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What changed in WESTWOOD HOLDINGS GROUP INC's 10-K — 2022 vs 2023

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

+198 added−209 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-13)

Top changes in WESTWOOD HOLDINGS GROUP INC's 2023 10-K

198 paragraphs added · 209 removed · 162 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

67 edited+9 added−12 removed86 unchanged
Biggest changeWestwood 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. 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.
Biggest changeThe 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.
Our Code of Business Conduct, Corporate Governance Guidelines and Audit Committee, Compensation Committee and Human Capital Committee, Governance/Nominating Committee Charters are available without charge on our website.
Our Code of Business Conduct, Corporate Governance Guidelines and Audit Committee, Compensation and Human Capital, and Governance/Nominating Committee Charters are available without charge on our website.
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, 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. 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.
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 11 unique ideas, perspectives and experiences.
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.
We support the UNPRI and recognize the importance of considering ESG issues as an element in our overall investment process. Engagement As part of our fundamental investment research process, our analysts conduct meetings with target company management and investor relations to understand strategy, execution and financial strength throughout the life of our investment.
We support the UNPRI and recognize the importance of considering ESG issues as an element in our overall investment process. 10 Engagement As part of our fundamental investment research process, our analysts conduct meetings with target company management and investor relations to understand strategy, execution and financial strength throughout the life of our investment.
Westwood’s Board of Directors (the "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 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 ESG Steering Committee is responsible for ensuring the effective execution of our overall ESG strategy. Along with our CEO, this group sets the strategic direction for our ESG agenda, oversees implementation, and reviews our ESG strategy with our Board of Directors.
Westwood’s ESG Steering Committee is responsible for ensuring the effective execution of our overall ESG strategy. Along with our CEO, this group sets the strategic direction for our ESG agenda, oversees implementation, and reviews our ESG strategy with our Board.
The team draws on the proprietary fundamental research of Westwood’s investment teams in order to identify securities with attractive risk-adjusted return profiles across a broad spectrum of income-producing securities. The principal investment strategies currently managed by the Multi-Asset team are as follows: Income Opportunity: Multi-Asset strategy that invests across multiple bond sectors, including convertibles and income-producing equity securities.
The team draws on the proprietary fundamental research of Westwood’s investment teams in order to identify securities with attractive risk-adjusted return profiles across a broad spectrum of income-producing securities. The principal investment strategies currently managed by the Multi-Asset team are as follows: Income Opportunity: Multi-Asset strategy that invests across multiple fixed income sectors, including convertibles and income-producing equity securities.
Several 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 continue to look for opportunities to expand the range of investment strategies we offer to existing and prospective clients.
To keep us all motivated, we have found a lot of inspiration in Coach John Wooden’s Pyramid of Success™ which helps us to 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.
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.
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 32% 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 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.
In addition to our investment in InvestCloud, we initiated a technology transformation several years ago with InvestCloud as a core provider. This technology transformation included overhauling and streamlining our enterprise data infrastructure and investment management operating platform. We also developed and launched digital client portals with InvestCloud, offering our clients secure “anytime, anywhere” access to their financial information. Charis.
In addition to our investment in InvestCloud, we initiated a technology transformation several years ago using InvestCloud as a core provider. This technology transformation included overhauling and streamlining our enterprise data infrastructure and investment management operating platform. We also 1 developed and launched digital client portals with InvestCloud, offering our clients secure “anytime, anywhere” access to their financial information.
We moved our technology infrastructure to secure, cloud-based access, created a data warehouse to improve our investment operations work flow, upgraded our trade order management and trade compliance systems, digitized our portfolio accounting and reconciliation system, and outsourced our trading function. We also developed digital client portals for our institutional and wealth management clients.
We moved our technology infrastructure to secure, cloud-based access, created a data warehouse to improve our investment operations workflow, upgraded our trade order management and trade compliance systems, digitized our portfolio accounting and reconciliation system, and outsourced our trading function. We also developed digital client portals for our institutional and wealth management clients.
We have considerably expanded our range of investment strategies by adding Energy and Real Assets, Tactical Absolute Return and Real Estate Income as a result of the recent Salient Acquisition. Continue to enhance our digital capabilities. Over the past several years, we have invested significantly to enhance our automation and digital efficiency.
We have considerably expanded our range of investment strategies by adding Energy and Real Assets, Tactical Absolute Return and Select Income as a result of the Salient Acquisition. Continue to enhance our digital capabilities. Over the past several years, we have invested significantly to enhance our automation and digital efficiency.
At the discretion of its Board of Directors, Westwood Trust has made quarterly and special dividend payments, and other distributions, to Westwood Holdings Group, Inc. out of undivided profits. SEC Broker‑Dealer Registration / FINRA Regulation SCLP and Forward are subject to regulation by the SEC, FINRA and various states.
At the discretion of its Board of Directors (the "Board"), Westwood Trust has made quarterly and special dividend payments, and other distributions, to Westwood Holdings Group, Inc. out of undivided profits. SEC Broker‑Dealer Registration / FINRA Regulation SCLP is subject to regulation by the SEC, FINRA and various states.
SMidCap Value: Investments in equity securities of approximately 50 to 70 companies benchmarked to the Russell 2500 Value Index. 2 SmallCap Value: Investments in equity securities of approximately 50 to 70 companies benchmarked to the Russell 2000 Value Index. AllCap Value: Investments in equity securities of approximately 50 to 80 companies benchmarked to the Russell 3000 Value Index.
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.
Our 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 SMidCap (WHGMX) ● Westwood Broadmark Tactical Plus (SBTIX) ● Westwood Quality Value (WHGLX) ● Westwood Broadmark Tactical Growth (FTGWX) ● Westwood Salient Global Real Estate (KIRYX) ● Westwood High Income (WHGHX) ● Westwood Salient MLP & Energy Infrastructure (SMLPX) ● Westwood Income Opportunity (WHGIX) ● Westwood Select Income (KIFYX) ● Westwood Quality AllCap (WQAIX) ● Westwood SmallCap Growth (WSCIX) ● Westwood Quality MidCap (WWMCX) ● Westwood Total Return (WLVIX) ● Westwood Quality SmallCap (WHGSX) As of December 31, 2022, the Westwood Funds® had AUM of $4.3 billion.
Our 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.
Community; 4. 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 sense to do so. It improves our ability to create an environment that values true diversity, inclusiveness and transparency and ultimately supports long-term employee growth.
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.
Meetings inform our investment analysis and amplify our understanding of a business’s ability to adapt to changing business environments. Meetings can happen in person, during investment conferences, video links and calls and build on long-standing relationships. Our understanding of material issues affecting the company is captured and shared in our valuation analysis and recommendations made by our Research Analysts.
Meetings inform our investment analysis and amplify our understanding of a business’s ability to adapt to changing business environments. Meetings can take place in person, during investment conferences and video calls, and they build on long-standing relationships. Our understanding of material issues affecting the company is captured and shared in our valuation analysis and recommendations made by our Research Analysts.
We believe a key factor leading to our being considered for new client mandates and platform placements is the in-depth knowledge of our firm, our people and our processes reflected in our current consultant and platform relationships and being developed in our prospective relationships. Attract and retain key employees .
We believe a key factor leading to our being considered for new client mandates and platform placements is the in-depth knowledge of our firm, our people and our processes currently embedded in our consultant and platform relationships and being developed in prospective relationships. Attract and retain key employees .
In addition, certain of our employees are registered with FINRA and such states and subject to SEC, state and FINRA regulation. The failure of these companies 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 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.
Investment Strategies We offer high-conviction equity, outcome-oriented solutions and liquid alternatives to address a wide range of investment objectives, including three strategies each with over $1 billion in AUM: LargeCap Value, Income Opportunity and SmallCap Value. 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 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.
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, 2022, approximately 43% of our workforce was female and minorities represented approximately 32% of our workforce. Employees 9 At December 31, 2022, we had 152 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, 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.
Typically invests in a range of asset types with the equity component usually between 30% and 50% in the normal running of the strategy. Total Return: Multi-Asset strategy that invests across multiple bond sectors, including convertibles and income producing equity securities.
Typically invests in a range of asset types with the equity component usually comprising between approximately 30% and 50% of this strategy. Total Return: Multi-Asset strategy that invests across multiple bond sectors, including convertibles and income producing equity securities.
Multi-Asset The Multi-Asset team employs an investment process that applies top-down views across asset classes along with bottom-up security selection, utilizing quantitative and fundamental tools to evaluate macro, micro and technical conditions across a range of asset classes. Our continuum of outcome-oriented solutions underpin our strategic and tactical allocations and along with a discipline geared toward managing downside risks.
Multi-Asset The Multi-Asset team employs an investment process that applies top-down views across asset classes along with bottom-up security selection, utilizing quantitative and fundamental tools to evaluate macro, micro and technical conditions across a range of asset classes. Our outcome-oriented solutions utilize strategic and tactical allocations as well as a discipline focused on managing downside risks.
As ESG evaluation techniques continue to evolve, we will adapt our analyses to implement our fiduciary responsibilities. 10 Westwood is a signatory of the United Nations Principles for Responsible Investment ("UNPRI") and is committed to adopting and implementing responsible investment principles in a manner consistent with our fiduciary duties to clients.
As ESG integration and evaluation techniques continue to evolve, we will adapt our analyses to ensure we comply with our fiduciary responsibilities at all times. Westwood is a signatory of the United Nations Principles for Responsible Investment ("UNPRI") and is committed to adopting and implementing responsible investment principles in a manner consistent with our fiduciary duties to clients.
Charis offers traditional banking services through Westwood Private Bank and provides clients of Westwood Trust efficient access to lines of credit secured by their investment portfolios. Our partnership provides Charis the opportunity to refer their clients needing more complex financial planning and investment services to Westwood Wealth Management. Westwood Hospitality.
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.
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.
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.
Typically invests in a range of asset types with the equity component usually between 50% and 70% in the normal running of the strategy. High Income: Multi-Asset strategy that invests across multiple bond sectors, including convertibles and income-producing equity securities.
Typically invests in a range of asset types with the equity component usually comprising between approximately 50% and 70% of this strategy. High Income: Multi-Asset strategy that invests across multiple bond sectors, including convertibles and income-producing equity securities. Typically invests in a range of asset types with the equity component usually comprising between approximately 15% and 30% of this strategy.
Our growth s trategy 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 approximatel y 22% of our fee revenues for the year ended December 31, 2022.
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 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 of Westwood Management and Westwood Trust.
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").
The SEC has interpreted that duty to impose standards, requirements and limitations on, among other things: trading of client accounts, allocation of investment opportunities among clients, use of soft dollars, execution of transactions and recommendations to clients.
As an investment adviser, we have a fiduciary duty to our clients. The SEC has interpreted that duty to impose standards, requirements and limitations on, among other things: trading of client accounts, allocation of investment opportunities among clients, use of soft dollars, execution of transactions and recommendations to clients.
Westwood Management and Westwood Trust collectively had AUM of approximately $14.8 billion and AUA of approximately $1.3 billion at December 31, 2022. 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 $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.
No employees are represented by a labor union, and we believe our employee relations are favorable. As of December 31, 2022, approximately 14% of our employees held the Chartered Financial Analyst designation. Environmental, Social and Governance ("ESG") ESG Core Principles Since inception, we have known the corporate culture we wanted to foster ― one focused on core values.
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.
Our investment in Westwood Hospitality seeded a private investment fund, which was offered to clients of Westwood Trust. Available Information We maintain a website at westwoodgroup.com.
Westwood Hospitality is a private investment fund seeded via our investment and which is offered to clients of Westwood Trust. Westwood Energy Secondaries is a private investment fund seeded via our investment and which is offered to our clients. Available Information We maintain a website at westwoodgroup.com.
We must also comply with anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001, as subsequently amended and reauthorized (the "Patriot Act"). We believe that we are in compliance with the regulations under the Investment Advisers Act, the Investment Company Act and the Patriot Act. As an investment adviser, we have a fiduciary duty to our clients.
We are also required to comply with anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001, as subsequently amended and reauthorized (the "Patriot Act"). We believe that we are in compliance with the regulations under the Investment Advisers Act, the Investment Company Act and the Patriot Act.
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.
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.
Identifying undervalued companies with strong fundamentals, where the outlook for future earnings growth is underestimated by the market, offers us the potential for asymmetric returns. This investment approach is intended to preserve capital during unfavorable periods and provide superior real returns over the long term. We have established a track record of delivering competitive risk-adjusted returns for our clients.
Identifying undervalued companies with strong fundamentals, where the outlook for future earnings growth is underestimated by the market, offers us the potential for asymmetric returns. This investment approach is intended to preserve capital during unfavorable periods and provide superior real returns over the long term.
Tactical Absolute Return Tactical Absolute Return strategies are subadvised by our affiliate, Broadmark. We believe that it may be unwise to be fully invested in equities during periods of intense speculation and monetary tightening within an overvalued market. We also find other market environments in which investors should be fully invested and even overweight higher beta sectors and indices.
These strategies may appeal to clients who believe that it may be unwise to be fully invested in equities during periods of intense speculation and monetary tightening within an overvalued market. We also find other market environments in which we believe investors should be fully invested and even overweight higher beta sectors and indices.
Governance Westwood is committed to the successful integration and promotion of ESG at the corporate level and the investment level. 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 permeating our business. The separation of responsibilities among these governing structures ensures proper accountability across our firm.
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. The portfolios primarily include growth stocks in the mid- to large-capitalization range.
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.
Our Intermediary sale team markets our mutual funds and separately managed accounts directly to select broker-dealers and RIAs. Managed accounts are similar in some ways 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 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.
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. We have focused on building our foundation in terms of personnel and infrastructure to support a larger business.
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.
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. Westwood Wealth Management provides wealth and investment management solutions primarily to individuals and utilizes both Westwood Management and external investment management services.
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.
Strategic Investments 1 Over the past several years we have made a number of strategic investments, including InvestCloud, Inc. ("InvestCloud") a digital financial services provider, Charis Bank, ("Charis") the parent company of Westwood Private Bank, and Westwood Hospitality Fund I, LLC ("Westwood Hospitality"), a private investment fund offered to clients of Westwood Trust. InvestCloud.
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.
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 and Westwood International Advisors (prior to its 2020 closure).
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 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 and the Westwood Funds ® , as well as sub-advisory services to other mutual funds and pooled investment vehicles.
Responsible Investment / ESG Integration Our responsible investment commitment is evident in our investment approach across our high-conviction equity and outcome-oriented solutions where we take a fundamental approach to identifying high-quality companies and sound businesses around the world.
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.
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.
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.
We have developed investment strategies that we expect to be attractive in our target institutional, wealth management and intermediary markets. 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.
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").
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. MidCap Value: Investments in equity securities of approximately 50 to 80 companies benchmarked to the Russell Midcap Value Index.
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.
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. Prior to Sept. 30, 2020, our advisory business also included our Emerging Markets Equity team.
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.
We will continue to focus on organic product initiatives to grow our investment strategies while considering new investment strategies via acquisitions or from third parties, as discussed under "Growth Strategy" below.
The Salient Acquisition expanded our product portfolio to serve financial intermediaries and institutional clients with additional product offerings, including Energy and Real Assets, Tactical Absolute Return, and Income Alternatives. We will continue to focus on organic product initiatives to grow our investment strategies while considering new investment strategies via acquisitions or from third parties, as discussed under "Growth Strategy" below.
Risk Factors.” General We manage investment assets and provide services for our clients through our subsidiaries, Westwood Management Corp., Westwood Advisors, L.L.C. and Salient Advisors LP (each of which is a registered investment adviser ("RIA") registered with the Securities and Exchange Commission and referred to hereinafter together as “Westwood Management”) and Westwood Trust.
(each of which is a registered investment adviser ("RIA") registered with the Securities and Exchange Commission and referred to hereinafter together as “Westwood Management”) and Westwood Trust ("Westwood Wealth Management").
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. We also focus on expanding our relationships with financial intermediaries that manage discretionary mutual fund models.
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.
As an active asset manager, ESG issues are directly linked into our bottom-up, fundamental assessment of companies and these issues have always been considered in our fundamental analyses evaluating the merits of a company's strategy, downside risk and valuation. We take a fundamental, financial materiality-based approach to identifying high-quality companies and sound businesses around the world.
Our fundamental, financial materiality-based approach to identifying high-quality companies and sound businesses around the world has always led our investment team to consider these issues in our fundamental analyses, which evaluate the merits of a company's strategy, downside risk and valuation.
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. Clients invest in these strategies through: MLP and Energy Infrastructure: Offers access to a wide universe of MLPs and MLP-related companies with the potential to capture energy infrastructure opportunities.
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.
SCLP is an SEC-registered broker-dealer and Financial Industry Regulatory Authority ("FINRA") member, and serves as a sub-placement agent for private placements. Forward is a limited broker-dealer and FINRA member which formerly acted as the distributor of the Salient Mutual Funds and the Forward Funds.
SCLP is an SEC-registered broker-dealer and Financial Industry Regulatory Authority ("FINRA") member and serves as a sub-placement agent for private placements. Salient Advisors is an SEC registered investment adviser, a Commodity Futures Trading Commission ("CFTC") registered Commodity Pool Operator ("CPO") and a National Futures Association ("NFA") member.
Westwood Trust Enhanced Balanced® portfolios allocate assets among these asset classes into a customizable portfolio for clients seeking to maximize return for any given level of risk. Periodic adjustments are made to asset class weightings in Enhanced Balanced® portfolios based on historical returns, risk and correlation data, and our current capital markets outlook.
Enhanced Balanced® Portfolios Westwood Trust is a strong proponent of asset class diversification and offers its clients the ability to diversify among many different asset classes. Westwood Trust Enhanced Balanced® portfolios allocate assets among these asset classes into a customizable portfolio for clients seeking to maximize return for any given level of risk.
In summary, our competitive landscape is intense and dynamic, which may affect our ability to compete successfully as an independent company. Additionally, most prospective clients perform a thorough review of an investment manager’s background, investment policies and performance before committing assets. In many cases, prospective clients invite competing firms to make presentations.
Additionally, most prospective clients perform a thorough review of an investment manager’s background, investment policies and performance before committing assets. In many cases, prospective clients invite competing firms to make presentations. The process of obtaining a new client typically takes twelve to eighteen months from the time of initial contact.
The process of obtaining a new client typically takes twelve to eighteen months from the time of initial contact. While we have achieved success in competing for clients, it is a process to which we dedicate significant resources over an extended period with no certainty of winning.
While we have achieved success in competing for clients, it is a process to which we dedicate significant resources over an extended period with no certainty of winning client mandates. Regulation Virtually all aspects of our business are subject to federal, state and other non-U.S. jurisdictions' laws and regulations.
We continually seek to expand AUM by organically growing our existing investment strategies and by adding new products as evidenced by the recent Salient Acquisition in November 2022. The Salient Acquisition expands our product portfolio to serve financial intermediaries and institutional clients beyond our traditional offerings, including Energy and Real Assets, Tactical Absolute Return, and Income Alternatives.
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.
Being active is more than an approach to investing, it also underpins how we run our business as a publicly traded company. 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.
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.
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. We enjoy strong relationships with many global, national and regional investment consulting firms, which have contributed to our being considered and hired by their clients.
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.
The loss of some or all of these large clients could have a material adverse effect on our business and our results of operations. Advisory and Sub-advisory Agreements Westwood Management manages client accounts under investment advisory and sub-advisory agreements.
The loss of some or all of these large clients could have a material adverse effect on our business and our results of operations. Managed Investment Solutions Our newest investment team, Managed Investment Solutions, joined us in late 2023, and focuses on tailoring investment solutions to a diverse array of individual institutional risk/reward tolerances and investment approaches.
Salient Advisors is an SEC registered investment adviser, a Commodity Futures Trading Commission ("CFTC") registered Commodity Pool Operator ("CPO") and a National Futures Association ("NFA") member. Salient Advisors is an advisor to the Westwood Salient Tactical Plus Fund, which is subadvised by Broadmark Asset Management, LLC ("Broadmark").
Salient Advisors is an advisor to the Westwood Salient Tactical Plus Fund, which is subadvised by Broadmark.
By leveraging our relationships we are able to offer our strategies within select defined contribution and other retirement plans where clients utilize mutual fund vehicles. Sub-advising funds of other financial institutions allows us to extend our marketing reach using other firms' distribution systems.
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.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 1A.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 1A. Risk Factors.” General We manage investment assets and provide services for our clients through our subsidiaries, Westwood Management Corp., Westwood Advisors, L.L.C. and Salient Advisors, L.P.
Removed
Prior to its liquidation in 2020, our wholly owned subsidiary, Westwood International Advisors, provided investment advisory services to institutional clients, the Westwood Funds®, other mutual funds, an Irish investment company authorized pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulation 2011 (as amended) (the “UCITS Fund”), individual investors and clients of Westwood Trust.
Added
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.
Removed
Acquisition of Asset Management Business of Salient Partners, L.P. On November 18, 2022, we completed our acquisition (the "Salient Acquisition") of the asset management business of Salient Partners, L.P. (“Salient Partners”), a Delaware limited partnership.
Added
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.
Removed
Salient Partners is a Houston-based real asset and investment firm offering a suite of strategies focused on energy and infrastructure, real estate and tactical alternative investments. Westwood purchased substantially all of the properties, rights and assets, and assumed certain liabilities of Salient Partners.
Added
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").
Removed
Westwood acquired Salient Partners’ four distinct investment capabilities: Energy Infrastructure, Tactical Equity, Real Estate, and Private Investments, as defined in the Company’s Form 8-K filed on May 25, 2022. As part of the Salient Acquisition we also acquired Salient Capital LP ("SCLP"), Forward Securities LLC ("Forward") and Salient Advisors, LP ("Salient Advisors").
Added
MidCap Value: Investments in equity securities of approximately 50 to 80 companies benchmarked to the Russell Midcap Value Index. SMidCap Value: Investments in equity securities of approximately 50 to 70 companies benchmarked to the Russell 2500 Value Index.
Removed
Westwood Management provides investment advisory services to large institutions, including corporate retirement plans, public retirement plans, endowments and foundations. Institutional separate account minimums vary by investment strategy and generally range from $10 million to $25 million.
Added
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.
Removed
Typically invests in a range of asset types with the equity component usually between 15% and 30% in the normal running of the strategy.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny 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. We are highly dependent on information systems and third-party vendors for securities pricing information, information processing and updates for certain software.
Biggest changeOur 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.
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; 17 • 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.
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.
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 12 • Some competitors may have more sophisticated, innovative or advanced distribution networks than we do.
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.
There is substantial competition for skilled personnel within 14 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 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.
Such factors include our financial position, capital requirements and liquidity, tax regulations, stock repurchase plans, state corporate and banking law restrictions, results of operations and other factors that our Board of Directors may consider relevant. As a holding company, our ability to pay dividends is dependent on the dividends and income we receive from our subsidiaries.
Such factors include our financial position, capital requirements and liquidity, tax regulations, stock repurchase plans, state corporate and banking law restrictions, results of operations and other factors that our Board may consider relevant. As a holding company, our ability to pay dividends is dependent on the dividends and income we receive from our subsidiaries.
We are a holding company, with no revenue-generating operations or assets other than our ownership interests in Westwood Management and Westwood Trust. 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.
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.
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.
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.
Our failure to retain one or more of these large relationships or to establish additional profitable relationships could have a material adverse effect on our business, financial condition and results of operations. General Risk Factors 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 failure to retain one or more of these large relationships or to establish additional profitable relationships could have a material adverse effect on our business, financial condition and results of operations. General Risk Factors We have made and may continue to make business combinations as a part of our business strategy, which may present risks and uncertainties.
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 active managers like us, which could have a material adverse effect on our business.
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.
Currently, 18 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 of Directors and compliance with applicable laws, including the provisions of the Finance Code 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 18 applicable to Westwood Trust. See “Item 7.
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.
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.
Risks Related to our Clients Competitive fee pressures could reduce revenues and profit margins. 16 To the extent we have to compete on the basis of price, we may not be able to maintain a profitable fee structure.
Risks Related to our Clients Competitive fee pressures could reduce revenues and profit margins. To the extent we have to compete on the basis of price, we may not be able to maintain a profitable fee structure.
We have historically paid a quarterly dividend; however, payment of future dividends is subject to the discretion of our Board of Directors, and various factors may impact our ability to maintain the current dividend or pay dividends at all.
We have historically paid a quarterly dividend; however, payment of future dividends is subject to the discretion of our Board, and various factors may impact our ability to maintain the current dividend or pay dividends at all.
We reinstated a dividend in the first quarter of 2021, following a suspension in the second quarter of 2020 as we preserved capital and provided additional financial flexibility amid the uncertainties created by the COVID-19 pandemic.
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.
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.
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.
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, 2022, 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, 2023, approximately 1% of our AUM is managed for clients who are domiciled outside the U. S.
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 22%, 22% and 24% of our fee revenues for the years ended December 31, 2022, 2021 and 2020, 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 21%, 22% and 22% of our fee revenues for the years ended December 31, 2023, 2022 and 2021, respectively.
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 $1.0 million in 2022, $3.4 million in 2021 and $3.2 million in 2020.
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.
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. We have recently invested in strategies offering 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 significant exposure to non-U.S. companies.
Successful cyber attacks at other asset management companies or other market participants, whether or not we are affected, could lead to a general loss of customer confidence in the industry that could negatively affect us, including harming the market perception of the effectiveness of our security measures, which could result in a loss of business. 15 Our business is vulnerable to systems failures that could have a material adverse effect on our business, financial condition and results of operations.
Successful cyber attacks at other asset management companies or other market participants, whether or not we are affected, could lead to a general loss of customer confidence in the industry that could negatively affect us, including harming the market perception of the effectiveness of our security measures, which could result in a loss of business.
Many aspects of our business involve substantial risks of liability. We could be named as defendants or co-defendants in lawsuits or could be involved in disputes that involve the threat of lawsuits seeking substantial damages.
Our business involves risks of being engaged in litigation and liability that could increase our expenses and reduce our results of operations. Many aspects of our business involve substantial risks of liability. We could be named as defendants or co-defendants in lawsuits or could be involved in disputes that involve the threat of lawsuits seeking substantial damages.
We devote considerable time and resources to both domestic and international compliance; however, we may fail to timely and properly identify regulatory requirements or modify our compliance procedures for changes in our regulatory environment, which may subject us to legal proceedings, domestic and foreign government investigations, penalties and fines. 13 Our business involves risks of being engaged in litigation and liability that could increase our expenses and reduce our results of operations.
We devote considerable time and resources to both domestic and international compliance; however, we may fail to timely and properly identify regulatory requirements or modify our compliance procedures for changes in our regulatory environment, which may subject us to legal proceedings, domestic and foreign government investigations, penalties and fines.
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.
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.
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.
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.
Added
We are highly dependent on information systems and third-party vendors for securities pricing information, information processing and updates for certain software.
Added
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.

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, and we lease a limited amount of office space in San Francisco, California on a month-to-month basis. 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 continue to assess these facilities to ensure their adequacy to serve our anticipated business needs. Item 3. Legal Proceedings.
We are subject from time to time to certain claims and legal proceedings arising in the ordinary course of our business. Item 4. Mine Safety Disclosures. Not applicable. 20 PART II
We are subject from time to time to certain claims and legal proceedings arising in the ordinary course of our business. Item 4. Mine Safety Disclosures. Not applicable. 21 PART II
Item 2. Properties. 19 Westwood, Westwood Management and Westwood Trust conduct their principal operations using approximately 32,000 square feet of leased office space in Dallas, Texas pursuant to a lease with an initial term that expires in March 2026.
Item 2. Properties. Westwood, Westwood Management and Westwood Trust conduct their principal operations using approximately 38,000 square feet of leased office space in Dallas, Texas pursuant to a lease with an initial term that expires in March 2026.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWestwood Holdings Group is the sole stockholder of Westwood Management and Westwood Trust.
Biggest changeDividends Declarations of cash dividends is at the discretion of the Board of Directors and is subject to limitations under the Delaware General Corporation Law. Westwood Holdings Group is the sole stockholder of Westwood Management and Westwood Trust.
Market Information Our common stock trades on the New York Stock Exchange under the symbol “WHG.” At December 31, 2022, there were approximately 200 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, 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.
The closing price of our common stock on the last trading day of the year ended December 31, 2022 was $11.13 per share. Historical stock price performance is not necessarily indicative of future price performance. Item 6. Reserved. 22
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
BMI Asset Management & Custody Banks Index 100.00 74.85 94.16 109.10 161.06 120.66 20.66 % The total return for our stock and for each index assumes $100 invested on December 31, 2017 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 100.00 125.80 145.77 215.18 161.21 211.89 111.89 % 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.
Index Period ended December 31, Cumulative Five-Year Total Return 2017 2018 2019 2020 2021 2022 Westwood Holdings Group, Inc. $ 100.00 $ 54.24 $ 51.85 $ 25.85 $ 34.12 $ 23.40 (76.60) % Russell 2000 Index 100.00 88.99 111.70 134.00 153.85 122.41 22.41 % S&P U.S.
Index 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.
Removed
Dividends We reinstated a dividend in the first quarter of 2021, following its suspension in the second quarter of 2020 as we preserved financial flexibility amid the uncertainties of COVID-19. Declarations of cash dividends is at the discretion of the Board of Directors and is subject to limitations under the Delaware General Corporation Law.
Added
As of December 31, 2023, there are $1.8 million of shares that may yet be repurchased under our share repurchase plan.
Removed
Between January 1, 2022 and December 31, 2022, under the share repurchase program, the Company repurchased 169,630 shares of our common stock at an average price of $13.47 per share, including commissions, for an aggregate purchase price of $2.3 million.
Added
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.
Removed
Between January 1, 2022 and December 31, 2022, the Company repurchased, on the open market, 35,891 shares of our common stock at an average price of $15.75 per share, including commissions, for an aggregate purchase price of $0.6 million.
Removed
The following table displays information with respect to the treasury shares we purchased during the year ended December 31, 2022: 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) $ 1,900,000 February 12,202 $ 16.39 12,202 June 93,875 $ 14.85 57,984 July 82,749 $ 12.60 82,749 August 16,695 $ 12.86 16,695 Total 205,521 $ 13.87 169,630 (1) These purchases relate to the share repurchase program and were authorized in April 2020. 21 Performance Graph The following graph compares total stockholder returns of Westwood since December 31, 2017 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 changeThe following table provides a reconciliation of net income (loss) to Economic Earnings: For the years ended December 31, (in thousands, except percentages and per share data) 2022 Change 2021 Change 2020 Change 2019 Change 2018 Net Income (Loss) $ (4,628) (147) % $ 9,763 (209) % $ (8,947) (251) % $ 5,911 (78) % $ 26,751 Add: Stock-based compensation expense 6,001 3 5,834 (13) 6,701 (35) 10,305 (33) 15,283 Add: Impairment expense — NM — NM 3,403 NM — NM — Add: Intangible amortization 1,889 16 1,624 (6) 1,721 — 1,726 3 1,672 Add: Currency translation adjustment reclassification — NM — NM 4,169 NM — NM — Add: Tax benefit from goodwill amortization 302 27 237 — 237 — 237 — 237 Economic Earnings $ 3,564 (80) % $ 17,458 140 % $ 7,284 (60) % $ 18,179 (59) % $ 43,943 Economic Earnings per Share $ 0.45 (80) % $ 2.20 142 % $ 0.91 (58) % $ 2.15 (58) % $ 5.14 The following table provides Economic Earnings by segment: For the years ended December 31, (in thousands, except percentages) 2022 Change 2021 Change 2020 Change 2019 Change 2018 Economic Earnings by Segment: Advisory $ 15,288 (25) % $ 20,259 133 % $ 8,713 (55) % $ 19,186 (60) % $ 47,574 Trust 3,087 (61) 8,018 41 5,668 (24) 7,487 31 5,737 Westwood Holdings (14,811) 37 (10,819) 52 (7,097) (16) (8,494) (9) (9,368) Total $ 3,564 (80) % $ 17,458 140 % $ 7,284 (60) % $ 18,179 (59) % $ 43,943 Liquidity and Capital Resources As of December 31, Balance Sheet Data (in thousands) 2022 2021 Cash and cash equivalents $ 23,859 $ 15,206 Accounts receivable 13,900 11,152 Total liquid assets $ 37,759 $ 26,358 Investments, at fair value $ 15,342 $ 65,024 We fund our operations and cash requirements with cash generated from operating activities.
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.
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; • 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 23 • 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 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.
With respect to most of our client AUM, we utilize a “value” investment style focused on achieving superior long-term, risk-adjusted returns by investing in companies with high levels of free cash flow, improving returns on equity and strengthening balance sheets that are well positioned for growth but whose value is not fully recognized in the marketplace.
With respect to most of our AUM, we utilize a “value” investment style focused on achieving superior long-term, risk-adjusted returns by investing in companies with high levels of free cash flow, improving returns on equity and strengthening balance sheets that are well positioned for growth but whose value is not fully recognized in the marketplace.
We believe the following are areas where the degree of judgment and complexity in determining amounts recorded in our Consolidated Financial Statements make accounting policies critical. Business Combinations Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed.
We believe the following are areas where the degree of judgment and complexity in determining amounts recorded in our Consolidated Financial Statements make accounting estimates critical. Business Combinations Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed.
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 investment in Charis. Provision for Income Taxes. The effective tax rate was 10.9% for 2022 compared to 30.3% for 2021.
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.
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. 29 Professional Services .
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 .
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.
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.
Critical Accounting Policies and 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 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.
We assess goodwill for impairment using either a qualitative or quantitative assessment. 34 The qualitative goodwill impairment assessment requires evaluating factors, based on the weight of evidence, to determine whether a reporting unit's carrying value would more likely than not exceed its fair value.
We assess goodwill for impairment using either a qualitative or quantitative assessment. The qualitative goodwill impairment assessment requires evaluating factors, based on the weight of evidence, to determine whether a reporting unit's carrying value would more likely than not exceed its fair value.
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 25 Net change in unrealized appreciation (depreciation) on private investments includes changes in the value of our private equity investments.
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.
Contractual Obligations Purchase commitments Our purchase commitments primarily consist of outsourced information technology services, software licenses and commitments for financial research tools.
Contractual Obligations Purchase commitments 34 Our purchase commitments primarily consist of outsourced information technology services, software licenses and commitments for financial research tools.
Item 8 “Financial Statements and Supplementary Data.” Accounting Developments See Note 2 “Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for a description of any new accounting standards and their anticipated effects on our Consolidated Financial Statements.
Accounting Developments See Note 2 “Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for a description of any new accounting standards and their anticipated effects on our Consolidated Financial Statements.
We added $0.9 billion of AUA from the Salient Acquisition. 26 Roll-Forward of Assets Under Management 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 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.
(3) Mutual Funds include the Westwood Funds®, a family of mutual funds for which Westwood Management serves as advisor. These funds are available to individual investors, institutional investors and wealth management accounts.
(3) Mutual Funds include the Westwood Funds®, a family of mutual funds for which Westwood Management or Salient Advisors serves as advisor. These funds are available to individual investors, institutional investors and wealth management accounts.
Our management and Board of Directors review Economic Earnings and Economic EPS to evaluate our ongoing performance, allocate resources, and review our dividend policy.
Our management and Board review Economic Earnings and Economic EPS to evaluate our ongoing performance, allocate resources, and review our dividend policy.
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 $39.2 million and $80.2 million as of December 31, 2022 and 2021, 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 short-term investments of $53.1 million and $39.2 million as of December 31, 2023 and 2022, respectively.
Net outflows were primarily related to our LargeCap Value, Income Opportunity and Enhanced Balance strategies.
Net outflows were primarily related to our LargeCap Value, Income Opportunity and Enhanced Balanced strategies.
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 2022, cash flow provided by operating activities was $51.5 million, compared to cash used in operating activities of $19.4 million during 2021, and cash flow provided by operating activities of $9.8 million during 2020.
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.
The following table presents our AUM (in millions, except percentages): As of December 31, 2022 Change 2021 Change 2020 Institutional (1) $ 6,785 (4) % $ 7,037 7 % $ 6,567 Wealth Management (2) 3,666 (17) % 4,420 2 % 4,335 Mutual Funds (3) 4,328 42 % 3,046 42 % 2,143 Total AUM (4) $ 14,779 2 % $ 14,503 11 % $ 13,045 (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 the UCITS Fund and 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, 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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis in conjunction with “Selected Financial Data” included in this Report, as well as our Consolidated Financial Statements and related notes thereto appearing elsewhere in this Report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis in conjunction with our Consolidated Financial Statements and related notes thereto appearing elsewhere in this Report.
Cash Dividends The following table summarizes dividends declared during 2022 and 2021: 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 32 2021 Dividends Declaration Date Record Date Paid Date Dividend Per Share February 10, 2021 March 2, 2021 April 1, 2021 $0.10 April 8, 2021 June 4, 2021 July 1, 2021 $0.10 July 27, 2021 (1) August 6, 2021 August 20, 2021 $2.50 July 27, 2021 September 3, 2021 October 1, 2021 $0.10 October 27, 2021 December 3, 2021 January 3, 2022 $0.15 $2.95 (1) This dividend was treated for accounting purposes as a return of capital.
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.
The UCITS Fund was liquidated in June 2020. (2) Wealth Management includes assets for which Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals pursuant to trust or agency agreements and assets for which Westwood Advisors, L.L.C. provides advisory services to high net worth individuals.
(2) Wealth Management includes assets for which Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals pursuant to trust or agency agreements and assets for which Westwood Advisors, L.L.C. provides advisory services to high net worth individuals.
As of December 31, 2022, 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) $ 7,944 $ 4,654 $ 3,290 $ — $ — (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, 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.
Investment Income Investment income primarily includes interest and dividend income on fixed income securities and money market funds. Other Income Other income primarily consists of income from the sublease of a portion of our corporate offices.
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.
Based on the qualitative analysis performed in 2022, we concluded that there were no changes that were reasonably likely to cause the fair value of the Trust reporting unit to be less than the reporting unit's carrying value and determined that there was no impairment of our goodwill.
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.
Firm-wide Assets Under Management Firm-wide assets under management of $16.1 billion at December 31, 2022 consisted of $14.8 billion of AUM and $1.3. billion of AUA. AUM increased $0.3 billion, or 2%, to $14.8 billion at December 31, 2022 compared to $14.5 billion at December 31, 2021.
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.
Quarterly average AUM decreased $1.2 billion, down 9%, to $13.1 billion 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 $1.5 billion, or 11%, to $14.5 billion at December 31, 2021 compared to $13.0 billion at December 31, 2020.
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.
The effective tax rate was 30.3% for 2021 compared to (17.9)% for 2020. 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.
We are required to assess whether a valuation allowance should be established against our deferred tax assets based on consideration of all available evidence, using a more-likely-than-not standard. As of December 31, 2022 and 2021, we have not recorded a valuation allowance on any deferred tax assets.
We are required to assess whether a valuation allowance should be established against our deferred tax assets based on consideration of all available evidence, using a more-likely-than-not standard.
Investment sub-advisory services are provided for the common trust funds by Westwood Management, Westwood International Advisors (prior to its closure, effective September 30, 2020) and unaffiliated sub-advisors. For certain assets in this category Westwood Trust provides limited custodial services for a minimal or no fee, viewing these assets as potentially converting to fee-generating managed assets in the future.
Investment sub-advisory services are provided for the common trust funds by Westwood Management. For certain assets in this category Westwood Trust provides limited custodial services for a minimal or no fee, viewing these assets as potentially converting to fee-generating managed assets in the future.
Supplemental Financial Information As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings and Economic earnings per share ("EPS"). We provide these measures in addition to, but not as a substitute for, net income (loss) and earnings (loss) per share, which are reported on a generally accepted accounting principles ("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, Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. and earnings (loss) per share, which are reported on a GAAP basis.
(4) AUM for 2022, 2021 and 2020 excludes approximately $1.3 billion, $292 million and $267 million 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.
(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.
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 flow used in investing activities was insignificant in 2020.
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.
In addition, we do not adjust Economic Earnings for tax deductions related to restricted stock expense or amortization of intangible assets.
In addition, we do not adjust Economic Earnings for tax deductions related to restricted stock expense or amortization of intangible assets. Economic EPS represents Economic Earnings divided by diluted weighted average shares outstanding.
This evaluation is updated on a continuing basis. 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.
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.
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. The actual outcome of our tax positions, if significantly different from our estimates, could materially impact the financial statements.
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.
Total revenues decreased $4.4 million, or 6%, to $68.7 million compared with $73.1 million for 2021. 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.
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.
At December 31, 2022, Westwood Trust had approximately $21.2 million in excess of its minimum capital requirement.
At December 31, 2023, Westwood Trust had approximately $11.1 million in excess of its minimum capital 33 requirement.
Quarterly average AUM increased $1.9 billion, up 15%, to $14.3 billion for 2021 compared with $12.4 billion for 2020. The increase in average AUM was primarily due to $2.2 billion of market appreciation in 2021.
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.
Our advisory fees are generated by Westwood Management and Westwood International Advisors (prior to its closure, effective September 30, 2020), which manage 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.
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.
We believe that these non-GAAP performance measures, while not substitutes for GAAP net income (loss) or earnings (loss) per share, are useful for management and investors when evaluating our underlying operating and financial performance and our available resources. We do not advocate that investors consider these non-GAAP measures without also considering financial information prepared in accordance with GAAP.
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.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Total Revenues. Total revenues increased $7.9 million, or 12%, to $73.1 million compared with $65.1 million for 2020.
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.
As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of assets acquired and liabilities assumed, with the corresponding offset to goodwill. 33 Consolidation We assess each legal entity that we manage to determine whether consolidation is appropriate at the onset of the relationship.
Our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of assets acquired and liabilities assumed, with the corresponding offset to goodwill.
If the carrying value exceeds the fair value, an impairment charge is recorded based on that difference. We completed our annual assessment of Trust goodwill in the third quarter of 2022 using a qualitative approach. There was no goodwill impairment in the Trust segment during the years ended December 31, 2022, 2021 or 2020.
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.
The above purchase commitments exclude agreements that are cancelable without significant penalty. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements.
The above purchase commitments exclude agreements that are cancelable without significant penalty.
The increase of $32.1 million from 2021 to 2022 primarily reflected the net sales of investments to fund the Salient Acquisition. The increase of $29.2 million from 2020 to 2021 primarily reflected net sales of investments and net income in 2021. Cash flow used in investing activities in 2022 was primarily related to the Salient Acquisition.
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.
Those payments are expected to be made from a combination of cash on hand, cash flows from operations and equity. 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.
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.
Quarterly average AUM decreased 9% to $13.1 billion for 2022 versus 2021, which contributed to a 6% decrease in total revenue from 2021. • AUA of $1.3 billion at December 31, 2022 rose from $0.3 billion in the prior year principally due to $0.9 billion of AUA acquired from Salient. • Our LargeCap Value, SMidCap Value, SmallCap Value, AllCap Value, MidCap Value, Platinum, Select Equity, Dividend Select, Income Opportunity, Total Return, High Income, Alternative Income and Enhanced Balance strategies all performed strongly by beating their primary benchmarks for the year. • We paid $5.6 million of dividends to our common stockholders. • We repurchased 205,521 shares of our common stock for an aggregate purchase price of $2.9 million. • Our financial position remains strong with liquid cash and short-term investments of $39.2 million and no debt as of December 31, 2022 . 24 Revenues We derive our revenues from investment advisory fees, trust fees and other revenues.
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 .
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 $14.8 billion and AUA of approximately $1.3 billion at December 31, 2022. We have established a track record of delivering competitive, risk-adjusted returns for our clients.
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.
We define Economic Earnings as net income (loss) plus non-cash stock-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 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.
Years ended December 31, (in thousands, except percentages) 2022 Change 2021 Change 2020 Revenues: Advisory fees: Asset-based $ 46,685 2 % $ 45,927 21 % $ 38,028 Performance-based 1,018 (69) 3,335 19 2,808 Trust fees 21,686 (10) 24,030 2 23,563 Trust performance-based fees — NM 101 (72) 366 Other revenues, net (708) 109 (339) (198) 346 Total revenues 68,681 (6) 73,054 12 65,111 Expenses: Employee compensation and benefits 40,124 (6) 42,532 1 42,141 Sales and marketing 2,003 56 1,280 7 1,194 Westwood mutual funds 2,201 (17) 2,657 58 1,681 Information technology 7,719 (5) 8,161 1 8,111 Professional services 5,357 22 4,391 3 4,271 General and administrative 9,057 12 8,074 (10) 8,941 Acquisition expenses 7,093 NM — NM — Impairment expense — NM — NM 3,403 (Gain) loss on foreign currency transactions — NM — NM (1,184) Total expenses 73,554 10 67,095 (2) 68,558 Net operating income (loss) (4,873) (182) 5,959 (273) (3,447) Realized gains on private investments — NM 8,371 NM — Net change in unrealized appreciation (depreciation) on private investments (1,495) (17) (1,797) 153 (711) Investment income 266 (69) 868 44 604 Other income 907 51 602 346 135 Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary — NM — NM (4,169) Income (loss) before income taxes $ (5,195) (137) % $ 14,003 (285) % $ (7,588) Provision for income taxes (567) (113) 4,240 212 1,359 Net income (loss) $ (4,628) (147) % $ 9,763 (209) % $ (8,947) NM - Not meaningful Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Total Revenues.
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.
For the years ended December 31, Cash Flow Data (in thousands) 2022 2021 2020 Operating cash flows $ 51,490 $ 19,385 $ (9,770) Investing cash flows (33,739) 9,566 (4) Financing cash flows (9,103) (26,806) (25,812) Historically we have funded our operations and cash requirements with cash generated from operating activities.
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.
Net client flows were primarily related to our Emerging Markets, SMidCap and LargeCap Value strategies.
Net outflows were primarily related to our Income Opportunity, MLP & Energy Infrastructure, LargeCap Value and SmallCap Value strategies.
Factors considered in this assessment include, but are not limited to, the legal organization of the entity, our equity ownership and contractual involvement with the entity and any related party or de facto agent implications of our involvement with the entity.
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.
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. 2022 Highlights The following items were reported for the year ended December 31, 2022: • Closed our strategic acquisition of Salient's asset management business on November 18, 2022, adding $2.7 billion of AUM and $0.9 billion of AUA to firm-wide assets under management. • AUM as of December 31, 2022 was $14.8 billion, a 2% increase compared to December 31, 2021.
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.
Economic EPS represents Economic Earnings divided by diluted weighted average shares outstanding. 30 For the year ended December 31, 2022, our Economic Earnings decreased by 80% to $3.6 million compared with $17.5 million for the year ended December 31, 2021. 2022 Economic Earnings was impacted by lower revenues, including lower performance fees, and higher expenses related to the Salient Acquisition.
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.
We may also use cash from operations to pay dividends to our stockholders. We reinstated a dividend in the first quarter of 2021, following its suspension in the second quarter of 2020 as we preserved financial flexibility amid the uncertainties created by the COVID-19 pandemic. We had no debt as of December 31, 2022 and 2021.
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.
Changes in tax laws may result in changes to our tax position and effective tax rates. We include penalties and interest on income-based taxes in the “General and administrative” line on our Consolidated Statements of Comprehensive Income (Loss).
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.
Cash used in financing activities was $9.1 million in 2022 compared to $26.8 million and $25.8 million in 2021 and 2020, respectively. The change from 2021 to 2022 primarily related to lower dividends in 2022.
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
Westwood International Advisors provided investment advisory services to an Irish investment company authorized pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulation 2011 (as amended) (the “UCITS Fund”), which was liquidated in June 2020.
Added
We have established a track record of delivering competitive, risk-adjusted returns for our clients.
Removed
Salient Capital LP ("SCLP") serves as a sub-placement agent for private placements, and Forward Securities LLC ("Forward") provides investment advisory services to mutual funds and other investment products.
Added
(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.
Removed
Acquisition expense Acquisition expense consists of costs related to the Salient Acquisition. Impairment expense Impairment expense consists of long-lived asset impairments, typically goodwill or intangible assets. Gain (loss) on foreign currency transactions Gain (loss) on foreign currency transactions consist of foreign currency transactions primarily related to Westwood International Advisors.
Added
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.
Removed
Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary includes a cumulative adjustment following the substantially completed liquidation of a foreign subsidiary, Westwood International Advisors.
Added
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.
Removed
AUA of $1.3 billion at December 31, 2022 rose from $0.3 billion at December 31, 2021 principally due to $0.9 billion of AUA acquired as part of the Salient transaction. AUA relates to our model portfolios for which we provide investment advice on a fee basis without having investment management authority.
Added
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.
Removed
As a result, $1.6 billion in two sub-advised Global Convertibles mandates returned to Aviva as of April 1, 2021. 27 Year Ended December 31, 2020 AUM (in millions) Institutional Wealth Management Mutual Funds Total Beginning of period assets $ 8,739 $ 4,438 $ 2,058 $ 15,235 Client flows: Inflows 937 335 967 2,239 Outflows (3,178) (766) (1,024) (4,968) Net client flows (2,241) (431) (57) (2,729) Market appreciation 69 328 142 539 Net change (2,172) (103) 85 (2,190) End of period assets $ 6,567 $ 4,335 $ 2,143 $ 13,045 The decrease in AUM for the year ended December 31, 2020 was due to net outflows of $2.7 billion, partially offset by market appreciation of $0.5 billion.
Added
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
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 28 conjunction with these statements included elsewhere in this Report.
Added
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.
Removed
The increase was attributable to a $7.9 million increase in asset-based advisory fees and a $0.5 million increase in Trust fees, both primarily due to higher average AUM compared to 2020 . Westwood Mutual Funds .
Added
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.
Removed
Westwood mutual funds expenses increased 58% to $2.7 million compared to $1.7 million for 2020 primarily due to one-time costs related to the reorganization of our mutual funds and a change in mutual fund administrator. General and administrative.
Added
We recorded a gain of $2.8 million upon the remeasurement of contingent consideration of the Salient Acquisition primarily due to changes in growth projections and volatility assumptions. Net change in unrealized appreciation (depreciation) on private investments. In 2022 we recorded a $1.6 million net change in unrealized depreciation to reflect a market transaction related to our previous investment in Charis.
Removed
General and administrative expenses decreased 9.7% to $8.1 million compared to $8.9 million in 2020 primarily due to lower rent expense following recent office space reductions. Realized gains on private investments. We recorded a realized gain of approximately $8.3 million in connection with InvestCloud's recapitalization in the first quarter of 2021. Net change in unrealized appreciation (depreciation) on private investments.
Added
Other income. We recorded life insurance proceeds of $5.0 million in 2023. Provision for Income Taxes. The effective tax rate was 23.2% for 2023 compared to 10.9% for 2022.
Removed
We recorded a $2.8 million net change in unrealized depreciation to reflect the recognition of previously recorded unrealized gains in connection with InvestCloud's recapitalization in the first quarter of 2021, partially offset by $0.9 million of fair value increases from market transactions related to our investment in Charis. Provision for Income Taxes.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA hypothetical 10% decrease in our average AUM during the year ended December 31, 2022 would have reduced our reported consolidated total revenue by approximately $7 million. 35 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, 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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Our revenues are primarily generated from fees derived as a percentage of our AUM, which is subject to market risks. Additionally, we invest corporate capital in various financial instruments, including U. S. treasury bills and equity funds, all of which present inherent market risks.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Our revenues are primarily generated from fees derived as a percentage of our AUM and AUA, which is subject to market risks. Additionally, we invest corporate capital in various financial instruments, including U. S. treasury bills and equity funds, all of which present inherent market risks.
We do not currently participate in any hedging activities, nor do we utilize any derivative financial instruments. The following information describes key aspects of certain financial instruments that involve market risks. Securities Markets and Interest Rates The value of AUM is affected by fluctuations in securities markets and changes in interest rates.
We do not currently participate in any hedging activities, nor do we utilize any derivative financial instruments. The following information describes key aspects of certain financial instruments that involve market risks. Securities Markets and Interest Rates The value of AUM and AUA is affected by fluctuations in securities markets and changes in interest rates.
Since we derive a substantial portion of our revenues from investment advisory and trust fees based on the value of AUM, our revenues may be adversely affected by a decline in the prices of securities or changing interest rates.
Since we derive a substantial portion of our revenues from investment advisory and trust fees based on the value of AUM and AUA, our revenues may be adversely affected by a decline in the prices of securities or changing interest rates.

Other WHG 10-K year-over-year comparisons