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FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Tables)
9 Months Ended
Sep. 30, 2018
Financial Assets and Liabilities at Fair Value

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

 

     September 30, 2018  
     Level I      Level II      Level III      NAV      Total  

Assets

              

Cash and Cash Equivalents — Money Market Funds

   $ 471,940      $ —        $ —        $ —        $ 471,940  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Investments

              

Investments of Consolidated Blackstone Funds (a)

              

Investment Funds

     —          —          —          85,287        85,287  

Equity Securities

     67,442        44,256        190,692        —          302,390  

Partnership and LLC Interests

     —          6,714        329,474        —          336,188  

Debt Instruments

     —          758,340        101,076        —          859,416  

Freestanding Derivatives

              

Foreign Currency Contracts

     —          1,906        —          —          1,906  

Credit Default Swaps

     —          170        —          —          170  

Total Return Swaps

     —          233        —          —          233  

Equity Options

     —          122        —          —          122  

Assets of Consolidated CLO Vehicles —Corporate Loans

     —          6,368,295        549,416        —          6,917,711  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments of Consolidated Blackstone Funds

     67,442        7,180,036        1,170,658        85,287        8,503,423  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Corporate Treasury Investments

              

Equity Securities

     316,771        —          —          —          316,771  

Debt Instruments

     406,164        1,880,805        17,038        —          2,304,007  

Other

     —          —          —          262,832        262,832  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Corporate Treasury Investments

     722,935        1,880,805        17,038        262,832        2,883,610  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Investments

     202,453        —          73,481        18,682        294,616  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments

     992,830        9,060,841        1,261,177        366,801        11,681,649  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accounts Receivable — Loans and Receivables

     —          —          419,803        —          419,803  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Assets

              

Freestanding Derivatives

              

Interest Rate Contracts

     2,109        34,551        —          —          36,660  

Foreign Currency Contracts

     —          961        —          —          961  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Other Assets

     2,109        35,512        —          —          37,621  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,466,879      $ 9,096,353      $ 1,680,980      $ 366,801      $ 12,611,013  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     September 30, 2018  
     Level I      Level II      Level III      Total  

Liabilities

           

Loans Payable — Liabilities of Consolidated CLO Vehicles (a)

           

Senior Secured Notes (b)

   $ —        $ 6,520,975      $ —        $ 6,520,975  

Subordinated Notes (b)

     —          158,623        —          158,623  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Loans Payable

     —          6,679,598        —          6,679,598  
  

 

 

    

 

 

    

 

 

    

 

 

 

Due to Affiliates — Liabilities of Consolidated CLO Vehicles (a)

           

Senior Secured Notes (b)

     —          3,273        —          3,273  

Subordinated Notes (b)

     —          65,259        —          65,259  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Due to Affiliates

     —          68,532        —          68,532  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities Sold, Not Yet Purchased

     35,374        130,936        —          166,310  
  

 

 

    

 

 

    

 

 

    

 

 

 

Accounts Payable, Accrued Expenses and Other Liabilities

           

Liabilities of Consolidated Blackstone Funds — Freestanding Derivatives (a)

           

Foreign Currency Contracts

     —          1,504        —          1,504  

Credit Default Swaps

     —          3,599        —          3,599  

Equity Options

     —          67        —          67  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities of Consolidated Blackstone Funds

     —          5,170        —          5,170  
  

 

 

    

 

 

    

 

 

    

 

 

 

Freestanding Derivatives

           

Interest Rate Contracts

     875        57,222        —          58,097  

Foreign Currency Contracts

     —          2,190        —          2,190  

Credit Default Swaps

     —          1,687        —          1,687  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Freestanding Derivatives

     875        61,099        —          61,974  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Accounts Payable, Accrued Expenses and Other Liabilities

     875        66,269        —          67,144  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 36,249      $ 6,945,335      $  —        $ 6,981,584  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2017  
     Level I      Level II      Level III      NAV      Total  

Assets

              

Cash and Cash Equivalents — Money Market Funds

   $ 853,680      $ —        $ —        $ —        $ 853,680  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Investments

              

Investments of Consolidated Blackstone Funds (a)

              

Investment Funds

     —          —          —          130,339        130,339  

Equity Securities

     67,443        44,026        131,867        —          243,336  

Partnership and LLC Interests

     —          2,549        331,448        —          333,997  

Debt Instruments

     —          643,608        58,155        —          701,763  

Freestanding Derivatives

              

Foreign Currency Contracts

     —          101        —          —          101  

Credit Default Swaps

     —          3,731        —          —          3,731  

Total Return Swaps

     —          526        —          —          526  

Assets of Consolidated CLO Vehicles

              

Corporate Loans

     —          10,318,316        507,443        —          10,825,759  

Corporate Bonds

     —          690,125        —          —          690,125  

Freestanding Derivatives — Foreign Currency Contracts

     —          23,986        —          —          23,986  

Other

     —          —          458        —          458  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments of Consolidated Blackstone Funds

     67,443        11,726,968        1,029,371        130,339        12,954,121  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Corporate Treasury Investments

              

Equity Securities

     282,866        —          —          —          282,866  

Debt Instruments

     —          1,943,654        24,249        —          1,967,903  

Other

     —          —          —          315,274        315,274  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Corporate Treasury Investments

     282,866        1,943,654        24,249        315,274        2,566,043  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Investments

     193,072        14,162        95,393        19,847        322,474  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments

     543,381        13,684,784        1,149,013        465,460        15,842,638  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accounts Receivable — Loans and Receivables

     —          —          239,659        —          239,659  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Assets

              

Freestanding Derivatives

              

Interest Rate Contracts

     575        1,467        —          —          2,042  

Foreign Currency Contracts

     —          2,097        —          —          2,097  

Credit Default Swaps

     —          304        —          —          304  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Other Assets

     575        3,868        —          —          4,443  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,397,636      $ 13,688,652      $ 1,388,672      $ 465,460      $ 16,940,420  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2017  
     Level I      Level II      Level III      Total  

Liabilities

           

Loans Payable — Liabilities of Consolidated CLO Vehicles (a)

           

Senior Secured Notes (b)

   $ —        $ 10,594,656      $ —        $ 10,594,656  

Subordinated Notes (b)

     —          703,164        —          703,164  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Loans Payable

     —          11,297,820        —          11,297,820  
  

 

 

    

 

 

    

 

 

    

 

 

 

Due to Affiliates — Liabilities of Consolidated CLO Vehicles (a)

           

Senior Secured Notes (b)

     —          996        —          996  

Subordinated Notes (b)

     —          40,390        —          40,390  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Due to Affiliates

     —          41,386        —          41,386  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities Sold, Not Yet Purchased

     —          154,380        —          154,380  
  

 

 

    

 

 

    

 

 

    

 

 

 

Accounts Payable, Accrued Expenses and Other Liabilities

           

Liabilities of Consolidated Blackstone Funds — Freestanding Derivatives (a)

           

Foreign Currency Contracts

     —          5,628        —          5,628  

Credit Default Swaps

     —          5,163        —          5,163  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities of Consolidated Blackstone Funds

     —          10,791        —          10,791  
  

 

 

    

 

 

    

 

 

    

 

 

 

Freestanding Derivatives

           

Interest Rate Contracts

     415        26,860        —          27,275  

Foreign Currency Contracts

     —          2,975        —          2,975  

Credit Default Swaps

     —          304        —          304  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Freestanding Derivatives

     415        30,139        —          30,554  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Investment Hedges — Foreign Currency Contracts

     —          453        —          453  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Accounts Payable, Accrued Expenses and Other Liabilities

     415        41,383        —          41,798  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 415      $ 11,534,969      $ —        $ 11,535,384  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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, has a controlling financial interest. 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 (1) the fair value of any beneficial interests held by Blackstone, and (2) the carrying value of any beneficial interests that represent compensation for services.

Summary of Quantitative Inputs and Assumptions for Items Categorized in Level III of Fair Value Hierarchy

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of September 30, 2018:

 

    Fair Value     Valuation
Techniques
  Unobservable
Inputs
    Ranges  

Weighted-
Average (a)

Financial Assets

         

Investments of Consolidated Blackstone Funds

         

Equity Securities

  $ 128,731     Discounted Cash Flows     Discount Rate     7.1% - 26.1%   12.4%
        Revenue CAGR     -12.2% - 45.4%   7.3%
        Book Value Multiple     1.1x - 9.5x   8.4x
        Exit Capitalization Rate     5.0% - 11.4%   8.0%
        Exit Multiple - EBITDA     2.6x - 17.5x   10.4x
        Exit Multiple - NOI     8.8x - 12.8x   11.9x
        Exit Multiple - P/E     10.0x - 17.0x   14.2x
    1,516     Market Comparable Companies     Book Value Multiple     0.8x - 8.0x   1.4x
    34,220     Other     N/A     N/A   N/A
    26,225     Transaction Price     N/A     N/A   N/A

Partnership and LLC Interests

    279,686     Discounted Cash Flows     Discount Rate     4.5% - 26.5%   9.7%
        Revenue CAGR     -3.0% - 45.5%   7.5%
        Book Value Multiple     8.5x - 9.3x   9.2x
        Exit Capitalization Rate     1.5% - 12.3%   6.1%
        Exit Multiple - EBITDA     0.1x - 15.2x   9.5x
        Exit Multiple - NOI     13.3x   N/A
    626     Market Comparable Companies     Book Value Multiple     1.1x   N/A
    10,755     Other     N/A     N/A   N/A
    609     Third Party Pricing     N/A     N/A   N/A
    37,798     Transaction Price     N/A     N/A   N/A

Debt Instruments

    5,510     Discounted Cash Flows     Discount Rate     7.8% - 16.7%   9.7%
        Exit Capitalization Rate     3.9%   N/A
    93,648     Third Party Pricing     N/A     N/A   N/A
    1,918     Transaction Price     N/A     N/A   N/A

Assets of Consolidated CLO Vehicles

    41     Discounted Cash Flows     Discount Rate     6.0%   N/A
    549,375     Third Party Pricing     N/A     N/A   N/A
 

 

 

         

Total Investments of Consolidated Blackstone Funds

    1,170,658          

Corporate Treasury
Investments

    7,541     Discounted Cash Flows     Discount Rate     5.2% - 6.2%   5.6%
        Default Rate     2.0%   N/A
        Pre-payment Rate     20.0%   N/A
        Recovery Lag     12 Months   N/A
        Recovery Rate     30.0% - 70.0%   68.0%
        Reinvestment Rate     LIBOR + 400 bps   N/A
    9,497     Third Party Pricing     N/A     N/A   N/A

Loans and Receivables

    353,494     Discounted Cash Flows     Discount Rate     4.4% - 12.9%   8.9%
    66,309     Transaction Price     N/A     N/A   N/A

Other Investments

    27,758     Discounted Cash Flows     Discount Rate     0.8% - 9.6%   2.0%
        Default Rate     2.0%   N/A
        Pre-payment Rate     20.0%   N/A
        Recovery Lag     12 Months   N/A
        Recovery Rate     70.0%   N/A
        Reinvestment Rate     LIBOR + 400 bps   N/A
    45,723     Transaction Price     N/A     N/A   N/A
 

 

 

         
  $ 1,680,980          
 

 

 

         

 

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, 2017:

 

    Fair Value     Valuation
Techniques
  Unobservable
Inputs
    Ranges   Weighted-
Average (a)

Financial Assets

         

Investments of Consolidated Blackstone Funds

         

Equity Securities

  $ 91,753     Discounted Cash Flows     Discount Rate     7.1% - 31.4%   12.6%
        Revenue CAGR     1.0% - 49.4%   7.1%
        Exit Capitalization Rate     5.0% - 11.4%   8.5%
        Exit Multiple - EBITDA     4.0x - 16.0x   9.9x
        Exit Multiple - NOI     8.8x - 12.5x   10.5x
        Exit Multiple - P/E     9.5x - 17.0x   11.0x
    862     Market Comparable Companies     Book Value Multiple     0.8x - 0.9x   0.9x
        Exit Multiple - EBITDA     8.0x   N/A
    17,536     Other     N/A     N/A   N/A
    21,716     Transaction Price     N/A     N/A   N/A

Partnership and LLC Interests

    293,744     Discounted Cash Flows     Discount Rate     4.6% - 26.5%   9.8%
        Revenue CAGR     -22.2% - 71.5%   8.4%
        Exit Capitalization Rate     3.1% - 10.0%   5.7%
        Exit Multiple - EBITDA     0.1x - 15.0x   8.6x
        Exit Multiple - NOI     12.5x   N/A
    530     Market Comparable Companies     Book Value Multiple     1.0x   N/A
    22,346     Other     N/A     N/A   N/A
    758     Third Party Pricing     N/A     N/A   N/A
    14,070     Transaction Price     N/A     N/A   N/A

Debt Instruments

    6,122     Discounted Cash Flows     Discount Rate     6.6% - 18.4%   9.6%
        Revenue CAGR     7.7%   N/A
        Exit Capitalization Rate     8.3%   N/A
        Exit Multiple - NOI     12.0x   N/A
    50,136     Third Party Pricing     N/A     N/A   N/A
    1,897     Transaction Price     N/A     N/A   N/A

Assets of Consolidated CLO Vehicles

    8,277     Market Comparable Companies     EBITDA Multiple     7.0x   N/A
    499,624     Third Party Pricing     N/A     N/A   N/A
 

 

 

         

Total Investments of Consolidated Blackstone Funds

    1,029,371          

Corporate Treasury
Investments

    8,886     Discounted Cash Flows     Discount Rate     5.1% - 6.3%   5.4%
        Default Rate     2.0%   N/A
        Pre-payment Rate     20%   N/A
        Recovery Lag     12 Months   N/A
        Recovery Rate     30.0% - 70.0%   68.1%
        Reinvestment Rate     LIBOR + 400 bps   N/A
    15,363     Third Party Pricing     N/A     N/A   N/A

Loans and Receivables

    239,659     Discounted Cash Flows     Discount Rate     7.1% - 10.3%   8.8%

Other Investments

    65,821     Discounted Cash Flows     Discount Rate     0.7% - 13.0%   2.2%
        Default Rate     2.0%   N/A
        Pre-payment Rate     20.0%   N/A
        Recovery Lag     12 Months   N/A
        Recovery Rate     70.0%   N/A
        Reinvestment Rate     LIBOR + 400 bps -   LIBOR + 401
        LIBOR + 413 bps   bps
    29,572     Transaction Price     N/A     N/A   N/A
 

 

 

         
  $ 1,388,672          
 

 

 

         

 

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.
NOI    Net operating income.
P/E    Price-earnings ratio.
Third Party Pricing    Third Party Pricing is generally determined on the basis of unadjusted prices between market participants provided by reputable dealers or pricing services.
Transaction Price    Includes recent acquisitions or transactions.
(a)    Unobservable inputs were weighted based on the fair value of the investments included in the range.
Summary of Changes in Financial Assets Measured at Fair Value for Which Level III Inputs Were Used

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 either Investment Income (Loss) or Net Gains from Fund Investment Activities in the Condensed Consolidated Statements of Operations.

 

    Level III Financial Assets at Fair Value
Three Months Ended September 30,
 
    2018     2017  
    Investments
of
Consolidated
Funds
    Loans and
Receivables
    Other
Investments (a)
    Total     Investments
of
Consolidated
Funds
    Loans and
Receivables
    Other
Investments (a)
    Total  

Balance, Beginning of Period

  $ 1,086,724     $ 346,603     $ 114,723     $ 1,548,050     $ 715,744     $ 306,279     $ 115,689     $ 1,137,712  

Transfer In to Level III (b)

    255,398       —         5,299       260,697       145,810       —         5,859       151,669  

Transfer Out of Level III (b)

    (221,162     —         (11,192     (232,354     (62,821     —         (721     (63,542

Purchases

    156,527       347,890       15,754       520,171       300,037       241,006       3,250       544,293  

Sales

    (119,593     (274,817     (69,272     (463,682     (154,131     (174,814     (6,723     (335,668

Settlements

    —         (8,397     —         (8,397     —         (4,469     (370     (4,839

Changes in Gains Included in Earnings

    12,764       8,524       35,207       56,495       27,116       3,730       3,232       34,078  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, End of Period

  $ 1,170,658     $ 419,803     $ 90,519     $ 1,680,980     $ 971,755     $ 371,732     $ 120,216     $ 1,463,703  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date

  $ 8,229     $ 8,523     $ 5,431     $ 22,183     $ 20,207     $ 3,730     $ (446   $ 23,491  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Level III Financial Assets at Fair Value
Nine Months Ended September 30,
 
    2018     2017  
    Investments
of
Consolidated
Funds
    Loans and
Receivables
    Other
Investments (a)
    Total     Investments
of
Consolidated
Funds
    Loans and
Receivables
    Other
Investments (a)
    Total  

Balance, Beginning of Period

  $ 1,029,371     $ 239,659     $ 119,642     $ 1,388,672     $ 685,873     $ 211,359     $ 130,588     $ 1,027,820  

Transfer In Due to Consolidation and Acquisition

    50,043       —         —         50,043       34,651       —           34,651  

Transfer Out Due to Deconsolidation

    (217,182     —         —         (217,182     (38,629     —         —         (38,629

Transfer In to Level III (b)

    160,125       —         5,299       165,424       99,042       —         22,254       121,296  

Transfer Out of Level III (b)

    (117,372     —         (26,909     (144,281     (138,299     —         (18,732     (157,031

Purchases

    590,153       718,811       35,567       1,344,531       584,519       578,711       24,853       1,188,083  

Sales

    (374,479     (538,520     (92,751     (1,005,750     (319,350     (426,315     (50,769     (796,434

Settlements

    —         (17,376     (4     (17,380     —         (8,362     (1,463     (9,825

Changes in Gains Included in Earnings

    49,999       17,229       49,675       116,903       63,948       16,339       13,485       93,772  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, End of Period

  $ 1,170,658     $ 419,803     $ 90,519     $ 1,680,980     $ 971,755     $ 371,732     $ 120,216     $ 1,463,703  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Changes in Unrealized Gains Included in Earnings Related to Investments Still Held at the Reporting Date

  $ 11,670     $ 17,229     $ 5,049     $ 33,948     $ 19,854     $ 16,340     $ 16     $ 36,210  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Represents corporate treasury investments and Other Investments.

(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.