BrightSphere Investment Group Inc. (Form: 10-Q, Received: 05/11/2020 16:19:52)

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38979



		BRIGHTSPHERE Investment Group Inc.

(Exact name of registrant as specified in its charter)



Delaware		47-1121020
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Clarendon Street, 53rd Floor		02116
Boston,	Massachusetts
(Address of principal executive offices)		(Zip Code)

(617)-369-7300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Ticker Symbol	Name of each exchange on which registered
Common stock, par value $0.001 per share	BSIG	New York Stock Exchange
4.800% Notes due 2026	BSIG 26	New York Stock Exchange
5.125% Notes due 2031	BSA	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

The number of shares of the registrant’s common stock, $0.001 per share, outstanding as of May 8, 2020 was 80,241,738.

Table of Contents

TABLE OF CONTENTS



		Page

	Explanatory Note	3

Part I	Financial Information	4

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	4

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019	5

	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019	6

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2020 and 2019	7

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	76

Item 4.	Controls and Procedures	78

Part II	Other Information	79

Item 1.	Legal Proceedings	79

Item 1A.	Risk Factors	79

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	79

Item 5.	Other Events	81

Item 6.	Exhibits	81

Table of Contents

EXPLANATORY NOTE

On July 12, 2019, the BrightSphere corporate group, which consisted of BrightSphere Investment Group plc, a public company limited by shares incorporated under the laws of England and Wales and its operating subsidiaries (such operating subsidiaries and the holding company collectively, the “BrightSphere Group”), completed a redomestication, resulting in BrightSphere Investment Group Inc., a Delaware corporation, becoming the publicly traded parent company of the BrightSphere Group (the “Redomestication”). As part of the Redomestication, which was approved by the shareholders of BrightSphere Investment Group plc, existing shares of BrightSphere Investment Group plc were exchanged on a one-for-one basis for newly issued shares of common stock of BrightSphere Investment Group Inc. immediately prior to the effective time of the Redomestication. As a result, all outstanding shareholders of BrightSphere Investment Group plc became common stockholders of BrightSphere Investment Group Inc. Throughout this Form 10-Q, references to “BrightSphere,” “the Company,” “we” and “us” (i) for periods until the completion of the Redomestication, refer to BrightSphere Investment Group plc and (ii) for periods after the completion of the Redomestication, refer to BrightSphere Investment Group Inc. Also throughout this Form 10-Q, we refer to our equity securities (i) for periods until the completion of the Redomestication, as ordinary shares and (ii) for periods after the completion of the Redomestication, as shares of common stock.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

BrightSphere Investment Group Inc.

Condensed Consolidated Balance Sheets

(in millions, except for share and per share data, unaudited)



	March 31, 2020			December 31, 2019
Assets
Cash and cash equivalents	$	124.4		$	111.3
Investment advisory fees receivable	134.8			151.9
Income taxes receivable	36.3			26.2
Fixed assets, net	66.6			65.8
Right of use assets	105.3			37.7
Investments (includes balances reported at fair value of $158.6 and $184.3)	161.0			186.3
Acquired intangibles, net	63.5			65.1
Goodwill	258.2			274.6
Other assets	57.9			52.0
Deferred tax assets	220.6			243.6
Assets of consolidated Funds:
Cash and cash equivalents, restricted	6.8			9.7
Investments (includes balances reported at fair value of $107.6 and $119.5)	178.8			190.6
Other assets	9.3			4.9
Total assets	$	1,423.5		$	1,419.7
Liabilities and stockholders’ equity
Accounts payable and accrued expenses	$	24.9		$	41.5
Accrued incentive compensation	63.9			137.8
Due to OM plc	3.7			3.7
Other compensation liabilities	356.4			404.9
Accrued income taxes	12.9			12.8
Operating lease liabilities	119.3			42.5
Other liabilities	3.1			3.1
Debt:
Non-recourse borrowings	21.7			35.0
Third party borrowings	613.9			533.8
Liabilities of consolidated Funds:
Accounts payable and accrued expenses	6.8			5.2
Securities sold, not yet purchased, at fair value	3.1			0.9
Other liabilities	—			0.1
Total liabilities	1,229.7			1,221.3
Commitments and contingencies
Redeemable non-controlling interests in consolidated Funds	74.5			83.9
Equity:
Common stock (par value $0.001; 82,482,768 and 85,886,371 shares, respectively, issued)	0.1			0.1
Additional paid-in capital	516.2			534.3
Retained deficit	(428.3		)	(452.5		)
Accumulated other comprehensive loss	(19.1		)	(17.5		)
Non-controlling interests	1.3			1.3
Non-controlling interests in consolidated Funds	49.1			48.8
Total equity and redeemable non-controlling interests in consolidated Funds	193.8			198.4
Total liabilities and equity	$	1,423.5		$	1,419.7

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BrightSphere Investment Group Inc.

Condensed Consolidated Statements of Operations

(in millions except for per share data, unaudited)



	Three Months Ended March 31,
	2020			2019
Revenue:
Management fees	$	178.5		$	207.5
Performance fees	1.0			(2.8		)
Other revenue	1.6			1.4
Consolidated Funds’ revenue	1.5			1.1
Total revenue	182.6			207.2
Operating expenses:
Compensation and benefits	57.4			101.1
General and administrative expense	27.7			32.5
Impairment of goodwill	16.4			—
Amortization of acquired intangibles	1.6			1.6
Depreciation and amortization	5.3			3.8
Consolidated Funds’ expense	0.1			0.2
Total operating expenses	108.5			139.2
Operating income	74.1			68.0
Non-operating income and (expense):
Investment income (loss)	(13.7		)	7.0
Interest income	0.3			1.1
Interest expense	(7.8		)	(7.0		)
Net consolidated Funds’ investment gains (losses)	(17.2		)	13.6
Total non-operating income (loss)	(38.4		)	14.7
Income from continuing operations before taxes	35.7			82.7
Income tax expense	13.6			21.6
Income from continuing operations	22.1			61.1
Gain (loss) on disposal of discontinued operations, net of tax	—			—
Net income	22.1			61.1
Net income (loss) attributable to non-controlling interests in consolidated Funds	(10.5		)	8.4
Net income attributable to controlling interests	$	32.6		$	52.7

Earnings per share (basic) attributable to controlling interests	$	0.38		$	0.54
Earnings per share (diluted) attributable to controlling interests	0.38			0.54
Continuing operations earnings per share (basic) attributable to controlling interests	0.38			0.54
Continuing operations earnings per share (diluted) attributable to controlling interests	0.38			0.54
Weighted average common stock outstanding	85.1			97.6
Weighted average diluted common stock outstanding	85.1			97.8

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BrightSphere Investment Group Inc.

Condensed Consolidated Statements of Comprehensive Income

(in millions, unaudited)



	Three Months Ended March 31,
	2020			2019
Net income	$	22.1		$	61.1
Other comprehensive income (loss):
Amortization related to derivative securities, net of tax	0.5			0.6
Foreign currency translation adjustment	(2.1		)	0.5
Total other comprehensive income (loss)	(1.6		)	1.1
Comprehensive income (loss) attributable to non-controlling interests in consolidated Funds)	(10.5		)	8.4
Total comprehensive income attributable to controlling interests	$	31.0		$	53.8

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BrightSphere Investment Group Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended March 31, 2020 and 2019

($ in millions except share data, unaudited)



	Common stock (millions)		Common stock, par value		Additional paid-in capital			Retained earnings (deficit)			Accumulated other comprehensive income (loss)			Total stockholders’ equity			Non- controlling interests		Non-controlling interests in consolidated Funds		Total equity			Redeemable non-controlling interests in consolidated Funds			Total equity and redeemable non-controlling interests in consolidated Funds
December 31, 2018	105.2		$	0.1	$	764.6		$	(640.5	)	$	(20.9	)	103.3			$	1.6	$	29.3	$	134.2		$	41.9		$	176.1
Issuance of common stock	0.2		—		—			—			—			—			—		—		—			—			—
Repurchase of common stock	(13.5	)	—		(180.5		)	—			—			(180.5		)	—		—		(180.5		)	—			(180.5		)
Capital contributions (redemptions)	—		—		—			—			—			—			—		—		—			(0.4		)	(0.4		)
Equity-based compensation	—		—		3.2			—			—			3.2			—		—		3.2			—			3.2
Foreign currency translation adjustment	—		—		—			—			0.5			0.5			—		—		0.5			—			0.5
Amortization related to derivatives securities, net of tax	—		—		—			—			0.6			0.6			—		—		0.6			—			0.6
Other changes in non-controlling interests	—		—		—			—			—			—			0.2		—		0.2			—			0.2
Dividends ($0.10 per share)	—		—		—			(9.2		)	—			(9.2		)	—		—		(9.2		)	—			(9.2		)
Net income (loss)	—		—		—			52.7			—			52.7			—		6.7		59.4			1.7			61.1
March 31, 2019	91.9		$	0.1	$	587.3		$	(597.0	)	$	(19.8	)	$	(29.4	)	$	1.8	$	36.0	$	8.4		$	43.2		$	51.6

December 31, 2019	85.9		$	0.1	$	534.3		$	(452.5	)	$	(17.5	)	$	64.4		$	1.3	$	48.8	$	114.5		$	83.9		$	198.4
Retirement of common stock	(0.2	)	—		—			—			—			—			—		—		—			—			—
Repurchase of common stock	(3.2	)	—		(19.2		)	—			—			(19.2		)	—		—		(19.2		)	—			(19.2		)
Capital contributions	—		—		—			—			—			—			—		0.2		0.2			1.2			1.4
Equity-based compensation	—		—		1.1			—			—			1.1			—		—		1.1			—			1.1
Foreign currency translation adjustment	—		—		—			—			(2.1		)	(2.1		)	—		—		(2.1		)	—			(2.1		)
Amortization related to derivative securities, net of tax	—		—		—			—			0.5			0.5			—		—		0.5			—			0.5
Dividends ($0.10 per share)	—		—		—			(8.4		)	—			(8.4		)	—		—		(8.4		)	—			(8.4		)
Net income (loss)	—		—		—			32.6			—			32.6			—		0.1		32.7			(10.6		)	22.1
March 31, 2020	82.5		$	0.1	$	516.2		$	(428.3	)	$	(19.1	)	$	68.9		$	1.3	$	49.1	$	119.3		$	74.5		$	193.8

See Notes to Condensed Consolidated Financial Statements

Table of Contents



BrightSphere Investment Group Inc. Condensed Consolidated Statements of Cash Flows (in millions, unaudited)
	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net income	$	22.1		$	61.1
Less: Net (income) loss attributable to non-controlling interests in consolidated Funds	10.5			(8.4		)
Adjustments to reconcile net income to net cash flows from operating activities from continuing operations:
Loss from discontinued operations, excluding consolidated Funds	—			—
Impairment of goodwill	16.4			—
Amortization of acquired intangibles	1.6			1.6
Depreciation and other amortization	5.3			3.8
Amortization of debt-related costs	1.1			0.9
Amortization and revaluation of non-cash compensation awards	(44.0		)	(12.7		)
Net earnings from Affiliate accounted for using the equity method	(0.6		)	(0.6		)
Distributions received from equity method Affiliate	0.2			—
Deferred income taxes	22.8			6.2
(Gains) losses on other investments	23.1			(18.3		)
Changes in operating assets and liabilities (excluding discontinued operations):
Decrease in investment advisory fees receivable	17.1			7.7
Increase in other receivables, prepayments, deposits and other assets	(18.2		)	(6.6		)
Decrease in accrued incentive compensation, operating lease liabilities and other liabilities	(70.3		)	(316.9		)
Decrease in accounts payable, accrued expenses and accrued income taxes	(16.2		)	(17.3		)
Net cash flows from operating activities of continuing operations, excluding consolidated Funds	(29.1		)	(299.5		)
Net income (loss) attributable to non-controlling interests in consolidated Funds	(10.5		)	8.4
Adjustments to reconcile net income (loss) attributable to non-controlling interests in consolidated Funds to net cash flows from operating activities from continuing operations of consolidated Funds:
(Gains) losses on other investments	12.0			(2.6		)
Purchase of investments	(25.1		)	(32.7		)
Sale of investments	22.0			28.0
(Increase) decrease in receivables and other assets	(4.4		)	2.3
Increase in accounts payable and other liabilities	1.6			3.6
Net cash flows from operating activities of continuing operations of consolidated Funds	(4.4		)	7.0
Net cash flows from operating activities of continuing operations	(33.5		)	(292.5		)
Net cash flows from operating activities of discontinued operations	—			—
Total net cash flows from operating activities	(33.5		)	(292.5		)
Cash flows from investing activities:
Additions of fixed assets	(6.3		)	(7.3		)
Purchase of investment securities	(4.8		)	(7.0		)
Sale of investment securities	12.2			9.9
Cash flows from investing activities of consolidated Funds
Contributions in equity method investees	(0.3		)	—
Distributions received from equity method investees	0.5			—
Net cash flows from investing activities of continuing operations	1.3			(4.4		)
Net cash flows from investing activities of discontinued operations	—			—
Total net cash flows from investing activities	1.3			(4.4		)

See Notes to Condensed Consolidated Financial Statements

Table of Contents



BrightSphere Investment Group Inc. Condensed Consolidated Statements of Cash Flows (in millions, unaudited)
	Three Months Ended March 31,
	2020			2019
Cash flows from financing activities:
Proceeds from third party and non-recourse borrowings	80.0			240.0
Repayment of third party and non-recourse borrowings	(13.3		)	(5.0		)
Payment to OM plc for co-investment redemptions	—			(5.1		)
Dividends paid to stockholders	(5.8		)	(6.4		)
Dividends paid to related parties	(2.7		)	(3.0		)
Repurchases of common stock	(17.1		)	(183.9		)
Cash flows from financing activities of consolidated Funds
Non-controlling interest capital redeemed	(0.1		)	—
Redeemable non-controlling interest capital raised	1.4			0.3
Redeemable non-controlling interest capital redeemed	—			(0.4		)
Net cash flows from financing activities of continuing operations	42.4			36.5
Net cash flows from financing activities of discontinued operations	—			—
Total net cash flows from financing activities	42.4			36.5
Effect of foreign exchange rate changes on cash and cash equivalents	—			—
Net increase (decrease) in cash and cash equivalents	10.2			(260.4		)
Cash and cash equivalents at beginning of period	121.0			345.5
Cash and cash equivalents at end of period (including cash at consolidated Funds classified as restricted)	$	131.2		$	85.1

Supplemental disclosure of cash flow information:
Interest paid (excluding consolidated Funds)	$	10.1		$	9.4
Income taxes paid	—			12.9

Supplemental disclosure of non-cash investing and financing transactions:
Payable for securities purchased by a consolidated Fund	$	1.1		$	15.5

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1) Organization and Description of the Business

BrightSphere Investment Group Inc. (“BrightSphere”, “BSIG” or the “Company”), through its subsidiaries, is a global asset management company with interests in a diverse group of investment management firms (the “Affiliates”) individually headquartered in the United States. The Company provides investment management services globally to predominantly institutional investors, in asset classes that include U.S. and global equities, fixed income, alternative assets, forestry and secondary strategies focused in real estate and private equity. Fees for services are largely asset-based and, as a result, the Company’s revenue fluctuates based on the performance of financial markets and investors’ asset flows in and out of the Company’s products.

The Company’s Affiliates are organized as limited liability companies. The Company generally utilizes a profit-sharing model in structuring its compensation and ownership arrangements with its Affiliates. The Affiliates’ variable compensation is generally based on each firm’s profitability. BSIG and Affiliate key employees share in profits after variable compensation according to their respective ownership interests. The profit-sharing model results in the alignment of BSIG and Affiliate key employee economic interests, which is critical to the Company’s talent management strategy and long-term growth of the business. The Company conducts its operations through the following three reportable segments:


•	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 and geographies, including Global, non-U.S., emerging markets and managed volatility equities, as well as multi-asset products.


•	Alternatives—comprised of illiquid and differentiated liquid investment strategies that include private equity, real estate and real assets, including forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.


•	Liquid Alpha—comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S., global, non-U.S. and emerging markets equities, as well as fixed income.

Prior to 2014, the Company was a wholly-owned subsidiary of Old Mutual plc (“OM plc”), an international long-term savings, protection and investment group, listed on the London Stock Exchange. On October 15, 2014, the Company completed the initial public offering (the “Offering”) by OM plc pursuant to the Securities Act of 1933, as amended. Additionally, between the Offering and February 25, 2019, the Company, OM plc and/or HNA Capital U.S. (“HNA”) completed a series of transactions in the Company’s shares, including a two-step transaction announced on March 25, 2017 for a sale by OM plc of a 24.95% shareholding in the Company to HNA and a two-step transaction announced on November 19, 2018 for a sale of the substantial majority of the ordinary shares held by HNA of the Company to Paulson & Co. (“Paulson”). On February 25, 2019, this transaction was completed and Paulson held approximately 21.7% of the ordinary shares of the Company. The remaining shares held by HNA were bought back by the Company in the first quarter of 2019.

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1) Organization and Description of the Business (cont.)

On July 12, 2019, the BrightSphere corporate group, which consisted of BrightSphere Investment Group plc, a public company limited by shares incorporated under the laws of England and Wales and its operating subsidiaries (such operating subsidiaries and the holding company collectively, the “BrightSphere Group”), completed a redomestication, resulting in BrightSphere Investment Group Inc., a Delaware corporation, becoming the publicly traded parent company of BrightSphere Group (the “Redomestication”). The scheme of arrangement pursuant to which the Redomestication was effected was approved by the Company’s shareholders and the High Court of Justice of England and Wales. Effective as of the close of business on July 12, 2019, all issued ordinary shares of BrightSphere Investment Group plc were exchanged on a one-for-one basis for newly issued shares of common stock of BrightSphere Investment Group Inc. As a result, all outstanding shareholders of BrightSphere Investment Group plc became common stockholders of BrightSphere Investment Group Inc. The common stock of BrightSphere Investment Group Inc. began trading on July 15, 2019, and the Company’s trading symbol on the NYSE remained unchanged as “BSIG.”

For the three months ended March 31, 2020, the Company repurchased 3,230,262 shares of common stock at an average price of $5.93 per share, or approximately $19.2 million in total, including commissions.

2) Basis of Presentation and Significant Accounting Policies

The Company’s significant accounting policies are as follows:

Basis of presentation

These unaudited Condensed Consolidated Financial Statements reflect the historical balance sheets, statements of operations and of comprehensive income, statements of changes in stockholders’ equity and statements of cash flows of the Company. Within these Condensed Consolidated Financial Statements, OM plc, HNA, Paulson and their related entities, as defined above, are referred to as “related parties.”

The Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of the Company’s Condensed Consolidated Financial Statements have been included. All dollar amounts, except per-share data in the text and tables herein, are stated in millions unless otherwise indicated. Transactions between the Company and its related parties are included in the Condensed Consolidated Financial Statements, however, material intercompany balances and transactions among the Company, its consolidated Affiliates and consolidated Funds are eliminated in consolidation.

As a result of the Redomestication on July 12, 2019, discussed in Note 1, the Company revised its equity accounts to reflect a U.S. domiciled company presentation on the Condensed Consolidated Statements of Changes in Stockholders’ equity and the Condensed Consolidated Balance Sheets for all periods presented. The previously issued ordinary shares of BrightSphere Investment Group plc were exchanged on a one-for-one basis for newly issued shares of common stock of BrightSphere Investment Group Inc. The Redomestication and related internal reorganization was accounted for consistent with a reorganization of entities under common control in accordance with ASC 805 Business Combinations. Accordingly, the transfer of the assets and liabilities and exchange of shares was recorded in the new entity (BrightSphere Investment Group Inc.) at their carrying amounts from the transferring entity (BrightSphere Investment Group plc) at the date of transfer.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

2) Basis of Presentation and Significant Accounting Policies (cont.)

The Company has revised certain amounts in prior-period financial statements to conform to the current period’s presentation. The Company changed the presentation of the purchase and sale of investments by its consolidated Funds within cash flows from investing activities in the prior period’s Condensed Consolidated Statements of Cash Flows to conform to the current period’s presentation of showing such purchase and sale of investments within cash flows from operating activities. The change had no impact on the total cash provided by or used in operating, investing or financing activities within the Condensed Consolidated Statements of Cash Flows, or any impact on the other Condensed Consolidated Financial Statements.

Certain disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (annual report on Form 10-K) are not required to be included on an interim basis in the Company’s quarterly reports on Form 10-Q. The Company has condensed or omitted these disclosures. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 2, 2020. The Company’s significant accounting policies, which have been consistently applied, are summarized in those financial statements.

Use of estimates

The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. The three months ended March 31, 2020 were characterized by heightened uncertainty due to the COVID-19 pandemic which could impact estimates and assumptions made by management. Actual results could differ from such estimates, and the differences may be material to the Condensed Consolidated Financial Statements.

Recently adopted accounting standards

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). This standard modifies the disclosure requirements on fair value measurements and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Notably, this guidance removes the disclosure requirements for the valuation processes for Level 3 fair value measurements. This guidance also adds new disclosure requirements for the range and weighted average of significant unobservable inputs used to develop fair value measurements categorized within Level 3 of the fair value hierarchy. The Company has determined that the adoption of this standard did not have a material impact on its Condensed Consolidated Financial Statements and related disclosures.

New accounting standard not yet adopted

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

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

3) Investments

Investments are comprised of the following as of the dates indicated (in millions):



	March 31, 2020		December 31, 2019
Investments of consolidated Funds held at fair value	$	107.6	$	119.5
Other investments held at fair value	69.3		95.5
Investments related to long-term incentive compensation plans held at fair value	89.3		88.8
Total investments held at fair value	266.2		303.8
Equity-accounted investments in Affiliates and consolidated Funds⁽¹⁾	73.6		73.1
Total investments per Condensed Consolidated Balance Sheets	$	339.8	$	376.9


(1)	Equity-accounted investments in consolidated Funds is comprised of Investments in partnership interests where a portion of return includes carried interest. These investments are accounted for within the scope of ASC 323, Investments - Equity Method and Joint Ventures because the Company has determined it has significant influence.

Investment income is comprised of the following for the three months ended March 31 (in millions):



	Three Months Ended March 31,
	2020			2019
Realized and unrealized gains (losses) on other investments held at fair value	$	(14.3	)	$	6.4
Investment return of equity-accounted investments in Affiliates	0.6			0.6
Total investment income (loss) per Condensed Consolidated Statements of Operations	$	(13.7	)	$	7.0

Investment gains (losses) on net consolidated funds is comprised of the following for the three months ended March 31 (in millions):



	Three Months Ended March 31,
	2020			2019
Realized and unrealized gains (losses) on consolidated Funds held at fair value	$	(17.2	)	$	13.6
Investment return of equity-accounted investments	—			—
Total net consolidated Funds’ investment gains (losses) per Condensed Consolidated Statements of Operations	$	(17.2	)	$	13.6

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

4) Fair Value Measurements

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2020 (in millions):



	Quoted prices in active markets (Level I)			Significant other observable inputs (Level II)			Significant unobservable inputs (Level III)		Uncategorized		Total value, March 31, 2020
Assets of BSIG and consolidated Funds⁽¹⁾
Common and preferred stock	$	7.2		$	—		$	—	$	—	$	7.2
Short-term investment funds	0.4			—			—		—		0.4
Bank loans	—			93.9			—		—		93.9
Derivatives	5.4			0.7			—		—		6.1
Consolidated Funds total	13.0			94.6			—		—		107.6
Investments in separate accounts⁽²⁾	27.9			9.5			—		—		37.4
Investments related to long-term incentive compensation plans⁽³⁾	89.3			—			—		—		89.3
Investments in unconsolidated Funds⁽⁴⁾	—			—			3.0		28.9		31.9
BSIG total	117.2			9.5			3.0		28.9		158.6
Total fair value assets	$	130.2		$	104.1		$	3.0	$	28.9	$	266.2
Liabilities of consolidated Funds⁽¹⁾
Derivatives	(2.6		)	(0.5		)	—		—		(3.1		)
Consolidated Funds total	(2.6		)	(0.5		)	—		—		(3.1		)
Total fair value liabilities	$	(2.6	)	$	(0.5	)	$	—	$	—	$	(3.1	)

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

4) Fair Value Measurements (cont.)

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2019 (in millions):



	Quoted prices in active markets (Level I)			Significant other observable inputs (Level II)			Significant unobservable inputs (Level III)		Uncategorized		Total value December 31, 2019
Assets of BSIG and consolidated Funds⁽¹⁾
Common and preferred stock	$	9.8		$	—		$	—	$	—	$	9.8
Short-term investment funds	0.1			—			—		—		0.1
Bank loans	—			109.0			—		—		109.0
Derivatives	0.5			0.1			—		—		0.6
Consolidated Funds total	10.4			109.1			—		—		119.5
Investments in separate accounts⁽²⁾	33.2			11.1			—		—		44.3
Investments related to long-term incentive compensation plans⁽³⁾	88.8			—			—		—		88.8
Investments in unconsolidated Funds⁽⁴⁾	—			—			3.0		48.2		51.2
BSIG total	122.0			11.1			3.0		48.2		184.3
Total fair value assets	$	132.4		$	120.2		$	3.0	$	48.2	$	303.8
Liabilities of consolidated Funds⁽¹⁾
Common stock	$	(0.5	)	$	—		$	—	$	—	$	(0.5	)
Derivatives	(0.1		)	(0.3		)	—		—		(0.4		)
Consolidated Funds total	(0.6		)	(0.3		)	—		—		(0.9		)
Total fair value liabilities	$	(0.6	)	$	(0.3	)	$	—	$	—	$	(0.9	)


(1)	Assets and liabilities measured at fair value are comprised of financial investments managed by the Company's Affiliates.

Equity securities, including common and preferred stock, short-term investment funds, other investments and derivatives which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. The securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.

The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Company has not made adjustments to the prices provided. Assets of consolidated Funds also include investments in bank loans. Interests in senior floating-rate loans for which reliable market participant quotations are readily available are valued at the average mid-point of bid and ask quotations obtained from a third party pricing service. These assets are classified as Level II.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

4) Fair Value Measurements (cont.)

If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III. If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained. In either case, such securities are classified as Level III. The Company performs due diligence procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures.

(2)

Investments in separate accounts of $37.4 million at March 31, 2020 consist of approximately 30% of cash equivalents and 70% of equity securities, fixed income securities, and other investments. Investments in separate accounts of $44.3 million at December 31, 2019 consist of approximately 3% of cash equivalents and 97% of equity securities, fixed income securities, and other investments. The Company values these using the published price of the underlying securities (classified as Level I) or quoted price supported by observable inputs as of the measurement date (classified as Level II).

(3)

Investments related to long-term incentive compensation plans of $89.3 million and $88.8 million at March 31, 2020 and December 31, 2019, respectively, were investments in publicly registered daily redeemable funds (some managed by Affiliates), which the Company has classified as trading securities and valued using the published price as of the measurement dates. Accordingly, the Company has classified these investments as Level I.

(4)

The uncategorized amounts of $28.9 million and $48.2 million at March 31, 2020 and December 31, 2019, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in Funds advised by Affiliates and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Condensed Consolidated Balance Sheets. These unconsolidated Funds consist primarily of real estate investment Funds, UCITS and other investment vehicles. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates. UCITS and other investment vehicles are not subject to redemption restrictions.

The real estate investment Funds of $5.9 million and $6.4 million at March 31, 2020 and December 31, 2019, respectively, are subject to longer than quarterly redemption restrictions, and due to their nature, distributions are received only as cash flows are generated from underlying assets over the life of the Funds. The range of time over which the underlying assets are expected to be liquidated by the investees is approximately one year to eleven years from March 31, 2020. The valuation process for the underlying real estate investments held by the real estate investment Funds begins with each property or loan being valued by the investment teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, acquisitions, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. In connection with this process, changes in fair value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions.

Investments in unconsolidated Funds categorized as Level III of $3.0 million and $3.0 million at March 31, 2020 and December 31, 2019, respectively, related to investments in Forestry Funds advised by Affiliates and are valued by the general partner of those Funds. Determination of estimated fair value involves subjective judgment because the actual fair value can be determined only through negotiation between parties in a sale transaction, and amounts ultimately realized may vary significantly from the fair value presented.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

4) Fair Value Measurements (cont.)

The following table reconciles the opening balances of Level III financial assets to closing balances at the end of the period (in millions):



	Three Months Ended March 31,
Investments in unconsolidated Funds	2020		2019
Level III financial assets
At beginning of the period	$	3.0	$	3.0
Transfers in (out) of Level III	—		—
Total net fair value gains/losses recognized in net income	—		—
Total Level III financial assets	$	3.0	$	3.0

There were no significant transfers of financial assets or liabilities between Levels II or III during the three months ended March 31, 2020.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

5) Variable Interest Entities

The Company, through its Affiliates, sponsors the formation of various entities considered to be variable interest entities (“VIEs”). These VIEs are primarily Funds managed by Affiliates and other partnership interests typically owned entirely by third party investors. Certain Funds may be capitalized with seed capital investments from the Company and may be owned partially by Affiliate key employees and/or individuals that own minority interests in an Affiliate.

The Company’s determination of whether it is the primary beneficiary of a Fund that is a VIE is based in part on an

assessment of whether or not the Company and its related parties are exposed to absorb more than an insignificant

amount of the risks and rewards of the entity. Typically, the Fund’s investors are entitled to substantially all of the

economics of these VIEs with the exception of the management fees and performance fees, if any, earned by the

Company or any investment the Company has made into the Funds. The Company generally is not the primary

beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest, including

interests of related parties, is substantial.

The following table presents the assets and liabilities of Funds that are VIEs and consolidated by the Company (in millions):



	3/31/2020		12/31/2019
Assets
Investments at fair value	$	107.6	$	119.5
Other assets of consolidated Funds	87.3		85.7
Total Assets	$	194.9	$	205.2
Liabilities
Liabilities of consolidated Funds	$	9.9	$	6.2
Total Liabilities	$	9.9	$	6.2

“Investments at fair value” consist of investments in bank loans, common and preferred stock, and other securities. To the extent the Company also has consolidated Funds that are not VIEs, the assets and liabilities of those Funds are not included in the table above.

The assets of consolidated VIEs presented in the table above belong to the investors in those Funds, are available for use only by the Fund to which they belong, and are not available for use by the Company to the extent they are held by non-controlling interests. Any debt or liabilities held by consolidated Funds have no recourse to the Company's general credit.

The Company’s involvement with Funds that are VIEs and not consolidated by the Company is generally limited to that of an investment manager and its investment in the unconsolidated VIE, if any. The Company’s investment in any unconsolidated VIE generally represents an insignificant interest of the Fund’s net assets and assets under management, such that the majority of the VIEs results are attributable to third parties. The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

5) Variable Interest Entities (cont.)

The following information pertains to unconsolidated VIEs for which the Company holds a variable interest (in millions):



	March 31, 2020		December 31, 2019
Unconsolidated VIE assets	$	6,311.5	$	6,625.5
Unconsolidated VIE liabilities	$	4,201.0	$	4,320.6
Equity interests on the Condensed Consolidated Balance Sheets	$	15.2	$	17.5
Maximum risk of loss⁽¹⁾	$	21.6	$	23.9


(1)	Includes equity investments the Company has made or is required to make and any earned but uncollected management and incentive fees. The Company does not record performance or incentive allocations until the respective measurement period has ended.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

6) Borrowings and Debt

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



	March 31, 2020					December 31, 2019
(in millions)	Carrying value		Fair Value		Fair Value Level	Carrying value		Fair Value		Fair Value Level
Third party borrowings:
$450 million revolving credit facility expiring August 22, 2022⁽¹⁾	$	220.0	$	220.0	2	$	140.0	$	140.0	2
$275 million 4.80% Senior Notes Due July 27, 2026⁽²⁾	272.5		245.7		2	272.4		287.2		2
$125 million 5.125% Senior Notes Due August 1, 2031⁽²⁾	121.4		88.1		2	121.4		126.4		2
Total third party borrowings	$	613.9	$	553.8		$	533.8	$	553.6
Non-recourse borrowings:
Non-recourse seed capital facility expiring January 15, 2021⁽¹⁾	$	21.7	$	21.7	2	$	35.0	$	35.0	2
Total non-recourse borrowing	$	21.7	$	21.7		$	35.0	$	35.0
Total borrowings	$	635.6	$	575.5		$	568.8	$	588.6


(1)	Fair value approximates carrying value because the credit facilities have variable interest rates based on selected short term market rates.


(2)	The difference between the principal amounts and the carrying values of the senior notes in the table above reflects the unamortized debt issuance costs and discounts.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

7) Leases

The Company has operating leases for corporate offices, data centers, vehicles and certain equipment. The operating leases have remaining lease terms of 1 year to 14 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

The following table summarizes information about the Company’s operating leases for the three months ended March 31, (in millions):



	Three Months Ended March 31,
	2020		2019
Operating lease cost	$	3.8	$	3.4
Variable lease cost	0.1		0.1
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	3.7		3.6
ROU asset obtained in exchange for new operating lease liabilities	70.7		49.9

In determining the incremental borrowing rate, the Company considered the interest rate yield for the specific interest rate environment and the Company’s credit spread at the inception of the lease. For the three months ended March 31, 2020 and 2019, the weighted average remaining lease term was 12.1 years and 4.7 years respectively, and the weighted average discount rate was 3.48% and 3.97%, respectively.

Maturities of operating lease liabilities were as follows (in millions):



	Operating Leases
Year Ending December 31,
2020 (excluding the three months ended March 31, 2020)	$	10.8
2021	13.3
2022	9.2
2023	11.1
2024	10.1
Thereafter	93.6
Total lease payments	148.1
Less imputed interest	(28.8		)
Total	$	119.3

Excluded from the table above is an operating lease for office space that was entered into during the fourth quarter of 2019, but has not yet commenced. The expected lease obligations are approximately $7.5 million and will be paid over an expected lease term of 12 years. This operating lease will commence in the second quarter of 2020.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

8) Goodwill and Intangible Assets

The following table presents the changes in goodwill for the three months ended March 31, 2020 and 2019 (in millions):



	Quant & Solutions			Alternatives			Liquid Alpha			Total
Goodwill	$	22.1		$	153.1		$	133.3		$	308.5
Accumulated impairment	(1.8		)	(5.0		)	(27.1		)	(33.9		)
December 31, 2019	$	20.3		$	148.1		$	106.2		$	274.6
Additions	—			—			—			—
Impairments	—			—			(16.4		)	(16.4		)
Disposals	—			—			—			—
Goodwill	22.1			153.1			133.3			308.5
Accumulated impairment	(1.8		)	(5.0		)	(43.5		)	(50.3		)
March 31, 2020	$	20.3		$	148.1		$	89.8		$	258.2



	Quant & Solutions			Alternatives			Liquid Alpha			Total
Goodwill	$	22.1		$	153.1		$	133.3		$	308.5
Accumulated impairment	(1.8		)	(5.0		)	(27.1		)	(33.9		)
December 31, 2018	$	20.3		$	148.1		$	106.2		$	274.6
Additions	—			—			—			—
Impairments	—			—			—			—
Disposals	—			—			—			—
Goodwill	22.1			153.1			133.3			308.5
Accumulated impairment	(1.8		)	(5.0		)	(27.1		)	(33.9		)
March 31, 2019	$	20.3		$	148.1		$	106.2		$	274.6

The 2019 annual impairment assessment determined that no impairment existed at the annual assessment date. Due to the decline in the Company’s assets under management for the three months ended March 31, 2020, management determined that an interim impairment assessment was necessary as of March 31, 2020.

The Company performed a quantitative impairment test for the Copper Rock Capital Partners LLC (“Copper Rock”) reporting unit which is included within the Liquid Alpha segment. The quantitative impairment test concluded that the fair value of the reporting unit did not exceed its carrying value. Accordingly, the Company recognized a goodwill impairment charge of $16.4 million for the three months ended March 31, 2020.

The fair value of the reporting unit was estimated using the income approach, which calculates the fair value based on the present value of estimated future cash flows. Cash flow projections are based on management’s estimates of Assets Under Management (“AUM”) growth rates, product mix and effective fee rates, taking into consideration industry and market conditions. The discount rates used are based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics. The Company’s quantitative impairment analysis at March 31, 2020 incorporated revised forecasts that took into account the market disruptions during the

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

8) Goodwill and Intangible Assets (cont.)

quarter and its impact on the results in future periods. Given the significant level of uncertainty that currently exists, management also considered alternative scenarios for market and reporting unit performance over the next several years. If the Company’s assets under management are further impacted by the global economic conditions caused by COVID-19, such as adverse and significant declines in the value of global financial markets, additional impairments of goodwill or intangible assets are possible in future periods.

The following table presents the change in definite-lived acquired intangible assets comprised of client relationships for the three months ended March 31, 2020 and 2019 (in millions):



	Gross Book Value		Accumulated Amortization & Impairment			Net Book Value
December 31, 2019	$	108.3	$	(44.2	)	$	64.1
Additions	—		—			—
Amortization	—		(1.6		)	(1.6		)
Disposals	—		—			—
March 31, 2020	$	108.3	$	(45.8	)	$	62.5



	Gross Book Value		Accumulated Amortization & Impairment			Net Book Value
December 31, 2018	$	108.3	$	(37.6	)	$	70.7
Additions	—		—			—
Amortization	—		(1.6		)	(1.6		)
Disposals	—		—			—
March 31, 2019	$	108.3	$	(39.2	)	$	69.1

The Company’s definite-lived acquired intangibles are amortized over their expected useful lives. As of March 31, 2020, these assets were being amortized over remaining useful lives of three to ten years. The Company recorded amortization expense of $1.6 million for each of the three months ended March 31, 2020 and 2019.

The Company also acquired a $1.0 million indefinite-lived intangible trade name in the acquisition of Landmark, included in acquired intangibles, net, on the Condensed Consolidated Balance Sheets at March 31, 2020 and 2019.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

8) Goodwill and Intangible Assets (cont.)

The 2019 annual impairment assessment of definite and indefinite-lived intangible assets determined that no impairment existed. Due to the decline in the Company’s assets under management in the three months ended March 31, 2020, the Company assessed definite and indefinite-lived intangible assets for possible impairment. For indefinite-lived intangible assets, the Company performed a qualitative assessment and determined that it was more likely than not that the indefinite-lived intangible asset was not impaired. For definite-lived intangible assets, no events or changes in circumstances indicated that the carrying amount of these assets may not be recoverable. As such, no impairment charges were determined for both the definite and indefinite-lived intangible assets.

The Company estimates that its consolidated annual amortization expense, assuming no useful life changes or additional investments in new or existing Affiliates, for each of the next five fiscal years is as follows (in millions):



Year Ending December 31,
2020 (excluding the three months ended March 31, 2020)	$	5.0
2021	6.6
2022	6.5
2023	6.4
2024	6.4
Thereafter	31.6
Total	$	62.5

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

9) Commitments and Contingencies

Operational commitments

The Company had unfunded commitments to invest up to approximately $41 million in co-investments as of March 31, 2020. These commitments will be funded as required through the end of the respective investment periods ranging through fiscal 2022.

Certain Affiliates operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any violations of such financial requirements occurring during the period.

Guaranty

The Company entered into a guaranty for an office space security deposit on behalf of an Affiliate in the amount of $2.5 million in January 2020. This represents the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guaranty in the event of default by the guaranteed parties. This guaranty expires in 2022. There are no liabilities recorded on the Condensed Consolidated Balance Sheet as of March 31, 2020 related to this guaranty.

Litigation

The Company and its Affiliates are subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals for matters for which the outcome is probable and can be reasonably estimated. If an insurance claim or other indemnification for a litigation accrual is available to the Company, the associated gain will not be recognized until all contingencies related to the gain have been resolved. As of March 31, 2020, there were no material accruals for claims, legal proceedings or other contingencies.

Indemnifications

In the normal course of business, such as through agreements to enter into business combinations and divestitures of Affiliates, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred.

Foreign tax contingency

The Company has clients in non-U.S. jurisdictions which require entities that are conducting certain business activities in such jurisdictions to collect and remit tax assessed on certain fees paid for goods and services provided. The Company does not believe this requirement is applicable based on its limited business activities in these jurisdictions. However, given the fact that uncertainty exists around the requirement, the Company has chosen to evaluate its potential exposure related to non-collection and remittance of these taxes. At March 31, 2020, management of the Company has estimated the potential maximum exposure and concluded that it is not material. No accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at March 31, 2020.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

9) Commitments and Contingencies (cont.)

Considerations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and investments. The Company maintains cash and cash equivalents and short term investments with various financial institutions. These financial institutions are typically located in cities in which the Company and its Affiliates operate. For the Company and certain Affiliates, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits. Additionally, the Company holds insurance policies which cover historical and future tax benefits relating to certain of its deferred tax assets. The insurers of the policies are considered a significant counterparty to the Company.

10) Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to controlling interests by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is similar to basic earnings per share, but is adjusted for the effect of potentially issuable common stock, except when inclusion is antidilutive.

The calculation of basic and diluted earnings per share of common stock is as follows (dollars in millions, except per share data):



	Three Months Ended March 31,
	2020		2019
Numerator:
Net income attributable to controlling interests	$	32.6	$	52.7
Less: Total income available to participating unvested securities⁽¹⁾	—		(0.1		)
Total net income attributable to common stock	$	32.6	$	52.6
Denominator:
Weighted-average shares of common stock outstanding—basic	85,081,166		97,645,020
Potential shares of common stock:
Restricted stock units	17,893		199,563
Weighted-average shares of common stock outstanding—diluted	85,099,059		97,844,583
Earnings per share of common stock attributable to controlling interests:
Basic	$	0.38	$	0.54
Diluted	$	0.38	$	0.54


(1)	Income available to participating unvested securities includes dividends paid on unvested restricted shares and their proportionate share of undistributed earnings.

Employee options to purchase 9,330,000 shares were not included in the computation of diluted EPS for the three months ended March 31, 2020 because the assumed proceeds from exercising such options exceed the average price of the shares of common stock for the period and, therefore, the options are deemed antidilutive.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

11) Revenue

Management fees

The Company’s management fees are a function of the fee rates the Affiliates charge to their clients, which are typically expressed in basis points, and the levels of the Company’s assets under management. The most significant driver of increases or decreases in this average fee rate is changes in the mix of the Company’s assets under management caused by net inflows or outflows in certain asset classes or disproportionate market movements. For certain of the Company’s Alternative funds, management fee revenue is calculated based on a percentage of assets under management or total capital commitments. These Alternative funds can also include “catch-up” provisions such that the Company records revenue for payments of fund management fees back to the initial closing date for funds with multiple closings, less placement fees paid to third parties related to these funds.

Performance fees

The Company’s products subject to performance fees earn these fees upon exceeding high-water mark performance thresholds or outperforming a hurdle rate. Conversely, the separate accounts / other products, which primarily earn management fees, are potentially subject to performance adjustments up or down based on investment performance versus benchmarks (i.e. fulcrum fees).

Other revenue

Included in other revenue are certain payroll and benefits costs and expenses paid on behalf of Funds by the Company’s Affiliates. In instances where a customer reimburses the Company for a cost paid on the customer’s behalf, the Company is acting as a principal and the reimbursement is accrued on a gross basis at cost as the corresponding reimbursable expenses are incurred. Revenue from expense reimbursement amounted to $1.1 million and $1.0 million for the three months ended March 31, 2020 and 2019, respectively, and is recorded in other revenue in the Company’s Condensed Consolidated Statements of Operations. Other revenue may also consist of other miscellaneous revenue, consisting primarily of administration and consulting services.

Disaggregation of management fee revenue

The Company classifies its revenue (including only consolidated Affiliates that are included in management fee revenue) among the following asset classes:


i.	U.S. equity, which includes small cap through large cap securities and substantially value or blended investment styles;


ii.	Global / non-U.S. equity, which includes global and international equities including emerging markets;


iii.	Fixed income, which includes government bonds, corporate bonds and other fixed income investments in the United States; and


iv.	Alternatives, which is comprised of illiquid and differentiated liquid investment strategies that include private equity, real estate and real assets, including forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

11) Revenue (cont.)

Management fee revenue by segment and asset class is comprised of the following for the three months ended March 31 (in millions):



	Three Months Ended March 31,
	2020		2019
Quant & Solutions
Global / non-U.S. equity	$	85.2	$	90.5
Alternatives
Alternatives	41.4		43.8
Liquid Alpha
Global / non-U.S. equity	18.8		26.4
Fixed income	6.3		6.4
U.S. equity	26.8		40.4
Management fee revenue	$	178.5	$	207.5

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

12) Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2020 and 2019 were as follows (in millions):



	Foreign currency translation adjustment			Valuation and amortization of derivative securities			Total
Balance, as of December 31, 2019	$	2.8		$	(20.3	)	$	(17.5	)
Foreign currency translation adjustment	(2.1		)	—			(2.1		)
Amortization related to derivatives securities, before tax	—			0.7			0.7
Tax impact	—			(0.2		)	(0.2		)
Other comprehensive income (loss)	(2.1		)	0.5			(1.6		)
Balance, as of March 31, 2020	$	0.7		$	(19.8	)	$	(19.1	)



	Foreign currency translation adjustment		Valuation and amortization of derivative securities			Total
Balance, as of December 31, 2018	$	1.8	$	(22.7	)	$	(20.9	)
Foreign currency translation adjustment	0.5		—			0.5
Amortization related to derivatives securities, before tax	—		0.7			0.7
Tax impact	—		(0.1		)	(0.1		)
Other comprehensive income	0.5		0.6			1.1
Balance, as of March 31, 2019	$	2.3	$	(22.1	)	$	(19.8	)

For the three months ended March 31, 2020 and 2019, the Company reclassified $0.7 million and $0.7 million, respectively, from accumulated other comprehensive income (loss) to interest expense on the Condensed Consolidated Statements of Operations.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

13) Derivatives and Hedging

Cash flow hedge

In July 2015, the Company entered into a series of $300.0 million notional Treasury rate lock contracts which were designated and qualified as cash flow hedges. The Company documented its hedging strategy and risk management objective for this contract in anticipation of a future debt issuance. The Treasury rate lock contract eliminated the impact of fluctuations in the underlying benchmark interest rate for future forecasted debt issuances. The Company assessed the effectiveness of the hedging contract at inception and on a quarterly basis thereafter. The forecasted debt issuances occurred in July 2016 and the Treasury rate lock, which had an accumulated fair value of $(34.4) million, was settled. Refer to Note 6, Borrowings and Debt, for additional information on the debt issuances.

As of March 31, 2020, the balance recorded in accumulated other comprehensive income (loss) was $(19.8) million, net of tax. This balance will be reclassified to earnings through interest expense over the life of the issued debt. Amounts of $0.7 million have been reclassified for each of the three months ended March 31, 2020 and 2019. During the next twelve months the Company expects to reclassify approximately $3.2 million to interest expense.

Derivatives of consolidated Funds

In the normal course of business, the Company’s consolidated Funds may enter into transactions involving derivative financial instruments in connection with Funds’ investing activities. Derivative instruments may be used as substitutes for securities in which the Funds can invest, to hedge portfolio investments or to generate income or gain to the Funds. The Funds may also use derivatives to manage duration; sector and yield curve exposures and credit and spread volatility. Derivative financial instruments base their value upon an underlying asset, index or reference rate. These instruments are subject to various risks, including leverage, market, credit, liquidity and operational risks. The Funds manage the risks associated with derivatives on an aggregate basis, along with the risks associated with its trading and as part of its overall risk management policies.

Table of Contents

BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

14) Segments

The Company has the following business segments:


•	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 and geographies, including Global, non-U.S., emerging markets and managed volatility equities, as well as multi-asset products.


•	Alternatives—comprised of illiquid and differentiated liquid investment strategies that include private equity, real estate and real assets, including forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.


•	Liquid Alpha—comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S., global, non-U.S. and emerging markets equities, as well as fixed income.

The Company has a corporate head office that is included in “Other”. The corporate head office supports the segments by providing infrastructure and administrative support in the areas of accounting/finance, information technology, legal, compliance and human resources. The corporate head office expenses are not allocated to the Company’s three business segments but the CODM does consider the cost structure of the corporate head office when evaluating the financial performance of the segments.

Performance Measure

The primary measure used by the CODM in measuring performance and allocating resources to the segments is Economic Net Income ("ENI"). The Company defines ENI 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. This measure supplements and should be considered in addition to, and not in lieu of, the Condensed Consolidated Statements of Operations prepared in accordance with U.S. GAAP. The Company does not disclose total asset information for its reportable segments as the information is not reviewed by the CODM.

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, non-cash amortization of employee equity owned pre-acquisition that occurred as a result of Landmark transaction, goodwill impairment and amortization of acquired intangible assets, capital transaction costs, restructuring costs, the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments, and the separate expenses recorded under U.S. GAAP for certain Fund expenses reimbursed to Affiliates. Additionally, variable compensation and Affiliate key employee distributions are segregated from ENI operating expenses.

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BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

14) Segments (cont.)

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

Segment Presentation

The following tables set forth summarized operating results for the Company's three segments and related adjustments necessary to reconcile the segment economic net income to arrive at the Company's consolidated U.S. GAAP net income (loss):

The following table presents the financial data for the Company’s three segments for the three months ended March 31, 2020 (in millions):



	Three Months Ended March 31, 2020
	Quant & Solutions		Alter-natives		Liquid Alpha		Other			Reconciling Adjustments				Total U.S. GAAP⁽¹⁾
ENI revenue	$	86.1	$	41.9	$	52.5	$	0.1		$	2.0		(a)	$	182.6

ENI operating expenses	37.1		16.6		19.8		7.7			(28.6		)	(b)	52.6
Earnings before variable compensation	49.0		25.3		32.7		(7.6		)	30.6				130.0
Variable compensation	17.0		9.2		12.5		1.0			6.4			(c)	46.1
ENI operating earnings (after variable comp)	32.0		16.1		20.2		(8.6		)	24.2				83.9
Affiliate key employee distributions	0.8		5.8		3.2		—			—				9.8
Earnings after Affiliate key employee distributions	31.2		10.3		17.0		(8.6		)	24.2				74.1
Net interest expense	—		—		—		(5.6		)	(1.9		)	(d)	(7.5		)
Net investment loss	—		—		—		—			(30.9		)	(e)	(30.9		)
Net loss attributable to non-controlling interests in consolidated Funds	—		—		—		—			10.5			(e)	10.5
Income tax (expense) benefit	—		—		—		(10.0		)	(3.6		)	(f)	(13.6		)
Economic net income	$	31.2	$	10.3	$	17.0	$	(24.2	)	$	(1.7	)		$	32.6

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BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

14) Segments (cont.)

The following table presents the financial data for the Company’s three segments for the three months ended March 31, 2019 (in millions):



	Three Months Ended March 31, 2019
	Quant & Solutions		Alter-natives		Liquid Alpha		Other			Reconciling Adjustments				Total U.S. GAAP⁽¹⁾
ENI revenue	$	90.5	$	44.0	$	71.1	$	0.1		$	1.5		(a)	$	207.2

ENI operating expenses	39.9		17.7		21.6		9.3			(15.4		)	(b)	73.1
Earnings before variable compensation	50.6		26.3		49.5		(9.2		)	16.9				134.1
Variable compensation	18.8		9.8		16.8		3.3			4.0			(c)	52.7
ENI operating earnings (after variable comp)	31.8		16.5		32.7		(12.5		)	12.9				81.4
Affiliate key employee distributions	1.0		5.7		6.7		—			—				13.4
Earnings after Affiliate key employee distributions	30.8		10.8		26.0		(12.5		)	12.9				68.0
Net interest expense	—		—		—		(3.5		)	(2.4		)	(d)	(5.9		)
Net investment income	—		—		—		—			20.6			(e)	20.6
Net income attributable to non-controlling interests in consolidated Funds	—		—		—		—			(8.4		)	(e)	(8.4		)
Income tax expense	—		—		—		(12.4		)	(9.2		)	(f)	(21.6		)
Economic net income	$	30.8	$	10.8	$	26.0	$	(28.4	)	$	13.5			$	52.7

(1)

The most directly comparable U.S. GAAP measure of ENI revenue is U.S. GAAP revenue. The most directly comparable U.S. GAAP measure of ENI operating expenses is U.S. GAAP operating expenses, which is comprised of ENI operating expenses, variable compensation and Affiliate key employee distributions above. The most directly comparable U.S. GAAP measure of earnings after Affiliate key employee distributions is U.S. GAAP operating Income. The most directly comparable U.S. GAAP measure of ENI is U.S. GAAP net income attributable to controlling interests.

Reconciling Adjustments:


(a)	Adjusted to exclude earnings from equity-accounted Affiliates, which are included in U.S. GAAP investment income, and to include consolidated Funds revenues and the separate revenues recorded for certain Fund expenses reimbursed by customers, which are included in U.S. GAAP revenue.

(b)

Adjusted to include non-cash amortization expense for pre-acquisition employee equity, non-cash expenses for key employee equity and profit interest revaluations, capital transaction costs, goodwill impairment and amortization of acquired intangible assets, restructuring costs, consolidated Funds’ operating expenses and the Fund expenses reimbursed by customers, each of which are included in U.S. GAAP operating expenses.


(c)	Adjusted to include restructuring costs and the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments, which are included in U.S. GAAP compensation expense.


(d)	Adjusted to include the cost of seed financing, which is included in U.S. GAAP interest expense.

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BrightSphere Investment Group Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

14) Segments (cont.)


(e)	Adjusted to include net investment income (loss), net income (loss) attributable to non-controlling interests in consolidated Funds, and the gain on disposal of discontinued operations, all of which are included in U.S. GAAP net income attributable to controlling interests.


(f)	Adjusted to include the impact of deferred taxes resulting from changes in tax law and the amortization of goodwill and acquired intangibles. Also adjusted to include tax expense or benefits relating to uncertain tax positions, the tax impact of certain ENI adjustments and other unusual items that are not included in current operating results for ENI purposes.

Management fee revenue by principal geographic area is comprised of the following for the three months ended March 31 (in millions):



	Three Months Ended March 31,
	2020		2019
U.S.	$	133.1	$	156.3
Non-U.S.	45.4		51.2
Management fee revenue	$	178.5	$	207.5

15) Related Party Transactions

Certain Affiliates have provided loans to Affiliate employees. At March 31, 2020 and December 31, 2019 the balance of the loans to Affiliate employees was $14.3 million and $16.1 million, respectively. These loans will be repaid by 2022.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

The following discussion of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes which appear elsewhere in this Quarterly Report on Form 10-Q.

This discussion contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements” at the end of this Item 2 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.

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 Affiliates, 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 location, and net flows by segment, client type and client location.


•	U.S. GAAP Results of Operations for the Three Months Ended March 31, 2020 and 2019 includes an explanation of changes in our U.S. GAAP revenue, expense and other items for the three months ended March 31, 2020 and 2019, 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 attributable to controlling interests and ENI for the three months ended March 31, 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 segment analysis for each of our business segments.


•	Capital Resources and Liquidity discusses our key balance sheet data. This section discusses Cash Flows from the business; Adjusted EBITDA; Future Capital Needs; Borrowings and Long-Term Debt. 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 the policies were applied and estimates were made.

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Overview

We are a diversified, global asset management company headquartered in Boston, Massachusetts. We operate our business through three business segments:


•	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 and geographies, including Global, non-U.S., emerging markets and managed volatility equities, as well as multi-asset products.


•	Alternatives—comprised of illiquid and differentiated liquid investment strategies that include private equity, real estate and real assets, including forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.


•	Liquid Alpha—comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S., global, non-U.S. and emerging markets equities, as well as fixed income.

Within our three segments, we have seven affiliate firms to whom we refer in this Quarterly Report as our Affiliates. Through our Affiliates, we offer a diverse range of actively-managed investment strategies and products to institutional investors around the globe. While our Affiliates maintain autonomy in the investment process and the day-to-day management of their businesses, our strategy is to work with them to accelerate the growth and profitability of their firms.

Under U.S. GAAP, our Affiliates may be consolidated into our operations or may be accounted for under the equity method of accounting. We may also be required to consolidate certain of our Affiliates’ 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.

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Our Affiliates within each business segment and their principal strategies include:

Quant & Solutions


◦	Acadian Asset Management LLC (“Acadian”)⁽²⁾—a leading quantitatively-oriented manager of active global and international equity, and alternative strategies.

Alternatives


◦	Landmark Partners, LLC (“Landmark”)—a leading global secondary private equity, real estate and real asset investment firm.


◦	Campbell Global, LLC (“Campbell Global”)—a leading sustainable forestry and natural resource investment manager that seeks to deliver superior investment performance by focusing on unique acquisition opportunities, client objectives and disciplined management.

Liquid Alpha


◦	Barrow, Hanley, Mewhinney & Strauss, LLC (“Barrow Hanley”)—a widely recognized value-oriented investment manager of U.S., international and global equities, fixed income and a range of balanced investment management strategies.


◦	Copper Rock Capital Partners LLC (“Copper Rock”)—a specialized growth equity investment manager of small-cap international, global and emerging markets equity strategies.


◦	Thompson, Siegel & Walmsley LLC (“TSW”)⁽²⁾—a value-oriented investment manager focused on small- and mid-cap U.S. equity, international equity and fixed income strategies.


◦	Investment Counselors of Maryland, LLC (“ICM”)⁽¹⁾—a value-driven domestic equity manager with product offerings focused on small- and mid-cap companies.


(1)	Accounted for under the equity method of accounting.


(2)	Certain smaller Acadian strategies are included in Alternatives and certain TSW strategies are included in Quant & Solutions where the classification is more appropriate.

Recent Developments

COVID-19 Impact

During 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. The overall extent and duration of COVID-19 on businesses and economic activity generally remains unclear. We continue to monitor the economic uncertainty and market volatility related to COVID-19, which has impacted the investment management industry in which we and our Affiliates operate. The extent of the impact on our business operations 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” in Part II—Other Information contained elsewhere in this Quarterly Report on Form 10-Q.

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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. Our Affiliates earn management fees based on assets under management. Approximately 70% of our management fees for the three months ended March 31, 2020 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. Our Affiliates 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 $16.1 billion, or 10% of our AUM in consolidated Affiliates, are in accounts with incentive fee or carried interest features in which we participate in the performance fee. The majority of these incentive fees are calculated based on value added over the relevant benchmarks on a rolling three-year basis. Carried interests are features of private equity funds, which are calculated based on long-term cumulative returns.

Our largest expense item is compensation and benefits paid to our and our Affiliates’ 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 our Affiliates result in the sharing of economics between BSUS and each Affiliate’s key management personnel using a profit-sharing model, except for ICM, which uses a revenue share model as a result of a legacy economic arrangement that has not been restructured. Profit sharing affects two elements within our earnings: (i) the calculation of variable compensation and (ii) the level of each Affiliate’s equity or profit interests distribution to its employees. Variable compensation is the portion of earnings that is contractually allocated to Affiliate employees as a bonus pool, typically representing a fixed 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 Affiliate 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 Affiliate 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 Affiliate key employees are either awarded as part of their variable compensation arrangements, or alternatively, may have originally resulted from BSUS acquiring less than 100% of the Affiliate. Over time, Affiliate 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 Affiliate key employees forgoing cash bonuses in exchange for the equivalent value in Affiliate 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.

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How We Measure Performance

We manage our business based on three business segments, 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 impact of a one-time compensation arrangement entered into that includes advances against future compensation payments, 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 equity-accounted Affiliates. 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 includes our share of earnings from equity-accounted Affiliates.

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, the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments, 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 Fund that is attributable to the outside investors or clients of the consolidated Fund is included in “Non-controlling interests” in our Condensed 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."

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Summary Results of Operations

The following table summarizes our unaudited results of operations for the three months ended March 31, 2020 and 2019:



($ in millions, unless otherwise noted)	Three Months Ended March 31,
	2020			2019			2020 vs. 2019
U.S. GAAP Basis
Revenue	$	182.6		$	207.2		$	(24.6	)
Pre-tax income from continuing operations attributable to controlling interests	46.2			74.3			(28.1		)
Net income from continuing operations attributable to controlling interests	32.6			52.7			(20.1		)
Net income attributable to controlling interests	32.6			52.7			(20.1		)
U.S. GAAP operating margin⁽¹⁾	40.6		%	32.8		%	776 bps
Earnings per share, basic ($)	$	0.38		$	0.54		$	(0.16	)
Earnings per share, diluted ($)	$	0.38		$	0.54		$	(0.16	)
Basic shares outstanding (in millions)	85.1			97.6			(12.5		)
Diluted shares outstanding (in millions)	85.1			97.8			(12.7		)

Economic Net Income Basis⁽²⁾⁽³⁾
(Non-GAAP measure used by management)
ENI revenue⁽⁴⁾	$	180.6		$	205.7		$	(25.1	)
Pre-tax economic net income⁽⁵⁾	44.3			51.6			(7.3		)
Adjusted EBITDA	56.2			58.9			(2.7		)
ENI operating margin⁽⁶⁾	33.1		%	33.3		%	(24) bps
Economic net income⁽⁷⁾	34.3			39.2			(4.9		)
ENI diluted EPS ($)	$	0.40		$	0.40		$	—

Other Operational Information
Assets under management (AUM) at period end (in billions)	$	161.8		$	222.3		$	(60.5	)
Net client cash flows (in billions)⁽⁸⁾	1.0			(0.3		)	1.3
Annualized revenue impact of net flows ⁽⁸⁾⁽⁹⁾	(0.2		)	(0.4		)	0.2


(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 Measure—Economic Net Income and Segment Analysis.”

(3)

Excludes restructuring costs of $0.4 million, costs associated with the transfer of an insurance policy from our former Parent of $0.3 million and $6.0 million relating to the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments for the three months ended March 31, 2020. Excludes restructuring costs at the Center of $4.0 million and costs associated with the redomicile to the U.S. of $0.3 million for the three months ended March 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 corresponds to our U.S. GAAP operating margin, excluding the effect of consolidated Funds.

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


(8)	Net flows and revenue impact of net flows for all periods above have been revised for the inclusion of reinvested income and distributions, and the exclusion of realizations.

(9)

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 distribution. 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 Affiliates. In addition, reinvested income and distribution for each segment is multiplied by average fee rate for the respective 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

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



($ in billions)	March 31, 2020		December 31, 2019
Acadian Asset Management	$	79.6	$	102.2
Barrow, Hanley, Mewhinney & Strauss	39.8		51.7
Campbell Global	4.9		4.8
Copper Rock Capital Partners	2.2		3.9
Investment Counselors of Maryland	1.6		2.4
Landmark Partners	18.5		18.3
Thompson, Siegel & Walmsley	15.2		21.1
Total assets under management	$	161.8	$	204.4

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Our strategies include:


i.	U.S. equity, which includes small cap through large cap securities and substantially value or blended investment styles;


ii.	Global / non-U.S. equity, which includes global and international equities including emerging markets;


iii.	Fixed income, which includes government bonds, corporate bonds and other fixed income investments in the United States; and


iv.	Alternatives, which consist of illiquid and differentiated liquid investment strategies that include private equity, real estate and real assets, including forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.

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



($ in billions)	March 31, 2020		December 31, 2019
U.S. equity, small/smid cap value	$	3.9	$	6.0
U.S. equity, mid cap value	3.4		5.3
U.S. equity, large cap value	21.4		30.2
U.S. equity, core/blend	1.6		1.9
Total U.S. equity	30.3		43.4
Global equity	32.2		40.3
International equity	41.5		54.9
Emerging markets equity	20.6		28.7
Total global / non-U.S. equity	94.3		123.9
Fixed income	12.9		13.3
Alternatives	24.3		23.8
Total assets under management	$	161.8	$	204.4

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



($ in billions)	March 31, 2020				December 31, 2019
	AUM		% of total		AUM		% of total
Sub-advisory	$	30.3	18.7	%	$	40.5	19.8	%
Corporate/Union	30.9		19.1	%	38.6		18.9	%
Public/Government	61.9		38.3	%	75.2		36.8	%
Endowment/Foundation	4.0		2.5	%	5.3		2.6	%
OM plc Group	1.6		1.0	%	2.1		1.0	%
Commingled Trust/UCITS	24.2		15.0	%	30.8		15.1	%
Mutual Fund	1.5		0.9	%	2.2		1.1	%
Other	7.4		4.6	%	9.7		4.7	%
Total assets under management	$	161.8			$	204.4

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



($ in billions)	March 31, 2020				December 31, 2019
	AUM		% of total		AUM		% of total
U.S.	$	118.1	73.0	%	$	148.4	72.6	%
Europe	15.6		9.6	%	20.1		9.8	%
Asia	10.0		6.2	%	12.4		6.1	%
Australia	6.8		4.2	%	9.4		4.6	%
Other	11.3		7.0	%	14.1		6.9	%
Total assets under management	$	161.8			$	204.4

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 have been revised for the inclusion of reinvested income and distributions, and the exclusion of realizations. Reinvested income and distributions represent investment yield that is reinvested back into the portfolios as opposed to distributed as cash. Realizations include distributions related to the sale of alternative assets, which represent a return on investment.

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 Affiliates. 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.

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



	Three Months Ended March 31,
($ in billions, unless otherwise noted)	2020			2019
Quant & Solutions
Beginning balance	$	101.9		$	85.2
Gross inflows	3.7			5.1
Gross outflows	(3.1		)	(3.3		)
Reinvested income and distributions	0.9			0.7
Net flows⁽¹⁾	1.5			2.5
Market appreciation (depreciation)	(24.4		)	7.4
Ending balance	$	79.0		$	95.1
Average AUM⁽²⁾	$	92.9		$	91.9

Alternatives
Beginning balance	$	23.8		$	23.8
Gross inflows	0.7			0.4
Gross outflows	(0.1		)	(0.2		)
Net flows⁽¹⁾	0.6			0.2
Market appreciation	—			0.1
Realizations and other⁽³⁾	(0.1		)	(0.1		)
Ending balance	$	24.3		$	24.0
Average AUM⁽²⁾	$	24.1		$	23.9

Liquid Alpha
Beginning balance	$	78.7		$	97.3
Gross inflows	2.8			1.4
Gross outflows	(4.3		)	(5.1		)
Reinvested income and distributions	0.4			0.7
Net flows⁽¹⁾	(1.1		)	(3.0		)
Market appreciation (depreciation)	(19.1		)	8.9
Ending balance	$	58.5		$	103.2
Average AUM	$	71.1		$	102.1
Average AUM of consolidated Affiliates	$	69.0		$	100.1

Total
Beginning balance	$	204.4		$	206.3
Gross inflows	7.2			6.9
Gross outflows	(7.5		)	(8.6		)
Reinvested income and distributions	1.3			1.4
Net flows⁽¹⁾	1.0			(0.3		)
Market appreciation (depreciation)	(43.5		)	16.4
Realizations and other⁽³⁾	(0.1		)	(0.1		)
Ending balance	$	161.8		$	222.3
Average AUM	$	188.1		$	217.9
Average AUM of consolidated Affiliates	$	186.0		$	215.9

Annualized basis points: inflows	36.6			34.7
Annualized basis points: outflows	41.4			33.9
Annualized revenue impact of net flows ($ in millions)⁽¹⁾	$	(0.2	)	$	(0.4	)

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(1)	Net flows and revenue impact of net flows for all periods above have been revised for the inclusion of reinvested income and distributions, and the exclusion of realizations.


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


(3)	Realizations include distributions related to the sale of alternative assets, and represent a return on investments. Other activity primarily relates to the decline in billable AUM as a legacy alternative fund transitioned from billing base on committed AUM to net asset value.

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.

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



($ in billions)	Three Months Ended March 31,
	2020			2019
Sub-advisory
Beginning balance	$	40.5		$	61.3
Gross inflows	2.1			1.3
Gross outflows	(2.4		)	(3.5		)
Reinvested income and distributions⁽¹⁾	0.2			0.4
Net flows⁽²⁾	(0.1		)	(1.8		)
Market appreciation (depreciation)	(10.1		)	5.8
Ending balance	$	30.3		$	65.3

Institutional
Beginning balance	$	152.0		$	135.1
Gross inflows	4.6			4.6
Gross outflows	(4.6		)	(4.6		)
Reinvested income and distributions⁽¹⁾	1.0			0.9
Net flows⁽²⁾	1.0			0.9
Market appreciation (depreciation)	(30.3		)	9.8
Realizations and other⁽³⁾	(0.1		)	(0.1		)
Ending balance	$	122.6		$	145.7

Retail/Other
Beginning balance	$	11.9		$	9.9
Gross inflows	0.5			1.0
Gross outflows	(0.5		)	(0.5		)
Reinvested income and distributions⁽¹⁾	0.1			0.1
Net flows⁽²⁾	0.1			0.6
Market appreciation (depreciation)	(3.1		)	0.8
Ending balance	$	8.9		$	11.3

Total
Beginning balance	$	204.4		$	206.3
Gross inflows	7.2			6.9
Gross outflows	(7.5		)	(8.6		)
Reinvested income and distributions⁽¹⁾	1.3			1.4
Net flows⁽²⁾	1.0			(0.3		)
Market appreciation (depreciation)	(43.5		)	16.4
Realizations and other⁽³⁾	(0.1		)	(0.1		)
Ending balance	$	161.8		$	222.3


(1)	Reinvested income and distributions is allocated based on consolidated total distribution rate multiplied by the beginning of period AUM of each client type.


(2)	Net flows for all periods above have been revised for the inclusion of reinvested income and distributions, and the exclusion of realizations.

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(3)	Realizations include distributions related to the sale of alternative assets, and represent a return on investments. Other activity primarily relates to the decline in billable AUM as a legacy alternative fund transitioned from billing base on committed AUM to net asset value.

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)	Three Months Ended March 31,
	2020			2019
U.S.
Beginning balance	$	148.4		$	156.8
Gross inflows	5.3			3.9
Gross outflows	(4.9		)	(6.0		)
Reinvested income and distributions⁽¹⁾	0.9			1.1
Net flows⁽²⁾	1.3			(1.0		)
Market appreciation (depreciation)	(31.5		)	12.4
Realizations and other⁽³⁾	(0.1		)	(0.1		)
Ending balance	$	118.1		$	168.1

Non-U.S.
Beginning balance	$	56.0		$	49.5
Gross inflows	1.9			3.0
Gross outflows	(2.6		)	(2.6		)
Reinvested income and distributions⁽¹⁾	0.4			0.3
Net flows⁽²⁾	(0.3		)	0.7
Market appreciation (depreciation)	(12.0		)	4.0
Realizations and other⁽³⁾	—			—
Ending balance	$	43.7		$	54.2

Total
Beginning balance	$	204.4		$	206.3
Gross inflows	7.2			6.9
Gross outflows	(7.5		)	(8.6		)
Reinvested income and distributions⁽¹⁾	1.3			1.4
Net flows⁽²⁾	1.0			(0.3		)
Market appreciation (depreciation)	(43.5		)	16.4
Realizations and other⁽³⁾	(0.1		)	(0.1		)
Ending balance	$	161.8		$	222.3


(1)	Reinvested income and distributions is allocated based on consolidated distribution total rate multiplied by the beginning of period AUM of each client location.


(2)	Net flows for all periods above have been revised for the inclusion of reinvested income and distributions, and the exclusion of realizations.

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(3)	Realizations include distributions related to the sale of alternative assets, and represent a return on investments. Other activity primarily relates to the decline in billable AUM as a legacy alternative fund transitioned from billing base on committed AUM to net asset value.

At March 31, 2020, our total assets under management were $161.8 billion, a decrease of $(42.6) billion, or (20.8)%, compared to $204.4 billion at December 31, 2019 and a decrease of $(60.5) billion, or (27.2)%, compared to $222.3 billion at March 31, 2019. The change in assets under management during the three months ended March 31, 2020 reflects net market depreciation of $(43.5) billion driven by the COVID-19 pandemic that caused significant market disruption, realizations and other of $(0.1) billion, partially offset by net flows of $1.0 billion.

For the three months ended March 31, 2020, our net flows were $1.0 billion compared to $(0.3) billion for the three months ended March 31, 2019. The improvement in net flows during the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was mainly impacted by higher gross sales in the Quant & Solutions segment. Reinvested income and distributions of $1.3 billion, and $1.4 billion are reflected in the net flows for the three months ended March 31, 2020 and March 31, 2019, respectively. For the three months ended March 31, 2020, the annualized revenue impact of the net flows was relatively flat at $(0.2) million compared to $(0.4) million for the three months ended March 31, 2019. Gross inflows of $7.2 billion in the three months ended March 31, 2020 yielded approximately 37 bps compared to $6.9 billion yielding approximately 35 bps in the year-ago period. Gross outflows of $(7.5) billion yielded approximately 41 bps in the three months ended March 31, 2020 compared to $(8.6) billion yielding approximately 34 bps in the year-ago period.

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U.S. GAAP Results of Operations for the Three Months Ended March 31, 2020 and 2019

Our U.S. GAAP results of operations were as follows for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
($ in millions, unless otherwise noted)	2020			2019			Increase (Decrease)
U.S. GAAP Statement of Operations
Management fees	$	178.5		$	207.5		$	(29.0	)
Performance fees	1.0			(2.8		)	3.8
Other revenue	1.6			1.4			0.2
Consolidated Funds’ revenue	1.5			1.1			0.4
Total revenue	182.6			207.2			(24.6		)
Compensation and benefits	57.4			101.1			(43.7		)
General and administrative expense	27.7			32.5			(4.8		)
Impairment of goodwill	16.4			—			16.4
Amortization of acquired intangibles	1.6			1.6			—
Depreciation and amortization	5.3			3.8			1.5
Consolidated Funds’ expense	0.1			0.2			(0.1		)
Total operating expenses	108.5			139.2			(30.7		)
Operating income	74.1			68.0			6.1
Investment income	(13.7		)	7.0			(20.7		)
Interest income	0.3			1.1			(0.8		)
Interest expense	(7.8		)	(7.0		)	(0.8		)
Net consolidated Funds’ investment gains (losses)	(17.2		)	13.6			(30.8		)
Income from continuing operations before taxes	35.7			82.7			(47.0		)
Income tax expense	13.6			21.6			(8.0		)
Income from continuing operations	22.1			61.1			(39.0		)
Gain (loss) on disposal of discontinued operations, net of tax	—			—			—
Net income	22.1			61.1			(39.0		)
Net income (loss) attributable to non-controlling interests in consolidated Funds	(10.5		)	8.4			(18.9		)
Net income attributable to controlling interests	$	32.6		$	52.7		$	(20.1	)

Basic earnings per share ($)	$	0.38		$	0.54		$	(0.16	)
Diluted earnings per share ($)	0.38			0.54			(0.16		)
Weighted average shares of common stock outstanding—basic	85.1			97.6			(12.5		)
Weighted average shares of common stock outstanding—diluted	85.1			97.8			(12.7		)

U.S. GAAP operating margin⁽¹⁾	40.6		%	32.8		%	776 bps

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

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



($ in millions)	Three Months Ended March 31,
U.S. GAAP Statement of Operations	2020		2019
Net income attributable to controlling interests	$	32.6	$	52.7
Exclude: (Gain) loss on disposal of discontinued operations, net of tax	—		—
Net income from continuing operations attributable to controlling interests	32.6		52.7
Add: Income tax expense	13.6		21.6
Pre-tax income from continuing operations attributable to controlling interests	$	46.2	$	74.3

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 equity-accounted Affiliates, average basis points earned on average assets under management were 38.6 bps and 39.0 bps three months ended March 31, 2020 and 2019, respectively. The most significant 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 segments, net catch-up fees, or disproportionate market movements.

Our average basis points by segment (including only consolidated Affiliates that are included in management fee revenue, unless indicated) over each of the periods indicated were:



($ in millions, except AUM data in billions)	Three Months Ended March 31,
($ in millions, except AUM data in billions)	2020			2019
	Revenue		Basis Pts	Revenue		Basis Pts
Quant & Solutions	$	85.2	37	$	90.5	40
Alternatives	41.4		69	43.8		74
Liquid Alpha	51.9		30	73.2		30
U.S. GAAP management fee revenue & weighted average fee rate on average AUM of consolidated Affiliates(1)	$	93.3	38.6	$	117.0	39.0
Average AUM excluding equity-accounted Affiliates	$	186.0		$	215.9
Average AUM including equity-accounted Affiliates & weighted average fee rate	$	188.1	37.8	$	217.9	36.2


(1)	Amounts shown are equivalent to ENI management fee revenue. (See “ENI Revenues”)

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Three months ended March 31, 2020 compared to three months ended March 31, 2019: Management fees decreased $(29.0) million, or (14.0)%, from $207.5 million for the three months ended March 31, 2019 to $178.5 million for the three months ended March 31, 2020. The decrease was primarily attributable to a decrease in average assets under management, which is attributable to outflows in 2019 and equity depreciation in the three months ended March 31, 2020. Average assets under management excluding equity-accounted Affiliates decreased (13.8)%, from $215.9 billion for the three months ended March 31, 2019 to $186.0 billion for the three months ended March 31, 2020, mainly due to the equity market decline during the three months ended March 31, 2020 driven by the COVID-19 pandemic and the impact of the $(22.8) billion reallocation of several Vanguard subadvisory strategies in the fourth quarter of 2019.

Performance Fees

Approximately $16.1 billion, or 10% of our AUM in consolidated Affiliates, were in accounts with incentive fee or carried interest features in which we participate. Performance fees are typically shared with our Affiliate key employees through various contractual compensation and profit-sharing arrangements.

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Performance fees improved $3.8 million, from $(2.8) million for the three months ended March 31, 2019 to $1.0 million for the three months ended March 31, 2020. A performance fee penalty in 2019 was attributable to sub-advisory assets no longer with the Affiliates. Performance fees are variable and are contractually triggered based on investment performance results over agreed upon time periods.

The liquidation of an alternative product may result in the recognition of a performance fee. With respect to liquidations likely to occur in the near term, we do not expect to receive any net performance fees that would be material to our operating results. These projections are based on market conditions and investment performance as of March 31, 2020.

Other Revenue

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Other revenue increased $0.2 million, from $1.4 million for the three months ended March 31, 2019 to $1.6 million for the three months ended March 31, 2020. The increase was primarily attributable to the increase in revenue recorded for certain Fund expenses paid by our Affiliates and subsequently reimbursed by the Fund for the three months ended March 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, revaluation of key employee owned Affiliate equity and profit interests, and the amortization of pre-acquisition employee equity;


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.

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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 three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
($ in millions)	2020			2019
Fixed compensation and benefits⁽¹⁾	$	47.6		$	50.8
Sales-based compensation⁽²⁾	2.1			2.7
Variable compensation⁽³⁾	46.1			52.7
Affiliate key employee distributions⁽⁴⁾	9.8			13.4
Non-cash Affiliate key employee equity revaluations⁽⁵⁾	(49.3		)	(20.1		)
Amortization of pre-acquisition employee equity⁽⁶⁾	1.1			1.6
Total U.S. GAAP compensation and benefits expense	$	57.4		$	101.1

(1)

Fixed compensation and benefits include base salaries, payroll taxes and the cost of benefit programs provided. For the three months ended March 31, 2020, $46.6 million of fixed compensation and benefits (of the $47.6 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 three months ended March 31, 2019 $49.7 million of fixed compensation and benefits (of the $50.8 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.

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(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 is allocated entirely to variable compensation. Center variable compensation includes cash and our 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, calculated as variable compensation divided by ENI earnings before variable compensation, will typically be between 25% and 35%.



	Three Months Ended March 31,
($ in millions)	2020		2019
Cash variable compensation	$	41.9	$	46.8
Non-cash equity-based award amortization	4.2		5.9
Total variable compensation^(a)	$	46.1	$	52.7

(a)

For the three months ended March 31, 2020, $39.7 million of variable compensation expense (of the $46.1 million above) is included within economic net income, which excludes $0.4 million of variable compensation associated with restructuring at an Affiliate and $6.0 million of a one-time compensation arrangement entered into that includes advances against future compensation payments. For the three months ended March 31, 2019, $48.7 million of variable compensation expense (of the $52.7 million above) is included within economic net income, which excludes $4.0 million of variable compensation associated with restructuring at the Center.

(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. Based on current economic arrangements, employee distributions range from approximately 20% to 40% of marginal ENI operating earnings at each of our consolidated Affiliates.

(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.


(6)	Amortization of pre-acquisition employee equity represents amortization of the value of employee equity owned prior to the acquisition of Landmark. This is included in U.S. GAAP compensation expense as a result of ongoing service requirements for employee recipients.

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

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Three months ended March 31, 2020 compared to three months ended March 31, 2019: Compensation and benefits expense decreased $(43.7) million, or (43.2)%, from $101.1 million for the three months ended March 31, 2019 to $57.4 million for the three months ended March 31, 2020. Fixed compensation and benefits decreased $(3.2) million, or (6.3)%, from $50.8 million for the three months ended March 31, 2019 to $47.6 million for the three months ended March 31, 2020, primarily reflecting headcount reductions at the Center and Affiliates. Variable compensation decreased $(6.6) million, or (12.5)%, from $52.7 million for the three months ended March 31, 2019 to $46.1 million for the three months ended March 31, 2020. The decrease was attributable to lower pre-variable compensation earnings, which in turn was primarily attributable to the decrease in management fee revenue, as well as a lower cost structure at the Center and Affiliates. Sales-based compensation decreased $(0.6) million, or (22.2)%, from $2.7 million for the three months ended March 31, 2019 to $2.1 million for the three months ended March 31, 2020, as a result of the structure of sales-based compensation programs, driven by the timing of asset inflows which trigger sales-based compensation in both current and prior periods. Affiliate key employee distributions decreased $(3.6) million, or (26.9)%, from $13.4 million for the three months ended March 31, 2019 to $9.8 million for the three months ended March 31, 2020, primarily as a result of lower earnings before Affiliate key employee distributions at the consolidated Affiliates. Revaluations of Affiliate equity decreased by $(29.2) million, from $(20.1) million for the three months ended March 31, 2019 to $(49.3) million for the three months ended March 31, 2020, driven by lower earnings at the Affiliates relative to the prior period, which was driven by lower AUM and revenue as a result of the recent market decline. Amortization of pre-acquisition equity decreased $(0.5) million, or (31.3)% from $1.6 million for the three months ended March 31, 2019 to $1.1 million for the three months ended March 31, 2020, driven by vesting of the employee equity.

General and Administrative Expense

Three months ended March 31, 2020 compared to three months ended March 31, 2019: General and administrative expense decreased $(4.8) million, or (14.8)%, from $32.5 million for the three months ended March 31, 2019 to $27.7 million for the three months ended March 31, 2020, driven by cost saving initiatives at the Center and Affiliates.

Impairment of Goodwill

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Impairment of goodwill was $0.0 million for the three months ended March 31, 2019 and $16.4 million for the three months ended March 31, 2020. The increase was the result of an impairment charge recorded for the Copper Rock reporting unit in the three months ended March 31, 2020. We performed a quantitative impairment test at March 31, 2020 due to the decline in our assets under management for the three months ended March 31, 2020. 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 three months ended March 31, 2020.

Amortization of Acquired Intangibles Expense

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Amortization of acquired intangibles expense was unchanged, at $1.6 million for the three months ended March 31, 2019 and $1.6 million for the three months ended March 31, 2020. This account primarily reflects the amortization of intangible assets acquired in the Landmark transaction.

Depreciation and Amortization Expense

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Depreciation and amortization expense increased $1.5 million, or 39.5%, from $3.8 million for the three months ended March 31, 2019 to $5.3 million for the three months ended March 31, 2020. The increase was primarily due to additional software and technology investments in the business.

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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; and


iii.	interest expense.

Investment Income

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Investment income decreased $(20.7) million from $7.0 million for the three months ended March 31, 2019 to $(13.7) million for the three months ended March 31, 2020. The decrease is primarily due to unrealized losses on seed investments driven by the market decline in the current year.

Interest Income

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Interest income decreased $(0.8) million, from $1.1 million for the three months ended March 31, 2019 to $0.3 million for the three months ended March 31, 2020. The decrease was due to lower average cash balances and decreases in short-term investment returns in the current year.

Interest Expense

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Interest expense increased $0.8 million, or 11.4%, from $7.0 million for the three months ended March 31, 2019 to $7.8 million for the three months ended March 31, 2020, primarily reflecting the increased utilization of our revolving credit facility in the current year.

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 and benefits from intercompany financing arrangements. 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.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) contains numerous income tax provisions including some that are expected to be effective retroactively. Our Condensed Consolidated Balance Sheet reflects the benefit of a provision that increased the business interest limitation under IRC Section 163(j) from 30% to 50% for tax years 2019 and 2020. This provision will allow the Company to utilize more deferred tax assets. The Company has assessed the CARES Act and at this time does not expect the CARES Act to have a material impact to the financial statements.

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Income tax expense decreased $(8.0) million, from $21.6 million for the three months ended March 31, 2019 to $13.6 million for the three months ended March 31, 2020. The decrease was primarily due to the decrease in income from continuing operations before tax attributable to controlling interests and a smaller increase to the liabilities for uncertain tax positions for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

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U.S. GAAP Consolidated Funds

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Consolidated Funds’ revenue increased $0.4 million, from $1.1 million for the three months ended March 31, 2019 to $1.5 million for the three months ended March 31, 2020. Consolidated Funds’ expense decreased $(0.1) million, from $0.2 million for the three months ended March 31, 2019 to $0.1 million for the three months ended March 31, 2020. Net consolidated Funds’ investment gain (loss) changed $(30.8) million from $13.6 million for the three months ended March 31, 2019 to $(17.2) million for the three months ended March 31, 2020 due to the equity market decline resulting from the COVID-19 pandemic that caused significant market disruption. 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 Condensed Consolidated Financial Statements and is not included in net income attributable to controlling interests or in management fees.

Key U.S. GAAP Operating Metrics

The following table shows our key U.S. GAAP operating metrics for the three months ended March 31, 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.



	Three Months Ended March 31,
($ in millions)	2020			2019
Numerator: Operating income	$	74.1		$	68.0
Denominator: Total revenue	$	182.6		$	207.2
U.S. GAAP operating margin⁽¹⁾	40.6		%	32.8		%

Numerator: Total operating expenses⁽²⁾	$	108.4		$	139.0
Denominator: Management fee revenue	$	178.5		$	207.5
U.S. GAAP operating expense / management fee revenue⁽³⁾	60.7		%	67.0		%

Numerator: Variable compensation	$	46.1		$	52.7
Denominator: Operating income before variable compensation and Affiliate key employee distributions^(2)(4)(5)	$	128.6		$	133.2
U.S. GAAP variable compensation ratio⁽³⁾	35.8		%	39.6		%

Numerator: Affiliate key employee distributions	$	9.8		$	13.4
Denominator: Operating income before Affiliate key employee distributions^(2)(4)(5)	$	82.5		$	80.5
U.S. GAAP Affiliate key employee distributions ratio⁽³⁾	11.9		%	16.6		%


(1)	Excluding the effect of Funds consolidation in the applicable periods, the U.S. GAAP operating margin is 40.1% for the three months ended March 31, 2020 and 32.6% for the three months ended March 31, 2019.


(2)	Excludes consolidated Funds expense of $0.1 million for the three months ended March 31, 2020 and $0.2 million for the three months ended March 31, 2019.


(3)	Excludes the effect of Funds consolidation for the three months ended March 31, 2020 and 2019.


(4)	Excludes consolidated Funds revenue of $1.5 million for the three months ended March 31, 2020 and $1.1 million for the three months ended March 31, 2019.

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(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:



	Three Months Ended March 31,
($ in millions)	2020			2019
Operating income	$	74.1		$	68.0
Affiliate key employee distributions	9.8			13.4
Operating income of consolidated Funds	(1.4		)	(0.9		)
Operating income before Affiliate key employee distributions	82.5			80.5
Variable compensation	46.1			52.7
Operating income before variable compensation and Affiliate key employee distributions	$	128.6		$	133.2

Effects of Inflation

For the three months ended March 31, 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 us 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.”

In the first quarter of 2020, we refined our definition of economic net income in light of a one-time compensation arrangement entered into that includes advance against future contractual compensation payments.

To calculate economic net income, we re-categorize certain line items on our Condensed 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.

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•	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 revenues 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:

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, as occurred as a result of the Landmark transaction, where such items have been included in compensation expense as a result of ongoing service requirements for certain employees. 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, restructuring costs incurred in continuing operations, and the impact of a one-time compensation arrangement entered into that includes advances against future contractual compensation payments.


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.

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Reconciliation of U.S. GAAP Net Income to Economic Net Income for the Three Months Ended March 31, 2020 and 2019

The following table reconciles net income attributable to controlling interests to economic net income for the three months ended March 31, 2020 and 2019:



		Three Months Ended March 31,
($ in millions)		2020			2019
U.S. GAAP net income attributable to controlling interests		$	32.6		$	52.7
Adjustments to reflect the economic earnings of the Company:
i.	Non-cash key employee-owned equity and profit interest revaluations	(49.3		)	(20.1		)
ii.	Goodwill impairment and amortization of acquired intangible assets and pre-acquisition employee equity	19.2			3.2
iii.	Capital transaction costs	0.2			—
iv.	Seed/Co-investment (gains) losses and financings⁽¹⁾	21.3			(10.2		)
v.	Tax benefit of goodwill and acquired intangibles deductions	2.3			2.3
vi.	Discontinued operations, restructuring and the impact of a one-time compensation arrangement that includes advances against future compensation payments⁽²⁾	6.7			4.3
vii.	ENI tax normalization	0.8			0.8
Tax effect of above adjustments, as applicable⁽³⁾		0.5			6.2
Economic net income		$	34.3		$	39.2


(1)	The net return on seed/co-investment (gains) losses and financings for the three months ended March 31, 2020 and 2019 is shown in the following table:



	Three Months Ended March 31,
($ in millions)	2020			2019
Seed/Co-investment (gains) losses	$	19.6		$	(12.5	)
Financing costs:
Seed/Co-investment average balance	123.3			149.4
Blended interest rate*	5.7		%	6.2		%
Financing costs	1.7			(2.3		)
Net seed/co-investment (gains) losses and financing	$	21.3		$	(10.2	)

* 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)

The three months ended March 31, 2020 includes restructuring costs of $0.4 million, costs associated with the transfer of an insurance policy from our former Parent of $0.3 million and $6.0 million relating to the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments. The three months ended March 31, 2019 includes restructuring costs at the Center of $4.0 million and costs associated with the redomicile to the U.S. of $0.3 million.


(3)	Reflects the sum of lines (i), (ii), (iii), (iv) and the restructuring component of line (vi) multiplied by the 27.3% U.S. statutory tax rate (including state tax).

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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.

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ENI Revenues

The following table reconciles U.S. GAAP revenue to ENI revenue for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
($ in millions)	2020			2019
U.S. GAAP revenue	$	182.6		$	207.2
Include investment return on equity-accounted Affiliates	0.6			0.6
Exclude revenue from consolidated Funds attributable to non-controlling interests	(1.5		)	(1.1		)
Exclude Fund expenses reimbursed by customers	(1.1		)	(1.0		)
ENI revenue	$	180.6		$	205.7

The following table identifies the components of ENI revenue:



	Three Months Ended March 31,
($ in millions)	2020		2019
Management fees⁽¹⁾	$	178.5	$	207.5
Performance fees⁽²⁾	1.0		(2.8		)
Other income, including equity-accounted Affiliates⁽³⁾	1.1		1.0
ENI revenue	$	180.6	$	205.7


(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 Affiliates of $0.6 million and $0.6 million for the three months ended March 31, 2020 and March 31, 2019, respectively. As further described in “—Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis,” ENI other income also excludes certain Fund expenses initially paid by our Affiliates on the Funds’ behalf and subsequently reimbursed.



	Three Months Ended March 31,
($ in millions)	2020			2019
U.S. GAAP other revenue	$	1.6		$	1.4
Earnings from equity-accounted Affiliates	0.6			0.6
Exclude Fund expenses reimbursed by customers	(1.1		)	(1.0		)
ENI other income	$	1.1		$	1.0

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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, we exclude the impact of key employee equity revaluations. We also exclude the amortization of pre-acquisition equity owned by employees, with a service requirement, associated with the Landmark acquisition. 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 three months ended March 31, 2020 and 2019.



	Three Months Ended March 31,
($ in millions)	2020			2019
U.S. GAAP operating expense	$	108.5		$	139.2
Less: items excluded from economic net income
Amortization of pre-acquisition employee equity	(1.2		)	(1.6		)
Non-cash key employee equity and profit interest revaluations	49.3			20.1
Goodwill impairment and amortization of acquired intangible assets	(18.0		)	(1.6		)
Capital transaction costs	—			—
Restructuring costs and the impact of a one-time compensation arrangement that includes advances against future compensation payments⁽¹⁾	(6.7		)	(4.3		)
Fund expenses reimbursed by customers	(1.1		)	(1.0		)
Funds’ operating expense	(0.1		)	(0.2		)
Less: items segregated out of U.S. GAAP operating expense
Variable compensation	(39.7		)	(48.7		)
Affiliate key employee distributions	(9.8		)	(13.4		)
ENI operating expense	$	81.2		$	88.5

(1)

Included for the three months ended March 31, 2020 are restructuring costs of $0.4 million, costs associated with the transfer of an insurance policy from our former Parent of $0.3 million and $6.0 million relating to the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments. Included for the three months ended March 31, 2019 are restructuring costs at the Center of $4.0 million and costs associated with the redomicile to the U.S. of $0.3 million.

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The following table identifies the components of ENI operating expense:



	Three Months Ended March 31,
($ in millions)	2020		2019
Fixed compensation & benefits⁽¹⁾	$	46.6	$	49.7
General and administrative expenses⁽²⁾	29.3		35.0
Depreciation and amortization	5.3		3.8
ENI operating expense	$	81.2	$	88.5


(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 and benefits expense for the three months ended March 31, 2020 and 2019 to ENI fixed compensation and benefits expense:



	Three Months Ended March 31,
($ in millions)	2020			2019
Total U.S. GAAP compensation and benefits expense	$	57.4		$	101.1
Amortization of pre-acquisition employee equity	(1.2		)	(1.6		)
Non-cash key employee equity and profit interest revaluations excluded from ENI	49.3			20.1
Sales-based compensation reclassified to ENI general & administrative expenses	(2.1		)	(2.7		)
Affiliate key employee distributions	(9.8		)	(13.4		)
Compensation related to restructuring expenses and the impact of a one-time arrangement that includes advances against future compensation payments^(a)	(6.2		)	(4.0		)
Variable compensation	(39.7		)	(48.7		)
Fund expenses reimbursed by customers	(1.1		)	(1.1		)
ENI fixed compensation and benefits	$	46.6		$	49.7


(a)	Includes costs related to restructuring and $6.0 million relating to the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments for the three months ended March 31, 2020. Includes $4.0 million related to restructuring at the Center for the three months ended March 31, 2019.

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



	Three Months Ended March 31,
($ in millions)	2020			2019
U.S. GAAP general and administrative expense	$	27.7		$	32.5
Sales-based compensation	2.1			2.7
Restructuring costs	(0.5		)	(0.2		)
ENI general and administrative expense	$	29.3		$	35.0

Key Non-GAAP Operating Metrics

The following table shows our key non-GAAP operating metrics for the three months ended March 31, 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:



	Three Months Ended March 31,
($ in millions)	2020			2019
Numerator: ENI operating earnings⁽¹⁾	$	59.7		$	68.5
Denominator: ENI revenue	$	180.6		$	205.7
ENI operating margin⁽²⁾	33.1		%	33.3		%

Numerator: ENI operating expense	$	81.2		$	88.5
Denominator: ENI management fee revenue⁽³⁾	$	178.5		$	207.5
ENI operating expense ratio⁽⁴⁾	45.5		%	42.7		%

Numerator: ENI variable compensation	$	39.7		$	48.7
Denominator: ENI earnings before variable compensation⁽¹⁾⁽⁵⁾	$	99.4		$	117.2
ENI variable compensation ratio⁽⁶⁾	39.9		%	41.6		%

Numerator: Affiliate key employee distributions	$	9.8		$	13.4
Denominator: ENI operating earnings⁽¹⁾	$	59.7		$	68.5
ENI Affiliate key employee distributions ratio⁽⁷⁾	16.4		%	19.6		%


(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.

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



	Three Months Ended March 31,
($ in millions)	2020			2019
U.S. GAAP operating income	$	74.1		$	68.0
Include earnings from equity-accounted Affiliates	0.6			0.6
Exclude the impact of:
Affiliate key employee-owned equity and profit interest revaluations	(49.3		)	(20.1		)
Goodwill impairment and amortization of acquired intangible assets and pre-acquisition employee equity	19.2			3.2
Capital transaction costs	—			—
Restructuring costs and the impact of a one-time compensation arrangement that includes advances against future compensation payments^(a)	6.7			4.3
Affiliate key employee distributions	9.8			13.4
Variable compensation	39.7			48.7
Funds’ operating income	(1.4		)	(0.9		)
ENI earnings before variable compensation	99.4			117.2
Less: ENI variable compensation	(39.7		)	(48.7		)
ENI operating earnings	59.7			68.5
Less: ENI Affiliate key employee distributions	(9.8		)	(13.4		)
ENI earnings after Affiliate key employee distributions	$	49.9		$	55.1

(a)

Includes restructuring costs of $0.4 million, costs associated with the transfer of an insurance policy from our former Parent of $0.3 million and $6.0 million relating to the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments for the three months ended March 31, 2020. Includes restructuring costs at the Center of $4.0 million and costs associated with the redomicile to the U.S. of $0.3 million for the three months ended March 31, 2019.

(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. Our U.S. GAAP operating margin, excluding the effect of consolidated Funds, is 40.1% for the three months ended March 31, 2020 and 32.6% for the three months ended March 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 we have in each of our 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 because in our profit sharing economic model, scale benefits both the Affiliate employees

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and our 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 our 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, calculated as variable compensation divided by ENI earnings before variable compensation, will typically be between 25% and 35%. 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. Based on current economic arrangements, employee distributions range from approximately 20% to 40% of marginal ENI operating earnings at each of our consolidated Affiliates. The ENI Affiliate key employee distributions ratio is most comparable to the U.S. GAAP Affiliate key employee distributions ratio.

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Tax on Economic Net Income

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



	Three Months Ended March 31,
($ in millions)	2020			2019
Pre-tax economic net income⁽¹⁾	$	44.3		$	51.6
Intercompany interest expense deductible for U.S. tax purposes	—			(16.8		)
Taxable economic net income	44.3			34.8
Taxes at the U.S. federal and state statutory rates⁽²⁾	(12.1		)	(9.5		)
Other reconciling tax adjustments	2.1			(2.9		)
Tax on economic net income	(10.0		)	(12.4		)
Add back intercompany interest expense previously excluded	—			16.8
Economic net income	$	34.3		$	39.2
Economic net income effective tax rate⁽³⁾	22.6		%	24.0		%


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



	Three Months Ended March 31,
($ in millions)	2020			2019
U.S. GAAP interest income	$	0.3		$	1.1
U.S. GAAP interest expense	(7.8		)	(7.0		)
U.S. GAAP net interest expense	(7.5		)	(5.9		)
Other ENI interest expense exclusions^(a)	1.9			2.4
ENI net interest expense	(5.6		)	(3.5		)
ENI earnings after Affiliate key employee distributions^(b)	49.9			55.1
Pre-tax economic net income	$	44.3		$	51.6


(a)	Other ENI interest expense exclusions represent cost of financing on seed capital and co-investments.


(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 (loss) 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.

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Segment Analysis

We conduct our operations through three business segments:


•	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 and geographies, including Global, non-U.S., emerging markets and managed volatility equities, as well as multi-asset products.


•	Alternatives—comprised of illiquid and differentiated liquid investment strategies that include private equity, real estate and real assets, including forestry, as well as a growing suite of liquid alternative capabilities in areas such as long/short, market neutral and absolute return.


•	Liquid Alpha—comprised of specialized investment strategies with a focus on alpha-generation across market cycles in long-only small-, mid-, and large-cap U.S., global, non-U.S. and emerging markets equities, as well as fixed income.

We have a corporate head office that is included in “Other”. The corporate head office supports the segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, strategy and relationship management, legal, compliance and human resources. The corporate head office expenses are not allocated to our three reportable segments but the CODM does consider the cost structure of the corporate head office when evaluating the financial performance of the segments.

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 our 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, non-cash amortization of the value of employee equity owned pre-acquisition that occurred as a result of the Landmark transaction, impairment of goodwill, the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments, 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.

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Segment ENI Revenue

The following table identifies the components of segment ENI revenue for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
($ in millions)	2020											2019
	Quant & Solutions			Alter-natives		Liquid Alpha		Other		Total		Quant & Solutions		Alter-natives		Liquid Alpha			Other		Total
Management fees	$	85.2		$	41.4	$	51.9	$	—	$	178.5	$	90.5	$	43.8	$	73.2		$	—	$	207.5
Performance fees	1.0			—		—		—		1.0		—		—		(2.8		)	—		(2.8		)
Other income, including equity-accounted subsidiaries	(0.1		)	0.5		0.6		0.1		1.1		—		0.2		0.7			0.1		1.0
ENI revenue	$	86.1		$	41.9	$	52.5	$	0.1	$	180.6	$	90.5	$	44.0	$	71.1		$	0.1	$	205.7

Quant & Solutions Segment ENI Revenue

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Quant & Solutions ENI revenue decreased $(4.4) million, or (4.9)%, from $90.5 million for the three months ended March 31, 2019 to $86.1 million for the three months ended March 31, 2020. The decrease was attributable to (5.9)% lower management fees, driven by lower average AUM primarily resulting from the equity market decline in the current year.

Alternatives Segment ENI Revenue

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Alternatives ENI revenue decreased $(2.1) million, or (4.8)%, from $44.0 million for the three months ended March 31, 2019 to $41.9 million for the three months ended March 31, 2020. The decrease was attributable to (5.5)% lower management fees largely resulting from a decline in liquid alternative assets.

Liquid Alpha Segment ENI Revenue

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Liquid Alpha ENI revenue decreased $(18.6) million, or (26.2)%, from $71.1 million for the three months ended March 31, 2019 to $52.5 million for the three months ended March 31, 2020. The decrease was attributable to (29.1)% lower management fees, driven by lower average AUM resulting from the equity market decline and net outflows over the last twelve months. The change in performance fees for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to fulcrum fees recorded in the prior period that did not repeat.

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Segment ENI Expense

The following table identifies the components of segment ENI expense for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
($ in millions)	2020										2019
	Quant & Solutions		Alter-natives		Liquid Alpha		Other		Total		Quant & Solutions		Alter-natives		Liquid Alpha		Other		Total
Fixed compensation & benefits	$	18.3	$	11.6	$	13.1	$	3.6	$	46.6	$	20.2	$	11.2	$	14.1	$	4.2	$	49.7
G&A	14.1		4.6		6.6		4.0		29.3		16.3		6.3		7.4		5.0		35.0
Depreciation and amortization	4.7		0.4		0.1		0.1		5.3		3.4		0.2		0.1		0.1		3.8
Total ENI Operating Expenses	$	37.1	$	16.6	$	19.8	$	7.7	$	81.2	$	39.9	$	17.7	$	21.6	$	9.3	$	88.5
Variable compensation	17.0		9.2		12.5		1.0		39.7		18.8		9.8		16.8		3.3		48.7
Affiliate key employee distributions	0.8		5.8		3.2		—		9.8		1.0		5.7		6.7		—		13.4
Total Expenses	$	54.9	$	31.6	$	35.5	$	8.7	$	130.7	$	59.7	$	33.2	$	45.1	$	12.6	$	150.6

Quant & Solutions Segment ENI Expense

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Quant & Solutions ENI operating expense decreased $(2.8) million, or (7.0)%, from $39.9 million for the three months ended March 31, 2019 to $37.1 million for the three months ended March 31, 2020. The decrease was driven by (9.4)% lower ENI fixed compensation and benefits expense resulting from headcount reduction, and (13.5)% lower ENI general and administrative expense resulting from cost saving initiatives. Quant & Solutions ENI variable compensation expense, which is based on contractual arrangements, decreased (9.6)%, as a result of lower pre-variable compensation earnings. Affiliate key employee distributions attributable to Quant & Solutions decreased (20.0)%, largely driven by lower Quant & Solutions ENI earnings after variable compensation.

Alternatives Segment ENI Expense

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Alternatives ENI operating expense decreased $(1.1) million, or (6.2)%, from $17.7 million for the three months ended March 31, 2019 to $16.6 million for the three months ended March 31, 2020. The decrease was driven by (27.0)% lower ENI general and administrative expense resulting from lower consulting costs. Alternatives ENI variable compensation expense, which is based on contractual arrangements, decreased (6.1)%, as a result of lower pre-variable compensation earnings. Affiliate key employee distributions attributable to Alternatives increased 1.8%, largely driven by the mix of distributable earnings between Affiliates period over period.

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Liquid Alpha Segment ENI Expense

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Liquid Alpha ENI operating expense decreased $(1.8) million, or (8.3)%, from $21.6 million for the three months ended March 31, 2019 to $19.8 million for the three months ended March 31, 2020. The decrease was driven by (7.1)% lower ENI fixed compensation and benefits expense resulting from headcount reduction and (10.8)% lower ENI general and administrative expense resulting from cost-saving initiatives. Liquid Alpha ENI variable compensation expense, which is based on contractual arrangements, decreased (25.6)%, as a result of lower pre-variable compensation earnings. Affiliate key employee distributions attributable to Liquid Alpha decreased (52.2)%, largely driven by lower Liquid Alpha ENI earnings after variable compensation.

Other ENI Expense

Three months ended March 31, 2020 compared to three months ended March 31, 2019: Other ENI operating expense decreased $(1.6) million, or (17.2)%, from $9.3 million for the three months ended March 31, 2019 to $7.7 million for the three months ended March 31, 2020. The decrease was driven by (14.3)% lower fixed compensation and benefit expense resulting from a reduction in headcount, and (20.0)% lower general and administrative expense resulting from cost-saving initiatives. Other ENI variable compensation expense decreased (69.7)% 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:



	Three Months Ended March 31,
($ in millions)	2020			2019
Cash provided by (used in)⁽¹⁾⁽²⁾
Operating activities	$	(29.1	)	$	(299.5	)
Investing activities	1.1			(4.4		)
Financing activities	41.1			36.6


(1)	Excludes consolidated Funds.


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

Comparison for the three months ended March 31, 2020 and 2019

Net cash used in operating activities of continuing operations decreased $270.4 million, from net cash used of $299.5 million for the three months ended March 31, 2019 to net cash used of $29.1 million for the three months ended March 31, 2020, driven by the change in operating liabilities as a result of the Landmark earnout that was settled in the three months ended March 31, 2019. In the three months ended March 31, 2020, net cash provided by investing activities of continuing operations increased $5.5 million, from $4.4 million used in the three months ended March 31, 2019 to $1.1 million provided for the three months ended March 31, 2020, driven primarily by net purchases and sales of investment securities in the three months ended March 31, 2020. Net cash provided by financing activities of continuing operations increased $4.5 million, from $36.6 million provided for the three months ended March 31, 2019 to $41.1 million provided for the three months ended March 31, 2020, primarily due to lower share repurchases, offset by a lower drawdown on the revolving credit facility in the three months ended March 31, 2020 compared to 2019.

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Supplemental Liquidity Measure — Adjusted EBITDA

As supplemental information, we provide information regarding Adjusted EBITDA, which we define as economic net income before net 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. It is also encapsulated in our line of credit as part of our liquidity covenants.

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 three months ended March 31, 2020 and 2019.



	Three Months Ended March 31,
($ in millions)	2020			2019
Net income attributable to controlling interests	$	32.6		$	52.7
Net interest expense to third parties	7.5			5.9
Income tax expense (including tax expenses related to discontinued operations)	13.6			21.6
Depreciation and amortization (including intangible assets) and goodwill impairment	23.3			5.4
EBITDA	$	77.0		$	85.6
Non-cash compensation costs, including revaluation of Affiliate key employee-owned equity and profit interests	(48.3		)	(20.1		)
Amortization of pre-acquisition employee equity	1.2			1.6
(Gain) loss on seed and co-investments	19.6			(12.5		)
Restructuring and the impact of a one-time compensation arrangement that includes advances against future compensation payments⁽¹⁾	6.7			4.3
Capital transaction costs	—			—
Adjusted EBITDA	$	56.2		$	58.9
ENI net interest expense to third parties	(5.6		)	(3.5		)
Depreciation and amortization⁽²⁾	(6.3		)	(3.8		)
Tax on economic net income	(10.0		)	(12.4		)
Economic net income	$	34.3		$	39.2

(1)

The three months ended March 31, 2020 includes restructuring costs of $0.4 million, costs associated with the transfer of an insurance policy from our former Parent of $0.3 million and $6.0 million relating to the impact of a one-time compensation arrangement entered into that includes advances against future compensation payments. Included in the three months ended March 31, 2019 are restructuring costs at the Center of $4.0 million and costs associated with the redomicile to the U.S. of $0.3 million.


(2)	The three months ended March 31, 2020 includes non-cash equity-based award amortization expense.

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.

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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.

Borrowings and Long-Term Debt

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



($ in millions)	3/31/2020		12/31/2019		Interest rate	Maturity
Third party borrowings:
Revolving credit facility	$	220.0	$	140.0	LIBOR + 1.50% plus 0.20% commitment fee	August 22, 2022
4.80% Senior Notes Due 2026	272.5		272.4		4.80%	July 27, 2026
5.125% Senior Notes Due 2031	121.4		121.4		5.125%	August 1, 2031
Total third party borrowings	$	613.9	$	533.8
Non-recourse borrowing:
Non-recourse seed capital facility	21.7		35.0		LIBOR + 1.55% plus 0.95% commitment fee	January 15, 2021
Total non-recourse borrowing	$	21.7	$	35.0
Total borrowings	$	635.6	$	568.8

Revolving Credit Facility

On August 20, 2019, we entered into a $450.0 million senior unsecured revolving credit facility with Citibank, as administrative agent and issuing bank, and RBC Capital Markets and BMO Capital Markets Corp. as joint lead arrangers and joint book runners (the “Credit Facility”). Subject to certain conditions, we may borrow up to an additional $150.0 million under the Credit Facility. The Credit Facility has a maturity date of August 22, 2022. The previous revolving credit facility with Citibank with maturity date of October 15, 2019 was terminated. Borrowings under the Credit Facility bear interest, at our 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 our credit rating or (b) the London interbank offered rate for a period, at our election, equal to one, two, three or six months plus an additional amount ranging from 1.125% to 2.00%, with such additional amount based on our credit rating. In addition, we are charged a commitment fee based on the average daily unused portion of the Credit Facility at a per annum rate ranging from 0.125% to 0.45%, with such amount based on our credit rating.

Under the Credit Facility, the ratio of third party borrowings to trailing twelve months Adjusted EBITDA cannot exceed 3.0x, and the interest coverage ratio must not be less than 4.0x. At March 31, 2020, our ratio of third party borrowings to trailing twelve months Adjusted EBITDA was 2.5x and our interest coverage ratio was 7.8x.

Our ratio of third party borrowings net of total cash and cash equivalents to trailing twelve months Adjusted EBITDA was 2.0x.

Moody’s Investor Service, Inc. and Standard & Poor’s have each assigned an investment-grade rating to our senior, unsecured long-term indebtedness. As a result of the assignment of the credit ratings, our interest rate on outstanding borrowings was set at LIBOR + 1.50% and the commitment fee on the unused portion of the revolving credit facility was set at 0.20%.

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Non-recourse seed capital facility

In July 2017, we entered into a non-recourse seed capital facility collateralized by our seed capital holdings and can borrow up to $65.0 million, so long as the borrowing does not represent more than 50% of the value of the seed capital collateral. At March 31, 2020, amounts outstanding under this non-recourse seed capital facility amounted to $21.7 million. Since this facility is non-recourse to us beyond the seed investments themselves, drawdowns under this facility are excluded from our third party debt levels for purposes of calculating our credit ratio covenants under the Credit Facility.

As of March 31, 2020, 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 long-term liabilities:



	March 31, 2020		December 31, 2019
($ in millions)
Share-based payments liability	$	184.8	$	221.8
Affiliate profit interests liability	82.6		94.8
Employee equity	267.4		316.6
Voluntary deferral plan liability	89.0		88.3
Total	$	356.4	$	404.9

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. Affiliate profit interests liability represents 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 and our Affiliates’ 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.

Critical Accounting Policies and Estimates

There have been no significant changes to the critical accounting policies and estimates disclosed in our most recent Form 10-K for the year ended December 31, 2019. Critical accounting policies and estimates are those that require management’s most difficult, subjective or complex judgments and would therefore be deemed the most critical to an understanding of our results of operations and financial condition.

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Recent Accounting Developments

See discussion of Recent Accounting Developments in Note 2 of the accompanying Condensed Consolidated Financial Statements.

Forward Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements, including information relating to anticipated revenues, margins, cash flows or earnings, anticipated future performance of our business and our Affiliates or particular segments, our expected future net cash flows, our anticipated expense levels, capital management, expected impact of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows,and/or expectations regarding market conditions. The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “can be,” “may be,” “aim to,” “may affect,” “may depend,” “intends,” “expects,” “believes,” “estimate,” “project,” and other similar expressions are intended to identify such forward-looking statements. Such statements are subject to various known and unknown risks and uncertainties and we caution readers that any forward-looking information provided by or on behalf of us is not a guarantee of future performance.

Actual results may differ materially from those in forward-looking information as a result of various factors, some of which are beyond our control, including but not limited to those discussed above and elsewhere in this Quarterly Report on Form 10-Q, including under Part II, Item 1A. Risk Factors, and in our most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 2, 2020, and subsequent SEC filings. Due to such risks and uncertainties and other factors, we caution each person receiving such forward-looking information not to place undue reliance on such statements. Further, such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and we undertake no obligations to update any forward looking statement to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

Our exposure to market risk is directly related to the role of our Affiliates as asset managers. Substantially all of our investment management revenues are derived from our Affiliates’ agreements with their clients. Under these agreements, the revenues we receive are based on the value of our assets under management or the investment performance on client accounts for which we earn performance fees. Accordingly, our revenues and net income may decline as a result of our assets under management decreasing due to depreciation of our investment portfolios. In addition, such depreciation could cause our clients to withdraw their funds in favor of investments offering higher returns or lower risk, which would cause our revenues and net income to decline further.

Our model for assessing the impact of market risk on our results uses March 31, 2020 ending AUM and management fee rates as the basis for management fee revenue calculations. With respect to performance fee revenue, we assume that relative investment performance is the same as in the past four quarters ended March 31, 2020. Therefore, market-driven changes in performance fees, which are typically based on relative performance versus market indices, reflect changes in the underlying AUM used in the calculation rather than differences in relative performance as a result of a changed market environment. The basis for the analysis is performance fees earned for the twelve months ended March 31, 2020.

Our profit sharing economic structure results in a sharing of market risk between us and our employees. Approximately 50% of our ENI cost structure is variable, representing variable compensation and key employee distributions for the Affiliates. These variable expenses generally are linked in a formulaic manner to the profitability of the business after covering operating expenses, which include base compensation and benefits, general and administrative expenses, and depreciation and amortization. In modeling the impact of market risk, we assume that these operating expenses remain unchanged, but the resulting impact on profit driven by increases or decreases in revenue will change variable compensation and Affiliate key employee distributions in line with their formulaic calculations. Any change in pre-tax profit is tax-affected at our statutory combined state and federal rate of approximately 27% to calculate profit after tax.

The value of our assets under management was $161.8 billion as of March 31, 2020. A 10% increase or decrease in the value of our assets under management, if proportionally distributed over all of our investment strategies, asset classes and client relationships, would cause an annualized increase or decrease in our gross management fee revenues of approximately $63.0 million based on our current weighted average fee rate of approximately 39 basis points, including equity-accounted Affiliates. Approximately $16.5 billion, or 10%, of our AUM, including equity-accounted Affiliates, are in accounts subject to performance fees. Of these assets, approximately 70% are in accounts for which performance fees, or management fee adjustments, are calculated based on investment return that differs from the relative benchmark returns. Assuming the market change does not impact our relative performance, a 10% increase or decrease in AUM would have a $0.4 million impact to our gross performance fees based on our trailing twelve month performance fees of $3.7 million as of March 31, 2020. The combined impact on our management fees and performance fees would have a direct impact on our earnings and result in an annual change of approximately $22.5 million in our post-tax economic net income, given our current cost structure and operating model.

Equity market risk, interest rate risk, and foreign currency risk are the market risks that could have the greatest impact on our management fees, performance fees and our business profitability. Impacts on our management and performance fees can be calculated based on the percentage of AUM constituting equity investments, fixed income investments, or foreign currency denominated investments, respectively, multiplied by the relevant weighted average management fee and performance fee attributable to that asset class.

•

Our equity markets-based AUM includes U.S. equities (including small cap through large cap securities and substantially value or blended investment styles) and global/non-U.S. equities (including global, non-U.S. and emerging markets securities). A 10% increase or decrease in equity markets would cause our $124.6 billion of equity assets under management to increase or decrease by $12.5 billion, resulting in a change in annualized

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management fee revenue of $44.4 million and an annual change in post-tax economic net income of approximately $16.9 million, given our current cost structure, operating model, and weighted average fee rate of 36 basis points at the mix of strategies as of March 31, 2020. Approximately $10.5 billion, or 8%, of our equity markets-based AUM are in accounts subject to performance fees. Of these assets, approximately 99% are in accounts for which performance fees, or management fee adjustments, are calculated based on investment return that differs from the relative benchmark returns. Assuming the market change does not impact our relative performance, a 10% change in equity markets would not have a material impact from performance fees on our post-tax economic net income, given our current cost structure and operating model.

•

Foreign currency AUM includes equity and alternative assets denominated in foreign currencies. A 10% increase or decrease in foreign exchange rates against the U.S. dollar would cause our $75.2 billion of foreign currency denominated AUM to increase or decrease by $7.5 billion, resulting in a change in annualized management fee revenue of $31.5 million and an annual change in post-tax economic net income of $12.2 million, based on weighted average fees earned on our foreign currency denominated AUM of 42 basis points at the mix of strategies as of March 31, 2020. Approximately $9.7 billion, or 13%, of our foreign currency denominated AUM are in accounts subject to performance fees. Of these assets, approximately 85% are in accounts for which performance fees, or management fee adjustments, are calculated based on investment return that differs from the relative benchmark returns. Assuming the market change does not impact our relative performance, a 10% change in foreign currency exchange rates would have a $0.2 million impact from performance fees on our post-tax economic net income, given our current cost structure and operating model.

•

Fixed income AUM includes instruments in government bonds, corporate bonds and other fixed income investments in the United States. A change in interest rates, resulting in a 10% increase or decrease in the value of our total fixed income AUM of $12.9 billion, would cause AUM to rise or fall by approximately $1.3 billion. Based on our fixed income weighted average fee rates of 19 basis points, annualized management fees would change by $2.4 million and post-tax economic net income would change by $0.9 million annually. There are currently no material fixed income assets earning performance fees as of March 31, 2020.

While the analysis above assumes that market changes occur in a uniform manner across the relevant portfolio, because of our declining fee rates for larger relationships and differences in our fee rates across asset classes, a change in the composition of our assets under management, in particular an increase in the proportion of our total assets under management attributable to strategies, clients or relationships with lower effective fee rates, could have a material negative impact on our overall weighted average fee rate.

As is customary in the asset management industry, clients invest in particular strategies to gain exposure to certain asset classes, which exposes their investment to the benefits and risks of such asset classes. We have not adopted a corporate-level risk management policy regarding client assets, nor have we attempted to hedge at the corporate level or within individual strategies the market risks that would affect the value of our overall assets under management and related revenues. Any reduction in the value of our assets under management would result in a reduction in our revenues.

Interest Rate Risk

We are exposed to interest rate risks primarily through borrowings under our Credit Facility. Interest on borrowings under the Credit Facility is based upon variable interest rates. Borrowings under our Credit Facility were $220 million as of March 31, 2020. We currently do not hedge against interest rate risk. As of March 31, 2020, a hypothetical 10% change in interest rates would have resulted in a $0.2 million change to our interest expense during the first quarter of 2020.

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Item 4. Controls and Procedures.

Controls and Procedures

Our management, including our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) at March 31, 2020. Based on this evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures are effective.

Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the quarter ended March 31, 2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we and our Affiliates may be parties to various claims, suits and complaints in the ordinary course of our business. Although the amount of liability that may result from these matters cannot be ascertained, we do not currently believe that, in the aggregate, they will result in liabilities material to our consolidated financial condition, future results of operations or cash flow.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in our most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 2, 2020, under the heading “Risk Factors” and the following additional risk factor.

The novel coronavirus (COVID-19) pandemic has disrupted and may continue to disrupt financial markets and our business.

The outbreak of COVID-19 and the related containment and mitigation measures put in place have had, and may continue to have, a serious impact on the economy and the financial and securities markets. As a result, the investment results of our Affiliates have been, and may continue to be, negatively affected, resulting in decreases to our assets under management and related revenue and earnings. In addition, the unfavorable economic conditions caused by the COVID-19 pandemic may increase our funding costs or limit our access to the capital markets, which could impact our ability to finance our operations through borrowing. As the potential impact of COVID-19 is impossible to predict, the extent to which COVID-19 could negatively affect our and our Affiliates’ operating results or the duration of any potential business disruption is uncertain.

In addition, our operations and the operations of our Affiliates, as well as third-party service providers on whom we rely, have been, and are expected to continue to be, significantly impacted by the COVID-19 pandemic. Although we have in place robust and well-established business continuity plans that address the potential impact to our business, no assurance can be given that the steps we have taken will continue to be effective or appropriate. While our employees have been successful in working remotely, operational challenges may arise in the future. In the event that our workforce, the workforce of one or more Affiliates, or the workforces of our or our Affiliates’ key service providers were to experience significant illness levels, our ability to operate our business normally could be materially disrupted. Any such material disruptions to our business operations could have a material adverse impact on our results of operation or financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets out information regarding purchases of equity securities by the Company for the three months ended March 31, 2020:



Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value that may yet be purchased under the plans or programs⁽¹⁾ (in millions)
January 1-31, 2020		$	—	—	$	278.6
February 1-29, 2020	239,062	10.44		239,062	276.1
March 1-31, 2020	2,991,200	5.57		2,991,200	259.4
Total	3,230,262	$	5.93	3,230,262

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(1)

On February 3, 2016, our Board of Directors authorized a $150.0 million open market share repurchase program, which was approved by shareholders on March 15, 2016. On April 18, 2018, our Board of Directors approved an amendment to the existing repurchase contract, to permit us to repurchase our common stock, from time to time, up to an aggregate limit of $600.0 million of common stock. This amendment was subsequently approved by our shareholders on June 19, 2018. We repurchased 3,230,262 shares of common stock under this program during the three months ended March 31, 2020. As of March 31, 2020, $259.4 million remained available to repurchase shares under the February 2016 program.

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Item 5. Other Events.

On May 8, the Company entered into an employment agreement with Christina Wiater, the Company’s principal financial officer and principal accounting officer (the “Wiater Employment Agreement”), pursuant to which Ms. Wiater’s compensation consists of an annual base salary of $425,000. Ms. Wiater will also be eligible to participate in certain Company-wide employee benefit programs, including the Company’s Profit Sharing and 401(k) Plan as well as health and welfare benefits. In addition, Ms. Wiater could receive a one-time payment of $850,000 upon the occurrence of certain extraordinary corporate events. In the event of a termination of Ms. Wiater’s employment by the Company without Cause (as defined in the Wiater Employment Agreement) or termination by Ms. Wiater for Good Reason (as defined in the Wiater Employment Agreement) (in either case a “Good Leaver Termination”), Ms. Wiater would be entitled to receive (a) separation payments equal to twelve (12) months of Ms. Wiater’s salary, (b) continuation of health benefits for twelve (12) months and (c) accelerated vesting of any equity awards. Any compensation paid to Ms. Wiater will be subject to the Claw-Back Policy adopted by the Board, as in effect from time-to-time.

The Employment Agreement contains customary restrictive covenants, including, non-disclosure, non-disparagement, non-interference, non-competition and a twelve (12) month non-solicitation covenant.

The description of the Wiater Employment Agreement included in this 10-Q is qualified by reference to Exhibit 10.13 filed with this Form 10-Q, which such Wiater Employment Agreement is incorporated into this description.

Item 6. Exhibits.



Exhibit No.			Description
2.1			Scheme of Arrangement, dated June 3, 2019, between BrightSphere Investment Group plc and the shareholders of BrightSphere Investment Group plc, incorporated by reference to Appendix A to BrightSphere Investment Group plc’s Proxy Statement on Schedule 14A filed on June 3, 2019.

3.1			Amended and Restated Certificate of Incorporation of BrightSphere Investment Group Inc., adopted as of July 12, 2019, incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K12B filed on July 15, 2019.

3.2			Amended and Restated Bylaws of BrightSphere Investment Group Inc., adopted as of July 12, 2019, incorporated herein by reference to Exhibit 3.2 to the Current Report on Form 8-K12B filed on July 15, 2019.

4.1			Specimen Common Stock Certificate of BrightSphere Investment Group Inc., incorporated herein by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q filed on August 9, 2019.

4.2			Third Supplemental Indenture, dated as of July 11, 2019, among BrightSphere Investment Group plc, as Original Issuer, BrightSphere Investment Group Inc., as Successor Company, Wilmington Trust, National Association, as Trustee, and Citibank, N.A., as Securities Administrator, incorporated herein by reference to Exhibit 4.8 to the Quarterly Report on Form 10-Q filed on August 9, 2019.

4.3			Fourth Supplemental Indenture, dated as of July 11, 2019, among BrightSphere Investment Group plc, as Original Issuer, BrightSphere Investment Group Inc., as Successor Company, Wilmington Trust, National Association, as Trustee, and Citibank, N.A., as Securities Administrator, incorporated herein by reference to Exhibit 4.9 to the Quarterly Report on Form 10-Q filed on August 9, 2019.

10.1			BrightSphere Investment Group Inc. Equity Incentive Plan, incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K12B filed on July 15, 2019.

10.2			Form of Indemnity Agreement, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K12B filed on July 15, 2019.

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Exhibit No.			Description
10.3			BrightSphere Investment Group Inc. Non-Employee Directors’ Equity Incentive Plan, incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K12B filed on July 15, 2019.
10.4			Revolving Credit Agreement, dated October 15, 2014, as amended and restated as of July 11, 2019, by and among BrightSphere Investment Group Inc., certain lenders, and Citibank N.A., as administrative agent, with Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint book runners and joint lead arrangers, incorporated herein by reference to Exhibit 10.20 to the Quarterly Report on Form 10-Q filed on August 9, 2019.

10.5			Revolving Credit Agreement dated as of August 20, 2019, among BrightSphere Investment Group Inc., a Delaware corporation, the lenders from time to time party thereto and Citibank N.A., as administrative agent for such lenders, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 21, 2019.

10.6*			Form of Restricted Stock Unit Award Agreement for Non-Employee Directors.

10.7*			Form of Restricted Stock Unit Award Agreement for U.K. Employees.

10.8*			Form of Restricted Stock Unit Award Agreement for Employees.

10.9*			Form of Option Award Agreement.

10.10*			Option Award Agreement, effective April 21, 2020 by and between BrightSphere Investment Group Inc. and Suren Rana.

10.11*			Amended and Restated Employment Agreement, dated April 15, 2020, by and between BrightSphere Inc. and Suren Rana.

10.12*			Form of Restricted Stock Award Agreement for Employees.

10.13*			Employment Agreement, dated May 8, 2020, by and between BrightSphere Inc. and Christina Wiater.

31.1*			Certification of the Company’s principal executive officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*			Certification of the Company’s principal financial officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**			Certification of the Company’s principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**			Certification of the Company’s principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Exhibit No.			Description
101*			Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, (ii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019, (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2020 and 2019, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019, and (vi) the Notes to Financial Statements.

104*			The cover page of this Quarterly Report on Form 10-Q, formatted in Inline eXtensible Business Reporting Language

* Filed herewith

** Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		BrightSphere Investment Group Inc.

Dated:	May 11, 2020

		By:	/s/ Suren Rana
			Suren Rana President and Chief Executive Officer (principal executive officer)

			/s/ Christina Wiater
			Christina Wiater Senior Vice President and Principal Financial Officer (principal financial officer and principal accounting officer)

Time-Based Vesting

Restricted Stock Unit Grant - U.S. Taxpayers

BRIGHTSPHERE INVESTMENT GROUP INC.

NON-EMPLOYEE DIRECTORS’ EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”) is made effective as of , 20 (the “Grant Date”) between BrightSphere Investment Group Inc., a Delaware corporation (the “Company”), and (the “Participant”).

WITNESSETH:

WHEREAS, the Company has adopted the BrightSphere Investment Group Inc. Non-Employee Directors’ Equity Incentive Plan (the “Plan”) for the benefit of the non-employee directors of the Company and its Subsidiaries; and

WHEREAS, the Committee, as defined in the Plan, has authorized the Award to the Participant of Restricted Stock Units under the Plan, on the terms and conditions set forth in the Plan and in this Agreement;

NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Participant hereby agree as follows:

1. Definitions.

Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Plan.

2. Award of Restricted Stock Units.

The Committee hereby grants to the Participant, on the Grant Date set forth above, Restricted Stock Units.

3. Vesting of Restricted Stock Units.

The Restricted Stock Units will become non-forfeitable and the Risk of Forfeiture shall lapse on the vesting dates (the “Vesting Dates”) and in the proportions described below, provided that the Participant continuously provides services to the Company or an Affiliate until the applicable Vesting Date.

Shares Vesting Vesting Date

4. Forfeiture of Restricted Stock Units.

If the Participant ceases to provide services to the Company and its Affiliates prior to a Vesting Date for any reason, except as described in Section 5, any unvested Restricted Stock Units shall automatically be forfeited, and all of the Participant’s rights to and interest in the Restricted Stock Units shall terminate without payment of consideration.

5. Accelerated Vesting Upon Certain Terminations.

If the Participant’s services to the Company and its Affiliates terminate prior to a Vesting Date as a result of the Participant’s death or disability, or if the Participant is not reelected to the Board or the Participant’s services to the Company and its Affiliates are otherwise involuntarily terminated without Cause, the Committee may, in its sole discretion, provide that the Participant’s Restricted Stock Units shall not be forfeited in accordance with Section 4, and that the Risk of Forfeiture shall lapse and all unvested Restricted Stock Units shall become fully vested and nonforfeitable upon such termination of services.

6. Settlement of Restricted Stock Units.

Within a reasonable period of time after each Vesting Date, or the date of any termination of services upon which any Restricted Stock Units vest in accordance with Section 5, but in any event within 70 days of each such date, the Company shall issue to or for the benefit of the Participant that number of shares of Stock equal to the aggregate number of Restricted Stock Units that vested on such date.

7. Voting and Dividend Equivalents.

Unless and until shares of Stock are issued by the Company to the Participant in settlement of vested Restricted Stock Units hereunder and are evidenced in book entry form on the records of the Company’s transfer agent in the name of the Participant, Participant shall not be, or have any of the rights or privileges of, a stockholder of the Company. Following vesting of any Restricted Stock Units hereunder, the Participant shall be entitled to receive payments (without interest or other earnings) equivalent to any dividends declared with respect to the shares of Stock underlying such vested Restricted Stock Units, the record dates for which fall on or after the Grant Date and prior to the date on which such shares of Stock are settled upon the Participant, at the time such shares of Stock are issued to the Participant in accordance with Section 6.

8. Authority of the Committee.

This Agreement and the Restricted Stock Units awarded hereunder shall be subject to such rules and regulations as the Committee shall adopt pursuant to the Plan. All decisions of the Committee upon any question arising under the Plan or under this Agreement shall be final, conclusive and binding upon the Participant and any person claiming any interest in the Award made under this Agreement.

9. Plan Terms.

The terms of the Plan are hereby incorporated herein by reference. In the event of a conflict between the terms and conditions of this Agreement and the terms and conditions of the Plan, the terms and conditions of the Plan shall prevail.

10. No Rights to Continued Service.

The Award of Restricted Stock Units pursuant to this Agreement shall not give the Participant any right to continue in service with the Company or any Affiliate.

11. Amendment.

The terms of this Award of Restricted Stock Units as evidenced by this Agreement may be amended by the Committee without the approval of the Participant, subject however to the limitations set out in the Plan, or may be amended by written agreement of the Participant and the Company. The Company reserves the right to amend the Plan at any time, subject to any limitations set out in the Plan.

12. Governing Law.

This Agreement shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof.

13. Participant Acknowledgment.

BRIGHTSPHERE INVESTMENT GROUP INC.

EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

WITNESSETH:

WHEREAS, the Company has adopted the BrightSphere Investment Group Inc. Equity Incentive Plan (the “Plan”) for the benefit of the employees of the Company and its Subsidiaries; and

NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Participant hereby agree as follows:

1.Definitions.

Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Plan.

2.Award of Restricted Stock Units.

The Committee hereby grants to the Participant, on the Grant Date set forth above, Restricted Stock Units.

3.Vesting of Restricted Stock Units.

The Restricted Stock Units will become non-forfeitable and the Risk of Forfeiture shall lapse on the vesting dates (the “Vesting Dates”) and in the proportions described below, provided that the Participant is continuously employed by the Company or an Affiliate until the applicable Vesting Date.



Restricted Stock Units Vesting	Vesting Date

4.Forfeiture of Restricted Stock Units.

If the Participant’s employment with the Company and its Affiliates terminates prior to a Vesting Date for any reason, except as described in Section 5, any unvested Restricted Stock Units shall automatically be forfeited, and all of the Participant’s rights to and interest in the Restricted Stock Units shall terminate without payment of consideration.

5.Accelerated Vesting Upon Certain Terminations.

If the Participant’s employment with the Company and its Affiliates terminates prior to a Vesting Date as a result of the Participant’s: (a) death; (b) involuntary termination for disability for which the Participant qualifies for benefits under a long-term disability plan sponsored by the Company or an Affiliate; or (c) involuntary termination without Cause, (i) the Participant’s Restricted Stock Units shall not be forfeited in accordance with Section 4, and all unvested Restricted Stock Units shall become fully vested and nonforfeitable upon such termination of employment; or (ii) where the Participant is subject to a post-termination covenant not to compete with the Company and/or its Affiliates that constitutes a Risk of Forfeiture, then the Participant’s Restricted Stock Units shall not be forfeited in accordance with Section 4 upon such termination of employment, and all the unvested Restricted Stock Units shall become fully vested and nonforfeitable upon the earlier of (A) the applicable Vesting Date; and (B) the expiration of the noncompete period, provided, however, that the Participant complies with the covenant not to compete through to such date.

6.Settlement of Restricted Stock Units.

Within a reasonable period of time following the date on which any Restricted Stock Unit becomes vested in accordance with Section 3 or 5 above, after each Vesting Date (and in any event within the calendar year that includes such date) the Company shall pay and transfer to the Participant that number of shares of Stock equal to the aggregate number of Restricted Stock Units that vested on that date.

7.No Rights as Stockholder Before Settlement; Dividend Equivalents.

Unless and until shares of Stock are issued or transferred by the Company to the Participant in settlement of vested Restricted Stock Units hereunder and are evidenced in book entry form on the records of the Company’s transfer agent in the name of the Participant, Participant shall not be, or have any of the rights or privileges of, a stockholder of the Company. Following vesting of any Restricted Stock Units hereunder, the Participant shall be entitled to receive payments (without interest or other earnings) equivalent to any dividends declared with respect to the shares of Stock underlying such vested Restricted Stock Units, the record dates for which fall on or after the Grant Date and prior to the date on which such shares of Stock are settled upon the Participant, at the time such shares of Stock are issued or transferred to the Participant in accordance with Section 6.

8.Authority of the Committee.

9.Withholding.

The Company and its Affiliates shall be entitled to deduct and withhold from any payment of any kind otherwise due to the Participant the amount necessary to satisfy their obligations to withhold, collect or account to any tax authority for any income taxes or social security contributions (including employee’s national insurance contributions) or other taxes and contributions (the “Employment Taxes”) under any and all federal, state, foreign and/or local tax rules or regulations in connection with the Participant’s Award of Restricted Stock Units, the underlying Stock and any dividends payable with respect to the shares of Stock. In addition, the Committee may require the Participant to satisfy such Employment Taxes by any (or a combination) of the following means: (a) cash, check, or wire transfer; or (b) authorizing the Company or an Affiliate to withhold and, if applicable, sell into the market, from the shares otherwise vesting and

deliverable to the Participant, the number of shares having a Market Value equal to the amount of the Employment Taxes, as of the date when the liability for Employment Taxes arises. The Participant agrees to indemnify the Company and its Affiliates for any Employment Taxes that may be payable with respect to the full number of shares of Stock vested and issued (including those shares of Stock that are deemed issued). To the extent that any shares of Stock are withheld by the Company or any Affiliate (other than the Participant’s employer) in accordance with this Section 9, the Company or that Affiliate shall pay over to the Participant’s employer sufficient moneys to satisfy the Participant’s liability under such indemnity.

10.Employer National Insurance Contributions.

The Participant hereby agrees that if required by the Company or any of its Affiliates the Participant shall accept liability for any employer’s (Secondary) Class 1 national insurance contributions (“Employer NICs”) which may be payable by the Company or any of its Affiliates in respect of the vesting or settlement of the Participant’s Restricted Stock Units, and that the vesting and settlement of such Restricted Stock Units is conditional on the Participant paying any such amounts. The Participant also agrees that if any additional consents or formal elections are required by the Company or any of its Affiliates to accomplish the above, the Participant will provide them promptly upon request. The Participant further agrees that the Company or any of its Affiliates may collect any Employer NICs payable pursuant to this Section 10 by any method set out in Section 9 above.

11.Plan Terms.

12.No Employment Rights.

By signing this Agreement, the Participant acknowledges that:

(a) participation in the Plan is voluntary and occasional and does not create any contractual or other right to future participation in the Plan, or benefits in lieu of participation in the Plan, even if participation is or has been offered repeatedly;

(b) all decisions with respect to future participation in the Plan, if any, will be at the sole discretion of the Committee;

(c) the Participant’s participation in the Plan shall not create a right to further employment with his or her employer and shall not interfere with the ability of his or her employer to terminate the Participant’s employment relationship at any time;

(d) the Participant is voluntarily participating in the Plan;

(e) participation in the Plan is an extraordinary item that does not constitute payment of any kind for service of any kind rendered to the Company or the Participant’s employer, and which is outside the scope of the Participant’s employment contract, if any;

(f) an Award of Restricted Stock Units acquired pursuant to the Plan is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;

(g) the future value of the Restricted Stock Units is unknown and cannot be predicted with certainty and any Restricted Stock Units acquired pursuant to the Plan may increase or decrease in value; and

(h) the Participant will have no entitlement to compensation or damages as a result of any loss or diminution in value of the Restricted Stock Units, as a result of the termination of the Participant’s employment by the Company or any of its Affiliates or by the Participant for any reason whatsoever and whether or not in breach of contract, and, by signing this Agreement, the Participant will be deemed irrevocably to have waived any such entitlement as might arise.

13. Data Protection.

The Participant understands that the Company and its Affiliates hold certain personal information (the “Data”) in connection with the Plan. The Participant further understands that recipients of Data may be located in the European Economic Area or elsewhere. The basis for any processing of Data about the Participant under the EU’s General Data Protection Regulation (2016/679) (or any successor laws) is set out in the Company’s Share Plan Privacy Notice. The Share Plan Privacy Notice also contains details about how the Participant’s Data is processed and the Participant’s rights in relation to the Data. The Participant has a right to review the Share Plan Privacy Notice.

14. Amendment.

15. Governing Law.

This Agreement shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof.

16. Participant Acknowledgment.

By accepting this Award electronically, the Participant hereby acknowledges that he or she has received and read the Plan and this Agreement and that he or she agrees to be bound by all of the terms and conditions of the Restricted Stock Unit Award as set forth in this Agreement, subject to the terms and conditions of the Plan. The Participant hereby further acknowledges and agrees that his or her right to receive or retain this Award, any amount received pursuant to this Award (in cash or shares of Stock), and any profit or gain realized in connection with this Award, is subject to cancellation and recoupment in accordance with the Company’s Claw-back Policy, as in force from time to time, provided that any sale proceeds payable (before the deduction of any related sale or transfer costs or any tax charges) on any sale or transfer of any shares of Stock subject to this Award pursuant to the Company’s Claw-back Policy following the expiry of five years from the Grant Date is at least equal to the market value (for the purposes of Chapter 2, Part 7 of the United Kingdom Income Tax (Earnings and Pensions) Act 2003) of the shares of Stock, and such sale proceeds shall be subject to the Company’s Claw-back Policy. The Participant understands that the Participant (and not the Company or any of its Affiliates) shall be responsible for the Employment Tax consequences to the Participant that may arise as a result of the transactions contemplated by this Agreement. The Participant acknowledges that he or she has consulted with any tax advisors he or she thinks advisable in connection with the Restricted Stock Units, and is not relying, and will not rely, on the Company or any Affiliate for any tax advice. By

executing this Agreement, the Participant hereby consents to receive documents in relation to the Plan and this Award by electronic delivery, and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or by a third party designated by the Company.



	BRIGHTSPHERE INVESTMENT GROUP INC.



	By:
	Its:

	The Participant acknowledges that, by accepting this Award electronically, he or she accepts this Award and agrees to be bound by the terms and conditions set forth in this Agreement and the Plan document.

BRIGHTSPHERE INVESTMENT GROUP INC.

EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

WITNESSETH:

WHEREAS, the Company has adopted the BrightSphere Investment Group Inc. Equity Incentive Plan (the “Plan”) for the benefit of the employees of the Company and its Subsidiaries; and

NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Participant hereby agree as follows:

1.Definitions.

Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Plan.

2.Award of Restricted Stock Units.

The Committee hereby grants to the Participant, on the Grant Date set forth above, Restricted Stock Units.

3.Vesting of Restricted Stock Units.

The Restricted Stock Units will become non-forfeitable and the Risk of Forfeiture shall lapse on the vesting dates (the “Vesting Dates”) and in the proportions described below, provided that the Participant is continuously employed by the Company or an Affiliate until the applicable Vesting Date.



Restricted Stock Units Vesting	Vesting Date

4.Forfeiture of Restricted Stock Units.

If the Participant’s employment with the Company and its Affiliates terminates prior to a Vesting Date for any reason, except as described in Section 5, any unvested Restricted Stock Units shall automatically be forfeited, and all of the Participant’s rights to and interest in the Restricted Stock Units shall terminate without payment of consideration.

5.Accelerated Vesting Upon Certain Terminations.

6.Settlement of Restricted Stock Units.

Within a reasonable period of time after each Vesting Date (and in any event within the calendar year that includes the Vesting Date) the Company shall pay and transfer to the Participant that number of shares of Stock equal to the aggregate number of Restricted Stock Units that vested on that Vesting Date.

7.Voting and Dividend Equivalents.

8.Authority of the Committee.

9.Withholding.

The Company shall have the right to require the Participant to remit to the Company an amount sufficient to satisfy federal, state, local, foreign or other withholding tax requirements if, when, and to the extent required by law in connection with the Participant’s Award of Restricted Stock Units (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates, held in book-entry position through the direct registration system of the Company’s transfer agent, for such shares, or prior to the vesting of such shares, as applicable. The obligations of the Company under the Plan shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to a Participant or to utilize any other withholding method prescribed by the Committee from time to time.

10.Plan Terms.

11.No Employment Rights.

The Award of Restricted Stock Units pursuant to this Agreement shall not give the Participant any right to remain employed with the Company or any Affiliate.

12.Amendment.

13.Governing Law.

This Agreement shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof.

14.Participant Acknowledgment.

By accepting this Award electronically, the Participant hereby acknowledges that he or she has received and read the Plan and this Agreement and that he or she agrees to be bound by all of the terms and conditions of the Restricted Stock Unit Award as set forth in this Agreement, subject to the terms and conditions of the Plan. The Participant hereby further acknowledges and agrees that his or her right to receive or retain this Award, any amount received pursuant to this Award (in cash or shares of Stock), and any profit or gain realized in connection with this Award, is subject to cancellation and recoupment in accordance with the Company’s Claw-back Policy, as in force from time to time. The Participant understands that the Participant (and not the Company or any of its Affiliates) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences to the Participant that may arise as a result of the grant of this Award of Restricted Stock Units and the issuance or transfer of shares of Stock as contemplated by this Agreement. By executing this Agreement, the Participant hereby consents to receive documents in relation to the Plan and this Award by electronic delivery, and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or by a third party designated by the Company.



	BRIGHTSPHERE INVESTMENT GROUP INC.



	By:
	Its:

	The Participant acknowledges that, by accepting this Award electronically, he or she accepts this Award and agrees to be bound by the terms and conditions set forth in this Agreement and the Plan document.

BRIGHTSPHERE INVESTMENT GROUP INC.

EQUITY INCENTIVE PLAN

OPTION AWARD AGREEMENT

THIS OPTION AWARD AGREEMENT (this “Agreement”), is entered into as of , 20 , by and between BrightSphere Investment Group Inc., a Delaware corporation, and the “Participant”.

WHEREAS, the Company has adopted the BrightSphere Investment Group Inc. Equity Incentive Plan (the “Plan”) for the benefit of the employees of the Company and its Subsidiaries; and

WHEREAS, the Committee, as defined in the Plan, has authorized this Award to the Participant of an Option under the Plan, on the terms and conditions set forth in the Plan and in this Agreement; and

NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Participant hereby agree as follows:

1.Definitions.

Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Plan.

2.Grant of Option.

The Company hereby grants to the Participant a Nonstatutory Option to purchase shares of Stock (such shares, the “Option Shares”), on the terms and subject to the conditions set forth in this Agreement and as otherwise provided in the Plan. The Option is not intended to qualify as an Incentive Option. The Options shall vest in accordance with Section 3. The exercise price shall be [ ] per Option Share.

3.Vesting.

(a)The Option will become non-forfeitable and exercisable on the vesting dates (the “Vesting Dates”) and in the proportions described below, provided that the Participant continuously provides services to the Company or an Affiliate until the applicable Vesting Date.



Percentage of Option Vesting	Vesting Date
%
%
%
%
%

(b)If the Participant’s employment with the Company and its Affiliates terminates prior to a Vesting Date for any reason, except as described in Section 3(c) below, any unvested portion of the Option shall automatically be forfeited and canceled, and the Participant shall immediately forfeit without any consideration any rights to the Option Shares subject to such unvested portion.

(c)If, within two (2) years following a Change of Control, the Participant’s employment with the Company and its Affiliates is terminated by the Company or an Affiliate without Cause or by the Participant for Good Reason, then that portion of the Option that would have vested on the next Vesting Date to occur shall become vested and nonforfeitable as of the date of the Participant’s termination of employment. For purposes of this agreement, Good Reason shall mean the occurrence of one or more of the following without the Participant’s consent, other than on account of mental or physical disability: (i) a material reduction of the Participant's base salary (base salary effective March 2, 2020), if such reduction is not related to either individual or corporate performance; (ii) a material, adverse change to the Participant's current title; (iii) a material change in the geographic location at which the Participant must regularly perform services for the Company (which, for purposes of this agreement, means a change in Participant's principal place of employment by 50 or more miles, provided that such relocation materially increases the time of the Participant's commute. The Participant must provide written notice of termination for Good Reason to the Company within thirty (30) days after the event constituting Good Reason. The Company shall have a period of thirty (30) days in which it may correct the act or failure to act that constitutes the grounds for Good Reason as set forth in the Participant's notice of termination. If the Company does not correct the act or failure to act, the Participant may terminate his employment for Good Reason not later than (30) days following the end of the Company's thirty (30)-day cure period.

(d)If the Participant’s employment with the Company and its Affiliates is involuntarily terminated without Cause, or the Participant resigns for Good Reason, any portion of the Option that would have vested during the 60 days following termination of employment, will be immediately vested upon the date of the Participant’s termination of employment; provided, however that any Option Shares acquired pursuant to the Option vesting in accordance with Section 2(c) may not be transferred until the specified Vesting Date.

4.Expiration.

(a)In no event shall all or any portion of the Option be exercisable after the fifth anniversary of the Grant Date (such five-year period, the “Option Period”).

(b)Except as set forth in Section 4(c) below, if, prior to the end of the Option Period, the Participant’s employment with the Company and all Affiliates is terminated for any reason, then the Option shall expire on the last day of the Option Period; provided, however, that the Option shall remain exercisable following such termination only to the extent that the Option was exercisable by the Participant on the date of termination.

(c)If the Participant ceases employment with the Company and its Affiliates due to a termination for Cause, the Option (whether vested or unvested) shall expire immediately upon such termination.

5.Method of Exercise.

The Option shall be exercisable in accordance with the terms of the Plan. Without limiting the generality of the foregoing, if the Stock is traded on an established market, payment of any exercise price may also be made through and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction.

6.Rights as a Stockholder.

The Participant shall not be deemed for any purpose to be the owner of any Option Shares unless, until and to the extent that: (i) this Option shall have been exercised pursuant to its terms; (ii) the Company shall have issued and delivered to the Participant the Option Shares; and (iii) the Participant’s name shall have been entered as a stockholder of record with respect to such Option Shares on the books of the Company, including through the direct registration system of the Company’s transfer agent. The Company shall cause the actions described in clauses (ii) and (iii) of the preceding sentence to occur promptly following settlement as contemplated by this Agreement, subject to compliance with applicable laws.

7.Authority of the Committee.

This Agreement and the Option awarded hereunder shall be subject to such rules and regulations as the Committee shall adopt pursuant to the Plan. All decisions of the Committee upon any question arising under the Plan or under this Agreement shall be final, conclusive and binding upon the Participant and any person claiming any interest in the Award made under this Agreement.

8.Tax Withholding.

The Company shall have the right to require the Participant to remit to the Company an amount sufficient to satisfy federal, state, local, foreign or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates, held in book-entry position through the direct registration system of the Company’s transfer agent, for such shares, or prior to the issuance or vesting of such shares, as applicable. The obligations of the Company hereunder shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant or to utilize any other withholding method prescribed by the Committee from time to time.

9.Plan Terms.

10.No Employment Rights.

The Option Award pursuant to this Agreement shall not give the Participant any right to remain employed with the Company or any Affiliate.

11.Amendment.

The terms of this Option Award as evidenced by this Agreement may be amended by the Committee without the approval of the Participant, subject however to the limitations set out in the Plan, or may be amended by written agreement of the Participant and the Company. The Company reserves the right to amend the Plan at any time, subject to any limitations set out in the Plan.

12.Electronic Participation.

The Company may, in its sole discretion, decide to deliver any documents related to this Agreement by electronic means. The Participant hereby consents to receive such documents by electronic delivery, including through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

13.Participant Acknowledgment.

By accepting this Award electronically, the Participant hereby acknowledges that he or she has received and read the Plan and this Agreement and that he or she agrees to be bound by all of the terms and conditions of the Option Award as set forth in this Agreement, subject to the terms and conditions of the Plan. The Participant hereby further acknowledges and agrees that his or her right to receive or retain this Award, any amount received pursuant to this Award (in cash or shares of Stock), and any profit or gain realized in connection with this Award, is subject to cancellation and recoupment in accordance with the Company’s Claw-back Policy, as in force from time to time. The Participant understands that the Participant (and not the Company or any of its Affiliates) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences to the Participant that may arise as a result of the transactions contemplated by this Agreement. The Participant acknowledges that he or she has consulted with any tax advisors he or she thinks advisable in connection with the Option Award, and is not relying, and will not rely, on the Company or any Affiliate for any tax advice.

[Remainder of page intentionally blank]

IN WITNESS WHEREOF, this Option Award Agreement has been executed by the Company and the Participant as of the day first written above.



	BRIGHTSPHERE INVESTMENT GROUP INC.



	By:
	Its:

	The Participant acknowledges that, by accepting this Award electronically, he or she accepts this Award and agrees to be bound by the terms and conditions set forth in this Agreement and the Plan document.

BRIGHTSPHERE INVESTMENT GROUP INC.

OPTION AWARD AGREEMENT

THIS OPTION AWARD AGREEMENT (this “Agreement”), is entered into as of April 21, 2020, by and between BrightSphere Investment Group Inc. (the “Company”), and Suren Rana (the “Participant”).

WHEREAS, pursuant to the terms of the Amended and Restated Employment Agreement effective April 15, 2020 between BrightSphere Inc. (“BrightSphere”) and the Participant (as it may be amended from time to time, the “Employment Agreement”), BrightSphere agreed to provide for the grant of the option to acquire shares of Stock (the “Option”) provided for herein to the Participant on the terms and subject to the conditions set forth herein;

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that it is in the best interests of the Company and its stockholders to grant the award provided for herein to the Participant on the terms and subject to the conditions set forth herein and approved the grant of the Option on April 15, 2020 (the “Grant Date”);

WHEREAS, the Option is being granted for purposes of (i) inducing the Participant to become, and to retain him as, Chief Executive Officer of the Company and (ii) further aligning the Participant’s interests with those of the Company’s stockholders;

WHEREAS, the grant of the Option provided for herein is issued under BrightSphere Investment Group Inc. Equity Incentive Plan, as amended from time to time (the “Plan”); and

WHEREAS, capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Plan.

NOW, THEREFORE, for and in consideration of the premises and the covenants of the parties contained in this Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.Grant of Option

(a)Grant. The Company hereby grants to the Participant a Nonstatutory Option to purchase 1,500,000 shares of Stock (such shares, the “Option Shares”), on the terms and subject to the conditions set forth in this Agreement and as otherwise provided in the Plan. The Option is not intended to qualify as an Incentive Option. The Options shall vest in accordance with Section 2. The exercise price shall be $10.00 per Option Share.

(b)Inducement. The Participant acknowledges that the grant of the Option hereunder is intended to be in consideration for, in part, the post-termination noncompetition provisions of Section 6.2(B) of the Employment Agreement.

2.Vesting

(a)Except as may otherwise be set forth in Section 2(b) or (c) below, the Option will vest 25% on December 31, 2020 (the “First Vesting Date”) and then 25% per year on the first, second, and third

anniversaries of the First Vesting Date (each, a “Vesting Date”), subject to the Participant’s continued employment with the Company or an Affiliate through such Vesting Date.

(b)Upon a Change of Control any unvested portion of the Option shall become vested and nonforfeitable as of the date immediately prior to the Change of Control.

(c)If the Participant’s employment with the Company and its Affiliates is involuntarily terminated without Cause, or the Participant resigns for Good Reason, any portion of the Option that is unvested will be immediately vested upon the date of the Participant’s termination of employment.

3.Termination of Employment or Services. Except as set forth in Section 2(c) above, if the Participant’s employment with the Company and its Affiliates terminates for any reason, the unvested portion of the Option shall be canceled immediately and the Participant shall immediately forfeit without any consideration any rights to the Option Shares subject to such unvested portion.

4.Expiration

(a)In no event shall all or any portion of the Option be exercisable after December 31, 2024 (such period, the “Option Period”).

(c) If the Participant ceases employment with the Company and its Affiliates due to a termination for Cause, the Option (whether vested or unvested) shall expire immediately upon such termination.

5.Method of Exercise and Form of Payment. The Option shall be exercisable in accordance with the terms of the Plan. Without limiting the generality of the foregoing, if the Stock is traded on an established market, payment of any exercise price may also be made through and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction. To the fullest extent permitted by the Plan, the Company shall permit the Participant to elect to satisfy tax requirements by directing the Company to withhold shares of Stock (up to the minimum statutory rate) otherwise deliverable in connection with the Award.

6.Rights as a Stockholder. The Participant shall not be deemed for any purpose to be the owner of any Option Shares unless, until and to the extent that (i) this Option shall have been exercised pursuant to its terms, (ii) the Company shall have issued and delivered to the Participant the Option Shares and (iii) the Participant’s name shall have been entered as a stockholder of record with respect to such Option Shares on the books of the Company. The Company shall cause the actions described in clauses (ii) and (iii) of the preceding sentence to occur promptly following settlement as contemplated by this Agreement, subject to compliance with applicable laws.

7.Compliance with Legal Requirements

(a)Generally. The granting and exercising of the Option, and any other obligations of the Company under this Agreement, shall be subject to all applicable U.S. federal, state and local laws, rules

and regulations, all applicable non-U.S. laws, rules and regulations and to such approvals by any regulatory or governmental agency as may be required. The Participant agrees to take all steps that the Committee or the Company determines are reasonably necessary to comply with all applicable provisions of U.S. federal and state securities law and non-U.S. securities law in exercising the Participant’s rights under this Agreement.

(b)Tax Withholding. The Participant shall be subject to the tax withholding terms of the Plan with respect to the Option. Without limiting the foregoing, whenever Option Shares are issued pursuant to the exercise of the Option, the Company and its Affiliates shall have the right to require the Participant to remit to the Company or an Affiliate an amount sufficient to satisfy federal, state, local, foreign or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates, held in book-entry position through the direct registration system of the Company’s transfer agent, for such shares.

8.Claw-Back Policy. Notwithstanding anything in this Agreement to the contrary, the Participant’s right to receive and retain this Option, to receive or retain any Option Shares and to retain any profit or gain realized by the Participant in connection with the sale or holding of the Option Shares, is subject to forfeiture, cancellation, recoupment, rescission, payback, setoff or other similar action in accordance with the Company’s Claw-Back Policy, which includes the ability of the Company to clawback upon a termination of employment for Cause. The Participant’s receipt of this Option shall be deemed to constitute the Participant’s acknowledgment of and consent to the Company’s application, implementation and enforcement of the Claw-Back Policy and any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, without further consideration or action.

9.Restrictive Covenants. Without limiting any other non-competition, non-solicitation, non-disparagement or non-disclosure or other similar agreement to which the Participant may be a party, Section 6 of the Employment Agreement (including any similar covenants in any successor employment agreement) are incorporated herein by reference and shall apply mutatis mutandis to this Agreement, and the Participant acknowledges and agrees that the grant of the Option is good and valuable consideration for continued compliance with the covenants set forth therein.

10.Miscellaneous

(a)Transferability. Notwithstanding anything to the contrary herein, the Option shall be subject to the non-transferability provisions of the Plan.

(b)Waiver. Any right of the Company contained in this Agreement may be waived in writing by the Committee. No waiver of any right hereunder by any party shall operate as a waiver of any other right, or as a waiver of the same right with respect to any subsequent occasion for its exercise, or as a waiver of any right to damages. No waiver by any party of any breach of this Agreement shall be held to constitute a waiver of any other breach or a waiver of the continuation of the same breach.

(c)Section 409A. The Option is not intended to be subject to Section 409A of the Code. Notwithstanding the foregoing or any provision of the Plan or this Agreement, if any provision of the Plan or this Agreement contravenes Section 409A of the Code or could cause the Participant to incur any tax, interest or penalties under Section 409A of the Code, the Committee may, in its sole discretion and without the Participant’s consent, modify such provision to (i) comply with, or avoid being subject to, Section 409A of the Code, or to avoid the incurrence of taxes, interest and penalties under Section 409A of the Code, and/or (ii) maintain, to the maximum extent practicable, the original intent and economic

benefit to the Participant of the applicable provision without materially increasing the cost to the Company or contravening the provisions of Section 409A of the Code. This Section 10(c) does not create an obligation on the part of the Company to modify the Plan or this Agreement and does not guarantee that the Option or the Option Shares will not be subject to interest and penalties under Section 409A.

(d)Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

(e)No Rights to Employment, Directorship or Service. Nothing contained in this Agreement shall be construed as giving the Participant any right to be retained, in any position, as an employee, consultant or director of the Company or its Affiliates or shall interfere with or restrict in any way the rights of the Company or its Affiliates, which are hereby expressly reserved, to remove, terminate or discharge the Participant at any time for any reason whatsoever.

(f)Beneficiary. The Participant may file with the Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such designation.

(g)Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and of the Participant and the beneficiaries, executors, administrators, heirs and successors of the Participant.

(h)Plan Terms. The terms of the Plan are hereby incorporated herein by reference. In the event of a conflict between the terms and conditions of this Agreement and the terms and conditions of the Plan, the terms and conditions of the Plan shall prevail.

(i)Entire Agreement. This Agreement (including those sections of the Employment Agreement that are incorporated herein by reference) together with the terms of the Plan contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect thereto.

(j)Termination and Amendment. This Option as evidenced by this Agreement may be amended by the Committee without the approval of the Participant, subject however to the limitations set out in the Plan, or may be amended by written agreement of the Participant and the Company. The Company reserves the rights to amend the Plan at any time, subject to any limitations set out in the Plan.

(k)Governing Law and Venue. This Agreement shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof.

(l)Headings. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.

(m)Counterparts. This Agreement may be executed in one or more counterparts (including via facsimile and electronic image scan (pdf)), each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

(n)Electronic Signature and Delivery. This Agreement may be accepted by return signature or by electronic confirmation. By accepting this Agreement, the Participant consents to the electronic delivery of prospectuses, annual reports and other information required to be delivered by U.S. Securities

and Exchange Commission rules (which consent may be revoked in writing by the Participant at any time upon three business days’ notice to the Company, in which case subsequent prospectuses, annual reports and other information will be delivered in hard copy to the Participant).

(o)Electronic Participation. The Company may, in its sole discretion, decide to deliver any documents related to this Agreement by electronic means. The Participant hereby consents to receive such documents by electronic delivery, including through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

(p)Participant Acknowledgment. By accepting this Award electronically, the Participant hereby acknowledges that he or she has received and read the Plan and this Agreement and that he or she agrees to be bound by all of the terms and conditions of the Option Award as set forth in this Agreement, subject to the terms and conditions of the Plan. The Participant hereby further acknowledges and agrees that his or her right to receive or retain this Award, any amount received pursuant to this Award (in cash or shares of Stock), and any profit or gain realized in connection with this Award, is subject to cancellation and recoupment in accordance with the Company’s Claw-back Policy, as in force from time to time. The Participant understands that the Participant (and not the Company or any of its Affiliates) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences to the Participant that may arise as a result of the transactions contemplated by this Agreement. The Participant acknowledges that he or she has consulted with any tax advisors he or she thinks advisable in connection with the Option Award, and is not relying, and will not rely, on the Company or any Affiliate for any tax advice.

[Remainder of page intentionally blank]

IN WITNESS WHEREOF, this Option Award Agreement has been executed by the Company and the Participant as of the day first written above.



		EXECUTIVE


		/s/ Suren Rana
		Suren Rana

		BRIGHTSPHERE INC.


		/s/ Richard Hart
		By: Richard Hart
		Its: Chief Legal Officer

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is effective as of the 15th day of April, 2020 by and between BrightSphere Inc., a Delaware corporation with an address at 200 Clarendon Street, 53rd Floor, Boston, Massachusetts 02116 (“BrightSphere”), and Suren Rana (the “Executive”).

WHEREAS, BrightSphere and the Executive previously entered into an employment agreement dated January 20, 2020 in connection with the appointment of the Executive as Chief Financial Officer (the “Original Agreement”);

WHEREAS, the Company has appointed the Executive as Chief Executive Officer (the “New Appointment”) ; and

WHEREAS, the parties desire to amend and restate the Original Agreement to reflect the New Appointment.


1.	DEFINITIONS

In this Agreement, unless the context otherwise requires:


(i)	The following terms shall have the following meanings:

“Basic Termination Payments” means (i) the Base Salary payable to Executive under Section 4.1(A) through the termination of employment, (ii) any expense reimbursements under Section 4.3 for expenses reasonably incurred in the performance of the Executive’s duties prior to termination, and (iii) the value of any unused vacation accrued to the date of termination of employment;

“Board” means the Board of Directors of the Company or any entity controlling the Company, including without limitation BrightSphere Investment Group Inc.;

“Cause” means (i) the Executive’s willful or reckless misconduct, or gross, continuing or repeated negligence in the performance of the Executive’s duties and responsibilities with respect to the Company, or his material failure to carry out directions which are reasonable in light of the Executive’s primary duties and responsibilities, or any other conduct that results in substantial injury (monetary or otherwise) to the Company or its officers, directors, employees or other agents; (ii) the Executive’s conviction of a felony (including but not limited to any felony conviction occurring prior to the Commencement Date), which has or could have a material adverse effect (monetary or otherwise) on the Company or its officers, directors, employees or other agents; (iii) the Executive’s embezzlement or misappropriation of funds, commission of any material act of dishonesty, fraud or deceit, or violation of any federal or state law applicable to the securities industry (including but not limited to any instances of such misconduct occurring prior to the Commencement Date); (iv) the Executive’s material breach of a legal or fiduciary duty owed to the Company or its officers, directors, employees or other agents; or (v) the Executive’s material breach of any provision of any agreement between the Executive and the Company and its officers, directors, employees or other agents, any Company policy or practice, or any applicable law. Notwithstanding anything in the paragraph to the contrary, this paragraph is not intended to prohibit the Executive from regular and customary critique, evaluation,

discipline, or as applicable, termination of the employment or engagement of any officers, employees or agents in the course of the Executive’s duties for the Company.

“COBRA” means Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended, and Section 4980B of the Code.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commencement Date” means January 20, 2019;

“Company” means BrightSphere, any company that is a subsidiary or holding company (up to and including the ultimate holding company) of BrightSphere and any subsidiary of any such holding company, and any person or entity directly or indirectly controlling, being controlled by, or under common control with BrightSphere.

“Compensation Committee” means the Compensation Committee of the Board of Directors of the Company, if any; provided, however, if there should be no Compensation Committee, then such reference to the Compensation Committee shall be to the Board of Directors or other authorized body or officer of the Company performing the described function;

“Confidential Information” means any confidential information concerning the business or affairs of the Company or concerning the Company’s customers, clients, vendors, suppliers, business partners, advisors, consultants or employees, including but not limited to the following: any financial information or valuation information concerning the Company, and any other proprietary information of the Company, including that relating to the demonstrably anticipated business of the Company that the Executive obtains, develops or learns in the course of the Executive’s employment by the Company and any and all memoranda, notes, reports, documents, emails and other media containing the foregoing. Confidential Information specifically includes: any inventions (whether or not patentable), works of authorship, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by the Executive during the term of the Executive’s employment, all business, technical and financial information, including trade secrets, information about clients, including their names, addresses and investment history; information about employees or applicants for employment, their compensation, qualifications and performance levels; all information regarding fees, commissions and compensation; all investment, advisory, technical or research data, and financial models developed by the Company and its employees; methods of operation; manuals, books and notes regarding the Company’s products and services; all drawings, designs, patterns, devices, methods, techniques, compilations, processes, product specifications and guidelines, future plans, cost and pricing information, computer programs, formulas, and equations; the cost to the Company of supplying its products and services; written business records, files, documents, specifications, plans and compilations of information concerning the business of the Company; and reports, correspondence, records account lists, price lists, budgets, indices, invoices and telephone records that the Executive obtains, develops, or learns in the course of the Executive’s employment by BrightSphere. “Confidential Information” shall include the Confidential Information of any third party disclosed to the Company under confidentiality obligations and any information which a reasonable person would consider confidential due to the circumstances surrounding disclosure or due to the nature of the information. Confidential Information shall not apply to information that has

been independently developed by others or has become generally known through no wrongful act on the part of the Executive or any other person having an obligation of confidentiality to the Company;

“Disability” means that the Executive has, for 90 consecutive days or 180 days in any 12-month period, been disabled as a result of any mental or physical illness in a manner which prevents him from performing the essential functions of his job, with or without reasonable accommodation determined by an independent qualified medical doctor selected by BrightSphere. In such circumstances, the Executive hereby agrees to submit to a medical examination by a qualified medical practitioner appointed by the Company and reasonably acceptable to the Executive;

“Good Reason” means the occurrence of one or more of the following without the Executive’s consent, other than on account of Executive’s inability to perform his duties on account of mental or physical disability: (i) a material reduction of the Executive’s Base Salary, if such reduction is not related to either individual or corporate performance; (ii) a material, adverse change to the Executive’s current title of Chief Executive Officer of the Company; (iii) a material change in the geographic location at which the Executive must regularly perform services for the Company (which, for purposes of this Agreement, means a change in Executive’s principal place of employment by 50 or more miles, provided that such relocation materially increases the time of the Executive’s commute); or (iv) the Company’s material breach of any provision of this Agreement. The Executive must provide written notice of termination for Good Reason to the Company within thirty (30) days after the event constituting Good Reason. The Company shall have a period of thirty (30) days in which it may correct the act or failure to act that constitutes the grounds for Good Reason as set forth in the Executive’s notice of termination. If the Company does not correct the act or failure to act, the Executive may terminate his employment for Good Reason not later than (30) days following the end of the Company’s thirty (30)-day cure period. If the event constituting Good Reason is a material reduction in Base Salary described in subsection (i) above, the Executive’s Base Salary for purposes of the severance calculations shall be determined without regard to the material reduction described in subsection (i);

“Notice Period” means the period ending sixty (60) days from the date of written notice to terminate the Agreement;

“Term” means the period beginning on the Commencement Date and continuing through the earlier of the fifth (5th) anniversary of the Commencement Date and the Termination Date;

“Termination Date” means the date when the Executive ceases to be employed by the Company;

“Trade Secrets” means proprietary data and information relating to the business of the Company including, but not limited to, technical or nontechnical data, formulae, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, product plans or lists of actual or potential customers or suppliers which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic

value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; and


(ii)	References to Sections are, unless otherwise stated, to sections of this Agreement; and


(iii)	Headings to Sections are for convenience only and shall not affect the construction or interpretation of this Agreement.


2.	EMPLOYMENT

2.1BrightSphere hereby agrees to employ the Executive and the Executive hereby agrees to accept employment with BrightSphere, on the terms and conditions more fully set forth herein.

2.2The Executive’s employment will continue from the Commencement Date until the fifth (5th) anniversary of the Commencement Date, unless earlier terminated in accordance with the provisions of Section 5 below. Provided, however, that the Executive’s employment is at all times on an at-will basis, and either the Executive or BrightSphere may terminate this Agreement with or without Cause, for any reason or no reason, consistent with the provisions of Section 5 herein.

2.3The Executive’s title shall be President and Chief Executive Officer, and the Executive’s responsibilities shall include such duties and responsibilities that may be assigned by the Board or its designee, consistent with the title of President and Chief Executive Officer of a company in the asset management business. The Executive was appointed to serve as a member of the Board on April 15, 2020; his appointment will be subject to re-election in accordance with then prevailing corporate governance procedures.

2.4The Executive will use reasonable best efforts to faithfully, diligently and efficiently perform such duties on behalf of the Company consistent with such office as may be assigned to the Executive from time to time by the Company. The Executive agrees to abide by the reasonable rules, regulations, instructions, personnel practices and policies of the Company, including without limitation BrightSphere’s Code of Ethics as well as its Insider Trading Policy, and any changes therein which may be adopted from time to time, all of which the Executive was first notified in writing. The Executive’s actions as an employee of BrightSphere shall at all times be consistent with the interests of the Company. Under no circumstances will the Executive knowingly take any action contrary to the best interests of the Company.

2.5The Executive may manage his investments and engage in charitable or civic activities. All outside activities remain subject to BrightSphere’s Insider Trading and other applicable policies. Executive must give his duties to the Company first priority and such activities must not interfere with the performance of his duties for the Company. Notwithstanding the foregoing, other than with regard to the Executive’s duties to the Company, the Executive will not accept any other employment, perform any consulting services, or serve on the board of directors or governing body of any other for-profit business throughout the Executive’s employment hereunder, except with the prior written consent of the Board.

2.6The Executive warrants that in entering into this Agreement and performing the obligations hereunder, the Executive has not and will not be in breach of any terms or obligations of any other employment or agreement. The Executive further represents that the performance of all the terms of this Agreement and as an employee of the Company has not, does not and will not breach any pre-existing agreement (i) to refrain from competing, directly or indirectly, with the business of such previous

employer or any other party or (ii) to keep in confidence proprietary information, knowledge or data acquired by the Executive prior to employment with the Company.


3.	PLACE OF WORK

The Executive shall primarily perform the duties assigned hereunder at BrightSphere’s office presently located in Boston, Massachusetts, and is expected to travel to and work at other Company offices and other appropriate places within or outside the United States for reasonable periods of time.


4.	COMPENSATION AND BENEFITS

In consideration of the services performed by the Executive, and subject to performance of the Executive’s duties and responsibilities to the Company, BrightSphere shall provide the Executive with the compensation and benefits described below:

4.1Compensation: The Executive’s compensation package shall consist of the following:

(A)Base Salary: BrightSphere will pay the Executive a base salary of Six Hundred and Fifty Thousand Dollars ($650,000) per annum (the “Base Salary”), such Base Salary to be paid in accordance with BrightSphere’s normal payroll procedures and subject to applicable tax deductions and withholdings. The salary shall be reviewed annually and any modification and the amount of any modification shall be in the Compensation Committee’s absolute discretion and notified to the Executive in writing.

(B)Equity Compensation: Pursuant to the Original Agreement, the Executive was provided a nonqualified stock option to purchases 2,070,000 shares of Common Stock of BrightSphere Investment Group Inc. (the “Original Award”). Executive shall retain the Original Award subject to the terms and conditions set forth in the Original Agreement and the Option Award Agreement related to such Original Award. Within a reasonable time following the date hereof, the Executive shall be offered a nonqualified stock option to purchase 1,500,000 shares of Common Stock of BrightSphere Investment Group Inc. (the “CEO Option Award”) at an exercise price per share equal to $10.00. The CEO Option Award shall be granted under, and be subject to the terms of, the BrightSphere Investment Group Inc. Equity Incentive Plan (the “Equity Incentive Plan”). Twenty five percent (25%) of the CEO Option Award shall be vested on December 31, 2020 (the “Initial Vesting Date”), with the remaining seventy-five percent (75%) vesting in equal twenty percent (25%) annual installments over a three-year period beginning on the first anniversary of the Initial Vesting Date, subject to the Executive’s continued employment with the Company through to such vesting date. Upon a “Change of Control,” as defined in the Equity Incentive Plan, any unvested portion of the CEO Option Award shall vest. The CEO Option Award shall have a term of four (4) years from the Initial Vesting Date and will be subject to the Company’s Claw-Back Policy, as in effect from time to time, which includes the ability of the Company to clawback upon a termination of employment for Cause. The CEO Option Award is being offered as an inducement to the Executive in connection with the Company’s appointment of the Executive as its Chief Executive Officer and in consideration for the post-termination noncompetition provisions of Section 6.2(B). The CEO Option Award shall be evidenced in writing by a stock option agreement, which will include such other terms as the Board deems appropriate.

(C)Other Incentive Compensation. The Executive may be eligible to receive one or more cash bonus awards if the Compensation Committee, in its sole discretion, determines that the Executive has provided exceptional performance. Notwithstanding the foregoing, the Executive shall not be entitled to participate in any equity compensation, annual bonus or long-term incentive plan that is made available to other executives of the Company. Without limiting the generality of the foregoing, during the Term, the Executive shall not be eligible to receive any additional award under the Equity Incentive Plan, or any other restricted stock, restricted stock unit, option, phantom stock or any other equity or equity-based award with respect to any securities of BrightSphere Investment Group Inc. or any of its affiliates.

4.2Benefits: Except as provided herein, the Executive shall be eligible to receive the various benefits offered by BrightSphere to its executive employees, including holidays, vacation, medical, dental, disability and life insurance, and such other benefits as may be determined from time to time. These benefits may be modified or eliminated from time to time at the sole discretion of BrightSphere. Where a particular benefit is subject to a formal plan, eligibility to participate in and receive the particular benefit shall be governed solely by the applicable plan document. Provided, however, should BrightSphere have a severance plan in effect as of Executive’s termination date, Executive will not be eligible for any payments under the plan unless otherwise approved by the Compensation Committee in its sole discretion.

4.3Expenses: The Executive shall be entitled to reimbursement for reasonable out-of-pocket expenses incurred for the Company’s business (including travel and entertainment) in accordance with the policies, practices and procedures of BrightSphere. The Executive shall comply with all Company policies, practices and procedures, and all codes of ethics or business conduct applicable to the Executive’s position, as may be in effect from time to time.


5.	TERMINATION OF AGREEMENT/EMPLOYMENT

5.1Payments Upon Termination. Either party may terminate the Executive’s employment prior to the fifth (5th) anniversary of the Commencement Date in accordance with the provisions of this Agreement. In such event, this Section 5.1 shall set forth and govern BrightSphere’s obligations to make any post-termination payments to the Executive on account of such termination. For the avoidance of doubt, if the Executive continues in employment with the Company through the fifth (5th) anniversary of this Agreement, the Agreement shall terminate and the Executive shall have no entitlement to any payments under this Section 5.1, other than, if the Executive’s employment is terminated, the Basic Termination Payments.

(A)Termination for Cause: BrightSphere may terminate this Agreement and the Executive’s employment for Cause immediately upon written notice. Upon termination of the Executive’s employment with BrightSphere in accordance with this Section 5.1(A), BrightSphere only shall be obligated to pay the Executive the Basic Termination Payments. Executive shall not be entitled to receive any other compensation or benefit, contingent or otherwise, except as otherwise required by applicable law.

(B)Termination with Notice: Either party may terminate this Agreement and the Executive’s employment for any reason by giving the other party not less than sixty (60) days’ advance notice in writing. If such notice is served by either party, BrightSphere shall be entitled, in its sole and absolute discretion, to terminate the Executive’s employment at any time during the Notice Period and to provide payment in lieu of notice.

(C)Termination by the Executive with Notice:


i.	Upon termination, BrightSphere shall pay the Executive the Basic Termination Payments; and

ii.

In the event that BrightSphere terminates this Agreement prior to the end of the Notice Period (without Cause), it shall pay the Executive an amount equivalent to his Base Salary and a taxable cash lump sum amount equivalent to BrightSphere’s share of the cost of medical and dental benefits with respect to similarly situated active employees of the Company for the remainder of the Notice Period.

(D)By BrightSphere with Notice or by Executive for Good Reason: In the event that BrightSphere terminates this Agreement without Cause (including in such event that the Executive dies or is terminated as a result of Disability during the Notice Period relating to a termination by the Company without Cause), or if the Executive terminates this Agreement for Good Reason, BrightSphere will pay the Executive the following:


i.	The Basic Termination Payments;

ii.

In the event that BrightSphere terminates this Agreement prior to the end of the Notice Period (without Cause), it shall pay the Executive an amount equivalent to his Base Salary and a taxable cash lump sum amount equivalent to BrightSphere’s share of the cost of medical and dental benefits with respect to similarly situated active employees of BrightSphere, for the remainder of the Notice Period;

iii.

An amount equal to twelve (12) months of the Executive’s Base Salary at the rate in effect immediately before the Termination Date, which shall be payable to the Executive, subject to applicable withholdings, in equal installments in accordance with the Company’s customary payroll schedule following the Termination Date, commencing with the first regular payroll falling on or following the sixtieth day after the Termination Date, with any installments that would otherwise have been paid between the Termination Date and the date of the first payment being paid with the first payment;

iv.

Provided that the Executive timely elects continued coverage pursuant to COBRA under the Company’s group medical plan, the Company shall reimburse the Executive for (or make direct payment to the carrier of) that portion of the cost of COBRA coverage incurred by the Executive equal to the premium costs incurred by the Company for similarly-situated active participants in the applicable group medical plan of the Company, for the lesser of twelve (12) months following the Termination Date and the period during which the Executive continues to be covered by COBRA coverage. Notwithstanding the foregoing, the benefits payable under this Section 5.1(D)(iv) shall be subject to and paid only if and to the extent permitted by the Patient Protection and Affordable Care Act of 2010 and other applicable law, and provided further that, at the Company’s election, such health care continuation may be paid or reimbursed on a taxable basis; and


v.	The Executive’s Option Award shall continue to vest during the Notice Period. Continued “vesting” means that the portion of the Option Award

that would vest during the Notice Period were the Executive to continue in employment through the end of the Notice Period will no longer be subject to the requirement of continued service, but (i) except to the extent withheld to pay related employment taxes, the shares subject to the Option Award may not be transferred until the specified vesting dates in the applicable award agreement, and (ii) the Option Award will be subject to forfeiture pursuant to the Company’s Claw-Back Policy or in the event of a breach by the Executive of any restrictive covenants under this Agreement or under any other agreement with the Company. For the avoidance of doubt, the portion of the Option Award that has not vested shall be forfeited upon the Termination Date


vi.	The Executive’s CEO Option Award shall vest immediately and will no longer be subject to the requirement of continued service but the CEO Option Award will be subject to forfeiture pursuant to the Company’s Claw-Back Policy or in the event of a breach by the Executive of any restrictive covenants under this Agreement or under any other agreement with the Company.

(E)Resignation by the Executive Prior to Expiration of the Notice Period: Should the Executive voluntarily resign prior to the expiration of a Notice Period (regardless of the party providing the notice), BrightSphere shall pay the Executive the Basic Termination Payments and the Executive shall not be entitled to receive any other compensation or benefit, contingent or otherwise, except as otherwise required by applicable law.

(F)Termination upon the Executive’s Death or Disability. In the event that the Executive dies during the Term or BrightSphere terminates his employment as a result of Disability (other than during the Notice Period as set forth in Section 5.1 (D) above), BrightSphere shall pay the Executive or his estate the following:


1.	The Basic Termination Payments; and


2.	With respect to a termination due to the Executive’s Disability, the benefit described in Section 5.1(D)(iv); and

(G)Release/Post-Termination Payments: The receipt of the compensation and benefits provided in this Section 5.1 to the Executive shall be in full and final satisfaction of the Executive’s rights and claims under this Agreement (or otherwise). Payment of any post-termination compensation or benefits to the Executive in excess of the Basic Termination Payments shall be in lieu of severance. Notwithstanding anything in this Section 5, if the Executive wishes to receive any portion of the compensation and benefits provided in this Section 5.1 in excess of the Basic Termination Benefits, the Executive (or his estate, in the event of his death) will be required to timely execute and deliver to the Company, and not revoke, a separation agreement substantially in the form provided by the Company (the “Separation Agreement”). The Separation Agreement shall include a complete customary release of claims against the Company and its directors, officers, employees and agents (the “Release”), and noncompetition obligations in form substantially similar to those set forth in Section 6.2(B). The Executive shall execute the Separation Agreement and deliver it to the Company within forty-seven (47) days following the Termination Date, and the Release must have become effective by its terms on or before the sixtieth (60th) day following the Termination Date, provided, however, that the Executive shall

have at least seven (7) business days to rescind acceptance of the Separation Agreement. To the extent applicable, the Separation Agreement is intended to constitute an agreement made in connection with the Executive’s cessation of or separation from employment that is exempt from the definition of “noncompetition agreement,” within the meaning of Section 24L(a) of Chapter 149 of the General Laws of the Commonwealth of Massachusetts.

(H)Equity: Unless otherwise provided herein or at the discretion of the Compensation Committee, the Executive’s rights and entitlements to any equity compensation, including the CEO Option Award, shall be governed by the terms of the applicable plan and award documents, subject to any Claw-Back Policy of the Company, which includes the ability of the Company to clawback upon a termination of employment for Cause.

5.2Resignations: Upon termination of the Executive’s employment, the Executive will also automatically resign, and will automatically be deemed to have resigned, from all positions with the Company (including any board membership positions), unless otherwise provided by the Board. The Executive hereby grants the Company an irrevocable power of attorney (with right of substitution) to take actions in the Executive’s name to effectuate such resignations.

5.3Upon termination (or suspension) of the Executive’s employment or this Agreement, regardless of the reason, the Executive shall deliver to the Company all books, documents, materials described in Section 6, and all credit cards, keys and other property of the business of the Company which may be in the Executive’s possession, custody or control.


6.	RESTRICTIVE COVENANTS

6.1Company Confidential Information, Trade Secrets and Intellectual Property.

(A)The Executive acknowledges and agrees that during employment with the Company, the Executive will acquire Confidential Information and Trade Secrets in relation to the Company and that through dealing closely with customers and clients the Executive will form close connections with and influence over those customers and clients. The Executive acknowledges and agrees that the Confidential Information, Trade Secrets and business relationships of the Company are necessary for the Company to continue to operate its business. The Executive further acknowledges and agrees that the Company has a reasonable, necessary and legitimate business interest in protecting its Confidential Information, Trade Secrets and business relationships and that the following covenants are reasonable and necessary to protect such business interests and are given for good and valuable consideration. Accordingly, the Executive will comply with the policies and procedures of the Company for protecting Confidential Information and Trade Secrets and not use, reproduce, distribute, disclose or otherwise disseminate the Confidential Information and Trade Secrets or any physical embodiments thereof other than as required by applicable law or for the proper performance of his duties and responsibilities to the Company, and may in no event take any action causing, or fail to take the action necessary in order to prevent, his disclosure of any Confidential Information and Trade Secrets disclosed to or developed by the Executive to lose its character or cease to qualify as Confidential Information or Trade Secrets.

(B)Nothing in this Agreement prohibits or limits the Executive from initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before, the Securities and Exchange Commission, the Department of Justice,

FINRA, any other self-regulatory organization or any other governmental, law enforcement, or regulatory authority, regarding this agreement and its underlying facts and circumstances, or any reporting of, investigation into, or proceeding regarding suspected violations of law, and that the Executive is not required to advise or seek permission from the Company before engaging in any such activity; provided, however, in connection with any such activity, the Executive must inform such authority that the information the Executive is providing is confidential.

(C)BrightSphere shall not seek to hold the Executive criminally or civilly liable under any Federal or State trade secret law for the disclosure of a Trade Secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. In addition, BrightSphere shall not seek to hold the Executive criminally or civilly liable under any Federal or State trade secret law for the disclosure of a Trade Secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Finally, if the Executive files a lawsuit for retaliation for reporting a suspected violation of law, the Executive may disclose the Trade Secret to his attorney and use the trade secret information in the court proceeding so long as the Executive files any document containing the Trade Secret under seal and does not disclose the Trade Secret, except pursuant to court order.

(D)The Executive hereby assigns and transfers to the Company any and all rights, title and interest in and to all intellectual property existing now or in the future, including, without limitation, patent rights, copyrights, the right to prepare derivative works, trade secret rights, sui generis database rights, moral and artist rights, and all other intellectual and industrial property rights of any sort in the United States and throughout the world now or hereafter known relating to any and all research, information, client lists, and all other investment, technical and research data any and all inventions (whether or not patentable), works of authorship, designs, trademarks, tradenames, domain names, processes, business plans, financial models, methods, know-how, ideas and information made, conceived, developed or reduced to practice, in whole or in part, by the Executive or on the Executive’s behalf for the benefit of the Company (“Company Intellectual Property”). With regards to any rights, title or interest that cannot be assigned pursuant to the foregoing provision, the Executive agrees to assign and transfer without further consideration any and all such rights, title and interest to the Company and to take any and all such further actions as are appropriate or necessary to accomplish the foregoing and hereby irrevocably appoints the Company to act as the Executive’s attorney for purposes of perfecting the Company’s interest in such Company Intellectual Property.

6.2Noncompetition.

(A)Restrictions During the Term. The Executive hereby agrees that all times during the Term, the Executive shall not whether alone or jointly, or as a partner, manager, member, director, officer, employee, consultant, representative, agent or joint venturer of any other party, directly or indirectly join, finance, invest in, lend to, be employed by, consult for, or otherwise participate in, or be connected with, any business that competes with the Company anywhere the Company does business and/or render services; provided however, that this limitation shall not apply to any equity interest that Executive has in a company whose stock is publicly traded so long as Executive does not own more than 5% of such equity.

(B)Post-Termination Restrictions. The Executive hereby agrees that for one year following the Term (and as further extended by applicable law), the Executive shall not whether alone or jointly, or as a partner, manager, member, director, officer, employee, consultant,

representative, agent or joint venture of any other party, directly or indirectly engage or participate in any business that competes with or is substantially similar to the business of the Company, by engaging in any activities or services in the Covered Region that (i) are similar to the activities and services the Executive performed or managed for the Company at any time during the last two years of the Executive’s employment, or (ii) may reasonably require the Executive to use or disclose Confidential Information. For purposes of this section, the “Covered Region” includes any area in which the Executive provided services or had a material presence or influence on behalf of the Company during any time within the two years immediately preceding the termination of the Executive’s employment with the Company; provided however, that this limitation shall not apply to any equity interest that Executive has in a company whose stock is publicly traded so long as Executive does not own more than 5% of such equity.

6.3Non-Solicitation. The Executive hereby agrees that all times during the Term, the Notice Period, and for a period of twelve (12) months after expiration of the later of the Notice Period or the Termination Date, the Executive shall not whether alone or jointly, or as a partner, manager, member, director, officer, employee, consultant, representative, agent or joint venturer of any other party, directly or indirectly:

(A)Solicit, induce or in any manner attempt to solicit or induce any person employed by or acting as a director, officer or agent of, or consultant to the Company to leave such position and become employed or associated with any other entity or business; or

(B)Employ or attempt to employ or negotiate or arrange the employment or engagement by any other person, of any person who to the Executive’s knowledge was within six months prior to the Notice Period, a director or senior employee of the Company who was personally known to the Executive; or

(C)Solicit, interfere with, disrupt or attempt to disrupt any relationship, contractual or otherwise, between the Company and any of its reasonably known respective clients, customers, partners or joint venturers.

6.4The Executive agrees that the duration and geographic scope of the restrictive provisions set forth in Section 6 herein are reasonable. In the event that any court determines that the duration or geographic scope, or both, are unreasonable and that such provision is to that extent unenforceable, the Executive agrees that the provision shall remain in full force and effect for the greatest time period and in the greatest area that would not render it unenforceable. The Executive also agrees that damages are an inadequate remedy for any breach of the restrictive provisions in this Agreement and that the Company shall, whether or not it is pursuing any potential remedies at law, be entitled to equitable relief in the form of preliminary and permanent injunctions without bond or other security upon any actual or threatened breach of the restrictive covenants herein.

6.5The Executive shall comply as is reasonable with (a) every applicable rule of law in the United States of which Executive knows or reasonably should have known and (b) the rules and regulations of the regulatory authorities of the United States insofar as the same are applicable to employment hereunder and of which Executive knows or reasonably should have known, and (c) every regulation of the Company with respect to insider trading, of which the Executive is first notified in writing.

6.6The Executive shall not during the Term, the Notice Period and at all times following the Termination Date:

(A)Divulge or communicate to any person or persons any Confidential Information (except to employees of, or to attorneys, accountants or other professionals engaged by, the Company with a need to know such information);

(B)Use any Confidential Information for the Executive’s own purposes or for any purposes other than those of the Company; or

(C)Through any failure to exercise all reasonable due care and diligence cause any unauthorized disclosure of any Confidential Information.

6.7All notes, memoranda, records, lists of customers and suppliers and employees, correspondence, documents, computer and other discs and tapes, data listing, codes, designs and drawings and other documents and material whatsoever (whether made or created by the Executive or otherwise) belonging to the business of the Company (and any copies of the same) (a) shall be and remain the property of the Company, and (b) shall be delivered by the Executive to the Company from time to time on demand and in any event on the termination of this Agreement.

6.8The Executive shall not at any time during the Term, Notice Period, and all times following the Termination Date make any untrue, misleading or disparaging statement with respect to the Company (or any of its directors, officers, employees or agents). Nor shall the Executive attribute to himself the investment performance of any single investment or group of investments managed by the Company or claim responsibility for having sourced, recommended, or made any such investment or group of investments. The Company shall use its commercially reasonable best efforts not to make, shall not authorize, and shall instruct its directors and executive officers not to make, any untrue, misleading or disparaging statements about the Executive at any time during the Term, Notice Period, and at all times following the Termination Date. Notwithstanding anything in the paragraph to the contrary, this paragraph is not intended to prohibit the Executive from regular and customary critique, evaluation, or discipline of any officers, directors, employees or agents in the course of the Executive’s duties for the Company.

6.9At no time after the Termination Date shall the Executive directly or indirectly represent himself as being interested in or employed by or in any way connected with the Company, other than as a former employee or officer of the Company. After the Termination Date, Executive shall not in the course of carrying on any trade or business claim, represent or otherwise indicate any present association with the Company for the purpose of carrying on or retaining any business, represent or otherwise indicate any past association with the Company, other than as a former employee or officer of the Company.

6.10From and after the Termination Date, the Executive agrees to cooperate in the transition of his duties and in the business affairs of the Company as may be reasonably requested by the Company. From and after the Termination Date, the Executive shall cooperate reasonably with the Company in the defense or prosecution of any claims or actions then in existence or that may be brought or threatened in the future against or on behalf of the Company, including any claims or actions against its officers, directors, agents and employees. The Executive’s cooperation in connection with such matters, actions, and claims shall include, without limitation, being available (at mutually agreeable times and locations, which agreement shall not be unreasonably withheld by the Executive, and without unreasonably interfering with his other professional obligations) to meet with the Company and its legal or other designated advisors, regarding any matters in which he has been involved; to prepare for any proceeding (including, without limitation, depositions, consultation, discovery, or trial); to provide truthful affidavits; to assist with any audit, inspection, proceeding, or other inquiry; and to act as a witness to provide truthful testimony in connection with any litigation or other legal proceeding affecting the Company. The

Company shall reimburse the Executive’s reasonable expenses incurred under this Section 6.10, including without limitation, any attorneys’ fees incurred in connection with such cooperation.

6.11The obligations of the Executive under this Section 6 shall survive termination of this Agreement to the extent provided in each sub-section. Further, the provisions of this Section 6 shall continue to apply with full force and effect should the Executive transfer to or otherwise become employed by any Company entity, or be promoted or reassigned to positions other than that held by the Executive as of the Effective Date of this Agreement. The Company shall have the right to communicate the Executive’s ongoing obligations hereunder to any entity or individual with whom the Executive becomes employed by or otherwise engaged following termination of employment with BrightSphere.


7.	GENERAL

7.1This Agreement shall be deemed to have been made in the Commonwealth of Massachusetts, shall take effect as an instrument under seal, and the validity, interpretation and performance of this Agreement shall be governed by, and construed in accordance with, the internal law of Commonwealth of Massachusetts, without giving effect to conflict of law principles. Both parties also agree that any action, demand, claim or counterclaim relating to the Executive’s employment, any termination of employment and/or the terms and provisions of this Agreement or to its alleged breach by either party, shall be commenced in Massachusetts as set forth in Section 8 below. Both parties further acknowledge that venue shall exclusively lie in Massachusetts and that material witnesses and documents may be located in Massachusetts.

7.2The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes all oral or written employment, consulting, change of control or similar agreements between the Executive, on the one hand, and the Company, on the other hand, except as otherwise set forth herein. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. This Agreement is binding upon and inures to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business, although the obligations of the Executive are personal and may be performed only by him.

7.3All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by overnight carrier, registered or certified mail, return receipt requested, postage prepaid, addressed as follows:


If to the Executive:	Suren Rana

At the notice address most recently maintained on file with the Company’s Human Resource department


If to the Company:	BrightSphere Inc.

200 Clarendon Street, 53^rd Floor

Boston, Massachusetts 02116

Attn: Chief Legal Officer

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when delivered to the addressee.

7.4The Company shall indemnify the Executive to the full extent permitted by applicable law and shall maintain reasonable insurance coverage (including but not limited to directors’ and officers’ liability insurance coverage) with respect to the Executive’s performance of his duties and responsibilities.

7.5All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. The Executive shall bear all expense of, and be solely responsible for, all federal, state and local taxes due with respect to any payment received under this Agreement.

7.6In the event of a change in ownership or control of the Company under Section 280G of the Code, if it shall be determined that any payment or distribution in the nature of compensation (within the meaning of section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, the aggregate present value of the Payments under this Agreement shall be reduced (but not below zero) to the Reduced Amount (defined below) if and only if the Accounting Firm (described below) determines that the reduction will provide the Executive with a greater net after-tax benefit than would no reduction. No reduction shall be made unless the reduction would provide the Executive with a greater net after-tax benefit. The determinations under this Section 7.6 shall be made as follows:

(A)The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Payments under this Agreement without causing any Payment under this Agreement to be subject to the Excise Tax (defined below), determined in accordance with Section 280G(d)(4) of the Code. The term “Excise Tax” means the excise tax imposed under Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.

(B)Payments under this Agreement shall be reduced on a nondiscretionary basis in such a way as to minimize the reduction in the economic value deliverable to the Executive. Where more than one Payment has the same value for this purpose and they are payable at different times, they will be reduced on a pro rata basis. Only amounts payable under this Agreement shall be reduced pursuant to this Section 7.6.

(C)All determinations to be made under this Section 7.6 shall be made by an independent certified public accounting firm selected by the Company and agreed to by the Executive immediately prior to the change-in-ownership or -control transaction (the “Accounting Firm”). The Accounting Firm shall provide its determinations and any supporting calculations both to the Company and the Executive within ten (10) days of the transaction. Any such determination by the Accounting Firm shall be binding upon the Company and the Executive. All

of the fees and expenses of the Accounting Firm in performing the determinations referred to in this Section 7.6 shall be borne solely by the Company.

7.7The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.


8.	ARBITRATION

(A)Except as provided herein, any and all disputes that arise out of or relate to the terms of this Agreement shall be resolved through final and binding arbitration. SUCH ARBITRATION SHALL BE IN LIEU OF ANY TRIAL BEFORE A JUDGE AND/OR JURY, AND THE EXECUTIVE AND THE COMPANY EXPRESSLY WAIVE ALL RIGHTS TO HAVE SUCH DISPUTES RESOLVED VIA TRIAL BEFORE A JUDGE AND/OR JURY. Such disputes shall include, without limitation, claims for breach of contract or of the covenant of good faith and fair dealing, claims of discrimination, and claims under any federal, state or local law or regulation now in existence or hereinafter enacted and as amended from time to time concerning in any way the Executive’s employment with the Company or its termination. The only claims not covered by this requirement to arbitrate disputes, which shall instead be resolved pursuant to applicable law in a court of competent jurisdiction based in Massachusetts, are: (i) claims for benefits under the unemployment insurance benefits; (ii) claims for workers’ compensation benefits under any of the Company’s workers’ compensation insurance policy or fund; (iii) claims under the National Labor Relations Act; (iv) claims brought by the Company for alleged violations of Section 6 of this Agreement; and (v) claims that may not be arbitrated as a matter of law.

(B)Arbitration will be conducted by and before JAMS in Boston, Massachusetts in accordance with the JAMS Employment Arbitration Rules and Procedures (the “JAMS Rules”). To the extent that anything in this arbitration section conflicts with any arbitration procedures required by applicable law, the arbitration procedures required by applicable law shall govern.

(C)During the course of arbitration, the Company will bear the cost of the arbitrator’s fee. The arbitrator will not have authority to award attorneys’ fees unless a statute or contract at issue in the dispute authorizes the award of attorneys’ fees to the prevailing party. In such case, the arbitrator shall have the authority to make an award of attorneys’ fees as required or permitted by the applicable statute or contract.

(D)The arbitrator shall issue a written award that sets forth the essential findings of fact and conclusions of law on which the award is based. The arbitrator shall have the authority to award any relief authorized by law in connection with the asserted claims or disputes. The arbitrator’s award shall be subject to correction, confirmation, or vacation, as provided by applicable law setting forth the standard of judicial review of arbitration awards. Judgment upon the arbitrator’s award may be entered in any court having jurisdiction thereof.


9.	SECTION 409A COMPLIANCE

(A)General. It is intended that compensation paid or delivered to the Executive pursuant to this Agreement is either paid in compliance with, or is exempt from, Section 409A of the Code and the regulations promulgated thereunder (“Section 409A”). If the Executive notifies the Company (with specificity as to the reason therefor) that he believes that any provision of this

Agreement (or of any award of compensation, including equity compensation or benefits) would cause him to incur any additional tax or interest under Section 409A and the Company concurs with such belief or the Company independently makes such determination, the Company shall, after consultation with the Executive, to the extent legally permitted and to the extent it is possible to timely reform the provision to avoid taxation under Section 409A, reform such provision to attempt to comply with Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Section 409A. To the extent that any provision hereof is modified in order to comply with or be exempt from Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to both the Executive and the Company of the applicable provision without violating the provisions of Section 409A but in any case Executive hereby agrees that all personal income taxes on his compensation under this Agreement and all penalties and interest with respect to such personal income taxes, if any, are his own responsibility. In no event shall the Company have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A, or any similar Treasury regulations or IRS rules or regulations that replace or supersede Treasury Regulation Section 1.409A after the Effective Date and that relate to the same or similar subject matter as Treasury Regulation Section 1.409A.

(B)Amounts Payable On Account of Termination: To the extent necessary to comply with Section 409A, for the purposes of determining when amounts subject to Section 409A that are payable upon Executive’s termination of employment under this Agreement will be paid, “termination of employment” or words of similar import, as used in this Agreement, shall be construed as the date that Executive first incurs a “separation from service” within the meaning of Section 409A.

(C)Reimbursement: Any taxable reimbursement of business or other expenses as specified under this Agreement shall be subject to the following conditions: (A) the expenses eligible for reimbursement in one taxable year shall not affect the expenses eligible for reimbursement in any other taxable year; (B) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; (C) the right to reimbursement shall not be subject to liquidation or exchange for another benefit; and (D) in accordance with the policies, practices and procedures of the Company.

(D)Specified Employees: If the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard to any payment that is considered deferred compensation subject to Section 409A payable on account of a “separation from service,” such payment or benefit shall be made, or provided at the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service”, and (ii) the date of the Executive’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this section (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, with interest thereon calculated at the long-term applicable federal rate (annual compounding) under Section 1274(d) of the Code in effect on the date of termination of employment, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

(E)Interpretative Rules: In applying Section 409A to amounts paid pursuant to this Agreement, any right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.


10.	ACKNOWLEDGMENTS

The Executive acknowledges that: (i) the Executive received this Agreement at least ten (10) business days prior to the date on which Section 6.2(B) is to be effective; (ii) the Executive has the right to consult with counsel prior to signing this Agreement; and (iii) the Executive has had a full and adequate opportunity to read, understand and discuss with the Executive’s advisors, including legal counsel, the terms and conditions contained in this Agreement prior to signing hereunder.

IN WITNESS WHEREOF this Agreement has been executed as of the day and year first above written.



		EXECUTIVE


		/s/ Suren Rana
		Suren Rana

		BRIGHTSPHERE INC.


		/s/ Richard Hart
		By: Richard Hart
		Its: Chief Legal Officer

Time-Vesting

Restricted Stock Grant - U.S. Taxpayers

BRIGHTSPHERE INVESTMENT GROUP INC.

EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

THIS RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”) is made effective as of , 20 (the “Grant Date”) between BrightSphere Investment Group Inc., a Delaware corporation (the “Company”), and the Participant (the “Participant”).

WITNESSETH:

WHEREAS, the Company has adopted the BrightSphere Investment Group Inc. Equity Incentive Plan (the “Plan”) for the benefit of the employees of the Company and its Subsidiaries; and

WHEREAS, the Committee, as defined in the Plan, has authorized the Award to the Participant of shares of Restricted Stock under the Plan, on the terms and conditions set forth in the Plan and in this Agreement;

NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Participant hereby agree as follows:

1. Definitions.

Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Plan.

2. Award of Restricted Stock.

The Committee hereby grants to the Participant, on the Grant Date set forth above, of Restricted Stock.

3. Vesting of Restricted Stock.

The shares of Restricted Stock will become non-forfeitable and the Risk of Forfeiture shall lapse on the vesting dates (the “Vesting Dates”) and in the proportions described below, provided that the Participant is continuously employed by the Company or an Affiliate until the applicable Vesting Date.



Percentage of Shares Vesting		Vesting Date

4. Forfeiture of Restricted Stock.

If the Participant’s employment with the Company and its Affiliates terminates prior to a Vesting Date for any reason, except as described in Section 5, any unvested Restricted Stock (including any dividends related to the Restricted Stock for which the record date occurs on or after the date of termination) shall automatically be forfeited, all of the Participant’s rights to and interest in the Restricted Stock shall terminate without payment of consideration, and the beneficial ownership of the forfeited Restricted Stock shall be transferred to an employee benefit trust established by the Company or a Subsidiary of the Company. Notwithstanding the foregoing, any consideration paid by the Participant for any share of Restricted Stock shall be returned to the Participant upon forfeiture of such share of Restricted Stock.

5. Accelerated Vesting Upon Certain Terminations.

If the Participant’s employment with the Company and its Affiliates terminates prior to a Vesting Date as a result of the Participant’s: (a) death; (b) disability for which the Participant qualifies for benefits under a long-term disability plan sponsored by the Company or an Affiliate; or (c) involuntary termination without Cause, the Committee may, in its sole discretion, (i) provide that the Participant’s Restricted Stock shall not be forfeited in accordance with Section 4, and that the Risk of Forfeiture shall lapse and all unvested Restricted Stock shall become fully vested and nonforfeitable upon such termination of employment; or (ii) where the Participant is subject to a post-termination covenant not to compete with the Company and/or its Affiliates that constitutes a Risk of Forfeiture, provide that the Participant’s Restricted Stock shall not be forfeited in accordance with Section 4 upon such termination of employment, and that the Risk of Forfeiture shall lapse upon the earlier of (A) the applicable Vesting Date; and (B) the expiration of the noncompete period, provided, however, that the Participant complies with the covenant not to compete through to such date.

In addition, notwithstanding Section 4, the Committee may, upon the termination of a Participant’s employment in circumstances which, in the sole discretion of the Committee, which need not be uniformly applied with respect to similarly situated Participants, constitute a “retirement” from the Company and its Affiliates, elect to Accelerate all or a portion of the Restricted Stock, which shall thereupon become fully vested and nonforfeitable.

6. Restriction on Transferability.

Except as provided in the Plan, until the lapse of the Risk of Forfeiture, the Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated, except by beneficiary designation, will or by the laws of descent and distribution upon the death of the Participant.

7. Voting and Dividend Rights.

The Participant shall have all the rights of a stockholder of Stock, including the right to vote the shares of Restricted Stock, until such shares are forfeited. The Participant shall have the right to receive, free of any Risk of Forfeiture (but subject to applicable withholding taxes) all cash and non-cash dividends paid with respect to shares of Restricted Stock until such shares are forfeited.

8. Book Entry Form of Shares.

Shares of Restricted Stock shall be held in book-entry position through the direct registration system of the Company’s transfer agent, provided however that the Committee may determine that a stock certificate shall be issued in respect of such shares of Restricted Stock. Until the Risk of Forfeiture with respect to the Restricted Stock has lapsed, each such book entry or certificate shall include an appropriate legend referring to the terms, conditions and restrictions described in the Plan and this Agreement.

9. Authority of the Committee.

This Agreement and the Restricted Stock awarded hereunder shall be subject to such rules and regulations as the Committee shall adopt pursuant to the Plan. All decisions of the Committee upon any question arising under the Plan or under this Agreement shall be final, conclusive and binding upon the Participant and any person claiming any interest in the Award made under this Agreement.

10. Withholding.

The Company shall have the right to require the Participant to remit to the Company an amount sufficient to satisfy federal, state, local, foreign or other withholding tax requirements if, when, and to the extent required by law in connection with the Participant’s Award of Restricted Stock (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates, held in book-entry position through the direct registration system of the Company’s transfer agent, for such shares, or prior to the vesting of such shares, as applicable. The obligations of the Company under the Plan shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to a Participant or to utilize any other withholding method prescribed by the Committee from time to time.

11. Plan Terms.

12. No Employment Rights.

The Award of Restricted Stock pursuant to this Agreement shall not give the Participant any right to remain employed with the Company or any Affiliate.

13. Amendment.

The terms of this Award of Restricted Stock as evidenced by this Agreement may be amended by the Committee without the approval of the Participant, subject however to the limitations set out in the Plan, or may be amended by written agreement of the Participant and the Company. The Company reserves the right to amend the Plan at any time, subject to any limitations set out in the Plan.

14. Governing Law.

This Agreement shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof.

15. Tax Consequences; Election Under Section 83(b) of the Code.

Upon issuance of the Restricted Stock hereunder, the Participant may make an election to be taxed upon such award under Section 83(b) of the Code. To effect such election, the Participant must file an appropriate election with the Internal Revenue Service within thirty (30) days after the Grant Date and otherwise in accordance with applicable Treasury Regulations. The Participant shall rely solely on the determinations of the Participant’s tax advisors or the Participant’s own determinations, and not on any statements or representations by the Company or any of its Affiliates or agents, with regard to all tax matters arising in connection with this Award, including any election under Section 83(b). The Participant shall notify the Company in writing if the Participant files an election pursuant to Section 83(b) of the Code with the Internal Revenue Service within 30 days from the date of the execution of this Agreement. If the Participant is an employee of the Company or a Subsidiary of the Company, the Participant’s employer intends, in the event the Company does not receive from the Participant evidence of a Section 83(b) election filing, to claim a tax deduction for any amount which would be taxable to the Participant in the absence of such an election.

16. Participant Acknowledgment.

By executing this Agreement, the Participant hereby acknowledges that he or she has received and read the Plan and this Agreement and that he or she agrees to be bound by all of the terms and conditions of the Restricted Stock Award as set forth in this Agreement, subject to the terms and conditions of the Plan. The Participant hereby further acknowledges and agrees that his or her right to receive or retain this Award, any amount received pursuant to this Award (in cash or shares of Stock), and any profit or gain realized in connection with this Award, is subject to cancellation and recoupment in accordance with the Company’s Claw-back Policy, as in force from time to time. The Participant understands that the Participant (and not the Company or any of its Affiliates) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences to the Participant that may arise as a result of the transactions contemplated by this Agreement, including without limitation the filing of an election under Section 83(b) of the Code if the Participant deems it to be appropriate. The Participant acknowledges that he or she has consulted with any tax advisors he or she thinks advisable in connection with the Restricted Stock, and is not relying, and will not rely, on the Company or any Affiliate for any tax advice, including, without limitation, in relation to any election pursuant to Section 83(b) of the Code. By executing this Agreement, the Participant hereby consents to receive documents in relation to the Plan and this Award by electronic delivery, and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or by a third party designated by the Company.



	BRIGHTSPHERE INVESTMENT GROUP INC.



	By:
	Its:

	The Participant acknowledges that, by accepting this Award electronically, he or she accepts this Award and agrees to be bound by the terms and conditions set forth in this Agreement and the Plan document.

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is effective as of the 15th day of April, 2020 by and between BrightSphere Inc., a Delaware corporation with an address at 200 Clarendon Street, 53rd Floor, Boston, Massachusetts 02116 (“BrightSphere”), and Christina Wiater (the “Employee”).


1.	DEFINITIONS

In this Agreement, unless the context otherwise requires:


(i)	The following terms shall have the following meanings:

“Basic Termination Payments” means (i) the Salary payable to Employee under Section 4.1(A) through the termination of employment, (ii) any expense reimbursements under Section 4.3 for expenses reasonably incurred in the performance of the Employee’s duties prior to termination, and (iii) the value of any unused vacation accrued to the date of termination of employment;

“Board” means the Board of Directors of the Company or any entity controlling the Company, including without limitation BrightSphere Investment Group Inc.;

“Cause” means (i) the Employee’s willful or reckless misconduct, or gross, continuing or repeated negligence in the performance of the Employee’s duties and responsibilities with respect to the Company, or her material failure to carry out directions which are reasonable in light of the Employee’s primary duties and responsibilities, or any other conduct that results in substantial injury (monetary or otherwise) to the Company or its officers, directors, employees or other agents; (ii) the Employee’s conviction of a felony (including but not limited to any felony conviction occurring prior to the Commencement Date), which has or could have a material adverse effect (monetary or otherwise) on the Company or its officers, directors, employees or other agents; (iii) the Employee’s embezzlement or misappropriation of funds, commission of any material act of dishonesty, fraud or deceit, or violation of any federal or state law applicable to the securities industry (including but not limited to any instances of such misconduct occurring prior to the Commencement Date); (iv) the Employee’s material breach of a legal or fiduciary duty owed to the Company or its officers, directors, employees or other agents; or (v) the Employee’s material breach of any provision of any agreement between the Employee and the Company and its officers, directors, employees or other agents, any Company policy or practice, or any applicable law. Notwithstanding anything in the paragraph to the contrary, this paragraph is not intended to prohibit the Employee from regular and customary critique, evaluation, discipline, or as applicable, termination of the employment or engagement of any officers, employees or agents in the course of the Employee’s duties for the Company. Prior to terminating the Employee for Cause pursuant to clauses (i) and (iv) above, the Company shall provide the Employee with written notice detailing the alleged acts constituting Cause and fifteen (15) days thereafter with an opportunity to cure such acts to the extent such acts are able to be cured.

“COBRA” means Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended, and Section 4980B of the Code.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commencement Date” means April 15, 2020;

“Company” means BrightSphere, any company that is a subsidiary or holding company (up to and including the ultimate holding company) of the Company and any subsidiary of any such holding company, and any person or entity directly or indirectly controlling, being controlled by, or under common control with BrightSphere.

“Confidential Information” means any confidential information concerning the business or affairs of the Company or concerning the Company’s customers, clients, vendors, suppliers, business partners, advisors, consultants or employees, including but not limited to the following: any financial information or valuation information concerning the Company, and any other proprietary information of the Company, including that relating to the demonstrably anticipated business of the Company that the Employee obtains, develops or learns in the course of the Employee’s employment by the Company and any and all memoranda, notes, reports, documents, emails and other media containing the foregoing. Confidential Information specifically includes: any inventions (whether or not patentable), works of authorship, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by the Employee during the term of the Employee’s employment, all business, technical and financial information, including trade secrets, information about clients, including their names, addresses and investment history; information about employees or applicants for employment, their compensation, qualifications and performance levels; all information regarding fees, commissions and compensation; all investment, advisory, technical or research data, and financial models developed by the Company and its employees; methods of operation; manuals, books and notes regarding the Company’s products and services; all drawings, designs, patterns, devices, methods, techniques, compilations, processes, product specifications and guidelines, future plans, cost and pricing information, computer programs, formulas, and equations; the cost to the Company of supplying its products and services; written business records, files, documents, specifications, plans and compilations of information concerning the business of the Company; and reports, correspondence, records account lists, price lists, budgets, indices, invoices and telephone records that the Employee obtains, develops, or learns in the course of the Employee’s employment by BrightSphere. “Confidential Information” shall include the Confidential Information of any third party disclosed to the Company under confidentiality obligations and any information which a reasonable person would consider confidential due to the circumstances surrounding disclosure or due to the nature of the information. Confidential Information shall not apply to information that has been independently developed by others or has become generally known through no wrongful act on the part of the Employee or any other person having an obligation of confidentiality to the Company;

“Disability” means that the Employee has, for 90 consecutive days or 180 days in any 12-month period, been disabled as a result of any mental or physical illness in a manner which prevents him from performing the essential functions of her job, with or without reasonable

accommodation determined by an independent qualified medical doctor selected by BrightSphere. In such circumstances, the Employee hereby agrees to submit to a medical examination by a qualified medical practitioner appointed by the Company and reasonably acceptable to the Employee;

“Equity Plan” means the BrightSphere Investment Group Inc. Equity Incentive Plan (as amended from time to time).

“Good Reason” means the occurrence of one or more of the following without the Employee’s consent, other than on account of Employee’s inability to perform her duties on account of mental or physical disability: (i) any reduction of the Employee’s Salary; (ii) an adverse change to the Employee’s current title of Principal Financial Officer of the Company or reporting relationship; (iii) a material adverse reduction in the Employee’s duties; (iv) a material change in the geographic location at which the Employee must regularly perform services for the Company (which, for purposes of this Agreement, means a change in Employee’s principal place of employment by 50 or more miles, provided that such relocation materially increases the time of the Employee’s commute); or (v) the Company’s material breach of any provision of this Agreement. The Employee must provide written notice of termination for Good Reason to the Company within thirty (30) days after the event constituting Good Reason. The Company shall have a period of thirty (30) days in which it may correct the act or failure to act that constitutes the grounds for Good Reason as set forth in the Employee’s notice of termination. If the Company does not correct the act or failure to act, the Employee may terminate her employment for Good Reason not later than (30) days following the end of the Company’s thirty (30)-day cure period. If the event constituting Good Reason is a material reduction in Salary described in subsection (i) above, the Employee’s Salary for purposes of the severance calculations shall be determined without regard to the material reduction described in subsection (i);

“Notice Period” means the period ending sixty (60) days from the date of written notice to terminate the Agreement;

“Term” means the period beginning on the Commencement Date and continuing through the Termination Date;

“Termination Date” means the date when the Employee ceases to be employed by the Company;


(ii)	References to Sections are, unless otherwise stated, to sections of this Agreement; and


(iii)	Headings to Sections are for convenience only and shall not affect the construction or interpretation of this Agreement.


2.	EMPLOYMENT

2.1BrightSphere hereby agrees to employ the Employee and the Employee hereby agrees to accept employment with BrightSphere, on the terms and conditions more fully set forth herein.

2.2The Employee’s employment will continue from the Commencement Date until it is terminated in accordance with the provisions of Section 5 below. Provided, however, that the Employee’s employment is at all times on an at-will basis, and either the Employee or BSIG may terminate this Agreement with or without Cause, for any reason or no reason, consistent with the provisions of Section 5 herein.

2.3The Employee’s title shall be SVP, Principal Financial Officer, and the Employee’s responsibilities shall include such duties and responsibilities that may be assigned by the President and Chief Executive Officer of BrightSphere Inc. consistent with the Employee’s title as SVP. Principal Financial Officer.

2.4The Employee will use reasonable best efforts to faithfully, diligently and efficiently perform such duties on behalf of the Company consistent with such office as may be assigned to the Employee from time to time by the Company. The Employee agrees to abide by the reasonable rules, regulations, instructions, personnel practices and policies of the Company, including without limitation BrightSphere’s Code of Ethics as well as its Insider Trading Policy, and any changes therein which may be adopted from time to time, all of which the Employee was first notified in writing. The Employee’s actions as an employee of BrightSphere shall at all times be consistent with the interests of the Company. Under no circumstances will the Employee knowingly take any action contrary to the best interests of the Company.

3.PLACE OF WORK

The Employee shall primarily perform the duties assigned hereunder at the Company’s office presently located in Boston, Massachusetts, and is expected to travel to and work at other Company offices and other appropriate places within or outside the United States for reasonable periods of time as necessary; provided that such travel can be undertaken safely and is consistent with applicable guidance from federal, state or local authorities. Notwithstanding the foregoing, the Employee shall have the reasonable discretion to telework consistent with the Company’s existing policies.


4.	COMPENSATION AND BENEFITS

In consideration of the services performed by the Employee, and subject to performance of the Employee’s duties and responsibilities to the Company, BrightSphere shall provide the Employee with the compensation and benefits described below:

4.1Compensation: BrightSphere will, effective as of January 1, 2020, pay the Employee a salary of Four Hundred and Twenty-Five Thousand Dollars ($425,000) per annum (the “Salary”), such Salary to be paid in accordance with BrightSphere’s normal payroll procedures and subject to applicable tax deductions and withholdings.

4.2Benefits: Except as provided herein, the Employee shall be eligible to receive the various benefits offered by BrightSphere to its employees, including holidays, vacation, medical, dental, disability and life insurance, and such other benefits as may be determined from time to time. These benefits may be modified or eliminated from time to time at the sole discretion of BrightSphere. Where a particular

benefit is subject to a formal plan, eligibility to participate in and receive the particular benefit shall be governed solely by the applicable plan document. Provided, however, should BrightSphere have a severance plan in effect as of Employee’s Termination Date, Employee will not, subject to Section 5.1(D) be eligible for any payments under the plan unless otherwise approved by the Compensation Committee in its sole discretion.

4.3Expenses: The Employee shall be entitled to reimbursement for reasonable out-of-pocket expenses incurred for the Company’s business (including travel and entertainment) in accordance with the policies, practices and procedures of BrightSphere. The Employee shall comply with all Company written policies, practices and procedures, and all codes of ethics or business conduct applicable to the Employee’s position, as may be in effect from time to time and which have been made available to the Employee.

5.TERMINATION OF AGREEMENT/EMPLOYMENT

5.1Payments Upon Termination. Either party may terminate the Employee’s employment in accordance with the provisions of this Agreement. In such event, this Section 5.1 shall set forth and govern BrightSphere’s obligations to make any post-termination payments to the Employee on account of such termination.

(A)Termination for Cause: BrightSphere may terminate this Agreement and the Employee’s employment for Cause immediately upon written notice. Upon termination of the Employee’s employment with BrightSphere in accordance with this Section 5.1(A), Employee shall not be entitled to receive any other compensation or benefit, contingent or otherwise, except as otherwise required by applicable law.

(B)Termination with Notice: Either party may terminate this Agreement and the Employee’s employment for any reason by giving the other party not less than sixty (60) days’ advance notice in writing. If such notice is served by either party, BrightSphere shall be entitled, in its sole and absolute discretion, to terminate the Employee’s employment at any time during the Notice Period and to provide payment in lieu of notice.

(C)Termination by the Employee with Notice:


i.	BrightSphere shall pay the Employee the Basic Termination Payments during the Notice Period; and


ii.	In the event that BrightSphere terminates this Agreement prior to the end of the Notice Period (without Cause), it shall pay the Employee an amount equivalent to her Salary and a taxable cash lump sum amount equivalent to BrightSphere’s share of the cost of medical and dental benefits with respect to similarly situated active employees of the Company for the remainder of the Notice Period.

(D)By BrightSphere with Notice or by Employee for Good Reason: In the event that BrightSphere terminates this Agreement without Cause (including in such event that the Employee dies or is terminated as a result of Disability during the Notice Period relating to a termination by the Company without Cause), or the Employee terminates this Agreement for Good Reason, BrightSphere will pay the Employee as follows:


i.	BrightSphere shall pay the Employee the Basic Termination Payments during the Notice Period;

ii.

In the event that BrightSphere terminates this Agreement prior to the end of the Notice Period (without Cause), it shall pay the Employee an amount equivalent to her Salary for the remainder of the Notice Period in one lump sum less applicable taxes and withholdings, if any, under state and federal law. In addition, to the extent the Employee is covered by the Company’s medical, dental, and vision insurance plans and elects within the appropriate time period to continue coverage under COBRA, the Company will pay for the Employee’s COBRA premiums for the remainder of the Notice Period;


iii.	A lump sum cash payment equal to the Employee’s Salary at the rate in effect immediately before the Termination Date, for a period of twelve (12) months, reduced by any amount of Salary paid to the Employee pursuant to clause (ii) above;

iv.

In addition, to the extent the Employee is covered by the Company’s medical, dental, and vision insurance plans and elects within the appropriate time period to extend her coverage under COBRA, the Company will pay for the Employee’s COBRA premiums for 12 months, reduced by any amount of COBRA premiums paid to or for the Employee pursuant to clause (ii) above following the termination of this Agreement prior to the end of the Notice Period; and

Accelerated vesting of the Employee’s restricted stock and restricted stock unit awards such that all unvested shares shall be deemed vested as of the Termination Date. Notwithstanding the foregoing, all of the awards will remain subject to forfeiture pursuant to the Company’s Claw-Back Policy or in the event of a breach by the Employee of any restrictive covenants under this Agreement or under any other agreement with the Company.

(E)Resignation by the Employee Prior to Expiration of the Notice Period: Should the Employee voluntarily resign prior to the expiration of a Notice Period (regardless of the party providing the notice), BrightSphere shall pay the Employee the Basic Termination Payments and the Employee shall not be entitled to receive any other compensation or benefit, contingent or otherwise, except as otherwise required by applicable law.

(F)Termination upon the Employee’s Death or Disability. In the event that the Employee dies during the Term or BrightSphere terminates her employment as a result of Disability (other than during the Notice Period as set forth in Section 5.1(D) above), BrightSphere shall pay the Employee or her estate the following:


1.	The Basic Termination Payments; and


2.	With respect to a termination due to the Employee’s Disability, the benefit described in Section 5.1(D)(iv); and


3.	Continuation of the Employee’s Salary for some period of time following the Notice Period, at the discretion of the Compensation Committee;

(G)Release/Post-Termination Payments: Other than with respect to the Additional Consideration (as such term is defined in Section 7.1 below), the receipt of the compensation and benefits provided in this Section 5.1 to the Employee shall be in full and final satisfaction of the Employee’s rights and claims under this Agreement (or otherwise). Payment of any post-termination compensation or benefits to the Employee in excess of the Basic Termination Payments shall be in lieu of severance. Notwithstanding anything in this Section 5, if the Employee wishes to receive any portion of the compensation and benefits provided in this Section 5.1 in excess of the Basic Termination Benefits, the Employee (or her estate, in the event of her death) will be required to timely execute and deliver to the Company, and not revoke, a separation agreement substantially in the form provided by the Company (the “Separation Agreement”). The Separation Agreement shall include a complete customary release of claims against the Company and its directors, officers, employees and agents (the “Release”). The Employee shall execute the Separation Agreement and deliver it to the Company within forty-five (45) days following the Termination Date. For a period of seven (7) days following the date the Employee executes the Release, Employee may revoke the Release by delivering a written statement to the Company. To the extent applicable, the Separation Agreement is intended to constitute an agreement made in connection with the Employee’s cessation of or separation from employment that is exempt from the definition of “noncompetition agreement,” within the meaning of Section 24L(a) of Chapter 149 of the General Laws of the Commonwealth of Massachusetts.

5.2Resignations: Upon termination of the Employee’s employment, the Employee will also automatically resign, and will automatically be deemed to have resigned, from all positions with the Company (including any board membership positions), unless otherwise provided by the Board. The Employee hereby grants the Company an irrevocable power of attorney (with right of substitution) to take actions in the Employee’s name to effectuate such resignations.

5.3Upon termination (or suspension) of the Employee’s employment or this Agreement, regardless of the reason, the Employee shall deliver to the Company all books, documents, materials described in Section 6, and all credit cards, keys and other property of the business of the Company which may be in the Employee’s possession, custody or control.

6.RESTRICTIVE COVENANTS

6.1Company Confidential Information, Trade Secrets and Intellectual Property.

(A)The Employee acknowledges and agrees that during employment with the Company, the Employee will acquire Confidential Information and Trade Secrets in relation to the Company and that through dealing closely with customers and clients the Employee will form close connections with and influence over those customers and clients. The Employee acknowledges and agrees that the Confidential Information, Trade Secrets and business relationships of the Company are necessary for the Company to continue to operate its business. The Employee further acknowledges and agrees that the Company has a reasonable, necessary and legitimate business interest in protecting its Confidential Information, Trade Secrets and business

relationships and that the following covenants are reasonable and necessary to protect such business interests and are given for good and valuable consideration. Accordingly, the Employee will comply with the policies and procedures of the Company for protecting Confidential Information and Trade Secrets and not use, reproduce, distribute, disclose or otherwise disseminate the Confidential Information and Trade Secrets or any physical embodiments thereof other than as required by applicable law or for the proper performance of her duties and responsibilities to the Company, and may in no event take any action causing, or fail to take the action necessary in order to prevent, her disclosure of any Confidential Information and Trade Secrets disclosed to or developed by the Employee to lose its character or cease to qualify as Confidential Information or Trade Secrets.

(B)Nothing in this Agreement prohibits or limits the Employee from initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before, the Securities and Exchange Commission, the Department of Justice, FINRA, any other self-regulatory organization or any other governmental, law enforcement, or regulatory authority, regarding this agreement and its underlying facts and circumstances, or any reporting of, investigation into, or proceeding regarding suspected violations of law, and that the Employee is not required to advise or seek permission from the Company before engaging in any such activity; provided, however, in connection with any such activity, the Employee must inform such authority that the information the Employee is providing is confidential.

(C)BrightSphere shall not seek to hold the Employee criminally or civilly liable under any Federal or State trade secret law for the disclosure of a Trade Secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. In addition, BrightSphere shall not seek to hold the Employee criminally or civilly liable under any Federal or State trade secret law for the disclosure of a Trade Secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Finally, if the Employee files a lawsuit for retaliation for reporting a suspected violation of law, the Employee may disclose the Trade Secret to her attorney and use the trade secret information in the court proceeding so long as the Employee files any document containing the Trade Secret under seal and does not disclose the Trade Secret, except pursuant to court order.

(D)The Employee hereby assigns and transfers to the Company any and all rights, title and interest in and to all intellectual property existing now or in the future, including, without limitation, patent rights, copyrights, the right to prepare derivative works, trade secret rights, sui generis database rights, moral and artist rights, and all other intellectual and industrial property rights of any sort in the United States and throughout the world now or hereafter known relating to any and all research, information, client lists, and all other investment, technical and research data any and all inventions (whether or not patentable), works of authorship, designs, trademarks, tradenames, domain names, processes, business plans, financial models, methods, know-how, ideas and information made, conceived, developed or reduced to practice, in whole or in part, by the Employee or on the Employee’s behalf for the benefit of the Company (“Company Intellectual Property”). With regards to any rights, title or interest that cannot be assigned pursuant to the foregoing provision, the Employee agrees to assign and transfer without further consideration any and all such rights, title and interest to the Company and to take any and all such further actions as are appropriate or necessary to accomplish the foregoing and hereby irrevocably appoints the Company to act as the Employee’s attorney for purposes of perfecting the Company’s interest in such Company Intellectual Property.

6.2Noncompetition. The Employee hereby agrees that all times during the Term, the Employee shall not whether alone or jointly, or as a partner, manager, member, director, officer, employee, consultant, representative, agent or joint venturer of any other party, directly or indirectly join, finance, invest in, lend to, be employed by, consult for, or otherwise participate in, or be connected with, any business that competes with the Company anywhere the Company does business and/or render services; provided however, that this limitation shall not apply to (1) any equity interest that Employee has in a company whose stock is publicly traded so long as Employee does not own more than 5% of such equity.

6.3Non-Solicitation. The Employee hereby agrees that all times during the Term, the Notice Period, and for a period of twelve (12) months after expiration of the later of the Notice Period or the Termination Date, the Employee shall not whether alone or jointly, or as a partner, manager, member, director, officer, employee, consultant, representative, agent or joint venturer of any other party, directly or indirectly:

(B)Employ or attempt to employ or negotiate or arrange the employment or engagement by any other person, of any person who to the Employee’s knowledge was within six months prior to the Notice Period, a director or senior employee of the Company who was personally known to the Employee; or

6.4The Employee agrees that the duration and geographic scope of the restrictive provisions set forth in Section 6 herein are reasonable. In the event that any court determines that the duration or geographic scope, or both, are unreasonable and that such provision is to that extent unenforceable, the Employee agrees that the provision shall remain in full force and effect for the greatest time period and in the greatest area that would not render it unenforceable. The Employee also agrees that damages are an inadequate remedy for any breach of the restrictive provisions in this Agreement and that the Company shall, whether or not it is pursuing any potential remedies at law, be entitled to equitable relief in the form of preliminary and permanent injunctions without bond or other security upon any actual or threatened breach of the restrictive covenants herein.

6.5The Employee shall comply as is reasonable with (a) every applicable rule of law in the United States of which Employee knows or reasonably should have known and (b) the rules and regulations of the regulatory authorities of the United States insofar as the same are applicable to employment hereunder and of which Employee knows or reasonably should have known, and (c) every regulation of the Company with respect to insider trading, of which the Employee is first notified in writing.

6.6The Employee shall not during the Term, the Notice Period and at all times following the Termination Date:

(B)Use any Confidential Information for the Employee’s own purposes or for any purposes other than those of the Company; or

(C)Through any failure to exercise all reasonable due care and diligence cause any unauthorized disclosure of any Confidential Information.

6.7All notes, memoranda, records, lists of customers and suppliers and employees, correspondence, documents, computer and other discs and tapes, data listing, codes, designs and drawings and other documents and material whatsoever (whether made or created by the Employee or otherwise) belonging to the business of the Company (and any copies of the same) (a) shall be and remain the property of the Company, and (b) shall be delivered by the Employee to the Company from time to time on demand and in any event on the termination of this Agreement.

6.8The Employee shall not at any time during the Term, Notice Period, and all times following the Termination Date make any untrue, misleading or disparaging statement with respect to the Company (or any of its directors, officers, employees or agents). Nor shall the Employee attribute to himself the investment performance of any single investment or group of investments managed by the Company or claim responsibility for having sourced, recommended, or made any such investment or group of investments. The Company shall use its commercially reasonable best efforts not to make, shall not authorize, and shall instruct its directors and executive officers not to make, any untrue, misleading or disparaging statements about the Employee at any time during the Term, Notice Period, and at all times following the Termination Date. Notwithstanding anything in the paragraph to the contrary, this paragraph is not intended to prohibit the Employee from regular and customary critique, evaluation, or discipline of any officers, directors, employees or agents in the course of the Employee’s duties for the Company.

6.9At no time after the Termination Date shall the Employee directly or indirectly represent himself as being interested in or employed by or in any way connected with the Company, other than as a former employee or officer of the Company. After the Termination Date, Employee shall not in the course of carrying on any trade or business claim, represent or otherwise indicate any present association with the Company for the purpose of carrying on or retaining any business, represent or otherwise indicate any past association with the Company, other than as a former employee or officer of the Company.

6.10From and after the Termination Date, the Employee agrees to cooperate in the transition of her duties and in the business affairs of the Company as may be reasonably requested by the Company. From and after the Termination Date, the Employee shall cooperate reasonably with the Company in the defense or prosecution of any claims or actions then in existence or that may be brought or threatened in the future against or on behalf of the Company, including any claims or actions against its officers, directors, agents and employees. The Employee’s cooperation in connection with such matters, actions, and claims shall include, without limitation, being available (at mutually agreeable times and locations, which agreement shall not be unreasonably withheld by the Employee, and without unreasonably interfering with her other professional obligations) to meet with the Company and its legal or other designated advisors, regarding any matters in which he has been involved; to prepare for any proceeding (including, without limitation, depositions, consultation, discovery, or trial); to provide truthful affidavits; to assist with any audit, inspection, proceeding, or other inquiry; and to act as a witness to provide truthful testimony in connection with any litigation or other legal proceeding affecting the Company. The Employee’s cooperation shall be provided at mutually convenient times and in a mutually convenient manner. The Company shall reimburse the Employee’s reasonable expenses incurred under this Section 6.10, including without limitation, any attorneys’ fees incurred in connection with such cooperation.

6.11The obligations of the Employee under this Section 6 shall survive termination of this Agreement to the extent provided in each sub-section. Further, the provisions of this Section 6 shall continue to apply with full force and effect should the Employee transfer to or otherwise become employed by any Company entity, or be promoted or reassigned to positions other than that held by the Employee as of the Effective Date of this Agreement. The Company shall have the right to communicate the Employee’s ongoing obligations hereunder to any entity or individual with whom the Employee becomes employed by or otherwise engaged following termination of employment with BrightSphere.

7.ADDITIONAL CONSIDERATION

7.1In the event of either (i) a Change of Control (as defined in the Equity Plan) of the Company or (ii) any transaction or series of transactions resulting in the sale (in full or in partial), transfer, carve-out, spin-off, liquidation, dissolution, wind up or other disposition of a substantial majority of the Company’s business⁽¹⁾, in each case during the Term or within twelve (12) months following a termination of employment by the Company without Cause or by the Employee with Good Reason, Employee shall receive a one-time payment of $850,000 (the “Additional Consideration”) to reflect the extraordinary time commitment anticipated in such an event, such payment to be made within thirty (30) days of the triggering event giving rise to the Additional Consideration. For the avoidance of doubt, if the Employee receives the full payment pursuant to this clause, this clause shall immediately terminate following such payment and the Employee shall no longer be eligible to receive a payment hereunder. It is the intention of the parties that the Employee will only be eligible to receive an aggregate amount of $850,000 pursuant to this clause. For the avoidance of doubt, the obligation to pay the Additional Consideration shall be a joint and several obligation of BrightSphere and each entity included in the definition of ‘Company” in Section 1.1 above.

8.GENERAL

8.1This Agreement shall be deemed to have been made in the Commonwealth of Massachusetts, shall take effect as an instrument under seal, and the validity, interpretation and performance of this Agreement shall be governed by, and construed in accordance with, the internal law of Commonwealth of Massachusetts, without giving effect to conflict of law principles. Both parties also agree that any action, demand, claim or counterclaim relating to the Employee’s employment, any termination of employment and/or the terms and provisions of this Agreement or to its alleged breach by either party, shall be commenced in Massachusetts as set forth in Section 9 below. Both parties further acknowledge that venue shall exclusively lie in Massachusetts and that material witnesses and documents may be located in Massachusetts.

8.1The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes all oral or written employment, consulting, change of control or similar agreements between the Employee, on the one hand, and the Company, on the other hand, except as otherwise set forth herein. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

______________________

(1) “substantial majority of the Company’s business” shall mean at least 80% of the Company’s operating businesses or Affiliates (as defined and reported in the Company’s 10-K filing for the period ended December 31, 2019)

This Agreement is binding upon and inures to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business, although the obligations of the Employee are personal and may be performed only by her.

8.2The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes all oral or written employment, consulting, change of control or similar agreements between the Employee, on the one hand, and the Company, on the other hand, except as otherwise set forth herein. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. This Agreement is binding upon and inures to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business, although the obligations of the Employee are personal and may be performed only by her.

8.3All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by overnight carrier, registered or certified mail, return receipt requested, postage prepaid, or via electronic mail addressed as follows:


If to the Employee:	Christina Wiater

At the notice address most recently maintained on file with the Company’s Human Resource department


If to the Company:	BrightSphere Inc.

200 Clarendon Street, 53^rd Floor

Boston, Massachusetts 02116

Attn: Chief Legal Officer

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when delivered to the addressee.

8.4The Company shall indemnify the Employee to the full extent permitted by applicable law and shall maintain reasonable insurance coverage (including but not limited to directors’ and officers’ liability insurance coverage) with respect to the Employee’s performance of her duties and responsibilities.

8.5All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. The Employee shall bear all expense of, and be solely responsible for, all federal, state and local taxes due with respect to any payment received under this Agreement.

8.6In the event of a change in ownership or control of the Company under Section 280G of the Code, if it shall be determined that any payment or distribution in the nature of compensation (within the meaning of section 280G(b)(2) of the Code) to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, the aggregate present value of the Payments under this Agreement shall be reduced (but not below zero) to the Reduced

Amount (defined below) if and only if the Accounting Firm (described below) determines that the reduction will provide the Employee with a greater net after-tax benefit than would no reduction. No reduction shall be made unless the reduction would provide the Employee with a greater net after-tax benefit. The determinations under this Section 8.6 shall be made as follows:

(B)Payments under this Agreement shall be reduced on a nondiscretionary basis in such a way as to minimize the reduction in the economic value deliverable to the Employee. Where more than one Payment has the same value for this purpose and they are payable at different times, they will be reduced on a pro rata basis. Only amounts payable under this Agreement shall be reduced pursuant to this Section 8.6.

(C)All determinations to be made under this Section 8.6 shall be made by an independent certified public accounting firm selected by the Company and agreed to by the Employee immediately prior to the change-in-ownership or -control transaction (the “Accounting Firm”). The Accounting Firm shall provide its determinations and any supporting calculations both to the Company and the Employee within ten (10) days of the transaction. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. All of the fees and expenses of the Accounting Firm in performing the determinations referred to in this Section 8.6 shall be borne solely by the Company.

8.7The Employee’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Employee or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

9.ARBITRATION

(A)Except as provided herein, any and all disputes that arise out of or relate to the terms of this Agreement shall be resolved through final and binding arbitration. SUCH ARBITRATION SHALL BE IN LIEU OF ANY TRIAL BEFORE A JUDGE AND/OR JURY, AND THE EXECUTIVE AND THE COMPANY EXPRESSLY WAIVE ALL RIGHTS TO HAVE SUCH DISPUTES RESOLVED VIA TRIAL BEFORE A JUDGE AND/OR JURY. Such disputes shall include, without limitation, claims for breach of contract or of the covenant of good faith and fair dealing, claims of discrimination, and claims under any federal, state or local law or regulation now in existence or hereinafter enacted and as amended from time to time concerning in any way the Employee’s employment with the Company or its termination. The only claims not covered by this requirement to arbitrate disputes, which shall instead be resolved pursuant to applicable law in a court of competent jurisdiction based in Massachusetts, are: (i) claims for benefits under the unemployment insurance benefits; (ii) claims for workers’ compensation benefits under any of the Company’s workers’ compensation insurance policy or fund; (iii) claims under the National Labor Relations Act; (iv) claims brought by the Company for alleged violations of Section 6 of this Agreement; and (v) claims that may not be arbitrated as a matter of law.

10.SECTION 409A COMPLIANCE

(A)General. It is intended that compensation paid or delivered to the Employee pursuant to this Agreement is either paid in compliance with, or is exempt from, Section 409A of the Code and the regulations promulgated thereunder (“Section 409A”). If the Employee notifies the Company (with specificity as to the reason therefor) that he believes that any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause him to incur any additional tax or interest under Section 409A and the Company concurs with such belief or the Company independently makes such determination, the Company shall, after consultation with the Employee, to the extent legally permitted and to the extent it is possible to timely reform the provision to avoid taxation under Section 409A, reform such provision to attempt to comply with Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Section 409A. To the extent that any provision hereof is modified in order to comply with or be exempt from Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to both the Employee and the Company of the applicable provision without violating the provisions of Section 409A but in any case Employee hereby agrees that all personal income taxes on her compensation under this Agreement and all penalties and interest with respect to such personal income taxes, if any, are her own responsibility. In no event shall the Company have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A, or any similar Treasury regulations or IRS rules or regulations that replace or supersede Treasury Regulation Section 1.409A after the Effective Date and that relate to the same or similar subject matter as Treasury Regulation Section 1.409A.

(B)Amounts Payable On Account of Termination: To the extent necessary to comply with Section 409A, for the purposes of determining when amounts subject to Section 409A that are payable upon Employee’s termination of employment under this Agreement will be paid, “termination of employment” or words of similar import, as used in this Agreement, shall be construed as the date that Employee first incurs a “separation from service” within the meaning of Section 409A.

(D)Specified Employees: If the Employee is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard to any payment that is considered deferred compensation subject to Section 409A payable on account of a “separation from service,” such payment or benefit shall be made, or provided at the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service”, and (ii) the date of the Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this section (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Employee in a lump sum, with interest thereon calculated at the long-term applicable federal rate (annual compounding) under Section 1274(d) of the Code in effect on the date of termination of employment, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

11.ACKNOWLEDGMENTS

The Employee acknowledges that: (i) the Employee received this Agreement at least ten (10) business days prior to the date on which Section 6.2 is to be effective; (ii) the Employee has the right to consult with counsel prior to signing this Agreement; and (iii) the Employee has had a full and adequate opportunity to read, understand and discuss with the Employee’s advisors, including legal counsel, the terms and conditions contained in this Agreement prior to signing hereunder.

IN WITNESS WHEREOF this Agreement has been executed as of May 8, 2020.



		EMPLOYEE


		/s/ Christina Wiater
		Christina Wiater

		BRIGHTSPHERE INC.


		/s/ Suren Rana
		By: Suren Rana
		Its: President and CEO

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Suren Rana, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of BrightSphere Investment Group Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2020



	/s/ Suren Rana
	Suren Rana
	President and Chief Executive Officer
	(principal executive officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christina Wiater, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of BrightSphere Investment Group Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2020



	/s/ Christina Wiater
	Christina Waiter
	Senior Vice President and Principal Financial Officer
	(principal financial officer and principal accounting officer)

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Suren Rana, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of BrightSphere Investment Group Inc. for the quarterly period ended March 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents in all material respects the financial condition and results of operations of BrightSphere Investment Group Inc. for the periods covered by the Report. The foregoing certification is being furnished to the Securities and Exchange Commission as part of the Report. A signed original of this statement has been provided to BrightSphere Investment Group Inc. and will be retained by BrightSphere Investment Group Inc. and furnished to the Securities and Exchange Commission or its staff upon request.



Date:	May 11, 2020	/s/ Suren Rana
		Name: Suren Rana
		Title: President and Chief Executive Officer
		(principal executive officer)

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Christina Wiater, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of BrightSphere Investment Group Inc. for the quarterly period ended March 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents in all material respects the financial condition and results of operations of BrightSphere Investment Group Inc. for the periods covered by the Report. The foregoing certification is being furnished to the Securities and Exchange Commission as part of the Report. A signed original of this statement has been provided to BrightSphere Investment Group Inc. and will be retained by BrightSphere Investment Group Inc. and furnished to the Securities and Exchange Commission or its staff upon request.



Date:	May 11, 2020	/s/ Christina Wiater
		Name: Christina Wiater
		Title: Senior Vice President and Principal Financial Officer
		(principal financial officer and principal accounting officer)