UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September~~June 30, ~~2020~~2021


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

For the transition period from to

Commission File Number: 001-10994

VIRTUS INVESTMENT PARTNERS, INC.

(Exact name of registrant as specified in its charter)



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

One Financial Plaza, Hartford, CT 06103

(Address of principal executive offices, including Zip Code)

(800) 248-7971

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

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, a 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.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock was ~~7,613,154~~7,651,606 as of ~~October 20, 2020.~~July 23, 2021.

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~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020	1
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	2
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	4
	Condensed Consolidated Statements of Changes in Equity (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	65
	Notes to Condensed Consolidated Financial Statements (Unaudited)	86
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2119
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3331
Item 4.	Controls and Procedures	3331

Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	3433
Item 1A.	Risk Factors	3433
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3533
Item 6.	Exhibits	3534
	Signatures	3635

"We," "us," "our," 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)	(in thousands, except share data)	September 30, 2020		December 31, 2019		(in thousands, except share data)	June 30, 2021		December 31, 2020
Assets:	Assets:					Assets:
Cash and cash equivalents	Cash and cash equivalents	$	202,212	$	221,781	Cash and cash equivalents	$	275,439	$	246,511
Investments	Investments	54,446		83,206		Investments	81,775		64,944
Accounts receivable, net	Accounts receivable, net	76,616		74,132		Accounts receivable, net	120,122		84,499
Assets of consolidated investment products ("CIP")	Assets of consolidated investment products ("CIP")					Assets of consolidated investment products ("CIP")
Cash and cash equivalents of CIP	Cash and cash equivalents of CIP	48,228		99,691		Cash and cash equivalents of CIP	129,816		86,980
Cash pledged or on deposit of CIP	Cash pledged or on deposit of CIP	6,007		467		Cash pledged or on deposit of CIP	602		6,358
Investments of CIP	Investments of CIP	2,333,685		2,030,110		Investments of CIP	2,271,843		2,333,277
Other assets of CIP	Other assets of CIP	27,415		23,612		Other assets of CIP	45,046		13,430
Furniture, equipment and leasehold improvements, net	Furniture, equipment and leasehold improvements, net	15,287		18,150		Furniture, equipment and leasehold improvements, net	12,896		14,488

Intangible assets, net	Intangible assets, net	287,793		310,391		Intangible assets, net	380,824		280,264
Goodwill	Goodwill	290,366		290,366		Goodwill	315,366		290,366
Deferred taxes, net	Deferred taxes, net	8,862		15,879		Deferred taxes, net	11,054		9,538
Other assets	Other assets	39,807		36,849		Other assets	48,039		36,288
Total assets	Total assets	$	3,390,724	$	3,204,634	Total assets	$	3,692,822	$	3,466,943
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Liabilities:	Liabilities:					Liabilities:
Accrued compensation and benefits	Accrued compensation and benefits	$	87,256	$	101,377	Accrued compensation and benefits	$	96,509	$	122,514
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	21,633		23,308		Accounts payable and accrued liabilities	45,755		25,357
Dividends payable	Dividends payable	8,742		8,915		Dividends payable	8,565		9,013

Contingent consideration (Note 4)						Contingent consideration (Note 4)	137,664		0
Debt	Debt	218,014		277,839		Debt	190,224		201,212

Other liabilities	Other liabilities	35,833		40,507		Other liabilities	38,387		36,120
Liabilities of CIP	Liabilities of CIP					Liabilities of CIP
Notes payable of CIP	Notes payable of CIP	2,190,937		1,834,535		Notes payable of CIP	2,132,012		2,190,445
Securities purchased payable and other liabilities of CIP	Securities purchased payable and other liabilities of CIP	41,020		168,051		Securities purchased payable and other liabilities of CIP	122,344		45,829
Total liabilities	Total liabilities	2,603,435		2,454,532		Total liabilities	2,771,460		2,630,490
Commitments and Contingencies (Note 13)

Commitments and Contingencies (Note 14)						Commitments and Contingencies (Note 14)	0		0
Redeemable noncontrolling interests	Redeemable noncontrolling interests	99,277		63,845		Redeemable noncontrolling interests	131,525		115,513
Equity:	Equity:					Equity:
Equity attributable to stockholders:	Equity attributable to stockholders:					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
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 11,905,842 shares issued and 7,651,606 shares outstanding at June 30, 2021, respectively, and 11,790,869 shares issued and 7,583,466 shares outstanding at December 31, 2020, respectively						Common stock, $0.01 par value, 1,000,000,000 shares authorized; 11,905,842 shares issued and 7,651,606 shares outstanding at June 30, 2021, respectively, and 11,790,869 shares issued and 7,583,466 shares outstanding at December 31, 2020, respectively	119		118
Additional paid-in capital	Additional paid-in capital	1,301,735		1,199,205		Additional paid-in capital	1,280,667		1,298,002
Retained earnings (accumulated deficit)	Retained earnings (accumulated deficit)	(178,574)		(215,216)		Retained earnings (accumulated deficit)	(35,704)		(135,259)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	0		9		Accumulated other comprehensive income (loss)	35		29
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)
Treasury stock, at cost, 4,254,236 and 4,207,403 shares at June 30, 2021 and December 31, 2020, respectively						Treasury stock, at cost, 4,254,236 and 4,207,403 shares at June 30, 2021 and December 31, 2020, respectively	(464,248)		(451,749)
Total equity attributable to stockholders	Total equity attributable to stockholders	679,030		675,699		Total equity attributable to stockholders	780,869		711,141
Noncontrolling interests	Noncontrolling interests	8,982		10,558		Noncontrolling interests	8,968		9,799
Total equity	Total equity	688,012		686,257		Total equity	789,837		720,940
Total liabilities and equity	Total liabilities and equity	$	3,390,724	$	3,204,634	Total liabilities and equity	$	3,692,822	$	3,466,943

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,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)	2020		2019		2020		2019		(in thousands, except per share data)	2021		2020		2021		2020
Revenues	Revenues									Revenues
Investment management fees	Investment management fees	$	129,785	$	120,023	$	360,623	$	340,532	Investment management fees	$	193,510	$	110,550	$	366,779	$	230,838
Distribution and service fees	Distribution and service fees	9,797		10,442		28,146		31,122		Distribution and service fees	23,450		8,889		43,798		18,349
Administration and shareholder service fees	Administration and shareholder service fees	15,114		15,280		43,056		44,747		Administration and shareholder service fees	25,877		13,289		48,437		27,942
Other income and fees	Other income and fees	94		210		425		761		Other income and fees	1,174		166		1,894		331
Total revenues	Total revenues	154,790		145,955		432,250		417,162		Total revenues	244,011		132,894		460,908		277,460
Operating Expenses	Operating Expenses									Operating Expenses
Employment expenses	Employment expenses	67,479		61,282		193,772		180,256		Employment expenses	87,630		60,163		179,389		126,293
Distribution and other asset-based expenses	Distribution and other asset-based expenses	19,570		20,927		56,324		62,013		Distribution and other asset-based expenses	36,021		17,345		68,315		36,754
Other operating expenses	Other operating expenses	16,343		18,228		52,664		56,125		Other operating expenses	21,946		17,436		41,526		36,321
Operating expenses of consolidated investment products ("CIP")	Operating expenses of consolidated investment products ("CIP")	1,016		376		9,944		3,395		Operating expenses of consolidated investment products ("CIP")	659		2,179		1,218		8,928
Restructuring and severance	Restructuring and severance	735		523		1,155		2,019		Restructuring and severance	0		420		0		420
Depreciation expense	Depreciation expense	1,106		1,245		3,560		3,729		Depreciation expense	981		1,196		2,079		2,454
Amortization expense	Amortization expense	7,532		7,587		22,598		22,711		Amortization expense	10,363		7,533		19,828		15,066
Total operating expenses	Total operating expenses	113,781		110,168		340,017		330,248		Total operating expenses	157,600		106,272		312,355		226,236
Operating Income (Loss)	Operating Income (Loss)	41,009		35,787		92,233		86,914		Operating Income (Loss)	86,411		26,622		148,553		51,224
Other Income (Expense)	Other Income (Expense)									Other Income (Expense)
Realized and unrealized gain (loss) on investments, net	Realized and unrealized gain (loss) on investments, net	2,498		2		2,068		5,474		Realized and unrealized gain (loss) on investments, net	2,494		7,114		3,385		(430)
Realized and unrealized gain (loss) of CIP, net	Realized and unrealized gain (loss) of CIP, net	2,680		(5,344)		(12,733)		2,455		Realized and unrealized gain (loss) of CIP, net	2,747		(6,744)		(1,940)		(15,413)
Other income (expense), net	Other income (expense), net	999		746		806		1,892		Other income (expense), net	826		(805)		2,597		(193)
Total other income (expense), net	Total other income (expense), net	6,177		(4,596)		(9,859)		9,821		Total other income (expense), net	6,067		(435)		4,042		(16,036)
Interest Income (Expense)	Interest Income (Expense)									Interest Income (Expense)
Interest expense	Interest expense	(2,877)		(4,889)		(9,202)		(15,205)		Interest expense	(2,256)		(3,126)		(4,570)		(6,325)
Interest and dividend income	Interest and dividend income	137		863		1,131		3,017		Interest and dividend income	166		242		302		994
Interest and dividend income of investments of CIP	Interest and dividend income of investments of CIP	26,088		30,290		83,951		87,060		Interest and dividend income of investments of CIP	22,562		28,634		46,438		57,863
Interest expense of CIP	Interest expense of CIP	(17,622)		(21,252)		(70,258)		(72,030)		Interest expense of CIP	(14,452)		(28,150)		(28,900)		(52,636)
Total interest income (expense), net	Total interest income (expense), net	5,726		5,012		5,622		2,842		Total interest income (expense), net	6,020		(2,400)		13,270		(104)
Income (Loss) Before Income Taxes	Income (Loss) Before Income Taxes	52,912		36,203		87,996		99,577		Income (Loss) Before Income Taxes	98,498		23,787		165,865		35,084
Income tax expense (benefit)	Income tax expense (benefit)	11,978		10,844		29,847		23,851		Income tax expense (benefit)	22,401		7,578		37,554		17,869
Net Income (Loss)	Net Income (Loss)	40,934		25,359		58,149		75,726		Net Income (Loss)	76,097		16,209		128,311		17,215
Noncontrolling interests	Noncontrolling interests	(11,286)		(1,274)		(21,507)		(2,969)		Noncontrolling interests	(13,130)		(4,930)		(28,756)		(10,221)
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

Net Income (Loss) Attributable to Virtus Investment Partners, Inc.										Net Income (Loss) Attributable to Virtus Investment Partners, Inc.	$	62,967	$	11,279	$	99,555	$	6,994
Earnings (Loss) per Share—Basic	Earnings (Loss) per Share—Basic	$	3.86	$	3.17	$	4.81	$	9.51	Earnings (Loss) per Share—Basic	$	8.18	$	1.46	$	12.97	$	0.92
Earnings (Loss) per Share—Diluted	Earnings (Loss) per Share—Diluted	$	3.71	$	2.95	$	4.60	$	8.86	Earnings (Loss) per Share—Diluted	$	7.86	$	1.43	$	12.39	$	0.88

Weighted Average Shares Outstanding—Basic	Weighted Average Shares Outstanding—Basic	7,684		6,947		7,611		6,990		Weighted Average Shares Outstanding—Basic	7,698		7,720		7,674		7,572
Weighted Average Shares Outstanding—Diluted	Weighted Average Shares Outstanding—Diluted	7,997		8,157		7,958		8,215		Weighted Average Shares Outstanding—Diluted	8,007		7,895		8,038		7,936

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 June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020		2021		2020
Net Income (Loss)	Net Income (Loss)	$	40,934	$	25,359	$	58,149	$	75,726	Net Income (Loss)	$	76,097	$	16,209	$	128,311	$	17,215
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
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)
Foreign currency translation adjustment, net of tax of $(2) and $0 for the three months ended June 30, 2021 and 2020, respectively, and $(2) and $9 for the six months ended June 30, 2021 and 2020, respectively										Foreign currency translation adjustment, net of tax of $(2) and $0 for the three months ended June 30, 2021 and 2020, respectively, and $(2) and $9 for the six months ended June 30, 2021 and 2020, respectively	0		(1)		6		(26)

Other comprehensive income (loss)	Other comprehensive income (loss)	17		(12)		(9)		(14)		Other comprehensive income (loss)	0		(1)		6		(26)
Comprehensive income (loss)	Comprehensive income (loss)	40,951		25,347		58,140		75,712		Comprehensive income (loss)	76,097		16,208		128,317		17,189
Comprehensive (income) loss attributable to noncontrolling interests	Comprehensive (income) loss attributable to noncontrolling interests	(11,286)		(1,274)		(21,507)		(2,969)		Comprehensive (income) loss attributable to noncontrolling interests	(13,130)		(4,930)		(28,756)		(10,221)
Comprehensive Income (Loss) Attributable to Stockholders		$	29,665	$	24,073	$	36,633	$	72,743
Comprehensive Income (Loss) Attributable to Virtus Investment Partners, Inc.										Comprehensive Income (Loss) Attributable to Virtus Investment Partners, Inc.	$	62,967	$	11,278	$	99,561	$	6,968

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,					Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2021		2020
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net income (loss)	Net income (loss)	$	58,149	$	75,726	Net income (loss)	$	128,311	$	17,215
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense, intangible asset and other amortization	Depreciation expense, intangible asset and other amortization	32,153		29,766		Depreciation expense, intangible asset and other amortization	23,196		21,557
Stock-based compensation	Stock-based compensation	16,412		16,384		Stock-based compensation	15,844		10,113
Amortization of deferred commissions	Amortization of deferred commissions	1,544		2,413		Amortization of deferred commissions	1,462		1,038
Payments of deferred commissions	Payments of deferred commissions	(1,475)		(1,522)		Payments of deferred commissions	(3,241)		(974)
Equity in earnings of equity method investments	Equity in earnings of equity method investments	(855)		(2,001)		Equity in earnings of equity method investments	(2,561)		93
(Gain) loss on extinguishment of debt	(Gain) loss on extinguishment of debt	(705)		0		(Gain) loss on extinguishment of debt	0		(705)
Realized and unrealized (gains) losses on investments, net	Realized and unrealized (gains) losses on investments, net	(2,069)		(4,636)		Realized and unrealized (gains) losses on investments, net	(3,381)		431
Distributions from equity method investments	Distributions from equity method investments	921		828		Distributions from equity method investments	1,908		726
Sales (purchases) of investments, net	Sales (purchases) of investments, net	15,586		8,784		Sales (purchases) of investments, net	(3,395)		4,703
Deferred taxes, net	Deferred taxes, net	7,020		3,392		Deferred taxes, net	(1,518)		5,014

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable, net and other assets	Accounts receivable, net and other assets	(7,989)		(3,057)		Accounts receivable, net and other assets	(43,203)		(2,032)
Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities	Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities	(22,931)		(24,211)		Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities	(12,651)		(52,788)
Operating activities of consolidated investment products ("CIP"):	Operating activities of consolidated investment products ("CIP"):					Operating activities of consolidated investment products ("CIP"):
Realized and unrealized (gains) losses on investments of CIP, net	Realized and unrealized (gains) losses on investments of CIP, net	6,739		(3,063)		Realized and unrealized (gains) losses on investments of CIP, net	(1,961)		11,603
Purchases of investments by CIP	Purchases of investments by CIP	(1,114,801)		(805,599)		Purchases of investments by CIP	(664,837)		(920,392)
Sales of investments by CIP	Sales of investments by CIP	624,675		588,678		Sales of investments by CIP	790,575		442,859
Net proceeds (purchases) of short term investments by CIP	Net proceeds (purchases) of short term investments by CIP	1,434		2,294		Net proceeds (purchases) of short term investments by CIP	15,191		68
(Purchases) sales of securities sold short by CIP, net	(Purchases) sales of securities sold short by CIP, net	267		1,241		(Purchases) sales of securities sold short by CIP, net	(88)		250
Change in other assets of CIP	Change in other assets of CIP	(2,039)		(184)		Change in other assets of CIP	(126)		(1,790)
Change in liabilities of CIP	Change in liabilities of CIP	(3,472)		7,247		Change in liabilities of CIP	(345)		2,130
Amortization of discount on notes payable of CIP	Amortization of discount on notes payable of CIP	11,169		4,505		Amortization of discount on notes payable of CIP	0		11,169
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	(380,267)		(103,015)		Net cash provided by (used in) operating activities	239,180		(449,712)
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Capital expenditures and other asset purchases	Capital expenditures and other asset purchases	(789)		(6,961)		Capital expenditures and other asset purchases	(4,336)		(475)

Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net	Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net	9,724		18,408		Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net	(1,191)		9,724

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

Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	8,935		13,470		Net cash provided by (used in) investing activities	(5,527)		9,249

Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:

Payment of long term debt	Payment of long term debt	(61,573)		(39,839)		Payment of long term debt	(11,826)		(44,059)

Common stock dividends paid	Common stock dividends paid	(16,460)		(12,244)		Common stock dividends paid	(13,748)		(11,320)
Preferred stock dividends paid	Preferred stock dividends paid	(2,084)		(6,253)		Preferred stock dividends paid	0		(2,084)
Repurchases of common shares	Repurchases of common shares	(25,000)		(30,000)		Repurchases of common shares	(12,499)		(17,500)

Stock options exercised						Stock options exercised	66		114
Taxes paid related to net share settlement of restricted stock units	Taxes paid related to net share settlement of restricted stock units	(5,530)		(5,953)		Taxes paid related to net share settlement of restricted stock units	(19,280)		(5,569)
Net subscriptions received from (redemptions/distributions paid to) noncontrolling interests	Net subscriptions received from (redemptions/distributions paid to) noncontrolling interests	(5,935)		7,630		Net subscriptions received from (redemptions/distributions paid to) noncontrolling interests	(6,636)		(3,951)
Financing activities of CIP:	Financing activities of CIP:					Financing activities of CIP:
Payments on borrowings by CIP	Payments on borrowings by CIP	(358,725)		(195,697)		Payments on borrowings by CIP	(103,722)		(326,201)
Borrowings by CIP	Borrowings by CIP	781,147		396,277		Borrowings by CIP	0		781,147
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	305,840		113,921		Net cash provided by (used in) financing activities	(167,645)		370,577
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	(65,492)		24,376		Net increase (decrease) in cash, cash equivalents and restricted cash	66,008		(69,886)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	321,939		254,656		Cash, cash equivalents and restricted cash, beginning of period	339,849		321,939
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	256,447	$	279,032	Cash, cash equivalents and restricted cash, end of period	$	405,857	$	252,053
Non-Cash Investing Activities:	Non-Cash Investing Activities:					Non-Cash Investing Activities:
Change in accrual for capital expenditures	Change in accrual for capital expenditures	$	8	$	(1,784)	Change in accrual for capital expenditures	$	(47)	$	(21)
Contingent consideration						Contingent consideration	$	137,664	$	0
Non-Cash Financing Activities:	Non-Cash Financing Activities:					Non-Cash Financing Activities:
Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net	Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net	$	17,137	$	22,046	Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net	$	(8,001)	$	17,137

Common stock dividends payable						Common stock dividends payable	$	6,277	$	5,169

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


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020
Reconciliation of cash, cash equivalents and restricted cash	Reconciliation of cash, cash equivalents and restricted cash					Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	Cash and cash equivalents	$	202,212	$	221,781	Cash and cash equivalents	$	275,439	$	246,511
Cash of CIP	Cash of CIP	48,228		99,691		Cash of CIP	129,816		86,980
Cash pledged or on deposit of CIP	Cash pledged or on deposit of CIP	6,007		467		Cash pledged or on deposit of CIP	602		6,358
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	256,447	$	321,939	Cash, cash equivalents and restricted cash at end of period	$	405,857	$	339,849

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			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			Common 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)	(in thousands, except per share data)	Shares	Par Value		Shares	Amount								Shares	Amount														(in thousands, except per share data)	Shares	Par Value													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
Balances at March 31, 2020																					Balances at March 31, 2020	7,695,413			$	117							$	1,304,868	$			(219,501)		$	(16)		4,038,563			$	(429,249)	$	656,219		$	10,247		$	666,466		$	87,115

Net income (loss)	Net income (loss)	—	—		—	—		—		24,085		—		—	—		24,085		(68)				24,017				1,342		Net income (loss)	—	—							—			11,279			—			—		—			11,279			(1,378)			9,901		6,308

Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—	—		—		—		(12)		—	—		(12)		—				(12)				—		Foreign currency translation adjustments	—	—							—			—			(1)			—		—			(1)			—			(1)		—
Net subscriptions (redemptions) and other	Net subscriptions (redemptions) and other	—	—		—	—		548		—		—		—	—		548		(657)				(109)				29,766		Net subscriptions (redemptions) and other	—	—							(167)			—			—			—		—			(167)			(524)			(691)		(2,736)

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

Cash dividends declared ($0.67 per common share)	Cash dividends declared ($0.67 per common share)	—	—		—	—		(4,972)		—		—		—	—		(4,972)		—				(4,972)				—		Cash dividends declared ($0.67 per common share)	—	—							(5,496)			—			—			—		—			(5,496)			—			(5,496)		—
Repurchases of common shares	Repurchases of common shares	(70,949)	—		—	—		—		—		—		70,949	(7,501)		(7,501)		—				(7,501)				—		Repurchases of common shares	(74,897)	—							—			—			—			74,897		(7,500)			(7,500)			—			(7,500)		—

Issuance of common shares related to employee stock transactions	Issuance of common shares related to employee stock transactions	3,653	0		—	—		5		—		—		—	—		5		—				5				—		Issuance of common shares related to employee stock transactions	43,756	1							12			—			—			—		—			13			—			13		—
Taxes paid on stock-based compensation	Taxes paid on stock-based compensation	—	—		—	—		(93)		—		—		—	—		(93)		—				(93)				—		Taxes paid on stock-based compensation	—	—							(2,019)			—			—			—		—			(2,019)			—			(2,019)		—
Stock-based compensation	Stock-based compensation	—	—		—	—		4,694		—		—		—	—		4,694		—				4,694				—		Stock-based compensation	—	—							5,838			—			—			—		—			5,838			—			5,838		—

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	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	Balances at June 30, 2020	7,664,272	$	118						$	1,303,036		$	(208,222)		$	(17)		4,113,460		$	(436,749)		$	658,166		$	8,345		$	666,511	$	90,687
Balances at March 31, 2021																					Balances at March 31, 2021	7,649,679			$	119							$	1,284,643	$	(98,671)	$	35		4,227,315			$	(456,748)		$	729,378	$	9,317		$	738,695		$	112,482

Net income (loss)	Net income (loss)	—	—		—	—		—		29,648		—		—	—		29,648		977				30,625				10,309		Net income (loss)	—	—							—			62,967			—			—		—			62,967			270			63,237		12,860

Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—	—		—		—		17		—	—		17		—				17				—		Foreign currency translation adjustments	—	—							—			—			0			—		—			0			—			0		—
Net subscriptions (redemptions) and other	Net subscriptions (redemptions) and other	—	—		—	—		0		—		—		—	—		0		(340)				(340)				(1,719)		Net subscriptions (redemptions) and other	—	—							—			—			—			—		—			—			(619)			(619)		6,183

Cash dividends declared ($0.82 per common share)	Cash dividends declared ($0.82 per common share)	—	—		—	—		(6,695)		—		—		—	—		(6,695)		—				(6,695)				—		Cash dividends declared ($0.82 per common share)	—	—							(6,604)			—			—			—		—			(6,604)			—			(6,604)		—
Repurchases of common shares	Repurchases of common shares	(53,867)	—		—	—		—		—		—		53,867	(7,500)		(7,500)		—				(7,500)				—		Repurchases of common shares	(26,921)	—							—			—			—			26,921		(7,500)			(7,500)			—			(7,500)		—

Issuance of common shares related to employee stock transactions	Issuance of common shares related to employee stock transactions	2,749	0		—	—		49		—		—		—	—		49		—				49				—		Issuance of common shares related to employee stock transactions	28,848	—							—			—			—			—		—			—			—			—		—
Taxes paid on stock-based compensation	Taxes paid on stock-based compensation	—	—		—	—		(124)		—		—		—	—		(124)						(124)				—		Taxes paid on stock-based compensation	—	—							(4,117)			—			—			—		—			(4,117)						(4,117)		—
Stock-based compensation	Stock-based compensation	—	—		—	—		5,469		—		—		—	—		5,469		—				5,469				—		Stock-based compensation	—	—							6,745			—			—			—		—			6,745			—			6,745		—
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
Balances at June 30, 2021																					Balances at June 30, 2021	7,651,606			$	119							$	1,280,667	$	(35,704)	$	35		4,254,236			$	(464,248)		$	780,869	$	8,968		$	789,837		$	131,525

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



	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, 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)	—	—		—	—		—		6,994		—		—	—		6,994		(1,123)		5,871		11,344

Foreign currency translation adjustments	—	—		—	—		—		—		(26)		—	—		(26)		—		(26)		—
Net subscriptions (redemptions) and other	—	—		—	—		(167)		—		—		—	—		(167)		(1,090)		(1,257)		15,498
Conversion of preferred stock	912,806	9		(1,150,000)	(110,843)		110,834		—		—		—	—		—		—		0		—



Cash dividends declared ($1.34 per common share)	—	—		—	—		(11,676)		—		—		—	—		(11,676)		—		(11,676)		—
Repurchases of common shares	(185,853)	—		—	—		—		—		—		185,853	(17,500)		(17,500)		—		(17,500)		—
Issuance of common shares related to employee stock transactions	128,039	2		—	—		112		—		—		—	—		114		—		114		—
Taxes paid on stock-based compensation	—	—		—	—		(5,569)		—		—		—	—		(5,569)		—		(5,569)		—
Stock-based compensation	—	—		—	—		10,297		—		—		—	—		10,297		—		10,297		—
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
Balances at December 31, 2020	7,583,466	$	118	0	$	0	$	1,298,002	$	(135,259)	$	29	4,207,403	$	(451,749)	$	711,141	$	9,799	$	720,940	$	115,513

Net income (loss)	—	—		—	—		—		99,555		—		—	—		99,555		345		99,900		28,411

Foreign currency translation adjustments	—	—		—	—		—		—		6		—	—		6		—		6		—
Net subscriptions (redemptions) and other	—	—		—	—		—		—		—		—	—		—		(1,176)		(1,176)		(12,399)




Cash dividends declared ($1.64 per common share)	—	—		—	—		(13,300)		—		—		—	—		(13,300)		—		(13,300)		—
Repurchases of common shares	(46,833)	—		—	—		—		—		—		46,833	(12,499)		(12,499)		—		(12,499)		—
Issuance of common shares related to employee stock transactions	114,973	1		—	—		65		—		—		—	—		66		—		66		—
Taxes paid on stock-based compensation	—	—		—	—		(19,280)		—		—		—	—		(19,280)				(19,280)		—
Stock-based compensation	—	—		—	—		15,180		—		—		—	—		15,180		—		15,180		—
Balances at June 30, 2021	7,651,606	$	119	0	$	0	$	1,280,667	$	(35,704)	$	35	4,254,236	$	(464,248)	$	780,869	$	8,968	$	789,837	$	131,525

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 offered through separate accounts and pooled or commingled structures to 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~~six months ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~2021.

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, ~~2019~~2020 ("~~2019~~2020 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 ~~2019~~2020 Annual Report on Form 10-K.

New Accounting Standards Implemented

In ~~August 2018,~~January 2020, the Financial Accounting Standards Board ~~(the "FASB"~~("FASB") issued Accounting Standards Update ("ASU") ~~2018-15,~~ ~~Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)~~. 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. 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.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820)~~. This standard modifies the disclosure requirements on fair value 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, 2020. Early adoption is permitted, with the amendments to be applied on a prospective basis. The Company ~~is currently evaluating the impact of adopting~~adopted this standard on ~~its~~January 1, 2021. The adoption of this standard did not have a material impact on the Company's 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~~adopted this standard ~~and, at~~on January 1, 2021. The adoption of this ~~time, does~~standard did not ~~anticipate it will~~ have a material impact on ~~its~~the Company's 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 additional investments, withdrawals and market performance. Because of this, these fees are considered constrained until the end of the contractual

Table of Contents

measurement period (monthly or quarterly), which is when asset values are generally determinable.

Revenue Disaggregated by Source

The following table summarizes ~~revenue~~investment management fees by source:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020		2021		2020
Investment management fees	Investment management fees									Investment management fees
Open-end funds	Open-end funds	$	63,458	$	59,060	$	176,584	$	169,326	Open-end funds	$	96,795	$	54,018	$	185,667	$	113,126
Closed-end funds	Closed-end funds	8,959		10,846		27,695		31,485		Closed-end funds	16,395		8,557		29,335		18,736

Retail separate accounts	Retail separate accounts	26,412		22,092		74,524		60,761		Retail separate accounts	42,475		22,398		79,987		48,112
Institutional accounts	Institutional accounts	29,048		25,180		76,571		71,013		Institutional accounts	35,782		24,606		68,220		47,523
Structured products	Structured products	1,297		1,725		3,288		4,957		Structured products	1,585		417		2,844		1,991

Other products	Other products	611		1,120		1,961		2,990		Other products	478		554		726		1,350
Total investment management fees	Total investment management fees	129,785		120,023		360,623		340,532		Total investment management fees	$	193,510	$	110,550	$	366,779	$	230,838
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

4. AllianzGI Strategic Partnership

On February 1, 2021, the Company completed the actions necessary to finalize its strategic partnership with Allianz Global Investors ("AllianzGI"), pursuant to which the Company became the investment adviser, distributor and/or administrator of certain of AllianzGI's open-end, closed-end and retail separate account assets. Additionally, as part of the strategic partnership, AllianzGI’s Dallas-based Value Equity team joined the Company as a newly established affiliated manager, NFJ Investment Group ("NFJ"). Assets acquired in connection with the transaction primarily consisted of definite-lived intangible assets representing open-end, closed-end and retail separate account investment contracts as well as indefinite-lived assets consisting of goodwill related to NFJ. The revenues and operating income of NFJ were not material to the Company's results of operations for the three and six months ended June 30, 2021.

Transaction consideration consists of variable cash payments based on a percentage of the investment management fees earned on certain open-end, closed-end and retail separate account assets adopted under the transaction. Payments are to be made annually around the anniversary of the closing date of the transaction over the next seven years. The estimate of these future revenue participation payments of $137.7 million at June 30, 2021 have been recorded as a liability and included as Contingent Consideration on the Company's Condensed Consolidated Balance Sheet. In addition, the Company capitalized $7.7 million of costs associated with certain assets acquired.

The following table summarizes the identified acquired assets:


	February 1, 2021
(in thousands)	Approximate Fair Value		Weighted Average Useful Life
Definite-lived intangible assets:
Open-end and closed-end fund investment contracts	$	101,447	13 years
Retail separate account investment contracts	17,000		6 years
Trade name	1,941		8 years
Total definite-lived intangible assets	$	120,388
Goodwill	25,000
Total assets acquired	$	145,388

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5. Intangible Assets, Net

Below is a summary of intangible assets, net:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020
Definite-lived intangible assets:	Definite-lived intangible assets:					Definite-lived intangible assets:
Investment contracts and other	Investment contracts and other	$	489,570	$	489,570	Investment contracts and other	$	609,958	$	489,570
Accumulated amortization	Accumulated amortization	(245,293)		(222,695)		Accumulated amortization	(272,650)		(252,822)
Definite-lived intangible assets, net	Definite-lived intangible assets, net	244,277		266,875		Definite-lived intangible assets, net	337,308		236,748
Indefinite-lived intangible assets	Indefinite-lived intangible assets	43,516		43,516		Indefinite-lived intangible assets	43,516		43,516
Total intangible assets, net	Total intangible assets, net	$	287,793	$	310,391	Total intangible assets, net	$	380,824	$	280,264

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Activity in intangible assets, net was as follows:


		Nine Months Ended September 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2021		2020
Intangible assets, net	Intangible assets, net					Intangible assets, net
Balance, beginning of period	Balance, beginning of period	$	310,391	$	338,812	Balance, beginning of period	$	280,264	$	310,391
Additions	Additions	0		1,823		Additions	120,388		0
Amortization	Amortization	(22,598)		(22,711)		Amortization	(19,828)		(15,066)
Balance, end of period	Balance, end of period	$	287,793	$	317,924	Balance, end of period	$	380,824	$	295,325

Definite-lived intangible asset amortization for the remainder of fiscal year ~~2020~~2021 and succeeding fiscal years is estimated as follows:


Fiscal Year	Fiscal Year	Amount (in thousands)		Fiscal Year	Amount (in thousands)
Remainder of 2020		7,529
2021		30,116
Remainder of 2021				Remainder of 2021	20,782
2022	2022	29,992		2022	41,440
2023	2023	29,330		2023	40,778
2024	2024	23,689		2024	35,136
2025 and thereafter		123,621
		$	244,277
2025				2025	30,368
2026 and thereafter				2026 and thereafter	168,804
Total				Total	$	337,308

5.6. Investments

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 ~~15,~~16, at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	June 30, 2021		December 31, 2020
Investment securities - fair value	Investment securities - fair value	$	31,641	$	60,990	Investment securities - fair value	$	54,448	$	39,990

Equity method investments (1)	Equity method investments (1)	12,039		12,030		Equity method investments (1)	13,193		12,676
Nonqualified retirement plan assets	Nonqualified retirement plan assets	9,302		8,724		Nonqualified retirement plan assets	12,132		10,612
Other investments	Other investments	1,464		1,462		Other investments	2,002		1,666
Total investments	Total investments	$	54,446	$	83,206	Total investments	$	81,775	$	64,944

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

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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 was as follows:


		September 30, 2020				December 31, 2019					June 30, 2021				December 31, 2020
(in thousands)	(in thousands)	Cost		Fair Value		Cost		Fair Value		(in thousands)	Cost		Fair Value		Cost		Fair Value
Investment Securities - fair value	Investment Securities - fair value									Investment Securities - fair value
Sponsored funds	Sponsored funds	$	21,075	$	22,043	$	44,588	$	47,654	Sponsored funds	$	40,304	$	40,791	$	22,378	$	25,909
Equity securities	Equity securities	7,105		9,594		11,250		13,320		Equity securities	10,123		13,642		9,614		14,078
Debt securities	Debt securities	7		4		44		16		Debt securities	7		15		7		3
Total investment securities - fair value	Total investment securities - fair value	$	28,187	$	31,641	$	55,882	$	60,990	Total investment securities - fair value	$	50,434	$	54,448	$	31,999	$	39,990

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company recognized realized gains of ~~$4.5~~$1.0 million and

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~~$4.2~~ $1.8 million ~~respectively,~~ on the sale of its investment securities - fair ~~value.~~value, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the Company recognized realized gains of ~~$1.0~~less than $0.1 million and ~~$0.4~~realized losses of $0.3 million ~~respectively,~~ on the sale of its investment securities - fair ~~value.~~value, respectively.

6.7. Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note ~~15,~~16, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 by fair value hierarchy level were as follows:

~~September~~June 30, ~~2020~~2021


(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	170,763	$	0	$	0	$	170,763	Cash equivalents	$	208,764	$	0	$	0	$	208,764
Investment securities - fair value	Investment securities - fair value									Investment securities - fair value
Sponsored funds	Sponsored funds	22,043		0		0		22,043		Sponsored funds	40,791		0		0		40,791
Equity securities	Equity securities	9,594		0		0		9,594		Equity securities	13,642		0		0		13,642
Debt securities	Debt securities	0		4		0		4		Debt securities	0		15		0		15

Nonqualified retirement plan assets	Nonqualified retirement plan assets	9,302		0		0		9,302		Nonqualified retirement plan assets	12,132		0		0		12,132
Total assets measured at fair value	Total assets measured at fair value	$	211,702	$	4	$	0	$	211,706	Total assets measured at fair value	$	275,329	$	15	$	0	$	275,344

December 31, ~~2019~~2020


(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	187,255	$	0	$	0	$	187,255	Cash equivalents	$	207,101	$	0	$	0	$	207,101
Investment securities - fair value	Investment securities - fair value									Investment securities - fair value
Sponsored funds	Sponsored funds	47,654		0		0		47,654		Sponsored funds	25,909		0		0		25,909
Equity securities	Equity securities	13,320		0		0		13,320		Equity securities	14,078		0		0		14,078
Debt securities	Debt securities	0		16		0		16		Debt securities	0		3		0		3

Nonqualified retirement plan assets	Nonqualified retirement plan assets	8,724		0		0		8,724		Nonqualified retirement plan assets	10,612		0		0		10,612
Total assets measured at fair value	Total assets measured at fair value	$	256,953	$	16	$	0	$	256,969	Total assets measured at fair value	$	257,700	$	3	$	0	$	257,703

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 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

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

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The Company had 0 Level 3 investments for the three- and ~~nine-month~~six-month periods ended ~~September~~June 30, 2021 and 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 for the nine months ended September 30, 2019:

~~Nine Months Ended September 30,~~

~~(in thousands)~~

~~2019~~

~~Level 3 Investments (1)~~

~~Balance at beginning of period~~

~~4,122~~

~~Purchases (sales), net~~

~~(4,185)~~

~~Change in realized and unrealized gain (loss), net~~

~~Balance at end of period~~

~~(1)The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment.~~respectively.

7.8. 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.

Dividends Declared

On ~~August 19, 2020,~~May 13, 2021, the Company declared a quarterly cash dividend of $0.82 per common share to be paid on ~~November~~August 13, ~~2020~~2021 to stockholders of record at the close of business on ~~October~~July 30, ~~2020.~~2021.

Common Stock Repurchases

In May 2020, the Company's Board of Directors authorized an additional 750,000 shares to be repurchased under the Company's share repurchase program, bringing the total number of shares authorized to be repurchased under the program since its inception to 4,930,045 shares. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company repurchased ~~53,867~~26,921 and ~~239,720~~46,833 common shares, respectively, at a weighted average price of ~~$139.20~~$278.56 and ~~$104.26~~$266.87 per share, respectively, for a total cost, including fees and expenses, of $7.5 million and ~~$25.0~~$12.5 million, respectively, under its share repurchase program. As of ~~September~~June 30, ~~2020, 762,718~~2021, 675,809 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.

8.9. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 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


(in thousands)	Foreign Currency Translation Adjustments
Balance at December 31, 2020	$	29

Foreign currency translation adjustments, net of tax of $(2)	6

Net current-period other comprehensive income (loss)	6
Balance at June 30, 2021	$	35

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(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)


(in thousands)	Foreign Currency Translation Adjustments
Balance at December 31, 2019	$	9

Foreign currency translation adjustments, net of tax of $9	(26)

Net current-period other comprehensive income (loss)	(26)
Balance at June 30, 2020	$	(17)

9.10. Stock-Based Compensation

Pursuant to the Company's Omnibus Incentive and Equity Plan (the "Plan"), officers, employees and directors may be granted equity-based awards, including restricted stock units ("RSUs"), performance stock units ("PSUs"), stock options and unrestricted shares of common stock. At ~~September~~June 30, ~~2020, 336,276~~2021, 814,812 shares of common stock remained available for issuance of the ~~2,820,000~~3,370,000 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,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
(in thousands)	(in thousands)									(in thousands)
Stock-based compensation expense	Stock-based compensation expense	$	6,299	$	5,000	$	16,412	$	16,384	Stock-based compensation expense	$	7,849	$	6,492	$	15,844	$	10,113

Restricted Stock Units

Each RSU entitles the holder to one share of common stock when the restriction expires. RSUs may be time-vested or performance-contingent (PSUs) that convert into RSUs after performance measurement is 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~~six months ended ~~September~~June 30, ~~2020~~2021 is summarized as follows:


		Number of Shares	Weighted Average Grant Date Fair Value			Number of Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2019		528,376	$	115.74
Outstanding at December 31, 2020					Outstanding at December 31, 2020	533,185	$	106.19
Granted	Granted	211,660	$	86.73	Granted	96,378	$	263.58
Forfeited	Forfeited	(3,844)	$	118.95	Forfeited	(20,851)	$	129.78
Settled	Settled	(181,091)	$	110.79	Settled	(183,473)	$	123.13
Outstanding at September 30, 2020		555,101	$	106.27
Outstanding at June 30, 2021					Outstanding at June 30, 2021	425,239	$	133.39

For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, a total of ~~63,566~~72,324 and ~~58,487~~62,899 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations. The Company paid ~~$5.6~~$19.3 million and ~~$5.9~~$5.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, in minimum employee tax withholding obligations related to RSUs withheld for the net share settlements. ~~These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have been otherwise issued as a result of the vesting.~~

During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company granted ~~68,371~~24,798 PSUs 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 (i) the intrinsic value method, for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718, and (ii) the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric under ASC 718. Compensation expense for

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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 end of the performance period.

As of ~~September~~June 30, ~~2020,~~2021, unamortized stock-based compensation expense for unvested RSUs and PSUs was ~~$27.2~~$33.2 million,

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with a weighted-average remaining ~~amortization period~~contractual life of 1.4 years.

~~10.~~11. Earnings (Loss) Per Share

~~Basic earnings~~Earnings (loss) per share ("EPS") is calculated in accordance with ASC 260, Earnings per Share. Basic EPS is computed by dividing net income (loss) attributable to ~~common stockholders~~Virtus Investment Partners, Inc. by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, including: (i) shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock method and (ii) shares issuable upon the conversion of the ~~MCPS,~~Company's previously outstanding mandatory convertible preferred stock ("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,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2020		2019		2020		2019		(in thousands, except per share amounts)	2021		2020		2021		2020
Net Income (Loss)	Net Income (Loss)	$	40,934	$	25,359	$	58,149	$	75,726	Net Income (Loss)	$	76,097	$	16,209	$	128,311	$	17,215
Noncontrolling interests	Noncontrolling interests	(11,286)		(1,274)		(21,507)		(2,969)		Noncontrolling interests	(13,130)		(4,930)		(28,756)		(10,221)
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

Net Income (Loss) Attributable to Virtus Investment Partners, Inc.										Net Income (Loss) Attributable to Virtus Investment Partners, Inc.	$	62,967	$	11,279	$	99,555	$	6,994
Shares:	Shares:									Shares:
Basic: Weighted-average number of shares outstanding	Basic: Weighted-average number of shares outstanding	7,684		6,947		7,611		6,990		Basic: Weighted-average number of shares outstanding	7,698		7,720		7,674		7,572
Plus: Incremental shares from assumed conversion of dilutive instruments	Plus: Incremental shares from assumed conversion of dilutive instruments	313		1,210		347		1,225		Plus: Incremental shares from assumed conversion of dilutive instruments	309		175		364		364
Diluted: Weighted-average number of shares outstanding	Diluted: Weighted-average number of shares outstanding	7,997		8,157		7,958		8,215		Diluted: Weighted-average number of shares outstanding	8,007		7,895		8,038		7,936
Earnings (Loss) per Share—Basic	Earnings (Loss) per Share—Basic	$	3.86	$	3.17	$	4.81	$	9.51	Earnings (Loss) per Share—Basic	$	8.18	$	1.46	$	12.97	$	0.92
Earnings (Loss) per Share—Diluted	Earnings (Loss) per Share—Diluted	$	3.71	$	2.95	$	4.60	$	8.86	Earnings (Loss) per Share—Diluted	$	7.86	$	1.43	$	12.39	$	0.88

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,			Three Months Ended June 30,		Six Months Ended June 30,
(in thousands)	(in thousands)	2020	2019	2020	2019	(in thousands)	2021	2020	2021	2020
Restricted stock units and options	Restricted stock units and options	1	32	0	29	Restricted stock units and options	5	35	6	1

Total anti-dilutive securities	Total anti-dilutive securities	1	32	0	29	Total anti-dilutive securities	5	35	6	1

~~11.~~12. Income Taxes

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

The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of ~~33.9%~~22.6% and ~~24.0%~~50.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The comparatively ~~higher~~lower estimated effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was primarily due to valuation allowances recorded in the prior year period for the tax effects of unrealized losses on certain Company investments.

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~~12.~~13. Debt

Credit Agreement

The Company's credit agreement, as amended (the "Credit Agreement"), is comprised of (i) $365.0 million of seven-year term debt (the "Term Loan") expiring in June 2024 and (ii) a $100.0 million five-year revolving credit facility (the "Credit Facility") expiring in June 2022. During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company ~~reduced~~repaid $11.8 million outstanding under its Term ~~Loan by $62.5~~Loan. At June 30, 2021, $193.8 million including the retirement of $10.0 million of principal for $8.9 million from certain debt holders in accordance with the prepayment provisions in the Credit Agreement. At September 30, 2020, $223.2 million wasremained 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 net of related debt issuance costs, which were ~~$5.2~~$3.6 million as of ~~September~~June 30, ~~2020.~~2021.

~~13.~~14. Commitments and Contingencies

Legal Matters

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~~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 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~~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~~Company's results of operations or cash flows in particular quarterly or annual periods.

~~14.~~15. Redeemable Noncontrolling Interests

Redeemable noncontrolling interests represent third-party investments in the Company's CIP and minority interests held in a consolidated majority-owned affiliate. Minority interests held in the affiliate are subject to holder put rights and Company call rights at established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value. The rights are exercisable at pre-established intervals (between four and seven years from their issuance) or upon certain conditions such as retirement. The put and call rights are not legally detachable or separately exercisable and are deemed to be embedded in the related noncontrolling interests. The Company, in purchasing affiliate equity, has the option to settle in cash or shares of the Company's common stock and is entitled to the cash flow associated with any purchased equity. Minority interests in an affiliate are recorded at estimated redemption value within redeemable noncontrolling interests onin the Company's Condensed Consolidated Balance Sheets, and any changes in the estimated redemption value ~~of these interests~~ are recorded onin the ~~Company’s~~ Condensed Consolidated Statements of Operations within noncontrolling interests.

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Redeemable noncontrolling interests for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 included the following amounts:


(in thousands)	(in thousands)	CIP		Affiliate Noncontrolling Interests		Total		(in thousands)	CIP		Affiliate Noncontrolling Interests		Total
Balances at December 31, 2019		$	5,429	$	58,416	$	63,845
Balances at December 31, 2020								Balances at December 31, 2020	$	28,061	$	87,452	$	115,513

Net income (loss) attributable to noncontrolling interests	Net income (loss) attributable to noncontrolling interests	(852)		3,474		2,622		Net income (loss) attributable to noncontrolling interests	918		4,087		5,005
Changes in redemption value (1)	Changes in redemption value (1)	0		19,031		19,031		Changes in redemption value (1)	0		23,406		23,406
Total net income (loss) attributable to noncontrolling interests	Total net income (loss) attributable to noncontrolling interests	(852)		22,505		21,653		Total net income (loss) attributable to noncontrolling interests	918		27,493		28,411
Net subscriptions (redemptions) and other	Net subscriptions (redemptions) and other	20,074		(6,295)		13,779		Net subscriptions (redemptions) and other	(6,393)		(6,006)		(12,399)

Balances at September 30, 2020		$	24,651	$	74,626	$	99,277
Balances at June 30, 2021								Balances at June 30, 2021	$	22,586	$	108,939	$	131,525

(1) Relates to noncontrolling interests redeemable at other than fair value.

~~15.~~16. Consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries and investment products that are consolidated. 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 (i) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (ii) where as a group, the holders of the equity investment at risk do not possess (x) the power through voting or similar rights to direct the activities that most significantly impact the entity’s economic performance; (y) the obligation to absorb expected losses or the right to receive expected residual returns of the entity; or (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 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.

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


		As of													As of
		September 30, 2020						December 31, 2019							June 30, 2021						December 31, 2020
				VIEs						VIEs					VOEs		VIEs				VOEs		VIEs
(in thousands)	(in thousands)	VOEs		CLOs		Other		VOEs		CLOs		Other		(in thousands)			CLOs		Other				CLOs		Other
Cash and cash equivalents	Cash and cash equivalents	$	9,128	$	43,930	$	1,177	$	2,665	$	97,130	$	363	Cash and cash equivalents	$	7,036	$	121,934	$	1,448	$	9,837	$	82,295	$	1,206
Investments	Investments	46,623		2,231,691		55,371		22,223		1,976,148		31,739		Investments	54,953		2,154,956		61,934		57,256		2,217,055		58,966
Other assets	Other assets	2,756		23,821		838		1,563		21,450		599		Other assets	13,962		30,195		889		1,989		10,484		957
Notes payable	Notes payable	0		(2,190,937)		0		0		(1,834,535)		0		Notes payable	0		(2,132,012)		0		0		(2,190,445)		0
Securities purchased payable and other liabilities	Securities purchased payable and other liabilities	(2,972)		(37,378)		(670)		(2,964)		(164,887)		(200)		Securities purchased payable and other liabilities	(20,534)		(101,176)		(634)		(2,566)		(42,940)		(323)
Noncontrolling interests	Noncontrolling interests	(22,362)		(8,982)		(2,289)		(3,865)		(10,558)		(1,564)		Noncontrolling interests	(16,975)		(8,968)		(5,611)		(24,707)		(9,799)		(3,354)
Net interests in CIP	Net interests in CIP	$	33,173	$	62,145	$	54,427	$	19,622	$	84,748	$	30,937	Net interests in CIP	$	38,442	$	64,929	$	58,026	$	41,809	$	66,650	$	57,452

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Consolidated CLOs

The majority of the Company's CIP that are VIEs are CLOs. At ~~September~~June 30, ~~2020,~~2021, the Company consolidated 6 CLOs. The financial information of certain CLOs is included on the Company's condensed consolidated financial statements on a one-month lag based upon the availability of the ~~fund~~fund's financial information. A majority-owned consolidated private fund, whose primary purpose is to invest in CLOs for which the Company serves as the collateral manager, is also included.

Investments of CLOs

The CLOs held investments of $2.2 billion at ~~September~~June 30, ~~2020~~2021 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~~2022 and ~~2028~~2029 and pay interest at LIBOR plus a spread of up to ~~12.00%~~10.00%. The CLOs may elect to reinvest any prepayments received on bank loan investments up until the periods between October 2019 and 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~~June 30, ~~2020,~~2021, the fair value of the senior bank loans was less than the unpaid principal balance by ~~$135.8~~$35.5 million. At ~~September~~June 30, ~~2020,~~2021, there were no material collateral assets in default.

Notes Payable of CLOs

The CLOs held notes payable with a total value, at par, of ~~$2.5~~$2.3 billion at ~~September~~June 30, ~~2020,~~2021, consisting of senior secured floating rate notes payable with a par value of ~~$2.2~~$2.1 billion and subordinated notes with a par value of $225.9 million. These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 0.8% to 8.7%. The principal amounts outstanding of these note obligations mature on dates ranging from October 2027 to January 2033.

The Company’s beneficial interests and maximum exposure to loss related to these consolidated CLOs is limited to (i) ownership in the subordinated notes and (ii) accrued management fees. The secured notes of the consolidated CLOs have contractual recourse only to the related assets of the CLO and are classified as financial liabilities. Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative 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~~June 30, ~~2020,~~2021, as shown in the table below:





(in thousands)
Subordinated notes	$	~~60,721~~63,664
Accrued investment management fees	~~1,424~~1,265
Total beneficial interests	$	~~62,145~~64,929

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


(in thousands)	~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021
Income:
Realized and unrealized gain (loss), net	$	~~(9,648)~~(4,646)
Interest income	~~81,846~~44,487

Total income	~~72,198~~39,841

Expenses:
Other operating expenses	~~9,535~~904
Interest expense	~~70,258~~28,901
Total expense	~~79,793~~29,805
Noncontrolling interests	~~146~~ (345)
Net Income (loss) attributable to CIP	$	~~(7,449)~~9,691

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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

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consolidated CLOs, which are eliminated upon consolidation:


(in thousands)	~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021
Distributions received and unrealized gains (losses) on the subordinated notes ~~held by the Company~~	$	~~(13,941)~~5,054
Investment management fees	~~6,492~~4,637

Total economic interests	$	~~(7,449)~~9,691

Fair Value Measurements of CIP

The assets and liabilities of CIP measured at fair value on a recurring basis as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 by fair value hierarchy level were as follows:

As of ~~September~~June 30, ~~2020~~2021


(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	43,930	$	0	$	0	$	43,930	Cash equivalents	$	121,934	$	0	$	0	$	121,934
Debt investments	Debt investments	14,472		2,275,610		13,326		2,303,408		Debt investments	1,281		2,194,503		50,186		2,245,970
Equity investments	Equity investments	27,092		1,349		1,836		30,277		Equity investments	21,907		2,071		1,895		25,873
Derivatives		586		845		0		1,431

Total assets measured at fair value	Total assets measured at fair value	$	86,080	$	2,277,804	$	15,162	$	2,379,046	Total assets measured at fair value	$	145,122	$	2,196,574	$	52,081	$	2,393,777
Liabilities	Liabilities									Liabilities
Notes payable	Notes payable	$	0	$	2,190,937	$	0	$	2,190,937	Notes payable	$	0	$	2,132,012	$	0	$	2,132,012
Derivatives		539		433		0		972

Short sales	Short sales	472		0		0		472		Short sales	531		0		0		531
Total liabilities measured at fair value	Total liabilities measured at fair value	$	1,011	$	2,191,370	$	0	$	2,192,381	Total liabilities measured at fair value	$	531	$	2,132,012	$	0	$	2,132,543

As of December 31, ~~2019~~2020


(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	97,130	$	0	$	0	$	97,130	Cash equivalents	$	82,295	$	0	$	0	$	82,295
Debt investments	Debt investments	218		1,973,427		39,389		2,013,034		Debt investments	16,859		2,219,199		53,368		2,289,426
Equity investments	Equity investments	15,872		171		1,033		17,076		Equity investments	38,468		3,856		814		43,138

Derivatives										Derivatives	858		1,227		0		2,085
Total assets measured at fair value	Total assets measured at fair value	$	113,220	$	1,973,598	$	40,422	$	2,127,240	Total assets measured at fair value	$	138,480	$	2,224,282	$	54,182	$	2,416,944
Liabilities	Liabilities									Liabilities
Notes payable	Notes payable	$	0	$	1,834,535	$	0	$	1,834,535	Notes payable	$	0	$	2,190,445	$	0	$	2,190,445

Derivatives										Derivatives	714		757		0		1,471
Short sales	Short sales	430		0		0		430		Short sales	520		0		0		520
Total liabilities measured at fair value	Total liabilities measured at fair value	$	430	$	1,834,535	$	0	$	1,834,965	Total liabilities measured at fair value	$	1,234	$	2,191,202	$	0	$	2,192,436

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 ma~~rket~~market funds. Cash investments in money market funds are valued using published net asset values and are classified as Level 1.

Debt and equity investments represent the underlying debt, equity and other securities held in 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.~~non-

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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

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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 on 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, on 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”~~"initial margin" requirements. The cash pledged or on deposit is recorded on 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,~~December 31, 2020, was immaterial. There were 0 derivative assets or liabilities held at June 30, 2021.

Notes payable represent notes issued by CIP CLOs and are measured using the measurement alternative in ASU 2014-13. Accordingly, the fair value of CLO liabilities was measured as the fair value of CLO assets less the sum of (i) the fair value of the beneficial interests held by the Company and (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 on the 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~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 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,					Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2021		2020
Level 3 Investments of CIP (1)
Balance at beginning of period	Balance at beginning of period	$	40,422	$	6,848	Balance at beginning of period	$	54,182	$	40,422
Realized gains (losses), net	Realized gains (losses), net	5		(95)		Realized gains (losses), net	(214)		4
Change in unrealized gains (losses), net	Change in unrealized gains (losses), net	(335)		310		Change in unrealized gains (losses), net	3,281		(920)

Purchases	Purchases	1,137		2,157		Purchases	4,395		56

Amortization	Amortization	9		(16)		Amortization	60		6
Sales	Sales	(1,256)		(5,414)		Sales	(27,309)		(1,195)
Transfers to Level 2	Transfers to Level 2	(50,463)		(42,232)		Transfers to Level 2	(44,578)		(38,607)
Transfers from Level 2	Transfers from Level 2	25,643		51,544		Transfers from Level 2	62,264		12,106
Balance at end of period		$	15,162	$	13,102
Balance at end of period (1)						Balance at end of period (1)	$	52,081	$	11,872

(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.

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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

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manager for these CDOs did not represent a variable interest 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, (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, and (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 VIEs that the Company does not consolidate as it is not the primary beneficiary 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~~June 30, ~~2020,~~2021, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was ~~$26.2~~$30.8 million.

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

Cautionary Statement Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains statements that are, or may be considered to be, forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements that are not historical facts, including statements about our beliefs or expectations, are "forward-looking 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 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 ~~2019~~2020 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q, as well as the following risks and uncertainties resulting from:(i) a reduction in our assets under management; (ii) inability to achieve expected acquisition-related benefits; and other risks and uncertainties; (iii) the on-going effects of the COVID-19 pandemic and associated global economic ~~disruption; (ii) any reduction in our assets under management; (iii)~~disruptions; (iv) withdrawal, renegotiation or termination of investment advisory agreements; ~~(iv)~~(v) damage to our reputation; ~~(v) failure to comply with investment guidelines or other contractual requirements;~~ (vi) inability to satisfy financial covenants ~~and payments related to our indebtedness;~~or make debt payments; (vii) inability to attract and retain key personnel; (viii) challenges from ~~the competition we face in our business;~~competition; (ix) ~~adverse regulatory and legal developments; (x) unfavorable changes in tax laws or limitations; (xi)~~ adverse developments related to unaffiliated subadvisers; ~~(xii)~~(x) negative ~~implications of~~ changes in key distribution relationships; ~~(xiii)~~(xi) interruptions in or failure to provide critical technological service by us or third parties; (xii) losses on our investments; (xiii) lack of sufficient capital on satisfactory terms; (xiv) ~~volatility associated~~adverse regulatory and legal developments; (xv) failure to comply with ~~our common stock; (xv)~~investment guidelines or other contractual requirements; (xvi) adverse civil litigation and government investigations or proceedings; ~~(xvi) risk~~(xvii) unfavorable changes in tax laws or limitations; (xviii) volatility in the trading of ~~loss on~~ our ~~investments; (xvii)~~common stock; (xix) inability to make quarterly common stock ~~dividends; (xviii) lack of sufficient capital on satisfactory terms; (xix)~~dividend payments; (xx) losses or costs not covered by insurance; ~~(xx)~~(xxi) impairment of goodwill or intangible assets; ~~(xxi) inability to achieve expected acquisition-related 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 ~~2019~~2020 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.

Overview

Our Business

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

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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 (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 are offered through separate accounts and pooled or commingled structures to a variety of 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~~offshore 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~~COVID-19 Impact

~~During the first three quarters of 2020, the~~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 toTo 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 the impact of COVID-19 with economic stimulus measures. ~~These measures are intended to support businesses, employees and consumers until economic activities recover. Although~~Despite the general recovery of the 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 continuecontinues 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.~~uncertain.

Financial Highlights

•▪Net income per diluted share was ~~$3.71~~$7.86 in the ~~third~~second quarter of ~~2020,~~2021, as compared to ~~$2.95~~net income per diluted share of $1.43 in the ~~third~~second quarter of ~~2019.~~2020.

•▪Total sales were ~~$7.6~~$9.6 billion in the ~~third~~second quarter of ~~2020,~~2021, an increase of ~~$2.9~~$0.1 billion, or ~~60.3%~~1.5%, from ~~$4.8~~$9.4 billion in the ~~third~~second quarter of ~~2019.~~2020. Net flows were ~~$1.2~~$1.3 billion in the ~~third~~second quarter of ~~2020~~2021 compared to ~~$(1.1)~~$2.8 billion in the ~~third~~second quarter of ~~2019.~~2020.

•▪Assets under management were ~~$116.5~~$178.6 billion at ~~September~~June 30, ~~2020,~~2021, an increase of ~~$12.4~~$70.2 billion, or ~~11.9%~~64.7%, from ~~September~~June 30, ~~2019.~~2020.

AllianzGI Strategic Partnership

On February 1, 2021, we completed the actions necessary to finalize the strategic partnership with Allianz Global Investors ("AllianzGI"), pursuant to which NFJ Investment Group ("NFJ") was established as a new affiliated manager and the Company became the investment adviser, distributor and/or administrator for $29.5 billion of AllianzGI's open-end, closed-end, institutional and retail separate account assets (the "AGI Transaction"). In addition, the Company had $3.8 billion of other fee earning assets as of June 30, 2021, also as a result of the AllianzGI partnership.

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~~AllianzGI Strategic Partnership~~Agreement with Westchester Capital Management

On ~~July 4, 2020, the Company~~February 1, 2021, we 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~~acquire all of ~~certain AllianzGI's open-end, closed-end and retail separate account assets.~~Westchester Capital Management ("Westchester"). The ~~agreement~~transaction is expected to close in the ~~first quarter~~second half of ~~2021.~~2021, subject to customary closing conditions and approvals, including by fund shareholders. The expected payment at closing is $135.0 million and there is an additional revenue-retention payment of up to $20.0 million due within six months of closing.

Agreement with Stone Harbor Investment Partners

On June 25, 2021, we entered into an agreement to acquire Stone Harbor Investment Partners LP ("Stone Harbor"). The transaction is expected to close near the end of 2021, subject to customary closing conditions and approvals, including by fund shareholders.

Assets Under Management

At ~~September~~June 30, ~~2020,~~2021, total assets under management were ~~$116.5~~$178.6 billion, representing an increase of ~~$12.4~~$70.2 billion, or ~~11.9%~~64.7%, from ~~September~~June 30, ~~2019,~~2020, and an increase of ~~$7.6~~$46.4 billion, or ~~7.0%~~35.1%, from December 31, ~~2019.~~2020. The increase in total assets under management from ~~September~~June 30, ~~2019~~2020 included ~~$10.7~~$34.0 billion of positive market performance, $29.5 billion from the AGI Transaction and ~~$2.8~~$7.7 billion of positive net flows. The change in total assets under management from December 31, ~~2019 included $5.8~~2020 was due to the increase from the AGI Transaction, $13.5 billion of positive market performance and ~~$2.4~~$3.8 billion of positive net flows.

~~Average long-term assets under management, which represent the majority~~ In addition, at June 30, 2021, we had $3.8 billion 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. The increase in average long-term assets under management compared to the prior year period was primarily due to market performance and positive net flows.other fee earning assets.

Operating Results

In the ~~third~~second quarter of ~~2020,~~2021, total revenues increased ~~6.1%~~83.6% to ~~$154.8~~$244.0 million from ~~$146.0~~$132.9 million in the ~~third~~second quarter of ~~2019,~~2020, primarily as a result of higher average assets under management in our open-end funds ~~retail separate~~as a result of positive market performance, positive net flows and ~~institutional accounts.~~the assets from the AGI Transaction. Operating income increased ~~$5.2~~$59.8 million to ~~$41.0~~$86.4 million in the ~~third~~second quarter of 2021 compared to $26.6 million in the second quarter of 2020, ~~compared to $35.8 million in the third quarter of 2019,~~ primarily due to ~~increased revenue.~~the same factors previously mentioned.

Assets Under Management by Product

The following table summarizes our assets under management by product:


		As of September 30,				Change					As of June 30,				Change
(in millions)	(in millions)	2020		2019		$		%		(in millions)	2021		2020		$		%
Open-End Funds (1)		$	43,369	$	41,190	$	2,179	5.3	%
Open-End Funds (1) (2)										Open-End Funds (1) (2)	$	75,333	$	41,144	$	34,189	83.1	%
Closed-End Funds	Closed-End Funds	5,629		6,816		(1,187)		(17.4)	%	Closed-End Funds	11,993		5,639		6,354		112.7	%
Exchange Traded Funds	Exchange Traded Funds	543		1,054		(511)		(48.5)	%	Exchange Traded Funds	1,260		541		719		132.9	%
Retail Separate Accounts	Retail Separate Accounts	24,727		18,863		5,864		31.1	%	Retail Separate Accounts	40,578		22,054		18,524		84.0	%
Institutional Accounts(2)	Institutional Accounts(2)	36,596		30,951		5,645		18.2	%	Institutional Accounts(2)	45,604		34,819		10,785		31.0	%
Structured Products	Structured Products	4,163		3,972		191		4.8	%	Structured Products	3,870		4,264		(394)		(9.2)	%
Total Long-Term		115,027		102,846		12,181		11.8	%
Liquidity (2)		1,460		1,221		239		19.6	%

Total	Total	$	116,487	$	104,067	$	12,420	11.9	%	Total	$	178,638	$	108,461	$	70,177	64.7	%
Average Assets Under Management (3)	Average Assets Under Management (3)	$	105,651	$	101,059	$	4,592	4.5	%	Average Assets Under Management (3)	$	163,611	$	102,031	$	61,580	60.4	%
Average Long-Term Assets Under Management (3)		$	104,358	$	99,324	$	5,034	5.1	%

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

(2)~~Represents assets under management~~Includes ultra-short strategies previously included in a separate liquidity ~~strategies, including in certain open-end funds and institutional accounts.~~strategy. Prior period amounts have been recast to conform to the current year presentation.

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

–Funds - average daily or weekly balances

–Retail Separate Accounts - prior-quarter ending balances

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

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Asset Flows by Product

The following table summarizes asset flows by product:
Three Months Ended
September 30, Nine Months Ended
September 30,
(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 June 30,				Six Months Ended June 30,
(in millions)	2021		2020		2021		2020
Open-End Funds (1) (2)
Beginning balance	$	72,164	$	34,361	$	50,771	$	43,824
Inflows	4,743		4,714		10,596		8,773
Outflows	(4,987)		(4,115)		(10,245)		(9,862)
Net flows	(244)		599		351		(1,089)
Market performance	3,469		6,255		4,599		(1,478)
Other (3)	(56)		(71)		19,612		(113)
Ending balance	$	75,333	$	41,144	$	75,333	$	41,144

Closed-End Funds
Beginning balance	$	11,664	$	5,343	$	5,914	$	6,748
Inflows	—		—		—		5
Outflows	—		—		—		—
Net flows	—		—		—		5
Market performance	514		380		619		(805)
Other (3)	(185)		(84)		5,460		(309)
Ending balance	$	11,993	$	5,639	$	11,993	$	5,639

Exchange Traded Funds
Beginning balance	$	1,021	$	480	$	837	$	1,156
Inflows	232		74		407		160
Outflows	(92)		(140)		(169)		(373)
Net flows	140		(66)		238		(213)
Market performance	104		137		202		(368)
Other (3)	(5)		(10)		(17)		(34)
Ending balance	$	1,260	$	541	$	1,260	$	541

Retail Separate Accounts
Beginning balance	$	37,244	$	17,660	$	29,751	$	20,414
Inflows	2,273		1,483		4,972		2,544
Outflows	(833)		(654)		(1,729)		(1,429)
Net flows	1,440		829		3,243		1,115
Market performance	1,910		3,560		4,051		520
Other (3)	(16)		5		3,533		5
Ending balance	$	40,578	$	22,054	$	40,578	$	22,054

Institutional Accounts (2)
Beginning balance	$	42,802	$	28,507	$	40,861	$	32,859
Inflows	2,302		3,141		4,186		4,640
Outflows	(2,184)		(1,667)		(4,052)		(3,444)
Net flows	118		1,474		134		1,196
Market performance	2,752		4,880		3,933		730
Other (3)	(68)		(42)		676		34
Ending balance	$	45,604	$	34,819	$	45,604	$	34,819

Structured Products
Beginning balance	$	3,985	$	4,343	$	4,060	$	3,903
Inflows	—		—		—		491
Outflows	(118)		(73)		(197)		(115)
Net flows	(118)		(73)		(197)		376
Market performance	33		33		68		72
Other (3)	(30)		(39)		(61)		(87)
Ending balance	$	3,870	$	4,264	$	3,870	$	4,264

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		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	(in millions)	2020		2019		2020		2019		(in millions)	2021		2020		2021		2020
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	Total									Total
Beginning balance	Beginning balance	$	108,461	$	105,006	$	108,904	$	92,030	Beginning balance	$	168,880	$	90,694	$	132,194	$	108,904
Inflows	Inflows	7,632		4,760		23,734		15,380		Inflows	9,550		9,412		20,161		16,613
Outflows	Outflows	(6,470)		(5,885)		(21,306)		(16,498)		Outflows	(8,214)		(6,649)		(16,392)		(15,223)
Net flows	Net flows	1,162		(1,125)		2,428		(1,118)		Net flows	1,336		2,763		3,769		1,390
Market performance	Market performance	7,119		1,019		5,779		14,422		Market performance	8,782		15,245		13,472		(1,329)
Other (2)		(255)		(833)		(624)		(1,267)
Other (3)										Other (3)	(360)		(241)		29,203		(504)
Ending balance	Ending balance	$	116,487	$	104,067	$	116,487	$	104,067	Ending balance	$	178,638	$	108,461	$	178,638	$	108,461

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

(2)Includes ultra-short strategies previously included in a separate liquidity strategy.

(3)Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from ~~liquidity~~cash management 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.~~

Assets Under Management by Asset Class

The following table summarizes our assets under management by asset class:


		As of September 30,				Change				% of Total					As of June 30,				Change				% of Total
(in millions)	(in millions)	2020		2019		$		%		2020		2019		(in millions)	2021		2020		$		%		2021		2020
Asset Class	Asset Class													Asset Class
Equity	Equity	$	81,032	$	65,544	$	15,488	23.6	%	69.6	%	63.0	%	Equity	$	113,751	$	66,205	$	47,546	71.8	%	63.8	%	61.0	%
Fixed income(1)	Fixed income(1)	29,603		31,704		(2,101)		(6.6)	%	25.4	%	30.4	%	Fixed income(1)	35,426		27,427		7,999		29.2	%	19.8	%	25.3	%
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	%
Multi-asset (2)														Multi-asset (2)	23,668		10,714		12,954		120.9	%	13.2	%	9.9	%
Alternatives (3)														Alternatives (3)	5,793		4,115		1,678		40.8	%	3.2	%	3.8	%
Total	Total	$	116,487	$	104,067	$	12,420	11.9	%	100.0	%	100.0	%	Total	$	178,638	$	108,461	$	70,177	64.7	%	100.0	%	100.0	%

(1)~~Consists~~Includes ultra-short strategies previously included in a separate liquidity strategy.

(2)Includes strategies with substantial holdings in at least two of the following asset classes: equity, fixed income and alternatives.

(3)Includes real estate securities, infrastructure, mid-stream energy, ~~securities~~long/short, and ~~master limited partnerships,~~ options ~~strategies and other.~~strategies.

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

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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,							Three Months Ended June 30,
		Average Fee Earned (expressed in basis points)		Average Assets Under Management (in millions) (2)					Average Fee Earned (expressed in basis points)		Average Assets Under Management (in millions) (2)
		2020	2019	2020		2019			2021	2020	2021		2020
Products	Products							Products
Open-End Funds (1)	Open-End Funds (1)	59.5	56.6	$	42,475	$	41,457	Open-End Funds (1)	46.4	49.5	$	74,126	$	38,182
Closed-End Funds	Closed-End Funds	62.1	64.7	5,742		6,649		Closed-End Funds	55.1	61.8	11,936		5,566
Exchange Traded Funds	Exchange Traded Funds	13.7	25.3	549		1,048		Exchange Traded Funds	14.0	5.1	1,159		554
Retail Separate Accounts	Retail Separate Accounts	47.6	48.0	22,054		18,260		Retail Separate Accounts	44.2	49.0	37,244		17,660
Institutional Accounts	Institutional Accounts	31.7	31.8	36,506		31,462		Institutional Accounts	32.2	31.1	44,538		31,931
Structured Products	Structured Products	34.2	37.3	4,171		3,957		Structured Products	40.0	26.8	3,875		4,265
All Long-Term Products		47.0	46.9	111,497		102,833
Liquidity (3)		12.3	10.7	1,393		1,710

All Products	All Products	46.6	46.3	$	112,890	$	104,543	All Products	42.5	42.9	$	172,878	$	98,158

		Nine Months Ended September 30,							Six Months Ended June 30,
		Average Fee Earned (expressed in basis points)		Average Assets Under Management (in millions) (2)					Average Fee Earned (expressed in basis points)		Average Assets Under Management (in millions) (2)
		2020	2019	2020		2019			2021	2020	2021		2020
Products	Products							Products
Open-End Funds (1)	Open-End Funds (1)	58.6	55.4	$	40,244	$	40,650	Open-End Funds (1)	47.2	49.0	$	70,187	$	40,087
Closed-End Funds	Closed-End Funds	62.2	64.9	5,944		6,486		Closed-End Funds	55.6	62.3	10,638		6,045
Exchange Traded Funds	Exchange Traded Funds	17.3	12.3	689		1,000		Exchange Traded Funds	10.8	7.3	1,024		758
Retail Separate Accounts	Retail Separate Accounts	49.7	47.8	20,043		16,794		Retail Separate Accounts	44.9	48.9	34,681		19,037
Institutional Accounts	Institutional Accounts	30.8	31.1	33,229		30,529		Institutional Accounts	31.9	30.1	43,151		31,876
Structured Products	Structured Products	31.6	36.5	4,209		3,865		Structured Products	39.4	30.3	3,930		4,228
All Long-Term Products		46.9	46.1	104,358		99,324
Liquidity (3)		11.4	10.4	1,293		1,735

All Products	All Products	46.4	45.5	$	105,651	$	101,059	All Products	42.8	42.8	$	163,611	$	102,031

(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 - prior-quarter ending 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.~~

Average fees earned represent investment management fees before the impact of consolidation of investment products ("CIP") and are net of revenue related adjustments divided by average net assets. Revenue related adjustments are based on specific agreements and reflect the portion of investment management fees passed-through to third-party client intermediaries for services to investors in sponsored investment products. Fund fees are calculated based on average daily or weekly net assets. Retail separate account fees are calculated based on the end of the preceding or current quarter’s asset values or on an average of month-end balances. Institutional account fees are calculated based on an average of month-end balances 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~~all products for the three ~~and nine~~ months ended ~~September~~June 30, ~~2020 increased~~2021 decreased by ~~0.1 and 0.8~~0.4 basis points ~~respectively,~~ compared to the same ~~periods~~period in the prior ~~year. The primary reason for the increase during the three and nine months ended September 30, 2020 was~~year primarily due to ~~changes in~~lower fee rates earned on the ~~underlying asset mix to higher fee earning strategies in open-end funds and retail separate accounts during~~assets under management acquired from the ~~current year periods.~~AGI Transaction.

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Results of Operations

Summary Financial Data


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%		(in thousands)	2021		2020		2021 vs. 2020		%		2021		2020		2021 vs. 2020		%
Investment management fees	Investment management fees	$	129,785	$	120,023	$	9,762	8.1	%	$	360,623	$	340,532	$	20,091	5.9	%	Investment management fees	$	193,510	$	110,550	$	82,960	75.0	%	$	366,779	$	230,838	$	135,941	58.9	%
Other revenue	Other revenue	25,005		25,932		(927)		(3.6)	%	71,627		76,630		(5,003)		(6.5)	%	Other revenue	50,501		22,344		28,157		126.0	%	94,129		46,622		47,507		101.9	%
Total revenues	Total revenues	154,790		145,955		8,835		6.1	%	432,250		417,162		15,088		3.6	%	Total revenues	244,011		132,894		111,117		83.6	%	460,908		277,460		183,448		66.1	%
Total operating expenses	Total operating expenses	113,781		110,168		3,613		3.3	%	340,017		330,248		9,769		3.0	%	Total operating expenses	157,600		106,272		51,328		48.3	%	312,355		226,236		86,119		38.1	%
Operating income (loss)	Operating income (loss)	41,009		35,787		5,222		14.6	%	92,233		86,914		5,319		6.1	%	Operating income (loss)	86,411		26,622		59,789		224.6	%	148,553		51,224		97,329		190.0	%
Other income (expense), net	Other income (expense), net	6,177		(4,596)		10,773		(234.4)	%	(9,859)		9,821		(19,680)		(200.4)	%	Other income (expense), net	6,067		(435)		6,502		NM		4,042		(16,036)		20,078		NM
Interest income (expense), net	Interest income (expense), net	5,726		5,012		714		14.2	%	5,622		2,842		2,780		97.8	%	Interest income (expense), net	6,020		(2,400)		8,420		NM		13,270		(104)		13,374		NM
Income (loss) before income taxes	Income (loss) before income taxes	52,912		36,203		16,709		46.2	%	87,996		99,577		(11,581)		(11.6)	%	Income (loss) before income taxes	98,498		23,787		74,711		314.1	%	165,865		35,084		130,781		372.8	%
Income tax expense (benefit)	Income tax expense (benefit)	11,978		10,844		1,134		10.5	%	29,847		23,851		5,996		25.1	%	Income tax expense (benefit)	22,401		7,578		14,823		195.6	%	37,554		17,869		19,685		110.2	%
Net income (loss)	Net income (loss)	40,934		25,359		15,575		61.4	%	58,149		75,726		(17,577)		(23.2)	%	Net income (loss)	76,097		16,209		59,888		369.5	%	128,311		17,215		111,096		645.3	%
Noncontrolling interests	Noncontrolling interests	(11,286)		(1,274)		(10,012)		785.9	%	(21,507)		(2,969)		(18,538)		624.4	%	Noncontrolling interests	(13,130)		(4,930)		(8,200)		166.3	%	(28,756)		(10,221)		(18,535)		181.3	%
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)	%

Net Income (Loss) Attributable to Virtus Investment Partners, Inc.																		Net Income (Loss) Attributable to Virtus Investment Partners, Inc.	$	62,967	$	11,279	$	51,688	458.3	%	$	99,555	$	6,994	$	92,561	NM

NM = Not meaningful

Revenues

Revenues by source were as follows:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%		(in thousands)	2021		2020		2021 vs. 2020		%		2021		2020		2021 vs. 2020		%
Investment management fees	Investment management fees																	Investment management fees
Open-end funds	Open-end funds	$	63,458	$	59,060	$	4,398	7.4	%	$	176,584	$	169,326	$	7,258	4.3	%	Open-end funds	$	96,795	$	54,018	$	42,777	79.2	%	$	185,667	$	113,126	$	72,541	64.1	%
Closed-end funds	Closed-end funds	8,959		10,846		(1,887)		(17.4)	%	27,695		31,485		(3,790)		(12.0)	%	Closed-end funds	16,395		8,557		7,838		91.6	%	29,335		18,736		10,599		56.6	%

Retail separate accounts	Retail separate accounts	26,412		22,092		4,320		19.6	%	74,524		60,761		13,763		22.7	%	Retail separate accounts	42,475		22,398		20,077		89.6	%	79,987		48,112		31,875		66.3	%
Institutional accounts	Institutional accounts	29,048		25,180		3,868		15.4	%	76,571		71,013		5,558		7.8	%	Institutional accounts	35,782		24,606		11,176		45.4	%	68,220		47,523		20,697		43.6	%
Structured products	Structured products	1,297		1,725		(428)		(24.8)	%	3,288		4,957		(1,669)		(33.7)	%	Structured products	1,585		417		1,168		280.1	%	2,844		1,991		853		42.8	%

Other products	Other products	611		1,120		(509)		(45.4)	%	1,961		2,990		(1,029)		(34.4)	%	Other products	478		554		(76)		(13.7)	%	726		1,350		(624)		(46.2)	%
Total investment management fees	Total investment management fees	129,785		120,023		9,762		8.1	%	360,623		340,532		20,091		5.9	%	Total investment management fees	193,510		110,550		82,960		75.0	%	366,779		230,838		135,941		58.9	%
Distribution and service fees	Distribution and service fees	9,797		10,442		(645)		(6.2)	%	28,146		31,122		(2,976)		(9.6)	%	Distribution and service fees	23,450		8,889		14,561		163.8	%	43,798		18,349		25,449		138.7	%
Administration and shareholder service fees	Administration and shareholder service fees	15,114		15,280		(166)		(1.1)	%	43,056		44,747		(1,691)		(3.8)	%	Administration and shareholder service fees	25,877		13,289		12,588		94.7	%	48,437		27,942		20,495		73.3	%
Other income and fees	Other income and fees	94		210		(116)		(55.2)	%	425		761		(336)		(44.2)	%	Other income and fees	1,174		166		1,008		607.2	%	1,894		331		1,563		472.2	%
Total revenues	Total revenues	$	154,790	$	145,955	$	8,835	6.1	%	$	432,250	$	417,162	$	15,088	3.6	%	Total revenues	$	244,011	$	132,894	$	111,117	83.6	%	$	460,908	$	277,460	$	183,448	66.1	%

Investment Management Fees

Investment management fees are earned based on a percentage of assets under management and are paid pursuant to the terms of the respective investment management contracts, which generally require monthly or quarterly payments. Investment management fees increased by ~~$9.8~~$83.0 million, or ~~8.1%~~75.0%, and ~~$20.1~~$135.9 million, or ~~5.9%~~58.9%, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to the same periods in the prior year. The increase in investment management fees during the ~~three-month period~~three- and six- month periods ended June 30, 2021 was due to an increase in average assets under management of ~~$8.3~~$74.7 billion, or ~~8.0%~~76.1% and $61.6 million, or 60.4%, respectively, primarily as a result of market performance, the AGI Transaction and ~~an increase in the total average fee rate of 0.3 basis points. The increase in investment management fees during the~~positive net flows.

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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 total average fee rate of 0.9 basis points.~~

Distribution and Service Fees

Distribution and service fees are sales- and asset-based fees earned from open-end funds for marketing and distribution services. Distribution and service fees ~~decreased~~increased by ~~$0.6~~$14.6 million, or ~~6.2%~~163.8%, and ~~$3.0~~$25.4 million, or ~~9.6%~~138.7%, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to the same periods in the prior year, ~~primarily~~ due to ~~lower~~higher average assets for open-end funds in share classes that have distribution and service ~~fees.~~fees primarily as a result of market performance and the AGI Transaction.

Administration and Shareholder 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 service fees ~~decreased~~increased by ~~$0.2~~$12.6 million, or ~~1.1%~~94.7%, and ~~$1.7~~$20.5 million, or ~~3.8%~~73.3%, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively,~~2021, compared to the same periods in the prior year primarily due to the ~~decrease~~increase in average assets under management for our open-end and closed-end ~~and ETFs~~funds during the ~~periods.~~periods primarily as a result of market performance, the AGI Transaction and positive net flows.

Other Income and Fees

Other income and fees primarily represent fees related to other fee earning assets and contingent sales charges earned from investor redemptions of certain shares sold without a front-end sales charge. Other income and fees ~~decreased~~increased by $1.0 million, or 607.2%, and $1.6 million, or 472.2%, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to the same periods in the prior year primarily due ~~to lower redemption income and professional service fees.~~fees associated with other fee earning assets as a result of the AGI Transaction.

Operating Expenses

Operating expenses by category were as follows:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%		(in thousands)	2021		2020		2021 vs. 2020		%		2021		2020		2021 vs. 2020		%
Operating expenses	Operating expenses																	Operating expenses
Employment expenses	Employment expenses	$	67,479	$	61,282	$	6,197	10.1	%	$	193,772	$	180,256	$	13,516	7.5	%	Employment expenses	$	87,630	$	60,163	$	27,467	45.7	%	$	179,389	$	126,293	$	53,096	42.0	%
Distribution and other asset-based expenses	Distribution and other asset-based expenses	19,570		20,927		(1,357)		(6.5)	%	56,324		62,013		(5,689)		(9.2)	%	Distribution and other asset-based expenses	36,021		17,345		18,676		107.7	%	68,315		36,754		31,561		85.9	%
Other operating expenses	Other operating expenses	16,343		18,228		(1,885)		(10.3)	%	52,664		56,125		(3,461)		(6.2)	%	Other operating expenses	21,946		17,436		4,510		25.9	%	41,526		36,321		5,205		14.3	%
Other operating expenses of CIP	Other operating expenses of CIP	1,016		376		640		170.2	%	9,944		3,395		6,549		192.9	%	Other operating expenses of CIP	659		2,179		(1,520)		(69.8)	%	1,218		8,928		(7,710)		(86.4)	%
Restructuring and severance	Restructuring and severance	735		523		212		40.5	%	1,155		2,019		(864)		(42.8)	%	Restructuring and severance	—		420		(420)		(100.0)	%	—		420		(420)		(100.0)	%
Depreciation expense	Depreciation expense	1,106		1,245		(139)		(11.2)	%	3,560		3,729		(169)		(4.5)	%	Depreciation expense	981		1,196		(215)		(18.0)	%	2,079		2,454		(375)		(15.3)	%
Amortization expense	Amortization expense	7,532		7,587		(55)		(0.7)	%	22,598		22,711		(113)		(0.5)	%	Amortization expense	10,363		7,533		2,830		37.6	%	19,828		15,066		4,762		31.6	%
Total operating expenses	Total operating expenses	$	113,781	$	110,168	$	3,613	3.3	%	$	340,017	$	330,248	$	9,769	3.0	%	Total operating expenses	$	157,600	$	106,272	$	51,328	48.3	%	$	312,355	$	226,236	$	86,119	38.1	%

Employment Expenses

Employment expenses consist of fixed and variable compensation and related employee benefit costs. Employment expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were ~~$67.5~~$87.6 million and ~~$193.8~~$179.4 million, ~~respectively,~~ which represented an increase of ~~$6.2~~$27.5 million, or ~~10.1%~~45.7%, and ~~$13.5~~$53.1 million, or ~~7.5%~~42.0%, compared to the same ~~periods~~period in the prior year. The increase for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 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 client intermediaries for providing services to investors in sponsored investment products. These payments are primarily based on ~~percentages of sales,~~ assets under management or ~~revenues.~~on a percentage of sales. 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~~increased by ~~$1.4~~$18.7 million, or ~~6.5%~~107.7%, and ~~$5.7~~$31.6 million, or ~~9.2%~~85.9%, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively,~~2021, as compared to the same periods in the prior year, primarily due to ~~a lower~~an increased percentage of sales and assets under management in share classes that have distribution and other asset-based ~~expenses.~~expenses primarily as a result of the AGI Transaction.

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~~June 30, ~~2020 decreased~~2021 increased by ~~$1.9~~$4.5 million, or ~~10.3%~~25.9%, ~~and $3.5 million, or 6.2%, respectively,~~ as compared to the same ~~periods~~period in the prior year primarily due to acquisition related professional fees and additional expenses as a result of the newly established affiliated manager, NFJ. Other operating expenses for the six months ended June 30, 2021 increased $5.2 million, or 14.3%, as compared to the same period in the prior year primarily due to acquisition related professional fees in the current year, partially offset by decreased travel and related expenses primarily as a result of the impact of COVID-19 on the current operating environment.

Other Operating Expenses of CIP

Other operating expenses of CIP ~~increased $0.6~~decreased $1.5 million, or ~~170.2% to $1.0 million~~69.8%, for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~increased $6.5~~$7.7 million, or ~~192.9%~~86.4%, ~~to $9.9 million,~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021 compared to the same periods in the prior year. The ~~increase~~decreases during the ~~three-month period was~~six-month periods were primarily due to ~~costs associated with~~ the ~~refinancing of debt for a CLO in the current year period. The increase in the nine-month period was primarily due to~~ costs associated with the issuance of a new CLO ~~as well as the refinancing of debt for two CLOs~~ in the ~~current~~prior year ~~period.~~

~~Restructuring and 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 in all periods.periods that did not recur.

Depreciation Expense

Depreciation expense consists primarily of the straight-line depreciation of furniture, equipment and leasehold improvements. Depreciation expense decreased ~~for~~$0.2 million, or 18.0%, and $0.4 million, or 15.3%, during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to the same periods in the prior year, primarily due to ~~a higher level of equipment being~~certain assets becoming fully ~~depreciated in the current year periods.~~depreciated.

Amortization Expense

Amortization expense consists of the amortization of definite-lived intangible assets over their estimated useful lives. Amortization expense ~~remained generally consistent~~increased for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to the same periods in the prior ~~year.~~year due to the additional amortization associated with the AGI Transaction.

Other Income (Expense)

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


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%		(in thousands)	2021		2020		2021 vs. 2020		%		2021		2020		2021 vs. 2020		%
Other Income (Expense)	Other Income (Expense)																	Other Income (Expense)
Realized and unrealized gain (loss) on investments, net	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) on investments, net	$	2,494	$	7,114	$	(4,620)	(64.9)	%	$	3,385	$	(430)	$	3,815	NM
Realized and unrealized gain (loss) of CIP, net	Realized and unrealized gain (loss) of CIP, net	2,680		(5,344)		8,024		(150.1)	%	(12,733)		2,455		(15,188)		(618.7)	%	Realized and unrealized gain (loss) of CIP, net	2,747		(6,744)		9,491		NM		(1,940)		(15,413)		13,473		(87.4)	%
Other income (expense), net	Other income (expense), net	999		746		253		33.9	%	806		1,892		(1,086)		(57.4)	%	Other income (expense), net	826		(805)		1,631		NM		2,597		(193)		2,790		NM
Total Other Income (Expense), net	Total Other Income (Expense), net	$	6,177	$	(4,596)	$	10,773	(234.4)	%	$	(9,859)	$	9,821	$	(19,680)	(200.4)	%	Total Other Income (Expense), net	$	6,067	$	(435)	$	6,502	NM		$	4,042	$	(16,036)	$	20,078	NM

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Realized and unrealized gain (loss) on investments, net

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

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~~2020~~ 2021 by ~~$2.5~~$(4.6) million and ~~$(3.4)~~$3.8 million, respectively, as compared to the same periods in the prior year. The realized and unrealized gains and losses during the ~~three-~~three and ~~nine-months~~six months ended ~~September~~June 30, ~~2020~~2021 reflected changes in overall market conditions experienced during the periods.

Realized and unrealized gain (loss) of CIP, net

Realized and unrealized gain (loss) of CIP, net changed ~~$8.0~~$9.5 million, ~~or (150.1)%,~~ and ~~$(15.2)~~$13.5 million, ~~or (618.7)%, respectively,~~ during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to the same periods in the prior year. The change for the three and six months ended ~~September~~June 30, ~~2020~~2021 consisted primarily of an increase in net realized and unrealized gains of ~~$85.1~~$90.5 million and $201.7 million, respectively, due to changes in market values of leveraged loans, partially offset by changes in unrealized losses of ~~$77.1~~$81.0 million and $188.2 million, respectively, related to ~~changes in~~ the value of the notes payable. The change for the nine months ended September 30, 2020 consisted primarily of net realized and unrealized losses of $86.8 million due to changes in market values of leveraged 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 ~~$0.3~~$1.6 million ~~or 33.9%,~~and $2.8 million for the three and six months ended ~~September~~June 30, ~~2020~~2021, respectively, compared to the same ~~period~~periods in the prior year, primarily due ~~primarily~~ to increased earnings from equity method investments during the current year period. Other income (expense), net decreased by $1.1 million, or 57.4%, for the nine months ended September 30, 2020 compared to the same period in the prior year primarily due to lower profits from equity method investments during the current year period.periods.

Interest Income (Expense)

Interest Income (Expense), net by category were as follows:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		2020 vs. 2019		%		2020		2019		2020 vs. 2019		%		(in thousands)	2021		2020		2021 vs. 2020		%		2021		2020		2021 vs. 2020		%
Interest Income (Expense)	Interest Income (Expense)																	Interest Income (Expense)
Interest expense	Interest expense	$	(2,877)	$	(4,889)	$	2,012	(41.2)	%	$	(9,202)	$	(15,205)	$	6,003	(39.5)	%	Interest expense	$	(2,256)	$	(3,126)	$	870	(27.8)	%	$	(4,570)	$	(6,325)	$	1,755	(27.7)	%
Interest and dividend income	Interest and dividend income	137		863		(726)		(84.1)	%	1,131		3,017		(1,886)		(62.5)	%	Interest and dividend income	166		242		(76)		(31.4)	%	302		994		(692)		(69.6)	%
Interest and dividend income of investments of CIP	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 and dividend income of investments of CIP	22,562		28,634		(6,072)		(21.2)	%	46,438		57,863		(11,425)		(19.7)	%
Interest expense of CIP	Interest expense of CIP	(17,622)		(21,252)		3,630		(17.1)	%	(70,258)		(72,030)		1,772		(2.5)	%	Interest expense of CIP	(14,452)		(28,150)		13,698		(48.7)	%	(28,900)		(52,636)		23,736		(45.1)	%
Total Interest Income (Expense), net	Total Interest Income (Expense), net	$	5,726	$	5,012	$	714	14.2	%	$	5,622	$	2,842	$	2,780	97.8	%	Total Interest Income (Expense), net	$	6,020	$	(2,400)	$	8,420	NM		$	13,270	$	(104)	$	13,374	NM

Interest Expense

Interest expense decreased ~~$2.0~~$0.9 million, or ~~41.2%~~27.8%, and ~~$6.0~~$1.8 million, or ~~39.5%~~27.7%, ~~respectively,~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, respectively, compared to the same periods in the prior year. The 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 decreased $0.1 million, or 31.4%, and $0.7 million, or ~~84.1%~~69.6%, ~~and $1.9 million, or 62.5%, respectively,~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to the same periods in the prior year. The decreases were primarily due to lower interest rates earned on cash ~~and lower dividends paid by our investments~~ as compared to the corresponding periods in the prior year.

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Interest and Dividend Income of Investments of CIP

Interest and dividend income of investments of CIP decreased ~~$4.2~~$6.1 million, or ~~13.9%~~21.2%, and ~~$3.1~~$11.4 million, or ~~3.6%~~19.7%, ~~respectively,~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to the same periods in the prior year. The ~~decrease during the three and nine-month periods was~~decreases were primarily due to a decrease in interest ~~rates partially offset by increased investments of CIP.~~rates.

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Interest Expense of CIP

Interest expense of CIP represents interest expense on the notes payable of CIP. Interest expense of CIP decreased by ~~$3.6~~$13.7 million, or ~~17.1%~~48.7%, and ~~$1.8~~$23.7 million, or ~~2.5%~~45.1%, ~~respectively,~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to the same periods in the prior year. The decrease during the ~~three-~~three and ~~nine-~~six months ended ~~September~~June 30, ~~2020~~2021 was primarily due to lower variable interest rates partially offset by higher average debt balances of CIP during the current year ~~periods.~~periods, as well as $3.3 million of amortization of discounts on notes payable in the prior year-to-date period that did not recur.

Income Tax Expense (Benefit)

The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of ~~33.9%~~22.6% and ~~24.0%~~50.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~increase~~decrease in the estimated effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared to the same period in the prior year was primarily due to income tax expense associated with valuation allowances recorded for ~~the tax effects of~~ unrealized losses on certain Company ~~investments.~~ investments in the corresponding prior year period that did not recur.

~~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					June 30, 2021		December 31, 2020		Change
(in thousands)	(in thousands)					2020 vs. 2019		%		(in thousands)					2021 vs. 2020		%
Balance Sheet Data	Balance Sheet Data									Balance Sheet Data
Cash and cash equivalents	Cash and cash equivalents	$	202,212	$	221,781	$	(19,569)	(8.8)	%	Cash and cash equivalents	$	275,439	$	246,511	$	28,928	11.7	%
Investments	Investments	54,446		83,206		(28,760)		(34.6)	%	Investments	81,775		64,944		16,831		25.9	%

Contingent consideration										Contingent consideration	137,664		—		137,664		—	%
Debt	Debt	218,014		277,839		(59,825)		(21.5)	%	Debt	190,224		201,212		(10,988)		(5.5)	%
Redeemable noncontrolling interests	Redeemable noncontrolling interests	99,277		63,845		35,432		55.5	%	Redeemable noncontrolling interests	131,525		115,513		16,012		13.9	%
Total equity	Total equity	688,012		686,257		1,755		0.3	%	Total equity	789,837		720,940		68,897		9.6	%


		Nine Months Ended September 30,				Change					Six Months Ended June 30,				Change
(in thousands)	(in thousands)	2020		2019		2020 vs. 2019		%		(in thousands)	2021		2020		2021 vs. 2020
Cash Flow Data	Cash Flow Data									Cash Flow Data
Provided by (Used In):	Provided by (Used In):									Provided by (Used In):
Operating Activities	Operating Activities	$	(380,267)	$	(103,015)	$	(277,252)	269.1	%	Operating Activities	$	239,180	$	(449,712)	$	688,892
Investing Activities	Investing Activities	8,935		13,470		(4,535)		(33.7)	%	Investing Activities	(5,527)		9,249		(14,776)
Financing Activities	Financing Activities	305,840		113,921		191,919		168.5	%	Financing Activities	(167,645)		370,577		(538,222)

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Overview

At ~~September~~June 30, ~~2020,~~2021, we had ~~$202.2~~$275.4 million of cash and cash equivalents and ~~$54.4~~$81.8 million of investments, which included ~~$31.6~~$54.4 million of investment securities, compared to ~~$221.8~~$246.5 million of cash and cash equivalents and ~~$83.2~~$64.9 million of investments, which included ~~$61.0~~$40.0 million of investment securities, at December 31, ~~2019.~~2020.

At ~~September~~June 30, ~~2020,~~2021, we had ~~$223.2~~$193.8 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.~~

Uses of Capital

Our main uses of capital related to operating activities ~~include payments~~comprise employee compensation and related benefit costs including payment of annual incentive compensation, interest on our indebtedness, income taxes and other operating expenses,

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which primarily 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 quarters of ~~2020~~2021 and ~~2019,~~2020, we paid ~~$84.7~~$96.9 million and ~~$76.2~~$84.7 million, respectively, in incentive compensation earned during the years ended December 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

In addition to operating activities, other uses of cash could include: (i) investments in organic growth, including expanding our distribution efforts; (ii) seeding or launching new products, including ~~seeding funds or~~adding seed capital to expand distribution opportunities and sponsoring CLO issuances; (iii) principal payments on debt outstanding through scheduled amortization, excess cash flow payment requirements or additional paydowns; (iv) dividend payments to common stockholders; (v) repurchases of our common ~~stock;~~stock, or withholding obligations for the net settlement of employee share transactions; (vi) investments in our infrastructure; (vii) investments in inorganic growth opportunities ~~as they arise where the purchase price can take the form of~~which may require upfront ~~payments~~ and/or ~~contingent consideration;~~future payments; (viii) integration costs, including restructuring and severance, related to ~~potential~~ acquisitions, if any; and (ix) purchases of affiliate noncontrolling interests.

Capital and Reserve Requirements

We operate a SEC registered broker-dealer subsidiary ~~registered with the SEC~~ that is subject to certain rules regarding minimum net capital. The 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 ~~September~~June 30, ~~2020,~~2021, the ratio of aggregate indebtedness to net capital of our broker-dealer was below the maximum allowed, and net capital was significantly greater than the required minimum.

Balance Sheet

Cash and cash equivalents consist of cash in banks and money market fund investments. Investments consist primarily of investments in our sponsored funds. CIP 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 considered a variable interest entity.

Operating Cash Flow

Net cash provided by operating activities of $239.2 million for the six months ended June 30, 2021 changed by $688.9 million from net cash used in operating activities of ~~$380.3 million for the nine months ended September 30, 2020 increased by $277.3 million from $103.0~~$449.7 million for the same period in the prior year primarily due to ~~increased~~an increase in net ~~purchases~~sales of investments by CIP of ~~$274.1~~$618.4 million in the current year period compared to the prior year period.

Investing Cash Flow

Cash flows from investing activities consist primarily of capital expenditures and other investing activities related to our business operations. Net cash used in investing activities was $5.5 million for the six months ended June 30, 2021 compared to net cash provided by investing activities ~~was $8.9 million for the nine months ended September 30, 2020 compared to $13.5~~of $9.2 million in the same period for the prior year. The primary investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were ~~related to increases in cash~~$4.3 million of ~~CIP due to the consolidation of additional investment products.~~capital expenditures and other asset purchases. The primary investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 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.~~

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products.

Financing Cash Flow

Cash flows from financing activities consist primarily of the issuance of common stock, return of capital through repurchases of common shares, dividends, withholding obligations for the net share settlement of employee share transactions, issuance and repayment of debt and changes to noncontrolling interests. Net cash ~~provided by~~related to financing activities ~~increased~~changed by ~~$191.9~~$538.2 million to ~~$305.8~~net cash used in financing activities of $167.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared to ~~$113.9 million for the nine months ended September 30, 2019. Net~~net cash provided by financing activities ~~increased during~~of $370.6 million for the ~~period~~six months ended June 30, 2020. The net change was primarily due to ~~an increase~~a decrease of ~~$221.8~~$558.7 million in net borrowings of CIP during the ~~nine~~six months ended ~~September~~June 30, ~~2020 compared to the prior year period, partially offset by an increase of $21.7 million on the repayment of debt during the nine months ended September 30, 2020~~2021 compared to the prior year period.

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Credit Agreement

Contractual Obligations

Our contractual obligations are summarized in our ~~2019~~2020 Annual Report on Form 10-K. As of ~~September~~June 30, ~~2020,~~2021, there have been no material changes ~~outside of the ordinary course of business~~ in our contractual obligations since December 31, ~~2019.~~2020.

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 ~~2019~~2020 Annual Report on Form 10-K. A complete description of our significant accounting policies is included in our ~~2019~~2020 Annual Report on Form 10-K. There were no material changes in our critical accounting policies in the three months ended ~~September~~June 30, ~~2020.~~2021.

Recently Issued Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is primarily exposed to market risk associated with unfavorable movements in interest rates and securities prices. ~~Except for the broad effects of COVID-19 on the global economy and major financial markets, during~~During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, there were no material changes to the information contained in Part II, Item 7A of the Company's ~~2019~~2020 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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

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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~~June 30, ~~2020,~~2021, 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.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

~~Legal Matters~~

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

The Company 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. BasedQuarterly Report 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.Form 10-Q.

Item 1A. Risk Factors

There have been no ~~significant~~material changes to the Company’s risk factors from those previously reported in our ~~2019~~2020 Annual Report on Form ~~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

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~~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.”~~10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

As of ~~September~~June 30, ~~2020,~~2021, an aggregate of 4,930,045 shares of our common stock had been authorized to be repurchased under the share repurchase program originally approved by our Board of Directors in 2010, and ~~762,718~~675,809 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.

The following table sets forth information regarding our share repurchases in each month during the quarter ended ~~September~~June 30, ~~2020:~~2021:

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)
April 1-30, 2021	—	$	—	—	702,730
May 1-31, 2021	12,988	$	272.54	12,988	689,742
June 1-30, 2021	13,933	$	284.17	13,933	675,809
Total	26,921			26,921

(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 May 2020. This repurchase program is not subject to an expiration date.

There were no unregistered sales of equity securities during the period covered by this Quarterly Report. Shares of our common stock purchased by participants in our Employee Stock Purchase Plan were delivered to participant accounts via open market purchases at fair value by the third-party administrator under the plan. We do not reserve shares for this plan or discount the purchase price of the shares.

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Item 6. Exhibits


Exhibit Number						Description

10.1*						Amended and Restated Virtus Investment Partners, Inc. Omnibus Incentive and Equity Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 17, 2021

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

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101						The following information formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (Unaudited) as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, (iii) Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, (iv) Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 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)

*Management contract, compensatory plan or arrangement.

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SIGNATURES

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

Dated: ~~November 5, 2020~~August 6, 2021


			VIRTUS INVESTMENT PARTNERS, INC.
			(Registrant)

			By:			/s/ Michael A. Angerthal
						Michael A. Angerthal
						Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

3435


(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