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What changed in Victory Capital Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Victory Capital Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+440 added−459 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-06)

Top changes in Victory Capital Holdings, Inc.'s 2023 10-K

440 paragraphs added · 459 removed · 358 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

94 edited+7 added−8 removed89 unchanged
Biggest changeStrategy/Benchmark Index 1 year 3 years 5 years 10 years Sycamore Mid Cap Value (1.92) % 12.28 % 10.69 % 14.00 % Russell MidCap Value (12.03) % 5.82 % 5.72 % 10.11 % Excess Return 10.11 % 6.46 % 4.97 % 3.89 % Victory US 500 (19.18) % 7.87 % 9.55 % 12.62 % S&P 500 (18.11) % 7.66 % 9.42 % 12.56 % Excess Return (1.07) % 0.21 % 0.13 % 0.06 % Sycamore Small Cap Value (5.78) % 8.07 % 8.38 % 12.47 % Russell 2000 Value (14.48) % 4.70 % 4.13 % 8.48 % Excess Return 8.70 % 3.37 % 4.25 % 3.99 % 10 Table of Contents Global Balanced (17.52) % 3.63 % 5.41 % 7.46 % Global Balanced Benchmark (16.49) % 2.02 % 3.76 % 5.77 % Excess Return (1.03) % 1.61 % 1.65 % 1.69 % USAA Income (12.96) % (1.56) % 1.09 % 2.40 % Bloomberg US Aggregate (13.01) % (2.71) % 0.02 % 1.06 % Excess Return 0.05 % 1.15 % 1.07 % 1.34 % Global Equity (19.00) % 6.77 % 8.13 % 10.65 % MSCI ACWI (18.36) % 4.00 % 5.23 % 7.98 % Excess Return (0.64) % 2.77 % 2.90 % 2.67 % Trivalent International Small-Cap Equity (22.32) % 0.80 % 1.24 % 8.26 % S&P Dev ex-US SmallCap (21.81) % (0.96) % (0.42) % 5.46 % Excess Return (0.51) % 1.76 % 1.66 % 2.80 % USAA Tax Exempt Intermediate-Term (7.66) % (0.12) % 1.75 % 2.54 % Bloomberg US Municipal 1-15 Year (5.95) % (0.22) % 1.44 % 1.95 % Excess Return (1.71) % 0.10 % (0.31) % 0.59 % USAA NASDAQ-100 (32.38) % 8.69 % 12.37 % 16.44 % NASDAQ-100 Total Return (32.38) % 8.68 % 12.36 % 16.45 % Excess Return 0.00 % 0.01 % 0.01 % (0.01) % Sophus Emerging Markets (21.21) % (3.71) % (1.90) % --- % MSCI EM (20.09) % (2.69) % (1.40) % 1.44 % Excess Return (1.12) % (1.02) % (0.50) % NA % A high percentage of our mutual fund and ETF assets have four- or five-star Morningstar ratings.
Biggest changeStrategy/Benchmark Index 1 year 3 years 5 years 10 years Sycamore Mid Cap Value 10.91 % 13.01 % 15.26 % 11.67 % Russell MidCap Value 12.71 % 8.36 % 11.16 % 8.26 % Excess Return (1.80) % 4.65 % 4.10 % 3.41 % Victory US 500 27.26 % 9.54 % 16.00 % 12.18 % S&P 500 26.29 % 10.00 % 15.69 % 12.03 % Excess Return (0.97) % (0.46) % 0.31 % 0.15 % Sycamore Small Cap Value 12.44 % 10.29 % 12.68 % 10.46 % Russell 2000 Value 14.65 % 7.94 % 10.00 % 6.76 % Excess Return (2.21) % 2.35 % 2.68 % 3.70 % WestEnd Global Balanced 14.00 % 2.25 % 8.88 % 6.92 % Global Balanced Benchmark 16.29 % 2.58 % 8.31 % 6.03 % Excess Return (2.29) % (0.33) % 0.57 % 0.89 % WestEnd Global Equity 20.06 % 5.58 % 13.26 % 10.06 % MSCI ACWI 22.20 % 5.75 % 11.72 % 7.93 % Excess Return (2.14) % (0.17) % 1.54 % 2.13 % 10 Table of Contents Victory NASDAQ-100 55.05 % 10.16 % 22.67 % 17.91 % NASDAQ-100 Total Return 55.13 % 10.18 % 22.66 % 17.91 % Excess Return (0.08) % (0.02) % 0.01 % 0.00 % Trivalent International Small-Cap Equity 16.77 % 0.96 % 9.12 % 6.68 % S&P Dev ex-US SmallCap 13.46 % (1.07) % 6.46 % 4.40 % Excess Return 3.31 % 2.03 % 2.66 % 2.28 % Victory Income Investors - Income 7.69 % (1.87) % 2.78 % 3.12 % Bloomberg US Aggregate 5.53 % (3.31) % 1.10 % 1.81 % Excess Return 2.16 % 1.44 % 1.68 % 1.31 % WestEnd US Sector 22.25 % 8.07 % 16.10 % 13.00 % S&P 500 26.29 % 10.00 % 15.69 % 12.03 % Excess Return (4.04) % (1.93) % 0.41 % 0.97 % Victory Income investors – Core Plus Fixed Income 7.79 % (1.32) % 3.38 % 3.49 % Bloomberg US Aggregate 5.53 % (3.31) % 1.10 % 1.81 % Excess Return 2.26 % 1.99 % 2.28 % 1.68 % A high percentage of our mutual fund and ETF assets have four- or five-star Morningstar ratings.
Our integrated platform allows us the ability to make investments that can benefit each Franchise and our Solutions Platform. Approximately two‑thirds of our operating expenses are variable in nature, consisting of the incentive compensation pool for employees, sales commissions, third‑party distribution costs, sub‑advising and the fees we pay to certain of our vendors.
Our integrated platform allows us the ability to make investments that can benefit each Franchise and our Solutions Platform. Approximately two‑thirds of our operating expenses are variable in nature, consisting of the incentive compensation pool for employees, sales commissions, third‑party distribution costs, sub‑advising and the fees we pay to certain vendors.
As registered investment advisers, VCM and WestEnd are subject to many additional requirements that cover, among other things: disclosure of information about our business to clients; maintenance of written policies and procedures; maintenance of extensive books and records; restrictions on the types of fees we may charge; custody of client assets; client privacy; advertising; and solicitation of clients.
As registered investment advisers, VCM and WestEnd are subject to many additional requirements that cover, among other things: disclosure of information about our business to clients; maintenance of written policies and procedures; maintenance of extensive books and records; restrictions on the types of fees we may charge; custody of client assets; client privacy; and advertising.
Economic and Structural Alignment of Interests Promotes Ownership Culture – Through our revenue share compensation model for our Franchises and broad employee ownership, we have structurally aligned our employees’ interests with those of our clients and other shareholders and have created an ownership culture that encourages employees to act in the best interests of clients and our Company shareholders, as well as to think long term.
Economic and Structural Alignment of Interests Promotes Ownership Culture – Through our revenue share compensation model for our Franchises and broad employee ownership, we have structurally aligned our employees’ interests with those of our clients and shareholders and have created an ownership culture that encourages employees to act in the best interests of clients and our Company shareholders, as well as to think long term.
We face competition with other investment firms in attracting and retaining assets. Additionally, we compete with other acquirers of investment management firms, including independent, integrated investment management firms and multi‑boutique businesses, insurance companies, banks, and other financial institutions. We compete with other managers offering similar strategies.
We face competition with other investment firms in attracting and retaining client assets. Additionally, we compete with other acquirers of investment management firms, including independent, integrated investment management firms and multi‑boutique businesses, insurance companies, banks, and other financial institutions. We compete with other managers offering similar strategies.
Although our operations are highly centralized, we do allow our Franchises a degree of customization with respect to their desired investment support functions, which we believe helps them maintain their unique investment processes and minimize disruptions.
Although our operations are highly centralized, we allow our Franchises a degree of customization with respect to their desired investment support functions, which we believe helps them maintain their unique investment processes and minimize disruptions.
Notably, a significant number of our employee shareholders acquired their equity in connection with the management‑led buyout with Crestview GP from KeyCorp, as well as in connection with the acquisitions of RS Investments and Munder.
Notably, a significant number of our employee shareholders acquired their equity in 2013 in connection with the management‑led buyout with Crestview GP from KeyCorp, as well as in connection with the acquisitions of RS Investments and Munder.
Our model reduces the administrative burdens borne by our Investment Franchises and allows them instead to focus on the investment process, which we believe can enhance their investment performance.
Our model reduces the administrative burdens borne by our Investment Franchises and allows them to focus on the investment process, which we believe can enhance their investment performance.
We have historically operated in Australia based on a “sufficient equivalence relief” exemption from local licensing with the Australian Securities and Investments commission. In 2021, we applied for a Foreign Australian Financial Services License which was granted on June 15, 2021. Compliance – Our legal and compliance functions consist of 13 professionals as of December 31, 2022.
We have historically operated in Australia based on a “sufficient equivalence relief” exemption from local licensing with the Australian Securities and Investments commission. In 2021, we applied for a Foreign Australian Financial Services License which was granted on June 15, 2021. Compliance – Our legal and compliance functions consist of 13 professionals as of December 31, 2023.
If a strategy is currently not offered in the wrapper of choice for a client, we have the infrastructure and ability to create a new investment vehicle, which helps our Franchises further diversify their client bases. Attractive Financial Profile – Our revenues are recurring in nature, as they are based on the level of client assets we manage.
If a strategy is currently not offered in the wrapper of choice for a client, we have the infrastructure and ability to create a new investment vehicle, which helps our Franchises further diversify their client base. Attractive Financial Profile – Our revenues are recurring in nature, as they are based on the level of client assets we manage.
In 2021, the Company acquired WestEnd Advisors (“WestEnd”), which maintains its own RIA, which is an affiliate RIA that receives certain services from VCM. VCM employs all of the Company’s United States investment professionals across all 12 Franchises and its Solutions Platform. VCM’s wholly owned subsidiaries include RS Investment Management (Singapore) Pte.
In 2021, the Company acquired WestEnd Advisors (“WestEnd”), which maintains its own RIA, which is an affiliate RIA that receives certain services from VCM. VCM employs all of the Company’s United States investment professionals across all 11 Franchises and its Solutions Platform. VCM’s wholly owned subsidiaries include RS Investment Management (Singapore) Pte.
THB serves clients in the U.S. and in Europe and Australia. Based in Norwalk, CT, our THB Investments Franchise includes eight investment professionals with an average industry experience of approximately 13 years. Trivalent Investments – Trivalent Investments utilizes a disciplined approach to stock selection across large to small companies in the international and emerging markets space.
THB serves clients in the U.S. and in Europe and Australia. Based in Norwalk, CT, our THB Investments Franchise includes eight investment professionals with an average industry experience of approximately 14 years. Trivalent Investments – Trivalent Investments utilizes a disciplined approach to stock selection across large to small companies in the international and emerging markets space.
For the year ended December 31, 2022, 81% of our total revenues were derived from our services to investment companies registered under the 1940 Act—i.e., mutual funds and ETFs. The 1940 Act imposes significant requirements and limitations on a registered fund, including with respect to its capital structure, investments, and transactions.
For the year ended December 31, 2023, 81% of our total revenues were derived from our services to investment companies registered under the 1940 Act – i.e., mutual funds and ETFs. The 1940 Act imposes significant requirements and limitations on a registered fund, including with respect to its capital structure, investments, and transactions.
We believe our unique business model is compelling for potential acquisition prospects. Under our model, Franchises retain the brands they have built as well as autonomy over their investment decisions, while simultaneously benefiting from the ability to leverage our centralized distribution, marketing, and operations platform.
We believe our unique business model is attractive for potential acquisition prospects. Under our model, Franchises retain the brands they have built as well as autonomy over their investment decisions, while simultaneously benefiting from the ability to leverage our centralized distribution, marketing, and operations platform.
Retail Sales – Our retail sales team includes regional external wholesalers, retirement specialists, RIA specialists, national account specialists, all of whom are supported by an internal sales desk. We also have a team of 10 distribution professionals specializing in the sale of third-party ETF model strategies.
Retail Sales – Our retail sales team includes regional external wholesalers, retirement specialists, RIA specialists, national account specialists, and ETF sales specialists, all of whom are supported by an internal sales desk. We also have a `team of distribution professionals specializing in the sale of third-party ETF model strategies.
This automatic flexing of our expense base helps to support profitability throughout various market cycles.
This automatic flexing of our operating expense base helps to support profitability throughout various market cycles.
While we exercise broad discretion over the day‑to‑day management of the business and affairs of the Victory Funds, USAA Funds, VictoryShares and the investment portfolios of the Victory Funds, USAA Funds, and VictoryShares and the funds we sub‑advise, the funds are subject to oversight of and governance by each fund’s board of directors.
While we exercise broad discretion over the day‑to‑day management of the business and affairs of the Victory Funds, Victory Portfolios III, VictoryShares and the investment portfolios of the Victory Funds, Victory Portfolios III, and VictoryShares and the funds we sub‑advise, the funds are subject to oversight of and governance by each fund’s board of directors.
Furthermore, we believe our Franchises’ brand independence reduces the impact of each individual Franchise’s performance on clients’ perceptions of the other Franchises. The distribution of AUM by Franchise and the number of Franchises, as well as succession planning, mitigates the level of key man risk typically associated with investment management businesses.
Furthermore, we believe our Franchises’ brand independence reduces the impact of each individual Franchise’s performance on clients’ perceptions of the other Franchises. The distribution of AUM by Franchise 12 Table of Contents and the number of Franchises, as well as succession planning, mitigates the level of key man risk typically associated with investment management businesses.
We offer mutual funds, ETFs, third-party ETF models, and separately managed wrap and unified 14 Table of Contents managed accounts on intermediary and retirement platforms. We have agreements with many of the largest platforms in our retail channel, which has provided an opportunity to place our retail products on those platforms.
We offer mutual funds, ETFs, third-party ETF models, and separately managed wrap and unified managed accounts on intermediary and retirement platforms. We have agreements with many of the largest platforms in our retail channel, which has provided an opportunity to place our retail products on those platforms.
Recent initiatives include investments in data and analytics, technology, distribution, and marketing to enhance organic growth in our business and increase efficiencies in our distribution channels. Inorganic Growth – We supplement our organic growth through strategic acquisitions.
Recent initiatives include investments in data and analytics, technology, distribution, and marketing to enhance organic growth in our business and increase efficiencies in our distribution channels. Inorganic Growth – We complement our organic growth through strategic acquisitions.
The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act and the 1940 Act, ranging from fines and censures to termination of an adviser’s registration. As an investment adviser, we have a fiduciary duty to our clients.
The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act 16 Table of Contents and the 1940 Act, ranging from fines and censures to termination of an adviser’s registration. As an investment adviser, we have a fiduciary duty to our clients.
For additional information concerning the competitive risks that we face, refer to “Risk Factors — Industry Risks — The investment management industry is intensely competitive.” Human Capital We have created a strong alignment of interests with clients and shareholders through employee ownership, our Franchise revenue share structure, and employee investments in our products.
For additional information concerning the competitive risks that we face, refer to “Risk Factors — Industry Risks — The investment management industry is intensely competitive.” 15 Table of Contents Human Capital We have created strong alignment of interests with clients and shareholders through employee ownership, our Franchise revenue share structure, and employee investments in our products.
ERISA, the regulations promulgated thereunder, and applicable provisions of the Internal Revenue Code impose certain duties on persons who are fiduciaries under ERISA, prohibit certain transactions involving ERISA plan clients and impose monetary penalties for violations of these prohibitions.
ERISA, the regulations 17 Table of Contents promulgated thereunder, and applicable provisions of the Internal Revenue Code impose certain duties on persons who are fiduciaries under ERISA, prohibit certain transactions involving ERISA plan clients and impose monetary penalties for violations of these prohibitions.
Munder Capital Management – Munder Capital Management has an experienced team utilizing a “Growth‑at‑a‑Reasonable‑Price” strategy in the U.S. equity markets designed to generate consistently strong performance over a market cycle. Munder performs extensive fundamental research in order to find attractive growth companies that it expects will exceed market expectations.
Munder Capital Management – Munder Capital Management has an experienced team utilizing a Growth‑at‑a‑Reasonable‑Price “GARP” strategy in the U.S. equity markets designed to generate consistently strong performance over a market cycle. Munder performs extensive fundamental research in order to find attractive growth companies that it expects will exceed market expectations.
Proven Acquirer with Compelling Value Proposition – We believe our platform allows us to continue to be a strategic acquirer within the investment management industry, providing us with an opportunity to further grow and scale our business. Through numerous transactions, we have demonstrated an ability to successfully source, execute and integrate new Franchises.
Proven Acquirer with Compelling Value Proposition – We believe our platform allows us to continue to be a strategic acquirer within the investment management industry, providing us with an opportunity to further grow 11 Table of Contents and scale our business. Through numerous transactions, we have demonstrated an ability to successfully source, execute, and integrate new Franchises.
This penetration provides the opportunity for us to sell more products through distribution platforms. We have several products on the research recommended/model portfolios of the top U.S. intermediary platforms. We also have several products on the recommended list of the top retirement platforms.
This penetration provides the opportunity for us to sell more products through distribution platforms. We have several products on the research recommended/model portfolios of the 14 Table of Contents top U.S. intermediary platforms. We also have several products on the recommended list of the top retirement platforms.
By offering a platform on which Franchises can focus on their core competencies, grow their client base faster and participate in a revenue share program, we believe we are providing an attractive proposition.
By offering a platform on which Franchises can focus on their core competencies, grow their client base faster and participate in a revenue share program, we believe we are providing a compelling proposition.
In addition to being aligned with our financial success through their equity ownership, our current employees collectively have invested nearly $200 million in products we manage as of December 31, 2022. We directly align the compensation paid to our investment teams with the performance of their respective Franchises by structuring formula‑based revenue sharing on the products they manage.
In addition to being aligned with our financial success through their equity ownership, our current employees collectively have invested more than $200 million in products we manage as of December 31, 2023. We directly align the compensation paid to our investment teams with the performance of their respective Franchises by structuring formula‑based revenue sharing on the products they manage.
Over a three‑year and five‑year basis, 52% and 58% of our fund AUM achieved four- or five-star ratings, respectively. Competitive Strengths We believe we have significant competitive strengths that position us for sustained growth and shareholder value creation over the long term.
Over a three‑year and five‑year basis, 53% and 65% of our fund AUM achieved four- or five-star ratings, respectively. Competitive Strengths We believe we have significant competitive strengths that position us for sustained growth and shareholder value creation over the long term.
Trivalent’s investment strategy is primarily a proprietary quantitative process that drives stock selection across various countries. Trivalent frequently conducts reviews of stock selection rankings within a portfolio construction and risk management context in order to isolate performance to stock selection. Trivalent is based in Boston, MA, and managed $4.4 billion in AUM as of December 31, 2022.
Trivalent’s investment strategy is primarily a proprietary quantitative process that drives stock selection across various countries. Trivalent frequently conducts reviews of stock selection rankings within a portfolio construction and risk management context in order to isolate performance to stock selection. Trivalent is based in Boston, MA, and managed $5.3 billion in AUM as of December 31, 2023.
Investment Performance – Our Franchises have established a long track record of benchmark‑relative outperformance, including prior to their acquisition by us. As of December 31, 2022, 79% of our strategies by AUM had returns in excess of their respective benchmarks over a ten‑year period, 79% over a five‑year period, 84% over a three‑year period, and 54% over a one-year period.
Investment Performance – Our Franchises have established a long track record of benchmark‑relative outperformance, including prior to their acquisition by us. As of December 31, 2023, 79% of our strategies by AUM had returns in excess of their respective benchmarks over a ten‑year period, 84% over a five‑year period, 62% over a three‑year period, and 49% over a one-year period.
In addition, we also advise clients on a non-discretionary basis where we provide actively managed models using non-proprietary products. This is often referred to as assets under advisement.
In addition, we also advise clients on a non-discretionary basis where we provide actively managed models. This is often referred to as assets under advisement.
Integrated Model Providing Centralized Distribution, Marketing, and Support Functions to Investment Franchises, which maintain complete Investment Autonomy – Our highly integrated model allows us to achieve benefits from both our substantial scale and the focus of our specialized investment managers. Our Franchises retain investment autonomy while benefiting from our centralized operating platform.
Integrated Platform Providing Centralized Distribution, Marketing, and Support Functions to Investment Franchises, which maintain complete Investment Autonomy – Our highly integrated centralized operating and distribution platform allows us to achieve benefits from both our substantial scale and the focus of our specialized investment managers.
Our registered transfer agent is subject to the 1934 Act and the rules and regulations promulgated thereunder. These laws and regulations generally grant the SEC and other supervisory bodies broad administrative powers to address non-compliance 17 Table of Contents with regulatory requirements.
Our registered transfer agent is subject to the 1934 Act and the rules and regulations promulgated thereunder. These laws and regulations generally grant the SEC and other supervisory bodies broad administrative powers to address non-compliance with regulatory requirements.
Item 1. Business Overview We are a diversified global asset management firm with $153.0 billion in total assets under management (“AUM”) as of December 31, 2022. Our differentiated business model combines boutique investment qualities of traditional and alternative investment managers with the benefits of an integrated, centralized (not standardized) operating and distribution platform.
Item 1. Business Overview We are a diversified global asset management firm with $166.6 billion in total assets under management (“AUM”) as of December 31, 2023. Our differentiated business model combines boutique investment qualities of traditional and alternative investment managers with the benefits of an integrated, centralized (not standardized) operating and distribution platform.
The table below sets forth our 10 largest strategies by AUM as of December 31, 2022, and their average annual total returns compared to their respective benchmark index over the one‑, three‑, five‑ and 10‑year periods ended December 31, 2022. These strategies represented approximately 43% of our total AUM as of December 31, 2022.
The table below sets forth our 10 largest strategies by assets as of December 31, 2023, and their average annual total returns compared to their respective benchmark index over the one‑, three‑, five‑ and 10‑year periods ended December 31, 2023. These strategies represented approximately 48% of our total AUM as of December 31, 2023.
We believe that compensation based on revenue rather than profits encourages investment professionals to focus their attention on investment performance, while encouraging them to provide good client service, focus on client retention and attract new assets.
We believe that compensation based on revenue rather than profits incentivizes investment professionals to focus their attention on investment performance, while encouraging them to focus on client retention, provide excellent client service, and attract new assets.
Of the companies with independently determined growth attributes, valuation is applied to find the most inexpensive growth companies. Munder is based in Birmingham, MI, and managed $1.3 billion in AUM as of December 31, 2022. Our Munder Investment Franchise includes five investment professionals with an average industry experience of approximately 25 years.
Of the companies with independently determined growth attributes, valuation is applied to find the most inexpensive growth companies. Munder is based in Birmingham, MI, and managed $1.4 billion in AUM as of December 31, 2023. Our Munder Investment Franchise includes five investment professionals with an average industry experience of approximately 26 years.
We strive to maintain a balance between direct investor, retail clients, and institutional clients with 34%, 37% and 29% of our AUM as of December 31, 2022, in each of these channels, respectively. We also have the capability to deliver our strategies in investment vehicles designed to meet the needs and preferences of investors in each channel.
We strive to maintain a balance between direct investor, retail clients, and institutional clients with 37%, 35% and 28% of our AUM as of December 31, 2023, in each of these channels, respectively. We also have the capability to deliver our strategies in investment vehicles designed to meet the needs and preferences of investors in each channel.
On an equal‑weighted basis, 67% of our strategies have outperformed their benchmarks over a ten‑year period, 63% over a five‑year period, 70% over a three‑year period, and 59% over a one-year period. We consider both the AUM‑weighted and equal‑weighted metrics in evaluating our investment performance.
On an equal‑weighted basis, 63% of our strategies have outperformed their benchmarks over a ten‑year period, 62% over a five‑year period, 63% over a three‑year period, and 56% over a one-year period. We consider both the AUM‑weighted and equal‑weighted metrics in evaluating our investment performance.
Asset Class Mix 6 Table of Contents Vehicle Mix Franchise/Platform Mix Data as of December 31, 2022, values may not total 100% due to rounding. 7 Table of Contents Within individual asset classes and strategies, our Franchises employ different investment approaches. This diversification reduces the correlation between investment return streams generated by multiple Franchises investing within the same asset class.
Franchise/Platform Mix Data as of December 31, 2023, values may not total 100% due to rounding. Within individual asset classes and strategies, our Franchises employ different investment approaches. This diversification reduces the correlation between investment return streams generated by multiple Franchises investing within the same asset class.
Our Trivalent Investment Franchise includes six investment professionals with an average industry experience of approximately 28 years. USAA Investments – The team at USAA Investments utilizes a rigorous process rooted in a team-oriented approach among portfolio managers, research analysts and traders. Their taxable and tax-exempt portfolios are built bond by bond using a fundamental, bottom up, credit and yield-focused analysis.
Our Trivalent Investment Franchise includes six investment professionals with an average industry experience of approximately 29 years. Victory Income Investors – Victory Income Investors utilizes a rigorous process rooted in a team-oriented approach among portfolio managers, research analysts and traders. Their taxable and tax-exempt portfolios are built bond by bond using a fundamental, bottom up, credit and yield-focused analysis.
SEC Investment Adviser and Investment Company Registration / Regulation – VCM and WestEnd are both registered with the SEC as investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and the Victory Funds, USAA Funds, VictoryShares and several of the investment 16 Table of Contents companies we sub‑advise are registered under the Investment Company Act of 1940, as amended (the “1940 Act”).
SEC Investment Adviser and Investment Company Registration / Regulation – VCM and WestEnd are both registered with the SEC as investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and the Victory Funds, Victory Portfolios III, VictoryShares and several of the investment companies we sub‑advise are registered under the Investment Company Act of 1940, as amended (the “1940 Act”).
With 12 autonomous Investment Franchises and a Solutions Platform, Victory Capital offers a wide array of investment products, including actively and passively managed mutual funds, rules-based and active exchange traded funds (“ETFs”), institutional separate accounts, variable insurance products (“VIPs”), Environmental, Social, and Governance (“ESG”) and impact investment strategies, alternative investments, private closed end funds, and a 529 Education Savings Plan.
With 11 autonomous Investment Franchises and a Solutions Platform, Victory Capital offers a wide array of investment products, including actively and passively managed mutual funds, rules-based and active exchange traded funds (“ETFs”), institutional separate accounts, variable insurance products (“VIPs”), alternative investments, private closed end funds, and a 529 Education Savings Plan.
(“Crestview GP”) from KeyCorp in 2013, we have successfully closed seven acquisitions, made and exited two minority investments, and through December 31, 2022, grown our AUM more than 750% from $17.9 billion to $153.0 billion. We understand the need to execute transactions while minimizing disruption to the investment teams and to the client experience.
(“Crestview GP”) from KeyCorp in 2013, we have successfully closed seven acquisitions, made and exited two minority investments, and through December 31, 2023, grown our AUM more than 830% from $17.9 billion to $166.6 billion. We understand the need to execute transactions while minimizing disruption to the investment teams and to the client experience.
For example, U.S. mid cap equities, which accounted for approximately 18% of total AUM as of December 31, 2022, consists of five Franchises, each following a different 12 Table of Contents investment strategy.
For example, U.S. mid cap equities, which accounted for approximately 18% of total AUM as of December 31, 2023, consists of five Franchises, each following a different investment strategy.
We believe the high percentage of employee ownership creates a collective alignment with our success. Additionally, our employees invest in products managed by our Franchises and Solutions Platform, providing direct alignment with the interests of our clients. As of December 31, 2022, 68% of our employees held nearly 20% of the equity in our Company.
We believe the high percentage of employee ownership creates a collective alignment with our success. Additionally, our employees invest in products managed by our Franchises and Solutions Platform, providing direct alignment with the interests of our clients. As of December 31, 2023, 86% of our employees held 15% of the equity in our Company.
We continue to build our platform to address the needs of clients who would like exposure to asset classes that have potential for alpha generation. We find that macro industry trends of asset flows moving from actively managed strategies to passive ones are less pronounced in certain of our asset classes.
We continue to build our platform to address the needs of clients who would like exposure to asset classes that have potential for alpha generation. We find that macro industry trends of asset flows moving from actively managed strategies to passive ones are less pronounced in certain asset classes and seek to concentrate our business development efforts in these areas.
Sycamore conducts fundamental research to find companies with strong high‑quality balance sheets that are undervalued versus comparable high-quality companies. Sycamore is based in Cincinnati, OH, and managed $32.1 billion in AUM as of December 31, 2022. Our Sycamore Investment Franchise has a team of 15 including 11 investment professionals with an average industry experience of approximately 17 years.
Sycamore conducts fundamental research to find companies with strong high‑quality balance sheets that are undervalued versus comparable high-quality companies. Sycamore is based in Cincinnati, OH, and managed $35.2 billion in AUM as of December 31, 2023. Our Sycamore Investment Franchise has a team of 16 including 12 investment professionals with an average industry experience of approximately 17 years.
We recognize and appreciate the importance of creating an environment in which all employees feel valued, included, and empowered to do their best work and as a result our Diversity, Inclusion, Cohesion, and Engagement Committee is charged with integrating a diversity strategy that drives best practices, goals, and objectives.
We recognize and appreciate the importance of creating an environment in which all employees feel valued, included, and empowered to do their best work and as a result our Diversity, Inclusion, Cohesion, and Engagement Committee is charged with driving best practices to promote diversity.
All other trademarks, service marks and trade names appearing in this report are the property of their respective owners. In the early part of the second quarter of 2023, as part of a broader rebranding strategy, the USAA Mutual Funds Trust will be renamed Victory Portfolios III, and the funds in the Trust will be rebranded as Victory Funds.
All other trademarks, service marks and trade names appearing in this report are the property of their respective owners. In April 2023, as part of a broader rebranding strategy, the USAA Mutual Funds Trust was renamed Victory Portfolios III, and the funds in the Trust were rebranded as Victory Funds.
As of December 31, 2022, 44 of our Victory Capital mutual funds and ETFs, with Morningstar overall ratings, earned ratings of four or five stars overall and 62% of our mutual fund and ETF AUM were rated four or five stars overall by Morningstar.
As of December 31, 2023, 42 of our Victory Capital mutual funds and ETFs, with Morningstar overall ratings, earned ratings of four or five stars overall and 70% of our mutual fund and ETF AUM were rated four or five stars overall by Morningstar.
Despite their lower average fee rates, by managing these competitively priced strategies on our integrated platform we can earn higher than our average margins on these products. Because we largely outsource our middle‑ and back‑office functions, as well as technology support, we have relatively minimal capital expenditure requirements.
Despite their lower average fee rates, by managing these competitively priced strategies on our integrated platform we can earn margins in excess of our average consolidated margin on these products. Because we largely outsource our middle‑ and back‑office functions, as well as certain aspects of technology support, we have relatively minimal capital expenditure requirements.
Our employees also held approximately $200 million of their personal assets in our investment products at year-end. We believe that doing our part to maintain the health and welfare of our employees is a critical element for achieving commercial success.
At year-end, our employees also had more than $200 million of their personal assets invested in our investment products at their own discretion. We believe that doing our part to maintain the health and welfare of our employees is a critical element for achieving commercial success.
Sophus is based in Des Moines, IA, with employees in London, Hong Kong, and Singapore, and managed $3.1 billion in AUM as of December 31, 2022. Our Sophus Investments Franchise includes 10 investment professionals with an average industry experience of approximately 19 years. Sycamore Capital – Sycamore Capital applies a quality value‑oriented approach to U.S. mid‑ and small‑ capitalization companies.
Sophus is based in Des Moines, IA, with employees in Europe and Asia, and managed $3.2 billion in AUM as of December 31, 2023. Our Sophus Investments Franchise includes 10 investment professionals with an average industry experience of approximately 22 years. Sycamore Capital – Sycamore Capital applies a quality value‑oriented approach to U.S. mid‑ and small‑ capitalization companies.
Investors will be able to leverage our open architecture brokerage option and establish brokerage accounts to invest in mutual funds and ETFs from our platform along with individual stocks and products managed by third-party providers including cash management capabilities.
Investors can now leverage our open architecture brokerage option and establish brokerage accounts to invest in mutual funds and ETFs from our platform along with individual stocks and products managed by third-party providers.
In recognition of this mission, Victory Capital has established an equity awards program that most employees participate in. As of December 31, 2022, we had 512 employees, with 68% holding ownership interests in our Company that totaled nearly 20% of the equity in our firm.
In recognition of this mission, Victory Capital has established an equity awards program, in which most employees participate. As of December 31, 2023, we had 481 employees, with 86% holding ownership interests in our Company that totaled 15% of the equity in our firm.
As of December 31, 2022, our Franchises and our Solutions Platform collectively managed a diversified set of 128 investment strategies. 3 Table of Contents Our design logos and the marks “Victory Capital,” “Victory Capital Management,” “Victory Funds,” “VictoryShares,” “Victory Capital inVest,” “VictoryConnect,” “CEMP,” “CEMP Volatility Weighted Indexes,” “INCORE Capital Management,” “Integrity,” “Integrity Asset Management,” “inVest,” “Munder,” “Munder Capital Management,” “New Energy Capital,” “THB,” “The Munder Funds,” “The Road to Victory,” “NewBridge,” “NewBridge Asset Management,” “RS Funds,” “RS Investments,” “Sophus Capital,” “Sycamore Capital,” “Trivalent Investments,” “USAA Investments,” “USAA Mutual Funds,” and “WestEnd Advisors,” are pending, owned, or licensed for a period of time by us or one of our subsidiaries.
As of December 31, 2023, our Franchises and our Solutions Platform collectively managed a diversified set of 118 investment strategies. 3 Table of Contents Our design logos and the marks “Victory Capital,” “Victory Capital Management,” “Victory Funds,” “VictoryShares,” “Victory Capital inVest,” “Victory Capital Solutions,” “inVest,” “Integrity,” “Integrity Asset Management,” “inVest,” “Munder,” “Munder Capital Management,” “New Energy Capital,” “THB,” “The Road to Victory,” “RS Investments,” “Sycamore Capital,” “Trivalent Investments,” “Victory Income Investors”, “USAA 529 Education Savings Plan,” and “WestEnd Advisors,” are pending, owned, or licensed for a period of time by us or one of our subsidiaries.
Unlike other models with unified branding, there is no requirement for newly acquired Franchises to adjust their product set due to pre‑existing products on our platform; they are marketed under their own brand as they were previously.
Within our model, each Franchise retains its own brand and logo, which has been built over time. Unlike other models with unified branding, there is no requirement for newly acquired Franchises to adjust their product set due to pre‑existing products on our platform; they are marketed under their own brand as they were previously.
We compete with other potential acquirers of investment management firms primarily on the basis of the following factors: (i) the strength of our distribution relationships; (ii) the value we add through our shared distribution, marketing and operations platforms; (iii) the investment autonomy Franchises retain post acquisition; (iv) the tenure and continuity of our management and investment professionals; and (v) the value that can be delivered to the seller through realization of synergies created by the combination of the businesses. 15 Table of Contents Our ability to continue to compete effectively will also depend upon our ability to retain our current investment professionals and employees and to attract highly qualified new investment professionals and employees.
We compete with other potential acquirers of investment management firms primarily on the basis of the following factors: (i) the strength of our distribution relationships; (ii) the value we add through our shared distribution, marketing and operations platforms as well as our uncapped revenue sharing arrangements; (iii) the investment autonomy Franchises retain post-acquisition; (iv) the tenure and continuity of our management and investment professionals; and (v) the value that can be delivered to the seller through realization of synergies created by the combination of the businesses.
We believe this broad diversification of customers has a stabilizing effect on revenue, as various types of investors have unique demand patterns and respond differently to trends and market cycles. Our Investment Franchises We own 100% of the equity in each of our 12 Investment Franchises.
We believe this broad diversification of customers has a stabilizing effect on revenue, as various types of investors have unique demand patterns and respond differently to trends and market cycles. Our Investment Franchises Our 11 Investment Franchises and Solutions Platform are not separate legal entities.
VCS is registered with the SEC as an introducing broker-dealer and serves as distributor and underwriter for the Victory Funds and USAA Funds and for municipal fund securities issued by the Nevada College Savings Trust Fund under the USAA 529 Education Savings Plan. VCS also serves as placement agent for certain private funds managed by VCM.
Ltd., and RS Investments (UK) Limited, Victory Capital Digital Assets, LLC and NEC Pipeline LLC. VCS is registered with the SEC as an introducing broker-dealer and serves as distributor and underwriter for certain Victory Funds and for municipal fund securities issued by the Nevada College Savings Trust Fund under the USAA 529 Education Savings Plan.
USAA Investments is based in San Antonio, TX, and managed $23.0 billion in AUM as of December 31, 2022. Our USAA Investment Franchise has a team of 34 including 29 investment professionals with an average industry experience of approximately 23 years.
Victory Income Investors is based in San Antonio, TX, and managed $28.0 billion in AUM as of December 31, 2023. Our Victory Income Investors Investment Franchise has a team of 39 including 30 investment professionals with an average industry experience of approximately 22 years. In April of 2023, USAA Investments was renamed “Victory Income Investors”.
Through our unified distribution platform, our Franchises can efficiently sell their products to institutional investors, retirement plans, wealth managers, as well as through retail and retirement intermediaries of all sizes, where it can be challenging for smaller managers to gain access, and directly to investors. 11 Table of Contents Within our model, each Franchise retains its own brand and logo, which has been built over time.
Through our unified distribution platform, our Franchises can efficiently sell their products to institutional investors, retirement plans, wealth managers, directly to individual investors, as well as through retail and retirement intermediaries of all sizes, where it can be challenging for smaller managers to gain access, and directly to investors.
RS Investments – RS Investments is made up of three distinct investment teams: (i) RS Value, (ii) RS Growth and (iii) RS Global. RS Value and RS Growth apply an original and proprietary fundamental approach to investing in value and growth‑oriented U.S. equity strategies. The RS Value and RS Growth teams conduct hundreds of company research meetings each year.
RS Value and RS Growth apply an original and proprietary fundamental approach to investing in value and growth‑oriented U.S. equity strategies. The RS Value and RS Growth teams conduct hundreds of company research meetings each year. RS Global utilizes a highly disciplined quantitative approach to managing core‑oriented global and international equity strategies.
Product Mix – Our investment strategies are offered through actively and passively managed mutual funds, rules-based and active ETFs, institutional separate accounts, VIPs, ESG and impact investment strategies, alternative investments, private closed end funds, and a 529 Education Savings Plan.
These asset classes collectively comprised 88% of our $166.6 billion of total AUM, and 90% of long-term AUM, as of December 31, 2023. Product Mix – Our investment strategies are offered through actively and passively managed mutual funds, rules-based and active ETFs, institutional separate accounts, VIPs, alternative investments, private closed end funds, and a 529 Education Savings Plan.
Our sales teams are staffed with accomplished professionals that are given specific training on how to position each of our strategies. Our distribution teams have historically focused on developing strategic long-term relationships with institutional consultants, institutional asset owners, retail and retirement intermediaries, RIAs, Family Offices, the Direct Channel, and bank trust departments.
Our distribution teams have historically focused on developing strategic long-term relationships with institutional consultants, institutional asset owners, retail and retirement intermediaries, RIAs, Family Offices, the Direct Channel, and bank trust departments. Complementing these relationships, we use data extensively to enhance the effectiveness of our distribution teams.
As illustrated below, as of December 31, 2022, our current business is well diversified from multiple perspectives, including by asset class, by investment vehicle, and by Franchises and our Solutions Platform.
As illustrated below, as of December 31, 2023, our current business is well diversified from multiple perspectives, including by asset class, by investment vehicle, and by Franchises and our Solutions Platform. Asset Class Mix 6 Table of Contents Vehicle Mix *Includes CITs, UCITs, private funds, and non-U.S. domiciled pooled vehicles.
Complementing these relationships, we use data extensively to enhance the effectiveness of our distribution teams. Investments in data packs from intermediaries, artificial intelligence initiatives, and predictive analytics — used to determine specific financial advisors’ propensities to buy or sell products —further enhance efficiencies.
Investments in data packs from intermediaries, artificial intelligence initiatives, and predictive analytics — used to determine specific financial advisors’ propensities to buy or sell products — further enhance efficiencies. These relationships can enhance our platform’s overall reach and allow our Franchises and Solutions Platform to access more clients.
Our Growth Strategy We have a purposeful strategy designed to achieve continued measured profitable growth and success for our clients, our employees, and our shareholders. The growth we pursue is both organic and inorganic.
(“VCTA”), a transfer agent registered with the SEC that acts as transfer agent for the Victory Portfolio III series of mutual funds. Our Growth Strategy We have a purposeful strategy designed to achieve continued profitable growth and success for our clients, our employees, and our shareholders. The growth we pursue is both organic and inorganic.
VCM also provides mutual fund administrative services for the Victory Portfolios, Victory Variable Insurance Funds, and the mutual fund series of the Victory Portfolios II (collectively, the “Victory Funds”), a family of open-end mutual funds; and VictoryShares (the Company’s ETF brand), as well as USAA branded investment products, which includes the USAA Mutual Fund Trust, a family of open-end mutual funds (the “USAA Funds”).
VCM also provides mutual fund administrative services for the Victory Portfolios, Victory Variable Insurance Funds, two mutual fund series named the Victory Portfolios II and Victory Portfolios III (collectively, the “Victory Funds”), that are families of open-end mutual funds; and VictoryShares (the Company’s ETF brand), and the USAA 529 Education Savings Plan.
Integrity is based in Rocky River, OH, and managed $4.7 billion in AUM as of December 31, 2022. Our Integrity Investment Franchise includes 10 investment professionals with an average industry experience of approximately 23 years.
Integrity conducts fundamental stock research to find attractive companies that have compelling discounts to the prevailing market conditions. Integrity is based in Rocky River, OH, and managed $5.4 billion in AUM as of December 31, 2023. Our Integrity Investment Franchise includes 10 investment professionals with an average industry experience of approximately 24 years.
In addition, we believe it provides our Franchises with the benefits of operating at scale, providing them with access to a larger number of clients as well as a more streamlined cost structure.
In addition, we believe it provides our Franchises with the benefits of operating at scale, providing them with access to a larger number of clients as well as a more streamlined cost structure. 13 Table of Contents As of December 31, 2023, we had 481 full-time employees with 160 in investment management, 206 in sales and marketing roles and 115 in management and support functions.
We believe the formula‑based, client‑aligned nature of our revenue sharing reduces complexity and fosters a culture of transparency where Franchises understand how, and on what terms, they are being measured to earn compensation. 13 Table of Contents Integrated Distribution, Marketing and Operations The centralization of our distribution, marketing and operational functions is a key component in our model, allowing our Franchises to focus on their core competencies of security and sector selection, portfolio construction, and client service.
We believe the formula‑based, client‑aligned nature of our revenue sharing reduces complexity and fosters a culture of transparency where Franchises understand how, and on what terms, they are being measured to earn compensation.
In the early part of the second quarter of 2023, USAA Investments will be renamed “Victory Income Investors.” WestEnd Advisors – WestEnd, is a third-party ETF model strategist providing turnkey, core model allocation strategies serving as holistic solutions and complementary sources of alpha.
In September 2023, retained strategies and personnel from INCORE were rebranded under Victory Income Investors brand. WestEnd Advisors – WestEnd, is a third-party ETF model strategist providing turnkey, core model allocation strategies serving as holistic solutions and complementary sources of alpha.
RS Global utilizes a highly disciplined quantitative approach to managing core‑oriented global and international equity strategies. RS Investments is based in San Francisco, CA, and managed $6.5 billion in AUM as of December 31, 2022. Our RS Investments Investment Franchise team total 25 members including 17 investment professionals with an average industry experience of approximately 22 years.
RS Investments is based in San Francisco, CA, and managed $7.4 billion in AUM as of December 31, 2023. Our RS Investments Investment 8 Table of Contents Franchise team total 23 members including 18 investment professionals with an average industry experience of approximately 22 years.
With no Investment Franchise accounting for more than 21% of total AUM, we are well diversified across asset classes and investment approaches. Our Franchises are independent from one another from an investment process perspective, maintain their own separate brands and logos, which have been built over time, and are led by dedicated Chief Investment Officers (“CIOs”).
Our Franchises are independent from one another from an investment process perspective, maintain their own separate brands and logos, which have been built over time, and are led by dedicated Chief Investment Officers (“CIOs”) or a dedicated management team. We customize each Franchise’s integration with our operating platform to optimize their investment processes.
NEC’s investments provide growth capital in all forms across the capital structure from credit to equity, as well as hybrid financing arrangements.
NEC’s investments provide growth capital in all forms across the capital structure from credit to equity, as well as hybrid financing arrangements. Based in Hanover, NH, our NEC Investment Franchise includes six investment professionals with an average industry experience of approximately 15 years.
Most of NewBridge’s team has worked together since 1996 doing fundamental research on high growth companies. NewBridge portfolios usually holds between 25 and 35 securities. NewBridge is based in New York, NY. Our NewBridge Investment Franchise includes four investment professionals with an average industry experience of approximately 25 years.
NewBridge Asset Management – NewBridge Asset Management applies a high conviction growth‑oriented strategy focusing on U.S. large‑capitalization companies experiencing superior long‑term growth rates with strong management teams. Most of NewBridge’s team has worked together since 1996 doing fundamental research on high growth companies. NewBridge portfolios usually holds between 25 and 35 securities. NewBridge is based in New York, NY.
We have demonstrated an ability to incorporate our Franchises onto our flexible infrastructure without significantly increasing incremental fixed costs, which is a key component to the scalability of our business model. This structure enables our Franchises to focus their efforts on the investment process, providing them with a scaled platform to enhance their investment performance and consequently their growth prospects.
Our Franchises retain investment autonomy while benefiting from our centralized operating platform that can be tailored to meet their specific needs. We have demonstrated an ability to incorporate our Franchises onto our flexible infrastructure without significantly increasing incremental fixed costs, which is a key component to the scalability of our business model.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile we collaborate with service providers and other third parties to develop secure transmission capabilities and other measures to protect against cyber-attacks, we cannot ensure that we or any third party has all appropriate controls in place to protect the confidentiality of such information. 41 Table of Contents An externally caused information security incident, such as a cyber attack, virus or worm, or an internally caused issue, such as failure to control access to sensitive systems, could materially interrupt business operations or cause disclosure or modification of sensitive or confidential client or competitive information and could result in material financial loss, loss of competitive position, regulatory actions, breach of clients contracts, reputational harm or legal liability.
Biggest changeAn externally caused information security incident, such as a cyberattack, which could include computer viruses, malware, malicious or destructive code, social engineering, phishing, denial-of-service attacks, ransomware, or identity theft, or an internally caused issue, such as failure to control access to sensitive systems, could materially interrupt business operations or cause disclosure or modification of sensitive or confidential client or competitive information and could result in material financial loss, loss of competitive position, regulatory actions, breach of client contracts, reputational harm or legal liability.
If a significant portion of the investors in such investments decided to withdraw their assets or terminate their investment advisory agreements for any reason, including poor investment performance or adverse market conditions, our revenues from those investments would decline, which would have a material adverse effect on our earnings and financial condition.
If a significant portion of the investors in such investments decided to withdraw their assets or terminate their investment advisory agreements for any reason, including poor investment performance or adverse market conditions, our revenues from those investments would decline, which would have a material adverse effect on our earnings and financial condition.
Factors that could cause the market price of our Common Stock to fluctuate significantly include: • our operating and financial performance and prospects and the performance of other similar companies; • our quarterly or annual earnings or those of other companies in our industry; • conditions that impact demand for our products and services; • the public’s reaction to our press releases, financial guidance and other public announcements, and filings with the SEC; • changes in earnings estimates or recommendations by securities or research analysts who track our Common Stock; 32 Table of Contents • market and industry perception of our level of success in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in government and other regulations; changes in accounting standards, policies, guidance, interpretations or principles; • departure of key personnel; • the number of shares publicly traded; • sales of our Common Stock by us, our investors or members of our management team; and • changes in general market, economic and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, telecommunications failures, cyber‑attacks, civil unrest in various parts of the world, acts of war, terrorist attacks or other catastrophic events.
Factors that could cause the market price of our Common Stock to fluctuate significantly include: • our operating and financial performance and prospects and the performance of other similar companies; • our quarterly or annual earnings or those of other companies in our industry; • conditions that impact demand for our products and services; • the public’s reaction to our press releases, financial guidance and other public announcements, and filings with the SEC; 32 Table of Contents • changes in earnings estimates or recommendations by securities or research analysts who track our Common Stock; • market and industry perception of our level of success in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in government and other regulations; changes in accounting standards, policies, guidance, interpretations or principles; • departure of key personnel; • the number of shares publicly traded; • sales of our Common Stock by us, our investors or members of our management team; and • changes in general market, economic and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, telecommunications failures, cyber‑attacks, civil unrest in various parts of the world, acts of war, terrorist attacks or other catastrophic events.
Business Risks • The COVID-19 and other pandemics have, and will likely continue to have, a negative impact on the global economy and interrupt normal business activity. • The loss of key investment professionals or members of our senior management team could have a material adverse effect on our business. • We derive substantially all of our revenues from contracts and relationships that may be terminated upon short or no notice. • Investors in certain funds that we advise can redeem their assets from those funds at any time without prior notice. • Investment recommendations provided to our direct investor channel may not be suitable or fulfill regulatory requirements; representatives may not disclose or address conflicts of interest, conduct inadequate due diligence, provide inadequate disclosure; transactions may be subject to human error or fraud. • The significant growth we have experienced over the past few years may be difficult to sustain and our growth strategy is dependent in part upon our ability to make and successfully integrate new strategic acquisitions. • Our expenses are subject to fluctuations that could materially impact our results of operations. • A significant proportion of our existing AUM is managed in long‑only investments. • Our efforts to establish and develop new teams and strategies may be unsuccessful and could negatively impact our results of operations and could negatively impact our reputation and culture. 19 Table of Contents • An assignment could result in termination of our investment advisory agreements to manage SEC‑registered funds and could trigger consent requirements in our other investment advisory agreements. • Our failure to comply with investment guidelines set by our clients, including the boards of registered funds, and limitations imposed by applicable law, could result in damage awards against us and a loss of AUM, either of which could adversely affect our results of operations or financial condition. • We provide a broad range of services to the Victory Funds, USAA Funds, VictoryShares and sub‑advised mutual funds which may expose us to liability. • Potential impairment of goodwill and intangible assets could result in not realizing the value of these assets. • If we were deemed an investment company required to register under the the Investment Company Act of 1940 (the “Investment Company Act”), we would become subject to burdensome regulatory requirements and our business activities could be restricted.
Business Risks • Pandemics have, and will likely continue to have, a negative impact on the global economy and interrupt normal business activity. • The loss of key investment professionals or members of our senior management team could have a material adverse effect on our business. • We derive substantially all of our revenues from contracts and relationships that may be terminated upon short or no notice. • Investors in certain funds that we advise can redeem their assets from those funds at any time without prior notice. • Investment recommendations provided to our direct investor channel may not be suitable or fulfill regulatory requirements; representatives may not disclose or address conflicts of interest, conduct inadequate due diligence, provide inadequate disclosure; transactions may be subject to human error or fraud. • The significant growth we have experienced over the past few years may be difficult to sustain and our growth strategy is dependent in part upon our ability to make and successfully integrate new strategic acquisitions. • Our expenses are subject to fluctuations that could materially impact our results of operations. • A significant proportion of our existing AUM is managed in long‑only investments. • Our efforts to establish and develop new teams and strategies may be unsuccessful and could negatively impact our results of operations and could negatively impact our reputation and culture. 19 Table of Contents • An assignment could result in termination of our investment advisory agreements to manage SEC‑registered funds and could trigger consent requirements in our other investment advisory agreements. • Our failure to comply with investment guidelines set by our clients, including the boards of registered funds, and limitations imposed by applicable law, could result in damage awards against us and a loss of AUM, either of which could adversely affect our results of operations or financial condition. • We provide a broad range of services to the Victory Funds, VictoryShares and sub‑advised mutual funds which may expose us to liability. • Potential impairment of goodwill and intangible assets could result in not realizing the value of these assets. • If we were deemed an investment company required to register under the Investment Company Act of 1940 (the “Investment Company Act”), we would become subject to burdensome regulatory requirements and our business activities could be restricted.
As a result, Crestview GP has the ability to elect several members of our board of directors and thereby significantly influence our policies and operations, including the appointment of management, future issuances of our common stock or other securities, the payment of dividends, if any, on our common stock, the incurrence of debt by us, amendments to our amended and restated certificate of incorporation and amended and restated bylaws, and the entering into of extraordinary transactions.
As a result, Crestview GP has the ability to elect members of our board of directors and thereby significantly influence our policies and operations, including the appointment of management, future issuances of our common stock or other securities, the payment of dividends, if any, on our common stock, the incurrence of debt by us, amendments to our amended and restated certificate of incorporation and amended and restated bylaws, and the entering into of extraordinary transactions.
We gain access to investors in the Victory Funds, USAA Funds and VictoryShares primarily through consultants, 401(k) platforms, broker‑dealers, financial advisors and mutual fund platforms through which shares of the funds are sold. We have relationships with certain third‑party intermediaries through which we access clients in multiple distribution channels.
We gain access to investors in the Victory Funds and VictoryShares primarily through consultants, 401(k) platforms, broker‑dealers, financial advisors and mutual fund platforms through which shares of the funds are sold. We have relationships with certain third‑party intermediaries through which we access clients in multiple distribution channels.
In addition, if it were determined that the Victory Funds, USAA Funds or VictoryShares failed to comply with applicable regulatory requirements as a result of action or failure to act by our employees, we could be responsible for losses suffered or penalties imposed.
In addition, if it were determined that the Victory Funds or VictoryShares failed to comply with applicable regulatory requirements as a result of action or failure to act by our employees, we could be responsible for losses suffered or penalties imposed.
We provide a broad range of administrative services to the Victory Funds, the USAA Funds and VictoryShares, including providing personnel to the Victory Funds, the USAA Funds and VictoryShares to serve as directors and officers, the preparation or supervision of the preparation of the Victory Funds’, USAA Funds’ and VictoryShares’ regulatory filings, maintenance of board calendars and preparation or supervision of the preparation of board meeting materials, management of compliance and regulatory matters, provision of shareholder services and communications, accounting services, including the supervision of the activities of the Victory Funds’, USAA Funds’ and VictoryShares’ accounting services provider in the calculation of the funds’ net asset values, supervision of the preparation of the Victory Funds’, USAA Funds’ and VictoryShares’ financial statements and coordination of the audits of those financial statements, tax services, including calculation of dividend and distribution amounts and supervision of tax return preparation, supervision of the 28 Table of Contents work of the USAA Funds’, Victory Funds’ and VictoryShares’ other service providers, VCTA acting as transfer agent to the USAA Funds and VCS acting as a distributor for the Victory Funds and USAA Funds.
We provide a broad range of administrative services to the Victory Funds and VictoryShares, including providing personnel to the Victory Funds and VictoryShares to serve as directors and officers, the preparation or supervision of the preparation of the Victory Funds' and VictoryShares’ regulatory filings, maintenance of board 28 Table of Contents calendars and preparation or supervision of the preparation of board meeting materials, management of compliance and regulatory matters, provision of shareholder services and communications, accounting services, including the supervision of the activities of the Victory Funds’ and VictoryShares’ accounting services provider in the calculation of the funds’ net asset values, supervision of the preparation of the Victory Funds’ and VictoryShares’ financial statements and coordination of the audits of those financial statements, tax services, including calculation of dividend and distribution amounts and supervision of tax return preparation, supervision of the work of the Victory Funds’ and VictoryShares’ other service providers, VCTA acting as transfer agent to the Victory Funds III and VCS acting as a distributor for the Victory Funds.
Third Party Risks • We depend primarily on third parties to market Victory Funds, USAA Funds and VictoryShares. • We rely on third parties to provide products or services for the operation of our business, and a failure or inability by such parties to provide these products or services could materially adversely affect our business.
Third Party Risks • We depend primarily on third parties to market Victory Funds and VictoryShares. • We rely on third parties to provide products or services for the operation of our business, and a failure or inability by such parties to provide these products or services could materially adversely affect our business.
Among other things, these provisions: • permit our board of directors to establish the number of directors and fill any vacancies and newly created directorships; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a shareholder rights plan; 35 Table of Contents • provide that our board of directors is expressly authorized to amend or repeal any provision of our bylaws; • restrict the forum for certain litigation against us to Delaware; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by shareholders at annual shareholder meetings; • establish a classified board of directors with three classes of directors and the removal of directors only for cause; • require that actions to be taken by our shareholders be taken only at an annual or special meeting of our shareholders, and not by written consent; • establish certain limitations on convening special shareholder meetings; and • restrict business combinations with interested shareholders.
Among other things, these provisions: • permit our board of directors to establish the number of directors and fill any vacancies and newly created directorships; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a shareholder rights plan; • provide that our board of directors is expressly authorized to amend or repeal any provision of our bylaws; • restrict the forum for certain litigation against us to Delaware; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by shareholders at annual shareholder meetings; • establish a classified board of directors with three classes of directors and the removal of directors only for cause; • require that actions to be taken by our shareholders be taken only at an annual or special meeting of our shareholders, and not by written consent; • establish certain limitations on convening special shareholder meetings; and • restrict business combinations with interested shareholders.
The allocation of such fees between us and the Victory Funds and VictoryShares is determined by the board of the Victory Funds and VictoryShares and the board of the USAA Funds, based on information and a recommendation from us, with the intent of allocating to us all costs attributable to marketing and distribution of (i) shares of the Victory Funds and USAA Funds not otherwise covered by distribution fees paid pursuant to a distribution and service plan adopted in accordance with Rule 12b‑1 under the 1940 Act and (ii) VictoryShares.
The allocation of such fees between us and the Victory Funds and VictoryShares is determined by the board of the Victory Funds and VictoryShares, based on information and a recommendation from us, with the intent of allocating to us all costs attributable to marketing and distribution of (i) shares of the Victory Funds otherwise covered by distribution fees paid pursuant to a distribution and service plan adopted in accordance with Rule 12b‑1 under the 1940 Act and (ii) VictoryShares.
If we make a mistake in the provision of those services, the Victory Funds, USAA Funds or VictoryShares could incur costs for which we might be liable.
If we make a mistake in the provision of those services, the Victory Funds or VictoryShares could incur costs for which we might be liable.
The 2021 Incremental Term Loans will mature in December 2028 and will bear interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves and subject to a 50 basis point floor) plus a margin of 2.25% or an alternate base rate plus a margin of 1.25%. 2022 LIBOR to Term SOFR Rate Transition On September 23, 2022, the Company entered into the Fourth Amendment (the “Fourth Amendment”) to the 2019 Credit Agreement to change the interest rate on its debt from LIBOR to a rate based on the secured overnight financing rate (“SOFR”) plus a ten-basis point credit spread adjustment.
The 2021 Incremental Term Loans will mature in December 2028 and will bear interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves and subject to a 50 basis point floor) plus a margin of 2.25% or an alternate base rate plus a margin of 1.25%. 2022 LIBOR to Term SOFR Rate Transition On September 23, 2022, the Company entered into the Fourth Amendment (the “Fourth Amendment”) to the 2019 Credit Agreement to change the interest rate on its debt from LIBOR to a rate based on the secured 31 Table of Contents overnight financing rate (“SOFR”) plus a ten-basis point credit spread adjustment.
If our strategies perform poorly for any reason, our earnings could decline because: • our existing clients may redeem their assets from our strategies or terminate their relationships with us; • the Morningstar and Lipper ratings and rankings of mutual funds and ETFs we manage may decline, which may adversely affect the ability of those funds to attract new or retain existing assets; and • third‑party financial intermediaries, advisors or consultants may remove our investment products from recommended lists due to poor performance or for other reasons, which may lead our existing clients to redeem their assets from our strategies or reduce asset inflows from these third parties or their clients.
If our strategies perform poorly for any reason, our earnings could decline because: • our existing clients may redeem their assets from our strategies or terminate their relationships with us; • the Morningstar and Lipper ratings and rankings of mutual funds and ETFs we manage may decline, which may adversely affect the ability of those funds to attract new or retain existing assets; and • third‑party financial intermediaries, advisors or consultants may remove our investment products from recommended lists due to poor performance or for other reasons, which may lead our existing 22 Table of Contents clients to redeem their assets from our strategies or reduce asset inflows from these third parties or their clients.
We provide a broad range of services to the Victory Funds, USAA Funds, VictoryShares and sub‑advised mutual funds which may expose us to liability.
We provide a broad range of services to the Victory Funds, VictoryShares and sub‑advised mutual funds which may expose us to liability.
In addition, we from time to time provide information to the funds for which we act as sub‑adviser (or to a person or entity providing administrative services to such a fund), and to the UCITS, for which we act as investment manager (or to the promotor of the UCITS or a person or entity providing administrative services to such a UCITS), which is used by those funds or UCITS in their efforts to comply with various regulatory requirements.
In addition, we from time to time provide information to the funds for which we act as sub‑adviser (or to a person or entity providing administrative services to such a fund), and to the UCITS, for which we act as investment manager (or to the promoter of the UCITS or a person or entity providing administrative services to such a UCITS), which is used by those funds or UCITS in their efforts to comply with various regulatory requirements.
Our assessment concluded that our internal control over financial reporting was effective as of December 31, 2021; however, there can be no assurance that we will be able to maintain the adequacy of our internal control over financial reporting, as such standards are modified, supplemented or amended from time to time in future periods.
Our assessment concluded that our internal control over financial reporting was effective as of December 31, 2023; however, there can be no assurance that we will be able to maintain the adequacy of our internal control over financial reporting, as such standards are modified, supplemented or amended from time to time in future periods.
These changes place significant additional demands on our finance and accounting staff, which may not have prior public company experience or experience working for a newly public company, and on our financial accounting and information systems, and we may need to, in the future, hire additional accounting and financial staff with appropriate public company reporting experience and technical accounting knowledge.
These changes place significant additional demands on our compliance, finance and accounting staff, which may not have prior public company experience or experience working for a public company, and on our financial accounting and information systems, and we may need to, in the future, hire additional accounting and financial staff with appropriate public company reporting experience and technical accounting knowledge.
We may support our money market funds to maintain their stable net asset values, or other products we manage, which could affect our revenues or operating results. Approximately 2% of our AUM as of December 31, 2022, consisted of assets in money market funds. Money market funds seek to preserve a stable net asset value.
We may support our money market funds to maintain their stable net asset values, or other products we manage, which could affect our revenues or operating results. Approximately 2% of our AUM as of December 31, 2023, consisted of assets in money market funds. Money market funds seek to preserve a stable net asset value.
As of December 31, 2022, our goodwill and intangible assets totaled $2.3 billion. The value of these assets may not be realized for a variety of reasons, including, but not limited to, significant redemptions, loss of clients, damage to brand name and unfavorable economic conditions.
As of December 31, 2023, our goodwill and intangible assets totaled $2.3 billion. The value of these assets may not be realized for a variety of reasons, including, but not limited to, significant redemptions, loss of clients, damage to brand name and unfavorable economic conditions.
We have expanded and intend to continue to expand our distribution efforts into non‑U.S. markets through partnered distribution efforts and product offerings, including Europe, Japan, Singapore, Hong Kong and Australia. For example, we organized and serve as investment manager of Irish‑domiciled UCIT fund.
We have expanded and intend to continue to expand our distribution efforts into non‑U.S. markets through partnered distribution efforts and product offerings, including Europe, Japan, Singapore, and Australia. For example, we organized and serve as investment manager of Irish‑domiciled UCIT fund.
Our strategies can perform poorly for a number of reasons, including: general market conditions; investor sentiment about market and economic conditions; investment styles and philosophies; investment decisions; global events; the performance of the companies in which our strategies invest and the currencies in which those investment are made; the fees we charge; the liquidity of securities or instruments in which our strategies 22 Table of Contents invest; and our inability to identify sufficient appropriate investment opportunities for existing and new client assets on a timely basis.
Our strategies can perform poorly for a number of reasons, including: general market conditions; investor sentiment about market and economic conditions; investment styles and philosophies; investment decisions; global events; the performance of the companies in which our strategies invest and the currencies in which those investment are made; the fees we charge; the liquidity of securities or instruments in which our strategies invest; and our inability to identify sufficient appropriate investment opportunities for existing and new client assets on a timely basis.
Our amended and restated certificate of incorporation provides that none of Crestview GP or Reverence Capital or any of their respective affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate.
Our amended and restated certificate of incorporation provides that none of Crestview GP or any of their respective affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate.
Material risks that may adversely affect our business, financial condition or results of operations include, but are not limited to, the following: Market and Investment Performance Risks • We earn substantially all of our revenues based on AUM, and any reduction in AUM would reduce our revenues and profitability. • The ongoing conflict in Ukraine has, and will likely continue to, negatively impact the global economy. • If our strategies perform poorly, clients could redeem their assets and we could suffer a decline in our AUM, which would reduce our earnings. • The historical returns of our strategies may not be indicative of their future results or of the strategies we may develop in the future. • We may support our money market funds to maintain their stable net asset values, or other products we manage, which could affect our revenues or operating results . • The performance of our strategies or the growth of our AUM may be constrained by unavailability of appropriate investment opportunities.
Material risks that may adversely affect our business, financial condition or results of operations include, but are not limited to, the following: Market and Investment Performance Risks • We earn substantially all of our revenues based on AUM, and any reduction in AUM would reduce our revenues and profitability. • The ongoing conflicts in Ukraine and Israel have, and will likely continue to, negatively impact the global economy. • If our strategies perform poorly, clients could redeem their assets and we could suffer a decline in our AUM, which would reduce our earnings. • The historical returns of our strategies may not be indicative of their future results or of the strategies we may develop in the future. • We may support our money market funds to maintain their stable net asset values, or other products we manage, which could affect our revenues or operating results . • The performance of our strategies or the growth of our AUM may be constrained by unavailability of appropriate investment opportunities.
ERISA and applicable provisions of the Internal Revenue Code impose certain duties on persons who are fiduciaries under ERISA, 36 Table of Contents require the investment adviser to carry bonds insuring against losses caused by fraud or dishonesty, prohibit certain transactions involving ERISA plan clients and impose excise taxes for violations of these prohibitions, and mandate certain required periodic reporting and disclosures.
ERISA and applicable provisions of the Internal Revenue Code impose certain duties on persons who are fiduciaries under ERISA, require the investment adviser to carry bonds insuring against losses caused by fraud or dishonesty, prohibit certain transactions involving ERISA plan clients and impose excise taxes for violations of these prohibitions, and mandate certain required periodic reporting and disclosures.
For that reason, cybersecurity is one of the principal operational risks we face as a provider of financial services and our operations rely on the effectiveness of our information and cyber security policies, procedures and capabilities to provide secure processing, storage and transmission of confidential and other information in our computer systems, software, networks and mobile devices and on the computer systems, software, networks and mobile devices of third parties on which we rely.
For that reason, cybersecurity is one of the principal operational risks we face as a provider of financial 41 Table of Contents services and our operations rely on the effectiveness of our information and cyber security policies, procedures and capabilities to provide secure processing, storage and transmission of confidential and other information in our computer systems, software, networks and mobile devices and on the computer systems, software, networks and mobile devices of third parties on which we rely.
In addition, if we determine that sufficient investment opportunities are not available for a strategy, we may choose to limit the growth of the strategy by limiting the rate at which we accept additional client assets for management under the strategy, closing the strategy to all or substantially all new investors or otherwise taking action to limit 23 Table of Contents the flow of assets into the strategy.
In addition, if we determine that sufficient investment opportunities are not available for a strategy, we may choose to limit the growth of the strategy by limiting the rate at which we accept additional client assets for management under the strategy, closing the strategy to all or substantially all new investors or otherwise taking action to limit the flow of assets into the strategy.
Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds In October 2022, the SEC adopted rules and amendments that will require open-end investment companies to transmit concise and visually engaging annual and semi-annual reports to shareholders that highlight key information that is particularly important for retail investors to assess and monitor their fund investments.
Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds On October 26, 2022, the SEC adopted rules and amendments that will require open-end investment companies to transmit concise and visually engaging annual and semi-annual reports to shareholders that highlight key information that is particularly important for retail investors to assess and monitor their fund investments.
Our substantial indebtedness may make it more difficult for us to withstand or respond to adverse or changing business, regulatory and economic conditions or to take advantage of new business opportunities or make necessary capital expenditures. In addition, the 2019 Credit Agreement contains financial and operating 30 Table of Contents covenants that may limit our ability to conduct our business.
Our substantial indebtedness may make it more difficult for us to withstand or respond to adverse or changing business, regulatory and economic conditions or to take advantage of new business opportunities or make necessary capital expenditures. In addition, the 2019 Credit Agreement contains financial and operating covenants that may limit our ability to conduct our business.
By limiting the growth of strategies, we may be managing the business in a manner that reduces the total amount of our AUM and our investment management fees over the short term. Business Risks The COVID-19 and other pandemics have, and will likely continue to have, a negative impact on the global economy and interrupt normal business activity.
By limiting the growth of strategies, we may be managing the business in a manner that reduces the total amount of our AUM and our investment management fees over the short term. Business Risks Pandemics have, and will likely continue to have, a negative impact on the global economy and interrupt normal business activity.
We also believe our primary source of income is properly characterized as income earned in exchange for the provision of services. We believe less than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis comprise assets that could be considered investment securities.
We also believe our primary source of income is properly characterized as income earned in exchange for the provision of services. We believe less than 40% of our total assets (exclusive of U.S. 29 Table of Contents government securities and cash items) on an unconsolidated basis comprise assets that could be considered investment securities.
As of December 31, 2022, we had approximately $1,002 million of outstanding debt that consisted of (i) an existing term loan balance of $631 million and (ii) incremental term loans in an aggregate principal amount of $371 million. In addition, we maintain a $100.0 million revolving credit facility, though no amounts were outstanding as of December 31, 2022.
As of December 31, 2023, we had approximately $1,002 million of outstanding debt that consisted of (i) an existing term loan balance of $631 million and (ii) incremental term loans in an aggregate principal amount of $371 million. In addition, we maintain a $100 million revolving credit facility, though no amounts were outstanding as of December 31, 2023.
We may be subject to claims of unsuitable investments. If individual investors suffer losses on their investment they may seek compensation from us on the basis of allegations that their investments were not suitable or that 25 Table of Contents the fund prospectuses or other marketing materials contained material errors or were misleading.
We may be subject to claims of unsuitable investments. If individual investors suffer losses on their investment they may seek compensation from us on the basis of allegations that their investments were not suitable or that the fund prospectuses or other marketing materials contained material errors or were misleading.
Similar laws in non‑U.S. jurisdictions may also impose stricter or more onerous requirements and implementing them may disrupt our business or cause us to incur significantly more costs to comply with those laws. Different laws may also contain conflicting provisions, making compliance with all laws more difficult.
Department of State. Similar laws in non‑U.S. jurisdictions may also impose stricter or more onerous requirements and implementing them may disrupt our business or cause us to incur significantly more costs to comply with those laws. Different laws may also contain conflicting provisions, making compliance with all laws more difficult.
Although less extensive than the range of services we provide to the Victory Funds, USAA Funds’ and VictoryShares, we also provide a limited range of services, in addition to investment management services, to sub‑advised mutual funds.
Although less extensive than the range of services we provide to the Victory Funds and VictoryShares, we also provide a limited range of services, in addition to investment management services, to sub‑advised mutual funds.
The investment management industry is intensely competitive. 39 Table of Contents The investment management industry is intensely competitive, with competition based on a variety of factors, including investment performance, fees, continuity of investment professionals and client relationships, the quality of services provided to clients, corporate positioning and business reputation, continuity of selling arrangements with intermediaries and differentiated products.
The investment management industry is intensely competitive, with competition based on a variety of factors, including investment performance, fees, continuity of investment professionals and client relationships, the quality of services provided to clients, corporate positioning and business reputation, continuity of selling arrangements with intermediaries and differentiated products.
However, if we were to be deemed an investment company required to register under the 1940 Act, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to 29 Table of Contents transact with our affiliates, could make it impractical for us to continue our business as currently conducted and could have a material adverse effect on our financial performance and operations.
However, if we were to be deemed an investment company required to register under the 1940 Act, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with our affiliates, could make it impractical for us to continue our business as currently conducted and could have a material adverse effect on our financial performance and operations.
The absence of such access could have a material adverse effect on our results of operations. We access institutional clients primarily through consultants. Our institutional business is dependent upon referrals from consultants. Many of these consultants review and evaluate our products and our firm from time to time.
The absence of such access could have a material adverse effect on our results of operations. 40 Table of Contents We access institutional clients primarily through consultants. Our institutional business is dependent upon referrals from consultants. Many of these consultants review and evaluate our products and our firm from time to time.
In those instances, we may choose to limit access to those strategies to new or existing investors, such as we have done for two mutual funds managed by the Sycamore Capital Franchise which had an aggregate of $23.1 billion in AUM as of December 31, 2022. • General domestic and global economic and political conditions can influence AUM.
In those instances, we may choose to limit access to those strategies to new or existing investors, such as we have done for two mutual funds managed by the Sycamore Capital Franchise which had an aggregate of $25.1 billion in AUM as of December 31, 2023. • General domestic and global economic and political conditions can influence AUM.
As of December 31, 2022, approximately 19% of our total AUM was invested in U.S. taxable and tax-exempt fixed-income and money market securities. While fixed-income is typically considered less volatile than the equity markets, it does exhibit different types of risks such as interest rate risk, credit risk, and over-the-counter liquidity risk.
As of December 31, 2023, approximately 17% of our total AUM was invested in U.S. taxable and tax-exempt fixed-income and money market securities. While fixed-income is typically considered less volatile than the equity markets, it does exhibit different types of risks such as interest rate risk, credit risk, and over-the-counter liquidity risk.
We have also expanded our distribution effort into non‑U.S. markets through partnered distribution efforts and product offerings, including Australia, Europe, Japan, Singapore and Hong Kong.
We have also expanded our distribution effort into non‑U.S. markets through partnered distribution efforts and product offerings, including Australia, Europe, Japan, and Singapore.
The stock market in general has been highly volatile. As a result, the market price and trading volume for our Common Stock may also be highly volatile, and investors our Common Stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects.
As a result, the market price and trading volume for our Common Stock may also be highly volatile, and investors our Common Stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects.
Thus, holders of our Common Stock will bear the risk of our future offerings reducing the market price of our Common Stock and diluting the value of their shareholdings in us. Provisions in our charter documents could discourage a takeover that shareholders may consider favorable.
Thus, holders of our Common Stock will bear the risk of our 35 Table of Contents future offerings reducing the market price of our Common Stock and diluting the value of their shareholdings in us. Provisions in our charter documents could discourage a takeover that shareholders may consider favorable.
The negative publicity associated with any of these factors could harm our reputation and adversely impact relationships with existing and potential clients, third‑party distributors, consultants and other business partners 42 Table of Contents and subject us to regulatory sanctions or litigation.
The negative publicity associated with any of these factors could harm our reputation and adversely impact relationships with existing and potential clients, third‑party distributors, consultants and other business partners and subject us to regulatory sanctions or litigation.
We are also subject to a number of laws and regulations governing payments and contributions to political persons or other third parties, including restrictions imposed by the Foreign Corrupt Practices Act (the “FCPA”), as well as trade sanctions administered by the Office of Foreign Assets Control, or OFAC, the U.S. Department of Commerce and the U.S. Department of State.
We are also subject to a number of laws and regulations governing payments and contributions to political persons or other third parties, including restrictions imposed by the Foreign Corrupt Practices Act (the “FCPA”), as well as trade sanctions administered by the Office of Foreign Assets Control, or OFAC, the U.S. Department 44 Table of Contents of Commerce and the U.S.
We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or non‑U.S. governmental regulatory authorities or self‑regulatory organizations that supervise the financial markets.
We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or non‑U.S. governmental regulatory authorities or self‑regulatory organizations that supervise the financial markets or the investment products that we offer.
Increasing government and regulatory scrutiny of the measures taken by companies to protect against cyber-attacks and data privacy breaches, and have resulted in heightened security requirements, including additional regulatory expectations for oversight of vendors and service providers.
Increasing government and regulatory scrutiny of the measures taken by companies to protect against cyberattacks and data privacy breaches, and have resulted in heightened security requirements, including additional regulatory expectations for oversight of vendors and service providers.
There was no change to the applicable margin on the referenced rate as a result of the Fourth Amendment. 31 Table of Contents The LIBOR rate loans outstanding as of the Fourth Amendment’s effective date continued as LIBOR rate loans until the end of their current interest periods.
There was no change to the applicable margin on the referenced rate as a result of the Fourth Amendment. The LIBOR rate loans outstanding as of the Fourth Amendment’s effective date continued as LIBOR rate loans until the end of their current interest periods.
Our sales team’s recommendations may not fulfill regulatory requirements as a result of their failing to collect sufficient information about an investor or failing to understand the investor’s needs or risk tolerances.
Our sales team’s recommendations may not fulfill regulatory requirements as a result of their failing to collect sufficient information about an investor or failing to understand the investor’s 25 Table of Contents needs or risk tolerances.
Our investment strategies are rated, ranked, recommended or assessed by independent third parties, distribution partners, and industry periodicals and services. These assessments may influence the investment decisions of our clients.
Our investment strategies are rated, ranked, recommended or assessed by independent third parties, distribution partners, and industry 21 Table of Contents periodicals and services. These assessments may influence the investment decisions of our clients.
The changes would mandate certain client reporting and event driven disclosure, enact audit requirements, and prohibit certain activities that the SEC deems contrary to the public interest or has a material 37 Table of Contents negative effect on other investors. The amendments also would require all advisors to document their annual compliance review in writing.
The changes mandate certain client reporting and event driven disclosure, enact audit requirements, and prohibit certain activities that the SEC deems contrary to the public interest or has a material negative effect on other investors. The amendments also require all advisors to document their annual compliance review in writing.
In addition, certain of our strategies have or may have capacity constraints, as there is a limit to the number of securities available for the strategy 21 Table of Contents to operate effectively.
In addition, certain of our strategies have or may have capacity constraints, as there is a limit to the number of securities available for the strategy to operate effectively.
The 1940 Act imposes similar obligations, as well as additional detailed operational requirements, on registered funds, which must be adhered to by their investment advisers. Investment advisers also are subject to certain state securities laws and regulations.
The 1940 Act imposes similar obligations, as well as additional detailed operational requirements, on registered funds, which must be adhered to by their investment 36 Table of Contents advisers. Investment advisers also are subject to certain state securities laws and regulations.
We derive substantially all of our revenues from investment advisory and sub‑advisory agreements as well as fund administration and accounting, agreements with the Victory Funds, USAA Funds and VictoryShares and transfer agency agreements with the USAA Funds, all of which are terminable by clients or our funds’ boards upon short notice or no notice.
We derive substantially all of our revenues from investment advisory and sub‑advisory agreements as well as fund administration and accounting, agreements with the Victory Funds and VictoryShares and transfer agency agreements with the Victory Portfolios III (the “Victory Funds III”), all of which are terminable by clients or our funds’ boards upon short notice or no notice.
The fair value of these liabilities is assessed on a quarterly basis and changes in assumptions used to determine the amount of the liability could lead to an adjustment that may have a material impact, favorable or unfavorable, on our results of operations. Indebtedness Risks Our substantial indebtedness may expose us to material risks.
The fair value of these liabilities is assessed on a quarterly basis and changes in assumptions used to determine the amount of the liability could lead to an adjustment that may have a material impact, favorable or unfavorable, on our results of operations.
For the year ended December 31, 2022, we generated approximately 85% of our total revenues from mutual funds and other pooled investment vehicles that we advise (including our proprietary mutual funds, or the Victory Funds, USAA Funds, VictoryShares, and other entities for which we are adviser or sub‑adviser).
For the year ended December 31, 2023, we generated approximately 84% of our total revenues from mutual funds and other pooled investment vehicles that we advise (including our proprietary mutual funds, or the Victory Funds, VictoryShares, and other entities for which we are adviser or sub‑adviser).
Our AUM has increased from $17.9 billion following our 2013 management‑led buyout with Crestview GP from KeyCorp to $153.0 billion as of December 31, 2022, primarily as a result of acquisitions. The absolute measure of our AUM represents a significant rate of growth that may be difficult to sustain.
Our AUM has increased from $17.9 billion following our 2013 management‑led buyout with Crestview GP from KeyCorp to $166.6 billion as of December 31, 2023, primarily as a result of acquisitions. The absolute measure of our AUM represents a significant rate of growth that may be difficult to sustain.
Other expenses associated with being a public company include increases in auditing, accounting and legal fees and expenses, investor relations expenses, increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses.
Other expenses 33 Table of Contents associated with being a public company include increases in auditing, accounting, compliance and legal fees and expenses, investor relations expenses, increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses.
Changes in interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws, trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars (such as the military conflict between Russia and Ukraine), pandemics (such as COVID-19), terrorist acts and security operations) and other conditions may impact the equity and credit markets, which may influence our AUM.
Changes in interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws, trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances such as the increased tension between the U.S. and China (including wars (such as the military conflict between Russia and Ukraine and the conflict in Israel), pandemics, terrorist acts and security operations) and other conditions may impact the equity and credit markets, which may influence our AUM.
General Risks • Reputational harm could result in a loss of AUM and revenues. • If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses. • Certain of our strategies invest principally in the securities of non‑U.S. companies, which involve foreign currency exchange, tax, political, social and economic uncertainties and risks. • The expansion of our business outside of the United States raises tax and regulatory risks, may adversely affect our profit margins and places additional demands on our resources and employees. • Failure to properly address conflicts of interest could harm our reputation, business and results of operations. • Insurance may not be available on a cost-effective basis to protect us from liability.
General Risks • Reputational harm could result in a loss of AUM and revenues. • If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses. • Certain of our strategies invest principally in the securities of non‑U.S. companies, which involve foreign currency exchange, tax, political, social and economic uncertainties and risks. • The expansion of our business outside of the United States raises tax and regulatory risks, may adversely affect our profit margins and places additional demands on our resources and employees. • Failure to properly address conflicts of interest could harm our reputation, business and results of operations. • Our contractual obligations may subject us to indemnification obligations to third parties. • Insurance may not be available on a cost-effective basis to protect us from liability. • Failure to protect our intellectual property may negatively impact our business. • Climate change may adversely affect our office locations.
The third parties with which we do business may also be sources of 40 Table of Contents cybersecurity or other technological risks.
The third parties with which we do business may also be sources of cybersecurity or other technological risks.
The direct channel serves existing or potential individual investors who invest in our proprietary Mutual Funds, ETFs and the USAA 529 Education Savings Plan. As of April 24, 2023, Investors will have the ability to invest in third party mutual funds, third party ETFs and individual equity securities listed on major U.S. exchanges on a self-directed basis.
The direct channel serves existing or potential individual investors who invest in our proprietary mutual funds, ETFs and the USAA 529 Education Savings Plan. Investors also have the ability to invest in third party mutual funds, third party ETFs and individual equity securities listed on major U.S. exchanges on a self-directed basis.
While it has not had a material adverse effect on our business, operations and financial results, the extent to which the conflict impacts our business, operations and financial results going forward will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the conflict; governmental and business actions that have been and continue to be taken in response to the conflict, the impact of the conflict on economic activity and any retaliatory actions taken by Russia.
While it has not had a material adverse effect on our business, operations and financial results, the extent to which the geopolitical uncertainty and conflicts impact our business, operations and financial results going forward will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the uncertainty and conflicts; governmental and business actions that have been and continue to be taken in response, and the impact on economic activity.
Capital Structure and Public Company Risks • A relatively large percentage of our common stock is concentrated with a small number of shareholders, which could increase the volatility in our stock trading and affect our share price . • The market price of our common stock is likely to be volatile and could decline. • Future sales of shares by shareholders could cause our stock price to decline. • If securities or industry analysts publish misleading or unfavorable research about our business, our stock price and trading volume could decline. • We are an “emerging growth company,” and any decision on our part to comply with certain reduced disclosure requirements applicable to emerging growth companies could make our Common Stock less attractive to investors. • The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company.” • Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, operating results and stock price • Our ability to pay regular dividends is subject to our Board’s discretion and Delaware law. • Future offerings of debt or equity securities may rank senior to our common stock. • Provisions in our charter documents could discourage a takeover that shareholders may consider favorable. • Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Capital Structure and Public Company Risks • If a relatively large percentage of our common stock is concentrated with a small number of shareholders, it could increase the volatility in our stock trading and affect our share price . • The market price of our common stock is likely to be volatile and could decline. • Future sales of shares by shareholders could cause our stock price to decline. • If securities or industry analysts publish misleading or unfavorable research about our business, our stock price and trading volume could decline. • The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business. • Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, operating results and stock price. • Our ability to pay regular dividends is subject to our Board’s discretion and Delaware law. • Future offerings of debt or equity securities may rank senior to our common stock. • Provisions in our charter documents could discourage a takeover that shareholders may consider favorable. • Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Consequently, either event could have either a temporary or permanent negative impact on our results of operations. A significant proportion of our existing AUM is managed in long‑only investments. As of December 31, 2022, approximately 78% of our AUM was invested in U.S. and international equity.
Consequently, either event could have either a temporary or permanent negative impact on our results of operations. 26 Table of Contents A significant proportion of our existing AUM is managed in long‑only investments. As of December 31, 2023, approximately 81% of our AUM was invested in U.S. and international equity.
In addition, the prices of equity securities may fluctuate more widely than the prices of other types of securities, making the level of our AUM and related revenues more volatile. 26 Table of Contents As of December 31, 2022, of the 78% of our AUM invested in U.S. and international equity approximately 28% of the AUM was concentrated in small‑ and mid‑cap equities.
In addition, the prices of equity securities may fluctuate more widely than the prices of other types of securities, making the level of our AUM and related revenues more volatile. As of December 31, 2023, of the 81% of our AUM invested in U.S. and international equity approximately 28% of the AUM was concentrated in U.S. small‑ and mid‑cap equities.
Crestview GP or Reverence Capital also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us, which could have an adverse effect on our growth prospects. The market price of our Common Stock is likely to be volatile and could decline.
Crestview GP may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us, which could have an adverse effect on our growth prospects. The market price of our Common Stock is likely to be volatile and could decline. The stock market in general has been highly volatile.
We may decline to manage assets from potential clients who demand lower fees even though such assets would increase our revenue and AUM in the short term.
We may decline to manage assets from potential clients who demand lower fees even though such assets would increase our revenue and AUM in the short term. The investment management industry is intensely competitive.
With the expansion of the Direct Investor Business to include brokerage capabilities through our broker-dealer entity VCS.Investors will be able to leverage our open architecture brokerage option and establish brokerage accounts to invest in mutual funds and ETFs from our platform along with individual stocks and products managed by third-party providers including cash management capabilities, these brokerage activities are likely to result in increased focus from FINRA as we will have to comply with extensive regulations imposed by FINRA.
Investors will be able to leverage our open architecture brokerage option and establish brokerage accounts to invest in mutual funds and ETFs from our platform along with individual stocks and products managed by third-party providers including cash management capabilities, these brokerage activities are likely to result in increased focus from FINRA as we will have to comply with extensive regulations imposed by FINRA.
Capital Structure and Public Company Risks A relatively large percentage of our Common Stock is concentrated with a small number of shareholders, which could increase the volatility in our stock trading and affect our share price. A large percentage of our common stock is held by a limited number of shareholders.
Capital Structure and Public Company Risks If a relatively large percentage of our Common Stock was concentrated with a small number of shareholders, it could increase the volatility in our stock trading and affect our share price.
While COVID-19 did not have a material adverse effect on our business, operations and financial results as of December 31, 2022, the extent to which the pandemic and other pandemics impact our business, operations and financial results will depend on numerous factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; and the effect on our ability to sell and provide our services.
The extent to which pandemics impact our business, operations and financial results will depend on numerous factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; and the effect on our ability to sell and provide our services.
We may support the development of new strategies by making one or more seed investments using capital that would otherwise be available for our general corporate purposes and acquisitions.
We may support the development of new strategies by making one or more seed investments using capital that would otherwise be available for our general corporate purposes and acquisitions. Making such a seed investment could expose us to potential capital losses.
A reduction in the fees charged by us could reduce our revenues and net income. Our fees vary by asset class and produce different revenues per dollar of AUM based on factors such as the type of assets being managed, the applicable strategy, the type of client and the client fee schedule.
Our fees vary by asset class and produce different revenues per dollar of AUM based on factors such as the type of assets being managed, the applicable strategy, the type of client and the client fee schedule.
Any such alternatives may not be available to us on satisfactory terms or at all. 2020 Debt Refinancing On January 17, 2020, we entered into the First Amendment (the “First Amendment”) to the 2019 Credit Agreement with the other loan parties thereto, Barclays Bank PLC, as administrative agent, and the Royal Bank of Canada as fronting bank.
Any such alternatives may not be available to us on satisfactory terms or at all. 2021 Debt Refinancing On February 18, 2021, we entered into the Second Amendment (the “Second Amendment”) to the 2019 Credit Agreement (as amended by the First Amendment to the Credit Agreement dated as of January 17, 2020, the “2020 Term Loans”) with the other loan parties thereto, Barclays Bank PLC, as administrative agent and collateral agent, the Royal Bank of Canada as fronting bank, and the lenders party thereto from time to time.
Sales of substantial amounts of our Common Stock in the public market, or the perception that these sales could occur, could cause the market price of our Common Stock to decline. As of February 28, 2023, 67,578,282 shares of our Common Stock are outstanding.
Sales of substantial amounts of our Common Stock in the public market, or the perception that these sales could occur, could cause the market price of our Common Stock to decline. As of February 20, 2024, 64,316,865 shares of our Common Stock are outstanding.
The performance of our strategies or the growth of our AUM may be constrained by unavailability of appropriate investment opportunities. The ability of our investment teams to deliver strong investment performance depends in large part on their ability to identify appropriate investment opportunities in which to invest client assets.
The ability of our investment teams to deliver strong investment performance depends in large part on their ability to identify appropriate investment opportunities in which to invest client assets.
The competitive nature of the investment management industry has led to a trend toward lower fees in certain segments of the investment management market. Our ability to sustain fee levels depends on future growth in specific asset classes and distribution channels. These factors, as well as regulatory changes, could further inhibit our ability to sustain fees for certain products.
The competitive nature of the investment management industry has led to a trend toward 39 Table of Contents lower fees in certain segments of the investment management market. Our ability to sustain fee levels depends on future growth in specific asset classes and distribution channels.
Outsourcing by Investment Advisers In October 2022, the SEC proposed a new rule under the Investment Advisers Act of 1940 designed to prohibit registered investment advisers from outsourcing certain services or functions without first meeting minimum requirements. The proposed rule would require advisers to conduct due diligence prior to engaging a service provider to perform certain services or functions.
Outsourcing by Investment Advisers On October 26, 2022, the SEC proposed a new rule under the Investment Advisers Act of 1940 designed to prohibit registered investment advisers from outsourcing certain services or functions without first meeting minimum requirements.
If we elect to provide support, we could incur losses from the support we provide and incur additional costs, including financing costs, in connection with the support. These losses and additional costs could be material and could adversely affect our earnings. In addition, certain proposed regulatory reforms could adversely impact the operating results of our money market funds.
If we elect to provide support, we could incur losses from the support we provide and incur additional costs, including financing costs, in connection with the support. These losses and additional costs could be material and could adversely affect our earnings.
In addition, we may agree to waive non‑competition provisions or other restrictive covenants applicable to former investment or management professionals in light of the circumstances surrounding their relationship with us.
In addition, we may agree to waive non‑competition provisions or other restrictive covenants applicable to former investment or management professionals in light of the circumstances surrounding their relationship with us. Although we may pursue legal actions for alleged breaches of non-compete or other restrictive covenants, such legal actions may not be effective in preventing such breaches.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company is not currently a party to any material legal proceedings. Item 4. Mine Saf ety Disclosures. Not applicable 45 Table of Contents PART II
Biggest changeThe Company is not currently a party to any material legal proceedings. Item 4. Mine Saf ety Disclosures. Not applicable 47 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 45 PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 48 Item 7A. Qualitative and Quantitative Disclosures Regarding Market Risk 69 Item 8. Financial Statements and Supplementary Data 71
Biggest changeItem 4. Mine Safety Disclosures 47 PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 48 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 51 Item 7A. Qualitative and Quantitative Disclosures Regarding Market Risk 70 Item 8. Financial Statements and Supplementary Data 72

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(2) Six share repurchase programs were authorized from 2018 to 2021, each for $15.0 million of the Company’s Common Stock, that were completed in September 2019, June 2020, October 2020, May 2021, January 2022 and May 2022.
Biggest changeTotal Number of Shares of Common Stock Average Price Paid Per Share of Common Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans Approximate Dollar Value That May Yet Be Purchased Under Outstanding Plans or Programs Period Purchased Stock or Programs (in millions) (1) October 1-31, 2023 — $ — — $ 51.9 November 1-30, 2023 1,178,191 32.26 1,178,191 13.9 December 1-31, 2023 570,915 33.63 570,915 95.2 Total 1,749,106 $ 32.71 1,749,106 (1) Six share repurchase programs were authorized from 2018 to 2021, each for $15.0 million of the Company’s Common Stock, that were completed in September 2019, June 2020, October 2020, May 2021, January 2022 and May 2022.
Under the 2022 Share Repurchase Program, which took effect in May 2022, the Company may purchase its shares from time to time until December 31, 2023 in privately negotiated transactions, through block trades, pursuant to open market purchases, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the SEC.
Under the 2024 Share Repurchase Program, which took effect in December 2023, the Company may purchase its shares from time to time in privately negotiated transactions, through block trades, pursuant to open market purchases, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the SEC.
Eaton Vance Corp. was acquired and ceased to publicly trade on March 1, 2021. The graph assumes that $100 was invested at the market close on February 8, 2018 in our common stock, the S&P 500 Index and the peer group and assumes reinvestment of any dividends.
Eaton Vance Corp. was acquired and ceased to publicly trade on March 1, 2021. The graph assumes that $100 was invested at the market close on December 31, 2018 in our common stock, the S&P 500 Index and the peer group and assumes reinvestment of any dividends.
Item 5. Market for Registrant’s Common Equity, Related Shar eholder Matters and Issuer Purchases of Equity Securities. Shares of the Company’s Common Stock are listed and trade on NASDAQ under the symbol “VCTR”. As of December 31, 2022, there were approximately 3,000 beneficial shareholders of the Company’s Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Shar eholder Matters and Issuer Purchases of Equity Securities. Shares of the Company’s Common Stock are listed and trade on NASDAQ under the symbol “VCTR”. As of December 31, 2023, there were approximately 22,000 beneficial shareholders of the Company’s Common Stock.
The stock price performance of the following graph is not necessarily indicative of future stock price performance. 46 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers. The following table sets out information regarding purchases of equity securities by the Company for the three months ended December 31, 2022.
The stock price performance of the following graph is not necessarily indicative of future stock price performance. 48 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers. The following table sets out information regarding purchases of equity securities by the Company for the three months ended December 31, 2023.
Potential increases to the Company’s cash dividend rate will be assessed annually. 47 Table of Contents
Potential increases to the Company’s cash dividend rate will be assessed annually. 50 Table of Contents
Performance Graph The following graph shows a comparison from February 8, 2018 (the date our Common Stock commenced trading on NASDAQ) through December 31, 2022 of the cumulative total return of our Common Stock, the Standard & Poor’s 500 Stock Index (S&P 500 Index) and a peer group comprised of Affiliated Managers Group, Inc., Artisan Partners Asset Management Inc., BrightSphere Investment Group plc, Eaton Vance Corp., and Virtus Investment Partners, Inc.
Performance Graph The following graph shows a comparison from December 31, 2018 through December 31, 2023 of the cumulative total return of our Common Stock, the Standard & Poor’s 500 Stock Index (S&P 500 Index) and a peer group comprised of Affiliated Managers Group, Inc., Artisan Partners Asset Management Inc., BrightSphere Investment Group plc, Eaton Vance Corp., and Virtus Investment Partners, Inc.
The amount and timing of purchases under the 2022 Share Repurchase Program will depend on a number of factors including the price and availability of the Company’s shares, trading volume, capital availability, Company performance and general economic and market conditions. The 2022 Share Repurchase Program can be suspended or discontinued at any time.
The amount and timing of purchases under the 2024 Share Repurchase Program will depend on a number of factors including the price and availability of the Company’s shares, trading volume, capital availability, Company performance and general economic and market conditions.
On May 5, 2022, the Company’s Board of Directors approved a new share repurchase program (the “2022 Share Repurchase Program”) authorizing the repurchase of up to $100.0 million of the Company’s Common Stock.
In May 2022, the Company’s’ Board of Directors approved a new share repurchase program (the “2022 Share Repurchase Program”) authorizing the repurchase of up to $100.0 million of the Company’s Common Stock. The 2022 Share Repurchase Program was completed in March 2023.
As of December 31, 2022, a total of $28.8 million was available for future repurchases under the 2022 Share Repurchase Program, and a cumulative total of 7.1 million shares of Common Stock had been repurchased under programs authorized by the Company’s Board of Directors at a total cost of $161.3 million for an average price of $22.70 per share.
As of December 31, 2023, $95.2 million was available for future repurchases under the 2024 Share Repurchase Program, and a cumulative total of 11.3 million shares of Common Stock had been repurchased under programs authorized by the Company’s Board of Directors at a total cost of $295.8 million for an average price of $26.26 per share.
In 2021, 0.9 million shares of Common Stock were repurchased under programs authorized by the Company’s Board of Directors at a total cost of $26.2 million for an average price of $29.53 per share, and in 2020, the Company repurchased 1.5 million shares of Common Stock at a total cost of $26.3 million for an average price of $17.57 per share.
The 2024 Share Repurchase Program can be suspended or discontinued at any time. • In 2023, the Company repurchased 4.2 million shares of Common Stock at a total cost of $134.5 million, which included $1.0 million in excise taxes payable on share repurchases, for an average price of $32.33 per share. • In 2022, the Company repurchased 3.0 million shares of Common Stock at a total cost of $87.3 million for an average price of $28.76 per share. • In 2021, 0.9 million shares of Common Stock were repurchased under programs authorized by the Company’s Board of Directors at a total cost of $26.2 million for an average price of $29.53 per share.
During 2022, the Board authorized a $0.25 per share quarterly cash dividend, an increase of $0.08, or 47%, from the $0.17 per share in the fourth quarter of 2021.
During 2022, the Company’s Board declared $1.00 of cash dividends per share, an increase of $0.47, or 89%, from the $0.53 per share of cash dividends declared in 2021. During 2023 the Company’s Board declared $1.28 of cash dividends per share, an increase of $0.28, or 28%, from the $1.00 per share of cash dividends declared in 2022.
Dividend Policy In 2019, the Company announced the initiation of quarterly cash dividends and paid its first quarterly dividend in September of that year. During 2020, the Board authorized two increases in the quarterly cash dividend. In August 2020, the dividend was increased by 20%; and, in November, the dividend was increased by 17%.
Dividend Policy In 2019, the Company announced the initiation of cash dividends and paid its first quarterly dividend to shareholders in September of that year. Each year, since the commencement of cash dividends in 2019, the 49 Table of Contents Company has increased the per-share amount of the quarterly cash dividends distributed to shareholders.
Removed
Total Number of Shares of Common Stock Average Price Paid Per Share of Common Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans Approximate Dollar Value That May Yet Be Purchased Under Outstanding Plans or Programs Period Purchased (1) Stock or Programs (in millions) (2) October 1-31, 2022 — $ — — $ 66.8 November 1-30, 2022 784,615 30.52 784,615 42.9 December 1-31, 2022 557,392 28.27 497,392 28.8 Total 1,342,007 $ 29.58 1,282,007 (1) Common Stock purchased in December 2022 includes 40,000 and 20,000 shares purchased on December 15, 2022 and December 16, 2022 in the open market by David Brown in multiple transactions at a weighted average cost per share of $27.01 and $26.90, respectively.
Added
In March 2023, the Company’s Board of Directors approved a new share repurchase program (the “2023 Share Repurchase Program”) authorizing the repurchase of up to $100.0 million of the Company’s Common Stock through December 31, 2025. The 2023 Share Repurchase Program was completed in December 2023.
Removed
In 2022, the Company repurchased 3.0 million shares of Common Stock at a total cost of $87.3 million for an average price of $28.76 per share.
Added
In December 2023, the Company’s Board of Directors approved a new share repurchase program (the “2024 Share Repurchase Program”) authorizing the repurchase of up to $100.0 million of the Company’s Common Stock through December 31, 2025.
Removed
Combined, the two increases resulted in the quarterly cash dividend growing by 40%, from $0.05 per share in the first quarter of 2020, to $0.07 per share in the fourth quarter of 2020. During 2021, the Board authorized four increases in the quarterly cash dividend.
Removed
Combined, the four increases resulted in the quarterly cash dividend growing by approximately 143%, from $0.07 per share in the fourth quarter of 2020, to $0.17 per share in the fourth quarter of 2021.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAlternative Total Market / (in millions) Equity Equity Income Equity Equity Solutions Investments Long-term Short-term Total Year Ended December 31, 2022 Beginning AUM $ 30,578 $ 20,094 $ 35,154 $ 15,766 $ 16,050 $ 60,364 $ 2,548 $ 180,554 $ 3,100 $ 183,654 Gross client cash inflows 6,859 3,162 5,524 406 4,149 8,169 5,045 33,313 621 33,934 Gross client cash outflows (6,919 ) (5,214 ) (9,545 ) (1,498 ) (3,111 ) (6,247 ) (3,324 ) (35,858 ) (807 ) (36,666 ) Net client cash flows (60 ) (2,053 ) (4,020 ) (1,093 ) 1,038 1,921 1,721 (2,545 ) (187 ) (2,732 ) Market appreciation / (depreciation) (2,641 ) (2,965 ) (3,345 ) (3,328 ) (3,153 ) (10,887 ) (215 ) (26,533 ) 39 (26,495 ) Realizations and distributions — — — — — — (376 ) (376 ) — (376 ) Acquired assets / Net transfers 14 27 (1,436 ) (372 ) 226 107 (16 ) (1,450 ) 350 (1,100 ) Ending AUM $ 27,892 $ 15,103 $ 26,353 $ 10,973 $ 14,160 $ 51,507 $ 3,663 $ 149,649 $ 3,302 $ 152,952 Year Ended December 31, 2021 (1) Beginning AUM $ 26,230 $ 18,368 $ 36,639 $ 14,230 $ 14,141 $ 33,676 $ 422 $ 143,706 $ 3,534 $ 147,241 Gross client cash inflows 5,935 4,562 6,756 364 2,822 6,217 1,213 27,869 386 28,254 Gross client cash outflows (7,742 ) (5,644 ) (9,000 ) (1,565 ) (2,362 ) (5,305 ) (201 ) (31,820 ) (914 ) (32,734 ) Net client cash flows (1,807 ) (1,082 ) (2,244 ) (1,202 ) 460 912 1,012 (3,952 ) (528 ) (4,480 ) Market appreciation / (depreciation) 6,169 2,685 649 2,766 1,662 6,611 30 20,573 10 20,583 Realizations and distributions — — — — — — — — — — Acquired assets / Net transfers (14 ) 122 110 (28 ) (214 ) 19,165 1,084 20,226 84 20,310 Ending AUM $ 30,578 $ 20,094 $ 35,154 $ 15,766 $ 16,050 $ 60,364 $ 2,548 $ 180,554 $ 3,100 $ 183,654 Year Ended December 31, 2020 (1) Beginning AUM $ 26,347 $ 17,346 $ 38,010 $ 14,091 $ 12,754 $ 31,616 $ 81 $ 140,245 $ 11,587 $ 151,832 Gross client cash inflows 4,144 4,458 6,512 695 2,495 4,517 380 23,201 12,656 35,857 Gross client cash outflows (7,605 ) (5,201 ) (9,151 ) (2,631 ) (2,551 ) (6,931 ) (44 ) (34,112 ) (21,097 ) (55,209 ) Net client cash flows (3,460 ) (742 ) (2,639 ) (1,936 ) (56 ) (2,413 ) 336 (10,911 ) (8,441 ) (19,352 ) Market appreciation / (depreciation) 3,436 1,959 1,507 1,935 1,433 4,460 5 14,736 58 14,794 Realizations and distributions — — — — — — — — — — Acquired assets / Net transfers (93 ) (195 ) (240 ) 139 10 14 1 (364 ) 331 (33 ) Ending AUM $ 26,230 $ 18,368 $ 36,639 $ 14,230 $ 14,141 $ 33,676 $ 422 $ 143,706 $ 3,534 $ 147,241 (1) Beginning in January 2022, the Company's "Other" asset class has been categorized to Solutions, Fixed Income, Global / Non-U.S.
Biggest changeEquity Solutions Alternative Investments Total Long-term Money Market / Short-term Total Year Ended December 31, 2023 Beginning AUM $ 27,892 $ 15,103 $ 26,353 $ 10,973 $ 14,160 $ 51,507 $ 3,663 $ 149,649 $ 3,302 $ 152,952 Gross client cash inflows 5,090 2,741 4,024 284 2,581 6,937 1,593 23,251 853 24,104 Gross client cash outflows (5,536 ) (3,859 ) (6,129 ) (1,286 ) (2,304 ) (8,310 ) (2,002 ) (29,426 ) (1,245 ) (30,671 ) Net client cash flows (446 ) (1,117 ) (2,105 ) (1,002 ) 276 (1,373 ) (409 ) (6,176 ) (391 ) (6,567 ) Market appreciation / (depreciation) 3,153 1,978 1,595 2,809 2,431 9,494 270 21,729 149 21,878 Realizations and distributions — — — — — — (100 ) (100 ) — (100 ) Acquired & divested assets / Net transfers (2) 5 (4 ) (1,487 ) (145 ) (96 ) (43 ) 7 (1,763 ) 211 (1,552 ) Ending AUM $ 30,604 $ 15,959 $ 24,355 $ 12,635 $ 16,772 $ 59,585 $ 3,431 $ 163,340 $ 3,271 $ 166,611 Year Ended December 31, 2022 Beginning AUM $ 30,578 $ 20,094 $ 35,154 $ 15,766 $ 16,050 $ 60,364 $ 2,548 $ 180,554 $ 3,100 $ 183,654 Gross client cash inflows 6,859 3,162 5,524 406 4,149 8,169 5,045 33,313 621 33,934 Gross client cash outflows (6,919 ) (5,214 ) (9,545 ) (1,498 ) (3,111 ) (6,247 ) (3,324 ) (35,858 ) (807 ) (36,666 ) Net client cash flows (60 ) (2,053 ) (4,020 ) (1,093 ) 1,038 1,921 1,721 (2,545 ) (187 ) (2,732 ) Market appreciation / (depreciation) (2,641 ) (2,965 ) (3,345 ) (3,328 ) (3,153 ) (10,887 ) (215 ) (26,533 ) 39 (26,495 ) Realizations and distributions — — — — — — (376 ) (376 ) — (376 ) Acquired & divested assets / Net transfers 14 27 (1,436 ) (372 ) 226 107 (16 ) (1,450 ) 350 (1,100 ) Ending AUM $ 27,892 $ 15,103 $ 26,353 $ 10,973 $ 14,160 $ 51,507 $ 3,663 $ 149,649 $ 3,302 $ 152,952 Year Ended December 31, 2021 (1) Beginning AUM $ 26,230 $ 18,368 $ 36,639 $ 14,230 $ 14,141 $ 33,676 $ 422 $ 143,706 $ 3,534 $ 147,241 Gross client cash inflows 5,935 4,562 6,756 364 2,822 6,217 1,213 27,869 386 28,254 Gross client cash outflows (7,742 ) (5,644 ) (9,000 ) (1,565 ) (2,362 ) (5,305 ) (201 ) (31,820 ) (914 ) (32,734 ) Net client cash flows (1,807 ) (1,082 ) (2,244 ) (1,202 ) 460 912 1,012 (3,952 ) (528 ) (4,480 ) Market appreciation / (depreciation) 6,169 2,685 649 2,766 1,662 6,611 30 20,573 10 20,583 Realizations and distributions — — — — — — — — — — Acquired & divested assets / Net transfers (14 ) 122 110 (28 ) (214 ) 19,165 1,084 20,226 84 20,310 Ending AUM $ 30,578 $ 20,094 $ 35,154 $ 15,766 $ 16,050 $ 60,364 $ 2,548 $ 180,554 $ 3,100 $ 183,654 (1) Beginning in January 2022, the Company's "Other" asset class has been categorized to Solutions, Fixed Income, Global / Non-U.S.
We are the primary obligor under the contracts with the Victory Funds, USAA Funds and VictoryShares and have the ability to select the service provider and establish pricing. As a result, fund administration fees and sub-administration expenses are recorded on a gross basis. VCS has contractual arrangements with third parties to provide certain distribution services.
We are the primary obligor under the contracts with the Victory Funds and VictoryShares and have the ability to select the service provider and establish pricing. As a result, fund administration fees and sub-administration expenses are recorded on a gross basis. VCS has contractual arrangements with third parties to provide certain distribution services.
Distribution and Other Asset‑based Expenses – Distribution and other asset‑based expenses consists of: (i) broker‑dealer distribution fees and platform distribution fees and (ii) sub‑administration, sub-transfer agent, sub‑advisory expenses and middle‑office expenses. Broker‑dealer distribution fees are paid by VCS as the broker‑dealer for the Victory Funds and USAA Funds to third‑party distributors.
Distribution and Other Asset‑based Expenses – Distribution and other asset‑based expenses consists of: (i) broker‑dealer distribution fees and platform distribution fees and (ii) sub‑administration, sub-transfer agent, sub‑advisory expenses and middle‑office expenses. Broker‑dealer distribution fees are paid by VCS as the broker‑dealer for the Victory Funds to third‑party distributors.
(3) The balance at December 31, 2022 represents the Company’s undrawn $99.9 million revolving credit facility and a $0.1 million standby letter of credit used as collateral for THB’s real estate location.
(3) The balance at December 31, 2023 and 2022 represents the Company’s undrawn $99.9 million revolving credit facility and a $0.1 million standby letter of credit used as collateral for THB’s real estate location.
VCM has hired a sub‑administrator, the fees for which are captured in sub‑administration expense. As administrator, VCM supervises the operations of the Victory Funds, VictoryShares and USAA Funds, including the services provided by the sub‑administrators.
VCM has hired a sub‑administrator, the fees for which are captured in sub‑administration expense. As administrator, VCM supervises the operations of the Victory Funds and VictoryShares, including the services provided by the sub‑administrators.
The increase is primarily due to the NEC and WestEnd acquisitions which closed on November 1, 2021 and December 31, 2021, respectively. The 2021 acquisition-related expenses include various transaction costs such as legal and filing fees and other professional fees as well as an estimated liability for potential one-time payments related to a prior acquisition.
The decrease is primarily due to the NEC and WestEnd acquisitions which closed on November 1, 2021 and December 31, 2021, respectively. The 2021 acquisition-related expenses include various transaction costs such as legal and filing fees and other professional fees as well as an estimated liability for potential one-time payments related to a prior acquisition.
Objective The objective of this section of the Annual Report on Form 10-K is to provide a discussion and analysis, from management’s perspective, of the key performance indicators and material information necessary to assess our financial condition, results of operations, liquidity and cash flows for the year ended December 31, 2022.
The objective of this section of the Annual Report on Form 10-K is to provide a discussion and analysis, from management’s perspective, of the key performance indicators and material information necessary to assess our financial condition, results of operations, liquidity and cash flows for the year ended December 31, 2023.
(9) Subtracting an estimate of income tax expense applied to the sum of the adjustments above. 64 Table of Contents (10) Represents the tax benefits associated with deductions allowed for intangibles and goodwill generated from acquisitions in which we received a step‑up in basis for tax purposes.
(9) Subtracting an estimate of income tax expense applied to the sum of the adjustments above. 65 Table of Contents (10) Represents the tax benefits associated with deductions allowed for intangibles and goodwill generated from acquisitions in which we received a step‑up in basis for tax purposes.
In preparing these financial statements, our estimates and judgements are based on historical experience, information from third-party valuation professionals and various other assumptions, giving due consideration to materiality. We consider the accounting policies discussed below to be critical to the understanding of our consolidated financial statements.
In preparing these financial statements, our estimates and judgements are based on historical experience, information from third-party valuation professionals and various other assumptions, giving due consideration to materiality. We consider the accounting policy discussed below to be critical to the understanding of our consolidated financial statements.
Fund administration and fund distribution fees also include fund transfer agent fees (related to the USAA Funds), which are based on a contractual rate applied to average AUM or the number of accounts in these funds. The Company has contractual arrangements with third parties to provide certain advisory, administration, transfer agent and distribution services.
Fund administration and fund distribution fees also include fund transfer agent fees, which are based on a contractual rate applied to average AUM or the number of accounts in these funds. The Company has contractual arrangements with third parties to provide certain advisory, administration, transfer agent and distribution services.
The sub-transfer agent is paid through a contractual arrangement based on a percentage of average fund AUM. • VCM, as the investment adviser for the Victory Funds and USAA Funds, has hired unaffiliated sub‑advisers to manage funds for which we do not have in‑house capabilities.
The sub-transfer agent is paid through a contractual arrangement based on a percentage of average fund AUM. • VCM, as the investment adviser for the Victory Funds, has hired unaffiliated sub‑advisers to manage funds for which we do not have in‑house capabilities.
Sub‑administration, sub-transfer agent, sub‑advisory and middle‑office expenses consist of fees paid to our sub‑administrators of the Victory Funds, VictoryShares and USAA Funds, fees paid to our sub-transfer agent for the USAA Funds, fees paid to sub‑advisers on certain Victory Funds and USAA Funds and fees paid to vendors to which we outsource middle‑office functions. • VCM acts as the administrator to the Victory Funds, VictoryShares and USAA Funds.
Sub‑administration, sub-transfer agent, sub‑advisory and middle‑office expenses consist of fees paid to our sub‑administrators of the Victory Funds and VictoryShares, fees paid to our sub-transfer agent for the Victory Funds III, fees paid to sub‑advisers on certain Victory Funds and fees paid to vendors to which we outsource middle‑office functions. • VCM acts as the administrator to the Victory Funds and VictoryShares.
VCS and our non‑U.S. subsidiaries were in compliance with these requirements as of and for the years ended December 31, 2022, 2021 and 2020. Cash Flows – The following table is derived from our Consolidated Statements of Cash Flows for the year ended December 31, 2022, 2021 and 2020.
VCS and our non‑U.S. subsidiaries were in compliance with these requirements as of and for the years ended December 31, 2023, 2022 and 2021. Cash Flows – The following table is derived from our Consolidated Statements of Cash Flows for the year ended December 31, 2023, 2022 and 2021.
The portion of the effective income tax rate attributable to state and local income taxes varies from year to year depending on amounts of income apportioned to each jurisdiction, whether we file income tax returns on a unitary or separate return basis and with changes in tax laws. 58 Table of Contents The following table presents our GAAP results of operations for the years ended December 31, 2022, 2021 and 2020 (in thousands except per share data).
The portion of the effective income tax rate attributable to state and local income taxes varies from year to year depending on amounts of income apportioned to each jurisdiction, whether we file income tax returns on a unitary or separate return basis and with changes in tax laws. 59 Table of Contents The following table presents our GAAP results of operations for the years ended December 31, 2023, 2022 and 2021 (in thousands except per share data).
The sub‑administrators are paid through a contractual arrangement based on a percentage of the average fund AUM. • VCTA acts as the transfer agent to the USAA Funds. VCTA has hired a sub-transfer agent, the fees for which are captured in sub-administration expense. As transfer agent, VCTA oversees the services provided by the sub-transfer agent.
The sub‑administrators are paid through a contractual arrangement based on a percentage of the average fund AUM. • VCTA acts as the transfer agent to the Victory Funds III. VCTA has hired a sub-transfer agent, the fees for which are captured in sub-administration expense. As transfer agent, VCTA oversees the services provided by the sub-transfer agent.
Restructuring and Integration Costs – Restructuring and integration costs include costs incurred in connection with business combinations, including the increase in the fair value of contingent acquisition payments, asset purchases and changes in business strategy.
Restructuring and Integration Costs – Restructuring and integration costs include costs incurred in connection with business combinations, including the change in the fair value of contingent acquisition payments, asset purchases and changes in business strategy.
The fees paid to the sub‑advisers are contractual based on a percentage of assets that they manage or based upon a percentage of revenue. • We have outsourced middle‑office operations to achieve a scalable operational infrastructure that utilizes a variable‑cost model.
The fees paid to the sub‑advisers 58 Table of Contents are contractual based on a percentage of assets that they manage or based upon a percentage of revenue. • We have outsourced middle‑office operations to achieve a scalable operational infrastructure that utilizes a variable‑cost model.
Pursuant to the Second Amendment, the Company repriced the existing term loans with replacement term loans in an aggregate principal amount of $755.7 million (the “Repriced Term Loans”).
Pursuant to the Second Amendment, the Company repriced the 2020 Term Loans with replacement term loans in an aggregate principal amount of $755.7 million (the “Repriced Term Loans”).
VCS is the primary obligor under the contracts with the Victory Funds and USAA Funds and has the ability to select the service provider and establish pricing. Substantially all of VCS’s revenue is recorded gross of payments made to third parties. Fund transfer agent fees are earned for providing mutual fund shareholder services.
VCS is the primary obligor under the contracts with the Victory Funds and has the ability to select the service provider and establish pricing. Substantially all of VCS’s revenue is recorded gross of payments made to third parties. 57 Table of Contents Fund transfer agent fees are earned for providing mutual fund shareholder services.
Transfer agent fees fluctuate based on the level of average AUM and the number of accounts in the USAA Funds. The Company has contractual arrangements with a third party to provide certain sub-transfer agent services.
Transfer agent fees fluctuate based on the level of average AUM and the number of accounts in the Victory Funds III. The Company has contractual arrangements with a third party to provide certain sub-transfer agent services.
There was no change to the applicable margin on the referenced rate as a result of the Fourth Amendment. The LIBOR rate loans outstanding as of the Fourth Amendment’s effective date continued as LIBOR rate loans until the end of their then current interest periods.
There was no change to the applicable margin on the referenced rate from the Fourth Amendment. The LIBOR rate loans outstanding as of the Fourth Amendment’s effective date continued as LIBOR rate loans until the end of their then current interest periods.
Our goal is to establish and maintain a client base that is diversified by Franchise and Solutions, asset class, distribution channel and vehicle. 52 Table of Contents Valuation of Assets Under Management The fair value of assets under management of the Victory Funds, USAA Funds and VictoryShares is primarily determined using quoted market prices or independent third-party pricing services or broker price quotes.
Our goal is to establish and maintain a client base that is diversified by Franchise and Solutions Platform, asset class, distribution channel and vehicle. Valuation of Assets Under Management The fair value of assets under management of the Victory Funds and VictoryShares is primarily determined using quoted market prices or independent third-party pricing services or broker price quotes.
Investment performance : • 44 of our total Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 62% of our fund and ETF AUM were rated four or five stars overall by Morningstar. 54% of our strategies by AUM had investment returns in excess of their respective benchmarks over a one-year period, 84% over a three-year period, 79% over a five-year period and 79% over a ten-year period.
Investment performance : • 42 of our total Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 70% of our fund and ETF AUM were rated four or five stars overall by Morningstar. 49% of our strategies by AUM had investment returns in excess of their respective benchmarks over a one-year period, 62% over a three-year period, 84% over a five-year period and 79% over a ten-year period.
(6) Adding back direct incremental costs of acquisitions, including restructuring costs. (7) Adding back debt issuance cost expense. (8) Adjusting for losses (earnings) on equity method investments.
(6) Adding back direct incremental costs of acquisitions, including restructuring costs. (7) Adding back debt issuance and Swap unwind cost expense. (8) Adjusting for losses (earnings) on equity method investments.
For the years ended December 31, 2022 and 2021, the Company recorded a decrease of $3.6 million and an increase of $13.8 million, respectively, in contingent payment liabilities associated with the USAA AMCO Acquisition.
For the years ended December 31, 2023 and 2022, the Company recorded an increase of $8.7 million and a decrease of $3.6 million, respectively, in contingent payment liabilities associated with the USAA AMCO Acquisition.
Actual results could differ from our estimates and assumptions, and any such difference could be material to our consolidated financial statements. Significant accounting policies are described more fully in Note 2, Significant Accounting Policies, to the audited consolidated financial statements.
Actual results could differ from our estimates and assumptions, and any such difference could be material to our consolidated financial statements. This significant accounting policy is described more fully in Note 2, Accounting Policies, to the audited consolidated financial statements.
Inflationary pressures can result in increases to our cost structure. Certain large expense components such as compensation and distribution expenses are predominately variable and move in tandem with revenues. To the degree that these expense increases are not recoverable or cannot be counterbalanced through price increases due to the competitive environment, our profitability could be negatively impacted.
Certain large expense components such as compensation and distribution expenses are predominately variable and move in tandem with revenues. To the degree that these expense increases are not recoverable or cannot be counterbalanced through price increases due to the competitive environment, our profitability could be negatively impacted.
Change in Value of Consideration Payable for Acquisition of Business 2022 compared to 2021 - The change in value of consideration payable for acquisition of business decreased $54.4 million as a result of decreases of $3.6 million and $37.0 million in the fair value of the contingent consideration associated with the USAA AMCO and WestEnd Acquisitions, respectively, for the year ended December 31, 2022 compared to an increase of $13.8 million associated with the USAA AMCO Acquisition for 61 Table of Contents the year ended December 31, 2021.
Refer to Note 4, Acquisitions, for further details on the fair value of contingent consideration payable. 2022 compared to 2021 - The change in value of consideration payable for acquisition of business decreased $54.4 million as a result of decreases of $3.6 million and $37.0 million in the fair value of the contingent 62 Table of Contents consideration associated with the USAA AMCO and WestEnd Acquisitions, respectively, for the year ended December 31, 2022 compared to an increase of $13.8 million associated with the USAA AMCO Acquisition for the year ended December 31, 2021.
Equity 14,160 16,050 14,141 12,754 5,080 Alternative Investments 3,663 2,548 422 81 46 Total Long-Term Assets $ 149,649 $ 180,554 $ 143,707 $ 140,245 $ 52,763 Money Market / Short-Term Assets 3,302 3,100 3,534 11,587 — Total $ 152,952 $ 183,654 $ 147,241 $ 151,832 $ 52,763 (1) Includes the impact of acquired assets from the THB, NEC and WestEnd Acquisitions, which closed on March 1, 2021, November 1, 2021 and December 31, 2021, respectively, and increased our AUM by approximately $547 million, $795 million and $19.3 billion, at closing, respectively.
Equity 16,772 14,160 16,050 14,141 12,754 Alternative Investments 3,431 3,663 2,548 422 81 Total Long-Term Assets $ 163,340 $ 149,649 $ 180,554 $ 143,707 $ 140,245 Money Market / Short-Term 3,271 3,302 3,100 3,534 11,587 Total Assets $ 166,611 $ 152,952 $ 183,654 $ 147,241 $ 151,832 (1) Includes the impact of acquired assets from the THB, NEC and WestEnd Acquisitions, which closed on March 1, 2021, November 1, 2021 and December 31, 2021, respectively, and increased our AUM by approximately $547 million, $795 million and $19.3 billion, at closing, respectively.
Refer to “Supplemental Non‑GAAP Financial Information” for more information about how we calculate Adjusted Net Income and a reconciliation of net income to Adjusted Net Income. • GAAP earnings per diluted share were $3.81 for the year ended December 31, 2022 compared to $3.75 for the same period in 2021.
Refer to “Supplemental Non‑GAAP Financial Information” for more information about how we calculate Adjusted Net Income and a reconciliation of net income to Adjusted Net Income. • GAAP earnings per diluted share was $3.12 for the year ended December 31, 2023 compared to $3.81 for the same period in 2022.
NEC Acquisition (the “NEC Acquisition”) – On November 1, 2021, the Company completed the acquisition of 100% of the equity interests in NEC, resulting in NEC becoming the Company’s eleventh investment franchise. Founded in 2004 and based in Hanover, NH, NEC is an alternative asset management firm focused on debt and equity investments in clean energy infrastructure projects and companies.
NEC Acquisition (the “NEC Acquisition”) – On November 1, 2021, the Company completed the acquisition of 100% of the equity interests in NEC. Founded in 2004 and based in Hanover, NH, NEC is an alternative asset management firm focused on debt and equity investments in clean energy infrastructure projects and companies.
Refer to Note 4, Acquisitions, for further details on the fair value of contingent consideration payable. Acquisition‑Related Costs 2022 compared to 2021 – Acquisition-related costs decreased $15.7 million to $0.5 million for the year ended December 31, 2022 compared to $16.3 million in the prior year.
Refer to Note 4, Acquisitions, for further details on the fair value of contingent consideration payable. Acquisition‑Related Costs 2023 compared to 2022 – Acquisition-related costs decreased $0.3 million to $0.2 million for the year ended December 31, 2023 compared to $0.5 million in the prior year.
For the year ended December 31, 2022, the Company recorded a decrease of $37.0 million in contingent payment liabilities associated WestEnd Acquisition, which is included in consideration payable for acquisition of business in the Consolidated Balance Sheets. 66 Table of Contents Advertising and Marketing Costs In December 2022, the Company entered into a long-term partnership with Spurs Sports & Entertainment and executed naming rights and partnership agreements for the team’s new performance center.
For the years ended December 31, 2023 and 2022, the Company recorded an increase of $14.5 million and a decrease of $37.0 million, respectively in contingent payment liabilities associated WestEnd Acquisition, which is included in consideration payable for acquisition of business in the Consolidated Balance Sheets. 68 Table of Contents Advertising and Marketing Costs In December 2022, the Company entered into a long-term partnership with Spurs Sports & Entertainment and executed naming rights and partnership agreements for the team’s new performance center.
Adjusted net income with tax benefit per diluted share was $4.58 and $4.82, respectively, for the years ended December 31, 2022 and 2021.
Adjusted net income with tax benefit per diluted share was $4.51 and $4.58, respectively, for the years ended December 31, 2023 and 2022.
The change in the effective tax rate was primarily due to increased non-deductible expenses. Refer to Note 10, Income Taxes, to the audited financial statements for further details on income taxes. 2021 compared to 2020 – Our effective tax rate decreased 3.1% from 23.7% in 2020 to 20.6% in 2021.
Refer to Note 10, Income Taxes, to the audited financial statements for further details on income taxes. 2022 compared to 2021 – Our effective tax rate increased 0.7% from 20.6% in 2021 to 21.3% in 2022. The change in the effective tax rate was primarily due to increased non-deductible expenses.
Small Cap Equity 15,103 20,094 18,368 17,346 12,948 U.S. Large Cap Equity 10,973 15,766 14,230 14,091 3,759 Global / Non-U.S.
Small Cap Equity 15,959 15,103 20,094 18,368 17,346 U.S. Large Cap Equity 12,635 10,973 15,766 14,230 14,091 Global / Non-U.S.
AUM by Asset Class – the following table presents our AUM by asset class as of the dates indicated: As of December 31, (in millions) 2022 2021(1)(3) 2020(3) 2019(2)(3) 2018(3) Fixed Income $ 26,353 $ 35,154 $ 36,639 $ 38,011 $ 6,872 Solutions 51,507 60,364 33,676 31,616 3,761 U.S. Mid Cap Equity 27,892 30,578 26,230 26,347 20,297 U.S.
AUM by Asset Class – the following table presents our AUM by asset class as of the dates indicated: As of December 31, (in millions) 2023 2022 2021(1)(3) 2020(3) 2019(2)(3) Fixed Income $ 24,355 $ 26,353 $ 35,154 $ 36,639 $ 38,011 Solutions 59,585 51,507 60,364 33,676 31,616 U.S. Mid Cap Equity 30,604 27,892 30,578 26,230 26,347 U.S.
Refer to “Supplemental Non‑GAAP Financial Information” for more information about how we calculate Adjusted Net Income and a reconciliation of net income to Adjusted Net Income. • Adjusted EBITDA and adjusted EBITDA margin was $424.2 million and 49.6%, respectively, for the year ended December 31, 2022 compared to $449.0 million and 50.4%, respectively, for the year ended December 31, 2021.
Refer to “Supplemental 52 Table of Contents Non‑GAAP Financial Information” for more information about how we calculate Adjusted Net Income and a reconciliation of net income to Adjusted Net Income. • Adjusted EBITDA and Adjusted EBITDA margin was $418.0 million and 50.9%, respectively, for the year ended December 31, 2023 compared to $424.2 million and 49.6%, respectively, for the year ended December 31, 2022.
The 2021 Incremental Term Loans mature in December 2028 and bear interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves and subject to a 50 basis point floor) plus a margin of 2.25% or an alternate base rate plus a margin of 1.25%.
The 2021 Incremental Term Loans will mature in December 2028 and, until the Fourth Amendment to the 2019 Credit Agreement, accrued interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves and subject to a 50 basis point floor) plus a margin of 2.25% or an alternate base rate plus a margin of 1.25%.
We generated $33.9 billion in gross flows and $2.7 billion in net outflows ($2.5 billion long-term, $0.2 billion short-term) for the year ended December 31, 2022, compared to $28.3 billion in gross flows and $4.5 billion in net outflows ($4.0 billion long-term, $0.5 billion short-term) for the same period in 2021.
We generated $24.1 billion in gross flows and $6.6 billion in net outflows ($6.2 billion long-term, $0.4 billion short-term) for the year ended December 31, 2023, compared to $33.9 billion in gross flows and $2.7 billion in net outflows ($2.5 billion long-term, $0.2 billion short-term) for the same period in 2022.
The Company incurred a total of $9.1 million of other third party costs related to the 2021 Incremental Term Loans, which were recorded as term loan debt issuance costs. 2022 LIBOR to Term SOFR Rate Transition On September 23, 2022, the Company entered into the Fourth Amendment (the “Fourth Amendment”) to the 2019 Credit Agreement to change the interest rate on the Repriced Term Loans and 2021 Incremental Term Loans from LIBOR to a rate based on SOFR plus a ten-basis point credit spread adjustment.
The Company incurred a total of $9.1 million of other third party costs related to the 2021 Incremental Term Loans, which were recorded as term loan debt issuance costs. 67 Table of Contents Fourth Amendment On September 23, 2022, the Company entered into the Fourth Amendment (the “Fourth Amendment”) to the 2019 Credit Agreement to change the interest rate on its debt from LIBOR to a rate based on the secured overnight financing rate (“SOFR”) plus a ten-basis point credit spread adjustment.
The following table presents our liquidity position as of December 31, 2022 and 2021: December 31, December 31, (in thousands) 2022 2021 Cash and cash equivalents (1) $ 38,171 $ 69,533 Accounts and other receivables (2) 84,473 104,305 Undrawn commitment on revolving credit facility (3) 100,000 100,000 Accounts and other payables (4) (109,320 ) (121,057 ) (1) We manage our cash balances in order to fund our day-to-day operations and invest excess cash into money market funds and other short-term investments.
The following table presents our liquidity position as of December 31, 2023 and 2022: December 31, December 31, (in thousands) 2023 2022 Cash and cash equivalents (1) $ 123,547 $ 38,171 Accounts and other receivables (2) 87,570 84,473 Undrawn commitment on revolving credit facility (3) 100,000 100,000 Accounts and other payables (4) (111,933 ) (109,320 ) (1) We manage our cash balances in order to fund our day-to-day operations and invest excess cash into money market funds and other short-term investments.
Our retail sales team offers intermediary and retirement platform clients, including broker-dealers, retirement platforms and RIA networks, mutual funds and ETFs as well as SMAs through wrap fee programs and access to our investment models through UMAs.
Our retail sales team offers intermediary and retirement platform clients, including broker-dealers, retirement platforms and RIA networks, mutual funds and ETFs as well as SMAs through wrap fee programs and access to our investment models through UMAs. Our direct investor business serves the investment needs of individual clients.
The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, average assets, revenues or earnings in the full-year period ended December 31, 2021.
The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, average assets, revenues or earnings in the full-year period ended December 31, 2021. (5) Reflects divested assets associated with the INCORE transaction.
Other business taxes (3) 2,118 1,657 (2,556 ) ii. Amortization of acquisition-related intangible assets (4) 35,160 12,631 12,830 iii. Share-based compensation (5) 10,143 13,110 15,020 iv. Acquisition, restructuring and exit costs (6) (28,722 ) 34,546 29,463 v.
Other business taxes (3) 1,707 2,118 1,657 ii. Amortization of acquisition-related intangible assets (4) 32,805 35,160 12,631 iii. Share-based compensation (5) 6,496 10,143 13,110 iv. Acquisition, restructuring and exit costs (6) 28,982 (28,722 ) 34,546 v.
Debt issuance costs (7) 5,620 5,589 6,546 Tax effect of above adjustments (9) (6,080 ) (16,883 ) (15,326 ) Adjusted Net Income $ 293,750 $ 329,039 $ 258,499 Tax benefit of goodwill and acquired intangibles (10) $ 37,490 $ 28,012 $ 26,992 Adjustments made to GAAP Net Income to calculate Adjusted EBITDA and Adjusted Net Income, as applicable, are: (1) Adding back interest paid on debt and other financing costs, net of interest income.
Debt issuance costs (7) 5,394 5,620 5,589 Tax effect of above adjustments (9) (18,847 ) (6,080 ) (16,883 ) Adjusted Net Income $ 269,694 $ 293,750 $ 329,039 Tax benefit of goodwill and acquired intangibles (10) $ 38,252 $ 37,490 $ 28,012 Adjustments made to GAAP Net Income to calculate Adjusted EBITDA and Adjusted Net Income, as applicable, are: (1) Adding back interest paid on debt and other financing costs, net of interest income.
The expense increase is primarily due to an increase in interest expense as a result of a higher debt principal balance resulting from our incremental borrowing in December 2021 to fund the WestEnd Acquisition.
The expense increase is primarily due to an increase in interest expense as a result of a higher debt principal balance resulting from our incremental borrowing in December 2021 to fund the WestEnd Acquisition. Also contributing was a higher average interest rate over the comparable period.
At December 31, 2021, the WestEnd acquired assets totaled $19.3 billion. The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, average assets, revenues or earnings in the full-year period ended December 31, 2021.
At December 31, 2021, the WestEnd acquired assets totaled $19.3 billion. The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, average assets, revenues or earnings in the full-year period ended December 31, 2021. Refer to Note 4, Acquisitions, for further details on the WestEnd Acquisition.
Restructuring and Integration Costs 2022 compared to 2021 – Restructuring and integration costs decreased $1.7 million to $0.9 million for the year ended December 31, 2022 compared to $2.6 million in the prior year.
Restructuring and Integration Costs 2023 compared to 2022 – Restructuring and integration costs decreased $0.3 million to $0.6 million for the year ended December 31, 2023 compared to $0.9 million in the prior year.
Equity, or Alternative Investments based on the underlying investment strategy. Additionally, all assets managed using alternative investment strategeies are now included in the Company's Alternative Investments asset class. Prior-period figures have been adjusted accordingly.
Equity, or Alternative Investments based on the underlying investment strategy. Additionally, all assets managed using alternative investment strategies are now included in the Company's Alternative Investments asset class. Prior-period figures have been adjusted accordingly. (2) Reflects the divested assets associated with the INCORE transaction.
The decrease was due to decrease in the net unrealized fair value of deferred compensation plan investments in 2022 compared to an increase in dividend income and unrealized gains on deferred compensation plan investments in 2021. 2021 compared to 2020 – Interest income and other income (expense) was income of $6.0 million in 2021, compared to income of $3.7 million in 2020.
The increase was due to an increase in dividend income and an increase in the net unrealized fair value of deferred compensation plan investments in 2023 compared to a decrease in the net unrealized fair value of deferred compensation plan investments in 2022. 2022 compared to 2021 – Interest income and other income (expense) was expense of $2.5 million in 2022 compared to income of $6.0 million in 2021.
Specifically, we make use of the non‑GAAP financial measures “Adjusted EBITDA” and “Adjusted Net Income.” 63 Table of Contents The following table sets forth a reconciliation from GAAP financial measures to non‑GAAP measures for the periods indicated: Year Ended December 31, (in thousands) 2022 2021 2020 Reconciliation of non-GAAP financial measures: Net income (GAAP) $ 275,511 $ 278,389 $ 212,522 Income tax expense (74,522 ) (72,253 ) (66,018 ) Income before income taxes $ 350,033 $ 350,642 $ 278,540 Interest expense (1) 41,024 24,285 33,724 Depreciation (2) 8,045 6,209 3,551 Other business taxes (3) 2,118 1,657 (2,556 ) Amortization of acquisition-related intangible assets (4) 35,160 12,631 12,830 Share-based compensation (5) 10,143 13,110 15,020 Acquisition, restructuring and exit costs (6) (28,722 ) 34,546 29,463 Debt issuance costs (7) 5,620 5,589 6,546 Losses from equity method investments (8) 825 331 193 Adjusted EBITDA $ 424,246 $ 449,000 $ 377,311 Year Ended December 31, (in thousands) 2022 2021 2020 Reconciliation of non-GAAP financial measures: Net income (GAAP) $ 275,511 $ 278,389 $ 212,522 Adjustments to reflect the operating performance of the Company: i.
Specifically, we make use of the non‑GAAP financial measures “Adjusted EBITDA” and “Adjusted Net Income.” 64 Table of Contents The following table sets forth a reconciliation from GAAP financial measures to non‑GAAP measures for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 2021 Reconciliation of non-GAAP financial measures: Net income (GAAP) $ 213,157 $ 275,511 $ 278,389 Income tax expense (62,751 ) (74,522 ) (72,253 ) Income before income taxes $ 275,908 $ 350,033 $ 350,642 Interest expense (1) 57,820 41,024 24,285 Depreciation (2) 8,842 8,045 6,209 Other business taxes (3) 1,707 2,118 1,657 Amortization of acquisition-related intangible assets (4) 32,805 35,160 12,631 Share-based compensation (5) 6,496 10,143 13,110 Acquisition, restructuring and exit costs (6) 28,982 (28,722 ) 34,546 Debt issuance costs (7) 5,394 5,620 5,589 Losses from equity method investments (8) — 825 331 Adjusted EBITDA $ 417,954 $ 424,246 $ 449,000 Year Ended December 31, (in thousands) 2023 2022 2021 Reconciliation of non-GAAP financial measures: Net income (GAAP) $ 213,157 $ 275,511 $ 278,389 Adjustments to reflect the operating performance of the Company: i.
The following table presents the components of acquisition, restructuring and exit costs for the periods indicated: Year Ended December 31, (in thousands) 2022 2021 2020 Acquisition-related costs $ 534 $ 16,262 $ 1,108 Change in value of consideration payable for acquisition of business (40,600 ) 13,800 11,300 Restructuring and integration costs 881 2,578 7,786 General and administrative — — 8,081 Personnel compensation and benefits 10,463 1,906 1,188 Total acquisition, restructuring and exit costs $ (28,722 ) $ 34,546 $ 29,463 Liquidity, Capital Resources and Contractual Obligations Sources and Uses of Cash – We generate strong cash flows from operations that allow us to meet our cash requirements.
The following table presents the components of acquisition, restructuring and exit costs for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 2021 Acquisition-related costs $ 217 $ 534 $ 16,262 Change in value of consideration payable for acquisition of business 23,236 (40,600 ) 13,800 Restructuring and integration costs 595 881 2,578 Personnel compensation and benefits 5,534 10,463 1,906 Interest income and other (income) expense (600 ) — — Total acquisition, restructuring and exit costs $ 28,982 $ (28,722 ) $ 34,546 Liquidity, Capital Resources and Contractual Obligations Sources and Uses of Cash – We generate strong cash flows from operations that allow us to meet our cash requirements.
Distribution and other asset-based expenses decreased $15.3 million, or 8.7%, to $161.1 million in 2022 compared to $176.4 million in 2021, primarily due to a change in vehicle mix and our underlying distribution platforms. 2021 compared to 2020 – Distribution and other asset‑based expenses are primarily based on AUM.
Distribution and other asset-based expenses decreased $15.3 million, or 8.7%, to $161.1 million in 2022 compared to $176.4 million in 2021, primarily due to a change in vehicle mix and our underlying distribution platforms. General and Administrative Expenses 2023 compared to 2022 – General and administrative expenses were $56.3 million in 2023 compared to $52.4 million in 2022.
Personnel Compensation and Benefits The following table presents the components of GAAP compensation expense for the year ended December 31, 2022, 2021 and 2020: Year Ended December 31, (in thousands) 2022 2021 2020 Salaries, payroll related taxes and employee benefits $ 87,819 $ 87,101 $ 76,304 Incentive compensation 94,511 108,952 87,412 Sales-based compensation (1) 27,589 19,249 14,158 Equity awards granted to employees and directors (2) 17,816 17,625 18,096 Acquisition and transaction-related compensation 10,463 1,906 1,188 Total personnel compensation and benefits expense $ 238,198 $ 234,833 $ 197,158 (1) Represents sales‑based commissions paid to our distribution teams.
Personnel Compensation and Benefits The following table presents the components of GAAP compensation expense for the year ended December 31, 2023, 2022 and 2021: Year Ended December 31, (in thousands) 2023 2022 2021 Salaries, payroll related taxes and employee benefits $ 90,884 $ 87,819 $ 87,101 Incentive compensation 87,081 94,511 108,952 Sales-based compensation (1) 20,945 27,589 19,249 Equity awards granted to employees and directors (2) 16,548 17,816 17,625 Acquisition and transaction-related compensation 5,534 10,463 1,906 Total personnel compensation and benefits expense $ 220,992 $ 238,198 $ 234,833 (1) Represents sales‑based commissions paid to our distribution teams.
Contingent Consideration At December 31, 2022 and 2021, the Company had $230.4 million and $309.4 million, respectively, in contingent consideration that is estimated to be payable over the next one and three years resulting from the USAA AMCO and WestEnd Acquisitions.
Contingent Consideration At December 31, 2023, the Company had $217.2 million in contingent consideration that is estimated to be payable over the next one to four years resulting from the WestEnd Acquisition. At December 31, 2022, the Company had $230.4 million in contingent consideration that was estimated to be payable from the USAA AMCO and WestEnd Acquisitions.
Key Performance Indicators The following table presents the key performance indicators we focus on when reviewing our results: Year Ended December 31, ($ in millions, except for basis points and percentages) 2022 2021 2020 AUM at period end $ 152,952 $ 183,654 $ 147,241 Average AUM 164,025 158,590 136,422 Gross flows 33,934 28,254 35,857 Net short term flows (187 ) (528 ) (8,441 ) Net long term flows (2,545 ) (3,952 ) (10,911 ) Net flows (2,732 ) (4,480 ) (19,352 ) Total revenue 854.8 890.3 775.4 Revenue on average AUM 52.1 bps 56.1 bps 56.8 bps Net income 275.5 278.4 212.5 Adjusted EBITDA (1) 424.2 449.0 377.3 Adjusted EBITDA margin (1)(2) 49.6 % 50.4 % 48.7 % Adjusted Net Income (1) 293.8 329.0 258.5 Tax benefit of goodwill and acquired intangibles (3) 37.5 28.0 27.0 (1) Our management uses Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the business.
Key Performance Indicators The following table presents the key performance indicators we focus on when reviewing our results: Year Ended December 31, ($ in millions, except for basis points and percentages) 2023 2022 2021 AUM at period end $ 166,611 $ 152,952 $ 183,654 Average AUM 158,268 164,025 158,590 Gross flows 24,104 33,934 28,254 Net short term flows (391 ) (187 ) (528 ) Net long term flows (6,176 ) (2,545 ) (3,952 ) Net flows (6,567 ) (2,732 ) (4,480 ) Total revenue 821.0 854.8 890.3 Revenue on average AUM 51.9 bps 52.1 bps 56.1 bps Net income 213.2 275.5 278.4 Adjusted EBITDA (1) 418.0 424.2 449.0 Adjusted EBITDA margin (1)(2) 50.9 % 49.6 % 50.4 % Adjusted Net Income (1) 269.7 293.8 329.0 Tax benefit of goodwill and acquired intangibles (3) 38.3 37.5 28.0 (1) Our management uses Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the business.
The acquisition also provided the Company the rights to offer products and services using the USAA brand and the opportunity to offer its products to USAA members through a direct distribution channel.
The acquisition expanded and diversified the Company’s investment platform and increased the Company’s size and scale. The acquisition also provided the Company the rights to offer products and services using the USAA brand and the opportunity to offer its products to USAA members through a direct distribution channel.
Adjusted Net Income was $293.8 million for the year ended December 31, 2022 compared to $329.0 million for the year ended December 31, 2021.
Adjusted Net Income was $269.7 million for the year ended December 31, 2023 compared to $293.8 million for the year ended December 31, 2022.
The net outflows were driven by $8.4 billion in money market and short-term strategies, $3.5 billion in our U.S. mid cap equity strategies, $2.6 billion in our fixed income strategies, $2.1 billion in our Solutions Platform, $1.9 billion in our U.S. large cap equity strategies and $0.7 billion in our U.S. small cap equity strategies.
The net outflows were driven by $2.2 billion in fixed income strategies, $1.8 billion our U.S. mid cap equity strategies, $1.2 billion in our U.S. large cap equity strategies, $1.1 billion in our U.S. small cap equity strategies and $0.5 billion in money market and short-term strategies, partially offset by $1.0 billion in net inflows into our alternative investment strategies, $0.9 billion into our Solutions Platform and $0.5 billion into our global/non-U.S. equity strategies.
Financial highlights : • Total revenue for the year ended December 31, 2022 was $854.8 million compared to $890.3 million for the year ended December 31, 2021. • Net income was $275.5 million and $278.4 million, respectively, for the years ended December 31, 2022 and 2021.
Financial highlights : • Total revenue for the year ended December 31, 2023 was $821.0 million compared to $854.8 million for the year ended December 31, 2022. • Net income was $213.2 million and $275.5 million, respectively, for the years ended December 31, 2023 and 2022.
These valuations require significant estimates and judgments related to projected revenue growth rates, adjustments for market-based risk, volatility and discount rates. The fair value of contingent consideration liabilities is remeasured at each reporting period, typically using the same methodology used to determine the acquisition date fair value.
These valuations require significant estimates and judgments related to the net revenue 5 year average annual growth rate, market price of risk adjustment for revenue (continuous), revenue volatility and discount rate. The fair value of contingent consideration liabilities is remeasured at each reporting period, generally using the same methodology used to determine the acquisition date fair value.
Interest Income and Other Income (Expense) 2022 compared to 2021 – Interest income and other income (expense) was expense of $2.5 million in 2022 compared to income of $6.0 million in 2021.
Interest Income and Other Income (Expense) 2023 compared to 2022 – Interest income and other income (expense) was income of $8.7 million in 2023 compared to expense of $2.5 million in 2022.
After the Second Amendment, the applicable margin on LIBOR under the Repriced Term Loans was 2.25%. 2021 Incremental Term Loans On December 31, 2021, the Company entered into the Third Amendment (the “Third Amendment”) to the 2019 Credit Agreement with the guarantors party thereto, Barclays Bank PLC, as administrative agent, and the lenders party thereto from time to time.
Third Amendment On December 31, 2021, the Company entered into the Third Amendment (the “Third Amendment”) to the 2019 Credit Agreement with the guarantors party thereto, Barclays Bank PLC, as administrative agent, and the lenders party thereto from time to time.
The interest rate effectively fixed by the Swap on $450 million of the Company’s outstanding term loan debt through July 1, 2026 changed from 3.215% to 3.149% as a result of the Swap Amendment.
The interest rate effectively fixed by the Swap on $450 million of the Company’s outstanding term loan debt through July 1, 2026 changed from 3.215% to 3.149% as a result of the Swap Amendment. On October 30, 2023, the Company monetized the gain on the Swap and entered into an agreement to terminate the Swap ("Swap Termination Agreement").
Year Ended December 31, (in thousands) 2022 2021 2020 Net cash provided by operating activities $ 335,211 $ 376,196 $ 250,616 Net cash used in investing activities (6,317 ) (556,588 ) (12,340 ) Net cash (used in) provided by financing activities (360,186 ) 227,217 (252,696 ) Operating Activities 2022 compared to 2021 – Cash provided by operating activities was $335.2 million in 2022, compared to $376.2 million in 2021.
Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by operating activities $ 330,291 $ 335,211 $ 376,196 Net cash used in investing activities (7,841 ) (6,317 ) (556,588 ) Net cash (used in) provided by financing activities (237,132 ) (360,186 ) 227,217 Operating Activities 2023 compared to 2022 – Cash provided by operating activities was $330.3 million in 2023, compared to $335.2 million in 2022.
As a result, fund transfer agent fees and sub-transfer agent expenses are recorded on a gross basis. 56 Table of Contents GAAP Expenses Our GAAP expenses principally consist of: (i) personnel compensation and benefits; (ii) distribution and other asset‑based expenses; (iii) general and administrative expenses; (iv) depreciation and amortization charges; and (v) acquisition‑related expenses comprising of changes in the fair value of contingent acquisition payments and restructuring and acquisition costs.
GAAP Expenses Our GAAP expenses principally consist of: (i) personnel compensation and benefits; (ii) distribution and other asset‑based expenses; (iii) general and administrative expenses; (iv) depreciation and amortization charges; and (v) acquisition‑related expenses comprising of changes in the fair value of contingent acquisition payments and restructuring and acquisition costs.
Average AUM was $164.0 billion in 2022 compared to $158.6 billion in 2021. 2021 compared to 2020 – Investment management fees increased $112.5 million, or 20.0%, to $674.5 million in 2021 from $562.0 million in 2020 due to an increase in average AUM year over year, partially offset by a decrease in revenue realization due to a shift in asset class and product mix.
Average AUM was $158.3 billion in 2023 compared to $164.0 billion in 2022. 2022 compared to 2021 – Investment management fees decreased $9.8 million, or 1.5%, to $664.7 million in 2022 from $674.5 million in 2021 due to decrease in revenue realization due to a shift in asset class and product mix, partially offset by an increase in average AUM.
The decrease is due to personnel restructuring within the direct to investor business. 2021 compared to 2020 – Restructuring and integration costs decreased $5.2 million, or 66.9%, to $2.6 million for the year ended December 31, 2021 compared to $7.8 million in the prior year.
The expense for the years ended December 31, 2023 and 2022 was primarily due to personnel restructuring. 2022 compared to 2021 – Restructuring and integration costs decreased $1.7 million to $0.9 million for the year ended December 31, 2022 compared to $2.6 million in the prior year. The decrease is due to personnel restructuring within the direct to investor business.
The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangibles with a step‑up in tax basis. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide us with a significant supplemental economic benefit.
The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangibles with a step‑up in tax basis.
December 31, 2021 AUM – Our total AUM at December 31, 2021 increased by $36.4 billion, or 24.7%, to $183.7 billion from $147.2 billion at December 31, 2020, primarily driven by the combination of net acquired assets and positive market movement of $20.3 billion and $20.6 billion, respectively, partially offset by net outflows of $4.5 billion. 55 Table of Contents The net outflows were driven by $2.2 billion in fixed income strategies, $1.8 billion our U.S. mid cap equity strategies, $1.2 billion in our U.S. large cap equity strategies, $1.1 billion in our U.S. small cap equity strategies and $0.5 billion in money market and short-term strategies, partially offset by $1.9 billion in net inflows into our Solutions Platform and $0.5 billion into our global/non-U.S. equity strategies.
Net outflows were driven by $2.1 billion in fixed income strategies, $1.4 billion in our Solutions Platform, $1.1 billion in our U.S. small cap equity strategies, $1.0 billion in our U.S. large cap equity strategies, $0.4 billion in our U.S. mid cap equity strategies, $0.4 billion in our alternative investment strategies and $0.4 billion in money market and short-term strategies, partially offset by $0.3 billion in net inflows into our global/non-U.S. equity strategies. 56 Table of Contents December 31, 2022 AUM – Our total AUM at December 31, 2022 decreased by $30.7 billion, or 16.7%, to $153.0 billion from $183.7 billion at December 31, 2021, primarily driven by negative market movement and net outflows of $26.5 billion and $2.7 billion, respectively.
Year Ended Year Ended Year Ended December 31, December 31, December 31, 2022 2021 2020 Revenue Investment management fees $ 664,710 $ 674,539 $ 562,036 Fund administration and distribution fees 190,090 215,726 213,315 Total revenue 854,800 890,265 775,351 Expenses Personnel compensation and benefits 238,198 234,833 197,158 Distribution and other asset-based expenses 161,105 176,385 175,687 General and administrative 52,373 53,722 51,218 Depreciation and amortization 43,201 18,840 16,381 Change in value of consideration payable for acquisition of business (40,600 ) 13,800 11,300 Acquisition-related costs 534 16,262 1,108 Restructuring and integration costs 881 2,578 7,786 Total operating expenses 455,692 516,420 460,638 Income from operations 399,108 373,845 314,713 Other income (expense) Interest income and other income (expense) (2,463 ) 6,045 3,703 Interest expense and other financing costs (43,964 ) (24,652 ) (37,005 ) Loss on debt extinguishment (2,648 ) (4,596 ) (2,871 ) Total other income (expense), net (49,075 ) (23,203 ) (36,173 ) Income before income taxes 350,033 350,642 278,540 Income tax expense (74,522 ) (72,253 ) (66,018 ) Net income $ 275,511 $ 278,389 $ 212,522 Earnings per share of common stock Basic $ 4.02 $ 4.10 $ 3.14 Diluted $ 3.81 $ 3.75 $ 2.88 Weighted average number of shares outstanding Basic 68,481 67,976 67,710 Diluted 72,266 74,151 73,719 Dividends declared per share of common stock $ 1.00 $ 0.53 $ 0.23 59 Table of Contents Investment Management Fees 2022 compared to 2021 – Investment management fees decreased $9.8 million, or 1.5%, to $664.7 million in 2022 from $674.5 million in 2021 due to decrease in revenue realization due to a shift in asset class and product mix, partially offset by an increase in average AUM.
Year Ended Year Ended Year Ended December 31, December 31, December 31, 2023 2022 2021 Revenue Investment management fees $ 640,876 $ 664,710 $ 674,539 Fund administration and distribution fees 180,152 190,090 215,726 Total revenue 821,028 854,800 890,265 Expenses Personnel compensation and benefits 220,992 238,198 234,833 Distribution and other asset-based expenses 149,596 161,105 176,385 General and administrative 56,287 52,373 53,722 Depreciation and amortization 41,647 43,201 18,840 Change in value of consideration payable for acquisition of business 23,236 (40,600 ) 13,800 Acquisition-related costs 217 534 16,262 Restructuring and integration costs 595 881 2,578 Total operating expenses 492,570 455,692 516,420 Income from operations 328,458 399,108 373,845 Other income (expense) Interest income and other income (expense) 8,732 (2,463 ) 6,045 Interest expense and other financing costs (61,282 ) (43,964 ) (24,652 ) Loss on debt extinguishment — (2,648 ) (4,596 ) Total other income (expense), net (52,550 ) (49,075 ) (23,203 ) Income before income taxes 275,908 350,033 350,642 Income tax expense (62,751 ) (74,522 ) (72,253 ) Net income $ 213,157 $ 275,511 $ 278,389 Earnings per share of common stock Basic $ 3.22 $ 4.02 $ 4.10 Diluted $ 3.12 $ 3.81 $ 3.75 Weighted average number of shares outstanding Basic 66,202 68,481 67,976 Diluted 68,214 72,266 74,151 Dividends declared per share of common stock $ 1.28 $ 1.00 $ 0.53 Investment Management Fees 2023 compared to 2022 – Investment management fees decreased $23.8 million, or 3.6%, to $640.9 million in 2023 from $664.7 million in 2022 due to decrease in average AUM.
The increase was primarily due to 67 Table of Contents term loan prepayments, repurchases of our Common Stock, payment of dividends and payment of taxes related to settlement of equity awards and payment of consideration for acquisition of $149.1 million, $101.2 million, $69.2 million, $31.1 million and $23.8 million, respectively, during 2022. 2021 compared to 2020 – Cash provided by financing activities increased $479.9 million to $227.2 million in 2021 compared to cash used in financing activities of $252.7 million in 2020.
The increase was primarily due to term loan prepayments, repurchases of our Common Stock, payment of dividends and payment of taxes related to settlement of equity awards and payment of consideration for acquisition of $149.1 million, $101.2 million, $69.2 million, $31.1 million and $23.8 million, respectively, during 2022.
The decrease was primarily due to $539.3 million paid in cash in the fourth quarter of 2021 related to the November 1, 2021 and December 31, 2021 closings of the NEC and WestEnd acquisitions, respectively. 2021 compared to 2020 – Cash used in investing activities increased by $544.3 million to $556.6 million in 2021, from $12.3 million in 2020.
The decrease was primarily due to $539.3 million paid in cash in the fourth quarter of 2021 related to the November 1, 2021 and December 31, 2021 closings of the NEC and WestEnd acquisitions, respectively. Financing Activities 2023 compared to 2022 – Cash used in financing activities decreased $123.1 million to $237.1 million in 2023 from $360.2 million in 2022.
The decrease of $1.3 million, or 2.5%, was primarily due to decreases in technology and professional fees. 2021 compared to 2020 – General and administrative expenses were $53.7 million in 2021 compared to $51.2 million in 2020.
Refer to Note 12, Derivatives, for further details on the Swap. 2022 compared to 2021 – General and administrative expenses were $52.4 million in 2022 compared to $53.7 million in 2021. The decrease of $1.3 million, or 2.5%, was primarily due to decreases in technology and professional fees.
The Victory Funds and USAA Funds pay VCS for distribution services and VCS, in turn, pays third‑party distributors. Platform distribution fees are paid by VCM as the investment adviser to the Victory Funds and USAA Funds.
The Victory Funds pay VCS for distribution services and VCS, in turn, pays third‑party distributors. Platform distribution fees are paid by VCM as the investment adviser to the Victory Funds. Platform distribution fees are paid to financial advisors, retirement plan providers and intermediaries for servicing and administering accounts invested in shares of the Victory Funds.
Incentive compensation and equity awards granted to employees and directors were $109.0 million and $17.6 million, respectively, for the year ended December 31, 2021, compared to $87.4 million and $18.1 million, respectively, for the same period in 2020.
Incentive compensation and equity awards granted to employees and directors were $87.1 million and $16.5 million, respectively, for the year ended December 31, 2023, compared to $94.5 million and $17.8 million, respectively, for the same period in 2022.
The $41.0 million net decrease in cash provided by operating activities was due to the combination of a $24.0 million decrease in working capital and a $14.2 million decrease in non-cash items. 2021 compared to 2020 – Cash provided by operating activities was $376.2 million in 2021, compared to $250.6 million in 2020.
The $41.0 million decrease in cash provided by operating activities was due to the combination of a $24.0 million decrease in working capital and a $14.2 million decrease in non-cash items. Investing Activities 2022 compared to 2021 – Cash used in investing activities increased by $1.5 million to $7.8 million in 2023, from $6.3 million in 2022.
The Repriced Term Loans have substantially the same terms as the previously existing term loans, including the same maturity date of July 2026, except that the Repriced Term Loans 65 Table of Contents provided for a reduced applicable margin on LIBOR of 25 basis points.
The Repriced Term Loans provided for substantially the same terms as the 2020 Term Loans, including the same maturity date of July 2026, except that the Repriced Term Loans reduced the applicable margin on LIBOR by 25 basis points, resulting in an applicable margin on LIBOR under the Repriced Term Loans of 2.25%.
Long-term net outflows were $2.5 billion and $4.0 billion for the years ended December 31, 2022 and 2021, respectively.
Long-term gross inflows were $23.3 billion and $33.3 billion for the years ended December 31, 2023 and 2022, respectively. Long-term net outflows were $6.2 billion and $2.5 billion for the years ended December 31, 2023 and 2022, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−3 removed13 unchanged
Biggest changeWhile negative returns in our strategies and net client cash outflows do not directly reduce the assets on our balance sheet (because the assets we manage are owned by our clients, not us), any reduction in the value of our AUM would result in a reduction in our revenues. 69 Table of Contents Exchange Rate Risk – A portion of the accounts that we advise hold investments that are denominated in currencies other than the U.S. dollar.
Biggest changeWhile negative returns in our strategies and net client cash outflows do not directly reduce the assets on our balance sheet (because the assets we manage are owned by our clients, not us), any reduction in the value of our AUM would result in a reduction in our revenues.
In addition, such depreciation could cause our clients to withdraw their assets in favor of other investment alternatives that they perceive to offer higher returns or lower risk, which could cause our revenues and net income to decline further. The value of our AUM was approximately $153 billion at December 31, 2022.
In addition, such depreciation could cause our clients to withdraw their assets in favor of other investment alternatives that they perceive to offer higher returns or lower risk, which could cause our revenues and net income to decline further. The value of our AUM was approximately $167 billion at December 31, 2023.
Assuming 9% of our AUM are invested in securities denominated in currencies other than the U.S. dollar and excluding the impact of any hedging arrangement, a 10% increase or decrease in the value of the U.S. dollar would decrease or increase the fair value of our AUM by approximately $1.4 billion, which would cause an annualized increase or decrease in revenues of approximately $7.3 million at our weighted-average fee rate for the business of 52 basis points for the year ended December 31, 2022.
Assuming 10% of our AUM are invested in securities denominated in currencies other than the U.S. dollar and excluding the impact of any hedging arrangement, a 10% increase or decrease in the value of the U.S. dollar would decrease or increase the fair value of our AUM by approximately $1.7 billion, which would cause an annualized increase or decrease in revenues of approximately $8.8 million at our weighted-average fee rate for the business of 52 basis points for the year ended December 31, 2023.
We believe our clients invest in each of our strategies in order to gain exposure to the portfolio securities of the respective strategies and may implement their own risk management program or procedures.
We believe our clients invest in each of our strategies in order to gain exposure to the portfolio securities of the 70 Table of Contents respective strategies and may implement their own risk management program or procedures.
A 10% increase or decrease in the value of our AUM, if proportionately distributed over all of our strategies, products and client relationships, would cause an annualized increase or decrease in our revenues of approximately $79.6 million at our weighted-average fee rate of 52 basis points for the year ended December 31, 2022.
A 10% increase or decrease in the value of our AUM, if proportionately distributed over all of our strategies, products and client relationships, would cause an annualized increase or decrease in our revenues of approximately $86.8 million at our weighted-average fee rate of 52 basis points for the year ended December 31, 2023.
At December 31, 2022, we were exposed to interest rate risk as a result of the unhedged amounts outstanding under the 2019 Credit Agreement, as amended. Refer to Note 11, Debt, for a description of the amounts outstanding as of such date and the applicable interest rate. 70 Table of Contents
At December 31, 2023, we were exposed to interest rate risk as a result of the amounts outstanding under the 2019 Credit Agreement, as amended. Refer to Note 11, Debt, for a description of the amounts outstanding as of such date and the applicable interest rate. 71 Table of Contents
The same 10% increase or decrease in the value of our total AUM, if attributed entirely to a proportionate increase or decrease in the AUM of the Victory Funds and USAA Funds, to which we provide a range of services in addition to those provided to institutional separate accounts, would cause an annualized increase or decrease in our revenues of approximately $93.3 million at the Victory Funds’ and USAA Funds’ aggregate weighted-average fee rate of 61 basis points for the year ended December 31, 2022.
The same 10% increase or decrease in the value of our total AUM, if attributed entirely to a proportionate increase or decrease in the AUM of the Victory Funds, to which we provide a range of services in addition to those provided to institutional separate accounts, would cause an annualized increase or decrease in our revenues of approximately $101.9 million at the Victory Funds’ aggregate weighted-average fee rate of 61 basis points for the year ended December 31, 2023.
If the same 10% increase or decrease in the value of our total AUM was attributable entirely to a proportionate increase or decrease in the assets of our institutional separate accounts, it would cause an annualized increase or decrease in our revenues of approximately $49.0 million at the weighted-average fee rate across all of our institutional separate accounts of 32 basis points for the year ended December 31, 2022.
If the same 10% increase or decrease in the value of our total AUM was attributable entirely to a proportionate increase or decrease in the assets of our institutional separate accounts, it would cause an annualized increase or decrease in our revenues of approximately $55.1 million at the weighted-average fee rate across all of our institutional separate accounts of 33 basis points for the year ended December 31, 2023.
Removed
We operate in several foreign countries and incur operating expenses associated with these operations. In addition, we have revenue and revenue-sharing arrangements that are denominated in non-U.S. currencies. We do not believe foreign currency fluctuations materially affect our results of operations.
Added
Exchange Rate Risk – A portion of the accounts that we advise hold investments that are denominated in currencies other than the U.S. dollar.
Removed
There is no change to the $450 million notional value, the July 1, 2026 expiration date, the quarterly payment frequency or the designated three-month maturity from the Swap Amendment.
Added
On October 30, 2023, the Company monetized the gain on the Swap and entered into an agreement to terminate the Swap, which was effective on October 30, 2023. Refer to Note 12, Derivatives, for further information on the Swap.
Removed
The interest rate effectively fixed by the Swap on $450 million of the Company’s outstanding term loan debt through July 1, 2026 changed from 3.215% to 3.149% as a result of the Swap Amendment. Refer to Note 12, Derivatives, for further information on the Swap.

Other VCTR 10-K year-over-year comparisons