

Delaware		26-3962811
~~Delaware~~	~~26-3962811~~
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

(Address of principal executive offices, including Zip Code)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

~~Title of each class~~

~~Trading Symbol(s)~~

~~Name of each exchange on which registered~~

Common Stock, $0.01 par value ~~(including Preferred Share Purchase Rights)~~

VRTS

The 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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 ☒

The number of shares outstanding of the registrant’s common stock was ~~6,878,020~~7,613,154 as of October ~~24, 2019.~~

Table of Contents

VIRTUS INVESTMENT PARTNERS, INC.

INDEX



		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets (Unaudited) as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019	1
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	2
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	4
	Condensed Consolidated Statements of Changes in Equity (Unaudited) for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	56
	Notes to Condensed Consolidated Financial Statements (Unaudited)	68
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2221
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3533
Item 4.	Controls and Procedures	3533

Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	3634
Item 1A.	Risk Factors	3634
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3635
Item 6.	Exhibits	3735
	Signatures	3836

"We," "us," "our," ~~"the Company,~~the "Company," and "Virtus" as used in this Quarterly Report on Form 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

Virtus Investment Partners, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except share data)	September 30, 2020		December 31, 2019
Assets:
Cash and cash equivalents	$	202,212	$	221,781
Investments	54,446		83,206
Accounts receivable, net	76,616		74,132
Assets of consolidated investment products ("CIP")
Cash and cash equivalents of CIP	48,228		99,691
Cash pledged or on deposit of CIP	6,007		467
Investments of CIP	2,333,685		2,030,110
Other assets of CIP	27,415		23,612
Furniture, equipment and leasehold improvements, net	15,287		18,150

Intangible assets, net	287,793		310,391
Goodwill	290,366		290,366
Deferred taxes, net	8,862		15,879
Other assets	39,807		36,849
Total assets	$	3,390,724	$	3,204,634
Liabilities and Equity
Liabilities:
Accrued compensation and benefits	$	87,256	$	101,377
Accounts payable and accrued liabilities	21,633		23,308
Dividends payable	8,742		8,915

Debt	218,014		277,839

Other liabilities	35,833		40,507
Liabilities of CIP
Notes payable of CIP	2,190,937		1,834,535
Securities purchased payable and other liabilities of CIP	41,020		168,051
Total liabilities	2,603,435		2,454,532
Commitments and Contingencies (Note 13)

Redeemable noncontrolling interests	99,277		63,845
Equity:
Equity attributable to stockholders:
Series D mandatory convertible preferred stock, $0.01 par value, 0 and 1,150,000 shares authorized, issued and outstanding at September 30, 2020 and December 31, 2019, respectively	0		110,843
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 11,780,481 shares issued and 7,613,154 shares outstanding at September 30, 2020, respectively, and 10,736,887 shares issued and 6,809,280 shares outstanding at December 31, 2019, respectively	118		107
Additional paid-in capital	1,301,735		1,199,205
Retained earnings (accumulated deficit)	(178,574)		(215,216)
Accumulated other comprehensive income (loss)	0		9
Treasury stock, at cost, 4,167,327 and 3,927,607 shares at September 30, 2020 and December 31, 2019, respectively	(444,249)		(419,249)
Total equity attributable to stockholders	679,030		675,699
Noncontrolling interests	8,982		10,558
Total equity	688,012		686,257
Total liabilities and equity	$	3,390,724	$	3,204,634

September 30,
2019 December 31,
2018
($ in thousands, except share data)
Assets:
Cash and cash equivalents $ 195,870
$ 201,705
Investments 44,583
79,558
Accounts receivable, net 74,173
70,047
Assets of consolidated investment products ("CIP")
Cash and cash equivalents of CIP 77,562
52,015
Cash pledged or on deposit of CIP 5,600
936
Investments of CIP 2,018,923
1,749,568
Other assets of CIP 16,822
31,057
Furniture, equipment and leasehold improvements, net 19,494
20,154
Intangible assets, net 317,924
338,812
Goodwill 290,366
290,366
Deferred taxes, net 18,475
22,116
Other assets 33,339
14,201
Total assets $ 3,113,131
$ 2,870,535
Liabilities and Equity
Liabilities:
Accrued compensation and benefits $ 78,073
$ 93,339
Accounts payable and accrued liabilities 23,310
27,926
Dividends payable 8,744
7,762
Debt 291,995
329,184
Other liabilities 36,487
20,010
Liabilities of CIP
Notes payable of CIP 1,821,243
1,620,260
Securities purchased payable and other liabilities of CIP 84,053
70,706
Total liabilities 2,343,905
2,169,187
Commitments and Contingencies (Note 15)

Redeemable noncontrolling interests 91,610
57,481
Equity:
Equity attributable to stockholders:
Series D mandatory convertible preferred stock, $0.01 par value, 1,150,000 shares authorized, issued and outstanding at September 30, 2019 and December 31, 2018 110,843
110,843
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 10,719,458 shares issued and 6,877,596 shares outstanding at September 30, 2019 and 10,552,624 shares issued and 6,997,382 shares outstanding at December 31, 2018, respectively 107
106
Additional paid-in capital 1,202,130
1,209,805
Retained earnings (accumulated deficit) (238,108 ) (310,865 )
Accumulated other comprehensive income (loss) (19 ) (731 )
Treasury stock, at cost, 3,841,862 and 3,555,242 shares at September 30, 2019 and December 31, 2018, respectively (409,249 ) (379,249 )
Total equity attributable to stockholders 665,704
629,909
Noncontrolling interests of CIP 11,912
13,958
Total equity 677,616
643,867
Total liabilities and equity $ 3,113,131
$ 2,870,535

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

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)	2020		2019		2020		2019
Revenues
Investment management fees	$	129,785	$	120,023	$	360,623	$	340,532
Distribution and service fees	9,797		10,442		28,146		31,122
Administration and shareholder service fees	15,114		15,280		43,056		44,747
Other income and fees	94		210		425		761
Total revenues	154,790		145,955		432,250		417,162
Operating Expenses
Employment expenses	67,479		61,282		193,772		180,256
Distribution and other asset-based expenses	19,570		20,927		56,324		62,013
Other operating expenses	16,343		18,228		52,664		56,125
Operating expenses of consolidated investment products ("CIP")	1,016		376		9,944		3,395
Restructuring and severance	735		523		1,155		2,019
Depreciation expense	1,106		1,245		3,560		3,729
Amortization expense	7,532		7,587		22,598		22,711
Total operating expenses	113,781		110,168		340,017		330,248
Operating Income (Loss)	41,009		35,787		92,233		86,914
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net	2,498		2		2,068		5,474
Realized and unrealized gain (loss) of CIP, net	2,680		(5,344)		(12,733)		2,455
Other income (expense), net	999		746		806		1,892
Total other income (expense), net	6,177		(4,596)		(9,859)		9,821
Interest Income (Expense)
Interest expense	(2,877)		(4,889)		(9,202)		(15,205)
Interest and dividend income	137		863		1,131		3,017
Interest and dividend income of investments of CIP	26,088		30,290		83,951		87,060
Interest expense of CIP	(17,622)		(21,252)		(70,258)		(72,030)
Total interest income (expense), net	5,726		5,012		5,622		2,842
Income (Loss) Before Income Taxes	52,912		36,203		87,996		99,577
Income tax expense (benefit)	11,978		10,844		29,847		23,851
Net Income (Loss)	40,934		25,359		58,149		75,726
Noncontrolling interests	(11,286)		(1,274)		(21,507)		(2,969)
Net Income (Loss) Attributable to Stockholders	29,648		24,085		36,642		72,757
Preferred stockholder dividends	0		(2,085)		0		(6,253)
Net Income (Loss) Attributable to Common Stockholders	$	29,648	$	22,000	$	36,642	$	66,504
Earnings (Loss) per Share—Basic	$	3.86	$	3.17	$	4.81	$	9.51
Earnings (Loss) per Share—Diluted	$	3.71	$	2.95	$	4.60	$	8.86


Weighted Average Shares Outstanding—Basic	7,684		6,947		7,611		6,990
Weighted Average Shares Outstanding—Diluted	7,997		8,157		7,958		8,215

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
($ in thousands, except per share data)
Revenues
Investment management fees $ 120,023
$ 121,713
$ 340,532
$ 325,357
Distribution and service fees 10,442
13,730
31,122
39,886
Administration and shareholder service fees 15,280
16,567
44,747
48,272
Other income and fees 210
200
761
655
Total revenues 145,955
152,210
417,162
414,170
Operating Expenses
Employment expenses 61,282
63,269
180,256
178,833
Distribution and other asset-based expenses 20,927
25,386
62,013
71,398
Other operating expenses 18,228
20,350
56,125
56,340
Operating expenses of consolidated investment products ("CIP") 376
529
3,395
2,823
Restructuring and severance 523
—
2,019
—
Depreciation and other amortization 1,245
1,189
3,729
3,304
Amortization expense 7,587
7,541
22,711
17,601
Total operating expenses 110,168
118,264
330,248
330,299
Operating Income (Loss) 35,787
33,946
86,914
83,871
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net 2
(374 ) 5,474
1,024
Realized and unrealized gain (loss) of CIP, net (5,344 ) (4,735 ) 2,455
(4,255 )
Other income (expense), net 746
549
1,892
2,323
Total other income (expense), net (4,596 ) (4,560 ) 9,821
(908 )
Interest Income (Expense)
Interest expense (4,889 ) (5,155 ) (15,205 ) (13,482 )
Interest and dividend income 863
716
3,017
3,255
Interest and dividend income of investments of CIP 30,290
26,596
87,060
71,678
Interest expense of CIP (21,252 ) (16,959 ) (72,030 ) (46,786 )
Total interest income (expense), net 5,012
5,198
2,842
14,665
Income (Loss) Before Income Taxes 36,203
34,584
99,577
97,628
Income tax expense (benefit) 10,844
6,653
23,851
22,641
Net Income (Loss) 25,359
27,931
75,726
74,987
Noncontrolling interests (1,274 ) (933 ) (2,969 ) (1,619 )
Net Income (Loss) Attributable to Stockholders 24,085
26,998
72,757
73,368
Preferred stockholder dividends (2,085 ) (2,085 ) (6,253 ) (6,253 )
Net Income (Loss) Attributable to Common Stockholders $ 22,000
$ 24,913
$ 66,504
$ 67,115
Earnings (Loss) per Share—Basic $ 3.17
$ 3.47
$ 9.51
$ 9.33
Earnings (Loss) per Share—Diluted $ 2.95
$ 3.19
$ 8.86
$ 8.67
Cash Dividends Declared per Preferred Share $ 1.81
$ 1.81
$ 5.44
$ 5.44
Cash Dividends Declared per Common Share $ 0.67
$ 0.55
$ 1.77
$ 1.45
Weighted Average Shares Outstanding—Basic (in thousands) 6,947
7,175
6,990
7,195
Weighted Average Shares Outstanding—Diluted (in thousands) 8,157
8,456
8,215
8,463

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

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,
	2019			2018			2019			2018
($ in thousands)
(in thousands)													(in thousands)	2020		2019		2020		2019
Net Income (Loss)	$	25,359		$	27,931		$	75,726		$	74,987		Net Income (Loss)	$	40,934	$	25,359	$	58,149	$	75,726
Other comprehensive income (loss), net of tax:													Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $4 and $2 for the three months ended September 30, 2019 and 2018, respectively, and $5 and $4 for the nine months ended September 30, 2019 and 2018, respectively	(12		)	(2		)	(14		)	(10		)
Unrealized gain (loss) on available-for-sale securities, net of tax of ($9) and $68 for the three and nine months ended September 30, 2018, respectively	—			24			—			(168		)
Foreign currency translation adjustment, net of tax of $(6) and $4 for the three months ended September 30, 2020 and 2019, respectively, and $3 and $5 for the nine months ended September 30, 2020 and 2019, respectively													Foreign currency translation adjustment, net of tax of $(6) and $4 for the three months ended September 30, 2020 and 2019, respectively, and $3 and $5 for the nine months ended September 30, 2020 and 2019, respectively	17		(12)		(9)		(14)

Other comprehensive income (loss)	(12		)	22			(14		)	(178		)	Other comprehensive income (loss)	17		(12)		(9)		(14)
Comprehensive income (loss)	25,347			27,953			75,712			74,809			Comprehensive income (loss)	40,951		25,347		58,140		75,712
Comprehensive (income) loss attributable to noncontrolling interests	(1,274		)	(933		)	(2,969		)	(1,619		)	Comprehensive (income) loss attributable to noncontrolling interests	(11,286)		(1,274)		(21,507)		(2,969)
Comprehensive Income (Loss) Attributable to Stockholders	$	24,073		$	27,020		$	72,743		$	73,190		Comprehensive Income (Loss) Attributable to Stockholders	$	29,665	$	24,073	$	36,633	$	72,743

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

Table of Contents

Virtus Investment Partners, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
(in thousands)	2020		2019
Cash Flows from Operating Activities:
Net income (loss)	$	58,149	$	75,726
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense, intangible asset and other amortization	32,153		29,766
Stock-based compensation	16,412		16,384
Amortization of deferred commissions	1,544		2,413
Payments of deferred commissions	(1,475)		(1,522)
Equity in earnings of equity method investments	(855)		(2,001)
(Gain) loss on extinguishment of debt	(705)		0
Realized and unrealized (gains) losses on investments, net	(2,069)		(4,636)
Distributions from equity method investments	921		828
Sales (purchases) of investments, net	15,586		8,784
Deferred taxes, net	7,020		3,392

Changes in operating assets and liabilities:
Accounts receivable, net and other assets	(7,989)		(3,057)
Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities	(22,931)		(24,211)
Operating activities of consolidated investment products ("CIP"):
Realized and unrealized (gains) losses on investments of CIP, net	6,739		(3,063)
Purchases of investments by CIP	(1,114,801)		(805,599)
Sales of investments by CIP	624,675		588,678
Net proceeds (purchases) of short term investments by CIP	1,434		2,294
(Purchases) sales of securities sold short by CIP, net	267		1,241
Change in other assets of CIP	(2,039)		(184)
Change in liabilities of CIP	(3,472)		7,247
Amortization of discount on notes payable of CIP	11,169		4,505
Net cash provided by (used in) operating activities	(380,267)		(103,015)
Cash Flows from Investing Activities:
Capital expenditures and other asset purchases	(789)		(6,961)

Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net	9,724		18,408


Sale of available-for-sale securities	0		2,023

Net cash provided by (used in) investing activities	8,935		13,470

Cash Flows from Financing Activities:

Payment of long term debt	(61,573)		(39,839)



Common stock dividends paid	(16,460)		(12,244)
Preferred stock dividends paid	(2,084)		(6,253)
Repurchases of common shares	(25,000)		(30,000)

Taxes paid related to net share settlement of restricted stock units	(5,530)		(5,953)
Net subscriptions received from (redemptions/distributions paid to) noncontrolling interests	(5,935)		7,630
Financing activities of CIP:
Payments on borrowings by CIP	(358,725)		(195,697)
Borrowings by CIP	781,147		396,277
Net cash provided by (used in) financing activities	305,840		113,921
Net increase (decrease) in cash, cash equivalents and restricted cash	(65,492)		24,376
Cash, cash equivalents and restricted cash, beginning of period	321,939		254,656
Cash, cash equivalents and restricted cash, end of period	$	256,447	$	279,032
Non-Cash Investing Activities:
Change in accrual for capital expenditures	$	8	$	(1,784)
Non-Cash Financing Activities:
Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net	$	17,137	$	22,046


Common stock dividends payable	$	6,288	$	4,608
Preferred stock dividends payable	$	0	$	2,085
Conversion of preferred stock to common stock	$	115,000	$	0

Nine Months Ended
September 30,
2019 2018
($ in thousands)
Cash Flows from Operating Activities:
Net income (loss) $ 75,726
$ 74,987
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense, intangible asset and other amortization 29,766
23,147
Stock-based compensation 16,384
16,914
Amortization of deferred commissions 2,413
2,734
Payments of deferred commissions (1,522 ) (3,839 )
Equity in earnings of equity method investments (2,001 ) (2,358 )
Realized and unrealized (gains) losses on investments, net (4,636 ) (752 )
Distributions received from equity method investments 828
4,032
Sales (purchases) of investments, net 8,784
5,571
Deferred taxes, net 3,392
9,710
Changes in operating assets and liabilities:
Accounts receivable, net and other assets (3,057 ) 10,368
Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities (24,211 ) (39,560 )
Operating activities of consolidated investment products ("CIP"):
Realized and unrealized (gains) losses on investments of CIP, net (3,063 ) 2,108
Purchases of investments by CIP (805,599 ) (857,999 )
Sales of investments by CIP 588,678
655,335
Net purchases (sales) of short term investments by CIP 2,294
111
Sales (purchases) of securities sold short by CIP, net 1,241
—
Change in other assets of CIP (184 ) (609 )
Change in liabilities of CIP 7,247
(1,589 )
Amortization of discount on notes payable of CIP 4,505
—
Net cash provided by (used in) operating activities (103,015 ) (101,689 )
Cash Flows from Investing Activities:
Capital expenditures and other asset purchases (6,961 ) (2,516 )
Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net 18,408
—
Acquisition of businesses (cash paid of $129.5 million, less cash acquired of $2.5 million in 2018) —
(126,995 )
Sale of available-for-sale securities 2,023
37,785
Purchases of available-for-sale securities —
(20,188 )
Net cash provided by (used in) investing activities 13,470
(111,914 )
Cash Flows from Financing Activities:
Issuance of debt —
105,000
Repayments on debt (39,839 ) (12,863 )
Payment of deferred financing costs —
(3,810 )
Common stock dividends paid (12,244 ) (10,093 )
Preferred stock dividends paid (6,253 ) (6,253 )
Repurchases of common shares (30,000 ) (12,501 )
Stock options exercised 648
719
Taxes paid related to net share settlement of restricted stock units (6,601 ) (6,517 )
Net subscriptions received from (redemptions/distributions paid to) noncontrolling interests 7,630
(2,159 )
Financing activities of CIP:
Payments on borrowings by CIP (195,697 ) (669,500 )
Borrowings by CIP 396,277
817,474
Net cash provided by (used in) financing activities 113,921
199,497
Net increase (decrease) in cash, cash equivalents and restricted cash 24,376
(14,106 )
Cash, cash equivalents and restricted cash, beginning of period 254,656
234,282
Cash, Cash Equivalents and Restricted Cash, End of Period $ 279,032
$ 220,176
Non-Cash Investing Activities:
Change in accrual for capital expenditures $ (1,784 ) $ 1,906
Non-Cash Financing Activities:
Increase (decrease) to noncontrolling interest due to consolidation (deconsolidation) of CIP, net $ 22,046
$ —
Common stock dividends payable $ 4,608
$ 3,930
Preferred stock dividends payable $ 2,085
$ 2,085


(in thousands)	September 30, 2020		December 31, 2019
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	202,212	$	221,781
Cash of CIP	48,228		99,691
Cash pledged or on deposit of CIP	6,007		467
Cash, cash equivalents and restricted cash at end of period	$	256,447	$	321,939

September 30,
2019 December 31, 2018
($ in thousands)
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents $ 195,870
$ 201,705
Cash of CIP 77,562
52,015
Cash pledged or on deposit of CIP 5,600
936
Cash, cash equivalents and restricted cash at end of period $ 279,032
$ 254,656

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

Table of Contents

Virtus Investment Partners, Inc.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


	Permanent Equity																				Temporary Equity
	Common Stock			Preferred Stock			Additional Paid-in Capital		Retained Earnings (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 June 30, 2019	6,944,892	$	107	1,150,000	$	110,843	$	1,204,033	$	(262,193)	$	(7)	3,770,913	$	(401,748)	$	651,035	$	12,637	$	663,672	$	60,502

Net income (loss)	—	—		—	—		—		24,085		—		—	—		24,085		(68)		24,017		1,342

Foreign currency translation adjustments	—	—		—	—		—		—		(12)		—	—		(12)		—		(12)		—
Net subscriptions (redemptions) and other	—	—		—	—		548		—		—		—	—		548		(657)		(109)		29,766

Cash dividends declared ($1.81 per preferred share)	—	—		—	—		(2,085)		—		—		—	—		(2,085)		—		(2,085)		—

Cash dividends declared ($0.67 per common share)	—	—		—	—		(4,972)		—		—		—	—		(4,972)		—		(4,972)		—
Repurchases of common shares	(70,949)	—		—	—		—		—		—		70,949	(7,501)		(7,501)		—		(7,501)		—
Issuance of common shares related to employee stock transactions	3,653	0		—	—		5		—		—		—	—		5		—		5		—
Taxes paid on stock-based compensation	—	—		—	—		(93)		—		—		—	—		(93)		—		(93)		—
Stock-based compensation	—	—		—	—		4,694		—		—		—	—		4,694		—		4,694		—

Balances at September 30, 2019	6,877,596	$	107	1,150,000	$	110,843	$	1,202,130	$	(238,108)	$	(19)	3,841,862	$	(409,249)	$	665,704	$	11,912	$	677,616	$	91,610
Balances at June 30, 2020	7,664,272	$	118	0	$	0	$	1,303,036	$	(208,222)	$	(17)	4,113,460	$	(436,749)	$	658,166	$	8,345	$	666,511	$	90,687

Net income (loss)	—	—		—	—		—		29,648		—		—	—		29,648		977		30,625		10,309

Foreign currency translation adjustments	—	—		—	—		—		—		17		—	—		17		—		17		—
Net subscriptions (redemptions) and other	—	—		—	—		0		—		—		—	—		0		(340)		(340)		(1,719)




Cash dividends declared ($0.82 per common share)	—	—		—	—		(6,695)		—		—		—	—		(6,695)		—		(6,695)		—
Repurchases of common shares	(53,867)	—		—	—		—		—		—		53,867	(7,500)		(7,500)		—		(7,500)		—

Issuance of common shares related to employee stock transactions	2,749	0		—	—		49		—		—		—	—		49		—		49		—
Taxes paid on stock-based compensation	—	—		—	—		(124)		—		—		—	—		(124)				(124)		—
Stock-based compensation	—	—		—	—		5,469		—		—		—	—		5,469		—		5,469		—
Balances at September 30, 2020	7,613,154	$	118	0	$	0	$	1,301,735	$	(178,574)	$	0	4,167,327	$	(444,249)	$	679,030	$	8,982	$	688,012	$	99,277

Permanent Equity Temporary Equity
Common Stock Preferred Stock
Additional
Paid-in
Capital

Retained Earnings (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 June 30, 2018 7,166,139
$ 105
1,150,000
$ 110,843
$ 1,213,341
$ (340,024 ) $ (622 ) 3,356,911
$ (359,248 ) $ 624,395
$ 15,971
$ 640,366
$ 3,420
Acquisition of business —
—
—
—
—
—
—
—
—
—
—
—
55,500
Net income (loss) —
—
—
—
—
26,998
—
—
—
26,998
110
27,108
823
Net unrealized gain (loss) on securities available-for-sale —
—
—
—
—
—
24
—
—
24
—
24
—
Foreign currency translation adjustments —
—
—
—
—
—
(2 ) —
—
(2 ) —
(2 ) —
Net subscriptions (redemptions) and other —
—
—
—
—
—
—
—
—
—
(574 ) (574 ) 505
Cash dividends declared ($1.81 per preferred share) —
—
—
—
(2,085 ) —
—
—
—
(2,085 ) —
(2,085 ) —
Cash dividends declared ($0.55 per common share) —
—
—
—
(4,222 ) —
—
—
—
(4,222 ) —
(4,222 ) —
Repurchases of common shares (38,184 ) —
—
—
—
—
—
38,184
(5,001 ) (5,001 ) —
(5,001 ) —
Issuance of common shares related to employee stock transactions 18,647
—
—
—
66
—
—
—
—
66
—
66
—
Taxes paid on stock-based compensation —
—
—
—
(1,279 ) —
—
—
—
(1,279 ) —
(1,279 ) —
Stock-based compensation —
—
—
—
4,824
—
—
—
—
4,824
—
4,824
—
Balances at September 30, 2018 7,146,602
$ 105
1,150,000
$ 110,843
$ 1,210,645
$ (313,026 ) $ (600 ) 3,395,095
$ (364,249 ) $ 643,718
$ 15,507
$ 659,225
$ 60,248
Balances at June 30, 2019 6,944,892
$ 107
1,150,000
$ 110,843
$ 1,204,033
$ (262,193 ) $ (7 ) 3,770,913
$ (401,748 ) $ 651,035
$ 12,637
$ 663,672
$ 60,502
Net income (loss) —
—
—
—
—
24,085
—
—
—
24,085
(68 ) 24,017
1,342
Foreign currency translation adjustments —
—
—
—
—
—
(12 ) —
—
(12 ) —
(12 ) —
Net subscriptions (redemptions) and other —
—
—
—
548
—
—
—
—
548
(657 ) (109 ) 29,766
Cash dividends declared ($1.81 per preferred share) —
—
—
—
(2,085 ) —
—
—
—
(2,085 ) —
(2,085 ) —
Cash dividends declared ($0.67 per common share) —
—
—
—
(4,972 ) —
—
—
—
(4,972 ) —
(4,972 ) —
Repurchases of common shares (70,949 ) —
—
—
—
—
—
70,949
(7,501 ) (7,501 ) —
(7,501 ) —
Issuance of common shares related to employee stock transactions 3,653
—
—
—
5
—
—
—
—
5
—
5
—
Taxes paid on stock-based compensation —
—
—
—
(93 ) —
—
—
—
(93 ) —
(93 ) —
Stock-based compensation —
—
—
—
4,694
—
—
—
—
4,694
—
4,694
—
Balances at September 30, 2019 6,877,596
$ 107
1,150,000
$ 110,843
$ 1,202,130
$ (238,108 ) $ (19 ) 3,841,862
$ (409,249 ) $ 665,704
$ 11,912
$ 677,616
$ 91,610

Permanent Equity Temporary Equity
Common Stock Preferred Stock
Additional
Paid-in
Capital

Retained Earnings (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, 2017 7,159,645
$ 105
1,150,000
$ 110,843
$ 1,216,173
$ (386,216 ) $ (600 ) 3,296,289
$ (351,748 ) $ 588,557
$ 16,667
$ 605,224
$ 4,178
Adjustment for adoption of ASU 2016-01 —
—
—
—
—
(178 ) 178
—
—
—
—
—
—
Net income (loss) —
—
—
—
—
73,368
—
—
—
73,368
876
74,244
743
Net unrealized gain (loss) on securities available-for-sale —
—
—
—
—
—
(168 ) —
—
(168 ) —
(168 ) —
Foreign currency translation adjustments —
—
—
—
—
—
(10 ) —
—
(10 ) —
(10 ) —
Net subscriptions (redemptions) and other —
—
—
—
—
—
—
—
—
—
(2,036 ) (2,036 ) (173 )
Acquisition of businesses —
—
—
—
—
—
—
—
—
—
—
—
55,500
Cash dividends declared ($5.44 per preferred share) —
—
—
—
(6,253 ) —
—
—
—
(6,253 ) —
(6,253 ) —
Cash dividends declared ($1.45 per common share) —
—
—
—
(11,099 ) —
—
—
—
(11,099 ) —
(11,099 ) —
Repurchases of common shares (98,806 ) —
—
—
—
—
—
98,806
(12,501 ) (12,501 ) —
(12,501 ) —
Issuance of common shares related to employee stock transactions 85,763
—
—
—
1,444
—
—
—
—
1,444
—
1,444
—
Taxes paid on stock-based compensation —
—
—
—
(6,517 ) —
—
—
—
(6,517 ) —
(6,517 ) —
Stock-based compensation —
—
—
—
16,897
—
—
—
—
16,897
—
16,897
—
Balances at September 30, 2018 7,146,602
$ 105
1,150,000
$ 110,843
$ 1,210,645
$ (313,026 ) $ (600 ) 3,395,095
$ (364,249 ) $ 643,718
$ 15,507
$ 659,225
$ 60,248
Balances at December 31, 2018 6,997,382
$ 106
1,150,000
$ 110,843
$ 1,209,805
$ (310,865 ) $ (731 ) 3,555,242
$ (379,249 ) $ 629,909
$ 13,958
$ 643,867
$ 57,481
Net income (loss) —
—
—
—
—
72,757
—
—
—
72,757
(297 ) 72,460
3,266
Foreign currency translation adjustments —
—
—
—
—
—
(14 ) —
—
(14 ) —
(14 ) —
Net subscriptions (redemptions) and other —
—
—
—
838
—
—
—
—
838
(1,749 ) (911 ) 30,863
Reclassification from other comprehensive (income) loss —
—
—
—
—
—
726
—
—
726
—
726
—
Cash dividends declared ($5.44 per preferred share) —
—
—
—
(6,253 ) —
—
—
—
(6,253 ) —
(6,253 ) —
Cash dividends declared ($1.77 per common share) —
—
—
—
(13,228 ) —
—
—
—
(13,228 ) —
(13,228 ) —
Repurchases of common shares (286,620 ) —
—
—
�� —
—
—
286,620
(30,000 ) (30,000 ) —
(30,000 ) —
Issuance of common shares related to employee stock transactions 166,834
1
—
—
1,429
—
—
—
—
1,430
—
1,430
—
Taxes paid on stock-based compensation —
—
—
—
(6,601 ) —
—
—
—
(6,601 ) —
(6,601 ) —
Stock-based compensation —
—
—
—
16,140
—
—
—
—
16,140
—
16,140
—
Balances at September 30, 2019 6,877,596
$ 107
1,150,000
$ 110,843
$ 1,202,130
$ (238,108 ) $ (19 ) 3,841,862
$ (409,249 ) $ 665,704
$ 11,912
$ 677,616
$ 91,610


	Permanent Equity																				Temporary Equity
	Common Stock			Preferred Stock			Additional Paid-in Capital		Retained Earnings (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, 2018	6,997,382	$	106	1,150,000	$	110,843	$	1,209,805	$	(310,865)	$	(731)	3,555,242	$	(379,249)	$	629,909	$	13,958	$	643,867	$	57,481

Net income (loss)	—	—		—	—		—		72,757		—		—	—		72,757		(297)		72,460		3,266
Reclassification from other comprehensive (income) loss	—	—		—	—		—		—		726		—	—		726		—		726		—
Foreign currency translation adjustments	—	—		—	—		—		—		(14)		—	—		(14)		—		(14)		—
Net subscriptions (redemptions) and other	—	—		—	—		838		—		—		—	—		838		(1,749)		(911)		30,863

Cash dividends declared ($5.44 per preferred share)	—	—		—	—		(6,253)		—		—		—	—		(6,253)		—		(6,253)		—

Cash dividends declared ($1.77 per common share)	—	—		—	—		(13,228)		—		—		—	—		(13,228)		—		(13,228)		—
Repurchases of common shares	(286,620)	—		—	—		—		—		—		286,620	(30,000)		(30,000)		—		(30,000)		—
Issuance of common shares related to employee stock transactions	166,834	1		—	—		1,429		—		—		—	—		1,430		—		1,430		—
Taxes paid on stock-based compensation	—	—		—	—		(6,601)		—		—		—	—		(6,601)		—		(6,601)		—
Stock-based compensation	—	—		—	—		16,140		—		—		—	—		16,140		—		16,140		—
Balances at September 30, 2019	6,877,596	$	107	1,150,000	$	110,843	$	1,202,130	$	(238,108)	$	(19)	3,841,862	$	(409,249)	$	665,704	$	11,912	$	677,616	$	91,610
Balances at December 31, 2019	6,809,280	$	107	1,150,000	$	110,843	$	1,199,205	$	(215,216)	$	9	3,927,607	$	(419,249)	$	675,699	$	10,558	$	686,257	$	63,845

Net income (loss)	—	—		—	—		—		36,642		—		—	—		36,642		(146)		36,496		21,653

Foreign currency translation adjustments	—	—		—	—		—		—		(9)		—	—		(9)		—		(9)		—
Net subscriptions (redemptions) and other	—	—		—	—		(167)		—		—		—	—		(167)		(1,430)		(1,597)		13,779
Conversion of preferred stock	912,806	9		(1,150,000)	(110,843)		110,834		—		—		—	—		0		—		0		—



Cash dividends declared ($2.16 per common share)	—	—		—	—		(18,371)		—		—		—	—		(18,371)		—		(18,371)		—
Repurchases of common shares	(239,720)	—		—	—		—		—		—		239,720	(25,000)		(25,000)		—		(25,000)		—
Issuance of common shares related to employee stock transactions	130,788	2		—	—		161		—		—		—	—		163		—		163		—
Taxes paid on stock-based compensation	—	—		—	—		(5,693)		—		—		—	—		(5,693)				(5,693)		—
Stock-based compensation	—	—		—	—		15,766		—		—		—	—		15,766		—		15,766		—
Balances at September 30, 2020	7,613,154	$	118	0	$	0	$	1,301,735	$	(178,574)	$	0	4,167,327	$	(444,249)	$	679,030	$	8,982	$	688,012	$	99,277

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

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" or "Virtus"), a Delaware corporation, operates in the investment management industry through its subsidiaries.

The Company provides investment management and related services to individuals and institutions. The Company’s retail investment management services are provided to individuals through products consisting of U.S. 1940 Act mutual funds and Undertaking for Collective Investment in Transferable Securities ("UCITS" or "offshore funds" and collectively, with U.S. 1940 Act mutual funds, "open-end funds"), exchange traded funds ("ETFs"), closed-end funds (collectively, with open-end funds and ETFs, "funds") and retail separate accounts. Institutional investment management services are ~~provided~~offered through separate accounts and pooled or commingled structures to ~~corporations, multi-employer retirement funds, employee retirement systems, foundations and endowments.~~a variety of institutional clients. The Company also provides subadvisory services to other investment advisers and serves as the collateral manager for structured products.

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") 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, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2020.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 ("2019 Annual Report on Form 10-K") filed with the Securities and Exchange Commission (the "SEC"). The Company’s significant accounting policies, which have been consistently applied, are summarized in its ~~2018~~2019 Annual Report on Form 10-K.

New Accounting Standards Implemented

In ~~July~~August 2018, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") ~~2018-09,~~ ~~Codification Improvements~~. This standard, which does not prescribe any new accounting guidance, clarifies several different FASB Accounting Standards Codification ("ASC") areas based on comments and suggestions made by various stakeholders. On January 1, 2019, the Company adopted this standard. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. This standard provides financial statement preparers with the option to reclassify tax effects within other comprehensive income (referred to as stranded tax effects) to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. On January 1, 2019, the Company adopted this standard. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~, with several amendments (collectively, "ASU 2016-02"). This standard requires a lessee to recognize assets and liabilities on the balance sheet arising from operating leases. For both finance leases and operating leases, the lease liability is initially measured at the present value of the future lease payments. In addition to the lease liability, companies are required to recognize a corresponding right of use ("ROU") asset representing the right to use the underlying leased asset over the lease term. The right of use asset is initially measured as the value of the lease liability, less indirect costs and prepaid lease payments, less lease incentives. ASU 2016-02 allows entities the option to apply its provisions at the effective date without adjusting comparative periods presented. The Company elected this optional transition method along with the package of practical expedients permitted under the standard, which allowed the Company to forgo (a) reassessing whether expired or existing non-lease contracts that commenced before January 1, 2019 contained an embedded lease, (b) reevaluating the accounting classification of our existing operating leases, and (c)

~~Table of Contents~~

determining whether initial direct costs related to existing leases should be capitalized. The Company also elected to combine lease and non-lease components in calculating the lease liability and ROU asset for operating leases. On January 1, 2019, the Company adopted this standard, which resulted in the recording of a ROU asset of $20.5 million and lease liability of $28.6 million representing a non-cash activity in the Company's Condensed Consolidated Statements of Cash Flows. See Note 8 for further discussion.

~~New Accounting Standards Not Yet Implemented~~

~~In August 2018, the FASB issued ASU~~ 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)~~("ASU 2018-15")~~. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, including an internal-use software license. ~~ASU 2018-15 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted.~~ The Company ~~does not expect that the~~adopted this standard on January 1, 2020. The adoption of this standard ~~will~~did not have a material impact on the Company's condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). This standard modifies the disclosure requirements on fair value ~~measurements~~measurements. The Company adopted this standard on January 1, 2020. 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 January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). This standard clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2019.~~2020. Early adoption is ~~permitted.~~permitted, with the amendments to be applied on a prospective basis. The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements.

Table of Contents

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, Income Taxes, and also improves consistent application by clarifying and amending existing guidance. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment. The Company has evaluated the impact of adopting this standard and, at this time, does not ~~expect that the adoption of this standard~~anticipate it will have a material impact on ~~the Company's~~its condensed consolidated financial statements.

3. Revenues

The Company's revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to 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 investment management, distribution and service, and administration and shareholder service fees are calculated are variable in nature and subject to factors outside of the Company's control such as ~~deposits,~~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), which is when asset values are generally determinable.

Revenue Disaggregated by Source

The following table summarizes revenue by source:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Investment management fees
Open-end funds	$	63,458	$	59,060	$	176,584	$	169,326
Closed-end funds	8,959		10,846		27,695		31,485

Retail separate accounts	26,412		22,092		74,524		60,761
Institutional accounts	29,048		25,180		76,571		71,013
Structured products	1,297		1,725		3,288		4,957

Other products	611		1,120		1,961		2,990
Total investment management fees	129,785		120,023		360,623		340,532
Distribution and service fees	9,797		10,442		28,146		31,122
Administration and shareholder service fees	15,114		15,280		43,056		44,747
Other income and fees	94		210		425		761
Total revenues	$	154,790	$	145,955	$	432,250	$	417,162

Three Months Ended September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
($ in thousands)
Investment management fees
Open-end funds $ 59,060
$ 62,466
$ 169,326
$ 174,032
Closed-end funds 10,846
10,614
31,485
31,161
Retail separate accounts 22,092
19,532
60,761
53,152
Institutional accounts 25,180
24,614
71,013
56,210
Structured products 1,725
3,602
4,957
7,996
Other products 1,120
885
2,990
2,806
Total investment management fees 120,023
121,713
340,532
325,357
Distribution and service fees 10,442
13,730
31,122
39,886
Administration and shareholder service fees 15,280
16,567
44,747
48,272
Other income and fees 210
200
761
655
Total revenues $ 145,955
$ 152,210
$ 417,162
$ 414,170

~~Table of Contents~~

4. ~~Business Combinations~~

~~Sustainable Growth Advisers, LP~~

On July 1, 2018, the Company completed the acquisition of 70% of the outstanding limited partnership interests of Sustainable Growth Advisers, LP ("SGA") and 100% of the membership interests in its general partner, SGIA, LLC (the "SGA Acquisition"). SGA is an investment manager specializing in U.S. and global growth equity portfolios. The total purchase price of the SGA Acquisition was $129.5 million. The Company accounted for the acquisition in accordance with ASC 805, ~~Business Combinations.~~ The purchase price was allocated to the assets acquired, liabilities assumed and redeemable noncontrolling interests based upon their estimated fair values at the date of the SGA Acquisition. Goodwill of $120.2 million and other intangible assets of $62.0 million were recorded as a result of the SGA Acquisition. The Company expects $127.5 million of this amount to be tax deductible over 15 years. The Company completed its final assessment of the fair value of purchased receivables and acquired contracts as of June 30, 2019, with no incremental measurement period adjustments recorded.

~~The following table summarizes the identified acquired assets, liabilities assumed and redeemable noncontrolling interests as of the acquisition date:~~

July 1, 2018
($ in thousands)
Assets:
Cash and cash equivalents $ 2,505
Investments 262
Accounts receivable 6,649
Furniture, equipment and leasehold improvements 70
Intangible assets 62,000
Goodwill 120,213
Other assets 659
Total Assets 192,358
Liabilities
Accrued compensation and benefits 824
Accounts payable and accrued liabilities 6,534
Total liabilities 7,358
Redeemable noncontrolling interests 55,500
Total Net Assets Acquired $ 129,500

~~Identifiable Intangible Assets Acquired~~

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

July 1, 2018
Approximate Fair Value Weighted Average of Useful Life
($ in thousands)
Definite-lived intangible assets:
Institutional and retail separate account investment contracts $ 49,000
6 years
Trade name 7,000
10 years
Non-competition agreements 6,000
5 years
Total definite-lived intangible assets $ 62,000

The following unaudited pro forma condensed consolidated results of operations are provided for illustrative purposes only and assume that the SGA Acquisition occurred on January 1, 2017. The unaudited pro forma information also reflects adjustments for transaction and integration expenses as if the SGA Acquisition occurred on January 1, 2017. This unaudited information should not be relied upon as indicative of historical results that would have been obtained if the SGA Acquisition

~~Table of Contents~~

~~had occurred on that date, nor of the results that may be obtained in the future.~~

Three Months Ended
September 30, 2018 Nine Months Ended
September 30, 2018
($ in thousands)
Total Revenues $ 152,210
$ 431,400
Net Income (Loss) Attributable to Common Stockholders $ 26,201
$ 69,284

5. Intangible Assets, Net

~~Intangible assets, net are summarized as follows:~~

September 30, 2019 December 31, 2018
($ in thousands)
Definite-lived intangible assets:
Investment contracts and other $ 489,570
$ 487,747
Accumulated amortization (215,162 ) (192,451 )
Definite-lived intangible assets, net 274,408
295,296
Indefinite-lived intangible assets 43,516
43,516
Total intangible assets, net $ 317,924
$ 338,812

Below is a summary of intangible assets, net:


(in thousands)	September 30, 2020		December 31, 2019
Definite-lived intangible assets:
Investment contracts and other	$	489,570	$	489,570
Accumulated amortization	(245,293)		(222,695)
Definite-lived intangible assets, net	244,277		266,875
Indefinite-lived intangible assets	43,516		43,516
Total intangible assets, net	$	287,793	$	310,391

Table of Contents

Activity in intangible assets, net iswas as follows:


	Nine Months Ended September 30,
(in thousands)	2020		2019
Intangible assets, net
Balance, beginning of period	$	310,391	$	338,812
Additions	0		1,823
Amortization	(22,598)		(22,711)
Balance, end of period	$	287,793	$	317,924

Nine Months Ended September 30,
2019 2018
($ in thousands)
Intangible assets, net
Balance, beginning of period $ 338,812
$ 301,954
Additions 1,823
62,000
Amortization (22,711 ) (17,601 )
Balance, end of period $ 317,924
$ 346,353

~~Estimated~~Definite-lived intangible asset amortization ~~expense of intangible assets~~ for the remainder of fiscal year ~~2019~~2020 and succeeding fiscal years is estimated as follows:

Fiscal Year
Amount
($ in thousands)
Remainder of 2019 $ 7,533
2020 30,127
2021 30,116
2022 29,992
2023 29,330
2024 and thereafter 147,310
$ 274,408

Investments consist primarily of investments in the Company's sponsored products. The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note ~~17,~~15, at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019 were as follows:

(1) The Company's equity method investments are valued on a three-month lag based upon the availability of financial information.

Investment Securities - fair value

Investment securities - fair value consist of investments in the Company's sponsored funds, separately managed accounts and trading debt securities. The composition of the Company’s investment securities - fair value ~~is summarized~~was as follows:


	September 30, 2020				December 31, 2019
(in thousands)	Cost		Fair Value		Cost		Fair Value
Investment Securities - fair value
Sponsored funds	$	21,075	$	22,043	$	44,588	$	47,654
Equity securities	7,105		9,594		11,250		13,320
Debt securities	7		4		44		16
Total investment securities - fair value	$	28,187	$	31,641	$	55,882	$	60,990

September 30, 2019 December 31, 2018
Cost Fair Value Cost Fair Value
($ in thousands)
Investment Securities - fair value
Sponsored funds $ 10,991
$ 12,366
$ 43,507
$ 40,191
Equity securities 9,982
11,257
16,380
16,981
Debt securities 44
28
3,816
2,099
Total Investment Securities - fair value $ 21,017
$ 23,651
$ 63,703
$ 59,271

For the three and nine months ended September 30, 2020, the Company recognized realized gains of $4.5 million and

$4.2 million, respectively, on the sale of its investment securities - fair value. For the three and nine months ended September 30, 2019, the Company recognized realized gains of $1.0 million and $0.4 million, respectively, on the sale of its investment securities - fair value. ~~For the three and nine months ended September 30, 2018, the Company recognized realized gains of $0.6 million and $1.9 million, respectively, on investment securities - fair value.~~

~~Investments Securities - available for sale~~

Investment securities - available for sale primarily consist of investments in collateralized loan obligations ("CLOs") for which the Company provides investment management services and does not consolidate. The Company had 0 investment securities - available for sale as of September 30, 2019. The composition of the Company’s investment securities - available for sale as of December 31, 2018 is summarized as follows:

December 31, 2018
Cost Unrealized Loss Unrealized Gain Fair Value
($ in thousands)
Investment Securities - available for sale
Investments in CLOs $ 3,696
$ (1,673 ) $ —
$ 2,023

7.6. Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note ~~17,~~15, as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 by fair value hierarchy level were as follows:

~~December 31, 2018~~

Level 1 Level 2 Level 3 Total
($ in thousands)
Assets
Cash equivalents $ 158,596
$ —
$ —
$ 158,596
Investment securities - fair value
Sponsored funds 40,191
—
—
40,191
Equity securities 16,981
—
—
16,981
Debt securities —
—
2,099
2,099
Investment securities - available for sale —
—
2,023
2,023
Nonqualified retirement plan assets 6,716
—
—
6,716
Total assets measured at fair value $ 222,484
$ —
$ 4,122
$ 226,606

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

Cash equivalents represent 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 funds represent investments in open-end funds, closed-end funds and ETFs for which the Company acts as the investment manager. The fair value of open-end 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 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 the securities are primarily traded and are categorized as Level 1.

Debt securities ~~and Investments - available for sale~~ ~~primarily~~ represent investments in ~~CLOs for which the Company provides investment management services. The investments in CLOs~~senior secured bank loans and are ~~measured at fair value~~ based on evaluated quotations received from independent ~~third-party valuations~~pricing services and are categorized as Level ~~2 and Level 3. The independent third-party valuations are based on discounted cash flow models and comparable trade data.~~2.

Nonqualified retirement plan assets represent mutual funds within a nonqualified retirement plan whose fair value is determined based on their published net asset value and are categorized as Level 1.

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

The Company had 0 Level 3 investments for the three- and nine-month periods ended September 30, 2020 and 0 Level 3 investments for the three months ended September 30, 2019. The following table is a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determine fair ~~value.~~

Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands)
2019 2018 2019 2018
Level 3 Investments (1)
Balance at beginning of period $ —
$ 5,744
$ 4,122
$ 4,439
Purchases (sales), net —
—
(4,185 ) 1,326
Change in realized and unrealized gain (loss), net —
(701 ) 63
(722 )
Balance at end of period $ —
$ 5,043
$ —
$ 5,043

~~The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment.~~

~~The Company recognizes a lease liability and a corresponding ROU asset on the commencement date of any lease arrangement. The lease liability is initially measured at the present~~ value of the future minimum lease payments over the lease term using the rate implicit in the arrangement or, if not available, the Company's incremental borrowing rate. A ROU asset is measured initially at the value of the lease liability, excluding any lease incentives and initial direct costs incurred. All of the Company's leases qualify as operating leases and consist primarily of real estate leases for its office locations, which have remaining initial lease terms ranging from 0.8 to 10.6 years and a weighted average remaining lease term of 7.1 years. The Company has options to renew some of its leases for periods ranging from 3.0 to 15.0 years, depending on the lease. None of the Company's renewal options were considered reasonably assured of being exercised, and, therefore, were excluded from the initial lease term used to determine the Company's ROU asset and lease liability. The Company's ROU asset, recorded in other assets, and lease liability, recorded in other liabilities, at September 30, 2019 was $17.6 million and $26.0 million, respectively. The weighted average discount rate used to measure the Company's lease liability was 4.91% at September 30, 2019.

Lease expense is recognized on a straight-line basis over the lease term and is recorded within other operating expenses. Lease expense totaled $1.3 million and $1.8 million for the three months ended September 30, 2019 and ~~2018, respectively, and $3.9 million and $5.2 million~~ for the nine months ended September 30, 2019:

(1)~~2018~~The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment.~~, respectively. Cash payments relating to operating leases during the nine months ended September 30, 2019 were $3.7 million.~~

~~Lease liability maturities as of September 30, 2019 were as follows:~~

($ in thousands) Amount
Remainder of 2019 $ 1,628
2020 5,703
2021 4,707
2022 3,664
2023 3,339
Thereafter 12,202
Total lease payments 31,243
Less: Imputed interest 5,207
Present value of lease liabilities $ 26,036

Minimum aggregate rental payments required under operating leases that have initial or remaining non-cancellable lease terms in excess of one year recorded in accordance with ASC 840 as of December 31, 2018 were as follows: $6.1 million in 2019; $6.5 million in 2020; $5.1 million in 2021; $3.9 million in 2022; $3.5 million in 2023; and $12.9 million thereafter.

9.7. Equity Transactions

Preferred Stock Conversion

On February 3, 2020, 1,150,000 shares of mandatory convertible preferred stock ("MCPS") converted to 912,870 shares of the Company's common stock. Each share of MCPS converted to 0.7938 shares of common stock at a conversion price of $125.97 per share, subject to customary anti-dilution adjustments. The number of shares of common stock issued upon conversion was determined based on the volume-weighted average 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.

On August ~~14, 2019,~~19, 2020, the Company declared a quarterly cash dividend of ~~$0.67~~$0.82 per common share to be paid on November ~~15, 2019~~13, 2020 to ~~shareholders~~stockholders of record at the close of business on October ~~31, 2019. The Company also declared a quarterly cash dividend of $1.8125 per share on~~30, 2020.

Common Stock Repurchases

In May 2020, the Company's ~~7.25% mandatory convertible preferred stock ("MCPS")~~Board of Directors authorized an additional 750,000 shares to be ~~paid on November 1, 2019~~repurchased under the Company's share repurchase program, bringing the total number of shares authorized to ~~shareholders of record at~~be repurchased under the close of business on October 15, 2019. As of September 30, 2019, unless converted earlier, each share of MCPS will convert automatically on February 1, 2020, the mandatory conversion date, into between 0.7605 and 0.9126 shares of common stock (a conversion price range between $131.49program since its inception to ~~$109.58 per share, respectively), subject to customary anti-dilution adjustments.~~

4,930,045 shares. During the three and nine months ended September 30, ~~2019,~~2020, the Company repurchased ~~70,949~~53,867 and ~~286,620~~239,720 common shares, respectively, at a weighted average ~~prices~~price of ~~$105.68~~$139.20 and ~~$104.63~~$104.26 per share, respectively, for a total cost, including fees and expenses, of $7.5 million and ~~$30.0~~$25.0 million, respectively, under its share repurchase program. As of September 30, ~~2019, 338,183~~2020, 762,718 shares remained available for repurchase. Under the terms of the program, the Company may repurchase shares of its common stock from time to time at its discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price and prevailing market and business conditions. The program, which has no specified term, may be suspended or terminated at any time.

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 were as follows:


(in thousands)	Unrealized Gains (Losses) on Securities Available-for-Sale		Foreign Currency Translation Adjustments
Balance at December 31, 2019	$	0	$	9

Foreign currency translation adjustments, net of tax of $3	0		(9)

Net current-period other comprehensive income (loss)	0		(9)
Balance at September 30, 2020	$	0	$	0

Unrealized Net
Gains and (Losses)
on Securities
Available-for-Sale
Foreign
Currency
Translation
Adjustments
($ in thousands)
Balance at December 31, 2018 $ (726 ) $ (5 )
Foreign currency translation adjustments, net of tax of $5 —
(14 )
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of ($254) 726
—
Net current-period other comprehensive income (loss) 726
(14 )
Balance at September 30, 2019 $ —
$ (19 )

Unrealized Net
Gains and (Losses)
on Securities
Available-for-Sale

Foreign
Currency
Translation
Adjustments
($ in thousands)
Balance at December 31, 2017 $ (612 ) $ 12
Unrealized net gain (loss) on securities available-for-sale, net of tax of $68 (168 ) —
Foreign currency translation adjustments, net of tax of $4 —
(10 )
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of ($61) (1) 178
—
Net current-period other comprehensive income (loss) 10
(10 )
Balance at September 30, 2018 $ (602 ) $ 2

(1)On January 1, 2018, the Company adopted amendments to ASC 825 pursuant to ASU 2016-01. This standard 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.




(in thousands)	Unrealized Gains (Losses) on Securities Available-for-Sale		Foreign Currency Translation Adjustments
Balance at December 31, 2018	$	(726)	$	(5)

Foreign currency translation adjustments, net of tax of $5	0		(14)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $(254)	726		0
Net current-period other comprehensive income (loss)	726		(14)
Balance at September 30, 2019	$	0	$	(19)

~~11.~~9. Stock-Based Compensation

~~Officers,~~Pursuant to the Company's Omnibus Incentive and Equity Plan (the "Plan"), officers, employees ~~consultants~~ and directors ~~of the Company~~ may be granted ~~equity based~~equity-based awards, including ~~registered~~restricted stock units ("RSUs"), performance stock units ("PSUs"), stock options and unrestricted shares of common ~~stock pursuant to the Company's Omnibus Incentive and Equity Plan (the "Plan").~~stock. At September 30, ~~2019,~~ ~~552,128~~2020, 336,276 shares of common stock remained available for issuance of the 2,820,000 shares that are authorized for issuance under the Plan.

~~Stock-based~~Stock based compensation expense is summarized as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
($ in thousands)
Stock-based compensation expense $ 5,000
$ 4,841
$ 16,384
$ 16,914

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 value of each RSU~~performance-contingent (PSUs) that convert into RSUs after performance measurement is based on the closing market price of the Company's common stock 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.complete and generally vest in one to three years. Shares that are issued upon vesting are newly issued shares from the Plan and are not issued from treasury stock.

RSU activity, inclusive of PSUs, for the nine months ended September 30, ~~2019~~2020 is summarized as follows:

Number
of Shares

Weighted Average
Grant Date
Fair Value
Outstanding at December 31, 2018 552,238
$ 111.49
Granted 181,367
$ 108.42
Forfeited (22,724 ) $ 94.37
Settled (158,916 ) $ 96.33
Outstanding at September 30, 2019 551,965
$ 115.55

For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, a total of ~~58,487~~63,566 and ~~40,384~~58,487 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations. The Company paid ~~$5.9~~$5.6 million and ~~$6.5~~$5.9 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, in minimum employee tax withholding obligations related to RSUs ~~withheld.~~withheld for net share settlements. These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have been otherwise issued as a result of the vesting.

During the nine months ended September 30, ~~2019,~~2020, the Company granted ~~52,960~~68,371 PSUs ~~included in the table above which~~that contain performance-based metrics in addition to a service condition. Compensation expense for PSUs is generally recognized over a three-year service period based upon the value determined using a combination of ~~(a)~~(i) the intrinsic value method, for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718 and ~~(b)~~(ii) the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric under ASC 718. Compensation expense for

PSU 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 PSU awards with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the ~~final outcome. For~~end of the ~~nine months ended September 30, 2019, total stock-based compensation expense for PSUs was $5.5 million.~~performance period.

As of September 30, ~~2019,~~2020, unamortized stock-based compensation expense for unvested RSUs and PSUs was ~~$32.4~~$27.2 million, with a weighted-average remaining amortization period of ~~1.5~~1.4 years.

Stock options generally cliff vest after three years and have a contractual life of 10 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, 2019 is summarized as follows:~~

Number
of Shares

Weighted
Average
Exercise Price
Outstanding at December 31, 2018 76,751
$ 12.86
Exercised (66,120 ) $ 9.79
Outstanding, vested and exercisable at June 30, 2019 10,631
$ 31.96

~~12.~~10. Earnings (Loss) Per Share

Basic earnings (loss) per share ("EPS") is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, including: ~~(a)~~(i) shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock ~~method;~~method and ~~(b)~~(ii) shares issuable upon the conversion of the MCPS, 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,
2019 2018 2019 2018
($ in thousands, except per share amounts)
Net Income (Loss) $ 25,359
$ 27,931
$ 75,726
$ 74,987
Noncontrolling interests (1,274 ) (933 ) (2,969 ) (1,619 )
Net Income (Loss) Attributable to Stockholders 24,085
26,998
72,757
73,368
Preferred stock dividends (2,085 ) (2,085 ) (6,253 ) (6,253 )
Net Income (Loss) Attributable to Common Stockholders $ 22,000
$ 24,913
$ 66,504
$ 67,115
Shares (in thousands):
Basic: Weighted-average number of common shares outstanding 6,947
7,175
6,990
7,195
Plus: Incremental shares from assumed conversion of dilutive instruments 1,210
1,281
1,225
1,268
Diluted: Weighted-average number of common shares outstanding 8,157
8,456
8,215
8,463
Earnings (Loss) per Share—Basic $ 3.17
$ 3.47
$ 9.51
$ 9.33
Earnings (Loss) per Share—Diluted $ 2.95
$ 3.19
$ 8.86
$ 8.67

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.~~anti-dilutive:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in thousands)
Restricted stock units 32
22
29
16
Total anti-dilutive securities 32
22
29
16

~~13.~~11. 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 ~~24.0%~~33.9% and ~~23.2%~~24.0% for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~increase in the~~comparatively higher estimated effective tax rate for the nine months ended September 30, ~~2019~~2020 was primarily due to valuation allowances recorded for the ~~increase in the valuation allowance associated with various investments the~~tax effects of unrealized losses on certain Company ~~holds.~~investments.

The Company's credit agreement, as amended (the "Credit Agreement") ~~comprises (a)~~, is comprised of (i) $365.0 million of seven-year term debt (the "Term Loan") expiring in June 2024 and ~~(b)~~(ii) a $100.0 million five-year revolving credit facility (the "Credit Facility") expiring in June 2022. During the nine months ended September 30, ~~2019,~~2020, the Company ~~made~~reduced its Term Loan by $62.5 million, including the retirement of $10.0 million of principal ~~loan payments of $39.8 million.~~for $8.9 million from certain debt holders in accordance with the prepayment provisions in the Credit Agreement. At September 30, ~~2019, $300.7~~2020, $223.2 million was outstanding under the Term Loan, and the Company had 0 outstanding borrowings under its Credit Facility. In accordance with ASC 835, Interest, the amounts outstanding under the Company's Term Loan are presented on the ~~condensed consolidated balance sheet~~Condensed Consolidated Balance Sheet net of related debt issuance costs, which were ~~$8.7~~$5.2 million as of September 30, ~~2019.~~2020.

The Company is involved from time to time in litigation and arbitration, as well as examinations, inquiries and investigations by various regulatory bodies, including the 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 for~~records 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, ~~Contingencies~~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.

Redeemable noncontrolling interests represent third-party ~~investor equity~~investments in the Company's CIP and minority interests held in a consolidated majority-owned affiliate. Minority interests held in anthe 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. ~~They~~The rights are exercisable at pre-established intervals (between four and seven years from their ~~July 2018 issuance~~issuance) or upon certain conditions such as ~~retirement).~~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 Company's common stock and is entitled to the cash flow associated with any purchased equity. Minority interests ~~held in an affiliate~~ are ~~generally~~ recorded at estimated redemption value within redeemable noncontrolling

interests on the Company's ~~condensed consolidated balance sheets,~~Condensed Consolidated Balance Sheets, and changes in estimated redemption value of these interests are recorded inon the Company’s ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations within noncontrolling interests. ~~In addition, under certain circumstances, the Company may issue or sell equity interests~~

Table of ~~the affiliate to employees or partners of the affiliate.~~Contents

Redeemable noncontrolling interests for the nine months ended September 30, ~~2019~~2020 included the following amounts:


(in thousands)	CIP		Affiliate Noncontrolling Interests		Total
Balances at December 31, 2019	$	5,429	$	58,416	$	63,845

Net income (loss) attributable to noncontrolling interests	(852)		3,474		2,622
Changes in redemption value (1)	0		19,031		19,031
Total net income (loss) attributable to noncontrolling interests	(852)		22,505		21,653
Net subscriptions (redemptions) and other	20,074		(6,295)		13,779

Balances at September 30, 2020	$	24,651	$	74,626	$	99,277

($ in thousands) CIP Affiliate Noncontrolling Interests Total
Balances at December 31, 2018 $ 2,384
$ 55,097
$ 57,481
Net income (loss) attributable to noncontrolling interests 774
2,492
3,266
Net subscriptions (redemptions) and other 35,316
(4,453 ) 30,863
Balances at September 30, 2019 $ 38,474
$ 53,136
$ 91,610
(1) Relates to noncontrolling interests redeemable at other than fair value.

~~17.~~15. Consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries ~~as well as~~and investment products that are consolidated. Voting interest entities ("VOEs") are 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 entities ("VIEs") 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 (x) the power through voting or similar rights to direct the activities that most significantly impact the entity’s economic ~~performance, (ii)~~performance; (y) the obligation to absorb expected losses or the right to receive expected residual returns of the ~~entity,~~entity; or ~~(iii)~~(z) proportionate voting and economic interests and where substantially all of the entity’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’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. CIP ~~include~~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 CLOs 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. The Company’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’s investments in, and fees generated from, these products.

~~Table of Contents~~

The following table presents the balances of ~~the~~ CIP that, after intercompany eliminations, ~~are~~were reflected inon the ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets as of September 30, ~~2019~~2020 and December 31, ~~2018:~~2019:


	As of
	September 30, 2020						December 31, 2019
			VIEs						VIEs
(in thousands)	VOEs		CLOs		Other		VOEs		CLOs		Other
Cash and cash equivalents	$	9,128	$	43,930	$	1,177	$	2,665	$	97,130	$	363
Investments	46,623		2,231,691		55,371		22,223		1,976,148		31,739
Other assets	2,756		23,821		838		1,563		21,450		599
Notes payable	0		(2,190,937)		0		0		(1,834,535)		0
Securities purchased payable and other liabilities	(2,972)		(37,378)		(670)		(2,964)		(164,887)		(200)
Noncontrolling interests	(22,362)		(8,982)		(2,289)		(3,865)		(10,558)		(1,564)
Net interests in CIP	$	33,173	$	62,145	$	54,427	$	19,622	$	84,748	$	30,937

As of
September 30, 2019 December 31, 2018
VIEs VIEs
VOEs CLOs Other VOEs CLOs Other
($ in thousands)
Cash and cash equivalents $ 8,717
$ 74,032
$ 413
$ 1,029
$ 51,363
$ 559
Investments 79,434
1,908,324
31,165
12,923
1,709,266
27,379
Other assets 2,584
13,684
554
228
30,426
403
Notes payable —
(1,821,243 ) —
—
(1,620,260 ) —
Securities purchased payable and other liabilities (2,658 ) (81,018 ) (377 ) (823 ) (69,737 ) (146 )
Noncontrolling interests (37,307 ) (11,912 ) (1,167 ) (2,348 ) (13,958 ) (36 )
Net interests in CIP $ 50,770
$ 81,867
$ 30,588
$ 11,009
$ 87,100
$ 28,159

The majority of the Company's CIP that are VIEs are CLOs. At September 30, ~~2019,~~2020, the Company consolidated 56 CLOs. The financial information ~~for~~of certain ~~of these~~ CLOs is included inon the Company's condensed consolidated financial statements on a one-month ~~in arrears~~lag based upon the availability of the fund financial information. ~~Majority-owned~~A majority-owned consolidated private ~~funds,~~fund, whose primary purpose is to invest in CLOs for which the Company serves as the collateral manager, ~~are~~is also included.

The ~~CLOs'~~CLOs held investments of ~~$1.9~~$2.2 billion at September 30, ~~2019 represented~~2020 consisting of bank loan investments, which comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across a variety of industries. These bank loan investments mature at various dates between 2020 and ~~2027~~2028 and pay interest at LIBOR plus a spread of up to ~~8.75%~~12.00%. The CLOs may elect to reinvest any prepayments received on bank loan investments up until the periods between October 2019 and ~~October 2021,~~March 2025, depending on the CLO. Generally, subsequent prepayments received after the reinvestment period must be used to pay down the note obligations. At September 30, ~~2019,~~2020, the fair value of the senior bank loans ~~exceeded~~was less than the unpaid principal balance by ~~$56.8~~$135.8 million. At September 30, 2020, there were no material collateral assets in default.

Notes Payable of CLOs

The CLOs ~~have issued~~held notes payable with a total value, at par, of ~~$2.0~~$2.5 billion at September 30, 2020, consisting of senior secured floating rate notes payable with a par value of ~~$1.8~~$2.2 billion and subordinated notes with a par value of ~~$173.0~~$225.9 million. These note obligations bear interest at variable rates based on LIBOR plus a pre-defined ~~spread.~~spread ranging from 0.8% to 8.7%. The principal amounts outstanding of these note obligations mature on dates ranging from October 2027 to ~~April 2029.~~January 2033.

The Company’s beneficial interests and maximum exposure to loss related to these consolidated CLOs is limited ~~to: (a)~~to (i) ownership in the subordinated notes and ~~(b)~~(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 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, ~~2019,~~2020, as shown in the table below:

As of

September 30, 2019
($ in thousands)
Subordinated notes $ 80,315
Accrued investment management fees 1,552
Total Beneficial Interests $ 81,867

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:


(in thousands)	Nine Months Ended September 30, 2020
Income:
Realized and unrealized gain (loss), net	$	(9,648)
Interest income	81,846

Total income	72,198

Expenses:
Other operating expenses	9,535
Interest expense	70,258
Total expense	79,793
Noncontrolling interests	146
Net Income (loss) attributable to CIP	$	(7,449)

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

consolidated CLOs, which are eliminated upon consolidation:

Nine Months Ended September 30,
($ in thousands) 2019
Distributions received and unrealized gains (losses) on the subordinated notes held by the Company $ 3,345
Investment management fees 5,192
Total Economic Interests $ 8,537

Fair Value Measurements of CIP

The assets and liabilities of CIP measured at fair value on a recurring basis as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 by fair value hierarchy level were as follows:


(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	43,930	$	0	$	0	$	43,930
Debt investments	14,472		2,275,610		13,326		2,303,408
Equity investments	27,092		1,349		1,836		30,277
Derivatives	586		845		0		1,431
Total assets measured at fair value	$	86,080	$	2,277,804	$	15,162	$	2,379,046
Liabilities
Notes payable	$	0	$	2,190,937	$	0	$	2,190,937
Derivatives	539		433		0		972
Short sales	472		0		0		472
Total liabilities measured at fair value	$	1,011	$	2,191,370	$	0	$	2,192,381

Level 1 Level 2 Level 3 Total
($ in thousands)
Assets
Cash equivalents $ 74,032
$ —
$ —
$ 74,032
Debt investments 21,686
1,934,395
12,610
1,968,691
Equity investments 49,701
39
492
50,232
Derivatives 105
884
—
989
Total Assets Measured at Fair Value $ 145,524
$ 1,935,318
$ 13,102
$ 2,093,944
Liabilities
Notes payable $ —
$ 1,821,243
$ —
$ 1,821,243
Derivatives 133
1,071
—
1,204
Short sales 424
—
—
424
Total Liabilities Measured at Fair Value $ 557
$ 1,822,314
$ —
$ 1,822,871


(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	97,130	$	0	$	0	$	97,130
Debt investments	218		1,973,427		39,389		2,013,034
Equity investments	15,872		171		1,033		17,076

Total assets measured at fair value	$	113,220	$	1,973,598	$	40,422	$	2,127,240
Liabilities
Notes payable	$	0	$	1,834,535	$	0	$	1,834,535

Short sales	430		0		0		430
Total liabilities measured at fair value	$	430	$	1,834,535	$	0	$	1,834,965

Level 1 Level 2 Level 3 Total
($ in thousands)
Assets
Cash equivalents $ 51,363
$ —
$ —
$ 51,363
Debt investments 5,306
1,724,714
6,848
1,736,868
Equity investments 12,700
—
—
12,700
Total Assets Measured at Fair Value $ 69,369
$ 1,724,714
$ 6,848
$ 1,800,931
Liabilities
Notes payable $ —
$ 1,620,260
$ —
$ 1,620,260
Short sales 707
—
—
707
Total Liabilities Measured at Fair Value $ 707
$ 1,620,260
$ —
$ 1,620,967

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

Cash equivalents represent investments in money market funds. Cash investments in ~~actively traded~~ money market funds are valued using published net asset values and are classified as Level1.

Debt and equity investments represent the underlying debt, equity and other securities held in CIP. Equity investments are valued at the official closing price on the exchange on which the securities are traded and are generally categorized within Level 1. Level 2 investments represent most debt securities, including bank loans and certain equity securities (including non-U.S. securities), for which closing prices are not readily available or are deemed to not reflect readily available market prices, and are valued using an independent pricing service. 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, these assets are classified as Level 1, 2 or 3 within the fair value measurement hierarchy. Level 3 investments include debt and equity securities that are not widely traded, are illiquid or are priced by dealers based on pricing models used by market makers in the security.

Derivative assets and liabilities represent futures contracts, swaps contracts, option contracts and forward contracts held in CIP. Derivative instruments in an asset position are classified as other assets of CIP inon the Condensed Consolidated Balance Sheets. Derivative instruments in a liability position are classified as liabilities of CIP within the Condensed Consolidated Balance Sheets. The change in fair value of such derivatives is recorded in realized and unrealized gain (loss) on investments of CIP, net, inon the Condensed Consolidated Statements of Operations. Depending on the nature of the inputs, these derivative assets and liabilities are classified as Level 1, 2 or 3 within the fair value measurement hierarchy. In connection with entering into these derivative contracts, these CIP may be required to pledge an amount of cash equal to the appropriate “initial margin” requirements. The cash pledged or on deposit is recorded inon the Condensed Consolidated Balance Sheets of the Company as Cash pledged or on deposit of CIP. The fair value of such derivatives at September 30, ~~2019~~2020 was immaterial.

Notes payable represent notes issued by ~~CLO~~ CIP CLOs and are measured using the measurement alternative in ASU 2014-13. Accordingly, the fair value of CLO liabilities iswas 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. The fair value of the beneficial interests held by the Company is based on third-party pricing information without adjustment.

Short sales are 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 price of the security will decline. Short sales are recorded inon the ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets within other liabilities of CIP and are classified as Level 1 based on the underlying equity security.

The securities purchase payable at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 approximated fair value due to the short-term nature of the instruments.

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


	Nine Months Ended September 30,
(in thousands)	2020		2019
Level 3 Investments of CIP (1)
Balance at beginning of period	$	40,422	$	6,848
Realized gains (losses), net	5		(95)
Change in unrealized gains (losses), net	(335)		310

Purchases	1,137		2,157

Amortization	9		(16)
Sales	(1,256)		(5,414)
Transfers to Level 2	(50,463)		(42,232)
Transfers from Level 2	25,643		51,544
Balance at end of period	$	15,162	$	13,102

Nine Months Ended September 30,
($ in thousands)
2019 2018
Level 3 Investments of CIP (1)
Balance at beginning of period $ 6,848
$ 34,781
Realized gains (losses), net (95 ) 1,993
Change in unrealized gains (losses), net 294
602
Purchases 2,157
7,122
Sales (5,414 ) (13,892 )
Transfers to Level 2 (42,232 ) (34,119 )
Transfers from Level 2 51,544
4,517
Balance at end of period $ 13,102
$ 1,004

(1)The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment. Transfers between Level 2 and Level 3 were due to trading activities at period end.

Nonconsolidated VIEs

The Company serves as the collateral manager for other collateralized loan and collateralized bond obligations (collectively, "CDOs") that are not consolidated. The assets and liabilities of these CDOs reside in bankruptcy remote, special purpose entities in which the Company has no ownership of, nor holds any notes issued by, the CDOs, and provides neither recourse nor guarantees. The Company has determined that the investment management fees it receives for serving as collateral

manager for these CDOs did not represent a variable interest ~~since: (a)~~since (i) the fees the Company earns are compensation for services provided and are commensurate with the level of effort required to provide the investment management ~~services; (b)~~services, (ii) the Company does not hold other interests in the CDOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CDOs' expected losses or receive more than an insignificant amount of the CDOs' expected residual ~~return;~~return, and ~~(c)~~(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 as~~since its interest in these entities does not provide the Company with the power to direct the activities that most significantly impact the entities' economic performance. At September 30, ~~2019,~~2020, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was ~~$13.8~~$26.2 million.

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," "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 the Company and the markets in which we operate, are not guarantees of future results or performance, and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, net asset inflows and outflows, operating cash flows, business plans and ability to borrow, for all future periods. All forward-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 that modify or ~~affect~~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 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" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our ~~2018~~2019 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q, as well as the following risks and uncertainties resulting from: ~~(a)~~(i) the on-going effects of the COVID-19 pandemic and associated global economic disruption; (ii) any reduction in our assets under management; ~~(b)~~(iii) withdrawal, renegotiation or termination of investment advisory agreements; ~~(c)~~(iv) damage to our reputation; ~~(d)~~(v) failure to comply with investment guidelines or other contractual requirements; ~~(e)~~(vi) inability to satisfy financial covenants and payments related to our indebtedness; ~~(f)~~(vii) inability to attract and retain key personnel; ~~(g)~~(viii) challenges from the competition we face in our business; ~~(h)~~(ix) adverse regulatory and legal developments; ~~(i)~~(x) unfavorable changes in tax laws or limitations; ~~(j)~~(xi) adverse developments related to unaffiliated subadvisers; ~~(k)~~(xii) negative implications of changes in key distribution relationships; ~~(l)~~(xiii) interruptions in or failure to provide critical technological service by us or third parties; ~~(m)~~(xiv) volatility associated with our common ~~and preferred~~ stock; ~~(n)~~(xv) adverse civil litigation and government investigations or proceedings; ~~(o)~~(xvi) risk of loss on our investments; ~~(p)~~(xvii) inability to make quarterly common ~~and preferred~~ stock ~~distributions; (q)~~dividends; (xviii) lack of sufficient capital on satisfactory terms; ~~(r)~~(xix) losses or costs not covered by insurance; ~~(s)~~(xx) impairment of goodwill or intangible assets; ~~(t)~~(xxi) inability to achieve expected acquisition-related ~~benefits~~benefits; and other risks and uncertainties. Any occurrence of, or any material adverse change in, one or more risk factors or risks and uncertainties referred to above, in our ~~2018~~2019 Annual Report on Form 10-K, this Quarterly Report on Form 10-Q and our other periodic reports filed with the Securities and Exchange Commission (the "SEC") could materially and adversely affect our operations, financial results, cash flows, prospects and liquidity.

Certain other factors that may impact our continuing operations, prospects, financial results and liquidity, or that 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 Relations." You are urged to carefully consider all such factors.

We provide investment management and related services to individuals and institutions. We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers, each having its own distinct investment style, autonomous investment process and individual brand. By offering a broad array of products, we believe we can appeal to a greater number of investors and have offerings across market cycles and through changes in investor preferences. Our earnings

are primarily driven by asset-based fees charged for services relating to these various products, including investment management, fund administration, distribution and shareholder services.

We offer investment strategies for individual and institutional investors in different product structures and through multiple distribution channels. Our investment strategies are available in a diverse range of styles and disciplines, managed by a collection of differentiated investment managers. We have offerings in various asset classes ~~(domestic and international equity,~~(equity, fixed income and alternative), geographies (domestic, international and emerging), market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental, quantitative and thematic). Our retail products include open-end funds and exchange traded funds ("ETFs"), as well as closed-end funds and retail separate accounts. Our institutional products ~~include~~are offered through separate accounts and pooled or commingled structures to a variety of ~~equity and fixed income strategies for corporations, multi-employer retirement funds, public employee retirement systems, foundations and endowments.~~institutional clients. We also provide subadvisory services to other investment advisers and serve as the collateral manager for structured products.

We distribute our open-end funds and ETFs principally through financial intermediaries. We have broad distribution access in the retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and registered investment advisers, banks and insurance companies. In many of these firms, we have a number of products that are on preferred "recommended" lists and on fee-based advisory programs. Our sales efforts are supported by regional sales professionals, a national account relationship group, and separate teams for ETFs and the retirement and insurance channels. We leverage third-party distributors for off-shore products and in certain international jurisdictions. Our retail separate accounts are distributed through financial intermediaries and directly to private clients by teams at an affiliated manager.

Our institutional services are marketed through relationships with consultants as well as directly to clients. We target key market segments, including foundations and endowments, corporate, public and private pension plans, and subadvisory relationships.

Recent Market Developments

During the first three quarters of 2020, the novel coronavirus global pandemic ("COVID-19") significantly impacted the global economy and financial markets, creating uncertainty, market volatility and dislocation. Financial markets experienced significant declines during the first quarter of 2020 and in the second and third quarter, certain markets, including domestic equity securities, experienced recoveries that more than offset the first quarter decline. In an effort to contain COVID-19 in the U.S., or slow its spread, the federal government and nearly every state enacted varying degrees of social containment measures, restricting business and related activities, closing borders, and restricting travel. Governments around the world have responded to COVID-19 with economic stimulus measures. These measures are intended to support businesses, employees and consumers until economic activities recover. Although financial markets, particularly domestic equity securities, have recovered in the second and third quarters, the economy has been slower to recover. The timing and magnitude of the economic recovery, as well as the sustainability of the financial markets recovery, is uncertain.

Impact of COVID-19 to our Business

As a result of the challenging and volatile capital, equity and credit markets, our assets under management experienced significant market volatility during the first nine months of 2020 with market appreciation (depreciation) of $(16.6) billion, $15.2 and $7.1 billion during the first, second and third quarters of 2020, respectively. In addition, the fair market value of our seed capital and other investments experienced similar relative volatility. To the extent that financial markets continue to be impacted, we may experience further volatility in our assets under management and the fair market value of our seed capital and other investments.

Financial Highlights

•Net ~~earnings~~income per diluted share ~~were~~was $3.71 in the third quarter of 2020, as compared to $2.95 in the third quarter of ~~2019, as compared to $3.19~~2019.

•Total sales were $7.6 billion in the third quarter of ~~2018.~~

~~Long-term assets~~•Assets under management were ~~$102.8~~$116.5 billion at September 30, ~~2019, a decrease~~2020, an increase of ~~$1.1~~$12.4 billion, or 11.9%, from September 30, ~~2018.~~2019.

AllianzGI Strategic Partnership

On July 4, 2020, the Company entered into an agreement with Allianz Global Investors U.S. LLC and Allianz Global Investors Distributors LLC (collectively, "AllianzGI") pursuant to which the Company is expected to become the investment adviser, distributor and/or administrator of certain AllianzGI's open-end, closed-end and retail separate account assets. The agreement is expected to close in the first quarter of 2021.

Assets Under Management

At September 30, ~~2019,~~2020, total assets under management were ~~$104.1~~$116.5 billion, representing ~~a decrease~~an increase of ~~$1.5~~$12.4 billion, or ~~1.4%~~11.9%, from September 30, ~~2018,~~2019, and an increase of ~~$12.0~~$7.6 billion, or ~~13.1%~~7.0%, from December 31, ~~2018.~~2019. The ~~decrease~~increase in total assets under management from September 30, ~~2018 was primarily due to~~2019 included $10.7 billion of positive market performance and $2.8 billion of positive net ~~outflows partially offset by market performance.~~flows. The ~~increase~~change in total assets under management from December 31, ~~2018 was primarily due to~~2019 included $5.8 billion of positive market performance ~~partially offset by~~and $2.4 billion of positive net ~~outflows.~~flows.

Average long-term assets under management, which represent the majority of our fee-earning asset levels, were $104.4 billion for the nine months ended September 30, 2020, an increase of $5.0 billion, or 5.1%, from $99.3 billion for the nine months ended September 30, ~~2019, an increase of $6.0 billion, or 6.4%, from $93.3 billion for the nine months ended September 30, 2018.~~2019. The increase in average long-term assets under management compared to the ~~September 30, 2018~~prior year period was primarily due to ~~our July 1, 2018 majority investment in Sustainable Growth Advisers (the "SGA Acquisition")~~market performance and ~~market performance.~~positive net flows.

In the third quarter of ~~2019,~~2020, total revenues ~~decreased 4.1%~~increased 6.1% to ~~$146.0~~$154.8 million from ~~$152.2~~$146.0 million in the third quarter of ~~2018,~~2019, primarily as a result of ~~lower~~higher average assets under management ~~related to~~in our open-end ~~funds.~~funds, retail separate and institutional accounts. Operating income increased ~~$1.8~~$5.2 million to $41.0 million in the third quarter of 2020 compared to $35.8 million in the third quarter of 2019, ~~compared to $33.9 million in the third quarter of 2018,~~ primarily due to ~~decreased operating expenses, partially offset by decreased~~increased revenue.

Assets Under Management by Product

The following table summarizes our assets under management by product:


	As of September 30,				Change
(in millions)	2020		2019		$		%
Open-End Funds (1)	$	43,369	$	41,190	$	2,179	5.3	%
Closed-End Funds	5,629		6,816		(1,187)		(17.4)	%
Exchange Traded Funds	543		1,054		(511)		(48.5)	%
Retail Separate Accounts	24,727		18,863		5,864		31.1	%
Institutional Accounts	36,596		30,951		5,645		18.2	%
Structured Products	4,163		3,972		191		4.8	%
Total Long-Term	115,027		102,846		12,181		11.8	%
Liquidity (2)	1,460		1,221		239		19.6	%
Total	$	116,487	$	104,067	$	12,420	11.9	%
Average Assets Under Management (3)	$	105,651	$	101,059	$	4,592	4.5	%
Average Long-Term Assets Under Management (3)	$	104,358	$	99,324	$	5,034	5.1	%

As of September 30, Change
2019 2018 $ %
($ in millions)
Open-End Funds (1) $ 41,189.7
$ 45,171.8
$ (3,982.1 ) (8.8 )%
Closed-End Funds 6,815.7
6,342.2
473.5
7.5 %
Exchange Traded Funds 1,053.9
983.4
70.5
7.2 %
Retail Separate Accounts 18,862.7
16,817.5
2,045.2
12.2 %
Institutional Accounts 30,951.3
30,960.1
(8.8 ) — %
Structured Products 3,972.3
3,647.8
324.5
8.9 %
Total Long-Term 102,845.6
103,922.8
(1,077.2 ) (1.0 )%
Liquidity (2) 1,221.3
1,675.1
(453.8 ) (27.1 )%
Total $ 104,066.9
$ 105,597.9
$ (1,531.0 ) (1.4 )%
Average Assets Under Management (3) $ 101,058.5
$ 95,073.8
$ 5,984.7
6.3 %
Average Long-Term Assets Under Management (3) $ 99,323.4
$ 93,328.0
$ 5,995.4
6.4 %
(1)Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds.

(2)Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts.

- (3)Averages for the nine-month period ended September 30 were calculated as follows:

–Funds - average daily or weekly balances

- –Retail Separate Accounts - ~~average of~~ prior-quarter ending balances ~~or average of month-end balances~~

- –Institutional Accounts and Structured Products - average of month-end balances

Asset Flows by Product

The following table summarizes asset flows by product:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2020		2019		2020		2019
Open-End Funds (1)
Beginning balance	$	40,053	$	41,223	$	42,870	$	37,710
Inflows	3,755		2,982		12,017		8,492
Outflows	(3,368)		(3,164)		(12,844)		(10,245)
Net flows	387		(182)		(827)		(1,753)
Market performance	3,004		(69)		1,518		5,235
Other (2)	(75)		218		(192)		(2)
Ending balance	$	43,369	$	41,190	$	43,369	$	41,190

Closed-End Funds
Beginning balance	$	5,639	$	6,653	$	6,748	$	5,956
Inflows	15		14		20		34
Outflows	—		—		—		—
Net flows	15		14		20		34
Market performance	54		246		(751)		1,090
Other (2)	(79)		(97)		(388)		(264)
Ending balance	$	5,629	$	6,816	$	5,629	$	6,816

Exchange Traded Funds
Beginning balance	$	541	$	1,078	$	1,156	$	668
Inflows	60		94		220		620
Outflows	(35)		(54)		(408)		(217)
Net flows	25		40		(188)		403
Market performance	(12)		(36)		(380)		67
Other (2)	(11)		(28)		(45)		(84)
Ending balance	$	543	$	1,054	$	543	$	1,054

Retail Separate Accounts
Beginning balance	$	22,054	$	18,260	$	20,414	$	14,998
Inflows	1,727		819		4,271		2,303
Outflows	(617)		(435)		(2,046)		(1,354)
Net flows	1,110		384		2,225		949
Market performance	1,591		297		2,111		3,069
Other (2)	(28)		(78)		(23)		(153)
Ending balance	$	24,727	$	18,863	$	24,727	$	18,863

Institutional Accounts
Beginning balance	$	34,545	$	32,056	$	32,635	$	27,445
Inflows	2,075		851		6,715		3,542
Outflows	(2,381)		(2,216)		(5,824)		(4,629)
Net flows	(306)		(1,365)		891		(1,087)
Market performance	2,472		527		3,199		4,824
Other (2)	(115)		(267)		(129)		(231)
Ending balance	$	36,596	$	30,951	$	36,596	$	30,951

Structured Products
Beginning balance	$	4,264	$	3,984	$	3,903	$	3,640
Inflows	—		—		491		389
Outflows	(69)		(16)		(184)		(53)
Net flows	(69)		(16)		307		336
Market performance	10		54		82		137
Other (2)	(42)		(50)		(129)		(141)
Ending balance	$	4,163	$	3,972	$	4,163	$	3,972

Three Months Ended September 30, Nine Months Ended September 30,
($ in millions) 2019 2018 2019 2018
Open-End Funds (1)
Beginning balance $ 41,223.5
$ 44,419.3
$ 37,710.0
$ 43,077.6
Inflows 2,981.8
3,807.4
8,491.6
11,947.6
Outflows (3,164.2 ) (3,465.1 ) (10,245.8 ) (10,347.9 )
Net flows (182.4 ) 342.3
(1,754.2 ) 1,599.7
Market performance (69.2 ) 464.1
5,234.0
704.4
Other (2) 217.8
(53.9 ) (0.1 ) (209.9 )
Ending balance $ 41,189.7
$ 45,171.8
$ 41,189.7
$ 45,171.8
Closed-End Funds
Beginning balance $ 6,653.1
$ 6,295.0
$ 5,956.0
$ 6,666.2
Inflows 14.0
12.9
34.2
13.4
Outflows —
—
—
—
Net flows 14.0
12.9
34.2
13.4
Market performance 246.0
124.4
1,090.3
(31.7 )
Other (2) (97.4 ) (90.1 ) (264.8 ) (305.7 )
Ending balance $ 6,815.7
$ 6,342.2
$ 6,815.7
$ 6,342.2
Exchange Traded Funds
Beginning balance $ 1,077.8
$ 1,029.9
$ 667.6
$ 1,039.2
Inflows 93.9
35.0
619.5
261.0
Outflows (54.2 ) (100.4 ) (217.4 ) (235.3 )
Net flows 39.7
(65.4 ) 402.1
25.7
Market performance (36.3 ) 50.1
67.2
37.8
Other (2) (27.3 ) (31.2 ) (83.0 ) (119.3 )
Ending balance $ 1,053.9
$ 983.4
$ 1,053.9
$ 983.4
Retail Separate Accounts
Beginning balance $ 18,259.5
$ 14,678.4
$ 14,998.4
$ 13,936.8
Inflows 819.3
921.4
2,302.8
2,359.4
Outflows (434.6 ) (563.1 ) (1,353.2 ) (1,924.9 )
Net flows 384.7
358.3
949.6
434.5
Market performance 297.0
608.7
3,069.2
1,269.1
Other (2) (78.5 ) 1,172.1
(154.5 ) 1,177.1
Ending balance $ 18,862.7
$ 16,817.5
$ 18,862.7
$ 16,817.5
Institutional Accounts
Beginning balance $ 32,056.2
$ 19,726.6
$ 27,445.0
$ 20,815.9
Inflows 850.5
1,484.5
3,542.6
3,332.5
Outflows (2,215.9 ) (1,604.8 ) (4,628.7 ) (4,720.3 )
Net flows (1,365.4 ) (120.3 ) (1,086.1 ) (1,387.8 )
Market performance 526.9
1,184.8
4,822.5
1,498.5
Other (2) (266.4 ) 10,169.0
(230.1 ) 10,033.5
Ending balance $ 30,951.3
$ 30,960.1
$ 30,951.3
$ 30,960.1
Structured Products
Beginning balance $ 3,983.7
$ 3,684.4
$ 3,640.3
$ 3,298.8
Inflows —
—
388.8
421.4
Outflows (16.0 ) (34.4 ) (52.9 ) (54.8 )
Net flows (16.0 ) (34.4 ) 335.9
366.6
Market performance 54.4
39.8
138.4
123.0
Other(2)
(49.8 ) (42.0 ) (142.3 ) (140.6 )
Ending balance $ 3,972.3
$ 3,647.8
$ 3,972.3
$ 3,647.8

Table of Contents


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2020		2019		2020		2019
Total Long-Term
Beginning balance	$	107,096	$	103,254	$	107,726	$	90,417
Inflows	7,632		4,760		23,734		15,380
Outflows	(6,470)		(5,885)		(21,306)		(16,498)
Net flows	1,162		(1,125)		2,428		(1,118)
Market performance	7,119		1,019		5,779		14,422
Other (2)	(350)		(302)		(906)		(875)
Ending balance	$	115,027	$	102,846	$	115,027	$	102,846

Liquidity (3)
Beginning balance	$	1,365	$	1,752	$	1,178	$	1,613




Other (2)	95		(531)		282		(392)
Ending balance	$	1,460	$	1,221	$	1,460	$	1,221

Total
Beginning balance	$	108,461	$	105,006	$	108,904	$	92,030
Inflows	7,632		4,760		23,734		15,380
Outflows	(6,470)		(5,885)		(21,306)		(16,498)
Net flows	1,162		(1,125)		2,428		(1,118)
Market performance	7,119		1,019		5,779		14,422
Other (2)	(255)		(833)		(624)		(1,267)
Ending balance	$	116,487	$	104,067	$	116,487	$	104,067

(1)Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds.

Total Long-Term
Beginning balance $ 103,253.8
$ 89,833.6
$ 90,417.3
$ 88,834.5
Inflows 4,759.5
6,261.2
15,379.5
18,335.3
Outflows (5,884.9 ) (5,767.8 ) (16,498.0 ) (17,283.2 )
Net flows (1,125.4 ) 493.4
(1,118.5 ) 1,052.1
Market performance 1,018.8
2,471.9
14,421.6
3,601.1
Other (2) (301.6 ) 11,123.9
(874.8 ) 10,435.1
Ending balance $ 102,845.6
$ 103,922.8
$ 102,845.6
$ 103,922.8
Liquidity (3)
Beginning balance $ 1,752.7
$ 1,784.9
$ 1,612.5
$ 2,128.7
Other (2) (531.4 ) (109.8 ) (391.2 ) (453.6 )
Ending balance $ 1,221.3
$ 1,675.1
$ 1,221.3
$ 1,675.1
Total
Beginning balance $ 105,006.5
$ 91,618.5
$ 92,029.8
$ 90,963.2
Inflows 4,759.5
6,261.2
15,379.5
18,335.3
Outflows (5,884.9 ) (5,767.8 ) (16,498.0 ) (17,283.2 )
Net flows (1,125.4 ) 493.4
(1,118.5 ) 1,052.1
Market performance 1,018.8
2,471.9
14,421.6
3,601.1
Other (2) (833.0 ) 11,014.1
(1,266.0 ) 9,981.5
Ending balance $ 104,066.9
$ 105,597.9
$ 104,066.9
$ 105,597.9
(2)Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from liquidity strategies, and the effect on net flows from non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), structured products reset transactions, and the use of leverage.


~~(1)~~	~~Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds~~


~~(2)~~	Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from liquidity strategies and the effect on net flows from non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), structured products reset transactions and the use of leverage


~~(3)~~	~~Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts~~

(3)Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts.

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)	2020		2019		$		%		2020		2019
Asset Class
Equity	$	81,032	$	65,544	$	15,488	23.6	%	69.6	%	63.0	%
Fixed income	29,603		31,704		(2,101)		(6.6)	%	25.4	%	30.4	%
Alternatives (1)	4,392		5,598		(1,206)		(21.5)	%	3.8	%	5.4	%
Liquidity (2)	1,460		1,221		239		19.6	%	1.2	%	1.2	%
Total	$	116,487	$	104,067	$	12,420	11.9	%	100.0	%	100.0	%

As of September 30, Change % of Total
2019 2018 $ % 2019 2018
($ in millions)
Asset Class
Equity $ 65,544.0
$ 62,654.4
$ 2,889.6
4.6 % 63.0 % 59.3 %
Fixed income 31,703.9
36,819.9
(5,116.0 ) (13.9 )% 30.4 % 34.9 %
Alternatives (1) 5,597.7
4,448.5
1,149.2
25.8 % 5.4 % 4.2 %
Liquidity (2) 1,221.3
1,675.1
(453.8 ) (27.1 )% 1.2 % 1.6 %
Total $ 104,066.9
$ 105,597.9
$ (1,531.0 ) (1.4 )% 100.0 % 100.0 %

(1)Consists of real estate securities, mid-stream energy securities and master limited partnerships, options strategies and other.


~~(1)~~	~~Consists of real estate securities, mid-stream energy securities and master limited partnerships, options strategies and other~~


~~(2)~~	~~Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts~~

(2)Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts.

Table of Contents

Average Assets Under Management and Average Basis Points

The following table summarizes 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) (2)
	2020	2019	2020		2019
Products
Open-End Funds (1)	59.5	56.6	$	42,475	$	41,457
Closed-End Funds	62.1	64.7	5,742		6,649
Exchange Traded Funds	13.7	25.3	549		1,048
Retail Separate Accounts	47.6	48.0	22,054		18,260
Institutional Accounts	31.7	31.8	36,506		31,462
Structured Products	34.2	37.3	4,171		3,957
All Long-Term Products	47.0	46.9	111,497		102,833
Liquidity (3)	12.3	10.7	1,393		1,710
All Products	46.6	46.3	$	112,890	$	104,543


	Nine Months Ended September 30,
	Average Fee Earned (expressed in basis points)		Average Assets Under Management (in millions) (2)
	2020	2019	2020		2019
Products
Open-End Funds (1)	58.6	55.4	$	40,244	$	40,650
Closed-End Funds	62.2	64.9	5,944		6,486
Exchange Traded Funds	17.3	12.3	689		1,000
Retail Separate Accounts	49.7	47.8	20,043		16,794
Institutional Accounts	30.8	31.1	33,229		30,529
Structured Products	31.6	36.5	4,209		3,865
All Long-Term Products	46.9	46.1	104,358		99,324
Liquidity (3)	11.4	10.4	1,293		1,735
All Products	46.4	45.5	$	105,651	$	101,059

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)
2019 2018 2019 2018
Products
Open-End Funds (1) 56.3
54.3
$ 41,457.2
$ 45,137.1
Closed-End Funds 64.7
65.9
6,648.6
6,386.7
Exchange Traded Funds 13.4
13.7
1,048.1
1,035.9
Retail Separate Accounts 47.5
49.2
18,259.5
15,536.7
Institutional Accounts 31.8
31.9
31,462.5
30,583.4
Structured Products 37.3
60.0
3,957.2
3,635.7
All Long-Term Products 46.6
47.4
102,833.1
102,315.5
Liquidity (3) 10.7
10.1
1,710.2
1,750.3
All Products 46.0
46.8
$ 104,543.3
$ 104,065.8

Nine Months Ended September 30,
($ in millions, except average fee earned data which is in basis points) Average Fees Earned
Average Assets Under
Management (2)
2019 2018 2019 2018
Products
Open-End Funds (1) 55.4
52.2
$ 40,650.1
$ 44,296.4
Closed-End Funds 64.9
66.1
6,485.8
6,300.0
Exchange Traded Funds 12.3
15.5
1,000.1
1,036.1
Retail Separate Accounts 47.8
48.5
16,793.7
14,486.3
Institutional Accounts 31.1
31.9
30,529.2
23,563.8
Structured Products 36.5
45.2
3,864.5
3,645.4
All Long-Term Products 46.1
46.7
99,323.4
93,328.0
Liquidity (3) 10.4
10.5
1,735.1
1,745.8
All Products 45.5
46.1
$ 101,058.5
$ 95,073.8
(1)Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds.

(2)Averages are calculated as follows:


~~(1)~~	~~Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds~~


~~(2)~~	~~Averages are calculated as follows:~~

- –Funds - average daily or weekly balances

- –Retail Separate Accounts - ~~average of~~ prior-quarter ending balances ~~or average of month-end balances~~

- –Institutional Accounts and Structured Products - average of month-end balances


~~(3)~~	~~Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts~~

(3)Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts.

Average fees earned represent investment management fees before the impact of consolidation of ~~sponsored~~ investment products ~~less fees paid to third-party service providers for investment management related services,~~("CIP") divided by average net assets. ~~Open-end fund, closed-end fund and exchange traded fund~~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 or current quarter’s asset values. Structured product fees are calculated based 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 funds.

The average fee rate earned on long-term products for the three and nine months ended September 30, ~~2019 decreased~~

~~Table of Contents~~

2020 increased by ~~0.8~~0.1 and ~~0.6~~0.8 basis points, respectively, compared to the same periods in the prior year. The primary reason for the ~~decrease~~increase during the three and nine months ended September 30, ~~2019~~2020 was ~~lower performance-related fees earned by our structured products partially offset by~~due to changes in the underlying asset mix to higher fee earning strategies in open-end ~~funds. The primary reasons for the decrease~~funds and retail separate accounts during the ~~nine months ended September 30, 2019 was the impact~~current year periods.

Table of the lower blended fee rates of the assets from the SGA Acquisition, which impacted institutional accounts, and lower performance-related fees earned on our structured products partially offset by changes in the underlying asset mix to higher fee earnings strategies in open-end funds.Contents

Results of Operations

Summary Financial Data


	Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%
Investment management fees	$	129,785	$	120,023	$	9,762	8.1	%	$	360,623	$	340,532	$	20,091	5.9	%
Other revenue	25,005		25,932		(927)		(3.6)	%	71,627		76,630		(5,003)		(6.5)	%
Total revenues	154,790		145,955		8,835		6.1	%	432,250		417,162		15,088		3.6	%
Total operating expenses	113,781		110,168		3,613		3.3	%	340,017		330,248		9,769		3.0	%
Operating income (loss)	41,009		35,787		5,222		14.6	%	92,233		86,914		5,319		6.1	%
Other income (expense), net	6,177		(4,596)		10,773		(234.4)	%	(9,859)		9,821		(19,680)		(200.4)	%
Interest income (expense), net	5,726		5,012		714		14.2	%	5,622		2,842		2,780		97.8	%
Income (loss) before income taxes	52,912		36,203		16,709		46.2	%	87,996		99,577		(11,581)		(11.6)	%
Income tax expense (benefit)	11,978		10,844		1,134		10.5	%	29,847		23,851		5,996		25.1	%
Net income (loss)	40,934		25,359		15,575		61.4	%	58,149		75,726		(17,577)		(23.2)	%
Noncontrolling interests	(11,286)		(1,274)		(10,012)		785.9	%	(21,507)		(2,969)		(18,538)		624.4	%
Net Income (Loss) Attributable to Stockholders	29,648		24,085		5,563		23.1	%	36,642		72,757		(36,115)		(49.6)	%
Preferred stockholder dividends	—		(2,085)		2,085		(100.0)	%	—		(6,253)		6,253		(100.0)	%
Net Income (Loss) Attributable to Common Stockholders	$	29,648	$	22,000	$	7,648	34.8	%	$	36,642	$	66,504	$	(29,862)	(44.9)	%

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 vs. 2018 % 2019 2018 2019 vs. 2018 %
($ in thousands)
Results of Operations
Investment management fees $ 120,023
$ 121,713
$ (1,690 ) (1.4 )% $ 340,532
$ 325,357
$ 15,175
4.7 %
Other revenues 25,932
30,497
(4,565 ) (15.0 )% 76,630
88,813
(12,183 ) (13.7 )%
Total revenues 145,955
152,210
(6,255 ) (4.1 )% 417,162
414,170
2,992
0.7 %
Total operating expenses 110,168
118,264
(8,096 ) (6.8 )% 330,248
330,299
(51 ) — %
Operating income (loss) 35,787
33,946
1,841
5.4 % 86,914
83,871
3,043
3.6 %
Other income (expense), net (4,596 ) (4,560 ) (36 ) 0.8 % 9,821
(908 ) 10,729
(1,181.6 )%
Interest income (expense), net 5,012
5,198
(186 ) (3.6 )% 2,842
14,665
(11,823 ) (80.6 )%
Income (loss) before income taxes 36,203
34,584
1,619
4.7 % 99,577
97,628
1,949
2.0 %
Income tax expense (benefit) 10,844
6,653
4,191
63.0 % 23,851
22,641
1,210
5.3 %
Net income (loss) 25,359
27,931
(2,572 ) (9.2 )% 75,726
74,987
739
1.0 %
Noncontrolling interests (1,274 ) (933 ) (341 ) 36.5 % (2,969 ) (1,619 ) (1,350 ) 83.4 %
Net Income (Loss) Attributable to Stockholders 24,085
26,998
(2,913 ) (10.8 )% 72,757
73,368
(611 ) (0.8 )%
Preferred stockholder dividends (2,085 ) (2,085 ) —
— % (6,253 ) (6,253 ) —
— %
Net Income (Loss) Attributable to Common Stockholders $ 22,000
$ 24,913
$ (2,913 ) (11.7 )% $ 66,504
$ 67,115
$ (611 ) (0.9 )%

Revenues

Revenues by source were as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%
Investment management fees
Open-end funds	$	63,458	$	59,060	$	4,398	7.4	%	$	176,584	$	169,326	$	7,258	4.3	%
Closed-end funds	8,959		10,846		(1,887)		(17.4)	%	27,695		31,485		(3,790)		(12.0)	%

Retail separate accounts	26,412		22,092		4,320		19.6	%	74,524		60,761		13,763		22.7	%
Institutional accounts	29,048		25,180		3,868		15.4	%	76,571		71,013		5,558		7.8	%
Structured products	1,297		1,725		(428)		(24.8)	%	3,288		4,957		(1,669)		(33.7)	%

Other products	611		1,120		(509)		(45.4)	%	1,961		2,990		(1,029)		(34.4)	%
Total investment management fees	129,785		120,023		9,762		8.1	%	360,623		340,532		20,091		5.9	%
Distribution and service fees	9,797		10,442		(645)		(6.2)	%	28,146		31,122		(2,976)		(9.6)	%
Administration and shareholder service fees	15,114		15,280		(166)		(1.1)	%	43,056		44,747		(1,691)		(3.8)	%
Other income and fees	94		210		(116)		(55.2)	%	425		761		(336)		(44.2)	%
Total revenues	$	154,790	$	145,955	$	8,835	6.1	%	$	432,250	$	417,162	$	15,088	3.6	%

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 vs. 2018 % 2019 2018 2019 vs. 2018 %
($ in thousands)
Investment management fees
Open-end funds $ 59,060
$ 62,466
$ (3,406 ) (5.5 )% $ 169,326
$ 174,032
$ (4,706 ) (2.7 )%
Closed-end funds 10,846
10,614
232
2.2 % 31,485
31,161
324
1.0 %
Retail separate accounts 22,092
19,532
2,560
13.1 % 60,761
53,152
7,609
14.3 %
Institutional accounts 25,180
24,614
566
2.3 % 71,013
56,210
14,803
26.3 %
Structured products 1,725
3,602
(1,877 ) (52.1 )% 4,957
7,996
(3,039 ) (38.0 )%
Other products 1,120
885
235
26.6 % 2,990
2,806
184
6.6 %
Total investment management fees 120,023
121,713
(1,690 ) (1.4 )% 340,532
325,357
15,175
4.7 %
Distribution and service fees 10,442
13,730
(3,288 ) (23.9 )% 31,122
39,886
(8,764 ) (22.0 )%
Administration and shareholder service fees 15,280
16,567
(1,287 ) (7.8 )% 44,747
48,272
(3,525 ) (7.3 )%
Other income and fees 210
200
10
5.0 % 761
655
106
16.2 %
Total revenues $ 145,955
$ 152,210
$ (6,255 ) (4.1 )% $ 417,162
$ 414,170
$ 2,992
0.7 %

~~Table of Contents~~

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 ~~decreased~~increased by ~~$1.7~~$9.8 million, or ~~1.4%~~8.1%, and $20.1 million, or 5.9%, for the three ~~months ended September 30, 2019 compared to the same period in the prior year due to a decrease in performance-related fees. Investment management fees increased $15.2 million, or 4.7%, for the~~and nine months ended September 30, ~~2019,~~2020, respectively, compared to the same ~~period~~periods in the prior ~~year~~year. The increase in investment management fees during the three-month period was due to an increase in average assets under management of ~~$6.0~~$8.3 billion, or ~~6.3%~~8.0%, ~~for~~and an increase in the ~~nine months ended September 30, 2019, primarily as a result~~total average fee rate of 0.3 basis points. The increase in investment management fees during the

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nine-month period was due to an increase in average assets under management of $4.6 billion and an increase in the ~~SGA Acquisition and market performance.~~total average fee rate of 0.9 basis points.

Distribution and Service Fees

Distribution and service fees ~~which~~ are ~~primarily~~ sales- and asset-based fees earned from open-end funds for marketing and distribution ~~services,~~services. Distribution and service fees decreased by ~~$3.3~~$0.6 million, or ~~23.9%~~6.2%, and ~~$8.8~~$3.0 million, or ~~22.0%~~9.6%, for the three and nine months ended September 30, ~~2019,~~2020, respectively, compared to the same periods in the prior year, primarily due to lower ~~sales and~~ average assets for open-end funds in share classes that have distribution and service fees.

Administration and Shareholder ~~Servicing~~Service Fees

Administration and shareholder service fees represent fees earned for fund administration and shareholder services from our open-end mutual funds, ETFs and certain of our closed-end funds. Fund administration and shareholder ~~servicing~~service fees decreased by ~~$1.3~~$0.2 million, or ~~7.8%~~1.1%, and ~~$3.5~~$1.7 million, or ~~7.3%~~3.8%, for the three and nine months ended September 30, ~~2019,~~2020, respectively, compared to the same periods in the prior ~~year. The decrease for the three and nine months ended September 30, 2019 was~~year primarily due to the decrease in average assets under management for our open-end, ~~funds.~~closed-end and ETFs during the periods.

Other Income and Fees

Other income and fees primarily represent contingent sales charges earned from investor redemptions of certain shares sold without a front-end sales charge. Other income and fees ~~remained relatively flat~~decreased for the three ~~months ended September 30, 2019. Other income~~ and ~~fees increased $0.1 million, or 16.2%, for the~~ nine months ended September 30, ~~2019,~~2020, compared to the same ~~period~~periods in the prior year, primarily due to ~~a higher level of~~lower redemption ~~income.~~income and professional service fees.

Operating Expenses

Operating expenses by category were as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%
Operating expenses
Employment expenses	$	67,479	$	61,282	$	6,197	10.1	%	$	193,772	$	180,256	$	13,516	7.5	%
Distribution and other asset-based expenses	19,570		20,927		(1,357)		(6.5)	%	56,324		62,013		(5,689)		(9.2)	%
Other operating expenses	16,343		18,228		(1,885)		(10.3)	%	52,664		56,125		(3,461)		(6.2)	%
Other operating expenses of CIP	1,016		376		640		170.2	%	9,944		3,395		6,549		192.9	%
Restructuring and severance	735		523		212		40.5	%	1,155		2,019		(864)		(42.8)	%
Depreciation expense	1,106		1,245		(139)		(11.2)	%	3,560		3,729		(169)		(4.5)	%
Amortization expense	7,532		7,587		(55)		(0.7)	%	22,598		22,711		(113)		(0.5)	%
Total operating expenses	$	113,781	$	110,168	$	3,613	3.3	%	$	340,017	$	330,248	$	9,769	3.0	%

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 vs. 2018 % 2019 2018 2019 vs. 2018 %
($ in thousands)
Operating expenses
Employment expenses $ 61,282
$ 63,269
$ (1,987 ) (3.1 )% $ 180,256
$ 178,833
$ 1,423
0.8 %
Distribution and other asset-based expenses 20,927
25,386
(4,459 ) (17.6 )% 62,013
71,398
(9,385 ) (13.1 )%
Other operating expenses 18,228
20,350
(2,122 ) (10.4 )% 56,125
56,340
(215 ) (0.4 )%
Other operating expenses of consolidated investment products ("CIP") 376
529
(153 ) (28.9 )% 3,395
2,823
572
20.3 %
Restructuring and severance 523
—
523
100.0 % 2,019
—
2,019
100.0 %
Depreciation and other amortization 1,245
1,189
56
4.7 % 3,729
3,304
425
12.9 %
Amortization expense 7,587
7,541
46
0.6 % 22,711
17,601
5,110
29.0 %
Total operating expenses $ 110,168
$ 118,264
$ (8,096 ) (6.8 )% $ 330,248
$ 330,299
$ (51 ) — %

~~Table of Contents~~

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, ~~2019~~2020 were ~~$61.3~~$67.5 million and ~~$180.3~~$193.8 million, respectively, which represented ~~a decrease of $2.0 million, or 3.1%, and~~ an increase of ~~$1.4~~$6.2 million, or ~~0.8%~~10.1%, and $13.5 million, or 7.5%, compared to the same periods in the prior year. The ~~decrease~~increase for the three ~~months ended September 30, 2019 was primarily due to lower sales~~ and ~~profit-based compensation. The increase for the~~ nine months ended September 30, ~~2019 reflected the addition of employees from the SGA Acquisition partially offset by lower sales-based~~2020 was primarily due to increased sales- and profit-based compensation.

Distribution and Other Asset-Based Expenses

Distribution and other asset-based expenses consist primarily of payments to third-party ~~distribution partners~~client intermediaries for providing services to investors in ~~our funds and payments to third-party service providers for~~sponsored investment ~~management-related services.~~products. These payments are primarily based on percentages of sales, assets under management or revenues. These 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-line basis over the periods in which commissions are generally recovered from distribution fee revenues

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and contingent sales charges received from shareholders of the funds upon redemption of their shares. Distribution and other asset-based expenses decreased by ~~$4.5~~$1.4 million, or ~~17.6%~~6.5%, and ~~$9.4~~$5.7 million, or ~~13.1%~~9.2%, infor the three and nine months ended September 30, ~~2019,~~2020, respectively, as compared to the same periods in the prior year, primarily due to ~~lower average open-end fund assets under management and~~ a lower percentage of sales and assets under management in share classes ~~where we pay~~that have 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 related costs, rent and occupancy expenses, and other business costs. Other operating expenses for the three and nine months ended September 30, ~~2019~~2020 decreased by ~~$2.1~~$1.9 million, or ~~10.4%~~10.3%, ~~primarily due~~and $3.5 million, or 6.2%, respectively, as compared to ~~costs incurred~~the same periods in the prior year, ~~period~~due to decreased travel and related toexpenses primarily as a result of the ~~SGA Acquisition that did not recur in~~impact of COVID-19 on the current ~~year period.~~ operating environment.

Other Operating Expenses of CIP

Other operating expenses of CIP increased $0.6 million, or 170.2% to $1.0 million for the three months ended September 30, 2020 and increased $6.5 million, or 192.9%, to $9.9 million, for the nine months ended September 30, ~~2019 decreased by $0.2 million, or 0.4%,~~2020, compared to the same ~~period~~periods in the prior ~~year primarily due to the aforementioned SGA Acquisition costs in the prior year, partially offset by the inclusion of SGA's other operating expenses for the full nine months ended September 30, 2019.~~

~~Other Operating Expenses of CIP~~

Other operating expenses of CIP decreased $0.2 million, or 28.9%, to $0.4 million and increased $0.6 million, or 20.3% to $3.4 million for the three and nine months ended September 30, 2019, respectively.year. The ~~decrease in~~increase during the three-month period was primarily ~~driven by fewer consolidated mutual funds~~due to costs associated with the refinancing of debt for a CLO in the current ~~year period versus the prior~~ year period. The increase in the nine-month period was primarily due to costs associated with the issuance of a new ~~CLO.~~CLO as well as the refinancing of debt for two CLOs in the current year period.

Restructuring and ~~severance~~Severance

During the three and nine months ended September 30, 2020, we incurred $0.7 million and $1.2 million, respectively, in restructuring and severance costs. During the three and nine months ended September 30, 2019, we incurred $0.5 million and $2.0 million, respectively in restructuring and severance costs. The costs primarily related to severance ~~costs.~~costs in all periods.

Depreciation ~~and Other Amortization~~ Expense

Depreciation ~~and other amortization~~ expense consists primarily of the straight-line depreciation of furniture, equipment and leasehold improvements. Depreciation ~~and amortization~~ expense ~~increased by $0.1 million, or 4.7%, and $0.4 million, or 12.9%,~~decreased for the three and nine months ended September 30, ~~2019, respectively,~~2020, compared to the same periods in the prior year, primarily due to ~~depreciation expense on new office space.~~a higher level of equipment being fully depreciated 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 remained generally consistent for the three ~~months ended September 30, 2019 compared to the same period in the prior year. Amortization expenses increased $5.1 million, or 29.0%, for the~~and nine months ended September 30, ~~2019,~~2020 compared to the same ~~period~~periods in the prior ~~year, primarily due to an increase in definite lived intangible assets as a result of the SGA Acquisition.~~year.

~~Table of Contents~~

Other Income (Expense)~~, net~~

Other Income (Expense), net by category ~~was~~were as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net	$	2,498	$	2	$	2,496	N/M		$	2,068	$	5,474	$	(3,406)	(62.2)	%
Realized and unrealized gain (loss) of CIP, net	2,680		(5,344)		8,024		(150.1)	%	(12,733)		2,455		(15,188)		(618.7)	%
Other income (expense), net	999		746		253		33.9	%	806		1,892		(1,086)		(57.4)	%
Total Other Income (Expense), net	$	6,177	$	(4,596)	$	10,773	(234.4)	%	$	(9,859)	$	9,821	$	(19,680)	(200.4)	%

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 vs. 2018 % 2019 2018 2019 vs. 2018 %
($ in thousands)
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net $ 2
$ (374 ) $ 376
N/M

$ 5,474
$ 1,024
$ 4,450
434.6 %
Realized and unrealized gain (loss) of CIP, net (5,344 ) (4,735 ) (609 ) 12.9 % 2,455
(4,255 ) 6,710
N/M
Other income (expense), net 746
549
197
35.9 % 1,892
2,323
(431 ) (18.6 )%
Total Other Income (Expense), net $ (4,596 ) $ (4,560 ) $ (36 ) 0.8 % $ 9,821
$ (908 ) $ 10,729
(1,181.6 )%

Realized and unrealized gain (loss) on investments, net

Realized and unrealized gain (loss) on investments, net changed during the three and nine months ended September 30, ~~2019~~

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2020 by ~~$0.4~~$2.5 million and ~~$4.5~~$(3.4) million, respectively, as compared to the same periods in the prior year. The realized and unrealized gains and losses during the ~~three months~~three- and nine-months ended September 30, ~~2018 primarily related to realized and unrealized losses on investments~~2020 reflected changes in ~~fixed income strategies. The change in realized and unrealized gains~~overall market conditions experienced during the ~~nine months ended September 30, 2019 primarily related to realized and unrealized gains on investments in alternative, domestic and international equity strategies in the current year.~~periods.

Realized and unrealized gain (loss) of CIP, net

Realized and unrealized gain (loss) of ~~our~~ CIP, net changed ~~$0.6~~$8.0 million, or (150.1)%, and ~~$6.7~~$(15.2) million, or (618.7)%, respectively, during the three and nine months ended September 30, ~~2019, respectively,~~2020, compared to the same periods in the prior year. The change for the three months ended September 30, ~~2019~~2020 consisted primarily of an increase in net realized and unrealized ~~losses~~gains of ~~$15.3~~$85.1 million, ~~on the investments of CIP, primarily~~ due to changes in market values of leveraged loans, partially offset by ~~an increase~~unrealized losses of ~~$14.7~~$77.1 million related to changes in ~~gains on~~the value of the notes payable. The change for the nine months ended September 30, ~~2019~~2020 consisted primarily ~~consisted~~ of ~~an increase in gains on the notes payable of $5.8 million and an increase of $0.9 million in~~net realized and unrealized ~~gains on the investments~~losses of ~~CIP, primarily~~$86.8 million due to changes in market values of leveraged ~~loans.~~loans, partially offset by unrealized gains of $71.7 million related to the changes in value of the notes payable.

Other income (expense), net

Other income (expense), net increased by ~~$0.2~~$0.3 million, or ~~35.9%~~33.9%, ~~and~~for the three months ended September 30, 2020 compared to the same period in the prior year due primarily to increased earnings from equity method investments during the current year period. Other income (expense), net decreased ~~$0.4~~by $1.1 million, or ~~18.6%~~57.4%, ~~during~~for the ~~three and~~ nine months ended September 30, ~~2019 respectively, as~~2020 compared to the same ~~periods~~period in the prior year primarily due to ~~changes in earnings on~~lower profits from equity method investments during the ~~periods.~~current year period.

Interest Income (Expense)

Interest Income (Expense), net

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


	Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%
Interest Income (Expense)
Interest expense	$	(2,877)	$	(4,889)	$	2,012	(41.2)	%	$	(9,202)	$	(15,205)	$	6,003	(39.5)	%
Interest and dividend income	137		863		(726)		(84.1)	%	1,131		3,017		(1,886)		(62.5)	%
Interest and dividend income of investments of CIP	26,088		30,290		(4,202)		(13.9)	%	83,951		87,060		(3,109)		(3.6)	%
Interest expense of CIP	(17,622)		(21,252)		3,630		(17.1)	%	(70,258)		(72,030)		1,772		(2.5)	%
Total Interest Income (Expense), net	$	5,726	$	5,012	$	714	14.2	%	$	5,622	$	2,842	$	2,780	97.8	%

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 vs. 2018 % 2019 2018 2019 vs. 2018 %
($ in thousands)
Interest Income (Expense)
Interest expense $ (4,889 ) $ (5,155 ) $ 266
(5.2 )% $ (15,205 ) $ (13,482 ) $ (1,723 ) 12.8 %
Interest and dividend income 863
716
147
20.5 % 3,017
3,255
(238 ) (7.3 )%
Interest and dividend income of investments of CIP 30,290
26,596
3,694
13.9 % 87,060
71,678
15,382
21.5 %
Interest expense of CIP (21,252 ) (16,959 ) (4,293 ) 25.3 % (72,030 ) (46,786 ) (25,244 ) 54.0 %
Total Interest Income (Expense), net $ 5,012
$ 5,198
$ (186 ) (3.6 )% $ 2,842
$ 14,665
$ (11,823 ) (80.6 )%

~~Table of Contents~~

Interest Expense

Interest expense decreased ~~$0.3~~$2.0 million, or ~~5.2%~~41.2%, and ~~increased $1.7~~$6.0 million, or ~~12.8%~~39.5%, respectively, for the three and nine months ended September 30, ~~2019, respectively,~~2020 compared to the same periods in the prior year. The ~~changes~~decreases were due to a decrease in the average levels of debt outstanding and a lower average interest rate compared to the same periods in the prior year. Also contributing to the decrease for the nine months ended September 30, 2020 was a $0.7 million gain recognized on the early extinguishment of debt.

Interest and Dividend Income

Interest and dividend income is earned on cash equivalents and our marketable securities.Interest and dividend income ~~increased $0.1~~decreased $0.7 million, or ~~20.5%~~84.1%, and ~~decreased $0.2~~$1.9 million, or ~~7.3%~~62.5%, respectively, for the three and nine months ended September 30, ~~2019, respectively,~~2020, compared to the same periods in the prior year. The ~~increase in the three-month period was primarily due to higher average cash and cash equivalents balances, offset by lower investment balances. The decrease in the nine-month period was~~decreases were primarily due to lower ~~investment balances~~interest rates earned on cash and lower dividends paid by our investments as compared to the corresponding ~~period~~periods in the prior year.

Table of Contents

Interest and Dividend Income of Investments of CIP

Interest and dividend income of investments of CIP ~~increased $3.7~~decreased $4.2 million, or 13.9%, and ~~$15.4~~$3.1 million, or ~~21.5%~~3.6%, respectively, for the three and nine months ended September 30, ~~2019, respectively,~~2020, compared to the same periods in the prior year. The ~~increases were due to increased investments of CIP~~decrease during the three and ~~nine months ended September 30, 2019 compared~~nine-month periods was primarily due to ~~the same periods~~a decrease in ~~the prior year.~~interest rates partially offset by increased investments of CIP.

Interest Expense of CIP

Interest expense of CIP represents interest expense on the notes payable of CIP. Interest expense of CIP ~~increased~~decreased by ~~$4.3~~$3.6 million, or ~~25.3%~~17.1%, and ~~$25.2~~$1.8 million, or ~~54.0%~~2.5%, respectively, for the three and nine months ended September 30, ~~2019, respectively,~~2020, compared to the same periods in the prior year. The ~~increases were~~decrease during the three- and nine- months ended September 30, 2020 was primarily due to lower variable interest rates partially offset by higher average debt balances of CIP ~~as well as $4.5 million of amortization of discounts on notes payable in~~during the ~~nine-month period ended September 30, 2019.~~current year periods.

Income Tax Expense (Benefit)

The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of ~~24.0%~~33.9% and ~~23.2%~~24.0% for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The increase in the estimated effective tax rate for the nine months ended September 30, ~~2019~~2020 was primarily due to t~~he increase in~~ valuation allowances recorded for the ~~valuation allowance associated with various investments the~~tax effects of unrealized losses on certain Company ~~holds.~~investments.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act, referred to herein as the CARES Act, which contains several income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. The Company has evaluated the current legislation and, at this time, does not anticipate the CARES Act to have a material impact on its condensed consolidated financial statements.

Liquidity and Capital Resources

Certain Financial Data

The following table summarizes certain financial data relating to our liquidity and capital resources:


											September 30, 2020		December 31, 2019			Change
	September 30, 2019		December 31, 2018		Change
					2019 vs. 2018			%
($ in thousands)
(in thousands)										(in thousands)					September 30, 2020			December 31, 2019			2020 vs. 2019	%
Balance Sheet Data										Balance Sheet Data
Cash and cash equivalents	$	195,870	$	201,705	$	(5,835	)	(2.9	)%	Cash and cash equivalents	$	202,212	$	221,781		$	(19,569)		(8.8)	%
Investments	44,583		79,558		(34,975		)	(44.0	)%	Investments	54,446		83,206			(28,760)			(34.6)	%

Debt	291,995		329,184		(37,189		)	(11.3	)%	Debt	218,014		277,839			(59,825)			(21.5)	%
Redeemable noncontrolling interests										Redeemable noncontrolling interests	99,277		63,845			35,432			55.5	%
Total equity	677,616		643,867		33,749			5.2	%	Total equity	688,012		686,257			1,755			0.3	%

At September 30, ~~2019,~~2020, we had ~~$195.9~~$202.2 million of cash and cash equivalents and ~~$44.6~~$54.4 million of investments, which included ~~$23.7~~$31.6 million of investment securities, compared to ~~$201.7~~$221.8 million of cash and cash equivalents and ~~$79.6~~$83.2 million of investments, which included ~~$61.3~~$61.0 million of investment securities, at December 31, ~~2018.~~2019.

At September 30, ~~2019,~~2020, we had ~~$300.7~~$223.2 million of principal outstanding under our term loan maturing June 1, 2024 and no outstanding borrowings under our $100.0 million revolving credit facility. The Company's liquidity and capital resources were not materially impacted by the economic conditions during the first nine months of 2020 as a result of the COVID-19 pandemic.

Our main uses of capital related to operating activities include payments of annual incentive compensation, interest on our indebtedness, income taxes and other operating expenses, which primarily ~~consisted~~consist of investment research, technology costs, professional fees and distribution and occupancy costs. 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 ~~quarter~~quarters of ~~2019~~2020 and ~~2018,~~2019, we paid ~~$76.2~~$84.7 million and ~~$74.1~~$76.2 million, respectively, in incentive compensation earned during the years ended December 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

In addition to operating activities, other uses of cash could include: ~~(a)~~(i) investments in organic growth, including expanding our distribution efforts; ~~(b)~~(ii) seeding or launching new products, including seeding funds or sponsoring CLO issuances; ~~(c)~~(iii) principal payments on debt outstanding through scheduled amortization, excess cash flow payment requirements or additional paydowns; ~~(d)~~(iv) dividend payments to ~~preferred and~~ common stockholders; ~~(e)~~(v) repurchases of our common stock; ~~(f)~~(vi) investments in our infrastructure; ~~(g)~~(vii) investments in inorganic growth opportunities as they ~~arise; (h)~~arise where the purchase price can take the form of upfront payments and/or contingent consideration; (viii) integration costs, including restructuring and severance, related to potential acquisitions, if any; and ~~(i) potential~~(ix) purchases of affiliate noncontrolling interests.

Capital and Reserve Requirements

We operate ~~two~~a broker-dealer ~~subsidiaries~~subsidiary registered with the SEC that ~~are~~is subject to certain rules regarding minimum net capital. The ~~broker-dealers are~~broker-dealer is 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, ~~2019 and December 31, 2018,~~2020, the ratio of aggregate indebtedness to net capital of our ~~broker-dealers~~broker-dealer was below the maximum allowed, and net capital was significantly greater than the required minimum.

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

Net cash used in operating activities of ~~$103.0~~$380.3 million for the nine months ended September 30, ~~2019~~2020 increased by ~~$1.3~~$277.3 million from ~~net cash used in operating activities of $101.7~~$103.0 million for the same period in the prior year primarily due ~~an increase in the~~to increased net purchases of investments by CIP of ~~CIP partially offset by changes~~$274.1 million in ~~our operating assets and liabilities and~~ the ~~operating assets and liabilities of CIP.~~current year period compared to the prior year period.

Cash flows from investing activities consist primarily of capital expenditures and other investing activities related to our business operations. Net cash provided by investing activities was ~~$13.5~~$8.9 million for the nine months ended September 30, ~~2019~~2020 compared to ~~net cash used in investing activities of $111.9~~$13.5 million in the same period for the prior year. The primary investing activities for the nine months ended September 30, 2020 were related to increases in cash of CIP due to the consolidation of additional investment products. The primary investing activities for the nine months ended September 30, 2019 were related to the increase in cash of $18.4 million from the consolidation of investment products partially offset by capital expenditures and other asset purchases of $7.0 million. ~~The primary investing activity for the nine months ended September 30, 2018 was the $127.0 million SGA Acquisition.~~

Cash flows from 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, issuance of and repayment of debt ~~by us~~ and ~~CIP and contributions~~changes to noncontrolling ~~interests related to CIP.~~interests. Net cash provided by financing activities ~~decreased~~increased by ~~$85.6~~$191.9 million to $305.8 million for the nine months ended September 30, 2020 as compared to $113.9 million for the nine months ended September 30, ~~2019 as compared to net~~2019. Net cash provided by financing activities increased during the period primarily due to an increase of ~~$199.5~~$221.8 million ~~for the nine months ended September 30, 2018. Cash flows from financing activities~~in net borrowings of CIP during the nine months ended September 30, ~~2019 consisted primarily of $200.6 million in net borrowings of CIP~~2020 compared to the prior year period, partially offset by ~~$39.8~~an increase of $21.7 million ~~in repayments~~on the repayment of ~~our~~ debt ~~and $30.0 million of repurchases of common stock. Cash flows from financing activities~~ during the nine months ended September 30, ~~2018 consisted primarily of $148.0 million of net borrowings by CIP, $92.1 million in net borrowings by~~2020 compared to the ~~Company partially offset by $12.5 million of repurchases of common stock.~~prior year period.

The Company's credit agreement, as amended (the "Credit Agreement"), ~~comprises (a)~~is comprised of (i) $365.0 million of seven-year term debt (the "Term Loan") expiring in June 2024 and ~~(b)~~(ii) a $100.0 million five-year revolving credit facility (the "Credit Facility") expiring in June 2022. At September 30, ~~2019, $300.7~~2020, $223.2 million was outstanding under the Term Loan, and there were no outstanding borrowings under the Credit Facility. In accordance with ~~ASC~~Accounting Standards Codification 835, Interest, the amounts outstanding under the Term Loan are presented on the ~~condensed consolidated balance sheet~~Condensed Consolidated Balance Sheet net of related debt issuance costs, which were ~~$8.7~~$5.2 million as of September 30, ~~2019.~~2020.

Contractual Obligations

Our contractual obligations are summarized in our ~~2018~~2019 Annual Report on Form 10-K. As of September 30, ~~2019,~~2020, there have been no material changes outside of the ordinary course of business in our contractual obligations since December 31, ~~2018.~~2019.

Critical Accounting Policies and Estimates

Our financial statements and the accompanying notes are prepared in accordance with 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 ~~2018~~2019 Annual Report on Form 10-K. A complete description of our significant accounting policies is included in our ~~2018~~2019 Annual Report on Form 10-K. There were no material changes in our critical accounting policies in the three months ended September 30, ~~2019.~~2020.

Recently Issued Accounting Pronouncements

For a discussion of accounting standards, see Note 2 in our condensed consolidated financial statements.

The Company is primarily exposed to market risk associated with unfavorable movements in interest rates and securities prices. ~~During~~Except for the broad effects of COVID-19 on the global economy and major financial markets, during the three and nine months ended September 30, ~~2019,~~2020, there were no material changes to the information contained in Part II, Item 7A of the Company's 2019 Annual Report on Form ~~10-K for the fiscal year ended December 31, 2018.~~10-K.

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"), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is 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. 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, ~~2019,~~2020, the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control 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.

The Company ~~accrues for~~records 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, 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.

~~The reader should carefully consider, in connection with the other information in this report,~~There have been no significant changes to the Company’s risk factors from those previously reported in our ~~2018~~2019 Annual Report on Form ~~10-K.~~10-K, other than as noted below.

The ongoing effects of the COVID-19 pandemic and associated global economic disruption and uncertainty have affected, and may further affect, our business, results of operations and financial condition.

As previously indicated in our 2019 Annual Report on Form 10-K, our results of operations are affected by certain economic factors, including the condition of the securities markets. The global financial markets, including the capital, equity and credit markets, have been challenged in reaction to the COVID-19 pandemic and its related economic impact. The broader implications of the COVID-19 pandemic on our results of operations and overall financial performance remain uncertain and, to the extent the financial markets continue to experience challenges, we may experience declines in our assets under management, which will adversely affect our revenues and earnings, and the fair value of our investments. Although we believe we have sufficient liquidity and capital resources to effectively continue operations for the foreseeable future, deterioration of worldwide credit and financial markets may limit our ability to raise capital and financing may not be available

to us in sufficient amounts, on acceptable terms, or at all. If we are unable to access sufficient capital on acceptable terms, our business could be adversely impacted.

In an effort to protect the health and safety of our employees, we implemented various measures to reduce the impact of COVID-19 across our organization, while also maintaining business continuity. Consistent with government guidelines and mandates, these initiatives included the adoption of social distancing policies, work-at-home arrangements, and suspending employee travel. Currently, many of our employees are working remotely from home in an effort to reduce the spread of the virus and maintain the health and safety of our employees. While our work from home efforts have been successful to date, operating remotely for an extended period could result in operational challenges, strain our technology resources and/or expose us to an increased number of cybersecurity threats. A decline in the health and safety of our employees, including key employees, or material disruptions to their ability to work remotely, including power or Internet outages or electronic systems failures, could negatively affect our ability to operate our business normally and have a material adverse impact on our results of operations or financial condition.

Additionally, many of the key service providers and vendors upon which we rely also have transitioned to remote work environments pursuant to business continuity plans. While, to date, the effects of COVID-19 have not had a material negative impact on the services they provide to us, or, we believe, their business operations or service levels, to the extent that the COVID-19 virus continues to spread and affect the employee base or operations of our service providers, disruptions in or the inability to provide services to us could negatively impact our business operations.

Please see additional discussion in Part I, Item 2. “Management Discussion and Analysis of Financial Condition and Results of Operations.”

As of September 30, ~~2019, 4,180,045~~2020, 4,930,045 shares of our common stock had been authorized to be repurchased under the share repurchase program approved by our Board of Directors, and ~~338,183~~762,718 shares remained 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. The program, which has no specified term, may be suspended or terminated at any time.


	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2019	528,376	$	115.74
Granted	211,660	$	86.73
Forfeited	(3,844)	$	118.95
Settled	(181,091)	$	110.79
Outstanding at September 30, 2020	555,101	$	106.27



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	September 30, 2019			December 31, 2018
($ in thousands, except share data)
Assets:
Cash and cash equivalents	$	195,870		$	201,705
Investments	44,583			79,558
Accounts receivable, net	74,173			70,047
Assets of consolidated investment products ("CIP")
Cash and cash equivalents of CIP	77,562			52,015
Cash pledged or on deposit of CIP	5,600			936
Investments of CIP	2,018,923			1,749,568
Other assets of CIP	16,822			31,057
Furniture, equipment and leasehold improvements, net	19,494			20,154
Intangible assets, net	317,924			338,812
Goodwill	290,366			290,366
Deferred taxes, net	18,475			22,116
Other assets	33,339			14,201
Total assets	$	3,113,131		$	2,870,535
Liabilities and Equity
Liabilities:
Accrued compensation and benefits	$	78,073		$	93,339
Accounts payable and accrued liabilities	23,310			27,926
Dividends payable	8,744			7,762
Debt	291,995			329,184
Other liabilities	36,487			20,010
Liabilities of CIP
Notes payable of CIP	1,821,243			1,620,260
Securities purchased payable and other liabilities of CIP	84,053			70,706
Total liabilities	2,343,905			2,169,187
Commitments and Contingencies (Note 15)
Redeemable noncontrolling interests	91,610			57,481
Equity:
Equity attributable to stockholders:
Series D mandatory convertible preferred stock, $0.01 par value, 1,150,000 shares authorized, issued and outstanding at September 30, 2019 and December 31, 2018	110,843			110,843
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 10,719,458 shares issued and 6,877,596 shares outstanding at September 30, 2019 and 10,552,624 shares issued and 6,997,382 shares outstanding at December 31, 2018, respectively	107			106
Additional paid-in capital	1,202,130			1,209,805
Retained earnings (accumulated deficit)	(238,108		)	(310,865		)
Accumulated other comprehensive income (loss)	(19		)	(731		)
Treasury stock, at cost, 3,841,862 and 3,555,242 shares at September 30, 2019 and December 31, 2018, respectively	(409,249		)	(379,249		)
Total equity attributable to stockholders	665,704			629,909
Noncontrolling interests of CIP	11,912			13,958
Total equity	677,616			643,867
Total liabilities and equity	$	3,113,131		$	2,870,535



	July 1, 2018
($ in thousands)
Assets:
Cash and cash equivalents	$	2,505
Investments	262
Accounts receivable	6,649
Furniture, equipment and leasehold improvements	70
Intangible assets	62,000
Goodwill	120,213
Other assets	659
Total Assets	192,358
Liabilities
Accrued compensation and benefits	824
Accounts payable and accrued liabilities	6,534
Total liabilities	7,358
Redeemable noncontrolling interests	55,500
Total Net Assets Acquired	$	129,500



	July 1, 2018
	Approximate Fair Value		Weighted Average of Useful Life
($ in thousands)
Definite-lived intangible assets:
Institutional and retail separate account investment contracts	$	49,000	6 years
Trade name	7,000		10 years
Non-competition agreements	6,000		5 years
Total definite-lived intangible assets	$	62,000



	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
($ in thousands)
Total Revenues	$	152,210	$	431,400
Net Income (Loss) Attributable to Common Stockholders	$	26,201	$	69,284


Fiscal Year	Amount (in thousands)
Remainder of 2020	7,529
2021	30,116
2022	29,992
2023	29,330
2024	23,689
2025 and thereafter	123,621
	$	244,277



Fiscal Year	Amount ($ in thousands)
Remainder of 2019	$	7,533
2020	30,127
2021	30,116
2022	29,992
2023	29,330
2024 and thereafter	147,310
	$	274,408



	December 31, 2018
	Cost		Unrealized Loss			Unrealized Gain		Fair Value
($ in thousands)
Investment Securities - available for sale
Investments in CLOs	$	3,696	$	(1,673	)	$	—	$	2,023



	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2018	552,238		$	111.49
Granted	181,367		$	108.42
Forfeited	(22,724	)	$	94.37
Settled	(158,916	)	$	96.33
Outstanding at September 30, 2019	551,965		$	115.55



	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2018	76,751		$	12.86
Exercised	(66,120	)	$	9.79
Outstanding, vested and exercisable at June 30, 2019	10,631		$	31.96


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2020		2019		2020		2019
Net Income (Loss)	$	40,934	$	25,359	$	58,149	$	75,726
Noncontrolling interests	(11,286)		(1,274)		(21,507)		(2,969)
Net Income (Loss) Attributable to Stockholders	29,648		24,085		36,642		72,757
Preferred stock dividends	0		(2,085)		0		(6,253)
Net Income (Loss) Attributable to Common Stockholders	$	29,648	$	22,000	$	36,642	$	66,504
Shares:
Basic: Weighted-average number of shares outstanding	7,684		6,947		7,611		6,990
Plus: Incremental shares from assumed conversion of dilutive instruments	313		1,210		347		1,225
Diluted: Weighted-average number of shares outstanding	7,997		8,157		7,958		8,215
Earnings (Loss) per Share—Basic	$	3.86	$	3.17	$	4.81	$	9.51
Earnings (Loss) per Share—Diluted	$	3.71	$	2.95	$	4.60	$	8.86





(in thousands)
Subordinated notes	$	60,721
Accrued investment management fees	1,424
Total beneficial interests	$	62,145


(in thousands)	Nine Months Ended September 30, 2020
Distributions received and unrealized gains (losses) on the subordinated notes held by the Company	$	(13,941)
Investment management fees	6,492

Total economic interests	$	(7,449)


~~(1)~~	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 trading activities at period end.



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Open-End Funds (1)
Beginning balance	$	41,223.5		$	44,419.3		$	37,710.0		$	43,077.6
Inflows	2,981.8			3,807.4			8,491.6			11,947.6
Outflows	(3,164.2		)	(3,465.1		)	(10,245.8		)	(10,347.9		)
Net flows	(182.4		)	342.3			(1,754.2		)	1,599.7
Market performance	(69.2		)	464.1			5,234.0			704.4
Other (2)	217.8			(53.9		)	(0.1		)	(209.9		)
Ending balance	$	41,189.7		$	45,171.8		$	41,189.7		$	45,171.8
Closed-End Funds
Beginning balance	$	6,653.1		$	6,295.0		$	5,956.0		$	6,666.2
Inflows	14.0			12.9			34.2			13.4
Outflows	—			—			—			—
Net flows	14.0			12.9			34.2			13.4
Market performance	246.0			124.4			1,090.3			(31.7		)
Other (2)	(97.4		)	(90.1		)	(264.8		)	(305.7		)
Ending balance	$	6,815.7		$	6,342.2		$	6,815.7		$	6,342.2
Exchange Traded Funds
Beginning balance	$	1,077.8		$	1,029.9		$	667.6		$	1,039.2
Inflows	93.9			35.0			619.5			261.0
Outflows	(54.2		)	(100.4		)	(217.4		)	(235.3		)
Net flows	39.7			(65.4		)	402.1			25.7
Market performance	(36.3		)	50.1			67.2			37.8
Other (2)	(27.3		)	(31.2		)	(83.0		)	(119.3		)
Ending balance	$	1,053.9		$	983.4		$	1,053.9		$	983.4
Retail Separate Accounts
Beginning balance	$	18,259.5		$	14,678.4		$	14,998.4		$	13,936.8
Inflows	819.3			921.4			2,302.8			2,359.4
Outflows	(434.6		)	(563.1		)	(1,353.2		)	(1,924.9		)
Net flows	384.7			358.3			949.6			434.5
Market performance	297.0			608.7			3,069.2			1,269.1
Other (2)	(78.5		)	1,172.1			(154.5		)	1,177.1
Ending balance	$	18,862.7		$	16,817.5		$	18,862.7		$	16,817.5
Institutional Accounts
Beginning balance	$	32,056.2		$	19,726.6		$	27,445.0		$	20,815.9
Inflows	850.5			1,484.5			3,542.6			3,332.5
Outflows	(2,215.9		)	(1,604.8		)	(4,628.7		)	(4,720.3		)
Net flows	(1,365.4		)	(120.3		)	(1,086.1		)	(1,387.8		)
Market performance	526.9			1,184.8			4,822.5			1,498.5
Other (2)	(266.4		)	10,169.0			(230.1		)	10,033.5
Ending balance	$	30,951.3		$	30,960.1		$	30,951.3		$	30,960.1
Structured Products
Beginning balance	$	3,983.7		$	3,684.4		$	3,640.3		$	3,298.8
Inflows	—			—			388.8			421.4
Outflows	(16.0		)	(34.4		)	(52.9		)	(54.8		)
Net flows	(16.0		)	(34.4		)	335.9			366.6
Market performance	54.4			39.8			138.4			123.0
Other(2)	(49.8		)	(42.0		)	(142.3		)	(140.6		)
Ending balance	$	3,972.3		$	3,647.8		$	3,972.3		$	3,647.8



Total Long-Term
Beginning balance	$	103,253.8		$	89,833.6		$	90,417.3		$	88,834.5
Inflows	4,759.5			6,261.2			15,379.5			18,335.3
Outflows	(5,884.9		)	(5,767.8		)	(16,498.0		)	(17,283.2		)
Net flows	(1,125.4		)	493.4			(1,118.5		)	1,052.1
Market performance	1,018.8			2,471.9			14,421.6			3,601.1
Other (2)	(301.6		)	11,123.9			(874.8		)	10,435.1
Ending balance	$	102,845.6		$	103,922.8		$	102,845.6		$	103,922.8
Liquidity (3)
Beginning balance	$	1,752.7		$	1,784.9		$	1,612.5		$	2,128.7
Other (2)	(531.4		)	(109.8		)	(391.2		)	(453.6		)
Ending balance	$	1,221.3		$	1,675.1		$	1,221.3		$	1,675.1
Total
Beginning balance	$	105,006.5		$	91,618.5		$	92,029.8		$	90,963.2
Inflows	4,759.5			6,261.2			15,379.5			18,335.3
Outflows	(5,884.9		)	(5,767.8		)	(16,498.0		)	(17,283.2		)
Net flows	(1,125.4		)	493.4			(1,118.5		)	1,052.1
Market performance	1,018.8			2,471.9			14,421.6			3,601.1
Other (2)	(833.0		)	11,014.1			(1,266.0		)	9,981.5
Ending balance	$	104,066.9		$	105,597.9		$	104,066.9		$	105,597.9



	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)
	2019	2018	2019		2018
Products
Open-End Funds (1)	56.3	54.3	$	41,457.2	$	45,137.1
Closed-End Funds	64.7	65.9	6,648.6		6,386.7
Exchange Traded Funds	13.4	13.7	1,048.1		1,035.9
Retail Separate Accounts	47.5	49.2	18,259.5		15,536.7
Institutional Accounts	31.8	31.9	31,462.5		30,583.4
Structured Products	37.3	60.0	3,957.2		3,635.7
All Long-Term Products	46.6	47.4	102,833.1		102,315.5
Liquidity (3)	10.7	10.1	1,710.2		1,750.3
All Products	46.0	46.8	$	104,543.3	$	104,065.8


	Nine Months Ended September 30,
($ in millions, except average fee earned data which is in basis points)	Average Fees Earned		Average Assets Under Management (2)
	2019	2018	2019		2018
Products
Open-End Funds (1)	55.4	52.2	$	40,650.1	$	44,296.4
Closed-End Funds	64.9	66.1	6,485.8		6,300.0
Exchange Traded Funds	12.3	15.5	1,000.1		1,036.1
Retail Separate Accounts	47.8	48.5	16,793.7		14,486.3
Institutional Accounts	31.1	31.9	30,529.2		23,563.8
Structured Products	36.5	45.2	3,864.5		3,645.4
All Long-Term Products	46.1	46.7	99,323.4		93,328.0
Liquidity (3)	10.4	10.5	1,735.1		1,745.8
All Products	45.5	46.1	$	101,058.5	$	95,073.8


Period	Total number of shares purchased	Average 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, 2020	—	$	—	—	816,585
August 1-31, 2020	27,552	$	141.15	27,552	789,033
September 1-30, 2020	26,315	$	137.17	26,315	762,718
Total	53,867			53,867



Period	Total number of shares purchased	Average 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, 2019	1,850	$	108.07	1,850	407,282
August 1-31, 2019	44,179	$	99.99	44,179	363,103
September 1-30, 2019	24,920	$	115.59	24,920	338,183
Total	70,949			70,949

(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 December 2017. This repurchase program is not subject to an expiration date



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



101						The following information formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (Unaudited) as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, (iii) Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, (iv) Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited).

104						Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)


			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)