Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2013

Partnership's Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table summarizes the Partnership’s assets and liabilities measured at fair value on a recurring basis by the above fair value hierarchy levels as of March 31, 2013:

(Dollars in millions)

Level I

Level II

Level III

Total

Assets

Investments of Consolidated Funds:

Equity securities

756.1

21.9

2,573.1

3,351.1

Bonds

—

909.2

Loans

—

13,507.4

Partnership and LLC interests ⁽¹⁾

—

4,002.2

Hedge funds

—

3,314.9

—

3,314.9

Other

—

8.8

756.1

3,336.8

21,000.7

25,093.6

Trading securities

—

22.0

Restricted securities of Consolidated Funds

0.2

—

0.2

Total

756.3

3,336.8

21,022.7

25,115.8

Liabilities

Loans payable of Consolidated Funds

—

14,312.7

Interest rate swaps

—

9.2

—

9.2

Derivative instruments of the CLOs

—

10.3

Contingent consideration⁽²⁾

—

65.7

166.8

232.5

Total

—

74.9

14,489.8

14,564.7

(1)	Balance represents Fund Investments that the Partnership consolidates one fiscal quarter in arrears.

(2)	Related to contingent cash and equity consideration associated with the acquisitions of Claren Road, AlpInvest, ESG and Vermillion, excluding employment-based contingent consideration (see Note 9).

The following table summarizes the Partnership’s assets and liabilities measured at fair value on a recurring basis by the above fair value hierarchy levels as of December 31, 2012:


(Dollars in millions)	Level I		Level II		Level III		Total
Assets
Investments of Consolidated Funds:
Equity securities	$	872.8	$	32.0	$	2,475.1	$	3,379.9
Bonds		—		—		934.2		934.2
Loans		—		—		13,290.1		13,290.1
Partnership and LLC interests ⁽¹⁾		—		—		4,315.5		4,315.5
Hedge funds		—		2,888.7		—		2,888.7
Other		—		—		7.3		7.3

		872.8		2,920.7		21,022.2		24,815.7
Trading securities		—		—		20.0		20.0
Restricted securities of Consolidated Funds		0.6		—		—		0.6

Total	$	873.4	$	2,920.7	$	21,042.2	$	24,836.3


Liabilities
Loans payable of Consolidated Funds	$	—	$	—	$	13,656.7	$	13,656.7
Interest rate swaps		—		10.5		—		10.5
Derivative instruments of the CLOs		—		—		15.8		15.8
Contingent consideration⁽²⁾		—		57.6		186.7		244.3

Total	$	—	$	68.1	$	13,859.2	$	13,927.3

(1)	Balance represents Fund Investments that the Partnership consolidates one fiscal quarter in arrears.

(2)	Related to contingent cash and equity consideration associated with the acquisitions of Claren Road, AlpInvest, ESG and Vermillion, excluding employment-based contingent consideration (see Note 9).

Financial Instruments Measured at Fair Value

The changes in financial instruments measured at fair value for which the Partnership has used Level III inputs to determine fair value are as follows (Dollars in millions):

Financial Assets
Three Months Ended March 31, 2013

Investments of Consolidated Funds

Equity
securities

Bonds

Loans

Partnership and
LLC interests

Other

Trading
securities and
other

Total

Balance, beginning of period

2,475.1

934.2

13,290.1

4,315.5

7.3

20.0

21,042.2

Transfers out ⁽¹⁾

(4.3

)

—

(4.3

)

Purchases

68.1

175.2

2,255.5

88.4

—

2,587.2

Sales

(44.5

)

(209.4

)

(593.5

)

(240.0

)

—

(1,087.4

)

Settlements

—

(1,418.4

)

—

(1,418.4

)

Realized and unrealized gains (losses), net

78.7

9.2

(26.3

)

(161.7

)

1.5

2.0

(96.6

)

Balance, end of period

2,573.1

909.2

13,507.4

4,002.2

8.8

22.0

21,022.7

Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date

124.5

21.7

121.8

69.9

(8.1

)

2.0

331.8


	Financial Assets Three Months Ended March 31, 2012
	Investments of Consolidated Funds
	Equity securities			Bonds			Loans			Partnership and LLC interests			Other			Trading securities and other		Total

Balance, beginning of period	$	1,868.9		$	557.0		$	10,152.6		$	4,198.6		$	20.8		$	30.6	$	16,828.5
Initial consolidation of funds		25.2			262.6			2,256.4			—			—			—		2,544.2
Transfers out ⁽¹⁾		(125.4	)		—			—			—			—			—		(125.4	)
Purchases		21.9			72.5			1,349.1			161.0			—			—		1,604.5
Sales		(94.3	)		(60.4	)		(595.3	)		(89.6	)		(1.7	)		—		(841.3	)
Settlements		—			—			(711.0	)		—			—			—		(711.0	)
Realized and unrealized gains (losses), net		165.3			45.0			298.5			(120.9	)		(7.5	)		1.8		382.2

Balance, end of period	$	1,861.6		$	876.7		$	12,750.3		$	4,149.1		$	11.6		$	32.4	$	19,681.7

Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date	$	381.1		$	32.9		$	198.3		$	174.6		$	(4.1	)	$	1.8	$	784.6

(1)	Transfers out of Level III financial assets were due to changes in the observability of market inputs used in the valuation of such assets. Transfers are measured as of the beginning of the quarter in which the transfer occurs.

Transfer Out of Level III of Financial Liabilities

Financial Liabilities
Three Months Ended March 31, 2013

Loans Payable
of Consolidated
Funds

Derivative
Instruments of
Consolidated
Funds

Contingent
Consideration

Total

Balance, beginning of period

13,656.7

15.8

186.7

13,859.2

Borrowings

1,236.4

—

1,236.4

Paydowns

(820.7

)

—

(10.0

)

(830.7

)

Sales

—

0.1

—

0.1

Realized and unrealized (gains) losses, net

240.3

(5.6

)

(9.9

)

224.8

Balance, end of period

14,312.7

10.3

166.8

14,489.8

Changes in unrealized (gains) losses included in earnings related to financial liabilities still held at the reporting date

354.2

(6.6

)

(9.9

)

337.7


	Financial Liabilities Three Months Ended March 31, 2012
	Loans Payable of Consolidated Funds			Derivative Instruments of Consolidated Funds		Subordinated Loan Payable to Affiliate			Contingent Consideration			Total

Balance, beginning of period	$	9,689.9		$	—	$	262.5		$	169.2		$	10,121.6
Initial consolidation of funds		2,215.8			4.6		—			—			2,220.4
Borrowings		490.1			—		—			—			490.1
Paydowns		(182.9	)		—		(260.0	)		(0.7	)		(443.6	)
Realized and unrealized (gains) losses, net		241.7			0.2		(2.5	)		2.0			241.4

Balance, end of period	$	12,454.6		$	4.8	$	—		$	170.5		$	12,629.9

Changes in unrealized (gains) losses included in earnings related to financial liabilities still held at the reporting date	$	153.2		$	3.9	$	—		$	(0.8	)	$	156.3

Quantitative Information About Partnership's Level III Inputs

The following table summarizes quantitative information about the Partnership’s Level III inputs as of March 31, 2013:


(Dollars in millions)	Fair Value at March 31, 2013		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Assets
Investments of Consolidated Funds:
Equity securities	$	2,412.5	Comparable Multiple	LTM EBITDA Multiple	5.6x - 14.0x (10.6x)
		76.4	Comparable Multiple	Price Earnings Multiple	(13.1x)
		15.6	Comparable Multiple	Book Value Multiple	(1.0x)
		25.3	Consensus Pricing	Indicative Quotes ($ per Share)	(1)
		43.3	Discounted Cash Flow	Discount Rate	7% - 11% (9%)
				Exit Cap Rate	5% - 8% (7%)

Bonds		909.2	Consensus Pricing	Indicative Quotes (% of Par)	(96)

Loans		13,244.5	Consensus Pricing	Indicative Quotes (% of Par)	(95)
		262.9	Market Yield Analysis	Market Yield	8% - 18% (10%)

Partnership and LLC interests		4,002.2	NAV of Underlying Fund⁽¹⁾	N/A	N/A

Other		8.8	Counterparty Pricing	Indicative Quotes (% of Notional Amount)	(3)

	$	21,000.7
Trading securities and other		13.1	Dealer Pricing	Indicative Quotes (% of Par)	(95)
		6.2	Comparable Multiple	LTM EBITDA Multiple	(5.7x)
		2.7	Discounted Cash Flow	Discount Rate	(7%)

Total	$	21,022.7


Liabilities
Loans payable of Consolidated Funds
Senior secured notes	$	13,204.1	Discounted Cash Flow with Consensus Pricing	Discount Rates	(3%)
				Default Rates	(3%)
				Recovery Rates	(59%)
				Indicative Quotes (% of Par)	(95)

Subordinated notes and preferred shares		1,102.3	Discounted Cash Flow with Consensus Pricing	Discount Rates	(21%)
				Default Rates	(3%)
				Recovery Rates	(55%)
				Indicative Quotes (% of Par)	(52)

Combination notes		6.3	Consensus Pricing	Indicative Quotes (% of Par)	(100)

Derivative instruments of Consolidated Funds		10.3	Counterparty Pricing	Indicative Quotes (% of Notional Amount)	(8)

Contingent cash consideration⁽²⁾		166.8	Discounted Cash Flow	Assumed % of Total Potential Contingent Payments	13% - 100% (89%)
				Discount Rate	2% - 32% (16%)

Total	$	14,489.8

(1)	Represents the Partnership’s investments in funds that are valued using the NAV of the underlying fund.

(2)	Related to contingent cash consideration associated with the acquisitions of Claren Road, AlpInvest, ESG and Vermillion (see Note 9).

The following table summarizes quantitative information about the Partnership’s Level III inputs as of December 31, 2012:


(Dollars in millions)	Fair Value at December 31, 2012		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Assets
Investments of Consolidated Funds:
Equity securities	$	2,311.5	Comparable Multiple	LTM EBITDA Multiple	5.6x - 13.5x (9.7x)
		69.4	Comparable Multiple	Price Earnings Multiple	(13.5x)
		15.4	Comparable Multiple	Book Value Multiple	(1.0x)
		33.8	Consensus Pricing	Indicative Quotes ($ per Share)	(10)
		45.0	Discounted Cash Flow	Discount Rate	9% - 15% (11%)
				Exit Cap Rate	6% - 8% (7%)

Bonds		934.2	Consensus Pricing	Indicative Quotes (% of Par)	(94)

Loans		12,952.9	Consensus Pricing	Indicative Quotes (% of Par)	(94)
		337.2	Market Yield Analysis	Market Yield	7% - 18% (10%)

Partnership and LLC interests		4,315.5	NAV of Underlying Fund⁽¹⁾	N/A	N/A

Other		7.3	Counterparty Pricing	Indicative Quotes (% of Notional Amount)	(3)

	$	21,022.2
Trading securities and other		11.2	Dealer Pricing	Indicative Quotes (% of Par)	(83)
		6.2	Comparable Multiple	LTM EBITDA Multiple	(5.6x)
		2.6	Discounted Cash Flow	Discount Rate	(7%)

Total	$	21,042.2


Liabilities
Loans payable of Consolidated Funds
Senior secured notes	$	12,658.4	Discounted Cash Flow with Consensus Pricing	Discount Rates	(4%)
				Default Rates	(3%)
				Recovery Rates	(58%)
				Indicative Quotes (% of Par)	(93)

Subordinated notes and preferred shares		996.9	Discounted Cash Flow with Consensus Pricing	Discount Rates	(29%)
				Default Rates	(3%)
				Recovery Rates	(53%)
				Indicative Quotes (% of Par)	(42)

Combination notes		1.4	Consensus Pricing	Indicative Quotes (% of Par)	(96)

Derivative instruments of Consolidated Funds		15.8	Counterparty Pricing	Indicative Quotes (% of Notional Amount)	(6)

Contingent cash consideration⁽²⁾		186.7	Discounted Cash Flow	Assumed % of Total Potential Contingent Payments	32% - 100% (79%)
				Discount Rate	2% - 35% (17%)

Total	$	13,859.2

(1)	Represents the Partnership’s investments in funds that are valued using the NAV of the underlying fund.

(2)	Related to contingent cash consideration associated with the acquisitions of Claren Road, AlpInvest, ESG and Vermillion (see Note 9).

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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