DIAMOND HILL INVESTMENT GROUP INC Fair Value Disclosure
The Company determines the fair value of its cash equivalents and certain investments using the following broad levels listed below:
Level 1 - Unadjusted quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-driven valuations in which all significant inputs are observable.
Level 3 - Valuations derived from techniques in which significant inputs are unobservable. The Company does not value any investments using Level 3 inputs.
These levels are not necessarily an indication of the risk or liquidity associated with investments.
The following table summarizes investments that are recognized in the Company’s consolidated balance sheet using fair value measurements (excludes investments classified as equity method investments) determined based upon the differing levels as of December 31, 2025 and 2024:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
$ |
41,130,032 |
|
|
|
— |
|
|
|
— |
|
|
$ |
41,130,032 |
|
Fair value investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities held in Consolidated Funds(a) |
|
$ |
1,009,441 |
|
|
|
30,153,536 |
|
|
|
— |
|
|
|
31,162,977 |
|
Company-sponsored investments |
|
$ |
30,888,582 |
|
|
|
— |
|
|
|
— |
|
|
|
30,888,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
|
40,339,754 |
|
|
|
— |
|
|
|
— |
|
|
|
40,339,754 |
|
Fair value investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities held in Consolidated Funds(a) |
|
|
1,840,412 |
|
|
|
33,742,750 |
|
|
|
— |
|
|
|
35,583,162 |
|
Company-sponsored investments |
|
$ |
30,146,571 |
|
|
|
— |
|
|
|
— |
|
|
$ |
30,146,571 |
|
Changes to fair values of the investments are recorded in the Company’s consolidated statements of income as investment income, net.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.