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Assets and Liabilities of Consolidated CLOs | 9 Months Ended
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Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Assets and Liabilities of Consolidated CLOs | Assets and Liabilities of Consolidated CLOs The term CLO generally refers to a special purpose vehicle that owns a portfolio of investments and issues various tranches of debt and subordinated note securities to finance the purchase of those investments. The investment activities of a CLO are governed by extensive investment guidelines, generally contained within a CLO’s indenture and other governing documents which limit, among other things, the CLO’s exposure to any single industry or obligor and provide that the CLO’s assets satisfy certain ratings requirements. Most CLOs have a defined investment period during which they are allowed to make investments and reinvest capital as it becomes available. The CLOs are considered variable interest entities (VIE). The assets of each of the CLOs, including cash and cash equivalents, are held solely as collateral to satisfy the obligations of the CLOs. The Company does not own and has no right to the benefits from, nor does it bear the risks associated with, the assets held by the CLOs, beyond its direct investments in, and investment advisory fees generated from, the CLOs. If the Company were to liquidate, the assets of the CLOs would not be available to its general creditors, and as a result, the Company does not consider these assets available for the benefit of its investors. Additionally, the investors in the CLOs have no recourse to the Company’s general assets for the debt issued by the CLOs. Therefore, this debt is not the Company’s obligation. The Company consolidates entities when it is determined to be the primary beneficiary under current VIE accounting guidance. The table below represents the assets and liabilities of the consolidated CLOs that are included in the Company’s Consolidated Balance Sheet as of the dates indicated:
| As of
| September 30, 2016 |  | December 31, 2015
Assets: |  |  |
Cash and cash equivalents | $ | 49,031 |  |  | $ | 38,716 |
Loans, at fair value (1) | 934,822 |  |  | 680,784 |
Other assets | 11,805 |  |  | 9,312 |
Total assets of consolidated CLOs | $ | 995,658 |  |  | $ | 728,812 |
Liabilities: |  |  |
Debt | $ | 927,982 |  |  | $ | 683,827 |
Other liabilities and accrued expenses | 15,236 |  |  | 14,489 |
Total liabilities of consolidated CLOs | $ | 943,218 |  |  | $ | 698,316 |
Net | $ | 52,440 |  |  | $ | 30,496 |
(1) | The unpaid principal balance for these loans is $970,916 and $727,357 and the difference between their fair value and UPB is $36,094 and $46,573 at September 30, 2016 and December 31, 2015 respectively.
The Company’s beneficial interests and maximum exposure to loss related to the Consolidated CLOs are limited to (i) ownership in the subordinated notes and related participations in management fees of the CLOs and (ii) accrued management fees. Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative results in the net amount of the CLOs shown above to be equivalent to the beneficial interests retained by Tiptree as illustrated in the below table:
Beneficial interests: | As of
| September 30, 2016 |  | December 31, 2015
Subordinated notes | $ | 51,742 |  |  | $ | 29,857 |
Accrued management fees | 698 |  |  | 639 |
Total beneficial interests | $ | 52,440 |  |  | $ | 30,496 |
The following table represents revenue and expenses of the consolidated CLOs included in the Company’s Consolidated Statements of Operations for the periods indicated:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Income: |  |  |  |  |  |  |
Net realized and unrealized gains (losses) | $ | (1,422 | ) |  | $ | (7,129 | ) |  | $ | (2,913 | ) |  | $ | (20,241 | )
Interest income | 13,978 |  |  | 10,221 |  |  | 37,626 |  |  | 40,926 |
Total revenue | 12,556 |  |  | 3,092 |  |  | 34,713 |  |  | 20,685 |
Expenses: |  |  |  |  |  |  |
Interest expense | 8,267 |  |  | 6,022 |  |  | 22,667 |  |  | 23,094 |
Other expense | 257 |  |  | 272 |  |  | 1,997 |  |  | 1,037 |
Total expense | 8,524 |  |  | 6,294 |  |  | 24,664 |  |  | 24,131 |
Net income (loss) attributable to consolidated CLOs | $ | 4,032 |  |  | $ | (3,202 | ) |  | $ | 10,049 |  |  | $ | (3,446 | )
As summarized in the table below, the application of the measurement alternative results in the consolidated net income summarized above to be equivalent to Tiptree’s own economic interests in the CLOs which are eliminated upon consolidation:
Economic interests: | Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Distributions received and realized and unrealized gains (losses) on the subordinated notes held by the Company, net | $ | 3,289 |  |  | $ | (3,855 | ) |  | $ | 7,880 |  |  | $ | (6,938 | )
Management fee income | 743 |  |  | 653 |  |  | 2,169 |  |  | 3,492 |
Total economic interests | $ | 4,032 |  |  | $ | (3,202 | ) |  | $ | 10,049 |  |  | $ | (3,446 | )

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 5A -URI http://asc.fasb.org/extlink&oid=52262685&loc=SL6759159-111685 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=52262685&loc=d3e5728-111685 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=52262685&loc=d3e5710-111685 + Details
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