OnAs of December 31, 2017,2020, we had $13.7$9.5 billion of AUM in twenty23 open-end equity fundsFunds and $1.9$2.4 billion in our Gabelli U.S. Treasury Money Market Fund. We market our open-end fundsFunds primarily through third party distribution programs, including no-transaction fee (“NTF”) programs, and have developed additional share classes for many of our funds for distribution through additionalthese third party distribution channels. AtAs of December 31, 2017,2020, third party distribution programs accounted for approximately 78% of all assets in open-end equity funds, and, approximately 22%69% of our AUM in open-end equity funds wasand approximately 31% of our AUM in open-end equity funds were sourced through direct sales relationships.

We act as investment advisor to sixteen16 closed-end funds, fourteen14 of which trade on the NYSE or its affiliated exchange:exchange. These funds cannot be redeemed by the fund’s shareholders, except in limited cases. The trading price of the shares is determined by supply and demand in the marketplace and, as a result, the shares may trade at a premium or discount to the net asset value of the fund. The closed-end funds are: Gabelli Equity Trust (GAB), GDL Fund (GDL), Gabelli Multimedia Trust (GGT), Gabelli Healthcare & Wellness ^Rx Trust (GRX), Gabelli Convertible and Income Securities Fund (GCV), Gabelli Utility Trust (GUT), Gabelli Dividend & Income Trust (GDV), Gabelli Global Utility & Income Trust (GLU), GAMCO Global Gold, Natural Resources & Income Trust (GGN), GAMCO Natural Resources, Gold & Income Trust (GNT), The Gabelli Global Small and Mid Cap Value Trust (GGZ), the Bancroft Fund Ltd. (BCV), the Ellsworth Growth and Income Fund Ltd. (ECF), and the Gabelli Go Anywhere Trust (GGO). We launched the Gabelli Value Plus+ Trust Plc (GVP) in 2015 and the Gabelli Merger Plus+Plus⁺ Trust PLCPlc (GMP) in 2017, both of which trade on the London Stock Exchange. As of December 31, 2017,2020, the sixteen16 closed-end funds had total assets of $8.1$7.8 billion, representing 34.0%39.5% of the total assets in our Funds business.

We provide investment advisory services to one fund under the GAMCO brand, the GAMCO International SICAV.  The SICAV, which has two sub-fund strategies, the GAMCO Merger Arbitrage Fund and the GAMCO All Cap Value Fund. Total AUM in the SICAV was $510$474 million at December 31, 2017.2020.

Institutional and Private Wealth Management:   At December 31, 2017,2020, we had $18.9$12.4 billion of AUM in approximately 1,7001,500 Institutional and Private Wealth ManagementPWM accounts, representing 43.8%38% of our total AUM. The Private Wealth ManagementAs of December 31, 2020, the PWM clients, –generally defined as individuals generally having minimum investable assets of $5$1.0 million, comprised approximately 80%82% of the total number of managementInstitutional and PWM accounts and approximately $5.3$4.1 billion, or 28%33%, of the Institutional and Private Wealth Management assets as of December 31, 2017.PWM AUM. We believe that Private Wealth ManagementPWM clients for the taxable portion of their assets are attracted to us by our returns and the tax efficient nature of the underlying investment process.process for the taxable portion of their assets. As of December 31, 2017,2020, institutional client accounts representedcomprised approximately $6.48% of the total number of Institutional and PWM accounts and approximately $2.8 billion, or 35%23%, of the Institutional and Private Wealth Management assets and 9%PWM AUM. As of the accounts.  FoundationDecember 31, 2020, foundation and endowment fund assets represented 11%comprised approximately 9% of the total number of Institutional and Private Wealth ManagementPWM accounts and approximately $1.7$1.0 billion, or 9%8%, of the Institutional and Private Wealth ManagementPWM AUM. TheAs of December 31, 2020, the sub-advisory clients, (wherewhere we act as sub-advisor to third party investment funds) heldfunds, comprised approximately $5.4 billion, or 29%, of total Institutional and Private Wealth Management assets with 1% of the total number of accounts.Institutional and PWM accounts and approximately $4.5 billion, or 36%, of total Institutional and PWM AUM.

The ten largest Institutional and Private Wealth ManagementPWM relationships comprised approximately 47% of GAMCO Asset Management AUM and approximately 20%18% of our total AUM as of December 31, 2020, and approximately 29%36% of GAMCO Asset Management revenues and approximately 9% of our total revenues for the year ended December 31, 2017.2020.

Investment advisory agreements for our Institutional and Private Wealth ManagementPWM clients are typically subject to termination by the client without penalty on 30 days’ notice or less.

We manage assets in the following wide spectrum of investment products and strategies:

Through Gabelli Funds, Advisor, we act as the investment advisor to all of the Funds, except with respect to the GAMCO Mathers Fund for which GAMCO Asset Management Inc. acts as the advisor.Funds.

Shareholders of the open-end fundsFunds are allowed to exchange shares among the same class of shares of the other open-end fundsFunds as economic and market conditions and investor needs change at no additional cost. However, as noted below, certain open-end fundsFunds impose a 2% redemption fee on shares redeemed within seven days or less after a purchase. We periodically introduce new funds designed to complement and expand our investment product offerings, respond to competitive developments in the financial marketplace, and meet the changing needs of investors.

Our marketing efforts for the open-end fundsFunds are currently focused on increasing the distribution and sales of our existing funds as well as creating new products for sale through our distribution channels. We believe that our marketing efforts for the fundsFunds will continue to generate additional revenues from investment advisory fees. We had traditionally distributed most of our open-end fundsFunds by using a variety of direct response marketing techniques, including telemarketing and advertising, and, as a result, we maintain direct relationships with many of our no-load open-end fundFund shareholders. Beginning in late 1995, we expanded our product distribution by offering several of our open-end fundsFunds through third party distribution programs, including NTF programs. In 1998 and 1999, we further expanded these efforts to include substantially all of our open-end fundsFunds in third party distribution programs. Approximately 22%31% of the AUM in the open-end equity funds are still attributable to our direct response marketing efforts. Third party distribution programs have become an increasingly important source of asset growth for us. Of the $13.7$9.5 billion of AUM in the open-end equity fundsFunds as of December 31, 2017,2020, approximately 78%69% were generated through third party distribution programs. We are responsible for paying the service and distribution fees charged by many of the third party distribution programs, although a portion of such servicedistribution fees under certain circumstances are payable by the funds.Funds. The multi-class shares are available in all of the Gabelli Funds, with the exception of the Gabelli Capital Asset Fund, the Gabelli Media Mogul Fund, and the GAMCO MathersGabelli Pet Parents’ Fund. We believe that the use of multi-class shares expands the distribution of our open-end fundsFunds into the advised sector of the mutual fund investment community. We introduced Class I shares, which are no-load shares with higher minimum initial investment and without distribution fees, available directly through G.distributors or through brokers that have entered into selling agreements with respect to Class I shares. The no-load shares are designated as Class AAA shares and are available for new and current investors. During 2017, we introduced Class T shares for some of our open-end funds which have a reduced sales charge as compared to Class A shares.  In general, distribution through third party programs has greater variable cost components and lower fixed cost components than distribution through our traditional direct sales methods.

We provide investment advisory and management services pursuant to an investment management agreement with each fund.fund (“Fund IMAs”). The investment management agreements with the fundsFund IMAs generally provide that we are responsible for the overall investment and administrative services, subject to the oversight of each fund's Boardfund’s board of Directorsdirectors or Trusteestrustees and in accordance with each fund'sfund’s fundamental investment objectives and policies. The investment management agreementsFund IMAs permit us to enter into separate agreements for sub-administrative and accounting services on behalf of the respective funds.

Our affiliated advisors provideadvisor provides the fundsFunds with administrative services pursuant to the management contracts.Fund IMAs. Such services include, without limitation, supervision of the calculation of net asset value, preparation of financial reports for shareholders of the funds, internal accounting, tax accounting and reporting, regulatory filings, and other services. Most of these administrative services are provided through sub-contracts with independent third parties. Transfer agency and custodial services are provided directly to the funds by independent third parties.

Our funds’ investment management agreementsEach of our Fund IMAs may continue in effect from year to year only if specifically approved at least annually by (i) the fund's Boardfund’s board of Directorsdirectors or Trusteestrustees or (ii) the fund'sfund’s shareholders and, in either case, the vote of a majority of the fund'sfund’s independent or non-interested directors or trustees who are not parties to the agreement or “interested persons” of any such party, within the meaning of the Investment Company Act of 1940, as amended (the “Company(“Company Act”). Each domestic fund may terminate its investment management agreementFund IMA at any time upon 60 days'days’ written notice by (i) a vote of the majority of the Boardboard of Directorsdirectors or Trusteestrustees cast in person at a meeting called for the purpose of voting on such termination or (ii) a vote at a meeting of shareholders of the lesser of either 67% of the voting shares represented in person or by proxy (if at least 50% of the shares are present at the meeting) or 50% of the outstanding voting shares of such Fund.fund. Each investment management agreementFund IMA automatically terminates in the event of its assignment, as defined in the Company Act. We may terminate an investment management agreementa Fund IMA without penalty on 60 days'days’ written notice.

G.distributors, a wholly-owned subsidiary of GBL, is a broker-dealer registered under the Securities Exchange Act, of 1934 and is regulated by FINRA.  G.distributors'the Financial Industry Regulatory Authority (“FINRA”). G.distributors’ revenues are derived primarily from the distribution of our open-end funds.Funds. G.distributors distributes our open-end fundsFunds pursuant to distribution agreements with each fund.Fund. It also distributes funds managed by Teton and its affiliates. Under each distribution agreement with an open-end fund,Fund, G.distributors offers and sells such open-end fund'sFund’s shares on a continuous basis and pays the majority of the costs of marketing and selling the shares, including printing and mailing prospectuses and sales literature, advertising, and maintaining sales and customer service personnelteammates and sales and services fulfillment systems, and payments to the sponsors of third party distribution programs, financial intermediaries, and G.distributorsG.distributors’ sales personnel.teammates. G.distributors receives fees for such services pursuant to distribution plans adopted under provisions of Rule 12b-1 (“12b-1”) of the Company Act. Distribution fees from the open-end fundsFunds are computed daily based on average net assets. DistributionFor the years ended December 31, 2020 and 2019, distribution fees from the open-end fundsFunds amounted to $39.7 million, $41.0$23.1 million and $47.7$29.2 million, respectively, while payments to third-parties for selling the open-end fundsFunds totaled $37.3 million, $39.7$21.0 million and $45.8$27.2 million, for the years ended December 31, 2017, 2016 and 2015, respectively. G.distributors is the principal underwriter for fundsthe Funds distributed in multiple classes of shares, which carry either a front-end, back-end or no sales charge. UnderwritingFor the years ended December 31, 2020 and 2019, underwriting fees and sales charges retained amounted to $1.5 million, $1.2$1.0 million and $1.0$1.3 million, for the years ended December 31, 2017, 2016 and 2015, respectively.

Under the distribution plans, the open-end Class AAA shares of the fundsopen-end Funds (except The Gabelli U.S. Treasury Money Market Fund, Gabelli Capital Asset Fund and The Gabelli ABC Fund) and the Class A T and VADV shares of variouscertain funds pay G.distributors a distribution or service fee of .25%0.25% per year (except the Class A shares of the TETON Westwood Funds and Gabelli Enterprise Mergers & Acquisition Fund which pay .50% and 0.45% per year, respectively, and the TETON Westwood Intermediate Bond Fund which pays .35%) on the average daily net assets of the fund. Class C shares have a 12b-1 distribution plan with a service and distribution fee totaling 1%1.00%. 

G.distributors’ distribution agreements with the fundseach fund may continue in effect from year to year only if specifically approved at least annually by (i) the fund's Boardfund’s board of Directorsdirectors or Trusteestrustees or (ii) the fund'sfund’s shareholders and, in either case, the vote of a majority of the fund'sfund’s board of directors or trustees who are not parties to the agreement or “interested persons” of any such party, within the meaning of the Company Act. Each fund may terminate its distribution agreement, or any agreement thereunder, at any time upon 60 days'days��� written notice by (i) a vote of the majority of its board of directors or trustees cast in person at a meeting called for the purpose of voting on such termination or (ii) a vote at a meeting of shareholders of the lesser of either 67% of the voting shares represented in person or by proxy (if at least 50% of the shares are present at the meeting) or 50% of the outstanding voting shares of such fund. Each distribution agreement automatically terminates in the event of its assignment, as defined in the Company Act. G.distributors may terminate a distribution agreement without penalty upon 60 days'days’ written notice.

 

G.distributors also offers our open-end fundFund products through our website, www.gabelli.com, where directly registered mutual fund investors can access their personal account information and buy, sell, and exchange Fundfund shares. Fund prospectuses, quarterly reports, fund applications, daily net asset values, and performance charts are all available online.

We compete with other investment management firms and mutual fund companies, insurance companies, banks, brokerage firms, and other financial institutions that offer products that have similar features and investment objectives. Many of these investment management firms are subsidiaries of large diversified financial companies. Many others are much larger in terms of AUM and revenues and, accordingly, have much larger sales organizations and marketing budgets. Historically, we have competed primarily on the basis of the long-term investment performance of many of our investment products.  However, weproducts in addition to brand recognition of the Firm and market awareness of its founder, Mr. Gabelli. We have taken steps to increase our distribution channels, brand name awarenessconsistency and marketing communications, and thought-leadership efforts. Other trends affecting the investment management business include the widespread popularity of index mutual funds and ETFs, which have tax and cost advantages over traditional investment companies.

The market for providing investment management services to Institutional and Private Wealth ManagementPWM clients is also highly competitive. Approximately 33%27% of our investment advisory fee revenue for the year ended December 31, 20172020 was derived from our Institutional and Private Wealth ManagementPWM business. Selection of investment advisors by U.S. institutional investors is often subject to a screening process and to favorable recommendations by investment industry consultants. Many of these investors require their investment advisors to have a successful and sustained performance record, often five years or longer with focus also on one-year and three-year performance records. We have significantly increased our AUM on behalf of U.S. institutional investors since our entry into the institutional asset management business in 1977.

Service marks and brand name recognition are important to our business. We have rights to the service marks under which our products are offered. We have registered certain service marks in the United StatesU.S. and will continue to do so as new trademarks and service marks are developed or acquired. We have rights to use the “Gabelli” name, the “GAMCO” name, and other names. Pursuant to an assignment agreement, Mr. Gabelli has assigned to us all of his rights, title, and interests in and to the “Gabelli” name for use in connection with investment management services, mutual funds and securities brokerage services. However, under the agreement, Mr. Gabelli will retain any and all rights, title, and interests he has or may have in the “Gabelli” name for use in connection with (i) charitable foundations controlled by Mr. Gabelli or members of his family and (ii) entities engaged in private investment activities for Mr. Gabelli or members of his family. In addition, the funds managed by Mr. Gabelli outside GBL have entered into a license agreement with us permitting them to continue limited use of the “Gabelli” name under specified circumstances.  We have taken, and will continue to take, action to protect our interests in these service marks.

Virtually all aspects of our businesses are subject to various federal, state, and foreign laws and regulations. These laws and regulations are primarily intended to protect investment advisory clients and shareholders of investment funds. Under such laws and regulations, agencies that regulate investment advisors and broker-dealers have broad powers, including the power to limit, restrict or prohibit such an advisor or broker-dealer from carrying on its business in the event that it fails to comply with such laws and regulations. In such an event, the possible sanctions that may be imposed include civil and criminal liability, the suspension of individual employees, injunctions, limitations on engaging in certain lines of business for specified periods of time, revocation of the investment advisor, and other registrations, censures, and fines.

Our business is subject to extensive regulation at the federal, state, and foreign level by the SEC and other regulatory bodies. Certain of our subsidiaries are registered with the SEC under the Investment Advisers Act of 1940, as amended (“Advisers Act”), and the funds are registered with the SEC under the Company Act. We also have a subsidiary that is registered as a broker-dealer with the SEC and is subject to regulation by FINRA and various states.

 

The subsidiaries of GBL that are registered with the CommissionSEC under the Advisers Act (Funds Advisor, Gabelli Fixed Income LLC(Gabelli Funds and GAMCO Asset) are regulated by and subject to examination by the SEC. The Advisers Act imposes numerous obligations on registered investment advisors, including fiduciary duties, disclosure obligations, and record keeping, operational, and marketing requirements. The CommissionSEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act, ranging from censure to termination of an investment advisor'sadvisor’s registration. The failure of an advisory subsidiary to comply with the requirements of the SEC could have a material adverse effect on us.

We derive a substantial majority of our revenues from investment advisory services through our various investment management agreements. Under the Advisers Act, our investment management agreements may not be assigned without the client'sclient’s consent. Under the Company Act, advisory agreements with registered investment companies such as our Funds terminate automatically upon assignment. The term “assignment” is broadly defined and includes direct as well as assignments that may be deemed to occur, under certain circumstances, upon the transfer, directly or indirectly, of a controlling interest in GBL.

Subsidiaries of GBL are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and to regulations promulgated thereunder, insofar as they are “fiduciaries” under ERISA with respect to certain of their clients. ERISA and applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), impose certain duties on persons who are fiduciaries under ERISA and prohibit certain transactions involving ERISA plan clients. Our failure to comply with these requirements could have a material adverse effect on us.

Investments by GBL and on behalf of our advisoryFunds and Institutional and PWM clients and investment funds often represent a significant equity ownership position in an issuer'sissuer’s class of stock. As of December 31, 2017,2020, we had five percent or more beneficial ownership with respect to 10880 equity securities. This activity raises frequent regulatory, legal, and disclosure issues regarding our aggregate beneficial ownership level with respect to portfolio securities, including issues relating to issuers'issuers’ shareholder rights plans or “poison pills,” and various federal and state regulatory limitations, including state gaming laws and regulations, federal communications laws and regulations, and federal and state public utility laws and regulations, as well as federal proxy rules governing shareholder communications and federal laws and regulations regarding the reporting of beneficial ownership positions. Foreign country regulations may have different levels of ownership limitations. Our failure to comply with these requirements could have a material adverse effect on us.

The USA Patriot Act of 2001 contains anti-money laundering and financial transparency laws and mandates the implementation of various new regulations applicable to broker-dealers, mutual funds and other financial services companies, including standards for verifying client identification at account opening and obligations to monitor client transactions and report suspicious activities. Anti-money laundering laws outside of the U.S. contain some similar provisions. Our failure to comply with these requirements could have a material adverse effect on us.

We and certain of our affiliates are subject to the laws of non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies. In connection with our office in London and our plans to market certain products in Europe, we are required to comply with the laws of the United Kingdom and other European countries regarding these activities. Our subsidiary, GAMCO Asset Management (UK) Limited, is regulated by the Financial Conduct Authority (“FCA”).Authority. In connection with our registration in the United Kingdom, we have minimum capital requirements that have been consistently met or exceeded. We opened an officeoffices in Hong Kong, Shanghai, and Tokyo and, therefore, are subject to national and local laws in that jurisdiction.those jurisdictions. We are subject to requirements in numerous jurisdictions regarding reporting of beneficial ownership positions in securities issued by companies whose securities are publicly-traded in those countries.

The investment management industry is likely to continue facing a high level of regulatory scrutiny and become subject to additional rules designed to increase disclosure, tighten controls, and reduce potential conflicts of interest. In addition, the CommissionSEC has substantially increased its use of focused inquiries, which request information from investment advisors and a number of fund complexes regarding particular practices or provisions of the securities laws. We participate in some of these inquiries in the normal course of our business. Changes in laws, regulations, and administrative practices by regulatory authorities, and the associated compliance costs, have increased our cost structure and could in the future have a material adverse impact. Although we have installed procedures and utilize the services of experienced administrators, accountants, and lawyers to assist us in adhering to regulatory guidelines and satisfying these requirements, and maintain insurance to protect ourselves in the case of client losses, there can be no assurance that the precautions and procedures that we have instituted and installed, or the insurance that we maintain to protect ourselves in case of client losses, will protect us from all potential liabilities.

As of February 28, 2018,2021, we had a full-time staff of 159 individuals,178 teammates, of whom 4166 served in the portfolio management, portfolio management support, and trading areas (including 1926 portfolio managers for the Funds and Institutional and Private Wealth Management)PWM), 5556 served in the marketing and shareholder servicing areas, and 6356 served in the administrative area.

Substantially all of our revenues are directly related to the amount of our AUM. Under our investment advisory contracts with our clients, the investment advisory fees we receive are typically based on the market value of AUM. In addition, we receive asset-based distribution and/or service fees with respect to the open-end fundsFunds managed by Gabelli Funds Advisor or Teton and its affiliates over time pursuant to distribution plans adopted under provisions of Rule 12b-1 under the Company Act. Rule 12b-1 fees typically are based on the average AUM and represented approximately 11.0%, 11.6%8.9% and 12.5%9.4% of our total revenues for the years ended December 31, 2017, 20162020 and 2015,2019, respectively. Accordingly, a decline in the prices of securities generally may cause our revenues and net income to decline by either causing the value of our AUM to decrease, which would result in lower investment advisory and Rule 12b-1 fees, or causing our clients to withdraw funds in favor of investments they perceive to offer greater opportunity or lower risk, which would also result in lower fees. The securities markets are highly volatile, and securities prices may increase or decrease for many reasons beyond our control, including, but not limited to, economic and political events, war (whether or not directly involving the U.S.), acts of terrorism, unanticipated changes in currency exchange rates, interest rates, inflation rates, the yield curve, defaults by derivative counterparties, bond default risks, sovereign debt crisis, and other factors that are difficult or impossible to predict. If a decline in securities prices caused our revenues to decline, it could have a material adverse effect on our earnings. Lastly, as we are a traditional asset manager, we do not receive additional revenue streams from alternative asset strategies such as hedge funds, private equity, or venture capital.

Our business is subject to extensive regulation in the United States,U.S., primarily at the federal level, including regulation by the SEC under the Company Act and the Advisers Act as well as other securities laws, by the Department of Labor under ERISA, and regulation by FINRA and state regulators. The Funds managed by Gabelli Funds Advisor are registered with the SEC as investment companies under the Company Act. The Advisers Act imposes numerous obligations on investment advisors, including record-keeping, advertising and operating requirements, fiduciary and disclosure obligations, custodial requirements, and prohibitions on fraudulent activities. The Company Act imposes similar obligations, as well as additional detailed operational requirements, on registered investment companies and investment advisors. In addition, our businesses are also subject to regulation by the Financial Services Authority in the United Kingdom, and we are also subject to the laws of other non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies.

ToPeriods of market volatility have occurred and could continue to occur in response to pandemics or other events outside of our control. These types of events have adversely affected and could continue to adversely affect operating results for us and the portfolios that we manage. For example, in December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in China and has since spread quickly to other countries, including the U.S., which has resulted in restrictions on travel and congregation and the temporary closure of many non-essential businesses in affected jurisdictions, including, beginning in March 2020, in the U.S. In addition to these developments having adverse consequences for us and the portfolios that we manage, the operations of GAMCO could be adversely impacted, including through quarantine measures and travel restrictions imposed on its personnel or service providers based in affected countries, or any related health issues of such personnel or service providers. As the potential impact of COVID-19 is difficult to predict, the extent to which COVID-19 could negatively affect our and our portfolio companies’ operating results or the duration of any potential business disruption is uncertain. Any potential impact to our results of operations will depend to a large extent on future developments and new information that provisionscould emerge regarding the duration and severity of COVID-19 and the Tax Cutsactions taken by authorities and Jobs Act (the “Act”)other entities to contain COVID-19 or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect the deductibility of named executive officer (“NEO”) compensation, we may be impacted.our operating results.

The investment management business is highly competitive and has relatively low barriers to entry. To the extent we are forced to compete on the basis of price, we may not be able to maintain our current fee structure. Although our investment managementadvisory fees vary from product to product, historically we have competed primarily on the performance of our products and not on the level of our investment managementadvisory fees relative to those of our competitors. In recent years, however, there has been a trend toward lower fees in the investment management industry. In order to maintain our fee structure in a competitive environment, we must be able to continue to provide clients with investment returns and service that make investors willing to pay our fees. In addition, the board of directors or trustees of each fundFund managed by Gabelli Funds Advisor must make certain findings as to the reasonableness of its fees. We cannot be assured that we will succeed in providing investment returns and service that will allow us to maintain our current fee structure. Fee reductions on existing or new business could have an adverse effect on our profit margins and results of operations.

A substantial majority of our revenues are derived from investment management agreements and distribution arrangements. Investment management agreements and distribution arrangements with the domestic Funds are terminable without penalty on 60 days'days’ notice (subject to certain additional procedural requirements in the case of termination by a Fund) and must be specifically approved at least annually, as required by law. Such annual renewal requires, among other things, approval by the disinterested members of each Fund'sFund’s board of directors or trustees. Investment advisory agreements with our Institutional and Private Wealth ManagementPWM clients are typically terminable by the client without penalty on 30 days'days’ notice or less. Any failure to renew or termination of a significant number of these agreements or arrangements would have a material adverse effect on us.

Open-end fundFund investors may redeem their investments in those fundsFunds at any time without prior notice. Investors may reduce the aggregate amount of AUM for any number of reasons, including investment performance, changes in prevailing interest rates, and financial market performance. In a declining stock market, the pace of mutual fund redemptions could accelerate. Poor performance relative to other asset management firms tends to result in decreased purchases of mutualopen-end fund shares and increased redemptions of mutualopen-end fund shares. The redemption of investments in mutual fundsthe Funds managed by Gabelli Funds Advisor would adversely affect our revenues, which are substantially dependent upon the AUM in our funds.Funds. If redemptions of investments in mutual fundsthe open-end Funds caused our revenues to decline, it could have a material adverse effect on our earnings.

Under the Company Act, an investment management agreement with a fund must provide for its automatic termination in the event of its assignment. The fund’s board and shareholders must vote to continue the agreement following its assignment, the cost of which ordinarily would be borne by us. Under the Advisers Act, a client’s investment management agreement may not be “assigned”assigned by the investment advisor without the client’s consent. An investment management agreement is considered to be assigned to another party when a controlling block of the advisor’s ownership is transferred. In our case, an assignment of our investment management agreements may occur if, among other things, we sell or issue a certain number of additional common shares in the future. We cannot be certain that our clients will consent to assignments of our investment management agreements or approve new agreements with us if an assignment occurs. Under the Company Act, if a fund’s investment advisor engages in a transaction that results in the assignment of its investment management agreement with the fund, the advisor may not impose an “unfair burden”unfair burden on that fund as a result of the transaction for a two-year period after the transaction is completed. The term “unfair burden” has been interpreted to include certain increases in investment advisory fees. This restriction may discourage potential purchasers from acquiring a controlling interest in our company.

A terrorist attack, political unrest, war (whether or not directly involving the U.S.), power failure, cyber-attack, technology failure, natural disaster, or many other possible catastrophic or unpredictable events could adversely affect our future revenues, expenses, and earnings by, among other things: causing disruptions in U.S., regional or global economic conditions; interrupting our normal business operations; inflicting employeeteammate casualties, including loss of our key executives; requiring substantial expenditures and expenses to repair, replace, and restore normal business operations; and reducing investor confidence.

We have a disaster recovery plan to address certain contingencies, but it cannot be assured that this plan will be effective or sufficient in responding to, eliminating, or ameliorating the effects of all disaster scenarios. If our employeesteammates or vendors we rely upon for support in a catastrophic event are unable to respond adequately or in a timely manner, we may lose clients resulting in a decrease in AUM, which may have a material adverse effect on revenues and net income.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We and the investments we manage may have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including:including brokers and dealers, commercial banks, investment banks, clearing organizations, mutual and hedge funds, and other institutions. Many of these transactions expose us, or the accounts we manage, to credit risk in the event of the counterparty’s default. There is no assurance that any such losses would not materially and adversely impact the Company’s revenues and earnings.

Since our OfferingIPO in 1999, Mr. Gabelli, through his control and majority ownership of GGCP, has beneficially owned a majority of our outstanding Class B Stock, currently representing 91%approximately 92% of voting control. As long as Mr. Gabelli indirectly beneficially owns a majority of the combined voting power of our common stock, he will have the ability to elect all of the members of our Board of Directors and thereby control our management and affairs, including determinations with respect to acquisitions, dispositions, borrowings, issuances of common stock or other securities, and the declaration and payment of dividends on the common stock. In addition, Mr. Gabelli will be able to determine the outcome of matters submitted to a vote of our shareholders for approval and will be able to cause or prevent a change in control of our company. As a result of Mr. Gabelli'sGabelli’s control, none of our agreements with Mr. Gabelli and other companies controlled by him can be assumed to have been arrived at through “arm's-length”arm’s-length negotiations, although we believe that the parties endeavor to implement market-based terms. There can be no assurance that we would not have received more favorable terms, or offered less favorable terms to, an unaffiliated party.

On February 6, 2008, Mr. Gabelli entered into an amended and restated employment agreement (the(as amended, the “2008 Employment Agreement”) with the Company, which was initially approved by the Company’s shareholders on November 30, 2007 and approved again on May 6, 2011, and May 5, 2015, and June 5, 2020, and which limits his activities outside of the Company. Under the 2008 Employment Agreement, the manner of computing Mr. Gabelli’s remuneration from GAMCO is unchanged.

Mr. Gabelli has agreed that while he is employed by us he will not provide investment management services outside of GAMCO, AC, and GGCP, except for certain permitted accounts. These permitted accounts, excluding personal accounts, held assets at December 31, 20172020 and 20162019 of approximately $267.7$263.9 million and $252.3$264.1 million, respectively. Mr. Gabelli continues to be a member of the team that manages the TETON Westwood Mighty Mites^SM Fund, whose advisor, Teton, was spun-off from GBL in March 2009. Effective February 27, 2017, Gabelli Funds became the sub-advisor to the TETON Westwood Mighty Mites^SM Fund. The assets in the TETON Westwood Mighty Mites^SM Fund at December 31, 20172020 and 2019 were $1.4 billion.$0.6 billion and $1.0 billion, respectively. The 2008 Employment Agreement may not be amended without approval by the approvalcommittee of the Compensation Committeeour Board of Directors responsible for administering compensation and Mr. Gabelli.

In addition to Mr. Gabelli, our future success depends to a substantial degree on our ability to retain and attract other qualified personnelteammates to conduct our investment management business, including ChristopherMessrs. Marangi and Kevin Dreyer, the other Co-Chief Investment Officers of the Value team.team, Howard Ward, the Chief Investment Officer of Growth, Caesar Bryan, who manages Gold portfolios, and the Dinsmore team that manages the Convertible strategies. The market for qualified portfolio managers is extremely competitive. We anticipate that it will be necessary for us to add portfolio managers and investment analysts as we further diversify our investment products and strategies. There can be no assurance, however, that we will be successful in our efforts to recruit and retain personnel.teammates. In addition, our investment professionals and senior marketing personnelteammates have direct contact with our Institutional and Private Wealth ManagementPWM clients, which can lead to strong client relationships. The loss of these personnelteammates could jeopardize our relationships with certain Institutional and Private Wealth ManagementPWM clients, and result in the loss of such accounts. The loss of key management professionals or the inability to recruit and retain sufficient portfolio managers and marketing personnelteammates could have a material adverse effect on our business.

Since the separation of AC from GAMCO, Mario J. Gabelli has continued to serve as our Chairman and Chief Executive Officer and also serves as Executive Chairman of AC. Marc Gabelli, a son of Mario J. Gabelli, continues to have responsibilities relating to GAMCO.GAMCO and AC. Kevin Handwerker, GAMCO’s Executive Vice President, General Counsel and Secretary, also serves AC in the same capacities. Douglas R. Jamieson has continued to serve as President and Director of GAMCO Asset Management Inc. and also serves as President and Chief Executive Officer, and Director of AC.  Agnes Mullady has continued to serve as President, and COO of the Fund Division of Gabelli Funds, LLC and also serves as an Executive Vice PresidentDirector of AC. In addition, certain of our portfolio managers and teammates will be providedprovide services to AC pursuant to the Transitional Services Agreement with AC and will beare officers or employees of AC. Such dual assignments could create, or appear to create, potential conflicts of interest when our and AC’s officers and directors face decisions that could have different implications for the two companies.

Also, some of our directors, executive officers, portfolio managers, and teammates own shares of AC common stock.stock as well as GGCP.

In addition, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between GAMCO and AC regarding the terms of the agreements governing the separation and the relationship thereafter between the companies. The executive officers and other personnel of AC who serve as directors or executive management of GAMCO may interpret these agreements in their capacity as AC employees in a manner that would adversely affect the business of GAMCO.

Our reputation is critical to acquiring, maintaining, and developing relationships with our clients, Mutual Fund shareholders, and third party intermediaries. Misconduct by our staff,teammates, or even unsubstantiated allegations, could result not only in direct financial harm but also in harm to our reputation, causing injury to the value of our brands and our ability to retain or attract AUM. Moreover, reputational harm may cause us to lose current employeesteammates and we may be unable to attract new employeesteammates with similar qualification or skills. Damage to our reputation could substantially reduce our AUM and impair our ability to maintain or grow our business, which could have a material adverse effect on us.

Currently, we maintain acertain proprietary investment positionpositions in a few securities. Market fluctuations and other factors may result in substantial losses in our proprietary accounts, which could have an adverse effect on our balance sheet, reduce our ability or willingness to make new investments, or impair our credit ratings.

Success in the investment management and mutual fund businesses is dependent on investment performance as well as distribution and client servicing. Good performance generally stimulates sales of our investment products and tends to keep withdrawals and redemptions low, which generates higher managementadvisory fees (which are based on the amount of AUM). Conversely, poor performance, both in absolute terms and/or relative to peers and industry benchmarks, tends to result in decreased sales, increased withdrawals and redemptions in the case of the open-end Funds, and in the loss of Institutional and Private Wealth ManagementPWM clients, with corresponding decreases in revenues to us. Many analysts of the mutual fund industry believe that investment performance is the most important factor for the growth of openopen-end and closed-end funds, such as those we offer. Failure of our investment products to perform well or failure of the Funds to maintain ratings or rankings could, therefore, have a material adverse effect on us.

In addition, when our investment products experience strong results relative to the market or other asset classes, clients'clients’ investments in our products may increase beyond their target levels, and we could, therefore, suffer withdrawals as our clients rebalance their investments to fit their asset allocation preferences.

We had approximately 1,7001,500 Institutional and Private Wealth ManagementPWM accounts as of December 31, 2017,2020, of which the ten largest accounts generated approximately 9% of our total revenues during the year ended December 31, 2017.2020. Account turnover for any reason would have an adverse effect on our revenues. Notwithstanding performance, we have, from time to time, experienced account turnover of large Institutional and Private Wealth ManagementPWM accounts as a result of corporate mergers and restructurings, and we could continue to lose accounts under these orand other circumstances.circumstances, including the performance of our small cap and value mandates.

Market conditions may preclude us from increasing the assets we manage in our closed-end funds.Funds. A significant portion of our recent growth in the assets we manage has resulted from public offerings of the common and preferred shares of the closed-end funds.Funds. We have raised approximately $5.4$6.2 billion in gross assets through closed-end fundFund offerings since January 2004. The market conditions for these offerings may not be as favorable in the future, which could adversely impact our ability to grow our AUM and our revenue.

A significant share of sales of our open-end fundsFunds come through third party distribution programs, which are programs sponsored by third party intermediaries that offer their mutual fund customers a variety of competing products and administrative services. A substantial component of sales growth is from third party distribution programs with no transaction fees payable by the customer, which we refer to as NTF programs. Approximately $4.2$2.5 billion of our AUM in the open-end equity fundsFunds as of December 31, 20172020 are held through NTF programs. The cost of participating in third party distribution programs is higher than our direct distribution costs, and it is anticipated that the cost of third party distribution programs will increase in the future. Any increase would be likely to have an adverse effect on our profit margins and results of operations. In addition, there can be no assurance that the third party distribution programs will continue to distribute the Funds.Funds on their platforms. Consolidation may result in the reduction of distributors or increased competition to access third party channels, as well as increased distribution costs. At December 31, 2017,2020, approximately 94%91% of the NTF program net assets in the Gabelli/GAMCO families of fundsFunds are attributable to two NTF programs. The decision by these third party distribution programs to discontinue distribution of the funds,our Funds, or a decision by us to withdraw one or more of the fundsFunds from the programs, could have an adverse effect on our growth of AUM.

We face operational risk arising from errors made in the execution, confirmation, or settlement of transactions or from transactions not being properly recorded, evaluated, or accounted for. Our business is highly dependent on our ability to process, on a daily basis, transactions across markets in an efficient and accurate manner. Consequently, we rely heavily on our financial, accounting, and other data processing systems. Despite the reliability of these systems, and the training and skill of our employeesteammates and third parties we rely on, it remains likely that errors may occasionally occur due to the extremely large number of transactions we process. In addition, if systems we use are unable to accommodate an increasing volume of transactions, our ability to expand our businesses could be constrained. If any of these systems do not operate properly or are disabled, we could suffer financial loss, a disruption of our businesses, liability to clients, regulatory intervention, or reputational damage.

The Company’sOur infrastructure, including itsour information systems and technology, is vital to the competitiveness of itsour business. The failure to maintain an adequate infrastructure commensurate with the size and scope of our business could impede our productivity and growth, which could cause our earnings or stock price to decline. We outsource a significant portion of our information systems operations to third parties who are responsible for providing the management, maintenance, and updating of such systems. Technology is subject to rapid change and we cannot guarantee that our competitors may not implement more advanced technology platforms for their products than we do for ours. In addition, there can be no assurance that the cost of maintaining such outsourcing arrangements will not increase from its current level, which could have a material adverse effect on us.

In addition, any inaccuracies, delays, system failures, or security breaches in these and other systems could subject us to client dissatisfaction and losses. Breach of our technology systems could result in the loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by the breach, additional security costs to mitigate against future incidents, and litigation costs resulting from the incident. Moreover, loss of confidential customer identification information could harm our reputation and subject us to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenues. Further, although we take precautions to password protect and encrypt our laptops, tablets, smartphones, and other mobile electronic hardware, if such hardware is stolen, misplaced or left unattended, it may become vulnerable to hacking or other unauthorized use, creating a possible security risk and resulting in potentially costly actions by us.

Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. We may be the target of cyber-attacks, including denial-of-service attacks, and must continuously monitor and develop our systems to protect our technology infrastructure and data from misappropriation or corruption. Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software, and networks may be vulnerable to unauthorized access, misuse, computer viruses, or other malicious code and other events that could have a security impact. If one or more of such events occur, this potentially could jeopardize our or our clients’ or counterparties’ confidential and other information processed and stored in our, our clients’, our counterparties’, or third parties’ operations, which could impact their ability to transact with us or otherwise result in significant losses or reputational damage. The increased use of mobile technologies can heighten these and other operational risks. We expect to expend significant additional resources on an ongoing basis to modify our protective measures and to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us.

We routinely transmit and receive personal, confidential, and proprietary information by email and other electronic means. We have discussed and worked with clients, vendors, service providers, counterparties, and other third parties to develop secure transmission capabilities and protect against cyber-attacks, but we do not have, and may be unable to put in place, secure capabilities with all of our clients, vendors, service providers, counterparties, and other third parties and we may not be able to ensure that these third parties have appropriate controls in place to protect the confidentiality of the information. An interception, misuse, or mishandling of personal, confidential, or proprietary information being sent to or received from a client, vendor, service provider, counterparty, or other third party could result in legal liability, regulatory action, and reputational harm.

The Company depends on a number of key vendors for various fund administration, accounting, custody, and transfer agent roles and other operational needs. The failure or inability of the Company to diversify its sources for key services or the failure of any key vendors to fulfill their obligations could lead to operational issues for the Company and in certain products, which could result in financial losses for the Company and its clients.

Our ability to meet anticipated cash needs is affected by factors such as the market value of our assets, our operating cash flows, and our creditworthiness as perceived by lenders. Adverse developments in any of these areas could have significantly adverse effects on our business. If we are unable to obtain funds and financing in a timely manner or on acceptable terms, we may be forced to incur unanticipated costs or revise our business plans. Further, our access to the capital markets depends significantly on our credit ratings. A reduction in our credit ratings could increase our borrowing costs and limit our access to the capital markets. Volatility in the U.S., regional, or global financing markets may also impact our ability to access the capital markets should we seek to do so, and we may be forced to incur unanticipated costs or experience other adverse effects on our business.  We currently have a credit rating of investment grade with one rating agency and one below investment grade with another rating agency.  We believe that if our credit rating was below investment grade with both credit agencies it would increase our long-term borrowing costs, on future borrowings, by 35 basis points, while a two notch downgrade would increase our long-term borrowing costs, on future borrowings, by approximately 60-70 basis points. Our current outstanding debt issuances would not be impacted by any changes in our ratings.

The volume of litigation and arbitration claims against financial services firms and the amount of damages claimed has increased over the past several years. The types of claims that we may face are varied. For example, we may face claims against us for purchasing securities that are inconsistent with a client’s investment objectives or guidelines, in connection with the operation of the Funds, or arising from an employment dispute. The risk of litigation is difficult to predict, assess, or quantify, and may occur years after the activities or events at issue. In addition, from time to time we may become the subject of governmental or regulatory investigations and/or examinations. Even if we prevail in a legal or regulatory action, the costs alone of defending against the action or the harm to our reputation could have a material adverse effect on us. The insurance coverage that we maintain with respect to legal and regulatory actions may be inadequate or may not cover certain proceedings.

Our investment management activities are subject to client guidelines, and our Mutual Fundmutual fund business involves compliance with numerous investment, asset valuation, liquidity, distribution, and tax requirements. A failure to comply with these guidelines or contractual requirements could result in damage to the Company’s reputation or in its clients seeking to recover losses, withdrawing their AUM, or terminating their contracts, any of which could cause the Company’s revenues and earnings to decline. There can be no assurance that the precautions and procedures that we have instituted and installed or the insurance we maintain to protect ourselves in case of client losses will protect us from potential liabilities.

The asset management business is intensely competitive. We compete with numerous investment management companies, stock brokerage and investment banking firms, insurance companies, banks, savings and loan associations, and other financial institutions. The periodic establishment of new investment management companies and other competitors increases the competition that we face. At the same time, consolidation in the financial services industry has created stronger competitors with greater financial resources and broader distribution channels than our own. Competition is based on various factors, including, among others, business reputation, investment performance, product mix and offerings, service quality and innovation, distribution relationships, and fees charged. Our competitive success in any or all of these areas cannot be assured. Additionally, competing securities dealers whom we rely upon to distribute our mutual fundsopen-end Funds also sell their own proprietary funds and investment products, which could limit the distribution of our investment products. To the extent that existing or potential customers, including securities dealers, decide to invest in or distribute the products of our competitors, the sales of our products as well as our market share, revenues, and net income could decline.

We may sell additional shares of Class A Stock in subsequent public offerings. We also may issue additional shares of Class A Stock or convertible debt securities. On March 5, 2018, AC completed a tender offer in which tendering AC shareholders received an aggregate of approximately 660,000 shares of our registered Class A Stock constituting approximately 7% of the Class A Stock outstanding. On October 29, 2018, AC completed another tender offer in which tendering AC shareholders received an aggregate of approximately 710,000 shares of our registered Class A Stock constituting approximately 7% of the Class A Stock outstanding. During 2020, AC sold 178,525 shares of our Class A Stock constituting approximately 2% of the Class A Stock outstanding. The market price of our Class A Stock could decline as a result of sales of Class A Stock by such shareholders. Any such sales, as well as sales by our other current shareholders, could be perceived negatively.

No prediction can be made as to the effect, if any, that future sales or distributions of Class B Stock owned by GGCP Holdings LLC will have on the market price of the Class A Stock from time to time. Sales or distributions of substantial amounts of Class A Stock or Class B Stock, or the perception that such sales or distributions are likely to occur, could adversely affect the prevailing market price for the Class A Stock.