8. VIEs

In the normal course of business, the Company maintains investments in sponsored CLO entities and privately offered equity funds that are considered VIEs. These variable interests generally represent seed investments made by the Company, as collateral manager or investment advisor, to launch or market these vehicles. The Company receives management fees for the services it provides as collateral manager or investment advisor to these entities. These fees may also be considered variable interests.

To determine whether or not the Company should be treated as the primary beneficiary of a VIE, management must make significant estimates and assumptions regarding probable future cash flows of the VIE. These estimates and assumptions relate primarily to market interest rates, credit default rates, pre-payment rates, discount rates, the marketability of certain securities and the probability of certain outcomes.

Investments in VIEs that are consolidated

CLO entity

As described in Note 2, the Company adopted the provisions of a new consolidation standard on November 1, 2010 that resulted in the consolidation of a CLO entity.

The Company irrevocably elected the fair value option for all assets and liabilities of this CLO entity upon adoption of the new accounting guidance. The Company elected the fair value option to mitigate any accounting mismatches between the carrying value of the senior and subordinated note obligations and the carrying value of the assets that are held to provide the cash flows for those note obligations. Unrealized gains and losses on assets and liabilities for which the fair value option has been elected are reported in earnings. Although the subordinated note obligations of the CLO entity have certain equity characteristics, the Company has determined that the subordinated notes should be recorded as liabilities on the Company's Consolidated Balance Sheet.

The assets of this CLO entity are held solely as collateral to satisfy the obligations of the entity. The Company has no right to the benefits from, nor does the Company bear the risks associated with, the assets held by the entity beyond the Company's minimal direct investment and beneficial interest therein and management fees generated from the entity. The note holders of the CLO entity have no recourse to the Company's general assets. There are neither explicit arrangements nor does the Company hold implicit variable interests that would require the Company to provide any ongoing financial support to the entity.

The following table presents, as of October 31, 2011, the fair value of the CLO entity's assets and liabilities subject to fair value accounting:

During fiscal 2011, changes in the fair values of the CLO entity's bank loans and other investments resulted in net losses of $4.6 million, while an increase in the fair value of the CLO's entity's note obligations resulted in net losses of $33.6 million. The combined net losses of $38.2 million were recorded as net losses on bank loans, other investments and note obligations of the consolidated CLO entity on the Company's Consolidated Statements of Income for the fiscal year ended October 31, 2011. Substantially all of the losses related to the CLO entity's bank loans, other investments and note obligations recorded in earnings for the period were attributable to changes in instrument-specific credit risk due to the credit spreads for these instruments tightening while benchmarked interest rates remained relatively unchanged.

The CLO entity's note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread, which ranges from 0.21 percent to 1.50 percent. The principal amounts outstanding of the note obligations issued by the CLO entity mature on April 20, 2019. The CLO entity may elect to reinvest any prepayments received on bank loans or other investments prior to April 2013. Any subsequent prepayments received must be used to pay down its note obligations.

Interest income and expense are recorded on an accrual basis and reported as interest income and interest expense in other income (expense) of the consolidated CLO entity on the Company's Consolidated Statements of Income for the fiscal year ended October 31, 2011.

At October 31, 2011, the following carrying amounts related to this CLO entity were included in the Company's Consolidated Balance Sheet:

For the fiscal year ended October 31, 2011, the Company recorded a net loss of $31.0 million related to the CLO entity. A net loss of $34.5 million for the fiscal year ended October 31, 2011 was included in net income attributable to non-controlling and other beneficial interests, reflecting the interests of third-party note holders of the CLO entity.

Other entities

Parametric Portfolio Associates maintains a 60 percent economic interest in Parametric Risk Advisors, which meets the definition of a VIE. The Company has made the determination that Parametric Portfolio Associates is the primary beneficiary of the VIE based on the fact that Parametric Portfolio Associates has the ability to direct the activities of Parametric Risk Advisors that most significantly impact its economic performance and Parametric Portfolio Associates is committed to providing ongoing working capital and infrastructure support. Additionally, Parametric Portfolio Associates is obligated to absorb all of the losses of Parametric Risk Advisors that could potentially be significant to Parametric Risk Advisors.

Parametric Risk Advisors had assets of $4.9 million and $3.8 million on October 31, 2011 and 2010, respectively, consisting primarily of cash and cash equivalents and investment advisory fees receivable, and liabilities of $2.5 million and $1.7 million on October 31, 2011 and 2010, respectively, consisting primarily of accrued compensation, accounts payable, accrued expenses and intercompany payables. Neither the Company's variable interest nor maximum risk of loss related to this VIE was material to the Company's Consolidated Financial Statements at either balance sheet date.

Investments in VIEs that are not consolidated

CLO entities

The Company is not deemed the primary beneficiary of three CLO entities in which it holds variable interests. These non-consolidated entities had total assets of $1.9 billion as of October 31, 2011 and 2010. The Company's variable interests in these entities consist of the Company's direct ownership in these entities and any collateral management fees earned but uncollected. The Company held investments in these entities totaling $0.3 million and $1.4 million on October 31, 2011 and 2010, respectively, and collateral management fees receivable totaling $3.0 million and $1.8 million on October 31, 2011 and 2010, respectively. In the fiscal year ended October 31, 2011, the Company did not provide any financial or other support to these entities that it was not previously contractually required to provide. The Company's risk of loss with respect to these managed CLO entities is limited to the carrying value of its investments in and collateral management fees receivable from the CLO entities as of October 31, 2011.

The Company's investments in the CLO entities identified above are collectively disclosed as a component of investments in Note 4. Income from these entities is recorded as a component of interest income based upon projected investment yields.

Other entities

The Company holds variable interests in, but is not deemed to be the primary beneficiary of, certain sponsored privately offered equity funds with total assets of $9.6 billion and $10.9 billion as of October 31, 2011 and 2010, respectively. The Company's variable interests in these entities consist of the Company's direct ownership in these entities and any investment advisory fees earned but uncollected. The Company held investments in these entities totaling $3.7 million and $3.3 million on October 31, 2011 and 2010, respectively, and investment advisory fees receivable totaling $0.4 million on October 31, 2011 and 2010, respectively. In the fiscal year ended October 31, 2011, the Company did not provide any financial or other support to these entities that it was not previously contractually required to provide. The Company's risk of loss with respect to these managed entities is limited to the carrying value of its investments and investment advisory fees receivable from the entities as of October 31, 2011.

The Company's investments in privately offered equity funds are carried at fair value and included in investments in sponsored funds, which are disclosed as a component of investments in Note 4. These investments are classified as available-for-sale and the Company records any change in fair value, net of income tax, in other comprehensive income (loss).