Equity Method Investments in Affiliates

9 Months Ended

Sep. 30, 2021

Equity Method Investments and Joint Ventures [Abstract]

In the first and second quarters of 2021, the Company completed minority investments in Boston Common Asset Management LLC (“Boston Common”) and OCP Asia Limited (“OCP Asia”), respectively. The majority of the consideration paid for both Boston Common and OCP Asia is deductible for U.S. tax purposes over a 15-year life. The Company’s purchase price allocation for each investment was measured using financial models that included assumptions of expected market performance, net client cash flows, and discount rates.

The financial results of certain Affiliates accounted for under the equity method are recognized in the Consolidated Financial Statements one quarter in arrears.

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


	Equity Method Investments in Affiliates (Net)
Balance, as of December 31, 2020	$	2,074.8
Investments in Affiliates	144.3
Earnings	218.9
Intangible amortization and impairments	(93.8)
Distributions of earnings	(288.1)
Return of capital	(3.4)
Foreign currency translation	25.8
Other	6.7
Balance, as of September 30, 2021	$	2,085.2

Definite-lived acquired client relationships at the Company’s Affiliates accounted for under the equity method are amortized over their expected period of economic benefit. The Company recognized amortization expense for these relationships of $34.3 million and $110.5 million for the three and nine months ended September 30, 2020, respectively, and $29.3 million and $93.8 million for the three and nine months ended September 30, 2021, respectively. Based on relationships existing as of September 30, 2021, the Company estimates the amortization expense attributable to its Affiliates will be approximately $30 million for the remainder of 2021, approximately $80 million in each of 2022 and 2023, and approximately $50 million in each of 2024, 2025, and 2026.

In the first quarter of 2020, the Company recorded a $140.0 million expense to reduce the carrying value of an Affiliate to fair value. The decline in the fair value was a result of a decline in assets under management and a reduction in projected growth, which decreased the forecasted revenue associated with the investment. The fair value of the investment was determined using a probability-weighted discounted cash flow analysis, a level 3 fair value measurement, that included projected compounded growth in assets under management over the first five years of (2)%, discount rates of 11% and 20% for asset- and performance-based fees, respectively, and a market participant tax rate of 25%. Based on the discounted cash flow analysis, the Company concluded that the fair value of its investment had declined below its carrying value and that the decline was other-than-temporary.

As of September 30, 2021, the estimated fair values of the Company’s Affiliates accounted for under the equity method exceeded their carrying values. If financial markets become depressed for a prolonged period as a result of COVID-19 or other factors, or the financial performance of an Affiliate worsens as a result of net client cash outflows or performance, regardless of the performance of financial markets, the fair values of these assets could drop below their carrying values for periods considered other-than-temporary, resulting in future impairments.

As of September 30, 2021, the Company was obligated to make deferred and contingent payments of $103.9 million related to certain of its Affiliates accounted for under the equity method, of which $63.9 million is payable in 2021, although this amount may be funded in future periods, and $40.0 million is payable in 2022.