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What changed in VIRTUS INVESTMENT PARTNERS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of VIRTUS INVESTMENT PARTNERS, INC.'s 2023 and 2024 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 2024 report.

+214 added−233 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-28)

Top changes in VIRTUS INVESTMENT PARTNERS, INC.'s 2024 10-K

214 paragraphs added · 233 removed · 188 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

53 edited+10 added−9 removed10 unchanged
Biggest changeWe 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.
Biggest changeWe monitor our managers' services by assessing their performance, style and consistency and the discipline with which they apply their investment process. 2 Table of Contents Our investment managers, their respective investment styles and assets under management as of December 31, 2024 were as follows: Investment Manager Location Investment Style Assets (in billions) AlphaSimplex Boston, MA Systematic Alternatives $ 6.1 Ceredex Value Advisors Orlando, FL Value Equity $ 5.2 Duff & Phelps Investment Management Chicago, IL Listed Real Assets $ 12.3 Kayne Anderson Rudnick Investment Management Los Angeles, CA Quality-Focused Equity $ 67.9 Newfleet Asset Management Hartford, CT Multi-Sector Fixed Income $ 15.3 NFJ Investment Group Dallas, TX Global Value Equity $ 5.8 Seix Investment Advisors Park Ridge, NJ Specialty Fixed Income $ 12.6 Silvant Capital Management Atlanta, GA Growth Equity $ 2.4 Stone Harbor Investment Partners New York, NY Emerging Markets Debt $ 5.4 Sustainable Growth Advisers Stamford, CT Global Growth Equity $ 24.9 Virtus Multi-Asset Hartford, CT Global Multi-Asset $ 0.1 Virtus Systematic San Diego, CA Global Equity $ 0.5 Westchester Capital Management Valhalla, NY Event-Driven Alternatives $ 2.7 Zevenbergen Capital Investments (1) Seattle, WA Disruptive Growth Equity $ 2.1 (1) Affiliated through ownership of a minority interest.
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").
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.
Reports, proxy statements and other information regarding issuers that file electronically with the SEC, including our filings, are also available to the public on the SEC's website at http://www.sec.gov.
Reports, proxy and other information statements and other information regarding issuers that file electronically with the SEC, including our filings, are also available to the public on the SEC's website at http://www.sec.gov.
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.
Our value as a company derives from the talents an d 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.
Programs 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.
Programs 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 backgrounds and experiences 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.
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.
For funds managed by subadvisers, the day-to-day investment management of the 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.
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.
We rely upon key personnel to manage our business, including senior executives, portfolio managers, securities analysts, wealth advisers, sales personnel and other professionals. The retention of senior executives and key investment personnel is material to the management of our business.
For retail separate accounts and institutional accounts, investment management fees are negotiated and based primarily on portfolio size and complexity, individual client requests and investment strategy capacity, as appropriate. In certain instances, institutional fees may include performance-related fees, generally earned if the returns on the portfolios exceed agreed upon periodic or cumulative return targets, primarily benchmark indices.
For intermediary sold retail separate accounts and institutional accounts, investment management fees are negotiated and based primarily on portfolio size and complexity, individual client requests and investment strategy capacity, as appropriate. In certain instances, institutional fees may include performance-related fees, generally earned if the returns on the portfolios exceed agreed upon periodic or cumulative return targets, primarily benchmark indices.
These 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 as well as providing office space, equipment and personnel that may be necessary for managing and administering the business affairs of the funds.
These services include: record keeping, preparing and filing documents required to comply with securities laws, legal administration and compliance services, client service, supervision of the activities of the funds' service providers, tax services and treasury services as well as providing office space, equipment and personnel that may be necessary for managing and administering the business affairs of the funds.
Retail 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. Our U.S. retail funds and retail separate accounts are distributed through financial intermediaries.
Retail 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. Our U.S. retail funds, ETFs and intermediary sold retail separate accounts are distributed through financial intermediaries.
Our Competition We face significant competition from a wide variety of financial institutions, including other investment management companies, as well as from proprietary products offered by our distribution partners such as banks, broker-dealers and financial planning firms.
We face significant competition from a wide variety of financial institutions, including other investment management companies. We also face competition from proprietary products offered by our distribution partners such as banks, broker-dealers and financial planning firms.
For our sponsored funds, we earn fees based on each fund's average daily or weekly net assets with most fee schedules providing for rate declines or "breakpoints" as asset levels increase to certain thresholds.
For our funds, we earn fees based on each fund's average daily or weekly net assets with certain fee schedules providing for rate declines or "breakpoints" as asset levels increase to certain thresholds.
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.
We use a multi-manager, multi-style approach, offering investment strategies from our investment 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 funds.
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.
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 investment managers with distribution, business and operational support.
Our earnings are primarily from asset-based fees charged for services relating to these various products, including investment management, fund administration, distribution and shareholder services.
Our earnings are primarily from asset-based fees charged for services relating to these various products, primarily investment management, but certain products include fund administration, distribution and shareholder services.
Information contained on the website is not incorporated by reference or otherwise considered part of this document. 8 Table of Contents
Information contained on the website is not incorporated by reference or otherwise considered part of this document.
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.
The Company and employees ha ve supported a wide 9 Table of Contents range of philanthropic activities that help to enrich and sustain the communities in which we have a business presence.
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.
Summary information regarding our select unaffiliated subadvisers, their respective investment styles and assets under management as of December 31, 2024 was as follows: Unaffiliated Subadviser Investment Style Assets (in billions) Voya Investment Management Income & Growth and Convertible $ 9.4 Other Various $ 2.3 3 Table of Contents Our Investment Products Our assets under management are in open-end funds, closed-end funds, retail separate accounts and institutional accounts.
(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).
(3) 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, market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental and quantitative).
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.
Our broker- 7 Table of Contents 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. Our Competition The financial services industry is a highly competitive global business.
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.
Our Advisers operating outside of the U.S. are also subject to regulation by various regulatory authorities and exchanges in the relevant jurisdiction such as directives and regulations in the European Union and other jurisdictions related to funds, including 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.
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").
Our Advisers manage 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. In the U.S., the open-end funds, ETFs and closed-end funds we offer are subject to the Investment Company Act of 1940, as amended (the "Investment Company Act").
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.
For more information about our regulatory environment, refer to “Risk Factors – Legal and Regulatory Risks.” 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 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 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) 2024 2023 2022 Open-end funds $ 317,990 $ 305,238 $ 335,585 Closed-end funds 59,184 58,136 63,841 Retail separate accounts 209,467 171,357 171,509 Institutional accounts 187,189 176,744 157,404 Total investment management fees 773,830 711,475 728,339 Administration fees 53,257 52,858 61,344 Shareholder service fees 21,037 20,999 24,518 Total $ 848,124 $ 785,332 $ 814,201 6 Table of Contents Investment Management Fees We provide investment management services through our investment managers (each an "Adviser") pursuant to investment management agreements.
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 wealth management business is marketed directly to individual clients by financial advisory teams at our Advisers. 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 institutional products are marketed through relationships with consultants as well as directly to clients.
Competition in our businesses is based on several factors, including investment performance, fees charged, access to distribution channels, and service to financial advisors and their clients.
Competition in our businesses is based on several factors, including, among others, product mix and offerings, investment performance, fees charged, access to distribution channels, service quality and innovation.
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 represent the range of management fees paid by the funds, from the highest to the lowest and includes the impact of breakpoints at which the fees for certain funds decrease as assets in such funds increase. Subadvisory fees paid on funds managed by unaffiliated subadvisers are not reflected.
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 represent the range of management fees paid by the funds, from the highest to the lowest and includes the impact of breakpoints at which the fees for certain funds decrease as assets in such funds increase. Subadvisory fees paid on funds managed by unaffiliated subadvisers are not reflected.
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.
Due to the extensive laws and regulations to which we and our Advisers are subject, we devote substantial time, expense, and effort to remain current on, and to address, legal and regulatory compliance matters. We have established compliance programs to address regulatory compliance, and we have experienced legal and compliance professionals in place to address these requirements.
Our global funds are offered in select investment strategies to non-U.S. investors. Our ETFs are offered in a range of actively managed and index-based investment capabilities across multiple asset classes.
Our ETFs are offered in a range of actively managed and index-based investment capabilities across multiple asset classes. Our global funds are offered in select investment strategies to non-U.S. investors. Summary information about our open-end funds by asset class as of December 31, 2024 was as follows: Total Assets (in millions) U.S.
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).
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 strategies are offered to a variety of institutional clients through institutional separate and commingled accounts, including subadvisory services to other investment advisers.
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.
Our retail investment strategies are provided to individual investors through products consisting of: mutual funds registered pursuant to the Investment Company Act of 1940, as amended that include U.S. retail funds, exchange-traded funds ("ETFs"); Undertaking for Collective Investment in Transferable Securities and Qualifying Investor Funds ("global funds" and collectively with U.S. retail funds and ETFs the "open-end funds"); closed-end funds (collectively with open-end funds, the "funds"); retail separate accounts sold through intermediaries and wealth advisory services to high- net-worth clients through our wealth management business.
Our Broker-Dealer Services We operate a broker-dealer that is registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is a member of the Financial Industry Regulatory Authority ("FINRA").
We target key market segments, including foundations and endowments, corporations, public and private pension plans, sovereign wealth funds and subadvisory relationships. Our Broker-Dealer Services We operate a broker-dealer that is registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is a member of the Financial Industry Regulatory Authority ("FINRA").
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.
Assets Under Management by Product as of December 31, 2024 Products (in billions) Open-end funds (1) $ 56.1 Closed-end funds 10.2 Retail separate accounts (2) 49.5 Institutional accounts (3) 59.2 Total Assets Under Management $ 175.0 (1) Represents assets under management of U.S. retail funds, global funds and exchange traded funds. (2) Includes investment models provided to managed account sponsors.
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.
Summary information about our closed-end funds as of December 31, 2024 was as follows: Asset Class Total Assets (in millions) Management Fee Range % (1) Multi-Asset (2) $ 7,309 1.50 - 0.50 Fixed Income 1,375 1.00 - 0.50 Equity 911 1.25 Alternatives (3) 630 1.00 Total Closed-End Funds $ 10,225 (1) Represents management fees earned as a percentage of average daily net assets.
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.
The Investment Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties, compliance and disclosure obligations, and operational and recordkeeping requirements. Certain of our Advisers are also members of the NFA and are regulated by the CFTC with respect to the management of funds and other products that utilize futures, swaps, or other CFTC regulated instruments.
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.
We also use the investment management services of select unaffiliated managers to sub-advise certain of our open- and closed-end funds.
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").
Our Investment Managers We provide investment management services through our investment managers who are registered as investment advisers 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 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.
In the U.S., we are subject to regulation by the SEC, the U.S. Commodity Futures Trading Commission ("CFTC"), other federal and state agencies, as well as FINRA and the National Futures Association ("NFA"). Each of our Advisers is registered as an investment adviser with the SEC under the Investment Advisers Act.
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.
The Investment Company Act governs the operations of registered 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.
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.
(2) Consists of multi-asset offerings not included in equity, fixed income and alternatives. (3) Consists of managed futures, event-driven, real estate securities, infrastructure, long/short and other strategies. 4 Table of Contents Closed-End Funds Our closed-end funds are offered in a variety of asset classes, each of which is traded on the New York Stock Exchange.
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.
Our global funds are registered with and subject to regulation by the Central Bank of Ireland. Our broker-dealer, VP Distributors, LLC, 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.
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.
At December 31, 2024, we had $2.3 billion of other fee earning assets.
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.
Human Capital As of December 31, 2024, we employed 805 employees and operated offices throughout the U.S., and in the U.K. 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.
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.
For more information on our competitive risks, refer to "Risk Factors – Risks Related to Our Industry, Business and Operations." 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 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.
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. 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 earn fees based on each fund's average daily or weekly net assets.
Administration Fees We provide various administrative services to our U.S. retail funds, ETFs and certain closed-end funds. We earn fees based on each fund's average daily or weekly net assets.
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.
(2) Consists of multi-asset offerings not included in equity, fixed income and alternatives. 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. Other fee earning assets are not included in our assets under management.
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.
Fees for CLOs are generally calculated at a contractual fee rate applied against the end of the preceding quarter par value of the total collateral being managed. Fees for wealth management accounts are generally based on a standard fee schedule that provides for rate declines or “breakpoints” as asset levels increase to certain thresholds.
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.
The following table summarizes our retail separate accounts by asset class as of December 31, 2024: Total Assets (in millions) Intermediary-Sold Managed Accounts Wealth Management Accounts Equity Domestic equity $ 38,558 $ 515 International equity 77 — Global equity 443 2 Specialty equity — 38 Fixed Income Leveraged finance 1,394 — Investment grade 200 420 Emerging markets debt 16 — Multi-Asset (1) 130 7,742 Alternatives (2) 1 — Total Retail Separate Accounts $ 40,819 $ 8,717 (1) Consists of multi-asset offerings not included in equity, fixed income and alternatives.
We also act as collateral manager for nine collateralized loan obligations ("CLOs"). In addition, we provide subadvisory services to unaffiliated mutual funds.
(2) Consists of managed futures, event-drive, real estate securities, infrastructure, long/short and other strategies. 5 Table of Contents Institutional Accounts Our institutional clients include corporations, multi-employer retirement funds, public employee retirement systems, foundations and endowments. We also provide subadvisory services to unaffiliated mutual funds. In addition, we act as collateral manager for collateralized loan obligations ("CLOs").
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.
We also have established legal and regulatory service providers in each of the countries where we conduct business. New regulations or interpretations of existing laws may result in enhanced disclosure obligations.
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.
(2) Consists of multi-asset offerings not included in equity, fixed income and alternatives. (3) Consists of managed futures, event-driven, real estate securities, infrastructure, long/short and other strategies. 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.
Removed
(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.
Added
Retail Funds ETFs Global Funds Management Fee Range % (1) Equity Domestic equity $ 19,692 $ 161 $ 607 2.50 - 0.29 International equity 2,558 12 4 2.50 - 0.49 Specialty equity 2,875 35 26 1.80 - 0.68 Global equity 363 — 1,858 1.85 - 0.55 Fixed Income Leveraged finance 2,683 301 46 1.70 - 0.38 Multi-sector 6,291 231 2,208 1.85 - 0.21 Hybrid 1,350 1,407 0.80 - 0.57 Emerging markets debt 260 12 383 1.60 - 0.55 Investment grade 624 16 0.50 - 0.17 Multi-Asset (2) 5,535 52 — 0.75 - 0.45 Alternatives (3) 5,583 824 76 1.65 - 0.45 Total Open-End Funds $ 47,814 $ 3,051 $ 5,208 (1) Represents management fees earned as a percentage of average daily net assets.
Removed
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.
Added
Wealth Management Accounts Wealth management accounts are investment accounts offered by certain of our investment managers directly to individual investors and include wealth advisory services and may utilize third-party investment services.
Removed
Services provided include wealth advisory and investment services that include third-party investment services.
Added
The following table summarizes our institutional accounts by asset class as of December 31, 2024: Total Assets (in millions) Separate Accounts Commingled Accounts Equity Domestic equity $ 21,336 $ 446 International equity 1,025 283 Global equity 8,720 247 Fixed Income Leveraged finance 1,105 3,083 Multi-sector 1,165 — Emerging markets debt 4,498 — Investment grade 8,628 — Alternatives (1) 7,171 1,054 Multi-Asset (2) 406 — Total Institutional Accounts $ 54,054 $ 5,113 (1) Consists of managed futures, event-driven, real estate securities, infrastructure, long/short and other strategies.
Removed
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.
Added
Our competitors, many of which are larger than us, offer a wide range of financial and investment management services and products to the same retail, institutional and high-net-worth investors and accounts that we are seeking to attract.
Removed
Commodity Futures trading Commission ("CFTC") with respect to the management of funds and other products that utilize futures, swaps, or other CFTC regulated instruments.
Added
Our primary source of distribution for retail products is through intermediaries that include third-party financial institutions such as: major wire-houses; national, regional and independent broker-dealers and financial advisors; banks and financial planners; and registered investment advisers. Because we rely on these intermediaries, we do not control the ultimate recommendations given to them by clients and they may recommend competing products.
Removed
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.
Added
We have distribution teams that operate in the United Kingdom and Singapore and are subject to regulation by the Financial Conduct Authority and Monetary Authority of Singapore, respectively. Virtus Fund Services, LLC is an SEC-registered transfer agent and is subject to the Exchange Act and the rules and regulations promulgated thereunder.
Removed
We have adopted a Code of Ethics pursuant to the provisions of the Investment Company Act and the Investment Advisers Act that require the disclosure of personal securities holdings and trading activity by all employees on a quarterly and annual basis.
Added
These laws and regulations grant the SEC broad administrative powers to address non-compliance with regulatory requirements. 8 Table of Contents We may be considered a fiduciary under the Employee Retirement Income Security Act, as amended (“ERISA”) and related regulations with respect to certain assets that we manage for benefit plans subject to ERISA.
Removed
Employees with investment discretion or access to investment decisions are subject to additional restrictions with respect to the pre-clearance of the purchase or sale of securities over which they have investment discretion or beneficial interest.
Added
ERISA, the regulations promulgated thereunder, and the applicable provisions of the Internal Revenue Code impose certain duties on persons who are fiduciaries under ERISA, prohibit certain transactions involving ERISA plan clients, and impose monetary penalties for violations of these provisions. The U.S.
Removed
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.
Added
Department of Labor, which administers ERISA and regulates, among others, investment advisers who service retirement plan clients, has been active in proposing and adopting additional regulations applicable to the investment management industry, some of which are under legal challenge.
Added
We offer competitive salaries and a comprehensive suite of benefits, including programs that support wellness, financial security, and professional development.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

30 edited+5 added−19 removed61 unchanged
Biggest changeOur 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.
Biggest changeAdditionally, we cannot provide assurance that we will continue to be successful in closing on transactions or that we will achieve the anticipated benefits from a transaction, including such things as revenue, tax benefits or cost synergies. Our investment management agreements are subject to renegotiation or termination on short notice, which could negatively impact our business.
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.
Our clients include our sponsored fund investors, represented by boards of trustees or directors (the "fund boards"), managed account program sponsors, institutional clients, and individual private 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 face significant competition from a wide variety of financial institutions, including other investment management companies, as well as from proprietary products offered by our distribution partners such as banks, broker-dealers and financial planning firms. Competition in our businesses is based on several factors, including investment performance, fees charged, access to distribution channels and service to financial advisors.
We face significant competition from a wide variety of financial institutions, including other investment management companies, as well as from proprietary products offered by our distribution partners such as banks, broker-dealers and financial planning firms. Competition in our businesses is based on several factors, including investment performance, fees charged, access to distribution channels and service to financial advisors and clients.
Capital, equity and credit markets can experience substantial volatility. Changes in interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws, trade barriers, commodity prices, currency exchange rates, national and international political circumstances and conflicts, public health issues and other conditions may impact the capital, equity and credit markets.
Capital, equity and credit markets can experience substantial volatility. Changes in interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws, trade barriers and tariffs, commodity prices, currency exchange rates, national and international political circumstances and conflicts, public health issues and other conditions may impact the capital, equity and credit markets.
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.
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, 2024. 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.
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.
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. 15 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.
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.
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 14 Table of Contents organization investigations and proceedings. (See Item 3.
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.
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 costs resulting from an incident.
If our clients, including our fund boards, were to view our fees as being inappropriately high relative to the market or the returns generated by our investment products, we may choose, or be required, to reduce our fee levels, or we may experience significant redemptions in our assets under management, which could have an adverse impact on our results of operations and financial condition.
If our clients, including our fund boards, were to view our fees as being inappropriately high 12 Table of Contents relative to the market or the returns generated by our investment products, we may choose, or be required, to reduce our fee levels, or we may experience significant redemptions in our assets under management, which could have an adverse impact on our results of operations and financial condition.
Therefore, if assets under management decline, our fee revenues would decline, reducing profitability as certain of our expenses are fixed or have contractual terms. Assets under management could decline due to a variety of factors including, but not limited to, the following: ▪ General domestic and global economic, political and public health conditions.
Therefore, if assets under management decline, our fee revenues would decline, reducing profitability as certain of our expenses are fixed or have contractual terms. Assets under management could decline due to a variety of factors including, but not limited to, the following: ▪ General domestic and global economic, political and other conditions.
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.
Any of these conditions could have an adverse impact on our business and profitability. 13 Table of Contents 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.
Tax authorities may disagree with certain positions we have taken that may result in the assessment of additional taxes. We regularly assess the appropriateness of our tax positions and reporting. We cannot provide assurance that we will accurately predict the outcomes of audits and the actual outcomes of these audits could be unfavorable.
Tax authorities may disagree with certain positions we have taken that may result in the assessment of additional taxes and/or penalties and interest. We regularly assess the appropriateness of our tax positions and reporting. We cannot provide assurance that we will accurately predict the outcomes of audits and the actual outcomes of these audits could be unfavorable.
Such a decrease could prompt investors to reduce their rate of investment or to partially or fully withdraw from markets, which could reduce our overall assets under management and have an adverse effect on our revenues, earnings and growth prospects.
Such impacts could prompt investors to reduce their rate of investment or to partially or fully withdraw from markets, which could reduce our overall assets under management and have an adverse effect on our revenues, earnings and growth prospects.
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.
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.
Although we and our third-party service providers have disaster recovery plans in place, we may nonetheless experience interruptions if a natural or man-made disaster or prolonged power outage were to occur, which could have an adverse impact on our business and profitability.
Although we and our third-party service providers have business continuity and disaster recovery plans in place, we may nonetheless experience interruptions if a natural or man-made disaster, prolonged power outage, or other business interruption event were to occur, which could have an adverse impact on our business and profitability.
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.
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 investment management subsidiaries and unaffiliated subadvisers is registered with the SEC under the Investment Advisers Act.
Any transaction may also involve a number of other risks, including additional demands on our staff, unanticipated problems regarding integration of operating facilities, technologies and new employees, and the existence of liabilities or contingencies not disclosed to, or otherwise unknown by, us prior to closing a transaction.
Any transaction may also involve a number of risks, including underperforming relative to expectations, the loss of customers or personnel, additional demands on our staff, unanticipated problems regarding integration of operating facilities, technologies and new employees, and the existence of liabilities or contingencies not disclosed to, or otherwise unknown by, us prior to closing a transaction.
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).
At December 31, 2024, we had $236.1 million in debt outstanding, excluding the notes payable of our CIP for which risk of loss to the Company is limited to our $111.1 million investment in such products. (See Note 19 of our consolidated financial statements for additional information on the notes payable of the CIP).
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.
As of December 31, 2024, the Company had $775.3 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. Item 1B. Unresolved Staff Comments. None.
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.
We use capital to incubate new investment strategies, introduce new products or to enhance distribution access of existing products. At December 31, 2024, we had $282.4 million of such investments, comprising $171.3 million of marketable securities and $111.1 million of net investments in CLOs.
In the event of extreme circumstances, including economic, political or business or health crises, such as a widespread systemic failure in the global financial system, failures of firms that have significant obligations as counterparties, political conflicts or global pandemics, we may suffer significant declines in assets under management and severe liquidity or valuation issues. ▪ Price declines in individual securities, market segments or geographic areas.
In the event of extreme circumstances, including economic, political or business or public health crises, such as a widespread systemic failure in the global financial system, failures of firms that have significant obligations as counterparties, we may suffer significant declines in our assets under management and severe liquidity or valuation issues. ▪ Real or perceived negative absolute or relative performance.
These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so.
Such provisions could also limit the price that certain investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.
Negative, uncertain or diminishing investor confidence in the markets and/or adverse market conditions could result in a decrease in investor risk tolerance.
Negative, uncertain or diminishing investor confidence in the markets and/or adverse market conditions as a result of the conditions listed herein, among others, may decrease investor risk tolerance and negatively impact security prices.
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.
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.
Portfolios that we manage that are focused on certain geographic markets or industry sectors are particularly vulnerable to political, social and economic events in those markets and sectors. If those markets or industries decline or experience volatility, this could have a negative impact on our assets under management and our revenues.
Portfolios that we manage that are focused on certain geographic markets or industry sectors may be particularly vulnerable to political, social and economic events in those markets and sectors.
We carry insurance in amounts and under terms that we believe are appropriate. Our insurance may not cover all liabilities and losses to which we may be exposed. Certain insurance coverage may not be available or may be prohibitively expensive in future periods.
GENERAL RISK FACTORS Our insurance policies may not cover all losses and costs to which we may be exposed, which could adversely impact our results of operations and financial condition. We carry insurance in amounts and under terms that we believe are appropriate. Our insurance may not cover all liabilities and losses to which we may be exposed.
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.
At December 31, 2024, we had $236.1 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.
Sales and redemptions of our investment strategies can be affected by investment performance relative to established benchmarks or other competing investment strategies. Our investment management strategies are rated, ranked or assessed by independent third-parties, distribution partners and industry periodicals and services. These assessments often influence the investment decisions of clients.
Our investment management strategies are rated, ranked or assessed by independent third-parties, distribution partners and industry periodicals and services. Third party financial intermediaries, advisers or consultants may remove our investment products from recommended lists due to poor performance or for other reasons.
Certain provisions of our certificate of incorporation and bylaws could discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions by which stockholders might otherwise receive a premium for their shares.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK We have corporate governance provisions that may make an acquisition of us more difficult. Certain provisions in our certificate of incorporation and bylaws and Delaware law could discourage, delay or prevent a merger, acquisition or other change in control even if certain shareholders may consider a change of control to be beneficial.
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.
These assessments often influence the investment decisions of clients and may lead to increased withdrawals of assets by existing clients and the inability to attract additional investments from new and existing clients. We may engage in strategic transactions that could pose financial or business risks.
Removed
The occurrence of public health issues such as a major epidemic or pandemic that affect public health and public perception of health risk, as well as local, state and/or national government restrictive measures implemented to control such issues, could adversely affect the global financial markets, our employees and the systems we rely on.
Added
Sales and redemptions of our investment strategies can be 10 Table of Contents affected by investment performance relative to established benchmarks or other competing investment strategies. Negative absolute performance as a result of price declines in securities may also negatively impact our sales and redemptions and the value of our assets under management.
Removed
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.
Added
The indebtedness we incur can take many forms including, but not limited to, term loans or revolving lines of 11 Table of Contents credit that customarily contain covenants.
Removed
Our assets under management have exposure to many different industries and counterparties and may be exposed to credit, operational or other risk due to the default by a counterparty or client or in the event of a market failure or disruption.
Added
These provisions could have the effect of making it more difficult for a third party to acquire, or discourage a third party from attempting to acquire, control of the Company without negotiating with our board of directors.
Removed
For example, certain non-U.S. markets, particularly emerging markets, are not as developed or as efficient as the U.S. financial markets and, as a result, may be less liquid, less regulated and significantly more volatile than the U.S. financial markets. In addition, certain industry sectors can experience significant volatility, such as the technology or oil sector.
Added
These provisions, among other things: ▪ Allow our board of directors to issue preferred stock and determine the powers, preferences and rights thereof without shareholder approval; ▪ Prohibit the Company's ability to engage, under certain circumstances, in business combinations with any interested shareholder for three years following the date that the shareholder became an interested shareholder; ▪ Require that special meetings of shareholders be called only by the chairperson of our board of directors; and ▪ Contain advance notice procedures that shareholders must comply with to nominate candidates to our board of directors or present proposals.
Removed
Liquidity or values in such markets or sectors may be adversely impacted by factors including political or economic events, government policies, expropriation, volume trading limits by foreign investors, social or civil unrest, etc. These factors may negatively impact the market value of a security or our ability to dispose of it. ▪ Real or perceived negative absolute or relative performance.
Added
Certain insurance coverage may not be available or may be prohibitively expensive in future periods.
Removed
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.
Removed
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.
Removed
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.
Removed
Our ability to pay or increase our dividends maybe subject to restrictions under the terms of our credit agreement. We cannot make any assurances that any dividends, whether quarterly or otherwise, will continue to be paid in the future. We have corporate governance provisions that may make an acquisition of us more difficult.
Removed
In addition, the provisions of Section 203 of the Delaware General Corporation Law also restrict certain business combinations with interested stockholders. GENERAL RISK FACTORS Our insurance policies may not cover all losses and costs to which we may be exposed, which could adversely impact our results of operations and financial condition.
Removed
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains statements that are, or may be considered to be, forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Removed
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.
Removed
Our forward-looking statements are based on a series of expectations, assumptions and projections about the Company and the markets in which we operate, are not guarantees of future results or performance, and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, net asset inflows and outflows, operating cash flows, business plans and ability to borrow, for all future periods.
Removed
All forward-looking statements contained in this Annual Report on Form 10-K are as of the date of this Annual Report on Form 10-K only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially.
Removed
We do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this Annual Report on Form 10-K, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized.
Removed
If there are any future public statements or disclosures by us that modify or impact any of the forward-looking statements contained in or accompanying this Annual Report on Form 10-K, such statements or disclosures will be deemed to modify or supersede such statements in this Annual Report on Form 10-K.
Removed
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.
Removed
Any occurrence of, or any material adverse change in, one or more risk factors or risks and uncertainties referred to in this Annual Report on Form 10-K and our other periodic reports filed with the SEC could materially and adversely affect our operations, financial results, cash flows, prospects and liquidity.
Removed
Certain other factors that may impact our continuing operations, prospects, financial results and liquidity, or that may cause actual results to differ from such forward-looking statements, are discussed or included in the Company's periodic reports filed with the SEC and are available on our website at www.virtus.com under "Investor Relations." You are urged to carefully consider all such factors.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+0 added−0 removed9 unchanged
Biggest changeOur cybersecurity systems, controls and processes are overseen by our cybersecurity information technology team which is managed by our CISO. Our CISO has over 25 years of experience in the information technology and cybersecurity field and is a Certified Information Systems Security Professional.
Biggest changeOur cybersecurity systems, controls and processes are overseen by our cybersecurity information technology team which is managed by our CISO.
It also incorporates various event, incident and response teams that comprise the Company's information security, risk management, compliance, legal and other functions as needed in response to any cybersecurity incidents. Our incident response protocol also provides for reporting mechanisms to senior management and our Board of Directors in the event of a material cybersecurity incident.
It also incorporates various event, incident and response teams that comprise the Company's information security, risk management, compliance, legal and other functions as needed in response to any cybersecurity incidents. Our incident response protocol also provides for reporting mechanisms to senior management and our Board of Directors ("Board") in the event of a material cybersecurity incident.
Cybersecurity Governance Our Board of Directors ("Board") oversees our risk management processes, including our risks from cybersecurity threats. As part of its ongoing responsibilities, the Board receives recurring reports from management on the Company’s cybersecurity risk environment and regularly meets with management to review the risk landscape and discuss the steps taken by management to monitor and mitigate cyber exposures.
Cybersecurity Governance Our Board oversees our risk management processes, including our risks from cybersecurity threats. As part of its ongoing responsibilities, the Board receives recurring reports from management on the Company’s cybersecurity risk environment and regularly meets with management to review the risk landscape and discuss the steps taken by management to monitor and mitigate cyber exposures.
Identifying and assessing cybersecurity risk is integrated into our overall enterprise risk management (“ERM”) processes. Our ERM processes consider cybersecurity threat risks alongside other company risks as part of our overall management activities. Cybersecurity risks related to our business are identified and managed though a multi-faceted approach utilizing various systems, controls, and processes.
Identifying and assessing cybersecurity risk is integrated into our overall enterprise risk management (“ERM”) processes. Our ERM processes consider cybersecurity threat risks alongside other company risks as part of our overall management activities. Cybersecurity risks related to our business are identified and managed through a multi-faceted approach utilizing various systems, controls, and processes.
“Risk Factors—Risks Related to our Industry, Business and Operations— We and our third-party service providers rely on numerous technology systems and any business interruption, security breach, or system failure could negatively impact our business and profitability ” of this Annual Report on Form 10-K, which should be read in conjunction with the information in this section.
“Risk Factors—Risks Related to our Industry, Business and Operations— We and our third-party service providers 16 Table of Contents rely on numerous technology systems and any business interruption, security breach, or system failure could negatively impact our business and profitability ” of this Annual Report on Form 10-K, which should be read in conjunction with the information in this section.
The Company maintains an Enterprise Risk Committee (“ERC”), comprising the Company executives who lead day-to-day risk management, and whose efforts are supplemented by specific risk-related committees or teams. The ERC is a cross- 16 Table of Contents functional committee that focuses on identifying and managing operational risk throughout the organization, including cybersecurity threats.
The Company maintains an Enterprise Risk Committee (“ERC”), comprising the Company executives who lead day-to-day risk management, and whose efforts are supplemented by specific risk-related committees or teams. The ERC is a cross-functional committee that focuses on identifying and managing operational risk throughout the organization, including cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We lease our principal offices, which are located at One Financial Plaza, Hartford, CT 06103. In addition, we lease office space in California, Connecticut, Florida, Georgia, Illinois, Massachusetts, New Jersey, New York, Texas, Singapore and the UK.
Biggest changeItem 2. Properties. We lease our principal offices, which are located at One Financial Plaza, Hartford, CT 06103. In addition, we lease office space in California, Connecticut, Florida, Georgia, Illinois, Massachusetts, New Jersey, New York, Texas, Singapore and the U.K.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. The information set forth in response to Item 103 of Regulation S-K under "Legal Proceedings" is incorporated by reference from Part II, Item 8. "Financial Statements and Supplementary Data," Note 12 "Commitments and Contingencies" of this Annual Report on Form 10-K.
Biggest changeItem 3. Legal Proceedings. The information set forth in response to Item 103 of Regulation S-K under "Legal Proceedings" is incorporated by reference from Part II, Item 8. "Financial Statements and Supplementary Data," Note 12 "Commitments and Contingencies" of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. 17 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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.
Biggest changeThe comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance. 18 Table of Contents Five-year TSR Among Virtus, S&P 500 Index and Financial Peer Group Since Inception TSR Among Virtus, S&P 500 Index and Financial Peer Group Financial Peer Group: Affiliated Managers Group, Inc., AllianceBernstein Holding L.P., Artisan Partners Asset Management Inc.*, Acadian Asset Management Inc.
Under the terms of the program, we may repurchase shares of our common stock from time to time at our discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price, prevailing market and business conditions, tax and other financial considerations. The program, which has no specified term, may be suspended or terminated at any time.
Under the terms of the program, we may repurchase shares of our common stock from time to time at our discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price, prevailing market and business conditions. The program, which has no specified term, may be suspended or terminated at any time.
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.
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 7, 2025, we had 6,967,534 shares of common stock outstanding that were held by approximately 38,000 holders of record.
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.
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, initially approved in 2010 by our Board of Directors. As of December 31, 2024, 403,312 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 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.
We cannot provide any assurances that any distributions, whether quarterly or otherwise, will continue to be paid in the future. On February 26, 2025, the Company declared a quarterly cash dividend of $2.25 per common share to be paid on May 14, 2025 to shareholders of record at the close of business on April 30, 2025.
Stock Performance Graph Cumulative Total Return Among Virtus, S&P 500 Index and Peer Companies The following graph compares the cumulative total shareholder return of Virtus since its inception with the performance of the Standard & Poor’s 500 ("S&P 500") Stock Index and a peer group index that consists of several peer companies (referred to as the "Financial Peer Group") as defined below.
Stock Performance Graph The following graphs compare the five-year and since inception cumulative total shareholder return ("TSR") of the Company with the performance of the Standard & Poor’s 500 ("S&P 500") Stock Index and a peer group index that consists of several peer companies (referred to as the "Financial Peer Group") as defined below.
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.
The graphs assume an equal investment in our common stock, the S&P 500 and the Financial Peer Group on December 31, 2019 (five-year TSR) and January 2, 2009 (since inception TSR), respectively, reflect reinvested dividends, and are weighted on a market capitalization basis. Each reported data point below represents the last trading day of each calendar year.
During the year ended December 31, 2023, we repurchased a total of 223,807 common shares for $45.2 million.
During the year ended December 31, 2024, we repurchased a total of 201,233 common shares for $45.1 million.
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.
The following table sets forth information regarding our share repurchases in each month during the quarter ended December 31, 2024: 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 Maximum number of shares that may yet be purchased under the plans or programs October 1—31, 2024 — $ — — 455,488 November 1—30, 2024 27,525 $ 239.20 27,525 427,963 December 1—31, 2024 24,651 $ 239.92 24,651 403,312 Total 52,176 52,176 (1) Average price paid per share is calculated on a settlement basis and excludes commissions and taxes.
Shares of our common stock purchased by participants in our Employee Stock Purchase Plan were delivered to participant accounts via open market purchases at fair value by the third-party administrator under the plan. We do not reserve shares for this plan or discount the purchase price of the shares.
Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the fourth quarter of fiscal 2024. Shares of our common stock purchased by participants in our Employee Stock Purchase Plan were delivered to participant accounts via open market purchases at fair value by the third-party administrator under the plan.
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. Rowe Price Group, Inc. and Victory Capital Holdings, Inc.* *Companies excluded from the cumulative total return table due to lack of comparative performance periods.
(formerly 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 since inception TSR table due to lack of comparative performance periods. 19 Table of Contents Item 6. Reserved
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(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.
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We do not reserve shares for this plan or discount the purchase price of the shares.

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeSummary Financial Data Years Ended December 31, Change (in thousands) 2024 2023 $ % Investment management fees $ 773,830 $ 711,475 $ 62,355 8.8 % Other revenue 133,119 133,793 (674) (0.5) % Total revenues 906,949 845,268 61,681 7.3 % Total operating expenses 724,459 693,784 30,675 4.4 % Operating income (loss) 182,490 151,484 31,006 20.5 % Total other income (expense), net (8,510) 3,681 (12,191) (331.2) % Total interest income (expense), net 33,896 31,399 2,497 8.0 % Income (loss) before income taxes 207,876 186,564 21,312 11.4 % Income tax expense (benefit) 55,423 45,088 10,335 22.9 % Net income (loss) 152,453 141,476 10,977 7.8 % Noncontrolling interests (30,707) (10,855) (19,852) 182.9 % Net Income (Loss) Attributable to Virtus Investment Partners, Inc. $ 121,746 $ 130,621 $ (8,875) (6.8) % Earnings (loss) per share-diluted $ 16.89 $ 17.71 $ (0.82) (4.6) % In 2024, total revenues increased $61.7 million, or 7.3%, to $906.9 million from $845.3 million in 2023, and operating income increased by $31.0 million, or 20.5%, to $182.5 million in 2024 from $151.5 million in 2023, primarily as a result of increased average assets under management during the current year partially offset by an increase in operating expenses. 24 Table of Contents Revenues Revenues by source were as follows: Years Ended December 31, Change (in thousands) 2024 2023 $ % Investment management fees Open-end funds $ 317,990 $ 305,238 $ 12,752 4.2 % Closed-end funds 59,184 58,136 1,048 1.8 % Retail separate accounts 209,467 171,357 38,110 22.2 % Institutional accounts 187,189 176,744 10,445 5.9 % Total investment management fees 773,830 711,475 62,355 8.8 % Distribution and service fees 54,692 56,153 (1,461) (2.6) % Administration and shareholder service fees 74,294 73,857 437 0.6 % Other income and fees 4,133 3,783 350 9.3 % Total Revenues $ 906,949 $ 845,268 $ 61,681 7.3 % 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.
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.
We use a multi-manager, multi-style approach, offering investment strategies from investment 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, 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.
Results of Operations - December 31, 2024 compared to December 31, 2023 A discussion of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 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, 2023 , which specific discussion is incorporated herein by reference.
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.
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, 2024, 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.
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. We completed our annual goodwill impairment assessment as of October 31, 2023, and no impairment was identified.
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. We completed our annual goodwill impairment assessment as of October 31, 2024, and no impairment was identified.
Distribution services are generally satisfied upon the sale of a fund share. Shareholder servicing activities are generally services satisfied over time. We distribute our open-end funds through third-party financial intermediaries that comprise national, regional and independent broker-dealers. These third-party financial intermediaries provide distribution and shareholder service activities on our behalf.
Distribution services are generally satisfied upon the sale of a fund share. Shareholder 31 Table of Contents servicing activities are generally services satisfied over time. We distribute our open-end funds through third-party financial intermediaries that comprise national, regional and independent broker-dealers. These third-party financial intermediaries provide distribution and shareholder service activities on our behalf.
(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 Average fees earned represent investment management fees, net of revenue-related adjustments, divided by average net assets, excluding the impact of consolidated investment products ("CIP").
(4) 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 Average fees earned represent investment management fees, net of revenue-related adjustments, and excluding the impact of consolidated investment products ("CIP") divided by average net assets.
Voting interest entities ("VOEs") are consolidated when we are considered to have a controlling financial interest, which is typically present when we own a majority of the voting interest in an entity or otherwise have the power to govern the financial and operating policies of the entity.
Voting interest entities ("VOEs") are consolidated when we are considered to have a controlling 29 Table of Contents financial interest, which is typically present when we own a majority of the voting interest in an entity or otherwise have the power to govern the financial and operating policies of the entity.
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.
In certain instances, 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.
In addition to operating activities, other uses of cash could include: (i) investments in organic growth, including seeding or launching new products and expanding distribution; (ii) debt principal payments through scheduled amortization, excess cash flow payment requirements or additional paydowns; (iii) dividend payments to common stockholders; (iv) repurchases of our common stock, or withholding obligations for the net settlement of employee share transactions; (v) investments in our infrastructure; (vi) investments in inorganic growth opportunities that may require upfront and/or future payments; (vii) integration costs, including restructuring and severance, related to acquisitions, if any; and (viii) purchases of affiliate equity interests.
In addition to operating activities, other uses of cash could include: (i) investments in organic growth, including seeding or launching new products and expanding distribution; (ii) debt principal payments through scheduled amortization or additional paydowns; (iii) dividend payments to common stockholders; (iv) repurchases of our common stock, or 28 Table of Contents withholding obligations for the net settlement of employee share transactions; (v) investments in our technology infrastructure; (vi) investments in inorganic growth opportunities that may require upfront and/or future payments; (vii) integration costs, including restructuring and severance, related to acquisitions, if any; and (viii) purchases of affiliate equity interests.
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.
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 30 Table of Contents these assets as of October 31, 2024, and no impairments were identified.
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.
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.
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.
Amounts paid to unaffiliated subadvisers for the years ended December 31, 2024, 2023 and 2022 were $45.4 million, $54.7 million and $77.0 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.
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.
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, 2024, the carrying value of definite-lived intangible assets was $335.9 million. Definite-lived intangible assets comprise certain investment management agreements, trade names and non-competition agreements.
(2) Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from cash management strategies, and the impact of non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), current income or capital returned by structured products and the use of leverage.
(2) Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from cash management strategies, and the impact of non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), current income or capital returned by structured products and the use of leverage. (3) Includes investment models provided to managed account sponsors.
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.
Other Income (Expense), net Other income (expense), net changed by $2.5 million during the year ended December 31, 2024 compared to the prior year primarily due to changes in the gains and losses on our equity method 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 24.2% and 34.9% for 2023 and 2022, 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 26.7% and 24.2% for 2024 and 2023, respectively.
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.
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 $3.9 million as of December 31, 2024.
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.
The minority interests in the investment management subsidiary are recorded at estimated redemption value within redeemable noncontrolling interests on the Company's Condensed Consolidated Balance Sheets, and any changes in the estimated redemption value are recorded on the Condensed Consolidated Statements of Operations within noncontrolling interests. Goodwill As of December 31, 2024, the carrying value of goodwill was $397.1 million.
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.
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. Our U.S. retail funds and retail separate accounts are distributed through financial intermediaries.
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.
Distribution and service fees decreased by $1.5 million, or 2.6%, for the year ended December 31, 2024 compared to the prior year, primarily due to lower sales and average assets under management for open-end funds in share classes that have sales- and asset-based distribution and service fees.
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.
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) (4) 2024 2023 2024 2023 Products Open-End Funds (1) 50.0 49.5 $ 57,039 $ 55,226 Closed-End Funds 58.6 57.8 10,092 10,060 Retail Separate Accounts (2) 43.4 43.7 46,575 37,601 Institutional Accounts (3) 31.1 31.7 62,947 58,595 All Products 42.0 42.2 $ 176,653 $ 161,482 (1) Represents assets under management of U.S. retail funds, global funds and ETFs.
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.
Shareholder services include maintaining shareholder accounts, processing shareholder transactions, preparing filings and performing necessary reporting. 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.
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.
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.
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.
(1) Assets under management excludes non-rated funds. Based on institutional-class shares, except for funds without I shares, for which A 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.
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.
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.
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.
At December 31, 2024, total assets under management were $175.0 billion, representing an increase of $2.7 billion, or 1.6%, from December 31, 2023. The change in total assets under management from December 31, 2023 included $15.8 billion from positive market performance, partially offset by $(10.4) billion of net outflows.
Retail separate account fees are calculated based on the end of the preceding or current quarter’s asset values or on an average of month-end balances. Institutional account fees are calculated based on an average of month-end balances, an average of current quarter’s asset values or on a combination of the underlying cash flows and the principal value of the product.
Institutional account fees are calculated based on an average of month-end balances, an average of current quarter’s asset values or on a combination of the underlying cash flows and the principal value of the product. Average fees earned will vary based on several factors, including the asset mix and expense reimbursements to the funds.
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.
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).
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.
Investment management fees increased by $62.4 million, or 8.8%, for the year ended December 31, 2024 compared to the prior year, primarily due to the increase in average assets under management. Distribution and Service Fees Distribution and service fees are sales- and asset-based fees earned from open-end funds for marketing and distribution services.
Credit Agreement The Company's credit agreement (the "Credit Agreement"), most recently amended on June 20, 2023 to change the base interest rate from LIBOR to SOFR, comprises (i) a $275.0 million term loan with a seven-year term (the "Term Loan") expiring in September 2028, and (ii) a $175.0 million revolving credit facility with a five-year term expiring in September 2026.
Credit Agreement The Company's credit agreement (the "Credit Agreement"), comprises (i) a $275.0 million term loan with a seven-year term (the "Term Loan") expiring in September 2028, and (ii) a $175.0 million revolving credit facility with a five-year term expiring in September 2026.
The change in fair value is recorded in the current period as a gain or loss. The $13.5 million change in fair value of contingent consideration for the year ended December 31, 2023 as compared to the prior year was primarily attributable to changes in underlying performance estimates and discount rates.
The change in fair value is recorded in the current period as a gain or loss. The change in fair value of contingent consideration for the year ended December 31, 2024 was primarily attributable to changes in underlying performance estimates. Depreciation Expense Depreciation expense consists primarily of the straight-line depreciation of furniture, equipment and leasehold improvements.
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.
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 (level 3 fair value measurement).
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.
The U.S. and global equity markets increased in value in 2024, as evidenced by increases in major indices as noted in the following table: December 31, As of Change Index 2024 2023 % MSCI World Index 3,708 3,169 17.0 % Standard & Poor's 500 Index 5,882 4,770 23.3 % Russell 2000 Index 2,250 2,027 11.0 % Morningstar / LSTA Leveraged Loan 100 Index 2,958 2,721 8.7 % 20 Table of Contents Financial Highlights ▪ Total revenues were $906.9 million in 2024, an increase of $61.7 million, or 7.3%, compared to total revenues of $845.3 million in 2023. ▪ Operating income was $182.5 million, in 2024, an increase of $31.0 million, or 20.5%, compared to $151.5 million in 2023. ▪ Net income per diluted share was $16.89 in 2024, a decrease of $0.82, or 4.6%, compared to net income per diluted share of $17.71 in 2023.
(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.
(4) 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) 2024 2023 Open-End Funds (1) Beginning balance $ 56,062 $ 53,000 Inflows 12,420 11,188 Outflows (16,532) (18,526) Net flows (4,112) (7,338) Market performance 4,949 8,160 Other (2) (826) 2,240 Ending balance $ 56,073 $ 56,062 Closed-End Funds Beginning balance $ 10,026 $ 10,361 Inflows 1 24 Outflows (41) — Net flows (40) 24 Market performance 1,112 453 Other (2) (873) (812) Ending balance $ 10,225 $ 10,026 Retail Separate Accounts (3) Beginning balance $ 43,202 $ 35,352 Inflows 8,621 6,680 Outflows (6,957) (5,972) Net flows 1,664 708 Market performance 4,667 7,141 Other (2) 3 1 Ending balance $ 49,536 $ 43,202 Institutional Accounts (4) Beginning balance $ 62,969 $ 50,663 Inflows 5,715 7,965 Outflows (13,660) (8,579) Net flows (7,945) (614) Market performance 5,101 9,077 Other (2) (958) 3,843 Ending balance $ 59,167 $ 62,969 Total Beginning balance $ 172,259 $ 149,376 Inflows 26,757 25,857 Outflows (37,190) (33,077) Net flows (10,433) (7,220) Market performance 15,829 24,831 Other (2) (2,654) 5,272 Ending balance $ 175,001 $ 172,259 (1) Represents assets under management of U.S. retail funds, global funds and ETFs.
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.
Uses of Capital Our operating expenses consist of employee compensation and related benefit costs and other operating expenses, which primarily consist of costs related to distribution, investment research and data, occupancy, software application and development and professional fees, as well as interest on our indebtedness and income taxes.
Administration and Shareholder Service Fees Administration and shareholder service fees represent fees earned for fund administration and shareholder services from our U.S. retail funds, ETFs and certain closed-end funds.
Administration and Shareholder Service Fees Administration and shareholder service fees represent fees earned for fund administration and shareholder services from our U.S. retail funds, ETFs and closed-end funds. Fund administration and shareholder service fees remained consistent for the year ended December 31, 2024 compared to the prior year.
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.
Performance is presented on an average annual total return basis for products with a one-, three-, five-, and/or ten-year track record, is net of fees for open-end funds, and is measured on a consistent basis relative to the most appropriate benchmarks.
(2) Represents assets under management of institutional separate and commingled accounts including structured products.
(2) Includes investment models provided to managed account sponsors. (3) 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.
(2) Includes investment models provided to managed account sponsors. (3) Represents assets under management of institutional separate and commingled accounts including structured products.
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.
Realized and Unrealized Gain (Loss) of CIP, net Realized and unrealized gain (loss) of CIP, net changed $12.1 million compared to the prior year primarily due to changes in net unrealized and realized losses of $38.0 million, due to changes in market values of leveraged loans partially offset by unrealized gains of $25.9 million related to the value of the notes payable.
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.
Noncontrolling interests - Investment Manager Noncontrolling interests - Investment Manager represents the minority interests of a majority owned consolidated investment management subsidiary. These minority interests are subject to holder put rights and Company call rights at pre-established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value.
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.
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 $17.0 million for 2024 decreased by $112.8 million from net cash used in investing activities of $129.7 million in 2023 primarily due to the AlphaSimplex acquisition in the prior year.
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.
Contingent payment obligations related to our asset purchases, if estimable and probable of payment, are initially 32 Table of Contents recorded at their estimated value and reviewed every reporting period for changes.
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.
The average fee rate earned on all products was flat for 2024 compared to the prior year. 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, 2024: Percentage of Assets Under Management (1) Beating Benchmark (2) Asset Class 1-Year 3-Year 5-Year 10-Year Equity 25% 18% 55% 75% Fixed Income 81% 58% 79% 72% Alternatives 54% 49% 91% 96% (1) Excludes closed-end funds, wealth management accounts, structured products and certain other multi-asset strategies.
Other Operating Expenses Other operating expenses primarily consist of investment research and technology costs, professional fees, travel and distribution-related costs, rent and occupancy expenses, and other business costs.
Other Operating Expenses Other operating expenses primarily consist of investment research and technology costs, software application and development expenses, professional fees, travel and distribution-related costs, rent and occupancy expenses, and other business costs. Other operating expenses remained consistent during the year ended December 31, 2024 compared to the prior year.
The lower estimated effective tax rate for 2023 was primarily due to excess tax benefits associated with stock-based compensation and the change in valuation allowances in the current year related to the tax effects of unrealized gains on certain of our investments.
The higher estimated effective tax rate for 2024 was primarily due to a change in valuation allowances associated with realized losses on the Company's investments as well as lower excess tax benefits associated with stock-based compensation.
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 Company, in purchasing equity of the investment management subsidiary, 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.
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.
Annual incentive compensation, our largest annual operating cash expenditure, is paid in the first quarter of the year. In 2024 and 2023, we paid approximately $146.1 million and $142.1 million, respectively, in incentive compensation earned during the years ended December 31, 2023 and 2022, respectively.
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.
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.
Declines in the values of these assets under management could lead to reduced revenues as management fees are generally earned as a percentage of assets under management.
In addition, the value of the assets that we manage may be negatively impacted if inflationary expectations result in a rising interest rate environment. Declines in the values of these assets under management could lead to reduced revenues as management fees are generally earned as a percentage of assets under management.
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) .
As of December 31, 2024, 32 of 70, or 46%, of our rated U.S. retail funds received an overall rating of 4 or 5 stars representing 71% 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) .
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.
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.
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.
Interest and Dividend Income of Investments of CIP Interest and dividend income of investments of CIP increased $7.0 million, or 3.6%, compared to the prior year. The increase is primarily attributable to the addition of a new CLO in the third quarter of 2023 and fourth quarter of 2024, respectively, and higher average interest rates during the current year.
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.
Assets Under Management Total sales were $26.8 billion in 2024, an increase of $0.9 billion, or 3.5%, from $25.9 billion in 2023. Net flows were $(10.4) billion in 2024 compared to net flows of $(7.2) billion in 2023.
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 realized and unrealized gains and losses reflect changes in overall market conditions for the 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.
Other Income (Expense), net Other Income (Expense), net by category were as follows: Years Ended December 31, Change (in thousands) 2024 2023 $ % Other Income (Expense) Realized and unrealized gain (loss) on investments, net $ 3,914 $ 6,525 $ (2,611) (40.0) % Realized and unrealized gain (loss) of CIP, net (14,460) (2,404) (12,056) 501.5 % Other income (expense), net 2,036 (440) 2,476 (562.7) % Total Other Income (Expense), net $ (8,510) $ 3,681 $ (12,191) (331.2) % Realized and Unrealized Gain (Loss) on Investments, net Realized and unrealized gain (loss) on investments, net changed during the year ended December 31, 2024 by $2.6 million as compared to the prior year.
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.
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.
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.
Administration & Shareholder Service Fees We provide administrative fund services to our U.S. retail funds, ETFs and closed-end funds and shareholder services to our U.S. retail 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.
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.
Capital and Reserve Requirements Certain of our subsidiaries are registered with the SEC, Central Bank of Ireland, Financial Conduct Authority or other regulators that subject them 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.
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.
At December 31, 2024, our broker-dealer 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.
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.
Operating Cash Flow Net cash provided by operating activities of $1.8 million for 2024 decreased by $235.4 million from cash flows provided by operating activities of $237.2 million in 2023 primarily due to an increase of $270.7 million in net purchases of investments of CIP in the current year period, partially offset by a $26.1 million increase in net sales of investments in the current year.
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.
Assets Under Management by Product The following table summarizes our assets under management by product: As of December 31, Change (in millions) 2024 2023 $ % Open-End Funds (1) $ 56,073 $ 56,062 $ 11 — % Closed-End Funds 10,225 10,026 199 2.0 % Retail Separate Accounts (2) 49,536 43,202 6,334 14.7 % Institutional Accounts (3) 59,167 62,969 (3,802) (6.0) % Total $ 175,001 $ 172,259 $ 2,742 1.6 % Average Assets Under Management (4) $ 176,653 $ 161,482 $ 15,171 9.4 % (1) Represents assets under management of U.S. retail funds, global funds and ETFs.
(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.
(4) 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: As of December 31, Change % of Total (in millions) 2024 2023 $ % 2024 2023 Asset Class Equity $ 100,792 $ 96,703 $ 4,089 4.2 % 57.6 % 56.2 % Fixed Income 37,696 37,192 504 1.4 % 21.5 % 21.6 % Multi-Asset (1) 21,174 21,411 (237) (1.1) % 12.1 % 12.4 % Alternatives (2) 15,339 16,953 (1,614) (9.5) % 8.8 % 9.8 % Total $ 175,001 $ 172,259 $ 2,742 1.6 % 100.0 % 100.0 % (1) Consists of multi-asset offerings not included in equity, fixed income, and alternatives.
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.
Other income and fees increased $0.4 million, or 9.3%, for the year ended December 31, 2024 compared to the prior year, primarily due to increased marketing fees earned during the current year. 25 Table of Contents Operating Expenses Operating expenses by category were as follows: Years Ended December 31, Change (in thousands) 2024 2023 $ % Operating expenses Employment expenses $ 432,587 $ 404,742 $ 27,845 6.9 % Distribution and other asset-based expenses 96,223 96,802 (579) (0.6) % Other operating expenses 127,526 125,871 1,655 1.3 % Other operating expenses of CIP 6,987 4,224 2,763 65.4 % Change in fair value of contingent consideration (5,608) (5,510) (98) 1.8 % Restructuring expense 1,487 824 663 80.5 % Depreciation expense 8,958 5,804 3,154 54.3 % Amortization expense 56,299 61,027 (4,728) (7.7) % Total operating expenses $ 724,459 $ 693,784 $ 30,675 4.4 % Employment Expenses Employment expenses consist of fixed and variable compensation and related employee benefit costs.
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.
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) 2024 2023 $ % Balance Sheet Data Cash and cash equivalents $ 265,888 $ 239,602 $ 26,286 11.0 % Investments 119,216 132,696 (13,480) (10.2) % Contingent consideration 63,505 90,938 (27,433) (30.2) % Debt 232,130 253,412 (21,282) (8.4) % Redeemable noncontrolling interests 107,282 104,869 2,413 2.3 % Total equity 901,636 868,289 33,347 3.8 % Years Ended December 31, Change (in thousands) provided by (used in) 2024 2023 $ % Cash Flow Data Operating activities $ 1,755 $ 237,157 $ (235,402) (99.3) % Investing activities (16,951) (129,732) 112,781 (86.9) % Financing activities 74,947 (356,113) 431,060 (121.0) % Overview At December 31, 2024, we had $265.9 million of cash and cash equivalents and $119.2 million of investments, which included $83.8 million of investment securities, compared to $239.6 million of cash and cash equivalents and $132.7 million of investments, which included $97.3 million of investment securities, at December 31, 2023.
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.
Interest Income (Expense), net Interest Income (Expense), net by category were as follows: Years Ended December 31, Change (in thousands) 2024 2023 $ % Interest Income (Expense) Interest expense $ (22,132) $ (23,431) $ 1,299 (5.5) % Interest and dividend income 12,488 12,458 30 0.2 % Interest and dividend income of investments of CIP 204,732 197,707 7,025 3.6 % Interest expense of CIP (161,192) (155,335) (5,857) 3.8 % Total Interest Income (Expense), net $ 33,896 $ 31,399 $ 2,497 8.0 % Interest Expense Interest expense decreased $1.3 million, or 5.5%, for the year ended December 31, 2024, compared to the prior year primarily due to lower average debt outstanding during the current year.
Our products include open-end funds, closed-end funds and retail separate accounts. We also provide subadvisory services to other investment advisers. Our institutional distribution resources include affiliate-specific 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 institutional distribution resources include affiliate-specific 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 institutional products are marketed through relationships with consultants as well as directly to clients.
To the degree that these expense increases are not recoverable or cannot be counterbalanced through pricing increases due to the competitive environment, our profitability could be negatively impacted. In addition, the value of the assets that we manage may be negatively impacted if inflationary expectations result in a rising interest rate environment.
Effects of Inflation Inflationary pressures can result in increases to our costs, especially to the extent that large expense components such as service provider, data and compensation are impacted. To the degree that these expense increases are not recoverable or cannot be counterbalanced through pricing increases due to the competitive environment, our profitability could be negatively impacted.
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.
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.
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.
Employment expenses of $432.6 million increased $27.8 million, or 6.9%, from the prior year primarily due to an increase in profit- and sales-based compensation and the addition of AlphaSimplex in April 2023. 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.
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.
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.
Other Operating Expenses of CIP Other operating expenses of CIP remained consistent during the year ended December 31, 2023 compared to the prior year.
These payments are primarily based on assets under management. Distribution and other asset-based expenses remained consistent during the year ended December 31, 2024 compared to the prior year.
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 marketing fees earned on certain ETFs.
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.
Interest and Dividend Income Interest and dividend income is earned on cash equivalents and our marketable securities. Interest and dividend income remained consistent during the year ended December 31, 2024 compared to the prior year.
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.
Amortization expense decreased $4.7 million, or 7.7%, for the year ended December 31, 2024 compared to the prior year, primarily due to intangible assets becoming fully amortized during the current year partially offset by the addition of 26 Table of Contents intangible assets related to the AlphaSimplex acquisition in the second quarter of the prior year.
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.
Depreciation expense increased $3.2 million, or 54.3%, for the year ended December 31, 2024 compared to the prior year primarily due to the acceleration of depreciation on leasehold improvements associated with a terminated lease in the current year period, as well as software and equipment purchases and depreciation expense associated with new office space.
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.
Interest Expense of CIP Interest expense of CIP represents interest expense on the notes payable of CIP. Interest expense of CIP increased by $5.9 million, or 3.8%, compared to the prior year. The increase is primarily attributable to the addition of new CLOs in the 27 Table of Contents third quarter of 2023 and fourth quarter of 2024.
The increase in cash used in financing activities during 2023 compared to the prior year was primarily due to an increase of $315.1 million in net borrowings by CIP, partially offset by a $45.0 million decrease in common share repurchases during the year ended December 31, 2023 as compared to the prior year.
Net cash provided by financing activities of $74.9 million in 2024 changed by $431.1 million from net cash used in financing activities of $356.1 million in the prior year primarily due to a $433.5 million increase in net borrowings of CIP attributable to the refinancing of two CLOs and the launch of a new CLO in the current year.
Removed
In many of these firms, we have a number of products that are on preferred "recommended" lists and on fee-based advisory programs. Our private client business is marketed directly to individual clients by financial advisory teams at our affiliated investment managers.

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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. 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.
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.
Given our borrowings are floating rate, we considered a hypothetical 100 basis point change in the base rate of our outstanding borrowings and determined that annual interest expense would change by an estimated $2.6 million, either an increase or decrease, depending on the direction of the change in the base rate.
Given our borrowings are floating rate, we considered a hypothetical 100 basis point change in the base rate of our outstanding borrowings and determined that annual interest expense would change by an estimated $2.4 million, either an increase or decrease, depending on the direction of the change in the base rate.
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.
At December 31, 2024, we were exposed to interest rate risk as a result of approximately $180.1 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 $2.5 million. At December 31, 2023, we had $258.8 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 $2.4 million. At December 31, 2024, we had $236.1 million outstanding under our Term Loan.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Market Risk Substantially all of our revenues are derived from investment management, distribution and service, and administration and shareholder service fees, which are based on the market value of assets under management. Accordingly, a decline in the market value of assets under management would cause our revenues and income to decline.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Market Risk Substantially all of our revenues are derived from investment management, distribution and service, and administration and shareholder service fees, which are all based on the market value of assets under management.
We are also subject to market risk due to a decline in the market value of our investments, which consist of marketable securities and our net interests in CIP.
Accordingly, a decline in the market value of assets under management would cause our revenues and income to decline. We are also subject to market risk due to a decline in the market value of our investments, which consist of marketable securities and our net interests in CIP.
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.
The following table summarizes the impact of a 10% increase or decrease in the fair values of these financial instruments: December 31, 2024 (in thousands) Fair Value 10% Change Investment securities - fair value (1) $ 83,771 $ 8,377 Our net interest in CIP (2) 199,720 19,972 Total Investments subject to Market Risk $ 283,491 $ 28,349 (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.
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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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