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FAIR VALUE

6 Months Ended

Jun. 30, 2019

Fair Value of Financial Assets and Liabilities

The short-term nature of cash and cash-equivalents, receivables and accounts payable causes each of their carrying values to approximate fair value. The fair value of short-term investments included in cash and cash-equivalents is a Level I valuation. The Company’s other financial assets and financial liabilities by fair-value hierarchy level are set forth below. Please see notes 10 and 18 for the fair value of the Company’s outstanding debt obligations and amounts due from/to affiliates, respectively.



	As of June 30, 2019											As of December 31, 2018
	Level I		Level II			Level III			Total			Level I		Level II			Level III			Total
Assets
U.S. Treasury and other securities ⁽¹⁾	$	387,585	$	—		$	—		$	387,585		$	546,531	$	—		$	—		$	546,531
Corporate investments	—		31,202			42,234			73,436			—		29,476			45,426			74,902
Foreign-currency forward contracts ⁽²⁾	—		1,148			—			1,148			—		1,654			—			1,654
Cross-currency swap ⁽²⁾	—		—			—			—			—		2,384			—			2,384
Total assets	$	387,585	$	32,350		$	42,234		$	462,169		$	546,531	$	33,514		$	45,426		$	625,471

Liabilities
Contingent liability ⁽³⁾	$	—	$	—		$	(6,737	)	$	(6,737	)	$	—	$	—		$	(6,657	)	$	(6,657	)
Foreign-currency forward contracts ⁽⁴⁾	—		(2,519		)	—			(2,519		)	—		(2,318		)	—			(2,318		)
Cross-currency swap ⁽⁴⁾	—		(2,197		)	—			(2,197		)	—		—			—			—
Total liabilities	$	—	$	(4,716	)	$	(6,737	)	$	(11,453	)	$	—	$	(2,318	)	$	(6,657	)	$	(8,975	)


(1)	Carrying value approximates fair value due to the short-term nature.


(2)	Amounts are included in other assets in the condensed consolidated statements of financial condition.


(3)	Amounts are included in accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition.


(4)	Amounts are included in accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition, except for $356 and $3 as of June 30, 2019 and December 31, 2018, respectively, which are included within corporate investments in the condensed consolidated statements of financial condition.

The table below sets forth a summary of changes in the fair value of Level III financial instruments:



	Three Months Ended June 30,
	2019						2018
	Corporate Investments			Contingent Liability			Corporate Investments			Contingent Liability

Beginning balance	$	48,423		$	(6,576	)	$	53,095		$	(16,203	)
Contributions or additions	54			—			5,117			—
Distributions	(7,181		)	—			(30,040		)	—
Net gain (loss) included in earnings	938			(161		)	2,912			7,074
Ending balance	$	42,234		$	(6,737	)	$	31,084		$	(9,129	)

Net change in unrealized gains (losses) attributable to financial instruments still held at end of period	$	938		$	(161	)	$	2,740		$	7,074



	Six Months Ended June 30,
	2019						2018
	Corporate Investments			Contingent Liability			Corporate Investments			Contingent Liability

Beginning balance	$	45,426		$	(6,657	)	$	50,902		$	(18,778	)
Contributions or additions	54			—			6,410			—
Distributions	(7,181		)	—			(30,855		)	—
Net gain (loss) included in earnings	3,935			(80		)	4,627			9,649
Ending balance	$	42,234		$	(6,737	)	$	31,084		$	(9,129	)

Net change in unrealized gains (losses) attributable to financial instruments still held at end of period	$	3,935		$	(80	)	$	3,659		$	9,649

The table below sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the Company’s Level III financial instruments:

Fair Value as of

Significant Unobservable Input

Financial Instrument

June 30, 2019

December 31, 2018

Valuation Technique

Range

Weighted Average

Corporate investment – Limited partnership interests

42,234

45,426

Market approach
(value of underlying assets)

Not applicable

Contingent liability

(6,737

)

(6,657

)

Discounted cash flow

Assumed % of total potential contingent payments

0% – 100%

24%

Fair Value of Financial Instruments Held By Consolidated Funds

The short-term nature of cash and cash-equivalents held at the consolidated funds causes their carrying value to approximate fair value. The fair value of cash-equivalents is a Level I valuation. Derivatives may relate to a mix of Level I, II or III investments, and therefore their fair-value hierarchy level may not correspond to the fair-value hierarchy level of the economically hedged investment. The table below summarizes the investments and other financial instruments of the consolidated funds by fair-value hierarchy level:



	As of June 30, 2019										As of December 31, 2018
	Level I		Level II			Level III		Total			Level I			Level II			Level III		Total
Assets
Investments:
Corporate debt – bank debt	$	—	$	5,446,582		$	101,495	$	5,548,077		$	—		$	5,216,923		$	136,055	$	5,352,978
Corporate debt – all other	—		1,262,793			23,208		1,286,001			634			963,423			185,378		1,149,435
Equities – common stock	3,440		—			42,972		46,412			24,483			—			3,063		27,546
Equities – preferred stock	—		—			1,934		1,934			—			—			1,426		1,426
Real estate	—		—			57,080		57,080			—			—			—		—
Total investments	3,440		6,709,375			226,689		6,939,504			25,117			6,180,346			325,922		6,531,385
Derivatives:
Foreign-currency forward contracts	—		3,350			—		3,350			—			2,275			—		2,275
Options and futures	—		—			—		—			189			—			—		189
Total derivatives ⁽¹⁾	—		3,350			—		3,350			189			2,275			—		2,464
Total assets	$	3,440	$	6,712,725		$	226,689	$	6,942,854		$	25,306		$	6,182,621		$	325,922	$	6,533,849

Liabilities
CLO debt obligations:
Senior secured notes	$	—	$	(4,146,828	)	$	—	$	(4,146,828	)	$	—		$	(3,976,602	)	$	—	$	(3,976,602	)
Subordinated notes	—		(165,195		)	—		(165,195		)	—			(151,392		)	—		(151,392		)
Total CLO debt obligations ⁽²⁾	—		(4,312,023		)	—		(4,312,023		)	—			(4,127,994		)	—		(4,127,994		)
Securities sold short:
Equity securities	—		—			—		—			(2,609		)	—			—		(2,609		)
Derivatives:
Foreign-currency forward contracts	—		(1,157		)	—		(1,157		)	—			(643		)	—		(643		)
Total derivatives ⁽³⁾	—		(1,157		)	—		(1,157		)	—			(643		)	—		(643		)
Total liabilities	$	—	$	(4,313,180	)	$	—	$	(4,313,180	)	$	(2,609	)	$	(4,128,637	)	$	—	$	(4,131,246	)


(1)	Amounts are included in other assets under “assets of consolidated funds” in the condensed consolidated statements of financial condition.


(2)	The fair value of CLO liabilities is classified based on the more observable fair value of CLO assets. Please see notes 2 and 10 for more information.


(3)	Amounts are included in accounts payable, accrued expenses and other liabilities under “liabilities of consolidated funds” in the condensed consolidated statements of financial condition

The following tables set forth a summary of changes in the fair value of Level III investments:



	Corporate Debt – Bank Debt			Corporate Debt – All Other			Equities – Common Stock			Equities – Preferred Stock			Real Estate		Total
Three Months Ended June 30, 2019
Beginning balance	$	114,945		$	201,201		$	7,424		$	1,482		$	—	$	325,052
Deconsolidation of funds	(49,454		)	—			—			—			—		(49,454		)
Transfers into Level III	6,775			(8,241		)	(3,060		)	—			—		(4,526		)
Transfers out of Level III	15,735			(143,107		)	—			—			—		(127,372		)
Purchases	20,676			(6,639		)	39,858			242			57,080		111,217
Sales	(7,157		)	(17,915		)	(799		)	—			—		(25,871		)
Realized gains (losses), net	133			235			3			—			—		371
Unrealized appreciation (depreciation), net	(158		)	(2,326		)	(454		)	210			—		(2,728		)
Ending balance	$	101,495		$	23,208		$	42,972		$	1,934		$	57,080	$	226,689
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period	$	30,566		$	(2,222	)	$	(55	)	$	210		$	—	$	28,499
Three Months Ended June 30, 2018
Beginning balance	$	94,495		$	87,401		$	3,703		$	611		$	—	$	186,210
Transfers into Level III	3,765			292			—			—			—		4,057
Transfers out of Level III	(6,203		)	—			(601		)	—			—		(6,804		)
Purchases	4,371			47,142			52,000			1,012			—		104,525
Sales	(11,852		)	(10,938		)	—			—			—		(22,790		)
Realized gains (losses), net	140			163			—			—			—		303
Unrealized appreciation (depreciation), net	(1,187		)	(124		)	(168		)	(37		)	—		(1,516		)
Ending balance	$	83,529		$	123,936		$	54,934		$	1,586		$	—	$	263,985
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period	$	(1,539	)	$	(361	)	$	(166	)	$	(37	)	$	—	$	(2,103	)



	Corporate Debt – Bank Debt			Corporate Debt – All Other			Equities – Common Stock			Equities – Preferred Stock			Real Estate			Total
Six Months Ended June 30, 2019
Beginning balance	$	136,055		$	185,378		$	3,063		$	1,426		$	—		$	325,922
Deconsolidation of funds	(49,454		)	—			—			—			—			(49,454		)
Transfers into Level III	24,285			513			2,351			—			—			27,149
Transfers out of Level III	(18,085		)	(149,387		)	—			—			—			(167,472		)
Purchases	27,773			10,519			39,857			242			57,080			135,471
Sales	(17,174		)	(24,716		)	(926		)	—			—			(42,816		)
Realized gains (losses), net	124			(126		)	29			—			—			27
Unrealized appreciation (depreciation), net	(2,029		)	1,027			(1,402		)	266			—			(2,138		)
Ending balance	$	101,495		$	23,208		$	42,972		$	1,934		$	57,080		$	226,689
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period	$	26,808		$	539		$	(1,003	)	$	266		$	—		$	26,610
Six Months Ended June 30, 2018
Beginning balance	$	86,999		$	75,388		$	3,427		$	—		$	121,588		$	287,402
Deconsolidation of funds	—			—			—			—			(121,087		)	(121,087		)
Transfers into Level III	28,929			899			490			—			—			30,318
Transfers out of Level III	(13,492		)	(490		)	(658		)	—			—			(14,640		)
Purchases	9,187			78,265			52,056			1,248			—			140,756
Sales	(29,324		)	(30,048		)	(311		)	—			(501		)	(60,184		)
Realized gains (losses), net	468			249			—			—			—			717
Unrealized appreciation (depreciation), net	762			(327		)	(70		)	338			—			703
Ending balance	$	83,529		$	123,936		$	54,934		$	1,586		$	—		$	263,985
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period	$	28,537		$	8,158		$	(602	)	$	(84	)	$	—		$	36,009

Total realized and unrealized gains and losses recorded for Level III investments are included in net realized gain on consolidated funds’ investments or net change in unrealized appreciation (depreciation) on consolidated funds’ investments in the condensed consolidated statements of operations.

Transfers out of Level III are generally attributable to certain investments that experienced a more significant level of market trading activity or completed an initial public offering during the respective period and thus were valued using observable inputs. Transfers into Level III typically reflect either investments that experienced a less significant level of market trading activity during the period or portfolio companies that undertook restructurings or bankruptcy proceedings and thus were valued in the absence of observable inputs.

The following table sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the consolidated funds’ Level III investments as of June 30, 2019:

Investment Type

Fair Value

Valuation Technique

Significant Unobservable
Inputs⁽¹⁾⁽²⁾

Range

Weighted Average ⁽³⁾

Credit-oriented investments:

Consumer discretionary:

8,621

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

6,203

Discounted cash flow ⁽⁴⁾

Discount rate

10% – 14%

12%

Financials:

12,023

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

4,393

Discounted cash flow ⁽⁴⁾

Discount rate

9% – 12%

11%

Health care:

25,321

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

2,012

Discounted cash flow ⁽⁴⁾

Discount rate

10% – 17%

12%

Real estate:

15,067

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

3,563

Discounted cash flow ⁽⁴⁾

Discount rate

10% – 12%

11%

Other:

33,494

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

14,010

Discounted cash flow ⁽⁴⁾

Discount rate

8% – 15%

13%

Equity investments:

39,883

Recent transaction price ⁽⁸⁾

Quoted prices

Not applicable

2,493

Discounted cash flow ⁽⁴⁾

Discount rate

10% – 15%

11%

2,166

Market approach
(comparable companies) ⁽⁶⁾

Earnings multiple ⁽⁷⁾

4x – 8x

360

Market approach
(comparable companies) ⁽⁶⁾

Revenue multiple ⁽⁹⁾

2x – 4x

Real estate investments:

57,080

Recent transaction price ⁽⁸⁾

Quoted prices

Not applicable

Total Level III
investments

226,689

Investment Type

Fair Value

Valuation Technique

Significant Unobservable
Inputs⁽¹⁾⁽²⁾

Range

Weighted Average ⁽³⁾

Credit-oriented investments:

Communication services:

20,746

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

2,416

Discounted cash flow ⁽⁴⁾

Discount rate

12% – 14%

13%

Financials:

108,277

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

3,608

Discounted cash flow ⁽⁴⁾

Discount rate

9% – 15%

14%

Health care:

37,724

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

2,550

Discounted cash flow ⁽⁴⁾

Discount rate

10% – 16%

14%

Real estate:

79,562

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

4,570

Discounted cash flow ⁽⁴⁾

Discount rate

12% – 23%

14%

Other:

38,959

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

17,943

Discounted cash flow ⁽⁴⁾

Discount rate

8% – 15%

13%

5,078

Recent transaction price ⁽⁸⁾

Not applicable

Equity investments:

2,099

Discounted cash flow ⁽⁴⁾

Discount rate

10% – 30%

12%

2,390

Market approach
(comparable companies) ⁽⁶⁾

Earnings multiple ⁽⁷⁾

4x – 10x

Total Level III
investments

325,922


(1)	The discount rate is the significant unobservable input used in the fair-value measurement of performing credit-oriented investments in which the consolidated funds do not have a controlling interest in the underlying issuer, as well as certain equity investments and real estate loan portfolios. An increase (decrease) in the discount rate would result in a lower (higher) fair-value measurement.

(2)

Multiple of either earnings or underlying assets is the significant unobservable input used in the market approach for the fair-value measurement of distressed credit-oriented investments, credit-oriented investments in which the consolidated funds have a controlling interest in the underlying issuer, equity investments and certain real estate-oriented investments. An increase (decrease) in the multiple would result in a higher (lower) fair-value measurement.


(3)	The weighted average is based on the fair value of the investments included in the range.


(4)	A discounted cash-flow method is generally used to value performing credit-oriented investments in which the consolidated funds do not have a controlling interest in the underlying issuer, as well as certain equity investments, real estate-oriented investments and real estate loan portfolios.


(5)	Certain investments are valued using vendor prices or broker quotes for the subject or similar securities. Generally, investments valued in this manner are classified as Level III because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities, or may require adjustment for investment-specific factors or restrictions.


(6)	A market approach is generally used to value distressed investments and investments in which the consolidated funds have a controlling interest in the underlying issuer.

(7)

Earnings multiples are based on comparable public companies and transactions with comparable companies. The Company typically utilizes multiples of EBITDA; however, in certain cases the Company may use other earnings multiples believed to be most relevant to the investment. The Company typically applies the multiple to trailing twelve-months’ EBITDA. However, in certain cases other earnings measures, such as pro forma EBITDA, may be utilized if deemed to be more relevant.


(8)	Certain investments are valued based on recent transactions, generally defined as investments purchased or sold within six months of the valuation date. The fair value may also be based on a pending transaction expected to close after the valuation date.


(9)	Revenue multiples are based on comparable public companies and transactions with comparable companies. The Company typically applies the multiple to trailing twelve-months’ revenue. However, in certain cases other revenue measures, such as pro forma revenue, may be utilized if deemed to be more relevant.

A significant amount of judgment may be required when using unobservable inputs, including assessing the accuracy of source data and the results of pricing models. The Company assesses the accuracy and reliability of the sources it uses to develop unobservable inputs. These sources may include third-party vendors that the Company believes are reliable and commonly utilized by other marketplace participants. As described in note 2, other factors beyond the unobservable inputs described above may have a significant impact on investment valuations.

During the three months ended June 30, 2019 and June 30, 2018, there were no changes in the valuation techniques for Level III securities.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details