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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 September 30, 2023
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
 
brightsphere-sphere_logoa06.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 State Street, 13th Floor02109
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 filer☒Accelerated 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 November 6, 2023 was 41,508,144.

TABLE OF CONTENTS
  Page
Part I
   
Item 1.
   
 
   
 
   
 
   
 
   
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
Part II
   
Item 1.
   
Item 1A.
   
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)
September 30,
2023		December 31,
2022
Assets  
Cash and cash equivalents$143.1 $108.4 
Investment advisory fees receivable103.8 122.5 
Income taxes receivable5.9 2.0 
Fixed assets, net45.6 47.7 
Right of use assets58.6 59.9 
Investments62.3 48.4 
Goodwill20.3 20.3 
Other assets27.5 27.7 
Deferred tax assets69.3 64.7 
Assets of consolidated Funds:
Cash and cash equivalents, restricted— 12.8 
Investments 16.4 1.9 
Other assets0.2 2.4 
Total assets$553.0 $518.7 
Liabilities and stockholders’ equity  
Accounts payable and accrued expenses$24.1 $31.0 
Accrued incentive compensation71.8 92.5 
Other compensation liabilities60.0 59.3 
Accrued income taxes1.3 4.6 
Operating lease liabilities73.9 75.8 
Other liabilities0.8 1.1 
Revolving credit facility13.0 — 
Third party borrowings273.8 273.5 
Liabilities of consolidated Funds:
Accounts payable and accrued expenses0.1 0.3 
Derivative liabilities at fair value— 2.2 
Securities sold, not yet purchased, at fair value3.0 — 
Total liabilities521.8 540.3 
Commitments and contingencies
Redeemable non-controlling interests in consolidated Funds8.3 — 
Equity: 
Common stock (par value $0.001; 41,508,144 and 41,435,087 shares, respectively, issued)
— — 
Additional paid-in capital1.8 1.5 
Retained earnings (deficit)29.2 (12.5)
Accumulated other comprehensive loss(8.1)(10.6)
Total equity (deficit) and redeemable non-controlling interests in consolidated Funds31.2 (21.6)
Total liabilities and equity$553.0 $518.7 
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
September 30,		Nine Months Ended
September 30,
 2023202220232022
Revenue:    
Management fees$95.3 $85.7 $278.7 $281.4 
Performance fees11.2 1.1 13.9 13.1 
Consolidated Funds’ revenue0.8 — 2.8 — 
Total revenue107.3 86.8 295.4 294.5 
Operating expenses:    
Compensation and benefits53.0 34.9 150.6 108.7 
General and administrative expense18.8 17.5 59.0 50.9 
Depreciation and amortization4.5 4.2 12.7 14.8 
Amortization of acquired intangibles— 0.1 — 0.1 
Consolidated Funds’ expense0.8 — 2.7 — 
Total operating expenses77.1 56.7 225.0 174.5 
Operating income30.2 30.1 70.4 120.0 
Non-operating income and (expense):    
Investment income (loss)(0.3)(0.4)0.2 (1.2)
Interest income1.7 0.2 4.3 0.3 
Interest expense(4.8)(4.6)(15.1)(15.9)
Loss on extinguishment of debt— — — (3.2)
Net consolidated Funds’ investment gains0.7 — 1.8 — 
Total non-operating loss(2.7)(4.8)(8.8)(20.0)
Income before income taxes27.5 25.3 61.6 100.0 
Income tax expense7.7 7.5 18.3 29.8 
Net income19.8 17.8 43.3 70.2 
Net income attributable to non-controlling interests in consolidated Funds0.2 — 0.3 — 
Net income attributable to controlling interests$19.6 $17.8 $43.0 $70.2 
Earnings per share (basic) attributable to controlling interests$0.47 $0.43 $1.04 $1.66 
Earnings per share (diluted) attributable to controlling interests0.46 0.42 1.01 1.62 
Weighted average common stock outstanding41.5 41.4 41.5 42.3 
Weighted average diluted common stock outstanding42.6 42.4 42.6 43.4 
See Notes to Condensed Consolidated Financial Statements

4
BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions, unaudited)
 
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2023202220232022
Net income$19.8 $17.8 $43.3 $70.2 
Other comprehensive income (loss):
Amortization related to derivative securities, net of tax
0.7 0.6 1.9 2.8 
Foreign currency translation adjustment(0.9)(2.5)0.6 (5.6)
Total other comprehensive income (loss)(0.2)(1.9)2.5 (2.8)
Comprehensive income attributable to non-controlling interests in consolidated Funds0.2 — 0.3 — 
Total comprehensive income attributable to controlling interests$19.4 $15.9 $45.5 $67.4 

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 September 30, 2023 and 2022
($ 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 (deficit)		Redeemable non-controlling
interests in
consolidated
Funds		Total equity (deficit)  and
redeemable
non-controlling
interests in
consolidated
Funds
June 30, 202241.4 $— $0.5 $(59.8)$(11.7)$(71.0)$— $(71.0)
Equity-based compensation— — 0.4 — — 0.4 — 0.4 
Foreign currency translation adjustment
— — — — (2.5)(2.5)— (2.5)
Amortization related to derivatives securities, net of tax
— — — — 0.6 0.6 — 0.6 
Dividends ($0.01 per share)
— — — (0.4)— (0.4)— (0.4)
Net income— — — 17.8 — 17.8 — 17.8 
September 30, 202241.4 $— $0.9 $(42.4)$(13.6)$(55.1)$— $(55.1)
June 30, 202341.5 $— $1.5 $10.1 $(7.9)$3.7 $2.3 $6.0 
Capital contributions— — — — — — 7.7 7.7 
Equity-based compensation— — 0.3 — — 0.3 — 0.3 
Foreign currency translation adjustment
— — — — (0.9)(0.9)— (0.9)
Amortization related to derivatives securities, net of tax
— — — — 0.7 0.7 — 0.7 
Net de-consolidation of Funds
— — — — — (1.9)(1.9)
Dividends ($0.01 per share)
— — (0.5)— (0.5)— (0.5)
Net income— — — 19.6 — 19.6 0.2 19.8 
September 30, 202341.5 $— $1.8 $29.2 $(8.1)$22.9 8.3 $31.2 
See Notes to Condensed Consolidated Financial Statements

6
BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the nine months ended September 30, 2023 and 2022
($ 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 (deficit)		Redeemable non-controlling interests in consolidated 
Funds		Total equity (deficit) and
redeemable
non-controlling
interests in
consolidated
Funds
December 31, 202145.4 $— $— $(6.8)$(10.8)$(17.6)$— $(17.6)
Issuance of common stock0.2 — — — — — — — 
Repurchase of common stock(4.2)— — (103.2)— (103.2)— (103.2)
Equity-based compensation— — 1.8 — — 1.8 — 1.8 
Foreign currency translation adjustment
— — — — (5.6)(5.6)— (5.6)
Amortization related to derivatives securities, net of tax
— — — — 2.8 2.8 — 2.8 
Withholding tax related to stock option exercise(0.9)(1.4)— (2.3)(2.3)
Dividends ($0.03 per share)
— — — (1.2)— (1.2)— (1.2)
Net income — — — 70.2 — 70.2 — 70.2 
September 30, 202241.4 $— $0.9 $(42.4)$(13.6)$(55.1)$— $(55.1)
December 31, 202241.4 $— $1.5 $(12.5)$(10.6)$(21.6)$— $(21.6)
Issuance of common stock0.1 — — — — — — — 
Capital contributions— — — — — — 9.9 9.9 
Equity-based compensation— — 1.0 — — 1.0 — 1.0 
Foreign currency translation adjustment
— — — — 0.6 0.6 — 0.6 
Amortization related to derivative securities, net of tax
— — — — 1.9 1.9 — 1.9 
Withholding tax related to stock option exercise and restricted stock vesting— — (0.7)— — (0.7)— (0.7)
Net de-consolidation of Funds
— — — — — — (1.9)(1.9)
Dividends ($0.03 per share)
— — — (1.3)— (1.3)— (1.3)
Net income— — — 43.0 — 43.0 0.3 43.3 
September 30, 202341.5 $— $1.8 $29.2 $(8.1)$22.9 $8.3 $31.2 
See Notes to Condensed Consolidated Financial Statements

7
BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Cash Flows
(in millions, unaudited) 
Nine Months Ended
September 30,
 20232022
Cash flows from operating activities:  
Net income43.3 70.2 
Less: Net (income) loss attributable to redeemable non-controlling interests in consolidated Funds(0.3)— 
Adjustments to reconcile net income to net cash flows from operating activities:  
Amortization of acquired intangibles— 0.1 
Loss on extinguishment of debt— 3.2 
Depreciation and other amortization12.7 14.8 
Amortization of debt-related costs3.1 4.6 
Amortization and revaluation of non-cash compensation awards2.3 (27.4)
Deferred income taxes(5.3)8.6 
(Gains) losses on other investments(3.9)5.3 
Changes in operating assets and liabilities:  
Decrease in investment advisory fees receivable18.7 75.9 
Increase in other receivables, prepayments, deposits and other assets(2.7)(4.9)
Decrease in accrued incentive compensation, operating lease liabilities and other liabilities(21.9)(65.1)
Decrease in accounts payable, accrued expenses and accrued income taxes(10.2)(22.0)
Net cash flows from operating activities, excluding consolidated Funds35.8 63.3 
Net income attributable to redeemable non-controlling interests in consolidated Funds0.3 — 
Adjustments to reconcile net income (loss) attributable to redeemable non-controlling interests of consolidated Funds to net cash flows from operating activities of consolidated Funds:
(Gains) losses on other investments(0.2)— 
Purchase of investments(9.8)— 
Sale of investments2.7 — 
(Increase) decrease in receivables and other assets(3.2)— 
Net cash flows from operating activities of consolidated Funds(10.2)— 
Net cash flows from operating activities25.6 63.3 
Cash flows from investing activities:  
Additions of fixed assets(10.7)(12.7)
Purchase of investment securities(8.5)(5.3)
Sale of investment securities8.0 8.7 
Cash flows from investing activities of consolidated Funds
Deconsolidation of Funds(12.5)— 
Net cash flows from investing activities(23.7)(9.3)
See Notes to Condensed Consolidated Financial Statements

8
BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Cash Flows
(in millions, unaudited) 
Nine Months Ended
September 30,
 20232022
Cash flows from financing activities:  
Proceeds from revolving credit facility100.0 202.0 
Repayment of third party borrowings and revolving credit facility(87.0)(298.0)
Payment for debt issuance costs— (0.9)
Payment to OM plc for co-investment redemptions(0.4)(1.1)
Dividends paid to stockholders(1.1)(0.8)
Dividends paid to related parties(0.6)(0.4)
Repurchases of common stock— (103.2)
Withholding tax payments related to stock option exercise and restricted stock vesting(0.7)(2.3)
Cash flows from financing activities of consolidated Funds:
      Redeemable non-controlling interest capital raised9.9 — 
Net cash flows from financing activities20.1 (204.7)
Effect of foreign exchange rate changes on cash and cash equivalents(0.1)— 
Net increase (decrease) in cash and cash equivalents21.9 (150.7)
Cash and cash equivalents at beginning of period$121.2 $252.1 
Cash and cash equivalents at end of period (including cash at consolidated Funds classified as restricted)$143.1 $101.4 
Supplemental disclosure of cash flow information:  
Interest paid (excluding consolidated Funds)$15.3 $15.7 
Income taxes paid30.5 34.7 







See Notes to Condensed Consolidated Financial Statements

9

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, beginning in 2021, has operated the business through one Affiliate, Acadian Asset Management LLC (“Acadian”). Acadian comprises the Company’s 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, 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, revenues fluctuate based on the performance of financial markets and investors’ asset flows in and out of Acadian’s products. The Company utilizes a profit-sharing model in structuring its compensation and ownership arrangements 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.
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. As of September 30, 2023, Paulson & Co. Inc. (“Paulson”) held approximately 21.6% of the common stock of the Company.

For the nine months ended September 30, 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.
All shares of common stock repurchased by the Company were retired.

10

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, statements of comprehensive income, statements of changes in stockholders’ equity and statements of 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 Affiliate and consolidated Funds are eliminated in consolidation.
Certain disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (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, 2022 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2023. 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. 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.

11

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

3) Investments
Investments are comprised of the following as of the dates indicated (in millions):
 September 30,
2023		December 31,
2022
Investments of consolidated Funds held at fair value
$16.4 $1.9 
Other investments20.3 8.4 
Investments related to long-term incentive compensation plans 42.0 40.0 
Total investments per Condensed Consolidated Balance Sheets$78.7 $50.3 

4) Fair Value Measurements
The following table summarizes the Company’s assets that are measured at fair value on a recurring basis at September 30, 2023 (in millions):
 Quoted prices
in active
markets
(Level I)		Significant
other
observable
inputs
(Level II)		Significant
unobservable
inputs
(Level III)		UncategorizedTotal value, September 30,
2023
Assets of BSIG and consolidated Funds(1)
 
Common stock$16.3 $— $— $— $16.3 
Derivatives— 0.1 — — 0.1 
Consolidated Funds total16.3 0.1 — — 16.4 
Investments in separate accounts(2)
0.1 — — — 0.1 
Investments related to long-term incentive compensation plans(3)
42.0 — — — 42.0 
Investments in unconsolidated Funds(4)
— — — 20.2 20.2 
BSIG total42.1 — — 20.2 62.3 
Total fair value assets$58.4 $0.1 $— $20.2 $78.7 
Liabilities of consolidated Funds(1)
Derivatives(3.0)— — — (3.0)
Consolidated Funds total(3.0)— — — (3.0)
Total fair value liabilities$(3.0)$— $— $— $(3.0)

12

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

4) Fair Value Measurements (cont.)

The following table summarizes the Company’s assets that are measured at fair value on a recurring basis at December 31, 2022 (in millions):
 Quoted prices
in active
markets
(Level I)		Significant
other
observable
inputs
(Level II)		Significant
unobservable
inputs
(Level III)		UncategorizedTotal value December 31, 2022
Assets of BSIG and consolidated Funds(1)
    
Derivatives$0.3 $1.6 $— $— $1.9 
Consolidated Funds total$0.3 $1.6 $— $— $1.9 
Investments in separate accounts(2)
4.2 — — — 4.2 
Investments related to long-term incentive compensation plans(3)
40.0 — — — 40.0 
Investments in unconsolidated Funds(4)
— — — 4.2 4.2 
BSIG total$44.2 $— $— $4.2 $48.4 
Total fair value assets$44.5 $1.6 $— $4.2 $50.3 
Liabilities of consolidated Funds(1)
Derivatives$(0.2)$(2.0)$— $— $(2.2)
Consolidated Funds total(0.2)(2.0)— — (2.2)
Total fair value liabilities$(0.2)$(2.0)$— $— $(2.2)
(1)Assets and liabilities measured at fair value are comprised of financial investments managed by the Company's Affiliate.
Equity securities and derivatives 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.

13

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

4) Fair Value Measurements (cont.)

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 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 $0.1 million at September 30, 2023 consisted of 100% cash equivalents. Investments in separate accounts of $4.2 million at December 31, 2022 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 $42.0 million and $40.0 million at September 30, 2023 and December 31, 2022, respectively, were investments in publicly registered daily redeemable funds (some managed by Acadian), 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 $20.2 million and $4.2 million at September 30, 2023 and December 31, 2022, 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 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. Other investment vehicles are not subject to redemption restrictions.
The real estate investment Funds of $4.1 million and $4.1 million at September 30, 2023 and December 31, 2022, 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 to two years from September 30, 2023. 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, finance, 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 and nine months ended September 30, 2023 and 2022, respectively.


14

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

5) Variable Interest Entities


The Company, through its Affiliate, sponsors the formation of various entities considered to be variable interest entities (“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 have ownership 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 absorb 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 following table presents the assets and liabilities of Funds that are VIEs and consolidated by the Company (in millions):
 September 30,
2023		December 31,
2022
Assets
Investments at fair value$16.4 $1.9 
Other assets of consolidated Funds0.2 $15.2 
Total Assets$16.6 $17.1 
Liabilities
Liabilities of consolidated Funds$3.1 $2.5 
Total Liabilities$3.1 $2.5 
“Investments at fair value” consist of investments in equity securities and derivatives. To the extent the Company also has consolidated Funds that are not VIEs, the assets and liabilities of those Funds are not included in the table above.
The assets of consolidated VIEs presented in the table above belong to the investors in those Funds, are available for use only by the Fund to which they belong, and are not available for use by the Company to the extent they are held by non-controlling interests. Any debt or liabilities held by consolidated Funds have no recourse to the Company’s general credit.
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 VIE’s 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.

15

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

5) Variable Interest Entities (cont.)

The following information pertains to unconsolidated VIEs for which the Company holds a variable interest (in millions):
September 30,
2023		December 31,
2022
Unconsolidated VIE assets$726.5 $728.1 
Unconsolidated VIE liabilities$305.9 $303.6 
Equity interests on the Condensed Consolidated Balance Sheets$4.1 $4.1 
Maximum risk of loss(1)
$4.1 $4.1 
(1)Includes equity investments the Company has made or is required to make.

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

September 30, 2023December 31, 2022
(in millions)Carrying ValueFair ValueFair Value LevelCarrying ValueFair ValueFair Value Level
Revolving credit facility:
$125 million revolving credit facility expiring March 7, 2025(1)
$13.0 $13.0 2$— $— 
Total revolving credit facility$13.0 $13.0 $— $— 
Third party borrowings:
$275 million 4.80% Senior Notes Due
July 27, 2026(2)
$273.8 $258.3 2$273.5 $249.7 2
$125 million 5.125% Senior Notes Due August 1, 2031(2)(3)
— — — — 
Total third party borrowings$273.8 $258.3 $273.5 $249.7 
(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 nine months ended September 30, 2022.

16

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

6) Borrowings and Debt (cont.)

Revolving Credit Facility
On March 7, 2022, Acadian, 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.
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 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.

7) 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 10 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 and nine months ended September 30 (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Operating lease cost$2.2 $2.5 $6.4 $7.5 
Variable lease cost— — 0.1 0.1 
Sublease income— $(0.1)— (0.4)
Total operating lease expense$2.2 $2.4 $6.5 $7.2 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$2.4 $1.3 $6.9 $5.7 
Right of use assets obtained in exchange for new operating lease liabilities— — 3.4 1.8 

17

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

7) Leases (cont.)
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 nine months ended September 30, 2023 and 2022, the weighted average remaining lease term was 9.7 and 10.7 years, respectively, and the weighted average discount rate was 3.53% and 3.39%, respectively.
Maturities of operating lease liabilities were as follows (in millions):
Operating Leases
Year Ending December 31,
2023 (excluding the nine months ended September 30, 2023)
$2.4 
20249.3 
20258.8 
20268.8 
20278.4 
Thereafter49.6 
Total lease payments$87.3 
   Less imputed interest(13.4)
Total$73.9 
8) Commitments and Contingencies
Operational commitments
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 2033. There are no liabilities recorded on the Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 related to this guaranty.
Litigation
The Company is subject to claims, legal proceedings, and other contingencies in the ordinary course of its 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. The Company establishes accruals for matters for which the outcome is probable and can be reasonably estimated. As of September 30, 2023, there were no material accruals for claims and the Company does not believe any outstanding matters will have a material adverse effect on the Company.

18

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

8) 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 September 30, 2023, 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 September 30, 2023.
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 Affiliate operate. For the Company and its Affiliate, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits. 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.

9) 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.

19

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

9) Earnings Per Share (cont.)
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 September 30,Nine Months Ended September 30,
 2023202220232022
Numerator:    
Net income attributable to controlling interests$19.6 $17.8 $43.0 $70.2 
Denominator:    
Weighted-average shares of common stock outstanding—basic41,508,143 41,431,729 41,479,116 42,266,420 
Potential shares of common stock:
Restricted stock units7,471 14,294 5,568 10,542 
Employee stock options1,074,103 907,419 1,164,121 1,113,540 
Weighted-average shares of common stock outstanding—diluted42,589,717 42,353,442 42,648,805 43,390,502 
Earnings per share of common stock attributable to controlling interests:    
Basic$0.47 $0.43 $1.04 $1.66 
Diluted$0.46 $0.42 $1.01 $1.62 

10) Revenue
Management fees
The Company’s management fees are a function of the fee rates the Affiliate charges to its 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.

20

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

10) Revenue (cont.)

Disaggregation of management fee revenue
The geographic disaggregation of management fee revenue for the three and nine months ended September 30 (in millions) are presented below:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Quant & Solutions
U.S.$72.0 $64.9 $209.3 $213.1 
Non-U.S.23.3 20.8 69.4 68.3 
Management fee revenue $95.3 $85.7 $278.7 $281.4 

11) Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), net of tax, for the three months ended September 30, 2023 and 2022 are as follows (in millions):
Foreign currency translation adjustmentValuation and amortization of derivative securitiesTotal
Balance, as of June 30, 2023
$3.2 $(11.1)$(7.9)
Foreign currency translation adjustment(0.9)— (0.9)
Amortization related to derivatives securities, before tax— 0.9 0.9 
Tax impact— (0.2)(0.2)
Other comprehensive income (loss)(0.9)0.7 (0.2)
Balance, as of September 30, 2023
$2.3 $(10.4)$(8.1)

Foreign currency translation adjustmentValuation and amortization of derivative securitiesTotal
Balance, as of June 30, 2022
$1.7 $(13.4)$(11.7)
Foreign currency translation adjustment(2.5)— (2.5)
Amortization related to derivatives securities, before tax— 0.8 0.8 
Tax impact— (0.2)(0.2)
Other comprehensive income (loss)(2.5)0.6 (1.9)
Balance, as of September 30, 2022
$(0.8)$(12.8)$(13.6)

21

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

11) Accumulated Other Comprehensive Income (Loss) (cont.)
The components of accumulated other comprehensive income (loss), net of tax, for the nine months ended September 30, 2023 and 2022 are as follows (in millions):
Foreign currency translation adjustmentValuation and amortization of derivative securitiesTotal
Balance, as of December 31, 2022$1.7 $(12.3)$(10.6)
Foreign currency translation adjustment0.6 — 0.6 
Amortization related to derivatives securities, before tax— 2.5 2.5 
Tax impact— (0.6)(0.6)
Other comprehensive income0.6 1.9 2.5 
Balance, as of September 30, 2023
$2.3 $(10.4)$(8.1)
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(5.6)— (5.6)
Amortization related to derivatives securities, before tax(1)
— 3.8 3.8