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Contact:[email protected](617)369-7300
BrightSphereReportsFinancialandOperatingResultsfortheSecondQuarterEndedJune30,2020andOtherBusinessUpdates
• U.S.GAAPearningspershareof$0.23forthequarter,comparedto$0.31forQ2'19• ENIearningspershareof$0.41forthequarter,comparedto$0.45forQ2'19• AnnounceddivestitureofBarrowHanleyandCopperRock;enhancesproformaorganicgrowthprofile,reducesdebtandenablessharerepurchases,whichcouldbe
accretivetoENIpershare• Netclientcashflows(“NCCF”)forthequarterof$(1.7)billion;excludingBarrowHanleyandCopperRock,NCCFofpositive$0.4billion• Repurchasesof2.4millionsharesatanaveragepriceof$6.56pershareinQ2’20,representinga3.0%reductioninourtotalsharesoutstandingsincethebeginningof
thequarter• AUMof$181.0billionatJune30,2020comparedto$161.8billionatMarch31,2020drivenbymarketappreciationinthesecondquarter,AUMof$135.2billion
excludingBarrowHanleyandCopperRock• Netleverageratioreducedto1.7xasofJune30,2020from2.0xasofMarch31,2020
BOSTON-August6,2020-BrightSphereInvestmentGroupInc.(NYSE:BSIG)reportsitsresultsforthesecondquarterendedJune30,2020.
SurenRana,BrightSphere’sPresidentandChiefExecutiveOfficersaid,“BrightSphereproducedENIearningspershareof$0.41forthequartercomparedto$0.45inthesecondquarteroflastyearand$0.40inthefirstquarterof2020reflectingtherevenuedeclinefromtheimpactofCOVID-19onouraverageAUMwhichwaspartiallyoffsetthroughexpensemanagementandoursharerepurchaseactivity.”
“Afterthequarter-end,weannounceddivestituresofourBarrowHanleyandCopperRockaffiliates.Weexpectthesedivestiturestoenhancethecompany’sorganicgrowthprofileasourremainingbusinesshashistoricallyproducedpositivenetflows.Proformaforthedivestitures,Quant&SolutionsandAlternativesbusinesssegmentswouldhaveaccountedfor88%ofAdjustedEBITDAforQ22020.Additionally,theportionofourrevenueunderlong-termcontractswouldhaveincreasedto29%forQ22020.$335millionofexpectednetproceedsfromthesalewouldprovideuscapitaltoreducedebtandrepurchaseshareswhichcouldresultindouble-digitaccretionto2021ENIpershare.”
“Ourtotalnetclientcashflowsinthequarteronaproformabasis,i.e.excludingBarrowHanleyandCopperRockaffiliates,werepositiveacrossourthreesegmentswithatotalof$0.4billion,reflectingthecontinuedstrengthofourwell-positionedproformabusinessmix.”
“Amidstthecontinuedmarketvolatility,BrightSphere’saffiliatesstayedconsistentwiththeirtime-testedinvestmentdisciplines.OurQuant&Solutionssegmentcontinuedtoshowstronglong-termperformancewith47%,48%and88%ofstrategiesbyrevenuebeatingtheirbenchmarksovertheprior3-,5-,and10-yearperiods,respectively.”
“InourAlternativessegment,whilethetravelandlogisticalrestrictionsimposedbythecoronavirusoutbreakareexpectedtodelaythepaceofraisingournextvintagefundsinthissegmentbyapproximatelytwoquarters,weremainconfidentinouroveralltargetedgrowthinthissegment.”
“Webelievewecontinuetobeontracktoachieveourtargetedannualizedcostsavingsofover$20millionbyQ12021inourcorporatecenterthroughtheimplementationofanaffiliate-leddistributionapproach.”
“Weintendtocontinuetooptimizecapitalmanagementbydeployingourstrongfreecashflowtopaydowndebtandrepurchaseoursharesinordertomaximizeshareholdervalue.Inthesecondquarter,wereducedtheborrowingsonourcorporaterevolverto$130millionfrom$220millionattheendofQ12020,reducingourNetDebt/AdjustedEBITDAratioto1.7xasoftheendofthesecondquartercomparedto2.0xattheendofthefirstquarter.Inthesecondquarter,werepurchased2.4millionsharesrepresentinga3.0%reductioninourtotalsharesoutstandingsincethebeginningofthequarter.WearepleasedthatS&PandMoody’shavebothreaffirmedourinvestmentgradecreditratingsaftertheannouncementofthedivestitureofBarrowHanleyandCopperRockaffiliates.”
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DividendDeclaration
TheCompany’sBoardofDirectorsapprovedaquarterlyinterimdividendof$0.01persharepayableonSeptember25,2020toshareholdersofrecordasofthecloseofbusinessonSeptember11,2020.
ConferenceCallDial-in
TheCompanywillholdaconferencecallandsimultaneouswebcasttodiscusstheresultsat11:00a.m.EasternTimeonAugust6,2020.Tolistentothecallorviewthewebcast,participantsshould:
Dial-in: TollFreeDial-inNumber: (844)445-4807InternationalDial-inNumber: (647)253-8636ConferenceID: 9362087
LinktoWebcast:https://event.on24.com/wcc/r/2403514/96E78BAFBA4011735F85002619A0C188
Dial-inReplay:AreplayofthecallwillbeavailablebeginningapproximatelyonehourafteritsconclusioneitheronBrightSphere’swebsite,athttps://ir.bsig.comorat:
TollFreeDial-inNumber: (800)585-8367InternationalDial-inNumber: (416)621-4642ConferenceID: 9362087
AboutBrightSphereBrightSphereisadiversified,globalassetmanagementcompanywithapproximately$135billion(1)ofassetsundermanagementasofJune30,2020.Throughitsfive(1)world-classinvestmentmanagementAffiliates,BrightSphereofferssophisticatedinvestorsaccesstoawidearrayofleadingquantitativeandsolutions-based,privateandpublicmarketalternative,andliquidalphastrategiesdesignedtomeetarangeofriskandreturnobjectives.Formoreinformation,pleasevisitBrightSphere’swebsiteatwww.bsig.com.Informationthatmaybeimportanttoinvestorswillberoutinelypostedonourwebsite.
__________________________________________________________(1) BrightSphereannounceddivestitureofBarrowHanleyandCopperRock.ProformatoexcludeBarrowHanleyandCopperRockasofJune30,2020.
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ForwardLookingStatementsThiscommunicationincludesforward-lookingstatementswhichmayinclude,fromtimetotime,informationrelatingtoafter-taxproceedsfromourdispositionsofBarrowHanleyandCopperRock,anticipatedrevenues,margins,operatingexpenseandvariablecompensationratios,cashflowsorearningsgrowthprofile,anticipatedperformanceoftheCompany’sbusinessorparticularsegments,expectedfuturenetcashflows,sharerepurchasesandexpectedENIpershareaccretion,anticipatedAUMgrowth,expenselevels,capitalmanagement,benefitsofourrecentrepositioningofourcorporatecenterand/orexpectationsregardingmarketconditions.Thewordsorphrases‘‘willlikelyresult,’’‘‘areexpectedto,’’‘‘willcontinue,’’‘‘isanticipated,’’‘‘canbe,’’‘‘maybe,’’‘‘aimto,’’‘‘mayaffect,’’‘‘maydepend,’’‘‘intends,’’‘‘expects,’’‘‘believes,’’‘‘estimate,’’‘‘project,’’andothersimilarexpressionsareintendedtoidentifysuchforward-lookingstatements.Suchstatementsaresubjecttovariousknownandunknownrisksanduncertaintiesandreadersshouldbecautionedthatanyforward-lookinginformationprovidedbyoronbehalfoftheCompanyisnotaguaranteeoffutureperformance.Actualresultsmaydiffermateriallyfromthoseinforward-lookinginformationasaresultofvariousfactors,someofwhicharebeyondtheCompany’scontrol,includingbutnotlimitedtothosediscussedaboveandelsewhereinthiscommunicationandintheCompany’smostrecentAnnualReportonForm10-K,filedwiththeSecuritiesandExchangeCommissiononMarch2,2020,QuarterlyReportonForm10-Q,filedwiththeSecuritiesandExchangeCommissiononMay11,2020,andsubsequentSECfilings,includingrisksrelatedtothedisruptioncausedbytheCOVID-19pandemic,whichhasandisexpectedtomateriallyaffectourbusiness,financialcondition,resultsofoperationsandcashflowsforanextendedperiodoftime.Duetosuchrisksanduncertaintiesandotherfactors,theCompanycautionseachpersonreceivingsuchforward-lookinginformationnottoplaceunduerelianceonsuchstatements.Further,suchforward-lookingstatementsspeakonlyasofthedateofthiscommunicationandtheCompanyundertakesnoobligationstoupdateanyforwardlookingstatementtoreflecteventsorcircumstancesafterthedateofthiscommunicationortoreflecttheoccurrenceofunanticipatedevents.
ThiscommunicationdoesnotconstituteanofferforanyfundmanagedbytheCompanyoranyAffiliateoftheCompany.
Non-GAAPFinancialMeasures
Thiscommunicationcontainsnon-GAAPfinancialmeasures.ReconciliationsofGAAPtonon-GAAPfinancialmeasuresareincludedintheReconciliationsandDisclosuressectionofthiscommunication.AdditionalreconciliationswithrespecttocertainsegmentmeasuresareincludedintheSupplementalInformationsectionofthiscommunication.
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Q22020EARNINGSPRESENTATION
August6,2020
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• U.S.GAAPEPSof$0.23forQ2'20comparedto$0.31forQ2'19
• ENIearningspershareof$0.41forthequartercomparedto$0.45forQ2'19
• AnnounceddivestitureofBarrowHanleyandCopperRockfor$335millioninexpectedafter-taxproceedsincludingseedcapital
◦ Resultsinamoreattractiveproformabusinessmixthathashistoricallygeneratedpositivenetflows
◦ Anticipateusingproceedstopaydowndebtandrepurchaseshares,whichcouldgeneratedoubledigitaccretionto2021ENIpershare;alsointendtouseadditionalcapitaltoseednewstrategiestoenhanceAffiliategrowth
• NCCF(1)of$(1.7)billionforQ2'20;NCCFofpositive$0.4billion(2)excludingBarrowHanleyandCopperRockforQ2'20
◦ Quant&SolutionscontinuedgeneratingpositiveNCCF;AlternativesNCCFwerebreak-even;LiquidAlphaNCCFof$(2.0)billionforQ2'20;LiquidAlphaNCCFofpositive$0.1billion(2)excludingBarrowHanleyandCopperRockforQ2'20
• QuantandSolutionsinvestmentperformancecontinuedtobestrongwith47%,48%and88%ofstrategiesbyrevenuebeatingtheirbenchmarksovertheprior3-,5-,and10-yearperiodsatJune30,2020
• IntheAlternativessegment,continuetoexpecttoreachtargetedAUMgrowthbutwithanapproximatetwoquartersdelayintiming
• Ontracktodeliverrun-ratecostsavingswithannualpre-taxincomebenefitofover$20millionbyQ1’21fromexecutionofcorporatecenterrepositioning
• Repurchased3.0%ofoutstandingsharesinQ2'20atanaveragepriceof$6.56pershare
• Revolverborrowingreducedto$130millionatJune30,2020comparedto$220millionatMarch31,2020;netleverageratioreducedto1.7xatJune30,2020from2.0xatMarch31,2020
BrightSphereHighlights
Q2’20andOtherRecentHighlights
__________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) NCCFandrevenueimpactofNCCFforallperiodsincludesreinvestedincomeanddistributions,andexcludesrealizations.(2) ProformafordivestitureofBarrowHanleyandCopperRockforthethreemonthsendedJune30,2020.
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• Totalrevenuedecreased(15.6)%fromQ2'19primarilyduetolowermanagementfeeswhichwereimpactedbyadeclineinequitymarketsanddeclineinaverageAUMin2020.
• Operatingexpensesdecreased(7.5)%fromQ2'19primarilyduetoareductionincompensationandbenefitsexpensedrivenbylowerfixedandvariablecompensationandadecreaseinG&Aexpenseasaresultofcostsavinginitiatives.
• Incometaxexpensedecreased(48.2)%inlinewithdecreaseinpre-taxearningsattributabletocontrollinginterestsandthedecreaseinexpenseattributabletouncertaintaxpositionsinthecurrentperiodversusthepriorperiod.
• U.S.GAAPnetincomeattributabletocontrollinginterestsdecreased(32.5)%fromtheyearagoquarterprimarilyduetothedecreaseinmanagementfeerevenueasaresultofloweraverageAUM.
• Dilutedearningspersharedecreased(25.8)%fromtheyearagoquarterduetolowerQ2'20earningsdescribedabove.
U.S.GAAPStatementofOperations($inmillions,unlessotherwisenoted) ThreeMonthsEnded
June30, June30,Increase(Decrease)
March31,
2020 2019 2020
Managementfees $ 170.7 $ 205.9 (17.1)% $ 178.5
Performancefees 0.3 (2.2) n/m 1.0
Otherrevenue 2.0 1.5 33.3% 1.6
ConsolidatedFunds’revenue 1.7 1.9 (10.5)% 1.5
Totalrevenue 174.7 207.1 (15.6)% 182.6
Compensationandbenefits 116.9 123.7 (5.5)% 57.4
Generalandadministrative 24.5 31.1 (21.2)% 27.7
Impairmentofgoodwill — — n/m 16.4
Amortizationofacquiredintangibles 1.9 1.7 11.8% 1.6
Depreciationandamortization 5.1 4.0 27.5% 5.3
ConsolidatedFunds’expense 0.1 — n/m 0.1
Totaloperatingexpenses 148.5 160.5 (7.5)% 108.5
Operatingincome 26.2 46.6 (43.8)% 74.1
Investmentincome(loss) 6.6 2.1 214.3% (13.7)
Interestincome 0.2 0.3 (33.3)% 0.3
Interestexpense (7.4) (8.8) (15.9)% (7.8)
NetconsolidatedFunds’investmentgains(losses) 35.6 (4.5) n/m (17.2)
Incomefromcontinuingoperationsbeforetaxes 61.2 35.7 71.4% 35.7
Incometaxexpense(benefit) 7.3 14.1 (48.2)% 13.6
Incomefromcontinuingoperations 53.9 21.6 149.5% 22.1
Gain(loss)ondisposalofdiscontinuedoperations,netoftax — — n/m —
Netincome 53.9 21.6 149.5% 22.1
Netincome(loss)attributabletonon-controllinginterests 35.0 (6.4) n/m (10.5)
Netincomeattributabletocontrollinginterests $ 18.9 $ 28.0 (32.5)% $ 32.6
Earningspershare,basic,$ $ 0.23 $ 0.31 (25.8)% $ 0.38
Earningspershare,diluted,$ $ 0.23 $ 0.31 (25.8)% $ 0.38
Basicsharesoutstanding(inmillions) 80.4 91.5 85.1
Dilutedsharesoutstanding(inmillions) 80.4 91.5 85.1
U.S.GAAPoperatingmargin 15% 23% (750)bps 41%
Pre-taxincomefromcontinuingoperationsattributabletocontrollinginterests $ 26.2 $ 42.1 (37.8)% $ 46.2
Netincomefromcontinuingoperationsattributabletocontrollinginterests $ 18.9 $ 28.0 (32.5)% $ 32.6
PleaseseeDefinitionsandAdditionalNotes
Q2'20vs.Q2'19
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DisciplinedExecutionofLong-TermGrowthStrategy
• Quant&Solutions◦ Leveragingbroadquantcapabilitiestoprovideexposuresandsolutionssoughtbyclients
• Alternatives◦ Diversesecondariesprivatemarketstrategiesattractinggrowinginvestorallocations
• LiquidAlpha◦ Differentiatedfundamentalstrategieswithstronglong-termalphagenerationremainattractive◦ Evolvingproductmixinhigherfeestrategies
• Productinnovation◦ SupportAffiliate-ledextensionsofinvestmentstrategiesintohigh-demandareasthroughongoing
seedingprogram• Affiliate-leddistributionenhancements
◦ SupportAffiliateexpansionofdistributionteamsincludingentryintonewmarketsandchannels
• Strongfreecashflowfromdiversifiedrevenuestreams;29%ofproformarevenue(1)fromlong-termcontracts
• Manageleverageusingfreecashflowsfromthebusiness• Continuerepurchasesaslongasitremainsvalueaccretive
◦ Year-todaterepurchasesof5.7millionsharesfor$35.3millionthroughJune30,2020• Ongoingexpensediscipline
◦ Ontracktodeliverrun-ratecostsavingswithannualpre-taxincomebenefitofover$20millionbyQ1’21fromexecutionofcorporatecenterrepositioning
FocusonHigh-DemandQuant&SolutionsandAlternativesStrategies(88%(1)
ofProFormaSegmentENIRevenue)
SupportAffiliates’GrowthStrategies
DriveShareholderValue
__________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ProformafordivestitureofBarrowHanleyandCopperRockforthethreemonthsendedJune30,2020.
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• Highlyscalableofferingswithsubstantialcapacityandgrowingglobaldemand
• Leveragingdataandtechnologyincomputationalfactor-basedinvestmentprocess
• Versatile,highly-tailored,outcome-driveninvestingtoachieveclient-specificgoals
• Ongoingproductinnovationrespondstoevolvingclientneeds
• Multi-AssetClasscapabilitymeetingincreaseddemandforbroad-based,bespokeinvestmentsolutions
• Demonstratedlong-termalphagenerationacrossdiverse,long-onlyinternationalanddomesticpublicsecuritiesstrategiesincludingequitiesandfixedincome
• Strongperformanceovermarketcyclesdrivenbyconsistentinvestmentdiscipline
• Expansionintoin-demand,higherfeeofferingssupporthealthyoperatingmargins
• Disciplinedadherencetoinvestmentprocessesacrossmarketcycles
• Diversesecondariesprivatemarketstrategiesinprivateequity,realestateandrealassets
• Predominatelyprivatemarket,withselecteddifferentiatedliquidstrategies
• Morethan90%ofrevenuecomprisingmanagementfeesfromlong-termcommittedcapital
• Long-datedinvestmentperiodsprovidelong-termcommittedassets
• Growingglobalinvestorbaseandsubstantialcapacity
LiquidAlpha(2)Quant&Solutions(2)
ProFormaBusinessMixPositionedtoGenerateOrganicGrowth• 88%(1)ofENIrevenueinhigh-demandQuant&SolutionsandAlternativesSegments
Alternatives(2)
___________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ProformafordivestitureofBarrowHanleyandCopperRockforthethreemonthsendedJune30,2020.(2) CertainsmallerAcadianstrategiesareincludedinAlternativesandcertainTSWstrategiesareincludedinQuant&Solutionswheretheclassificationismoreappropriate.
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___________________________________________________________
PleaseseeDefinitionsandAdditionalNotes(1) ProformafordivestitureofBarrowHanleyandCopperRockforthethreemonthsendedJune30,2020.(2) Representpercentageofsegmentpre-taxeconomicnetincomeandadjustedEBITDA,andexcludeseconomicnetincomeandadjustedEBITDAofthecorporateheadofficeincludedin‘other’asreflectedin
segmentinformation.
MoreAttractiveProFormaBusinessMix-byEarningsMetrics(1)BrightSphe
reProForm
a
EconomicNetIncome(2)ENIRevenue
Quant&Solutions67%
Alternativ…21%
LiquidAlpha12%
AdjustedEBITDA(2)
Quant&Solutions48%
LiquidAlpha27%
Alternatives25%
Quant&Solutions58%
LiquidAlpha12%
Alternatives30%
Quant&Solutions53%
LiquidAlpha29%
Alternatives19%
Quant&Solutions64%
LiquidAlpha13%
Alternatives23%
Quant&Solutions56%
LiquidAlpha26%
Alternatives18%
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___________________________________________________________
PleaseseeDefinitionsandAdditionalNotes(1) ProformafordivestitureofBarrowHanleyandCopperRockasofJune30,2020.
MoreAttractiveProFormaBusinessMix-byAUM(1)BrightSphe
reProForm
a
ByAssetClassBySegment ByClientLocation
Quant&Solutions51%
LiquidAlpha36%
Alternatives13%
U.S.A.73%Europe
10%
Asia6%
Australia4%
Other7%
Equity80%
FixedIncome7%
Alternatives13%
Quant&Solutions68%
LiquidAlpha14%
Alternatives18%
Equity81%
FixedIncome1%
Alternatives18%
U.S.A.70%
Europe11%
Asia6%
Australia5%
Other7%
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Equal-Weighted
52% 62%89%
3-Year 5-Year 10-Year0%
50%
100%
Revenue-Weighted
47% 48%
88%
3-Year 5-Year 10-Year0%
50%
100%
SegmentHighlight:Quant&Solutions• SegmentNCCFof$0.3billionforQ2'20comparedto$1.0billionforQ2'19;AUMdecreased5.7%fromQ2'19primarilyduetoQ1’20marketdecline• Continuedstronginvestmentperformance;declinein5-and10-yearrecorddrivenbymanagedvolatilitystrategiesthattendtounderperformbroadmarketduringlargeequity
marketralliessuchasinQ2'20• SegmentENIdecreased11.1%inQ2'20comparedtoQ2'19duetonegativeQ1’20marketandloweraverageAUM,andoperatingmarginincreased10bpsto36.4%inQ2'20
comparedtoQ2'19mainlyduetocostmanagement
SegmentPerformance-Quant&Solutions(1)
Q1'20 46% 59% 100%
Q2'19 72% 90% 90%
Q1'20 52% 68% 94%
Q2'19 57% 80% 95%
Asset-Weighted
40% 41%
83%
3-Year 5-Year 10-Year0%
50%
100%
Q1'20 41% 63% 100%
Q2'19 62% 87% 87%
KeyPerformanceMetricsThreeMonthsEndedJune30, ThreeMonthsEndedMarch31,
2020 2019 Increase(Decrease) 2020 Increase(Decrease)
OperationalInformationAUM$b $ 92.0 $ 97.6 (5.7)% $ 79.0 16.5%AverageAUM$b $ 86.9 $ 95.6 (9.1)% $ 92.9 (6.5)%NCCF$b $ 0.3 $ 1.0 $ (0.7) $ 1.5 $ (1.2)AnnualizedRevenueImpactofNCCF$m $ (6.8) $ 2.1 $ (8.9) $ (0.9) $ (5.9)ENImanagementfeerate(bps) 38 39 (1) 37 1
EconomicNetIncomeBasisENIRevenue$m $ 82.8 $ 93.7 (11.6)% $ 86.1 (3.8)%SegmentEconomicNetIncome$m $ 28.8 $ 32.4 (11.1)% $ 31.2 (7.7)%ENIOperatingMargin 36.4% 36.3% 10bps 37.2% (80)bpsAdjustedEBITDA$m $ 33.4 $ 35.9 (7.0)% $ 35.9 (7.0)%
___________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) AsofJune30,2020,Quant&Solutionsassetsrepresenting56%ofrevenuewereoutperformingbenchmarksona1-yearbasis,comparedto46%atMarch31,2020and34%atJune30,2019.
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SegmentHighlight:Alternatives
• SegmentAUMincreasedto$24.1billionatJune30,2020comparedto$23.5billionatJune30,2019
• Alternativesrevenuedecreased4.1%,andsegmentENIdecreased14.3%inQ2'20comparedtoQ2'19,mainlyduetochangeinassetandAffiliatedistributionmix
AlternativeAssetsbyStrategy
LiquidAlternatives:3.3%
PrivateEquity:49.0%
RealEstate:23.7%
RealAssets:24.1%
AlternativeAssetsBreakout
FundofOne:32.4%
Commingled:67.6%
KeyPerformanceMetricsThreeMonthsEndedJune30, ThreeMonthsEndedMarch31,
2020 2019 Increase(Decrease) 2020 Increase(Decrease)
OperationalInformationAUM$b $ 24.1 $ 23.5 2.6% $ 24.3 (0.8)%AverageAUM$b $ 24.3 $ 23.8 2.1% $ 24.1 0.8%NCCF$b $ — $ (0.1) n/m $ 0.6 $ (0.6)AnnualizedRevenueImpactofNCCF$m $ — $ (2.3) n/m $ 5.4 $ (5.4)ENImanagementfeerate(bps)(1) 69 73 (4) 69 —
EconomicNetIncomeBasisENIRevenue$m $ 42.5 $ 44.3 (4.1)% $ 41.9 1.4%SegmentEconomicNetIncome(2)$m $ 10.2 $ 11.9 (14.3)% $ 10.3 (1.0)%ENIOperatingMargin 40.2% 41.3% (110)bps 38.4% 180bpsAdjustedEBITDA(2)$m $ 10.5 $ 12.1 (13.2)% $ 10.7 (1.9)%
AlternativeAssetsOverview
__________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) Excludingnetcatch-upfees,theweightedaveragefeerateforalternativeswouldbe71bpsinQ2'20,75bpsinQ2'19,and71bpsinQ1'20.(2) SegmentENIandAdjustedEBITDAincludenetplacementagentfeesof$(1.2)millioninQ2'20,$(1.3)millioninQ2'19,and$(1.5)millioninQ1'20.
(typically8-12yearlockup)
(InstitutionalclientcanmaintainAlternative
exposurebeyondtermsoftypicalfund)
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Asset-Weighted
48% 52%
85%
3-Year 5-Year 10-Year0%
100%
Revenue-Weighted
41% 44%
83%
3-Year 5-Year 10-Year0%
100%
SegmentHighlight:LiquidAlpha• SegmentNCCFof$(2.0)billionforQ2'20comparedto$(2.0)billionforQ2'19;excludingBarrowHanleyandCopperRock,NCCFof$0.1billionforQ2'20• SegmentAUMdecreased37.5%to$64.9billionatJune30,2020comparedtoJune30,2019duetoVanguardreallocationof$22.8billioninQ4’19atBarrowHanley
andtheimpactofQ1’20marketdecline,proformaAUMof$19.1billionatJune30,2020downfrom$23.0billionatJune30,2019partlyduetomarketdepreciation• SegmentinvestmentperformanceimprovedasportfoliossawsignificantrecoveryandoutperformanceinQ2'20
SegmentPerformance-LiquidAlpha(3)(4)
KeyPerformanceMetricsThreeMonthsEndedJune30, ThreeMonthsEndedMarch31,
2020 2019 Increase(Decrease) 2020 Increase(Decrease)
OperationalInformationAUM$b $ 64.9 $ 103.9 (37.5)% $ 58.5 10.9%AverageAUM$b $ 63.2 $ 102.7 (38.5)% $ 71.1 (11.1)%NCCF$b $ (2.0) $ (2.0) $ — $ (1.1) $ (0.9)AnnualizedRevenueImpactofNCCF$m $ (6.6) $ (7.6) $ 1.0 $ (4.7) $ (1.9)ENImanagementfeerate(bps)(1) 31 27 4 30 1
EconomicNetIncomeBasisENIRevenue$m $ 47.1 $ 66.5 (29.2)% $ 52.5 (10.3)%SegmentEconomicNetIncome$m $ 15.7 $ 25.1 (37.5)% $ 17.0 (7.6)%ENIOperatingMargin(2) 39.3% 46.5% (720)bps 38.5% 80bpsAdjustedEBITDA$m $ 15.8 $ 25.3 (37.5)% $ 17.1 (7.6)%
Equal-Weighted
52% 57%81%
3-Year 5-Year 10-Year0%
100%
Q1'20 22% 29% 55%
Q2'19 55% 42% 61%
Q1'20 32% 47% 69%
Q2'19 62% 55% 72%
Q1'20 22% 30% 54%
Q2'19 54% 43% 54%
___________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ProformaENImanagementfeerateof40bps,38bps,and38bpsasofJune30,2020,June30,2019,andMarch31,2020,respectively.ProformaforthedivestitureofBarrowHanleyandCopperRock.(2) ProformaENIOperatingMarginof45.5%,49.3%,and44.0%asofJune30,2020,June30,2019,andMarch31,2020,respectively.ProformaforthedivestitureofBarrowHanleyandCopperRock.(3) AsofJune30,2020LiquidAlphaassetsrepresenting39%ofrevenuewereoutperformingbenchmarksona1-yearbasis,comparedto19%atMarch31,2020and16%atJune30,2019.(4) ExcludingBarrowHanleyandCopperRock,LiquidAlphaassetsrepresenting67%,29%,32%,and92%ofrevenueoutperformedbenchmarksona1-,3-,5-,and10-yearbasisatJune30,2020.
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$0.3 $0.3
$(2.0)
$0.1
Q22020 ProformaexcludingBHMSandCRC
$-3
$-2
$-1
$0
$1
$2
$(6.8) $(6.8)
$(6.6)
$0.7
Q22020 ProformaexcludingBHMSandCRC
$-14
$-12
$-10
$-8
$-6
$-4
$-2
$0
$2
$4
$6
$8
RevenueImpactasa%
ofBOPRunRate
ManagementFees(4)
(1.7)%
__________________________________________________________(1) NCCFandrevenueimpactofNCCFforallperiodsincludesreinvestedincomeanddistributions,andexcludesrealizations(pleaseseeDefinitionsandAdditionalNotes).(2) Annualizedrevenueimpactofnetflowsrepresentsannualizedmanagementfeesexpectedtobeearnedonnewaccountsandnetassetscontributedtoexistingaccounts(inflows),lesstheannualizedmanagementfeesloston
terminatedaccountsornetassetswithdrawnfromexistingaccounts(outflows),plusrevenueimpactfromreinvestedincomeanddistribution.Annualizedmanagementfeeforclientflowiscalculatedbymultiplyingtheannualgrossfeeratefortherelevantaccountwiththeinflowortheoutflow,includingequity-accountedAffiliates.Inaddition,reinvestedincomeanddistributionforeachsegmentismultipliedbyaveragefeeratefortherespectivesegmenttocomputetherevenueimpact.
(3) AveragefeeraterepresentstheaverageblendedfeerateonassetsforeachsegmentforthethreemonthsendedJune30,2020.(4) PercentageisequaltotheannualrevenueimpactofNCCFdividedbyrunratemanagementfeesbasedonbeginningofyearAUM.(5) AlternativesNCCFwereapproximatelybreak-evenforthethreemonthsendedJune30,2020.(6) BrightSpherehasannounceddivestitureofBarrowHanleyandCopperRock.
NetClientCashFlowsBreakdown
AUMNetClientCashFlows(“NCCF”)(1) RevenueImpactofNCCF(1)(2)
Quant&Solutions LiquidAlphaAlternatives(5) Avg.FeeRate(bps)(3)
TotalNCCF $(1.7) $0.4
69
38
31
$m$b
Q22020
34
43
Bpsinflows
Bpsoutflows
$0.0
$0.0
$0.0
(6) (6)
38
69
40
39.8 44.2
15
KeyPerformanceMetrics
KeyPerformanceMetrics(1)
($inmillions,unlessotherwisenoted) ThreeMonthsEndedJune30, ThreeMonthsEndedMarch31,
U.S.GAAPBasis 2020 2019Increase(Decrease) 2020
Increase(Decrease)
Revenue $ 174.7 $ 207.1 (15.6)% $ 182.6 (4.3)%
Pre-taxincomefromcont.ops.attributabletocontrollinginterests 26.2 42.1 (37.8)% 46.2 (43.3)%
Netincomeattributabletocontrollinginterests 18.9 28.0 (32.5)% 32.6 (42.0)%
Dilutedsharesoutstanding(inmillions) 80.4 91.5 85.1
Dilutedearningspershare,$ $ 0.23 $ 0.31 (25.8)% $ 0.38 (39.5)%
U.S.GAAPoperatingmargin 15% 23% (750)bps 41% n/m
EconomicNetIncomeBasis(Non-GAAPmeasureusedbymanagement)
ENIrevenue $ 172.5 $ 204.6 (15.7)% $ 180.6 (4.5)%
Pre-taxeconomicnetincome 42.5 53.2 (20.1)% 44.3 (4.1)%
Economicnetincome 32.9 41.0 (19.8)% 34.3 (4.1)%
ENIdilutedearningspershare,$ $ 0.41 $ 0.45 (8.9)% $ 0.40 2.5%
AdjustedEBITDA 53.9 63.4 (15.0)% 56.2 (4.1)%
ENIoperatingmargin 34% 36% (152)bps 33% 120bps
OtherOperationalInformation
Assetsundermanagementatperiodend($inbillions)(2) $ 181.0 $ 225.0 (19.6)% $ 161.8 11.9%
Netclientcashflows($inbillions)(3) (1.7) (1.1) n/m 1.0 n/m
Annualizedrevenueimpactofnetflows($inmillions) (13.4) (7.8) n/m (0.2) n/m
__________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) PleaseseeReconciliationsandDisclosuresforthereconciliationofNetincomeattributabletocontrollingintereststoAdjustedEBITDAandENI.(2) ProformaAUMof$135.2billion,$143.9billion,and$119.8billionasofJune30,2020,June30,2019,andMarch31,2020,respectively.ProformafordivestitureofBarrowHanleyandCopperRock.(3) NCCFandrevenueimpactofNCCFforallperiodsincludesreinvestedincomeanddistributions,andexcludesrealizations(pleaseseeDefinitionsandAdditionalNotes).
16
ENIRevenue
Commentary
• ENIRevenueincludesmanagementfees,performancefees,andourshareofearningsfromequity-accountedAffiliates
• Q2'20ENIrevenueof$172.5milliondecreasedfromQ2'19by(15.7)%primarilyduetoadecreaseinmanagementfees
• Managementfeesdecreased(17.1)%fromQ2'19primarilyduetoadecreaseinaverageAUMdrivenbyequitymarketdecline
ENIRevenue($M) ThreeMonthsEndedJune30, ThreeMonthsEndedMarch31,
2020 2019Increase(Decrease) 2020
Increase(Decrease)
Managementfees $ 170.7 $ 205.9 (17.1)% $ 178.5 (4.4)%
Performancefees 0.3 (2.2) n/m 1.0 (70.0)%
Otherincome,includingequity-accountedAffiliates 1.5 0.9 66.7% 1.1 36.4%
ENIrevenue $ 172.5 $ 204.6 (15.7)% $ 180.6 (4.5)%
___________________________________________________________PleaseseeDefinitionsandAdditionalNotes
17
ENIOperatingExpensesThreeMonthsEndedJune30, ThreeMonthsEndedMarch31,
($M) 2020 2019Increase(Decrease)
2020Increase(Decrease)$M %ofMFs(2) $M %ofMFs(2) $M %ofMFs(2)
Fixedcompensationandbenefits $ 42.8 25.1% $ 47.3 23.0% (10)% $ 46.6 26.1% (8)%
G&Aexpenses(excl.sales-basedcompensation) 24.0 14.1% 28.6 13.9% (16)% 27.2 15.2% (12)%
Depreciationandamortization 5.1 3.0% 4.0 1.9% 28% 5.3 3.0% (4)%
Coreoperatingexpensesubtotal $ 71.9 42.1% $ 79.9 38.8% (10)% $ 79.1 44.3% (9)%
Sales-basedcompensation 2.1 1.2% 3.1 1.5% (32)% 2.1 1.2% —%
TotalENIoperatingexpenses $ 74.0 43.4% $ 83.0 40.3% (11)% $ 81.2 45.5% (9)%
Note:ENIManagementfees $ 170.7 $ 205.9 (17)% $ 178.5 (4)%
• TotalENIoperatingexpensesreflectAffiliateoperatingexpensesandCenterexpenses(excludingvariablecompensation)
• ENIOperatingexpensesreducedto$74.0millioninQ2’20from$83.0millioninQ2’19reflectingexpensedisciplineandCenterrestructuring,whileQ2'20OperatingExpenseRatio(1)increasedto43.4%fortheperiodduethedeclineofrevenueinQ2’20
• Full-yearOperatingExpenseRatio(1)expectedtobeintherangeof45-48%iftheequitymarketremainsatthesamelevel;ratioissubjecttofluctuationsasassetsandENImanagementfeeschange
◦ ProFormafull-yearOperatingExpenseRatioisalsoexpectedtobeintherangeof45-48%(3)
◦ RatioexpectedtotrenddownoncetheannualsavingsfromCenterrestructuringisrealizedin2021
__________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) OperatingExpenseRatioreflectstotalENIoperatingexpensesasapercentofmanagementfees.(2) RepresentsreportedENImanagementfeerevenue.(3) ProformafordivestitureofBarrowHanleyandCopperRock.
ENIOperatingExpenses
Commentary
18
ENIVariableCompensation($M) ThreeMonthsEndedJune30, ThreeMonthsEndedMarch31,
2020 2019 Increase(Decrease) 2020 Increase(Decrease)
Cashvariablecompensation $ 35.3 $ 44.1 (20)% $ 35.5 (1)%
Add:Non-cashequity-basedawardamortization 4.1 4.3 (5)% 4.2 (2)%
Variablecompensation 39.4 48.4 (19)% 39.7 (1)%
Earningsbeforevariablecompensation $ 98.5 $ 121.6 (19)% $ 99.4 (1)%
VariableCompensationRatio(VCas%ofearningsbeforevariablecomp.) 40.0% 39.8% 20bps 39.9% 6bps
• Variablecompensationtypicallyawardedbasedoncontractualpercentage(e.g.,~25–35%)ofeachAffiliate’sENIearningsbeforevariablecompensationplusCenterbonusesandalsoincludesacontractualsplitofcertainperformancefees
◦ Affiliatevariablecompensationincludescashandequityprovidedthroughrecycling
◦ CentervariablecompensationincludescashandBSIGequity
• Q2'20VariableCompensationRatioincreasedslightlyto40.0%from39.8%inQ2'19
• Full-yearVariableCompensationRatioexpectedtobeintherangeof41-42%
◦ ProFormafull-yearVariableCompensationRatioisexpectedtobeintherangeof38-40%(1)
___________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ProformafordivestitureofBarrowHanleyandCopperRock.
ENIVariableCompensation
Commentary
19
AffiliateKeyEmployeeDistributionsThreeMonthsEndedJune30, ThreeMonthsEndedMarch31,
($M)2020 2019
Increase(Decrease) 2020
Increase(Decrease)
Earningsaftervariablecompensation(ENIoperatingearnings) $ 59.1 $ 73.2 (19)% $ 59.7 (1)%
Less:Affiliatekeyemployeedistributions (11.0) (13.8) (20)% (9.8) 12%
EarningsafterAffiliatekeyemployeedistributions $ 48.1 $ 59.4 (19)% $ 49.9 (4)%
AffiliateKeyEmployeeDistributionRatio(/) 18.6% 18.9% (24)bps 16.4% 220bps
• Representsemployees’shareofprofitfromtheirrespectiveAffiliate,insomecasesfollowinganinitialpreferencetoBSIG(1)
• Q2'20DistributionRatioof18.6%lowerthanQ2'19mainlyduetoadecreaseinENIoperatingearnings,andachangeinmixofearnings
• Full-yearDistributionRatioexpectedtobeintherangeof17-18%;mixofAffiliateearningswillhavesignificantimpacttotheratio
◦ ProFormafull-yearDistributionRatioisexpectedtobeintherangeof19-20%(2)
__________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ForconsolidatedAffiliates.(2) ProformafordivestitureofBarrowHanleyandCopperRock.
AffiliateKeyEmployeeDistributions
Commentary
A
B A
B
20
BalanceSheet($M) June30,2020 December31,2019
Assets
Cashandcashequivalents $ 115.8 $ 111.3
Investmentadvisoryfeesreceivable 126.2 151.9
Rightofuseassets 108.7 37.7
Investments 145.1 186.3
Otherassets 699.4 727.3
AssetsofconsolidatedFunds 227.6 205.2
Totalassets $ 1,422.8 $ 1,419.7
Liabilitiesandshareholders’equity
Accountspayableandaccruedexpenses $ 128.3 $ 179.3
DuetoOMplc 3.4 3.7
Non-recourseborrowings 21.7 35.0
Thirdpartyborrowings 524.0 533.8
Operatingleaseliabilities 124.9 42.5
Otherliabilities 383.8 420.8
LiabilitiesofconsolidatedFunds 4.2 6.2
Totalliabilities $ 1,190.3 $ 1,221.3
Shareholders’equity 72.4 64.4
Non-controllinginterests,includingNCIofconsolidatedFunds 160.1 134.0
Totalequity 232.5 198.4
Totalliabilitiesandequity $ 1,422.8 $ 1,419.7
Weightedaveragequarterlydilutedshares(ENI) 80.4 85.9
Leverageratio(1) 2.2x 2.1x
Netleverageratio(2) 1.7x 1.7x
BalanceSheetManagement
• $0.01pershareinterimdividendapproved;
◦ PayableSeptember25toshareholdersofrecordasofSeptember11
• Revolverbalancereducedto$130millionasofJune30comparedto$220millionasofMarch31
• QTDJune30,theCompanyhaspurchased2.4millionsharesatanaveragepriceof$6.56/share
• June30netleverageratio(Debt,netoftotalcashandcashequivalents/Adj.EBITDA)of1.7x
• Totalseedandco-investmentholdingsof$115.7million
Capital
Dividend,Investment&Buyback
_______________________________________________________________(1) DebtcalculatedpertermsoftheCompany’sexternalrevolverandexcludesnon-recourseborrowings,dividedbylasttwelvemonthsAdjustedEBITDA.(2) DebtcalculatedpertermsoftheCompany’sexternalrevolver,netoftotalcashandcashequivalents,dividedbylasttwelvemonthsAdjustedEBITDA.
21
SupplementalInformation
22
SegmentInformationforQ2'20andQ2'19
ThreeMonthsEndedJune30,2020 ThreeMonthsEndedJune30,2019
($inmillions,unlessotherwisenoted)Quant&Solutions Alternatives LiquidAlpha Other
ReconcilingItems(1)
TotalU.S.GAAP(3)
Quant&Solutions Alternatives LiquidAlpha Other
ReconcilingItems(1)
TotalU.S.GAAP(3)
ENIRevenue $ 82.8 $ 42.5 $ 47.1 $ 0.1 $ 2.2 $ 174.7 $ 93.7 $ 44.3 $ 66.5 $ 0.1 $ 2.5 $ 207.1
ENIOperatingExpenses 35.0 15.7 17.4 5.9 16.4 90.4 39.7 15.6 19.9 7.8 14.7 97.7
Earningsbeforevariablecompensation 47.8 26.8 29.7 (5.8) (14.2) 84.3 54.0 28.7 46.6 (7.7) (12.2) 109.4
Variablecompensation 17.7 9.7 11.2 0.8 7.7 47.1 20.0 10.4 15.7 2.3 0.6 49.0
Earningsaftervariablecompensation 30.1 17.1 18.5 (6.6) (21.9) 37.2 34.0 18.3 30.9 (10.0) (12.8) 60.4
Affiliatekeyemployeedistributions 1.3 6.9 2.8 — — 11.0 1.6 6.4 5.8 — — 13.8
EarningsafterAffiliatekeyemployeedistributions 28.8 10.2 15.7 (6.6) (21.9) 26.2 32.4 11.9 25.1 (10.0) (12.8) 46.6
Netinterestincome(expense) — — — (5.6) (1.6) (7.2) — — — (6.2) (2.3) (8.5)
Netinvestmentincome(loss) — — — — 42.2 42.2 — — — — (2.4) (2.4)
Net(income)lossattributabletonon-controllinginterest — — — — (35.0) (35.0) — — — — 6.4 6.4
Incometax(expense)benefit — — — (9.6) 2.3 (7.3) — — — (12.2) (1.9) (14.1)
EconomicNetIncome $ 28.8 $ 10.2 $ 15.7 $ (21.8) $ (14.0) $ 18.9 $ 32.4 $ 11.9 $ 25.1 $ (28.4) $ (13.0) $ 28.0
AdjustedEBITDA(2) $ 33.4 $ 10.5 $ 15.8 $ (5.8) $ (35.0) $ 18.9 $ 35.9 $ 12.1 $ 25.3 $ (9.9) $ (35.4) $ 28.0
SegmentAssetsUnderManagement($b) $ 92.0 $ 24.1 $ 64.9 $ — $ — $ 181.0 $ 97.6 $ 23.5 $ 103.9 $ — $ — $ 225.0
__________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ForfurtherinformationandadditionalreconciliationsbetweenGAAPandnon-GAAPmeasures,refertotheReconciliationsandDisclosuressectionofthispresentationandtheCompany’sQuarterlyReporton
Form10-Q.(2) PleaseseeReconciliationsandDisclosuresforthereconciliationofnetincomeattributabletocontrollingintereststoAdjustedEBITDAandENI.(3) RepresentsU.S.GAAPequivalentofnon-GAAPsegmentinformationpresented.ThemostdirectlycomparableU.S.GAAPmeasureofENIrevenueisU.S.GAAPrevenue.ThemostdirectlycomparableU.S.GAAP
measureofENIoperatingexpensesisU.S.GAAPoperatingexpenses,whichiscomprisedofOperatingexpenses,VariablecompensationandAffiliatekeyemployeedistributionsabove.ThemostdirectlycomparableU.S.GAAPmeasureofEarningsafterAffiliatekeyemployeedistributionsisU.S.GAAPOperatingIncome.TheU.S.GAAPequivalentofEconomicNetIncomeisU.S.GAAPNetIncomeattributabletocontrollinginterests.TheU.S.GAAPequivalentofAdjustedEBITDAisU.S.GAAPNetIncomeattributabletocontrollinginterests.
23
ThreeMonthsEndedMarch31,2020
($inmillions,unlessotherwisenoted) Quant&Solutions Alternatives LiquidAlpha OtherReconcilingItems(1) TotalU.S.GAAP(3)
ENIRevenue $ 86.1 $ 41.9 $ 52.5 $ 0.1 $ 2.0 $ 182.6
ENIOperatingExpenses 37.1 16.6 19.8 7.7 (28.6) 52.6
Earningsbeforevariablecompensation 49.0 25.3 32.7 (7.6) 30.6 130.0
Variablecompensation 17.0 9.2 12.5 1.0 6.4 46.1
Earningsaftervariablecompensation 32.0 16.1 20.2 (8.6) 24.2 83.9
Affiliatekeyemployeedistributions 0.8 5.8 3.2 — — 9.8
EarningsafterAffiliatekeyemployeedistributions 31.2 10.3 17.0 (8.6) 24.2 74.1
Netinterestincome(expense) — — — (5.6) (1.9) (7.5)
Netinvestmentincome(loss) — — — — (30.9) (30.9)
Net(income)lossattributabletonon-controllinginterest — — — — 10.5 10.5
Incometax(expense)benefit — — — (10.0) (3.6) (13.6)
EconomicNetIncome $ 31.2 $ 10.3 $ 17.0 $ (24.2) $ (1.7) $ 32.6
AdjustedEBITDA(2) $ 35.9 $ 10.7 $ 17.1 $ (7.5) $ (23.6) $ 32.6
SegmentAssetsUnderManagement($b) $ 79.0 $ 24.3 $ 58.5 $ — $ — $ 161.8
SegmentInformationforQ1'20
__________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ForfurtherinformationandadditionalreconciliationsbetweenGAAPandnon-GAAPmeasures,refertotheReconciliationsandDisclosuressectionofthispresentationandtheCompany’sQuarterlyReporton
Form10-Q.(2) PleaseseeReconciliationsandDisclosuresforthereconciliationofnetincomeattributabletocontrollingintereststoAdjustedEBITDAandENI.(3) RepresentsU.S.GAAPequivalentofnon-GAAPsegmentinformationpresented.ThemostdirectlycomparableU.S.GAAPmeasureofENIrevenueisU.S.GAAPrevenue.ThemostdirectlycomparableU.S.GAAP
measureofENIoperatingexpensesisU.S.GAAPoperatingexpenses,whichiscomprisedofOperatingexpenses,VariablecompensationandAffiliatekeyemployeedistributionsabove.ThemostdirectlycomparableU.S.GAAPmeasureofEarningsafterAffiliatekeyemployeedistributionsisU.S.GAAPOperatingIncome.TheU.S.GAAPequivalentofEconomicNetIncomeisU.S.GAAPNetIncomeattributabletocontrollinginterests.TheU.S.GAAPequivalentofAdjustedEBITDAisU.S.GAAPNetIncomeattributabletocontrollinginterests.
24
AssetsUnderManagementRollforwardbySegment
($inbillions,unlessotherwisenoted) ThreeMonthsEndedJune30,2020 June30,2019 March31,2020
QuantitativeandSolutions Beginningbalance $ 79.0 $ 95.1 $ 101.9Grossinflows 3.3 2.5 3.7Grossoutflows (3.7) (2.2) (3.1)Reinvestedincomeanddistributions 0.7 0.7 0.9Netflows(3) 0.3 1.0 1.5
Marketappreciation(depreciation) 12.7 1.5 (24.4)Endingbalance $ 92.0 $ 97.6 $ 79.0AverageAUM(1) $ 86.9 $ 95.6 $ 92.9
Alternatives Beginningbalance $ 24.3 $ 24.0 $ 23.8Grossinflows 0.1 0.3 0.7Grossoutflows (0.1) (0.4) (0.1)Netflows(3) — (0.1) 0.6
Marketdepreciation — (0.2) —
Realizationsandother(2) (0.2) (0.2) (0.1)Endingbalance $ 24.1 $ 23.5 $ 24.3AverageAUM(1) $ 24.3 $ 23.8 $ 24.1
LiquidAlpha Beginningbalance $ 58.5 $ 103.2 $ 78.7Grossinflows 2.4 2.3 2.8Grossoutflows (4.9) (5.2) (4.3)Reinvestedincomeanddistributions 0.5 0.9 0.4Netflows(3) (2.0) (2.0) (1.1)
Marketappreciation(depreciation) 8.4 2.7 (19.1)Endingbalance $ 64.9 $ 103.9 $ 58.5AverageAUM $ 63.2 $ 102.7 $ 71.1AverageAUMofconsolidatedAffiliates $ 61.3 $ 100.5 $ 69.0
Total Beginningbalance $ 161.8 $ 222.3 $ 204.4Grossinflows 5.8 5.1 7.2Grossoutflows (8.7) (7.8) (7.5)Reinvestedincomeanddistributions 1.2 1.6 1.3Netflows(3) (1.7) (1.1) 1.0
Marketappreciation(depreciation) 21.1 4.0 (43.5)Realizationsandother(2) (0.2) (0.2) (0.1)Endingbalance(4) $ 181.0 $ 225.0 $ 161.8AverageAUMofconsolidatedAffiliates $ 172.5 $ 219.9 $ 186.0
ENImanagementfeerateofconsolidatedAffiliates(5) 39.8 37.5 38.6
Basispoints:inflows 33.8 36.0 36.6Basispoints:outflows 42.7 40.0 41.4Annualizedrevenueimpactofnetflows(inmillions) $ (13.4) $ (7.8) $ (0.2)___________________________________________________________
(1) AverageAUMequalsaverageAUMofconsolidatedAffiliates.(2) Realizationsincludedistributionsrelatedtothesaleofalternativeassets,andrepresentareturnoninvestments.OtheractivityprimarilyrelatestothedeclineinbillableAUMasalegacyalternativefundtransitionedfrombillingbaseoncommittedAUMtonetassetvalue.(3) NCCFandrevenueimpactofNCCFforallperiodsabovehavebeenrevisedandincludereinvestedincomeanddistributions,andexcluderealizations(pleaseseeDefinitionsandAdditionalNotes).(4) ProformaAUMof$135.2billion,$143.9billion,and$119.8billionasofJune30,2020,June30,2019,andMarch31,2020,respectively.ProformafordivestitureofBarrowHanleyandCopperRock.(5) ProformaENImanagementfeerateofconsolidatedAffiliatesof44.2bps,44.9bps,and42.8bpsasofJune30,2020,June30,2019,andMarch31,2020,respectively.ProformafordivestitureofBarrowHanleyandCopperRock.
25
ReconciliationsandDisclosures
26
ThreeMonthsEnded
($inmillions) June30, June30, March31,
2020 2019 2020
U.S.GAAPnetincomeattributabletocontrollinginterests $ 18.9 $ 28.0 $ 32.6
AdjustmentstoreflecttheeconomicearningsoftheCompany:Non-cashkeyemployee-ownedequityandprofitinterestrevaluations(2) 10.9 7.1 (49.3)
Goodwillimpairmentandamortizationofacquiredintangibleassetsandpre-acquisitionemployeeequity(2) 3.7 4.0 19.2
Capitaltransactioncosts(2) 0.3 1.6 0.2
Seed/Co-investment(gains)lossesandfinancings(2) (6.7) (2.8) 21.3
Taxbenefitofgoodwillandacquiredintangibledeductions 2.3 2.4 2.3
Discontinuedoperations,restructuringandtheimpactofaone-timecompensationarrangementthatincludesadvancesagainstfuturecompensationpayments(2)(3) 8.1 1.3 6.7
TotaladjustmenttoreflectearningsoftheCompany $ 18.6 $ 13.6 $ 0.4
Taxeffectofaboveadjustments(2) (4.4) (3.0) 0.5
ENItaxnormalization (0.2) 2.4 0.8
Economicnetincome $ 32.9 $ 41.0 $ 34.3
ENInetinterestexpensetothirdparties 5.6 6.2 5.6
Depreciationandamortization(4) 5.8 4.0 6.3
TaxonEconomicNetIncome 9.6 12.2 10.0
AdjustedEBITDA $ 53.9 $ 63.4 $ 56.2
ReconciliationsfromU.S.GAAPtoNon-GAAPMeasures(1)
i. Excludenon-cashexpensesrepresentingchangesinthevalueofAffiliateequityandprofitinterestsheldbyAffiliatekeyemployees
ii. Excludenon-cashamortizationorimpairmentexpensesrelatedtoacquiredgoodwillandotherintangibles,aswellastheamortizationofthevalueofemployeeequityownedpriortoacquisitions.Pleasenotethattherevaluationsrelatedtotheseacquisition-relateditemsareincludedin(1)above
iii.Excludecapitaltransactioncostsincludingthecostsofraisingdebtorequity,gainsorlossesrealizedasaresultofredeemingdebtorequityanddirectincrementalcostsassociatedwithacquisitionsofbusinessesorassets
iv.Excludegains/lossesonseedcapitalandco-investments,aswellasrelatedfinancingcosts
v. Includecashtaxbenefitsrelatedtotaxamortizationofacquiredintangibles
vi.Excluderesultsofdiscontinuedoperationsastheyarenotpartoftheongoingbusiness,restructuringcostsincurredincontinuingoperationsandtheimpactofaone-timecompensationarrangemententeredintothatincludesadvancesagainstfuturecompensationpayments
vii. Excludeone-offtaxbenefitsorcostsunrelatedtocurrentoperations
ENIAdjustments
___________________________________________________________PleaseseeDefinitionsandAdditionalNotes
(1) ForfurtherinformationandadditionalreconciliationsbetweenU.S.GAAPandnon-GAAPmeasures,seetheCompany’sQuarterlyReportonForm10-Q.(2) Tax-affecteditemsforwhichadjustmentsareincludedin“Taxeffectofaboveadjustments”line,excludingthediscontinuedoperationscomponentofitem6;taxedat27.3%U.S.statutoryrate(includingstatetax).(3) ThethreemonthsendedJune30,2020includesrestructuringattheCenterandAffiliatesof$3.0million,costsassociatedwiththetransferofaninsurancepolicyfromourformerParentof$0.3million,and$4.7million
relatingtotheimpactofaone-timecompensationarrangemententeredintothatincludesadvancesagainstfuturecompensationpayments.ThethreemonthsendedJune30,2019includesrestructuringcostsattheCenterof$0.5million,andcostsassociatedwiththeredomiciletotheU.S.of$0.8million.ThethreemonthsendedMarch31,2020includesrestructuringcostsatanAffiliateof$0.4million,costsassociatedwiththetransferofaninsurancepolicyfromourformerParentof$0.3million,and$6.0millionrelatingtotheimpactofaone-timecompensationarrangemententeredintothatincludesadvancesagainstfuturecompensationpayments.
(4) ThethreemonthsendedJune30,2020andMarch31,2020includesnon-cashequity-basedawardamortizationexpense.
1
3
2
4
5
1
2
3
4
5
6
7
7
6
27
ReconciliationsfromU.S.GAAPtoNon-GAAPMeasures(1)(cont.)
Reconciliationofper-shareU.S.GAAPNetIncometoEconomicNetIncome($) ThreeMonthsEnded
June30, June30, March31,
2020 2019 2020
U.S.GAAPnetincomepershare $ 0.23 $ 0.31 $ 0.38
AdjustmentstoreflecttheeconomicearningsoftheCompany:
i. Non-cashkeyemployee-ownedequityandprofitinterestrevaluations 0.14 0.07 (0.59)
ii. Goodwillimpairmentandamortizationofacquiredintangibleassetsandpre-acquisitionemployeeequity 0.05 0.04 0.23
iii. Capitaltransactioncosts — 0.02 —
iv. Seed/Co-investment(gains)lossesandfinancing (0.08) (0.03) 0.25
v. Taxbenefitofgoodwillandacquiredintangiblesdeductions 0.03 0.03 0.03
vi. Discontinuedoperations,restructuringandtheimpactofaone-timecompensationarrangementthatincludesadvancesagainstfuturecompensationpayments 0.10 0.01 0.08
vii. ENItaxnormalization — 0.03 0.01
Taxeffectofaboveadjustments,asapplicable (0.06) (0.03) 0.01
Economicnetincomepershare $ 0.41 $ 0.45 $ 0.40
ReconciliationofU.S.GAAPRevenuetoENIRevenue($inmillions) ThreeMonthsEnded
June30, June30, March31,
2020 2019 2020
U.S.GAAPrevenue $ 174.7 $ 207.1 $ 182.6
Includeinvestmentreturnonequity-accountedAffiliates 0.6 0.7 0.6
ExcluderevenuefromconsolidatedFunds (1.7) (1.9) (1.5)
Excludefixedcompensationreimbursedbycustomers (1.1) (1.3) (1.1)
ENIrevenue $ 172.5 $ 204.6 $ 180.6
___________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ForfurtherinformationandadditionalreconciliationsbetweenU.S.GAAPandnon-GAAPmeasures,seetheCompany’sQuarterlyReportonForm10-Q.
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ReconciliationsfromU.S.GAAPtoNon-GAAPMeasures(1)(cont.)
ReconciliationofU.S.GAAPOperatingExpensetoENIOperatingExpense($inmillions) ThreeMonthsEnded
June30, June30, March31,
2020 2019 2020
U.S.GAAPoperatingexpense $ 148.5 $ 160.5 $ 108.5
Less:itemsexcludedfromENI
Amortizationofpre-acquisitionemployeeequity(2) (1.8) (2.3) (1.2)
Non-cashkeyemployee-ownedequityandprofitinterestrevaluations (10.9) (7.1) 49.3
Goodwillimpairmentandamortizationofacquiredintangibleassets (1.9) (1.7) (18.0)
Capitaltransactioncosts (0.2) (1.6) —
Restructuringcostsandtheimpactofaone-timecompensationarrangementthatincludesadvancesagainstfuturecompensationpayments(3) (8.1) (1.3) (6.7)
Compensationreimbursedbycustomers (1.1) (1.3) (1.1)
Funds’operatingexpense (0.1) — (0.1)
Less:itemssegregatedoutofU.S.GAAPoperatingexpense
Variablecompensation(4) (39.4) (48.4) (39.7)
Affiliatekeyemployeedistributions (11.0) (13.8) (9.8)
ENIoperatingexpense $ 74.0 $ 83.0 $ 81.2
___________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ForfurtherinformationandadditionalreconciliationsbetweenU.S.GAAPandnon-GAAPmeasures,seetheCompany’sQuarterlyReportonForm10-Q.(2) Reflectsamortizationofpre-acquisitionequityownedbyemployees,associatedwiththeLandmarkacquisition.RevaluationoftheLandmarkinterestsisincludedin“Non-cashkeyemployee-ownedequityandprofitinterest
revaluations”above.(3) ThethreemonthsendedJune30,2020includesrestructuringattheCenterandAffiliatesof$3.0million,costsassociatedwiththetransferofaninsurancepolicyfromourformerParentof$0.3million,and$4.7millionrelating
totheimpactofaone-timecompensationarrangemententeredintothatincludesadvancesagainstfuturecompensationpayments.ThethreemonthsendedJune30,2019includesrestructuringcostsattheCenterof$0.5million,andcostsassociatedwiththeredomiciletotheU.S.of$0.8million.ThethreemonthsendedMarch31,2020includesrestructuringcostsatanAffiliateof$0.4million,costsassociatedwiththetransferofaninsurancepolicyfromourformerParentof$0.3million,and$6.0millionrelatingtotheimpactofaone-timecompensationarrangemententeredintothatincludesadvancesagainstfuturecompensationpayments.
(4) RepresentsENIvariablecompensation.ForthethreemonthsendedJune30,2020,June30,2019,andMarch31,2020,theU.S.GAAPequivalentofvariablecompensationwas$47.1million,$49.0millionand$46.1million,respectively.
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ReconciliationsfromU.S.GAAPtoNon-GAAPMeasures(1)(cont.)
ReconciliationofU.S.GAAPpre-taxincomefromcontinuingoperationstoPre-taxENI($inmillions) ThreeMonthsEnded
June30, June30, March31,
2020 2019 2020
U.S.GAAPpre-taxincomefromcontinuingoperations $ 61.2 $ 35.7 $ 35.7
AdjustmentstoreflecttheeconomicearningsoftheCompany:
Non-cashkeyemployee-ownedequityandprofitinterestrevaluations 10.9 7.1 (49.3)
Goodwillimpairmentandamortizationofacquiredintangibleassetsandpre-acquisitionemployeeequity 3.7 4.0 19.2
Capitaltransactioncosts 0.3 1.6 0.2
Seed/Co-investment(gains)lossesandfinancings (6.7) (2.8) 21.3
Restructuringandtheimpactofaone-timecompensationarrangementthatincludesadvancesagainstfuturecompensationpayments(2) 8.1 1.2 6.7
Net(income)lossattributabletonon-controllinginterests (35.0) 6.4 10.5
Pre-taxENI $ 42.5 $ 53.2 $ 44.3
___________________________________________________________PleaseseeDefinitionsandAdditionalNotes(1) ForfurtherinformationandadditionalreconciliationsbetweenU.S.GAAPandnon-GAAPmeasures,seetheCompany’sQuarterlyReportonForm10-Q.(2) ThethreemonthsendedJune30,2020includesrestructuringattheCenterandAffiliatesof$3.0million,costsassociatedwiththetransferofaninsurancepolicyfromourformerParentof$0.3million,and
$4.7millionrelatingtotheimpactofaone-timecompensationarrangemententeredintothatincludesadvancesagainstfuturecompensationpayments.ThethreemonthsendedJune30,2019includesrestructuringcostsattheCenterof$0.5million,andcostsassociatedwiththeredomiciletotheU.S.of$0.8million.ThethreemonthsendedMarch31,2020includesrestructuringcostsatanAffiliateof$0.4million,costsassociatedwiththetransferofaninsurancepolicyfromourformerParentof$0.3million,and$6.0millionrelatingtotheimpactofaone-timecompensationarrangemententeredintothatincludesadvancesagainstfuturecompensationpayments.
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DefinitionsandAdditionalNotesReferencesto“BrightSphere,”“BSIG”orthe“Company”refertoBrightSphereInvestmentGroupInc.;referencesto“OMplc”refertoOldMutualplc,theCompany’sformerparent;referencesto“BSUS”orthe“Center”refertotheholdingcompanyexcludingtheAffiliates.BrightSphereoperatesitsbusinessthroughsevenassetmanagementfirms(the“Affiliates”).BrightSphere’sdistributionactivitiesareconductedinvariousjurisdictionsthroughaffiliatedcompaniesinaccordancewithlocalregulatoryrequirements.
TheCompanyusesanon-GAAPperformancemeasurereferredtoaseconomicnetincome(“ENI”)torepresentitsviewoftheunderlyingeconomicearningsofthebusiness.ENIisusedtomakeresourceallocationdecisions,determineappropriatelevelsofinvestmentordividendpayout,managebalancesheetleverage,determineAffiliatevariablecompensationandequitydistributions,andincentivizemanagement.TheCompany’sENIadjustmentstoU.S.GAAPincludebothreclassificationsofU.S.GAAPrevenueandexpenseitems,aswellasadjustmentstoU.S.GAAPresults,primarilytoexcludenon-cash,non-economicexpenses,ortoreflectcashbenefitsnotrecognizedunderU.S.GAAP.
Inthefirstquarterof2020,theCompanyrefineditsdefinitionofeconomicnetincomeinlightofaone-timecompensationarrangemententeredintothatincludesadvancesagainstfuturecompensationpayments.
TheCompanyre-categorizescertainlineitemsontheincomestatementto:• excludetheeffectofFundconsolidationbyremovingtheportionofFundrevenues,expensesandinvestmentreturnwhichisnotattributabletoitsshareholders.• includewithinmanagementfeerevenueanyfeespaidtoAffiliatesbyconsolidatedFunds,whichareviewedasinvestmentincomeunderU.S.GAAP.• includetheCompany’sshareofearningsfromequity-accountedAffiliateswithinotherincome,ratherthaninvestmentincome;• treatsales-basedcompensationasageneralandadministrativeexpense,ratherthanpartoffixedcompensationandbenefits;• identifyseparatelyfromoperatingexpenses,variablecompensationandAffiliatekeyemployeedistributions,whichrepresentAffiliateearningssharedwithAffiliatekeyemployees;
and• nettheseparaterevenuesandexpensesrecordedunderU.S.GAAPforcertainFundexpensesinitiallypaidbytheCompany’sAffiliatesontheFund’sbehalfandsubsequently
reimbursed,tobetterreflecttheactualeconomicsoftheCompany’sbusiness.
TheCompanyalsomakesthefollowingadjustmentstoU.S.GAAPresultstomorecloselyreflectitseconomicresultsby:i. excludingnon-cashexpensesrepresentingchangesinthevalueofAffiliateequityandprofitinterestsheldbyAffiliatekeyemployees.Theseownershipinterestsmayincertain
circumstancesberepurchasedbyBrightSphereatavaluebasedonapre-determinedfixedmultipleoftrailingearningsandassuchthisvalueiscarriedontheCompany’sbalancesheetasaliability.Non-cashmovementsinthevalueofthisliabilityaretreatedascompensationexpenseunderU.S.GAAP.However,anyequityorprofitinterestsrepurchasedbyBrightSpherecanbeusedtofundaportionoffuturevariablecompensationawards,resultinginsavingsincashvariablecompensationthatoffsetthenegativecasheffectofrepurchasingtheequity.
ii. excludingnon-cashamortizationorimpairmentexpensesrelatedtoacquiredgoodwillandotherintangiblesasthesearenon-cashchargesthatdonotresultinanoutflowoftangibleeconomicbenefitsfromthebusiness.Italsoexcludestheamortizationofacquisition-relatedcontingentconsideration,aswellasthevalueofemployeeequityownedpre-acquisition,asoccurredasaresultoftheLandmarktransaction,wheresuchitemshavebeenincludedincompensationexpenseasaresultofongoingservicerequirementsforcertainemployees.Pleasenotethattherevaluationsrelatedtotheseacquisition-relateditemsareincludedin(i)above.
iii. excludingcapitaltransactioncosts,includingthecostsofraisingdebtorequity,gainsorlossesrealizedasaresultofredeemingdebtorequityanddirectincrementalcostsassociatedwithacquisitionsofbusinessesorassets.
iv. excludingseedcapitalandco-investmentgains,lossesandrelatedfinancingcosts.ThenetreturnsontheseinvestmentsareconsideredandpresentedseparatelyfromENIbecauseENIisprimarilyameasureoftheCompany’searningsfrommanagingclientassets,whichthereforediffersfromearningsgeneratedbyitsinvestmentsinAffiliateproducts,whichcanbevariablefromperiodtoperiod.
v. includingcashtaxbenefitsassociatedwithdeductionsallowedforacquiredintangiblesandgoodwillthatmaynotberecognizedorhavetimingdifferencescomparedtoU.S.GAAP.vi. excludingtheresultsofdiscontinuedoperationsattributabletocontrollinginterestssincetheyarenotpartoftheCompany’songoingbusiness,restructuringcostsincurredin
continuingoperationsandtheimpactofaone-timecompensationarrangemententeredintothatincludesadvancesagainstfuturecompensationpayments.vii. excludingdeferredtaxresultingfromchangesintaxlawandexpirationofstatutes,adjustmentsforuncertaintaxpositions,deferredtaxattributabletointangibleassetsandother
unusualitemsnotrelatedtocurrentoperatingresultstoreflectENItaxnormalization.
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DefinitionsandAdditionalNotesENIearningsbeforevariablecompensationENIearningsbeforevariablecompensationiscalculatedasENIrevenue,lessENIoperatingexpense.
ENIvariablecompensationratioTheENIvariablecompensationratioiscalculatedasvariablecompensationdividedbyENIearningsbeforevariablecompensation.ItisusedbymanagementandisusefultoinvestorstoevaluateconsolidatedvariablecompensationasmeasuredagainsttheCompany’sENIearningsbeforevariablecompensation.VariablecompensationisusuallyawardedbasedonacontractualpercentageofeachAffiliate’sENIearningsbeforevariablecompensationandmaybepaidintheformofcashornon-cashAffiliateequityorprofitinterests.CentervariablecompensationincludescashandBrightSphereequity.Non-cashvariablecompensationawardstypicallyvestoverseveralyearsandarerecognizedascompensationexpenseoverthatserviceperiod.ThevariablecompensationratioateachAffiliatewilltypicallybebetween25%and35%.
ENIAffiliatekeyemployeedistributionratioTheAffiliatekeyemployeedistributionratioiscalculatedasAffiliatekeyemployeedistributionsdividedbyENIoperatingearnings.TheENIAffiliatekeyemployeedistributionratioisusedbymanagementandisusefultoinvestorstoevaluateAffiliatekeyemployeedistributionsasmeasuredagainsttheCompany’sENIoperatingearnings.AffiliatekeyemployeedistributionsrepresenttheshareofAffiliateprofitsaftervariablecompensationthatisattributabletoAffiliatekeyemployeeequityandprofitinterestsholders,accordingtotheirownershipinterests.AtcertainAffiliates,BSUSisentitledtoaninitialpreferenceoverprofitsaftervariablecompensation,structuredsuchthatbeforeapreferencethresholdisreached,therewouldbenorequiredkeyemployeedistributions,whereasforprofitsabovethethresholdthekeyemployeedistributionamountwouldbecalculatedbasedonthekeyemployeeeconomicpercentages,whichrangefromapproximately20%to40%atitsconsolidatedAffiliates.U.S.GAAPoperatingmarginU.S.GAAPoperatingmarginequalsoperatingincomefromcontinuingoperationsdividedbytotalrevenue.
ConsolidatedFunds
FinancialinformationpresentedinaccordancewithU.S.GAAPmayincludetheresultsofconsolidatedpooledinvestmentvehicles,orFunds,managedbytheCompany’sAffiliates,whereithasbeendeterminedthattheseentitiesarecontrolledbytheCompany.Financialresultswhichare“attributabletocontrollinginterests”excludetheimpactofFundstotheextentitisnotattributabletotheCompany’sshareholders.Annualizedrevenueimpactofnetflows(“NCCF”)Annualizedrevenueimpactofnetflowsrepresentsannualizedmanagementfeesexpectedtobeearnedonnewaccountsandnetassetscontributedtoexistingaccounts(inflows),lesstheannualizedmanagementfeeslostonterminatedaccountsornetassetswithdrawnfromexistingaccounts(outflows),plusrevenueimpactfromreinvestedincomeanddistribution.Annualizedmanagementfeeforclientflowiscalculatedbymultiplyingtheannualgrossfeeratefortherelevantaccountwiththeinflowortheoutflow,includingequity-accountedAffiliates.Inaddition,reinvestedincomeanddistributionforeachsegmentismultipliedbyaveragefeeratefortherespectivesegmenttocomputetherevenueimpact.
ReinvestedincomeanddistributionsNetflowsincludereinvestedincomeanddistributionsmadebyBrightSphere’sAffiliates.Reinvestedincomeanddistributionsrepresentinvestmentyieldnotdistributedascash,andreinvestedbacktotheportfolios.
RealizationsandOtherRealizationsincludedistributionsrelatedtothesaleofalternativeassetsandrepresentreturnoninvestments.OtheractivityprimarilyrelatestothedeclineinbillableAUMasalegacyalternativefundtransitionedfrombillingbasedoncommittedAUMtonetassetvalue.
n/m“Notmeaningful.”
BSIG2020032
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TheCompanyadjustsitsincometaxexpensetoreflectanytaximpactofitsENIadjustments.
AdjustedEBITDAAdjustedEBITDAisdefinedaseconomicnetincomebeforeinterest,incometaxes,depreciationandamortization.TheCompanynotesthatitscalculationofAdjustedEBITDAmaynotbeconsistentwithAdjustedEBITDAascalculatedbyothercompanies.TheCompanybelievesAdjustedEBITDAisausefulliquiditymetricbecauseitindicatestheCompany’sabilitytomakefurtherinvestmentsinitsbusiness,servicedebtandmeetworkingcapitalrequirements.RefertothereconciliationofU.S.GAAPnetincomeattributabletocontrollingintereststoENIandAdjustedEBITDA.
SegmentENISegmentENIrepresentsENIforeachoftheCompany’sreportablesegments,calculatedinaccordancewiththeCompany’sdefinitionofEconomicNetIncome,beforeincometax,interestincomeandinterestexpense.
Methodologiesforcalculatinginvestmentperformance(1):Revenue-weightedinvestmentperformancemeasuresthepercentageofmanagementfeerevenuegeneratedbyAffiliatestrategieswhicharebeatingbenchmarks.Itcalculateseachstrategy’spercentageweightbytakingitsestimatedcompositerevenueovertotalcompositerevenuesineachperiod,thensumsthetotalpercentageofrevenueforstrategiesoutperforming.Equal-weightedinvestmentperformancemeasuresthepercentageofAffiliates’scalestrategies(definedasstrategieswithgreaterthan$100millionofAUM)beatingbenchmarks.Eachoutperformingstrategyover$100millionhasthesameweight;thecalculationsumsthenumberofstrategiesoutperformingrelativetothetotalnumberofcompositesover$100million.Asset-weightedinvestmentperformancemeasuresthepercentageofAUMinstrategiesbeatingbenchmarks.Itcalculateseachstrategy’spercentageweightbytakingitscompositeAUMovertotalcompositeAUMineachperiod,thensumsthetotalpercentageofAUMforstrategiesoutperforming.
ENIoperatingearningsENIoperatingearningsrepresentsENIearningsbeforeAffiliatekeyemployeedistributionsandiscalculatedasENIrevenue,lessENIoperatingexpense,lessENIvariablecompensation.ItdiffersfromeconomicnetincomebecauseitdoesnotincludetheeffectsofAffiliatekeyemployeedistributions,netinterestexpenseorincometaxexpense.
ENIoperatingmarginTheENIoperatingmargin,whichiscalculatedbeforeAffiliatekeyemployeedistributions,isusedbymanagementandisusefultoinvestorstoevaluatetheoveralloperatingmarginofthebusinesswithoutregardtotheCompany’svariousownershiplevelsateachoftheAffiliates.ENIoperatingmarginisanon-GAAPefficiencymeasure,calculatedbasedonENIoperatingearningsdividedbyENIrevenue.TheENIoperatingmarginismostcomparabletotheCompany’sU.S.GAAPoperatingmargin.
ENImanagementfeerevenueENIManagementfeerevenuecorrespondstoU.S.GAAPmanagementfeerevenue.
Netcatch-upfeesNetcatch-upfeesrepresentpaymentoffundmanagementfeesbacktotheinitialclosingdateforcertainproductswithmultipleclosings,lessplacementfeespaidtothirdpartiesrelatedtothesefunds.ENIoperatingexpenseratioTheENIoperatingexpenseratioisusedbymanagementandisusefultoinvestorstoevaluatethelevelofoperatingexpenseasmeasuredagainsttheCompany’srecurringmanagementfeerevenue.TheCompanyhasprovidedthisratiosincemanyoperatingexpenses,includingfixedcompensation&benefitsandgeneralandadministrativeexpense,aregenerallylinkedtotheoverallsizeofthebusiness.TheCompanytracksthisratioasakeymeasureofscaleeconomiesatBrightSpherebecauseinitsprofitsharingeconomicmodel,scalebenefitsboththeAffiliateemployeesandBrightSphereshareholders.
DefinitionsandAdditionalNotes
___________________________________________________________(1) LiquidAlphaSegment’sWindsorIILargeCapValueaccountAUMandreturnareseparatedfromLiquidAlpha’sLargeCapValuecompositeinrevenue-weighted,equal-weightedandasset-
weightedoutperformancepercentagecalculationsfortheperiodendedJune30,2019.
BSIG2020032
