UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172023
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-10994
virtuslogo2016.jpgvrtslogo2019a02.jpg
VIRTUS INVESTMENT PARTNERS, INC.
(Exact name of registrant as specified in its charter)

Delaware26-3962811
Delaware26-3962811
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
100 Pearl St.,One Financial Plaza, Hartford, CT 06103
(Address of principal executive offices) (Zipoffices, including Zip Code)
(800) 248-7971
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueVRTSThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES x NO  ¨Yes ☒No  ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company,”" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer
¨
Accelerated filerx
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company¨
Emerging growth company
¨

☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  xYes  ☐    No  ☒
The number of shares outstanding of the registrant’s common stock was 7,158,0157,184,989 as of October 26, 2017.
27, 2023.










Table of Contents

VIRTUS INVESTMENT PARTNERS, INC.
INDEX
 
Page
Item 1.
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 20172023 and December 31, 20162022
21
Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 20172023 and 20162022
32
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 20172023 and 20162022
43
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 20172023 and 20162022
54
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for the Three and Nine Months Ended September 30, 20172023 and 20162022
65
Notes to Condensed Consolidated Financial Statements (Unaudited)
76
Item 2.
2719
Item 3.
4129
Item 4.
4229
Item 1.
4330
Item 1A.
4430
Item 2.
4530
Item 6.5.
4531
Item 6.
4631
32
“"We,” “us,” “our,” "the Company,”" "us," "our," the "Company," and “Virtus”"Virtus" as used in this Quarterly Report on Form 10-Q (the "10-Q") refer to Virtus Investment Partners, Inc., a Delaware corporation, and its subsidiaries.




Table of Contents

PART I – FINANCIAL INFORMATION
 
Item 1.    Financial Statements

Table of Contents


Virtus Investment Partners, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data)September 30,
2023		December 31,
2022
Assets:
Cash and cash equivalents$195,403 $338,234 
Investments152,349 100,330 
Accounts receivable, net107,014 99,274 
Assets of consolidated investment products ("CIP")
Cash and cash equivalents of CIP209,747 250,301 
Cash pledged or on deposit of CIP683 644 
Investments of CIP2,069,215 2,190,113 
Other assets of CIP34,481 45,445 
Furniture, equipment and leasehold improvements, net25,503 19,123 
Intangible assets, net452,338 442,519 
Goodwill397,098 348,836 
Deferred taxes, net23,659 23,171 
Other assets97,809 94,944 
Total assets$3,765,299 $3,952,934 
Liabilities and Equity
Liabilities:
Accrued compensation and benefits$161,745 $181,805 
Accounts payable and accrued liabilities32,740 33,200 
Dividends payable16,860 15,812 
Contingent consideration94,421 128,400 
Debt273,815 255,025 
Other liabilities93,134 87,827 
Liabilities of CIP
Notes payable of CIP1,943,949 2,083,314 
Securities purchased payable and other liabilities of CIP184,817 230,897 
Total liabilities2,801,481 3,016,280 
Commitments and Contingencies (Note 14)
Redeemable noncontrolling interests96,266 113,718 
Equity:
Equity attributable to Virtus Investment Partners, Inc.:
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 12,160,311 shares issued and 7,182,763 shares outstanding at September 30, 2023; and 12,033,247 shares issued and 7,181,554 shares outstanding at December 31, 2022122 120 
Additional paid-in capital1,295,988 1,286,244 
Retained earnings (accumulated deficit)190,615 130,261 
Accumulated other comprehensive income (loss)(373)(358)
Treasury stock, at cost, 4,977,548 and 4,851,693 shares at September 30, 2023 and December 31, 2022, respectively(624,248)(599,248)
Total equity attributable to Virtus Investment Partners, Inc.862,104 817,019 
Noncontrolling interests5,448 5,917 
Total equity867,552 822,936 
Total liabilities and equity$3,765,299 $3,952,934 
 September 30,
2017		 December 31,
2016
($ in thousands, except share data)   
Assets:   
Cash and cash equivalents$164,867
 $64,588
Investments96,752
 89,371
Accounts receivable, net61,762
 35,879
Assets of consolidated investment products ("CIP")   
Cash and cash equivalents of CIP221,196
 18,099
Cash pledged or on deposit of CIP722
 984
Investments of CIP1,595,727
 489,042
Other assets of CIP36,940
 9,158
Furniture, equipment and leasehold improvements, net11,557
 7,728
Intangible assets, net307,017
 38,427
Goodwill170,153
 6,788
Deferred taxes, net49,002
 47,535
Other assets25,863
 16,789
Total assets$2,741,558
 $824,388
Liabilities and Equity   
Liabilities:   
Accrued compensation and benefits$69,833
 $47,885
Accounts payable and accrued liabilities31,676
 25,176
Dividends payable6,318
 3,479
Contingent consideration51,690
 —
Debt248,540
 30,000
Other liabilities18,356
 13,505
Liabilities of consolidated investment products ("CIP")   
Notes payable of CIP1,455,932
 328,761
Securities purchased payable and other liabilities of CIP191,312
 16,643
Total liabilities2,073,657
 465,449
Commitments and Contingencies (Note 14)
 
Redeemable noncontrolling interests of consolidated investment products67,227
 37,266
Equity:   
Equity attributable to stockholders:   
Series D mandatory convertible preferred stock, $0.01 par value, 1,150,000 shares authorized; 1,150,000 and 0 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively110,843
 —
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 10,454,304 shares issued and 7,158,015 shares outstanding at September 30, 2017 and 9,119,058 shares issued and 5,889,013 shares outstanding at December 31, 2016105
 91
Additional paid-in capital1,216,741
 1,090,331
Accumulated deficit(391,714) (424,279)
Accumulated other comprehensive income (loss)(40) (224)
Treasury stock, at cost, 3,296,289 and 3,230,045 shares at September 30, 2017 and December 31, 2016, respectively(351,748) (344,246)
Total equity attributable to stockholders584,187
 321,673
Noncontrolling interests of consolidated investment products16,487
 —
Total equity600,674
 321,673
Total liabilities and equity$2,741,558
 $824,388


The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Table of Contents

Virtus Investment Partners, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands, except per share data)2023202220232022
Revenues
Investment management fees$184,869 $172,850 $529,326 $564,691 
Distribution and service fees14,333 15,746 42,618 52,912 
Administration and shareholder service fees19,069 20,563 55,668 66,889 
Other income and fees1,000 1,102 3,069 3,516 
Total revenues219,271 210,261 630,681 688,008 
Operating Expenses
Employment expenses101,587 88,230 304,895 283,583 
Distribution and other asset-based expenses24,157 26,818 73,332 88,247 
Other operating expenses30,494 31,096 94,707 94,367 
Operating expenses of consolidated investment products ("CIP")553 538 1,613 1,927 
Change in fair value of contingent consideration— — (6,800)2,900 
Restructuring expense691 4,015 691 4,015 
Depreciation expense1,504 938 4,134 2,835 
Amortization expense15,382 14,609 45,581 43,895 
Total operating expenses174,368 166,244 518,153 521,769 
Operating Income (Loss)44,903 44,017 112,528 166,239 
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net(1,918)(2,493)2,469 (16,018)
Realized and unrealized gain (loss) of CIP, net(1,013)(8,440)(2,853)(43,443)
Other income (expense), net128 (659)(1,062)199 
Total other income (expense), net(2,803)(11,592)(1,446)(59,262)
Interest Income (Expense)
Interest expense(6,222)(3,557)(17,444)(8,661)
Interest and dividend income2,872 1,013 8,785 1,870 
Interest and dividend income of investments of CIP49,803 28,644 144,501 71,436 
Interest expense of CIP(38,218)(20,356)(112,153)(46,860)
Total interest income (expense), net8,235 5,744 23,689 17,785 
Income (Loss) Before Income Taxes50,335 38,169 134,771 124,762 
Income tax expense (benefit)12,181 10,754 31,794 43,969 
Net Income (Loss)38,154 27,415 102,977 80,793 
Noncontrolling interests(7,248)4,265 (3,190)1,348 
Net Income (Loss) Attributable to Virtus Investment Partners, Inc.$30,906 $31,680 $99,787 $82,141 
Earnings (Loss) per Share—Basic$4.26 $4.33 $13.72 $11.05 
Earnings (Loss) per Share—Diluted$4.19 $4.25 $13.50 $10.76 
Weighted Average Shares Outstanding—Basic7,258 7,308 7,272 7,434 
Weighted Average Shares Outstanding—Diluted7,379 7,463 7,393 7,636 
 Three Months Ended
September 30,		 Nine Months Ended September 30,
 2017 2016 2017 2016
($ in thousands, except per share data)       
Revenues       
Investment management fees$97,295
 $60,398
 $230,628
 $176,234
Distribution and service fees11,482
 12,116
 32,704
 36,761
Administration and transfer agent fees14,699
 9,588
 33,156
 29,085
Other income and fees199
 222
 1,095
 624
Total revenues123,675
 82,324
 297,583
 242,704
Operating Expenses       
Employment expenses54,159
 33,142
 136,792
 102,184
Distribution and other asset-based expenses20,552
 17,380
 51,639
 52,913
Other operating expenses17,733
 11,392
 51,195
 34,614
Operating expenses of consolidated investment products6,757
 635
 7,872
 6,442
Restructuring and severance1,584
 1,879
 10,478
 4,270
Depreciation expense1,038
 754
 2,478
 2,392
Amortization expense5,063
 604
 7,109
 1,858
Total operating expenses106,886
 65,786
 267,563
 204,673
Operating Income (Loss)16,789
 16,538
 30,020
 38,031
Other Income (Expense)       
Realized and unrealized gain (loss) on investments, net1,367
 961
 2,951
 3,584
Realized and unrealized gain (loss) of consolidated investment products, net13,465
 3,680
 16,485
 9,888
Other income (expense), net436
 250
 1,129
 463
Total other income (expense), net15,268
 4,891
 20,565
 13,935
Interest Income (Expense)       
Interest expense(4,116) (128) (8,098) (389)
Interest and dividend income679
 221
 1,313
 1,113
Interest and dividend income of investments of consolidated investment products17,778
 5,411
 28,536
 14,856
Interest expense of consolidated investment products(16,249) (3,788) (22,101) (10,188)
Total interest income (expense), net(1,908) 1,716
 (350) 5,392
Income (Loss) Before Income Taxes30,149
 23,145
 50,235
 57,358
Income tax expense (benefit)9,626
 6,869
 15,939
 20,512
Net Income (Loss)20,523
 16,276
 34,296
 36,846
Noncontrolling interests(1,731) (651) (2,782) (770)
Net Income (Loss) Attributable to Stockholders18,792
 15,625
 31,514
 36,076
Preferred stockholder dividends(2,084) —
 (6,252) —
Net Income (Loss) Attributable to Common Stockholders$16,708
 $15,625
 $25,262
 $36,076
Earnings (Loss) per Share—Basic$2.32
 $2.04
 $3.64
 $4.47
Earnings (Loss) per Share—Diluted$2.21
 $1.99
 $3.52
 $4.39
Cash Dividends Declared per Preferred Share$1.81
 $—
 $5.44
 $—
Cash Dividends Declared per Common Share$0.45
 $0.45
 $1.35
 $1.35
Weighted Average Shares Outstanding—Basic (in thousands)7,212
 7,676
 6,942
 8,062
Weighted Average Shares Outstanding—Diluted (in thousands)8,492
 7,854
 7,168
 8,223


The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Table of Contents

Virtus Investment Partners, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months Ended
September 30,		Nine Months Ended
September 30,
Three Months Ended
September 30,		 Nine Months Ended September 30,
2017 2016 2017 2016
($ in thousands)       
(in thousands)(in thousands)2023202220232022
Net Income (Loss)$20,523
 $16,276
 $34,296
 $36,846
Net Income (Loss)$38,154 $27,415 $102,977 $80,793 
Other comprehensive income (loss), net of tax:       Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of ($348) for the nine months ended September 30, 2016.10
 —
 12
 569
Unrealized gain on available-for-sale securities, net of tax of ($32) and $31 for the three months ended September 30, 2017 and 2016, respectively and ($115) and ($140) for the nine months ended September 30, 2017 and 2016, respectively.38
 (50) 172
 230
Foreign currency translation adjustment, net of tax of $82 and $31 for the three months ended September 30, 2023 and 2022, respectively and $5 and $280 for the nine months ended September 30, 2023 and 2022Foreign currency translation adjustment, net of tax of $82 and $31 for the three months ended September 30, 2023 and 2022, respectively and $5 and $280 for the nine months ended September 30, 2023 and 2022(226)(504)(15)(791)
Other comprehensive income (loss)48
 (50) 184
 799
Other comprehensive income (loss)(226)(504)(15)(791)
Comprehensive income (loss)20,571
 16,226
 34,480
 37,645
Comprehensive income (loss)37,928 26,911 102,962 80,002 
Comprehensive (income) loss attributable to noncontrolling interests(1,731) (651) (2,782) (770)Comprehensive (income) loss attributable to noncontrolling interests(7,248)4,265 (3,190)1,348 
Comprehensive Income (Loss) Attributable to Stockholders$18,840
 $15,575
 $31,698
 $36,875
Comprehensive Income (Loss) Attributable to Virtus Investment Partners, Inc.Comprehensive Income (Loss) Attributable to Virtus Investment Partners, Inc.$30,680 $31,176 $99,772 $81,350 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Table of Contents



Virtus Investment Partners, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 Nine Months Ended
September 30,
 2017 2016
($ in thousands)   
Cash Flows from Operating Activities:   
Net income (loss)$34,296
 $36,846
Adjustments to reconcile net income to net cash provided by (used in) operating activities:   
Depreciation expense, intangible asset and other amortization11,621
 4,430
Stock-based compensation14,970
 9,064
Excess tax benefit from stock-based compensation—
 (192)
Amortization of deferred commissions1,666
 1,900
Payments of deferred commissions(2,104) (1,405)
Equity in earnings of equity method investments(1,150) (444)
Realized (gain) loss on sale of equity method investment—
 (2,883)
Realized and unrealized (gains) losses on trading securities, net(3,117) (700)
Distributions from equity method investments911
 —
Sales (purchases) of trading securities, net3,859
 10,811
Loss on disposal of fixed assets345
 —
Deferred taxes, net6,056
 9,032
Changes in operating assets and liabilities:   
Accounts receivable, net and other assets(9,466) (297)
Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities(2,147) (12,893)
Operating activities of consolidated investment products ("CIP"):   
Realized and unrealized gains on investments of CIP, net(16,875) (10,104)
Purchases of investments by CIP(527,214) (388,272)
Sales of investments by CIP377,238
 325,929
Net purchases of short term investments by CIP565
 5,773
Sales (purchases) of securities sold short by CIP, net209
 (4,648)
Change in cash pledged or on deposit of CIP262
 9,644
Change in other assets of CIP417
 (893)
Change in liabilities of CIP833
 4,453
Amortization of discount on notes payable of CIP5,042
 3,719
Net cash provided by (used in) operating activities(103,783) (1,130)
Cash Flows from Investing Activities:   
Capital expenditures(1,243) (1,461)
Proceeds from sale of equity method investment—
 8,621
Change in cash and cash equivalents of consolidated investment products due to consolidation, net5,466
 103
Equity method investment contributions—
 (2,471)
Acquisition of business (cash paid $471.4 million, less cash acquired $77.6 million)(393,446) —
Purchases of available-for-sale securities(194) (183)
Net cash provided by (used in) investing activities(389,417) 4,609
Cash Flows from Financing Activities:   
Issuance of debt260,000
 —
Repayments on credit facility and other debt(30,970) —
Payment of deferred financing costs(15,549) (1,442)
Proceeds from issuance of mandatory convertible preferred stock, net of issuance costs111,004
 —
Proceeds from issuance of common stock, net of issuance costs109,487
 —
Common stock dividends paid(9,352) (11,119)
Preferred stock dividends paid(4,169) —
Repurchases of common shares(7,502) (72,216)
Proceeds from exercise of stock options106
 428
Taxes paid related to net share settlement of restricted stock units(3,436) (1,518)
Excess tax benefits from stock-based compensation—
 192
Contributions of noncontrolling interests, net18,448
 3,959
Financing activities of consolidated investment products ("CIP"):   
Payments on borrowings by CIP(105,000) (156,154)
Proceeds from issuance of notes payable by CIP474,009
 316,280
Repayment of notes payable by CIP(500) —
Net cash provided by (used in) financing activities796,576
 78,410
Net increase (decrease) in cash and cash equivalents303,376
 81,889
Cash and cash equivalents, beginning of period82,687
 97,384
Cash and Cash Equivalents, End of Period$386,063
 $179,273
Non-Cash Investing Activities:   
Change in accrual for capital expenditures$96
 $140
Non-Cash Financing Activities:   
Increase (decrease) to noncontrolling interest due to consolidation (deconsolidation) of consolidated investment products, net$11,286
 $(48,292)
Stock issued for acquisition of business$21,738
 $—
Contingent consideration for acquisition of business$51,690
 $—
Common stock dividends payable$4,234
 $3,424
Preferred stock dividends payable$2,084
 $—
Accrued stock issuance costs$332
 $—
 Nine Months Ended
September 30,
(in thousands)20232022
Cash Flows from Operating Activities:
Net income (loss)$102,977 $80,793 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense, intangible asset and other amortization51,017 48,143 
Stock-based compensation20,072 19,267 
Amortization of deferred commissions1,261 3,653 
Payments of deferred commissions(1,105)(1,789)
Equity in earnings of equity method investments810 (527)
Distributions from equity method investments1,789 2,239 
Right of use asset— 3,222 
Realized and unrealized (gains) losses on investments, net(2,459)16,056 
Sales (purchases) of investments, net(24,881)(8,396)
Change in fair value of contingent consideration(6,800)2,900 
Deferred taxes, net2,735 (5,500)
Changes in operating assets and liabilities:
Accounts receivable, net and other assets3,441 32,940 
Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities(38,966)(76,639)
Operating activities of consolidated investment products ("CIP"):
Realized and unrealized (gains) losses on investments of CIP, net(1,769)41,312 
Purchases of investments by CIP(905,184)(601,749)
Sales of investments by CIP1,028,251 595,451 
Net proceeds (purchases) of short-term investments and securities sold short by CIP(168)(655)
Change in other assets and liabilities of CIP(1,181)4,129 
Net cash provided by (used in) operating activities229,840 154,850 
Cash Flows from Investing Activities:
Capital expenditures(6,438)(5,495)
Acquisition of businesses, net of cash acquired of $4,395 and $8,443 for the nine months ended September 30, 2023 and 2022, respectively(108,999)(19,944)
Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net(267)(308)
Purchase of equity method investment(11,645)— 
Net cash provided by (used in) investing activities(127,349)(25,747)
Cash Flows from Financing Activities:
Borrowings on credit agreement50,000 — 
Repayments on credit agreement(32,063)(12,062)
Common stock dividends paid(38,385)(35,244)
Repurchase of common shares(25,000)(80,000)
Payment of contingent consideration(27,179)(33,036)
Taxes paid related to net share settlement of restricted stock units(13,436)(16,450)
Affiliate equity sales (purchases)(20,784)(11,089)
Net contributions from (distributions to) noncontrolling interests5,967 (1,091)
Financing activities of CIP:
Payments on borrowings by CIP(317,362)(129,996)
Borrowings by CIP132,473 — 
Net cash provided by (used in) financing activities(285,769)(318,968)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(68)(650)
Net increase (decrease) in cash, cash equivalents and restricted cash(183,346)(190,515)
Cash, cash equivalents and restricted cash, beginning of period589,179 586,145 
Cash, cash equivalents and restricted cash, end of period$405,833 $395,630 
Non-Cash Investing Activities:
Contingent consideration$— $1,200 
Non-Cash Financing Activities:
Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net$(7,170)$(338)
Common stock dividends payable$13,788 $12,014 

(in thousands)September 30,
2023		December 31, 2022
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents$195,403 $338,234 
Cash of CIP209,747 250,301 
Cash pledged or on deposit of CIP683 644 
Cash, cash equivalents and restricted cash at end of period$405,833 $589,179 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Table of Contents

Virtus Investment Partners, Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Permanent EquityTemporary Equity
 Common StockAdditional
Paid-in
Capital		Retained Earnings (Accumulated
Deficit)		Accumulated
Other
Comprehensive
Income (Loss)		Treasury StockTotal
Attributed To
Virtus Investment Partners, Inc.		Non-
controlling
Interests		Total
Equity		Redeemable
Non-
controlling
Interests
(in thousands, except per share data)SharesPar ValueSharesAmount
Balances at June 30, 20227,275,337 $120 $1,275,907 $88,196 $(267)4,747,951 $(579,248)$784,708 $6,997 $791,705 $139,147 
Net income (loss)— — — 31,680 — — — 31,680 151 31,831 (4,416)
Foreign currency translation adjustments— — — — (504)— — (504)— (504)— 
Net subscriptions (redemptions) and other— — 2,035 — — — — 2,035 (414)1,621 (10,289)
Cash dividends declared ($1.65 per common share)— — — (12,552)— — — (12,552)— (12,552)— 
Repurchases of common shares(50,422)— — — — 50,422 (10,000)(10,000)— (10,000)— 
Issuance of common shares related to employee stock transactions7,058 — — — — — — — — — — 
Taxes paid on stock-based compensation— — (1,166)— — — — (1,166)— (1,166)— 
Stock-based compensation— — 5,004 — — — — 5,004 — 5,004 — 
Balances at September 30, 20227,231,973 $120 $1,281,780 $107,324 $(771)4,798,373 $(589,248)$799,205 $6,734 $805,939 $124,442 
Balances at June 30, 20237,254,786 $122 $1,286,775 $174,011 $(147)4,903,533 $(609,248)$851,513 $5,196 $856,709 $110,399 
Net income (loss)— — — 30,906 — — — 30,906 671 31,577 6,577 
Foreign currency translation adjustments— — — — (226)— — (226)— (226)— 
Net subscriptions (redemptions) and other— — 3,218 — — — — 3,218 (419)2,799 (20,710)
Cash dividends declared ($1.90 per common share)— — — (14,302)— — — (14,302)— (14,302)— 
Repurchases of common shares(74,015)— — — — 74,015 (15,000)(15,000)— (15,000)— 
Issuance of common shares related to employee stock transactions1,992 — — — — — — — — — — 
Taxes paid on stock-based compensation— — (214)— — — — (214)— (214)— 
Stock-based compensation— — 6,209 — — — — 6,209 — 6,209 — 
Balances at September 30, 20237,182,763 $122 $1,295,988 $190,615 $(373)4,977,548 $(624,248)$862,104 $5,448 $867,552 $96,266 
 Common Stock Preferred Stock 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 Treasury Stock 
Total
Attributed To
Stockholders
 
Non-
controlling
Interests
 
Total
Equity
 
Redeemable
Non-
controlling
Interests
($ in thousands, except per share data)Shares Par Value Shares Amount Shares Amount 
Balances at December 31, 20158,398,944
 $96
 —
 $—
 $1,140,875
 $(472,614) $(1,034) 1,214,144
 $(157,699) $509,624
 $(167) $509,457
 $73,864
Net income (loss)—
 —
 —
 —
 —
 36,076
 —
 —
 —
 36,076
 —
 36,076
 770
Net unrealized gain (loss) on securities available-for-sale—
 —
 —
 —
 —
 —
 230
 —
 —
 230
 —
 230
 —
Foreign currency translation adjustments—
 —
 —
 —
 —
 —
 569
 —
 —
 569
 —
 569
 —
Activity of noncontrolling interests, net—
 —
 —
 —
 —
 (167) —
 —
 —
 (167) 167
 —
 (44,333)
Cash dividends declared ($1.35 per common share)—
 —
 —
 —
 (11,003) —
 —
 —
 —
 (11,003) —
 (11,003) —
Repurchases of common shares(844,671) (6) —
 —
 (47,207) —
 —
 288,155
 (25,003) (72,216) —
 (72,216) —
Issuance of common shares related to employee stock transactions55,480
 1
 —
 —
 991
 —
 —
 —
 —
 992
 —
 992
 —
Taxes paid on stock-based compensation—
 —
 —
 —
 (1,518) —
 —
 —
 —
 (1,518) —
 (1,518) —
Stock-based compensation—
 —
 —
 —
 8,815
 —
 —
 —
 —
 8,815
 —
 8,815
 —
Tax deficiencies from stock-based compensation—
 —
 —
 —
 (1,603) —
 —
 —
 —
 (1,603) —
 (1,603) —
Balances at September 30, 20167,609,753
 $91
 —
 $—
 $1,089,350
 $(436,705) $(235) 1,502,299
 $(182,702) $469,799
 $—
 $469,799
 $30,301
Balances at December 31, 20165,889,013
 $91
 —
 $—
 $1,090,331
 $(424,279) $(224) 3,230,045
 $(344,246) $321,673
 $—
 $321,673
 $37,266
Cumulative effect adjustment for adoption of ASU 2016-09—
 —
 —
 —
 —
 1,051
 —
 —
 —
 1,051
 —
 1,051
 —
Net income (loss)—
 —
 —
 —
 —
 31,514
 —
 —
 —
 31,514
 1,073
 32,587
 1,709
Net unrealized gain (loss) on securities available-for-sale—
 —
 —
 —
 —
 —
 172
 —
 —
 172
 —
 172
 —
Foreign currency translation adjustments—
 —
 —
 —
 —
 —
 12
 —
 —
 12
 —
 12
 —
Activity of noncontrolling interests, net—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 15,414
 15,414
 28,252
Issuance of mandatory convertible preferred stock, net of offering costs—
 —
 1,150,000
 110,843
 —
 —
 —
 —
 —
 110,843
 —
 110,843
 —
Cash dividends declared ($5.44 per preferred share)—
 —
 —
 —
 (6,253) —
 —
 —
 —
 (6,253) —
 (6,253) —
Issuance of common stock for acquisition of business213,669
 2
 —
 —
 21,738
 —
 —
 —
 —
 21,740
 —
 21,740
 —
Issuance of common stock, net of offering costs1,046,500
 11
 —
 —
 109,317
 —
 —
 —
 —
 109,328
 —
 109,328
 —
Cash dividends declared ($1.35 per common share)—
 —
 —
 —
 (10,103) —
 —
 —
 —
 (10,103) —
 (10,103) —
Repurchases of common shares(66,244) —
 —
 —
 —
 —
 —
 66,244
 (7,502) (7,502) —
 (7,502) —
Issuance of common shares related to employee stock transactions75,077
 1
 —
 —
 835
 —
 —
 —
 —
 836
 —
 836
 —
Taxes paid on stock-based compensation—
 —
 —
 —
 (3,441) —
 —
 —
 —
 (3,441)   (3,441) —
Stock-based compensation—
 —
 —
 —
 14,317
 —
 —
 —
 —
 14,317
 —
 14,317
 —
Balances at September 30, 20177,158,015
 $105
 1,150,000
 $110,843
 $1,216,741
 $(391,714) $(40) 3,296,289
 $(351,748) $584,187
 $16,487
 $600,674
 $67,227

Permanent EquityTemporary Equity
 Common StockAdditional
Paid-in
Capital		Retained Earnings (Accumulated
Deficit)		Accumulated
Other
Comprehensive
Income (Loss)		Treasury StockTotal
Attributed To
Virtus Investment Partners, Inc.		Non-
controlling
Interests		Total
Equity		Redeemable
Non-
controlling
Interests
(in thousands, except per share data)SharesPar ValueSharesAmount
Balances at December 31, 20217,506,151 $119 $1,276,424 $60,962 $20 4,400,596 $(509,248)$828,277 $8,350 $836,627 $138,965 
Net income (loss)— — — 82,141 — — — 82,141 (184)81,957 (1,164)
Foreign currency translation adjustments— — — — (791)— — (791)— (791)— 
Net subscriptions (redemptions) and other— — 2,035 — — — — 2,035 (1,432)603 (13,359)
Cash dividends declared ($4.65 per common share)— — — (35,779)— — — (35,779)— (35,779)— 
Repurchases of common shares(397,777)— — — — 397,777 (80,000)(80,000)— (80,000)— 
Issuance of common shares related to employee stock transactions123,599 1 (1)— — — — — — — — 
Taxes paid on stock-based compensation— — (16,450)— — — — (16,450)— (16,450)— 
Stock-based compensation— — 19,772 — — — — 19,772 — 19,772 — 
Balances at September 30, 20227,231,973 $120 $1,281,780 $107,324 $(771)4,798,373 $(589,248)$799,205 $6,734 $805,939 $124,442 
Balances at December 31, 20227,181,554 $120 $1,286,244 $130,261 $(358)4,851,693 $(599,248)$817,019 $5,917 $822,936 $113,718 
Net income (loss)— — — 99,787 — — — 99,787 786 100,573 2,404 
Foreign currency translation adjustments— — — — (15)— — (15)— (15)— 
Net subscriptions (redemptions) and other— — 3,218 — — — — 3,218 (1,255)1,963 (19,856)
Cash dividends declared ($5.20 per common share)— — — (39,433)— — — (39,433)— (39,433)— 
Repurchases of common shares(125,855)— — — — 125,855 (25,000)(25,000)— (25,000)— 
Issuance of common shares related to employee stock transactions127,064 2 (2)— — — — — — — — 
Taxes paid on stock-based compensation— — (13,436)— — — — (13,436)— (13,436)— 
Stock-based compensation— — 19,964 — — — — 19,964 — 19,964 — 
Balances at September 30, 20237,182,763 $122 $1,295,988 $190,615 $(373)4,977,548 $(624,248)$862,104 $5,448 $867,552 $96,266 

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

5
Table of Contents

Virtus Investment Partners, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Business

Virtus Investment Partners, Inc. (“the Company,” “we,” “us,” “our,”(the "Company," "we," "us," "our" or “Virtus”"Virtus"), a Delaware corporation, operates in the investment management industry through its subsidiaries.


The Company provides investment management and related services to individualsinstitutions and institutions.individuals. The Company's investment strategies are offered to institutional clients through separate accounts and pooled, or commingled, structures. The Company’s retail investment management services are provided to individuals through products consisting of U.S. 1940 Actof: mutual funds andregistered pursuant to the Investment Company Act of 1940, as amended ("U.S. retail funds"); Undertaking for Collective Investment in Transferable Securities ("UCITS"and Qualifying Investor Funds (collectively, "global funds") (collectively,and collectively with U.S. retail funds, variable insurance funds, and exchange-traded funds ("ETFs"), (the "open-end funds"),; closed-end funds exchange traded(collectively, with open-end funds, (“ETFs”the "funds"); and retail separate accounts that include intermediary-sold and private client accounts. InstitutionalThe Company also provides subadvisory services to other investment management services are provided to corporations, multi-employer retirement funds, employee retirement systems, foundations, endowments,advisers and serves as the collateral manager for structured products and as a subadviser to unaffiliated mutual funds.products.


On June 1, 2017, the Company completed the acquisition of RidgeWorth Investments ("RidgeWorth"), which provided investment management services through its affiliated managers to clients in North America, Europe and Asia. See Note 3 for further discussion of the RidgeWorth acquisition.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”("GAAP") for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial condition and results of operations. Operating results for the nine months ended September 30, 20172023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2023.

The Company has reclassified certain amounts in prior-period financial statements to conform to the current period's presentation. Previously, the Company reported consolidated investment products and consolidated sponsored investment products separately. Currently, the Company combines these categories under the caption "consolidated investment products" and has accordingly reclassified prior presentations. Further, the Company has reclassified its prior net presentation of purchases and sales of investments by its consolidated sponsored investments products and its consolidated investment product in the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016 to conform with the current year presentation of showing such purchases and sales as separate line items within the cash flows from operating activities. The reclassifications had no impact on the net cash provided by or used in operating, investing or financing activities within the Condensed Consolidated Statement of Cash Flows, nor any impact on the other Condensed Consolidated Financial Statements.
These unaudited Condensed Consolidated Financial Statementscondensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20162022 (the "2022 Annual Report on Form 10-K") filed with the Securities and Exchange Commission.Commission (the "SEC"). The Company’s significant accounting policies, which have been consistently applied, are summarized in its 20162022 Annual Report on Form 10-K.


New Accounting Standards Implemented

3. Revenues
The Company adopted Accounting Standards Update ("ASU") 2016-09, ImprovementsCompany's revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to Employee Share-Based Payment Accounting ("ASU 2016-09")customers. Investment management fees, distribution and service fees, and administration and shareholder service fees are generally calculated as a percentage of average net assets of the investment portfolios managed. The net asset values from which these fees are calculated are variable in nature and subject to factors outside of the Company's control, such as additional investments, withdrawals and market performance. Because of this, these fees are considered constrained until the end of the contractual measurement period (monthly or quarterly), on January 1, 2017. This standard makes several modifications to the accounting for forfeitures and employer tax withholdings on share-based compensation as well as the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation of certain components of share-based awards. Upon adoption, the Company recorded a $1.1 million cumulative effect adjustment to retained earnings for excess tax benefits that were not previously recognized because the related tax deduction had not reduced current taxes payable. which is when asset values are generally determinable.

Investment Management Fees by Source    
The Company elected to adopt all provisions impacting the Condensed Consolidated Statements of Operations and Cash Flows prospectively.following table summarizes investment management fees by source:

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Investment management fees
Open-end funds$80,294 $80,234 $229,721 $262,486 
Closed-end funds14,673 15,773 44,025 48,887 
Retail separate accounts44,441 39,154 127,323 134,069 
Institutional accounts45,461 37,689 128,257 119,249 
Total investment management fees$184,869 $172,850 $529,326 $564,691 
6
Table of Contents


The Company adopted ASU 2016-07, Investments - Equity Method and Joint Ventures (Topic 232): Simplifying the Transition to the Equity Method of Accounting, on January
4. Acquisitions
AlphaSimplex Group, LLC
On April 1, 2017. This standard eliminates the requirement that, when an existing cost method investment qualifies for use of the equity method, a reporting entity must restate its historical financial statements, as if the equity method had been used during all previous periods. Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive income/(loss) would be recognized through earnings. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

New Accounting Standards Not Yet Implemented

In November 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning and ending cash on the statement of cash flows. This standard is effective for annual periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted. A reporting entity is required to apply this standard on a retrospective basis as of the beginning of the fiscal year for which the standard is effective. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"),which clarifies the treatment of several cash flow activities. ASU 2016-15 also clarifies that when cash receipts and cash payments have aspects of more than one classification of cash flows and cannot be separated, classification will depend on the predominant source or use. This update is effective for annual periods beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 was originally effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year or for periods beginning after December 15, 2017. Adoption of the standard requires either a retrospective or a modified retrospective approach to adoption, and early adoption is permitted as of the original effective date. The core principle of the model is that revenue is recognized upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration to be received for the goods or services. The guidance also changes the accounting for certain contract costs and revises the criteria for determining if an entity is acting as a principal or agent in certain arrangements. This update is effective for annual periods beginning after December 15, 2017 and interim periods within those fiscal years. The Company's implementation assessment includes the identification of revenue within the scope of the guidance, as well as the evaluation of revenue contracts, and it is also evaluating the presentation of certain revenue-related costs on a gross versus net basis and related disclosures of revenue. Although the Company is still evaluating the impact of ASU 2014-09, it has not identified material changes in the timing of revenue recognition.

In March 2016, the FASB issued ASU 2016-08, Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net), which amends the principal-versus-agent implementation guidance in ASU 2014-09, Revenue from Contracts with Customers, discussed above. The new guidance will impact whether an entity reports revenue on a gross or net basis. The Company is currently evaluating the potential impact of adopting this standard on its consolidated financial statements, which is effective for the Company in conjunction with the adoption of ASU 2014-09.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). The standard replaces current codification Topic 840 with updated guidance on accounting for leases and requires a lessee to recognize assets and liabilities arising from an operating lease on the balance sheet, whereas previous guidance did not require lease assets and liabilities to be recognized for most leases. Furthermore, this standard permits companies to make an accounting policy election to not recognize lease assets and liabilities for leases with a term of 12 months or less. For both finance leases and operating leases, the lease liability should be initially measured at the present value of the lease payments. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will not significantly change under this new guidance. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods therein. Early adoption is permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements but expects to record a right-of-use asset and a related lease obligation in the Company's consolidated balance sheet upon adoption.

Table of Contents

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), which requires all equity investments (other than those accounted for under the equity method) to be measured at fair value with changes in the fair value recognized through net income. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and interim periods therein. Early adoption is not permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements with respect to equity investments that currently report changes in fair value as a component of accumulated other comprehensive income in equity attributable to stockholders. Comprehensive income, net of tax, with respect to these equity investments was $0.2 million for the year ended December 31, 2016.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations: Clarifying the Definition of a Business ("ASU 2017-01"). The standard clarifies the definition of a business and adds guidance to assist entities when evaluating whether transactions should be accounted for as acquisitions or disposals of assets or as businesses. The standard provides a screen to determine whether a set of assets and activities qualifies as a business or as a set of assets. ASU 2017-01 is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The standard requires a prospective approach to adoption, and early adoption is only permitted for specific transactions. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 requires that an entity perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but the loss cannot exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for fiscal years and interim periods within those years beginning after December 15, 2019. The amendments require a prospective approach to adoption, and early adoption is permitted for interim or annual goodwill impairment tests. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
3. Business Combination

On June 1, 2017,2023, the Company completed the acquisition of RidgeWorth (the "Acquisition" or the "Acquired Business"AlphaSimplex Group, LLC ("AlphaSimplex"), a multi-boutique asset managerwhich was accounted for in accordance with approximately $40.1 billion in assets under management, including $35.7 billion in long term assets under management and $4.4 billion in liquidity strategies. The Acquisition significantly increased assets under management, and provided a wider range of strategies for institutional and individual investors, and broader distribution and client service resources.

Accounting Standards Codification ("ASC") 805, Business Combinations ("ASC 805"). The total purchase price paid of the Acquisition was $547.1$113.4 million comprising $485.2 million for the business and $61.9 million for certain balance sheet investments. At the closing, the Company paid $471.4 million in cash, issued 213,669 shares of the Company's common stock with a value of $21.7 million based on a stock price of $101.76, and recorded $51.7 million in contingent consideration and $2.3 million in deferred cash consideration. The conditions for the $51.7 million of contingent consideration were met as of September 30, 2017, and the Company expects to pay this amount during the fourth quarter of 2017.

The Company accounted for the acquisition in accordance with ASC 805, Business Combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the Acquisition.

Givenacquisition. Goodwill of $48.3 million and intangible assets of $55.4 million were recorded for the timing of this transaction and complexityacquisition. The Company expects $103.7 million of the purchase accounting, the Company's estimate of the fair value adjustment specificprice, related to the acquired intangible assetsgoodwill and finalintangibles, to be tax positions is preliminary.deductible over 15 years. The Company intends to finalize the accounting for these items as soon as reasonably possible. The Company may adjust the preliminary purchase price allocation as necessary, during the measurement period of upis based upon preliminary information and is subject to one year after the closing date as it obtains morechange if additional information as to facts and circumstances existing asbecomes available. The final fair value of the acquisition date. Duringnet assets acquired may result in adjustments to certain assets and liabilities, including goodwill. The revenues and operating income of AlphaSimplex were not material to the quarterCompany's results of operations for the three and nine months ended September 30, 2017, the Company recorded a measurement period adjustment of $1.0 million to increase deferred tax assets with a corresponding reduction to goodwill as a result of the finalization of certain tax analyses.2023.

The excess purchase price over the estimated fair values of assets acquired and liabilities and non-controlling interests assumed of $163.4 million was recorded as goodwill. It is anticipated that this full amount will be tax deductible when the additional $51.7 million of contingent consideration is settled. In addition, $6.4 million in acquisition costs will be included as goodwill for taxes and deducted over 15 years.

Table of Contents


The following table summarizes the initial estimate of amounts of identified acquired assets and liabilities assumed as of the AlphaSimplex acquisition date:

April 1, 2023
(in thousands)
Assets:
Cash and cash equivalents$4,395 
Investments8,567 
Accounts receivable5,422 
Furniture, equipment and leasehold improvements4,161 
Intangible assets55,400 
Goodwill48,262 
Other assets9,126 
Total Assets135,333 
Liabilities:
Accounts payable and accrued liabilities21,939 
Total Liabilities21,939 
Total Net Assets Acquired$113,394

 June 1, 2017
($ in thousands) 
Assets: 
Cash and cash equivalents$39,343
Investments5,516
Accounts receivable19,941
Assets of consolidated investment products ("CIP")

Cash and cash equivalents of CIP38,261
Investments of CIP902,493
Other assets of CIP21,158
Furniture, equipment and leasehold improvements5,505
Intangible assets275,700
Goodwill163,365
Deferred taxes, net6,590
Other assets3,003
Total Assets1,480,875
Liabilities

Accrued compensation and benefits18,263
Accounts payable and accrued liabilities11,938
Other liabilities2,601
Liabilities of consolidated investment products ("CIP") 
Notes payable of CIP770,160
Securities purchased payable and other liabilities of CIP115,100
Noncontrolling Interests of CIP15,731
Total Liabilities & Noncontrolling Interests933,793
Total Net Assets Acquired$547,082

Identifiable Intangible Assets Acquired

In connection with the allocation of the AlphaSimplex purchase price, wethe Company identified the following intangible assets:

April 1, 2023
Approximate Fair Value
(in thousands)
Weighted Average of Useful Life
(in years)
Definite-lived intangible assets:
Investment management agreements52,000 10.5
Trade names3,400 9.0
Total definite-lived intangible assets$55,400 
The fair value of investment management agreements was estimated using a discounted cash flow method and the fair value of the trade names was estimated using a royalty savings method, each of which was prepared with the assistance of an independent valuation firm.

Stone Harbor Investment Partners
On January 1, 2022, the Company acquired Stone Harbor Investment Partners, LLC ("Stone Harbor"), which was accounted for in accordance with ASC 805. The total purchase price of $30.1 million was allocated to the assets acquired and liabilities assumed, based upon their estimated fair values at the date of the acquisition, as well as goodwill of $10.3 million and definite-lived intangible assets of $10.8 million.


7
 June 1, 2017
 Approximate Fair Value Weighted Average of Useful Life
($ in thousands)  
Definite-lived intangible assets:  
Mutual fund investment contracts$189,200
 16.0 years
Institutional and retail separate account investment contracts77,000
 10.4 years
Trademarks/Trade names800
 10.0 years
Total finite-lived intangible assets267,000
  
Indefinite-lived intangible assets:   
Trade names8,700
 N/A
Total identifiable intangible assets$275,700
  
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5. Goodwill and Intangible Assets, Net
Acquired Business

For the three and nine months ended September 30, 2017, the Company incurred $4.9 million and $22.9 millionActivity in transaction and integration costs associated with the acquisition comprised of $1.5 million and $10.1 million in severance and restructuring charges, $1.2 million and $8.5 million of other operating expenses, and $2.2 million and $4.3 million in employment expenses, respectively.
Income of the Acquired Business subsequent to the effective closing date of the Acquisition of June 1, 2017, for the quarter and four months ended September 30, 2017,goodwill was as follows:

(in thousands)
Balance at December 31, 2022$348,836 
Acquisitions48,262 
Balance at September 30, 2023$397,098

 Three Months EndedFour Months Ended
 September 30, 2017September 30, 2017
($ in thousands)  
Total Revenues$32,478
$44,014
Restructuring and severance$1,453
$9,849
All other operating expenses$23,685
$32,249
Operating Income (Loss)$1,648
$(3,776)
Income (Loss) Before Income Taxes$5,446
$48
Below is a summary of intangible assets, net:
Definite-LivedIndefinite-LivedTotal
(in thousands)Gross Book ValueAccumulated AmortizationNet Book ValueNet Book ValueNet Book Value
Balances at December 31, 2022$756,028 $(355,807)$400,221 $42,298 $442,519 
Additions55,400 — 55,400 — 55,400 
Intangible amortization— (45,581)(45,581)— (45,581)
Balances at September 30, 2023$811,428 $(401,388)$410,040 $42,298 $452,338 
The following Unaudited Pro Forma Condensed Consolidated Results
Definite-lived intangible asset amortization for the remainder of Operations are provided for illustrative purposes onlyfiscal year 2023 and assume that the acquisition occurred on January 1, 2016. The unaudited pro forma information also reflects adjustment for transaction and integration expenses as if the transaction had been consummated on January 1, 2016. This unaudited information should not be relied upon as being indicative of historical results that would have been obtained if the acquisition had occurred on that date, nor of the results that may be obtained in the future.

 Three Months Ended September 30, Nine Months Ended September 30,
  2016 2017 2016
($ in thousands, except per share amounts)      
Total Revenues $118,010
 $361,070
 $349,091
Net Income Attributable to Common Stockholders $13,696
 $29,975
 $19,759
       
Basic EPS $1.74
 $3.42
 $2.39
Diluted EPS $1.70
 $3.31
 $2.34


4. Intangible Assets, Net

Intangible assets, net are summarizedsucceeding fiscal years is estimated as follows:
Fiscal Year
Amount
(in thousands)
Remainder of 2023$15,445 
202456,739 
202551,971 
202650,991 
202747,890 
2028 and thereafter187,004 
Total$410,040 


 September 30, 2017 December 31, 2016
($ in thousands)   
Definite-lived intangible assets:   
Investment contracts$425,747
 $158,747
Accumulated amortization(162,246) (155,136)
Definite-lived intangible assets, net263,501
 3,611
Indefinite-lived intangible assets43,516
 34,816
Total intangible assets, net$307,017
 $38,427

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Activity in intangible assets, net is as follows:
 Nine Months Ended September 30,
 2017 2016
($ in thousands)   
Intangible assets, net   
Balance, beginning of period$38,427
 $40,887
Additions (1)
275,700
 —
Amortization(7,110) (1,857)
Balance, end of period$307,017
 $39,030

(1) - See Note 3 for details on the acquired intangible assets related to the Acquisition.

5.6. Investments
At September 30, 2017 and December 31, 2016, the Company's investments were as follows:
 September 30, 2017 December 31, 2016
($ in thousands)   
Marketable securities$75,702
 $74,907
Equity method investments10,570
 7,731
Nonqualified retirement plan assets6,813
 5,808
Other investments3,667
 925
Total investments$96,752
 $89,371
Marketable Securities
Marketable securitiesInvestments consist primarily of investments in the Company's sponsored mutual funds,products. The Company's investments, excluding the investments inassets of consolidated investment products ("CIP") discussed in Note 15.16, at September 30, 2023 and December 31, 2022 were as follows:
(in thousands)September 30, 2023December 31, 2022
Investment securities - fair value$118,464 $76,999 
Equity method investments (1)22,557 11,448 
Nonqualified retirement plan assets11,328 10,154 
Other investments— 1,729 
Total investments$152,349 $100,330 
(1)     The Company’s marketableCompany's equity method investments are valued on a three-month lag based upon the availability of financial information. On January 1, 2023, the Company made an additional investment in an existing minority interest in an affiliated manager for $11.6 million including transaction costs.

Investment Securities - fair value
Investment securities - fair value consist of both tradinginvestments in the Company's sponsored funds and available-for-sale securities.separately managed accounts. The composition of the Company’s marketableinvestment securities is summarized- fair value was as follows:
September 30, 2017
8
 Cost 
Unrealized
Loss
 
Unrealized
Gain
 
Fair
Value
($ in thousands)       
Trading:       
Sponsored funds$56,511
 $(1,141) $1,204
 $56,574
Equity securities12,677
 —
 2,555
 15,232
Available-for-sale:       
Sponsored closed-end funds3,694
 (260) 462
 3,896
Total marketable securities$72,882
 $(1,401) $4,221
 $75,702
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December 31, 2016
9
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 Cost 
Unrealized
Loss
 
Unrealized
Gain
 
Fair
Value
($ in thousands)       
Trading:       
Sponsored funds$61,784
 $(1,942) $177
 $60,019
Equity securities10,578
 —
 895
 11,473
Available-for-sale:       
Sponsored closed-end funds3,500
 (265) 180
 3,415
Total marketable securities$75,862
 $(2,207) $1,252
 $74,907
September 30, 2023December 31, 2022
(in thousands)CostFair ValueCostFair Value
Investment Securities - fair value
Sponsored funds$82,156 $76,958 $67,472 $62,744 
Equity securities15,829 17,167 13,440 14,255 
Debt securities24,339 24,339 — — 
Total investment securities - fair value$122,324 $118,464 $80,912 $76,999 


For the three and nine months ended September 30, 2017,2023, the Company recognized a net realized gainlosses of $0.3$0.1 million and net realized loss of $1.6gains $2.1 million, respectively, on trading securities.related to its investment securities - fair value. For the three and nine months ended September 30, 2016,2022, the Company recognized a net realized gaingains of $0.1$0.4 million and a net realized loss of $0.3$0.4 million, respectively, on trading securities.related to its investment securities - fair value.




6.7. Fair Value Measurements
The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of consolidated investment products, which are separatelyCIP discussed in Note 15,16, as of September 30, 20172023 and December 31, 20162022 by fair value hierarchy level were as follows:
September 30, 20172023
(in thousands)Level 1Level 2Level 3Total
Assets
Cash equivalents$157,635 $— $— $157,635 
Investment securities - fair value
Sponsored funds76,958 — — 76,958 
Equity securities17,167 — — 17,167 
Debt securities— — 24,339 24,339 
Nonqualified retirement plan assets11,328 — — 11,328 
Total assets measured at fair value$263,088 $— $24,339 $287,427 
Liabilities
Contingent consideration$— $— $54,910 $54,910 
Total liabilities measured at fair value$— $— $54,910 $54,910 

December 31, 2022
(in thousands)Level 1Level 2Level 3Total
Assets
Cash equivalents$287,126 $— $— $287,126 
Investment securities - fair value
Sponsored funds62,744 — — 62,744 
Equity securities14,255 — — 14,255 
Nonqualified retirement plan assets10,154 — — 10,154 
Total assets measured at fair value$374,279 $— $— $374,279 
Liabilities
Contingent consideration$— $— $78,100 $78,100 
Total liabilities measured at fair value$— $— $78,100 $78,100 
10
 Level 1 Level 2 Level 3 Total
($ in thousands)       
Assets       
Cash equivalents$96,500
 $—
 $—
 $96,500
Marketable securities - trading:       
Sponsored funds56,574
 —
 —
 56,574
Equity securities15,232
 —
 —
 15,232
Marketable securities - available-for-sale:       
Sponsored closed-end funds3,896
 —
 —
 3,896
Other investments:       
Investment in collateralized loan obligation—
 —
 2,741
 2,741
Nonqualified retirement plan assets6,813
 —
 —
 6,813
Total assets measured at fair value$179,015
 $—
 $2,741
 $181,756

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December 31, 2016
 Level 1 Level 2 Level 3 Total
($ in thousands)       
Assets       
Cash equivalents$48,620
 $—
 $—
 $48,620
Marketable securities - trading:       
Sponsored funds60,019
 —
 —
 60,019
Equity securities11,473
 —
 —
 11,473
Marketable securities - available-for-sale:       
Sponsored closed-end funds3,415
 —
 —
 3,415
Other investments       
Nonqualified retirement plan assets5,808
 —
 —
 5,808
Total assets measured at fair value$129,335
 $—
 $—
 $129,335

The following is a discussion of the valuation methodologies used for the Company’s assets measured at fair value:
Cash equivalentsrepresent investments in money market funds. Cash investments in actively traded money market funds are valued using published net asset values and are classified as Level 1.

Sponsored fundsrepresent investments in open-end mutualfunds, closed-end funds and closed-end fundsETFs for which the Company acts as the investment manager. The fair value of open-end mutual funds is determined based on their published net asset values and are categorized as Level 1. The fair value of closed-end funds and ETFs is determined based on the official closing price on the exchange on which they are traded and are categorized as Level 1.

Equity securities include represent securities traded on active markets, and are valued at the official closing price (typically the last sale or bid) on the exchange on which theythe securities are primarily traded and are categorized as Level 1.
Investment in collateralized loan obligations is measured at fair value based on independent third party valuations and is categorized as Level 3.
Nonqualified retirement plan assetsrepresent open-end mutual funds within athe Company's nonqualified retirement plan whose fair value is determined based on their published net asset value and are categorized as Level 1.


Debt securities represent investments in senior secured bank loans and are based on evaluated quotations received from independent pricing services and are categorized as Level 2 or Level 3.

Contingent consideration represents liabilities associated with the Company's business combinations. The estimated fair values are measured with simulation models using unobservable market data inputs prepared with the assistance of an independent valuation firm. These liabilities are categorized as Level 3.

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

Transfers into and out of levels are reflected when: (1) significant inputs used for the fair value measurement, including market inputs or performance attributes, become observable or unobservable; (2) when the Company determines it has the ability, or no longer has the ability, to redeem, in the near term, certain investments that the Company values using a net asset value; or (3) if the book value no longer represents fair value. There were no transfers between levels during the three and nine months ended September 30, 2017 and 2016.


The following table istables present a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determinebeginning and ending balances of recurring fair value.
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 Three Months Ended September 30, Nine Months Ended September 30,
 ($ in thousands)
2017 2016 2017 2016
Level 3 Investments (a)       
Balance at beginning of period$2,909
 $—
 $—
 $—
Acquired in business combination
 —
 2,916
 —
Change in unrealized (loss), net(168) —
 (175) —
Balance at end of period$2,741
 $—
 $2,741
 $—
(a) The investments that are categorizedvalue measurements classified as Level 3 were valued utilizing third-party pricing information without adjustment.assets and liabilities:

Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Assets
Balance at beginning of period$— $— $— $— 
Purchases (sales), net24,339 — 24,339 — 
Balance at end of period$24,339 $— $24,339 $— 
Liabilities
Balance at beginning of period$54,910 $72,980 $78,100 $88,400 
Additions for acquisition— — — 1,200 
Reduction for payments made— — (16,390)(19,520)
Increase (reduction) of liability related to re-measurement of fair value— — (6,800)2,900 
Balance at end of period$54,910 $72,980 $54,910 $72,980 

7.
8. Equity Transactions

During the nine months ended September 30, 2017, the Company issued 1,150,000 shares of 7.25% mandatory convertible preferred stock ("MCPS") in a public offering, which included the exercise of the underwriters' over-allotment option, for net proceeds of $111.0 million, after underwriting discounts, commissions and other offering expenses. During the same period, the Company also issued 1,260,169 shares of common stock consisting of: 1) 1,046,500 shares of common stock in a public offering, which included the exercise of the underwriters' over-allotment option, for net proceeds of $109.5 million, after underwriting discounts, commissions and other offering expenses; and 2) 213,669 shares of the Company's common stock as part of the consideration for the acquisition of RidgeWorth. See Note 3 for further discussion of the Acquisition.
The MCPS has a liquidation preference of $100.00 per share. Unless converted earlier, each share of MCPS will convert automatically on February 1, 2020 (the "mandatory conversion date") into between 0.7576 and 0.9091 shares of common stock, subject to customary anti-dilution adjustments. The number of shares of common stock issuable upon conversion will be determined based on the average volume-weighted price per share of the Company's common stock over the 20 consecutive trading day period beginning on, and including, the 22nd scheduled trading day immediately preceding the mandatory conversion date. Each share of MCPS can be converted prior to the mandatory conversion date, at the option of the holder, at the minimum conversion rate of 0.7576 or at a specified rate, in the event of a fundamental change as defined in the certificate of designations of the MCPS.
Dividends on the MCPS will be payable on a cumulative basis when, as and if declared by the Company's Board of Directors, at an annual rate of 7.25% on the liquidation preference of $100.00 per share. If declared, these dividends will be paid in cash, or, subject to certain limitations, in shares of common stock (or a combination thereof) on February 1, May 1, August 1, and November 1 of each year, continuing to, and including, February 1, 2020.
Declared
On August 16, 2017,2023, the Company declared a quarterly cash dividend of $0.45$1.90 per common share to be paid on November 15, 20172023 to shareholdersstockholders of record at the close of business on October 31, 2017. The Company also declared a quarterly cash dividend of $1.8125 per share on the Company's 7.25% MCPS to be paid on November 1, 2017 to shareholders of record at the close of business on October 15, 2017.2023.


Common Stock Repurchases
During the three and nine months ended September 30, 2017,2023, the Company repurchased 66,24474,015 and 125,855 common shares, respectively, at a weighted average price of $113.21$202.63 and $198.61 per share, respectively, for a total cost, including fees and expenses, of approximately $7.5 million.$15.0 million and $25.0 million, respectively, under its share repurchase program. As of September 30, 2017, there were 133,7562023, 702,497 shares remained available to be repurchased of a total of 3,430,045 shares of Company common stock that had been approved by the Company's Board of Directors.for repurchase. Under the terms of the program, the Company may repurchase shares of its
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common stock from time to time at its discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price and prevailing market and business conditions. The program, which has no specified term, may be suspended or terminated at any time.



8.
9. Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) by componentwere as follows:
Nine Months Ended
September 30,
(in thousands)20232022
Balance at beginning of period$(358)$20 
Net current-period other comprehensive income (loss) (1)(15)(791)
Balance at end of period$(373)$(771)
(1)     Consists of foreign currency translation adjustments, net of tax of $5 and $280 for the nine months ended September 30, 20172023 and 2016 were as follows:2022, respectively.

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Unrealized 
Net Gains
and (Losses)
on Securities
Available-for-
Sale
 Foreign 
Currency
Translation
Adjustments
($ in thousands)   
Balance December 31, 2016$(224) $—
Unrealized net gain (loss) on securities available-for-sale, net of tax of $(115)172
 —
Foreign currency translation adjustments—
 12
Amounts reclassified from accumulated other comprehensive income (loss)—
 —
Net current-period other comprehensive income (loss)172
 12
Balance September 30, 2017$(52) $12
    
 
Unrealized
Net Gains
and (Losses)
on Securities
Available-for-
Sale
 
Foreign 
Currency
Translation
Adjustments
($ in thousands)   
Balance December 31, 2015$(465) $(569)
Unrealized net gain (loss) on securities available-for-sale, net of tax of $(140)230
 —
Foreign currency translation adjustments, net of tax of $(348)—
 569
Amounts reclassified from accumulated other comprehensive income (loss)—
 —
Net current-period other comprehensive income (loss)230
 569
Balance September 30, 2016$(235) $—


9.10. Stock-Based Compensation

The Company's Amended and Restated Omnibus Incentive and Equity Plan (the “Plan”) provides for the grant of equity-basedEquity-based awards, including restricted stock units (“RSUs”("RSUs"), performance stock units ("PSUs"), stock options and unrestricted shares of common stock. Asstock, may be granted to officers, employees and directors of the Company pursuant to the Company's Omnibus Incentive and Equity Plan (the "Omnibus Plan"). At September 30, 2017, a maximum of 2,400,0002023, 478,711 shares of common stock wereremained available for issuance of the 3,370,000 shares that are authorized for issuance under the Plan, and 496,870 shares remained available for issuance. Shares that are issued upon exercise of stock options and vesting of RSUs are newly issued shares from the Plan and are not issued from treasury stock.Omnibus Plan.

Stock-based compensation expense is summarized as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2023202220232022
Stock-based compensation expense$7,668 $5,148 $20,072 $19,267 

Restricted Stock Units

Each RSU entitles the holder to one share of common stock when the restriction expires. RSUs generally have a term of one to three years and may be time-vested or performance-contingent. The fair valueperformance-contingent (PSUs) that convert into RSUs after the performance measurement is complete and generally vest in one to three years. Shares that are issued upon vesting are newly issued shares from the Omnibus Plan and are not issued from treasury stock.
RSU activity, inclusive of each RSU is estimated using the intrinsic value method, which is based on the fair market value price on the date of grant unless it contains a performance metric that is considered a market condition. RSUs that contain a market condition are valued using a simulation valuation model. RSU activityPSUs, for the nine months ended September 30, 20172023 is summarized as follows:
Number
of Shares		Weighted Average
Grant Date
Fair Value
Outstanding at December 31, 2022377,087 $178.21 
Granted207,206 $160.10 
Forfeited(35,341)$146.07 
Settled(199,880)$119.68 
Outstanding at September 30, 2023349,072 $204.23 
 
Number
of Shares
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2016302,824
 $111.56
Granted274,392
 $108.25
Forfeited(29,134) $121.06
Settled(78,423) $140.86
Outstanding at September 30, 2017469,659
 $104.14
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For the nine months ended September 30, 20172023 and 2016,2022, a total of 32,18677,583 and 19,45777,508 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations. The Company paid $3.4$13.4 million and $1.5$16.5 million for the nine months ended September 30, 20172023 and 2016,2022, respectively, in minimum employee tax withholding obligations related to RSUs withheld.withheld for the net share settlements. These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been otherwise issued as a result of the vesting.

During the nine months ended September 30, 2017,2023, the Company granted 87,458 RSUs which44,583 PSUs that contain performance-based metrics in addition to a service condition (Performance Share Units or "PSUs").condition. Compensation expense for these PSUs is generally recognized over a three-year service period based upon the value determined using a combination of (i) the intrinsic value method for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718, Stock Compensation ("ASC 718")
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and (ii) the Monte Carlo simulation valuation model for awards under the performance metric that representscontain a "market condition" performance metric under ASC 718. Compensation expense for thePSU awards that contain a market condition is fixed at the date of grant and will not be adjusted in future periods based upon the achievement of the market condition. Compensation expense for thePSU awards with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the final outcome. Forend of the nine months ended September 30, 2017, total stock-based compensation expense was $4.1 million for these PSUs.performance period.
On June 1, 2017, the Company also granted 35,148 PSUs and 65,561 RSUs to certain RidgeWorth employees in connection with the Acquisition in order to replace incentives that were in place prior to the Acquisition. The PSUs will vest if certain performance measures are met over a five-year period, with the ability for accelerated vesting if those same conditions are met by year four. The RSUs contain only a service condition and will vest over four years beginning with year two. For the nine months ended September 30, 2017, total stock-based compensation expense was $0.8 million for these PSUs and RSUs.
The Company recognized total stock compensation expense of $15.0 million and $9.1 million, for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017,2023, unamortized stock-based compensation expense for unvested RSUs and PSUs was $32.4$36.0 million with a weighted-average remaining amortization period of two years.

Stock Options

Stock options generally cliff vest after three years and have a contractual life of 101.3 years. Stock options are granted with an exercise price equal to the fair market value of the shares at the date of grant.


Stock option activity for the nine months ended September 30, 2017 is summarized as follows:
 
Number
of Shares
 
Weighted
Average
Exercise Price
Outstanding at December 31, 2016137,157
 $17.77
Granted—
 $—
Exercised(26,749) $23.43
Forfeited—
 $—
Outstanding at September 30, 2017110,408
 $16.40

10. Restructuring and Severance

During the three months ended September 30, 2017, the Company incurred $0.5 million in severance costs related to staff reductions in connection with the Acquisition and the Company's outsourcing activities and $1.0 million in restructuring costs related to future lease obligations and leasehold improvement write-offs for vacated office space. During the nine months ended September 30, 2017, the Company incurred $9.4 million in severance costs related to staff reductions in connection with the Acquisition and the Company's outsourcing activities and $1.0 million in restructuring costs related to future lease obligations and leasehold improvement write-offs for vacated office space. Total unpaid severance and related charges as of September 30, 2017 was $6.8 million, which the Company expects to pay over the next three years. The Company expects to incur additional severance costs in connection with the Acquisition of approximately $0.3 million related to one-time termination benefits that are being earned over a transition period.


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11. Earnings per(Loss) Per Share
Basic earningsEarnings (loss) per share (“EPS”("EPS") is calculated in accordance with ASC 260, Earnings per Share. Basic EPS is computed by dividing net income available(loss) attributable to common stockholdersVirtus Investment Partners, Inc. by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances.Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, including: (1)including shares issuable upon the vesting of RSUs and common stock option exercises using the treasury stock method; and (2) shares issuable upon the conversion of the Company's MCPS,method, as determined under the if-converted method. For purposes of calculating diluted EPS, preferred stock dividends have been subtracted from net income (loss) in periods in which utilizing the if-converted method would be anti-dilutive.

The computation of basic and diluted EPS is as follows:
 Three Months Ended September 30,Nine Months Ended
September 30,
(in thousands, except per share amounts)2023202220232022
Net Income (Loss)$38,154 $27,415 $102,977 $80,793 
Noncontrolling interests(7,248)4,265 (3,190)1,348 
Net Income (Loss) Attributable to Virtus Investment Partners, Inc.$30,906 $31,680 $99,787 $82,141 
Shares:
Basic: Weighted-average number of shares outstanding7,258 7,308 7,272 7,434 
Plus: Incremental shares from assumed conversion of dilutive instruments121 155 121 202 
Diluted: Weighted-average number of shares outstanding7,379 7,463 7,393 7,636 
Earnings (Loss) per Share—Basic$4.26 $4.33 $13.72 $11.05 
Earnings (Loss) per Share—Diluted$4.19 $4.25 $13.50 $10.76 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
($ in thousands, except per share amounts)       
Net Income (Loss)$20,523
 $16,276
 $34,296
 $36,846
Noncontrolling interests(1,731) (651) (2,782) (770)
Net Income (Loss) Attributable to Stockholders18,792
 15,625
 31,514
 36,076
Preferred stock dividends(2,084) —
 (6,252) —
Net Income (Loss) Attributable to Common Stockholders$16,708
 $15,625
 $25,262
 $36,076
Shares (in thousands):

 
    
Basic: Weighted-average number of shares outstanding7,212
 7,676
 6,942
 8,062
Plus: Incremental shares from assumed conversion of dilutive instruments1,280
 178
 226
 161
Diluted: Weighted-average number of shares outstanding8,492
 7,854
 7,168
 8,223
Earnings (Loss) per Share—Basic$2.32
 $2.04
 $3.64
 $4.47
Earnings (Loss) per Share—Diluted$2.21
 $1.99
 $3.52
 $4.39


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

 Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2023202220232022
Restricted stock units2 31 332 
Total anti-dilutive securities2 31 332 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
(in thousands)       
Restricted stock units and stock options4
 12
 4
 11
Preferred stock—
 —
 878
 —
Total anti-dilutive securities4
 12
 882
 11



12. Income Taxes

In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances at each interim period. On a quarterly basis, the estimated annual effective tax rate is adjusted, as appropriate, based upon changes in facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and at each interim period thereafter.


The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of 31.7%23.6% and 35.8%35.2% for the nine months ended September 30, 20172023 and 2016,2022, respectively. The decrease in thelower estimated effective tax rate for the nine months ended September 30, 2023 was primarily due to changesexcess tax benefits associated with stock-based compensation and the change in valuation allowances in the current year related to the tax effects of unrealized gains on certain Company investments. The higher effective tax rate in the prior year period was due to valuation allowances related to market adjustmentsrecorded for the tax effects of unrealized losses on the Company’s marketable securities, as well as an increase in the valuation allowance associated with net operating losses that could expire before being utilized.certain Company investments.


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13. Debt

Credit Agreement
Credit Agreement

On June 1, 2017, in connection with the Acquisition, the Company entered into a newThe Company's credit agreement ("Credit(the "Credit Agreement") comprised of (1) $260.0, most recently amended on June 20, 2023, changing the base interest rate from LIBOR to SOFR, comprises (i) a $275.0 million ofterm loan with a seven-year term debt ("Term(the "Term Loan") expiring in September 2028, and (2)(ii) a $100.0$175.0 million five-year revolving credit facility ("Credit Facility"). Additionally, aswith a result offive-year term expiring in September 2026. On April 3, 2023, the Credit Agreement,Company borrowed $50.0 million under the Company's previous revolving credit facility and December 16, 2016 debt financing commitment were terminated.to partially finance its acquisition of AlphaSimplex (see Note 4 for further information). During the nine months ended September 30, 2017,2023, the Company expensed approximately $1.1repaid $30.0 million of unamortized deferred financing costs related toand $2.1 million outstanding under the previous senior unsecured revolving credit facility.facility and Term Loan, respectively. At September 30, 2017, $260.02023, $20.0 million and $259.5 million was outstanding.

Amounts outstanding under the Credit Agreement for therevolving credit facility and Term Loan, andrespectively. In accordance with ASC 835, Interest, the Credit Facility bear interest at an annual rate equal to, at the option of the Company, either (i) LIBOR (adjusted for reserves) for interest periods of one, two, three or six months (or, solely in the case of the Credit Facility, if agreed to by each relevant Lender, twelve months or periods less than one month), subject to a “floor” of 0% for the Credit Facility and 0.75% for the Term Loan, or (ii) an alternate base rate, in either case plus an applicable margin. The applicable margins are set initially at 3.75%, in the case of LIBOR-based loans, and 2.75%, in the case of alternate base rate loans, and will range from 3.50% to 3.75%, in the case of LIBOR-based loans, and 2.50% to 2.75%, in the case of alternate base rate loans, based on the secured net leverage ratio of the Company as of the last day of the preceding fiscal quarter. Interest is payable on the last day of each interest period with respect to LIBOR-based loans, but at least at three-month intervals, and quarterly in arrears with respect to alternate base rate loans (but, in the case of LIBOR-based loans with an interest period of more than three months).

The obligations of the Company under the Credit Agreement are guaranteed by certain of its subsidiaries (the “Guarantors”) and secured by substantially all of the assets of the Company and the Guarantors, subject to customary exceptions. The Credit Agreement contains customary affirmative and negative covenants, including covenants that affect, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, create liens, merge or dissolve, make investments, dispose of assets, engage in sale and leaseback transactions, purchase shares of our common stock, make distributions and dividends and pre-payments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year, or modify its organizational documents, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains a financial maintenance covenant, requiring a maximum leverage ratio, as of the last day of each of the trailing four fiscal quarter periods, of no greater than the levels set forth in the Credit Agreement.

At any time, upon timely notice, the Company may terminate the Credit Agreement in full, reduce the commitment under the Credit Facility in minimum specified increments, or prepay the Term Loan in whole or in part, subject to the payment of breakage fees with respect to LIBOR-based loans and, in the case of any Term Loans that are prepaid in connection with a “repricing transaction” occurring within the six-month period following the closing date, a 1.00% premium.

Term Loan

The Term Loan, which was priced on March 2, 2017, had a delayed draw fee of $1.2 million between March 2, 2017 and the closing date of June 1, 2017. The Term Loan amortizes at the rate of 1.00% per annum payable in equal quarterly installments and will be mandatorily repaid with: (a) 50% of the Company’s excess cash flow, as defined in the Credit Agreement, on an annual basis, beginning with the fiscal year ended December 31, 2018, stepping down to 25% if the Company’s secured net leverage ratio declines below 1.0, and further stepping down to 0% if the Company’s secured net leverage ratio declines below 0.5; (b) the net proceeds of certain asset sales, casualty or condemnation events, subject to customary reinvestment rights; and (c) the proceeds of any indebtedness incurred other than indebtedness permitted to be incurred by the Credit Agreement.
Credit Facility

At September 30, 2017, no amounts were outstanding under the Credit Facility. The Company has the right, subject to customary conditions specified in the Credit Agreement, to request additional revolving credit facility commitments and additional term loans to be made under the Credit Agreement up to an aggregate amount equal to the sum of (x) $75.0 million and (y) an amount subject to a pro forma secured net leverage ratio of the Company of no greater than 1.75 to 1.00.

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Under the terms of the Credit Agreement, the Company is required to pay a quarterly commitment feeCompany's Term Loan are presented on the average unused amountCondensed Consolidated Balance Sheet net of the Credit Facility,related debt issuance costs, which fee is initially set at 0.50% and will, following the first delivery of certain financial reports required under the Credit Agreement, range from 0.375% to 0.50%, based on the secured net leverage ratio of the Companywere $5.7 million as of the last day of the preceding fiscal quarter, as reflected in such financial reports.September 30, 2023.



14. Commitments and Contingencies
Legal Matters

The Company is regularly involved from time to time in litigation and arbitration, as well as examinations, inquiries and investigations by various regulatory bodies, including the Securities and Exchange Commission ("SEC"), involving its compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting its products and other activities. Legal and regulatory matters of this nature involve or may involve but are not limited to the Company’s activities as an employer, issuer of securities, investor, investment adviser, broker-dealer or taxpayer. In addition, in the normal course of business, the Company discusses matters with its regulators raised during regulatory examinations or is otherwise subject to their inquiry. These matters could result in censures, fines, penalties or other sanctions.


The Company accrues forrecords a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. In addition, in the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosures related to such matter as appropriate and in compliance with ASC 450, Loss Contingencies. The disclosures, accruals or estimates, if any, resulting from the foregoing analysis are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. Based on information currently available, available insurance coverage, indemnities and established reserves, the Company believes that the outcomes of its legal and regulatory proceedings are not likely, either individually or in the aggregate, to have a material adverse effect on the Company’sCompany's results of operations, cash flows or its consolidated financial condition. However, in the event of unexpected subsequent developments, and given the inherent unpredictability of these legal and regulatory matters, the Company can provide no assurance that its assessment of any claim, dispute, regulatory examination or investigation or other legal matter will reflect the ultimate outcome, and an adverse outcome in certain matters could from time to time, have a material adverse effect on the Company’sCompany's results of operations or cash flows in particular quarterly or annual periods.


In re Virtus Investment Partners, Inc. Securities Litigation; formerly Tom Cummins v. Virtus Investment Partners Inc.
et al

15. Redeemable Noncontrolling Interests
On February 20, 2015,Redeemable noncontrolling interests represent third-party investments in the Company's CIP and minority interests held in a putative class action complaint alleging violationsconsolidated affiliate. Minority interests held in the affiliate are subject to holder put rights and Company call rights at established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value. The rights are exercisable at pre-established intervals (between four and seven years from their issuance) or upon certain provisionsconditions, such as retirement. The put and call rights are not legally detachable or separately exercisable and are deemed to be embedded in the related noncontrolling interests. The Company, in purchasing affiliate equity, has the option to settle in cash or shares of the federal securities laws was filed by an individual shareholder againstCompany's common stock and is entitled to the Company and certain of the Company’s current officers (the “defendants”)cash flow associated with any purchased equity. These minority interests in the United States District Court foraffiliate are recorded at estimated redemption value within redeemable noncontrolling interests on the Southern DistrictCompany's Condensed Consolidated Balance Sheets, and any changes in the estimated redemption value are recorded on the Condensed Consolidated Statements of New York (the "Court"). On April 21, 2015, three plaintiffs, including the original plaintiff, filed motions to be appointed lead plaintiffs and, on June 9, 2015, the Court appointed Arkansas Teachers Retirement System lead plaintiff. On August 21, 2015, the plaintiff filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint, which was purportedly filed on behalf of all purchasers of the Company’s common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint alleges that, during the Class Period, the defendants disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds formerly subadvised by F-Squared Investments Inc. ("F-Squared"). The Consolidated Complaint alleges claims under Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5. The plaintiff seeks to recover unspecified damages. A motion to dismiss the Consolidated Complaint was filed on behalf of the Company and the other defendants on October 21, 2015. On July 1, 2016, the Court entered an opinion and order granting in part, and denying in part, the motion to dismiss, narrowing Plaintiff's claims under Sections 10(b) and 20(a) of the Exchange Act and dismissing one of the defendants from the suit. The remaining defendants' Answer to the Consolidated Complaint was filed on August 5, 2016. Plaintiff's motion for class certification was granted on May 15, 2017. Discovery has since been completed. On October 6, 2017, defendants moved for summary judgment, and briefing on that motion is expected to be completed on December 21, 2017. The Company believes that the suit is without merit and intends to defend it vigorously. The Company believes that there is not a material loss that is probable and reasonably estimable related to this claim.Operations within noncontrolling interests.


Mark Youngers v. Virtus Investment Partners, Inc. et al


14
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On May 8, 2015, a putative class action complaint alleging violations of certain provisions of the federal securities laws was filed in the United States District CourtRedeemable noncontrolling interests for the Central District of California (the "District Court") by an individual who alleges he is a former shareholder of one ofnine months ended September 30, 2023 included the Virtus mutual funds formerly subadvised by F-Squared and formerly known as the AlphaSector Funds. The complaint alleges claims against the Company, certain of the Company’s officers and affiliates, and certainfollowing amounts:
(in thousands)CIPAffiliate Noncontrolling InterestsTotal
Balances at December 31, 2022$18,268 $95,450 $113,718 
Net income (loss) attributable to noncontrolling interests772 5,245 6,017 
Changes in redemption value (1)— (3,613)(3,613)
Total net income (loss) attributable to noncontrolling interests772 1,632 2,404 
Affiliate equity sales (purchases)— (20,784)(20,784)
Net subscriptions (redemptions) and other6,676 (5,748)928 
Balances at September 30, 2023$25,716 $70,550 $96,266 
(1)     Relates to noncontrolling interests redeemable at other parties (the “defendants”). The complaint was purportedly filed on behalf of purchasers of the AlphaSector Funds between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”). The complaint alleges that, during the Class Period, the defendants disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On June 7, 2015, a group of three individuals, including the original plaintiff, filed a motion to be appointed lead plaintiff, and on July 27, 2015, the District Court appointed movants as lead plaintiff. On October 1, 2015, the plaintiffs filed a First Amended Class Action Complaint which, among other things, added a derivative claim for breach of fiduciary duty on behalf of Virtus Opportunities Trust. On October 19, 2015, the District Court entered an order transferring the action to the Southern District of New York (the "Court"). On January 4, 2016, the Plaintiffs filed a Second Amended Complaint. A motion to dismiss was filed on behalf of the Company and affiliated defendants on February 1, 2016. On July 1, 2016, the Court entered an opinion and order granting in part, and denying in part, the motion to dismiss. The Court dismissed four causes of action entirely and a fifth cause of action with respect to a portion of the Class Period. The Court also dismissed all claims against ten defendants named in the Complaint. The Court held that the Plaintiffs may pursue certain securities claims under Sections 10(b) and 20(a) of the Exchange Act and Section 12 of the Securities Act of 1933. The remaining defendants filed an Answer to the Second Amended Complaint on August 5, 2016. A Stipulation of Voluntary Dismissal of the claim under Section 12 of the Securities Act was filed on September 15, 2016. The defendants filed a motion to certify an interlocutory appeal of the July 1, 2016 order to the Court of Appeals for the Second Circuit on August 26, 2016. The motion was denied on January 6, 2017. Plaintiff's motion for class certification was denied on May 15, 2017. On July 28, 2017 Plaintiffs filed a motion seeking leave to amend their complaint to address deficiencies identified by the Court in its orders dismissing, in part, plaintiffs' Second Amended Complaint and denying class certification. Briefing on that motion was completed, and a hearing was held on September 7, 2017, where the court reserved decision. The Company believes that the suit has no basis in law or fact and intends to defend it vigorously. The Company believes that there is not a material loss that is probable and reasonably estimable related to this claim.than fair value.



15.
16. Consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries and investment products that are consolidated. VotingA voting interest entitiesentity ("VOEs"VOE") areis consolidated when the Company is considered to have a controlling financial interest, which is typically present when the Company owns a majority of the voting interest in an entity or otherwise has the power to govern the financial and operating policies of the entity.


The Company evaluates any variable interest entitiesentity ("VIEs"VIE") in which the Company has a variable interest for consolidation. A VIE is an entity in which either: (a)either (i) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support;support, or (b)(ii) where as a group, the holders of the equity investment at risk do not possess: (i)possess any one of the following: (a) the power through voting or similar rights to direct the activities that most significantly impact the entity’sentity's economic performance, (ii)(b) the obligation to absorb expected losses or the right to receive expected residual returns of the entity, or (iii)(c) proportionate voting and economic interests and where substantially all of the entity’sentity's activities either involve or are conducted on behalf of an investor with disproportionately fewer voting rights. If an entity has any of these characteristics, it is considered a VIE and is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that has both the power to direct the activities that most significantly impact the VIE’sVIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.


In the normal course of its business, the Company sponsors various investment products, some of which are consolidated by the Company. Consolidated investment products includeCIP includes both VOEs, made up primarily of open-end funds in which the Company holds a controlling financial interest, and VIEs, which primarily consist of collateralized loan obligations ("CLOs"CLO") and certain global and private funds ("GF") of which the Company is considered the primary beneficiary. The consolidation and deconsolidation of these investment products have no impact on net income (loss) attributable to stockholders.Virtus Investment Partners, Inc. The Company’sCompany's risk with respect to these investment products is limited to its beneficial interests in these products. The Company has no right to the benefits from, and does not bear the risks associated with, these investment products beyond the Company’sCompany's investments in, and fees generated from, these products.


15
Table of Contents

The following table presents the balances of the consolidated investment productsCIP that, after intercompany eliminations, arewere reflected inon the Condensed Consolidated Balance Sheets as of September 30, 20172023 and December 31, 2016:
2022:
As of
 September 30, 2023December 31, 2022
VOEsVIEsVOEsVIEs
(in thousands)CLOsGFsCLOsGFs
Cash and cash equivalents$865 $208,056 $1,509 $1,153 $249,003 $789 
Investments19,147 1,978,308 71,760 24,669 2,106,764 58,680 
Other assets110 33,143 1,228 295 43,993 1,157 
Notes payable— (1,943,949)— — (2,083,314)— 
Securities purchased payable and other liabilities(547)(183,520)(750)(573)(230,141)(183)
Noncontrolling interests(6,451)(5,448)(19,265)(7,879)(5,917)(10,389)
Net interests in CIP$13,124 $86,590 $54,482 $17,665 $80,388 $50,054 
 As of
 September 30, 2017 December 31, 2016
   VIEs   VIEs
 VOEs CLOs Other VOEs CLOs Other
            
($ in thousands)           
Cash and cash equivalents$756
 $217,747
 $3,415
 $1,859
 $14,449
 $2,775
Investments33,053
 1,494,992
 67,682
 99,247
 346,967
 42,828
Other assets790
 34,847
 1,303
 2,211
 5,888
 1,059
Notes payable—
 (1,455,932) —
 —
 (328,761) —
Securities purchased payable and other liabilities(1,422) (188,270) (1,620) (2,310) (12,534) (1,799)
Noncontrolling interests(3,821) (16,487) (63,406) (12,505) —
 (24,761)
The Company’s net interests in consolidated investment vehicles$29,356
 $86,897
 $7,374
 $88,502
 $26,009
 $20,102


Consolidated CLOs

The majority of the Company's consolidated investment productsCIP that are VIEs are CLOs. At September 30, 2017, the Company consolidated four CLOs. The financial information of certain CLOs is included inon the Company's condensed consolidated financial statements on a one-month lag based upon the availability of their financial information. Majority-ownedA majority-owned consolidated private funds,fund, whose primary purpose is to invest in CLOs for which the Company serves as the collateral manager, areis also included. At September 30, 2023, the Company consolidated eight CLOs. During the month of September 2023, one of the CLOs was issued and the Company made a $26.4 million investment in the subordinated notes.


Investments of CLOs

The CLOs held investments of $1.5$2.0 billion at September 30, 2017 represent2023 consisting of bank loan investments whichthat comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across a variety of industries. These bank loan investments mature at various dates between 20182023 and 20302032 and pay interest at LIBOR or SOFR plus a spread of upspread. The CLOs have a reinvestment period where any prepayments received on bank loan investments may be reinvested. Generally, subsequent prepayments received after the reinvestment period must be used to 9.5%.pay down the note payable obligations. The reinvestment periods end between October 2019 and October 2026, depending on the CLO. At September 30, 2017,2023, the fair value of the senior bank loans exceededloan investments was less than the unpaid principal (par) balance by approximately $6.2$107.0 million. At September 30, 2017,2023, there were no material collateral assets in default.


Notes Payable of CLOs

The CLOs holdheld notes payable with a total value, at par, of $1.7$2.2 billion at September 30, 2023, consisting of senior secured floating rate notes payable with a par value of $1.5$1.9 billion and subordinated notes with a par value of $139.8$237.4 million. These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 1.0%0.8% to 8.75%9.1%. The principal amounts outstanding of thethese note obligations issued by the CLOs mature on dates ranging from April 2018October 2027 to October 2029. 2034.

The CLOs may elect to reinvest any prepayments received on bank loan investments between October 2019 and October 2021, depending on the CLO. Generally, subsequent prepayments received after the reinvestment period must be used to pay down the note obligations.

The Company’sCompany's beneficial interests and maximum exposure to loss related to these consolidated CLOs is limited to:to (i) ownership in the subordinated notes and (ii) accrued management fees. The secured notes of the consolidated CLOs have contractual recourse only to the related assets of the CLO and are classified as financial liabilities. Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative as adopted on January 1, 2016, prescribed by ASU 2014-13,Consolidation (Topic 810) ("ASU 2014-13"), results in the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by the Company at September 30, 2017,2023, as shown in the table below:

(in thousands)
Subordinated notes$85,556 
Accrued investment management fees1,034 
Total Beneficial Interests$86,590

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 As of

September 30, 2017
($ in thousands) 
Subordinated notes$85,963
Accrued investment management fees934
  Total Beneficial Interests$86,897

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

Nine Months Ended September 30, 2023
(in thousands)
Income:
Realized and unrealized gain (loss), net$(3,317)
Interest income140,078 
Total Income136,761 
Expenses:
Other operating expenses1,236 
Interest expense112,153 
Total Expense113,389 
Noncontrolling interests(786)
Net Income (Loss) Attributable to CLOs$22,586

 Nine Months Ended September 30,
($ in thousands)2017
Income: 
Realized and unrealized gain (loss), net$11,063
Interest income25,458
Other income542
  Total Income37,063
  
Expenses: 
Other operating expenses6,404
Interest expense22,101
  Total Expense28,505
Noncontrolling interest(1,073)
Net Income (loss) attributable to CIPs$7,485

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

Nine Months Ended September 30, 2023
(in thousands)
Distributions received and unrealized gains (losses) on the subordinated notes held by the Company$15,907 
Investment management fees6,679 
Total Economic Interests$22,586

Nine Months Ended September 30,
($ in thousands)2017
Distributions received and unrealized gains on the subordinated notes held by the Company$4,783
Investment management fees2,702
  Total Economic Interests$7,485

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Fair Value Measurements of Consolidated Investment Products

CIP
The assets and liabilities of the consolidated investment productsCIP measured at fair value on a recurring basis as of September 30, 20172023 and December 31, 20162022 by fair value hierarchy level were as follows:

As of September 30, 20172023
(in thousands)Level 1Level 2Level 3Total
Assets
Cash equivalents$208,056 $— $— $208,056 
Debt investments167 1,976,568 61,939 2,038,674 
Equity investments28,761 437 1,343 30,541 
Total assets measured at fair value$236,984 $1,977,005 $63,282 $2,277,271 
Liabilities
Notes payable$— $1,943,949 $— $1,943,949 
Short sales489 — — 489 
Total liabilities measured at fair value$489 $1,943,949 $— $1,944,438 

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 Level 1 Level 2 Level 3 Total
($ in thousands)       
Assets       
Cash equivalents$217,708
 $—
 $—
 $217,708
Debt investments—
 1,511,791
 48,760
 1,560,551
Equity investments34,614
 —
 562
 35,176
Total Assets Measured at Fair Value$252,322
 $1,511,791
 $49,322
 $1,813,435
Liabilities       
Notes payable$—
 $1,455,932
 $—
 $1,455,932
Derivatives2
 —
 —
 2
Short sales751
 —
 —
 751
Total Liabilities Measured at Fair Value$753
 $1,455,932
 $—
 $1,456,685
As of December 31, 20162022
(in thousands)Level 1Level 2Level 3Total
Assets
Cash equivalents$249,003 $— $— $249,003 
Debt investments243 2,119,082 42,246 2,161,571 
Equity investments25,003 2,204 1,335 28,542 
Total assets measured at fair value$274,249 $2,121,286 $43,581 $2,439,116 
Liabilities
Notes payable$— $2,083,314 $— $2,083,314 
Short sales414 — — 414 
Total liabilities measured at fair value$414 $2,083,314 $— $2,083,728 
 Level 1 Level 2 Level 3 Total
($ in thousands)       
Assets       
Cash equivalents$14,449
 $—
 $—
 $14,449
Debt investments—
 448,477
 87
 448,564
Equity investments40,270
 208
 —
 40,478
Derivatives4
 —
 —
 4
Total Assets Measured at Fair Value$54,723
 $448,685
 $87
 $503,495
Liabilities       
Notes payable$—
 $328,761
 $—
 $328,761
Derivatives3
 235
 62
 300
Short sales649
 —
 —
 649
Total Liabilities Measured at Fair Value$652
 $328,996
 $62
 $329,710


The following is a discussion of the valuation methodologies used for the assets and liabilities of the Company’s CIPsCIP measured at fair value:


Cash equivalentsLevel 1 assets represent cash investments in money market funds. Cashmarket funds and debt and equity investments in actively traded money market fundsthat are valued using published net asset values and are classified as Level 1.
Debt and equity investments represent the underlying debt, equity and other securities held in consolidated investment products. Equity investments are valued ator the official closing price on the exchange on which the securities are traded and are generally categorized within Level 1. traded.

Level 2 investmentsassets represent most debt securities, including bank loans and certain equity securities (including non-USnon-U.S. securities), for which closing prices are not readily available or are deemed to not reflect readilyreadily available market prices, and are valued using an independent pricing service. Debt investments are valued based on quotations received from independent pricing services or from dealers who make markets in such securities. Bank loan investments, which are included as debt investments, are generally priced at the average mid-point of bid and ask quotations obtained from a third-party pricing service. Fair value may also be based upon valuations obtained from independent third-party brokers or dealers utilizing matrix pricing models that consider information regarding securities with similar characteristics. In certain instances, fair value has been determined utilizing discounted cash flow analyses or single broker non-binding quotes. Depending on the nature of the inputs,
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these assets are classified as Level 1, 2 or 3 within the fair value measurement hierarchy. Level 3 investmentsassets include debt and equity securities that are not widely traded, are illiquid or are priced by dealers based on pricing models used by market makers in the security.


ForLevel 1 liabilities consist of short sales transactions in which a security is sold that is not owned or is owned but there is no intention to deliver, in anticipation that the nine months ended September 30, 2017price of the security will decline. Short sales are recorded on the Condensed Consolidated Balance Sheets within other liabilities of CIP and 2016, securities held by consolidated investment products with an end-of-period value of $0.0 million and $0.3 million, respectively, were transferred from are classified as Level 1 based on the underlying equity security.

Level 2 to Level 1 because an exchange price became available. For the nine months ended September 30, 2017 and 2016, securities held by consolidated investment products with an end-of-period valueliabilities consists of $0.0 million and $0.5 million, respectively, were transferred from Level 1 to Level 2 because certain non-U.S. securities-quoted market prices were adjusted based on third-party factors derived from model-based valuation techniques for which the significant assumptions were observable in the market.

Notes payable represent notes payables issued by consolidated investments products that are CLOs and are measured using the measurement alternative in ASU 2014-13. Accordingly, the fair value of CLO liabilities was measured as the fair value of CLO assets less the sum of: (a)of (i) the fair value of the beneficial interests held by the Company, and (b)(ii) the carrying value of any beneficial interests that represent compensation for services.

Short Salesare transactions in which a security is sold which is not owned or is owned but there is no intention to deliver, in anticipation that the price The fair value of the security will decline. Short sales are recorded inbeneficial interests held by the Condensed Consolidated Balance Sheets within other liabilities of CIPs and are classified as level 1Company is based on the underlying equity security.third-party pricing information without adjustment.



The securities purchasepurchased payable at September 30, 20172023 and December 31, 20162022 approximated fair value due to the short-term nature of the instruments.


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The following table is a reconciliation of assets of consolidated investment productsCIP for Level 3 investments for which significant unobservable inputs were used to determine fair value.value:
 Nine Months Ended September 30,
 (in thousands)
20232022
Balance at beginning of period$43,581 $3,157 
Realized gains (losses), net(4,306)(596)
Change in unrealized gains (losses), net3,980 (425)
Purchases3,430 1,930 
Amortization284 9 
Sales(7,890)(12,142)
Transfers to Level 2(79,288)(53,746)
Transfers from Level 2103,491 107,622 
Balance at end of period (1)$63,282 $45,809 
 Nine Months Ended September 30,
 ($ in thousands)
2017 2016
Level 3 Debt securities (a)   
Balance at beginning of period$25
 $1,397
Realized gains(losses,), net(90) (356)
Change in unrealized gains (losses), net87
 350
Acquired in business combination9,151
 —
Purchases1,212
 163
Paydowns—
 (5)
Amortization12
 —
Sales(765) (1,461)
Transferred to Level 244,634
 —
Transfers from Level 2(4,944) 58
Balance at end of period$49,322
 $146
(1)The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment. Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable/unobservable at period end.

(a)The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment. All transfers are deemed to occur at the end of period. Transfers between Level 2 and Level 3 were due to a decrease in trading activities at period end.




Nonconsolidated VIEs

The Company serves as the collateral manager for other collateralized loan and collateralized bond obligations (collectively, “CDOs”)CLOs that are not consolidated. The assets and liabilities of these CDOsCLOs reside in bankruptcy remote, special purpose entities in which the Company has no ownership of, nor holds any notes issued by, the CDOs,CLOs, and provides neither recourse nor guarantees. The Company has determined that the investment management fees it receives for serving as collateral manager for these CDOsCLOs did not represent a variable interest as: (1)as (i) the fees the Company earns are compensation for services provided and are
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commensurate with the level of effort required to provide the investment management services; (2)services, (ii) the Company does not hold other interests in the CDOsCLOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CDO'sCLOs' expected losses or receive more than an insignificant amount of the CDO'sCLOs' expected residual return;return, and (3)(iii) the investment management arrangement only includes terms, conditions and amounts that are customarily present in arrangements for similar services negotiated at arm's length.
    
The Company has interests in certain other entities that are VIEs that the Company does not consolidate as it is not the primary beneficiary of those entities. The Company is not the primary beneficiary assince its interest in these entities does not provide the Company with the power to direct the activities that most significantly impact the entities' economic performance. At September 30, 2017,2023, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $14.7$25.3 million.


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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains statements that are, or may be considered to be, forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking"forward-looking statements." These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “intent,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” “predict,” “would,” “potential,” “future,” “forecast,” “guarantee,” “assume,” “likely,” “target”"expect," "estimate," "intent," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project," "opportunity," "predict," "would," "potential," "future," "forecast," "guarantee," "assume," "likely," "target" or similar statements or variations of such terms.

Our forward-looking statements are based on a series of expectations, assumptions and projections about ourthe Company and the markets in which we operate. Our financial statementsoperate, are not guarantees of future results or performance, and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, net cashasset inflows and outflows, operating cash flows, business plans and future credit facilities,ability to borrow, for all future periods. All of ourforward-looking statements contained in this Quarterly Report on Form 10-Q are as of the date of this Quarterly Report on Form 10-Q only.


We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. We do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If there are any future public statements or disclosures by us whichthat modify or impact any of the forward-looking statements contained in or accompanying this Quarterly Report on Form 10-Q, such statements or disclosures will be deemed to modify or supersede such statements in this Quarterly Report.Report on Form 10-Q.


Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under “Risk Factors”"Risk Factors" and “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations" in our 20162022 Annual Report on Form 10-K as well as the following risks and uncertainties: (a)this Quarterly Report on Form 10-Q, resulting from: (i) any reduction in our assets under management; (b)(ii) inability to achieve the expected benefits of our strategic transactions; (iii) withdrawal, renegotiation or termination of investment advisory agreements; (c)(iv) damage to our reputation; (d)(v) inability to satisfy financial debt covenants and required payments; (vi) inability to attract and retain key personnel; (vii) challenges from competition; (viii) adverse developments related to unaffiliated subadvisers; (ix) negative changes in key distribution relationships; (x) interruptions, breaches, or failures of technology systems; (xi) loss on our investments; (xii) lack of sufficient capital on satisfactory terms; (xiii) adverse regulatory and legal developments; (xiv) failure to comply with investment guidelines or other contractual requirements; (e) the inability to attract and retain key personnel; (f) challenges from the competition we face in our business; (g)(xv) adverse regulatory and legal developments; (h)civil litigation, government investigations, or proceedings; (xvi) unfavorable changes in tax laws or limitations; (i) adverse developments related to unaffiliated subadvisers; (j) negative implications of changes in key distribution relationships; (k) interruptions in or failure to provide service by third parties; (l) volatility associated with our common and preferred stock; (m) adverse civil litigation and government investigations or proceedings; (n) the risk of loss on our investments; (o) the(xvii) inability to make quarterly common and preferred stock distributions; (p) the lack of sufficient capital on satisfactory terms; (q) liabilities anddividend payments; (xviii) impediments from certain corporate governance provisions; (xix) losses or costs not covered by insurance; (r) the inability to satisfy financial covenants; (s) the inability to achieve expected acquisition-related financial benefits and synergies,(xx) impairment of goodwill or other intangible assets; and other risks and uncertainties. Any occurrence of, or any material adverse change in, one or more risk factors or risks and uncertainties describedreferred to above, in our 20162022 Annual Report on Form 10-K, or in any ofthis Quarterly Report on Form 10-Q and our filingsother periodic reports filed with the Securities and Exchange Commission (“SEC”(the "SEC"). could materially and adversely affect our operations, financial results, cash flows, prospects and liquidity.

Certain other factors whichthat may impact our continuing operations, prospects, financial results and liquidity, or whichthat may cause actual results to differ from such forward-looking statements, are discussed or included in the Company’s periodic reports filed with the SEC and are available on our website at www.virtus.com under “Investor"Investor Relations.”" You are urged to carefully consider all such factors.


Overview

    Our Business
We are a provider ofprovide investment management and related services to individualsinstitutions and institutions.individuals. We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers, and unaffiliated subadvisers, each having its own distinct investment style, autonomous investment process and individual brand.brand, as well as from select unaffiliated subadvisers for certain of our retail funds. By offering a broad array of products, we believe we can appeal to a greater number of investors which allows us toand have offerings across market cycles and through changes in investor preferences. Our earnings are primarily driven byfrom asset-based fees charged for services relating to these various products, including investment management, fund administration, distribution, and shareholder services.



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We offer investment strategies for individualinstitutional and institutionalindividual investors in different product structuresinvestment products and through multiple distribution channels. Our investment strategies are available in a diverse range of styles and disciplines, managed by
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a collection of boutique differentiated investment managers, both affiliated and unaffiliated.managers. We have offerings in various asset classes (domestic and international equity,(equity, fixed income, multi-asset and alternative)alternatives), in allgeographies (domestic, global, international and emerging), market capitalizations (large, mid and small), in different styles (growth, blendcore and value), and with various investment approaches (fundamental quantitative and thematic)quantitative). Our institutional products are offered through separate accounts and pooled or commingled structures to a variety of institutional clients. Our retail products include open-end funds, closed-end funds exchange traded funds (“ETFs”) and retail separate accounts. We also offer certain of ourprovide subadvisory services to other investment strategiesadvisers and serve as the collateral manager for structured products.

Our institutional distribution resources include affiliate specific sales teams primarily focused on the U.S. market, supported by shared consultant relation support and non-U.S. institutional distribution. Our institutional products are marketed through relationships with consultants as well as directly to institutional clients.

We distribute our open-endtarget key market segments, including foundations and endowments, corporations, public and private pension plans, sovereign wealth funds and ETFs principallysubadvisory relationships.

Our retail distribution resources in the U.S. consist of regional sales professionals, a national account relationship group and specialized teams for retirement and ETFs. Our U.S. retail funds and retail separate accounts are distributed through financial intermediaries.We have broad distribution access in the U.S. retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and registered investment advisors,advisers, banks and insurance companies. In many of these firms, we have a number of products that are on firms’ preferred “recommended”"recommended" lists and on fee-based advisory programs. Our sales efforts are supportedprivate client business is marketed directly to individual clients by regional sales professionals, a national accounts relationship group, and separate teams for ETFs and retirement and insurance products.
Our retail separate accounts are distributed through financial intermediaries and directly byadvisory teams at one of our affiliated investment managers. Our institutional distribution strategy is an affiliate-centric and coordinated model. Through relationships with consultants, our affiliates target key market segments, including foundations and endowments, corporate, public and private pension plans, and unaffiliated subadvised mutual funds.


Financial Highlights
▪Net earningsincome per diluted share was $2.21$4.19 in the third quarter of 2017.2023, a decrease of $0.06, or 1.4%, compared to net income per diluted share of $4.25 in the third quarter of 2022.
▪Total sales (inflows) were $4.6$5.8 billion in the third quarter of 2017,2023, an increase of $1.5$0.1 billion, or 48.3%1.5%, from $3.1$5.7 billion in the third quarter of 2016.2022. Net flows were $0.2$(1.5) billion in the third quarter of 20172023 compared to $0.5net flows of $(3.3) billion in the third quarter of 2016.2022.
Long-term assets▪Assets under management were $87.1$162.5 billion at September 30, 2017,2023, an increase of $40.6$17.6 billion, or 12.1%, from September 30, 2016.2022.


Acquisition of RidgeWorth

AlphaSimplex
On JuneApril 1, 2017, we2023, the Company completed the acquisition of RidgeWorth Investments (the "Acquisition" or the "Acquired Business"AlphaSimplex Group, LLC ("AlphaSimplex"). RidgeWorth managed approximately $40.1 billion in assets under management as of June 1, 2017, including $35.7 billion in long term assets under management and $4.4 billion in liquidity strategies. The Acquisition significantly increased our assets under management, and provided a wider range of strategies for institutional and individual investors, and broader distribution and client service resources.

Total consideration for the Acquisition was $547.1 million, comprising $485.2 million for the business and $61.9 million for certain balance sheet investments. At the closing, we paid $471.4$113.4 million in cash issued 213,669 shares of our common stock with a value of $21.7at closing, including $50.0 million based on a stock price of $101.76, and recorded $51.7 million in contingent consideration and $2.3 million in deferred cash consideration. The conditions fordrawn from the $51.7Company's revolving credit facility. At September 30, 2023, the Company had repaid $30.0 million of contingent consideration were met as of September 30, 2017, and we expect to pay thisthe amount duringdrawn on the fourth quarter of 2017.credit facility.

Assets Under Management

At September 30, 2017,2023, total assets under management were $90.6$162.5 billion, representing an increase of $44.0$17.6 billion, or 94.6%12.1%, from September 30, 20162022, and an increase of $45.2$13.2 billion, or 99.6%8.8%, from December 31, 2016.2022. The increase in assets under managementfrom September 30, 2022 was due to $19.3 billion of positive market performance and $7.8 billion from the acquisition of AlphaSimplex, partially offset by $6.8 billion of net outflows. The increase from December 31, 20162022 was primarily due to $10.5 billion in positive market performance and $7.8 billion from the Acquired Business which added $40.1acquisition of AlphaSimplex, partially offset by $3.4 billion as of June 1, 2017, market appreciation of $6.2 billion, and positive flows of $0.6 billion.net outflows.


Average long-term assets under management, which represent the majority of our fee-earning asset levels, were $64.3 billion for the nine months ended September 30, 2017, an increase of $19.0 billion, or 41.9%, from $45.3 billion for the nine months ended September 30, 2016. The increase in long-term average assets under management compared to September 30, 2016 was primarily due to the Acquisition and the cumulative impact of market appreciation.






Operating Results
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In the third quarter of 2017, total revenues increased 50.2% to $123.7 million from $82.3 million in the third quarter of 2016, primarily as a result of $32.5 million of additional revenues from the Acquired Business. Operating income was relatively flat at $16.8 million in the third quarter of 2017 compared to $16.5 million in the third quarter of 2016. The third quarter of 2017 included $4.9 million and $4.9 million, respectively, in higher amortization of intangible assets and other operating expenses related to acquisition and integration costs.


Assets Under Management by Product

The following table summarizes our assets under management by product:
As of September 30,Change
(in millions)20232022$%
Open-End Funds (1)$54,145 $54,454 $(309)(0.6)%
Closed-End Funds9,472 10,146 (674)(6.6)%
Retail Separate Accounts38,665 33,381 5,284 15.8 %
Institutional Accounts (2)60,257 46,993 13,264 28.2 %
Total$162,539 $144,974 $17,565 12.1 %
Average Assets Under Management (3)$161,074 $172,853 $(11,779)(6.8)%
(1)Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
(2)Represents assets under management of institutional separate and commingled accounts including structured products.
 As of September 30, Change
 2017 2016 $ %
($ in millions)       
Open-End Funds (1)$42,397.7
 $25,266.4
 $17,131.3
 67.8 %
Closed-End Funds6,735.4
 6,887.3
 (151.9) (2.2)%
Exchange Traded Funds955.7
 460.6
 495.1
 107.5 %
Retail Separate Accounts13,057.2
 7,924.8
 5,132.4
 64.8 %
Institutional Accounts20,630.5
 5,376.6
 15,253.9
 283.7 %
Structured Products3,360.0
 623.8
 2,736.2
 438.6 %
Total Long-Term87,136.5
 46,539.5
 40,597.0
 87.2 %
Liquidity (3)3,431.4
 —
 3,431.4
 —
Total$90,567.9
 $46,539.5
 $44,028.4
 94.6 %
Average Assets Under Management (2)$65,898.5
 $45,335.0
 $20,563.5
 45.4 %
Average Long-Term Assets Under Management (2)$64,345.3
 $45,335.0
 $19,010.3
 41.9 %
(3)Averages are calculated as follows:
(1)Represents assets under management of U.S. 1940 Act mutual funds and Undertakings for Collective Investments in Transferable Securities ("UCITS")
(2)Averages are calculated as follows:
- –Funds - average daily or weekly balances
- –Retail Separate Accounts - prior quarterprior-quarter ending balance or average of month-end balances in quarter
- –Institutional Accounts - average of month-end balances in quarter
(3)    Represents assets under management in liquidity strategies, including open-end funds and institutional accounts
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Asset Flows by Product
The following table summarizes asset flows by product:
Three Months Ended
September 30,		Nine Months Ended
September 30,
Three Months Ended September 30, Nine Months Ended September 30,
($ in millions)2017 2016 2017 2016
(in millions)(in millions)2023202220232022
Open-End Funds (1)       Open-End Funds (1)
Beginning balance$41,452.8
 $24,813.8
 $23,432.8
 $28,882.1
Beginning balance$56,828 $59,479 $53,000 $78,706 
Inflows2,842.5
 1,882.5
 7,129.1
 5,427.8
Inflows2,687 2,880 8,248 10,956 
Outflows(2,872.7) (2,139.4) (7,286.0) (10,733.5)Outflows(4,137)(5,689)(13,621)(21,710)
Net flows(30.2) (256.9) (156.9) (5,305.7)Net flows(1,450)(2,809)(5,373)(10,754)
Market performance1,040.7
 736.5
 3,697.5
 1,919.9
Market performance(1,034)(2,012)3,900 (17,919)
Other (2)(65.6) (27.0) 15,424.3
 (229.9)Other (2)(199)(204)2,618 4,421 
Ending balance$42,397.7
 $25,266.4
 $42,397.7
 $25,266.4
Ending balance$54,145 $54,454 $54,145 $54,454 
Closed-End Funds       Closed-End Funds
Beginning balance$6,707.2
 $6,959.6
 $6,757.4
 $6,222.3
Beginning balance$10,166 $10,645 $10,361 $12,068 
Inflows—
 —
 —
 —
Inflows— 157 24 189 
Outflows—
 —
 (112.8) (103.3)Outflows— — — — 
Net flows—
 —
 (112.8) (103.3)Net flows— 157 24 189 
Market performance124.4
 (63.3) 421.6
 839.7
Market performance(504)(531)(300)(1,977)
Other (2)(96.2) (9.0) (330.8) (71.4)Other (2)(190)(125)(613)(134)
Ending balance$6,735.4
 $6,887.3
 $6,735.4
 $6,887.3
Ending balance$9,472 $10,146 $9,472 $10,146 
Exchange Traded Funds       
Beginning balance$968.8
 $399.4
 $596.8
 $340.8
Inflows104.1
 66.9
 554.9
 182
Outflows(28.9) (19.6) (103.2) (74.2)
Net flows75.2
 47.3
 451.7
 107.8
Market performance4.2
 19.4
 30.3
 23.2
Other (2)(92.5) (5.5) (123.1) (11.2)
Ending balance$955.7
 $460.6
 $955.7
 $460.6
Retail Separate Accounts       Retail Separate Accounts
Beginning balance$12,351.1
 $7,407.2
 $8,473.5
 $6,784.4
Beginning balance$38,992 $35,248 $35,352 $44,538 
Inflows704.4
 516.1
 2,049.8
 1,359.5
Inflows1,849 1,179 4,562 4,489 
Outflows(480.1) (182.0) (1,233.7) (860.9)Outflows(1,524)(1,418)(4,246)(4,789)
Net flows224.3
 334.1
 816.1
 498.6
Net flows325 (239)316 (300)
Market performance478.3
 189.9
 1,273.7
 647.2
Market performance(652)(1,628)2,997 (10,857)
Other (2)3.5
 (6.4) 2,493.9
 (5.4)Other (2)— — — — 
Ending balance$13,057.2
 $7,924.8
 $13,057.2
 $7,924.8
Ending balance$38,665 $33,381 $38,665 $33,381 
Institutional Accounts       
Beginning balance$20,639.1
 $4,920.0
 $5,492.7
 $4,799.7
Inflows439.9
 612.5
 1,074.7
 1,023.6
Outflows(893.7) (207.2) (1,697.7) (775.8)
Net flows(453.8) 405.3
 (623.0) 247.8
Market performance451.1
 56.4
 757.5
 348.9
Other (2)(5.9) (5.1) 15,003.3
 (19.8)
Ending balance$20,630.5
 $5,376.6
 $20,630.5
 $5,376.6
Structured Products       
Beginning balance$2,899.8
 $669.7
 $613.1
 $356.0
Inflows474.3
 —
 474.3
 316.3
Outflows(55.6) (45.2) (296.3) (58.7)
Net flows418.7
 (45.2) 178.0
 257.6
Market performance37.1
 3.9
 60.9
 13.4
Other (2)4.4
 (4.6) 2,508.0
 (3.2)
Ending balance$3,360.0
 $623.8
 $3,360.0
 $623.8
       
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Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2023202220232022
Institutional Accounts (3)
Beginning balance$62,330 $50,048 $50,663 $51,874 
Inflows1,274 1,507 6,786 7,408 
Outflows(1,648)(1,930)(5,173)(6,585)
Net flows(374)(423)1,613 823 
Market performance(1,434)(2,475)3,912 (15,144)
Other (2)(265)(157)4,069 9,440 
Ending balance$60,257 $46,993 $60,257 $46,993 
Total
Beginning balance$168,316 $155,420 $149,376 $187,186 
Inflows5,810 5,723 19,620 23,042 
Outflows(7,309)(9,037)(23,040)(33,084)
Net flows(1,499)(3,314)(3,420)(10,042)
Market performance(3,624)(6,646)10,509 (45,897)
Other (2)(654)(486)6,074 13,727 
Ending balance$162,539 $144,974 $162,539 $144,974 
(1)Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
Total Long-Term       
Beginning balance$85,018.8
 $45,169.7
 $45,366.3
 $47,385.3
Inflows4,565.2
 3,078.0
 11,282.8
 8,309.2
Outflows(4,331.0) (2,593.4) (10,729.7) (12,606.4)
Net flows234.2
 484.6
 553.1
 (4,297.2)
Market performance2,135.8
 942.8
 6,241.5
 3,792.3
Other (2)(252.3) (57.6) 34,975.6
 (340.9)
Ending balance$87,136.5
 $46,539.5
 $87,136.5
 $46,539.5
Liquidity       
Beginning balance$3,570.6
 $—
 $—
 $—
Other (2)(139.2) —
 3,431.4
 —
Ending balance$3,431.4
 $—
 $3,431.4
 $—
Total       
Beginning balance$88,589.4
 $45,169.7
 $45,366.3
 $47,385.3
Inflows4,565.2
 3,078.0
 11,282.8
 8,309.2
Outflows(4,331.0) (2,593.4) (10,729.7) (12,606.4)
Net flows234.2
 484.6
 553.1
 (4,297.2)
Market performance2,135.8
 942.8
 6,241.5
 3,792.3
Other (2)(391.5) (57.6) 38,407.0
 (340.9)
Ending balance$90,567.9
 $46,539.5
 $90,567.9
 $46,539.5
(2)Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from cash management strategies, and the impact of non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), current income or capital returned by structured products and the use of leverage.

(3)Represents assets under management of institutional separate and commingled accounts including structured products.
(1)Includes assets under management of U.S. 1940 Act mutual funds and Undertakings for Collective Investments in Transferable Securities ("UCITS")
(2)Represents open-end and closed-end mutual fund distributions, net of reinvestments, net flows from non-sales related activities such as asset acquisitions/(dispositions), marketable securities investments/(withdrawals), the impact on assets from the use of leverage, and the net change in assets for liquidity strategies


Assets Under Management by Asset Class
The following table summarizes our assets under management by asset class:
 As of September 30,Change% of Total
(in millions)20232022$%20232022
Asset Class
Equity$87,984 $78,034 $9,950 12.8 %54.1 %53.7 %
Fixed income37,352 36,910 442 1.2 %23.0 %25.5 %
Multi-asset (1)19,937 19,364 573 3.0 %12.3 %13.4 %
Alternatives (2)17,266 10,666 6,600 61.9 %10.6 %7.4 %
Total$162,539 $144,974 $17,565 12.1 %100.0 %100.0 %
(1)     Consists of strategies and client accounts with substantial holdings in at least two of the following asset classes: equity, fixed income, and alternatives.
(2)     Consists of managed futures, event-driven, real estate securities, infrastructure, long/short, and other strategies.


23
 As of September 30, Change % of Total
 2017 2016 $ % 2017 2016
($ in millions)           
Asset Class           
Equity$43,147.9
 $26,669.5
 $16,478.4
 61.8% 47.6% 57.3%
Fixed income39,741.7
 15,756.8
 23,984.9
 152.2% 43.9% 33.9%
Alternatives (1)4,246.9
 4,113.2
 133.7
 3.3% 4.7% 8.8%
Liquidity (2)3,431.4
 —
 3,431.4
 100.0% 3.8% —%
Total$90,567.9
 $46,539.5
 $44,028.4
 94.6% 100.0% 100.0%
(1)Consists of real estate securities, master-limited partnerships, option strategies and other
(2)Represents assets under management in liquidity strategies, including open-end funds and institutional accounts

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Average Assets Under Management and Average Basis PointsFees Earned
The following table summarizestables summarize the average management fees earned in basis points and average assets under management:
 Three Months Ended September 30,
Average Fee Earned
(expressed in basis points)
Average Assets Under
 Management
 (in millions) (3)
 2023202220232022
Products
Open-End Funds (1)51.1 46.8 $56,511 $60,185 
Closed-End Funds58.2 57.0 10,001 10,971 
Retail Separate Accounts43.3 42.2 38,992 35,248 
Institutional Accounts (2)30.3 31.3 62,368 50,668 
All Products42.0 41.5 $167,872 $157,072 
 Nine Months Ended September 30,
Average Fee Earned
(expressed in basis points)
Average Assets Under
 Management
 (in millions) (3)
 2023202220232022
Products
Open-End Funds (1)49.446.4$55,591 $67,105 
Closed-End Funds57.657.4$10,216 $11,379 
Retail Separate Accounts43.942.9$37,247 $40,203 
Institutional Accounts (2)31.231.1$58,020 $54,166 
All Products42.141.5$161,074 $172,853 
 Three Months Ended September 30,
($ in millions, except average fee earned data which is in basis points)Average Fees Earned
 Average Assets Under Management (2)
 2017 2016 2017 2016
Products     
Open-End Funds (1)47.9
 50.1
 $42,080.9
 $25,149.9
Closed-End Funds66.0
 65.9
 6,758.1
 6,853.4
Exchange Traded Funds27.0
 32.4
 945.0
 426.0
Retail Separate Accounts46.6
 53.2
 12,345.5
 7,413.6
Institutional Accounts31.0
 37.0
 20,728.6
 5,044.2
Structured Products47.1
 76.3
 3,111.1
 643.4
All Long-Term Products44.8
 51.8
 85,969.2
 45,530.5
Liquidity (3)6.0
 —
 3,331.1
 —
All Products43.4
 51.8
 $89,300.3
 $45,530.5
        
        
 Nine Months Ended September 30,
 Average Fees Earned
 Average Assets Under Management (2)
 2017 2016 2017 2016
Products     
Open-End Funds (1)49.5
 48.9
 $32,296.7
 $25,994.5
Closed-End Funds66.0
 65.6
 6,784.6
 6,555.2
Exchange Traded Funds28.4
 34.3
 868.3
 378.3
Retail Separate Accounts49.7
 54.8
 10,317.6
 7,065.7
Institutional Accounts32.6
 37.2
 12,375.6
 4,878.9
Structured Products42.1
 49.2
 1,702.5
 462.4
All Long-Term Products47.6
 50.9
 64,345.3
 45,335.0
Liquidity (3)7.6
 —
 1,553.2
 —
All Products46.6
 50.9
 $65,898.5
 $45,335.0
(1)Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
(2)Represents assets under management of institutional separate and commingled accounts including structured products.
(1)Represents assets under management of U.S. 1940 Act mutual funds and Undertakings for Collective Investments in Transferable Securities ("UCITS")
(2)Averages are calculated as follows:
- (3)Averages are calculated as follows:
–Funds - average daily or weekly balances
- –Retail Separate Accounts - prior quarterprior-quarter ending balance or average of month-end balances in quarter
- –Institutional Accounts - average of month-end balances in quarter
(3)    Represents assets under management in liquidity strategies, including open-end funds and institutional accounts


Average fees earned represent investment management fees, net of fees paid to third-party service providers for investment management related services and investment management fees earned from consolidated investment products,revenue-related adjustments, divided by average net assets. Open-end mutual fund, closed end fundassets, excluding the impact of consolidated investment products ("CIP"). Revenue-related adjustments are based on specific agreements and exchange traded fundreflect the portion of investment management fees passed-through to third-party client intermediaries for services to investors in sponsored investment products. Fund fees are calculated based on average daily or weekly net assets. Retail separate account fees are calculated based on the end of the preceding or current quarter’s asset values or on an average of month-end balances. Institutional account fees are calculated based on an average of month-end balances, oran average of current quarter’s asset values. Structured products fees are calculated basedvalues or on a combination of the underlying cash flows and the principal value of the product. Average fees earned will vary based on several factors, including the asset mix and expense reimbursements to the funds.
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The average fee rate earned on all products for the three and nine months ended September 30, 2017 decreased2023 increased by 8.40.5 basis points and 4.30.6 basis points, respectively, compared to the same periods in the prior year primarily due to the impact on the average fees earned as a resultaddition of the assetsalternative strategies with higher fee rates from the Acquired Business having a lower blended fee rate. The product categories most impacted were institutional accounts and retail separate accounts, where the additional assets were primarily in fixed income strategies. For the nine months ended September 30, 2017, the increase in average fees earned on open-end funds was primarily attributable to market appreciation and positive net flows in higher fee equity products.AlphaSimplex acquisition.

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Results of Operations
Summary Financial Data
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
(in thousands)20232022$%20232022$%
Investment management fees$184,869 $172,850 $12,019 7.0 %$529,326 $564,691 $(35,365)(6.3)%
Other revenue34,402 37,411 (3,009)(8.0)%101,355 123,317 (21,962)(17.8)%
Total revenues219,271 210,261 9,010 4.3 %630,681 688,008 (57,327)(8.3)%
Total operating expenses174,368 166,244 8,124 4.9 %518,153 521,769 (3,616)(0.7)%
Operating income (loss)44,903 44,017 886 2.0 %112,528 166,239 (53,711)(32.3)%
Other income (expense), net(2,803)(11,592)8,789 (75.8)%(1,446)(59,262)57,816 (97.6)%
Interest income (expense), net8,235 5,744 2,491 43.4 %23,689 17,785 5,904 33.2 %
Income (loss) before income taxes50,335 38,169 12,166 31.9 %134,771 124,762 10,009 8.0 %
Income tax expense (benefit)12,181 10,754 1,427 13.3 %31,794 43,969 (12,175)(27.7)%
Net income (loss)38,154 27,415 10,739 39.2 %102,977 80,793 22,184 27.5 %
Noncontrolling interests(7,248)4,265 (11,513)(269.9)%(3,190)1,348 (4,538)(336.6)%
Net Income (Loss) Attributable to Virtus Investment Partners, Inc.$30,906 $31,680 $(774)(2.4)%$99,787 $82,141 $17,646 21.5 %
Earnings (loss) per share-diluted$4.19 $4.25 $(0.06)(1.4)%$13.50 $10.76 $2.74 25.5 %
In the third quarter of 2023, total revenues increased 4.3% to $219.3 million from $210.3 million in the third quarter of 2022, primarily as a result of the addition of AlphaSimplex. Operating income increased $0.9 million to $44.9 million in the third quarter of 2023 compared to $44.0 million in the third quarter of 2022, due primarily to the aforementioned increased revenue, partially offset by increased operating expenses due to the addition of AlphaSimplex.
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 vs. 2016 % 2017 2016 2017 vs. 2016 %
($ in thousands)               
Results of Operations               
Investment management fees$97,295
 $60,398
 $36,897
 61.1 % $230,628
 $176,234
 $54,394
 30.9 %
Other revenues26,380
 21,926
 4,454
 20.3 % 66,955
 66,470
 485
 0.7 %
Total revenues123,675
 82,324
 41,351
 50.2 % 297,583
 242,704
 54,879
 22.6 %
Total operating expenses106,886
 65,786
 41,100
 62.5 % 267,563
 204,673
 62,890
 30.7 %
Operating income (loss)16,789
 16,538
 251
 1.5 % 30,020
 38,031
 (8,011) (21.1)%
Other income (expense), net15,268
 4,891
 10,377
 212.2 % 20,565
 13,935
 6,630
 47.6 %
Interest income (expense), net(1,908) 1,716
 (3,624) (211.2)% (350) 5,392
 (5,742) (106.5)%
Income (loss) before income taxes30,149
 23,145
 7,004
 30.3 % 50,235
 57,358
 (7,123) (12.4)%
Income tax expense (benefit)9,626
 6,869
 2,757
 40.1 % 15,939
 20,512
 (4,573) (22.3)%
Net income (loss)20,523
 16,276
 4,247
 26.1 % 34,296
 36,846
 (2,550) (6.9)%
Noncontrolling interests(1,731) (651) (1,080) (165.9)% (2,782) (770) (2,012) (261.3)%
Net Income (Loss) Attributable to Stockholders18,792
 15,625
 3,167
 20.3 % 31,514
 36,076
 (4,562) (12.6)%
Preferred stockholder dividends(2,084) —
 (2,084) (100.0)% (6,252) —
 (6,252) (100.0)%
Net Income (Loss) Attributable to Common Stockholders$16,708
 $15,625
 $1,083
 6.9 % $25,262
 $36,076
 $(10,814) (30.0)%

Revenues

Revenues by source were as follows:
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
(in thousands)20232022$%20232022$%
Investment management fees
Open-end funds$80,294 $80,234 $60 0.1 %$229,721 $262,486 $(32,765)(12.5)%
Closed-end funds14,673 15,773 (1,100)(7.0)%44,025 48,887 (4,862)(9.9)%
Retail separate accounts44,441 39,154 5,287 13.5 %127,323 134,069 (6,746)(5.0)%
Institutional accounts45,461 37,689 7,772 20.6 %128,257 119,249 9,008 7.6 %
Total investment management fees184,869 172,850 12,019 7.0 %529,326 564,691 (35,365)(6.3)%
Distribution and service fees14,333 15,746 (1,413)(9.0)%42,618 52,912 (10,294)(19.5)%
Administration and shareholder service fees19,069 20,563 (1,494)(7.3)%55,668 66,889 (11,221)(16.8)%
Other income and fees1,000 1,102 (102)(9.3)%3,069 3,516 (447)(12.7)%
Total revenues$219,271 $210,261 $9,010 4.3 %$630,681 $688,008 $(57,327)(8.3)%
 Three Months Ended September 30,  Nine Months Ended September 30,
 2017 2016 2017 vs. 2016 %  2017 2016 2017 vs. 2016 %
($ in thousands)            
Investment management fees            
Funds$63,075
 $44,204
 $18,871
 42.7 %  $156,245
 $131,467
 $24,778
 18.8 %
Retail separate accounts14,686
 10,267
 4,419
 43.0 %  38,879
 29,470
 9,409
 31.9 %
Institutional accounts19,030
 5,927
 13,103
 221.1 %  34,623
 15,297
 19,326
 126.3 %
Liquidity504
 —
 504
 100.0 %  881
 —
 881
 100.0 %
Total investment management fees97,295
 60,398
 36,897
 61.1 %  230,628
 176,234
 54,394
 30.9 %
Distribution and service fees11,482
 12,116
 (634) (5.2)%  32,704
 36,761
 (4,057) (11.0)%
Administration and transfer agent fees14,699
 9,588
 5,111
 53.3 %  33,156
 29,085
 4,071
 14.0 %
Other income and fees199
 222
 (23) (10.4)%  1,095
 624
 471
 75.5 %
Total revenues$123,675
 $82,324
 $41,351
 50.2 %  $297,583
 $242,704
 $54,879
 22.6 %
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Investment Management Fees
Investment management fees are earned based on a percentage of assets under management and are paid pursuant to the terms of the respective investment management contracts, which generally require monthly or quarterly payments. Investment management fees increased by $36.9$12.0 million, or 61.1%7.0%, and $54.4decreased $35.4 million, or 30.9%6.3%, for the three and nine months ended September 30, 2017,2023, respectively, compared to the same periods in the prior year. The increase for the three months ended September 30, 2023 was primarily due to the addition of AlphaSimplex. The decrease for the nine months ended September 30, 2023 was primarily due to lower average assets under management, partially offset by the addition of AlphaSimplex.

Distribution and Service Fees
Distribution and service fees are sales- and asset-based fees earned from open-end funds for marketing and distribution services. Distribution and service fees decreased by $1.4 million, or 9.0%, and $10.3 million, or 19.5%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year, primarily due to an increase inlower average assets of $38.5 billion and $15.0 billion, respectively, primarily as a result of the Acquisition. Also contributing to the increase was positive market performance over the trailing four quarters. The third quarter of 2017 included approximately $32.5 million of investment management fee revenues related to the full quarter impact of the additional assets managed as a result of the Acquisition.

Distribution and Service Fees

Distribution and service fees, which are asset-based fees earned fromfor open-end funds for marketing and distribution services, decreased by $0.6 million, or 5.2%, and $4.1 million, or 11.0%, for the three and nine months ended September 30, 2017, respectively, compared to the same periods in the prior year due to lower average open-end assets under management in share classes that have sales- and asset-based distribution and service fees.

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Administration and Transfer AgentShareholder Service Fees

Administration and transfer agentshareholder service fees represent fees earned for fund administration and shareholder services from our open-end mutualU.S. retail funds and certain of our closed-end funds. Fund administration and transfer agentshareholder service fees increaseddecreased by $5.1$1.5 million, or 53.3%7.3%, and $11.2 million, or 16.8%, for the three months ended June 30, 2017 and $4.1 million, or 14.0%, for the nine months ended September 30, 20172023, respectively, compared to the same periods in the prior year primarily due to $4.5 millionthe decrease in additional administration and transfer agent feesaverage assets under management in open-end funds during the periods as a result of the fund reorganization following the Acquisition, which were largely offset by higher fund expense reimbursements included inmarket performance and net investment management fees.outflows.


Other Income and Fees

Other income and fees primarily represent fees related to other fee-earning assets and contingent sales charges earned from investor redemptions of certain shares sold without a front-end sales charge. Other income and fees were relatively flatdecreased by $0.1 million, or 9.3%, and $0.4 million, or 12.7%, for the three months ended September 30, 2017, compared to the same period in the prior year. Other income and fees increased $0.5 million, or 75.5%, for the nine months ended September 30, 2017,2023, respectively, compared to the same periodperiods in the prior year,year. The decline was primarily due to $0.5 millionlower redemption income as well as the decline in average other income related tofee-earning assets in the recovery of costs from a third-party service provider during the first quarter of 2017.current year periods.


Operating Expenses
Operating expenses by category were as follows:
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
(in thousands)20232022$%20232022$%
Operating expenses
Employment expenses$101,587 $88,230 $13,357 15.1 %$304,895 $283,583 $21,312 7.5 %
Distribution and other asset-based expenses24,157 26,818 (2,661)(9.9)%73,332 88,247 (14,915)(16.9)%
Other operating expenses30,494 31,096 (602)(1.9)%94,707 94,367 340 0.4 %
Other operating expenses of CIP553 538 15 2.8 %1,613 1,927 (314)(16.3)%
Restructuring expense691 4,015 (3,324)(82.8)%691 4,015 (3,324)(82.8)%
Change in fair value of contingent consideration— — — — %(6,800)2,900 (9,700)(334.5)%
Depreciation expense1,504 938 566 60.3 %4,134 2,835 1,299 45.8 %
Amortization expense15,382 14,609 773 5.3 %45,581 43,895 1,686 3.8 %
Total operating expenses$174,368 $166,244 $8,124 4.9 %$518,153 $521,769 $(3,616)(0.7)%
 Three Months Ended September 30,  Nine Months Ended September 30,
 2017 2016 2017 vs. 2016 %  2017 2016 2017 vs. 2016 %
($ in thousands)                
Operating expenses                
Employment expenses$54,159
 $33,142
 $21,017
 63.4 %  $136,792
 $102,184
 $34,608
 33.9 %
Distribution and other asset-based expenses20,552
 17,380
 3,172
 18.3 %  51,639
 52,913
 (1,274) (2.4)%
Other operating expenses24,490
 12,027
 12,463
 103.6 %  59,067
 41,056
 18,011
 43.9 %
Restructuring and severance1,584
 1,879
 (295) (15.7)%  10,478
 4,270
 6,208
 145.4 %
Depreciation and amortization expense6,101
 1,358
 4,743
 349.3 %  9,587
 4,250
 5,337
 125.6 %
Total operating expenses$106,886
 $65,786
 $41,100
 62.5 %  $267,563
 $204,673
 $62,890
 30.7 %
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Employment Expenses

Employment expenses consist of fixed and variable compensation and related employee benefit costs. Employment expenses for the three and nine months ended September 30, 20172023 were $54.2$101.6 million and $304.9 million, respectively, which represented an increase of $21.0$13.4 million, or 63.4%15.1%, and $21.3 million, or 7.5%, respectively, compared to the same periodperiods in the prior year. The increase reflected $13.6 million of employment expenses as a result of the June 1, 2017 addition of employees from the Acquisition, higher sales-based and profit-based compensation,increases were primarily due to a 48.3% increase in total sales and increased profits at our affiliates, and $2.3 million in incremental incentive compensation primarily related to efforts associated with the Acquisition.

Employment expenses for the nine months ended September 30, 2017 were $136.8 million, which represented an increase of $34.6 million, or 33.9%, compared to the same period in the prior year. The increase reflected $18.0 million of employment expenses as a result of the addition of AlphaSimplex, which includes retention payments to employees fromas part of the Acquisition, higher sales-based and profit-based compensation, due to a 35.8% increase in total sales and increased profits at our affiliates, and $4.3 million of incremental incentive compensation primarily related to efforts associated with the Acquisition.transaction consideration that were classified as employment expense.


Distribution and Other Asset-Based Expenses

Distribution and other asset-based expenses consist primarily of payments to third-party distribution partnersclient intermediaries for providing services to investors in our funds and payments to third-party service providers forsponsored investment management-related services.products. These payments are primarily based on percentages of assets under management or revenues. Thesemanagement. Distribution and other asset-based expenses also include the amortization of deferred sales commissions related to up-front commissions on shares sold without a front-end sales charge to shareholders. The deferred sales commissions are amortized on a straight linestraight-line basis over the periods in whichperiod commissions are generally recovered from distribution fee revenues and contingent sales charges received from shareholders of the funds upon redemption of their shares. Distribution and other asset-based expenses increased by $3.2 million, or 18.3%, inDuring the three and nine months ended September 30, 2017 as compared to the same period in the prior year primarily due increased asset based sub-transfer agent expenses related to services provided to mutual funds from the Acquisition. Distribution2023, distribution and other asset-based expenses decreased $1.3$2.7 million, or 2.4%9.9%, for the nine months ended September 30, 2017and $14.9 million, or 16.9%, respectively, compared to the same periodperiods in the prior year primarily due to lower average open-end fund assets under management and a lower percentage ofdecrease in assets under management in share classes where we paythat have asset-based distribution and other asset-based expenses.


Other Operating Expenses

Other operating expenses primarily consist of investment research and technology costs, professional fees, travel and distribution relatedtravel-and distribution-related costs, rent and occupancy expenses, operating expenses of our consolidated investment products and other miscellaneousbusiness costs. Other operating expenses decreased $0.6 million, or 1.9%, and increased $0.3 million, or 0.4%, for the three and nine months ended September 30, 2017 increased by $12.5 million, or 103.6%, as2023, respectively, compared to the same periodperiods in the prior yearyear. The decrease in the three-month period ended September 30, 2023 was
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primarily attributable to lower legal expenses and other third-party support costs partially offset by the addition of AlphaSimplex. The increase for the nine-month period ended September 30, 2023 was primarily due to $6.8 millionthe addition of AlphaSimplex, partially offset by a decrease in other third-party support costs.

Other Operating Expenses of CIP
Other operating expenses of our consolidated investment products, consistingCIP remained consistent during the three and nine months ended September 30, 2023 compared to the respective periods in the prior year.

Change in Fair Value of expensesContingent Consideration
Contingent consideration related to the issuanceCompany's acquisitions are fair valued on each reporting date taking into consideration changes in various estimates, including underlying performance estimates, discount rates and amount of a CLOtime until the conditions of the contingent payments are achieved. The change in fair value is recorded in the quarter, $4.5current period as a gain or loss. The $9.7 million change in fair value of additional other operating expenses of the Acquired Business, and $1.2 million of acquisition and integration expenses, primarily comprised of professional fees.

Other operating expensescontingent consideration for the nine months ended September 30, 2017 increased by $18.0 million, or 43.9%, as2023 compared to the samerespective period in the prior year primarily due to $8.5 million of acquisition and integration expenses, primarily comprised of professional fees, and $6.0 million in other operating expenses of the Acquired Business. Other operating expenses for the nine months ended September 30, 2017 also included $1.4 million in higher operating expenses of our consolidated investment products,was primarily attributable to the addition of four consolidated investment products as a result of the Acquisition as compared to the corresponding prior year period.changes in underlying performance estimates and discount rates.


Restructuring and SeveranceDepreciation Expense

During the three months ended September 30, 2017, we incurred $1.6 million of restructuring and severance expenses comprised of $0.5 million in severance costs related to staff reductions in connection with the Acquisition and outsourcing activities, and $1.0 million in restructuring costs, related to the payment of future lease obligations and leasehold improvements write-offs for vacated office space related to the Acquisition.

During the nine months ended September 30, 2017, we incurred $10.5 million of restructuring and severance expenses, primarily comprised of $9.0 million in severance costs related to staff reductions in connection with the Acquisition and $0.4 million in severance costs related to outsourcing activities. We also incurred $1.0 million in restructuring costs related to future lease obligations and leasehold improvements write-offs for vacated office space related to the Acquisition.
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Depreciation and Amortization Expense

Depreciation and amortization expense consists primarily of the straight-line depreciation of furniture, equipment and leasehold improvements, as well as the amortization of acquired investment advisory contracts, recorded as definite-lived intangible assets, both over their estimated useful lives.improvements. Depreciation and amortization expense increased by $4.7$0.6 million, or 60.3%, and $5.3$1.3 million, or 45.8%, for the three and nine months ended September 30, 2017,2023, respectively, compared to the respective periods in the prior year. The increases were primarily due to the addition of AlphaSimplex, as well as software and equipment purchases made in the current year periods.

Amortization Expense
Amortization expense consists of the amortization of definite-lived intangible assets over their estimated useful lives. Amortization expense increased $0.8 million, or 5.3%, and $1.7 million, or 3.8%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year, primarily due an increase in definite lived intangible assets as a resultto the addition of the Acquisition.AlphaSimplex.


Other Income (Expense)
Other Income (Expense), net

Other Income, net by category waswere as follows:
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
(in thousands)20232022$%20232022$%
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net$(1,918)$(2,493)$575 (23.1)%$2,469 $(16,018)$18,487 (115.4)%
Realized and unrealized gain (loss) of CIP, net(1,013)(8,440)7,427 (88.0)%(2,853)(43,443)40,590 (93.4)%
Other income (expense), net128 (659)787 (119.4)%(1,062)199 (1,261)(633.7)%
Total Other Income (Expense), net$(2,803)$(11,592)$8,789 (75.8)%$(1,446)$(59,262)$57,816 (97.6)%
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 vs. 2016 % 2017 2016 2017 vs. 2016 %
($ in thousands)               
Other Income (Expense)               
Realized and unrealized gain (loss) on investments, net$1,367
 $961
 $406
 42.2%
$2,951
 $3,584
 $(633) (17.7)%
Realized and unrealized gain (loss) of consolidated investment products, net13,465
 3,680
 9,785
 265.9% 16,485
 9,888
 6,597
 66.7 %
Other income (expense), net436
 250
 186
 74.4% 1,129
 463
 666
 143.8 %
Total Other Income (Expense), net$15,268
 $4,891
 $10,377
 212.2% $20,565
 $13,935
 $6,630
 47.6 %


Realized and unrealized gain (loss) on investments, net

Realized and unrealized gain (loss) on investments, net increasedchanged during the three months ended September 30, 2017 by $0.4 million, or 42.2%, as compared to the same period in the prior year. The increase was primarily due to unrealized gains related to marketable securities in domestic equity strategies.

Realized and unrealized gain on investments, net decreased during the nine months ended September 30, 20172023 by $0.6 million or 17.7%, asand $18.5 million, respectively, compared to the same periodperiods in the prior year. The realized and unrealized gains on investments, net duringand losses reflect changes in overall market conditions for the nine months ended September 30, 2017 was primarily attributable to unrealized gains on our domestic equity strategies. The realized and unrealized gains on investments, net during the nine months ended September 30, 2016 primarily consisted of a realized gain of approximately $2.9 million on the sale of one of our equity method investments.respective periods.


Realized and unrealized gain (loss) of consolidated investment products,CIP, net

Realized and unrealized gains,gain (loss) of CIP, net of our CIPs, were $13.5 million during the three months ended September 30, 2017, which primarily consisted of $14.5 million in changes on the note payable as a result of applying the measurement alternative of ASU 2014-13 partially offsetchanged by $1.0 million in realized and unrealized losses on the investments of our CIPs.

Realized and unrealized gains, net of our CIPs, were $16.5 million during the nine months ended September 30, 2017, which primarily consisted of $16.5 million in changes on the note payable as a result of applying the measurement alternative of ASU 2014-13.
Interest Income (Expense), net

Interest income (expense), net by category were as follows:

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 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 vs. 2016 % 2017 2016 2017 vs. 2016 %
($ in thousands)               
Interest Income (Expense)               
Interest expense$(4,116) $(128) $(3,988) N/M
 $(8,098) $(389) $(7,709) N/M
Interest and dividend income679
 221
 458
 207.2 % 1,313
 1,113
 200
 18.0 %
Interest and dividend income of investments of consolidated investment products17,778
 5,411
 12,367
 228.6 % 28,536
 14,856
 13,680
 92.1 %
Interest expense of consolidated investment products(16,249) (3,788) (12,461) 329.0 % (22,101) (10,188) (11,913) 116.9 %
Total Interest Income (Expense), net$(1,908) $1,716
 $(3,624) (211.2)% $(350) $5,392
 $(5,742) (106.5)%

Interest Expense

Interest expense increased $4.0$7.4 million and $7.7$40.6 million forduring the three and nine months ended September 30, 2017,2023, respectively, compared to the same periods in the prior year. The change for the three months ended September 30, 2023 consisted primarily of unrealized gains of $41.8 million due to changes in market values of leveraged loans, partially offset by changes in unrealized losses of $34.4 million related to the value of the notes payable. The change for the nine months ended September 30, 2023 consisted primarily of unrealized gains of $124.8 million due to changes in market values of leveraged loans, partially offset by changes in unrealized losses of $84.2 million related to the value of the notes payable.

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Other income (expense), net
Other income (expense), net changed by $0.8 million and $1.3 million during the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year primarily due to changes in the gains and losses on our equity method investments.

Interest Income (Expense)
Interest Income (Expense), net by category were as follows:
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
(in thousands)20232022$%20232022$%
Interest Income (Expense)
Interest expense$(6,222)$(3,557)$(2,665)74.9 %$(17,444)$(8,661)$(8,783)101.4 %
Interest and dividend income2,872 1,013 1,859 183.5 %8,785 1,870 6,915 369.8 %
Interest and dividend income of investments of CIP49,803 28,644 21,159 73.9 %144,501 71,436 73,065 102.3 %
Interest expense of CIP(38,218)(20,356)(17,862)87.7 %(112,153)(46,860)(65,293)139.3 %
Total Interest Income (Expense), net$8,235 $5,744 $2,491 43.4 %$23,689 $17,785 $5,904 33.2 %

Interest Expense
Interest expense increased $2.7 million, or 74.9%, and $8.8 million, or 101.4%, during the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year. The increases were dueattributable to the write-off of $1.1 million in unamortized deferred financing costs as a result of the termination of our prior credit facility, $1.2 million in delayed draw fees associated with our new credit agreement, and a higher average level ofinterest rates and higher average debt outstandingbalances during the current year periods.

Interest and Dividend Income
Interest and dividend income increased $1.9 million, or 183.5%, and $6.9 million, or 369.8%, during the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year. The increases were primarily attributable to higher interest earned on cash balances during the current year periods compared to the prior year periods.


Interest and Dividend Income of Investments of CIP

Interest and dividend income of investments of CIP increased $0.5$21.2 million, or 207.2%73.9%, and $0.2$73.1 million, or 18.0%102.3%, for the three and nine months ended September 30, 2017,2023, respectively, compared to the same periods in the prior year. The increases were primarily due to a higher dividend paying marketable securitiesaverage interest rates during the three months ended September 30, 2017, compared tocurrent year periods and the same periodsaddition of a CLO in the prior year.third and fourth quarter of 2023 and 2022, respectively.


Interest Expense of CIP
Interest expense of CIP represents interest expense on the notes payable of CIP. Interest expense of CIP increased $17.9 million, or 87.7%, and Dividend Income of Investments of Consolidated Investment Products
Interest and dividend income of investments of CIPs increased $12.4$65.3 million, and $13.7 millionor 139.3%, for the three and nine months ended September 30, 2017,2023, respectively, compared to the same periods in the prior year. The increases were primarily due to a higher balance of our investments of CIPs during the three and nine months ended September 30, 2017 compared to the same periods in the prior year.

Interest Expense of Consolidated Investment Products
Interest expense of CIPs represents interest expense on the notes payable of the CIPs. Interest expense of CIPs increased by $12.5 million, or 329.0%, and $11.9 million, or 116.9%, for the three and six months ended September 30, 2017, respectively,2023 were primarily due to higher average debt balances for our consolidated investment products forinterest rates and the three and nine months ended September 30, 2017 as compared to the same periodsaddition of a CLO in the prior year.third and fourth quarter of 2023 and 2022 respectively.


Income Tax Expense (Benefit)

The provision for income taxes reflectsreflected U.S. federal, state and local taxes at an estimated effective tax rate of 31.7%23.6% and 35.8%35.2% for the nine months ended September 30, 20172023 and 2016,2022, respectively. The decrease in thelower estimated effective tax rate for the nine months ended September 30, 2023 was primarily due to a decreaseexcess tax benefits associated with stock-based compensation and the change in valuation allowances in the current year related to the tax effects of unrealized gains on certain of our investments. The higher effective tax rate in the prior-year period was due to valuation allowances related to market adjustmentsrecorded for the tax effects of unrealized losses on the Company's marketable securities, as well as an increase in the valuation allowance associated with net operating losses that could expire before being utilized.certain of our investments.



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Liquidity and Capital Resources
Certain Financial Data
The following table summarizes certain inancialfinancial data relating to our liquidity and capital resources:
September 30, 2023December 31, 2022Change
September 30, 2017 December 31, 2016 Change
2017 vs. 2016 %    
($ in thousands)       
(in thousands)(in thousands)September 30, 2023December 31, 2022$%
Balance Sheet Data       Balance Sheet Data
Cash and cash equivalents$164,867
 $64,588
 $100,279
 155.3%Cash and cash equivalents$195,403 $338,234 $(142,831)(42.2)%
Investments96,752
 89,371
 7,381
 8.3%Investments152,349 100,330 52,019 51.8 %
Contingent consideration51,690
 —
 51,690
 100.0%Contingent consideration94,421 128,400 (33,979)(26.5)%
Debt248,540
 30,000
 218,540
 728.5%Debt273,815 255,025 18,790 7.4 %
Redeemable noncontrolling interestsRedeemable noncontrolling interests96,266 113,718 (17,452)(15.3)%
Total equity584,187
 321,673
 262,514
 81.6%Total equity867,552 822,936 44,616 5.4 %
 
 Nine Months Ended
September 30,		Change
(in thousands)20232022$%
Cash Flow Data
Provided by (Used in):
Operating activities$229,840 $154,850 $74,990 48.4 %
Investing activities(127,349)(25,747)(101,602)394.6 %
Financing activities(285,769)(318,968)33,199 (10.4)%
 Nine Months Ended September 30, Change
 2017 2016 2017 vs. 2016 %
($ in thousands)       
Cash Flow Data       
Provided by (Used In):       
Operating Activities$(103,783) $(1,130) $(102,653) 9,084.3 %
Investing Activities(389,417) 4,609
 (394,026) (8,549.1)%
Financing Activities796,576
 78,410
 718,166
 915.9 %


Overview

At September 30, 2017,2023, we had $164.9$195.4 million of cash and cash equivalents and $75.7$152.3 million of investments, in marketablewhich included $118.5 million of investment securities, compared to $64.6$338.2 million of cash and $74.9cash equivalents and $100.3 million respectively,of investments, which included $77.0 million of investment securities, at December 31, 2016. At September 30, 2017, we had $260.0 million oustanding under our seven-year term debt ("Term Loan") and no outstanding borrowings under our $100.0 million revolving credit facility (the "Credit Facility"). Our credit agreement contains a net leverage ratio covenant, defined as net debt divided by EBITDA, set at 2.5:1, as of September 30, 2017 with scheduled reductions to 1.75:1 through December 31, 2018 and thereafter. As of September 30, 2017, we had $146.8 million of net debt, when including the $51.7 million of contingent consideration, which resulted in a net leverage ratio of 0.9:1.0 as of September 30, 2017.2022.

During the nine months ended September 30, 2017, we issued 1,046,500 shares of common stock and 1,150,000 shares of 7.25% mandatory convertible preferred stock ("MCPS") in public offerings for net proceeds of $220.5 million, after underwriting discounts, commissions and other offering expenses. We used the net proceeds of these offerings, together with cash on hand, 213,699 shares of our common stock, proceeds from the sale of investments and net borrowings of approximately $244.1 million from the new credit agreement, as described below, to finance the Acquisition and pay related fees and expenses.


Uses of Capital

Our main uses of capital related to operating activities include payments of annual incentivecomprise employee compensation income tax payments and related benefit costs, other operating expenses, which primarily consist of investment research, and technology costs, professional fees, distribution and occupancy costs.costs, interest on our indebtedness and income taxes. Annual incentive compensation, which is one of the largest annual operating cash expenditures, is typically paid in the first quarter of the year. In the first quarterquarters of 20172023 and 2016,2022, we paid approximately $39.7$142.1 million and $42.5$151.6 million, respectively, in incentive compensation earned during the years ended December 31, 20162022 and 2015,2021, respectively.


In addition to the capital used for operating activities, other uses of cash will includecould include: (i) investments in organic growth, including seeding or launching new products and expanding distribution; (ii) debt principal payments through scheduled amortization, excess cash flow payment requirements or additional paydowns; (iii) dividend payments to common stockholders; (iv) repurchases of contingent consideration, (ii) integration costs, including severance, related toour common stock, or withholding obligations for the Acquisition, (iii)net settlement of employee share transactions; (v) investments in our organic growth, including our distribution efforts and launches of new products, (iv) seeding of new investments, including sponsoring CLO issuances from our affiliated managers, (v) interest and principal payments on debt outstanding,infrastructure; (vi) dividend payments to
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preferred and common stockholders, (vii) investments in our infrastructure and (viii) investments in inorganic growth opportunities as they arise. Although we continuously monitor working capitalthat may require upfront and/or future payments; (vii) integration costs, including restructuring and severance, related to ensure adequate resources are available for near-term liquidity requirements, our liquidity could be impacted by contingencies, as described in Note 14acquisitions, if any; and (viii) purchases of our consolidated financial statements.affiliate equity interests.
    
Capital and Reserve Requirements

We operate twoan SEC registered broker-dealer subsidiaries registered with the SEC which aresubsidiary that is subject to certain rules regarding minimum net capital. The broker-dealers are required to maintain a ratio of “aggregate indebtedness” to “net capital,” as defined, which may not exceed 15 to 1 and must also maintain a minimum amount of net capital. Failure to meet these requirements could result in adverse consequences to us, including additional reporting requirements a lower required ratio of aggregate indebtedness to net capital or interruption of our business. At both September 30, 2017 and December 31, 2016, the ratio of aggregate indebtedness to net capital of2023, our broker-dealers was below the maximum allowed, andbroker-dealer net capital was significantly greater than the required minimum.


Balance Sheet

Cash and cash equivalents consist of cash in banks and money market fund investments. Investments consist primarily of investments in our affiliated mutualsponsored funds. Consolidated investment products primarilyCIP represent investment products for which we provide investment management
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services and where we either have either a controlling financial interest or we are considered the primarilyprimary beneficiary of an investment product that is a considered a variable interest entity.


Operating Cash Flow

Net cash used inprovided by operating activities of $103.8$229.8 million for the nine months ended September 30, 20172023 increased by $102.7$75.0 million from net cash usedprovided by operating activities of $1.1$154.9 million for the same period in the prior year primaryprimarily due to an increase of $129.9 million in net purchasessales of investments of our consolidated investment products.by CIP.


Investing Cash Flow

Net cash used inCash flows from investing activities consistsconsist primarily of capital expenditures and other investing activities related to our investing activities.business operations. Net cash used in investing activities of $389.4was $127.3 million for the nine months ended September 30, 2017 increased by $394.0 million from2023 compared to net cash provided byused in investing activities of $4.6$25.7 million in the same period for the prior year. The primaryincrease in cash used in investing activities forduring the nine months ended September 30, 20172023 compared to the prior year period was $393.4 millionprimarily due to the acquisition of net cash used for the Acquisition.AlphaSimplex.


Financing Cash Flow

Cash flows provided byfrom financing activities consist primarily of the issuance of common and preferred stock, return of capital through repurchases of common shares, dividends, withholding obligations for the net share settlement of employee share transactions and contributions to noncontrolling interests related to our consolidated investment products.common shares, issuance and repayment of debt by us and CIP, payments of contingent consideration and changes to noncontrolling interests. Net cash provided byused in financing activities increased $718.2decreased by $33.2 million to $796.6$285.8 million for the nine months ended September 30, 2017 as compared to $78.42023 from $319.0 million for the nine months ended September 30, 2016.2022. The primary reason for the increasenet change was primarily due to cash raiseda $55.0 million decrease in share repurchases and an increase of $220.5 million related to the issuance of preferred stock and common stock, net of issuance costs paid, $244.1 million in term loan borrowings, net of issuance costs paid, and $369.0$30.0 million in net borrowings of our consolidated investment products. These financing cash inflows wereon the credit agreement in the current year, partially offset by a $54.9 million increase on the repaymentsrepayment on borrowings of $30.0 million on our terminated credit facility.CIP.


CreditCredit Agreement

On June 1, 2017, in a connection with the Acquisition, the Company entered into a newThe Company's credit agreement ("Credit(the "Credit Agreement") comprised of (1) $260.0, most recently amended on June 20, 2023, changing the base interest rate from LIBOR to SOFR, comprises (i) a $275.0 million ofterm loan with a seven-year term debt ("Term(the "Term Loan") expiring in September 2028, and (2)(ii) a $100.0$175.0 million five-year revolving credit facility ("Credit Facility"). Additionally, aswith a result of the Credit Agreement, the Company's previous revolving credit facility and December 16, 2016 debt financing commitment were terminated.five-year term expiring in September 2026. During the nine months ended September 30, 2017,2023, the Company expensed approximately $1.1repaid $30.0 million of unamortized deferred financing costs related to the previous senior unsecured revolving credit facility. The Company borrowed the full $260.0and $2.1 million under the Term Loan on June 1, 2017 to fund a portion of the purchase price of the Acquisition, and at September 30, 2017, $260.0 million was outstanding.


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Amounts outstanding under the Credit Agreement for therevolving credit facility and Term Loan, and the Credit Facility bear interest at an annual rate equal to, at the option of the Company, either (i) LIBOR (adjusted for reserves) for interest periods of one, two, three or six months (or, solely in the case of the Credit Facility, if agreed to by each relevant Lender, twelve months or periods less than one month), subject to a “floor” of 0% for the Credit Facility and 0.75% for the Term Loan, or (ii) an alternate base rate, in either case plus an applicable margin. The applicable margins are set initially at 3.75%, in the case of LIBOR-based loans, and 2.75%, in the case of alternate base rate loans, and will range from 3.50% to 3.75%, in the case of LIBOR-based loans, and 2.50% to 2.75%, in the case of alternate base rate loans, based on the secured net leverage ratio of the Company as of the last day of the preceding fiscal quarter. Interest is payable on the last day of each interest period with respect to LIBOR-based loans, but at least at three-month intervals, and quarterly in arrears with respect to alternate base rate loans (but, in the case of LIBOR-based loans with an interest period of more than three months).

The obligations of the Company under the Credit Agreement are guaranteed by certain of its subsidiaries (the “Guarantors”) and secured by substantially all of the assets of the Company and the Guarantors, subject to customary exceptions. The Credit Agreement contains customary affirmative and negative covenants, including covenants that affect, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, create liens, merge or dissolve, make investments, dispose of assets, engage in sale and leaseback transactions, purchase of shares of our common stock, make distributions and dividends and pre-payments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year, or modify its organizational documents, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains a financial maintenance covenant, requiring a maximum leverage ratio, as of the last day of each of the trailing four fiscal quarter periods, of no greater than the levels set forth in the Credit Agreement.

At any time, upon timely notice, the Company may terminate the Credit Agreement in full, reduce the commitment under the Credit Facility in minimum specified increments, or prepay the Term Loan in whole or in part, subject to the payment of breakage fees with respect to LIBOR-based loans and, in the case of any Term Loans that are prepaid in connection with a “repricing transaction” occurring within the six-month period following the closing date, a 1.00% premium.

Term Loan

The Term Loan, which was priced on March 2, 2017, had a delayed draw fee of $1.2 million between March 2, 2017 and the closing date of June 1, 2017. The Term Loan amortizes at the rate of 1.00% per annum payable in equal quarterly installments and will be mandatorily repaid with: (a) 50% of the Company’s excess cash flow on an annual basis, beginning with the fiscal year ended December 31, 2018, stepping down to 25% if the Company’s secured net leverage ratio declines below 1.0, and further stepping down to 0% if the Company’s secured net leverage ratio declines below 0.5; (b) the net proceeds of certain asset sales, casualty or condemnation events, subject to customary reinvestment rights; and (c) the proceeds of any indebtedness incurred other than indebtedness permitted to be incurred by the Credit Agreement.
Credit Facility

respectively. At September 30, 2017, no amounts2023, $20.0 million and $259.5 million were outstanding under the Credit Facility. The Company has the right, subject to customary conditions specified in the Credit Agreement, to request additional revolving credit facility commitments and additional term loans to be madeTerm Loan, respectively. In accordance with ASC 835, Interest, the amounts outstanding under the Credit Agreement up to an aggregate amount equal to the sum of (x) $75.0 million and (y) an amount subject to a pro forma secured net leverage ratio of the Company of no greater than 1.75 to 1.00.

Under the terms of the Credit Agreement, the Company is required to pay a quarterly commitment feeCompany's Term Loan are presented on the average unused amountCondensed Consolidated Balance Sheet net of the Credit Facility,related debt issuance costs, which fee is initially set at 0.50% and will, following the first delivery of certain financial reports required under the Credit Agreement, range from 0.375% to 0.50%, based on the secured net leverage ratio of the Companywere $5.7 million as of the last day of the preceding fiscal quarter, as reflected in such financial reports.September 30, 2023.

Contractual Obligations

Except for borrowings under our Credit Agreement and notes payable of consolidated investment products acquired as part of the Acquisition as previously discussed in our Form 10-Q for the quarterly period ended June 30, 2017, there have been no material changes outside of the ordinary course of business in our contractual obligations since December 31, 2016 as disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2016.

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Critical Accounting Policies and Estimates

Our financial statements and the accompanying notes are prepared in accordance with generally accepted accounting principles generally accepted in the United States of America, which require the use of estimates. Actual results will vary from these estimates. A discussion of our critical accounting policies and estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 20162022 Annual Report on Form 10-K. A complete description of our significant accounting policies is included in our 20162022 Annual Report on Form 10-K. There were no material changes in our critical accounting policies and estimates in the three months ended September 30, 2017.2023.


Recently Issued Accounting Pronouncements
For a discussion of accounting standards, see Note 2 withinin our condensed consolidated financial statements.


Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Market Risk
Substantially all of our revenues are derived from investment management, distribution and service, and administration and transfer agent fees, which are based on the market value of assets under management. Accordingly, a decline in the prices of securities would cause our revenues and income to decline due to a decrease in the value of the assets under management. In addition, a decline in security prices could cause our clients to withdraw their investments in favor of other investments offering higher returns or lower risk, which would cause our revenues and income to decline.
We are also subjectThe Company is primarily exposed to market risk due to a decline in the market value of our investments, which consist of marketable securities, other investments and the Company’s net interests in consolidated investment products. The following table summarizes the impact of a 10% increase or decrease in the fair values of these financial instruments:
 September 30, 2017
$ in thousandsFair Value 10% Change
    
Marketable Securities - Available for Sale (a)
$3,896
 $390
Marketable Securities - Trading (b)
71,806
 7,181
Other Investments (b)
2,741
 274
Company's net interests in Consolidated Investment Products (c)
123,629
 12,363
Total Investments subject to Market Risk$202,072
 $20,208
(a)Any gains or losses arising from changes in the fair value of available-for-sale investments are recognized in accumulated other comprehensive income, net of tax, until the investment is sold or otherwise disposed of, or if the investment is determined to be other-than-temporarily impaired, at which time the cumulative gain or loss previously reported in equity is included in income. The Company evaluates the carrying value of investments for impairment on a quarterly basis. In its impairment analysis, the Company takes into consideration numerous criteria, including the duration and extent of any decline in fair value and the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value. If the decline in value is determined to be other-than-temporary, the carrying value of the security is generally written down to fair value through the Condensed Consolidated Statement of Operations. If such a 10% increase or decrease in fair value were to occur, it would not result in an other-than-temporary impairment charge that would be material to the Company's pre-tax earnings.
(b)If such a 10% increase or decrease in fair values were to occur, the change of these investments would result in a corresponding increase or decrease in our pre-tax earnings.
(c)These represent the Company's direct investments in investment products that are consolidated. Upon consolidation, these direct investments are eliminated, and the assets and liabilities of consolidated investment products are consolidated in the Condensed Consolidated Balance Sheet, together with a noncontrolling interest balance representing the portion of the consolidated investment products owned by third parties. If a 10% increase or decrease in the fair values of the Company's direct investments in consolidated investment products were to occur, it would result in a corresponding increase or decrease in the Company's pre-tax earnings.
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Interest Rate Risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. At September 30, 2017, we were exposed to interest rate risk as a result of approximately $157.0 million in investments we have in fixed and floating rate income funds/products in which we have invested and which includes our net interests in consolidated investment products. We considered a hypothetical 100 basis point changeassociated with unfavorable movements in interest rates and determined thatsecurities prices. During the fair value of our fixed income investments could change by an estimated $1.1 million.
Atthree and nine months ended September 30, 2017, we had $260.0 million outstanding under our Term Loan and2023, there were no amounts outstanding under our Credit Facility. Amounts outstanding undermaterial changes to the Credit Agreement bear interest at an annual rate equal to, at the optioninformation contained in Part II, Item 7A of the Company, either LIBOR (adjusted for reserves) for interest periods of one, two, three or six months (or, solely in the case of the revolving credit facility, if agreed to by each relevant Lender, twelve months or periods less than one month) (subject to a “floor” of 0% in the case of the revolving credit facility and 0.75% in the case of the term loan) or an alternate base rate, in either case plus an applicable margin. The applicable margins are initially set at 3.75%, in the case of LIBOR-based loans, and 2.75%, in the case of alternate base rate loans and will, following the first delivery of certain financial reports required under the credit agreement, range from 3.50% to 3.75%, in the case of LIBOR-based loans, and 2.50% to 2.75%, in the case of alternate base rate loans, basedCompany's 2022 Annual Report on the secured net leverage ratio of the Company as of the last day of the preceding fiscal quarter, as reflected in such financial reports.Form 10-K.
At September 30, 2017, we had $1,455.9 million outstanding of notes payable of our consolidated investment products. The notes bear interest at annual rates equal to the average LIBOR rate for interest periods of three months and six months plus, in each case, an applicable margin, that ranges from 1.00% to 8.75%.


Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sSEC's rules and forms and that such information is
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accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.


Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Consistent with guidance issued by the Securities and Exchange Commission that an assessment of internal controls over financial reporting of a recently acquired business may be omitted from management's evaluation of disclosure controls and procedures, management is excluding an assessment of such internal controls of RidgeWorth acquired by the Company on June 1, 2017, from its evaluation of the effectiveness of the Company's disclosure controls and procedures. RidgeWorth represented approximately 69.3% of the Company's consolidated total assets and 26.3% of the Company's consolidated total revenues as of and for the quarter ended September 30, 2017.

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2017,2023, the end of the period covered by this Quarterly Report on Form 10-Q.


Changes in Internal ControlsControl over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


As mentioned above, the Company acquired RidgeWorth on June 1, 2017. The Company is in the process of reviewing the internal control structure of RidgeWorth and, if necessary, will make appropriate changes as it integrates RidgeWorth into the Company's overall internal control over financial reporting process.

PART II – OTHER INFORMATION
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Item 1.    Legal Proceedings

Legal Matters

The Companyinformation set forth in response to Item 103 of Regulation S-K under "Legal Proceedings" is regularly involved in litigationincorporated by reference from Part I, Financial Information Item 1. "Financial Statements" Note 14 "Commitments and arbitration as well as examinations, inquiries and investigations by various regulatory bodies, including the Securities and Exchange Commission ("SEC"), involving its compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting its products and other activities. Legal and regulatory mattersContingencies" of this nature involve or may involve but are not limited to the Company’s activities as an employer, issuer of securities, investor, investment adviser, broker-dealer or taxpayer. In addition, in the normal course of business, the Company discusses matters with its regulators raised during regulatory examinations or is otherwise subject to their inquiry. These matters could result in censures, fines, penalties or other sanctions.Quarterly Report on Form 10-Q.


The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. In addition, in the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosures related to such matter as appropriate and in compliance with ASC 450, Loss Contingencies. The disclosures, accruals or estimates, if any, resulting from the foregoing analysis are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. Based on information currently available, available insurance coverage, indemnities and established reserves, the Company believes that the outcomes of its legal and regulatory proceedings are not likely, either individually or in the aggregate, to have a material adverse effect on the Company’s results of operations, cash flows or its consolidated financial condition. However, in the event of unexpected subsequent developments and given the inherent unpredictability of these legal and regulatory matters, the Company can provide no assurance that its assessment of any claim, dispute, regulatory examination or investigation or other legal matter will reflect the ultimate outcome and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods.

In re Virtus Investment Partners, Inc. Securities Litigation; formerly Tom Cummins v. Virtus Investment Partners Inc.
et al

On February 20, 2015, a putative class action complaint alleging violations of certain provisions of the federal securities laws was filed by an individual shareholder against the Company and certain of the Company’s current officers (the “defendants”) in the United States District Court for the Southern District of New York (the "Court"). On April 21, 2015, three plaintiffs, including the original plaintiff, filed motions to be appointed lead plaintiffs and, on June 9, 2015, the Court appointed Arkansas Teachers Retirement System lead plaintiff. On August 21, 2015, the plaintiff filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint, which was purportedly filed on behalf of all purchasers of the Company’s common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint alleges that, during the Class Period, the defendants disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds formerly subadvised by F-Squared Investments Inc. ("F-Squared"). The Consolidated Complaint alleges claims under Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5. The plaintiff seeks to recover unspecified damages. A motion to dismiss the Consolidated Complaint was filed on behalf of the Company and the other defendants on October 21, 2015. On July 1, 2016, the Court entered an opinion and order granting in part, and denying in part, the motion to dismiss, narrowing Plaintiff's claims under Sections 10(b) and 20(a) of the Exchange Act and dismissing one of the defendants from the suit. The remaining defendants' Answer to the Consolidated Complaint was filed on August 5, 2016. Plaintiff's motion for class certification was granted on May 15, 2017. Discovery has since been completed. On October 6, 2017, defendants moved for summary judgment, and briefing on that motion is expected to be completed on December 21, 2017. The Company believes that the suit is without merit and intends to defend it vigorously. The Company believes that there is not a material loss that is probable and reasonably estimable related to this claim.

Mark Youngers v. Virtus Investment Partners, Inc. et al

On May 8, 2015, a putative class action complaint alleging violations of certain provisions of the federal securities laws was filed in the United States District Court for the Central District of California (the "District Court") by an individual who alleges he is a former shareholder of one of the Virtus mutual funds formerly subadvised by F-Squared and formerly known as the AlphaSector Funds. The complaint alleges claims against the Company, certain of the Company’s officers and
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affiliates, and certain other parties (the “defendants”). The complaint was purportedly filed on behalf of purchasers of the AlphaSector Funds between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”). The complaint alleges that, during the Class Period, the defendants disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On June 7, 2015, a group of three individuals, including the original plaintiff, filed a motion to be appointed lead plaintiff, and on July 27, 2015, the District Court appointed movants as lead plaintiff. On October 1, 2015, the plaintiffs filed a First Amended Class Action Complaint which, among other things, added a derivative claim for breach of fiduciary duty on behalf of Virtus Opportunities Trust. On October 19, 2015, the District Court entered an order transferring the action to the Southern District of New York (the "Court"). On January 4, 2016, the Plaintiffs filed a Second Amended Complaint. A motion to dismiss was filed on behalf of the Company and affiliated defendants on February 1, 2016. On July 1, 2016, the Court entered an opinion and order granting in part, and denying in part, the motion to dismiss. The Court dismissed four causes of action entirely and a fifth cause of action with respect to a portion of the Class Period. The Court also dismissed all claims against ten defendants named in the Complaint. The Court held that the Plaintiffs may pursue certain securities claims under Sections 10(b) and 20(a) of the Exchange Act and Section 12 of the Securities Act of 1933. The remaining defendants filed an Answer to the Second Amended Complaint on August 5, 2016. A Stipulation of Voluntary Dismissal of the claim under Section 12 of the Securities Act was filed on September 15, 2016. The defendants filed a motion to certify an interlocutory appeal of the July 1, 2016 order to the Court of Appeals for the Second Circuit on August 26, 2016. The motion was denied on January 6, 2017. Plaintiff's motion for class certification was denied on May 15, 2017. On July 28, 2017 Plaintiffs filed a motion seeking leave to amend their complaint to address deficiencies identified by the Court in its orders dismissing, in part, plaintiffs' Second Amended Complaint and denying class certification. Briefing on that motion was completed, and a hearing was held on September 7, 2017, where the court reserved decision. The Company believes that the suit has no basis in law or fact and intends to defend it vigorously. The Company believes that there is not a material loss that is probable and reasonably estimable related to this claim.

Item 1A.    Risk Factors
The reader should carefully consider, in connection with the other information in this report,There have been no material changes to the Company’s risk factors from those previously reported in our 20162022 Annual Report on Form 10-K.
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Item 2.    Unregistered Sales of Equity Securities, and Use of Proceeds, and Issuer Purchases of Equity Securities

AsAn aggregate of September 30, 2017, 3,430,0455,680,045 shares of our common stock have been authorized to be repurchased under a share repurchase program since it was initially approved in 2010 by our Board of Directors, and 133,756Directors. As of September 30, 2023, 702,497 shares remainremained available for repurchase. Under the terms of the program, we may repurchase shares of our common stock from time to time at our discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price, and prevailing market and business conditions.conditions, tax and other financial considerations. The program, which has no specified term, may be suspended or terminated at any time.


The following table sets forth information regarding our share repurchases in each month during the quarter ended September 30, 2017:2023.

PeriodTotal number of shares purchasedAverage price paid per share (1)Total number of shares purchased as part of publicly announced plans or programs (2)Maximum number of shares that may yet be purchased under the plans or programs (2)
July 1-31, 20231,900 $206.69 1,900 774,612 
August 1-31, 202343,618 $201.82 43,618 730,994 
September 1-30, 202328,497 $203.60 28,497 702,497 
Total74,015 74,015 

MonthTotal number of shares repurchased Average price paid per share (1) Total number of shares repurchased as part of publicly announced plans or programs (2) Maximum number of shares that may yet be repurchased under the plans or programs (2)
July 1-31, 2017—
 —
 —
 200,000
August 1-31, 2017—
 —
 —
 200,000
September 1-30, 201766,244
 $113.21
 66,244
 133,756
Total66,244
   66,244
  

(1)Average price paid per share is calculated on a settlement basis and excludes commissions.
(2)The share repurchases above were completed pursuant to a program announced in the fourth quarter of 2010 and most recently expanded in October 2015. This repurchase program is not subject to an expiration date.

(2)The share repurchases above were completed pursuant to a program announced in the fourth quarter of 2010 and most recently expanded in May 2022. This repurchase program is not subject to an expiration date.
There were no unregistered sales
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Item 5.    Other Information
During the period covered by this Quarterly Report. Shares of our common stock purchased by participants in our Employee Stock Purchase Plan were delivered to participant accounts via open market purchases at fair value by the third-party administrator under the plan. We do not reserve shares for this plan or discount the purchase pricethree months ended September 30, 2023, none of the shares.Company's directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended), adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).


Item 6.    Exhibits
Exhibit
Number
Description
31.1
Certification of the Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of the Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of the Registrant’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101The following information is formatted in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 20172023 and December 31, 2016,2022, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 20172023 and 2016,2022, (iii) Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 20172023 and 2016,2022, (iv) Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 20172023 and 2016,2022, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 20172023 and 20162022 and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited).
104Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November 6, 2017
8, 2023
VIRTUS INVESTMENT PARTNERS, INC.
(Registrant)
VIRTUS INVESTMENT PARTNERS, INC.
By:(Registrant)
By:/s/ Michael A. Angerthal


Michael A. Angerthal
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)



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