FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2015

FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

8. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

The following tables summarize the valuation of the Partnership’s financial assets and liabilities by the fair value hierarchy and NAV:

	June 30, 2015
	Level I		Level II		Level III		NAV		Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds	$	—	$	—	$	—	$	166,886	$	166,886
Equity Securities		57,720		80,490		124,500		—		262,710
Partnership and LLC Interests		—		146,316		514,769		—		661,085
Debt Instruments		—		178,568		34,137		—		212,705
Assets of Consolidated CLO Vehicles
Corporate Loans		—		2,771,457		243,383		—		3,014,840
Corporate Bonds		—		226,723		20,360		—		247,083
Freestanding Derivatives — Foreign Currency Contracts		—		1,134		—		—		1,134
Other		—		281		—		—		281
Total Investments of Consolidated Blackstone Funds		57,720		3,404,969		937,149		166,886		4,566,724
Blackstone’s Treasury Cash Management Strategies
Investment Funds		235,520		—		—		—		235,520
Equity Securities		95,869		170		—		—		96,039
Debt Instruments		—		1,137,114		49,524		118,655		1,305,293
Other		—		—		—		63,060		63,060
Total Blackstone’s Treasury Cash Management Strategies		331,389		1,137,284		49,524		181,715		1,699,912
Money Market Funds		636,975		—		—		—		636,975
Net Investment Hedges — Foreign Currency Contracts		—		525		—		—		525
Freestanding Derivatives
Interest Rate Contracts		2,058		418		—		—		2,476
Foreign Currency Contracts		—		2,154		—		—		2,154
Loans and Receivables		—		—		36,440		—		36,440
Other Investments		33,022		—		102,210		27,496		162,728
	$	1,061,164	$	4,545,350	$	1,125,323	$	376,097	$	7,107,934

	June 30, 2015
	Level I		Level II		Level III		Total
Liabilities
Liabilities of Consolidated Funds and CLO Vehicles (a)
Senior Secured Notes (b)	$	—	$	2,912,753	$	—	$	2,912,753
Subordinated Notes (b)		—		119,577		—		119,577
Freestanding Derivatives — Foreign Currency Contracts		—		7,580		—		7,580
Freestanding Derivatives — Credit Default Swaps		—		2,286		—		2,286
Freestanding Derivatives
Interest Rate Contracts		2,388		2,427		—		4,815
Foreign Currency Contracts		—		757		—		757
Credit Default Swaps		—		4,445		—		4,445
Securities Sold, Not Yet Purchased		—		138,783		—		138,783
	$	2,388	$	3,188,608	$	—	$	3,190,996

	December 31, 2014
	Level I		Level II		Level III		NAV		Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds	$	—	$	—	$	—	$	1,103,210	$	1,103,210
Equity Securities		58,934		114,115		179,311		—		352,360
Partnership and LLC Interests		—		187,140		1,496,422		—		1,683,562
Debt Instruments		—		1,502,314		105,970		—		1,608,284
Assets of Consolidated CLO Vehicles
Corporate Loans		—		5,691,517		588,075		—		6,279,592
Corporate Bonds		—		292,690		—		—		292,690
Freestanding Derivatives — Foreign Currency Contracts		—		8,915		—		—		8,915
Freestanding Derivatives — Interest Rate Contracts		—		2,281		—		—		2,281
Other		13		19,455		25,045		—		44,513
Total Investments of Consolidated Blackstone Funds		58,947		7,818,427		2,394,823		1,103,210		11,375,407
Blackstone’s Treasury Cash Management Strategies
Investment Funds		307,111		—		—		—		307,111
Equity Securities		71,746		—		—		—		71,746
Debt Instruments		—		1,090,794		84,894		50,507		1,226,195
Other		—		—		—		61,009		61,009
Total Blackstone’s Treasury Cash Management Strategies		378,857		1,090,794		84,894		111,516		1,666,061
Money Market Funds		198,278		—		—		—		198,278
Net Investment Hedges — Foreign Currency Contracts		—		523		—		—		523
Freestanding Derivatives
Interest Rate Contracts		263		144		—		—		407
Foreign Currency Contracts		—		2,798		—		—		2,798
Credit Default Swaps		—		85		—		—		85
Loans and Receivables		—		—		40,397		—		40,397
Other Investments		31,731		436		104,491		9,593		146,251
	$	668,076	$	8,913,207	$	2,624,605	$	1,224,319	$	13,430,207

	December 31, 2014
	Level I		Level II		Level III		Total
Liabilities
Liabilities of Consolidated Funds and CLO Vehicles (a)
Senior Secured Notes	$	—	$	—	$	6,448,352	$	6,448,352
Subordinated Notes		—		—		348,752		348,752
Freestanding Derivatives — Foreign Currency Contracts		—		21,875		—		21,875
Freestanding Derivatives — Credit
Default Swaps		—		2,514		—		2,514
Freestanding Derivatives
Interest Rate Contracts		1,357		3,233		—		4,590
Foreign Currency Contracts		—		681		—		681
Credit Default Swaps		—		868		—		868
Securities Sold, Not Yet Purchased		—		85,878		—		85,878
	$	1,357	$	115,049	$	6,797,104	$	6,913,510

(a) Pursuant to GAAP consolidation guidance, the Partnership is required to consolidate all VIEs in which it has been identified as the primary beneficiary, including certain CLO vehicles, and other funds in which a consolidated entity of the Partnership, as the general partner of the fund, is presumed to have control. While the Partnership is required to consolidate certain funds, including CLO vehicles, for GAAP purposes, the Partnership has no ability to utilize the assets of these funds and there is no recourse to the Partnership for their liabilities since these are client assets and liabilities.

(b) Senior and subordinate notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (a) the fair value of any beneficial interests held by Blackstone, and (b) the carrying value of any beneficial interests that represent compensation for services.

The following table summarizes the fair value transfers between Level I and Level II for positions that existed as of June 30, 2015 and 2014, respectively:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Transfers from Level I into Level II (a)	$	—	$	—	$	—	$	—
Transfers from Level II into Level I (b)	$	89	$	49,298	$	5,777	$	67,327

(a) Transfers out of Level I represent those financial instruments for which restrictions exist and adjustments were made to an otherwise observable price to reflect fair value at the reporting date.

(b) Transfers into Level I represent those financial instruments for which an unadjusted quoted price in an active market became available for the identical asset.

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of June 30, 2015:

	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted- Average (a)
Financial Assets
Investments of Consolidated Blackstone Funds
Equity Securities	$	86,132	Discounted Cash Flows	Discount Rate	8.7% - 25.0%	12.8%
				Revenue CAGR	1.8% - 22.0%	7.4%
				Exit Multiple - EBITDA	4.5x - 17.0x	9.3x
				Exit Multiple - P/E	10.5x - 15.0x	11.0x
		32,784	Transaction Price	N/A	N/A	N/A
		184	Market Comparable Companies	EBITDA Multiple	6.5x - 7.8x	6.9x
		34	Third Party Pricing	N/A	N/A	N/A
		5,366	Other	N/A	N/A	N/A
Partnership and LLC Interests		483,105	Discounted Cash Flows	Discount Rate	4.4% - 25.7%	9.4%
				Revenue CAGR	-22.0% - 27.9%	8.4%
				Exit Multiple - EBITDA	3.0x - 23.3x	10.2x
				Exit Capitalization Rate	3.1% - 19.5%	6.3%
		17,991	Transaction Price	N/A	N/A	N/A
		11,671	Third Party Pricing	N/A	N/A	N/A
		2,002	Other	N/A	N/A	N/A
Debt Instruments		9,501	Discounted Cash Flows	Discount Rate	6.5% - 34.3%	14.6%
				Revenue CAGR	7.2% - 20.0%	16.1%
				Exit Multiple - EBITDA	6.3x - 9.5x	8.5x
				Exit Capitalization Rate	1.0% - 4.4%	2.0%
		21,222	Third Party Pricing	N/A	N/A	N/A
		3,165	Transaction Pricing	N/A	N/A	N/A
		249	Market Comparable Companies	EBITDA Multiple	6.4x	N/A
Assets of Consolidated CLO Vehicles		198,226	Third Party Pricing	N/A	N/A	N/A
		65,517	Market Comparable Companies	EBITDA Multiple	4.5x - 7.0x	5.1x
Total Investments of Consolidated Blackstone Funds		937,149

	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted- Average (a)
Blackstone’s Treasury Cash Management Strategies	$	35,979	Discounted Cash Flows	Default Rate	1.0% - 2.0%	1.9%
				Recovery Rate	30.0% - 70.0%	67.9%
				Recovery Lag	12 months	N/A
				Pre-payment Rate	20.0% - 30.0%	29.6%
				Reinvestment Rate	LIBOR + 350 bps	LIBOR + 395 bps
					LIBOR + 450 bps
				Discount Rate	5.8% - 11.3%	6.7%
		13,545	Third Party Pricing	N/A	N/A	N/A
Loans and Receivables		14,727	Discounted Cash Flows	Discount Rate	14.8%	N/A
		21,713	Transaction Price	N/A	N/A	N/A
Other Investments		85,388	Discounted Cash Flows	Discount Rate	1.3% - 12.5%	3.0%
				Default Rate	2.0%	N/A
				Recovery Rate	70.0%	N/A
				Recovery Lag	12 months	N/A
				Pre-payment Rate	20.0%	N/A
				Reinvestment Rate	LIBOR + 400 bps	N/A
		446	Market Comparable Companies	EBITDA Multiple	6.9x	N/A
		16,376	Transaction Price	N/A	N/A	N/A
Total	$	1,125,323

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of December 31, 2014:

	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted- Average (a)
Financial Assets
Investments of Consolidated Blackstone Funds
Equity Securities	$	106,727	Discounted Cash Flows	Discount Rate	8.4% - 24.7%	11.8%
				Revenue CAGR	0.7% - 24.4%	7.1%
				Exit Multiple - EBITDA	5.0x - 13.0x	10.1x
				Exit Multiple - P/E	10.5x - 17.0x	11.2x
		67,706	Transaction Price	N/A	N/A	N/A
		163	Market Comparable Companies	EBITDA Multiple	6.7x - 7.6x	6.9x
		45	Third Party Pricing	N/A	N/A	N/A
		4,670	Other	N/A	N/A	N/A
Partnership and LLC Interests		485,748	Discounted Cash Flows	Discount Rate	4.4% - 21.5%	9.5%
				Revenue CAGR	-4.4% - 41.7%	6.5%
				Exit Multiple - EBITDA	1.0x - 19.1x	9.7x
				Exit Capitalization Rate	2.0% - 19.1%	6.8%
		996,199	Transaction Price	N/A	N/A	N/A
		13,793	Third Party Pricing	N/A	N/A	N/A
		682	Other	N/A	N/A	N/A
Debt Instruments		9,570	Discounted Cash Flows	Discount Rate	8.8% - 24.7%	16.1%
				Revenue CAGR	4.7% - 6.8%	5.0%
				Exit Multiple - EBITDA	5.9x - 11.3x	11.0x
				Exit Capitalization Rate	1.0% - 12.4%	9.3%
				Default Rate	2%	N/A
				Recovery Rate	30.0% - 70.0%	66.0%
				Recovery Lag	12 months	N/A
				Pre-payment Rate	20%	N/A
				Reinvestment Rate	LIBOR + 400 bps	N/A
		95,542	Third Party Pricing	N/A	N/A	N/A
		686	Transaction Price	N/A	N/A	N/A
		172	Market Comparable Companies	EBITDA Multiple	6.6x - 7.9x	6.6x
Assets of Consolidated CLO Vehicles		318,636	Third Party Pricing	N/A	N/A	N/A
		290,658	Market Comparable Companies	EBITDA Multiple	3.8x - 15.0x	6.1x
		3,826	Discounted Cash Flows	Discount Rate	8.0%	N/A
Total Investments of Consolidated Blackstone Funds		2,394,823

	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted- Average (a)
Blackstone’s Treasury Cash Management Strategies	$	26,167	Discounted Cash Flows	Default Rate	1.0%	N/A
				Recovery Rate	30.0% - 70.0%	66.0%
				Recovery Lag	12 months	N/A
				Pre-payment Rate	30.0%	N/A
				Reinvestment Rate	LIBOR + 450 bps	N/A
				Discount Rate	5.8% - 10.0%	7.2%
		54,257	Third Party Pricing	N/A	N/A	N/A
		4,470	Transaction Price	N/A	N/A	N/A
Loans and Receivables		26,247	Discounted Cash Flows	Discount Rate	10.5% - 12.2%	10.9%
		14,150	Transaction Price	N/A	N/A	N/A
Other Investments		11,887	Transaction Price	N/A	N/A	N/A
		92,604	Discounted Cash Flows	Discount Rate	1.3% - 12.5%	2.9%
				Default Rate	2.0%	N/A
				Recovery Rate	30.0% - 70.0%	66.0%
				Recovery Lag	12 months	N/A
				Pre-payment Rate	20.0%	N/A
				Reinvestment Rate	LIBOR + 400 bps	N/A
Total	$	2,624,605
Financial Liabilities
Liabilities of Consolidated CLO Vehicles	$	6,797,104	Discounted Cash Flows	Default Rate	2.0%	N/A
				Recovery Rate	30.0% - 70.0%	66.0%
				Recovery Lag	12 months	N/A
				Pre-payment Rate	20.0%	N/A
				Discount Rate	0.3% - 19.3%	2.3%
				Reinvestment Rate	LIBOR + 400 bps	N/A

N/A Not applicable.

CAGR Compound annual growth rate.

EBITDA Earnings before interest, taxes, depreciation and amortization.

Exit Multiple Ranges include the last twelve months EBITDA, forward EBITDA and price/earnings exit multiples.

(a) Unobservable inputs were weighted based on the fair value of the investments included in the range.

The significant unobservable inputs used in the fair value measurement of the Blackstone’s Treasury Cash Management Strategies, debt instruments, other investments and liabilities of consolidated CLO vehicles are discount rates, default rates, recovery rates, recovery lag, pre-payment rates and reinvestment rates. Increases (decreases) in any of the discount rates, default rates, recovery lag and pre-payment rates in isolation would result in a lower (higher) fair value measurement. Increases (decreases) in any of the recovery rates and reinvestment rates in isolation would result in a higher (lower) fair value measurement. Generally, a change in the assumption used for default rates may be accompanied by a directionally similar change in the assumption used for recovery lag and a directionally opposite change in the assumption used for recovery rates and pre-payment rates.

The significant unobservable inputs used in the fair value measurement of equity securities, partnership and LLC interests, debt instruments, assets of consolidated CLO vehicles and loans and receivables are discount rates, exit capitalization rates, exit multiples, EBITDA multiples and revenue compound annual growth rates. Increases (decreases) in any of discount rates and exit capitalization rates in isolation can result in a lower (higher) fair value measurement. Increases (decreases) in any of exit multiples and revenue compound annual growth rates in isolation can result in a higher (lower) fair value measurement.

Since December 31, 2014, there have been no changes in valuation techniques within Level II and Level III that have had a material impact on the valuation of financial instruments.

The following tables summarize the changes in financial assets and liabilities measured at fair value for which the Partnership has used Level III inputs to determine fair value and does not include gains or losses that were reported in Level III in prior years or for instruments that were transferred out of Level III prior to the end of the respective reporting period. Total realized and unrealized gains and losses recorded for Level III investments are reported in Investment Income and Net Gains from Fund Investment Activities in the Condensed Consolidated Statements of Operations.

	Level III Financial Assets at Fair Value Three Months Ended June 30,
	2015												2014
	Investments of Consolidated Funds			Loans and Receivables			Other Investments (c)			Total			Investments of Consolidated Funds			Loans and Receivables			Other Investments (c)			Total
Balance, Beginning of Period (a)	$	920,448		$	40,691		$	163,798		$	1,124,937		$	2,442,346		$	61,573		$	123,525		$	2,627,444
Transfer Out Due to Deconsolidation		—			—			—			—			(140,393	)		—			—			(140,393	)
Transfer In to Level III (b)		59,939			—			2,772			62,711			196,770			—			4,293			201,063
Transfer Out of Level III (b)		(156,054	)		—			(24,480	)		(180,534	)		(234,833	)		—			(9,735	)		(244,568	)
Purchases		154,173			—			8,407			162,580			160,206			12,403			55,791			228,400
Sales		(98,872	)		(5,464	)		(1,819	)		(106,155	)		(210,913	)		(31,345	)		(4,126	)		(246,384	)
Settlements		—			(1,041	)		(115	)		(1,156	)		—			(432	)		(145	)		(577	)
Changes in Gains (Losses) Included in Earnings and Other Comprehensive Income		57,515			2,254			3,171			62,940			47,672			526			(2,086	)		46,112
Balance, End of Period	$	937,149		$	36,440		$	151,734		$	1,125,323		$	2,260,855		$	42,725		$	167,517		$	2,471,097
Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date	$	17,044		$	2,255		$	471		$	19,770		$	65,791		$	526		$	(1,393	)	$	64,924

	Level III Financial Assets at Fair Value Six Months Ended June 30,
	2015												2014
	Investments of Consolidated Funds			Loans and Receivables			Other Investments (c)			Total			Investments of Consolidated Funds			Loans and Receivables			Other Investments (c)			Total
Balance, Beginning of Period (a)	$	2,394,821		$	40,397		$	189,384		$	2,624,602		$	2,460,907		$	137,788		$	44,774		$	2,643,469
Transfer In Due to Consolidation and Acquisition (d)		—			—			—			—			205,890			—			—			205,890
Transfer Out Due to Deconsolidation		(1,460,538	)		—			—			(1,460,538	)		(238,399	)		—			—			(238,399	)
Transfer In to Level III (b)		58,184			—			19,897			78,081			222,991			—			7,972			230,963
Transfer Out of Level III (b)		(149,636	)		—			(47,164	)		(196,800	)		(292,469	)		—			(10,744	)		(303,213	)
Purchases		227,260			6,186			33,339			266,785			315,009			93,645			133,430			542,084
Sales		(178,391	)		(9,535	)		(36,973	)		(224,899	)		(487,333	)		(188,064	)		(7,573	)		(682,970	)
Settlements		—			(2,079	)		(218	)		(2,297	)		—			(1,170	)		(301	)		(1,471	)
Changes in Gains (Losses) Included in Earnings and Other Comprehensive Income		45,449			1,471			(6,531	)		40,389			74,259			526			(41	)		74,744
Balance, End of Period	$	937,149		$	36,440		$	151,734		$	1,125,323		$	2,260,855		$	42,725		$	167,517		$	2,471,097
Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date	$	13,511		$	1,343		$	1,879		$	16,733		$	86,668		$	526		$	1,172		$	88,366

	Level III Financial Liabilities at Fair Value Three Months Ended June 30,
	2015						2014
	Collateralized Loan Obligations Senior Notes		Collateralized Loan Obligations Subordinated Notes		Total		Collateralized Loan Obligations Senior Notes			Collateralized Loan Obligations Subordinated Notes			Total
Balance, Beginning of Period	$	—	$	—	$	—	$	7,795,523		$	619,188		$	8,414,711
Transfer In Due to Consolidation and Acquisition (d)		—		—		—		32,197			10,000			42,197
Transfer Out Due to Deconsolidation		—		—		—		(814,300	)		(133,454	)		(947,754	)
Settlements		—		—		—		(609,646	)		—			(609,646	)
Changes in (Gains) Losses Included in Earnings and Other Comprehensive Income		—		—		—		4,064			(20,977	)		(16,913	)
Balance, End of Period	$	—	$	—	$	—	$	6,407,838		$	474,757		$	6,882,595
Changes in Unrealized (Gains) Losses Included in Earnings Related to Liabilities Still Held at the Reporting Date	$	—	$	—	$	—	$	2,510		$	(20,977	)	$	(18,467	)

	Level III Financial Liabilities at Fair Value Six Months Ended June 30,
	2015									2014
	Collateralized Loan Obligations Senior Notes			Collateralized Loan Obligations Subordinated Notes			Total			Collateralized Loan Obligations Senior Notes			Collateralized Loan Obligations Subordinated Notes			Total
Balance, Beginning of Period	$	6,448,352		$	348,752		$	6,797,104		$	8,302,572		$	610,435		$	8,913,007
Transfer In Due to Consolidation and Acquisition (d)		—			—			—			504,216			96,182			600,398
Transfer Out Due to Deconsolidation		(4,168,405	)		(261,934	)		(4,430,339	)		(1,453,391	)		(173,252	)		(1,626,643	)
Transfer Out Due to Amended CLO Guidance (e)		(2,279,947	)		(86,818	)		(2,366,765	)		—			—			—
Issuances		—			—			—			—			—			—
Settlements		—			—			—			(998,633	)		(110	)		(998,743	)
Changes in (Gains) Losses Included in Earnings and Other Comprehensive Income		—			—			—			53,074			(58,498	)		(5,424	)
Balance, End of Period	$	—		$	—		$	—		$	6,407,838		$	474,757		$	6,882,595
Changes in Unrealized (Gains) Losses Included in Earnings Related to Liabilities Still Held at the Reporting Date	$	—		$	—		$	—		$	48,982		$	(58,498	)	$	(9,516	)

(a) Beginning of period 2015 balances have been adjusted to remove investments for which fair value is based on NAV. Pursuant to amended fair value guidance, disclosure in the fair value hierarchy is no longer required.

(b) Transfers in and out of Level III financial assets and liabilities were due to changes in the observability of inputs used in the valuation of such assets and liabilities.

(c) Represents Blackstone’s Treasury Cash Management Strategies and Other Investments.

(d) Represents the transfer into Level III of financial assets and liabilities as a result of the consolidation of certain fund entities.

(e) Transfers out due to amended CLO measurement guidance represents the transfer out of Level III for liabilities of consolidated CLO vehicles for which fair value is based on the more observable fair value of CLO assets. Such liabilities are classified as Level II within the fair value hierarchy. As the guidance was adopted as of January 1, 2015, there are no transfers for the three months ending June 30, 2015.