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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless we state otherwise or the context otherwise requires, references in this Annual Report on Form 10-K to “BrightSphere” or “BSIG” refer to BrightSphere Investment Group Inc., references to the “Company” refer to BSIG, and references to “we,” “our” and “us” refer to BSIG and its consolidated subsidiaries and previously disposed equity-accounted Affiliate, excluding discontinued operations. References to the holding company or “Center” excluding the Affiliates refer to BrightSphere Inc., or BSUS, a Delaware corporation and indirect, wholly owned subsidiary of BSIG. Unless we state otherwise or the context otherwise requires, references in this Annual Report on Form 10-K to “Affiliates” or an “Affiliate” refer to the asset management firms in which we have or previously had an ownership interest. References in this Annual Report on Form 10-K to “OM plc” refer to Old Mutual plc, our former parent. None of the information in this Annual Report on Form 10-K constitutes either an offer or a solicitation to buy or sell Acadian’s products or services, nor is any such information a recommendation for Acadian’s products or services.

The following discussion of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes which appear in this Annual Report on Form 10-K in Item 8, Financial Statements and Supplementary Data.

This discussion contains forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” for more information. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly under Item 1A, Risk Factors.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

Our MD&A is presented in five sections:

•Overview provides a brief description of our business. It includes information on our reporting segment and underlying Affiliate, a summary of The Economics of Our Business and an explanation of How We Measure Performance using a non-GAAP measure which we refer to as economic net income, or ENI. This section also provides a Summary Results of Operations and information regarding our Assets Under Management by Affiliate, strategy, client type and client location, and net flows by segment.

•U.S. GAAP Results of Operations for the years ended December 31, 2021, 2020 and 2019 includes an explanation of changes in our U.S. GAAP revenue, expense, and other items over the last three years as well as key U.S. GAAP operating metrics.

•Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis includes an explanation of the key differences between U.S. GAAP net income and ENI, the key measure management uses to evaluate our performance. This section also provides a reconciliation between U.S. GAAP net income and ENI for the years ended December 31, 2021, 2020 and 2019, as well as a reconciliation of key ENI operating items including ENI revenue and ENI operating expenses. This section also provides key Non-GAAP operating metrics and a calculation of tax on economic net income. In addition, this section provides analysis for our business segment.

•Capital Resources and Liquidity discusses our key balance sheet data. This section discusses Cash Flows from the business; Working Capital and Long-Term Debt;Adjusted EBITDA; Future Capital Needs; and Commitments, Contingencies and Off-Balance Sheet Obligations. The discussion of Adjusted EBITDA includes an explanation of how we calculate Adjusted EBITDA and a reconciliation of U.S. GAAP net income attributable to controlling interests to Adjusted EBITDA.

•Critical Accounting Policies and Estimates provides a discussion of the key accounting policies and estimates that we believe are the most critical to an understanding of our results of operations and financial condition. These accounting policies and estimates require complex management judgment regarding matters that are highly uncertain at the time policies were applied and estimates were made.

Overview

We are a global asset management company headquartered in Boston, Massachusetts. We historically held interests in a group of investment management firms (the “Affiliates”) individually headquartered in the United States. We have completed the disposition of certain Affiliates and currently operate our business through the following segment:

•Quant & Solutions—comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies. This segment is comprised of our interest in our sole Affiliate, Acadian Asset Management LLC.

Through Acadian, we offer a diverse range of actively-managed investment strategies and products to institutional investors around the globe.

The corporate head office is included within the Other category. The corporate head office expenses are not allocated to the Company’s business segment but the Chief Operating Decision Maker (“CODM”) does consider the cost structure of the corporate head office when evaluating the financial performance of our segment.

As of December 31, 2020, we had three reportable segments that were comprised of five Affiliates. We entered into agreements to divest our equity interests in four Affiliates during the year ended December 31, 2021. Prior to March 31, 2021, we had an Alternatives reportable segment which was comprised of Landmark Partners, LLC (“Landmark”) and Campbell Global, LLC (“Campbell Global”) operating segments. On March 30, 2021, we entered into an agreement to sell all of our interests in Landmark and completed the sale on June 2, 2021. As a result of this transaction, Landmark was reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment. The Campbell Global operating segment was reclassified to the Other category within our segment reporting. On August 31, 2021, we completed the sale of all of our interests in Campbell Global. Operational information for Campbell Global is included within the Other category until August 31, 2021, the consummation of the sale. See “Recent Developments” herein.

Prior to June 30, 2021, we had a Liquid Alpha reportable segment which was comprised of Thompson, Siegel & Walmsley LLC (“TSW”) and Investment Counselors of Maryland (“ICM”). On May 9, 2021, we entered into an agreement to sell all of our interests in TSW and completed the sale on July 22, 2021. As a result of this transaction, TSW has been reclassified to discontinued operations and the Liquid Alpha segment no longer constitutes a reportable segment of the Company. The ICM operating segment was included in the Other category within our segment reporting for the year ended December 31, 2021. On July 19, 2021 we completed the sale of all of our interests in ICM. Operational information for ICM is included within the Other category until July 19, 2021, the consummation of the sale. See “Recent Developments” herein.

Under U.S. GAAP, Acadian is consolidated into our financial statements. We may also be required to consolidate Acadian’s sponsored investment entities, or Funds, due to the nature of our decision-making rights, our economic interests in these Funds or the rights of third party clients in those Funds.

Recent Developments

Divestiture of Campbell Global, TSW, ICM and Landmark

On August 31, 2021, we completed the sale of all of our interests in Campbell Global to J.P. Morgan Asset Management.

On July 22, 2021, we completed the sale of all of our interests in TSW to Pendal Group Limited.

On July 19, 2021, we completed the sale of all our interests in ICM, an equity-accounted Affiliate, to William Blair Investment Management.

On June 2, 2021, we completed the sale of all of our equity interests in Landmark to Ares Management Corporation.

COVID-19 Impact

Beginning in the first quarter of 2020, the outbreak of COVID-19 had a significant impact on the global economy and the financial and securities markets, which will likely to continue for months to come. Because most of the revenue we earn is based on the market value of our assets under management, fluctuations in global markets impact our revenues and earnings.

The COVID-19 pandemic continues to impact the manner in which we operate. As of the date of this filing, the majority of our employees are working from home and our employees have significantly reduced business travel. Additionally, many third-party vendors on whom we rely for certain critical functions are also operating in remote environments. Given the continued uncertainty surrounding the COVID-19 pandemic, it is difficult to predict how long such remote working conditions and travel restrictions will last. We expect most operating costs to return to pre-COVID-19 levels when employees return to the office and resume business travel.

We believe we are operating well under these circumstances, benefiting from the flexible and highly mobile operating environment. However, market volatility, as well as changes in our operations and those of our key vendors, may result in increased client redemptions; inefficiencies, delays and decreased communication; and an increase in the number and significance of operational and trade errors. In addition, we do not know what, if any, longer-term impact the current operating circumstances (and/or the extension of them) will have on our business and results. The extent of the impact on our business operations, assets under management and financial results will depend on a number of factors and future developments, which are uncertain and cannot be predicted. See Item 1A, Risk Factors.

The Economics of Our Business

Our profitability is affected by a variety of factors including the level and composition of our average assets under

management, or AUM, fee rates charged on AUM and our expense structure. We earn management fees based on assets under management. Approximately 80% of our management fees are calculated based on average AUM (calculated on either a daily or monthly basis) with the remainder of our management fees calculated based on period-end AUM or other measuring methods. Changes in the levels of our AUM are driven by our investment performance and net client cash flows. We may also earn performance fees, or adjust management fees, when certain accounts differ in relation to relevant benchmarks or exceed or fail to exceed required returns. Approximately $15.0 billion, or 13.0% of our AUM are in accounts with incentive fee in which we participate in the performance fee. The majority of these performance fees are calculated based on value added over the relevant benchmarks on a rolling one-year basis.

Our largest expense item is compensation and benefits paid to our employees, which consists of both fixed and variable components. Fixed compensation and benefits represents base salaries and wages, payroll taxes and the costs of our employee benefit programs. Variable compensation, calculated as described below, may be awarded in cash, equity or profit interests.

The arrangements in place with Acadian result in the sharing of economics between BSUS and Acadian’s key management personnel using a profit-sharing model. Profit sharing affects two elements within our earnings: (i) the calculation of variable compensation and (ii) the level of Acadian’s equity or profit interests distribution to its employees.

Variable compensation is the portion of earnings that is contractually allocated to Acadian employees as a bonus pool, typically representing a percentage of earnings before variable compensation, which is measured as revenues less fixed compensation and benefits and other operating and administrative expenses. Profits after variable compensation are shared between us and Acadian key employee equity holders according to our respective equity or profit interests ownership. The sharing of profits in this manner ensures that the economic interests of Acadian key employees and those of BSUS are aligned, both in terms of generating strong annual earnings as well as investing those earnings back into the business in order to generate growth over the long term. We view profit sharing as an attractive operating model, as it allows us to share in the benefits of operating leverage as the business grows, and ensures all equity and profit interests holders are incentivized to achieve that growth.

Equity or profit interests owned by Acadian key employees are awarded as part of their variable compensation arrangement. Over time, Acadian key employee-owned equity or profit interests are recycled from one generation of employee owners to the next, either by the next generation purchasing equity or profit interests directly from retiring principals, or by Acadian key employees forgoing cash bonuses in exchange for the equivalent value in Acadian equity or profit interests. The recycling of equity or profit interests is often facilitated by BSUS; see “—U.S. GAAP Results of Operations—U.S. GAAP Expenses—Compensation and Benefits Expense” for a further discussion. Employee equity is valued at a fixed multiple of profits, so employees have transparency into both their earning potential in any year from the bonus pool and share of profits, as well as the current value of their equity and the long-term potential to realize value from its growth.

In this structure, key employees who are managing the business have incentives to manage for profit, but also to manage the business prudently, in the interest of their clients, and invest for growth, since they will benefit over the long term as both employees and equity holders. In this way, Acadian is aligned with BSUS and the public shareholders to generate profits and growth over time.

How We Measure Performance

We manage our business based on one segment, reflecting how our management assesses the performance of our business.

In measuring and monitoring the key components of our earnings, our management uses a non-GAAP financial measure, ENI, to evaluate the financial performance of, and to make operational decisions for, our business. We also use ENI to make resource allocation decisions, determine appropriate levels of investment or dividend payout, manage balance sheet leverage, determine Affiliate variable compensation and equity distributions, and incentivize management. It is an important measure in evaluating our financial performance because we believe it most accurately represents our operating performance and cash generation capability.

ENI differs from net income determined in accordance with U.S. GAAP as a result of both the reclassification of certain income statement items and the exclusion of certain non-cash or non-recurring income statement items. In particular, ENI excludes non-cash charges representing the changes in the value of Affiliate equity and profit interests held by Affiliate key employees, the results of discontinued operations which are no longer part of our business, restructuring costs, capital transaction costs, seed capital and co-investment gains, losses and related financing costs, and that portion of consolidated Funds which are not attributable to our stockholders. ENI is also adjusted for amortization of acquisition-related contingent consideration and pre-acquisition retained equity with service components.

ENI revenue is primarily comprised of the fee revenues paid to us by our clients for our advisory services and earnings from our former equity-accounted Affiliate. Revenue included within ENI differs from U.S. GAAP revenue in that it excludes amounts from consolidated Funds which are not attributable to our stockholders, it excludes reimbursement of certain costs we paid on behalf of our customers and it includes our share of earnings from our former equity-accounted Affiliate.

ENI expenses are calculated to reflect all usual expenses from ongoing continuing operations attributable to our stockholders. Expenses included within ENI differ from U.S. GAAP expenses in that they exclude amounts from consolidated Funds which are not attributable to our stockholders, revaluations of Affiliate key employee owned equity and profit interests, amortization and impairment of acquired intangibles and other acquisition-related items, costs we paid on behalf of our customers which were subsequently reimbursed and certain other non-cash expenses.

“Non-controlling interests” is a concept under U.S. GAAP that identifies net components of revenues and expenses that are not attributable to our stockholders. For example, the portion of the net income (loss) of any consolidated Funds that is attributable to the outside investors or clients of the consolidated Funds is included in “Non-controlling interests” in our Consolidated Financial Statements. Conversely, “controlling interests” is the portion of revenue or expense that is attributable to our stockholders.

For a more detailed discussion of the differences between U.S. GAAP net income and economic net income, see "—Non-GAAP Supplemental Performance Measure — Economic Net Income and Segment Analysis."

Summary Results of Operations

The following table summarizes our results of operations for the years ended December 31, 2021, 2020 and 2019:

Years ended December 31, Increase (Decrease)

U.S. GAAP Basis

Diluted shares outstanding (in millions) 80.5 82.0 91.3 (1.5) (9.3)

Economic Net Income Basis(2)(3)

(Non-GAAP measure used by management)

Other Operational Information

Net client cash flows (in billions) (5.9) (4.9) (32.4) (1.0) 27.5

(1)U.S. GAAP operating margin equals operating income from continuing operations divided by total revenue.

(2)Economic net income is a non-GAAP measure we use to evaluate the performance of our business. For a reconciliation to U.S. GAAP financial information and a further discussion of economic net income refer to “—Non-GAAP Supplemental Performance Measures—Economic Net Income and Segment Analysis.”

(3)Excludes income from discontinued operations attributable to controlling interests, as well as restructuring costs at the Center and Affiliates of $3.8 million, costs associated with the transfer of an insurance policy from our former Parent of $1.2 million, and the gain on sale of subsidiaries of $48.6 million for the year ended December 31, 2021. Excludes income from discontinued operations attributable to controlling interests, as well as restructuring at the Center and subsidiaries of $9.4 million, costs associated with the transfer of an insurance policy from our former Parent of $1.6 million, and the gain on sale of subsidiaries of $241.3 million for the year ended December 31, 2020. Excludes income from discontinued operations attributable to controlling interests, as well as restructuring costs at the Center and Affiliates of $6.7 million, costs associated with the transfer of an insurance policy from our former Parent of $0.9 million, and costs associated with the redomicile to the U.S. of $1.6 million for the year ended December 31, 2019.

(4)ENI revenue is the ENI measure which corresponds to U.S. GAAP revenue.

(5)Pre-tax economic net income is the ENI measure which corresponds to U.S. GAAP pre-tax income from continuing operations attributable to controlling interests.

(6)ENI operating margin is a non-GAAP efficiency measure, calculated based on ENI operating earnings divided by ENI revenue. ENI operating earnings is calculated as ENI revenue, less ENI operating expense, less ENI variable compensation. The ENI operating margin is most comparable to our U.S. GAAP operating margin (excluding the effect of consolidated Funds).

(7)Economic net income is the ENI measure which corresponds to U.S. GAAP net income from continuing operations attributable to controlling interests.

(8)Annualized revenue impact of net flows represents the difference between annualized management fees expected to be earned on new accounts and net assets contributed to existing accounts, less the annualized management fees lost on terminated accounts or net assets withdrawn from existing accounts, plus revenue impact from reinvested income and distributions, including equity-accounted Affiliate. The annualized management fees are calculated by multiplying the annual gross fee rate for the relevant account by the net assets gained in the account in the event of a positive flow, excluding any current or future market appreciation or depreciation, or the net assets lost in the account in the event of an outflow, excluding any current or future market appreciation or depreciation. In addition, reinvested income and distributions for the segment is multiplied by average fee rate for the segment to compute the revenue impact. For a further discussion of the uses and limitations of the annualized revenue impact of net flows, see “Assets Under Management” herein.

Assets Under Management

Our total assets under management as of December 31, 2021 were $117.2 billion. The following table presents our assets under management by Affiliate as of each of the dates indicated:

Barrow, Hanley, Mewhinney & Strauss(1) — — 51.7

Campbell Global(2) — 4.7 4.8

Copper Rock Capital Partners(3) — — 3.9

Investment Counselors of Maryland(4) — 3.2 2.4

Thompson, Siegel & Walmsley(6) — 22.3 21.1

(1)On November 17, 2020, we completed the sale of all our interests in Barrow, Hanley, Mewhinney & Strauss LLC (“Barrow”).

(2)On August 31, 2021, we completed the sale of all our interests in Campbell Global, see “Recent Developments” herein.

(3)On July 24, 2020, we completed the sale of all our interests in Copper Rock Capital Partners LLC (“Copper Rock”).

(4)On July 19, 2021, we completed the sale of all our interests in ICM, see “Recent Developments” herein.

(5)On June 2, 2021, we completed the sale of all our interests in Landmark, see “Recent Developments” herein.

(6)On July 22, 2021, we completed the sale of all our equity interests in TSW, see “Recent Developments” herein.

Our strategies include:

i.Developed Markets equity, which includes Quant & Solutions, global, international and U.S. equities;

ii.Emerging Markets equity, which includes Quant & Solutions equity investments in the emerging and frontier markets; and

iii.Other, which is mainly comprised of forestry and equities managed by our previous Affiliates.

The following table presents our assets under management by strategy as of each of the dates indicated:

The following table shows assets under management by client type as of each of the dates indicated:

AUM % of total AUM % of total AUM % of total

The following table shows assets under management by client location as of each of the dates indicated:

AUM % of total AUM % of total AUM % of total

AUM flows and the annualized revenue impact of net flows

Net client cash flows and revenue impact of net client cash flows for all periods include reinvested income and distributions, and exclude realizations. Reinvested income and distributions represent investment yield that is reinvested back into the portfolios as opposed to distributed as cash.

In the following table, we present our asset flows and market appreciation (depreciation) by segment. We also present a key metric used to better understand our asset flows, the annualized revenue impact of net client cash flows. Annualized revenue impact of net flows represents annualized management fees expected to be earned on new accounts and net assets contributed to existing accounts (inflows), less the annualized management fees lost on terminated accounts or net assets withdrawn from existing accounts (outflows), plus revenue impact from reinvested income and distributions. Annualized management fee for client flow is calculated by multiplying the annual gross fee rate for the relevant account with the inflow or the outflow, including equity-accounted Affiliate. In addition, reinvested income and distributions for each segment is multiplied by average fee rate for the respective segment to compute the revenue impact.

The annualized revenue impact of net flows metric is designed to provide investors with a better indication of the potential financial impact of net client cash flows, however it has certain limitations. For instance, it does not include assumptions for the next twelve months’ market appreciation or depreciation and investment performance associated with the assets gained or lost. Nor does it account for factors such as future client terminations or additional contributions or withdrawals over the next twelve months. Additionally, the basis points reported are fee rates based on the asset levels at the time of the transactions and do not consider the fact that client fee rates may change over the next twelve months.

The following table summarizes our asset flows and market appreciation (depreciation) by segment for each of the periods indicated:

($ in billions, unless otherwise noted) Years ended December 31,

Quant & Solutions

Reinvested income and distributions 2.7 2.8 2.9

Other(1) 1.1 — —

Liquid Alpha(3)

Sale of Affiliates — (50.3) —

Gross inflows — 5.9 5.0

Reinvested income and distributions — 1.1 1.9

Market appreciation — (0.7) 14.8

Other(1)(3) (3.2) — —

Ending balance $ — $ 3.2 $ 58.0

Average AUM of consolidated Affiliates $ — $ 40.0 $ 74.6

Other(3)

Beginning balance $ 5.8 $ 5.4 $ 5.9

Sale of Affiliates (8.9) — —

Gross outflows (0.2) (0.3) (0.8)

Market appreciation 0.6 (0.3) 0.1

Ending balance $ — $ 5.8 $ 5.4

Average AUM of consolidated Affiliates $ 2.9 $ 5.7 $ 5.6

Total

Sale of Affiliates (8.9) (50.3) —

Reinvested income and distributions 2.7 3.9 4.8

Other (0.1) — —

Discontinued operations(3) — 40.7 39.4

Ending balance including discontinued operations $ 117.2 $ 156.7 $ 204.4

Average AUM of consolidated Affiliates $ 116.8 $ 140.2 $ 175.2

Annualized basis points: inflows 46.4 34.6 34.4

Annualized basis points: outflows 36.5 39.7 26.6

Annualized revenue impact of net flows (in millions) $ (10.3) $ (31.0) $ (68.7)

(1)AUM representing liquid alternative strategies previously excluded from the Quant & Solutions segment has been reclassified as of January 1, 2021.

(2)Average AUM equals average AUM of consolidated Affiliates.

(3)Our reportable segments reflect the sales of Landmark and TSW. As a result of the sale, Landmark, previously included in the Alternatives segment, is reported within discontinued operations and Alternatives no longer constitutes a reportable segment. The remaining portion of the Alternatives segment, including Campbell Global, has been reclassified to “Other” for all periods presented. TSW, previously included in the Liquid Alpha segment, is now reported within discontinued operations and Liquid Alpha no longer constitutes a reportable segment as of the beginning of the second quarter of 2021. The remaining portion of the Liquid Alpha segment, including ICM, has been reclassified to the Other category as of the beginning of the first quarter of 2021.

We also analyze our asset flows by client type and client location. Our client types include:

i.Sub-advisory, which includes assets managed for underlying mutual fund and variable insurance products which are sponsored by insurance companies and mutual fund platforms, where the end client is typically retail;

ii.Institutional, which includes assets managed for public / government pension funds, including U.S. state and local government funds and non-U.S. sovereign wealth, local government and national pension funds; also includes corporate and union-sponsored pension plans; and

iii.Retail / other, which includes assets managed for mutual funds sponsored by our Affiliates, defined contribution plans and accounts managed for high net worth clients.

The following table summarizes our asset flows by client type for each of the periods indicated:

($ in billions) Years ended December 31,

Sub-advisory

Sale of Affiliates (0.4) (16.8) —

Reinvested income and distributions 0.3 0.7 1.4

Market appreciation 1.6 0.1 8.2

Institutional

Sale of Affiliates (6.0) (30.5) —

Reinvested income and distributions 2.3 3.0 3.2

Other(1) (0.1) — —

Retail / Other

Beginning balance $ 6.7 $ 8.3 $ 6.4

Sale of Affiliates (2.5) (3.0) —

Gross outflows (1.6) (1.4) (1.4)

Reinvested income and distributions 0.1 0.2 0.2

Market appreciation 1.2 0.3 1.3

Ending balance $ 5.3 $ 6.7 $ 8.3

Total

Sale of Affiliates (8.9) (50.3) —

Reinvested income and distributions 2.7 3.9 4.8

Other (0.1) — —

Discontinued operations(2) — 40.7 39.4

Ending balance including discontinued operations $ 117.2 $ 156.7 $ 204.4

(1)Other movements related to billable assets adjustment.

(2)Reflects the sales of Landmark and TSW. As a result of the transactions, Landmark and TSW are reported within discontinued operations.

It is a strategic objective to increase our percentage of assets under management sourced from non-U.S. clients. Our categorization by client location includes:

i.U.S.-based clients, where the contracting client is based in the United States, and

ii.Non-U.S.-based clients, where the contracting client is based outside the United States.

The following table summarizes asset flows by client location for each of the periods indicated:

($ in billions) Years ended December 31,

U.S.

Sale of Affiliates (7.9) (39.9) —

Reinvested income and distributions 1.8 2.7 3.6

Non-U.S.

Sale of Affiliates (1.0) (10.4) —

Reinvested income and distributions 0.9 1.2 1.2

Other(1) (0.1) — —

Total

Sale of Affiliates (8.9) (50.3) —

Reinvested income and distributions 2.7 3.9 4.8

Other (0.1) — —

Discontinued operations(2) — 40.7 39.4

Ending balance including discontinued operations $ 117.2 $ 156.7 $ 204.4

(1)Other movements related to billable assets adjustment.

(2)Reflects the sales of Landmark and TSW. As a result of the transactions, Landmark and TSW are reported within discontinued operations.

At December 31, 2021, our total assets under management were $117.2 billion, an increase of $1.2 billion or 1.0%, compared to $116.0 billion excluding discontinued operations at December 31, 2020. The assets under management at December 31, 2020 represented a decrease of $(49.0) billion or (29.7)% compared to $165.0 billion excluding discontinued operations at December 31, 2019. The change in assets under management during the year ended December 31, 2021 reflects the sale of Campbell Global and ICM of $(8.9) billion, net flows of $(5.9) billion including reinvested income and distributions of $2.7 billion, and realizations and other of $(0.1) billion, offset by net market appreciation of $16.1 billion from continued market recovery. The change in assets under management during the year ended December 31, 2020 reflects the sales of Barrow Hanley Mewhinney & Strauss, LLC (“Barrow Hanley”) and Copper Rock Capital Partners, LLC (“Copper Rock”) of $(50.3) billion, net flows of $(4.9) billion including reinvested income and distributions of $3.9 billion, partially offset by net market appreciation of $6.2 billion. The change in assets under management during the year ended December 31, 2019 reflects net market appreciation of $28.8 billion and net flows of $(32.4) billion including reinvested income and distributions of $4.8 billion.

For the year ended December 31, 2021, our net outflows were $(5.9) billion compared to net outflows of $(4.9) billion for the year ended December 31, 2020 and net outflows of $(32.4) billion for the year ended December 31, 2019. The change in net outflows for the year ended December 31, 2021 was primarily due to re-balancing and asset reallocation in certain Quant & Solutions strategies. The change in net outflows for the year ended December 31, 2020 was primarily due to the $(22.8) billion reallocation of several Vanguard sub-advisory strategies at our previously disposed Affiliate, Barrow Hanley, for the year ended December 31, 2019 that did not occur in the year ended December 31, 2020. Reinvested income and distributions of $2.7 billion, $3.9 billion, and $4.8 billion are reflected in the net flows for the years ended December 31, 2021, 2020 and 2019, respectively. For the year ended December 31, 2021, the annualized revenue impact of the net flows improved to $(10.3) million compared to $(31.0) million for the year ended December 31, 2020 and $(68.7) million for the year ended December 31, 2019.

U.S. GAAP Results of Operations

For the Years Ended December 31, 2021, 2020 and 2019

Our U.S. GAAP results of operations were as follows for the years ended December 31, 2021, 2020 and 2019.

Years ended December 31, Increase (Decrease)

U.S. GAAP Consolidated Statements of Operations(1)

Consolidated Funds’ revenue — 5.5 6.6 (5.5) (1.1)

Amortization of acquired intangibles 0.1 0.3 0.2 (0.2) 0.1

Consolidated Funds’ expense — 0.2 0.3 (0.2) (0.1)

Net consolidated Funds’ investment gain (loss) — (5.2) 4.2 5.2 (9.4)

Income from discontinued operations, net of tax 77.3 67.8 37.3 9.5 30.5

Gain on disposal of discontinued operations, net of tax 691.0 — — 691.0 —

(1)Certain Funds have been consolidated due to our seed capital or co-investments in the Funds.

(2)U.S. GAAP operating margin equals operating income from continuing operations divided by total revenue.

The following table reconciles our net income attributable to controlling interests to our pre-tax income from continuing operations attributable to controlling interests:

Years ended December 31,

U.S. GAAP Consolidated Statements of Operations

Net income attributable to controlling interests $ 828.4 $ 286.7 $ 223.9

U.S. GAAP Revenues

Our U.S. GAAP revenues principally consist of:

i.management fees earned based on our overall weighted average fee rate charged to our clients and the level of assets under management;

ii.performance fees earned or management fee adjustments when our Affiliates’ investment performance over agreed time periods for certain clients has differed from pre-determined hurdles;

iii.other revenue, consisting primarily of consulting services as well as reimbursement of certain Fund expenses our Affiliates paid on behalf of our Funds; and

iv.revenue from consolidated Funds, a portion of which is attributable to the holders of non-controlling interests in consolidated Funds.

Management Fees

Our management fees are a function of the fee rates our Affiliates charge to their clients, which are typically expressed in basis points, and the levels of our assets under management.

Excluding assets managed by our previous equity-accounted Affiliate, average basis points earned on average assets under management were 37.1 bps for the year ended December 31, 2021, 34.1 bps for the year ended December 31, 2020 and 33.2 bps for the year ended December 31, 2019. The greatest driver of increases or decreases in this average fee rate is changes in the mix of our assets under management caused by net inflows or outflows in certain asset classes, dispositions, and disproportionate market movements.

Year ended December 31, 2021 compared to year ended December 31, 2020: Management fees decreased $(45.6) million, or (9.5)%, from $478.9 million for the year ended December 31, 2020 to $433.3 million for the year ended December 31, 2021. The decrease was primarily due to the disposition of Barrow Hanley, which was included for the majority of 2020, but had no impact on 2021, and lower overall level of average assets under management. Average assets under management excluding our previous equity-accounted Affiliate decreased (16.7)%, from $140.2 billion for the year ended December 31, 2020 to $116.8 billion for the year ended December 31, 2021, primarily due to the sale of Campbell Global in the third quarter of 2021 and the sale of Barrow Hanley that occurred in the fourth quarter of 2020.

Year ended December 31, 2020 compared to year ended December 31, 2019: Management fees decreased $(103.2) million, or (17.7)%, from $582.1 million for the year ended December 31, 2019 to $478.9 million for the year ended December 31, 2020. The decrease was primarily due to the disposition of Barrow Hanley and Copper Rock and lower overall level of average assets under management. Average assets under management excluding our previous equity-accounted Affiliate decreased (20.0)%, from $175.2 billion for the year ended December 31, 2019 to $140.2 billion for the year ended December 31, 2020, mainly due to the sale of Barrow Hanley and Copper Rock and the equity market decline during the first quarter of 2020 driven by the COVID-19 pandemic.

Performance Fees

Approximately $15.0 billion, or 13.0% of our AUM at December 31, 2021, are in accounts with performance fee features in which we participate. Performance fees are typically shared with our Affiliate key employees through various contractual compensation and profit-sharing arrangements.

Year ended December 31, 2021 compared to year ended December 31, 2020: Performance fees increased $77.0 million, from $7.8 million for the year ended December 31, 2020 to $84.8 million for the year ended December 31, 2021. Included in the increase is $16 million of performance fees earned by a timber investment from our previous Affiliate, Campbell Global. Acadian contributed approximately $61 million of the increase due to out-performance in a wide range of strategies in 2021, such as long/short and emerging markets equities. Many of Acadian’s performance fee-eligible accounts posted strong absolute and relative returns and crystallized performance fees during 2021.

Year ended December 31, 2020 compared to year ended December 31, 2019: Performance fees improved $7.9 million, from $(0.1) million for the year ended December 31, 2019 to $7.8 million for the year ended December 31, 2020. A performance fee penalty in 2019 was attributable to sub-advisory assets no longer with the Affiliates.

Other Revenue

Year ended December 31, 2021 compared to year ended December 31, 2020: Other revenue decreased $(1.6) million, or (21.9)%, from $7.3 million for the year ended December 31, 2020 to $5.7 million for the year ended December 31, 2021. The decrease was primarily attributable to the sale of Campbell Global during the year ended December 31, 2021.

Year ended December 31, 2020 compared to year ended December 31, 2019: Other revenue increased $1.3 million, or 21.7%, from $6.0 million for the year ended December 31, 2019 to $7.3 million for the year ended December 31, 2020. The increase was primarily attributable to an increase in consulting performed by an Affiliate for the year ended December 31, 2020.

U.S. GAAP Expenses

Our U.S. GAAP expenses principally consist of:

i.compensation paid to our investment professionals and other employees, including base salary, benefits, sales-based compensation, variable compensation, Affiliate distributions, and revaluation of key employee owned Affiliate equity and profit interests;

ii.general and administrative expenses;

iii.impairment of goodwill;

iv.amortization of acquired intangible assets;

v.depreciation and amortization charges; and

vi.expenses of consolidated Funds, a portion of which is attributable to the holders of non-controlling interests in consolidated Funds.

Compensation and Benefits Expense

Our most significant category of expense is compensation and benefits awarded to our and our Affiliates’ employees. The following table presents the components of U.S. GAAP compensation expense for the years ended December 31, 2021, 2020 and 2019:

Years ended December 31,

Sales-based compensation(2) 7.6 7.6 9.7

Affiliate key employee distributions(4) 13.4 8.5 20.1

Non-cash Affiliate key employee equity revaluations(5) 32.9 (15.1) (67.9)

Total U.S. GAAP compensation and benefits expense $ 284.6 $ 243.1 $ 248.6

(1)Fixed compensation and benefits includes base salaries, payroll taxes and the cost of benefit programs provided. For the year ended December 31, 2021, $97.2 million of fixed compensation and benefits (of the $100.2 million above) is included within economic net income, which excludes Fund expenses initially paid by our Affiliates on the Fund’s behalf and subsequently reimbursed. For the year ended December 31, 2020, $125.7 million of fixed compensation and benefits (of the $130.0 million above) is included within economic net income, which excludes Fund expenses initially paid by our Affiliates on the Fund’s behalf and subsequently reimbursed. For the year ended December 31, 2019, $144.3 million of fixed compensation and benefits (of the $148.7 million above) is included within economic net income, which excludes Fund expenses initially paid by our Affiliates on the Fund’s behalf and subsequently reimbursed.

(2)Sales-based compensation is paid to our and our Affiliates’ sales and distribution teams and represents compensation earned by our sales professionals, paid over a multi-year period, related to revenue earned on new sales. Its variability is based upon the structure of sales-based compensation due on inflows of assets under management and market-based movement in both current and prior periods.

(3)Variable compensation is contractually set and calculated individually at each Affiliate, plus Center bonuses and compensation paid by our Affiliates on behalf of their Funds that are subsequently reimbursed. Variable compensation is usually awarded based on a contractual percentage of each Affiliate’s ENI profits before variable compensation and may be paid in the form of cash or non-cash Affiliate equity or profit interests. In Affiliates with an agreed split of performance fees between Affiliate employees and BSUS, the Affiliates’ share of performance fees, which ranges between 60%-75% of the total, is allocated entirely to variable compensation. For certain Affiliates, the variable compensation earned on performance fees vest over three-years and compensation expense is recognized over that service period. Center variable compensation includes cash and BSIG equity. Non-cash variable compensation awards typically vest over several years and are recognized as compensation expense over that service period.

Years ended December 31,

Non-cash equity-based award amortization 5.9 12.4 16.6

(a)For the year ended December 31, 2021, $129.6 million of variable compensation expense (of the $130.5 million above) is included within economic net income, which excludes $0.9 million of variable compensation associated with restructuring at an Affiliate. For the year ended December 31, 2020, $107.9 million of variable compensation expense (of the $112.1 million above) is included within economic net income, which excludes the variable compensation associated with restructuring at the Center and the Affiliates of $3.8 million, and variable compensation subsequently reimbursed by Funds of $0.3 million. For the year ended December 31, 2019, $131.3 million of variable compensation expense (of the $138.0 million above) is included within economic net income, which excludes $6.7 million of variable compensation associated with restructuring at the Center and the Affiliates, as well as variable compensation subsequently reimbursed by Funds.

(4)Affiliate key employee distributions represent the share of Affiliate profits after variable compensation that is attributable to Affiliate key employee equity and profit interests holders, according to their ownership interests. The Affiliate key employee distribution ratio at each Affiliate is calculated as Affiliate key employee distributions divided by ENI operating earnings at that Affiliate. At certain Affiliates with tiered equity structures, BSUS and other classes of employee equity holders are entitled to an initial proportionate preference over profits after variable compensation, structured such that before a preference threshold is reached, there would be no required key employee distributions to the tiered equity holders, whereas for profits above the threshold the key employee distribution amount to the tiered equity holders would be calculated based on the tiered key employee ownership percentages.

(5)Non-cash Affiliate key employee equity revaluations represent changes in the value of Affiliate equity and profit interests held by Affiliate key employees. These ownership interests may, in certain circumstances, be repurchased by BSUS at a value based on a pre-determined fixed multiple of twelve-month earnings and as such a liability is carried on our balance sheet based on the expected cash to be paid. However, any equity or profit interests repurchased by BSUS can be used to fund a portion of future variable compensation awards, resulting in savings in cash variable compensation that offset the negative cash effect of repurchasing the equity. Our Affiliate equity and profit interest plans have been designed to ensure BSUS is not required to repurchase more equity than we can reasonably recycle through variable compensation awards in any given twelve month period.

Fluctuations in compensation and benefits expense for the periods presented are discussed below.

Year ended December 31, 2021 compared to year ended December 31, 2020: Compensation and benefits expense increased $41.5 million, or 17.1%, from $243.1 million for the year ended December 31, 2020 to $284.6 million for the year ended December 31, 2021. Fixed compensation and benefits decreased $(29.8) million, or (22.9)%, from $130.0 million for the year ended December 31, 2020 to $100.2 million for the year ended December 31, 2021, primarily reflecting the disposition of Affiliates and cost savings from the restructuring at the Center and Affiliates. Variable compensation increased $18.4 million, or 16.4%, from $112.1 million for the year ended December 31, 2020 to $130.5 million for the year ended December 31, 2021. The increase was primarily attributable to higher performance fee revenues in 2021, of which the Affiliates’ share is determined by a contractual split and recognized as compensation over their respective vesting periods. Sales-based compensation remained at $7.6 million for the years ended December 31, 2020 and 2021, respectively. Affiliate key employee distributions increased $4.9 million, or 57.6%, from $8.5 million for the year ended December 31, 2020 to $13.4 million for the year ended December 31, 2021 as a result of higher post-variable compensation earnings and the change in the mix of earnings at the consolidated Affiliates. Revaluations of Affiliate key employee equity changed $48.0 million in 2021, reflecting revaluations of key employee ownership interests at our consolidated Affiliates, as the value of Affiliate equity decreased $(15.1) million for the year ended December 31, 2020 and increased $32.9 million for the year ended December 31, 2021.

Year ended December 31, 2020 compared to year ended December 31, 2019: Compensation and benefits expense decreased $(5.5) million, from $248.6 million for the year ended December 31, 2019 to $243.1 million for the year ended December 31, 2020. Fixed compensation and benefits decreased $(18.7) million, or (12.6)%, from $148.7 million for the year ended December 31, 2019 to $130.0 million for the year ended December 31, 2020. This decrease reflects the cost savings from the restructuring at the Center and Affiliates, as well as the disposition of Barrow Hanley and Copper Rock in 2020. Variable compensation decreased $(25.9) million, or (18.8)%, from $138.0 million for the year ended December 31, 2019 to $112.1 million for the year ended December 31, 2020. The decrease was attributable to lower pre-variable compensation earnings in 2020. Sales-based compensation decreased $(2.1) million, or (21.6)%, from $9.7 million for the year ended December 31, 2019 to $7.6 million for the year ended December 31, 2020, as a result of the structure of sales-based compensation programs, driven by the timing of asset inflows triggering sales-based compensation in both current and prior periods. Affiliate key employee distributions decreased $(11.6) million, or (57.7)%, from $20.1 million for the year ended December 31, 2019 to $8.5 million for the year ended December 31, 2020, as a result of lower earnings before Affiliate key employee distributions at the consolidated Affiliates. Revaluations of Affiliate key employee equity changed by $52.8 million in 2020, reflecting revaluations of key employee ownership interests at our consolidated Affiliates, as the value of Affiliate equity decreased $(67.9) million for the year ended December 31, 2019 and decreased $(15.1) million for the year ended December 31, 2020.

General and Administrative Expense

Year ended December 31, 2021 compared to year ended December 31, 2020: General and administrative expense decreased $(16.8) million, or (19.1)%, from $88.0 million for the year ended December 31, 2020 to $71.2 million for the year ended December 31, 2021. The decrease was primarily due to cost saving initiatives at the Center and Affiliates and the disposition of Campbell Global in the third quarter of 2021 and Barrow Hanley in the fourth quarter of 2020.

Year ended December 31, 2020 compared to year ended December 31, 2019: General and administrative expense decreased $(19.1) million, or (17.8)%, from $107.1 million for the year ended December 31, 2019 to $88.0 million for the year ended December 31, 2020. The decrease was primarily due to cost saving initiatives at the Center and Affiliates and the disposition of Barrow Hanley and Copper Rock in 2020.

Impairment of Goodwill

Year ended December 31, 2021 compared to year ended December 31, 2020: Impairment of goodwill was $16.4 million for the year ended December 31, 2020 and there was no impairment for the year ended December 31, 2021. The change was the result of the impairment charge recorded for the Copper Rock reporting unit during the year ended December 31, 2020, which was included within the Liquid Alpha segment prior to its disposition in the third quarter of 2020.

Year ended December 31, 2020 compared to year ended December 31, 2019: No goodwill impairment charge was recorded in the year ended December 31, 2019. A goodwill impairment charge of $16.4 million was recorded for the year ended December 31, 2020 with respect to the Copper Rock reporting unit which was included within the Liquid Alpha segment prior to its disposition in July 2020. In the first quarter of 2020, we performed a quantitative impairment test of Copper Rock due to the decline in assets under management, and the fair value of the Copper Rock reporting unit did not exceed its carrying value. Accordingly, we recognized a goodwill impairment charge of $16.4 million for the year ended December 31, 2020.

Amortization of Acquired Intangibles Expense

Year ended December 31, 2021 compared to year ended December 31, 2020: Amortization of acquired intangibles expense decreased $(0.2) million, or (66.7)%, from $0.3 million for the year ended December 31, 2020 to $0.1 million for the year ended December 31, 2021. The change is due to the disposition of Copper Rock in 2020.

Year ended December 31, 2020 compared to year ended December 31, 2019: Amortization of acquired intangibles expense increased $0.1 million, or 50.0%, from $0.2 million for the year ended December 31, 2019 to $0.3 million for the year ended December 31, 2020. The change is due to the disposition of Copper Rock in 2020.

Depreciation and Amortization Expense

Year ended December 31, 2021 compared to year ended December 31, 2020: Depreciation and amortization expense increased $2.3 million, or 11.6%, from $19.8 million for the year ended December 31, 2020 to $22.1 million for the year ended December 31, 2021. The increase was primarily related to additional software and technology investments in the business.

Year ended December 31, 2020 compared to year ended December 31, 2019: Depreciation and amortization expense increased $3.6 million, or 22.2%, from $16.2 million for the year ended December 31, 2019 to $19.8 million for the year ended December 31, 2020. The increase was primarily related to additional software and technology investments in the business.

U.S. GAAP Other Non-Operating Items of Income and Expense

Other non-operating items of income and expense consist of:

i.investment income;

ii.interest income;

iii.interest expense; and

iv.gain on sale of subsidiaries

Investment Income

Year ended December 31, 2021 compared to year ended December 31, 2020: Investment income increased $3.4 million, or 69.4%, from $4.9 million for the year ended December 31, 2020 to $8.3 million for the year ended December 31, 2021. The increase is primarily due to an increase in returns generated by seed capital investments driven by continued market recovery in 2021 compared to 2020, which included the negative impact of the market decline in the first quarter of 2020.

Year ended December 31, 2020 compared to year ended December 31, 2019: Investment income decreased $(11.9) million, or (70.8)%, from $16.8 million for the year ended December 31, 2019 to $4.9 million for the year ended December 31, 2020. The decrease is primarily due to the change in unrealized gains/losses on seed investments driven by the market decline in the first quarter of 2020, which was partially offset by the change in unrealized gains in the following quarters of 2020 as the market recovered.

Interest Income

Year ended December 31, 2021 compared to year ended December 31, 2020: Interest income decreased $(0.4) million, or (66.7)%, from $0.6 million for the year ended December 31, 2020 to $0.2 million for the year ended December 31, 2021, principally due to a decrease in short-term investment returns in 2021.

Year ended December 31, 2020 compared to year ended December 31, 2019: Interest income decreased $(1.6) million, or (72.7)%, from $2.2 million for the year ended December 31, 2019 to $0.6 million for the year ended December 31, 2020, principally due to a decrease in short-term investment returns in 2020.

Interest Expense

Year ended December 31, 2021 compared to year ended December 31, 2020: Interest expense decreased $(3.7) million, or (13.0)%, from $28.5 million for the year ended December 31, 2020 to $24.8 million for the year ended December 31, 2021, primarily reflecting a lower balance drawn on our revolving credit facilities during 2021. We paid down the balance in full on our revolving credit facility in the year ended December 31, 2021.

Year ended December 31, 2020 compared to year ended December 31, 2019: Interest expense decreased $(3.7) million, or (11.5)%, from $32.2 million for the year ended December 31, 2019 to $28.5 million for the year ended December 31, 2020, primarily reflecting a lower balance drawn on our non-recourse seed capital and revolving credit facilities during 2020. We paid down the balance on our non-recourse seed capital facility, and paid down the balance on our revolving credit facility in the year ended December 31, 2020.

Gain on Sale of Subsidiaries

Year ended December 31, 2021 compared to year ended December 31, 2020: Gain on sale of subsidiaries decreased $(192.7) million from $241.3 million for the year ended December 31, 2020 to $48.6 million for the year ended December 31, 2021, representing our gain on sale of our equity interest in ICM and Campbell Global, slightly offset by the loss on disposition of a business unit during the year ended December 31, 2021. Included in the balance for the year ended December 31, 2020 is a gain of $7.2 million on the sale of our equity interests in Copper Rock, a gain of $231.2 million on the sale of our equity interests in Barrow Hanley and a gain of $2.9 million on a previously disposed Affiliate.

Year ended December 31, 2020 compared to year ended December 31, 2019: Gain on sale of subsidiaries was $241.3 million for the year ended December 31, 2020 representing a gain of $7.2 million on the sale of our equity interests in Copper Rock, a gain of $231.2 million on the sale of our equity interests in Barrow Hanley and a gain of $2.9 million on a previously disposed Affiliate. No gain on sale of subsidiaries was recorded in the year ended December 31, 2019.

U.S. GAAP Income Tax Expense

Our effective tax rate has been impacted by changes in liabilities for uncertain tax positions, tax effects of stock-based compensation, limitations on executive compensation, the mix of income earned in the United States versus lower-taxed foreign jurisdictions. Our effective tax rate could be impacted in the future by these items as well as further changes in tax laws and regulations in jurisdictions in which we operate.

Year ended December 31, 2021 compared to year ended December 31, 2020: Income tax expense decreased $(47.1) million, from $97.1 million for the year ended December 31, 2020 to $50.0 million for the year ended December 31, 2021. The decrease in income tax expense relates to the decrease in income from continuing operations for the year ended December 31, 2021, primarily related to the sale of certain Affiliates that occurred during 2021. The decrease in income tax expense from the sale was partially offset by an increase to the permanent disallowance of executive compensation in 2021, a lower tax benefit recognized in 2021 from changes in uncertain tax positions that resulted from the lapse in statute of limitations, and an increase of state tax obligations.

Year ended December 31, 2020 compared to year ended December 31, 2019: Income tax expense increased $86.6 million, from $10.5 million for the year ended December 31, 2019 to $97.1 million for the year ended December 31, 2020, primarily due to the increase in the income from continuing operations before taxes which was driven by the gain on sale of Affiliates, in addition to the reductions to liabilities for uncertain tax positions due to the lapse of statutes of limitation and adjustments to deferred tax assets in 2020 compared to 2019. Deferred tax assets have been adjusted primarily for changes in the Company's state tax rates and an increase in state tax obligations.

U.S. GAAP Consolidated Funds

The net income or loss of all Consolidated Funds, excluding any income or loss attributable to seed capital or co-investments we make in the Funds, is included in non-controlling interests in our Consolidated Financial Statements and is not included in net income attributable to controlling interests or in management fees.

As discussed further in Note 3 of our accompanying Consolidated Financial Statements, we sold our equity interests in Landmark on June 2, 2021, which resulted in the de-consolidation of all Landmark Funds as of June 2, 2021, the consummation of the sale. The discontinued operations accounting treatment was applied for the consolidated Landmark Funds.

Year ended December 31, 2021 compared to year ended December 31, 2020: As noted above, the gains and losses related to the Landmark funds are included with discontinued operations. There were no consolidated Funds in 2021. Consolidated Funds’ revenue was $5.5 million for the year ended December 31, 2020. Consolidated Funds’ expense was $0.2 million for the year ended December 31, 2020.

Year ended December 31, 2020 compared to year ended December 31, 2019: Consolidated Funds’ revenue decreased $(1.1) million, from $6.6 million for the year ended December 31, 2019 to $5.5 million for the year ended December 31, 2020. Consolidated Funds’ expense decreased $(0.1) million, from $0.3 million for the year ended December 31, 2019 to $0.2 million for the year ended December 31, 2020. The decrease in Consolidated Funds’ revenue and decrease in Consolidated Funds’ expense is due to changes in the number of Consolidated Funds during the year ended December 31, 2019, including the deconsolidation of Funds due to redemption of seed investments in Barrow Hanley Consolidated Funds following the sale of our equity interests in Barrow Hanley in November 2020. Consolidated Funds’ investment gain (loss) decreased $(9.4) million from $4.2 million for the year ended December 31, 2019 to $(5.2) million for the year ended December 31, 2020.

Discontinued Operations

As discussed further in Note 3 of our accompanying Consolidated Financial Statements, we completed the sale of all our equity interests in TSW on July 19, 2021, and we completed the sale of all our equity interests in Landmark on June 2, 2021. As a result, Landmark and TSW are reported within discontinued operations.

Year ended December 31, 2021 compared to year ended December 31, 2020: Income from discontinued operations increased $9.5 million from $67.8 million for the year ended December 31, 2020 to $77.3 million for the year ended December 31, 2021. Income from discontinued operations represents the income from TSW and Landmark, including consolidated Landmark Funds. The increase is driven by the increase in investment gains from the consolidated Landmark Funds attributable to non-controlling interests in the current year. The gain on disposal of discontinued operations, net of tax was $691.0 million for the year ended December 31, 2021 representing our gain on sale of our equity interests in Landmark and TSW. There was no gain on disposal of discontinued operations for the year ended December 31, 2020.

Year ended December 31, 2020 compared to year ended December 31, 2019: Income from discontinued operations increased $30.5 million from $37.3 million for the year ended December 31, 2019 to $67.8 million for the for the year ended December 31, 2020. Income from discontinued operations represents the income from TSW and Landmark, including consolidated Landmark Funds. The increase is driven by the increase in investment gains from the consolidated Landmark Funds attributable to non-controlling interests in the current year.

Key U.S. GAAP Operating Metrics

The following table shows our key U.S. GAAP operating metrics for the years ended December 31, 2021, 2020 and 2019. The second, third and fourth metrics below have each been adjusted to eliminate the effect of consolidated Funds to more accurately reflect the economics of our Company.

Years ended December 31,

U.S. GAAP operating expense / management fee revenue(3) 87.2 % 76.8 % 63.9 %

U.S. GAAP variable compensation ratio(3) 45.0 % 45.4 % 36.9 %

Numerator: Affiliate key employee distributions $ 13.4 $ 8.5 20.1

U.S. GAAP Affiliate key employee distributions ratio(3) 8.4 % 6.3 % 8.5 %

(1)Excluding the effect of Funds consolidation in the applicable periods, the U.S. GAAP operating margin would be 27.8% for the year ended December 31, 2021, 25.6% for the year ended December 31, 2020 and 36.7% for the year ended December 31, 2019.

(2)Excludes consolidated Funds’ expense of $0.0 million for the year ended December 31, 2021, $0.2 million for the year ended December 31, 2020 and $0.3 million for the year ended December 31, 2019.

(3)Excludes the effect of Funds consolidation for the years ended December 31, 2021, 2020 and 2019.

(4)Excludes consolidated Funds’ revenue of $0.0 million for the year ended December 31, 2021, $5.5 million for the year ended December 31, 2020 and $6.6 million for the year ended December 31, 2019.

(5)The following table identifies the components of operating income before variable compensation and Affiliate key employee distributions, as well as operating income before Affiliate key employee distributions:

Years ended December 31,

Affiliate key employee distributions 13.4 8.5 20.1

Operating (income) loss of consolidated Funds — (5.3) (6.3)

Effects of Inflation

For the years ended December 31, 2021, 2020 and 2019, inflation did not have a material effect on our consolidated results of operations.

Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis

As supplemental information, we provide a non-GAAP performance measure that we refer to as economic net income, or ENI, which represents our management’s view of the underlying economic earnings generated by us. We define economic net income as ENI revenue less (i) ENI operating expenses, (ii) variable compensation, (iii) key employee distributions, (iv) net interest and (v) taxes, each as further discussed in this section. ENI adjustments to U.S. GAAP include both reclassifications of U.S. GAAP revenue and expense items, as well as adjustments to U.S. GAAP results, primarily to exclude non-cash, non-economic expenses, or to reflect cash benefits not recognized under U.S. GAAP.

ENI is an important measure to investors because it is used by the Company to make resource allocation decisions, determine appropriate levels of investment or dividend payout, manage balance sheet leverage, determine Affiliate variable compensation and equity distributions, and incentivize management. It is also an important measure because it assists management in evaluating our operating performance and is presented in a way that most closely reflects the key elements of our profit share operating model with our Affiliates. For a further discussion of how we use ENI and why ENI is useful to investors, see “—Overview—How We Measure Performance.”

To calculate economic net income, we re-categorize certain line items on our Consolidated Statements of Operations to reflect the following:

•We exclude the effect of Funds consolidation by removing the portion of Fund revenues, expenses and investment return which were not attributable to our stockholders.

•We include within management fee revenue any fees paid to Affiliates by consolidated Funds, which are viewed as investment income under U.S. GAAP.

•We include our share of earnings from equity-accounted Affiliates within other income in ENI revenue, rather than investment income.

•We treat sales-based compensation as a general and administrative expense, rather than part of fixed compensation and benefits.

•We identify separately from operating expenses variable compensation and Affiliate key employee distributions, which represent Affiliate earnings shared with Affiliate key employees.

•We net the separate revenue and expenses under U.S. GAAP for certain Fund expenses initially paid by our Affiliates on the Funds’ behalf and subsequently reimbursed, to better reflect the economics of our business.

We also make the following adjustments to U.S. GAAP results to more closely reflect our economic results:

i.We exclude non-cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees. These ownership interests may in certain circumstances be repurchased by BSUS at a value based on a pre-determined fixed multiple of trailing earnings and as such this value is carried on our balance sheet as a liability. Non-cash movements in the value of this liability are treated as compensation expense under U.S. GAAP. However, any equity or profit interests repurchased by BSUS can be used to fund a portion of future variable compensation awards, resulting in savings in cash variable compensation that offset the negative cash effect of repurchasing the equity. Our Affiliate equity and profit interest plans have been designed to ensure BSUS is never required to repurchase more equity than we can reasonably recycle through variable compensation awards in any given twelve month period.

ii.We exclude non-cash amortization or impairment expenses related to acquired goodwill and other intangibles as these are non-cash charges that do not result in an outflow of tangible economic benefits from the business. We also exclude the amortization of acquisition-related contingent consideration, as well as the value of employee equity owned pre-acquisition. Please note that the revaluations related to these acquisition-related items are included in (i) above.

iii.We exclude capital transaction costs, including the costs of raising debt or equity, gains or losses realized as a result of redeeming debt or equity and direct incremental costs associated with acquisitions of businesses or assets.

iv.We exclude seed capital and co-investment gains, losses and related financing costs. The net returns on these investments are considered and presented separately from ENI because ENI is primarily a measure of our earnings from managing client assets, which therefore differs from earnings generated by our investments in Affiliate products, which can be variable from period to period.

v.We include cash tax benefits associated with deductions allowed for acquired intangibles and goodwill that may not be recognized or have timing differences compared to U.S. GAAP.

vi.We exclude the results of discontinued operations attributable to controlling interests since they are not part of our ongoing business and restructuring costs incurred in continuing operations.

vii.We exclude deferred tax resulting from changes in tax law and expiration of statutes, adjustments for uncertain tax positions, deferred tax attributable to intangible assets and other unusual items not related to current operating results to reflect ENI tax normalization.

We also adjust our income tax expense to reflect any tax impact of our ENI adjustments.

Reconciliation of U.S. GAAP Net Income to Economic Net Income for the Years Ended December 31, 2021, 2020 and 2019

The following table reconciles U.S. GAAP net income attributable to controlling interests to economic net income for the years ended December 31, 2021, 2020 and 2019:

Years ended December 31,

Adjustments to reflect the economic earnings of the Company:

iii. Capital transaction costs 1.8 0.8 2.9

iv. Seed/Co-investment (gains) losses and financings(1) (4.0) 4.1 (9.9)

v. Tax benefit of goodwill and acquired intangibles deductions 1.1 1.6 1.9

vi. Discontinued operations and restructuring(2) (743.8) (269.6) (17.8)

vii. ENI tax normalization(3) (1.7) 2.2 (46.9)

Tax effect of above adjustments(4) 3.5 60.8 17.8

(1)The net return on seed/co-investment (gains) losses and financings for the years ended December 31, 2021, 2020 and 2019 are shown in the following table.

Years ended December 31,

Seed/Co-investment (gains) losses $ (5.7) $ (1.6) $ (18.7)

Financing costs:

Blended interest rate* 5.9 % 5.9 % 6.1 %

Net seed/co-investment (gains) losses and financing $ (4.0) $ 4.1 $ (9.9)

* The blended rate is based first on the interest rate paid on our non-recourse seed capital facility up to the average amount drawn, and thereafter on the weighted average rate of the long-term debt.

(2)For the year ended December 31, 2021, includes net income from discontinued operations attributable to controlling interest of $700.3 million, restructuring costs at the Center and Affiliates of $3.8 million, costs associated with the transfer of an insurance policy from our former Parent of $1.2 million, and the gain on sale of Affiliates of $48.6 million. For the year ended December 31, 2020, includes net income from discontinued operations attributable to controlling interest of $39.4 million, restructuring costs at the Center and Affiliates of $9.4 million, costs associated with the transfer of an insurance policy from our former Parent of $1.6 million, and the gain on sale of Affiliates of $241.3 million. For the year ended December 31, 2019, includes net income from discontinued operations attributable to controlling interest of $27.0 million, restructuring costs at the Center of $6.7 million, costs associated with the transfer of an insurance policy from our former Parent of $0.9 million, and costs associated with the redomicile to the U.S. of $1.6 million.

(3)Includes adjustments of $3.0 million, $8.7 million and $40.8 million to remove the tax benefit resulting from the reduction in liabilities for uncertain tax positions recorded during the years ended December 31, 2021, 2020 and 2019, respectively.

(4)Reflects the sum of line items (i), (ii), (iii), (iv) and the restructuring portion of line item (vi) taxed at the 27.3% U.S. statutory rate (including state tax).

The following table reconciles U.S. GAAP net income per share to economic net income per share for the years ended December 31, 2021, 2020 and 2019:

Years ended December 31,

U.S. GAAP net income per share $ 10.29 $ 3.49 $ 2.45

Adjustments to reflect the economic earnings of the Company:

iv. Seed/Co-investment (gains) losses and financings (0.05) 0.05 (0.11)

v. Tax benefit of goodwill and acquired intangibles deductions 0.01 0.02 0.02

vi. Discontinued operations and restructuring (9.23) (3.29) (0.20)

Tax effect of above adjustments 0.04 0.74 0.20

Economic net income per share $ 1.47 $ 1.08 $ 1.14

Limitations of Economic Net Income

Economic net income is the key measure our management uses to evaluate the financial performance of, and make operational decisions for, our business. Economic net income is not audited, and is not a substitute for net income or other performance measures that are derived in accordance with U.S. GAAP. Furthermore, our calculation of economic net income may differ from similarly titled measures provided by other companies.

Because the calculation of economic net income excludes certain ongoing expenses, including amortization expense and certain compensation costs, it has certain material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures of earnings.

ENI Revenues

The following table reconciles U.S. GAAP Revenue to ENI Revenue for the years ended December 31, 2021, 2020 and 2019:

Years ended December 31,

Include earnings from equity-accounted Affiliate 2.6 2.9 2.8

Exclude Fund expenses reimbursed by customers (2.9) (4.6) (4.4)

The following table identifies the components of ENI revenue:

Years ended December 31,

Other income, including equity-accounted Affiliate(3) 5.4 5.6 4.4

(1)ENI management fees correspond to U.S. GAAP management fees.

(2)ENI performance fees correspond to U.S. GAAP performance fees.

(3)ENI other income is comprised primarily of other revenue under U.S. GAAP, plus our earnings from equity-accounted Affiliate of $2.6 million for the year ended December 31, 2021, $2.9 million for the year ended December 31, 2020 and $2.8 million for the year ended December 31, 2019. Other income also excludes certain Fund expenses initially paid by our Affiliates on the Funds’ behalf that are subsequently reimbursed. Refer to “—Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis” for a full discussion regarding the items excluded from the calculation of economic net income.

Years ended December 31,

U.S. GAAP other revenue $ 5.7 $ 7.3 $ 6.0

Earnings from equity-accounted Affiliate 2.6 2.9 2.8

Exclude Fund expenses reimbursed by customers (2.9) (4.6) (4.4)

ENI other income $ 5.4 $ 5.6 $ 4.4

ENI Operating Expenses

The largest difference between U.S. GAAP operating expense and ENI operating expense relates to compensation. As shown in the following reconciliation, the Company excludes the impact of key employee equity revaluations. We also exclude the amortization of contingent purchase price and pre-acquisition equity owned by employees, both with a service requirement. Variable compensation and Affiliate key employee distributions are also segregated out of U.S. GAAP operating expense in order to align with the manner in which these items are contractually calculated at the Affiliate level.

The following table reconciles U.S. GAAP operating expense to ENI operating expense for the years ended December 31, 2021, 2020 and 2019:

Years ended December 31,

Less: items excluded from economic net income

Non-cash key employee equity and profit interest revaluations (32.9) 15.1 67.9

Capital transaction costs (1.2) (0.2) (2.7)

Restructuring costs(1) (5.1) (11.2) (9.2)

Fund expenses reimbursed by customers (2.9) (4.6) (4.4)

Funds’ operating expenses — (0.2) (0.3)

Less: items segregated out of U.S. GAAP operating expense

Affiliate key employee distributions (13.4) (8.5) (20.1)

(1)For the year ended December 31, 2021, includes $3.8 million of restructuring costs at the Center and Affiliates and $1.2 million costs associated with the transfer of an insurance policy from our former Parent. For the year ended December 31, 2020, includes $9.4 million of restructuring costs at the Center and Affiliates and $1.6 million costs associated with the transfer of an insurance policy from our former Parent. For the year ended December 31, 2019, includes restructuring costs at the Center and the Affiliates of $6.7 million.

(2)For the year ended December 31, 2021, excludes variable compensation related to restructuring at the Affiliates of $0.9 million that is included within Restructuring costs. For the year ended December 31, 2020, excludes variable compensation related to restructuring at the Center and the Affiliates of $3.8 million that is included within Restructuring costs, and Fund expenses reimbursed by customers of $0.3 million. For the year ended December 31, 2019, excludes variable compensation related to restructuring at the Center and the Affiliates of $6.7 million that is included within Restructuring costs.

The following table identifies the components of ENI operating expense:

Years ended December 31,

(1)Fixed compensation and benefits include base salaries, payroll taxes and the cost of benefit programs provided. The following table reconciles U.S. GAAP compensation expense to ENI fixed compensation and benefits expense for the years ended December 31, 2021, 2020 and 2019:

Years ended December 31,

Total U.S. GAAP compensation and benefits expense $ 284.6 $ 243.1 $ 248.6

Affiliate key employee distributions (13.4) (8.5) (20.1)

Restructuring expenses (0.9) (3.9) (6.7)

Fund expenses reimbursed by customers (3.0) (4.6) (4.4)

ENI fixed compensation and benefits $ 97.2 $ 125.7 $ 144.3

(2)The following table reconciles U.S. GAAP general and administrative expense to ENI general and administrative expense:

Years ended December 31,

U.S. GAAP general and administrative expense $ 71.2 $ 88.0 $ 107.1

Sales-based compensation 7.6 7.6 9.7

Capital transaction costs (1.2) (0.2) (2.7)

Restructuring costs(a) (4.1) (7.3) (2.5)

Additional ENI adjustments — (0.1) —

ENI general and administrative expense $ 73.5 $ 88.0 $ 111.6

(a)Reflects $2.9 million related to restructuring at the Center and Affiliates and $1.2 million of costs associated with the transfer of an insurance policy from our former Parent for the year ended December 31, 2021. Reflects $5.6 million related to restructuring at the Center and Affiliates, and $1.6 million costs associated with the transfer of an insurance policy from our former Parent in the year ended December 31, 2020. Reflects $2.5 million related to our redomicile to the U.S. in the year ended December 31, 2019.

Key Non-GAAP Operating Metrics

The following table shows our key non-GAAP operating metrics for the years ended December 31, 2021, 2020 and 2019. We present these metrics because they are the measures our management uses to evaluate the profitability of our business and are useful to investors because they represent the key drivers and measures of economic performance within our business model. Please see the footnotes below for an explanation of each ratio, its usefulness in measuring the economics and operating performance of our business, and a reference to the most closely related U.S. GAAP measure:

Years ended December 31,

Denominator: ENI management fee revenue(3) $ 433.3 $ 478.9 $ 582.1

ENI operating expense ratio(4) 44.5 % 48.8 % 46.7 %

ENI variable compensation ratio(6) 39.2 % 41.7 % 41.8 %

Numerator: Affiliate key employee distributions $ 13.4 $ 8.5 $ 20.1

ENI Affiliate key employee distributions ratio(7) 6.7 % 5.6 % 11.0 %

(1)ENI operating earnings represents ENI earnings before Affiliate key employee distributions and is calculated as ENI revenue, less ENI operating expense, less ENI variable compensation. It differs from economic net income because it does not include the effects of Affiliate key employee distributions, net interest expense or income tax expense.

The following table reconciles U.S. GAAP operating income (loss) to ENI operating earnings:

Years ended December 31,

Include earnings from equity-accounted Affiliate 2.6 2.9 2.8

Exclude the impact of:

Capital transaction costs 1.2 0.2 2.7

Affiliate key employee distributions 13.4 8.5 20.1

Funds’ operating income — (5.3) (6.3)

Less: ENI Affiliate key employee distributions (13.4) (8.5) (20.1)

ENI earnings after Affiliate key employee distributions $ 187.7 $ 142.4 $ 162.9

(a)For the year ended December 31, 2021, includes restructuring costs of $1.2 million associated with the transfer of an insurance policy from our former Parent and $3.8 million of restructuring costs at the Center and Affiliates. For the year ended December 31, 2020, includes restructuring costs of $1.6 million associated with the transfer of an insurance policy from our former Parent and $9.4 million of restructuring costs at the Center and Affiliates. For the year ended December 31, 2019, includes $6.7 million of restructuring costs at the Center and the Affiliates, $2.5 million of costs incurred in connection with the redomicile to the U.S.

(2)The ENI operating margin, which is calculated before Affiliate key employee distributions, is used by management and is useful to investors to evaluate the overall operating margin of the business without regard to our various ownership levels at each of the Affiliates. The ENI operating margin is most comparable to our U.S. GAAP operating margin (excluding the effect of consolidated Funds) of 27.8% for the year ended December 31, 2021, 25.6% for the year ended December 31, 2020 and 36.7% for the year ended December 31, 2019.

The ENI operating margin is important because it gives investors an understanding of the profitability of the total business relative to revenue, irrespective of the ownership position which BSIG has in each of its Affiliates. Management and investors use this ratio when comparing our profitability relative to our peer group and evaluating our ability to manage the cost structure and profitability of our business under different operating environments.

(3)ENI Management fee revenue corresponds to U.S. GAAP management fee revenue.

(4)The ENI operating expense ratio is used by management and is useful to investors to evaluate the level of operating expense as measured against our recurring management fee revenue. We have provided this ratio since many operating expenses, including fixed compensation and benefits and general and administrative expense, are generally linked to the overall size of the business. We track this ratio as a key measure of scale economies at BSIG because in our profit sharing economic model, scale benefits both the Affiliate employees and BSIG stockholders. The ENI operating expense ratio is most comparable to the U.S. GAAP operating expense / management fee revenue ratio.

(5)ENI earnings before variable compensation is calculated as ENI revenue, less ENI operating expense.

(6)The ENI variable compensation ratio is used by management and is useful to investors to evaluate consolidated variable compensation as measured against our ENI earnings before variable compensation. Variable compensation is contractually set and calculated individually at each Affiliate, plus Center bonuses. Variable compensation is usually awarded based on a contractual percentage of each Affiliate’s ENI earnings before variable compensation and may be paid in the form of cash or non-cash Affiliate equity or profit interests. Center variable compensation includes cash and BSIG equity. Non-cash variable compensation awards typically vest over several years and are recognized as compensation expense over that service period. The variable compensation ratio at each Affiliate is calculated as variable compensation divided by ENI earnings before variable compensation. The ENI variable compensation ratio is most comparable to the U.S. GAAP variable compensation ratio.

(7)The ENI Affiliate key employee distribution ratio is used by management and is useful to investors to evaluate Affiliate key employee distributions as measured against our ENI operating earnings. Affiliate key employee distributions represent the share of Affiliate profits after variable compensation that is attributable to Affiliate key employee equity and profit interests holders, according to their ownership interests. The Affiliate key employee distribution ratio at each Affiliate is calculated as Affiliate key employee distributions divided by ENI operating earnings at that Affiliate. At certain Affiliates with tiered equity structures, BSUS and other classes of employee equity holders are entitled to an initial proportionate preference over profits after variable compensation, structured such that before a preference threshold is reached, there would be no required key employee distributions to the tiered equity holders, whereas for profits above the threshold the key employee distribution amount to the tiered equity holders would be calculated based on the tiered key employee ownership percentages. The ENI Affiliate key employee distributions ratio is most comparable to the U.S. GAAP Affiliate key employee distributions ratio.

Tax on Economic Net Income

The following table reconciles the United States statutory tax to tax on economic net income:

Years ended December 31,

Intercompany interest expense deductible for U.S. tax purposes — — (35.5)

Taxes at the U.S. federal and state statutory rates(2) (45.2) (40.1) (35.6)

Other reconciling tax adjustments (1.9) 7.6 (2.1)

Tax on economic net income (47.1) (32.5) (37.7)

Add back intercompany interest expense previously excluded — — 35.5

Economic net income effective tax rate(3) 28.5 % 26.9 % 26.6 %

(1)Includes interest income and third party ENI interest expense, as shown in the following table:

Years ended December 31,

U.S. GAAP interest income $ 0.2 $ 0.6 $ 2.2

U.S. GAAP interest expense (24.8) (28.5) (32.2)

U.S. GAAP net interest expense (24.6) (27.9) (30.0)

Other ENI interest expense exclusions(a) 2.3 6.3 9.0

ENI net interest income (expense) (22.3) (21.6) (21.0)

ENI earnings after Affiliate key employee distributions(b) 187.7 142.4 162.9

(a)Other ENI interest expense exclusions represent cost of financing on seed capital and co-investments and amortization of debt issuance costs. Other ENI interest expense includes $1.7 million related to the cost of seed and co-investment financing and $0.6 million related to the amortization of debt issuance costs for the year ended December 31, 2021.

(b)ENI earnings after Affiliate key employee distributions is calculated as ENI operating income (ENI revenue, less ENI operating expense, less ENI variable compensation), less Affiliate key employee distributions. Refer to “—Key Non-GAAP Operating Metrics” for a reconciliation from U.S. GAAP operating income to ENI earnings after Affiliate key employee distributions.

(2)Taxed at U.S. Federal and State statutory rate of 27.3%.

(3)The economic net income effective tax rate is calculated by dividing the tax on economic net income by pre-tax economic net income.

Segment Analysis

We operate our business through the following reportable segment(1)(2):

The corporate head office is included within the Other(1)(2) category. The corporate head office expenses are not allocated to the Company’s business segment but the CODM does consider the cost structure of the corporate head office when evaluating the financial performance of our segment.

(1)Prior to March 31, 2021, we had an Alternatives reportable segment which was comprised of Landmark and Campbell Global operating segments. On June 2, 2021, we sold all of our interests in Landmark. As a result of this transaction, Landmark has been reclassified to discontinued operations, and the Alternatives segment no longer constitutes a reportable segment. The reportable segments for all periods presented have been recast to reflect the reporting of Landmark within discontinued operations and the reclassification of Campbell Global to “Other”. On August 31, 2021,we completed the sale of all our interests in Campbell Global. The financial results of Campbell Global are included in the “Other” category until August 30, 2021, the consummation of the sale.

(2)Prior to June 30, 2021, we had a Liquid Alpha reportable segment which was comprised of TSW and ICM. On February 6, 2021, we entered into an agreement to sell all of our interests in ICM, an equity-accounted Affiliate. On July 19, 2021, we completed the sale of all our interests in TSW. As a result of this transaction, TSW has been reclassified to discontinued operations and Liquid Alpha no longer constitutes a reportable segment. The ICM operating segment was reclassified to “Other” within our segment reporting for the twelve months ended months ended December 31, 2021. On July 19, 2021 we completed the sale of all our interests in ICM, an equity-accounted Affiliate. The financial results of ICM are included in the “Other” category until July 19, 2021, the consummation of the sale.

The primary measure used by the CODM in measuring performance and allocating resources to the segments is Economic Net Income ("ENI"). We define economic net income for the segments as ENI revenue less (i) ENI operating expenses, (ii) variable compensation and (iii) key employee distributions. The ENI adjustments to U.S. GAAP include both reclassifications of U.S. GAAP revenue and expense items, as well as adjustments to U.S. GAAP results, primarily to exclude non-cash, non-economic expenses, or to reflect cash benefits not recognized under U.S. GAAP.

ENI revenue includes management fees, performance fees and other revenue under U.S. GAAP, adjusted to include management fees paid to Affiliates by consolidated Funds and the Company’s share of earnings from equity-accounted Affiliates. ENI revenue is also adjusted to exclude the separate revenues recorded under U.S. GAAP for certain Fund expenses reimbursed to our Affiliates.

ENI operating expenses include compensation and benefits, general and administrative expense, and depreciation and amortization under U.S. GAAP, adjusted to exclude non-cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees, goodwill impairment and amortization of acquired intangible assets, capital transaction costs, restructuring costs, and the separate expenses recorded under U.S. GAAP for certain Fund expenses reimbursed to our Affiliates. Additionally, variable compensation and Affiliate key employee distributions are segregated from ENI operating expenses.

ENI segment results are also adjusted to exclude the portion of consolidated Fund revenues, expenses and investment return recorded under U.S. GAAP.

Refer to the reconciliations of U.S. GAAP revenue to ENI revenue, U.S. GAAP Operating expense to ENI Operating expense, variable compensation and Affiliate key employee distributions disclosed previously within this section.

Segment ENI Revenue

The following tables identify the components of segment ENI revenue for the years ended December 31, 2021, 2020 and 2019:

Years ended December 31,

Quant & Solutions Other Total Quant & Solutions Liquid Alpha Other Total

Other income, including equity-accounted affiliate — 5.4 5.4 — 3.0 2.6 5.6

Year ended December 31,

Quant & Solutions Liquid Alpha Other Total

Other income, including equity-accounted affiliate — 2.8 1.6 4.4

Quant & Solutions Segment ENI Revenue

Year ended December 31, 2021 compared to year ended December 31, 2020: Quant & Solutions ENI revenue increased $133.3 million, or 37.6%, from $354.8 million for the year ended December 31, 2020 to $488.1 million for the year ended December 31, 2021. The $61 million increase in performance fees was primarily due to higher performance fees earned during the fourth quarter of 2021 as a result of out-performance in a wide range of strategies in 2021, such as long/short and emerging markets equities, as well as 20.9% higher management fees driven by higher average AUM primarily resulting from the equity market increase in the last twelve months.

Year ended December 31, 2020 compared to year ended December 31, 2019: Quant & Solutions ENI revenue decreased $(25.8) million, or (6.8)%, from $380.6 million for the year ended December 31, 2019 to $354.8 million for the year ended December 31, 2020. The decrease was attributable to (6.5)% lower management fees driven by lower average AUM primarily resulting from the equity market decline in the first quarter of 2020.

Liquid Alpha Segment ENI Revenue

Year ended December 31, 2021 compared to year ended December 31, 2020: Liquid Alpha ENI revenue was $111.1 million for the year ended December 31, 2020 and was comprised of the ENI revenue from Barrow Hanley, Copper Rock and ICM. There was no Liquid Alpha ENI revenue for the year ended December 31, 2021 as the Liquid Alpha segment no long constituted a reportable segment.

Year ended December 31, 2020 compared to year ended December 31, 2019: Liquid Alpha ENI revenue decreased $(69.2) million, or (38.4)%, from $180.3 million for the year ended December 31, 2019 to $111.1 million for the year ended December 31, 2020. The decrease was attributable to (42.3)% lower management fees driven by lower average AUM resulting from the disposition of Barrow Hanley and Copper Rock, the equity market decline in the first quarter of 2020, and net outflows in 2020. The change in performance fees was primarily due to higher fulcrum fees recorded in the year ended December 31, 2020 compared to the year ended December 31, 2019.

Segment ENI Expense

The following tables identify the components of segment ENI expense for the years ended December 31, 2021, 2020 and 2019:

Years ended December 31,

Quant & Solutions Other Total Quant & Solutions Liquid Alpha Other Total

Year ended December 31,

Quant & Solutions Liquid Alpha Other Total

Affiliate key employee distributions 6.4 13.7 — 20.1

Quant & Solutions Segment ENI Expense

Year ended December 31, 2021 compared to year ended December 31, 2020: Quant & Solutions ENI operating expense increased $11.8 million, or 7.9%, from $149.0 million for the year ended December 31, 2020 to $160.8 million for the year ended December 31, 2021. The increase was driven by 7.3% higher ENI fixed compensation and benefits expense resulting from higher headcount and 6.3% higher ENI general and administrative expense primarily due to increased portfolio administrative and systems costs. Quant & Solutions ENI variable compensation expense is based on contractual percentage of earnings before variable compensation, and also includes a formulaic split of performance fee revenue that gets deferred and recognized as variable compensation expense over a three-year vesting period. Quant & Solutions ENI variable compensation expense increased 38.5% as a result of higher earnings before variable compensation, including performance fees. Affiliate key employee distributions attributable to Quant & Solutions increased 188.4%, primarily due to higher Quant & Solutions ENI earnings after variable compensation as well as the leveraged nature of the sharing agreement.

Year ended December 31, 2020 compared to year ended December 31, 2019: Quant & Solutions ENI operating expense decreased $(11.6) million, or (7.2)%, from $160.6 million for the year ended December 31, 2019 to $149.0 million for the year ended December 31, 2020. The decrease was driven by (7.2)% lower ENI fixed compensation and benefits expense resulting from headcount reduction and (13.8)% lower ENI general and administrative expense such as travel reflecting the impact of COVID-19 and cost-saving initiatives. Quant & Solutions ENI variable compensation expense, which is based on contractual arrangements, decreased (3.7)%, as a result of lower earnings before variable compensation. Affiliate key employee distributions attributable to Quant & Solutions decreased (32.8)%, primarily due to lower Quant & Solutions ENI earnings after variable compensation.

Liquid Alpha Segment ENI Expense

Year ended December 31, 2021 compared to year ended December 31, 2020: Liquid Alpha ENI operating expense was $39.4 million for the year ended December 31, 2020 and was comprised of the ENI expense from Barrow Hanley and Copper Rock. There was no Liquid Alpha ENI expense for the year ended December 31, 2021 as the Liquid Alpha segment no longer constituted as a reportable segment.

Year ended December 31, 2020 compared to year ended December 31, 2019: Liquid Alpha ENI operating expense decreased $(14.7) million, or (27.2)%, from $54.1 million for the year ended December 31, 2019 to $39.4 million for the year ended December 31, 2020. The decrease was driven by (21.3)% lower ENI fixed compensation and benefits expense and (37.1)% lower ENI general and administrative expense driven by the Barrow Hanley and Copper Rock dispositions. Liquid Alpha ENI variable compensation expense, which is based on contractual arrangements, decreased (33.6)%, as a result of lower pre-variable compensation earnings. Affiliate key employee distributions attributable to Liquid Alpha decreased (71.5)%, primarily driven by dispositions and lower Liquid Alpha ENI earnings after variable compensation.

Other ENI Expense

Year ended December 31, 2021 compared to year ended December 31, 2020: Other ENI operating expense decreased $(13.1) million or (29.0)%, from $45.1 million for the year ended December 31, 2020 to $32.0 million for the year ended December 31, 2021. The decrease was driven by (27.9)% lower ENI fixed compensation and benefits expense resulting from dispositions, and (30.5)% lower ENI general and administrative expense resulting from cost-saving initiatives. Other ENI variable compensation expense increased 372.1% due to an increase in variable compensation at Campbell Global as a result of higher earnings, and an increase in Center variable compensation.

Year ended December 31, 2020 compared to year ended December 31, 2019: Other ENI operating expense decreased $(12.3) million, or (21.4)%, from $57.4 million for the year ended December 31, 2019 to $45.1 million for the year ended December 31, 2020. The decrease was driven by (18.2)% lower ENI fixed compensation and benefits expense resulting from a reduction in headcount and (27.8)% lower ENI general and administrative expense resulting from cost-saving initiatives. Other ENI variable compensation expense decreased (49.2)% due to a reduction in headcount.

Capital Resources and Liquidity

Cash Flows

The following table summarizes certain key financial data relating to cash flows. All amounts presented exclude consolidated Funds:

Years ended December 31,

Cash provided by (used in)(1)(2)

(1)Excludes consolidated Funds.

(2)Cash flow data shown only includes cash flows from continuing operations.

Our most significant uses of cash include share repurchases, repayment of third-party borrowings, third-party interest payments, tax payments, seed capital investments, dividends and compensation and general and administrative expenses.

Comparison for the Years Ended December 31, 2021, 2020 and 2019

Net cash provided by operating activities of continuing operations excluding consolidated Funds decreased $(175.0) million, from net cash provided of $170.6 million during the year ended December 31, 2020 to net cash used of $(4.4) million during the year ended December 31, 2021. The decrease was primarily driven by taxes paid on the gain on sales of Affiliates and discontinued operations of $163 million in 2021, as well as changes in operating assets and liabilities offset by changes in net income period over period.

Net cash provided by operating activities of continuing operations excluding consolidated Funds increased $253.9 million, from net cash used of $(83.3) million during the year ended December 31, 2019 to net cash provided of $170.6 million during the year ended December 31, 2020. The increase was primarily driven by changes in operating assets and liabilities period over period, driven largely by the Landmark earnout that was settled in the year ended December 31, 2019.

Net cash provided by investing activities of continuing operations increased $674.4 million, from $361.6 million provided in the year ended December 31, 2020 to $1,036.0 million provided in the year ended December 31, 2021. The increase was driven by sale proceeds received from the sales of Landmark, TSW, Campbell Global and ICM in 2021. Net cash provided by investing activities of continuing operations increased $343.2 million, from $18.4 million provided in the year ended December 31, 2019 to $361.6 million provided in the year ended December 31, 2020. The increase was driven by sale proceeds received from the sale of Barrow Hanley in 2020.

Net cash used in financing activities, excluding consolidated Funds, consists of share repurchases, third-party borrowings, payments made to OM plc, withholding tax payments on stock option exercises and dividend payments. Net cash used in financing activities was $(1,152.4) million, $(232.2) million and $(140.4) million for the years ended December 31, 2021, 2020 and 2019, respectively. Share repurchases and third party borrowing activity were the drivers of the changes in financing activities year over year. We paid $(1,121.7) million for share repurchases in 2021 compared to $(46.0) million in 2020 and $(239.8) million in 2019. In 2020, we paid down net $(175.0) million against third party borrowings compared to a net draw on third party borrowings of $175.0 million in 2019.

Working Capital and Long-Term Debt

The following table summarizes certain key financial data relating to our capital resources and liquid net assets. All amounts presented exclude the non-controlling interest portion of consolidated Funds:

Years ended December 31,

Balance Sheet Data(1)

Current assets

Current liabilities

Accounts payable and accrued expenses $ 35.2 $ 31.3 $ 39.7

Accrued short-term incentive compensation 117.4 78.3 98.3

Notes payable and other debt(2) 121.8 — —

Long-term notes payable and other debt $ 273.1 $ 394.3 $ 568.8

(1)Excludes the non-controlling interest portion of consolidated Funds.

(2)Includes the short-term portion of our third-party borrowings. On December 17, 2021, we issued a notice for the full redemption of the $125 million aggregate principal amount outstanding of our 5.125% Senior Notes due August 1, 2031 (the “2031 Notes”). On January 18, 2022 we completed the full redemption of the 2031 Notes.

(3)Excluded from other short-term liabilities for each of the years presented is an income tax reserve relating to net operating losses that does not represent a current obligation of the Company. Puts related to Affiliate equity and profits interests are also excluded on a short-term basis because they are funded through recycling.

Working capital is defined as current assets less current liabilities, excluding the non-controlling interest portion of consolidated Funds. Our net working capital has been positive over the past several years and was $144.7 million at December 31, 2021. Our most significant current liabilities have been accounts payable, accrued compensation expense and the short-term portion of our third-party debt. Accrued compensation expense has primarily consisted of variable compensation accruals made throughout the year based on contractual arrangements. Our cash management practices generally require that working capital be maintained at a sufficient level to meet short-term operational needs at both Acadian and BSUS. Periodic distributions of Acadian earnings to BSUS and Acadian key employee equity holders are made according to our distribution policies, with BSUS having the ability to access any surplus cash at Acadian as necessary during interim periods.

Borrowings and Long-Term Debt

The following table summarizes our financing arrangements as of the dates indicated:

($ in millions) December 31,2021 December 31,2020 Interest rate Maturity

Third party borrowings:

Total third party borrowings $ 394.9 $ 394.3

(1)On December 17, 2021, we issued a notice for the full redemption of the $125 million aggregate principal amount outstanding for the 5.125% Senior Notes Due 2031. On January 18, 2022 we completed the full redemption of the 2031 Notes.

Third party borrowings

Revolving Credit Facility

On September 3, 2020, we along with Royal Bank of Canada, BMO Harris Bank, N.A., Bank of China, New York Branch, Wells Fargo Bank, National Association, Barclays Bank PLC, 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 an amendment (the “Amendment”) to the Revolving Credit Agreement dated as of August 20, 2019 (the “Original Credit Agreement”, and as amended by the Amendment, the “Amended Credit Agreement”). The Amendment included changes to the Original Credit Agreement to permit the sale of the Company's equity interests in Barrow Hanley (the “Barrow Hanley Sale”). Under the Original Credit Agreement, the Barrow Hanley Sale required consent of the Lenders given that Barrow Hanley accounted for more than 10% of our consolidated Adjusted EBITDA. The Amendment provided that, effective immediately upon the consummation of the Barrow Hanley Sale, the Lenders commitments under the Credit Agreement would be $150 million. The Barrow Hanley Sale was consummated on November 17, 2020 and the Lenders’ commitments under the Amended Credit Agreement were reduced to $150 million from thereon.

On February 23, 2021, we along with the Lenders, entered into an assignment and assumption and amendment agreement (the “Assignment”) to the Amended Credit Agreement. Pursuant to the Assignment, the Amended Credit Agreement was assigned to and assumed by Acadian and the Amended Credit Agreement was amended (the Amended Credit Agreement, as amended by the Assignment, the “Acadian Credit Agreement”) to, among other things, reduce the Lenders’ commitments thereunder to $125 million. The Acadian Credit Agreement has a maturity date of August 22, 2022.

Borrowings under the Acadian Credit Agreement bear interest, at Acadian’s option, at either the per annum rate equal to (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5% and (iii) the one month Adjusted LIBO Rate plus 1.0%, plus, in each case, an additional amount based on its credit rating or (b) the London interbank offered rate for a period, at our election equal to one, three or six months plus an additional amount ranging from 1.5% to 2.0%, with such additional amount based on Acadian’s Leverage Ratio (as defined below). 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 ratio of Acadian’s trailing twelve months Adjusted EBITDA to Acadian’s interest expense (the “Interest Coverage Ratio”) must be not less than 4.0x. At December 31, 2021, Acadian’s Leverage Ratio was 0.1x and Acadian’s Interest Coverage Ratio was 293x.

Senior Notes

In July 2016, we issued $275.0 million of 4.80% Senior Notes due 2026 (the “2026 Notes”) and $125.0 million of 5.125% Senior Notes due 2031. We used the net proceeds of these offerings to finance the acquisition of Landmark in August 2016, purchase seed capital from OM plc, settle a Treasury rate lock contract and pay down the balance of the previous revolving credit facility.

4.80% Senior Notes Due July 2026

The $275.0 million 2026 Notes were sold at a discount of $(0.5) million and we incurred debt issuance costs of $(3.0) million, which are being amortized to interest expense over the ten-year term. The 2026 Notes can be redeemed at any time prior to the scheduled maturity in part or in aggregate, at the greater of 100% of the principal amount at that time or the sum of the remaining scheduled payments discounted at the treasury rate (as defined) plus 0.5%, together with any related accrued and unpaid interest.

5.125% Senior Notes Due August 2031

The $125.0 million 2031 Notes incurred debt issuance costs of $(4.3) million, which are being amortized to interest expense over the fifteen-year term. The 2031 Notes can be redeemed at any time, on or after August 1, 2019, at a redemption price equal to 100.0% of the principal amount together with any related accrued and unpaid interest. On December 17, 2021, we issued a notice for the full redemption of the $125 million aggregate principal amount outstanding. On January 18, 2022 we completed the full redemption of the 2031 Notes. The redemption price for the 2031 Notes was $1,011.53 per $1,000.00 of principal amount of the 2031 Notes, which is equal to 100% of the principal amount, plus accrued and unpaid interest on the principal amount being redeemed up to, but excluding, the date of redemption. The aggregate interest paid upon redemption was approximately $1.4 million.

As of December 31, 2021, we were in compliance with the required covenants related to borrowings and debt facilities.

Other Compensation Liabilities

Other compensation liabilities principally consist of cash-settled Affiliate equity and profit interests liabilities held by certain Affiliate key employees, and voluntary deferred compensation plans. The following table summarizes our other compensation liabilities:

Years ended December 31,

Share-based payments liability $ 28.1 $ 25.0

Affiliate profit interests liability 30.6 0.8

Voluntary deferral plan liability 45.0 48.0

Share-based payments liability represents the value of Affiliate key employee-owned equity that may under certain circumstances be repurchased by us that is considered an equity award under U.S. GAAP based on the terms and conditions attached to these interests. Profit interests represent the value of Affiliate key employee-owned equity that may under certain circumstances be repurchased by us that is not considered an equity award under U.S. GAAP, but rather a form of compensation arrangement, based on the terms and conditions attached to these interests. Our obligation in any given period in respect of funding these potential repurchases of Affiliate equity is limited to only that portion that may be put to us by Affiliate key employees, which is typically capped annually under the terms of these arrangements such that we are not required to repurchase more than we can reasonably recycle by re-granting the interests in lieu of cash variable compensation owed to Affiliate key employees.

Certain of our key employees are eligible to participate in our voluntary deferral plan, or VDP, which provides our senior personnel the opportunity to voluntarily defer a portion of their compensation. There is a voluntary deferral plan investment balance included in investments on the Consolidated Balance Sheets that corresponds to this deferral liability.

Additionally, we have recorded accrued incentive compensation of $117.4 million and $78.3 million on the Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively. Included within the accrued incentive compensation balance is the vested portion of Acadian’s deferred compensation pool. Acadian’s deferred compensation pool is based on a contractual percentage of Acadian performance fee revenues and post-bonus profits, and is subject to a three-year vesting period. Compensation expense is recognized over the requisite service period. Unamortized compensation expense related to the unvested portion of the deferred compensation pool of $13.8 million and $13.8 million is expected to be recognized in the years ending December 31, 2022 and 2023, respectively.

For additional discussion of our compensation programs, please refer to the compensation discussions contained within our definitive proxy statement for our 2022 annual meeting of shareholders incorporated herein by reference.

Supplemental Liquidity Measure—Adjusted EBITDA

As supplemental information, we provide information regarding Adjusted EBITDA, which we define as economic net income before interest, income taxes, depreciation and amortization. Adjusted EBITDA is a non-GAAP liquidity measure that we provide in addition to, but not as a substitute for, cash flows from operating activities. It should be noted that our calculation of Adjusted EBITDA may not be consistent with Adjusted EBITDA as calculated by other companies. We believe Adjusted EBITDA is a useful liquidity metric because it indicates our ability to make further investments in our business, service debt and meet working capital requirements.

The following table reconciles our U.S. GAAP net income attributable to controlling interests to EBITDA to Adjusted EBITDA to economic net income for the years ended December 31, 2021, 2020 and 2019:

Years Ended December 31,

Net income attributable to controlling interests $ 828.4 $ 286.7 223.9

Net interest expense to third parties 24.6 27.9 30.0

(Gain) loss on seed and co-investments (5.7) (1.6) (18.7)

Custody fees on seed portfolio — 0.1 —

Capital transaction costs 1.2 0.2 2.7

ENI net interest expense to third parties (22.3) (21.6) (21.0)

Depreciation and amortization(2) (24.0) (22.5) (16.2)

Tax on economic net income (47.1) (32.5) (37.7)

(1)Included in restructuring for the year ended December 31, 2021 are $3.8 million of restructuring costs at the Center and Affiliates, $1.2 million costs associated with the transfer of an insurance policy from our former Parent, and the gain on sale of Affiliates of $48.6 million. Included in restructuring for the year ended December 31, 2020 are $9.4 million of restructuring costs at the Center and Affiliates, $1.6 million costs associated with the transfer of an insurance policy from our former Parent and the gain on sale of Affiliates of $241.3 million. Included in restructuring for the year ended December 31, 2019 are $6.7 million of restructuring costs at the Center and Affiliates and $2.5 million of costs incurred in connection with our redomicile to the U.S.

(2)The years ended December 31, 2021 and 2020 include non-cash equity-based award amortization expense.

For a full discussion regarding the items excluded from Adjusted EBITDA above and the calculation of economic net income, refer to “—Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis.”

Limitations of Adjusted EBITDA

As a non-GAAP, unaudited liquidity measure and derivation of EBITDA, Adjusted EBITDA has certain material limitations. It does not include cash costs associated with capital transactions and excludes certain U.S. GAAP expenses that fall outside the definition of EBITDA. Each of these categories of expense represents costs to us of doing business, and therefore any measure that excludes any or all of these categories of expense has material limitations.

Future Capital Needs

We believe that our available cash and cash equivalents to be generated from operations, supplemented by short-term and long-term financing, as necessary, will be sufficient to fund current operations and capital requirements for at least the next twelve months, as well as our day-to-day operations and future investment requirements. Our ability to secure short-term and long-term financing in the future will depend on several factors, including our future profitability, our relative levels of debt and equity and the overall condition of the credit markets.

Commitments, Contingencies and Off-Balance Sheet Obligations

AAMI US Equity

AAMI · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

AAMI US Equity☆

AAMI · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

AAMI US Equity