Equity Method Investments in Affiliates

9 Months Ended

Sep. 30, 2017

Equity Method Investments and Joint Ventures [Abstract]

In 2016, the Company completed investments in Systematica Investments L.P. and Baring Private Equity Asia, both of which closed on January 4, 2016, Capula Investment Management, LLP, Mount Lucas Management LP and Capeview Capital LLP, all of which closed on July 1, 2016, Partner Fund Management, L.P., which closed on September 30, 2016, and Winton Group Ltd., which closed on October 4, 2016. The purchase price allocations were completed using financial models that included assumptions of expected market performance, net client cash flows and discount rates. The majority of the consideration paid is deductible for U.S. tax purposes over a 15-year life. The financial results of certain equity method Affiliates are recognized in the Consolidated Financial Statements one quarter in arrears.

The aggregate purchase price allocation for the 2016 investments was as follows:



	Total
Consideration paid	$	1,362.3

Definite-lived acquired client relationships	$	560.8
Indefinite-lived acquired client relationships	36.9
Tangible assets	2.0
Deferred tax liability	(91.8		)
Goodwill	854.4
	$	1,362.3

For these new investments, the Company recorded amortization expense on the definite-lived acquired client relationships of $3.7 million and $11.2 million in the three and nine months ended September 30, 2016, respectively, and $15.5 million and $33.9 million in the three and nine months ended September 30, 2017, respectively.

The following table presents the change in Equity method investments in Affiliates:



	Total
Balance, as of December 31, 2016	$	3,368.3
Equity method earnings	303.3
Equity method intangible amortization	(71.7		)
Distributions of earnings from equity method investments	(368.0		)
Investments	29.8
Foreign currency translation	32.1
Other	(3.0		)
Balance, as of September 30, 2017	$	3,290.8

As of September 30, 2017, the definite-lived relationships at all of the Company’s equity method Affiliates were being amortized over a weighted average life of approximately 10 years. The Company recognized amortization expense for these relationships of $14.0 million and $43.0 million for the three and nine months ended September 30, 2016, respectively, and $25.9 million and $71.7 million for the three and nine months ended September 30, 2017, respectively. Based on relationships existing as of September 30, 2017, the Company estimates the annual amortization expense attributable to its current equity method Affiliates will be approximately $100 million in each of 2017 and 2018 and $80 million in each of 2019, 2020 and 2021.

The Company has determined that one of its equity method Affiliates is significant under Rule 10-01(b)(1) of Regulation S-X. For the three and nine months ended September 30, 2016, this equity method Affiliate recognized revenue of $230.2 million and $658.6 million, respectively, and net income of $126.4 million and $361.0 million, respectively. For the three and nine months ended September 30, 2017, this equity method Affiliate recognized revenue of $301.8 million and $826.6 million, respectively, and net income of $178.3 million and $471.3 million, respectively.