in real estate Funds 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 eight years from December 31, 2016. The valuation process for the underlying real estate investments held by the real estate investments 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.
Not included in the above are $52.0 million and $51.6 million at December 31, 2016 and December 31, 2015, respectively, of various investments carried at cost, including investments in timber and timberlands. In January 2017, $50.1 million of these investments were sold for a net gain of approximately $1.7 million.

There were no significant transfers of financial assets or liabilities among Levels I, II or III during the years ended December 31, 2016 and 2015.
Variable Interest Entities
Variable Interest Entities
The Company, through its Affiliates, sponsors the formation of various entities considered to be VIEs. The Company consolidates these entities pursuant to ASC Topic 810 relating to the consolidation of VIEs. These VIEs are primarily Funds managed by Affiliates that are typically owned entirely by third-party investors, however, certain Funds are capitalized with seed capital investments from the Company and its related parties 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 the majority 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 at December 31 (in millions):
 
2016
 
2015
Assets
 

 
 

Investments at fair value
$
14.9

 
$

Other assets of consolidated Funds
0.6

 

Total Assets
$
15.5

 
$

Liabilities
 

 
 

Other liabilities of consolidated Funds
$
0.7