10-Q 1 bsig-20220331.htm 10-Q bsig-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
(Mark One)
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2022
OR
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to
Commission File Number: 001-38979
 
bsig-20220331_g1.jpg
BRIGHTSPHERE
Investment Group Inc.
(Exact name of registrant as specified in its charter) 
Delaware47-1121020
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
  
200 Clarendon Street, 53rd Floor02116
Boston, Massachusetts
(Address of principal executive offices)(Zip Code)
(617)-369-7300
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker SymbolName of each exchange on which registered
Common stock, par value $0.001 per shareBSIGNew York Stock Exchange
4.800% Notes due 2026BSIG 26New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filerAccelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No ý 
The number of shares of the registrant’s common stock, $0.001 per share, outstanding as of May 5, 2022 was 41,425,469.


TABLE OF CONTENTS
  Page
Part I
   
Item 1.
   
 
   
 
   
 
   
 
   
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
Part II
   
Item 1.
   
Item 1A.
   
Item 2.
Item 5.
Item 6.


2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

BrightSphere Investment Group Inc.
Condensed Consolidated Balance Sheets
(in millions, except for share and per share data, unaudited)
March 31,
2022
December 31,
2021
Assets  
Cash and cash equivalents$88.8 $252.1 
Investment advisory fees receivable114.3 167.1 
Income taxes receivable6.4 4.9 
Fixed assets, net48.9 50.2 
Right of use assets63.3 65.1 
Investments53.4 54.5 
Goodwill20.3 20.3 
Other assets27.8 28.2 
Deferred tax assets70.9 72.4 
Total assets$494.1 $714.8 
Liabilities and stockholders’ equity  
Accounts payable and accrued expenses$21.0 $35.2 
Accrued incentive compensation28.9 117.4 
Other compensation liabilities94.7 103.7 
Accrued income taxes8.8 1.1 
Operating lease liabilities76.1 77.6 
Other liabilities1.3 2.5 
Debt:
Revolving credit facility88.0  
Third party borrowings273.2 394.9 
Total liabilities592.0 732.4 
Commitments and contingencies
Equity: 
Common stock (par value $0.001; 41,425,594 and 45,397,260 shares, respectively, issued)
  
Additional paid-in capital  
Retained deficit(88.0)(6.8)
Accumulated other comprehensive loss(9.9)(10.8)
Non-controlling interests in consolidated Funds  
Total equity(97.9)(17.6)
Total liabilities and equity$494.1 $714.8 
See Notes to Condensed Consolidated Financial Statements

3

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Operations
(in millions except for per share data, unaudited)
 
Three Months Ended
March 31,
 20222021
Revenue:  
Management fees$102.2 $103.8 
Performance fees10.0 4.6 
Other revenue 1.3 
Total revenue112.2 109.7 
Operating expenses:  
Compensation and benefits46.8 52.6 
General and administrative expense16.9 19.1 
Depreciation and amortization5.3 5.5 
Amortization of acquired intangibles  
Total operating expenses69.0 77.2 
Operating income43.2 32.5 
Non-operating income and (expense):  
Investment income (loss)(0.1)2.6 
Interest income  
Interest expense(6.5)(6.2)
Loss on extinguishment of debt(3.2) 
Loss on sale of subsidiary (1.3)
Total non-operating income (loss)(9.8)(4.9)
Income from continuing operations before taxes33.4 27.6 
Income tax expense9.6 9.1 
Income from continuing operations23.8 18.5 
Income from discontinued operations, net of tax 21.9 
Net income23.8 40.4 
Net income attributable to non-controlling interests in consolidated Funds 13.4 
Net income attributable to controlling interests$23.8 $27.0 
Earnings per share (basic) attributable to controlling interests$0.54 $0.34 
Earnings per share (diluted) attributable to controlling interests0.53 0.33 
Continuing operations earnings per share (basic) attributable to controlling interests0.54 0.23 
Continuing operations earnings per share (diluted) attributable to controlling interests0.53 0.22 
Weighted average common stock outstanding44.0 79.3 
Weighted average diluted common stock outstanding45.3 82.3 
See Notes to Condensed Consolidated Financial Statements

4

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions, unaudited)
 
Three Months Ended
March 31,
 20222021
Net income$23.8 $40.4 
Other comprehensive income (loss):
Amortization related to derivative securities, net of tax
1.6 0.6 
Foreign currency translation adjustment(0.7)1.1 
Total other comprehensive income0.9 1.7 
Comprehensive income attributable to non-controlling interests in consolidated Funds 13.4 
Total comprehensive income attributable to controlling interests$24.7 $28.7 

See Notes to Condensed Consolidated Financial Statements

5

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the three months ended March 31, 2022 and 2021
($ in millions except share data, unaudited)
 Common stock
(millions)
Common stock, 
par
value
Additional paid-in capitalRetained earnings (deficit)Accumulated
other
comprehensive
income (loss)
Total
stockholders’
equity
Non-
controlling
interests
Non-controlling
interests in
consolidated
Funds
Total 
equity
Total equity and
redeemable
non-controlling
interests in
consolidated
Funds
December 31, 202079.4 $0.1 $492.4 $(176.5)$(13.6)$302.4 $1.7 $80.3 $384.4 $384.4 
Capital contributions— — — — — — 3.8 — 3.8 3.8 
Equity-based compensation— — 0.4 — — 0.4 — — 0.4 0.4 
Foreign currency translation adjustment
— — — — 1.1 1.1 — — 1.1 1.1 
Amortization related to derivatives securities, net of tax
— — — — 0.6 0.6 — — 0.6 0.6 
Other changes in non-controlling interests
— — — — — — 0.1 — 0.1 0.1 
Dividends ($0.01 per share)
— — — (0.8)— (0.8)— — (0.8)(0.8)
Net income — — — 27.0 — 27.0 — 13.4 40.4 40.4 
March 31, 202179.4 $0.1 $492.8 $(150.3)$(11.9)$330.7 $5.6 $93.7 $430.0 $430.0 
December 31, 202145.4 $ $ $(6.8)$(10.8)$(17.6)$ $ $(17.6)$(17.6)
Issuance of common stock0.2 — — — — — — — —  
Repurchase of common stock(4.2)— — (103.2)— (103.2)— — (103.2)(103.2)
Equity-based compensation— — 0.9 — — 0.9 — — 0.9 0.9 
Foreign currency translation adjustment
— — — — (0.7)(0.7)— — (0.7)(0.7)
Amortization related to derivative securities, net of tax
— — — — 1.6 1.6 — — 1.6 1.6 
Withholding tax related to stock option exercise— — (0.9)(1.4)— (2.3)— — (2.3)(2.3)
Dividends ($0.01 per share)
— — — (0.4)— (0.4)— — (0.4)(0.4)
Net income— — — 23.8 — 23.8 — — 23.8 23.8 
March 31, 202241.4 $ $ $(88.0)$(9.9)$(97.9)$ $ $(97.9)$(97.9)
See Notes to Condensed Consolidated Financial Statements

6

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Cash Flows
(in millions, unaudited) 
Three Months Ended
March 31,
 20222021
Cash flows from operating activities:  
Net income23.8 40.4 
Less: Income from discontinued operations, net of tax (21.9)
Adjustments to reconcile net income to net cash flows from operating activities from continuing operations:
  
Loss on extinguishment of debt3.2  
Loss on sale of subsidiary 1.3 
Depreciation and other amortization5.3 5.5 
Amortization of debt-related costs2.7 1.1 
Amortization and revaluation of non-cash compensation awards(4.2)1.6 
Net earnings from Affiliate accounted for using the equity method (1.1)
Distributions received from equity method Affiliate 1.1 
Distributions from discontinued operations 20.3 
Deferred income taxes0.8 2.3 
(Gains) losses on other investments1.2 (2.7)
Changes in operating assets and liabilities (excluding discontinued operations):  
(Increase) decrease in investment advisory fees receivable52.7 (6.0)
Decrease in other receivables, prepayments, deposits and other assets0.4 11.2 
Decrease in accrued incentive compensation, operating lease liabilities and other liabilities(92.2)(49.2)
Decrease in accounts payable, accrued expenses and accrued income taxes(8.1)(11.2)
Net cash flows from operating activities of continuing operations(14.4)(7.3)
Net cash flows from operating activities of discontinued operations (13.0)
Total net cash flows from operating activities(14.4)(20.3)
Cash flows from investing activities:  
Additions of fixed assets, excluding discontinued operations(4.0)(3.5)
Purchase of investment securities(4.8)(2.0)
Sale of investment securities4.8 6.1 
Net cash flows from investing activities of continuing operations(4.0)0.6 
Net cash flows from investing activities of discontinued operations 2.2 
Total net cash flows from investing activities(4.0)2.8 
Cash flows from financing activities:  
Proceeds from revolving credit facility125.0 95.0 
Repayment of third party borrowings and revolving credit facility(162.0)(14.0)
Payment for debt issuance costs(0.9)(0.4)
Payment to OM plc for co-investment redemptions(1.1)(1.3)
Dividends paid to stockholders(0.3)(0.6)
Dividends paid to related parties(0.1)(0.3)
Repurchases of common stock(103.2) 
Withholding tax payments related to stock option exercise(2.3) 
Net cash flows from financing activities of continuing operations(144.9)78.4 
Net cash flows from financing activities of discontinued operations 0.4 
Total net cash flows from financing activities(144.9)78.8 
Effect of foreign exchange rate changes on cash and cash equivalents  
Net increase (decrease) in cash and cash equivalents(163.3)61.3 
See Notes to Condensed Consolidated Financial Statements

7

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Cash Flows
(in millions, unaudited) 
Three Months Ended
March 31,
 20222021
Cash and cash equivalents at beginning of period252.1 372.9 
Cash and cash equivalents at beginning of period classified within assets held for sale$ $31.2 
Cash and cash equivalents at end of period$88.8 $465.4 
Less: cash and cash equivalents at end of period classified within assets held for sale  (20.7)
Cash and cash equivalents at end of period from continuing operations$88.8 444.7
Supplemental disclosure of cash flow information:  
Interest paid$8.0 $8.2 
Income taxes paid3.0 0.3 







See Notes to Condensed Consolidated Financial Statements

8


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1) Organization and Description of the Business
BrightSphere Investment Group Inc. (“BrightSphere”, “BSIG” or the “Company”), through its subsidiaries, is a global asset management company. The Company provides investment management services globally to predominantly institutional investors. The Company historically held interests in a diverse group of investment management firms (the “Affiliates”) individually headquartered in the United States. The Company completed the disposition of certain Affiliates and currently operates the business through one Affiliate, Acadian Asset Management LLC (“Acadian”), within its Quant & Solutions reportable segment:
Quant & Solutions—comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies.
Acadian is organized as a limited liability company. Fees for services are largely asset-based and, as a result, the Company’s revenue fluctuates based on the performance of financial markets and investors’ asset flows in and out of the Company’s products. The Company utilizes a profit-sharing model in structuring its compensation and ownership with Acadian. Variable compensation is based on the firm’s profitability. BSIG and Acadian key employees share in profits after variable compensation according to their respective ownership interests. The profit-sharing model results in the alignment of BSIG and Acadian key employee economic interests, which is critical to the Company’s talent management strategy and long-term growth of the business.     
The corporate head office is included within the Other category, along with the Company’s previously disposed affiliates, Campbell Global, LLC (“Campbell Global”) and Investment Counselors of Maryland (“ICM”), for the prior year period.
Prior to 2014, the Company was a wholly-owned subsidiary of Old Mutual plc (“OM plc”), an international long-term savings, protection, and investment group, listed on the London Stock Exchange. On October 15, 2014, the Company completed the initial public offering (the “Offering”) by OM plc pursuant to the Securities Act of 1933, as amended. Additionally, between the Offering and February 25, 2019, the Company, OM plc and/or HNA Capital U.S. (“HNA”) completed a series of transactions in the Company’s shares, including a two-step transaction announced on March 25, 2017 for a sale by OM plc of a 24.95% shareholding in the Company to HNA and a two-step transaction announced on November 19, 2018 for a sale of the substantial majority of the shares held by HNA of the Company to Paulson & Co. (“Paulson”). On February 25, 2019, this transaction was completed and Paulson held approximately 21.7% of the shares of the Company. The remaining shares held by HNA were bought back by the Company in the first quarter of 2019.

For the three months ended March 31, 2022, the Company repurchased 4,147,450 shares of common stock at an average price of $24.09 per share, or approximately $100 million in total, including commissions. For the three months ended March 31, 2021, the Company did not repurchase any shares of common stock.


9


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

2) Basis of Presentation and Significant Accounting Policies


The Company’s significant accounting policies are as follows:
Basis of presentation
These unaudited Condensed Consolidated Financial Statements reflect the historical balance sheets, statements of operations, comprehensive income, changes in stockholders’ equity and cash flows of the Company. Within these Condensed Consolidated Financial Statements, Paulson and its related entities, as defined above, are referred to as “related parties.”
The Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of the Company’s Condensed Consolidated Financial Statements have been included. All dollar amounts, except per-share data in the text and tables herein, are stated in millions unless otherwise indicated. Transactions between the Company and its related parties are included in the Condensed Consolidated Financial Statements, however, material intercompany balances and transactions among the Company, its consolidated Affiliates and consolidated Funds are eliminated in consolidation.
The Notes to the Condensed Consolidated Financial Statements are presented on a continuing operations basis unless otherwise noted. See Note 3, Discontinued Operations for additional information.
Certain disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (annual report on Form 10-K) are not required to be included on an interim basis in the Company’s quarterly reports on Form 10-Q. The Company has condensed or omitted these disclosures. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022. The Company’s significant accounting policies, which have been consistently applied, are summarized in those financial statements.
Use of estimates
The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. The three months ended March 31, 2022 were characterized by continued uncertainty due to the COVID-19 pandemic which could impact estimates and assumptions made by management. Actual results could differ from such estimates, and the differences may be material to the Condensed Consolidated Financial Statements.
New accounting standards not yet adopted

The Company has considered all newly issued accounting guidance that is applicable to the Company’s operations and the preparation of the unaudited Condensed Consolidated Financial Statements, including those that have not yet been adopted. The Company does not believe that any such guidance has or will have a material effect on its Condensed Consolidated Financial Statements and related disclosures.


10


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

3) Discontinued Operations
Landmark Partners
On March 30, 2021, the Company entered into a definitive agreement with Ares Holdings L.P. (“Ares”), pursuant to which Ares agreed to purchase all of the Company’s interests in Landmark and the Company’s co-investments in Landmark funds. On June 2, 2021, the Company completed the sale of all its interests in Landmark to Ares for cash consideration of $690.0 million, adjusted for customary closing adjustments. The divestiture of Landmark met the discontinued operations criteria as it represented a strategic shift that had a major effect on the Company’s operations and financial results. The Company redeemed co-investments of $31.5 million in Landmark’s funds as of June 2, 2021 upon consummation of the sale.
Thompson, Siegel & Walmsley, LLC
On May 9, 2021, the Company entered into an agreement with Pendal Group Limited (“Pendal”), to sell all of the Company’s interests in Thompson, Siegel & Walmsley, LLC (“TSW”) and the Company’s seed investment in TSW strategies. On July 22, 2021, the Company completed the sale of all its interests in TSW to Pendal for cash consideration of $240.0 million. The divestiture of TSW met the discontinued operations criteria as it represented a strategic shift that has a major effect on the Company’s operations and financial results.
The major classes of revenue and expenses constituting net income from discontinued operations attributable to controlling interests for Landmark and TSW in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 are as follows (in millions):
Three Months Ended March 31,
 20222021
Revenues$ $58.2 
Operating expenses:
Compensation and benefits 43.8 
General and administrative expenses 4.4 
Amortization of intangibles 1.6 
Depreciation and amortization 0.3 
Consolidated Funds’ expense 0.1 
Total operating expenses 50.2 
Operating income (loss) 8.0 
Investment gains of consolidated Funds 16.6 
Income from discontinued operations before taxes 24.6 
Income tax expense 2.7 
Income from discontinued operations, net of tax  21.9 
Income from discontinued operations attributable to non-controlling interests 13.4 
Net income from discontinued operations attributable to controlling interests$ $8.5 
Consolidated Funds
In connection with the sale of Landmark on June 2, 2021, the Company transferred its co-investment interests in Landmark funds to Ares for $31.5 million. The redemption resulted in the de-consolidation of consolidated Funds

11


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

3) Discontinued Operations (cont.)
that were considered to be variable interest entities (“VIEs”) as of June 2, 2021 upon consummation of the sale. The criteria for discontinued operations accounting treatment were met. The consolidated Funds’ investments gains/(losses) from discontinued operations, net of tax, attributable to controlling interests was $3.1 million in the Company’s Condensed Consolidated Statement of Operations for the three months ended March 31, 2021.
4) Investments
Investments are comprised of the following as of the dates indicated (in millions):
 March 31,
2022
December 31,
2021
Other investments9.0 9.5 
Investments related to long-term incentive compensation plans 44.4 45.0 
Total investments per Condensed Consolidated Balance Sheets53.4 54.5 
Investment income is comprised of the following for the three months ended March 31 (in millions):
Three Months Ended March 31,
 20222021
Realized and unrealized gains (losses) on other investments held at fair value$(0.1)$1.5 
Earnings from equity-accounted investment in Affiliate 1.1 
Total investment income (loss) per Condensed Consolidated Statements of Operations
$(0.1)$2.6 

12


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

5) Fair Value Measurements

The following table summarizes the Company’s assets that are measured at fair value on a recurring basis at March 31, 2022 (in millions):
 Quoted prices
in active
markets
(Level I)
Significant
other
observable
inputs
(Level II)
Significant
unobservable
inputs
(Level III)
UncategorizedTotal value,
March 31, 2022
Assets(1)
 
Investments in separate accounts(2)
4.5   — 4.5 
Investments related to long-term incentive compensation plans(3)
44.4   — 44.4 
Investments in unconsolidated Funds(4)
   4.5 4.5 
Total fair value assets$48.9 $ $ $4.5 $53.4 
The following table summarizes the Company’s assets that are measured at fair value on a recurring basis at December 31, 2021 (in millions):
 Quoted prices
in active
markets
(Level I)
Significant
other
observable
inputs
(Level II)
Significant
unobservable
inputs
(Level III)
UncategorizedTotal value December 31, 2021
Assets(1)
    
Investments in separate accounts(2)
4.6   — 4.6 
Investments related to long-term incentive compensation plans(3)
45.0   — 45.0 
Investments in unconsolidated Funds(4)
   4.9 4.9 
Total fair value assets$49.6 $ $ $4.9 $54.5 
(1)Assets measured at fair value are comprised of financial investments managed by the Company's Affiliates.
Equity securities, including common and preferred stock and short-term investment funds which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. The securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.
The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Company has not made adjustments to the prices provided.
If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III. If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained. In either case, such securities are classified as Level III. The Company performs due diligence

13


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

5) Fair Value Measurements (cont.)

procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures.
(2)Investments in separate accounts of $4.5 million at March 31, 2022 consist of approximately 100% of equity securities and other investments. Investments in separate accounts of $4.6 million at December 31, 2021 consist of approximately 100% of equity securities and other investments. The Company values these using the published price of the underlying securities (classified as Level I) or quoted price supported by observable inputs as of the measurement date (classified as Level II).
(3)Investments related to long-term incentive compensation plans of $44.4 million and $45.0 million at March 31, 2022 and December 31, 2021, respectively, were investments in publicly registered daily redeemable funds (some managed by Affiliates), which the Company has classified as trading securities and valued using the published price as of the measurement dates. Accordingly, the Company has classified these investments as Level I.
(4)The uncategorized amounts of $4.5 million and $4.9 million at March 31, 2022 and December 31, 2021, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in Funds and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Condensed Consolidated Balance Sheets. These unconsolidated Funds consist primarily of real estate investment Funds, UCITS and other investment vehicles. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates. UCITS and other investment vehicles are not subject to redemption restrictions.
The real estate investment Funds of $4.4 million and $4.8 million at March 31, 2022 and December 31, 2021, respectively, are subject to longer than quarterly redemption restrictions, and due to their nature, distributions are received only as cash flows are generated from underlying assets over the life of the Funds. The range of time over which the underlying assets are expected to be liquidated by the investees is approximately one year from March 31, 2022. The valuation process for the underlying real estate investments held by the real estate investment Funds begins with each property or loan being valued by the investment teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, acquisitions, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. In connection with this process, changes in fair value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions.
There were no significant transfers of financial assets or liabilities between Levels II or III during the three months ended March 31, 2022 and 2021, respectively.

14


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

6) Variable Interest Entities


The Company, through its Affiliate, sponsors the formation of various entities considered to be VIEs. These VIEs are primarily Funds managed by the Company’s Affiliate and other partnership interests typically owned entirely by third party investors. Certain Funds may be capitalized with seed capital investments from the Company and may be owned partially by Affiliate key employees and/or individuals that own non-controlling interests in the Affiliate.
The Company’s determination of whether it is the primary beneficiary of a Fund that is a VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to more than an insignificant amount of the risks and rewards of the entity. Typically, the Fund’s investors are entitled to substantially all of the economics of these VIEs with the exception of the management fees and performance fees, if any, earned by the Company or any investment the Company has made into the Funds. The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest, including interests of related parties, is substantial. The Company did not consolidate any funds that are VIEs as of March 31, 2022 and December 31, 2021.
The Company’s involvement with Funds that are VIEs and not consolidated by the Company is generally limited to that of an investment manager and its investment in the unconsolidated VIE, if any. The Company’s investment in any unconsolidated VIE generally represents an insignificant interest of the Fund’s net assets and assets under management, such that the majority of the VIEs results are attributable to third parties. The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors.
The following information pertains to unconsolidated VIEs for which the Company holds a variable interest (in millions):
March 31,
2022
December 31,
2021
Unconsolidated VIE assets$765.4 $795.5 
Unconsolidated VIE liabilities$316.1 $323.6 
Equity interests on the Condensed Consolidated Balance Sheets$4.4 $4.8 
Maximum risk of loss(1)
$4.6 $5.0 
(1)Includes equity investments the Company has made or is required to make.


15


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

7) Borrowings and Debt

The Company’s borrowings and long-term debt was comprised of the following as of the dates indicated (in millions):

March 31, 2022December 31, 2021
(in millions)Carrying ValueFair ValueFair Value LevelCarrying ValueFair ValueFair Value Level
Revolving credit facility:
$125 million revolving credit facility expiring March 7, 2025(1)
$88.0 $88.0 2$ $ 
Total revolving credit facility$88.0 $88.0 $ $ 
Third party borrowings:
$275 million 4.80% Senior Notes Due
July 27, 2026
(2)
$273.2 $265.3 2$273.1 $286.5 2
$125 million 5.125% Senior Notes Due August 1, 2031(2)(3)
  121.8 126.4 2
Total third party borrowings$273.2 $265.3 $394.9 $412.9 
(1)Fair value approximates carrying value because the credit facility has variable interest rates based on selected short term market rates.
(2)The difference between the principal amounts and the carrying values of the senior notes in the table above reflects the unamortized debt issuance costs and discounts.
(3)On January 18, 2022, the Company completed the full redemption of the $125 million aggregate principal amount outstanding of its 5.125% Senior Notes due August 1, 2031. As a result of this transaction, the Company recorded a $3.2 million loss on extinguishment of debt within the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022.
Revolving Credit Facility
On March 7, 2022, the Company, Royal Bank of Canada, BMO Harris Bank, N.A., Goldman Sachs Bank USA, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into a new revolving credit facility agreement (the “Acadian Credit Agreement”), which replaced the Company’s revolving credit facility dated as of August 20, 2019 (as amended by an amendment dated September 3, 2020 and an assignment and assumption and amendment agreement dated February 23, 2021, the “Original Credit Agreement”). The maturity date of this Original Credit Agreement was August 22, 2022, and the maturity date of the Acadian Credit Agreement is March 7, 2025.

16


BrightSphere Investment Group Inc.
Notes to Consolidated Financial Statements
(unaudited)

7) Borrowings and Debt (cont.)

Borrowings under the Acadian Credit Agreement bear interest, at Acadian’s option, at the per annum rate equal to either (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5% and (iii) the secured overnight financing rate for a one month period plus a credit spread adjustment of 0.10% (“Adjusted Term SOFR”) plus 1%, plus, in each case, an additional amount ranging from 0.5% to 1.0%, with such additional amount based on Acadian’s Leverage Ratio (as defined below) or (b) Adjusted Term SOFR for plus an additional amount ranging from 1.5% to 2.0%, with such additional amount based on Acadian’s Leverage Ratio. In addition, Acadian is charged a commitment fee based on the average daily unused portion of the revolving credit facility under the Acadian Credit Agreement at a per annum rate ranging from 0.25% to 0.375%, with such amount based on Acadian’s Leverage Ratio.
Under the Acadian Credit Agreement, the ratio of Acadian’s third-party borrowings to Acadian’s trailing twelve months Adjusted EBITDA, as defined by the Acadian Credit Agreement (the “Leverage Ratio”), cannot exceed 2.5x and the Acadian interest coverage ratio must not be less than 4.0x.

8) Leases
The Company has operating leases for corporate offices, data centers and certain equipment. The operating leases have remaining lease terms of less than 1 year to 12 years, some of which include options to extend the leases for up to 5 years.
The following table summarizes information about the Company’s operating leases for the three months ended March 31 (in millions):
Three Months Ended March 31,
20222021
Operating lease cost$2.5 $2.9 
Sublease income(0.1) 
Total operating lease expense$2.4 $2.9 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$2.2 $2.6 
In determining the incremental borrowing rate, the Company considered the interest rate yield for the specific interest rate environment and the Company’s credit spread at the inception of the lease. For the three months ended March 31, 2022 and 2021, the weighted average remaining lease term was 11.2 years and 11.1 years, respectively, and the weighted average discount rate was 3.35% and 3.34%, respectively.
Maturities of operating lease liabilities were as follows (in millions):

17


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

8) Leases (cont.)
Operating Leases
Year Ending December 31,
2022 (excluding the three months ended March 31, 2022)
4.0 
20238.6 
20248.0 
20257.7 
20267.6 
Thereafter56.4 
Total lease payments$92.3 
   Less imputed interest(16.2)
Total$76.1 
Operational commitments
The Company had an unfunded commitment to invest up to approximately $0.2 million in co-investments at a former Affiliate as of March 31, 2022. These commitments will be funded as required through the end of the investment period through 2022.
Included in cash and cash equivalents is $1.5 million pertaining to the wind-down of BrightSphere Investment UK, Ltd.
A number of our subsidiaries operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any violations of such financial requirements occurring during the period.
Guaranty
The Company entered into a guaranty for an office space security deposit in the amount of $2.5 million in January 2020. This represents the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guaranty in the event of default by the guaranteed parties. This guaranty expires in 2022. There are no liabilities recorded on the Condensed Consolidated Balance Sheet as of March 31, 2022 related to this guaranty.
Litigation
The Company and its Affiliates are subject to claims, legal proceedings, and other contingencies in the ordinary course of their business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals for matters for which the outcome is probable and can be reasonably estimated. If an insurance claim or other indemnification for a litigation accrual is available to the Company, the associated gain will not be recognized until all contingencies related to the gain have been resolved. As of March 31, 2022, there were no material accruals for claims, legal proceedings, or other contingencies.

18


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

9) Commitments and Contingencies (cont.)

Indemnifications
In the normal course of business, such as through agreements to enter into business combinations and divestitures of Affiliates, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred.
Foreign tax contingency
The Company has clients in non-U.S. jurisdictions which require entities that are conducting certain business activities in such jurisdictions to collect and remit tax assessed on certain fees paid for goods and services provided. The Company does not believe this requirement is applicable based on its limited business activities in these jurisdictions. However, given the fact that uncertainty exists around the requirement, the Company has chosen to evaluate its potential exposure related to non-collection and remittance of these taxes. At March 31, 2022, management of the Company has estimated the potential maximum exposure and concluded that it is not material. No accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at March 31, 2022.
Considerations of credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, restricted cash and investments. The Company maintains cash and cash equivalents and short term investments with various financial institutions. These financial institutions are typically located in cities in which the Company and its Affiliates operate. For the Company and certain Affiliates, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits. At March 31, 2022, approximately $20.5 million of the Company’s cash and cash equivalents were invested in money market funds. Additionally, the Company holds insurance policies which cover historical and future tax benefits relating to certain of its deferred tax assets. The insurers of the policies are considered a significant counterparty to the Company.


19


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

10) Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to controlling interests by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is similar to basic earnings per share, but is adjusted for the effect of potentially issuable common stock, except when inclusion is antidilutive.
The calculation of basic and diluted earnings per share of common stock is as follows (dollars in millions, except per share data):
 Three Months Ended March 31,
 20222021
Numerator:  
Income from continuing operations attributable to controlling interests$23.8 $18.5 
Income from discontinued operations attributable to controlling interests (Note 3) 8.5 
Net income attributable to common stock$23.8 $27.0 
Denominator:  
Weighted-average shares of common stock outstanding—basic43,969,713 79,319,556 
Potential shares of common stock:
Restricted stock units10,112 35,621 
Employee stock options1,347,565 2,965,491 
Weighted-average shares of common stock outstanding—diluted45,327,390 82,320,668 
Earnings per share of common stock attributable to controlling interests:  
Basic
Continuing operations$0.54 $0.23 
Discontinued operations 0.11 
Basic earnings per share of common stock attributable to controlling interests$0.54 $0.34 
Diluted
Continuing operations$0.53 $0.22 
Discontinued operations 0.11 
Diluted earnings per share of common stock attributable to controlling interests$0.53 $0.33 


20


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

11) Revenue (cont.)
Management fees
The Company’s management fees are a function of the fee rates the Affiliates charge to their clients, which are typically expressed in basis points, and the levels of the Company’s assets under management. The most significant driver of increases or decreases in this average fee rate is changes in the mix of the Company’s assets under management caused by net inflows or outflows in certain asset classes or disproportionate market movements.
Performance fees
The Company’s products subject to performance fees earn these fees upon exceeding high-water mark performance thresholds or outperforming a hurdle rate. Performance fees are recorded in revenues when the contractual performance criteria have been met and when it is probable that a significant reversal of revenue recognized will not occur in future reporting periods.

Other revenue
Included in other revenue are certain payroll and benefits costs and expenses paid on behalf of Funds by the Company’s Affiliates. In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, the Company is acting as a principal and the reimbursement is accrued on a gross basis at cost as the corresponding reimbursable expenses are incurred. There was no revenue from expense reimbursements for the three months ended March 31, 2022. Revenue from expense reimbursements amounted to $1.0 million for the three months ended March 31, 2021. Revenue is recorded in other revenue in the Company’s Condensed Consolidated Statements of Operations. Other revenue may also consist of other miscellaneous revenue, consisting primarily of administration and consulting services.
Disaggregation of management fee revenue
The geographic disaggregation of management fee revenue for the three months ended March 31 (in millions) are presented below:
Three Months Ended March 31,
20222021
Quant & Solutions
U.S.$77.0 $74.4 
Non-U.S.25.2 24.5 
Other(1)
U.S. 3.7 
Non-U.S. 1.2 
Management fee revenue $102.2 $103.8 
(1)The Company’s previously disposed affiliates, Campbell Global and ICM, are included within the Other category for the three months ended March 31, 2021.


21


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

12) Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2022 and 2021 are as follows (in millions):
Foreign currency translation adjustmentValuation and amortization of derivative securitiesTotal
Balance, as of December 31, 2021
$4.8 $(15.6)$(10.8)
Foreign currency translation adjustment(0.7) (0.7)
Amortization related to derivatives securities, before tax(1)
 2.2 2.2 
Tax impact (0.6)(0.6)
Other comprehensive income (loss)(0.7)1.6 0.9 
Balance, as of March 31, 2022
$4.1