Virtus Investment Partners Inc.
02/27/2026 | Press release | Distributed by Public on 02/27/2026 07:39
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
| Management's Discussion and Analysis of Financial Condition and Results of Operations. |
Overview
Our Business
We provide investment management and related services to institutions and individuals. We use a multi-manager, multi-style approach, offering investment strategies from investment managers, each having its own distinct investment style,
autonomous investment process and individual brand, as well as from select unaffiliated managers for certain of our retail funds. By offering a broad array of products, we believe we can appeal to a greater number of investors and have offerings across market cycles and through changes in investor preferences. Our earnings are primarily from asset-based fees charged for services relating to these various products, including investment management, fund administration, distribution, and shareholder services.
We offer investment strategies for institutional and individual investors in different investment products and through multiple distribution channels. Our investment strategies are available in a diverse range of styles and disciplines, managed by differentiated investment managers. We have offerings in various asset classes (equity, fixed income, multi-asset and alternatives), geographies (domestic, global, international and emerging), market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental and quantitative). Our institutional products are offered to a variety of institutional clients through institutional separate accounts and commingled accounts, including subadvisory services to other investment advisers as well as collateral management of structured products. Our retail products include open-end funds, closed-end funds and retail separate accounts.
Our institutional distribution resources include investment manager-specific sales teams primarily focused on the U.S. market, supported by shared consultant relations and U.S. and non-U.S. institutional sales distribution. Our institutional products are marketed through relationships with consultants as well as directly to clients. We target key market segments, including foundations and endowments, corporations, public and private pension plans, sovereign wealth funds and subadvisory relationships.
Our retail distribution resources in the U.S. consist of regional sales professionals, a national account relationship group and specialized teams for retirement and exchange traded funds ("ETFs"). Our U.S. retail funds, ETFs and intermediary sold retail separate accounts are distributed through financial intermediaries. We have broad distribution access in the U.S. retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and registered investment advisers, banks and insurance companies. In many of these firms, we have a number of products that are on preferred "recommended" lists and on fee-based advisory programs. Our wealth management business is marketed directly to individual clients by financial advisory teams at our investment managers.
Market Developments
The financial markets have a significant impact on the value of our assets under management and on the level of our sales and net flows. The capital and financial markets experience fluctuation, volatility and declines, which impact investment returns and asset flows of our investment offerings as well as in investor choices and preferences among investment products. The changes in our assets under management may also be affected by the factors discussed in Item 1A. "Risk Factors" of this Annual Report on Form 10-K.
The U.S. and global equity markets increased in value in 2025, as evidenced by increases in major indices as noted in the following table:
| December 31, | Change | |||||||||||||||||||
| Index | 2025 | 2024 | % | |||||||||||||||||
| MSCI World Index | 4,430 | 3,708 | 19.5 | % | ||||||||||||||||
| Standard & Poor's 500 Index | 6,846 | 5,882 | 16.4 | % | ||||||||||||||||
| Russell 2000 Index | 2,482 | 2,250 | 10.3 | % | ||||||||||||||||
| Morningstar / LSTA Leveraged Loan 100 Index | 3,172 | 2,958 | 7.2 | % | ||||||||||||||||
Financial Highlights
▪Total revenues were $852.9 million in 2025, a decrease of $54.1 million, or 6.0%, compared to total revenues of $906.9 million in 2024.
▪Operating income was $168.7 million, in 2025, a decrease of $13.8 million, or 7.6%, compared to $182.5 million in 2024.
▪Net income per diluted share was $19.97 in 2025, an increase of $3.08, or 18.2%, compared to net income per diluted share of $16.89 in 2024.
Crescent Cove Advisors
On December 15, 2025, the Company completed the acquisition of a 35% minority interest in Crescent Cove Advisors, LP ("Crescent Cove"), an investment manager specializing in private capital solutions, for $41.1 million.
Keystone National Group
On December 5, 2025, the Company entered into an agreement to acquire a majority interest in Keystone National Group ("Keystone"), an investment manager specializing in asset-centric private credit. Under the agreement, the Company would purchase a majority interest in Keystone for consideration of $200.0 million at closing and up to an additional $170.0 million of deferred consideration, including earnout payments subject to the achievement of future revenue targets. The transaction is expected to close in the first quarter of 2026, subject to customary closing conditions, necessary regulatory approvals and client approvals, including approvals by the Keystone registered fund shareholders.
Assets Under Management
Total sales were $23.4 billion in 2025, a decrease of $3.3 billion, or 12.4%, from $26.8 billion in 2024. Net flows were $(18.9) billion in 2025 compared to net flows of $(10.4) billion in 2024.
At December 31, 2025, total assets under management were $159.5 billion, representing a decrease of $15.5 billion, or 8.9%, from December 31, 2024. The change in total assets under management from December 31, 2024 included $(18.9) billion of net outflows partially offset by $5.9 billion from positive market performance.
Assets Under Management by Product
The following table summarizes our assets under management by product:
| (in millions) | As of December 31, | Change | |||||||||||||||||||||
| Product | 2025 | 2024 | $ | % | |||||||||||||||||||
| Open-End Funds (1) | $ | 52,759 | $ | 56,073 | $ | (3,314) | (5.9) | % | |||||||||||||||
| Closed-End Funds | 10,635 | 10,225 | 410 | 4.0 | % | ||||||||||||||||||
| Retail Separate Accounts (2) | 43,091 | 49,536 | (6,445) | (13.0) | % | ||||||||||||||||||
| Institutional Accounts (3) | 53,008 | 59,167 | (6,159) | (10.4) | % | ||||||||||||||||||
| Total | $ | 159,493 | $ | 175,001 | $ | (15,508) | (8.9) | % | |||||||||||||||
| Average Assets Under Management (4) | $ | 169,011 | $ | 176,653 | $ | (7,642) | (4.3) | % | |||||||||||||||
(1)Represents assets under management of U.S. retail funds, ETFs and global funds.
(2)Includes investment models provided to managed account sponsors.
(3)Represents assets under management of institutional separate and commingled accounts including structured products.
(4)Calculated according to revenue earning basis that includes average daily, weekly, monthly beginning balance, monthly ending balance, or quarter beginning and ending balance, as well as quarter beginning or ending spot balance.
Asset Flows by Product
The following table summarizes asset flows by product:
| Years Ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Open-End Funds (1) | |||||||||||
| Beginning balance | $ | 56,073 | $ | 56,062 | |||||||
| Inflows | 11,438 | 12,420 | |||||||||
| Outflows | (17,077) | (16,532) | |||||||||
| Net flows | (5,639) | (4,112) | |||||||||
| Market performance | 3,378 | 4,949 | |||||||||
| Other (2) | (1,053) | (826) | |||||||||
| Ending balance | $ | 52,759 | $ | 56,073 | |||||||
| Closed-End Funds | |||||||||||
| Beginning balance | $ | 10,225 | $ | 10,026 | |||||||
| Inflows | 12 | 1 | |||||||||
| Outflows | (104) | (41) | |||||||||
| Net flows | (92) | (40) | |||||||||
| Market performance | 1,268 | 1,112 | |||||||||
| Other (2) | (766) | (873) | |||||||||
| Ending balance | $ | 10,635 | $ | 10,225 | |||||||
| Retail Separate Accounts (3) | |||||||||||
| Beginning balance | $ | 49,536 | $ | 43,202 | |||||||
| Inflows | 5,864 | 8,621 | |||||||||
| Outflows | (11,064) | (6,957) | |||||||||
| Net flows | (5,200) | 1,664 | |||||||||
| Market performance | (1,233) | 4,667 | |||||||||
| Other (2) | (12) | 3 | |||||||||
| Ending balance | $ | 43,091 | $ | 49,536 | |||||||
| Institutional Accounts (4) | |||||||||||
| Beginning balance | $ | 59,167 | $ | 62,969 | |||||||
| Inflows | 6,125 | 5,715 | |||||||||
| Outflows | (14,070) | (13,660) | |||||||||
| Net flows | (7,945) | (7,945) | |||||||||
| Market performance | 2,446 | 5,101 | |||||||||
| Other (2) | (660) | (958) | |||||||||
| Ending balance | $ | 53,008 | $ | 59,167 | |||||||
| Total | |||||||||||
| Beginning balance | $ | 175,001 | $ | 172,259 | |||||||
| Inflows | 23,439 | 26,757 | |||||||||
| Outflows | (42,315) | (37,190) | |||||||||
| Net flows | (18,876) | (10,433) | |||||||||
| Market performance | 5,859 | 15,829 | |||||||||
| Other (2) | (2,491) | (2,654) | |||||||||
| Ending balance | $ | 159,493 | $ | 175,001 | |||||||
(1)Represents assets under management of U.S. retail funds, ETFs and global funds.
(2)Represents open-end and closed-end fund distributions net of reinvestments, the impact of non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), current income or capital returned by structured products and the use of leverage.
(3)Includes investment models provided to managed account sponsors.
(4)Represents assets under management of institutional separate and commingled accounts including structured products.
Assets Under Management by Asset Class
The following table summarizes assets under management by asset class:
| (in millions) | As of December 31, | Change | % of Total | ||||||||||||||||||||||||||||||||
| Asset Class | 2025 | 2024 | $ | % | 2025 | 2024 | |||||||||||||||||||||||||||||
| Equity | $ | 82,584 | $ | 100,792 | $ | (18,208) | (18.1) | % | 51.7 | % | 57.6 | % | |||||||||||||||||||||||
| Fixed Income | 39,879 | 37,696 | 2,183 | 5.8 | % | 25.0 | % | 21.5 | % | ||||||||||||||||||||||||||
| Multi-Asset (1) | 21,617 | 21,174 | 443 | 2.1 | % | 13.6 | % | 12.1 | % | ||||||||||||||||||||||||||
| Alternatives (2) | 15,413 | 15,339 | 74 | 0.5 | % | 9.7 | % | 8.8 | % | ||||||||||||||||||||||||||
| Total | $ | 159,493 | $ | 175,001 | $ | (15,508) | (8.9) | % | 100.0 | % | 100.0 | % | |||||||||||||||||||||||
(1)Consists of multi-asset offerings not included in equity, fixed income, and alternatives.
(2)Consists of real estate securities, managed futures, event-driven, infrastructure and other strategies.
Average Assets Under Management and Average Fees Earned
The following table summarizes the average management fees earned in basis points and average assets under management:
| Years Ended December 31, | |||||||||||||||||||||||
|
Average Fee Earned
(expressed in basis points)
|
Average Assets Under Management
(in millions)(4)
|
||||||||||||||||||||||
| Products | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Open-End Funds (1) | 46.6 | 50.0 | $ | 55,059 | $ | 57,039 | |||||||||||||||||
| Closed-End Funds | 58.5 | 58.6 | 10,474 | 10,092 | |||||||||||||||||||
| Retail Separate Accounts (2) | 42.4 | 43.4 | 47,402 | 46,575 | |||||||||||||||||||
| Institutional Accounts (3) | 31.7 | 31.1 | 56,076 | 62,947 | |||||||||||||||||||
| All Products | 41.2 | 42.0 | $ | 169,011 | $ | 176,653 | |||||||||||||||||
(1)Represents assets under management of U.S. retail funds, ETFs and global funds.
(2)Includes investment models provided to managed account sponsors.
(3)Represents assets under management of institutional separate and commingled accounts including structured products.
(4)Calculated according to revenue earning basis that includes average daily, weekly, monthly beginning balance, monthly ending balance, or quarter beginning and ending balance, as well as quarter beginning or ending spot balance.
Average fees earned represent investment management fees, net of revenue-related adjustments, and excluding the impact of consolidated investment products ("CIP") divided by average net assets. Revenue-related adjustments are based on specific agreements and reflect the portion of investment management fees passed-through to third-party client intermediaries for services to investors in sponsored investment products. Fund fees are calculated based on average daily or weekly net assets. Retail separate account fees, which include fees for wealth management accounts, are calculated based on the end of the preceding or current quarter's asset values or on an average of month-end balances. Institutional account fees are calculated based on an average of month-end balances, an average of current quarter's asset values or on a combination of the underlying cash flows and the principal value of the product. Average fees earned will vary based on several factors, including the asset mix and expense reimbursements to the funds.
The average fee rate earned decreased for the year ended December 31, 2025 compared to the prior year primarily due to a shift in the asset mix in our open-end funds to investment strategies that have a lower fee rate, partially offset by an increase in average fee rates of our institutional accounts due to the redemptions of lower fee earning assets.
Investment Performance
The following table presents a summary of investment performance by asset class measured by the percentage of assets under management exceeding their relevant benchmarks as of December 31, 2025:
|
Percentage of Assets Under Management Beating Benchmark (1) |
||||||||||||||||||||||||||
| Asset Class | 1-Year | 3-Year | 5-Year | 10-Year | ||||||||||||||||||||||
| Equity | 6% | 21% | 20% | 62% | ||||||||||||||||||||||
| Fixed Income | 63% | 76% | 66% | 77% | ||||||||||||||||||||||
| Alternatives (2) | 53% | 60% | 60% | 71% | ||||||||||||||||||||||
| Multi-Asset (3) | 8% | 41% | 38% | 41% | ||||||||||||||||||||||
| Total | 24% | 39% | 36% | 64% | ||||||||||||||||||||||
(1)Percentage outperforming benchmark is reported as the percentage of assets under management that have outperformed benchmarks across the indicated periods. Performance is presented on an average annual total return basis for products with a one-, three-, five- and/or ten-year track record, and is measured on a consistent basis relative to the most appropriate benchmarks. Fund investment performance is net of fees. Benchmark indices are unmanaged, their returns do not reflect any fees, expenses or sales charges, and they are not available for direct investment. Certain strategies do not have stated benchmarks, such as wealth management, structured products, and certain other multi-asset accounts and therefore are excluded from the analysis.
(2)Consists of real estate securities, managed futures, event driven, infrastructure and other strategies.
(3)Consists of multi-asset offerings not included in equity, fixed income and alternative.
Results of Operations - December 31, 2025 compared to December 31, 2024
A discussion of our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2024, which specific discussion is incorporated herein by reference.
Summary Financial Data
| Years Ended December 31, | Change | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Investment management fees | $ | 725,039 | $ | 773,830 | $ | (48,791) | (6.3) | % | |||||||||||||||
| Other revenue | 127,826 | 133,119 | (5,293) | (4.0) | % | ||||||||||||||||||
| Total revenues | 852,865 | 906,949 | (54,084) | (6.0) | % | ||||||||||||||||||
| Total operating expenses | 684,185 | 724,459 | (40,274) | (5.6) | % | ||||||||||||||||||
| Operating income (loss) | 168,680 | 182,490 | (13,810) | (7.6) | % | ||||||||||||||||||
| Total other income (expense), net | (18,807) | (8,510) | (10,297) | 121.0 | % | ||||||||||||||||||
| Total interest income (expense), net | 37,376 | 33,896 | 3,480 | 10.3 | % | ||||||||||||||||||
| Income (loss) before income taxes | 187,249 | 207,876 | (20,627) | (9.9) | % | ||||||||||||||||||
| Income tax expense (benefit) | 51,261 | 55,423 | (4,162) | (7.5) | % | ||||||||||||||||||
| Net income (loss) | 135,988 | 152,453 | (16,465) | (10.8) | % | ||||||||||||||||||
| Noncontrolling interests | 2,408 | (30,707) | 33,115 | (107.8) | % | ||||||||||||||||||
| Net Income (Loss) Attributable to Virtus Investment Partners, Inc. | $ | 138,396 | $ | 121,746 | $ | 16,650 | 13.7 | % | |||||||||||||||
| Earnings (loss) per share-diluted | $ | 19.97 | $ | 16.89 | $ | 3.08 | 18.2 | % | |||||||||||||||
In 2025, total revenues decreased $54.1 million, or 6.0%, to $852.9 million from $906.9 million in 2024, and operating income decreased by $13.8 million, or 7.6%, to $168.7 million in 2025 from $182.5 million in 2024, due primarily to decreased revenues as mentioned above.
Revenues
Revenues by source were as follows:
| Years Ended December 31, | Change | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Investment management fees | |||||||||||||||||||||||
| Open-end funds | $ | 286,610 | $ | 317,990 | $ | (31,380) | (9.9) | % | |||||||||||||||
| Closed-end funds | 61,305 | 59,184 | 2,121 | 3.6 | % | ||||||||||||||||||
| Retail separate accounts | 209,538 | 209,467 | 71 | - | % | ||||||||||||||||||
| Institutional accounts | 167,586 | 187,189 | (19,603) | (10.5) | % | ||||||||||||||||||
| Total investment management fees | 725,039 | 773,830 | (48,791) | (6.3) | % | ||||||||||||||||||
| Distribution and service fees | 49,579 | 54,692 | (5,113) | (9.3) | % | ||||||||||||||||||
| Administration and shareholder service fees | 73,275 | 74,294 | (1,019) | (1.4) | % | ||||||||||||||||||
| Other income and fees | 4,972 | 4,133 | 839 | 20.3 | % | ||||||||||||||||||
| Total Revenues | $ | 852,865 | $ | 906,949 | $ | (54,084) | (6.0) | % | |||||||||||||||
Investment Management Fees
Investment management fees are earned based on a percentage of assets under management and are paid pursuant to the terms of the respective investment management agreements, which generally require monthly or quarterly payments. Investment management fees decreased by $48.8 million, or 6.3%, for the year ended December 31, 2025 compared to the prior year, primarily due to decreased average assets under management and a decreased average fee rate.
Distribution and Service Fees
Distribution and service fees are sales- and asset-based fees earned from open-end funds for marketing and distribution services. Distribution and service fees decreased by $5.1 million, or 9.3%, for the year ended December 31, 2025 compared to the prior year, primarily due to lower sales and average assets under management for open-end funds in share classes that have sales- and asset-based distribution and service fees.
Administration and Shareholder Service Fees
Administration and shareholder service fees represent fees earned for fund administration and shareholder services from our U.S. retail funds, ETFs and closed-end funds. Fund administration and shareholder service fees decreased by $1.0 million, or 1.4%, for the year ended December 31, 2025 compared to the prior year primarily due to the decrease in average assets under management of our U.S. retail funds partially offset by increased closed-end fund administrative fees.
Other Income and Fees
Other income and fees primarily represent fees related to other fee-earning assets and marketing fees earned on certain ETFs. Other income and fees increased $0.8 million, or 20.3%, for the year ended December 31, 2025 compared to the prior year, primarily due to increased marketing fees earned during the current year.
Operating Expenses
Operating expenses by category were as follows:
| Years Ended December 31, | Change | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Employment expenses | $ | 400,720 | $ | 432,587 | $ | (31,867) | (7.4) | % | |||||||||||||||
| Distribution and other asset-based expenses | 89,047 | 96,223 | (7,176) | (7.5) | % | ||||||||||||||||||
| Other operating expenses | 130,358 | 127,526 | 2,832 | 2.2 | % | ||||||||||||||||||
| Other operating expenses of CIP | 5,812 | 6,987 | (1,175) | (16.8) | % | ||||||||||||||||||
| Change in fair value of contingent consideration | (2,214) | (5,608) | 3,394 | (60.5) | % | ||||||||||||||||||
| Restructuring expense | 693 | 1,487 | (794) | (53.4) | % | ||||||||||||||||||
| Depreciation expense | 7,992 | 8,958 | (966) | (10.8) | % | ||||||||||||||||||
| Amortization expense | 51,777 | 56,299 | (4,522) | (8.0) | % | ||||||||||||||||||
| Total operating expenses | $ | 684,185 | $ | 724,459 | $ | (40,274) | (5.6) | % | |||||||||||||||
Employment Expenses
Employment expenses consist of fixed and variable compensation and related employee benefit costs. Employment expenses decreased by $31.9 million, or 7.4%, for the year ended December 31, 2025 primarily due to a decrease in profit- and sales-based compensation and stock-based compensation.
Distribution and Other Asset-Based Expenses
Distribution and other asset-based expenses consist primarily of payments to third-party client intermediaries for providing services to investors in sponsored investment products. These payments are primarily based on assets under management. Distribution and other asset-based expenses decreased $7.2 million, or 7.5%, for the year ended December 31, 2025 primarily due to decreases in assets under management in share classes that have asset-based distribution and other asset-based expenses.
Other Operating Expenses
Other operating expenses primarily consist of investment research and technology costs, software application and development expenses, professional fees, travel and distribution-related costs, rent and occupancy expenses, and other business costs. Other operating expenses increased $2.8 million, or 2.2% during the year ended December 31, 2025 compared to the prior year primarily due to increased legal and professional fees associated with the Keystone acquisition and the refinancing of the Company's credit facility.
Other Operating Expenses of CIP
Other operating expenses of CIP decreased $1.2 million, or 16.8%, from the prior year primarily due to refinancing activities associated with two CLOs in the prior year period.
Change in Fair Value of Contingent Consideration
Contingent consideration related to the Company's acquisitions are fair valued on each reporting date incorporating changes in various estimates, including underlying performance estimates, discount rates and amount of time until the conditions of the contingent payments are achieved. The change in fair value is recorded in the current period as a gain or loss. The change in fair value of contingent consideration for the year ended December 31, 2025 was primarily attributable to changes in underlying performance estimates and the passage of time.
Depreciation Expense
Depreciation expense consists primarily of the straight-line depreciation of furniture, equipment and leasehold improvements. Depreciation expense decreased by $1.0 million, or 10.8%, for the year ended December 31, 2025 compared to the prior year primarily due to the prior year acceleration of depreciation on leasehold improvements associated with a terminated lease.
Amortization Expense
Amortization expense consists of the amortization of definite-lived intangible assets over their estimated useful lives. Amortization expense decreased $4.5 million, or 8.0%, for the year ended December 31, 2025 compared to the prior year,
primarily due to intangible assets becoming fully amortized.
Other Income (Expense), net
Other Income (Expense), net by category were as follows:
| Years Ended December 31, | Change | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Realized and unrealized gain (loss) on investments, net | $ | 5,823 | $ | 3,914 | $ | 1,909 | 48.8 | % | |||||||||||||||
| Realized and unrealized gain (loss) of CIP, net | (28,103) | (14,460) | (13,643) | 94.3 | % | ||||||||||||||||||
| Other income (expense), net | 3,473 | 2,036 | 1,437 | 70.6 | % | ||||||||||||||||||
| Total Other Income (Expense), net | $ | (18,807) | $ | (8,510) | $ | (10,297) | 121.0 | % | |||||||||||||||
Realized and Unrealized Gain (Loss) on Investments, net
Realized and unrealized gain (loss) on investments, net changed during the year ended December 31, 2025 by $1.9 million as compared to the prior year. The change for the year ended December 31, 2025 is primarily attributable to an increase in unrealized gains due to changes in market values of our investments.
Realized and Unrealized Gain (Loss) of CIP, net
Realized and unrealized gain (loss) of CIP, net changed $13.6 million compared to the prior year primarily due to changes in net unrealized and realized losses of $50.7 million, due to changes in market values of leveraged loans partially offset by unrealized gains of $37.1 million related to the value of the notes payable.
Other Income (Expense), net
Other income (expense), net changed by $1.4 million during the year ended December 31, 2025 compared to the prior year primarily due to changes in the gains and losses on our equity method investments, as well as foreign currency gains and losses.
Interest Income (Expense), net
Interest Income (Expense), net by category were as follows:
| Years Ended December 31, | Change | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Interest Income (Expense) | |||||||||||||||||||||||
| Interest expense | $ | (21,471) | $ | (22,132) | $ | 661 | (3.0) | % | |||||||||||||||
| Interest and dividend income | 12,303 | 12,488 | (185) | (1.5) | % | ||||||||||||||||||
| Interest and dividend income of investments of CIP | 187,452 | 204,732 | (17,280) | (8.4) | % | ||||||||||||||||||
| Interest expense of CIP | (140,908) | (161,192) | 20,284 | (12.6) | % | ||||||||||||||||||
| Total Interest Income (Expense), net | $ | 37,376 | $ | 33,896 | $ | 3,480 | 10.3 | % | |||||||||||||||
Interest Expense
Interest expense decreased $0.7 million, or 3.0%, for the year ended December 31, 2025, compared to the prior year primarily due to lower average interest rates during the current year partially offset by higher average debt during the current year.
Interest and Dividend Income
Interest and dividend income is earned on cash equivalents and our marketable securities. Interest and dividend income remained consistent during the year ended December 31, 2025 compared to the prior year.
Interest and Dividend Income of Investments of CIP
Interest and dividend income of investments of CIP decreased $17.3 million, or 8.4%, compared to the prior year. The decrease is primarily attributable to lower average interest rates in the current year partially offset by the addition of new CLOs in the fourth quarters of 2024 and 2025.
Interest Expense of CIP
Interest expense of CIP represents interest expense on the notes payable of CIP. Interest expense of CIP decreased by $20.3 million, or 12.6%, compared to the prior year. The decrease is primarily due to lower average interest rates in the current year period partially offset by the addition of new CLOs in the fourth quarters of 2024 and 2025.
Income Tax Expense (Benefit)
The provision for income taxes reflected U.S. federal, state and local taxes and foreign taxes at an estimated effective tax rate of 27.4% and 26.7% for 2025 and 2024, respectively. The higher estimated effective tax rate for 2025 was primarily due to a change in valuation allowances in the current year related to the tax effects of lower realized and unrealized gains on Company investments compared to the prior year, along with the establishment of a valuation allowance on certain state tax attributes.
Effects of Inflation
Inflationary pressures can result in increases to our costs, especially to the extent that large expense components such as service provider, data and compensation are impacted. To the degree that these expense increases are not recoverable or cannot be counterbalanced through pricing increases due to the competitive environment, our profitability could be negatively impacted. In addition, the value of the assets that we manage may be negatively impacted if inflationary expectations result in a rising interest rate environment. Declines in the values of these assets under management could lead to reduced revenues as management fees are generally earned as a percentage of assets under management.
Liquidity and Capital Resources
Certain Financial Data
The following tables summarize certain financial data relating to our liquidity and capital resources:
| (in thousands) | December 31, | Change | |||||||||||||||||||||
| Balance Sheet Data | 2025 | 2024 | $ | % | |||||||||||||||||||
| Cash and cash equivalents | $ | 386,483 | $ | 265,888 | $ | 120,595 | 45.4 | % | |||||||||||||||
| Investments | 157,480 | 119,216 | 38,264 | 32.1 | % | ||||||||||||||||||
| Contingent consideration | 39,108 | 63,505 | (24,397) | (38.4) | % | ||||||||||||||||||
| Debt | 389,957 | 232,130 | 157,827 | 68.0 | % | ||||||||||||||||||
| Redeemable noncontrolling interests | 102,934 | 107,282 | (4,348) | (4.1) | % | ||||||||||||||||||
| Total equity | 934,845 | 901,636 | 33,209 | 3.7 | % | ||||||||||||||||||
| (in thousands) | Years Ended December 31, | Change | |||||||||||||||||||||
|
Cash Flow Data provided by (used in) |
2025 | 2024 | $ | % | |||||||||||||||||||
| Operating activities | $ | (67,199) | $ | 1,755 | $ | (68,954) | (3,929.0) | % | |||||||||||||||
| Investing activities | (47,339) | (16,951) | (30,388) | 179.3 | % | ||||||||||||||||||
| Financing activities | 191,025 | 74,947 | 116,078 | 154.9 | % | ||||||||||||||||||
Overview
At December 31, 2025, we had $386.5 million of cash and cash equivalents and $157.5 million of investments, which included $76.5 million of investment securities, compared to $265.9 million of cash and cash equivalents and $119.2 million of investments, which included $83.8 million of investment securities, at December 31, 2024.
Uses of Capital
Our operating expenses consist of employee compensation and related benefit costs and other operating expenses, which primarily consist of costs related to distribution, investment research and data, occupancy, software application and development and professional fees, as well as interest on our indebtedness and income taxes. Annual incentive compensation, our largest annual operating cash expenditure, is paid in the first quarter of the year. In 2025 and 2024, we paid approximately $158.4 million and $146.1 million, respectively, in incentive compensation earned during the years ended December 31, 2024 and 2023, respectively.
In addition to operating activities, other uses of cash could include: (i) investments in organic growth, including
seeding or launching new products and expanding distribution; (ii) debt principal payments through scheduled amortization or additional paydowns; (iii) dividend payments to common stockholders; (iv) repurchases of our common stock, or withholding obligations for the net settlement of employee share transactions; (v) investments in our technology infrastructure; (vi) investments in inorganic growth opportunities that may require upfront and/or future payments; (vii) integration costs, including restructuring and severance, related to acquisitions, if any; and (viii) purchases of investment manager equity interests.
Capital and Reserve Requirements
Certain of our subsidiaries are registered with the SEC, Central Bank of Ireland, Financial Conduct Authority or other regulators that subject them to certain rules regarding minimum net capital. Failure to meet these requirements could result in adverse consequences to us, including additional reporting requirements, or interruption of our business. At December 31, 2025, our broker-dealer net capital was significantly greater than the required minimum.
Balance Sheet
Cash and cash equivalents consist of cash in banks and money market fund investments. Investments consist primarily of investments in our sponsored funds. CIP represent investment products for which we provide investment management services and where we have either a controlling financial interest or are considered the primary beneficiary of an investment product that is considered a variable interest entity.
Operating Cash Flow
Net cash used in operating activities of $67.2 million for 2025 changed by $69.0 million from cash provided by operating activities of $1.8 million in 2024 primarily due to an increase of $44.4 million in net purchases of investments of CIP in the current year and a decrease of $25.7 million in net sales of investments in the current year.
Investing Cash Flow
Cash flows from investing activities consist primarily of capital expenditures and other investing activities related to our business operations. Net cash used in investing activities of $47.3 million for 2025 increased by $30.4 million from net cash used in investing activities of $17.0 million in 2024 primarily due to the purchase of a minority interest in Crescent Cove in the current year.
Financing Cash Flow
Cash flows from financing activities consist primarily of transactions related to our common shares, issuance and repayment of debt by us and CIP, payments of contingent consideration and purchases and sales of noncontrolling interests. Net cash provided by financing activities of $191.0 million in 2025 increased by $116.1 million from net cash provided by financing activities of $74.9 million in the prior year primarily due to a $183.7 million increase in net borrowings as a result of the refinancing of our credit facility, partially offset by a $25.3 million decrease in net borrowings and payments of CIP and a $22.4 million decrease in net contributions from noncontrolling interests.
Credit Agreement
On September 26, 2025, the Company refinanced its existing credit agreement by entering into a new agreement (the "Credit Agreement"). The Credit Agreement provides for (i) a $400.0 million term loan with a seven-year term (the "Term Loan") expiring in September 2032, and (ii) a $250.0 million revolving credit facility with a five-year term expiring in September 2030. A portion of the proceeds of the refinancing have been used to repay the $234.7 million outstanding on the previous term loan. The Company has the right, subject to customary conditions specified in the Credit Agreement, to request additional revolving credit facility commitments and additional term loans to be made under the Credit Agreement. The Company had $399.0 million outstanding at December 31, 2025 under the Term Loan. In accordance with Accounting Standards Codification ("ASC") 835, Interest, the amounts outstanding under the Company's Term Loan are presented on the Consolidated Balance Sheet net of related debt issuance costs, which were $9.0 million as of December 31, 2025.
Recently Issued Accounting Pronouncements
For a discussion of accounting standards, see Part II, Item 8, "Financial Statements and Supplementary Data," Note 2 "Summary of Significant Accounting Policies."
Critical Accounting Policies and Estimates
Our consolidated financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which requires the use of estimates. Actual results will vary
from these estimates. Management believes the following critical accounting policies are important to understanding our results of operations and financial position.
Consolidation
The consolidated financial statements include the accounts of the Company, its subsidiaries and investment products that are consolidated. Voting interest entities ("VOEs") are consolidated when we are considered to have a controlling financial interest, which is typically present when we own a majority of the voting interest in an entity or otherwise have the power to govern the financial and operating policies of the entity.
We evaluate any variable interest entities ("VIEs") in which we have a variable interest for consolidation. A VIE is an entity in which either (i) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (ii) where, as a group, the holders of the equity investment at risk do not possess: (x) the power through voting or similar rights to direct the activities that most significantly impact the entity's economic performance; (y) the obligation to absorb expected losses or the right to receive expected residual returns of the entity; or (z) proportionate voting and economic interests and where substantially all of the entity's activities either involve or are conducted on behalf of an investor with disproportionately fewer voting rights. If an entity has any of these characteristics, it is considered a VIE and is consolidated by its primary beneficiary, which is the entity that has both the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.
CIP includes both VOEs, made up primarily of open-end funds in which we hold a controlling financial interest, and VIEs, which primarily consist of CLOs of which we are considered the primary beneficiary. The consolidation and deconsolidation of these investment products have no impact on net income (loss) attributable to stockholders. Our risk with respect to these investment products is limited to our beneficial interests in these products. We have no right to the benefits from, and do not bear the risks associated with, these investment products beyond our investments in, and fees generated from, these products.
Noncontrolling Interests
Noncontrolling interests - CIP
Noncontrolling interests - CIP represent third-party investments in the Company's CIP and are classified as redeemable noncontrolling interests on the Consolidated Balance Sheets because investors in those products are able to request withdrawal at any time.
Noncontrolling interests - Investment Manager
Noncontrolling interests - Investment Manager represents the minority interests of a majority owned consolidated investment management subsidiary. These minority interests are subject to holder put rights and Company call rights at pre-established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value. The rights are exercisable at pre-established intervals or upon certain conditions, such as retirement. The put and call rights are not legally detachable or separately exercisable and are deemed to be embedded in the related noncontrolling interests. The Company, in purchasing equity of the investment management subsidiary, has the option to settle in cash or shares of the Company's common stock and is entitled to the cash flow associated with any purchased equity. The minority interests in the investment management subsidiary are recorded at estimated redemption value within redeemable noncontrolling interests on the Company's Consolidated Balance Sheets, and any changes in the estimated redemption value are recorded on the Consolidated Statements of Operations within noncontrolling interests.
Goodwill
As of December 31, 2025, the carrying value of goodwill was $397.1 million. Goodwill represents the excess of the acquisition purchase price over the fair value of identified net assets and liabilities acquired. We have one reporting unit for purposes of assessing the carrying value of goodwill. Goodwill impairment testing is performed at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If we determine that the carrying value of the reporting unit is less than the fair value, a second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. We completed our annual goodwill impairment assessment as of October 31, 2025, and no impairment was identified. For purposes of this assessment, we considered various qualitative factors including, but not limited to, certain indicators of fair value (e.g., market capitalization and market multiplies for asset managers) and determined that it was more likely than not that the fair value of our reporting unit was greater than its carrying value. Only a significant decline in the fair value of our reporting unit would indicate that an impairment may exist.
Indefinite-Lived Intangible Assets
As of December 31, 2025, the carrying value of indefinite-lived intangible assets was $42.3 million. Indefinite-lived intangible assets comprise certain fund investment management agreements and trade names. We perform indefinite-lived intangible asset impairment tests annually, or more frequently, should circumstances change, which could reduce the fair value of indefinite-lived intangible assets below their carrying value. We completed our annual impairment assessment of these assets as of October 31, 2025, and no impairments were identified. For purposes of this assessment, we considered various qualitative factors for the investment management agreement intangible assets including, but not limited to, changes in (i) assets under management, (ii) operating margins, and (iii) net cash flows generated, and we determined that it was more likely than not that the fair value of indefinite-lived intangible assets was greater than their carrying value. Only a significant decline in the fair value of the indefinite-lived intangible assets would indicate that an impairment may exist.
Definite-Lived Intangible Assets
As of December 31, 2025, the carrying value of definite-lived intangible assets was $285.1 million. Definite-lived intangible assets comprise certain investment management agreements, trade names and non-competition agreements. We monitor the useful lives of definite-lived intangible assets and revise the useful lives, if necessary, based on the circumstances. Significant judgment is required in estimating the period that these assets will contribute to our cash flows and the pattern over which these assets will be consumed. A change in the remaining useful life of any of these assets could have a significant impact on amortization expense. All amortization expense is calculated on a straight-line basis. Impairment testing is performed whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If we were to determine that the carrying value of the definite-lived intangible assets was less than the sum of the undiscounted cash flows expected to result from the asset, we would quantify the impairment using a discounted cash flow model.
Revenue Recognition
Our revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers. Investment management fees, distribution and service fees, and administration and shareholder service fees are generally calculated as a percentage of average net assets of the investment portfolios managed. The net asset values from which these fees are calculated are variable in nature and subject to factors outside of the Company's control, such as additional investments, withdrawals and market performance. Because of this, these fees are considered constrained until the end of the contractual measurement period (monthly or quarterly), which is when asset values are generally determinable.
Investment Management Fees
We provide investment management services pursuant to investment management agreements through our investment advisers (each an "Adviser"). Investment management services represent a series of distinct daily services that are performed over time. Fees earned on funds are based on each fund's average daily or weekly net assets and are generally calculated and received on a monthly basis. For funds managed by unaffiliated subadvisers, we record investment management fees net of the subadvisory fees since we are deemed to be an agent of the fund as it relates to the services they perform, with our performance obligation being to arrange for the provision of that service and not control the specified service before it is performed. Amounts paid to unaffiliated subadvisers for the years ended December 31, 2025, 2024 and 2023 were $44.3 million, $45.4 million and $54.7 million, respectively.
Retail separate account fees are generally earned based on the end of the preceding or current quarter's asset values. Institutional account fees are generally earned based on an average of month-end balances. In certain instances, institutional fees may include performance related fees that are based on investment returns relative to benchmarks. Fees for structured finance products consist of senior, subordinated and, in certain instances, incentive management fees. Senior and subordinated management fees are based on the end of the preceding quarter par value of the collateral managed with subordinated fees being earned only after certain portfolio criteria are met. Incentive fees on CLOs are typically a percentage of the excess cash flows available to holders of subordinated notes, above a threshold level internal rate of return.
We rely on service providers to provide information for the pricing of the underlying investment securities for the asset values that drive our investment management fees and our assets under management. Our service providers have formal valuation policies and procedures over the valuation of investments.
Distribution and Service Fees
Distribution and service fees are sales- and asset-based fees earned from open-end funds for marketing and distribution services. These fees primarily consist of an asset-based fee that is paid by the fund over a period of years to cover allowable sales and marketing expenses for the fund or front-end sales charges that are based on a percentage of the offering
price. Asset-based distribution and service fees are primarily based on percentages of the average daily net asset value and are paid monthly pursuant to the terms of the respective distribution and service fee contracts.
Distribution and service fees represent two performance obligations comprised of distribution and related shareholder servicing activities. Distribution services are generally satisfied upon the sale of a fund share. Shareholder servicing activities are generally services satisfied over time.
We distribute our open-end funds through third-party financial intermediaries that comprise national, regional and independent broker-dealers. These third-party financial intermediaries provide distribution and shareholder service activities on our behalf. We pay related distribution and service fees to these third-party financial intermediaries for these services as we consider ourselves the principal in these arrangements since we have control of the services prior to the services being transferred to the customer. These payments are classified within distribution and other asset-based expenses.
Administration & Shareholder Service Fees
We provide administrative fund services to our U.S. retail funds, ETFs and closed-end funds and shareholder services to our U.S. retail funds. Administration and shareholder services are performed over time. We earn fees for these services, which are calculated and paid monthly, based on each fund's average daily or weekly net assets. Administrative fund services include: record keeping, preparing and filing documents required to comply with securities laws, legal administration and compliance services, customer service, supervision of the activities of the funds' service providers, tax services and treasury services. We also provide office space, equipment and personnel that may be necessary for managing and administering the business affairs of the funds. Shareholder services include maintaining shareholder accounts, processing shareholder transactions, preparing filings and performing necessary reporting.
Other Income and Fees
Other income and fees primarily represent fees related to other fee-earning assets and contingent sales charges earned from investor redemptions of certain shares sold without a front-end sales charge.
Accounting for Income Taxes
We account for income taxes in accordance with ASC 740,Income Taxes, which requires recognition of the amount of taxes payable or refundable for the current year, as well as deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the reported amounts on the Consolidated Financial Statements. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained, based on the technical merits of the position. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We record interest and penalties related to income taxes as a component of income tax expense.
Significant judgment is required in determining the provision for income taxes and, in particular, any valuation allowance that is recorded against our deferred tax assets. The methodology for determining the realizability of deferred tax assets includes consideration of taxable income in prior carryback year(s), if carryback is permitted under the tax law, as well as consideration of the reversal of deferred tax liabilities that are in the same period and jurisdiction and are of the same character as the temporary differences that gave rise to the deferred tax assets. Our methodology also includes estimates of future taxable income from operations, as well as the expiration dates and amounts of carryforwards related to net operating losses and capital losses. These estimates are projected through the life of the related deferred tax assets based on assumptions that we believe to be reasonable and consistent with demonstrated operating results. Changes in future operating results not currently forecasted may have a significant impact on the realization of deferred tax assets. Valuation allowances are provided when it is determined that it is more likely than not that the benefit of deferred tax assets will not be realized.
Contingent Consideration
We periodically enter into contingent payment arrangements in connection with our business combinations or asset purchases. In contingent payment arrangements, we agree to pay additional transaction consideration to the seller based on future performance. We estimate the value of future payments of these potential future obligations at the time a business combination or asset purchase is consummated. Liabilities under contingent payment arrangements are recorded within contingent consideration on the Consolidated Balance Sheets.
Contingent payment obligations related to business combinations are remeasured at fair value each reporting date using a simulation model or an income approach valuation technique with the assistance of an independent valuation firm
(level 3 fair value measurement). The change in fair value is recorded in the current period as a gain or loss. Gains and losses resulting from changes in the fair value of contingent payment obligations are reflected within change in fair value of contingent consideration on the Consolidated Statements of Operations.
Contingent payment obligations related to our asset purchases, if estimable and probable of payment, are initially recorded at their estimated value and reviewed every reporting period for changes. Any changes to the estimated value are recorded as an update of the initial acquisition cost of the asset with a corresponding change to the estimated contingent payment obligation on the Consolidated Balance Sheets.
Loss Contingencies
The likelihood that a loss contingency exists is evaluated using the criteria of ASC 450, Contingencies,and an accrued liability is recorded if the likelihood of a loss is considered both probable and reasonably estimable at the date of the consolidated financial statements.
We believe that we have considered relevant circumstances that we may be currently subject to, and the consolidated financial statements accurately reflect our reasonable estimate of the results of our operations, financial condition and cash flows for the years presented.
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