Equity Method Investments in Affiliates

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



	Equity Method Investments in Affiliates (Net)
	2017			2018
Balance, beginning of period	$	3,368.3		$	3,304.7
Equity method earnings	501.4			370.6
Equity method intangible amortization and impairments	(199.2		)	(370.8		)
Distributions of earnings from equity method investments	(429.8		)	(466.3		)
Investments	29.8			7.3
Foreign currency translation	62.3			(34.5		)
Other⁽¹⁾	(28.1		)	(20.0		)
Balance, end of period	$	3,304.7		$	2,791.0

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⁽¹⁾	Primarily reflects the Company’s share of entity level taxes.

Definite-lived acquired relationships at the Company’s equity method Affiliates are amortized over their expected period of economic benefit. The Company recognized amortization expense for these relationships of $59.2 million, $106.1 million and $97.5 million, respectively, for the years ended December 31, 2016, 2017 and 2018. Based on relationships existing as of December 31, 2018, the Company estimates the annual amortization expense attributable to its equity method Affiliates will be approximately $95 million in 2019, 2020 and 2021 and $75 million in 2022 and 2023.

For the year ended December 31, 2017, the Company determined that the fair value of a U.S. alternative Affiliate had declined below its carrying value. The decline in the fair value of this Affiliate was the result of a cumulative decline in assets under management, coupled with the recent loss of a significant client, which had decreased the forecasted revenue of the Affiliate. The fair value of this Affiliate was determined using a discounted cash flow analysis, a level 3 fair value measurement, that projected future cash flows associated with the investment and discount rates that were developed with input from valuation experts. The significant assumptions used in the cash flow analysis include a projected growth rate of 10.0%, discount rates of 14.0% and 25.0% for asset and performance based fees, respectively, and a market participant tax rate of 25.0%. The Company considered the decline in fair value to be other-than-temporary and, accordingly, the Company recognized a $93.1 million expense to reduce the asset to fair value.

For the year ended December 31, 2018, the Company determined that the fair value of the U.S. alternative Affiliate and the fair value of one of its non-U.S. alternative Affiliates had declined below their respective carrying values. The decline in the fair values of these Affiliates was caused by declines in assets under management as a result of client redemptions, coupled with recent negative investment returns, which resulted in the decrease of forecasted performance based fees for these Affiliates. For the U.S. alternative Affiliate for which the Company recorded an expense to reduce the carrying value to fair value in 2017, the Company recorded an additional $33.3 million expense to reduce the carrying value of this Affiliate to zero as the business was liquidated. For the non-U.S. alternative Affiliate, the Company determined the fair value using a discounted cash flow analysis, a level 3 fair value measurement, that projected future cash flows associated with the investment and discount rates that were developed with input from valuation experts. The significant assumptions used in the cash flow analysis include a projected growth rate of 2.5%, discount rates of 11.0% and 20.0% for asset and performance based fees, respectively, and a market participant tax rate of 25.0%. The Company considered the decline in fair value to be other-than-temporary and, accordingly, the Company recognized a $240.0 million expense to reduce the asset to fair value.

For the Company’s remaining equity method investments in Affiliates, the Company completed its annual evaluations as of December 31, 2017 and 2018 and no other impairments were identified.

The following table presents summarized financial information for Affiliates accounted for under the equity method:



	For the Years Ended December 31,
	2016⁽²⁾		2017		2018
Revenue⁽¹⁾	$	2,200.9	$	3,126.3	$	3,231.7
Net income⁽¹⁾	1,068.9		2,182.7		1,286.1



	December 31,
	2017		2018
Assets	$	3,324.9	$	2,730.4
Liabilities and Non-controlling interests	1,405.5		1,235.1

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⁽¹⁾	Revenue and the associated net income include asset and performance based fees and the impact of consolidated investment products.


⁽²⁾	Revenue and net income reflect investments in new Affiliates for the full-year, regardless of the date of the Company’s investment.

The Company’s share of undistributed earnings from equity method investments was $92.4 million as of December 31, 2018.

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 years ended December 31, 2017 and 2018, this equity method Affiliate recognized revenue of $1,317.8 million and $1,137.5 million, respectively, and net income of $806.6 million and $524.5 million, respectively.