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Consolidated Sponsored Investment Products | 9 Months Ended
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Sep. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Consolidated Sponsored Investment Products | Consolidated Sponsored Investment Products In the normal course of its business, the Company sponsors various investment products. The Company consolidates an investment product when it owns a majority of the voting interest in the entity or it is the primary beneficiary of an investment product that is a VIE, as a consolidated sponsored investment product. The consolidation and deconsolidation of these investment products has no impact on net income attributable to stockholders. The Company’s risk with respect to these investments is limited to its investment 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 Company does not consider cash and investments held by consolidated sponsored investment products or any other VIE to be assets of the Company other than its direct investment in these products. As of September 30, 2015 and December 31, 2014, the Company consolidated 14 and 12 sponsored investment products, respectively. During the nine months ended September 30, 2015, the Company consolidated three additional sponsored investment products and deconsolidated one sponsored investment product because it no longer had a majority voting interest. The following table presents the balances of the consolidated sponsored investment products that were reflected in the Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014:
| As of
| September 30, 2015 |  | December 31, 2014
($ in thousands) |  |  |  |
Total cash and cash equivalents | $ | 16,732 |  |  | $ | 8,687 |
Total investments | 311,429 |  |  | 236,652 |
All other assets | 10,494 |  |  | 6,960 |
Total liabilities | (29,849 | ) |  | (12,556 | )
Redeemable noncontrolling interests | (49,895 | ) |  | (23,071 | )
The Company’s net interests in consolidated sponsored investment products | $ | 258,911 |  |  | $ | 216,672 |
The Company's net interest as a percentage of total investments of consolidated sponsored investment products | 83.1 | % |  | 91.6 | %
Fair Value Measurements The assets and liabilities of the consolidated sponsored investment products measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014 by fair value hierarchy level were as follows: As of September 30, 2015
| Level 1 |  | Level 2 |  | Level 3 |  | Total
($ in thousands) |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Debt securities | $ | — |  |  | $ | 147,663 |  |  | $ | 926 |  |  | $ | 148,589 |
Equity securities | 155,763 |  |  | 7,077 |  |  | — |  |  | 162,840 |
Derivatives | 125 |  |  | 633 |  |  | — |  |  | 758 |
Total assets measured at fair value | $ | 155,888 |  |  | $ | 155,373 |  |  | $ | 926 |  |  | $ | 312,187 |
Liabilities |  |  |  |  |  |  |
Derivatives | $ | 403 |  |  | $ | 917 |  |  | $ | — |  |  | $ | 1,320 |
Short sales | 9,432 |  |  | 423 |  |  | — |  |  | 9,855 |
Total liabilities measured at fair value | $ | 9,835 |  |  | $ | 1,340 |  |  | $ | — |  |  | $ | 11,175 |
As of December 31, 2014
| Level 1 |  | Level 2 |  | Level 3 |  | Total
($ in thousands) |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Debt securities | $ | — |  |  | $ | 135,050 |  |  | $ | 1,065 |  |  | $ | 136,115 |
Equity securities | 82,417 |  |  | 18,120 |  |  | — |  |  | 100,537 |
Derivatives | 154 |  |  | 227 |  |  | — |  |  | 381 |
Total assets measured at fair value | $ | 82,571 |  |  | $ | 153,397 |  |  | $ | 1,065 |  |  | $ | 237,033 |
Liabilities |  |  |  |  |  |  |
Derivatives | $ | 191 |  |  | $ | — |  |  | $ | — |  |  | $ | 191 |
Short sales | 7,491 |  |  | 674 |  |  | — |  |  | 8,165 |
Total liabilities measured at fair value | $ | 7,682 |  |  | $ | 674 |  |  | $ | — |  |  | $ | 8,356 |
The following is a discussion of the valuation methodologies used for the assets and liabilities of the Company’s consolidated sponsored investment products measured at fair value. Investments of consolidated sponsored investment products represent the underlying debt, equity and other securities held in sponsored products which are consolidated by the Company. Equity securities are valued at the official closing price on the exchange on which the securities are traded and are categorized within Level 1. Level 2 investments include most debt securities, which are valued based on quotations received from independent pricing services or from dealers who make markets in such securities and certain equity securities, including non-US 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. Pricing services do not provide pricing for all securities, and therefore indicative bids from dealers are utilized, which are based on pricing models used by market makers in the security and are also included within Level 2. Level 3 investments include debt securities that are not widely traded, are illiquid or are priced by dealers based on pricing models used by market makers in the security. The following table is a reconciliation of assets of consolidated sponsored investment products for Level 3 investments for which significant unobservable inputs were used to determine fair value.
| Nine Months Ended September 30,
($ in thousands) | 2015 |  | 2014
Level 3 Debt securities (a) |  |  |
Balance at beginning of period | $ | 1,065 |  |  | $ | — |
Purchases | 135 |  |  | 450 |
Paydowns | (14 | ) |  | (2 | )
Sales | (13 | ) |  | — |
Transferred to Level 2 | (126 | ) |  | — |
Change in unrealized gain/(loss), net | (121 | ) |  | (1 | )
Balance at end of period | $ | 926 |  |  | $ | 447 |
(a) | None of the securities reflected in the above table were internally fair valued at September 30, 2015.
For the nine months ended September 30, 2015, securities held by consolidated sponsored investment products with an end of period value of $8.9 million were transferred from Level 2 to Level 1 because certain non-US securities quoted market prices were no longer adjusted based on third-party factors derived from model-based valuation techniques for which the significant assumptions were observable in the market. For the nine months ended September 30, 2015, securities held by consolidated sponsored investment products with an end of period value of $0.3 million were transferred from Level 1 to Level 2 because certain non-US securities quoted market prices were adjusted based on third-party factors derived from model-based valuation techniques for which the significant assumptions were observable in the market. There were no transfers between Level 1, Level 2, or Level 3 during the nine months ended September 30, 2014. Derivatives The Company has certain consolidated sponsored investment products which include derivative instruments as part of their investment strategies to contribute to the achievement of defined investment objectives. These derivatives may include futures contracts, options contracts and forward contracts. Derivative instruments in an asset position are classified as other assets of consolidated sponsored investment products in the Condensed Consolidated Balance Sheets. Derivative instruments in a liability position are classified as liabilities of consolidated sponsored investment products within the Condensed Consolidated Balance Sheets. The change in fair value of such derivatives is recorded in realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net, in the Condensed Consolidated Statements of Operations. In connection with entering into these derivative contracts, these funds may be required to pledge to the broker an amount of cash equal to the “initial margin” requirements that varies based on the type of derivative. The cash pledged or on deposit is recorded in the Condensed Consolidated Balance Sheets of the Company as Cash pledged or on deposit of consolidated sponsored investment products. The fair value of such derivatives at September 30, 2014 and December 31, 2014 was immaterial. The Company's consolidated sponsored investment products were party to the following derivative instruments for the period ended September 30, 2015:
($ in thousands) |
| Volume
Purchased options | $ | 3,527 |  |  | (a)
Written options | 2,499 |  |  | (b)
Futures contracts long/short | 109,286 |  |  | (c)
Forward foreign currency exchange purchase contracts | 2,294 |  |  | (d)
Forward foreign currency exchange sale contracts | 26,565 |  |  | (e)
Interest rate swaps | 31,603 |  |  | (a)
Other swaps | 27,956 |  |  | (f)
(a) Represents cost of holdings as of the end of the period. (b) Represents aggregate premiums received for the period. (c) Represents cost at trade date for holdings as of the end of the period. (d) Represents value of trade date payable for holdings as of the end of the period. (e) Represents value at settlement date receivable for holdings as of the end of the period.
(f) | Includes credit default, total return, inflation and variance swaps. Represents notional value of holdings as of the end of the period.
The following is a summary of the consolidated sponsored investment products' derivative instruments as of September 30, 2015. For financial reporting purposes the Company does not offset derivative assets and derivative liabilities that are subject to netting arrangements in its Condensed Consolidated Balance Sheet.
| Fair Value
($ in thousands) | Assets |  | Liabilities
Futures contracts | $ | 119 |  |  | $ | 33 |
Forward foreign currency exchange contracts | 228 |  |  | 117 |
Swaps | 1,226 |  |  | 1,002 |
Purchased options | 1,005 |  |  | — |
Purchased swaptions | 701 |  |  | — |
Written options | — |  |  | 691 |
Total derivative assets and liabilities in the Condensed Consolidated Balance Sheets | 3,279 |  |  | 1,843 |
Derivatives not subject to a master netting agreement | (654 | ) |  | (207 | )
Total assets and liabilities subject to a master netting agreement | 2,625 |  |  | 1,636 |
The Company's consolidated sponsored investment products have counterparty risk associated with these derivative assets and liabilities. Multiple counterparties are utilized to mitigate this risk, and the maximum exposure to a single bank does not exceed 34.4% of the total derivative assets or 40.9% of the total derivative liabilities. The following is a summary of the net gains (losses) recognized in income by primary risk exposure, for the three and nine months ended September 30, 2015:
($ in thousands) | Three Months Ended September 30, 2015 |  | Nine Months Ended September 30, 2015
Interest rate contracts | $ | (217 | ) |  | $ | (75 | )
Foreign currency exchange contracts | 263 |  |  | 666 |
Equity contracts | 633 |  |  | 1,414 |
Commodity contracts | 212 |  |  | 126 |
Credit contracts | (13 | ) |  | (100 | )
Total | $ | 878 |  |  | $ | 2,031 |
Short Sales Some of the Company’s consolidated sponsored investment products may engage in short sales, which are transactions in which a security is sold which 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 in the Condensed Consolidated Balance Sheets within other liabilities of consolidated sponsored investment products. Borrowings One of the Company’s consolidated sponsored investment products employs leverage in the form of using proceeds from short sales, which allows it to use its long positions as collateral in order to purchase additional securities. The use of these proceeds from short sales is secured by the assets of the consolidated sponsored investment product, which are held with the custodian in a separate account. This consolidated sponsored investment product is permitted to borrow up to 33.33% of its total assets.

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- Definition The entire disclosure for the information summarizing investments in and advances to majority-owned subsidiaries, other controlled companies, and other affiliates. It reflects specified information about ownership, financial results from, and financial position in such entities. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 6 -Subparagraph (SX 210.12-14) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611322-123010 + Details
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