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What changed in VIRTUS INVESTMENT PARTNERS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of VIRTUS INVESTMENT PARTNERS, 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.

+213 added−246 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-27)

Top changes in VIRTUS INVESTMENT PARTNERS, INC.'s 2023 10-K

213 paragraphs added · 246 removed · 186 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

41 edited+11 added−8 removed20 unchanged
Biggest changeOur programs and practices in (i) workforce diversity, (ii) inclusive culture, (iii) community participation, (iv) employee involvement, and (v) philanthropy are designed to help us deliver on our commitment to maintaining an organization that is diverse, equitable, and inclusive for all employees. ▪ We collaborate with organizations, institutions, and referral sources to identify diverse talent pools and increase the diversity of potential candidates. ▪ We prohibit any form of discrimination and have no tolerance for harassment in any form or any behavior that may contribute to a hostile, intimidating, unwelcoming, and/or inaccessible work environment. ▪ We engage with employees across the organization to raise the awareness of and advance our diversity and inclusion efforts. ▪ We and our employees have a rich history of community engagement and philanthropic activities that support the diverse needs of the communities in which we have a business presence.
Biggest changePrograms and practices - including those supporting workforce diversity, an inclusive culture, employee involvement in community activities and corporate philanthropy - are designed to help us deliver on our commitment to maintaining an organization that is diverse and inclusive for all employees. ▪ As an employer, we prohibit any form of discrimination and have no tolerance for harassment in any form or any behavior that may contribute to a hostile, intimidating, unwelcoming, and/or inaccessible work environment. ▪ Collaborative efforts with organizations, institutions, and referral sources support us in identifying diverse talent pools, increasing the diversity of potential candidates, and engaging with employees across the organization to raise the awareness of and advance our inclusion efforts. ▪ Community engagement is ingrained into our culture.
Item 1. Business. Organization Virtus Investment Partners, Inc. (the "Company"), a Delaware corporation, commenced operations on November 1, 1995 and became an independent publicly traded company on December 31, 2008. Our Business We provide investment management and related services to individuals and institutions.
Item 1. Business. Organization Virtus Investment Partners, Inc. (the "Company"), a Delaware corporation, commenced operations on November 1, 1995 and became an independent publicly traded company on December 31, 2008. Our Business We provide investment management and related services to institutions and individuals.
The percentages listed represent the range of management advisory fees paid by the funds, from the highest to the lowest. The range indicated includes the impact of breakpoints at which management advisory fees for certain of the funds in each fund type decrease as assets in such funds increase.
The percentages listed represent the range of management advisory fees paid by the funds, from the highest to the lowest. The range indicated includes the impact of breakpoints at which management advisory fees for certain of the funds in each fund type decrease as assets in such funds increase.
We have broad distribution access in the U.S. retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and registered investment advisers, banks and insurance companies. In many of these firms, we have a number of products that are on preferred "recommended" lists and on fee-based advisory programs.
We have broad distribution access in the U.S. retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and registered investment advisers, banks and insurance companies. In many of these firms, we have a number of products that are on preferred or "recommended" lists and on fee-based advisory programs.
For funds managed by subadvisers, the day-to-day investment management of the fund's portfolio is performed by the subadviser, which receives a management fee based on a percentage of the Adviser's management fee. Each fund bears all expenses associated with its operations.
For funds managed by subadvisers, the day-to-day investment management of the fund's portfolio is performed by the subadviser, which receives a fee based on a percentage of the management fee. Each fund bears all expenses associated with its operations.
(2) Represents assets under management of institutional separate and commingled accounts, including structured products. Open-End Funds Our U.S. retail funds are offered in a variety of asset classes (domestic, global and international equity, taxable and non-taxable fixed income, multi-asset and alternative investments), market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental and quantitative).
(2) Represents assets under management of institutional separate and commingled accounts, including structured products. Open-End Funds Our U.S. retail funds are offered in a variety of asset classes (domestic, global and international equity, taxable and non-taxable fixed income, multi-asset and alternatives), market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental and quantitative).
Our broker-dealer is subject to the net capital rule of the Securities and Exchange Commission (the "SEC"), which is designed to enforce minimum standards regarding the general financial condition and liquidity of broker-dealers.
Our broker-dealer is subject to, among others, the net capital rule of the Securities and Exchange Commission (the "SEC"), which is designed to enforce minimum standards regarding the general financial condition and liquidity of broker-dealers.
We depend upon our key personnel to manage our business, including our senior executives, portfolio managers, securities analysts, investment advisers, sales personnel and other professionals. The retention of our key investment personnel is material to the management of our business.
We rely upon key personnel to manage our business, including senior executives, portfolio managers, securities analysts, investment advisers, sales personnel and other professionals. The retention of senior executives and key investment personnel is material to the management of our business.
A copy of our Corporate Governance Principles, our Code of Conduct and the charters of our Audit Committee, Compensation Committee, and Governance Committee are posted on our website at http://ir.virtus.com under "Corporate Governance" and are available in print to any person who requests copies by contacting Investor Relations by email to: investor.relations@virtus.com or by mail to Virtus Investment Partners, Inc., c/o Investor Relations, One Financial Plaza, Hartford, CT 06103.
A copy of our Corporate Governance Guidelines, our Code of Conduct and the charters of our Audit Committee, Compensation Committee, and Governance Committee are posted on our website at http://ir.virtus.com under "Corporate Governance" and are available in print without charge to any person who requests copies by contacting Investor Relations by email to: investor.relations@virtus.com or by mail to Virtus Investment Partners, Inc., c/o Investor Relations, One Financial Plaza, Hartford, CT 06103.
Our private client business is marketed directly to individual clients by financial advisory teams at our affiliated investment managers. Institutional Our institutional distribution resources include affiliate specific institutional sales teams primarily focused on the U.S. market, supported by shared consultant relation support and non-U.S. institutional distribution.
Our private client business is marketed directly to individual clients by financial advisory teams at our affiliated investment managers. Institutional Our institutional distribution resources include affiliate-specific institutional sales teams primarily focused on the U.S. market, supported by shared consultant relations and U.S. and non-U.S. institutional sales distribution.
Our retail products include mutual funds registered pursuant to the Investment Company Act of 1940, as amended ("U.S. retail funds"); Undertaking for Collective Investment in Transferable Securities and Qualifying Investor Funds (collectively, "global funds") and collectively with U.S. retail funds, variable insurance funds, exchange-traded funds ("ETFs"), the "open-end funds"); closed-end funds (collectively, with open-end funds, the "funds"); and retail separate accounts that include intermediary-sold and private client accounts.
Our products include mutual funds registered pursuant to the Investment Company Act of 1940, as amended ("U.S. retail funds"); Undertaking for Collective Investment in Transferable Securities and Qualifying Investor Funds (collectively, "global funds") and collectively with U.S. retail funds, variable insurance funds, exchange-traded funds ("ETFs"), the "open-end funds"); closed-end funds (collectively, with open-end funds, the "funds"); and retail separate accounts that include intermediary-sold and private client accounts; and institutional separate and commingled accounts, including structured products.
We also act as collateral manager for 12 collateralized loan obligations ("CLOs"). In addition, we provide subadvisory services to unaffiliated mutual funds.
We also act as collateral manager for nine collateralized loan obligations ("CLOs"). In addition, we provide subadvisory services to unaffiliated mutual funds.
Subadvisory fees paid on funds managed by unaffiliated subadvisers are not reflected in the percentages listed. Retail Separate Accounts Intermediary-Sold Managed Accounts Intermediary-sold managed accounts are individual investment accounts that are contracted through intermediaries as part of investment programs offered to retail investors.
Subadvisory fees paid on funds managed by unaffiliated subadvisers are not reflected in the percentages listed. Retail Separate Accounts Intermediary-Sold Managed Accounts Intermediary-sold managed accounts are individual investment accounts that are contracted through intermediaries as part of investment programs offered to retail investors. Private Client Accounts Private client accounts are investment accounts offered by certain affiliates directly to individual investors.
Our broker-dealer serves as the principal underwriter and distributor of our funds under sales agreements with unaffiliated financial intermediaries, provides market advisory services to sponsors of retail separate accounts, and is also a program manager and distributor of a qualified tuition plan under Section 529 of the Internal Revenue Code ("529 Plan").
Our broker-dealer serves as the principal underwriter and distributor of our funds, provides market advisory services to sponsors of retail separate accounts, and is also a program manager and distributor of a qualified tuition plan under Section 529 of the Internal Revenue Code ("529 Plan").
Information contained on the website is not incorporated by reference or otherwise considered part of this document.
Information contained on the website is not incorporated by reference or otherwise considered part of this document. 8 Table of Contents
Other fee earning assets are not included in our assets under management. At December 31, 2022, we had $2.5 billion of other fee earning assets.
Other fee earning assets are not included in our assets under management. At December 31, 2023, we had $2.6 billion of other fee earning assets.
We monitor our managers' services by assessing their performance, style and consistency and the discipline with which they apply their investment process. 1 Table of Contents Our affiliated investment managers, their respective investment styles and assets under management as of December 31, 2022 were as follows: Affiliated Manager Headquarters Investment Style Assets (in billions) Ceredex Value Advisors Founded 1995 Orlando, FL Value Equities $ 7.0 Duff & Phelps Investment Management Founded 1932 Chicago, IL Listed Real Assets $ 12.0 Kayne Anderson Rudnick Investment Management Founded 1984 Los Angeles, CA Quality-Oriented Equities $ 47.4 Newfleet Asset Management (1) Founded 2011 Hartford, CT Multi-Sector Fixed Income $ 12.1 NFJ Investment Group Founded 1989 Dallas, TX Global Value Equities $ 6.8 Seix Investment Advisors (1) Founded 1992 Park Ridge, NJ Investment Grade and Leveraged Finance Fixed Income $ 14.4 Silvant Capital Management Founded 2008 Atlanta, GA Growth Equities $ 1.7 Stone Harbor Investment Partners (1) Founded 2006 New York, NY Emerging Markets Debt $ 6.6 Sustainable Growth Advisers Founded 2003 Stamford, CT Global Growth Equities $ 20.8 Westchester Capital Management Founded 1989 Valhalla, NY Event-Driven Equity $ 5.1 Virtus Multi-Asset (1) Hartford, CT Global Multi-Asset $ 0.2 Virtus Systematic (1) San Diego, CA Systematic Equity $ 0.5 Zevenbergen Capital Investments (2) Founded 1987 Seattle, WA High Growth Equity $ 1.3 (1) Operates as a division within a broader legal entity.
We monitor our managers' services by assessing their performance, style and consistency and the discipline with which they apply their investment process. 1 Table of Contents Our affiliated investment managers, their respective investment styles and assets under management as of December 31, 2023 were as follows: Affiliated Manager Headquarters Investment Style Assets (in billions) AlphaSimplex Founded 1999 Boston, MA Systematic Alternatives $ 7.4 Ceredex Value Advisors Founded 1995 Orlando, FL Value Equity $ 6.2 Duff & Phelps Investment Management Founded 1932 Chicago, IL Listed Real Assets $ 12.3 Kayne Anderson Rudnick Investment Management Founded 1984 Los Angeles, CA Quality-Focused Equity $ 59.6 Newfleet Asset Management (1) Founded 2011 Hartford, CT Multi-Sector Fixed Income $ 14.7 NFJ Investment Group Founded 1989 Dallas, TX Global Value Equity $ 6.6 Seix Investment Advisors (1) Founded 1992 Park Ridge, NJ Specialty Fixed Income $ 13.1 Silvant Capital Management Founded 2008 Atlanta, GA Growth Equity $ 2.2 Stone Harbor Investment Partners (1) Founded 2006 New York, NY Emerging Markets Debt $ 5.6 Sustainable Growth Advisers Founded 2003 Stamford, CT Global Growth Equity $ 26.4 Virtus Multi-Asset (2) Founded 2022 Hartford, CT Global Multi-Asset $ 0.2 Virtus Systematic (2) Founded 2022 San Diego, CA Systematic Global Equity $ 0.4 Westchester Capital Management Founded 1989 Valhalla, NY Event-Driven Alternatives $ 3.7 Zevenbergen Capital Investments (3) Founded 1987 Seattle, WA Disruptive Growth Equity $ 1.9 (1) Operates as a division of Virtus Fixed Income Advisors LLC, a wholly owned subsidiary of the Company.
We have competitive salaries and offer a comprehensive suite of benefits, including programs that support wellness, financial security, and professional development. ▪ We regularly assess and benchmark our compensation and benefit practices and conduct internal and external pay comparisons to assist us in ensuring that employees are compensated fairly, equitably and competitively. ▪ We offer career enhancement opportunities to maximize each employee's potential and develop leaders throughout the organization. ▪ We provide an education assistance program with tuition reimbursement for employees who wish to continue their education to secure increased responsibility and growth within their careers. ▪ We offer benefits that promote financial and personal security including comprehensive insurance coverage, matching 401(k) employee contributions, an employee stock purchase plan and employee reimbursement of work-related expenses. ▪ Our wellness programs include health screenings and wellness earned premium rebates, as well as paid time off for vacation, illness, bereavement, parental and family care leave, and volunteer activities.
As part of our offerings, we: ▪ Regularly assess and benchmark our compensation and benefit practices and conduct internal and external pay comparisons to assist us in ensuring that employees are compensated fairly, equitably and competitively. ▪ Offer career enhancement opportunities to maximize each employee's potential and develop leaders throughout the organization. ▪ Provide an education assistance program with tuition reimbursement for employees who wish to continue their education to secure increased responsibility and growth within the organization and in their careers. ▪ Offer benefits that promote financial and personal security including comprehensive medical, dental, prescription, disability and life insurance coverages as well as an employee assistance program; company match to employees' 401(k) contributions; and an employee stock purchase plan. ▪ Provide wellness programs that include health screenings and wellness earned premium rebates, as well as paid time off for vacation, illness, bereavement, parental and family care leave, and volunteer activities.
Subadvisory fees paid on funds managed by unaffiliated subadvisers are not reflected in the percentages listed. 3 Table of Contents Closed-End Funds Our closed-end funds are offered in a variety of asset classes such as equity, fixed income and multi-asset.
Subadvisory fees paid on funds managed by unaffiliated subadvisers are not reflected in the percentages listed. 3 Table of Contents Closed-End Funds Our closed-end funds are offered in a variety of asset classes such as equity, fixed income, multi-asset and alternatives, each of which is traded on the New York Stock Exchange.
Assets Under Management by Product as of December 31, 2022 Products (in billions) Open-end funds (1) $ 53.0 Closed-end funds 10.4 Retail separate accounts 35.4 Institutional accounts (2) 50.7 Total Assets Under Management $ 149.4 (1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
Assets Under Management by Product as of December 31, 2023 Products (in billions) Open-end funds (1) $ 56.1 Closed-end funds 10.0 Retail separate accounts 43.2 Institutional accounts (2) 63.0 Total Assets Under Management $ 172.3 (1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
Our Investment Management, Administration and Shareholder Services Our investment management, administration and shareholder service fees earned in each of the last three years were as follows: Years Ended December 31, (in thousands) 2022 2021 2020 Open-end funds $ 335,585 $ 395,152 $ 250,030 Closed-end funds 63,841 63,301 36,833 Retail separate accounts 171,509 174,919 104,932 Institutional accounts 157,404 148,213 113,543 Total investment management fees 728,339 781,585 505,338 Administration fees 61,344 73,113 41,582 Shareholder service fees 24,518 29,418 17,881 Total $ 814,201 $ 884,116 $ 564,801 Investment Management Fees We provide investment management services through our affiliated investment advisers (each an "Adviser") pursuant to investment management agreements.
Our Investment Management, Administration and Shareholder Services Our investment management, administration and shareholder service fees earned in each of the last three years were as follows: Years Ended December 31, (in thousands) 2023 2022 2021 Open-end funds $ 305,238 $ 335,585 $ 395,152 Closed-end funds 58,136 63,841 63,301 Retail separate accounts 171,357 171,509 174,919 Institutional accounts 176,744 157,404 148,213 Total investment management fees 711,475 728,339 781,585 Administration fees 52,858 61,344 73,113 Shareholder service fees 20,999 24,518 29,418 Total $ 785,332 $ 814,201 $ 884,116 Investment Management Fees We provide investment management services through our affiliated investment managers (each an "Adviser") pursuant to investment management agreements.
Our Code of Ethics also imposes restrictions with respect to personal transactions in securities that are held, recently sold, or contemplated for purchase by our mutual funds, and certain transactions are restricted so as to avoid the possibility of improper use of information relating to the management of client accounts.
Our Code of Ethics also imposes restrictions with respect to personal transactions in securities that are held, recently sold, or contemplated for purchase by our mutual funds, and certain transactions are restricted so as to avoid the possibility of improper use of information relating to the management of client accounts. 7 Table of Contents Human Capital As of December 31, 2023, we employed 824 employees and operated offices throughout the U.S., and in the U.K. and Singapore.
Our investment strategies are available in a diverse range of styles and disciplines, managed by differentiated investment managers. We have offerings in various asset classes (equity, fixed income, multi-asset and alternative), geographies (domestic, global, international and emerging), market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental and quantitative).
We have offerings in various asset classes (equity, fixed income, multi-asset and alternatives), geographies (domestic, global, international and emerging), market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental and quantitative).
Our global funds are sold to non-U.S. institutional and retail clients who are not citizens or residents of the U.S. Our officers, directors and employees may, from time to time, own securities that are also held by one or more of our funds or strategies offered to clients.
Our officers, directors and employees may, from time to time, own securities that are also held by one or more of our funds or strategies offered to clients.
Summary information about our institutional accounts as of December 31, 2022 was as follows: Asset Class Total Assets (in millions) Equity Domestic $ 20,112 International 1,241 Global 6,703 Fixed Income Leveraged finance 12,338 Investment grade 5,752 Alternative 3,653 Multi-Asset 864 Total Institutional Accounts 50,663 Other Fee Earning Assets Other fee earning assets include assets for which we provide services for an asset-based fee but do not serve as the investment adviser.
Summary information about our institutional accounts as of December 31, 2023 was as follows: Asset Class Total Assets (in millions) Equity Domestic $ 23,970 International 1,610 Global 8,271 Fixed Income Leveraged finance 10,303 Investment grade 8,923 Alternatives 8,926 Multi-Asset 966 Total Institutional Accounts $ 62,969 Other Fee Earning Assets Other fee earning assets include assets for which we provide services for an asset-based fee but do not serve as the investment adviser.
Our global funds are registered with and subject to regulation by the Central Bank of Ireland. New regulations or interpretations of existing laws may result in enhanced disclosure obligations, including with respect to climate change or other environmental, social and governance ("ESG") matters, which could negatively affect us or materially increase our regulatory burden.
Our global funds are registered with and subject to regulation by the Central Bank of Ireland. New regulations or interpretations of existing laws may result in enhanced disclosure obligations.
Our Investment Managers We provide investment management services through our affiliated investment managers who are registered under the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"). The investment managers are responsible for portfolio management activities for our retail and institutional products operating under advisory, subadvisory or collateral management agreements.
We also provide subadvisory services to other investment advisers and serve as the collateral manager for structured products. Our Investment Managers We provide investment management services through our affiliated investment managers who are registered directly and indirectly as investment advisers under the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act").
We also use the investment management services of select unaffiliated managers to sub-advise certain of our open- and closed-end funds.
The investment managers are responsible for portfolio management activities for our retail and institutional products operating under advisory, subadvisory or collateral management agreements. We also use the investment management services of select unaffiliated managers to sub-advise certain of our open- and closed-end funds.
Summary information about our open-end funds as of December 31, 2022 was as follows: Asset Class Number of Funds Total Assets (in millions) Advisory Fee Range % (1) Domestic Equity 27 $ 18,021 2.15 - 0.29 Fixed Income 46 15,298 1.85 - 0.21 International Equity 14 4,077 1.20 - 0.21 Multi-Asset 4 5,662 0.75 - 0.45 Alternative 16 6,319 1.25 - 0.45 Specialty Equity 9 2,391 0.95 - 0.59 Global Equity 7 1,232 1.85 - 0.65 Total Open-End Funds 123 $ 53,000 (1) Percentage of average daily net assets.
Summary information about our open-end funds as of December 31, 2023 was as follows: Asset Class Number of Funds Total Assets (in millions) Advisory Fee Range % (1) Domestic Equity 28 $ 20,159 2.15 - 0.29 Fixed Income 43 14,454 1.85 - 0.17 International Equity 13 3,364 1.85 - 0.21 Multi-Asset 4 5,777 0.75 - 0.45 Alternatives 17 7,456 1.65 - 0.45 Specialty Equity 10 2,937 1.80 - 0.59 Global Equity 7 1,915 1.85 - 0.55 Total Open-End Funds 122 $ 56,062 (1) Percentage of average daily net assets.
Human Capital As of December 31, 2022, we employed 772 employees and we operate offices in the U.S., UK and Singapore. We strive to attract and retain talented individuals by creating an environment of excellence and opportunity that serves as a foundation for all employees to reach their potential and make meaningful contributions to the organization.
We strive to attract and retain talented individuals by creating an environment of excellence and opportunity that serves as a foundation for all employees to reach their potential and make meaningful contributions to the organization. We offer competitive salaries and a comprehensive suite of benefits, including programs that support wellness, financial security, and professional development.
We managed the following closed-end funds as of December 31, 2022, each of which is traded on the New York Stock Exchange: Asset Class Number of Funds Total Assets (in millions) Advisory Fee Range % (1) Multi-Asset 5 $ 7,159 1.00 - 0.50 Fixed Income 7 1,746 1.00 - 0.50 Equity 1 786 1.25 Alternatives 1 670 1.00 Total Closed-End Funds 14 $ 10,361 (1) Percentage of average weekly or daily net assets.
Summary information about our closed-end funds as of December 31, 2023 was as follows: Asset Class Number of Funds Total Assets (in millions) Advisory Fee Range % (1) Multi-Asset 5 $ 7,058 1.00 - 0.50 Fixed Income 6 1,572 1.00 - 0.50 Equity 1 826 1.25 Alternatives 1 570 1.00 Total Closed-End Funds 13 $ 10,026 (1) Percentage of average weekly or daily net assets.
International Growth Equity $ 2.6 Other Risk-Based Quantitative, Income-Focused Equity and Systematic Quantitative $ 1.1 2 Table of Contents Our Investment Products Our assets under management are in open-end funds, closed-end funds, retail separate accounts and institutional accounts.
Summary information regarding our select unaffiliated subadvisers, their respective investment styles and assets under management as of December 31, 2023 were as follows: Unaffiliated Subadviser Investment Style Assets (in billions) Voya Investment Management Income & Growth and Convertible $ 9.7 Other International Growth Equity, Income-Focused Equity, Risk Managed and Quantitative $ 2.3 2 Table of Contents Our Investment Products Our assets under management are in open-end funds, closed-end funds, retail separate accounts and institutional accounts.
We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers, each having its own distinct investment style, autonomous investment process, individual brand, and select unaffiliated subadvisers. By offering a broad array of products, we believe we can appeal to a greater number of investors and have offerings across market cycles and through changes in investor preferences.
By offering a broad array of products, we believe we can appeal to a greater number of investors and have offerings across market cycles and through changes in investor preferences. Through our multi-manager model, we provide our affiliated managers with retail and institutional distribution capabilities and business and operational support.
Services provided include investment and wealth advisory services employing both affiliated and unaffiliated investment managers and select third-party business partners.
Services provided include wealth advisory and investment services that include third-party investment services.
The financial services industry is highly regulated, and failure to comply with related laws and regulations can result in the revocation of registrations, the imposition of censures or fines and the suspension or expulsion of a firm and/or its employees from the industry.
Our competitors, many of which are larger than us, often offer similar products and use similar distribution sources, and may also offer less expensive products, have greater access to key distribution channels and have greater resources than we do. 6 Table of Contents Our Regulatory Matters The financial services industry is highly regulated, regulations are complex, and failure to comply with related laws and regulations can result in the revocation of registrations, the imposition of censures or fines and the suspension or expulsion of a firm and/or its employees from the industry.
The collective sum of our individual differences, backgrounds, unique skills, and life experiences creates an environment where employees and the company can achieve the highest levels of performance.
Our value as a company derives from the talents and diversity of all employees, and we are committed to creating and maintaining an environment where every employee is treated with dignity and respect. The collective sum of employees' backgrounds, unique skills, and life experiences creates an environment where they and the company can achieve the highest levels of performance.
Each of our affiliated investment managers and unaffiliated subadvisers is registered with the SEC under the Investment Advisers Act. Our affiliated investment managers operating outside of the U.S. are also subject to regulation by various regulatory authorities and exchanges in the relevant jurisdictions, including, for those active in the United Kingdom (the "UK"), the Financial Conduct Authority (the "FCA").
The Investment Company Act governs the operations of mutual funds and imposes obligations on their advisers, including investment restrictions and other governance, compliance, reporting and fiduciary obligations with respect to the management of those funds. Affiliated investment managers operating outside of the U.S. are also subject to regulation by various regulatory authorities and exchanges in the relevant jurisdiction.
Summary information about our private client accounts as of December 31, 2022 was as follows: Asset Class Total Assets (in millions) Multi-Asset $ 6,054 Fixed Income Investment grade 110 Leveraged finance 3 Equity Domestic 25 Total Private Client Accounts $ 6,192 4 Table of Contents Institutional Accounts Our institutional clients include corporations, multi-employer retirement funds, public employee retirement systems, foundations and endowments.
The following table summarizes our retail separate accounts by asset class as of December 31, 2023: Total Assets (in millions) Intermediary-Sold Managed Accounts Private Client Accounts Equity Domestic $ 33,105 $ 29 International equity 81 — Global equity 366 — Specialty equity 70 — Fixed Income Leveraged finance 1,444 2 Investment grade 196 298 Multi-Asset (1) 175 7,435 Alternatives 1 — Total Retail Separate Accounts $ 35,438 $ 7,764 (1) For private client accounts, consists of individual client accounts with substantial holdings in at least two of the following asset classes: equity, fixed income, and alternatives. 4 Table of Contents Institutional Accounts Our institutional clients include corporations, multi-employer retirement funds, public employee retirement systems, foundations and endowments.
Senior and subordinated management fees are calculated at a contractual fee rate applied against the end of the preceding quarter par value of the total collateral being managed with subordinated fees being recognized only after certain portfolio criteria are met.
Fees for CLOs are generally 5 Table of Contents calculated at a contractual fee rate applied against the end of the preceding quarter par value of the total collateral being managed. Administration Fees We provide various administrative services to our U.S. retail funds, ETFs and the majority of our closed-end funds.
Through our multi-manager model, we provide our affiliated managers with centralized U.S. retail distribution capabilities and offer institutional sales and business support resources to support affiliate operations. We offer investment strategies for individual and institutional investors in different investment products and through multiple distribution channels.
We offer investment strategies for institutional and individual investors in different investment products and through multiple distribution channels. Our investment strategies are available in a diverse range of styles and disciplines, managed by differentiated investment managers.
We have distribution teams that operate offices in the UK and Singapore and are subject to regulation by both the FCA and Monetary Authority of Singapore, respectively. Each of our U.S. sponsored funds is registered with the SEC under the Investment Company Act of 1940, as amended ("the Investment Company Act").
The ability to transact business in these jurisdictions and to conduct cross-border activities, is subject to the continuing availability of regulatory authorizations and exemptions. We have distribution teams that operate offices in the United Kingdom and Singapore and are subject to regulation by the Financial Conduct Authority and Monetary Authority of Singapore, respectively.
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Our investment strategies are offered to institutional clients through separate accounts and pooled, or commingled, structures. We also provide subadvisory services to other investment advisers and serve as the collateral manager for structured products.
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We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers, each having its own distinct investment style, autonomous investment process, individual brand, as well as from select unaffiliated managers for certain of our retail funds.
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(2) Affiliated through ownership of a minority interest. Our select unaffiliated subadvisers, their respective investment styles and assets under management as of December 31, 2022 were as follows: Unaffiliated Subadviser Investment Style Assets (in billions) Voya Investment Management Income & Growth and Convertible $ 9.8 Vontobel Asset Management, Inc.
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(2) Operates as a division of Virtus Investment Advisers, Inc., a wholly owned subsidiary of the Company. (3) Affiliated through ownership of a minority interest.
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Summary information about our intermediary-sold managed accounts as of December 31, 2022 was as follows: Asset Class Total Assets (in millions) Equity Domestic $ 26,789 Global 357 Specialty 77 International 82 Fixed Income Leveraged finance 1,464 Investment grade 193 Multi-Asset 198 Total Intermediary-Sold Managed Accounts $ 29,160 Private Client Accounts Private client accounts are investment accounts offered by certain affiliates directly to individual investors.
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We are subject to regulation by the SEC, other federal and state agencies, certain international regulators, as well as FINRA and other self-regulatory organizations. Each of our affiliated investment managers is registered directly and indirectly as an investment adviser with the SEC under the Investment Advisers Act.
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Fees for CLOs, for which we act as the collateral manager, 5 Table of Contents consist of senior, subordinated and, in certain instances, incentive management fees.
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The Investment Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties, compliance and disclosure obligations, and operational and recordkeeping requirements. Certain investment management affiliates are also members of the National Futures Association and are regulated by the U.S.
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Incentive fees on certain of our structured products are typically a percentage of the excess cash flows available to holders of the subordinated notes, above a threshold level internal rate of return. Administration Fees We provide various administrative services to our U.S. retail funds, ETFs and the majority of our closed-end funds.
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Commodity Futures trading Commission ("CFTC") with respect to the management of funds and other products that utilize futures, swaps, or other CFTC regulated instruments.
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Our competitors, many of which are larger than us, often offer similar products and use similar distribution sources, and may also offer less expensive products, have greater access to key distribution channels and have greater resources than we do. 6 Table of Contents Our Regulatory Matters We are subject to regulation by the SEC and other federal and state agencies, as well as FINRA and other self-regulatory organizations.
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Our affiliated investment managers also advise registered and unregistered funds in the U.S. and other jurisdictions and are subject to the regulatory requirements in the jurisdiction where those funds are sponsored or offered, including with respect to mutual funds and closed end funds in the U.S., the Investment Company Act of 1940, as amended (the "Investment Company Act").
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Most aspects of our investment management business are subject to various U.S. federal and state laws and regulations. Our U.S.-domiciled open-end mutual funds are generally available for sale and are qualified in all 50 states, Washington, D.C., Puerto Rico, Guam and the U.S. Virgin Islands.
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Some of our investment affiliates are subject to directives and regulations in the European Union and other jurisdictions related to funds, such as the Undertakings for the Collective Investment of Transferable Securities ("UCITS") Directive and the Alternative Investment Fund Managers Directive ("AIFMD"), with respect to depository functions, remuneration policies and sanctions and other matters.
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The departure of our key investment personnel could cause us to lose certain client accounts, which could adversely affect our business. 7 Table of Contents We believe our value as a company derives from the talents and diversity of our employees, and we are committed to creating and maintaining an environment where every employee is treated with dignity and respect.
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Our broker-dealer is subject to SEC and FINRA rules and regulations, including extensive regulatory requirements related to sales practices, registration of personnel, compliance and supervision and compensation and disclosure. Sales and marketing activities of investment management services are also subject to regulation by non-U.S. authorities in the jurisdictions in which investment management products and services are offered.
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Due to the extensive laws and regulations to which we and our investment management affiliates are subject, we and our investment management affiliates must devote substantial time, expense, and effort to remain current on, and to address, legal and regulatory compliance matters.
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We and our investment management affiliates have established compliance programs to address regulatory compliance and we have experienced legal and compliance professionals in place to address these requirements. We also have established legal and regulatory advisers in each of the countries where we conduct business.
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The Company and employees have supported a wide range of philanthropic activities that help to enrich and sustain the communities in which we have a business presence.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFurthermore, any such matters at these unaffiliated firms may have an adverse impact on our business or reputation or expose us to regulatory scrutiny, including with respect to our oversight of such firms. We periodically negotiate provisions and renewals of these relationships, and we cannot provide assurance that such terms will remain acceptable to us or the unaffiliated firms.
Biggest changeProblems stemming from the business activities of those firms may negatively impact or disrupt their operations or expose them to disciplinary action or reputational harm. Furthermore, any such matters at these unaffiliated firms may have an adverse impact on our business or reputation or expose us to regulatory scrutiny, including with respect to our oversight of such firms.
Our clients include our sponsored fund investors, represented by boards of trustees or directors (the "boards"), managed account program sponsors, individual private clients, and institutional clients. Our investment management agreements with these clients may be terminated on short notice and without penalty. As a result, there would be little impediment for these clients to terminate our agreements.
Our clients include our sponsored fund investors, represented by boards of trustees or directors (the "fund boards"), managed account program sponsors, individual private clients, and institutional clients. Our investment management agreements with these clients may be terminated on short notice and without penalty. As a result, there would be little impediment for these clients to terminate our agreements.
We are highly dependent on access to these various distribution systems to maintain and raise assets under management. These distributors are generally not contractually required to distribute our products and typically offer their clients various investment products and services, including proprietary products and services, in addition to, and in competition with, our products and services.
We are highly dependent on access to these distribution systems to raise and maintain assets under management. These distributors are generally not contractually required to distribute our products and typically offer their clients various investment products and services, including proprietary products and services, in addition to, and in competition with, our products and services.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK We may not pay quarterly dividends as intended or at all . The declaration, payment and determination of the amount of our quarterly dividends may change at any time.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK We may not pay dividends as intended or at all. The declaration, payment and determination of the amount of our quarterly dividends may change at any time.
In making decisions regarding our quarterly dividends, we consider general economic and business conditions as well as our strategic plans and prospects, business and investment opportunities, financial condition and operating results, working capital requirements and anticipated cash needs, contractual and regulatory restrictions (including under the terms of our credit agreement) and other obligations, that may have implications on the payment of distributions by us to our shareholders or by our subsidiaries to us, and such other factors as we may deem relevant.
In making decisions regarding our dividends, we consider general economic and business conditions as well as our strategic plans and prospects, business and investment opportunities, financial condition and operating results, working capital requirements and anticipated cash needs, contractual and regulatory restrictions (including under the terms of our credit agreement) and other obligations, that may have implications on the payment of distributions by us to our shareholders or by our subsidiaries to us, and such other factors as we may deem relevant.
The sophistication of cyber threats continues to increase, including through the use of "ransomware" and phishing attacks, and our controls and the preventative actions we take to reduce the risk of cyber incidents and protect our information systems may be insufficient to detect or prevent unauthorized access, cyber-attacks or other security breaches to our computer systems or those of third parties with whom we do business.
The sophistication of cyber threats continues to increase, including through the use of "ransomware" and phishing attacks, and our controls and the preventative actions we take to reduce the risk of cyber incidents and protect our information systems may be insufficient to detect or prevent unauthorized access, cyber-attacks or other security breaches to our systems or those of third parties with whom we do business.
We may need to obtain additional capital in the future that may not be available to us in sufficient amounts or on acceptable terms, which could have an adverse impact on our business. Our ability to meet our future cash needs is dependent upon our ability to generate or have short-term access to cash.
We may need to obtain additional capital that may not be available to us in sufficient amounts or on acceptable terms, which could have an adverse impact on our business. Our ability to meet our future cash needs is dependent upon our ability to generate or have short-term access to cash.
Under our credit agreement, we are required to use a portion of our cash flow to service interest and make required annual principal payments, which will restrict our cash flow available for other purposes. The credit agreement also contains covenants that may limit our ability to return capital to shareholders.
Under our credit agreement, we are required to use a portion of our cash flow to service interest and make required annual principal payments, which may restrict our cash flow available for other purposes. The credit agreement also contains covenants that may limit our ability to return capital to shareholders.
If an assignment occurs, we cannot be certain that the Company will be able to obtain the necessary approvals or client consents. The withdrawal, renegotiation or termination of any investment management contract relating to a material portion of assets under management would have an adverse impact on our results of operations and financial condition.
If an assignment occurs, we cannot be certain that the Company will be able to obtain the necessary approvals or client consents. The withdrawal, renegotiation or termination of any investment management agreement relating to a material portion of assets under management would have an adverse impact on our results of operations and financial condition.
The boards of our sponsored funds may deem it to be in the best interests of a fund's shareholders to make decisions adverse to us, such as reducing the compensation paid to us, requesting that we subsidize fund expenses over certain thresholds, or imposing restrictions on our management of the fund.
The fund boards may deem it to be in the best interests of a fund's shareholders to make decisions adverse to us, such as reducing the compensation paid to us, requesting that we subsidize fund expenses over certain thresholds, or imposing restrictions on our management of the fund.
Our technology systems, and those of third-party service providers, are critical to our operations. The ability to consistently and reliably obtain accurate securities pricing information, process client portfolio and fund shareholder transactions, and provide reports and other customer service to clients is an essential part of our business.
Our technology systems, and those of third-party service providers, are critical to our operations. The ability to consistently and reliably obtain accurate securities pricing information, process client portfolio and fund shareholder transactions, and provide reports and other services to clients is an essential part of our business.
A breach of our technology systems, or of those of third-party service providers, through cyber-attacks or failure to manage and sufficiently secure our technology environment could result in interruptions or malfunctions in the operations of our business, loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by a breach or to recover access to our systems, additional costs to mitigate against future incidents, and litigation costs resulting from an incident.
A breach of our systems, or of those of third-party service providers, through cyber-attacks or failure to manage and sufficiently secure our technology environment could result in interruptions or malfunctions in the operations of our business, loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by a breach or to recover access to our systems, additional costs to mitigate against future incidents, and litigation 12 Table of Contents costs resulting from an incident.
If an assignment were to occur, we cannot be certain that the funds' boards and shareholders would approve a new investment advisory agreement. In addition, investment advisory agreements for the separate accounts we manage may not be assigned without the consent of the client.
If an assignment were to occur, we cannot be certain that the funds' boards and shareholders would approve a new investment management agreement. In addition, investment management agreements for the separate accounts we manage may not be assigned without the consent of the client.
Under the Investment Company Act, investment advisory agreements automatically terminate in the event of an assignment, which may occur if, among other events, the Company undergoes a change in control, such as any person acquiring 25% of the voting rights of our common stock.
Under the Investment Company Act, investment management agreements automatically terminate in the event of an assignment, which may occur if, among other events, the Company undergoes a change in control, such as any person acquiring 25% of the voting rights of our common stock.
All statements that are not historical facts, including statements about our beliefs or expectations, are "forward-looking statements." These statements may be identified by such forward-looking terminology as "expect," "estimate," "intent," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project," "opportunity," "predict," "would," "potential," "future," 14 Table of Contents "forecast," "guarantee," "assume," "likely," "target" or similar statements or variations of such terms.
All statements that are not historical facts, including statements about our beliefs or expectations, are "forward-looking statements." These statements may be identified by such forward-looking terminology as "expect," "estimate," "intent," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project," "opportunity," "predict," "would," "potential," "future," "forecast," "guarantee," "assume," "likely," "target" or similar statements or variations of such terms.
Any delays or inaccuracies in obtaining pricing information, processing such transactions or reports, other breaches and errors, and any inadequacies in other customer service could result in reimbursement obligations or other liabilities or alienate clients and potentially give rise to claims against us.
Any delays or inaccuracies in obtaining pricing information, processing such transactions or reports, other breaches and errors, and any inadequacies in other client service could result in reimbursement obligations or other liabilities or alienate clients and potentially give rise to claims against us.
These investments are in a variety of asset classes, including alternative, fixed income and equity strategies and first-loss tranches of CLO equity. Many of these investments employ a long-term investment strategy with an optimal investment period spanning several years.
These investments are in a variety of asset classes, including alternatives, fixed income and equity strategies and first-loss tranches of CLO equity. Many of these investments employ a long-term investment strategy with an optimal investment period spanning several years.
Any failure or interruption of those systems, whether resulting from technology or infrastructure breakdowns, defects or external causes such as fire, natural disaster, computer viruses, acts of terrorism or power disruptions, or public health events could result in financial loss, negatively impact our reputation and negatively affect our ability to do business.
Any failure or interruption of third-party systems, whether resulting from technology or infrastructure breakdowns, defects or external causes such as fire, natural disaster, computer viruses, acts of terrorism or power disruptions, or public health events could result in financial loss, negatively impact our reputation and negatively affect our ability to do business.
In addition, any business we acquire may underperform relative to expectations or may lose customers or employees. Our investment advisory agreements are subject to renegotiation or termination on short notice, which could negatively impact our business.
In addition, any business we acquire may underperform relative to expectations or may lose customers or employees. Our investment management agreements are subject to renegotiation or termination on short notice, which could negatively impact our business.
Our clients may renegotiate their investment contracts, or reduce the assets we manage for them, due to a number of reasons including, but not limited to: poor investment performance; loss of key investment personnel; 9 Table of Contents a change in the client's or third-party distributors' decision makers; and reputational, regulatory or compliance issues.
Our clients may renegotiate their investment contracts, or reduce the assets we manage for them, due to a number of reasons including, but not limited to: poor investment performance; loss of key investment personnel; a change in the client's or third-party distributors' decision makers; and reputational, regulatory or compliance issues.
We may incur substantial legal expenses in defending against proceedings commenced by a client, regulatory authority or other private litigant. Substantial 13 Table of Contents legal liability levied on us could cause significant reputational harm and have an adverse impact on our results of operations and financial condition.
We may incur substantial legal expenses in defending against proceedings commenced by a client, regulatory authority or other private litigant. Substantial legal liability levied on us could cause significant reputational harm and have an adverse impact on our results of operations and financial condition.
As our insurance policies come up for renewal, we may need to assume higher deductibles or pay higher premiums, which could have an adverse impact on our results of operations and financial condition. We have goodwill and other intangible assets on our balance sheet that could become impaired, which could impact our results of operations and financial condition.
As our insurance policies come up for renewal, we may need to assume higher deductibles or pay higher premiums, which could have an adverse impact on our results of operations and financial condition. 14 Table of Contents We have goodwill and other intangible assets on our balance sheet that could become impaired, which could impact our results of operations and financial condition.
Any of these conditions could have an adverse impact on our business and profitability. We and certain of our third-party vendors receive and store personal information as well as non-public business information. Although we and our third-party vendors take precautions, we may still be vulnerable to hacking or other unauthorized use.
Any of these conditions could have an adverse impact on our business and profitability. We and certain of our third-party service providers receive and store personal information as well as non-public business information. Although we and our third-party service providers take precautions, we may still be vulnerable to hacking or other unauthorized use.
Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K, resulting from: (i) any reduction in our assets under management including from domestic and global conditions, security price declines and negative performance; (ii) inability to achieve the expected benefits of our strategic transactions; (iii) withdrawal, renegotiation or termination of investment advisory agreements; (iv) damage to our reputation; (v) inability to satisfy financial debt covenants and required payments; (vi) inability to attract and retain key personnel; (vii) challenges from the competition we face in our business; (viii) adverse developments related to unaffiliated subadvisers; (ix) negative changes in key distribution relationships; (x) interruptions, breaches, or failures of technology systems; (xi) loss on our investments; (xii) lack of sufficient capital on satisfactory terms; (xiii) adverse regulatory and legal developments; (xiv) failure to comply with investment guidelines or other contractual requirements; (xv) adverse civil litigation, government investigations, or proceedings; (xvi) unfavorable changes in tax laws or limitations; (xvii) inability to make quarterly common stock dividends; (xviii) impediments from certain corporate governance provisions; (xix) losses or costs not covered by insurance; (xx) impairment of goodwill or other intangible assets; and other risks and uncertainties.
Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K, resulting from: (i) any reduction in our assets under management; (ii) inability to achieve the expected benefits of strategic transactions; (iii) withdrawal, renegotiation or termination of investment management agreements; (iv) damage to our reputation; (v) inability to satisfy financial debt covenants and required payments; (vi) inability to attract and retain key personnel; (vii) challenges from competition; (viii) adverse developments related to unaffiliated subadvisers; (ix) negative changes in key distribution relationships; (x) interruptions, breaches, or failures of technology systems; (xi) loss on our investments; (xii) lack of sufficient capital on satisfactory terms; (xiii) adverse regulatory and legal developments; (xiv) failure to comply with investment guidelines or other contractual requirements; (xv) adverse civil litigation, government investigations, or proceedings; (xvi) unfavorable changes in tax laws or limitations; (xvii) inability to make common stock dividend payments; (xviii) impediments from certain corporate governance provisions; (xix) losses or costs not covered by insurance; (xx) impairment of goodwill or other intangible assets; and other risks and uncertainties.
Existing clients may withdraw their assets in order to invest in these products, and we may be unable to attract additional investments from existing and new clients, which would lead to a decline in our assets under management and market share. Our profits are highly dependent on the fees we earn for our products and services.
Existing clients may withdraw their assets in order to invest in these products, and we may be unable to attract additional investments from existing and new clients, which would lead to a decline in our assets under management and market share. 11 Table of Contents Our profits are highly dependent on the fees we earn for our products and services.
While we compensate these intermediaries pursuant to contractual agreements, we may not be able to retain access to these channels at all or at similar pricing. Increasing competition for these distribution channels could cause our distribution costs to rise, which could have an adverse effect on our business, 11 Table of Contents revenues and profitability.
While we compensate these intermediaries pursuant to contractual agreements, we may not be able to retain access to these channels at all or at similar pricing. Increasing competition for these distribution channels could cause our distribution costs to rise, which could have an adverse effect on our business, revenues and profitability.
Employment rates, economic weakness and budgetary challenges in parts of the world, uncertainty regarding governmental regulations and international trade policies, conflicts such as in Ukraine, concern over prospects in China and emerging markets, and growing debt for certain countries all indicate that economic and political conditions remain 8 Table of Contents unpredictable.
Employment rates, economic weakness and budgetary challenges in parts of the world, uncertainty regarding governmental regulations and international trade policies, conflicts such as in Ukraine and the Middle East, concern over prospects in China and emerging markets, and growing debt for certain countries all indicate that economic and political conditions remain unpredictable.
Any lawsuits, investigations or proceedings could result in reputational damage, loss of clients and assets, settlements, awards, injunctions, fines, penalties, increased costs and expenses in resolving a claim, diversion of employee resources and resultant financial losses.
"Legal Proceedings" for further information.) Any lawsuits, investigations or proceedings could result in reputational damage, loss of clients and assets, settlements, awards, injunctions, fines, penalties, increased costs and expenses in resolving a claim, diversion of employee resources and resultant financial losses.
In addition, like many companies, our computer systems are regularly the target of computer viruses or other malicious codes, unauthorized access, cyber-attacks or other computer-related penetrations.
In addition, our computer systems are regularly the target of viruses or other malicious codes, unauthorized access, cyber-attacks or other computer-related penetrations.
As of December 31, 2022, the Company had $791.4 million in intangible assets and goodwill. We cannot be certain that we will realize the value of such intangible assets. Our intangible assets may become impaired as a result of a variety of factors which could adversely affect our financial condition and results of operations.
As of December 31, 2023, the Company had $829.2 million in intangible assets and goodwill. We cannot be certain that we will realize the value of such intangible assets. Our intangible assets may become impaired as a result of a variety of factors which could adversely affect our financial condition and results of operations.
From time to time, we and/or our sponsored funds may be named as defendants or co-defendants in lawsuits or be involved in disputes that involve the threat of lawsuits seeking substantial damages. We and/or our sponsored funds are also involved from time to time in governmental and self-regulatory organization investigations and proceedings. See Item 3. "Legal Proceedings" for further information.
From time to time, we and/or our sponsored funds may be named as defendants or co-defendants in lawsuits or be involved in disputes that involve the threat of lawsuits seeking substantial 13 Table of Contents damages. We and/or our sponsored funds are also involved from time to time in governmental and self-regulatory organization investigations and proceedings. (See Item 3.
The indebtedness we incur can take many forms including, but not limited to, term loans or revolving lines of credit that customarily contain covenants. At December 31, 2022, the Company had $261.6 million of total debt outstanding under its credit agreement, excluding debt of consolidated investment products ("CIP"), and had no borrowings outstanding under its $175.0 million revolving credit facility.
The indebtedness we incur can take many forms including, but not limited to, term loans or revolving lines of credit that customarily contain covenants. 10 Table of Contents At December 31, 2023, we had $258.8 million of total debt outstanding under its credit agreement, excluding debt of consolidated investment products ("CIP"), and had no borrowings outstanding under our $175.0 million revolving credit facility.
The investment management industry in which we operate is subject to extensive and frequently changing regulation. We are subject to regulation by the SEC and other federal and state agencies, as well as FINRA and other self-regulatory organizations. Each of our affiliated investment managers and unaffiliated subadvisers is registered with the SEC under the Investment Advisers Act.
We are subject to regulation by the SEC, other federal and state agencies, certain international regulators, as well as FINRA and other self-regulatory organizations. Each of our affiliated investment managers and unaffiliated subadvisers is registered with the SEC under the Investment Advisers Act.
At December 31, 2022, we had $261.6 million in debt outstanding, excluding the notes payable of our CIP for which risk of loss to the Company is limited to our $78.9 million investment in such products. See Note 21 of our consolidated financial statements for additional information on the notes payable of the CIP.
At December 31, 2023, we had $258.8 million in debt outstanding, excluding the notes payable of our CIP for which risk of loss to the Company is limited to our $95.5 million investment in such products. (See Note 20 of our consolidated financial statements for additional information on the notes payable of the CIP).
We utilize unaffiliated firms to provide investment management services and any matters that adversely impact them or any change in our relationships with them could adversely affect our revenues and profitability. We utilize unaffiliated subadvisers as investment managers for certain of our retail funds.
We utilize unaffiliated firms to provide investment management services and any matters that adversely impact them or any change in our relationships with them could adversely affect our revenues and profitability. We utilize unaffiliated subadvisers as investment managers for certain of our retail funds. Because we have no ownership interests in these firms, we do not control their business activities.
We use capital to incubate new investment strategies, introduce new products or to enhance distribution access of existing products. At December 31, 2022, the Company had $223.5 million of such investments, comprising $144.6 million of marketable securities and $78.9 million of net investments in CLOs.
We use capital to incubate new investment strategies, introduce new products or to enhance distribution access of existing products. At December 31, 2023, we had $275.6 million of such investments, comprising $180.1 million of marketable securities and $95.5 million of net investments in CLOs.
The volatility in the markets in the past has highlighted the interconnection of the global economies and markets and has demonstrated how the deteriorating financial condition of one institution may adversely impact the performance of other institutions.
Any of the conditions listed herein, among others, may impact our assets under management. Past volatility in the markets has highlighted the interconnection of the global economies and markets and has demonstrated how deteriorating financial condition of one institution may adversely impact the performance of other institutions.
If the performance of our investment strategies is perceived to be underperforming relative to peers, it could result in increased withdrawals of assets by existing clients and the inability to attract additional investments from new and existing clients. We may engage in significant transactions that may not achieve the anticipated benefits or could expose us to additional or increased risks.
If the performance of our investment strategies is perceived to be underperforming relative to peers, it could result in 9 Table of Contents increased withdrawals of assets by existing clients and the inability to attract additional investments from new and existing clients.
There is significant competition in the job market for these professionals and compensation levels in the industry are highly competitive.
There is significant competition in the job market for these professionals and compensation levels in the industry are highly competitive. Our industry is also characterized by the movement of investment professionals among different firms.
These relationships can also be terminated upon short notice without penalty. In addition, the departure of key employees at unaffiliated subadvisers could cause higher redemption rates for certain assets under management.
We periodically negotiate provisions and renewals of these relationships, and we cannot provide assurance that such terms will remain acceptable to us or the unaffiliated firms. These relationships can also be terminated upon short notice without penalty. In addition, the departure of key employees at unaffiliated subadvisers could cause higher redemption rates for certain assets under management.
Increases or decreases in the value of these investments could increase the volatility of our earnings, and an other-than-temporary or permanent decline in the value of these investments could result in the loss of capital and have an adverse impact on our results of operations and financial condition. 12 Table of Contents LEGAL AND REGULATORY RISKS We are subject to an extensive and complex regulatory environment and changes in regulations or failure to comply with them could adversely affect our revenues and profitability.
Increases or decreases in the value of these investments could increase the volatility of our earnings, and an other-than-temporary or permanent decline in the value of these investments could result in the loss of capital and have an adverse impact on our results of operations and financial condition.
We cannot provide assurance that we will continue to be successful in closing on transactions or achieving anticipated financial benefits, including such things as revenue or cost synergies.
Our past acquisitions and strategic transactions have led to a significant increase in our assets under management and an expansion of our product and service offerings. We cannot provide assurance that we will continue to be successful in closing on transactions or achieving anticipated financial benefits, including such things as revenue or cost synergies.
We have executed several inorganic transactions over the past years and we regularly evaluate potential transactions, including acquisitions, consolidations, joint ventures, strategic partnerships, or similar transactions, some of which could be significant. Our past acquisitions and strategic transactions have led to a significant increase in our assets under management and an expansion of our product and service offerings.
We may engage in significant transactions that may not achieve the anticipated benefits or could expose us to additional or increased risks. We have executed several inorganic transactions over the past years and we regularly evaluate potential transactions, including acquisitions, consolidations, joint ventures, strategic partnerships, or similar transactions, some of which could be significant.
New regulations or interpretations of existing laws may result in enhanced disclosure obligations, including with respect to climate change or other environmental, social and governance ("ESG") matters, which could negatively affect us or materially increase our regulatory burden.
There are various regulatory reform initiatives in the U.S. and other jurisdictions and new regulations or interpretations of existing laws may result in enhanced disclosure obligations which could negatively affect us or materially increase our regulatory burden.
Although we have generated sufficient cash in the past, we may not do so in the future. The Company had unused capacity under its revolving credit facility of $175.0 million as of December 31, 2022.
Although we have generated sufficient cash in the past, we may not do so in the future. We had unused capacity under our revolving credit facility of $175.0 million as of December 31, 2023. Our ability to access capital markets efficiently depends on a number of factors, including the state of credit and equity markets, interest rates and credit spreads.
In certain circumstances, the departure of key investment personnel could cause higher redemption rates in certain strategies or the loss of certain client accounts.
Declines in our stock price would result in deterioration of the value of equity awards granted, thus lessening the effectiveness of using stock-based awards to retain key employees. In certain circumstances, the departure of key investment personnel could cause higher redemption rates in certain strategies or the loss of certain client accounts.
Our industry is also characterized by the movement of investment professionals among different firms. 10 Table of Contents If we are unable to continue to attract and retain key employees, or if compensation costs required to attract and retain key employees increase, our performance, including our competitive position, could be adversely affected.
If we are unable to continue to attract and retain key employees, or if compensation costs required to attract and retain key employees increase, our performance, including our competitive position, could be adversely affected. Additionally, we utilize equity awards as part of our compensation plans and as a means for recruiting and retaining key employees.
Removed
For example, the outbreak and spread of contagious diseases, such as the COVID-19 pandemic in early 2020, resulted in a widespread global public health crisis, which had, and may continue to have, negative impacts on global financial markets. Any of the conditions listed herein, among others, may impact our assets under management.
Added
LEGAL AND REGULATORY RISKS We are subject to an extensive and complex regulatory environment and changes in regulations or failure to comply with them could adversely affect our revenues and profitability. The investment management industry in which we operate is subject to extensive and frequently changing regulation.
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Our ability to access capital markets efficiently depends on a number of factors, including the state of credit and equity markets, interest rates and credit spreads.
Removed
Additionally, we utilize equity awards as part of our compensation plans and as a means for recruiting and retaining key employees. Declines in our stock price would result in deterioration of the value of equity awards granted, thus lessening the effectiveness of using stock-based awards to retain key employees.
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Because we typically have no ownership interests in these unaffiliated firms, we do not control their business activities. Problems stemming from the business activities of these unaffiliated firms may negatively impact or disrupt their operations or expose them to disciplinary action or reputational harm.
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Our business is highly dependent on third-party service providers' information systems, including for our ability to obtain prompt and accurate securities pricing information and to process transactions and reports.
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Our affiliated investment managers operating outside of the U.S. are also subject to regulation by various regulatory authorities and exchanges in the relevant jurisdictions, including, for those active in the UK, the Financial Conduct Authority ("FCA").
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We have distribution teams that operate offices in the UK and Singapore and are subject to regulation by the FCA and the Monetary Authority of Singapore, respectively. Each of our U.S.-sponsored funds is registered with the SEC under the Investment Company Act. Our global funds are registered with and subject to regulation by the Central Bank of Ireland.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+1 added−1 removed4 unchanged
Biggest changeThe comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance. 16 Table of Contents Financial Peer Group: Affiliated Managers Group, Inc., AllianceBernstein Holding L.P., Artisan Partners Asset Management Inc.*, BrightSphere Investment Group Inc.*, Cohen & Steers, Inc., Federated Hermes, Inc., Franklin Resources, Inc., Invesco Ltd., Janus Henderson Group Plc*, T.
Biggest changeFinancial Peer Group: Affiliated Managers Group, Inc., AllianceBernstein Holding L.P., Artisan Partners Asset Management Inc.*, BrightSphere Investment Group Inc.*, Cohen & Steers, Inc., Federated Hermes, Inc., Franklin Resources, Inc., Invesco Ltd., Janus Henderson Group Plc*, T. Rowe Price Group, Inc. and Victory Capital Holdings, Inc.* *Companies excluded from the cumulative total return table due to lack of comparative performance periods.
This graph assumes an equal investment in our common stock, the S&P 500 and the Peer Group on January 2, 2009, reflects reinvested dividends, and is weighted on a market capitalization basis. Each reported data point below represents the last trading day of each calendar year.
This graph assumes an equal investment in our common stock, the S&P 500 and the Financial Peer Group on January 2, 2009, reflects reinvested dividends, and is weighted on a market capitalization basis. Each reported data point below represents the last trading day of each calendar year.
(2) The share repurchases above were completed pursuant to a program announced in the fourth quarter of 2010 and most recently increased in May 2022. This repurchase program is not subject to an expiration date. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the fourth quarter of fiscal 2022.
(2) The share repurchases were completed pursuant to a program announced in the fourth quarter of 2010 and most recently increased in May 2022. This repurchase program is not subject to an expiration date. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the fourth quarter of fiscal 2023.
Issuer Purchases of Equity Securities An aggregate of 5,680,045 shares of our common stock have been authorized to be repurchased under a share repurchase program since it was initially approved in 2010 by our Board of Directors. As of December 31, 2022, 828,352 shares remained available for repurchase.
Issuer Purchases of Equity Securities An aggregate of 5,680,045 shares of our common stock have been authorized to be repurchased under a share repurchase program since it was initially approved in 2010 by our Board of Directors. As of December 31, 2023, 604,545 shares remained available for repurchase.
We cannot provide any assurances that any distributions, whether quarterly or otherwise, will continue to be paid in the future. On February 22, 2023, our Board of Directors declared a quarterly cash dividend of $1.65 per common share to be paid on May 15, 2023 to shareholders of record at the close of business on April 28, 2023.
We cannot provide any assurances that any distributions, whether quarterly or otherwise, will continue to be paid in the future. On February 21, 2024, the Company declared a quarterly cash dividend of $1.90 per common share to be paid on May 15, 2024 to shareholders of record at the close of business on April 30, 2024.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the NASDAQ Global Market under the trading symbol "VRTS." As of February 10, 2023, we had 7,181,554 shares of common stock outstanding that were held by approximately 41,000 holders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the New York Stock Exchange under the trading symbol "VRTS." As of February 9, 2024, we had 7,087,728 shares of common stock outstanding that were held by approximately 39,000 holders of record.
The following table sets forth information regarding our share repurchases in each month during the quarter ended December 31, 2022: Period Total number of shares purchased Average price paid per share (1) Total number of shares purchased as part of publicly announced plans or programs (2) Maximum number of shares that may yet be purchased under the plans or programs (2) October 1—31, 2022 — $ — — 881,672 November 1—30, 2022 28,737 $ 183.58 28,737 852,935 December 1—31, 2022 24,583 $ 192.12 24,583 828,352 Total 53,320 53,320 (1) Average price paid per share is calculated on a settlement basis and excludes commissions.
The following table sets forth information regarding our share repurchases in each month during the quarter ended December 31, 2023: Period Total number of shares purchased Average price paid per share (1) Total number of shares purchased as part of publicly announced plans or programs (2) Maximum number of shares that may yet be purchased under the plans or programs (2) October 1—31, 2023 2,256 $ 183.27 2,256 700,241 November 1—30, 2023 54,427 $ 196.51 54,427 645,814 December 1—31, 2023 41,269 $ 215.37 41,269 604,545 Total 97,952 97,952 (1) Average price paid per share is calculated on a settlement basis and excludes commissions and taxes.
During the year ended December 31, 2022, we repurchased a total of 451,097 common shares for $90.0 million.
During the year ended December 31, 2023, we repurchased a total of 223,807 common shares for $45.2 million.
Removed
Rowe Price Group, Inc. and Victory Capital Holdings, Inc.* *The above listed peers are excluded from the cumulative total return table due to the lack of comparable performance periods.
Added
The 18 Table of Contents comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance.

Item 7. Management's Discussion & Analysis

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

85 edited+14 added−43 removed34 unchanged
Biggest changeOperating income decreased by $128.0 million, or 39.3%, to $197.5 million in 2022 from $325.5 million in 2021 due to the previously mentioned factors. 22 Table of Contents Revenues Revenues by source were as follows: Years Ended December 31, Change (in thousands) 2022 2021 2022 vs. 2021 % Investment management fees Open-end funds $ 335,585 $ 395,152 $ (59,567) (15.1) % Closed-end funds 63,841 63,301 540 0.9 % Retail separate accounts 171,509 174,919 (3,410) (1.9) % Institutional accounts 157,404 148,213 9,191 6.2 % Total investment management fees 728,339 781,585 (53,246) (6.8) % Distribution and service fees 67,518 90,555 (23,037) (25.4) % Administration and shareholder service fees 85,862 102,531 (16,669) (16.3) % Other income and fees 4,660 4,563 97 2.1 % Total revenues $ 886,379 $ 979,234 $ (92,855) (9.5) % Investment Management Fees Investment management fees are earned based on a percentage of assets under management and are paid pursuant to the terms of the respective investment management contracts, which generally require monthly or quarterly payments.
Biggest changeSummary Financial Data Years Ended December 31, Change (in thousands) 2023 2022 2023 vs. 2022 % Investment management fees $ 711,475 $ 728,339 $ (16,864) (2.3) % Other revenue 133,793 158,040 (24,247) (15.3) % Total revenues 845,268 886,379 (41,111) (4.6) % Total operating expenses 693,784 688,919 4,865 0.7 % Operating income (loss) 151,484 197,460 (45,976) (23.3) % Other income (expense), net 3,681 (51,938) 55,619 (107.1) % Interest income (expense), net 31,399 18,366 13,033 71.0 % Income (loss) before income taxes 186,564 163,888 22,676 13.8 % Income tax expense (benefit) 45,088 57,260 (12,172) (21.3) % Net income (loss) 141,476 106,628 34,848 32.7 % Noncontrolling interests (10,855) 10,913 (21,768) (199.5) % Net Income (Loss) Attributable to Virtus Investment Partners, Inc. $ 130,621 $ 117,541 $ 13,080 11.1 % Earnings (loss) per share-diluted $ 17.71 $ 15.50 $ 2.21 14.3 % In 2023, total revenues decreased $41.1 million, or 4.6%, to $845.3 million from $886.4 million in 2022, and operating income decreased by $46.0 million, or 23.3%, to $151.5 million in 2023 from $197.5 million in 2022, primarily as a result of lower average assets under management. 24 Table of Contents Revenues Revenues by source were as follows: Years Ended December 31, Change (in thousands) 2023 2022 2023 vs. 2022 % Investment management fees Open-end funds $ 305,238 $ 335,585 $ (30,347) (9.0) % Closed-end funds 58,136 63,841 (5,705) (8.9) % Retail separate accounts 171,357 171,509 (152) (0.1) % Institutional accounts 176,744 157,404 19,340 12.3 % Total investment management fees 711,475 728,339 (16,864) (2.3) % Distribution and service fees 56,153 67,518 (11,365) (16.8) % Administration and shareholder service fees 73,857 85,862 (12,005) (14.0) % Other income and fees 3,783 4,660 (877) (18.8) % Total Revenues $ 845,268 $ 886,379 $ (41,111) (4.6) % Investment Management Fees Investment management fees are earned based on a percentage of assets under management and are paid pursuant to the terms of the respective investment management agreements, which generally require monthly or quarterly payments.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview Our Business We provide investment management and related services to individuals and institutions.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview Our Business We provide investment management and related services to institutions and individuals.
We offer investment strategies for individual and institutional investors in different investment products and through multiple distribution channels. Our investment strategies are available in a diverse range of styles and disciplines, managed by differentiated investment managers.
We offer investment strategies for institutional and individual investors in different investment products and through multiple distribution channels. Our investment strategies are available in a diverse range of styles and disciplines, managed by differentiated investment managers.
(2) Represents assets under management of institutional separate and commingled accounts including structured products.
(2) Represents assets under management of institutional separate and commingled accounts including structured products.
CIP represent investment products for which we provide investment management services and where we have either a controlling financial interest or we are considered the primary beneficiary of an investment product that is considered a variable interest entity.
CIP represent investment products for which we provide investment management services and where we have either a controlling financial interest or are considered the primary beneficiary of an investment product that is considered a variable interest entity.
Revenue Recognition Our revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers. Investment management fees, distribution and service fees, and administration and shareholder service fees are calculated as a percentage of average net assets of the investment portfolios managed.
Revenue Recognition Our revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers. Investment management fees, distribution and service fees, and administration and shareholder service fees are generally calculated as a percentage of average net assets of the investment portfolios managed.
We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers, each having its own distinct investment style, autonomous investment process and individual brand, as well as from select unaffiliated subadvisers for certain of our retail funds.
We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers, each having its own distinct investment style, autonomous investment process and individual brand, as well as from select unaffiliated managers for certain of our retail funds.
Results of Operations - December 31, 2022 compared to December 31, 2021 A discussion of our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2021 , which specific discussion is incorporated herein by reference.
Results of Operations - December 31, 2023 compared to December 31, 2022 A discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2022 , which specific discussion is incorporated herein by reference.
We perform indefinite-lived intangible asset impairment tests annually, or more frequently, should circumstances change, which could reduce the fair value of indefinite-lived intangible assets below their carrying value. We completed our annual impairment assessment of these assets as of October 31, 2022, and no impairments were identified.
We perform indefinite-lived intangible asset impairment tests annually, or more frequently, should circumstances change, which could reduce the fair value of indefinite-lived intangible assets below their carrying value. We completed our annual impairment assessment of these assets as of October 31, 2023, and no impairments were identified.
For purposes of this assessment, we considered various qualitative factors for the investment advisory contract intangible assets including, but not limited to, changes in (i) assets under management, (ii) operating margins, and (iii) net cash flows generated, and we determined that it was more likely than not that the fair value of indefinite-lived intangible assets was greater than their carrying value.
For purposes of this assessment, we considered various qualitative factors for the investment management agreement intangible assets including, but not limited to, changes in (i) assets under management, (ii) operating margins, and (iii) net cash flows generated, and we determined that it was more likely than not that the fair value of indefinite-lived intangible assets was greater than their carrying value.
We believe that we have considered relevant circumstances that we may be currently subject to, and the consolidated financial statements accurately reflect our reasonable estimate of the results of our operations, financial condition and cash flows for the years presented. 32 Table of Contents
We believe that we have considered relevant circumstances that we may be currently subject to, and the consolidated financial statements accurately reflect our reasonable estimate of the results of our operations, financial condition and cash flows for the years presented.
Impact of New Accounting Standards For a discussion of accounting standards, see Part II, Item 8, "Financial Statements and Supplementary Data," Note 2 "Summary of Significant Accounting Policies." Critical Accounting Policies and Estimates Our consolidated financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which requires the use of estimates.
Recently Issued Accounting Pronouncements For a discussion of accounting standards, see Part II, Item 8, "Financial Statements and Supplementary Data," Note 2 "Summary of Significant Accounting Policies." Critical Accounting Policies and Estimates Our consolidated financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which requires the use of estimates.
Noncontrolling Interests Noncontrolling interests - CIP Noncontrolling interests - CIP represent third-party investments in our CIP and are classified as redeemable noncontrolling interests in our Consolidated Balance Sheets because investors in those products are able to request withdrawal at any time. Noncontrolling interests - affiliate Noncontrolling interests - affiliate represent minority interests held in a consolidated affiliate.
Noncontrolling Interests Noncontrolling interests - CIP Noncontrolling interests - CIP represent third-party investments in the Company's CIP and are classified as redeemable noncontrolling interests on the Consolidated Balance Sheets because investors in those products are able to request withdrawal at any time. Noncontrolling interests - Affiliate Noncontrolling interests - affiliate represent minority interests held in a consolidated affiliate.
Distribution and Other Asset-Based Expenses Distribution and other asset-based expenses consist primarily of payments to third-party client intermediaries for providing services to investors in sponsored investment products. These payments are primarily based on assets under management or on a percentage of sales.
Distribution and Other Asset-Based Expenses Distribution and other asset-based expenses consist primarily of payments to third-party client intermediaries for providing services to investors in sponsored investment products. These payments are primarily based on assets under management.
Amounts paid to unaffiliated subadvisers for the years ended December 31, 2022, 2021 and 2020 were $77.0 million, $115.5 million and $38.6 million, respectively. Retail separate account fees are generally earned based on the end of the preceding or current quarter's asset values. Institutional account fees are generally earned based on an average of month-end balances.
Amounts paid to unaffiliated subadvisers for the years ended December 31, 2023, 2022 and 2021 were $54.7 million, $77.0 million and $115.5 million, respectively. Retail separate account fees are generally earned based on the end of the preceding or current quarter's asset values. Institutional account fees are generally earned based on an average of month-end balances.
(2) Consists of event-driven, real estate securities, infrastructure, long/short and other strategies.
(2) Consists of managed futures, event-driven, real estate securities, infrastructure, long/short, and other strategies.
We record investment management fees net of the fees paid to unaffiliated subadvisers since we are deemed to be an agent of the fund as it relates to the day-to-day investment management services they perform, with our performance obligation being to arrange for the provision of that service and not control the specified service before it is performed.
For funds managed by unaffiliated subadvisers, we record investment management fees net of the subadvisory fees since we are deemed to be an agent of the fund as it relates to the services they perform, with our performance obligation being to arrange for the provision of that service and not control the specified service before it is performed.
The higher estimated effective tax rate for 2022 was primarily due to valuation allowances recorded in the current year for the tax effects of unrealized losses on certain Company investments. Effects of Inflation Inflationary pressures can result in increases to our costs, especially to the extent that large expense components such as compensation are impacted.
The higher effective tax rate in the prior year was due to valuation allowances recorded for the tax effects of unrealized losses on certain of our investments. Effects of Inflation Inflationary pressures can result in increases to our costs, especially to the extent that large expense components such as compensation are impacted.
Only a significant decline in the fair value of our reporting unit would indicate that an impairment may exist. Indefinite-Lived Intangible Assets As of December 31, 2022, the carrying value of indefinite-lived intangible assets was $42.3 million. Indefinite-lived intangible assets comprise certain fund investment advisory contracts and trade names.
Only a significant decline in the fair value of our reporting unit would indicate that an impairment may exist. Indefinite-Lived Intangible Assets As of December 31, 2023, the carrying value of indefinite-lived intangible assets was $42.3 million. Indefinite-lived intangible assets comprise certain fund investment management agreements and trade names.
We rely on data provided to us by service providers for the pricing of the underlying investment securities for the asset values that drive our investment management fees and our assets under management. Our service providers have formal valuation policies and procedures over the valuation of investments.
We rely on service providers to provide information for the pricing of the underlying investment securities for the asset values that drive our investment management fees and our assets under management. Our service providers have formal valuation policies and procedures over the valuation of investments.
Income Tax Expense (Benefit) The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of 34.9% and 25.7% for 2022 and 2021, respectively.
Income Tax Expense (Benefit) The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of 24.2% and 34.9% for 2023 and 2022, respectively.
Fund administration and shareholder service fees decreased by $16.7 million, or 16.3%, for the year ended December 31, 2022 compared to the prior year, primarily due to the decrease in average assets under management for our open- and closed-end funds during the period as a result of market performance and net outflows in our open-end funds.
Fund administration and shareholder service fees decreased by $12.0 million, or 14.0%, for the year ended December 31, 2023 compared to the prior year, primarily due to the decrease in average assets under management in open-end funds during the period as a result of market performance and net outflows.
The put and call rights are not legally detachable or separately exercisable and are deemed to be embedded in the related 28 Table of Contents noncontrolling interests. We, in purchasing affiliate equity, have the option to settle in cash or shares of common stock and are entitled to the cash flow associated with any purchased equity.
The put and call rights are not legally detachable or separately exercisable and are deemed to be embedded in the related noncontrolling interests. The Company, in purchasing affiliate equity, has the option to settle in cash or shares of the Company's common stock and is entitled to the cash flow associated with any purchased equity.
The change for the current year consisted primarily of net realized and unrealized losses of $140.5 million due to changes in market values of leveraged loans, partially offset by unrealized gains of $103.0 million related to the value of the notes payable.
The change for the current year consisted primarily of net realized and unrealized gains of $145.8 million primarily due to changes in market values of leveraged loans, partially offset by changes in net realized and unrealized losses of $108.9 million related to the value of the notes payable.
Only a significant decline in the fair value of the indefinite-lived intangible assets would indicate that an impairment may exist. Definite-Lived Intangible Assets As of December 31, 2022, the carrying value of definite-lived intangible assets was $400.2 million. Definite-lived intangible assets comprise certain fund investment advisory contracts, trade names and non-competition agreements.
Only a significant decline in the fair value of the indefinite-lived intangible assets would indicate that an impairment may exist. Definite-Lived Intangible Assets As of December 31, 2023, the carrying value of definite-lived intangible assets was $389.8 million. Definite-lived intangible assets comprise certain investment management agreements, trade names and non-competition agreements.
Minority interests held in an affiliate are subject to holder put rights and our call rights at established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value. These rights are exercisable at pre-established intervals (between four and seven years from their issuance) or upon certain conditions such as retirement.
Minority interests held in the affiliate are subject to holder put rights and Company call rights at established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value. The rights are exercisable at pre-established intervals or upon certain conditions, such as retirement.
Investment management services represent a series of distinct daily services that are performed over time. Fees earned on funds are based on each fund's average daily or weekly net assets and are generally calculated and received on a monthly basis.
Investment Management Fees We provide investment management services pursuant to investment management agreements through our investment advisers (each an "Adviser"). Investment management services represent a series of distinct daily services that are performed over time. Fees earned on funds are based on each fund's average daily or weekly net assets and are generally calculated and received on a monthly basis.
The primary beneficiary is the entity that has both the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.
If an entity has any of these characteristics, it is considered a VIE and is consolidated by its primary beneficiary, which is the entity that has both the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.
In accordance with Accounting Standards Codification ("ASC") 835, Interest , the amounts outstanding under the Company's Term Loan are presented on the Consolidated Balance Sheet net of related debt issuance costs, which were $6.6 million as of December 31, 2022.
At December 31, 2023, $258.8 million was outstanding under the Term Loan. In accordance with ASC 835, Interest , the amounts outstanding under the Company's Term Loan are presented on the Consolidated Balance Sheet net of related debt issuance costs, which were $5.4 million as of December 31, 2023.
Distribution and other asset-based expenses decreased $28.4 million, or 20.2%, compared to the prior year primarily due to lower sales and a decrease in assets under management in share classes that have sales- and asset-based distribution and other asset-based expenses.
Distribution and other asset-based expenses decreased $15.8 million, or 14.0%, compared to the prior year primarily due to a decrease in average assets under management in share classes that have asset-based distribution and other asset-based expenses.
Average Assets Under Management and Average Fees Earned The following table summarizes the average management fees earned in basis points and average assets under management: Years Ended December 31, Average Fee Earned (expressed in basis points) Average Assets Under Management (in millions) (3) 2022 2021 2022 2021 Products Open-End Funds (1) 46.6 46.9 $ 64,046 $ 74,774 Closed-End Funds 57.4 55.8 11,132 11,352 Retail Separate Accounts 42.8 44.6 38,498 37,867 Institutional Accounts (2) 31.4 32.2 53,120 48,849 All Products 41.6 42.9 $ 166,795 $ 172,841 (1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
Average Assets Under Management and Average Fees Earned The following table summarizes the average management fees earned in basis points and average assets under management: Years Ended December 31, Average Fee Earned (expressed in basis points) Average Assets Under Management (in millions) (3) 2023 2022 2023 2022 Products Open-End Funds (1) 49.5 46.6 $ 55,226 $ 64,046 Closed-End Funds 57.8 57.4 10,060 11,132 Retail Separate Accounts 43.7 42.8 37,601 38,498 Institutional Accounts (2) 31.7 31.4 58,595 53,119 All Products 42.2 41.6 $ 161,482 $ 166,795 (1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
In certain instances, institutional fees may include performance related fees that are based on relative investment returns. Fees for structured finance products, for which we act as the collateral manager, consist of senior, subordinated and, in certain instances, incentive management fees.
In certain instances, 31 Table of Contents institutional fees may include performance related fees that are based on investment returns relative to benchmarks. Fees for structured finance products consist of senior, subordinated and, in certain instances, incentive management fees.
Distribution and service fees decreased by $23.0 million, or 25.4%, for the year ended December 31, 2022, primarily due to lower sales for open-end funds in share classes that have sales-based distribution and service fees.
Distribution and service fees decreased by $11.4 million, or 16.8%, for the year ended December 31, 2023 compared to the prior year, primarily due to lower average assets for open-end funds in share classes that have sales- and asset-based distribution and service fees.
(1) Assets under management excludes non-rated funds. Based on institutional-class shares, except for funds without I shares, for which shares were used, or if A share rating is higher than I shares. Past performance is not indicative of future results. (2) Morningstar ratings are based on risk-adjusted returns. Strong ratings are not indicative of positive fund performance.
By comparison, 32.5% of Morningstar's fund population is given a 4- or 5-star rating (2) . (1) Assets under management excludes non-rated funds. Based on institutional-class shares, except for funds without I shares, for which shares were used, or if A share rating is higher than I shares. Past performance is not indicative of future results.
Investing Cash Flow Cash flows from investing activities consist primarily of capital expenditures and other investing activities related to our business operations. Net cash used in investing activities of $27.5 million for 2022 decreased by $147.6 million from net cash used in investing activities of $175.0 million in 2021.
Investing Cash Flow Cash flows from investing activities consist primarily of capital expenditures and other investing activities related to our business operations. Net cash used in investing activities was $129.7 million for 2023 compared to net cash used in investing activities of $27.5 million in 2022.
Contingent Consideration We periodically enter into contingent payment arrangements in connection with our business combinations or asset purchases. In contingent payment arrangements, we agree to pay additional transaction consideration to the seller based on future performance. We estimate the value of future payments of these potential future obligations at the time a business combination or asset purchase is consummated.
In contingent payment arrangements, we agree to pay additional transaction consideration to the seller based on future performance. We estimate the value of future payments of these potential future obligations at the time a business combination or asset purchase is consummated. Liabilities under contingent payment arrangements are recorded within contingent consideration on the Consolidated Balance Sheets.
Change in Fair Value of Contingent Consideration Contingent consideration related to the NFJ, Westchester and Stone Harbor transactions are remeasured at fair value each reporting date taking into consideration changes in various estimates, including underlying performance estimates, discount rates and amount of time until the conditions of the contingent payments are achieved.
Change in Fair Value of Contingent Consideration Contingent consideration related to the Company's acquisitions are fair valued on each reporting date incorporating changes in various estimates, including underlying performance estimates, discount rates and amount of time until the conditions of the contingent payments are achieved.
The U.S. and global equity markets decreased in value in 2022, as evidenced by decreases in major indices as noted in the following table: December 31, As of Change Index 2022 2021 % MSCI World Index 2,603 3,232 (19.5) % Standard & Poor's 500 Index 3,840 4,766 (19.4) % Russell 2000 Index 1,761 2,245 (21.6) % Morningstar / LSTA Leveraged Loan Index 2,406 2,420 (0.6) % Financial Highlights ▪ Net income per diluted share was $15.50 in 2022, a decrease of $10.51, or 40.4%, as compared to net income per diluted share of $26.01 in 2021. ▪ Total sales were $30.3 billion in 2022, a decrease of $6.2 billion, or 17.0%, from $36.5 billion in 2021.
The U.S. and global equity markets increased in value in 2023, as evidenced by increases in major indices as noted in the following table: December 31, As of Change Index 2023 2022 % MSCI World Index 3,169 2,603 21.7 % Standard & Poor's 500 Index 4,770 3,840 24.2 % Russell 2000 Index 2,027 1,761 15.1 % Morningstar / LSTA Leveraged Loan Index 2,721 2,406 13.1 % 20 Table of Contents Financial Highlights ▪ Net income per diluted share was $17.71 in 2023, an increase of $2.21, or 14.3%, compared to net income per diluted share of $15.50 in 2022. ▪ Total sales were $25.9 billion in 2023, a decrease of $4.4 billion, or 14.6%, from $30.3 billion in 2022.
Shareholder services include maintaining shareholder accounts, processing shareholder transactions, preparing filings and performing necessary reporting. 31 Table of Contents Other Income and Fees Other income and fees primarily represent fees related to other fee-earning assets and contingent sales charges earned from investor redemptions of certain shares sold without a front-end sales charge.
Other Income and Fees Other income and fees primarily represent fees related to other fee-earning assets and contingent sales charges earned from investor redemptions of certain shares sold without a front-end sales charge.
Investment management fees decreased by $53.2 million, or 6.8%, for the year ended December 31, 2022, due to lower average assets under management and a lower average fee rate. Distribution and Service Fees Distribution and service fees are sales- and asset-based fees earned from open-end funds for marketing and distribution services.
Investment management fees decreased by $16.9 million, or 2.3%, for the year ended December 31, 2023 compared to the prior year, primarily due to lower average assets under management, partially offset by the addition of AlphaSimplex. Distribution and Service Fees Distribution and service fees are sales- and asset-based fees earned from open-end funds for marketing and distribution services.
(3) Averages are calculated as follows: – Funds - average daily or weekly balances – Retail Separate Accounts - average of prior-quarter ending balances – Institutional Accounts - average of month-end balances 19 Table of Contents The following table summarizes asset flows by product: Asset Flows by Product Years Ended December 31, (in millions) 2022 2021 Open-End Funds (1) Beginning balance $ 78,706 $ 51,608 Inflows 13,985 19,158 Outflows (28,549) (21,525) Net flows (14,564) (2,367) Market performance (15,113) 6,308 Other (2) 3,971 23,157 Ending balance $ 53,000 $ 78,706 Closed-End Funds Beginning balance $ 12,068 $ 5,914 Inflows 191 22 Outflows — — Net flows 191 22 Market performance (1,346) 1,223 Other (2) (552) 4,909 Ending balance $ 10,361 $ 12,068 Retail Separate Accounts Beginning balance $ 44,538 $ 29,751 Inflows 5,710 9,215 Outflows (6,440) (4,085) Net flows (730) 5,130 Market performance (8,456) 6,124 Other (2) — 3,533 Ending balance $ 35,352 $ 44,538 Institutional Accounts (3) Beginning balance $ 51,874 $ 44,921 Inflows 10,407 8,101 Outflows (8,747) (7,404) Net flows 1,660 697 Market performance (12,168) 5,697 Other (2) 9,297 559 Ending balance $ 50,663 $ 51,874 Total Beginning balance $ 187,186 $ 132,194 Inflows 30,293 36,496 Outflows (43,736) (33,014) Net flows (13,443) 3,482 Market performance (37,083) 19,352 Other (2) 12,716 32,158 Ending balance $ 149,376 $ 187,186 (1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
(3) Averages are calculated as follows: – Funds - average daily or weekly balances – Retail Separate Accounts - prior-quarter ending balances – Institutional Accounts - average of month-end balances 21 Table of Contents Asset Flows by Product The following table summarizes asset flows by product: Years Ended December 31, (in millions) 2023 2022 Open-End Funds (1) Beginning balance $ 53,000 $ 78,706 Inflows 11,188 13,985 Outflows (18,526) (28,549) Net flows (7,338) (14,564) Market performance 8,160 (15,113) Other (2) 2,240 3,971 Ending balance $ 56,062 $ 53,000 Closed-End Funds Beginning balance $ 10,361 $ 12,068 Inflows 24 191 Outflows — — Net flows 24 191 Market performance 453 (1,346) Other (2) (812) (552) Ending balance $ 10,026 $ 10,361 Retail Separate Accounts Beginning balance $ 35,352 $ 44,538 Inflows 6,680 5,710 Outflows (5,972) (6,440) Net flows 708 (730) Market performance 7,141 (8,456) Other (2) 1 — Ending balance $ 43,202 $ 35,352 Institutional Accounts (3) Beginning balance $ 50,663 $ 51,874 Inflows 7,965 10,407 Outflows (8,579) (8,747) Net flows (614) 1,660 Market performance 9,077 (12,168) Other (2) 3,843 9,297 Ending balance $ 62,969 $ 50,663 Total Beginning balance $ 149,376 $ 187,186 Inflows 25,857 30,293 Outflows (33,077) (43,736) Net flows (7,220) (13,443) Market performance 24,831 (37,083) Other (2) 5,272 12,716 Ending balance $ 172,259 $ 149,376 (1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
Uses of Capital Our main uses of capital related to operating activities comprise employee compensation and related benefit costs, which include annual incentive compensation, other operating expenses, which primarily consist of investment research, technology costs, professional fees, distribution and occupancy costs, interest on our indebtedness, and income taxes.
Uses of Capital Our operating expenses consist of employee compensation and related benefit costs and, other operating expenses, which primarily consist of investment research, technology costs, professional fees, distribution and occupancy costs, as well as interest on our indebtedness and income taxes. Annual incentive compensation, the largest annual operating cash expenditure, is paid in the first quarter of the year.
The average fee rate earned for 2022 on all products decreased by 1.3 basis points compared to the prior year primarily due to a lower proportion of assets under management in equity products as a result of negative equity markets in the year partially offset by a higher proportion of alternative assets. 21 Table of Contents Investment Performance The following table presents a summary of investment performance by asset class measured by the percentage of assets under management exceeding their relevant benchmarks as of December 31, 2022: Percentage of Assets Under Management Beating Benchmark (2) Asset Class (1) 3-Year 5-Year 10-Year Equity 50% 67% 65% Fixed Income 65% 49% 54% Alternatives 94% 95% 92% (1) Excludes non-rated funds, closed-end funds, private client accounts, structured products and certain other multi-asset strategies.
The average fee rate earned on all products for 2023 increased by 0.6 basis points compared to the prior year primarily due to the addition of alternative strategies with higher fee rates from the AlphaSimplex acquisition. 23 Table of Contents Investment Performance The following table presents a summary of investment performance by asset class measured by the percentage of assets under management exceeding their relevant benchmarks as of December 31, 2023: Percentage of Assets Under Management Beating Benchmark (2) Asset Class (1) 3-Year 5-Year 10-Year Equity 42% 70% 69% Fixed Income 61% 77% 71% Alternatives 59% 94% 98% (1) Excludes closed-end funds, private client accounts, structured products and certain other multi-asset strategies.
Contingent payment obligations related to our asset purchases, if estimable and probable of payment, are initially recorded at their estimated value and reviewed every reporting period for changes.
Gains and losses resulting from changes in the fair value of contingent payment obligations are reflected within change in fair value of contingent consideration on the Consolidated Statements of Operations. Contingent payment obligations related to our asset purchases, if estimable and probable of payment, are initially recorded at their estimated value and reviewed every reporting period for changes.
We have offerings in various asset classes (equity, fixed income, multi-asset and alternative), geographies (domestic, global, international and emerging), market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental and quantitative). Our retail products include open-end funds, closed-end funds and retail separate accounts.
We have offerings in various asset classes (equity, fixed income, multi-asset and alternatives), geographies (domestic, global, international and emerging), market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental and quantitative). Our institutional products are offered through institutional separate accounts and commingled accounts, including structured products to a variety of institutional clients.
The realized and unrealized gains and losses during the year ended December 31, 2022 reflected changes in overall market conditions experienced during the year. Realized and Unrealized Gain (Loss) of CIP, net Realized and unrealized gain (loss) of CIP, net changed $37.5 million compared to the prior year.
The realized and unrealized gains and losses reflect changes in overall market conditions for the year. Realized and Unrealized Gain (Loss) of CIP, net Realized and unrealized gain (loss) of CIP, net changed $36.9 million compared to the prior year.
The decrease in cash used in investing activities during 2022 compared to the prior year related to the decrease in cash paid for acquisitions. Financing Cash Flow Cash flows from financing activities consist primarily of transactions related to our common shares, issuance and repayment of debt by us and CIP, payments of contingent consideration and changes to noncontrolling interests.
Financing Cash Flow Cash flows from financing activities consist primarily of transactions related to our common shares, issuance and repayment of debt by us and CIP, payments of contingent consideration and purchases and sales of noncontrolling interests. Net cash used in financing activities increased by $254.1 million to $356.1 million in 2023 from $102.1 million in the prior year.
(3) Represents assets under management of institutional separate and commingled accounts including structured products. 20 Table of Contents The following table summarizes our assets under management by asset class: December 31, Change % of Total (in millions) 2022 2021 2022 vs. 2021 % 2022 2021 Asset Class Equity $ 81,894 $ 116,546 $ (34,652) (29.7) % 54.9 % 62.3 % Fixed Income 36,903 34,261 2,642 7.7 % 24.7 % 18.3 % Multi-Asset (1) 19,937 24,853 (4,916) (19.8) % 13.3 % 13.3 % Alternatives (2) 10,642 11,526 (884) (7.7) % 7.1 % 6.1 % Total $ 149,376 $ 187,186 $ (37,810) (20.2) % 100.0 % 100.0 % (1) Includes strategies with substantial holdings in at least two of the following asset classes: equity, fixed income and alternatives.
(3) Represents assets under management of institutional separate and commingled accounts including structured products. 22 Table of Contents Assets Under Management by Asset Class The following table summarizes assets under management by asset class: December 31, Change % of Total (in millions) 2023 2022 2023 vs. 2022 % 2023 2022 Asset Class Equity $ 96,703 $ 81,894 $ 14,809 18.1 % 56.2 % 54.9 % Fixed Income 37,192 36,903 289 0.8 % 21.6 % 24.7 % Multi-Asset (1) 21,411 19,937 1,474 7.4 % 12.4 % 13.3 % Alternatives (2) 16,953 10,642 6,311 59.3 % 9.8 % 7.1 % Total $ 172,259 $ 149,376 $ 22,883 15.3 % 100.0 % 100.0 % (1) Consists of strategies and client accounts with substantial holdings in at least two of the following asset classes: equity, fixed income, and alternatives.
Administration & Shareholder Service Fees We provide administrative fund services to our U.S. retail funds, ETFs and the majority of our closed-end funds and shareholder services to our open-end funds. Administration and shareholder services are performed over time. We earn fees for these services, which are calculated and paid monthly, based on each fund's average daily or weekly net assets.
Administration & Shareholder Service Fees We provide administrative fund services to our U.S. retail funds, ETFs and the majority of our closed-end funds and shareholder services to our U.S. retail funds. Administration and shareholder services are performed over time.
Liabilities under contingent payment arrangements are recorded within contingent consideration on the Consolidated Balance Sheets. Contingent payment obligations related to business combinations are remeasured at fair value each reporting date using a simulation model with the assistance of an independent valuation firm and approved by management (level 3 fair value measurement).
Contingent payment obligations related to business combinations are remeasured at fair value each reporting date using a simulation model with the assistance of an independent valuation firm (level 3 fair value measurement). The change in fair value is recorded in the current period as a gain or loss.
Assets Under Management by Product The following table summarizes our assets under management by product: As of December 31, As of Change (in millions) 2022 2021 2022 vs. 2021 % Open-End Funds (1) $ 53,000 $ 78,706 $ (25,706) (32.7) % Closed-End Funds 10,361 12,068 (1,707) (14.1) % Retail Separate Accounts 35,352 44,538 (9,186) (20.6) % Institutional Accounts (2) 50,663 51,874 (1,211) (2.3) % Total Assets Under Management $ 149,376 $ 187,186 $ (37,810) (20.2) % Average Assets Under Management (3) $ 166,795 $ 172,841 $ (6,046) (3.5) % (1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
Assets Under Management by Product The following table summarizes our assets under management by product: As of December 31, As of Change (in millions) 2023 2022 2023 vs. 2022 % Open-End Funds (1) $ 56,062 $ 53,000 $ 3,062 5.8 % Closed-End Funds 10,026 10,361 (335) (3.2) % Retail Separate Accounts 43,202 35,352 7,850 22.2 % Institutional Accounts (2) 62,969 50,663 12,306 24.3 % Total $ 172,259 $ 149,376 $ 22,883 15.3 % Average Assets Under Management (3) $ 161,482 $ 166,795 $ (5,313) (3.2) % (1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance funds.
The net asset values from which 30 Table of Contents these fees are calculated are variable in nature and subject to factors outside of our control such as additional investments, withdrawals and market performance.
The net asset values from which these fees are calculated are variable in nature and subject to factors outside of the Company's control, such as additional investments, withdrawals and market performance. Because of this, these fees are considered constrained until the end of the contractual measurement period (monthly or quarterly), which is when asset values are generally determinable.
Other Income (Expense), net Other Income (Expense), net by category were as follows: Years Ended December 31, Change (in thousands) 2022 2021 2022 vs. 2021 % Other Income (Expense) Realized and unrealized gain (loss) on investments, net $ (12,489) $ 3,907 $ (16,396) (419.7) % Realized and unrealized gain (loss) of CIP, net (39,296) (1,761) (37,535) 2,131.5 % Other income (expense), net (153) 4,230 (4,383) (103.6) % Total Other Income (Expense), net $ (51,938) $ 6,376 $ (58,314) (914.6) % Realized and Unrealized Gain (Loss) on Investments, net Realized and unrealized gain (loss) on investments, net changed during the year ended December 31, 2022 by $16.4 million, as compared to the prior year.
Other Income (Expense), net Other Income (Expense), net by category were as follows: Years Ended December 31, Change (in thousands) 2023 2022 2023 vs. 2022 % Other Income (Expense) Realized and unrealized gain (loss) on investments, net $ 6,525 $ (12,489) $ 19,014 (152.2) % Realized and unrealized gain (loss) of CIP, net (2,404) (39,296) 36,892 (93.9) % Other income (expense), net (440) (153) (287) 187.6 % Total Other Income (Expense), net $ 3,681 $ (51,938) $ 55,619 (107.1) % Realized and Unrealized Gain (Loss) on Investments, net Realized and unrealized gain (loss) on investments, net changed during the year ended December 31, 2023 by $19.0 million as compared to the prior year.
Incentive fees on certain of our CLOs are typically a percentage of the excess cash flows available to holders of the subordinated notes, above a threshold level internal rate of return.
Senior and subordinated management fees are based on the end of the preceding quarter par value of the collateral managed with subordinated fees being earned only after certain portfolio criteria are met. Incentive fees on CLOs are typically a percentage of the excess cash flows available to holders of subordinated notes, above a threshold level internal rate of return.
Our methodology also includes estimates of future taxable income from operations, as well as the expiration dates and amounts of carryforwards related to net operating losses and capital losses. These estimates are projected through the life of the related deferred tax assets based on assumptions that we believe to be reasonable and consistent with demonstrated operating results.
Our methodology also includes estimates of future taxable income from operations, as well as the expiration dates and amounts of carryforwards related to net operating losses and capital losses.
Interest and dividend income increased $3.1 million, or 226.1%, compared to the prior year due to higher average investment balances and higher interest rates during the current year compared to the prior year.
Interest and Dividend Income Interest and dividend income is earned on cash equivalents and our marketable securities. Interest and dividend income increased $8.0 million, or 180.1%, compared to the prior year due to higher average investment balances and higher 27 Table of Contents interest rates during the current year compared to the prior year.
We have broad distribution access in the U.S. retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and registered investment advisers, banks and insurance companies. In many of these firms, we have a number of products that are on preferred "recommended" lists and on fee-based advisory programs.
Our U.S. retail funds and retail separate accounts are distributed through financial intermediaries. We have broad distribution access in the U.S. retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and registered investment advisers, banks and insurance companies.
Interest Expense of CIP Interest expense of CIP represents interest expense on the notes payable of CIP. Interest expense of CIP increased by $19.8 million, or 32.8%, compared to the prior year primarily due to higher average interest rates during the current year and the addition of a new CLO in the current year.
Interest expense of CIP increased by $75.1 million, or 93.6%, compared to the prior year primarily due to higher average interest rates and the addition of a CLO during the third quarter of 2023 and fourth quarter of 2022.
As of December 31, 2022, 34 of 77, or 44%, of our rated U.S. retail funds received an overall rating of 4 or 5 stars representing 57% of our total U.S. retail fund assets under management (1) . By comparison, 32.5% of Morningstar's fund population is given a 4 or 5 star rating (2) .
Past performance is not indicative of future results. As of December 31, 2023, 38 of 77, or 49%, of our rated U.S. retail funds received an overall rating of 4 or 5 stars representing 70% of our total U.S. retail fund assets under management (1) .
Net flows were $(13.4) billion in 2022 compared to $3.5 billion in 2021. 18 Table of Contents ▪ Assets under management were $149.4 billion at December 31, 2022, a decrease of $37.8 billion, or 20.2%, from $187.2 billion at December 31, 2021.
Net flows were $(7.2) billion in 2023 compared to $(13.4) billion in 2022. ▪ Assets under management were $172.3 billion at December 31, 2023, an increase of $22.9 billion, or 15.3%, from $149.4 billion at December 31, 2022.
The capital and financial markets experience fluctuation, volatility and declines, which impact investment returns and asset flows of our investment offerings as well as in investor choices and preferences among investment products. The changes in our assets under management may also be affected by the factors discussed in Item 1A. "Risk Factors" of this Annual Report on Form 10-K.
Market Developments The financial markets have a significant impact on the value of our assets under management and on the level of our sales and net flows. The capital and financial markets experience fluctuation, volatility and declines, which impact investment returns and asset flows of our investment offerings as well as in investor choices and preferences among investment products.
(2) Percentage beating benchmark is reported as the percentage of assets under management that have outperformed benchmarks across the indicated periods. Performance is presented on an average annual total return basis for products with a three-, five-, and/or ten-year track record, is net of fees and is measured on a consistent basis relative to the most appropriate benchmarks.
Performance is presented on an average annual total return basis for products with a three-, five-, and/or ten-year track record, is net of fees and is measured on a consistent basis relative to the most appropriate benchmarks. Benchmark indices are unmanaged, their returns do not reflect any fees, expenses or sales charges, and they are not available for direct investment.
Other Income (Expense), net Other income (expense), net decreased by $4.4 million during the year ended December 31, 2022 compared to the prior year primarily due to lower equity method investment income during the current year.
Other Income (Expense), net Other income (expense), net changed by $0.3 million during the year ended December 31, 2023 compared to the prior year primarily due to changes in the gains and losses on our equity method investments.
Annual incentive compensation, which is one of the largest annual operating cash expenditures, is typically paid in the first quarter of the year. In 2022 and 2021, we paid approximately $151.6 million and $96.9 million, respectively, in incentive compensation earned during the years ended December 31, 2021 and 2020, respectively.
In 2023 and 2022, we paid approximately $142.1 million and $151.6 million, respectively, in incentive compensation earned during the years ended December 31, 2022 and 2021, respectively.
Minority interests held in an affiliate are generally recorded in our Consolidated Balance Sheets at estimated redemption value within redeemable noncontrolling interests, and changes in estimated redemption value of these interests are recorded in our Consolidated Statements of Operations within noncontrolling interests.
These minority interests in the affiliate are recorded at estimated redemption value within redeemable noncontrolling interests on the Company's Consolidated Balance Sheets, and any changes in the estimated redemption value are recorded on the Consolidated Statements of Operations within noncontrolling 30 Table of Contents interests. Goodwill As of December 31, 2023, the carrying value of goodwill was $397.1 million.
Liquidity and Capital Resources Certain Financial Data The following tables summarize certain financial data relating to our liquidity and capital resources: December 31, Change (in thousands) 2022 2021 2022 vs. 2021 % Balance Sheet Data Cash and cash equivalents $ 338,234 $ 378,921 $ (40,687) (10.7) % Investments 100,330 108,890 (8,560) (7.9) % Contingent consideration 128,400 162,564 (34,164) (21.0) % Debt 255,025 266,346 (11,321) (4.3) % Redeemable noncontrolling interests 113,718 138,965 (25,247) (18.2) % Total equity 822,936 836,627 (13,691) (1.6) % Years Ended December 31, Change (in thousands) 2022 2021 2022 vs. 2021 % Cash Flow Data Provided by (used in) Operating activities $ 132,670 $ 665,729 $ (533,059) (80.1) % Investing activities (27,467) (175,033) 147,566 (84.3) % Financing activities (102,057) (244,400) 142,343 (58.2) % 26 Table of Contents Overview At December 31, 2022, we had $338.2 million of cash and cash equivalents and $100.3 million of investments, which included $77.0 million of investment securities, compared to $378.9 million of cash and cash equivalents and $108.9 million of investments, which included $80.3 million of investment securities, at December 31, 2021.
Liquidity and Capital Resources Certain Financial Data The following tables summarize certain financial data relating to our liquidity and capital resources: December 31, Change (in thousands) 2023 2022 2023 vs. 2022 % Balance Sheet Data Cash and cash equivalents $ 239,602 $ 338,234 $ (98,632) (29.2) % Investments 132,696 100,330 32,366 32.3 % Contingent consideration 90,938 128,400 (37,462) (29.2) % Debt 253,412 255,025 (1,613) (0.6) % Redeemable noncontrolling interests 104,869 113,718 (8,849) (7.8) % Total equity 868,289 822,936 45,353 5.5 % Years Ended December 31, Change (in thousands) 2023 2022 2023 vs. 2022 % Cash Flow Data Provided by (used in) Operating activities $ 237,157 $ 132,670 $ 104,487 78.8 % Investing activities (129,732) (27,467) (102,265) 372.3 % Financing activities (356,113) (102,057) (254,056) 248.9 % 28 Table of Contents Overview At December 31, 2023, we had $239.6 million of cash and cash equivalents and $132.7 million of investments, which included $97.3 million of investment securities, compared to $338.2 million of cash and cash equivalents and $100.3 million of investments, which included $77.0 million of investment securities, at December 31, 2022.
Goodwill impairment testing is performed at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If we determine that the carrying value of the reporting unit is less than the fair value, a second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any.
Goodwill represents the excess of the acquisition purchase price over the fair value of identified net assets and liabilities acquired. We have one reporting unit for purposes of assessing the carrying value of goodwill. Goodwill impairment testing is performed at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Amortization expense increased $14.0 million, or 31.5%, for the year ended December 31, 2022 compared to the prior year due to the additional amortization associated with the acquisitions of Stone Harbor and Westchester.
Amortization expense increased $2.5 million, or 4.3%, for the year ended December 31, 2023 compared to the prior year, primarily due to the addition of AlphaSimplex.
Administrative fund services include: record keeping, preparing and filing documents required to comply with securities laws, legal administration and compliance services, customer service, supervision of the activities of the funds' service providers, tax services and treasury services. We also provide office space, equipment and personnel that may be necessary for managing and administering the business affairs of the funds.
We earn fees for these services, which are calculated and paid monthly, based on each fund's average daily or weekly net assets. Administrative fund services include: record keeping, preparing and filing documents required to comply with securities laws, legal administration and compliance services, customer service, supervision of the activities of the funds' service providers, tax services and treasury services.
Interest Income (Expense), net Interest Income (Expense), net by category were as follows: Years Ended December 31, Change (in thousands) 2022 2021 2022 vs. 2021 % Interest Income (Expense) Interest expense $ (13,173) $ (9,240) $ (3,933) 42.6 % Interest and dividend income 4,448 1,364 3,084 226.1 % Interest and dividend income of investments of CIP 107,325 90,080 17,245 19.1 % Interest expense of CIP (80,234) (60,398) (19,836) 32.8 % Total Interest Income (Expense), net $ 18,366 $ 21,806 $ (3,440) (15.8) % Interest Expense Interest expense increased $3.9 million, or 42.6%, for the year ended December 31, 2022 compared to the prior year primarily due to higher interest rates on our debt. 25 Table of Contents Interest and Dividend Income Interest and dividend income is earned on cash equivalents and our marketable securities.
Interest Income (Expense), net Interest Income (Expense), net by category were as follows: Years Ended December 31, Change (in thousands) 2023 2022 2023 vs. 2022 % Interest Income (Expense) Interest expense $ (23,431) $ (13,173) $ (10,258) 77.9 % Interest and dividend income 12,458 4,448 8,010 180.1 % Interest and dividend income of investments of CIP 197,707 107,325 90,382 84.2 % Interest expense of CIP (155,335) (80,234) (75,101) 93.6 % Total Interest Income (Expense), net $ 31,399 $ 18,366 $ 13,033 71.0 % Interest Expense Interest expense increased $10.3 million, or 77.9%, for the year ended December 31, 2023, compared to the prior year primarily due to higher average interest rates and higher average debt balances during the current year.
Operating Cash Flow Cash flows provided by operating activities of $132.7 million for 2022 decreased by $533.1 million from cash flows provided by operating activities of $665.7 million in 2021 primarily due to a $396.2 million reduction in net sales of investments by CIP and a decrease in accrued compensation and other liability balances compared to the prior year.
Operating Cash Flow Net cash provided by operating activities of $237.2 million for 2023 increased by $104.5 million from cash flows provided by operating activities of $132.7 million in 2022 primarily due to a decrease of $117.4 million in net purchases of investments by CIP.
Other income and fees increased modestly during the year ended December 31, 2022 compared to the prior year. 23 Table of Contents Operating Expenses Operating expenses by category were as follows: Years Ended December 31, Change (in thousands) 2022 2021 2022 vs. 2021 % Operating expenses Employment expenses $ 371,259 $ 358,230 $ 13,029 3.6 % Distribution and other asset-based expenses 112,612 141,039 (28,427) (20.2) % Other operating expenses 126,178 90,134 36,044 40.0 % Other operating expenses of CIP 4,408 3,562 846 23.8 % Change in fair value of contingent consideration 8,020 12,400 (4,380) (35.3) % Restructuring expense 4,015 — 4,015 100.0 % Depreciation expense 3,923 3,900 23 0.6 % Amortization expense 58,504 44,481 14,023 31.5 % Total operating expenses $ 688,919 $ 653,746 $ 35,173 5.4 % Employment Expenses Employment expenses consist of fixed and variable compensation and related employee benefit costs.
Other income and fees decreased $0.9 million, or 18.8%, for the year ended December 31, 2023 compared to the prior year, primarily due to lower redemption income as well as the decline in average other fee-earning assets in the current year. 25 Table of Contents Operating Expenses Operating expenses by category were as follows: Years Ended December 31, Change (in thousands) 2023 2022 2023 vs. 2022 % Operating expenses Employment expenses $ 404,742 $ 371,259 $ 33,483 9.0 % Distribution and other asset-based expenses 96,802 112,612 (15,810) (14.0) % Other operating expenses 125,871 126,178 (307) (0.2) % Other operating expenses of CIP 4,224 4,408 (184) (4.2) % Change in fair value of contingent consideration (5,510) 8,020 (13,530) (168.7) % Restructuring expense 824 4,015 (3,191) (79.5) % Depreciation expense 5,804 3,923 1,881 47.9 % Amortization expense 61,027 58,504 2,523 4.3 % Total operating expenses $ 693,784 $ 688,919 $ 4,865 0.7 % Employment Expenses Employment expenses consist of fixed and variable compensation and related employee benefit costs.
Changes in future operating results not currently forecasted may have a significant impact on the realization of deferred tax assets. Valuation allowances are provided when it is determined that it is more likely than not that the benefit of deferred tax assets will not be realized.
Valuation allowances are provided when it is determined that it is more likely than not that the benefit of deferred tax assets will not be realized. Contingent Consideration We periodically enter into contingent payment arrangements in connection with our business combinations or asset purchases.
At December 31, 2022, the ratio of aggregate indebtedness to net capital of our broker-dealer was below the maximum allowed, and net capital was significantly greater than the required minimum. Balance Sheet Cash and cash equivalents consist of cash in banks and money market fund investments. Investments consist primarily of investments in our sponsored funds.
Balance Sheet Cash and cash equivalents consist of cash in banks and money market fund investments. Investments consist primarily of investments in our sponsored funds.
The change in total assets under management from December 31, 2021 included $37.1 billion of negative market performance and $13.4 billion of net outflows partially offset by $14.7 billion in assets under management from the addition of Stone Harbor.
Assets Under Management At December 31, 2023, total assets under management were $172.3 billion, representing an increase of $22.9 billion, or 15.3%, from December 31, 2022. The change in total assets under management from December 31, 2022 included $24.8 billion from positive market performance and $7.8 billion from the acquisition of AlphaSimplex, partially offset by $7.2 billion of net outflows.
Interest and Dividend Income of Investments of CIP Interest and dividend income of investments of CIP increased $17.2 million, or 19.1%, compared to the prior year primarily due to higher average interest rates in the current year and the addition of a new CLO in the current year.
Interest and Dividend Income of Investments of CIP Interest and dividend income of investments of CIP increased $90.4 million, or 84.2%, compared to the prior year primarily attributable to higher interest earned on cash balances. Interest Expense of CIP Interest expense of CIP represents interest expense on the notes payable of CIP.
Other operating expenses increased $36.0 million, or 40.0%, for the year ended December 31, 2022 as compared to the prior year primarily due to the addition of Stone Harbor and Westchester, as well as higher travel and related expenses.
Other operating expenses decreased modestly by $0.3 million, or 0.2%, for the year ended December 31, 2023 as compared to the prior year primarily due to a decrease in other third-party support costs partially offset by the addition of AlphaSimplex.
Failure to meet these requirements could result in adverse consequences to us, including additional reporting requirements, a lower required ratio of aggregate indebtedness to net capital, or interruption of our business.
Capital and Reserve Requirements We operate an SEC-registered broker-dealer subsidiary that is subject to certain rules regarding minimum net capital. Failure to meet these requirements could result in adverse consequences to us, including additional reporting requirements, or interruption of our business. At December 31, 2023, our broker-dealer net capital was significantly greater than the required minimum.
Our sales efforts are supported by regional sales professionals, a national account relationship group, and additional teams for ETFs and the retirement and insurance channels. Our retail separate accounts are distributed through financial intermediaries and directly to private clients by teams at an affiliated manager. Our institutional services are marketed through relationships with consultants as well as directly to clients.
Our institutional products are marketed through relationships with consultants as well as directly to clients. We target key market segments, including foundations and endowments, corporations, public and private pension plans, sovereign wealth funds and subadvisory relationships. Our retail distribution resources in the U.S. consist of regional sales professionals, a national account relationship group and specialized teams for retirement and ETFs.
Depreciation expense remained consistent in 2022 compared to the prior year. Amortization Expense Amortization expense consists of the amortization of definite-lived intangible assets over their estimated useful lives.
Depreciation expense increased $1.9 million, or 47.9%, for the year ended December 31, 2023 compared to the prior year primarily due to the addition of AlphaSimplex, as well as leasehold improvements and equipment purchases made in the current year. 26 Table of Contents Amortization Expense Amortization expense consists of the amortization of definite-lived intangible assets over their estimated useful lives.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIf a 10% increase or decrease in the fair values of our direct investments in CIP were to occur, it would result in a corresponding increase or decrease in our pre-tax earnings.
Biggest changeIf a 10% increase or decrease in the fair values of our direct investments in CIP were to occur, it would result in a corresponding increase or decrease in our pre-tax earnings. 33 Table of Contents Interest Rate Risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The applicable margin on amounts outstanding under the Credit Agreement is 2.25%, in the case of LIBOR-based loans, and 1.25%, in the case of an alternate base rate loan.
The applicable margin on amounts outstanding under the Credit Agreement is 2.25%, in the case of SOFR-based loans, and 1.25%, in the case of an alternate base rate loan.
At December 31, 2022, we were exposed to interest rate risk as a result of approximately $155.8 million of investments in fixed and floating rate income products, which include our net interests in CIP.
At December 31, 2023, we were exposed to interest rate risk as a result of approximately $184.0 million of investments in fixed- and floating-rate income products, which include our net interests in CIP.
We considered a hypothetical 100 basis point change in interest rates and determined that the fair value of our fixed income investments could change by an estimated $2.7 million. At December 31, 2022, we had $261.6 million outstanding under our Term Loan.
We considered a hypothetical 100 basis point change in interest rates and determined that the fair value of our fixed income investments could change by an estimated $2.5 million. At December 31, 2023, we had $258.8 million outstanding under our Term Loan.
The following table summarizes the impact of a 10% increase or decrease in the fair values of these financial instruments: December 31, 2022 (in thousands) Fair Value 10% Change Investment securities - fair value (1) $ 76,999 $ 7,700 Our net interest in CIP (2) 148,107 14,811 Total Investments subject to Market Risk $ 225,106 $ 22,511 (1) If a 10% increase or decrease in fair values were to occur, it would result in a corresponding increase or decrease in our pre-tax earnings.
The following table summarizes the impact of a 10% increase or decrease in the fair values of these financial instruments: December 31, 2023 (in thousands) Fair Value 10% Change Investment securities - fair value (1) $ 97,304 $ 9,730 Our net interest in CIP (2) 179,588 17,959 Total Investments subject to Market Risk $ 276,892 $ 27,689 (1) If a 10% increase or decrease in fair values were to occur, it would result in a corresponding increase or decrease in our pre-tax earnings.
Removed
Interest Rate Risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

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