BRIGHTSPHERE INVESTMENT GROUP PLC, 10-Q filed on 5/9/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
May 07, 2019
Document and Entity Information    
Entity Registrant Name BrightSphere Investment Group plc  
Entity Central Index Key 0001611702  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Emerging Growth Company false  
Entity Small Business false  
Entity Common Stock, Shares Outstanding   91,869,338
v3.19.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
Assets    
Investments (includes balances reported at fair value of $209.3 and $196.6) $ 349.8 $ 323.3
Total assets 1,355.9 1,553.7
Liabilities and shareholders’ equity    
Total liabilities 1,304.3 1,377.6
Commitments and contingencies
Equity:    
Total equity and redeemable non-controlling interests in consolidated Funds 51.6 176.1
Total liabilities and equity 1,355.9 1,553.7
Consolidated Entity Excluding Consolidated Funds    
Assets    
Cash and cash equivalents 73.3 340.6
Investment advisory fees receivable 151.4 159.1
Income taxes receivable 4.8 3.9
Fixed assets, net 52.4 49.0
Investments (includes balances reported at fair value of $209.3 and $196.6) 211.8 198.5
Acquired intangibles, net 70.1 71.7
Goodwill 274.6 274.6
Other assets 92.1 41.6
Deferred tax assets 263.0 270.1
Liabilities and shareholders’ equity    
Accounts payable and accrued expenses 32.4 54.3
Accrued incentive compensation 61.2 171.0
Due to OM plc 30.4 33.0
Other compensation liabilities 424.4 649.2
Accrued income taxes 54.6 53.6
Third party borrowings 628.4 393.3
Other liabilities 54.5 8.3
Equity:    
Ordinary shares (nominal value $0.001; 91,869,338 and 105,160,021 shares, respectively, issued) 0.1 0.1
Shareholders’ equity (9.7) 124.1
Accumulated other comprehensive loss (19.8) (20.9)
Non-controlling interests 1.8 1.6
Consolidated Funds    
Assets    
Investments (includes balances reported at fair value of $209.3 and $196.6) 138.0 124.8
Other assets 12.6 14.9
Cash and cash equivalents, restricted 11.8 4.9
Liabilities and shareholders’ equity    
Accounts payable and accrued expenses 16.6 13.1
Other liabilities 0.3 0.1
Securities sold, not yet purchased, at fair value 1.5 1.7
Redeemable non-controlling interests in consolidated Funds 43.2 41.9
Equity:    
Non-controlling interests $ 36.0 $ 29.3
v3.19.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
Investment fair value $ 302.6 $ 321.4
Consolidated Entity Excluding Consolidated Funds    
Investment fair value $ 209.3 $ 196.6
Ordinary shares, nominal value (in dollars per share) $ 0.001 $ 0.001
Ordinary shares, issued (in shares) 91,869,338 105,160,021
Consolidated Funds    
Investment fair value $ 93.3 $ 124.8
v3.19.1
Condensed Consolidated Statements of Operations - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Revenue:    
Revenue $ 207.5 $ 245.0
Total revenue 207.2 249.7
Operating expenses:    
Total operating expenses 139.2 224.1
Operating income 68.0 25.6
Non-operating income and (expense):    
Total non-operating income 14.7 57.9
Income from continuing operations before taxes 82.7 83.5
Income tax expense 21.6 28.7
Income from continuing operations 61.1 54.8
Gain (loss) on disposal of discontinued operations, net of tax 0.0 0.0
Net income 61.1 54.8
Net income attributable to controlling interests $ 52.7 $ 57.3
Earnings per share (basic) attributable to controlling interests (in dollars per share) $ 0.54 $ 0.52
Earnings per share (diluted) attributable to controlling interests (in dollars per share) 0.54 0.52
Continuing operations earnings per share (basic) attributable to controlling interests (in dollars per share) 0.54 0.52
Continuing operations earnings per share (diluted) attributable to controlling interests (in dollars per share) $ 0.54 $ 0.52
Weighted average ordinary shares outstanding (in shares) 97,645,020 109,396,367
Weighted average diluted ordinary shares outstanding (in shares) 97,844,583 109,592,626
Consolidated Entity Excluding Consolidated Funds    
Revenue:    
Other revenue $ 1.4 $ 2.5
Operating expenses:    
Compensation and benefits 101.1 189.2
General and administrative expense 32.5 29.5
Amortization of acquired intangibles 1.6 1.6
Depreciation and other amortization 3.8 3.4
Non-operating income and (expense):    
Investment income 7.0 66.1
Interest income 1.1 0.5
Interest expense (7.0) (6.3)
Gain (loss) on disposal of discontinued operations, net of tax 0.0 0.0
Consolidated Funds    
Revenue:    
Total revenue 1.1 0.2
Operating expenses:    
Total operating expenses 0.2 0.4
Non-operating income and (expense):    
Net consolidated Funds’ investment gains (losses) 13.6 (2.4)
Net income (loss) attributable to non-controlling interests in consolidated Funds 8.4 (2.5)
Management fees | Consolidated Entity Excluding Consolidated Funds    
Revenue:    
Revenue 207.5 245.0
Performance fees | Consolidated Entity Excluding Consolidated Funds    
Revenue:    
Revenue $ (2.8) $ 2.0
v3.19.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Net income $ 61.1 $ 54.8
Other comprehensive income:    
Amortization related to derivative securities, net of tax 0.6 0.6
Foreign currency translation adjustment 0.5 0.8
Total other comprehensive income 1.1 1.4
Total comprehensive income attributable to controlling interests 53.8 58.7
Consolidated Funds    
Other comprehensive income:    
Comprehensive income (loss) attributable to non-controlling interests in consolidated Funds $ 8.4 $ (2.5)
v3.19.1
Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($)
shares in Millions, $ in Millions
Total
Consolidated Funds
Ordinary shares
Consolidated Entity Excluding Consolidated Funds
Shareholders’ equity
Consolidated Entity Excluding Consolidated Funds
Accumulated other comprehensive income (loss)
Consolidated Entity Excluding Consolidated Funds
Total shareholders’ equity
Consolidated Entity Excluding Consolidated Funds
Non- controlling interests
Consolidated Entity Excluding Consolidated Funds
Non- controlling interests
Consolidated Funds
Beginning balance (in shares) at Dec. 31, 2017     109.7          
Beginning balance at Dec. 31, 2017 $ 127.3   $ 0.1 $ 96.9 $ (21.6) $ 75.4 $ 1.3 $ 50.6
Increase (Decrease) in Stockholders' Equity                
Issuance of ordinary shares (in shares)     1.0          
Repurchase of ordinary shares (in shares)     (0.2)          
Repurchase of ordinary shares (2.6)     (2.6)   (2.6)    
Capital contributions (redemptions) (0.1)     (0.1)   (0.1)    
Equity-based compensation 1.3     1.3   1.3    
Foreign currency translation adjustment 0.8       0.8 0.8    
Amortization related to derivative securities, net of tax 0.6       0.6 0.6    
Business acquisition 0.1           0.1  
Dividends ($0.10 per share) (10.0)     (10.0)   (10.0)    
Net income 54.6     57.3   57.3   (2.7)
Ending balance (in shares) at Mar. 31, 2018     110.5          
Ending balance at Mar. 31, 2018 172.0   $ 0.1 142.8 (20.2) 122.7 1.4 47.9
Beginning balance at Dec. 31, 2017   $ 44.0            
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds                
Capital contributions (redemptions)   0.1            
Net de-consolidation of Funds   (7.1)            
Net income   0.2            
Ending balance at Mar. 31, 2018   37.2            
Beginning balance at Dec. 31, 2017 171.3              
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds                
Issuance of ordinary shares 0.0              
Repurchase of ordinary shares (2.6)              
Capital contributions (redemptions) 0.0              
Equity-based compensation 1.3              
Foreign currency translation adjustment 0.8              
Amortization related to derivative securities, net of tax 0.6              
Net de-consolidation of Funds (7.1)              
Dividends ($0.10 per share) (10.0)              
Net income (loss) 54.8              
Ending balance at Mar. 31, 2018 209.2              
Beginning balance (in shares) at Dec. 31, 2018     105.2          
Beginning balance at Dec. 31, 2018 134.2   $ 0.1 124.1 (20.9) 103.3 1.6 29.3
Increase (Decrease) in Stockholders' Equity                
Issuance of ordinary shares (in shares)     0.2          
Repurchase of ordinary shares (in shares)     (13.5)          
Repurchase of ordinary shares (180.5)     (180.5)   (180.5)    
Equity-based compensation 3.2     3.2   3.2    
Foreign currency translation adjustment 0.5       0.5 0.5    
Amortization related to derivative securities, net of tax 0.6       0.6 0.6    
Business acquisition 0.2           0.2  
Dividends ($0.10 per share) (9.2)     (9.2)   (9.2)    
Net income 59.4     52.7   52.7   6.7
Ending balance (in shares) at Mar. 31, 2019     91.9          
Ending balance at Mar. 31, 2019 8.4   $ 0.1 $ (9.7) $ (19.8) $ (29.4) $ 1.8 $ 36.0
Beginning balance at Dec. 31, 2018   41.9            
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds                
Capital contributions (redemptions)   (0.4)            
Net income   1.7            
Ending balance at Mar. 31, 2019   $ 43.2            
Beginning balance at Dec. 31, 2018 176.1              
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds                
Issuance of ordinary shares 0.0              
Repurchase of ordinary shares (180.5)              
Capital contributions (redemptions) (0.4)              
Equity-based compensation 3.2              
Foreign currency translation adjustment 0.5              
Amortization related to derivative securities, net of tax 0.6              
Net de-consolidation of Funds 0.0              
Dividends ($0.10 per share) (9.2)              
Net income (loss) 61.1              
Ending balance at Mar. 31, 2019 $ 51.6              
v3.19.1
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Parenthetical) - $ / shares
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]    
Dividends (in dollars per share) $ 0.10 $ 0.10
v3.19.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Cash flows from operating activities:    
Net income $ 61.1 $ 54.8
Adjustments to reconcile net income to net cash flows from operating activities from continuing operations:    
(Gain) loss on disposal of discontinued operations, excluding consolidated Funds 0.0 0.0
Changes in operating assets and liabilities (excluding discontinued operations):    
Net cash flows from operating activities of continuing operations (287.8) (35.1)
Net cash flows from operating activities of discontinued operations 0.0 0.0
Total net cash flows from operating activities (287.8) (35.1)
Cash flows from investing activities:    
Net cash flows from investing activities of continuing operations (9.1) 74.9
Net cash flows from investing activities of discontinued operations 0.0 0.0
Total net cash flows from investing activities (9.1) 74.9
Cash flows from financing activities:    
Net cash flows from financing activities of continuing operations 36.5 (50.5)
Net cash flows from financing activities of discontinued operations 0.0 0.0
Total net cash flows from financing activities 36.5 (50.5)
Effect of foreign exchange rate changes on cash and cash equivalents 0.0 0.0
Net decrease in cash and cash equivalents (260.4) (10.7)
Cash and cash equivalents at beginning of period 345.5 200.4
Cash and cash equivalents at end of period (including cash at consolidated Funds classified as restricted) 85.1 189.7
Supplemental disclosure of cash flow information:    
Interest paid (excluding consolidated Funds) 9.4 9.4
Income taxes paid 12.9 1.1
Supplemental disclosure of non-cash investing and financing transactions:    
De-consolidation of Funds 0.0 (7.1)
Consolidated Entity Excluding Consolidated Funds    
Adjustments to reconcile net income to net cash flows from operating activities from continuing operations:    
(Gain) loss on disposal of discontinued operations, excluding consolidated Funds 0.0 0.0
Amortization of acquired intangibles 1.6 1.6
Depreciation and other amortization 3.8 3.4
Amortization of debt-related costs 0.9 0.8
Amortization and revaluation of non-cash compensation awards (12.7) 51.9
Net earnings from Affiliates accounted for using the equity method (0.6) (0.6)
Gain on sale of investment in Affiliate 0.0 (65.7)
Deferred income taxes 6.2 (6.9)
(Gains) losses on other investments (18.3) (0.4)
Changes in operating assets and liabilities (excluding discontinued operations):    
(Increase) decrease in investment advisory fees receivable and amounts due from OM plc 7.7 (2.7)
(Increase) decrease in other receivables, prepayments, deposits and other assets (6.6) 28.6
Increase (decrease) in accrued incentive compensation, amounts due to OM plc and other liabilities (316.9) (87.9)
Increase (decrease) in accounts payable, accrued expenses and accrued income taxes (17.3) (14.2)
Net cash flows from operating activities of continuing operations (299.5) (34.8)
Cash flows from investing activities:    
Additions of fixed assets (7.3) (3.4)
Proceeds from sale of investment in Affiliate 0.0 100.0
Purchase of investment securities (7.0) (47.2)
Sale of investment securities 9.9 26.9
Cash flows from financing activities:    
Proceeds from third party borrowings 240.0 0.0
Repayment of third party and non-recourse borrowings (5.0) (33.5)
Payment to OM plc for deferred tax arrangement 0.0 0.0
Payment to OM plc for co-investment redemptions (5.1) 0.0
Dividends paid to shareholders (6.4) (7.5)
Dividends paid to related parties (3.0) (2.5)
Payment to OM plc for promissory notes 0.0 (4.5)
Repurchases of ordinary shares (183.9) (2.6)
Consolidated Funds    
Cash flows from operating activities:    
Less: Net (income) loss attributable to non-controlling interests in consolidated Funds (8.4) 2.5
Adjustments to reconcile net income to net cash flows from operating activities from continuing operations:    
(Gains) losses on other investments (2.6) 2.4
Changes in operating assets and liabilities (excluding discontinued operations):    
(Increase) decrease in receivables and other assets 2.3 (2.8)
Increase (decrease) in accounts payable and other liabilities 3.6 2.6
Net cash flows from operating activities of continuing operations 11.7 (0.3)
Cash flows from investing activities:    
Purchase of investment securities (32.7) (38.3)
Sale of investments 28.0 36.9
Cash flows from financing activities:    
Non-controlling interest capital raised 0.3 0.0
Redeemable non-controlling interest capital redeemed (0.4) 0.1
Supplemental disclosure of non-cash investing and financing transactions:    
Payable for securities purchased by a consolidated Fund $ 15.5 $ 0.0
v3.19.1
Organization and Description of the Business
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Description of the Business
BrightSphere Investment Group plc (“BrightSphere”, “BSIG” or the “Company”), through its subsidiaries, is a global asset management business with interests in a diverse group of boutique investment management firms (the “Affiliates”) individually headquartered in the United States. The Company provides investment management services globally to predominantly institutional investors, in asset classes that include U.S. and global equities, fixed income, alternative assets, timber and secondary Funds focused in real estate and private equity. Fees for services are largely asset-based and, as a result, the Company’s revenue fluctuates based on the performance of financial markets and investors’ asset flows in and out of the Company’s products.
The Company’s Affiliates are organized as limited liability companies. The Company generally utilizes a profit-sharing model in structuring its compensation and ownership arrangements with its Affiliates. The Affiliates’ variable compensation is generally based on each firm’s profitability. BSIG and Affiliate key employees share in profits after variable compensation according to their respective ownership interests. The profit-sharing model results in the alignment of BSIG and Affiliate key employee economic interests, which is critical to the Company’s talent management strategy and long-term growth of the business. The Company operates in one business segment.
Prior to 2014, the Company was a wholly-owned subsidiary of Old Mutual plc (“OM plc”), an international long-term savings, protection and investment group, listed on the London Stock Exchange. On October 15, 2014, the Company completed the initial public offering (the “Offering”) by OM plc pursuant to the Securities Act of 1933, as amended. Additionally, between the Offering and March 31, 2019, the Company, OM plc and/or HNA Capital US (“HNA”) completed a series of transactions in the Company’s shares, including a two-step transaction announced on March 25, 2017 for a sale by OM plc of a 24.95% shareholding in the Company to HNA and a two-step transaction announced on November 19, 2018 for a sale of the substantial majority of the ordinary shares held by HNA of the Company to Paulson & Co. (“Paulson”). On February 25, 2019, this transaction was completed resulting in Paulson holding approximately 21.7% of the ordinary shares of the Company. The remaining shares held by HNA were bought back by the Company in the first quarter of 2019.
For the three months ended March 31, 2019, the Company repurchased 13,498,078 ordinary shares at an average price of $13.28 per share.
v3.19.1
Basis of Presentation and Significant Accounting Policies
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Basis of Presentation and Significant Accounting Policies
The Company’s significant accounting policies are as follows:
Basis of presentation
These unaudited Condensed Consolidated Financial Statements reflect the historical balance sheets, statements of operations and of comprehensive income, statements of changes in shareholders’ equity and statements of cash flows of the Company.
The Condensed 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. Material intercompany balances and transactions among the Company and its consolidated Affiliates are eliminated in consolidation.
Certain disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (annual report or Form 10-K) are not required to be included on an interim basis in the Company’s quarterly reports on Forms 10-Q. The Company has condensed or omitted these disclosures. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019. The Company’s significant accounting policies, which have been consistently applied, are summarized in those Financial Statements.
Recently adopted accounting standards
In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases” (“Topic 842”). Topic 842 requires that lessees recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases with a lease term greater than 12 months. The Company adopted the standard on January 1, 2019 using the modified retrospective approach, without restating prior comparative periods. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases.

The Company recorded a ROU asset of approximately $44.2 million and a lease liability of approximately $49.9 million, primarily related to real estate operating leases on January 1, 2019, with no cumulative-effect adjustment to opening retained earnings. The initial recognition of ROU asset and lease liability represented a non-cash activity. The adoption of the new standard had a material impact on the Company’s Condensed Consolidated Balance Sheet, but did not have an impact on our Condensed Consolidated Statement of Operations.

The package of three practical expedients applicable to the Company have been elected which resulted in the Company not having to reassess whether expired or existing contracts upon adoption contained a lease. It also allowed the Company to retain the historical classifications of our leases and initial direct costs. The Company has also made an accounting policy election to apply short-term exemption to leases that meet the definition of short-term leases under the new standard.

On January 1, 2019, the Company early adopted ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The capitalized implementation costs will be expensed over the term of the hosting arrangement. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

Summary of Significant Accounting Policies
Leases
The Company determines if an arrangement is a lease at inception. The Company’s leases qualify as operating leases and consist primarily of corporate offices, data centers, vehicles and certain equipment. Operating lease liabilities are included in Other liabilities and ROU assets are included in Other assets on the Condensed Consolidated Balance Sheet.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As the leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company uses the implicit rate when readily determinable.
The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company elected both at transition and on an ongoing basis, to combine lease and non-lease components in calculating the lease liability and ROU asset for all operating leases.
v3.19.1
Investments
3 Months Ended
Mar. 31, 2019
Investments [Abstract]  
Investments
Investments are comprised of the following as of the dates indicated (in millions):
 
March 31,
2019
 
December 31,
2018
Investments of consolidated Funds held at fair value
$
93.3

 
$
124.8

Other investments held at fair value
108.4

 
104.8

Investments related to long-term incentive compensation plans held at fair value
100.9

 
91.8

Total investments held at fair value
302.6

 
321.4

Equity-accounted investments in Affiliates and consolidated Funds(1)
47.2

 
1.9

Total investments per Condensed Consolidated Balance Sheets
$
349.8

 
$
323.3

 
 
(1)
Equity-accounted investments in consolidated Funds is comprised of Investments in partnership interests where a portion of return includes carried interest. These investments are accounted for within the scope of ASC 323, Investments - Equity Method and Joint Ventures because the Company has determined it has significant influence.

In August 2017, the Company executed a non-binding term sheet to sell its stake in Heitman LLC to Heitman’s management for cash consideration totaling $110 million. Pursuant to this term sheet, BSIG entered into a redemption agreement on November 17, 2017 and the Company reclassified its investment in Heitman to a cost method investment. The transaction closed on January 5, 2018 and resulted in a gain of $65.7 million included in the table below.


Investment income is comprised of the following for the three months ended March 31 (in millions):
 
Three Months Ended March 31,
 
2019
 
2018
Realized and unrealized gains on other investments held at fair value
$
6.4

 
$
(0.2
)
Investment return of equity-accounted investments in Affiliates
0.6

 
0.6

Gain on sale of Affiliate carried at cost

 
65.7

Total investment income per Condensed Consolidated Statements of Operations
$
7.0

 
$
66.1

v3.19.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2019 (in millions):
 
Quoted prices
in active
markets
(Level I)
 
Significant
other
observable
inputs
(Level II)
 
Significant
unobservable
inputs
(Level III)
 
Uncategorized
 
Total value,
March 31, 2019
Assets of BSIG and consolidated Funds(1)
 
 

 
 

 
 
 
 

Common and preferred stock
$
13.5

 
$

 
$

 
$

 
$
13.5

Short-term investment funds
0.8

 

 

 

 
0.8

Bank loans

 
74.2

 

 

 
74.2

Other investments
4.2

 

 

 

 
4.2

Derivatives
0.5

 
0.1

 

 

 
0.6

Consolidated Funds total
19.0

 
74.3

 

 

 
93.3

Investments in separate accounts(2)
36.0

 
10.4

 

 

 
46.4

Investments related to long-term incentive compensation plans(3)
100.9

 

 

 

 
100.9

Investments in unconsolidated Funds(4)

 

 
3.0

 
59.0

 
62.0

BSIG total
136.9

 
10.4

 
3.0

 
59.0

 
209.3

Total fair value assets
$
155.9

 
$
84.7

 
$
3.0

 
$
59.0

 
$
302.6

Liabilities of consolidated Funds(1)
 
 
 
 
 
 
 
 
Derivatives
(1.4
)
 
(0.1
)
 

 

 
(1.5
)
Consolidated Funds total
(1.4
)
 
(0.1
)
 

 

 
(1.5
)
Total fair value liabilities
$
(1.4
)
 
$
(0.1
)
 
$

 
$

 
$
(1.5
)

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2018 (in millions): 
 
Quoted prices
in active
markets
(Level I)
 
Significant
other
observable
inputs
(Level II)
 
Significant
unobservable
inputs
(Level III)
 
Uncategorized
 
Total value December 31, 2018
Assets of BSIG and consolidated Funds(1)
 
 

 
 

 
 

 
 

Common and preferred stock
$
13.8

 
$

 
$

 
$

 
$
13.8

Short-term investment funds
2.2

 

 

 

 
2.2

Bank loans

 
63.9

 

 

 
63.9

Other investments
3.7

 

 

 
38.8

 
42.5

Derivatives
2.2

 
0.2

 

 

 
2.4

Consolidated Funds total
21.9

 
64.1

 

 
38.8

 
124.8

Investments in separate accounts(2)
35.0

 
8.2

 

 

 
43.2

Investments related to long-term incentive compensation plans(3)
91.8

 

 

 

 
91.8

Investments in unconsolidated Funds(4)

 

 
3.0

 
58.6

 
61.6

BSIG total
126.8

 
8.2

 
3.0

 
58.6

 
196.6

Total fair value assets
$
148.7

 
$
72.3

 
$
3.0

 
$
97.4

 
$
321.4

 
Liabilities of consolidated Funds(1)
 
 
 
 
 
 
 
 
Common stock
$
(0.8
)
 
$

 
$

 
$

 
$
(0.8
)
Derivatives
(0.8
)
 
(0.1
)
 

 

 
(0.9
)
Consolidated Funds total
(1.6
)
 
(0.1
)
 

 

 
(1.7
)
Total fair value liabilities
$
(1.6
)
 
$
(0.1
)
 
$

 
$

 
$
(1.7
)
 
 
(1)
Assets and liabilities measured at fair value are comprised of financial investments managed by the Company's Affiliates.
Equity securities, including common and preferred stock, short-term investment funds, other investments and derivatives which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. These securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II. 
The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Company has not made adjustments to the prices provided. Assets of consolidated Funds also include investments in bank loans. Interests in senior floating-rate loans for which reliable market participant quotations are readily available are valued at the average mid-point of bid and ask quotations obtained from a third-party pricing service. These assets are classified as Level II.    
If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III. If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained. In either case, such securities are classified as Level III. The Company performs due diligence procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures.
The uncategorized amount of $0.0 million and $38.8 million at March 31, 2019 and December 31, 2018, respectively, represents investments made by consolidated Funds and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Condensed Consolidated Balance Sheets. These consolidated Funds consist of real estate and private equity investment Funds. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates.
(2)
Investments in separate accounts of $46.4 million at March 31, 2019 consist of approximately 6% of cash equivalents and 94% of equity securities, fixed income securities, and other investments. Investments in separate accounts of $43.2 million at December 31, 2018 consist of approximately 11% of cash equivalents and 89% of equity securities, fixed income securities, and other investments. The Company values these using the published price of the underlying securities (classified as Level I) or quoted price supported by observable inputs as of the measurement date (classified as Level II).
(3)
Investments related to long term compensation plans of $100.9 million and $91.8 million at March 31, 2019 and December 31, 2018, 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 uncategorized amounts of $59.0 million and $58.6 million at March 31, 2019 and December 31, 2018, 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 and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Condensed Consolidated Balance Sheets. These unconsolidated Funds consist primarily of real estate investment Funds, UCITS and other investment vehicles. 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 real estate investment Funds of $15.8 million are subject to longer than 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 eleven years from March 31, 2019. The valuation process for the underlying real estate investments held by the real estate investment Funds begins with each property or loan being valued by the investment teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, acquisitions, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. In connection with this process, changes in fair-value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions. 
Investments in unconsolidated Funds categorized as Level III of $3.0 million at March 31, 2019 relates to investments in Timber Funds advised by Affiliates and are valued by the general partner of those Funds. Determination of estimated fair value involves subjective judgment because the actual fair value can be determined only through negotiation between parties in a sale transaction, and amounts ultimately realized may vary significantly from their fair value presented.
The following table reconciles the opening balances of Level III financial assets to closing balances at the end of the period (in millions):
 
Investments in unconsolidated Funds
 
Three Months Ended
March 31, 2019
Three Months Ended
March 31, 2018
Level III financial assets
 
 
At beginning of the period
$
3.0

$

Transfers in (out) of Level 3

6.4

Total net fair value losses recognized in net income

(0.1
)
Total Level III financial assets
$
3.0

$
6.3


There were no significant transfers of financial assets or liabilities among Levels I, II or III during the three months ended March 31, 2019.
v3.19.1
Variable Interest Entities
3 Months Ended
Mar. 31, 2019
Variable Interest Entities  
Variable Interest Entities
The Company, through its Affiliates, sponsors the formation of various entities considered to be variable interest entities (“VIEs”). These VIEs are primarily Funds managed by Affiliates and are investment vehicles typically owned entirely by third-party investors. Certain Funds may be capitalized with seed capital investments from the Company and may be owned partially by Affiliate key employees and/or individuals that own minority interests in an Affiliate.

The Company’s determination of whether it is the primary beneficiary of a Fund that is a VIE is based in part on an
assessment of whether or not the Company and its related parties are exposed to absorb more than an insignificant
amount of the risks and rewards of the entity. Typically the Fund’s investors are entitled to substantially all of the
economics of these VIEs with the exception of the management fees and performance fees, if any, earned by the
Company or any investment the Company has made into the Funds. The Company generally is not the primary
beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest, including
interests of related parties, is substantial.

The following table presents the assets and liabilities of Funds that are VIEs and consolidated by the Company (in millions):
 
3/31/2019
 
12/31/2018
Assets
 

 
 

Investments at fair value
$
93.3

 
$
124.8

Other assets of consolidated Funds
69.1

 
19.8

Total Assets
$
162.4

 
$
144.6

Liabilities
 

 
 

Liabilities of consolidated Funds
$
18.4

 
$
14.9

Total Liabilities
$
18.4

 
$
14.9


“Investments at fair value” consist of investments in bank loans, common and preferred stock, and other securities. To the extent the Company also has consolidated Funds that are not VIEs, the assets and liabilities of those Funds are not included in the table above.
The assets of consolidated VIEs presented in the table above belong to the investors in those Funds, are available for use only by the Fund to which they belong, and are not available for use by the Company to the extent they are held by non-controlling interests. Any debt or liabilities held by consolidated Funds have no recourse to the Company's general credit.
The Company’s involvement with Funds that are VIEs and not consolidated by the Company is generally limited to that of an investment manager and its investment in the unconsolidated VIE, if any. The Company’s investment in any unconsolidated VIE generally represents an insignificant interest of the Fund’s net assets and assets under management, such that the majority of the VIE’s results are attributable to third parties. The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors.
The following information pertains to unconsolidated VIEs for which the Company holds a variable interest (in millions):
 
March 31,
2019
 
December 31,
2018
Unconsolidated VIE assets
$
4,810.2

 
$
4,814.9

Unconsolidated VIE liabilities
$
2,140.0

 
$
2,115.1

Equity interests on the Condensed Consolidated Balance Sheets
$
20.7

 
$
22.5

Maximum risk of loss(1)
$
30.7

 
$
31.0

 
 
(1)
Includes equity investments the Company has made or is required to make and any earned but uncollected management and incentive fees. The Company does not record performance or incentive allocations until the respective measurement period has ended.
v3.19.1
Borrowings and Debt
3 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]  
Borrowings and Debt
The Company’s borrowings and long-term debt was comprised of the following as of the dates indicated (in millions): 
 
March 31, 2019
 
December 31, 2018
 
Carrying value(1)
 
Fair Value
 
Carrying value(1)
 
Fair Value
$350 million revolving credit facility expiring October 15, 2019
$
235.0

 
$
235.0

 
$

 
$

Non-recourse seed capital facility expiring January 17, 2020
$

 
$

 
$

 
$

Long-term bonds:
 
 
 
 
 
 
 
$275 million 4.80% Senior Notes Due July 27, 2026
$
272.2

 
$
274.8

 
$
272.2

 
$
266.0

$125 million 5.125% Senior Notes Due August 1, 2031
121.2

 
115.2

 
121.1

 
102.3

Total borrowings and long-term debt
$
628.4

 
$
625.0

 
$
393.3

 
$
368.3


 
 
(1)
The difference between the principal amounts and the carrying values of the senior notes in the table above reflects the unamortized debt issuance costs and discounts.
v3.19.1
Leases
3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases
The Company has operating leases for corporate offices, data centers, vehicles and certain equipment. The operating leases have remaining lease terms of 1 year to 6 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.
As of March 31, 2019, the ROU asset of $46.3 million was included within Other assets and the lease liability of $51.9 million was included within Other liabilities, on the Condensed Consolidated Balance Sheet.
The following table summarizes information about the Company’s operating leases for the three months ended March 31, 2019 (in millions, except lease term and discount rate):
 
Three Months Ended March 31,
 
2019
Operating lease cost
$
3.4

Cash paid for amounts included in the measurement of lease liabilities:
 
    Operating cash flows from operating leases
3.6

ROU asset obtained in exchange for new operating lease liabilities
4.8

Weighted average remaining lease term
4.7 years

Weighted average discount rate
3.97
%

In determining the incremental borrowing rate, the Company considered the interest rate yield for the specific interest rate environment and the Company’s credit spread at the inception of the lease.

Maturities of operating lease liabilities were as follows (in millions):
 
Operating Leases
Year Ending December 31,
 
2019 (excluding the three months ended March 31, 2019)
$
14.8

2020
14.3

2021
12.5

2022
6.0

2023
3.0

Thereafter
6.6

Total lease payments
57.2

   Less imputed interest
(5.3
)
Total
$
51.9

v3.19.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Operational commitments
The Company had unfunded commitments to invest up to approximately $66 million in co-investments as of March 31, 2019. These commitments will be funded as required through the end of the respective investment periods ranging through fiscal 2024.
Certain Affiliates operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any violations of such financial requirements occurring during the period.
Litigation
The Company and its Affiliates are subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals for matters for which the outcome is probable and can be reasonably estimated. If an insurance claim or other indemnification for a litigation accrual is available to the Company, the associated gain will not be recognized until all contingencies related to the gain have been resolved. As of March 31, 2019, there were no material accruals for claims, legal proceedings or other contingencies.
Indemnifications
In the normal course of business, such as through agreements to enter into business combinations and divestitures of Affiliates, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred.
Foreign tax contingency
The Company has clients in non-U.S. jurisdictions which require entities that are conducting certain business activities in such jurisdictions to collect and remit tax assessed on certain fees paid for goods and services provided. The Company does not believe this requirement is applicable based on its limited business activities in these jurisdictions. However, given the fact that uncertainty exists around the requirement, the Company has chosen to evaluate its potential exposure related to non-collection and remittance of these taxes. At March 31, 2019, management of the Company has estimated the potential maximum exposure and concluded that it is not material. No accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at March 31, 2019.
Considerations of credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash investments. The Company maintains cash and cash equivalents and short term investments with various financial institutions. These financial institutions are typically located in cities in which the Company and its Affiliates operate. For the Company and certain Affiliates, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits.
v3.19.1
Earnings Per Share
3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to controlling interests by the weighted-average number of shares outstanding. Diluted earnings per share is similar to basic earnings per share, but is adjusted for the effect of potentially issuable ordinary shares, except when inclusion is antidilutive. 
The calculation of basic and diluted earnings per ordinary share is as follows (dollars in millions, except per share data):
 
Three Months Ended March 31,
 
2019
 
2018
Numerator:
 

 
 

Net income attributable to controlling interests
$
52.7

 
$
57.3

Less: Total income available to participating unvested securities(1)
(0.1
)
 
(0.2
)
Total net income attributable to ordinary shares
$
52.6

 
$
57.1

Denominator:
 

 
 

Weighted-average ordinary shares outstanding—basic
97,645,020

 
109,396,367

Potential ordinary shares:
 
 
 
Restricted stock units
199,563

 
196,259

Weighted-average ordinary shares outstanding—diluted
97,844,583

 
109,592,626

Earnings per ordinary share attributable to controlling interests:
 

 
 

Basic
$
0.54

 
$
0.52

Diluted
$
0.54

 
$
0.52

 
 
(1)
Income available to participating unvested securities includes dividends paid on unvested restricted shares and their proportionate share of undistributed earnings.
Employee options to purchase 8,970,000 shares were not included in the computation of diluted EPS for the three months ended March 31, 2019 because the assumed proceeds from exercising such options exceed the average price of the ordinary shares for the period and, therefore, the options are deemed antidilutive.
v3.19.1
Revenue
3 Months Ended
Mar. 31, 2019
Revenue from Contract with Customer [Abstract]  
Revenue
Management fees
The Company’s management fees are a function of the fee rates the Affiliates charge to their clients, which are typically expressed in basis points, and the levels of the Company’s assets under management. The greatest driver of increases or decreases in this average fee rate is changes in the mix of the Company’s assets under management caused by net inflows or outflows in certain asset classes or disproportionate market movements.
Performance fees
The Company’s alternative products subject to performance fees earn these fees upon exceeding high-water mark performance thresholds or outperforming a hurdle rate. Conversely, the separate accounts / other products, which primarily earn management fees, are potentially subject to performance adjustments up or down based on investment performance versus benchmarks (i.e. fulcrum fees).     
Other revenue
Included in other revenue are certain payroll and benefits costs and expenses paid on behalf of Funds by the Company’s Affiliates. In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, the Company is acting as a principal and the reimbursement is accrued on a gross basis at cost as the corresponding reimbursable expenses are incurred. Revenue from expense reimbursement amounted to $1.0 million and $2.3 million for the three months ended March 31, 2019 and 2018, respectively, and is recorded in other revenue in the Company’s Condensed Consolidated Statements of Operations. Other revenue may also consist of other miscellaneous revenue, consisting primarily of administration and consulting services.
Disaggregation of management fee revenue
The Company classifies its revenue (including only consolidated Affiliates that are included in management fee revenue) among the following asset classes:
i.
U.S. equity, which includes small cap through large cap securities and substantially value or blended investment styles;
ii.
Global / non-U.S. equity, which includes global and international equities including emerging markets;
iii.
Fixed income, which includes government bonds, corporate bonds and other fixed income investments in the United States; and
iv.
Alternatives, which consist of timberland investments, secondary Funds focused in real estate and private equity, and other alternative investments.
Revenue by asset class for the three months ended March 31, 2019 and 2018 were (in millions):
 
Three Months Ended March 31,
 
2019
 
2018
U.S. equity
$
40.4

 
$
47.6

Global / non-U.S. equity
116.9

 
128.6

Fixed income
6.4

 
6.8

Alternatives
43.8

 
62.0

Management fee revenue
$
207.5

 
$
245.0

v3.19.1
Accumulated Other Comprehensive Income
3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
Accumulated Other Comprehensive Income
The following tables show the tax effects allocated to each component of other comprehensive income (loss) (in millions):
 
For the three months ended March 31, 2019
 
Pre-Tax
 
Tax
(Expense)
 
Net of Tax
Foreign currency translation adjustment
$
0.5

 
$

 
$
0.5

Amortization related to derivative securities
0.7

 
(0.1
)
 
0.6

Other comprehensive income
$
1.2

 
$
(0.1
)
 
$
1.1

 
For the three months ended March 31, 2018
 
Pre-Tax
 
Tax
(Expense)
 
Net of Tax
Foreign currency translation adjustment
$
0.8

 
$

 
$
0.8

Amortization related to derivative securities
0.7

 
(0.1
)
 
0.6

Other comprehensive income
$
1.5

 
$
(0.1
)
 
$
1.4

The components of accumulated other comprehensive income (loss) for the three months ended March 31, 2019 were as follows (in millions):
 
Foreign currency translation adjustment
 
Valuation and amortization of derivative securities
 
Total
Balance, as of December 31, 2018
$
1.8

 
$
(22.7
)
 
$
(20.9
)
Other comprehensive income
0.5

 
0.6

 
1.1

Balance, as of March, 31 2019
$
2.3

 
$
(22.1
)
 
$
(19.8
)

The Company reclassified $0.7 million and $0.7 million from accumulated other comprehensive income (loss) to interest expense on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018, respectively.
v3.19.1
Derivatives and Hedging
3 Months Ended
Mar. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging
Cash flow hedge
In July 2015, the Company entered into a series of $300.0 million notional Treasury rate lock contracts which were designated and qualified as cash flow hedges. The Company documented its hedging strategy and risk management objective for this contract in anticipation of a future debt issuance. The Treasury rate lock contract eliminated the impact of fluctuations in the underlying benchmark interest rate for future forecasted debt issuances. The forecasted debt issuances occurred in July 2016 and the Treasury rate lock, which had an accumulated fair value of $(34.4) million, was settled. Refer to Note 6, Borrowings and Debt, for additional information on the debt issuances.
As of March 31, 2019, the balance recorded in accumulated other comprehensive income (loss) was $(22.1) million, net of tax. This balance will be reclassified to earnings through interest expense over the life of the issued debt. Amounts of $0.7 million and $0.7 million have been reclassified for the three months ended March 31, 2019 and 2018, respectively. During the next twelve months the Company expects to reclassify approximately $3 million to interest expense.
Derivatives of consolidated Funds
In the normal course of business, the Company’s consolidated Funds may enter into transactions involving derivative financial instruments in connection with Funds’ investing activities. Derivative instruments may be used as substitutes for securities in which the Funds can invest, to hedge portfolio investments or to generate income or gain to the Funds. The Funds may also use derivatives to manage duration; sector and yield curve exposures and credit and spread volatility. Derivative financial instruments base their value upon an underlying asset, index or reference rate. These instruments are subject to various risks, including leverage, market, credit, liquidity and operational risks. The Funds manage the risks associated with derivatives on an aggregate basis, along with the risks associated with its trading and as part of its overall risk management policies.
v3.19.1
Basis of Presentation and Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Basis of presentation
Basis of presentation
These unaudited Condensed Consolidated Financial Statements reflect the historical balance sheets, statements of operations and of comprehensive income, statements of changes in shareholders’ equity and statements of cash flows of the Company.
The Condensed 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. Material intercompany balances and transactions among the Company and its consolidated Affiliates are eliminated in consolidation.
Certain disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (annual report or Form 10-K) are not required to be included on an interim basis in the Company’s quarterly reports on Forms 10-Q. The Company has condensed or omitted these disclosures. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019. The Company’s significant accounting policies, which have been consistently applied, are summarized in those Financial Statements.
Recently adopted accounting pronouncements
Recently adopted accounting standards
In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases” (“Topic 842”). Topic 842 requires that lessees recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases with a lease term greater than 12 months. The Company adopted the standard on January 1, 2019 using the modified retrospective approach, without restating prior comparative periods. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases.

The Company recorded a ROU asset of approximately $44.2 million and a lease liability of approximately $49.9 million, primarily related to real estate operating leases on January 1, 2019, with no cumulative-effect adjustment to opening retained earnings. The initial recognition of ROU asset and lease liability represented a non-cash activity. The adoption of the new standard had a material impact on the Company’s Condensed Consolidated Balance Sheet, but did not have an impact on our Condensed Consolidated Statement of Operations.

The package of three practical expedients applicable to the Company have been elected which resulted in the Company not having to reassess whether expired or existing contracts upon adoption contained a lease. It also allowed the Company to retain the historical classifications of our leases and initial direct costs. The Company has also made an accounting policy election to apply short-term exemption to leases that meet the definition of short-term leases under the new standard.

On January 1, 2019, the Company early adopted ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The capitalized implementation costs will be expensed over the term of the hosting arrangement. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.
Leases
Leases
The Company determines if an arrangement is a lease at inception. The Company’s leases qualify as operating leases and consist primarily of corporate offices, data centers, vehicles and certain equipment. Operating lease liabilities are included in Other liabilities and ROU assets are included in Other assets on the Condensed Consolidated Balance Sheet.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As the leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company uses the implicit rate when readily determinable.
The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company elected both at transition and on an ongoing basis, to combine lease and non-lease components in calculating the lease liability and ROU asset for all operating leases.
v3.19.1
Investment (Tables)
3 Months Ended
Mar. 31, 2019
Investments [Abstract]  
Schedule of investment components
Investments are comprised of the following as of the dates indicated (in millions):
 
March 31,
2019
 
December 31,
2018
Investments of consolidated Funds held at fair value
$
93.3

 
$
124.8

Other investments held at fair value
108.4

 
104.8

Investments related to long-term incentive compensation plans held at fair value
100.9

 
91.8

Total investments held at fair value
302.6

 
321.4

Equity-accounted investments in Affiliates and consolidated Funds(1)
47.2

 
1.9

Total investments per Condensed Consolidated Balance Sheets
$
349.8

 
$
323.3

 
 
(1)
Equity-accounted investments in consolidated Funds is comprised of Investments in partnership interests where a portion of return includes carried interest. These investments are accounted for within the scope of ASC 323, Investments - Equity Method and Joint Ventures because the Company has determined it has significant influence.
Investment income including realized gain loss on investments

Investment income is comprised of the following for the three months ended March 31 (in millions):
 
Three Months Ended March 31,
 
2019
 
2018
Realized and unrealized gains on other investments held at fair value
$
6.4

 
$
(0.2
)
Investment return of equity-accounted investments in Affiliates
0.6

 
0.6

Gain on sale of Affiliate carried at cost

 
65.7

Total investment income per Condensed Consolidated Statements of Operations
$
7.0

 
$
66.1


v3.19.1
Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Summary of the assets and liabilities that are measured at fair value on a recurring basis
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2019 (in millions):
 
Quoted prices
in active
markets
(Level I)
 
Significant
other
observable
inputs
(Level II)
 
Significant
unobservable
inputs
(Level III)
 
Uncategorized
 
Total value,
March 31, 2019
Assets of BSIG and consolidated Funds(1)
 
 

 
 

 
 
 
 

Common and preferred stock
$
13.5

 
$

 
$

 
$

 
$
13.5

Short-term investment funds
0.8

 

 

 

 
0.8

Bank loans

 
74.2

 

 

 
74.2

Other investments
4.2

 

 

 

 
4.2

Derivatives
0.5

 
0.1

 

 

 
0.6

Consolidated Funds total
19.0

 
74.3

 

 

 
93.3

Investments in separate accounts(2)
36.0

 
10.4

 

 

 
46.4

Investments related to long-term incentive compensation plans(3)
100.9

 

 

 

 
100.9

Investments in unconsolidated Funds(4)

 

 
3.0

 
59.0

 
62.0

BSIG total
136.9

 
10.4

 
3.0

 
59.0

 
209.3

Total fair value assets
$
155.9

 
$
84.7

 
$
3.0

 
$
59.0

 
$
302.6

Liabilities of consolidated Funds(1)
 
 
 
 
 
 
 
 
Derivatives
(1.4
)
 
(0.1
)
 

 

 
(1.5
)
Consolidated Funds total
(1.4
)
 
(0.1
)
 

 

 
(1.5
)
Total fair value liabilities
$
(1.4
)
 
$
(0.1
)
 
$

 
$

 
$
(1.5
)

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2018 (in millions): 
 
Quoted prices
in active
markets
(Level I)
 
Significant
other
observable
inputs
(Level II)
 
Significant
unobservable
inputs
(Level III)
 
Uncategorized
 
Total value December 31, 2018
Assets of BSIG and consolidated Funds(1)
 
 

 
 

 
 

 
 

Common and preferred stock
$
13.8

 
$

 
$

 
$

 
$
13.8

Short-term investment funds
2.2

 

 

 

 
2.2

Bank loans

 
63.9

 

 

 
63.9

Other investments
3.7

 

 

 
38.8

 
42.5

Derivatives
2.2

 
0.2