FAIR VALUE

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

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. There were no transfers between Level I and Level II positions for the years ended December 31, 2019 and 2018. Please see notes 11 and 19 for the fair value of the Company’s outstanding debt obligations and amounts due from/to affiliates, respectively.

	As of December 31, 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)	$	9,232	$	—		$	—	$	9,232		$	546,531	$	—		$	—		$	546,531
Corporate investments	—		4,717			30,311		35,028			—		29,476			45,426			74,902
Foreign-currency forward contracts (2)	—		—			—		—			—		1,654			—			1,654
Cross-currency swap (2)	—		—			—		—			—		2,384			—			2,384
Total assets	$	9,232	$	4,717		$	30,311	$	44,260		$	546,531	$	33,514		$	45,426		$	625,471
Liabilities
Contingent consideration (3)	$	—	$	—		$	—	$	—		$	—	$	—		$	(6,657	)	$	(6,657	)
Foreign-currency forward contracts (4)	—		(1,703		)	—		(1,703		)	—		(2,318		)	—			(2,318		)
Total liabilities	$	—	$	(1,703	)	$	—	$	(1,703	)	$	—	$	(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 consolidated statements of financial condition.

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

(4) Amounts are included in accounts payable, accrued expenses and other liabilities in the consolidated statements of financial condition, except for $94 and $3 as of December 31, 2019 and 2018, respectively, which are included within corporate investments in the consolidated statements of financial condition.

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

	Year Ended December 31,
	2019						2018
	Corporate Investments			Contingent Consideration Liability			Corporate Investments			Contingent Consideration Liability
Beginning balance	$	45,426		$	(6,657	)	$	50,902		$	(18,778	)
Contributions or additions	937			—			19,382			—
Distributions	(9,643		)	—			(31,614		)	—
Restructuring distribution of net assets	(14,416		)	6,657			—			—
Net gain (loss) included in earnings	8,007			—			6,756			12,121
Ending balance	$	30,311		$	—		$	45,426		$	(6,657	)
Net change in unrealized gains (losses) attributable to financial instruments still held at end of period	$	8,007		$	—		$	4,796		$	12,121

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 December 31,						Significant Unobservable Input		Weighted Average
Financial Instrument	2019		2018			Valuation Technique		Range
Corporate investment – Limited partnership interests	$	30,311	$	45,426		Market approach (value of underlying assets)	Not applicable	Not applicable	Not applicable
Contingent liability	—		(6,657		)	Discounted cash flow	Assumed % of total potential contingent payments	0% – 100%	23%

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 December 31, 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	$	—		$	5,911,523		$	149,642	$	6,061,165		$	—		$	5,216,923		$	136,055	$	5,352,978
Corporate debt – all other	—			903,246			31,266		934,512			634			963,423			185,378		1,149,435
Equities – common stock	552			345			130,437		131,334			24,483			—			3,063		27,546
Equities – preferred stock	—			—			657		657			—			—			1,426		1,426
Real estate	—			—			230,741		230,741			—			—			—		—
Total investments	552			6,815,114			542,743		7,358,409			25,117			6,180,346			325,922		6,531,385
Derivatives:
Foreign-currency forward contracts	27			6,863			—		6,890			—			2,275			—		2,275
Options and futures				—			—		—			189			—			—		189
Total derivatives	27			6,863			—		6,890			189			2,275			—		2,464
Total assets	$	579		$	6,821,977		$	542,743	$	7,365,299		$	25,306		$	6,182,621		$	325,922	$	6,533,849
Liabilities
CLO debt obligations:
Senior secured notes (1)	$	—		$	(5,613,846	)	$	—	$	(5,613,846	)	$	—		$	(3,976,602	)	$	—	$	(3,976,602	)
Subordinated notes (1)	—			(154,153		)	—		(154,153		)	—			(151,392		)	—		(151,392		)
Total CLO debt obligations	—			(5,767,999		)	—		(5,767,999		)	—			(4,127,994		)	—		(4,127,994		)
Securities sold short:
Equity securities	—			—			—		—			(2,609		)	—			—		(2,609		)
Derivatives:
Foreign-currency forward contracts	(202		)	(2,349		)	—		(2,551		)	—			(643		)	—		(643		)
Total liabilities	$	(202	)	$	(5,770,348	)	$	—	$	(5,770,550	)	$	(2,609	)	$	(4,128,637	)	$	—	$	(4,131,246	)

(1) The fair value of CLO liabilities is classified based on the more observable fair value of CLO assets. Please see notes 2 and 11 for more information.

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
2019
Beginning balance	$	136,055		$	185,378		$	3,063		$	1,426		$	—		$	325,922
Deconsolidation of funds	(121,146		)	(116,714		)	(3,063		)	(1,426		)	—			$	(242,349	)
Transfers into Level III	9,300			—			2,391			776			—			12,467
Transfers out of Level III	(5,293		)	(57,325		)	(504		)	—			—			(63,122		)
Purchases	155,546			27,857			130,341			—			230,741			544,485
Sales	(15,282		)	(8,471		)	(266		)	—			—			(24,019		)
Realized gains (losses), net	46			(119		)	(106		)	—			—			(179		)
Unrealized (depreciation) appreciation, net	(9,584		)	660			(1,419		)	(119		)	—			(10,462		)
Ending balance	$	149,642		$	31,266		$	130,437		$	657		$	230,741		$	542,743
Net change in unrealized (depreciation) appreciation attributable to assets still held at end of period	$	(9,780	)	$	390		$	(1,419	)	$	(119	)	$	—		$	(10,928	)
2018
Beginning balance	$	86,999		$	75,388		$	3,427		$	—		$	121,588		$	287,402
Deconsolidation of funds	—			—			(52,000		)	(172		)	(121,087		)	(173,259		)
Transfers into Level III	48,312			2,034			490			—			—			50,836
Transfers out of Level III	(26,845		)	(10,984		)	(658		)	—			—			(38,487		)
Purchases	83,199			186,210			52,533			1,248			—			323,190
Sales	(54,649		)	(57,414		)	(387		)	—			(501		)	(112,951		)
Realized gains (losses), net	659			351			59			—						1,069
Unrealized (depreciation) appreciation, net	(1,620		)	(10,207		)	(401		)	350			—			(11,878		)
Ending balance	$	136,055		$	185,378		$	3,063		$	1,426		$	—		$	325,922
Net change in unrealized (depreciation) appreciation attributable to assets still held at end of period	$	(1,729	)	$	(7,619	)	$	(401	)	$	350		$	—		$	(9,399	)

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 consolidated statements of operations.

There were no transfers between Level I and Level II positions for the year ended December 31, 2019. Transfers between Level I and Level II positions for the year ended December 31, 2018 included $0.7 million from Level I to Level II due to a decline in trading activity for one credit-oriented security, which was valued using broker quotes.

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 December 31, 2019:

Investment Type	Fair Value		Valuation Technique	Significant Unobservable Inputs (1)(2)	Range	Weighted Average (3)
Credit-oriented investments:
Consumer discretionary:	$	16,836	Recent market information (5)	Quoted prices	Not applicable	Not applicable
Financials:	17,274		Recent market information (5)	Quoted prices	Not applicable	Not applicable
Health care:	26,863		Recent market information (5)	Quoted prices	Not applicable	Not applicable
Real estate:	16,755		Recent market information (5)	Quoted prices	Not applicable	Not applicable
	71,906		Recent transaction price (4)
Other:	31,274		Recent market information (5)	Quoted prices	Not applicable	Not applicable
Equity investments:
	130,341		Discounted cash flow (4)	Discount rate	6% – 8%	7%
	753		Recent market information (5)
Real estate-oriented:
	230,741		Recent transaction price (4)	Not Applicable	Not applicable	Not applicable
Total Level III investments	$	542,743

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 December 31, 2018:

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	Not applicable
	2,416		Discounted cash flow (4)	Discount rate	12% – 14%	13%
FInancials:	108,277		Recent market information (5)	Quoted prices	Not applicable	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	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	Not applicable
	4,570		Discounted cash flow (4)	Discount rate	12% – 23%	14%
Other:	38,959		Recent market information (5)	Quotes prices	Not applicable	Not applicable
	17,943		Discounted cash flow (4)	Discount rate	8% – 15%	13%
	5,078		Recent transaction price (8)	Not applicable	Not applicable	Not applicable
Equity investments:
	2,390		Discounted cash flow (4)	Discount rate	10% – 30%	12%
	2,099		Market approach (comparable companies) (6)	Earnings multiple (7)	4x – 10x	7x
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.

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 year ended December 31, 2019, the valuation technique for one Level III credit-oriented investment changed from a discounted cash flow to a market approach based on comparable companies due to the anticipated restructuring of the portfolio company. There were no changes in the valuation techniques for Level III securities for the year ended December 31, 2018.