Edgar Filing: VIRTUS INVESTMENT PARTNERS, INC.

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



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

For the fiscal year ended December 31, 2015



¨	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 1-10994

VIRTUS INVESTMENT PARTNERS, INC.

(Exact name of registrant as specified in its charter)



Delaware		95-4191764
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 Pearl St., Hartford, CT 06103

(Address of principal executive offices)

Registrant’s telephone number, including area code

(800) 248-7971

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



Title of each class		Name of each exchange on which registered
Common Stock, $.01 par value		The NASDAQ Stock Market LLC
(including attached Preferred Share Purchase Rights)

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

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ¨ Yes x No

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

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

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold (based on the closing share price as quoted on the NASDAQ Global Market) as of the last business day of the registrant’s most recently completed second fiscal quarter was $915,291,836. For purposes of this calculation, shares of common stock held or controlled by executive officers and directors of the registrant have been treated as shares held by affiliates.

There were 8,408,228 shares of the registrant’s common stock outstanding on February 5, 2016.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement which will be filed with the SEC in connection with the 2016 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.

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Virtus Investment Partners, Inc.

Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2015



		Page
PART I

Item 1.	Business	1
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	Mine Safety Disclosures	18

PART II

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	19
Item 6.	Selected Financial Data	21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 8.	Financial Statements and Supplementary Data	40
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	40
Item 9A.	Controls and Procedures	40
Item 9B.	Other Information	41

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	42
Item 11.	Executive Compensation	42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	42
Item 13.	Certain Relationships and Related Transactions, and Director Independence	43
Item 14.	Principal Accounting Fees and Services	43

PART IV

Item 15.	Exhibits and Financial Statement Schedules	44

“We,” “us,” “our,” the “Company” and “Virtus,” as used in this Annual Report on Form 10-K (“Annual Report”), refer to Virtus Investment Partners, Inc., a Delaware corporation, and its subsidiaries.

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PART I



Item 1.	Business.

Organization

Virtus Investment Partners, Inc. (the “Company”) commenced operations on November 1, 1995 through a reverse merger with Duff & Phelps Corporation. The Company was a majority-owned subsidiary of The Phoenix Companies, Inc. (“PNX”) from 1995 to 2001 and a wholly-owned subsidiary of PNX from 2001 until 2008. On December 31, 2008, PNX distributed 100% of Virtus common stock to PNX stockholders in a spin-off transaction.

Our Business

We are a provider of investment management and related services to individuals and institutions. We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers and select unaffiliated subadvisors, each having its own distinct investment style, autonomous investment process and individual brand. By offering a broad array of products, we believe we can appeal to a greater number of investors which allows us to have opportunities across market cycles and through changes in investor preferences.

We provide our products in a number of forms and through multiple distribution channels. Our retail products include open-end mutual funds, closed-end funds, exchange traded funds, variable insurance funds, Undertakings for Collective Investments in Transferable Securities ("UCITS") and separately managed accounts. Our open-end mutual funds and exchange traded funds are distributed through financial intermediaries. Our closed-end funds trade on the New York Stock Exchange, and our exchange traded funds are traded on either the New York Stock Exchange or NASDAQ. Our variable insurance funds are available as investment options in variable annuities and life insurance products distributed by life insurance companies. Separately managed accounts are comprised of intermediary programs, sponsored and distributed by unaffiliated brokerage firms and private client accounts which are offered to the high net-worth clients of one of our affiliated managers. We also manage institutional accounts for corporations, multi-employer retirement funds, public employee retirement systems, foundations, endowments and as a subadviser to unaffiliated mutual funds. Our earnings are primarily driven by asset-based fees charged for services relating to these products including investment management, fund administration, distribution and shareholder services. These fees are based on a percentage of assets under management (“AUM”) and are calculated using daily or weekly average assets, quarter-end assets or average month-end assets.

Our Investment Managers

Our investment management services are provided by investment managers who are registered investment advisers under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”). The investment managers are responsible for portfolio management activities for our retail and institutional products operating under advisory or subadvisory agreements. We provide our affiliated managers with distribution, operational and administrative support, thereby allowing each affiliated manager to focus primarily on investment management. We also engage select unaffiliated subadvisers for certain of our open-end mutual funds and exchange traded funds. At December 31, 2015, $12.7 billion or 26.8% of our assets under management were managed by unaffiliated subadvisers. We monitor the quality of our managers’ services by assessing their performance, style, consistency and the discipline with which they apply their investment process.

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Our affiliated investment managers and their respective assets under management, styles and strategies are as follows:

Affiliated Managers

Duff & Phelps

Investment

Management

Newfleet

Asset

Management

Kayne

Anderson

Rudnick

Investment

Management

Zweig/Euclid

Advisors

Rampart

Investment

Management

Cliffwater

Investments

Assets Under Management at

December 31, 2015

($ in billions)

$9.2

$10.9

$9.5

$4.3

$0.6

$0.2

Location

Chicago, IL

Hartford, CT

Los Angeles, CA

New York, NY

Boston, MA

Hartford, CT

Investment Style

Quality-oriented,

equity income;

high quality

fixed

income

Multi-sector,

value-driven

fixed income

Quality at a

reasonable

price

Growth at a

reasonable

price,

high quality

fixed income

Systematic,

disciplined

options

solutions

Multi-manager

alternative

portfolios

Investment

Types

Equities

• Utilities

• Large, Mid & Small Cap Core/ Growth/ Value

• International & Emerging Markets Small-Cap

• Large Cap Core

• Tactical Asset Allocation

• International

• Large Cap Core

• Low Volatility

Fixed Income

• Tax

Advantaged

• High Grade

Core

• Municipals

• Multi-sector

• Core

• Core Plus

• Bank Loans

• High Yield

• Municipals

• Emerging

Markets

• Structured

Products

• California Municipals

• Intermediate Total Return & Government

• U.S. Gov't Grade Agencies

• Investment Grade Corporates

• Sovereign

Alternative/Other

• Real Estate

• Infrastructure

• Master Limited

Partnerships

• Options Strategies

• Multi-Strategy

Products

Open-End Mutual Funds

Closed-End Funds

Exchange traded funds

Variable Insurance

Funds

UCITs

Separately Managed Accounts

Institutional

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Our Investment Products

Our assets under management are comprised of open-end funds, closed-end funds, exchange traded funds, variable insurance funds, separately managed accounts (intermediary sponsored and private client) and institutional accounts (traditional institutional mandates and structured products).

Assets Under Management by Product as of December 31, 2015

($ in billions)



Retail Products
Mutual fund assets
Open-end funds	$	28.9
Closed-end funds	6.2
Exchange traded funds	0.3
Total fund assets	35.4
Separately managed accounts	6.8
Total retail assets	42.2
Total institutional assets	5.2
Total Assets Under Management	$	47.4

Open-End Funds

As of December 31, 2015, we managed 61 open-end funds, comprised of U.S. domiciled open-end mutual funds ("open-end mutual funds") variable insurance funds and UCITS, with total assets of $28.9 billion. Our open-end mutual funds are offered in a variety of asset classes (equity, fixed income and alternative investments), in all market capitalizations (large, mid and small), in different styles (growth, blend and value) and with various investment approaches (fundamental, quantitative and thematic). Our variable insurance funds are available as investment options in variable annuities and life insurance products distributed by life insurance companies. Our Ireland domiciled UCITS, which we refer to as the Global Funds, are offered in select investment strategies to non-US investors. At December 31, 2015, assets under management in these funds were $36.3 million.

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Our open-end funds as of December 31, 2015 were as follows:



Fund Type/Name	Inception	Assets		Advisory Fee (1)	3-Year Average Return (2)
		($ in millions)		(%)	(%)
Alternatives
Virtus Real Estate Securities Fund	1995	$	1,309.6	0.75-0.65	10.63
Virtus Dynamic Trend Fund	1998	449.4		0.15-0.14	7.45
Virtus Global Infrastructure Fund	2004	123.3		0.65-0.55	4.54
Virtus Global Real Estate Securities Fund	2009	94.8		0.85-0.75	8.27
Virtus Alternative Total Solution Fund	2014	89.9		1.95-1.90	N/A
Virtus Multi-Strategy Target Return Fund	2015	65.2		1.30-1.25	N/A
Virtus Herzfeld Fund	2012	49.6		1.00-0.95	4.65
Virtus International Real Estate Securities Fund	2007	40.2		1.00-0.90	4.13
Virtus Alternative Income Solution Fund	2014	36.2		1.80-1.75	N/A
Virtus Alternative Inflation Solution Fund	2014	29.3		1.75-1.70	N/A
Virtus Essential Resources Fund	2015	4.3		1.10	N/A
Virtus Select MLP and Energy Fund	2015	4.1		1.00	N/A
Virtus Alternative Diversifier (3)	2005	—		—	(2.18	)
Asset Allocation
Virtus Balanced Fund	1975	512.0		0.55-0.45	5.07
Virtus Multi-Asset Trend Fund	2011	215.6		1.00-0.90	0.29
Virtus Tactical Allocation Fund	1940	158.9		0.70-0.60	5.26
Equity
Virtus Equity Trend Fund	2010	1,508.6		1.00-0.95	5.47
Virtus Strategic Growth Fund	1995	450.9		0.70-0.60	16.16
Virtus Sector Trend Fund	2003	448.6		0.45-0.40	8.44
Virtus Small-Cap Core Fund	2002	291.7		0.75	11.17
Virtus Contrarian Value Fund	1997	273.0		0.75-0.70	4.50
Virtus Quality Small-Cap Fund	2006	229.4		0.70	12.08
Virtus Small-Cap Sustainable Growth Fund	2006	170.1		0.90-0.80	13.55
Virtus Growth & Income Fund	1997	156.0		0.75-0.65	14.43
Virtus Wealth Masters Fund	2012	108.7		0.85-0.80	10.48
Virtus Mid-Cap Growth Fund	1975	87.3		0.80-0.70	9.92
Virtus Quality Large-Cap Value Fund	2005	67.7		0.75-0.65	11.31
Virtus Mid-Cap Core Fund	2009	29.7		0.80-0.70	14.50
Virtus Low Volatility Equity Fund	2013	5.6		0.95-0.85	N/A
Fixed Income
Virtus Multi-Sector Short Term Bond Fund	1992	7,255.1		0.55-0.43	1.20
Virtus Senior Floating Rate Fund	2008	604.2		0.60-0.50	1.92
Virtus Multi-Sector Intermediate Bond Fund	1989	299.3		0.55-0.45	0.87
Virtus Low Duration Income Fund	1999	280.0		0.55-0.45	1.45
Virtus Tax-Exempt Bond Fund	2001	194.9		0.45	2.43
Virtus Credit Opportunities Fund (4)	2015	94.6		0.75	N/A
Virtus Bond Fund	1998	72.1		0.45-0.40	1.35
Virtus High Yield Fund	1980	71.2		0.65-0.55	1.80
Virtus CA Tax-Exempt Bond Fund	1983	31.8		0.45-0.35	3.46
Virtus Strategic Income Fund	2014	28.0		0.80-0.75	N/A
Virtus Emerging Markets Debt Fund	2012	26.2		0.75-0.70	(1.89)

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Fund Type/Name	Inception	Assets		Advisory Fee (1)	3-Year Average Return (2)
		($ in millions)		(%)	(%)
International/Global
Virtus Emerging Markets Opportunities Fund	1997	9,729.7		1.00-0.95	(3.30	)
Virtus Foreign Opportunities Fund	1990	1,803.5		0.85-0.75	3.89
Virtus Global Opportunities Fund	1960	161.8		0.85-0.75	8.83
Virtus Global Equity Trend Fund	2011	46.9		1.00-0.90	0.93
Virtus International Small-Cap Fund	2012	43.0		1.00-0.95	7.67
Virtus Emerging Markets Equity Income Fund	2012	34.5		1.05-1.00	(8.66)
Virtus Greater European Opportunities Fund	2009	26.6		0.85-0.80	4.62
Virtus International Equity Fund	2010	7.2		0.85-0.75	3.07
Virtus International Wealth Masters Fund	2014	5.0		0.90-0.85	N/A
Virtus Emerging Markets Small Cap Fund	2013	4.1		1.20-1.15	N/A
Variable Insurance Funds
Virtus Capital Growth Series	1982	210.1		0.70-0.60	16.47
Virtus International Series	1990	209.9		0.75-0.65	(2.49	)
Virtus Multi-Sector Fixed Income Series	1982	131.8		0.50-0.40	0.95
Virtus Growth and Income Series	1998	109.8		0.70-0.60	9.60
Virtus Strategic Allocation Series	1984	106.5		0.60-0.50	6.27
Virtus Small-Cap Value Series	2000	92.9		0.90-0.80	12.24
Virtus Real Estate Securities Series	1995	88.2		0.75-0.65	10.78
Virtus Small-Cap Growth Series	2002	56.1		0.85-0.80	14.21
Virtus Equity Trend Series	2011	11.1		1.00	6.06
Global Funds
Virtus GF Multi-Sector Short Duration Bond Fund	2013	32.2		1.75-0.55	N/A
Virtus GF US Small Cap Focus Fund	2014	4.1		1.65-0.75	N/A
		$	28,882.1

(1)

Percentage of average daily net assets of each fund. The percentages listed represent the range of management advisory fees paid by the funds, from the highest to the lowest. A range indicates that the fund has breakpoints at which management advisory fees decrease as assets in the funds increase. We pay subadvisory fees on funds managed by unaffiliated subadvisers, which are not reflected in the percentages listed.


(2)	Represents average annual total return performance of the largest share class as measured by net assets for which performance data is available.


(3)	This fund contains investments in other Virtus open-end mutual funds. The related assets invested in other Virtus open-end mutual funds are reflected only in the balances of the respective funds.


(4)	Other Virtus open-end mutual funds invest in this fund, the assets invested in by other Virtus open-end funds are reflected solely in this fund.

Past performance does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

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Closed-End Funds

We managed nine closed-end funds as of December 31, 2015, each of which is traded on the New York Stock Exchange, with aggregate assets of $6.2 billion. Closed-end funds do not continually offer to sell and redeem their shares; rather, daily liquidity is provided by the ability to trade the shares of these funds at prices that may be above or below the shares’ net asset value.

Our closed-end funds as of December 31, 2015 are as follows:



Fund Type/Name	Assets		Advisory Fee
	($ in billions)		%
Balanced
DNP Select Income Fund Inc.	$	3.3	0.60-0.50	(1)
Zweig Total Return Fund Inc.	0.4		0.70	(2)
Virtus Total Return Fund	0.2		0.85	(2)
Equity
Duff & Phelps Global Utility Income Fund Inc.	0.9		1.00	(1)(3)
Zweig Fund Inc.	0.3		0.85	(2)
Alternatives
Duff & Phelps Select Energy MLP Fund	0.2		1.00	(2)
Fixed Income
Duff & Phelps Utility and Corporate Bond Trust Inc.	0.4		0.50	(1)
Virtus Global Multi-Sector Income Fund	0.3		0.95	(2)
DTF Tax-Free Income Inc.	0.2		0.50	(1)
Total Closed-End Funds	$	6.2


(1)	Percentage of average weekly net assets. The percentage listed represents the range of management advisory fees paid by the funds, from the highest to the lowest. A range indicates that the fund has breakpoints at which management advisory fees decrease as assets in the fund increase.


(2)	Percentage of average daily net assets of each fund.


(3)	The adviser has contractually agreed to waive a portion of its fee for a period of time, which is not reflected in the percentage listed.

Exchange Traded Funds

In April 2015, we made an investment for a majority ownership position in Virtus ETF Solutions (“VES”), formerly known as ETF Issuer Solutions, that operates a platform for listing, operating, and distributing exchange traded funds. We manage seven U.S.-domiciled exchange traded funds with total assets under management of $0.3 billion at December 31, 2015.

Separately Managed Accounts

Separately managed accounts are individually owned portfolios that include intermediary sponsored programs, whereby an intermediary assists individuals in hiring investment managers that have been approved by the broker-dealer to fulfill those objectives and private client accounts that are accounts of high net-worth individuals who are direct clients of an affiliated manager. Separately managed account assets totaled $6.8 billion at December 31, 2015.

Institutional Accounts

We offer a variety of equity and fixed income strategies to institutional clients, including corporations, multi-employer retirement funds, public employee retirement systems, foundations, endowments and as a subadviser to unaffiliated mutual funds. Our institutional assets under management totaled $5.2 billion as of December 31, 2015.

Our Investment Management, Administration and Transfer Agent Services

Our investment management fees, administration fees and transfer agent fees earned in each of the last three years were as follows:

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	Years Ended December 31,
	2015		2014		2013
($ in thousands)
Investment management fees:
Funds	$	209,994	$	249,355	$	213,864
Separately managed accounts	37,296		35,152		31,510
Institutional accounts	17,575		16,156		15,183
Total investment management fees	264,865		300,663		260,557
Administration fees	33,981		39,374		33,736
Transfer agent fees	14,266		16,642		14,449
Total	$	313,112	$	356,679	$	308,742

Investment Management Fees

We provide investment management services pursuant to investment management agreements through our affiliated investment advisers (each, an “Adviser”). With respect to our open-end funds, closed-end funds and exchange traded funds, the Adviser provides overall management services to a fund, subject to supervision by the fund’s board of directors, pursuant to agreements that must be approved annually by each fund’s board of directors and which may be terminated without penalty upon written notice, or automatically, in certain situations, such as a “change in control” of the Adviser. We earn fees based on each fund’s average daily or weekly net assets with most fee schedules providing for rate declines or “breakpoints” as asset levels increase to certain thresholds. For funds managed by a subadviser, the agreement provides that the subadviser manage the day-to-day investment management of the fund’s portfolio and receive a management fee from the Adviser based on the percentage of average daily net assets in the funds they subadvise or a percentage of the Adviser’s management fee. Each fund bears all expenses associated with its operations. In some cases, to the extent total fund expenses exceed a specified percentage of a fund’s average net assets, the Adviser has agreed to reimburse the funds for such excess expenses or voluntarily or contractually waive a portion of its fee for a period of time.

For separately managed accounts and institutional accounts, fees are negotiated and are based primarily on asset size, portfolio complexity and individual client requests.

Administration Fees

We provide fund administration services to our open-end funds, exchange traded funds and certain of our closed-end funds. We earn fees based on each fund’s average daily or weekly net assets. Administrative services include recordkeeping, preparing and filing documents required to comply with federal and state securities laws, legal administration and compliance services, supervising the activities of the funds’ other service providers, providing assistance with fund shareholder meetings, tax services and treasury services as well as providing office space, equipment and personnel that may be necessary for managing and administering the business affairs of the funds.

Transfer Agent Fees

We provide shareholder services to our open-end mutual funds. We earn fees based on each fund’s average daily net assets. Shareholder services include maintaining shareholder accounts, processing shareholder transactions, preparing filings and performing necessary reporting, among other things. We engage third-party service providers to perform certain aspects of the shareholder services.

Our Distribution Services

We distribute our open-end funds and exchange traded funds through financial intermediaries. We have broad access in the retail market, with distribution partners that include national and regional broker-dealers and independent financial advisory firms. Our sales efforts are supported by regional sales professionals, a national account relationship group and separate teams for the retirement and insurance products.

Our separately managed accounts are distributed through financial intermediaries and directly by teams at our affiliated managers. Our institutional distribution strategy is an affiliate-centric model. Through relationships with consultants, they target key market segments, including foundations and endowments, corporate, public and private pension plans and subadvisory accounts.

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Our Broker-Dealer Services

We have two subsidiaries that are broker-dealers registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are members of the Financial Industry Regulatory Authority (“FINRA”). They serve as principal underwriters and distributors of our open-end mutual funds, exchange traded funds and our separately managed accounts. Our broker-dealers are subject to the SEC's net capital rule designed to enforce minimum standards regarding the general financial condition and liquidity of broker-dealers.

Open-end mutual fund shares, UCITS and exchange traded fund shares are distributed by VP Distributors, LLC ("VPD") and ETF Distributors, LLC (“ETFD”) both under sales agreements with unaffiliated financial intermediaries. VPD also markets advisory services to sponsors of separately managed account programs. ETFD serves as the principal underwriter and distributor of our exchange traded funds.

Our Competition

Our Regulatory Matters

We are subject to regulation by the Securities and Exchange Commission (“SEC”), FINRA and other federal and state agencies and self-regulatory organizations. Each affiliated manager and unaffiliated subadviser is registered with the SEC under the Investment Advisers Act. Each open-end mutual fund, closed-end fund, exchange traded fund and each series of our variable insurance funds is registered with the SEC under the Investment Company Act of 1940. Our Global Funds are subject to regulation by the Central Bank of Ireland (“CBI”) and the funds and each investment manager and sub-investment manager to the Global Funds are registered with the CBI. See Item 3. Legal Proceedings for more information.

The financial services industry is highly regulated and failure to comply with related laws and regulations can result in the revocation of registrations, the imposition of censures or fines and the suspension or expulsion of a firm and/or its employees from the industry. All of our U.S.-domiciled open-end mutual funds are currently available-for-sale and are qualified in all 50 states, Washington, D.C., Puerto Rico, Guam and the U.S. Virgin Islands. Our Global Funds are sold through financial intermediaries to investors who are not citizens of or residents of the United States. Most aspects of our investment management business, including the business of the unaffiliated subadvisers, are subject to various U.S. federal and state laws and regulations.

Our officers, directors and employees may, from time to time, own securities that are also held by one or more of our funds. Our internal policies with respect to personal investments are established pursuant to the provisions of the Investment Company Act and/or the Investment Advisers Act. Employees, officers and directors who, in the function of their responsibilities to us, meet the requirements of the Investment Company Act, Investment Advisers Act and/or of FINRA regulations, must disclose personal securities holdings and trading activity. Those employees, officers and directors with investment discretion or access to investment decisions are subject to additional restrictions with respect to the pre-clearance of the purchase or sale of securities over which they have investment discretion or beneficial interest. Other restrictions are imposed upon supervised persons with respect to personal transactions in securities that are held, recently sold or contemplated for purchase by our mutual funds. All supervised persons are required to report holdings and transactions on an annual and quarterly basis pursuant to the provisions of the Investment Company Act and Investment Advisers Act. In addition, certain transactions are restricted so as to avoid the possibility of improper use of information relating to the management of client accounts.

Our Employees

As of December 31, 2015, we had 426 full time equivalent employees. None of our employees are represented by a union.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as proxy statements, are available free of charge on our website located at www.virtus.com as soon as reasonably practicable after they are filed with or furnished to the SEC. You may also read and copy any document we file at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Reports, proxy statements

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and other information regarding issuers that file electronically with the SEC, including our filings, are also available to the public on the SEC’s website at http://www.sec.gov.

A copy of our Corporate Governance Principles, our Code of Conduct and the charters of our Audit Committee, Compensation Committee, Governance Committee and Risk and Finance Committee are posted on our website, www.virtus.com, under “About Us,” “Investor Relations,” “Corporate Governance” and are available in print to any person who requests copies by contacting Investor Relations by email to: investor.relations@virtus.com or by mail to Virtus Investment Partners, Inc., c/o Investor Relations, 100 Pearl Street, Hartford, CT 06103. Information contained on the website is not incorporated by reference or otherwise considered part of this document.

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Item 1A.	Risk Factors.

This section describes some of the potential risks relating to our business, such as market, liquidity, operational, reputation and regulatory. The risks described below are some of the more important factors that could affect our business. You should carefully consider the risks described below, together with all of the other information included in this Annual Report on Form 10-K, in evaluating the Company and our common stock. If any of the risks described below actually occur, our business, revenues, profitability, results of operations, financial condition, cash flows, reputation and stock price could be materially adversely affected.

We earn substantially all of our revenues based on assets under management, and therefore a reduction in assets under management would reduce our revenues and profitability. Assets under management fluctuate based on many factors including market conditions, investment performance and client withdrawals.

The majority of our revenues are generated from asset-based fees from investment management products and services to individuals and institutions. Therefore, if the assets under management decline, our fee revenues decline reducing profitability as some of our expenses are fixed. There are several reasons that assets under management could decline as discussed below:

•

The value of assets under management can decline due to price declines in specific securities, market segments or geographic areas where those assets are invested. Funds and portfolios that we manage related to certain geographic markets and industry sectors are particularly vulnerable to political, social and economic events in those markets and sectors. If these industries or markets decline or experience volatility, this could have a negative impact on our assets under management and our revenues. For example, certain non-U.S. markets, particularly emerging markets, are not as developed or as efficient as the U.S. financial markets and, as a result, may be less liquid, less regulated and significantly more volatile than the U.S. financial markets. Liquidity in such markets may be adversely impacted by political or economic events, government policies, expropriation, volume trading limits by foreign investors and social or civil unrest. These factors may negatively impact the market value of an investment or our ability to dispose it. In addition, an increase in the value of the U.S. dollar relative to non-U.S. currencies could result in a decrease in the U.S. dollar value of assets under management that are denominated in non-U.S. currencies.

•

The performance of our investment strategies is critical to the maintenance and growth of assets under management. Net flows related to our investment strategies can be affected by investment performance relative to other competing investment strategies or to established benchmarks. Our investment management strategies are rated, ranked or assessed by independent third-parties, distribution partners, and industry periodicals and services. These assessments often influence the investment decisions of our clients. If the performance or assessment of our investment strategies is seen as underperforming relative to peers, it could result in an increase in the withdrawal of assets by existing clients and the inability to attract additional investments from existing and new clients. In addition, certain of our investment strategies have capacity constraints, as there is a limit to the number of securities available for the strategy to operate effectively. In those instances, we may choose to limit access to new or existing investors. In addition, certain mutual funds employ the use of leverage as part of their investment strategies, which will increase or decrease the Company’s assets under management, and the risk associated with the investment, as the proceeds from the use of leverage are invested in accordance with the funds’ investment strategies.

•

General domestic and global economic and political conditions can influence assets under management. Changes in interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws, trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts and security operations) and other conditions may impact the equity and credit markets which may influence our assets under management. In recent years, capital and credit markets have experienced substantial volatility. While there has been some recovery in the capital markets employment rates, continued economic weakness and budgetary challenges in the Eurozone, escalating regional turmoil in the Middle East, concern over growth prospects in China and emerging markets, growing debt loads for certain countries and uncertainty about the consequences of governments eventually withdrawing monetary stimulus all indicate that economic and political conditions remain unpredictable. If the security markets decline or experience volatility, our assets under management and our revenues could be negatively impacted. In addition, diminishing investor confidence in the markets and/or adverse market conditions could result in a decrease in investor risk tolerance. Such a decrease could prompt investors to reduce their rate of investment or to fully withdraw from markets, which could lower our overall assets under management and have an adverse effect on our revenues, earnings and growth prospects.

The volatility in the markets in the recent past has highlighted the interconnection of the global markets and demonstrated how the deteriorating financial condition of one institution may materially adversely impact the performance of other institutions. Our assets under management have exposure to many different industries and

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counterparties and may be exposed to credit, operational or other risk due to the default by a counterparty or client or in the event of a market failure or disruption or otherwise. In the event of extreme circumstances, including economic, political or business crises, such as a widespread systemic failure in the global financial system or failures of firms that have significant obligations as counterparties, we may suffer significant declines in assets under management and severe liquidity or valuation issues.

Moreover, a significant amount of our assets under management are in investments represented by strategies that primarily invest in securities in non-U.S. companies. Many non-U.S. financial markets are not as developed or as efficient as the U.S. financial markets and, as a result, have limited liquidity and greater price volatility and may lack established regulations. Liquidity in such markets also may be adversely impacted by political or economic events, government policies, expropriation, volume trading limits by foreign investors and social and civil unrest. An investment’s market value or the ability to dispose of an investment may be adversely impacted by any of these factors. Governments of foreign jurisdictions may assert their abilities to tax local gains and/or income of foreign investors, including our clients, which could adversely impact the economics associated with investing in foreign jurisdictions or non-U.S. based companies. These risks also could impact the performance of our strategies that invest in such markets and, in particular, strategies that concentrate investments in emerging market companies and countries.

•

Changes in interest rates can have adverse effects on our assets under management. Increases in interest rates from their historically low present levels may adversely affect the net asset values of our assets under management. Furthermore, increases in interest rates may result in reduced prices in equity markets. Conversely, decreases in interest rates could lead to outflows in fixed income assets that we manage as investors seek higher yields. Any of these effects could lower our assets under management and revenues and, if our revenues decline without a commensurate reduction in our expenses, would lead to a reduction in our net income.

Any of these factors could cause our assets under management to decline and have an adverse impact on our results of operations and financial condition.

Our investment advisory agreements are subject to withdrawal, renegotiation or termination on short notice.

Our clients include the boards of directors for our sponsored mutual funds, managed account program sponsors, private clients and institutional clients. Our investment management agreements with these clients may be terminated upon short notice without penalty. As a result, there would be little impediment to these sponsors or clients terminating our agreements. Our clients may terminate or renegotiate their investment contracts with us or reduce the aggregate amount of assets under management with us due to a number of reasons including investment performance, reputational, regulatory or compliance issues, loss of key investment management or other personnel or a change in management or control of clients, third-party distributors, subadvisers or others with whom we have relationships. The directors of our sponsored funds may deem it to be in the best interests of a fund’s shareholders to make decisions adverse to us, such as reducing the compensation paid to us, requesting that we subsidize fund expenses over certain thresholds, or imposing restrictions on our management of the fund. Under the Investment Company Act, investment advisory agreements automatically terminate in the event of an assignment, which may occur if, among other events, the Company undergoes a change in control, such as any person acquiring 25% voting rights of our common stock. If an assignment were to occur, we cannot be certain that the fund’s board of directors and its stockholders would approve a new investment advisory agreement. In addition, investment advisory agreements for the separate accounts we manage may not be assigned without the consent of the client. If an assignment occurs, we cannot be certain that the Company will be able to obtain the necessary fund approvals or the necessary consents from our clients. The withdrawal, renegotiation or termination of any investment management contract relating to a material portion of assets under management would have an adverse impact on our results of operations and financial condition.

Any damage to our reputation could harm our business and lead to a reduction in our revenues and profitability.

Maintaining a strong reputation with the investment community is critical to our success. Our reputation is vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate even if they are without merit or satisfactorily addressed. Our reputation may be impacted by many factors, including but not limited to: poor performance; litigation; conflicts of interests; regulatory inquiries, investigations or findings; operational failures (including cyber breaches); intentional or unintentional misrepresentation of our products or services; or employee misconduct or rumors. Any damage to our reputation could impede our ability to attract and retain clients and key personnel, adversely impact relationships with third-party distributors and other business partners and lead to a reduction in the amount of our assets under management, any of which could adversely affect our results of operations and financial condition.

We manage client assets under agreements that have established investment guidelines or other contractual requirements, and any failure to comply could result in claims, losses or regulatory sanctions, which could negatively impact our revenues and profitability.

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The agreements under which we manage client assets often have established investment guidelines or other contractual requirements that we are required to comply with in providing our investment management services. Although we maintain various compliance procedures and other controls to prevent, detect, and correct such errors, any failure or allegation of a failure to comply with these guidelines or other requirement could result in client claims, reputational damage, withdrawal of assets and potential regulatory sanctions, any of which could have an adverse impact on our results of operations and financial condition.

Our business relies on the ability to attract and retain key employees, and the loss of such employees could negatively affect financial performance.

The success of our business is dependent to a large extent on our ability to attract and retain key employees such as senior executives, portfolio managers, securities analysts and sales personnel. Competition in the job market for these professionals is generally intense and compensation levels in the industry are highly competitive. The market for investment managers is also characterized by the movement of investment managers among different firms.

If we are unable to continue to attract and retain key employees, or if compensation costs required to attract and retain key employees increase, our performance, including our competitive position, could be materially adversely affected. Additionally, we utilize Company equity awards as part of our compensation plans and as a means for recruiting and retaining key employees. Declines in our stock price could result in deterioration in the value of equity awards granted, thus lessening the effectiveness of retaining key employees through stock-based awards.

In certain circumstances, the departure of key employees could cause higher redemption rates for certain assets under management, or the loss of certain client accounts. Any inability to retain our key employees, attract qualified employees, or replace key employee positions in a timely manner, could lead to a reduction in the amount of our assets under management, which could have a material adverse effect on our revenues and profitability. In addition, there could be additional costs to replace, retain or attract new talent which would result in a decrease in our profitability and have an adverse impact on our results of operations and financial condition.

The highly competitive nature of the asset management industry may force us to reduce the fees we charge to clients, increase amounts paid to financial intermediaries or provide more support to those intermediaries, all of which could result in a reduction of our revenues and profitability.

We face significant competition from a wide variety of financial institutions, including other investment management companies, as well as from proprietary products offered by our distribution partners such as banks, broker-dealers and financial planning firms. Competition in our businesses is based on several factors including investment performance, access to distribution channels, service to financial advisers and their clients and fees charged. Our competitors, many of which are larger than we are, often offer similar products, use similar distribution sources, offer less expensive products, have greater access to key distribution channels and have greater resources, geographic footprints and name recognition than we do. Additionally, certain products and asset classes, such as passive or index-based products, are becoming increasingly popular with investors. Existing clients may withdraw their assets in order to invest in these products, and we may be unable to attract additional investments from existing and new clients, which would lead to a decline in our assets under management and market share.

In addition, our profits are highly dependent on the fee levels for our products and services. In recent years, there has been a trend in certain segments of our markets toward lower fees and lower fee products, such as passive products. Competition could cause us to reduce the fees that we charge for products and services. In order to maintain appropriate fee levels in a competitive environment, we must be able to continue to provide clients with investment products and services that are viewed as appropriate in relation to the fees charged. If our clients, including our fund boards, were to view our fees as being high relative to the market or the returns provided by our investment products, we may choose to reduce our fee levels or we may experience significant redemptions in our assets under management which could have an adverse impact on our results of operations and financial condition.

We are subject to an extensive and complex regulatory environment, and changes in regulations or failure to comply with regulation could adversely affect our revenues and profitability.

The investment management industry in which we operate is subject to extensive and frequently changing regulation. We are regulated by the SEC under the Exchange Act, the Investment Company Act and the Investment Advisers Act, and we are subject to regulation by the Commodities Futures Trading Commission under the Commodities Exchange Act. Our Global Funds are subject to regulation by the CBI. We are also regulated by FINRA, the Department of Labor under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), as well as other federal and state laws and regulations.

The regulatory environment that we operate in changes often and has seen increased regulatory focus in recent years. For example, in fiscal 2015, the SEC proposed new rules addressing liquidity risk management by registered open-end funds and the use of derivatives by registered open-end and closed-end funds. If these regulations are adopted substantially as proposed, they could materially impact the provision of investment services or limit opportunities for certain funds we manage and

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increase our management and administration costs, with potential adverse effects on our revenues, expenses and results of operations.

Although we spend extensive time and resources on compliance efforts designed to ensure compliance with all applicable laws and regulations, if we or our affiliates fail to timely and properly modify and update our compliance procedures in this changing and highly complex regulatory environment, we may be subject to various legal proceedings, including civil litigation, governmental investigations and enforcement actions and result in fines, penalties or suspensions of individual employees or limitations on particular business activities which could have an adverse impact on our results of operations and financial condition.

Changes in tax laws and unanticipated tax liabilities could have an adverse impact on our financial condition, results of operations and cash flow.

We are subject to federal and state income taxes in the United States. Tax authorities may disagree with certain positions we have taken or implement changes in tax policy, which may result in the assessment of additional taxes. We regularly assess the appropriateness of our tax positions and reporting. We cannot provide assurance, however, that we will accurately predict the outcomes of audits, and the actual outcomes of these audits could be unfavorable. In addition, our ability to use net operating loss carryforwards and other tax attributes available to us will be dependent on our ability to generate taxable income.

We utilize unaffiliated firms in providing investment management services and any matters that have an adverse impact to their business, or any change in our relationships with these unaffiliated firms could lead to a reduction in assets under management, which will adversely affect our revenues and profitability.

We utilize unaffiliated subadvisers as investment managers for certain of our retail products and we have licensing arrangements with unaffiliated data providers. Because we typically have no ownership interests in these unaffiliated firms, we do not control the business activities of such firms. Problems stemming from the business activities of these unaffiliated firms may negatively impact or disrupt such firms’ operations or expose them to disciplinary action or reputational harm. Furthermore, any such matters at these unaffiliated firms may have an adverse impact on our business or reputation or expose us to regulatory scrutiny, including with respect to our oversight of such firms. For example, in December 2014 an unaffiliated former subadviser, F-Squared, settled charges with the SEC that it had violated federal securities laws and during fiscal 2015 were ultimately terminated as a subadviser of our funds. We also subsequently entered into an agreement with the SEC to settle allegations stemming from our relationship with F-Squared. See “Item 3. Legal Proceedings” for a description of this settlement agreement and the regulatory proceedings against F-Squared.

We periodically negotiate provisions and renewals of these relationships, and we cannot provide assurance that such terms will remain acceptable to us or the unaffiliated firms. These relationships can also be terminated upon short notice without penalty. In addition, similar to our business, the departure of key employees at our unaffiliated subadvisers could cause higher redemption rates for certain assets under management, or the loss of certain client accounts. An interruption or termination of our unaffiliated firm relationships could affect our ability to market our products and result in a reduction in assets under management which could have an adverse impact on our results of operations and financial condition.

We distribute through intermediaries, and changes in key distribution relationships could reduce our revenues, increase our costs and adversely affect our profitability.

Our primary source of distribution for our retail products is through intermediaries that include third-party financial intermediaries, such as: major wire houses; national, regional and independent broker-dealers and financial advisors; banks and financial planners and registered investment advisors. Our success is highly dependent on access to these various distribution systems. These distributors are generally not contractually required to distribute our products and typically offer their clients various investment products and services, including proprietary products and services, in addition to and in competition with our products and services. While we compensate these intermediaries for selling our products and services pursuant to contractual agreements, we may not be able to retain access to these channels at all or at similar pricing. Increasing competition for these distribution channels could cause our distribution costs to rise, which could have a material adverse effect on our business, revenues and profitability. To the extent that existing or future intermediaries prefer to do business with our competitors, the sales of our products as well as our market share, revenues and profitability could decline.

We and our third-party service providers, which includes securities pricing and transaction processing services, rely on numerous technology systems, and a temporary business interruption or security breach could negatively impact our business and profitability. Our business will suffer if our technology systems fail or are interrupted or if security breaches or other disruptions compromise our information.

Our technology systems and those of our third-party service providers are critical to our operations. The ability to consistently and reliably obtain accurate securities pricing information, process client portfolio and fund shareholder transactions and provide reports and other customer service to fund shareholders and clients in other accounts managed by us is an essential part of our business. Any delays or inaccuracies in obtaining pricing information, processing such transactions or

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such reports, other breaches and errors, and any inadequacies in other customer service, could result in reimbursement obligations or other liabilities, or alienate customers and potentially give rise to claims against us. Our customer service capability, as well as our ability to obtain prompt and accurate securities pricing information and to process transactions and reports, is highly dependent on our third-party service providers’ information systems. Any failure or interruption of those systems, whether resulting from technology or infrastructure breakdowns, defects or external causes such as fire, natural disaster, viruses, acts of terrorism or power disruptions, could result in financial loss, negatively impact our reputation, and negatively affect our ability to do business. Although we, and our third-party service providers, have disaster recovery plans in place, we may experience temporary interruptions if a natural disaster or prolonged power outages were to occur which could have an adverse impact on our results of operations and financial condition.

In addition, like other companies in the financial services industry, our computer systems are regularly subject to and are expected to continue to be the target of computer viruses or other malicious codes, unauthorized access, cyber-attacks or other computer-related penetrations. While we have experienced threats to our data and systems, to date, we are not aware that we have experienced a material breach of cyber security. Over time, however, the sophistication of cyber threats continues to increase, and any controls we put in place and preventative actions we take to reduce the risk of cyber incidents and protect our information may be insufficient to detect or prevent unauthorized access, cyber-attacks or other security breaches to our computer systems or those of third parties with whom we do business. Breach of our technology systems or those of third parties with whom we do business through cyber-attacks, or failure to manage and secure our technology environment, could result in interruptions or malfunctions in the operations of our business, loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by a breach, additional costs to mitigate against future incidents and litigation costs resulting from an incident.

We and certain of our third-party vendors receive and store personal information as well as non-public business information. Although we and our third-party vendors take precautions, we may still be vulnerable to hacking or other unauthorized use. A breach of the systems or hardware could result in an unauthorized access to our proprietary business or client data or release of this type of data, which could subject us to legal liability or regulatory action under data protection and privacy laws which may result in fines or penalties, the termination of existing client contracts, costly mitigation activities and harm to our reputation, which could have an adverse impact on our results of operations and financial condition.

Ownership of a relatively large percentage of our common stock is concentrated with a small number of shareholders, which could increase the volatility in our stock trading and dramatically affect our share price.

A large percentage of our common stock is held by a limited number of shareholders. If our larger shareholders decide to liquidate their positions, it could cause significant fluctuation in the share price of our common stock. Public companies with a relatively concentrated level of institutional shareholders, such as we have, often have difficulty generating trading volume in their stock which may increase the volatility in the price of our common stock.

Civil litigation and government investigations or proceedings could adversely affect our business.

Many aspects of our business involve substantial risks of liability, and there have been substantial incidences of litigation and regulatory investigations in the financial services industry in recent years, including customer claims as well as class action suits seeking substantial damages. From time to time, we and/or our funds may be named as defendants or co-defendants in lawsuits or be involved in disputes that involve the threat of lawsuits seeking substantial damages. We and/or our funds are also involved from time to time in governmental and self-regulatory organization investigations and proceedings. For example, in fiscal 2015, two putative class action complaints were filed against us and certain of our officers and affiliates, alleging violation of certain provisions of federal securities laws. We also recently entered into an agreement with the SEC to settle allegations stemming from our relationship with our former subadvisor, F-Squared. See “Item 3. Legal Proceedings” for additional information related to these matters.

Any of these lawsuits, investigations or proceedings could result in reputational damage, loss of clients and assets, settlements, awards, injunctions, fines, penalties, increased costs and expenses in resolving a claim, diversion of employee resources and resulting financial losses. Predicting the outcome of such matters is inherently difficult, particularly where claims are brought on behalf of various classes of claimants or by a large number of claimants, when claimants seek substantial or unspecified damages or when investigations or legal proceedings are at an early stage. A substantial judgment, settlement, fine or penalty could be material to our operating results or cash flows for a particular period, depending on our results for that period, or could cause us significant reputational harm, which could harm our business prospects.

We depend to a large extent on our business relationships and our reputation to attract and retain clients. As a result, allegations of improper conduct by private litigants, including investors in our funds, or regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our investment activities or the asset management industry in general, whether or not valid, may harm our reputation, which may be more damaging to our business than to other types of businesses. We may incur substantial legal expenses in defending against proceedings

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commenced by a client, regulatory authority or other private litigant. Substantial legal liability levied on us could cause significant reputational harm and have an adverse impact on our results of operations and financial condition.

We have a significant portion of our assets invested in marketable securities that are primarily comprised of our seed capital program, which exposes us to earnings volatility with regard to these investments and a risk of capital loss.

We use capital to seed new investment strategies and make new investments to introduce new products or enhance distribution access. At December 31, 2015, the Company had $273.7 million of seed capital investments in a variety of asset classes including alternative, fixed income and equity strategies. We also had $40.0 million invested in our consolidated investment product ("CIP"). Many of these investments employ a long-term investment strategy and entail an optimal investment period spanning several years. Accordingly, during this investment period, the Company’s capital utilized in these investments may not be available for other corporate purposes at all or without significantly diminishing our investment return. We cannot provide assurance that these investments will perform as expected. Moreover, increases or decreases in the value of these investments will increase the volatility of our earnings, and a decline in the value of these investments would result in the loss of capital and have an adverse impact on our results of operations and financial condition.

Our investment in our consolidated investment product exposes us to substantial risks, including but not limited to the possibility that we may not receive any return on such investment.

As of December 31, 2015, the Company had invested $40.0 million into a special purpose entity (“SPE”) that was created specifically to accumulate bank loan assets for securitization as a potential collateralized loan obligation (a “CLO”) that will be managed by our Newfleet affiliate. The SPE is a variable interest entity (a “VIE”), and the Company consolidates the SPE's assets and liabilities within our financial statements as it is the primary beneficiary of the VIE. We refer to the Company’s investment in this SPE as our consolidated investment product.

Our consolidated investment product entered into a warehouse financing agreement with a financial institution in August 2015, pursuant to which the warehouse provider will finance the purchase of loans that will be ultimately included in a CLO. The SPE selects the investments in the warehouse subject to the approval of the warehouse provider. Although we would anticipate completing the issuance of this particular CLO, we may not be able to complete such issuance on terms that are acceptable to us. If the relevant CLO transaction is not issued or consummated, as applicable, the warehouse investments may be liquidated, and we may lose some or all of our equity investment, or first loss investment in the warehouse facility if the value of the loans we purchased in it decreases. In addition, regardless of whether the CLO is issued or consummated, if any of the warehoused investments are sold before such issuance or consummation, we will bear any resulting loss on the sale.

We cannot assure you that our intended quarterly distributions will be paid each quarter or at all.

The declaration, payment and determination of the amount of our quarterly dividend, may change at any time. In making decisions regarding our quarterly dividend, we consider general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, legal, tax, regulatory and other restrictions that may have implications on the payment of distributions by us to our common shareholders or by our subsidiaries to us, and such other factors as we may deem relevant. We cannot assure you that any distributions, whether quarterly or otherwise, will be paid.

We may need to raise additional capital in the future, and resources may not be available to us in sufficient amounts or on acceptable terms, which could have an adverse impact on our business.

Our ability to meet the future cash needs of the Company is dependent upon our ability to generate cash. Although the Company has been successful in generating sufficient cash in the past, it may not be in the future. As of December 31, 2015, we maintained a strong cash and working capital position and had no debt outstanding other than the debt of our consolidated investment product for which recourse to the Company is limited to its $40.0 million investment. See Footnote 18 of our consolidated financial statements for additional information on the debt of the consolidated investment product. We may need to raise capital to fund new business initiatives in the future, however, and financing may not be available to us in sufficient amounts, on acceptable terms, or at all. Our ability to access capital markets efficiently depends on a number of factors, including the state of credit and equity markets, interest rates and credit spreads. If we are unable to access sufficient capital on acceptable terms our business could be adversely impacted.

We have corporate governance provisions that may make an acquisition of us more difficult.

Certain provisions of our certificate of incorporation and bylaws could discourage, delay, or prevent a merger, acquisition, or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. Stockholders who wish

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to participate in these transactions may not have the opportunity to do so. In addition, the provisions of Section 203 of the Delaware General Corporation Law also restrict certain business combinations with interested stockholders.

Our insurance policies may not cover all liabilities and losses to which we may be exposed.

We carry insurance in amounts and under terms that we believe are appropriate. Our insurance may not cover all liabilities and losses to which we may be exposed. Certain insurance coverage may not be available or may be prohibitively expensive in future periods. As our insurance policies come up for renewal, we may need to assume higher deductibles or pay higher premiums, which could have an adverse impact on our results of operations and financial condition.

We may engage in strategic transactions that could create risks.

We regularly review, and from time to time have discussions with and engage in, potential strategic transactions, including potential acquisitions, consolidations, joint ventures or similar transactions, some of which may be material. We cannot provide assurance that we will find suitable candidates for strategic transactions at acceptable prices, have sufficient capital resources to pursue such transactions, be successful in negotiating the required agreements or successfully close transactions after signing such agreements.

Any strategic transactions may also involve a number of other risks, including additional demands on our staff, unanticipated problems regarding integration of operating facilities, technologies and new employees and the existence of liabilities or contingencies not disclosed to, or otherwise unknown by, us prior to closing a transaction. In addition, any business we acquire may underperform relative to expectations or may lose customers or employees. As a result, the Company may not be able to realize all of the expected benefits from such transactions or may be required to spend additional time or money on integration.

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains statements that are, or may be considered to be, forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” "intent," "plan," “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” “opportunity,” “predict,” “would,” “potential,” “future,” “forecast,” “guarantee,” “assume,” “likely,” “target” or similar statements or variations of such terms.

Our forward-looking statements are based on a series of expectations, assumptions and projections about our Company and the markets in which we operate, are not guarantees of future results or performance and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, net cash inflows and outflows, operating cash flows, business plans and credit facilities, for all future periods. All of our forward-looking statements contained in this Annual Report on Form 10-K are as of the date of this Annual Report on Form 10-K only.

We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. We do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this Annual Report on Form 10-K, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If there are any future public statements or disclosures by us which modify or impact any of the forward-looking statements contained in or accompanying this Annual Report on Form 10-K, such statements or disclosures will be deemed to modify or supersede such statements in this Annual Report on Form 10-K.

Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K. Any occurrence of, or any material adverse change in, one or more risk factors or risks and uncertainties referred to in this Annual Report on Form 10-K or our other periodic reports filed with the SEC could materially and adversely affect our operations, financial results, cash flows, prospects and liquidity. You are urged to carefully consider all such factors.



Item 1B.	Unresolved Staff Comments.

None.

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Item 2.	Properties.

We lease our principal offices, which are located at 100 Pearl St., Hartford, CT 06103. In addition, we lease office space in Illinois, California, Massachusetts and New York.



Item 3.	Legal Proceedings.

The Company is regularly involved in litigation and arbitration as well as examinations, inquiries and investigations by various regulatory bodies, including the SEC, involving its compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting its products and other activities. Legal and regulatory matters of this nature involve or may involve but are not limited to the Company’s activities as an employer, issuer of securities, investor, investment adviser, broker-dealer or taxpayer. In addition, in the normal course of business, the Company discusses matters with its regulators raised during regulatory examinations or is otherwise subject to their inquiry. These matters could result in censures, fines, penalties or other sanctions.

The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. In addition, in the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosures related to such matter as appropriate and in compliance with ASC 450, Loss Contingencies. The disclosures, accruals or estimates, if any, resulting from the foregoing analysis are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. Based on information currently available, available insurance coverage and established reserves, the Company believes that the outcomes of its legal and regulatory proceedings are not likely, either individually or in the aggregate, to have a material adverse effect on the Company’s results of operations, cash flows or its consolidated financial condition. However, in the event of unexpected subsequent developments and given the inherent unpredictability of these legal and regulatory matters, the Company can provide no assurance that its assessment of any claim, dispute, regulatory examination or investigation or other legal matter will reflect the ultimate outcome and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods.

Regulatory Matter

As previously disclosed, in December 2014 the SEC announced a settlement with F-Squared Investments (“F-Squared”), an unaffiliated former subadviser, which settled charges that F-Squared had violated the federal securities laws as described in Investment Advisers Act Release No. 3988. The settlement related to F-Squared’s inaccurate performance information for the period of April 2001 through September 2008, including indices that certain Virtus mutual funds tracked beginning in September 2009 and January 2011. As part of the SEC’s non-public, confidential investigation of this matter, the SEC staff informed the Company that it was inquiring into whether the Company had violated securities laws or regulations with respect to F-Squared’s historical performance information. In November 2015, without admitting or denying the SEC's findings, the Company consented to the entry of the order which found that the Company violated certain Sections of the Investment Advisers Act and the Investment Company Act of 1940. The Company agreed to pay a total of $16.5 million which it paid in the fourth quarter of 2015.

In re Virtus Investment Partners, Inc. Securities Litigation; formerly styled as Tom Cummins v. Virtus Investment Partners Inc. et al

On February 20, 2015, a putative class action complaint alleging violation of the federal securities laws was filed by an individual shareholder against the Company and certain of the Company’s current officers (the “defendants”) in the United States District Court for the Southern District of New York. On April 21, 2015, three plaintiffs, including the original plaintiff, filed motions to be appointed lead plaintiff. On June 9, 2015, the court entered an order appointing Arkansas Teachers Retirement System lead plaintiff. On August 21, 2015, plaintiff filed a Consolidated Class Action Complaint (the “Consolidated Complaint”) amending the originally filed complaint. The Consolidated Complaint was purportedly filed on behalf of all purchasers of the Company’s common stock between January 25, 2013 and May 11, 2015 (the “Class Period”). The Consolidated Complaint alleges that during the Class Period, the defendants disseminated materially false and misleading statements and concealed material adverse facts relating to certain funds subadvised by F-Squared. The Consolidated Complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5. The plaintiff seeks to recover unspecified damages. The Company believes that the suit is without merit and intends to defend it

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vigorously. A motion to dismiss the Consolidated Complaint was filed on behalf of the Company and the other defendants on October 21, 2015. Briefing of the motion was completed on December 4, 2015, and oral argument was held on December 17, 2015. The motion is pending. The Company believes that there is not a material loss that is probable and reasonably estimable related to this claim.

Mark Youngers v. Virtus Investment Partners, Inc. et al

On May 8, 2015, a putative class action complaint alleging violations of certain provisions of the federal securities laws was filed in the United States District Court for the Central District of California by an individual who alleges he is a former shareholder of one of the Virtus mutual funds formerly subadvised by F-Squared and formerly known as the AlphaSector Funds. The complaint purports to allege claims against the Company, certain of the Company’s officers and affiliates, and certain other parties (the “defendants”). The complaint was purportedly filed on behalf of purchasers of the AlphaSector Funds between May 8, 2010 and December 22, 2014, inclusive (the “Class Period”). The complaint alleges that during the Class Period the defendants disseminated materially false and misleading statements and concealed or omitted material facts necessary to make the statements made not misleading. On June 7, 2015, a group of three individuals, including the original plaintiff, filed a motion to be appointed lead plaintiff. No other motions to be appointed lead plaintiff were filed. On July 27, 2015, the court granted the motion, appointing movants as lead plaintiff. On July 27, 2015, the court issued an order to show cause requiring lead plaintiff to explain no later than July 31, 2015, why his claims should not be transferred and consolidated with the In re Virtus Investment Partners, Inc. Securities Litigation action discussed above. On October 1, 2015, plaintiff filed a First Amended Class Action Complaint which among other things, added a derivative claim for breach of fiduciary duty on behalf of Virtus Opportunities Trust. On October 19, 2015, the United States District Court for the Central District of California entered an order transferring the action to the Southern District of New York. On January 4, 2016, Plaintiffs filed a Second Amended Complaint. Defendants’ filed a motion to dismiss on February 1, 2016. The Company believes the plaintiffs claims asserted in the complaint are frivolous and intends to defend it vigorously. The Company believes that there is not a material loss that is probable and reasonably estimable related to this claim.



Item 4.	Mine Safety Disclosures.

Not applicable.

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PART II



Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded on the NASDAQ Global Market under the trading symbol “VRTS.” As of February 5, 2016, we had 8,408,228 shares of our common stock outstanding that were held by approximately 60,400 holders of record. The table below sets forth the quarterly high and low sales prices of our common stock on the NASDAQ Global Market, and the amount of dividends declared, for each quarter in the last two fiscal years.



	Year Ended						Year Ended
	December 31, 2015						December 31, 2014
Quarter Ended	High		Low		Dividends Declared		High		Low		Dividends Declared
First Quarter	$	171.00	$	126.94	$	0.45	$	208.92	$	169.03	$	—
Second Quarter	$	147.77	$	113.47	$	0.45	$	215.72	$	165.00	$	0.45
Third Quarter	$	134.78	$	97.37	$	0.45	$	227.29	$	166.35	$	0.45
Fourth Quarter	$	141.97	$	94.52	$	0.45	$	188.04	$	151.81	$	0.45

On February 17, 2016, our board of directors declared a quarterly cash dividend of $0.45 per common share to be paid on May 13, 2016 to shareholders of record at the close of business on April 29, 2016.

There have been no non-cash dividends on our common stock with respect to the periods presented. The continuation of the payment of any dividends on our common stock and the amount thereof will be determined by our board of directors depending upon, among other factors, our earnings, operations, financial condition, capital requirements and general business outlook at the time payment is considered.

Issuer Purchases of Equity Securities

During 2015, we repurchased a total of 638,703 shares of our common stock pursuant to a repurchase program implemented by our board of directors in 2010. In 2015, we authorized an additional 1.5 million shares of our common stock to be repurchased under the share repurchase program. As of December 31, 2015, 2.7 million shares of our common stock have been authorized to be repurchased under the program and 1,485,856 shares remain available for repurchase. Under the terms of the program, we may repurchase shares of our common stock from time to time at our discretion through open market repurchases and/or privately negotiated transactions, depending on price and prevailing market and business conditions. The program, which has no specified term, may be suspended or terminated at any time.

The following table sets forth information regarding our share repurchases in each month during the quarter ended December 31, 2015:



Month	Total number of shares repurchased	Average price paid per share (1)		Total number of shares repurchased as part of publicly announced plans or programs	Maximum number of shares that may yet be repurchased under the plans or programs (2)
October 1—31, 2015	—	$	—	—	1,756,091
November 1—30, 2015	156,174	$	129.64	156,174	1,599,917
December 1—31, 2015	114,061	$	129.05	114,061	1,485,856
Total	270,235			270,235


(1)	Average price paid per share is calculated on a settlement basis and excludes commissions.


(2)	The share repurchases above were completed pursuant to a program announced in the fourth quarter of 2010 and most recently expanded in October 2015. This repurchase program is not subject to an expiration date.

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There were no unregistered sales of equity securities during the period covered by this Annual Report. Shares of our common stock purchased by participants in our Employee Stock Purchase Plan were delivered to participant accounts via open market purchases at fair value by the third-party administrator under the plan. We do not reserve shares for this plan or discount the purchase price of the shares.

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Item 6.	Selected Financial Data.

The following table sets forth our selected consolidated financial and other data at the dates and for the periods indicated. The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K.



($ in thousands, except per share data)	Years Ended December 31,
	2015 (1)		2014 (1)		2013 (1)		2012 (2)		2011 (2)
Results of Operations
Revenues	$	381,977	$	450,598	$	389,215	$	280,086	$	204,652
Operating expenses	301,599		319,878		275,711		219,641		190,749
Operating income	80,378		130,720		113,504		60,445		13,903
Income tax expense (benefit) (3)	36,972		39,349		44,778		27,030		(132,428		)
Net income (3)	30,671		96,965		77,130		37,773		145,420
Net income attributable to common stockholders (3)	35,106		97,700		75,190		37,608		111,678
Earnings per share—basic (3)	3.99		10.75		9.18		4.87		17.98
Earnings per share—diluted (3)	3.92		10.51		8.92		4.66		16.34
Cash dividends declared per share	1.80		1.35		—		—		—
	As of December 31,
	2015 (1)		2014 (1)		2013 (2)		2012 (2)		2011 (2)
Balance Sheet Data
Cash and cash equivalents	$	87,574	$	202,847	$	271,014	$	63,432	$	45,267
Investments	56,738		63,448		37,258		18,433		18,357
Investments of consolidated sponsored investment products	323,335		236,652		139,054		43,227		—
Investments of consolidated investment product	199,485		—		—		—		—
Goodwill and other intangible assets, net	47,588		47,043		49,893		53,971		56,891
Total assets	859,729		698,773		644,954		332,749		286,379
Accrued compensation and benefits	49,617		54,815		53,140		41,252		31,171
Debt	—		—		—		15,000		15,000
Debt of consolidated investment product	152,597		—		—		—		—
Total liabilities	276,408		112,350		109,900		85,115		68,007
Redeemable noncontrolling interests	73,864		23,071		42,186		3,163		—
Total equity	509,457		563,352		492,868		244,471		183,155
	As of December 31,
	2015		2014		2013		2012		2011
($ in millions)
Assets Under Management
Total assets under management	$	47,385	$	56,702	$	57,740	$	45,537	$	34,588


(1)	Derived from audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.


(2)	Derived from audited consolidated financial statements not included in this Annual Report on Form 10-K.


(3)	The amount shown for the 2014 fiscal year includes a net tax benefit of approximately $15.5 million due to the resolution of uncertain tax positions. The amount shown for the 2011 fiscal year includes a tax benefit of $132.4 million, primarily related to the release of a valuation allowance on certain deferred tax assets.

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

Overview

Our Business

We are a provider of investment management and related services to individuals and institutions. We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers and unaffiliated subadvisers, each having its own distinct investment style, autonomous investment process and individual brand. By offering a broad array of products, we believe we can appeal to a greater number of investors, which allows us to have offerings across market cycles through changes in investor preferences. Our earnings are primarily driven by asset-based fees charged for services relating to these various products including investment management, fund administration, distribution and shareholder services.

We offer investment strategies for individual and institutional investors in different product structures and through multiple distribution channels. Our investment strategies are available in a diverse range of styles and disciplines, managed by a collection of boutique investment managers, both affiliated and unaffiliated. We have offerings in various asset classes (domestic and international equity, fixed income and alternative), in all market capitalizations (large, mid and small), in different styles (growth, blend and value) and with various investment approaches (fundamental, quantitative and thematic). Our retail products include open-end mutual funds, closed-end funds, exchange traded funds (“ETFs”), variable insurance funds, UCITs, and separately managed accounts. We also offer certain of our investment strategies to institutional clients.

We distribute our open-end funds and exchange traded funds principally through financial intermediaries. We have broad access in the retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and registered investment advisors, banks and insurance companies. In many of these firms, we have a number of products that are on firms’ preferred “recommended” lists and on fee-based advisory programs. Our sales efforts are supported by regional sales professionals, a national account relationship group and separate teams for exchange traded funds, our retirement and insurance products.

Our separately managed accounts are distributed through financial intermediaries and directly by teams at one of our affiliated managers. Our institutional distribution strategy is an affiliate-centric and coordinated model. Through relationships with consultants, our affiliates target key market segments, including foundations and endowments, corporate, public and private pension plans and unaffiliated mutual funds.

Market Developments

In 2015, the global equity markets were down as evidenced by the MSCI World Index ending the year at 1,663 as compared to 1,710 at the start of the year, a decrease of 2.7%. The major U.S. equity indexes were also down for 2015, with the Dow Jones Industrial Average ending the year at 17,425, from 17,823 at the beginning of the year, a decrease of 2.2%, and the Standard & Poor’s 500 Index decreased by 0.7% ending the year at 2,044, from 2,059 at the beginning of the year. The major U.S. bond index, the Barclays U.S. Aggregate Bond Index, increased 0.5% in 2015 ending the year at 1,925, compared to 1,915 at the beginning of the year.

The financial markets have had and are likely to continue to have a significant impact on asset flows and the value of our assets under management. The capital and financial markets could experience fluctuation, volatility and declines, as they have in the past, which could impact relative investment returns and asset flows among investment products as well as investor choices and preferences among investment products, including equity, fixed income and alternative products.

Financial Highlights


•	Net income per diluted share was $3.92 in 2015 compared to $10.51 in 2014.


•	Total sales (inflows) were $12.7 billion in 2015 compared to $15.2 billion in 2014. Net outflows were $6.3 billion in 2015 compared to $1.2 billion in 2014.


•	Assets under management were $47.4 billion at December 31, 2015 compared to $56.7 billion at December 31, 2014.

Assets Under Management

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At December 31, 2015, we managed $47.4 billion in total assets, representing a decrease of $9.3 billion, or 16.4%, from the $56.7 billion managed at December 31, 2014. The decrease in assets under management was primarily due to net outflows of $6.3 billion and market depreciation of $2.2 billion. The $6.3 billion in net outflows during 2015 was primarily attributable to $6.6 billion in net outflows in five Virtus open-end funds, previously known as the AlphaSector funds. During 2015, the Company terminated the services of the unaffiliated subadviser to the former AlphaSector funds and at December 31, 2015, assets under management in these products represented $2.7 billion, or 5.7% of total assets under management. Excluding the former AlphaSector funds, net inflows were $0.3 billion during 2015.

Assets under management for our open-end funds were $28.9 billion at December 31, 2015, a decrease of $8.6 billion, or 23.0%, from $37.5 billion at December 31, 2014. Average assets under management for all products, which generally correspond to our fee-earning asset levels, decreased by $6.8 billion, or 11.5%, to $52.3 billion for the year ended December 31, 2015, from $59.1 billion for the year ended December 31, 2014 for the same reasons discussed above regarding total assets under management.

Certain mutual funds employ the use of leverage as part of their investment strategies. The addition or reduction of leverage will increase or decrease our assets under management, as the proceeds from the use of leverage are invested in accordance with the funds’ investment strategies. For the periods ended December, 31, 2015, 2014 and 2013, we had assets under management from the use of leverage of $1.6 billion, $1.8 billion and $2.2 billion, respectively, which represents 3.5%, 3.3% and 3.8% of our total assets under management, respectively.

The changes in our assets under management may also be affected by the factors discussed in Item 1A of this Annual Report on Form 10-K “Risk Factors”.

Operating Results

In 2015, total revenues decreased 15.2% to $382.0 million from $450.6 million in 2014. Revenues decreased in 2015 compared to 2014, primarily as a result of a decrease in average assets under management. Operating income decreased by 38.5% from $130.7 million in 2014 to $80.4 million in 2015, primarily due to decreased revenues driven by lower levels of average assets under management offset by lower operating expenses associated with the decreased revenues discussed above.

Assets Under Management by Product

The following table summarizes our assets under management by product:



	As of December 31,						Change
	2015		2014		2013		2015 vs. 2014			%		2014 vs. 2013			%
($ in millions)

Fund assets
Open-end funds (1)	$	28,882.1	$	37,514.2	$	37,679.5	$	(8,632.1	)	(23.0	)%	$	(165.3	)	(0.4	)%
Closed-end funds	6,222.3		7,581.4		6,499.6		(1,359.1		)	(17.9	)%	1,081.8			16.6	%
Exchange traded funds	340.8		—		—		340.8			100.0	%	—			—	%
Money market funds (2)	—		—		1,556.6		—			—	%	(1,556.6		)	(100.0	)%
Total fund assets	35,445.2		45,095.6		45,735.7		(9,650.4		)	(21.4	)%	(640.1		)	(1.4	)%
Separately managed accounts (3)	6,784.4		6,884.8		7,433.1		(100.4		)	(1.5	)%	(548.3		)	(7.4	)%
Total retail assets	42,229.6		51,980.4		53,168.8		(9,750.8		)	(18.8	)%	(1,188.4		)	(2.2	)%
Total institutional accounts (3)	5,155.7		4,722.0		4,570.8		433.7			9.2	%	151.2			3.3	%
Total Assets Under Management	$	47,385.3	$	56,702.4	$	57,739.6	$	(9,317.1	)	(16.4	)%	$	(1,037.2	)	(1.8	)%
Average Assets Under Management	$	52,310.5	$	59,122.1	$	52,975.8	$	(6,811.6	)	(11.5	)%	$	6,146.3		11.6	%

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(1)	Includes assets under management of open-end mutual funds, UCITS and variable insurance funds.


(2)	On October 20, 2014, our money market funds were liquidated.


(3)	Includes assets under management related to option strategies.

Asset Flows by Product

The following table summarizes our asset flows by product for the periods indicated:

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($ in millions)	December 31,
	2015			2014			2013
Open-End Funds (1)
Beginning balance	$	37,514.2		$	37,679.5		$	27,122.8
Inflows	10,046.8			12,733.7			19,146.3
Outflows	(17,010.5		)	(13,428.1		)	(11,237.1		)
Net flows	(6,963.7		)	(694.4		)	7,909.2
Market performance	(1,511.5		)	1,297.2			2,337.9
Other (2)	(156.9		)	(768.1		)	309.6
Ending balance	$	28,882.1		$	37,514.2		$	37,679.5
Closed-End Funds
Beginning balance	$	7,581.4		$	6,499.6		$	6,231.6
Inflows	—			493.8			—
Outflows	—			—			—
Net flows	—			493.8			—
Market performance	(811.9		)	799.3			728.2
Other (2)	(547.2		)	(211.3		)	(460.2		)
Ending balance	$	6,222.3		$	7,581.4		$	6,499.6
Exchange Traded Funds
Beginning balance	$	—		$	—		$	—
Inflows	342.8			—			—
Outflows	(49.0		)	—			—
Net flows	293.8			—			—
Market performance	(27.9		)	—			—
Other (2)	74.9			—			—
Ending balance	$	340.8		$	—		$	—
Money Market Funds
Beginning balance	$	—		$	1,556.6		$	1,994.1
Other (2)	—			(1,556.6		)	(437.5		)
Ending balance	$	—		$	—		$	1,556.6
Separately Managed Accounts (3)
Beginning balance	$	6,884.8		$	7,433.1		$	5,829.0
Inflows	1,291.9			1,333.6			1,384.0
Outflows	(1,428.6		)	(2,244.8		)	(1,225.9		)
Net flows	(136.7		)	(911.2		)	158.1
Market performance	70.7			355.5			1,481.4
Other (2)	(34.4		)	7.4			(35.4		)
Ending balance	$	6,784.4		$	6,884.8		$	7,433.1
Institutional Accounts (3)
Beginning balance	$	4,722.0		$	4,570.8		$	4,359.5
Inflows	1,008.3			650.5			796.3
Outflows	(526.1		)	(743.0		)	(782.1		)
Net flows	482.2			(92.5		)	14.2
Market performance	46.2			389.2			314.7
Other (2)	(94.7		)	(145.5		)	(117.6		)
Ending balance	$	5,155.7		$	4,722.0		$	4,570.8
Total
Beginning balance	$	56,702.4		$	57,739.6		$	45,537.0
Inflows	12,689.8			15,211.6			21,326.6
Outflows	(19,014.2		)	(16,415.9		)	(13,245.1		)
Net flows	(6,324.4		)	(1,204.3		)	8,081.5
Market performance	(2,234.4		)	2,841.2			4,862.2
Other (2)	(758.3		)	(2,674.1		)	(741.1		)
Ending balance	$	47,385.3		$	56,702.4		$	57,739.6

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(1)	Includes assets under management of open-end mutual funds, UCITS and variable insurance funds.


(2)	Represents dividends distributed, net of reinvestments, net flows of cash management strategies, net flows and market performance on structured products, which are a component of institutional accounts, and net flows from non-sales related activities such as asset acquisitions/(dispositions), marketable securities investments/(withdrawals) and the impact on assets from the use of leverage.

(3) Includes assets under management related to option strategies

The following table summarizes our assets under management by asset class:



	December 31,						Change
	2015		2014		2013		2015 vs. 2014			%		2014 vs. 2013			%
($ in millions)
Asset Class
Equity	$	28,314.9	$	34,180.7	$	33,610.7	$	(5,865.8	)	(17.2	)%	$	570.0		1.7	%
Fixed income	15,115.6		16,681.6		15,829.4		(1,566.0		)	(9.4	)%	852.2			5.4	%
Alternatives (1)	3,468.7		5,372.4		5,308.3		(1,903.7		)	(35.4	)%	64.1			1.2	%
Other (2)	486.1		467.7		2,991.2		18.4			3.9	%	(2,523.5		)	(84.4	)%
Total	$	47,385.3	$	56,702.4	$	57,739.6	$	(9,317.1	)	(16.4	)%	$	(1,037.2	)	(1.8	)%


(1)	Consists of long/short equity, real estate securities, master-limited partnerships and other.


(2)	Consists of option strategies and cash management; at December 31, 2013, cash management strategies, which were liquidated in 2014, were $1,587.6 million.

Average Assets Under Management and Average Basis Points

The following table summarizes average assets under management and the average management fee earned:



	December 31,
	Average Fee Earned (expressed in basis points)			Average Assets Under Management ($ in millions)
	2015	2014	2013	2015		2014		2013
Products
Open-End Funds (1)	48.2	51.3	51.1	$	33,290.1	$	39,620.3	$	33,821.0
Closed-End Funds	66.7	65.6	61.6	6,946.3		7,112.9		6,476.0
Exchange Traded Funds	23.6	—	—	179.3		—		—
Money Market Funds	—	—	1.6	—		1,060.1		1,700.7
Separately Managed Accounts (2)	54.1	51.9	48.7	6,863.8		6,774.2		6,471.4
Institutional Accounts (2)	34.9	35.5	33.7	5,031.0		4,554.6		4,506.7
All Products	50.1	50.9	49.2	$	52,310.5	$	59,122.1	$	52,975.8


(1)	Includes assets under management of open-end mutual funds, UCITS and variable insurance funds.


(2)	Includes assets under management related to options strategies.

Average fees earned represent investment management fees net of fees paid to third-party service providers for investment management related services and less the impact of investment management fees earned from consolidated sponsored investment products divided by average net assets. Mutual funds and exchange traded fund fees are calculated based on average daily or weekly net assets. Separately managed account fees are calculated based on the end of the preceding or current quarter’s asset values or on an average of month-end balances. Institutional account fees are calculated based on an average of month-end balances or current quarter’s asset values. Average fees earned will vary based on several factors, including the asset mix and reimbursements to funds.

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Year ended December 31, 2015 compared to year ended December 31, 2014. The average fee rate earned for 2015 decreased 0.8 basis points as compared to the prior year primarily related to a 3.1 basis point decrease in the open-end mutual fund fee rate partially offset by an increase in the average fee rate on separately managed accounts which was driven by increased average high net worth assets under management. The 3.1 basis point decline in the open-end fund fee rate was primarily attributable to a negative $13.3 million variable incentive fee from one mutual fund during 2015. Excluding the variable incentive fee, the open-end fund fee rate would have been 52.2 basis points in 2015 compared to 50.9 in 2014.

Year ended December 31, 2014 compared to year ended December 31, 2013. The average fee rate earned for 2014 increased 1.7 basis points as compared to the prior year primarily related to the liquidation of our money market funds in October 2014 and an increase in the closed-end fund fee rate related to a closed-end fund launch during the year. The average fee rate earned on institutional and separately managed accounts increased in 2014 as compared to 2013 primarily due to the redemption of low fee earning accounts.

Results of Operations

Summary Financial Data



	Years Ended December 31,									Change
	2015			2014			2013			2015 vs. 2014			%		2014 vs. 2013			%
($ in thousands)
Investment management fees	$	264,865		$	300,663		$	260,557		$	(35,798	)	(11.9	)%	$	40,106		15.4	%
Other revenue	117,112			149,935			128,658			(32,823		)	(21.9	)%	21,277			16.5	%
Total revenues	381,977			450,598			389,215			(68,621		)	(15.2	)%	61,383			15.8	%
Total operating expenses	301,599			319,878			275,711			(18,279		)	(5.7	)%	44,167			16.0	%
Operating income	80,378			130,720			113,504			(50,342		)	(38.5	)%	17,216			15.2	%
Other (expense) income, net	(26,650		)	(2,843		)	5,939			(23,807		)	837.4	%	(8,782		)	(147.9	)%
Interest income, net	13,915			8,437			2,465			5,478			64.9	%	5,972			242.3	%
Income before income taxes	67,643			136,314			121,908			(68,671		)	(50.4	)%	14,406			11.8	%
Income tax expense	36,972			39,349			44,778			(2,377		)	(6.0	)%	(5,429		)	(12.1	)%
Net income	30,671			96,965			77,130			(66,294		)	(68.4	)%	19,835			25.7	%
Noncontrolling interests	4,435			735			(1,940		)	3,700			503.4	%	2,675			(137.9	)%
Net income attributable to common stockholders	$	35,106		$	97,700		$	75,190		$	(62,594	)	(64.1	)%	$	22,510		29.9	%
Earnings per share - diluted	$	3.92		$	10.51		$	8.92		$	(6.59	)	(62.7	)%	$	1.59		17.8	%

Table of Contents

Revenues

Total revenues were $382.0 million in 2015 compared to $450.6 million in 2014 representing a decrease of $68.6 million or 15.2%. The decrease was primarily due to lower average assets under management and lower fee rates in 2015 compared to 2014.

Revenues by source were as follows:



	Years Ended December 31,						Change
($ in thousands)	2015		2014		2013		2015 vs 2014			%		2014 vs 2013		%
Investment management fees
Funds	$	209,994	$	249,348	$	213,863	$	(39,354	)	(15.8	)%	$	35,485	16.6	%
Separately managed accounts	37,296		35,153		31,510		2,143			6.1	%	3,643		11.6	%
Institutional accounts	17,575		16,162		15,184		1,413			8.7	%	978		6.4	%
Total investment management fees	264,865		300,663		260,557		(35,798		)	(11.9	)%	40,106		15.4	%
Distribution and service fees	67,066		91,950		78,965		(24,884		)	(27.1	)%	12,985