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What changed in WESTWOOD HOLDINGS GROUP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of WESTWOOD HOLDINGS GROUP 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.

+248 added−260 removedSource: 10-K (2025-03-05) vs 10-K (2024-03-07)

Top changes in WESTWOOD HOLDINGS GROUP INC's 2024 10-K

248 paragraphs added · 260 removed · 215 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

109 edited+26 added−17 removed36 unchanged
Biggest changeOur sub-advisory fees are generally computed based upon the average daily AUM and are payable on a monthly basis. 4 Westwood Management provides investment advisory services to the Westwood Funds® family of mutual funds: ● Westwood Alternative Income (WMNIX) ● Westwood Quality SmallCap (WHGSX) ● Westwood Broadmark Tactical Plus (SBTIX) ● Westwood Quality SMidCap (WHGMX) ● Westwood Broadmark Tactical Growth (FTGWX) ● Westwood Quality Value (WHGLX) ● Westwood High Income (WHGHX) ● Westwood Salient Global Real Estate (KIRYX) ● Westwood Income Opportunity (WHGIX) ● Westwood Salient MLP & Energy Infrastructure (SMLPX) ● Westwood Quality AllCap (WQAIX) ● Westwood Select Income (KIFYX) ● Westwood Quality MidCap (WWMCX) ● Westwood Total Return (WLVIX) As of December 31, 2023, AUM in the Westwood Funds® totaled $4.1 billion.
Biggest changeWestwood Management provides investment advisory services to the Westwood Funds® family of mutual funds: ● Westwood Alternative Income (WMNIX) ● Westwood Quality MidCap (WWMCX) ● Westwood Broadmark Tactical Plus (SBTIX) ● Westwood Quality SmallCap (WHGSX) ● Westwood Broadmark Tactical Growth (FTGWX) ● Westwood Quality SMidCap (WHGMX) ● Westwood Multi-Asset Income (WHGHX) ● Westwood Quality Value (WHGLX) ● Westwood Income Opportunity (WHGIX) ● Westwood MLP & Energy Infrastructure (SMLPX) ● Westwood Quality AllCap (WQAIX) ● Westwood Real Estate Income (KIFYX) Westwood Management provides investment advisory services to the Westwood ETFs: ● Westwood Salient Enhanced Midstream Income ETF (MDST) ● Westwood Salient Enhanced Energy Income ETF (WEEI) As of December 31, 2024, AUM in the Westwood Funds® totaled $3.9 billion.
Alternative Income: We believe a market-neutral approach utilizing convertible arbitrage and opportunistic fixed income can serve as a complement to bond allocations. Our framework consists of three primary sources of return that aim to neutralize systematic risk.
Alternative Income: We believe that a market-neutral approach utilizing convertible arbitrage and opportunistic fixed income can serve as a complement to bond allocations. Our framework consists of three primary sources of return that aim to neutralize systematic risk.
The Finance Code provides for and regulates a variety of matters, such as: • minimum capital maintenance requirements; • restrictions on dividends; • restrictions on investments of restricted capital; • lending and borrowing limitations; • prohibitions against engaging in certain activities; • periodic fiduciary and information technology examinations by the Texas Department of Banking Commissioner; • furnishing periodic financial statements to the Texas Department of Banking Commissioner; • fiduciary record keeping requirements; and • prior regulatory approval for certain corporate events (such as mergers, the sale or purchase of all or substantially all trust company assets and transactions transferring control of a trust company).
The Finance Code provides for and regulates a variety of matters, such as: • minimum capital maintenance requirements; • restrictions on dividends; • restrictions on investments of restricted capital; • lending and borrowing limitations; • prohibitions against engaging in certain activities; • periodic fiduciary and information technology examinations by the Texas Department of Banking Commissioner; 9 • furnishing periodic financial statements to the Texas Department of Banking Commissioner; • fiduciary record keeping requirements; and • prior regulatory approval for certain corporate events (mergers, sale or purchase of all or substantially all trust company assets, and transactions transferring control of a trust company).
Equity portfolios are generally patterned after the institutional strategies offered by Westwood Management or developed by our internal investment teams. Fixed income portfolios consist of targeted "laddered" portfolios of primarily high-quality municipal securities and Treasury bills. Westwood Trust also sponsors a range of commingled funds in which client assets are commingled to achieve economies of scale.
Equity portfolios are generally patterned after the institutional strategies offered by Westwood Management or developed by our internal investment teams. Fixed income portfolios consist of targeted "laddered" portfolios of primarily high-quality municipal securities, corporate securities and Treasury bills. Westwood Trust also sponsors a range of commingled funds in which client assets are commingled to achieve economies of scale.
Trust General Westwood Trust provides fiduciary and investment services to high net worth individuals and families, non-profit endowments and foundations, public and private retirement plans and individual retirement accounts ("IRAs"). Westwood Trust is chartered and regulated by the Texas Department of Banking. Fees charged by Westwood Trust are separately negotiated with each client and are typically based on AUM.
Trust General Westwood Trust provides fiduciary and investment services to high net worth individuals and families, non-profit endowments and foundations, public and private retirement plans and individual retirement accounts. Westwood Trust is chartered and regulated by the Texas Department of Banking. Fees charged by Westwood Trust are separately negotiated with each client and are typically based on AUM.
We manage accounts for our clients with the authority to buy and sell securities, select broker-dealers to execute trades and negotiate brokerage commission rates. We receive soft dollar credits from certain broker-dealers that are used to pay for brokerage and research-related products, which 8 reduces certain company operating expenses.
We manage accounts for our clients with the authority to buy and sell securities, select broker-dealers to execute trades and negotiate brokerage commission rates. We receive soft dollar credits from certain broker-dealers that are used to pay for brokerage and research-related products, which reduces certain company operating expenses.
Institutional separate account minimums vary by investment strategy and generally range from $10 million to $25 million. Westwood Management also provides advisory services to financial advisors, individuals and the Westwood Funds ® , as well as sub-advisory services to other mutual funds and pooled investment vehicles.
Institutional separate account minimums vary by investment strategy and generally range from $10 million to $25 million. Westwood Management also provides advisory services to financial advisors, individuals, the Westwood Funds ® mutual funds, and Westwood ETFs, as well as sub-advisory services to other mutual funds and pooled investment vehicles.
Westwood Management Corp. also acts as adviser to the Westwood Funds®, a family of mutual funds registered with the SEC under the Investment Company Act of 1940 (the “Investment Company Act”). As an adviser to a registered investment company, Westwood Management Corp. must comply with the Investment Company Act and related regulations.
Westwood Management Corp. also acts as adviser to the Westwood Funds®, a family of mutual funds registered with the SEC under the Investment Company Act of 1940, as amended (the “Investment Company Act”). As an adviser to a registered investment company, Westwood Management Corp. must comply with the Investment Company Act and related regulations.
We have separate governing structures to ensure that we have the necessary leadership to create and sustain a clear corporate strategy permeating our business. The separation of responsibilities among these governing structures ensures proper accountability across our firm.
We have separate governing structures to ensure that we have the necessary leadership to create and sustain a clear corporate strategy across our business. The separation of responsibilities among these governing structures ensures proper accountability across our firm.
Westwood’s Board plays an important role to ensure that the interests of shareholders are being represented and that Westwood is fulfilling its fiduciary duties. The Board regularly interacts with management to ensure that stakeholder interests are properly considered.
Westwood’s Board plays an important role to ensure that the interests of shareholders are represented and that Westwood is fulfilling its fiduciary duties. The Board regularly interacts with management to ensure that stakeholder interests are properly considered.
We also focus on expanding our relationships with financial intermediaries that manage discretionary mutual fund models. Our Intermediary sales team markets our mutual funds and separately managed accounts directly to select broker-dealers and RIAs. Managed accounts are somewhat similar to mutual fund relationships in that a third-party financial institution, such as a broker-dealer or RIA, trades securities using our model.
We also focus on expanding our relationships with financial intermediaries that manage discretionary mutual fund models. Our Intermediary sales team markets our mutual funds, ETFs and separately managed accounts directly to select broker-dealers and RIAs. Managed accounts are similar to mutual fund relationships in that a third-party financial institution, such as a broker-dealer or RIA, trades securities using our model.
All of our filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on our website.
All of our filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are available free of charge on our website.
We intend to use soft dollars to pay only for brokerage and research related products and services that fall within the safe harbor provisions of the Securities Exchange Act of 1934. If our ability to use soft dollars were reduced or eliminated as a result of the implementation of statutory amendments or new regulations, our operating expenses would increase.
We intend to use soft dollars to pay only for brokerage and research related products and services that fall within the safe harbor provisions of the Exchange Act. If our ability to use soft dollars were reduced or eliminated as a result of the implementation of statutory amendments or new regulations, our operating expenses would increase.
Developing new investment strategies and building the organization can result in incurring expenses before significant offsetting revenues are realized. We continue to evaluate new strategies and resources in terms of meeting actual and potential investor needs. During 2022 we acquired the asset management business of Salient Partners, L.P. (the "Salient Acquisition").
Developing new investment strategies and building the organization to support these strategies can result in incurring expenses before significant offsetting revenues are realized. We continue to evaluate new strategies and resources in terms of meeting actual and potential investor needs. During 2022 we acquired the asset management business of Salient Partners, L.P. (the "Salient Acquisition").
Sub-advising funds of other financial institutions allows us to extend our marketing reach using other firms' distribution systems. Intermediary and Retail In the intermediary and retail channel, our team directly markets our investment services, including the Westwood Funds®, to financial intermediaries, RIAs, broker-dealers, turnkey asset management programs and select mutual fund platforms.
Sub-advising funds of other financial institutions allows us to extend our marketing reach via other firms' distribution systems. Intermediary and Retail In the intermediary and retail channel, our team directly markets our investment services, including the Westwood Funds®, to financial intermediaries, RIAs, broker-dealers, turnkey asset management programs and select mutual fund platforms.
Westwood is committed to the responsible use, and protection of, our natural environment through conservation and sustainable practices that enhance ecosystem resilience, human well-being and ultimately our company’s strength and resiliency. Through our initiative to calculate our travel-related carbon footprint and buy offset carbon credits, we have begun to measure and offset greenhouse gas emissions.
Westwood is committed to the responsible use, and protection of, our natural environment through conservation and sustainable practices that enhance ecosystem resilience, human well-being and ultimately our company’s strength and resiliency. Through our initiative to calculate our travel-related carbon footprint and buy offset carbon credits, we measure and offset greenhouse gas emissions.
Certain clients have contractual performance-based fee arrangements, which generate additional revenues if we outperform a specified index over a specific period of time. Revenue for performance-based fees is recorded at the end of the measurement period. Revenue from advance payments is deferred and recognized over the period that services are performed.
Some clients have contractual performance-based fee arrangements, which generate additional revenues if we outperform a specified index over a specific period of time. Revenue for performance-based fees is recorded at the end of the measurement period. Revenue from advance payments is deferred and recognized over the period that services are performed.
Competition We are subject to substantial and growing competition in all aspects of our business. Barriers to entry in the asset management business are relatively low and we expect more competitors in future. Many asset managers are larger, better known and have greater resources than us.
Competition We are subject to substantial and growing competition in all aspects of our business. Barriers to entry in the asset management business are relatively low and we expect more competitors in the future. Many asset managers are larger, better known and have greater resources than we do.
In addition, certain of our employees are registered with FINRA and such states and subject to SEC, state and FINRA regulation. The failure of this company and/or employees to comply with relevant regulation could have a material adverse effect on our business.
In addition, certain of our employees are registered with FINRA and various states and are subject to SEC, state and FINRA regulation. The failure of this company and/or employees to comply with relevant regulation could have a material adverse effect on our business.
Our focus on transparency, corporate governance, life principles, ethical conduct and giving back to the communities in which we operate is core to our values. Governance Westwood is committed to the successful integration and promotion of ESG at the corporate level and the investment level.
Our focus on transparency, corporate governance, life principles, ethical conduct and giving back to the communities in which we operate is central to our values. Governance Westwood is committed to the successful integration and promotion of ESG at the corporate level and the investment level.
Our engagement is generally conducted through direct dialogue between our investment professionals and company managements which provides a more constructive approach toward understanding issues and encouraging solutions that provide value to stakeholders. Proxy Voting Westwood views proxy voting rights as valuable portfolio assets. Our overarching principle is to exercise voting responsibilities solely in the best interests of our clients.
Our engagement is generally conducted via direct dialogue between our investment professionals and company managements which is a more constructive approach toward understanding issues and encouraging solutions that provide value to stakeholders. Proxy Voting Westwood views proxy voting rights as valuable portfolio assets. Our overarching principle is to exercise voting responsibilities solely in the best interests of our clients.
Many of our competitors offer more investment strategies and services than we do and many have substantially greater AUM. We compete against numerous investment dealers, banks, insurance companies, mutual fund companies, exchange-traded funds, brokerage and investment firms and others that sell equity funds, taxable income funds, tax-free investments and other investment products.
Many of our competitors offer more investment strategies and services than we do and many have substantially greater AUM. We compete against numerous investment dealers, banks, insurance companies, mutual fund companies, ETFs, brokerage and investment firms and others that sell equity funds, taxable income funds, tax-free investments and other investment products.
Our common stock is listed on the New York Stock Exchange under the ticker symbol “WHG.” We are a holding company whose principal assets consist of the capital stock and ownership interests of our operating subsidiaries, primarily Westwood Management, Westwood Trust and Broadmark Asset Management, LLC ("Broadmark").
Our common stock is listed on the New York Stock Exchange under the ticker symbol "WHG." We are a holding company whose principal assets consist of the capital stock and ownership interests of our operating subsidiaries, primarily Westwood Management, Westwood Trust and Broadmark Asset Management, LLC ("Broadmark").
As is typical for the asset management industry, these agreements are usually terminable upon short notice and provide for revenues based on the market value of client AUM.
Typical of the asset management industry, these agreements are usually terminable upon short notice and provide for revenues based on the market value of client AUM.
Westwood Management Our business is subject to regulation at federal and state levels by the SEC and other regulatory bodies. Westwood Management Corp. and Westwood Advisors, L.L.C. are registered with the SEC under the Investment Advisers Act and under the laws of various states.
Westwood Management Our business is subject to regulation at federal and state levels by the SEC and other regulatory bodies. Westwood Management Corp. and Westwood Advisors, L.L.C. are registered with the SEC under the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act") and under the laws of various states.
Vista offers traditional banking services and provides clients of Westwood Trust efficient access to lines of credit secured by their investment portfolios. Our partnership provides Vista the opportunity to refer its clients needing more complex financial planning and investment services to Westwood Wealth Management.
Vista offers traditional banking services and provides clients of Westwood Trust efficient access to lines of credit secured by their investment portfolios. Our partnership enables Vista to refer its clients needing more complex financial planning and investment services to Westwood Wealth Management.
No employees are represented by a labor union, and we believe our employee relations are favorable. As of December 31, 2023, approximately 16% of our employees held the Chartered Financial Analyst designation. Environmental, Social and Governance ("ESG") ESG Core Principles Since inception, we have fostered a corporate culture focused on a set of core values.
No employees are represented by a labor union, and we believe our employee relations are favorable. As of December 31, 2024, approximately 15% of our employees held the Chartered Financial Analyst designation. Environmental, Social and Governance ESG Core Principles Since inception, we have fostered a corporate culture focused on a set of core values.
We maintain strong relationships with many global, national and regional investment consulting firms, which have contributed to our being considered and hired by their clients. By leveraging these relationships, we can offer our strategies within select defined contribution and other retirement plans where clients utilize mutual fund vehicles.
We maintain strong relationships with many global, national and regional investment consulting firms, which have contributed to our being considered and hired by their clients. By leveraging these relationships, we can offer our investment strategies within select defined contribution and other retirement plans in which clients utilize mutual fund and collective investment trusts vehicles.
Advisory General Our advisory business encompasses five distinct investment capabilities — United States ("U.S.") Value Equity, Multi-Asset, Energy and Real Assets, Tactical Absolute Return, and Income Alternatives. Westwood Management provides investment advisory services to large institutions, including corporate retirement plans, public retirement plans, endowments and foundations.
Advisory General Our advisory business encompasses six distinct investment capabilities — United States ("U.S.") Value Equity, Multi-Asset, Energy and Real Assets, Tactical Absolute Return, Income Alternatives and Managed Investment Solutions. Westwood Management provides investment advisory services to large institutions, including corporate retirement plans, public retirement plans, endowments and foundations.
The success of our business is dependent on client, institutional investment consultant and intermediary relationships. In addition to investment performance, we believe that client service is of paramount importance in the asset management business.
The success of our business is dependent on client, institutional investment consultant and intermediary relationships. In addition to offering attractive investment opportunities and investment performance, we believe that client service is of paramount importance in the asset management business.
Growth Strategy We believe we have established a strong platform to support future growth, deriving strength from the experience and capabilities of our management team and our skilled investment and client professionals.
Growth Strategy 6 We believe we have established a strong platform to support future growth, deriving strength from the experience and capabilities of our management team and our skilled investment, distribution and client service professionals.
Management provides the Board with regular updates on our ESG efforts and collaboration between the Board and those responsible for ESG is key to our implementation strategy. Our Board benefits from deep industry experience and a majority of its members are independent which enables strong oversight of our business.
Management regularly updates the Board on our ESG efforts and collaboration between the Board and those responsible for ESG is key to our implementation strategy. Our Board benefits from deep industry experience and a majority of its members are independent which enables strong oversight of our business.
We have established a track record of producing both competitive risk adjusted and real returns for our clients. The principal investment strategies currently managed by the U.S. Value Equity team are as follows: LargeCap Value: Investments in equity securities of approximately 40 to 60 companies benchmarked to the Russell 1000 Value Index.
We have established a track record of producing competitive risk adjusted and real returns for our clients. The principal investment strategies currently managed by the U.S. Value Equity team are as follows: AllCap Value: Investments in equity securities of approximately 40 to 60 companies benchmarked to the Russell 3000 Value Index.
To keep us motivated, we have found inspiration in Coach John Wooden’s Pyramid of Success™ which helps all of us aspire to and maintain a culture of teamwork, integrity and putting client interests ahead of our own. Our ESG focus is guided by the following six pillars: 1. Environmental impact; 2. Diversity, equity and inclusion; 3. Community; 4.
We have found inspiration in Coach John Wooden’s Pyramid of Success™ which helps us aspire to and maintain a culture of teamwork, integrity and putting client interests ahead of our own. Our ESG focus is guided by the following six pillars: 1. Environmental impact; 2. Diversity, equity and inclusion; 3. Community; 4. Responsible investing; 5.
Our growth strategy provides clients with more investment opportunities and diversifies our AUM and revenue sources, thereby reducing risk in any one area of investment and increasing our competitive ability to attract new clients. Our ten largest clients accounted for approximately 21% of our fee revenues for the year ended December 31, 2023.
Our growth strategy provides clients with more investment opportunities and diversifies our AUM and revenue sources, thereby reducing risk in any one area of investment and increasing our ability to attract new clients Our ten largest clients accounted for approximately 20% of our fee revenues for the year ended December 31, 2024.
The Finance Code also gives the Banking Commissioner broad regulatory powers (including penalties and civil and administrative actions) if the trust company violates certain provisions of the Finance Code, including implementing conservatorship or closure if Westwood Trust is determined to be in a “hazardous condition” (as defined by applicable law).
The Finance Code gives the Banking Commissioner broad regulatory powers (including penalties and civil and administrative actions) if the trust company violates certain provisions of the Finance Code, including implementing conservatorship or closure if Westwood Trust is determined to be in a "hazardous condition" (as defined by applicable law).
As part of the Salient Acquisition we also acquired Salient Capital, L.P. ("SCLP"), Salient Advisors, L.P. ("Salient Advisors") and an approximately 48% interest in Broadmark. Broadmark is a San Francisco-based RIA managing and/or sub-advising mutual funds, retail and institutional separately-managed accounts.
As part of the Salient Acquisition we also acquired Salient Capital, L.P. ("SCLP"), Salient Advisors, L.P. ("Salient Advisors") and an approximately 48% interest in Broadmark. Broadmark is a San Francisco-based RIA managing and/or sub-advising mutual funds, retail and institutional separately-managed accounts. SCLP serves as a sub-placement agent for private placements.
Responsible Investment / ESG Integration Our responsible investment commitment is evident in our investment approach across our investment solutions where we take a fundamental approach to identifying high-quality companies and sound businesses around the world. As an active asset manager, ESG issues are directly linked into our bottom-up, fundamental assessment of companies.
Responsible Investment / ESG Integration Our responsible investment commitment is evident in our overall investment approach where we take a fundamental approach to identifying high-quality companies and sound businesses around the world. As an active asset manager, ESG issues are directly considered in our bottom-up, fundamental assessment of companies.
Accordingly, a major business focus for us is to build strong relationships with clients to enhance our ability to anticipate their needs and satisfy their investment objectives. Our team approach is designed to deliver efficient, responsive service to our clients.
Accordingly, a major business focus for us is to build strong relationships with clients to enhance our ability to anticipate their needs and satisfy their investment objectives. Our team approach is designed to deliver efficient, responsive service to our clients, while innovating investment strategies and product alternatives.
Westwood was founded by a woman — a remarkable feat in 1983, when the finance industry had only a small percentage of women in the workforce. We embrace opportunity for individuals from all backgrounds and are committed to fostering an environment that values unique ideas, perspectives and experiences.
Westwood was founded by a woman in 1983, when the finance industry had only a small percentage of women in the workforce. We embrace opportunity for individuals from all backgrounds and are committed to fostering unique ideas, perspectives and experiences.
Diversity, Equity and Inclusion Diversity is an important part of our culture and identity; approximately 43% of our employees are women — many in senior positions — and approximately 34% of our employees self-identify as members of minority communities. Diversity, Equity and Inclusion concepts are an integral part of our history, culture and identity.
Diversity, Equity and Inclusion ("DEI") Diversity is an important part of our culture and identity; approximately 41% of our employees are women — many in senior positions — and approximately 32% of our employees self-identify as members of minority communities. DEI concepts are an integral part of our history, culture and identity.
We use proxy voting as a means of addressing corporate governance issues and identifying corporate actions that enhance shareholder value. Our process benefits from multiple inputs and directly involves our investment professionals. Westwood uses guidelines from a third-party proxy research service, Glass, Lewis & Co. ("Glass Lewis"), that we believe create value for our clients and cover most proxy issues.
We use proxy voting as a means of addressing corporate governance issues and identifying corporate actions that enhance shareholder value. Our process benefits from multiple inputs and directly involves our investment professionals. 11 Westwood uses guidelines from a third-party proxy research service, Glass, Lewis & Co.
We may also consider forging alliances with other financial services or technology firms to leverage our core competency of developing and managing investment strategies with partners that can provide enhanced distribution capabilities or additional service offerings. Continue to strengthen our brand name.
We may consider forging alliances with other financial services or technology firms to leverage our core competency of developing and managing investment strategies and obtain enhanced distribution capabilities or additional service offerings. Continue to strengthen our brand name.
Investment Strategies We offer high-conviction equity, outcome-oriented solutions and liquid alternatives to address a wide range of investment objectives, including four strategies each with over $1 billion in AUM: LargeCap Value, Income Opportunity, SmallCap Value and MLP & Energy Infrastructure. U.S. Value Equity The U.S.
Investment Strategies We offer high-conviction equity, outcome-oriented solutions and liquid alternatives to address a wide range of investment objectives, including five strategies each having AUM exceeding $1 billion in AUM: LargeCap Value, Income Opportunity, SmallCap Value, MLP & Energy Infrastructure and SMidCap Value. U.S. Value Equity The U.S.
Many of our investment professionals have been prominent in print and electronic media, and we will continue to use creative ways to strengthen our brand name and reputation in our target markets. Develop or acquire new investment strategies. We continue to look for opportunities to expand the range of investment strategies we offer to existing and prospective clients.
Many of our investment professionals have been prominent in print and electronic media, and we will continue to use creative ways to strengthen our brand name and reputation in our target markets. Develop or acquire new investment strategies. We constantly seek opportunities to expand our range of investment strategies available to existing and prospective clients.
We may consider internally developed strategies that extend our existing investment process to new markets, asset classes or strategies, and we may also consider externally acquired investment 7 strategies. An expanded range of investment strategies offers additional ways to serve our client base, generating more diversified revenue streams and providing asset and revenue growth potential.
We consider internally developed strategies to extend our existing investment process to new markets, asset classes or strategies and we may consider externally acquired investment strategies. An expanded range of investment strategies offers more ways to serve our client base, generating diversified revenue streams and underpinning asset and revenue growth.
Every year, Westwood supports several charitable organizations financially and through employee volunteer efforts focused on issues that include education, children’s needs, homelessness, food insecurity and disaster relief. Environment At Westwood, we embrace caring for our communities and work hard to take care of the world around us.
Every year, Westwood supports a number of charitable organizations financially and via employee volunteer efforts focused on issues like education, children’s needs, homelessness, food insecurity and disaster relief. Environment At Westwood, we embrace caring for our communities and work hard to take care of the world around us.
These laws and regulations are primarily intended to protect investment advisory clients. Under such laws and regulations, agencies that regulate investment advisers have broad administrative powers, including the power to limit, restrict or prohibit advisers from carrying on their business if they fail to comply with such laws and regulations.
Under such laws and regulations, agencies that regulate investment advisers have broad administrative powers, including the power to limit, restrict or prohibit advisers from carrying on their business if they fail to comply with such laws and regulations.
We may pursue a variety of transactions, including acquisitions of asset management firms, mutual funds, wealth management firms or other financial institutions, as well as hiring investment professionals or teams. We consider opportunities that can enhance our existing operations, expand our range of investment strategies and services, or further develop our distribution capabilities.
These may include acquisitions of asset management firms, investment funds, wealth management firms or other financial institutions, as well as hiring investment professionals or teams. We consider opportunities that can enhance our existing operations, expand our range of investment strategies and services, or further develop our distribution capabilities.
Value Equity team employs a value-oriented approach focused on identifying undervalued, high-quality businesses capable of generating superior risk-adjusted returns, using a fundamental, bottom-up, three-step investment process. Our team seeks well-run businesses with conservative balance sheets and strong free cash flow that can grow their business value by funding growth initiatives or by returning capital to shareholders.
Value Equity team employs a value-oriented approach to identify undervalued, high-quality businesses capable of generating superior risk-adjusted returns, using a fundamental, bottom-up, investment process. Our team seeks well-run businesses with conservative balance sheets and strong free cash flow that can expand enterprise value by funding growth initiatives or by returning capital to shareholders.
Diversity and Inclusion We believe that our culture of diversity and inclusion enables us to develop and fully utilize the strengths of our people. As of December 31, 2023, approximately 43% of our workforce was female and minorities represented approximately 34% of our workforce. Employees 9 At December 31, 2023, we had 145 full-time employees, all located in the U.S.
Diversity and Inclusion We believe that our culture of diversity and inclusion enables us to develop and fully utilize the strengths of our people. As of December 31, 2024, approximately 41% of our workforce was female and minorities represented approximately 32% of our workforce. Employees At December 31, 2024, we had 151 full-time employees, all located in the U.S.
Our operating structure is capable of supporting a larger business and thus we believe we are poised to accommodate growth by acquisition, product innovation and internal growth within our client base. We have developed investment strategies that we expect to be attractive in our target institutional, wealth management and intermediary markets.
Our operating structure can support a larger business and we believe we are able to accommodate growth by acquisition, product innovation and internal growth within our client base. We have developed investment strategies that we expect to be attractive in our target institutional, wealth management and intermediary markets.
We believe opportunities for future growth will come from our ability to: • generate growth in our investment management platform from new and existing clients and consultant relationships, while expanding intermediary distribution; • attract and retain key employees; • grow assets in our existing investment strategies; • continue to enhance our digital capabilities; • foster continued growth of the wealth management platform and distribution channel; • foster expanded intermediary distribution; • pursue strategic corporate development opportunities; • continue to strengthen our brand name; and • develop or acquire new investment strategies. 6 Generate growth from new and existing clients and consultant relationships, while expanding intermediary distribution .
We believe opportunities for future growth will come from our ability to: • generate growth in our investment management platform from new and existing clients and consultant relationships; • attract and retain key employees; • grow assets in our existing investment strategies; • foster continued growth of the wealth management platform and distribution channel; • expand intermediary distribution; • innovate to bring newly developed investment capabilities and vehicles to market; • pursue strategic corporate development opportunities; • continue to strengthen our brand name; and • develop or acquire new investment strategies.
We believe that, in such an environment, our employees feel valued, involved and empowered to do their best work, deliver the best possible service to our clients and meet their full potential.
We encourage an environment where our employees feel valued, involved and empowered to do their best work, deliver the best possible service to our clients and meet their full potential.
Westwood Management and Westwood Trust collectively had AUM of approximately $15.5 billion and AUA of approximately $1.1 billion at December 31, 2023. We were incorporated under the laws of the State of Delaware on December 12, 2001.
Westwood Management and Westwood Trust collectively had AUM of approximately $16.6 billion and AUA of approximately $1.0 billion at December 31, 2024. We were incorporated under the laws of the State of Delaware on December 12, 2001.
Responsible investing; 5. Privacy and data protection; and 6. Governance. We include ESG pillars in the way we conduct our business and measure ourselves against them because it makes good sense. It improves our ability to create an environment that values true diversity, inclusiveness and transparency and ultimately supports long-term employee growth.
Privacy and data protection; and 6. Governance. 10 We include ESG pillars in conducting our business and measure ourselves against them because they make good sense. It improves our ability to create an environment that values true diversity, inclusiveness and transparency and ultimately supports long-term employee growth.
Acquisition of Controlling Interest in Broadmark Asset Management LLC In January 2023 we acquired an additional 32% interest in Broadmark for $1.2 million (net of cash acquired), increasing our ownership of Broadmark to approximately 80%, which represents a controlling interest for financial statement consolidation purposes (the "Broadmark Acquisition").
In January 2023 we acquired an additional 32% interest in Broadmark, increasing our ownership of Broadmark to approximately 80%, which represents a controlling interest for financial statement consolidation purposes (the "Broadmark Acquisition").
As our primary business objective, we intend to maintain and enhance existing relationships with clients, investment consultants and intermediaries by providing value-added investment performance and client service. Over the last few years, we have expanded and restructured our distribution team to improve our proactive sales and client engagement strategy.
Generate growth from new and existing clients and consultant relationships . A primary business objective is to maintain and enhance existing relationships with clients, investment consultants and intermediaries by providing value-added investment opportunities, performance and excellent client service. Over the last few years, we have expanded and restructured our distribution team to improve our proactive sales and client engagement strategy.
It is designed to help investors sidestep market downturns, while attempting to participate in its growth via the continuous and active management of portfolio market exposure. Income Alternatives Our Multi-Asset team manages our Alternative Income strategy, and our Real Estate team manages our Select Income and Global Real Estate strategies.
Designed to help investors sidestep market downturns while attempting to participate in market upsides via continuous active management of portfolio market exposure. Income Alternatives Our Multi-Asset team manages our Alternative Income strategy, and our Real Estate team manages our Real Estate Income strategy.
We believe we have created a workplace environment in which motivated, performance-driven and client-oriented individuals can thrive. As a public company, we offer our employees a compensation program that includes strong equity incentives to closely align their success with that of our clients and stockholders.
We have created a workplace environment in which motivated, performance-driven and client-oriented individuals can thrive. As a public company, we offer certain employees a compensation program that includes strong equity incentives to align their success with that of our clients and stockholders. We believe these factors are critical to maintaining a stable, client-focused environment to support future growth.
Tactical Plus: Strategy that actively manages equity market exposure by primarily investing in equity-based futures, ETFs and options. Seeks to produce above-average, risk-adjusted returns, in any market environment while exhibiting less downside volatility than the S&P 500 ® Index by investing primarily in a diversified portfolio of instruments with exposure to 3 U.S. and non-U.S. equity securities.
Seeks to produce above-average, risk-adjusted returns in any market environment while exhibiting less downside volatility than the S&P 500 ® Index by investing mainly in a diversified portfolio of instruments with exposure to U.S. 3 and non-U.S. equity securities.
The demand for passive strategies with low-fee structures has rapidly increased and investors frequently demand customized and personalized strategies to fit their investment needs. This shift in the marketplace may benefit competitors offering certain investment vehicles that we do not offer. In summary, our competitive landscape is intense and dynamic, which may affect our ability to compete successfully.
The demand for passive strategies with low-fee structures has rapidly increased and investors frequently demand customized and personalized strategies to fit their investment needs. This shift in the marketplace may benefit competitors offering certain investment vehicles that we do not offer.
SmallCap Value: Investments in equity securities of approximately 50 to 70 companies benchmarked to the Russell 2000 Value Index. 2 AllCap Value: Investments in equity securities of approximately 50 to 80 companies benchmarked to the Russell 3000 Value Index.
LargeCap Value: Investments in equity securities of approximately 40 to 60 companies benchmarked to the Russell 1000 Value Index. MidCap Value: Investments in equity securities of approximately 50 to 80 companies benchmarked to the Russell Midcap Value Index. 2 SmallCap Value: Investments in equity securities of approximately 50 to 70 companies benchmarked to the Russell 2000 Value Index.
The offering allows investors to own a diversified portfolio of dividend-producing equity securities. The portfolios primarily include value stocks, along with mid- and large-cap stocks. High Alpha Strategy The Westwood High Alpha strategy aims to provide long-term appreciation to investors. The offering allows investors to own a concentrated portfolio of securities to provide higher returns commensurate with higher volatility.
High Alpha Strategy The Westwood High Alpha strategy aims to provide long-term appreciation to investors. The offering allows investors to own a concentrated portfolio of securities to provide higher returns commensurate with higher volatility. These portfolios primarily include growth stocks in the mid- to large-capitalization range.
The offering allows individuals to own a diversified portfolio of best ideas from across Westwood's investment teams. The portfolios include value and growth stocks, along with small-, mid- and large-cap stocks. Westwood Select Equity is also available without the tax efficiency overlay. Dividend Select Strategy 5 The Westwood Dividend Select strategy aims to provide dividend income to investors.
Westwood Select Equity is also available without the tax efficiency overlay. Dividend Select Strategy The Westwood Dividend Select strategy aims to provide dividend income to investors. The offering allows investors to own a diversified portfolio of dividend-producing equity securities. These portfolios primarily include value stocks, along with mid- and large-cap stocks.
We are committed to offsetting our carbon emissions generated through air travel, a substantial portion of our emissions as an asset manager.
We are committed to offsetting our carbon emissions generated through air travel which makes up a substantial portion of our carbon emissions.
A summary of voting is sent to each client for whom proxies are voted on an annual basis. Social Impact and Corporate Giving Westwood has a long history of community involvement and support of local charitable causes. This involvement is a cornerstone of our culture, drives employee engagement and makes employees proud to work at Westwood.
Social Impact and Corporate Giving Westwood has a long history of community involvement and support of local charitable causes. This involvement is a cornerstone of our culture, drives employee engagement and makes employees proud to work at Westwood.
Strategic Investments Over the past several years we have made a number of strategic investments, including investments in InvestCloud, Inc. ("InvestCloud"), Vista Bank, ("Vista"), Westwood Hospitality Fund I, LLC ("Westwood Hospitality") and Westwood Energy Secondaries Fund I, LLC ("Westwood Energy Secondaries"). InvestCloud is a digital financial services provider.
Strategic Investments 1 Over the past several years we have made a number of strategic investments, including investments in Vista Bank, ("Vista"), Westwood Hospitality Fund I, LLC ("Westwood Hospitality"), Westwood Energy Secondaries Fund I, LLC ("Westwood Energy Secondaries"), the TXSE Group Inc ("TXSE") and Westwood Engineered Beta ("WEBs").
The investment team monitors key risk factors for each company and the overall market and positions portfolios accordingly to align with their portfolio management philosophy.
In addition to fundamental analyses, the team utilizes quantitative models to measure valuations, momentum and other risk attributes. The investment team monitors key risk factors for each company and the overall market and positions portfolios accordingly to align with their portfolio management philosophy.
We believe that providing investors with access to our mutual funds and separately managed accounts is a key component to achieving asset growth in the defined contribution and retirement marketplaces as well as with RIAs and select broker-dealers. Pursue strategic corporate development opportunities. We continually evaluate strategic corporate development opportunities to augment our organic growth.
We believe that providing investors with access to our mutual funds, separately managed accounts, and ETFs is a key component to achieving asset growth in the defined contribution and retirement marketplaces as well as with RIAs and select broker-dealers. Innovate to bring newly developed investment capabilities and vehicles to market.
The principal investment strategy currently managed by the Energy and Real Asset team is as follows: MLP & Energy Infrastructure: Offers access to a wide universe of MLPs and MLP-related companies with the potential to capture energy infrastructure opportunities. Tactical Absolute Return Tactical Absolute Return strategies are subadvised by Broadmark.
The principal investment strategy currently managed by the Energy and Real Asset team is: MLP & Energy Infrastructure: Provides access to a universe of energy infrastructure, MLPs and MLP-related companies with the potential to diversify a traditional stock/bond portfolio along with income and inflation protection. Tactical Absolute Return Our Tactical Absolute Return strategies are subadvised by Broadmark.
Westwood Trust’s commingled funds fall within two basic categories: personal trusts (common trust funds) and employee benefit trusts (collective investment funds). Westwood Trust sponsors commingled funds for most of the investment strategies managed by Westwood Management. Westwood Trust also develops asset allocation models for certain clients utilizing its commingled funds, mutual funds managed by Westwood Management and non-affiliated mutual funds.
Westwood Trust’s commingled funds fall within two basic categories: personal trusts (common trust funds) and employee benefit trusts (collective investment funds). Westwood Trust sponsors commingled funds for several of the investment strategies managed by Westwood Management.
The portfolios primarily include growth stocks in the mid- to large-capitalization range. Distribution Channels Westwood Management investment funds and advisory services are distributed through two primary market channels - Institutional and Intermediary. Our Distribution sales and support infrastructure supports marketing and client service in both channels.
Distribution Channels Westwood Management investment funds and advisory services are distributed through two primary market channels - Institutional and Intermediary. Our Distribution sales and support infrastructure supports dedicated marketing and client service in both channels. Westwood Wealth Management provides wealth and investment management solutions primarily to individuals and utilizes both Westwood Management and external investment management services.
Information contained on, or connected to, our website is not incorporated by reference into this Report and should not be considered part of this Report or any other filing that we make with the Securities and Exchange Commission ("SEC").
For a discussion of our investment in WEBs, see "Growth Strategy" below. Available Information We maintain a website at westwoodgroup.com. Information contained on, or connected to, our website is not incorporated by reference into this Report and should not be considered part of this Report or any other filing that we make with the SEC.
Westwood does not set and track engagement objectives. We engage on specific topics on a case-by-case basis and when ESG or other issues are of specific concern, our team seeks purposeful dialogue to understand how the company plans to address the issues which will then be viewed from a "tracking" perspective over time.
We engage on specific topics on a case-by-case basis and when ESG or other issues are of specific concern, our team seeks to understand how the company plans to address relevant issues and then tracks them over time.
Westwood Wealth Management provides wealth and investment management solutions primarily to individuals and utilizes both Westwood Management and external investment management services. Institutional The institutional team markets Westwood funds and advisory and sub-advisory services to defined benefit and defined contribution corporate and public plan sponsors, foundations and endowments, financial institutions and investment consultants.
Institutional The institutional team markets Westwood mutual funds, collective investment trusts, separate accounts and managed investment solutions, as well as advisory and sub-advisory services to defined benefit and defined contribution corporate and public plan sponsors, foundations and endowments, financial institutions and investment consultants.
The portfolio managers consider the primary risk factors for midstream energy infrastructure companies to be equity markets, high yield spreads, commodity prices and interest rates. The team monitors and discusses changes in these risk factors on a daily basis. The firm utilizes quantitative models to measure valuations, momentum and other risk attributes.
The team has the potential to take advantage of a range of energy opportunities. Our portfolio managers consider primary risk factors for midstream energy infrastructure companies to be economic conditions, equity markets, high yield spreads, volume throughput, energy demand, commodity prices and interest rates. The team monitors and discusses changes in these risk factors on a daily basis.
For the past several years, we have expanded our geographic approach and focused coverage for intermediary distribution, building up our intermediary sales team to extend our reach and accelerate growth in top markets. As a result of the Salient Acquisition, we have again expanded our sales and marketing resources to accelerate growth geographically and across market segments via third-party platforms.
As a result of the Salient Acquisition, we have again expanded our sales and marketing resources to accelerate growth geographically and across market segments via third-party platforms.
Utilizes a rigorous, repeatable, bottom-up investment approach incorporating quantitative and qualitative analyses of company cash flows, assets and management. Our ability to grow AUM is primarily dependent on our competitive investment performance and our success in building strong relationships with our clients, investment consulting firms, financial intermediaries and RIAs.
Our ability to grow AUM is primarily dependent on our competitive investment performance and success in building strong relationships with clients, investment consulting firms, financial intermediaries and RIAs.
We continually seek to expand AUM by organically growing our existing investment strategies and by adding new products as evidenced by our Salient Acquisition in November 2022 and our subsequent acquisition of a controlling interest in Broadmark in 2023.
We continually seek to expand AUM by organically growing our current investment strategies and by adding new products like our Salient Acquisition in 2022, the acquisition of a controlling interest in Broadmark in 2023, the addition of our Managed Investment Solutions team in 2023, and the launch of our first two actively-managed ETFs in 2024.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSome regulations are focused directly on the investment management industry, while others are more broadly focused but affect our industry as well. The Dodd-Frank Act of 2010 significantly increased and revised the federal rules and regulations governing the financial services industry and, in addition to other regulations, has generally resulted in increased compliance and administrative requirements.
Biggest changeThe Dodd-Frank Act of 2010 significantly increased and revised the federal rules and regulations governing the financial services industry and has generally resulted in increased compliance and administrative requirements. For example, the SEC’s adoption of Form PF and revisions to Form ADV impose additional reporting requirements for SEC-registered investment advisors.
As a result, we may be unable to attract or retain client investments in these strategies, or assets invested in these strategies may experience significant declines in value and our results of operations may be negatively affected.
As a result, we may be unable to attract or retain client investments in these strategies, and assets invested in these strategies may experience significant declines in value and our results of operations may be negatively affected.
There is substantial competition for skilled personnel within the asset management business, and the failure to attract, develop, retain and motivate qualified personnel could negatively impact our business, financial condition, results of operations and future prospects. In order to retain or replace key personnel, we may be required to increase compensation, which would decrease net income.
There is substantial competition for skilled personnel within the asset management business, and failure to attract, develop, retain and motivate qualified personnel could negatively impact our business, financial condition, results of operations and future prospects. In order to retain or replace key personnel, we may be required to increase compensation, which would decrease net income.
A failure of our and our third party vendors' controls to protect our information technology from an external or internal attack or to prevent a breach of confidential client or competitive information could materially interrupt our operations and expose us to regulatory and legal actions, which could have a material adverse effect on our operating results, reputation and stock price.
A failure of our controls or our third party vendors' controls to protect our information technology from an external or internal attack or to prevent a breach of confidential client or competitive information could materially interrupt our operations and expose us to regulatory and legal actions, which could have a material adverse effect on our operating results, reputation and stock price.
The potential risks associated with successful integration and realization of benefits include, but are not limited to the following: • our due diligence may not identify or fully assess valuation issues, potential liabilities or other acquisition risks; • acquired entities may not achieve anticipated revenue targets, cost savings or other synergies or benefits, or acquisitions may not result in improved operating performance, which could adversely affect our earnings, and we may be unable to recover investments in any such acquisitions; • we may have difficulty integrating acquired businesses, resulting in unforeseen difficulties and greater expenses than expected; • we may have difficulty entering into new markets in which we are not experienced in an efficient and cost-effective manner while maintaining adequate standards, controls and procedures; • key personnel within an acquired organization may resign from their related positions resulting in a significant loss to our strategic and operational efficiency associated with the acquired company; • the effectiveness of our daily operations may be reduced by the redirection of employees and other resources to acquisition and integration activities; 17 • we may assume liabilities of an acquired business (including litigation, tax liabilities, and other contingent liabilities), including liabilities that were unknown at the time of the acquisition, that pose future risks to our working capital needs, cash flows and the profitability of related operations; • we may assume unprofitable projects that pose future risks to our working capital needs, cash flows and the profitability of related operations; or • business acquisitions may include substantial transactional costs to complete the acquisition that exceed the estimated financial and operational benefit.
The potential risks associated with successful integration and realization of benefits include, but are not limited to the following: • our due diligence may not identify or fully assess valuation issues, potential liabilities or other acquisition risks; • acquired entities may not achieve anticipated revenue targets, cost savings or other synergies or benefits, or acquisitions may not result in improved operating performance, which could adversely affect our earnings, and we may be unable to recover investments in any such acquisitions; • we may have difficulty integrating acquired businesses, resulting in unforeseen difficulties and greater expenses than expected; • we may have difficulty entering into new markets in which we are not experienced in an efficient and cost-effective manner while maintaining adequate standards, controls and procedures; • key personnel within an acquired organization may resign from their related positions resulting in a significant loss to our strategic and operational efficiency associated with the acquired company; • the effectiveness of our daily operations may be reduced by the redirection of employees and other resources to acquisition and integration activities; • we may assume liabilities of an acquired business (including litigation, tax liabilities, and other contingent liabilities), including liabilities that were unknown at the time of the acquisition, that pose future risks to our working capital needs, cash flows and the profitability of related operations; • we may assume unprofitable projects that pose future risks to our working capital needs, cash flows and the profitability of related operations; or • business acquisitions may include substantial transactional costs to complete the acquisition that exceed the estimated financial and operational benefit.
Business acquisitions are subject to the risks commonly associated with such transactions including, among others, potential exposure to unknown liabilities of acquired companies and to acquisition costs and expenses, the difficulty and expense of integrating the operations and personnel of the acquired companies, potential disruptions to the business of the combined company and potential diversion of management’s time and attention, the impairment of relationships with and the possible loss of key employees and clients as a result of changes in management, potential litigation or other legal risks, potential write-downs related to goodwill impairments in connection with acquisitions and dilution to the stockholders of the combined company if the acquisition is made for stock of the combined company.
Business acquisitions are subject to the risks commonly associated with such transactions including, among others, potential exposure to unknown liabilities of acquired companies and to acquisition costs and expenses, the difficulty and expense of integrating the operations and personnel of the acquired companies, potential disruptions to the business of the combined company and potential diversion of management’s time and attention, the impairment of relationships with and the possible loss of key employees and clients as a result of changes in management, potential litigation or other legal risks, potential write-downs related to goodwill impairments in connection with acquisitions and dilution to the stockholders of the combined company if the acquisition is made for stock of 18 the combined company.
As a result, we face increased operational, regulatory, compliance, marketing, client service, reputational and foreign exchange rate risks. In particular, rapid regulatory change is occurring internationally with respect to financial institutions, including, but not limited to, anticipated revisions to the European Communities (Undertakings for Collective Investment in Transferable Securities, or "UCITS") Regulations 2011 and the Markets in Financial Instruments Directive.
As a result, we face increased operational, regulatory, compliance, marketing, client service, reputational and foreign exchange rate risks. Rapid regulatory change is occurring internationally with respect to financial institutions, including, but not limited to, anticipated revisions to the European Communities (Undertakings for Collective Investment in Transferable Securities, or "UCITS") Regulations 2011 and the Markets in Financial Instruments Directive.
Although we believe such actions enable us to retain client assets and maintain our profit margins, if clients perceive a change in our investment or operational decisions favors a strategy to maximize short term results, they may withdraw funds, which could adversely affect our revenues and results of operations. Insurance coverage may be inadequate to cover legal and regulatory proceedings.
Although we believe such actions enable us to retain client assets and maintain our profit margins, if clients perceive a change in our investment or operational decisions favors a strategy to maximize short term results, they may withdraw funds, which could adversely affect our revenues and results of operations. 19 Insurance coverage may be inadequate to cover legal and regulatory proceedings.
If we are unable to compete effectively, our earnings could be reduced and our business could be adversely affected. Some of our strategies invest in the securities of non-U.S. companies, which involve foreign currency exchange, tax, political, social and economic uncertainties and risks. Some of our strategies offer access to global markets with significant exposure to non-U.S. companies.
If we are unable to compete effectively, our earnings could be reduced, and our business could be adversely affected. Some of our strategies invest in the securities of non-U.S. companies, which involve foreign currency exchange, tax, political, social and economic uncertainties and risks. Some of our strategies offer access to global markets with exposure to non-U.S. companies.
Item 1A. Risk Factors. 11 We believe these represent the material risks currently facing our business. Our business, financial condition or results of operations could be materially adversely affected by these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.
Item 1A. Risk Factors. We believe these represent the material risks currently facing our business. Our business, financial condition or results of operations could be materially adversely affected by these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.
Many financial markets are less developed or efficient than U.S. financial markets with limited liquidity and higher price volatility, and may lack an established regulatory framework. Liquidity and price volatility may be adversely affected by political or economic events, government policies and social or civil unrest within a particular country.
Many financial markets are less developed or efficient than U.S. financial markets with limited liquidity and higher price volatility and may also lack an established regulatory framework. Liquidity and price volatility may be adversely affected by political or economic events, government policies and social or civil unrest within a particular country.
The development of new investment strategies, whether through acquisition or internal development, requires a substantial amount of time and significant financial resources, including expenses related to compensation, sales and marketing, information technology, legal counsel and other professional services.
The development of new investment strategies, whether through acquisition or internal development, requires a substantial amount of time and significant financial resources, including expenses related to compensation, sales and marketing, 14 information technology, legal counsel and other professional services.
Currently, our primary source of cash consists of dividends from Westwood Management or Westwood Trust. The payment of dividends by Westwood Trust is subject to the discretion of its Board and compliance with applicable laws, including the provisions of the Finance Code 18 applicable to Westwood Trust. See “Item 7.
Currently, our primary source of cash consists of dividends from Westwood Management or Westwood Trust. The payment of dividends by Westwood Trust is subject to the discretion of its Board and compliance with applicable laws, including the provisions of the Finance Code applicable to Westwood Trust. See “Item 7.
Our business is vulnerable to systems failures that could have a material adverse effect on our business, financial condition and results of operations. 15 Any delays or inaccuracies in securities pricing information or information processing could give rise to claims that could have a material adverse effect on our business, financial condition and results of operations.
Our business is vulnerable to systems failures that could have a material adverse effect on our business, financial condition and results of operations. Any delays or inaccuracies in securities pricing information or information processing could give rise to claims that could have a material adverse effect on our business, financial condition and results of operations.
Any such proceeding or liability could have a material adverse effect upon our business, financial condition, results of operations and business prospects. In addition, the regulatory environment in which we operate is subject to change.
Any such proceeding or liability could have a material adverse effect upon our business, financial condition, results of operations and business prospects. The regulatory environment in which we operate is subject to change.
Investment and sales professionals often 14 maintain strong relationships with their clients, and their departure may cause us to lose client accounts, which could have a material impact on our revenues and results of operations.
Investment and sales professionals often maintain strong relationships with their clients, and their departure may cause us to lose client accounts, which could have a material impact on our revenues and results of operations.
As an SEC-RIA, 13 mutual fund adviser, trustee to certain Trust clients and publicly-traded entity, we are subject to governmental and self-regulatory organization examinations, investigations and proceedings.
As an SEC-RIA, mutual fund adviser, trustee to certain Trust clients and publicly traded entity, we are subject to governmental and self-regulatory organization examinations, investigations and proceedings.
A number of factors increase our competitive risks, including the following: • Potential competitors have a relatively low cost of entering the investment management industry; • Many competitors have greater financial, technological, marketing and other resources, more comprehensive name recognition and more personnel than we do; • The continuing trend toward consolidation in the investment management industry, and the securities business in general, has served to increase the size and strength of some of our competitors; • Recent changes in consumer demand for technological capabilities, including the enhanced ability for firms to offer lower fees for passive management strategies, has increased competition in our industry; • Shifts in demand for alternative investment styles, asset classes and distribution vehicles may cause our competitors to be perceived as more attractive; • Other industry participants, hedge funds and alternative asset managers may seek to recruit our investment professionals; • Some competitors charge lower fees for their investment management services than we do; • Some competitors may provide more comprehensive client services, including banking, financial planning and tax planning at levels beyond those we currently provide; and • Some competitors may have more sophisticated, innovative or advanced distribution networks than we do.
Several factors increase competitive risks, including the following: • Potential competitors have a relatively low cost of entering the investment management industry; • Many competitors have greater financial, technological, marketing and other resources, more comprehensive name recognition and more personnel; • The continuing trend toward consolidation in the investment management industry, and the securities business in general, has served to increase the size and strength of some of our competitors; • Recent changes in consumer demand for technological capabilities, including the enhanced ability for firms to offer lower fees for passive management strategies, have increased competition; • Shifts in demand for alternative investment styles, asset classes and distribution vehicles may cause our competitors to be perceived as more attractive; • Other industry participants, hedge funds and alternative asset managers may seek to recruit our investment professionals; • Some competitors charge lower fees for their investment management services; • Some competitors may provide more comprehensive client services, including banking, financial planning and tax planning at levels beyond those we currently provide; and • Some competitors may have more sophisticated, innovative or advanced distribution networks.
Fluctuations in foreign currency exchange rates could negatively affect the returns of clients invested in these strategies. Investments in non-U.S. issuers may also be affected by tax positions taken in countries or regions in which we are invested, as well as political, social and economic uncertainty or other diplomatic developments.
Fluctuations in foreign currency exchange rates could negatively affect the returns of clients invested in these strategies. Investments in non-U.S. issuers may also be affected by tax policies in countries or regions in which we are invested, as well as political, social and economic uncertainty or other diplomatic developments.
Business — Regulation.” We engage in product offerings and international business activities through our global multi-asset securities product offerings that are available to our international and domestic clients. As of December 31, 2023, approximately 1% of our AUM is managed for clients who are domiciled outside the U. S.
Business — Regulation." We engage in product offerings and international business activities through our global multi-asset securities product offerings that are available to our international and domestic clients. As of December 31, 2024, approximately 1% of our AUM is managed for clients who are domiciled outside the U. S.
Although our common stock is traded on the New York Stock Exchange, it may be relatively illiquid, or “thinly traded,” which can increase share price volatility and make it difficult for larger investors to buy or sell shares in the public market without affecting the share price.
Although our common stock is traded on the New York Stock Exchange, it may be relatively illiquid, or "thinly traded," which can increase share price volatility and make it difficult for larger investors to buy or sell shares in the public market without affecting the share price.
We maintain insurance coverage in amounts and on terms we believe appropriate to cover legal and regulatory matters and potential cyber security attacks; however, we can make no assurance that there will be adequate coverage or that a specific claim will be covered by our insurance policies.
We maintain insurance coverage in amounts and on terms we believe appropriate to cover legal and regulatory matters and potential cybersecurity attacks; however, we can make no assurance that there will be adequate coverage or that a specific claim will be covered by our insurance policies.
We are dependent to a significant degree on our ability to maintain our relationships with clients, consultants, managed account platforms and other intermediaries. Our ten largest clients accounted for approximately 21%, 22% and 22% of our fee revenues for the years ended December 31, 2023, 2022 and 2021, respectively.
We are dependent to a significant degree on our ability to maintain our relationships with clients, consultants, managed account platforms and other intermediaries. Our ten largest clients accounted for approximately 20%, 21% and 22% of our fee 17 revenues for the years ended December 31, 2024, 2023 and 2022, respectively.
Similarly, the investment strategies that we manage could be subject to actual or threatened lawsuits and governmental and self-regulatory organization investigations and proceedings, any of which could harm the investment returns or reputation of the applicable fund or result in our being liable for any resulting damages.
Our investment strategies could be subject to actual or threatened lawsuits and governmental and self-regulatory organization investigations and proceedings, any of which could harm the investment returns or reputation of the applicable fund or result in our being liable for any resulting damages.
Technology and Privacy Risks Failure to implement and maintain effective cyber security controls could disrupt our operations and have a material adverse effect on our results of operations, reputation and stock price.
Technology and Privacy Risks Failure to implement and maintain effective cybersecurity controls could disrupt our operations and have a material adverse effect on our results of operations, reputation and stock price.
Our business is dependent on information technology systems and the cyber security controls we and our third party vendors have in place to protect those systems and the information contained therein.
Our business is dependent on information technology systems and the cybersecurity controls we and our third party vendors have in place to protect those systems and the information contained therein.
Our revenues from performance-based fees can fluctuate significantly between measurement periods, depending on how we perform relative to the indexes specified in these agreements. For example, we earned performance fees of $1.6 million in 2023, $1.0 million in 2022 and $3.4 million in 2021.
Our revenues from performance-based fees can fluctuate significantly between measurement periods, depending on how we perform relative to the indexes specified in these agreements. For example, we earned performance fees of $1.9 million in 2024, $1.6 million in 2023 and $1.0 million in 2022.
In particular, we have faced significant competition from competitors with lower fee, passive investment strategies. Investment advisors that emphasize passive products have gained, and may continue to gain, significant market share from 12 active managers like us, which could have a material adverse effect on our business.
We have faced significant competition from competitors with lower fee, passive investment strategies. Investment advisors emphasizing passive products have gained, and may continue to gain, significant market share from active managers like us, which could have a material adverse effect on our business.
In addition, during periods of slowing growth or declining revenues, profits and profit margins are adversely affected because certain expenses remain relatively fixed. • Investment performance: Because we compete with many asset management firms on the basis of our investment strategies, the maintenance and growth of AUM and AUA is dependent, to a significant extent, on the investment performance of the assets that we manage.
In addition, during periods of slowing growth or declining revenues, profits and profit margins are adversely affected because certain expenses remain relatively fixed. 12 • Investment performance: Because we compete with many asset management firms based on our investment strategies, the maintenance and growth of AUM and AUA is largely dependent on the investment performance of the assets that we manage.
There has been an increased incidence of litigation and regulatory investigations in the asset management industry in recent years, including customer claims, as well as class action suits seeking substantial damages.
There has been an increased incidence recently of litigation and regulatory investigations in the asset management industry, including customer claims and class action suits seeking substantial damages.
A third-party vendor's failure to accurately perform important operations or follow our processes, policies and procedures could result in the loss of clients, significant regulatory sanctions, fines, penalties and litigation, which could have a material adverse effect on our business, financial condition and results of operations. We are a holding company dependent on the operations and funds of our subsidiaries.
A third-party vendor's failure to accurately perform important operations or follow our processes, policies and 15 procedures could result in the loss of clients, significant regulatory sanctions, fines, penalties and litigation, which could have a material adverse effect on our business, financial condition and results of operations.
Additionally, the SEC issued guidance in February 2018 stating that, as a public company, we are expected to have controls and procedures that relate to cyber security disclosure, and are required under the federal securities laws to disclose information relating to certain cyber attacks or other information security breaches.
We, as a public company, have controls and procedures that relate to cybersecurity disclosure and are required under the federal securities laws to disclose information relating to certain cyber attacks or other information security breaches.
The prevailing market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including actual or anticipated fluctuations in operating results; changes in market valuations of other similar companies; additions or departures of key personnel; future sales of common stock; deviations in net revenues or in losses from levels expected by the investment community; and trading volume fluctuations.
If any such limited trading in our stock continues, it may be difficult for holders to sell their shares in the public market at any given time at prevailing prices. 16 The prevailing market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including actual or anticipated fluctuations in operating results; changes in market valuations of other similar companies; additions or departures of key personnel; future sales of common stock; deviations in net revenues or in losses from levels expected by the investment community; and trading volume fluctuations.
We may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. In recent years, regulators have increased their oversight of the financial services industry.
We may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. In recent years, regulators have increased their oversight of the financial services industry. Some regulations focus on the investment management industry while other, more broadly focused regulations still affect our industry.
The investment management and wealth management industry is highly competitive and innovative. The investment management and wealth management industry is highly competitive based on a variety of factors, including investment performance, fee rates, continuity of investment professionals and client relationships, the quality of services provided to clients, corporate positioning, business reputation and differentiated products.
The investment management and wealth management industry is highly competitive based on factors such as investment performance, fee rates, continuity of investment professionals and client relationships, the quality of client service, corporate positioning, business reputation and differentiated products.
In recent years, there has been a trend toward lower fees in the investment management industry driven in large part by low-cost, passive strategies, and we are actively marketing lower fee structures to stay competitive.
In recent years, there has been a trend toward lower fees in the investment management industry driven in large part by low-cost, passive strategies, and we are actively marketing lower fee structures to stay competitive. We cannot be assured that we will succeed in providing investment returns and service levels that will allow us to maintain a profitable fee structure.
The historical returns of our strategies and the ratings and rankings we, or the mutual funds that we advise, have received in the past should not be considered indicative of the future results of these strategies or of any other strategies that we may develop in the future.
The historical returns of our strategies and the ratings and rankings we, or the mutual funds that we advise, have generated should not be considered indicative of the future results of these strategies or of any other strategies that we may develop. The investment performance we achieve for our customers varies over time and variances can be wide.
Legal and Regulatory Risks Our business is subject to extensive regulation, which is subject to frequent change, with attendant compliance costs and serious consequences for violations; expansion into international markets and introduction of new products and services increases our regulatory and operational risks.
Legal and Regulatory Risks Our business is subject to extensive regulation, which is subject to frequent change, with attendant compliance costs and serious consequences for violations; expansion into international markets and introduction of new products and services increases our regulatory and operational risks. 13 Virtually all aspects of our business are subject to laws and regulations, including the Investment Advisers Act, the Investment Company Act, the Patriot Act, the Finance Code and anti-money laundering laws.
The investment performance we achieve for our customers varies over time and variances can be wide. In addition, certain of our investment strategies have capacity constraints, as there may be a limit to the number of securities available for certain strategies to operate effectively. In those instances, we may choose to limit access to new or existing investors.
Certain of our investment strategies have capacity constraints because there may be a limit to the number of securities available for certain strategies to operate effectively. In those instances, we may choose to limit access to new or existing investors. The investment management and wealth management industry is highly competitive and innovative.
We are a holding company, with no revenue-generating operations or assets other than our ownership interests in Westwood Management, Westwood Trust and Broadmark. Accordingly, we are dependent on the cash flow generated by these operating subsidiaries and rely on dividends or other intercompany transfers from our operating subsidiaries to generate the funds necessary to meet our obligations.
Accordingly, we are dependent on the cash flow generated by these operating subsidiaries and rely on dividends or other intercompany transfers from our operating subsidiaries to generate the funds necessary to meet our obligations.
While we believe that changes in laws, rules and regulations, including those discussed above, have increased our administrative and compliance costs, we are unable to quantify the increased costs attributable to such changes. See “Item 1.
ERISA Section 408(b)(2) and related regulations require additional information to be provided to ERISA-governed retirement plans. We believe that changes in laws, rules and regulations, including those discussed above, have increased our administrative and compliance costs however we are unable to quantify the increased costs attributable to such changes. See "Item 1.
Investors may be unable to buy or sell a certain quantity of our shares in the public market within one or more trading days. If any such limited trading in our stock continues, it may be difficult for holders to sell their shares in the public market at any given time at prevailing prices.
Investors may be unable to buy or sell a certain quantity of our shares in the public market within one or more trading days.
In addition, we have performance fee agreements with certain clients, who pay a fee if we outperform a specified index over predetermined periods of time.
Continued fee reductions on existing or future new business could have an adverse effect on our profit margins and results of operations. In addition, we have performance fee agreements with certain clients who pay a fee if we outperform a specified index over predetermined periods of time.
Removed
Virtually all aspects of our business are subject to laws and regulations, including the Investment Advisers Act, the Investment Company Act, the Patriot Act, the Finance Code and anti-money laundering laws.
Added
We are a holding company dependent on the operations and funds of our subsidiaries. We are a holding company, with no revenue-generating operations or assets other than our ownership interests in Westwood Management, Westwood Trust and Broadmark.
Removed
For example, the SEC’s adoption of Form PF and revisions to Form ADV impose additional reporting requirements for SEC-registered investment advisors. Additionally, ERISA Section 408(b)(2) and related regulations require additional information to be provided to ERISA-governed retirement plans.
Removed
We cannot be assured that we will 16 succeed in providing investment returns and service levels that will allow us to maintain a profitable fee structure. Continued fee reductions on existing or future new business could have an adverse effect on our profit margins and results of operations.
Removed
We reinstated a dividend in the first quarter of 2021, following its suspension in the second quarter of 2020 as we preserved capital and provided additional financial flexibility amid uncertainties created by the COVID-19 pandemic.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity. Over the past several years we have invested significantly to enhance our cybersecurity governance.
Biggest changeItem 1C. Cybersecurity. We have invested significantly over the past several years to enhance our cybersecurity governance. We have expanded our control access to data and systems, invested in firewalls and security systems, elevated internal awareness through trainings and exercises, and upgraded our systems, programs and intrusion monitoring.
We have also designed procedures to implement our cybersecurity policy, minimize cybersecurity threats to our clients and conduct reviews to monitor and ensure our policy is observed, properly implemented and amended or updated as necessary, including cybersecurity oversight, periodic risk assessments and external consultant reviews, access restrictions, ongoing training, governance policies and procedures, authentication protocols, secure access measures, and policies for elevating suspicious activities.
We have designed procedures to implement our cybersecurity policy, minimize cybersecurity threats to our clients and conduct reviews to monitor and ensure our policy is observed, properly implemented and amended or updated as necessary, including cybersecurity oversight, periodic risk assessments and external consultant reviews, access restrictions, ongoing training, governance policies and procedures, authentication protocols, secure access measures, and policies for elevating suspicious activities.
In the event of a cybersecurity breach Westwood management notifies our Board as soon as practicable, along with affected parties including clients, regulatory bodies, third parties and employees, as necessary and required by applicable laws and regulations.
In the event of a cybersecurity breach Westwood management notifies our Board as soon as practicable, along with other affected parties including clients, regulatory bodies, third parties and employees, as necessary and required by applicable laws and regulations.
We protect all the assets of our clients and safeguard the proprietary and confidential information of Westwood and its employees, which is a fundamental responsibility of every Westwood employee. Westwood is responsible for distributing our policies and procedures to employees and conducting appropriate employee training to ensure employees’ adherence to our policies and procedures.
Our goal is to protect all the assets of our clients and safeguard the proprietary and confidential information of Westwood and its employees, which is a fundamental responsibility of every Westwood employee. Westwood is responsible for distributing our policies and procedures to employees and conducting appropriate employee training to ensure employees’ adherence to our policies and procedures.
Ensuring annual compliance with our information security management policies and procedures; e. Application and execution of our risk management framework in the event of a potential issue; and f. Development and execution of an action plan for each potential issue to address risks via remediating, mitigating, accepting or closing the issue.
Application and execution of our risk management framework in the event of a potential issue; and f. Development and execution of an action plan for each potential issue to address risks via remediating, mitigating, accepting or closing the issue.
Containing, eradicating and restoring normal operations if an event has occurred through quick responses, isolating and preserving evidence to aid in remediation and assisting investigators, isolating additional systems from 20 being impacted by the situation being remediated, tracking issues, communicating a strategy and protocol to follow to maintain control of information and confidentiality and to ensure members of the IRT and Westwood management are kept informed of issues as the incident develops and is resolved, and developing and implementing strategies for ensuring the integrity of impacted information systems and critical information hosted on those systems.
The IRT, comprised of various cross-functional subject matter experts, is also responsible for: a. detecting and analyzing suspicious events that might indicate a breach has occurred; and b. containing, eradicating and restoring normal operations through quick responses, isolating and preserving evidence to aid in remediation and assisting investigators, isolating additional systems from being impacted by the situation being remediated, tracking issues, communicating a strategy and protocol to follow to maintain control of information and confidentiality and to ensure members of the IRT and Westwood management are kept informed of issues as the incident develops and is resolved, and developing and implementing strategies for ensuring the integrity of impacted information systems and critical information hosted on those systems.
These responsibilities include, but are not limited to: a. Designing, implementing and executing our framework over information security management; b. Reviewing and updating our policies and procedures annually; c. Assigning all data within Westwood to an appropriate owner, and ensuring data owners have knowledge of such data and have an information classification selected for that data; d.
Reviewing and updating our policies and procedures annually; c. Assigning all data within Westwood to an appropriate owner, and ensuring data owners have knowledge of such data and have an information classification selected for that data; d. Ensuring annual compliance with our information security management policies and procedures; e.
We have expanded our control access to data and systems, invested in firewalls and security systems, elevated internal awareness through trainings and exercises, and upgraded our systems, programs and intrusion monitoring. 19 We conduct periodic vulnerability assessments based on our use of technology, third party vendor relationships and reported changes in cybercrime methodologies, and in response to any attempted cyber incident, among other circumstances.
We conduct periodic vulnerability assessments based on our use of technology, third party vendor relationships and reported changes in cybercrime methodologies, and in response to any attempted cyber incident, among other circumstances.
Overseeing effective implementation of our cybersecurity initiatives and alignment with agreed policies and strategies; b. Oversight of the continued and consistent implementation of our cybersecurity policies and procedures; and c. Promoting overall corporate commitment to cybersecurity. Westwood management is responsible for the execution of the framework for the management of our information security.
Oversight of the continued and consistent implementation of our cybersecurity policies and procedures; and c. Promoting overall corporate commitment to cybersecurity. Westwood management is responsible for the execution of the framework for the management of our information security. These responsibilities include, but are not limited to: a. Designing, implementing and executing our framework for information security management; b.
Along with management, our Board reviews our cybersecurity efforts and programs and is informed of cybersecurity risks primarily through discussions with management, trainings and exercises. Westwood relies on its Board, in conjunction with senior management members, to ensure ongoing success of its cybersecurity environment. Our Board’s responsibilities include, but are not limited to: a.
Along with management, our Board reviews our cybersecurity efforts and programs and is informed of cybersecurity risks primarily through discussions with management, educational sessions and exercises. Our Board’s responsibilities include, but are not limited to: 20 a. Overseeing effective implementation of cybersecurity initiatives and alignment with our policies and strategies; b.
Removed
The IRT, comprised of various cross-functional subject matter experts, is also responsible for: a. Detecting and analyzing suspicious events that might indicate an event has occurred; b.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, we lease approximately 11,000 square feet of office space in Houston, Texas pursuant to a lease that expires in September 2029. We lease a limited amount of office space in San Francisco, California and Chicago, Illinois. We continue to assess these facilities to ensure their adequacy to serve our anticipated business needs. Item 3. Legal Proceedings.
Biggest changeIn addition, we lease approximately 11,000 square feet of office space in Houston, Texas pursuant to a lease that expires in September 2029. We lease a limited amount of office space in San Francisco, California and Chicago, Illinois. We monitor these facilities to ensure their adequacy to serve our anticipated business needs. Item 3. Legal Proceedings.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+2 added−2 removed6 unchanged
Biggest changeIndex Period ended December 31, Cumulative Five-Year Total Return 2018 2019 2020 2021 2022 2023 Westwood Holdings Group, Inc. $ 100.00 $ 95.59 $ 47.65 $ 62.90 $ 43.14 $ 51.33 (48.67) % Russell 2000 Index 100.00 125.53 150.58 172.90 137.56 160.85 60.85 % S&P U.S.
Biggest changeIndex Period ended December 31, Cumulative Five-Year Total Return 2019 2020 2021 2022 2023 2024 Westwood Holdings Group, Inc. $ 100.00 $ 49.85 $ 65.80 $ 45.20 $ 53.70 $ 64.90 (35.10) % Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 42.93 % S&P U.S.
The closing price of our common stock on the last trading day of the year ended December 31, 2023 was $12.57 per share. Historical stock price performance is not necessarily indicative of future price performance. Item 6. Reserved. 23
The closing price of our common stock on the last trading day of the year ended December 31, 2024 was $14.51 per share. Historical stock price performance is not necessarily indicative of future price performance. Item 6. Reserved. 23
Market Information Our common stock trades on the New York Stock Exchange under the symbol “WHG.” At December 31, 2023, there were approximately 190 record holders of our common stock, although we believe that the number of beneficial owners of our common stock is substantially greater.
Market Information Our common stock trades on the New York Stock Exchange under the symbol "WHG." At December 31, 2024, there were approximately 130 record holders of our common stock, although we believe that the number of beneficial owners of our common stock is substantially greater.
BMI Asset Management & Custody Banks Index 100.00 125.80 145.77 215.18 161.21 211.89 111.89 % The total return for our stock and for each index assumes $100 invested on December 31, 2018 in our common stock, the Russell 2000 Index, and the S&P U.S. BMI Asset Management & Custody Banks Index, including reinvestment of dividends.
BMI Asset Management & Custody Banks Index 100.00 115.88 171.06 128.15 168.44 232.43 132.43 % The total return for our stock and for each index assumes $100 invested on December 31, 2019 in our common stock, the Russell 2000 Index, and the S&P U.S. BMI Asset Management & Custody Banks Index, including reinvestment of dividends.
Removed
As of December 31, 2023, there are $1.8 million of shares that may yet be repurchased under our share repurchase plan.
Added
Between January 1, 2024 and December 31, 2024, under the share repurchase program, the Company repurchased 108,225 shares of our common stock at an average price of $12.46 per share, including commissions, for an aggregate purchase price of $1.3 million.
Removed
The Company did not repurchase any shares of our common stock during the year ended December 31, 2023. 22 Performance Graph The following graph compares total stockholder returns of Westwood since December 31, 2018 with the total return of the Russell 2000 Index and the S&P U.S.
Added
The following table displays information with respect to the treasury shares we purchased during the year ended December 31, 2024: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (1) Repurchase program (1) $ 500,000 April 20,059 $ 12.92 20,059 May 41,710 $ 12.37 41,710 June 24,577 $ 12.20 24,577 July 6,919 $ 12.30 6,919 August 9,924 $ 12.52 9,924 September 5,036 $ 12.73 5,036 Total 108,225 $ 12.46 108,225 (1) These purchases relate to the share repurchase program and were authorized in April 2020. 22 Performance Graph The following graph compares total stockholder returns of Westwood since December 31, 2019 with the total return of the Russell 2000 Index and the S&P U.S.

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe have included the tax impact of adjustments for all periods presented: For the years ended December 31, (in thousands, except percentages and per share data) 2023 Change 2022 Change 2021 Change 2020 Change 2019 Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. $ 9,520 (306) % $ (4,628) (147) % $ 9,763 (209) % $ (8,947) (251) % $ 5,911 Stock-based compensation expense 6,518 9 6,001 3 5,834 (13) 6,701 (35) 10,305 Impairment expense — NM — NM — NM 3,403 NM — Intangible amortization 4,149 120 1,889 16 1,624 (6) 1,721 — 1,726 Currency translation adjustment reclassification — NM — NM — NM 4,169 NM — Tax benefit from goodwill amortization 500 66 302 27 237 — 237 — 237 Tax impact of adjustments to GAAP comprehensive income (loss) (2,345) 160 (901) (61) (2,309) (179) 2,922 (164) (4,539) Economic Earnings $ 18,342 589 % $ 2,663 (82) % $ 15,149 48 % $ 10,206 (25) % $ 13,640 Economic Earnings per Share $ 2.26 402 % $ 0.45 (80) % $ 2.20 142 % $ 0.91 (58) % $ 2.15 The following tables provide Economic Earnings by segment: For the years ended December 31, (in thousands, except percentages) 2023 Change 2022 Change 2021 Change 2020 Change 2019 Advisory comprehensive income (loss) $ 13,585 23 % $ 11,010 (34) % $ 16,783 781 % $ 1,905 (86) % $ 13,654 Stock-based compensation expense 4,456 16 3,847 15 3,347 5 3,199 (40) 5,362 Impairment expense — NM — NM — (100) 3,403 NM — Intangible amortization 2,674 633 365 183 129 (37) 206 21 170 Tax benefit from goodwill amortization 262 297 66 NM — NM — NM — Tax impact of adjustments to GAAP comprehensive income (loss) (2,404) (38) (3,865) 44 (2,679) (177) 3,495 (173) (4,790) Economic Earnings $ 18,573 63 % $ 11,423 (35) % $ 17,580 44 % $ 12,208 (15) % $ 14,396 32 For the years ended December 31, (in thousands, except percentages) 2023 Change 2022 Change 2021 Change 2020 Change 2019 Trust comprehensive income (loss) $ 1,777 78 % $ 1,000 (82) % $ 5,660 89 % $ 2,991 (28) % $ 4,147 Stock-based compensation expense 326 (31) 471 (37) 743 (28) 1,027 (35) 1,587 Intangible amortization 1,359 (1) 1,379 — 1,378 (2) 1,413 (7) 1,516 Tax benefit from goodwill amortization 238 1 236 — 237 — 237 — 237 Tax impact of adjustments to GAAP comprehensive income (loss) (424) (46) (779) (27) (1,060) (147) 2,274 (222) (1,869) Economic Earnings $ 3,276 42 % $ 2,307 (67) % $ 6,958 (12) % $ 7,942 41 % $ 5,618 For the years ended December 31, (in thousands, except percentages) 2023 Change 2022 Change 2021 Change 2020 Change 2019 Westwood Holdings comprehensive income (loss) $ (5,842) (65) % $ (16,638) 31 % $ (12,680) (8) % $ (13,843) 16 % $ (11,890) Stock-based compensation expense 1,736 3 1,683 (3) 1,744 (30) 2,475 (26) 3,356 Intangible amortization 146 1 145 24 117 15 102 155 40 Currency translation adjustment reclassification — NM — NM — NM 4,169 NM — Tax impact of adjustments to GAAP comprehensive income (loss) 453 (88) 3,743 162 1,430 (150) (2,847) (234) 2,120 Economic Earnings $ (3,507) (68) % $ (11,067) 18 % $ (9,389) (6) % $ (9,944) 56 % $ (6,374) Liquidity and Capital Resources As of December 31, Balance Sheet Data (in thousands) 2023 2022 Cash and cash equivalents $ 20,422 $ 23,859 Accounts receivable 14,394 13,900 Total liquid assets $ 34,816 $ 37,759 Investments, at fair value $ 32,674 $ 15,342 Historically we have funded our operations and cash requirements with cash generated from operating activities.
Biggest changeFor the year ended December 31, 2024, our Economic Earnings decreased by 62% to $7.0 million compared with $18.3 million for the year ended December 31, 2023. 2024 Economic Earnings was impacted by higher revenues offset by losses from changes in the fair value of contingent consideration. 30 The following table provides a reconciliation of Income (loss) attributable to Westwood Holdings Group, Inc. to Economic Earnings: For the years ended December 31, (in thousands, except percentages and per share data) 2024 Change 2023 Change 2022 Change 2021 Change 2020 Income (loss) attributable to Westwood Holdings Group, Inc. $ 2,215 (77) % $ 9,520 (306) % $ (4,628) (147) % $ 9,763 (209) % $ (8,947) Stock-based compensation expense 5,537 (15) 6,518 9 6,001 3 5,834 (13) 6,701 Impairment expense — NM — NM — NM — NM 3,403 Intangible amortization 4,148 — 4,149 120 1,889 16 1,624 (6) 1,721 Currency translation adjustment reclassification — NM — NM — NM — NM 4,169 Tax benefit from goodwill amortization 340 (32) 500 66 302 27 237 — 237 Tax impact of adjustments to GAAP net income (loss) (5,275) 125 (2,345) 160 (901) (61) (2,309) (179) 2,922 Economic Earnings $ 6,965 (62) % $ 18,342 589 % $ 2,663 (82) % $ 15,149 48 % $ 10,206 Economic Earnings per Share $ 0.82 (64) % $ 2.26 402 % $ 0.45 (80) % $ 2.20 142 % $ 0.91 The following tables provide Economic Earnings by segment: For the years ended December 31, (in thousands, except percentages) 2024 Change 2023 Change 2022 Change 2021 Change 2020 Advisory net income $ 17,653 30 % $ 13,585 23 % $ 11,010 (34) % $ 16,783 781 % $ 1,905 Stock-based compensation expense 3,762 (16) 4,456 16 3,847 15 3,347 5 3,199 Impairment expense — NM — NM — NM — NM 3,403 Intangible amortization 2,665 — 2,674 633 365 183 129 (37) 206 Tax benefit from goodwill amortization 104 (60) 262 NM 66 NM — NM — Tax impact of adjustments to GAAP net income (3,500) 46 (2,404) (38) (3,865) 44 (2,679) (177) 3,495 Economic Earnings $ 20,684 11 % $ 18,573 63 % $ 11,423 (35) % $ 17,580 44 % $ 12,208 31 For the years ended December 31, (in thousands, except percentages) 2024 Change 2023 Change 2022 Change 2021 Change 2020 Trust net income $ 2,756 55 % $ 1,777 78 % $ 1,000 (82) % $ 5,660 89 % $ 2,991 Stock-based compensation expense 74 (77) 326 (31) 471 (37) 743 (28) 1,027 Intangible amortization 1,359 — 1,359 (1) 1,379 — 1,378 (2) 1,413 Tax benefit from goodwill amortization 236 (1) 238 1 236 — 237 — 237 Tax impact of adjustments to GAAP net income (780) 84 (424) (46) (779) (27) (1,060) (147) 2,274 Economic Earnings $ 3,645 11 % $ 3,276 42 % $ 2,307 (67) % $ 6,958 (12) % $ 7,942 For the years ended December 31, (in thousands, except percentages) 2024 Change 2023 Change 2022 Change 2021 Change 2020 Westwood Holdings net income (loss) $ (18,194) 211 % $ (5,842) (65) % $ (16,638) 31 % $ (12,680) (8) % $ (13,843) Stock-based compensation expense 1,701 (2) 1,736 3 1,683 (3) 1,744 (30) 2,475 Intangible amortization 124 (15) 146 1 145 24 117 15 102 Currency translation adjustment reclassification — NM — NM — NM — NM 4,169 Tax impact of adjustments to GAAP net income (loss) (995) (320) 453 (88) 3,743 162 1,430 (150) (2,847) Economic Earnings $ (17,364) 395 % $ (3,507) (68) % $ (11,067) 18 % $ (9,389) (6) % $ (9,944) Liquidity and Capital Resources As of December 31, Balance Sheet Data (in thousands) 2024 2023 Cash and cash equivalents $ 18,847 $ 20,422 Accounts receivable 14,453 14,394 Total liquid assets $ 33,300 $ 34,816 Trading securities $ 25,748 $ 32,674 Historically we have funded our operations and cash requirements with cash generated from operating activities.
Our income tax rate differed from the 21% statutory tax rate due to permanent differences between book and tax restricted stock expense based on a decrease in our stock price between the restricted stock grant and vesting date, along with the impact of state and local taxes.
Our income tax rate differed from the 21% statutory tax rate due to permanent differences between book and tax restricted stock expense based on a decrease in our stock price between the restricted stock grant and vesting date, along with the impact of state and local taxes.
Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others: • the composition and market value of our AUM and AUA; • our ability to maintain our fee structure in light of competitive fee pressures; • risks associated with actions of activist stockholders; • distributions to our common stockholders have included and may in the future include a return of capital; • inclusion of foreign company investments in our AUM; • regulations adversely affecting the financial services industry; • our ability to maintain effective cyber security; • litigation risks; • our ability to develop and market new investment strategies successfully; • our reputation and our relationships with current and potential customers; • our ability to attract and retain qualified personnel; • our ability to perform operational tasks; • our ability to select and oversee third-party vendors; • our dependence on the operations and funds of our subsidiaries; • our ability to maintain effective information systems; • our ability to prevent misuse of assets and information in the possession of our employees and third-party vendors, which could damage our reputation and result in costly litigation and liability for our clients and us; • our stock is thinly traded and may be subject to volatility; • competition in the investment management industry; • our ability to avoid termination of client agreements and the related investment redemptions; • the significant concentration of our revenues in a small number of customers; • we have made and may continue to make business combinations as a part of our business strategy, which may present certain risks and uncertainties; • our relationships with investment consulting firms; • our ability to identify and execute on our strategic initiatives; • our ability to declare and pay dividends; • our ability to fund future capital requirements on favorable terms; • our ability to properly address conflicts of interest; • our ability to maintain adequate insurance coverage; and 24 • our ability to maintain an effective system of internal controls.
Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others: • the composition and market value of our AUM and AUA; • our ability to maintain our fee structure in light of competitive fee pressures; • risks associated with actions of activist stockholders; • distributions to our common stockholders have included and may in the future include a return of capital; • inclusion of foreign company investments in our AUM; • regulations adversely affecting the financial services industry; • our ability to maintain effective cybersecurity; • litigation risks; • our ability to develop and market new investment strategies successfully; • our reputation and our relationships with current and potential customers; • our ability to attract and retain qualified personnel; • our ability to perform operational tasks; • our ability to select and oversee third-party vendors; • our dependence on the operations and funds of our subsidiaries; • our ability to maintain effective information systems; • our ability to prevent misuse of assets and information in the possession of our employees and third-party vendors, which could damage our reputation and result in costly litigation and liability for our clients and us; • our stock is thinly traded and may be subject to volatility; • competition in the investment management industry; • our ability to avoid termination of client agreements and the related investment redemptions; • the significant concentration of our revenues in a small number of customers; • we have made and may continue to make business combinations as a part of our business strategy, which may present certain risks and uncertainties; • our relationships with investment consulting firms; • our ability to identify and execute on our strategic initiatives; • our ability to declare and pay dividends; • our ability to fund future capital requirements on favorable terms; • our ability to properly address conflicts of interest; • our ability to maintain adequate insurance coverage; and 24 • our ability to maintain an effective system of internal controls.
We do not advocate that investors consider these non-GAAP measures without also considering financial information prepared in accordance with GAAP. We define Economic Earnings as Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. plus non-cash equity-based compensation expense, impairment expense, amortization of intangible assets, currency translation adjustment reclassification and deferred taxes related to goodwill.
We do not advocate that investors consider these non-GAAP measures without also considering financial information prepared in accordance with GAAP. We define Economic Earnings as Income (loss) attributable to Westwood Holdings Group, Inc. plus non-cash equity-based compensation expense, impairment expense, amortization of intangible assets, currency translation adjustment reclassification and deferred taxes related to goodwill.
Year Ended December 31, 2022 AUM (in millions) Institutional Wealth Management Mutual Funds Total Beginning of period assets $ 7,037 $ 4,420 $ 3,046 $ 14,503 Client flows: Inflows 286 457 800 1,543 Outflows (698) (714) (1,029) (2,441) Net client flows (412) (257) (229) (898) Salient acquisition 788 — 1,873 2,661 Market depreciation (628) (497) (362) (1,487) Net change (252) (754) 1,282 276 End of period assets $ 6,785 $ 3,666 $ 4,328 $ 14,779 The increase in AUM for the year ended December 31, 2022 was due to $2.7 billion of AUM from the Salient Acquisition, offset by market depreciation of $1.5 billion and net outflows of $0.9 billion.
Year Ended December 31, 2022 AUM (in millions) Institutional Wealth Management Mutual Funds Total Beginning of period assets $ 7,037 $ 4,420 $ 3,046 $ 14,503 Client flows: Inflows 286 457 800 1,543 Outflows (698) (714) (1,029) (2,441) Net client flows (412) (257) (229) (898) Salient acquisition 788 — 1,873 2,661 Market appreciation (depreciation) (628) (497) (362) (1,487) Net change (252) (754) 1,282 276 End of period assets $ 6,785 $ 3,666 $ 4,328 $ 14,779 The increase in AUM for the year ended December 31, 2022 was due to $2.7 billion of AUM from the Salient Acquisition partially offset by market depreciation of $1.5 billion and net outflows of $0.9 billion.
Supplemental Financial Information As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings and Economic EPS. We provide these measures in addition to, not as a substitute for, Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. and earnings (loss) per share, which are reported on a GAAP basis.
Supplemental Financial Information As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings and Economic EPS. We provide these measures in addition to, not as a substitute for, Income (loss) attributable to Westwood Holdings Group, Inc. and earnings (loss) per share, which are reported on a GAAP basis.
Revenues We derive our revenues from investment advisory fees, trust fees and other revenues. Our advisory fees are generated by Westwood Management, which manages client accounts under investment advisory and sub-advisory agreements. Advisory 25 fees are typically calculated based on a percentage of AUM and AUA and are paid in accordance with the terms of the agreements.
Revenues We derive our revenues from investment advisory fees, trust fees and other revenues. Our advisory fees are generated by Westwood Management, which manages client accounts under investment advisory and sub-advisory agreements. Advisory fees are typically calculated based on a percentage of AUM and AUA and are paid in accordance with the terms of the agreements.
We believe that these non-GAAP performance measures, while not substitutes for GAAP Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. or earnings (loss) per share, are useful for management and investors when evaluating our underlying operating and financial performance and our available resources.
We believe that these non-GAAP performance measures, while not substitutes for GAAP Income (loss) attributable to Westwood Holdings Group, Inc. or earnings (loss) per share, are useful for management and investors when evaluating our underlying operating and financial performance and our available resources.
Although depreciation on fixed assets is a non-cash expense, 31 we do not add it back when calculating Economic Earnings because depreciation charges represent an allocation of the decline in the value of the related assets that will ultimately require replacement.
Although depreciation on fixed assets is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent an allocation of the decline in the value of the related assets that will ultimately require replacement.
Critical Accounting Estimates The preparation of our Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent losses and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates 33 The preparation of our Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent losses and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period.
In the event we were to determine that a reporting unit's carrying value would more likely than not exceed its fair value, quantitative testing would be performed comparing carrying values to estimated fair values. The quantitative analysis requires a comparison of each reporting unit’s carrying value to the fair value of the respective unit.
In the event we were to determine that a reporting unit's carrying value would more likely than not exceed its fair value, quantitative testing would be performed comparing carrying values to estimated fair values. 34 The quantitative analysis requires a comparison of each reporting unit’s carrying value to the fair value of the respective unit.
Advisory fees are paid quarterly in advance based on AUM on the last day of the preceding quarter, quarterly in arrears based on AUM on the last day of the quarter just ended or are based on a daily or monthly analysis of AUM for the stated period. We recognize advisory fee revenues as services are rendered.
Advisory fees are paid quarterly in advance based on AUM on the last day of the preceding quarter, quarterly in arrears based on AUM on the last day of the quarter just ended or are based on a daily or monthly analysis of AUM for the 25 stated period. We recognize advisory fee revenues as services are rendered.
We periodically review our tax positions and adjust the balances as 36 new information becomes available. In making these assessments, we often must analyze complex tax laws of multiple domestic and international jurisdictions.
We periodically review our tax positions and adjust the balances as new information becomes available. In making these assessments, we often must analyze complex tax laws of multiple domestic and international jurisdictions.
Contractual Obligations Purchase commitments 34 Our purchase commitments primarily consist of outsourced information technology services, software licenses and commitments for financial research tools.
Contractual Obligations Purchase commitments Our purchase commitments primarily consist of outsourced information technology services, software licenses and commitments for financial research tools.
Based on the qualitative analyses performed in 2023, we concluded that there were no changes that were reasonably likely to cause the fair value of the Advisory and Trust reporting units to be less than those reporting unit's carrying values, and determined that there was no impairment of our goodwill.
Based on the qualitative analyses performed in 2024, we concluded that there were no changes that were reasonably likely to cause the fair value of the Advisory and Trust reporting units to be less than those reporting unit's carrying values, and determined that there was no impairment of our goodwill.
If the carrying value exceeds the fair value, an impairment charge is recorded based on that difference. We completed our most recent annual goodwill impairment assessment during the third quarter of 2023 and determined that no goodwill impairment related to the Advisory or Trust segment was required.
If the carrying value exceeds the fair value, an impairment charge is recorded based on that difference. We completed our most recent annual goodwill impairment assessment during the third quarter of 2024 and determined that no goodwill impairment related to the Advisory or Trust segment was required.
We believe that current cash and short-term investment balances plus cash generated from operations will be sufficient to meet the operating and capital requirements of our ordinary business operations through at least the next twelve months, however there can be no assurance that we will not require additional financing within this time frame.
We believe that current cash and liquid investment balances plus cash generated from operations will be sufficient to meet the operating and capital requirements of our ordinary business operations through at least the next twelve months, however there can be no assurance that we will not require additional financing within this time frame.
We include penalties and interest on income-based taxes, if any, in the “General and administrative” line on our Consolidated Statements of Comprehensive Income (Loss). Significant judgment is required in determining the provision for income taxes and, in particular, factors considered when assessing whether a valuation allowance should be established and our estimated uncertain tax positions.
We include penalties and interest on income-based taxes, if any, in the “General and administrative” line on our Consolidated Statements of Operations. Significant judgment is required in determining the provision for income taxes and, in particular, factors considered when assessing whether a valuation allowance should be established and our estimated uncertain tax positions.
We may also use cash from operations to pay dividends to our stockholders or for deferred contingent consideration payments. We had no debt as of December 31, 2023 and 2022.
We may also use cash from operations to pay dividends to our stockholders or for deferred contingent consideration payments. We had no debt as of December 31, 2024 and 2023.
Quarterly average AUM increased $1.9 billion, up 15%, to $15.0 billion compared with $13.1 billion for 2022. The increase in average AUM was primarily due to $2.0 billion of market appreciation in 2023. AUM increased $0.3 billion, or 2%, to $14.8 billion at December 31, 2022 compared to $14.5 billion at December 31, 2021.
AUM increased $0.7 billion, or 5%, to $15.5 billion at December 31, 2023 compared to $14.8 billion at December 31, 2022. Quarterly average AUM increased $1.9 billion, up 15%, to $15.0 billion compared with $13.1 billion for 2022. The increase in average AUM was primarily due to $2.0 billion of market appreciation in 2023.
A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date, and the fair value of the contingent consideration is remeasured at each subsequent reporting period with any change in fair value recognized as income or expense within the Consolidated Statements of Comprehensive Income (Loss).
A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date, and the fair value of the contingent consideration is remeasured at each subsequent reporting period with any change in fair value recognized as income or expense within the Consolidated Statements of Operations.
There was no goodwill impairment for either segment during the years ended December 31, 2023, 2022 or 2021.
There was no goodwill impairment for either segment during the years ended December 31, 2024, 2023 or 2022.
The following table presents our AUM (in millions, except percentages): As of December 31, 2023 Change 2022 Change 2021 Institutional (1) $ 7,215 6 % $ 6,785 (4) % $ 7,037 Wealth Management (2) 4,140 13 % 3,666 (17) % 4,420 Mutual Funds (3) 4,104 (5) % 4,328 42 % 3,046 Total AUM (4) $ 15,459 5 % $ 14,779 2 % $ 14,503 (1) Institutional includes (i) separate accounts of corporate pension and profit sharing plans, public employee retirement funds, Taft-Hartley plans, endowments, foundations and individuals; (ii) sub-advisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles, including collective investment trusts; and (iv) managed account relationships with brokerage firms and other registered investment advisors that offer Westwood products to their customers.
The following table presents our AUM (in millions, except percentages): As of December 31, 2024 Change 2023 Change 2022 Institutional (1) $ 8,301 15 % $ 7,215 6 % $ 6,785 Wealth Management (2) 4,391 6 % 4,140 13 % 3,666 Mutual Funds (3) 3,915 (5) % 4,104 (5) % 4,328 Total AUM $ 16,607 7 % $ 15,459 5 % $ 14,779 (1) Institutional includes (i) separate accounts of corporate pension and profit sharing plans, public employee retirement funds, Taft-Hartley plans, endowments, foundations and individuals; (ii) sub-advisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles, including collective investment trusts; and (iv) managed account relationships with brokerage firms and other registered investment advisors that offer Westwood products to their customers.
SCLP serves as a sub-placement agent for private placements. Our revenues are generally derived from fees based on a percentage of AUM and AUA, and Westwood Management and Westwood Trust collectively had AUM of approximately $15.5 billion and AUA of approximately $1.1 billion at December 31, 2023.
SCLP serves as a sub-placement agent for private placements. Our revenues are generally derived from fees based on a percentage of AUM and AUA, and Westwood Management and Westwood Trust collectively had AUM of approximately $16.6 billion and AUA of approximately $1.0 billion at December 31, 2024.
As of December 31, 2023, our purchase commitments for the next five years and thereafter were as follows (in thousands): Payments due in: Total Less than 1 year 1-3 years 4-5 years Thereafter Purchase commitments (1) $ 14,637 $ 6,519 $ 5,674 $ 2,444 $ — (1) A “purchase commitment” is defined as an agreement to purchase goods or services that is enforceable and legally binding and that specifies all significant terms, including (a) fixed or minimum quantities to be purchased; (b) fixed, minimum or variable price provisions; and (c) the approximate timing of the transaction.
As of December 31, 2024, our purchase commitments for the next five years and thereafter were as follows (in thousands): Payments due in: Total Less than 1 year 1-3 years 4-5 years Thereafter Purchase commitments (1) $ 15,685 $ 7,102 $ 6,307 $ 2,276 $ — (1) A “purchase commitment” is defined as an agreement to purchase goods or services that is enforceable and legally binding and that specifies all significant terms, including (a) fixed or minimum quantities to be purchased; (b) fixed, minimum or variable price provisions; and (c) the approximate timing of the transaction.
Cash Dividends The following table summarizes dividends declared during 2023 and 2022: 2023 Dividends Declaration Date Record Date Paid Date Dividend Per Share February 15, 2023 (1) March 1, 2023 April 3, 2023 $0.15 April 26, 2023 (1) June 2, 2023 July 3, 2023 $0.15 August 2, 2023 (1) September 1, 2023 October 2, 2023 $0.15 October 31, 2023 (1) December 1, 2023 January 3, 2024 $0.15 $0.60 2022 Dividends Declaration Date Record Date Paid Date Dividend Per Share February 9, 2022 March 4, 2022 April 1, 2022 $0.15 April 27, 2022 June 3, 2022 July 1, 2022 $0.15 July 27, 2022 September 2, 2022 October 1, 2022 $0.15 October 26, 2022 (1) December 22, 2023 January 23, 2023 $0.15 $0.60 (1) This dividend was treated for accounting purposes as a return of capital.
Cash Dividends The following table summarizes dividends declared during 2024 and 2023: 2024 Dividends Declaration Date Record Date Paid Date Dividend Per Share February 14, 2024 (1) March 1, 2024 April 3, 2024 $0.15 May 1, 2024 (1) June 3, 2024 July 1, 2024 $0.15 July 31, 2024 (1) September 2, 2024 October 1, 2024 $0.15 October 30, 2024 (1) December 2, 2024 January 3, 2025 $0.15 $0.60 2023 Dividends Declaration Date Record Date Paid Date Dividend Per Share February 15, 2023 (1) March 1, 2023 April 3, 2023 $0.15 April 26, 2023 (1) June 2, 2023 July 3, 2023 $0.15 August 2, 2023 (1) September 1, 2023 October 2, 2023 $0.15 October 31, 2023 (1) December 1, 2023 January 3, 2024 $0.15 $0.60 (1) This dividend was treated for accounting purposes as a return of capital.
Roll-Forward of Assets Under Management Year Ended December 31, 2023 AUM (in millions) Institutional Wealth Management Mutual Funds Total Beginning of period assets* $ 6,968 $ 3,666 $ 4,145 $ 14,779 Client flows: Inflows 360 446 814 1,620 Outflows (936) (615) (1,347) (2,898) Net client flows (576) (169) (533) (1,278) Market appreciation 823 643 492 1,958 Net change 247 474 (41) 680 End of period assets $ 7,215 $ 4,140 $ 4,104 $ 15,459 * Certain assets under management acquired from Salient were reclassified from Mutual Funds to Institutional as of December 31, 2022 to be consistent with the classification of existing assets. 27 The increase in AUM for the year ended December 31, 2023 was due to market appreciation of $2.0 billion, offset by net outflows of $1.3 billion.
Net outflows were primarily related to our LargeCap Value and SmallCap Value strategies. 27 Year Ended December 31, 2023 AUM (in millions) Institutional Wealth Management Mutual Funds Total Beginning of period assets* $ 6,968 $ 3,666 $ 4,145 $ 14,779 Client flows: Inflows 360 446 814 1,620 Outflows (936) (615) (1,347) (2,898) Net client flows (576) (169) (533) (1,278) Market appreciation (depreciation) 823 643 492 1,958 Net change 247 474 (41) 680 End of period assets $ 7,215 $ 4,140 $ 4,104 $ 15,459 * Certain assets under management acquired from Salient were reclassified from Mutual Funds to Institutional as of December 31, 2022 to be consistent with the classification of existing assets.
General and administrative expenses increased 38% to $12.5 million compared to $9.1 million in 2022 primarily due to increased intangible asset amortization following the Salient Acquisition. (Gain) loss from change in fair value of contingent consideration.
Information technology costs increased primarily due to additional software licenses and investment research expenses. General and administrative. General and administrative expenses increased 38% to $12.5 million compared to $9.1 million in 2022 primarily due to increased intangible asset amortization following the Salient Acquisition. (Gain) loss from change in fair value of contingent consideration.
Cash flow provided by investing activities in 2023 was primarily related to the receipt of life insurance proceeds offset by the Broadmark Acquisition, while cash flow used in investing activities in 2022 was primarily related to the Salient Acquisition.
Cash flow used in investing activities in 2024 primarily related to the purchases of strategic investments, compared to cash flow provided by investing activities in 2023 related to the receipt of life insurance proceeds offset by the Broadmark Acquisition. Cash flow used in investing activities in 2022 was primarily related to the Salient Acquisition.
Changes in working capital, especially accounts receivable and accounts payable, are generally the result of timing differences between collection of fees billed and payment of operating expenses. We had cash and short-term investments of $53.1 million and $39.2 million as of December 31, 2023 and 2022, respectively.
Changes in working capital, especially accounts receivable and accounts payable, are generally the result of timing differences between collection of fees billed and payment of operating expenses. We had cash and liquid investments of $44.6 million and $53.1 million as of December 31, 2024 and 2023, respectively.
The decrease of $52.7 million from 2022 to 2023 primarily reflected the net purchases of investments in 2023, compared to net sales of investments in 2022 to fund the Salient Acquisition. The increase of $32.1 million from 2021 to 2022 primarily reflected net sales of investments and net income in 2021.
The increase of $22.3 32 million from 2023 to 2024 primarily reflected the net sales of investments in 2024 compared to net purchases of investments in 2023. The decrease of $52.7 million from 2022 to 2023 primarily reflected net sales of investments in 2022 to fund the Salient Acquisition.
(Gain) loss from change in fair value of contingent consideration (Gain) loss from change in fair value of contingent consideration consists of fair value adjustments related to contingent consideration from our 2022 acquisition of Salient. Acquisition expenses Acquisition expenses consist of costs related to the Salient Acquisition.
(Gain) loss from change in fair value of contingent consideration (Gain) loss from change in fair value of contingent consideration consists of fair value adjustments related to contingent consideration from our 2022 acquisition of Salient, with gains representing reductions in value and losses representing increases in value. Acquisition expenses Acquisition expenses consist of costs related to the Salient Acquisition.
Total revenues increased $21.1 million, or 31%, to $89.8 million compared with $68.7 million for 2022. The increase was attributable to higher average assets under management following our acquisition of Salient Partners' asset management business during the fourth quarter of 2022, partially offset by a $1.4 million decrease in Trust fees due to lower average AUM. Employee Compensation and Benefits.
The increase was attributable to higher average assets under management following our acquisition of Salient Partners' asset management business during the fourth quarter of 2022, partially offset by a $1.4 million decrease in Trust fees due to lower average AUM. Employee Compensation and Benefits. Employee compensation and benefits expenses increased due to additional headcount resulting from the Salient Acquisition.
At December 31, 2023 and 2022, working capital aggregated $53.6 million and $40.6 million, respectively. Westwood Trust is required by the Texas Finance Code to maintain cash and investments in an amount equal to the minimum restricted capital of $4.0 million . Restricted capital is included in Investments in the accompanying Consolidated Balance Sheets.
Westwood Trust is required by the Texas Finance Code to maintain cash and investments in an amount equal to the minimum restricted capital of $4.0 million . Restricted capital is included in "Investments at fair value" in the accompanying Consolidated Balance Sheets. At December 31, 2024, Westwood Trust had approximately $11.9 million in excess of its minimum capital requirement.
Quarterly average AUM increased 15% to $15.0 billion for 2023 versus 2022, which contributed to a 31% increase in total revenue from 2022. • Our SMidCap Value, SmallCap Value, MidCap Value, High Alpha, Enhanced Balanced, High Income, Alternative Income, Global Real Estate and Select Income strategies performed strongly by beating their primary benchmarks for the year. • We paid $5.5 million of dividends to our common stockholders. • Our financial position remains strong with liquid cash and short-term investments of $53.1 million and no debt as of December 31, 2023 .
Quarterly average AUM increased 9% to $16.3 billion for 2024 versus 2023, which contributed to a 6% increase in total revenue from 2023. • Our SMidCap Value, Multi-Asset, Credit Opportunities, Real Estate Income, MLP SMA, MLP High Conviction and MLP & Energy Infrastructure strategies performed strongly by beating their primary benchmarks for the year. • We paid $5.4 million of dividends to our common stockholders. • Our financial position remains strong with liquid cash and investments of $44.6 million and no debt as of December 31, 2024 .
Westwood mutual funds expenses increased primarily due to an increase in mutual fund placement fees for certain mutual funds acquired in the Salient Acquisition. 30 Information Technology. Information technology costs increased primarily due to additional software licenses and investment research expenses. General and administrative.
Sales and Marketing . Sales and marketing expenses increased due to higher product placement fees for certain Salient funds. Westwood Mutual Funds. Westwood mutual funds expenses increased primarily due to an increase in mutual fund placement fees for certain mutual funds acquired in the Salient Acquisition. Information Technology.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Total Revenues. Total revenues decreased $4.4 million, or 6%, to $68.7 million compared with $73.1 million for 2021.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Total Revenues. Total revenues increased $21.1 million, or 31%, to $89.8 million compared with $68.7 million for 2022.
Accordingly, we will present further AUA details going forward: 28 (in millions) Year Ended December 31, 2023 Assets Under Advisement Beginning of period assets $ 1,255 Inflows 160 Outflows (400) Net client flows (240) Market appreciation (depreciation) 64 Net change (176) End of period assets $ 1,079 Results of Operations The following table and discussion of our results of operations is based upon data derived from our Consolidated Statements of Comprehensive Income (Loss) contained in our Consolidated Financial Statements and should be read in conjunction with these statements included elsewhere in this Report. 29 Years ended December 31, (in thousands, except percentages) 2023 Change 2022 Change 2021 Revenues: Advisory fees: Asset-based $ 67,391 44 % $ 46,685 2 % $ 45,927 Performance-based 1,265 24 1,018 (69) 3,335 Trust fees 20,242 (7) 21,686 (10) 24,030 Trust performance-based fees 349 NM — (100) 101 Other revenues, net 534 (175) (708) 109 (339) Total revenues 89,781 31 68,681 (6) 73,054 Expenses: Employee compensation and benefits 52,918 32 40,124 (6) 42,532 Sales and marketing 2,990 49 2,003 56 1,280 Westwood mutual funds 3,133 42 2,201 (17) 2,657 Information technology 9,650 25 7,719 (5) 8,161 Professional services 5,132 (4) 5,357 22 4,391 General and administrative 12,512 38 9,057 12 8,074 (Gain) loss from change in fair value of contingent consideration (2,768) NM — NM — Acquisition expenses 209 (97) 7,093 NM — Total expenses 83,776 14 73,554 10 67,095 Net operating income (loss) 6,005 (223) (4,873) (182) 5,959 Realized gains on private investments — NM — (100) 8,371 Net change in unrealized appreciation (depreciation) on private investments 6 (100) (1,495) (17) (1,797) Investment income 1,191 348 266 (69) 868 Other income 6,241 588 907 51 602 Income (loss) before income taxes $ 13,443 (359) % $ (5,195) (137) % $ 14,003 Income tax provision 2,872 (607) (567) (113) 4,240 Net income (loss) $ 10,571 (328) % $ (4,628) (147) % $ 9,763 Total comprehensive income (loss) $ 10,571 (328) % $ (4,628) (147) % $ 9,763 Less: Comprehensive income (loss) attributable to noncontrolling interest 1,051 NM — NM — Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. $ 9,520 (306) % $ (4,628) (147) % $ 9,763 NM - Not meaningful Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Total Revenues.
Years ended December 31, (in thousands, except percentages) 2024 Change 2023 Change 2022 Revenues: Advisory fees: Asset-based $ 69,755 4 % $ 67,391 44 % $ 46,685 Performance-based 1,393 10 1,265 24 1,018 Trust fees 21,422 6 20,242 (7) 21,686 Trust performance-based fees 482 38 349 NM — Other revenues, net 1,669 213 534 (175) (708) Total revenues 94,721 6 89,781 31 68,681 Expenses: Employee compensation and benefits 56,011 6 52,918 32 40,124 Sales and marketing 2,668 (11) 2,990 49 2,003 Westwood mutual funds 3,254 4 3,133 42 2,201 Information technology 9,662 — 9,650 25 7,719 Professional services 5,468 7 5,132 (4) 5,357 General and administrative 11,947 (5) 12,512 38 9,057 (Gain) loss from change in fair value of contingent consideration 4,881 (276) (2,768) NM — Acquisition expenses — NM 209 (97) 7,093 Total expenses 93,891 12 83,776 14 73,554 Net operating income (loss) 830 (86) 6,005 (223) (4,873) Net change in unrealized appreciation (depreciation) on private investments — NM 6 (100) (1,495) Net investment income 2,183 83 1,191 348 266 Other income 1,002 (84) 6,241 588 907 Income (loss) before income taxes $ 4,015 (70) % $ 13,443 (359) % $ (5,195) Income tax provision 1,804 (37) 2,872 (607) (567) Net income (loss) $ 2,211 (79) % $ 10,571 (328) % $ (4,628) Less: Income (loss) attributable to noncontrolling interest (4) (100) % 1,051 NM — Income (loss) attributable to Westwood Holdings Group, Inc. $ 2,215 (77) % $ 9,520 (306) % $ (4,628) NM - Not meaningful Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Total Revenues.
For the years ended December 31, Cash Flow Data (in thousands) 2023 2022 2021 Operating cash flows $ (1,185) $ 51,490 $ 19,385 Investing cash flows 4,112 (33,739) 9,566 Financing cash flows (6,364) (9,103) (26,806) The changes in net cash provided by operating activities generally reflect changes in earnings plus the effects of non-cash items and changes in working capital.
For the years ended December 31, Cash Flow Data (in thousands) 2024 2023 2022 Operating cash flows $ 21,122 $ (1,185) $ 51,490 Investing cash flows (4,613) 4,112 (33,739) Financing cash flows (18,084) (6,364) (9,103) During 2024, cash flow provided by operating activities was $21.1 million, compared to cash used in operating activities of $1.2 million during 2023 and cash provided by operating activities of $51.5 million during 2022.
For the year ended December 31, 2023, changes in growth projections and volatility assumptions were the primary drivers of changes in our fair value estimates. Consolidation We assess each legal entity that we manage to determine whether consolidation is appropriate at the onset of the relationship.
For the years ended December 31, 2024 and 2023, changes in growth projections, due to increases in AUM and AUA values, and volatility assumptions were the primary drivers of changes in our fair value estimates. Goodwill Goodwill is tested at least annually for impairment.
Net outflows were primarily related to our LargeCap Value, Income Opportunity and Enhanced Balanced strategies.
Net outflows were primarily related to our LargeCap Value, Income Opportunity and Enhanced Balanced strategies. Roll-Forward of Assets Under Advisement AUA has historically been disclosed in aggregate due to its relative insignificance to our business.
Net outflows were primarily related to our Income Opportunity, MLP & Energy Infrastructure, LargeCap Value and SmallCap Value strategies.
The increase in AUM for the year ended December 31, 2023 was due to market appreciation of $2.0 billion offset by net outflows of $1.3 billion. Net outflows were primarily related to our Income Opportunity, MLP & Energy Infrastructure, LargeCap Value and SmallCap Value strategies.
Quarterly average AUM decreased $1.2 billion, down 9%, to $13.1 billion for 2022 compared with $14.3 billion for 2021. The decrease in average AUM was primarily due to $1.5 billion of market depreciation in 2022.
AUM increased $1.1 billion, or 7%, to $16.6 billion at December 31, 2024 compared to $15.5 billion at December 31, 2023. Quarterly average AUM increased $1.4 billion, up 9%, to $16.3 billion compared with $15.0 billion for 2023. The increase in average AUM was primarily due to $1.9 billion of market appreciation in 2024.
Net Investment Income Net investment income primarily includes interest and dividend income on fixed income securities and money market funds. 26 Other Income Other income primarily consists of income from the sublease of a portion of our corporate offices and the receipt of life insurance proceeds.
Net Change in Unrealized Appreciation (Depreciation) on Private Investments Net change in unrealized appreciation (depreciation) on private investments includes changes in the value of our private equity investments. Net Investment Income Net investment income primarily includes interest and dividend income on fixed income securities and money market funds.
We believe that investors will recognize the potential for new revenue streams inherent in these products and services however there is no guarantee that they will occur. 2023 Highlights The following items were reported for the year ended December 31, 2023: • Integrated Salient's asset management business, following our 2022 acquisition. • Added the Managed Investment Solutions team, bolstering our ability to provide customized solutions to institutional and wealth investors. • Acquired an additional 32% interest in Broadmark, an RIA managing and/or sub-advising mutual funds, retail and institutional separately-managed accounts, resulting in our holding an approximately 80% controlling interest. • AUM as of December 31, 2023 was $15.5 billion, 5% higher than December 31, 2022.
We believe that investors will recognize the potential for new revenue streams inherent in these products and services however there is no guarantee that they will occur. 2024 Highlights The following items were reported for the year ended December 31, 2024: • Launched two new ETFs: Westwood Salient Enhanced Midstream Income ETF (MDST) and Westwood Salient Enhanced Energy Income ETF (WEEI). • Entered a partnership with WEBs Investments Inc., a new firm to develop and launch innovative investment strategies for investors and advisors. • AUM as of December 31, 2024 was $16.6 billion, 7% higher than December 31, 2023.
Firm-wide Assets Under Management Firm-wide assets under management of $16.6 billion at December 31, 2023 consisted of $15.5 billion of AUM and $1.1 billion of AUA. AUM increased $0.7 billion, or 5%, to $15.5 billion at December 31, 2023 compared to $14.8 billion at December 31, 2022.
Other Income Other income primarily consists of income from the sublease of a portion of our corporate offices and the receipt of life insurance proceeds. Firm-wide Assets Under Management 26 Firm-wide assets under management of $17.6 billion at December 31, 2024 consisted of $16.6 billion of AUM and $1.0 billion of AUA.
Year Ended December 31, 2021 AUM (in millions) Institutional Wealth Management Mutual Funds Total Beginning of period assets $ 6,567 $ 4,335 $ 2,143 $ 13,045 Client flows: Inflows 1,901 413 1,461 3,775 Outflows (1,062) (896) (996) (2,954) Net client flows 839 (483) 465 821 Global convertibles transition (1,593) — — (1,593) Market appreciation 1,224 568 438 2,230 Net change 470 85 903 1,458 End of period assets $ 7,037 $ 4,420 $ 3,046 $ 14,503 The increase in AUM for the year ended December 31, 2021 was due to market appreciation of $2.2 billion and net inflows of $0.8 billion, partially offset by the transition of our Global Convertibles team.
Roll-Forward of Assets Under Management Year Ended December 31, 2024 AUM (in millions) Institutional Wealth Management Mutual Funds Total Beginning of period assets $ 7,215 $ 4,140 $ 4,104 $ 15,459 Client flows: Inflows 1,070 338 663 2,071 Outflows (966) (524) (1,353) (2,843) Net client flows 104 (186) (690) (772) Market appreciation (depreciation) 982 437 501 1,920 Net change 1,086 251 (189) 1,148 End of period assets $ 8,301 $ 4,391 $ 3,915 $ 16,607 The increase in AUM for the year ended December 31, 2024 was due to market appreciation of $1.9 billion offset by net outflows of $0.8 billion.
Removed
Realized Gains on Private Investments Realized gains on private investments includes amounts by which the net proceeds from the sale or redemption of our private investments exceeded costs. Net Change in Unrealized Appreciation (Depreciation) on Private Investments Net change in unrealized appreciation (depreciation) on private investments includes changes in the value of our private equity investments.
Added
Following our November 2022 acquisition of Salient's asset management business, AUA becane a more meaningful component of our business and accordingly, we will present AUA details from the year ended December 31, 2023 going forward: Years Ended December 31, AUA (in millions) 2024 2023 Beginning of period assets $ 1,079 $ 1,255 Inflows 105 160 Outflows (316) (400) Net client flows (211) (240) Market appreciation (depreciation) 92 64 Net change (119) (176) End of period assets $ 960 $ 1,079 Results of Operations 28 The following table and discussion of our results of operations is based upon data derived from our Consolidated Statements of Operations contained in our Consolidated Financial Statements and should be read in conjunction with these statements included elsewhere in this Report.
Removed
(4) AUM for 2023, 2022 and 2021 excludes approximately $1.1 billion, $1.3 billion and $0.3 billion of assets under advisement, respectively, related to our model portfolios for which we provide investment advice on a fee basis without having investment management authority. We added $0.9 billion of AUA from the Salient Acquisition.
Added
Total revenues increased $4.9 million, or 6%, to $94.7 million compared to $89.8 million for 2023. The increase was attributable to higher average assets under management. Employee Compensation and Benefits. Employee compensation and benefits expenses increased primarily due to higher performance-related incentive compensation following increased AUM balances and additional headcount. (Gain) loss from change in fair value of contingent consideration.
Removed
Net inflows were primarily related to our SmallCap Value strategy, partially offset by net outflows in our Enhanced Balance strategy. In late 2020 we decided to exit the stand-alone convertibles business and our Global Convertibles team transitioned back to Aviva Investors, from which they had joined Westwood.
Added
We recorded a loss of $4.9 million upon the remeasurement of contingent consideration, payable in the first quarter of 2025 for the Salient Acquisition primarily, due to positive changes in growth projections following asset appreciation and asset flows in the period. 29 Provision for Income Taxes. The effective tax rate was 44.9% for 2024 compared to 23.2% for 2023.
Removed
As a result, $1.6 billion in two sub-advised Global Convertibles mandates returned to Aviva as of April 1, 2021. Roll-Forward of Assets Under Advisement AUA has historically been disclosed in total due to its relative insignificance to our business. However, following our November 2022 acquisition of Salient's asset management business, AUA has become a more meaningful component of our business.
Added
Cash used in financing activities was $18.1 million in 2024 compared to $6.4 million and $9.1 million in 2023 and 2022, respectively. The change from 2023 to 2024 related to payments for contingent consideration for the Salient Acquisition and treasury stock purchases in 2024. The change from 2022 to 2023 primarily related to treasury stock purchases in 2022.
Removed
Employee compensation and benefits expenses increased due to additional headcount resulting from the Salient Acquisition. Sales and Marketing . Sales and marketing expenses increased due to higher product placement fees for certain Salient funds. Westwood Mutual Funds.
Removed
The decrease was attributable to a $2.3 million decrease in Trust fees due to lower average AUM, and a decrease in performance fees, partially offset by a $0.8 million increase in asset-based advisory fees. Employee Compensation and Benefits.
Removed
Employee compensation and benefits expenses decreased due to lower commissions and incentive compensation, partially offset by higher salaries following an increase in headcount from the Salient Acquisition. Sales and Marketing . Sales and marketing expenses increased as in-person sales activities returned to pre-COVID-19 levels. Professional Services .
Removed
Professional services expenses increased primarily due to higher subadvisory expenses and various legal costs. General and administrative. General and administrative expenses increased 12% to $9.1 million compared to $8.9 million in 2021 primarily due to higher rent expense following our Houston, Texas office space expansion. Acquisition expenses .
Removed
Acquisition expenses are related to the Salient Acquisition and consisted primarily of investment banking fees, legal fees, information technology expenses related to systems integrations, mutual fund costs related to proxy solicitations and information technology integration costs. $1.8 million of acquisition expenses incurred in the nine months ended September 30, 2022 were included in Professional Services ($1.0 million), Westwood Mutual Funds ($0.5 million) and Information Technology ($0.3 million) before being reclassified to acquisition expenses upon consummation of the Salient Acquisition.
Removed
Net change in unrealized appreciation (depreciation) on private investments. We recorded a $1.6 million net change in unrealized depreciation to reflect a market transaction related to our previous investment in Charis. Provision for Income Taxes. The effective tax rate was 10.9% for 2022 compared to 30.3% for 2021.
Removed
For the year ended December 31, 2023, our Economic Earnings increased by 589% to $18.3 million compared with $2.7 million for the year ended December 31, 2022. 2023 Economic Earnings was impacted by higher revenues and the receipt of life insurance proceeds, offset by higher expenses following the Salient Acquisition.
Removed
The following table provides a reconciliation of Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. to Economic Earnings.
Removed
At December 31, 2023, Westwood Trust had approximately $11.1 million in excess of its minimum capital 33 requirement.
Removed
Changes in working capital, especially accounts receivable and accounts payable, generally result from timing differences between collection of fees billed and payment of operating expenses. During 2023, cash flow used in operating activities was $1.2 million, compared to cash provided by operating activities of $51.5 million during 2022 and $19.4 million during 2021.
Removed
Cash flow provided by investing activities in 2021 was related to realized gains on private investments and the sale of property and equipment following the sublease of a portion of our Dallas, Texas corporate office space. Cash used in financing activities was $6.4 million in 2023 compared to $9.1 million and $26.8 million in 2022 and 2021, respectively.
Removed
The change from 2022 to 2023 related to treasury stock purchases in 2022. The change from 2021 to 2022 primarily related to lower dividends in 2022.
Removed
We first determine whether the entity is a variable interest entity (“VIE”), or a voting interest entity (“VOE”), under GAAP and whether we have a controlling financial interest in the entity. Assessing whether or not an entity is a VOE or VIE and if it requires consolidation involves judgment and analysis.
Removed
To assess whether we have the power to direct the activities of an entity that most significantly impact the VIE’s economic performance, we consider all the facts and circumstances, including, but not limited to, the legal organization of the 35 VIE, our equity ownership and contractual involvement with the entity and any related party or de facto agent implications of our involvement with the entity.
Removed
This assessment includes identifying the activities that most significantly impact the entity’s economic performance and identifying which party, if any, has power over those activities. Entities that do not qualify as a VIE are assessed for consolidation under the VOE model.
Removed
Under the VOE model, we consolidate the entity if we determine that we have a controlling financial interest in the entity through our ownership of greater than 50% of the outstanding voting shares of the entity and that other equity holders do not have substantive voting, participating or liquidation rights.
Removed
A VOE is an entity that is outside the scope of the guidance for VIEs. Consolidation of a VOE is required when a reporting entity owns a controlling financial interest in a VOE. Ownership of a majority of the voting interests is the usual condition for a controlling financial interest. Goodwill Goodwill is tested at least annually for impairment.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA hypothetical 10% decrease in our average AUM and AUA during the year ended December 31, 2023 would have reduced our reported consolidated total revenue by approximately $9 million. Our cash equivalents and other investment instruments are exposed to financial market risk due to fluctuations in interest rates, which may affect interest income.
Biggest changeA hypothetical 10% decrease in our average AUM and AUA during the year ended December 31, 2024 would have reduced our reported consolidated total revenue by approximately $9 million. Our cash equivalents and other investment instruments are exposed to financial market risk due to fluctuations in interest rates, which may affect interest income.

Other WHG 10-K year-over-year comparisons