Investments, at Fair Value

12 Months Ended

Mar. 31, 2024

Investments held by Ben or held by the Customer ExAlt Trusts are comprised of investments in alternative assets, public debt and equity securities, other equity securities and interests (including those of a related party), and put options. The composition of investments recorded at fair value by holder is included in the table below (in thousands):


	March 31, 2024				March 31, 2023
	Ben		Customer ExAlt Trusts		Ben		Customer ExAlt Trusts
Alternative assets	$	—	$	293,916	$	—	$	385,851
Public equity securities and option	—		4,897		4,742		8,087
Debt securities available-for-sale	—		2,962		620		76,278
Other equity securities and interests	6		27,338		—		21,643
Total investments, at fair value	$	6	$	329,113	$	5,362	$	491,859

Investments in Alternative Assets held by the Customer ExAlt Trusts

The investments in alternative assets are held, either through direct ownership or through beneficial interests, by certain of the Customer ExAlt Trusts and consist primarily of limited partnership interests in various alternative investments, including private equity funds. These alternative investments are valued using NAV as a practical expedient. Changes in the NAV of these investments are recorded in investment income (loss), net in our consolidated statements of comprehensive income (loss). The investments in alternative assets provide the economic value that ultimately collateralizes the ExAlt Loans that Ben Liquidity originates with the Customer ExAlt Trusts in liquidity transactions and any associated fees due from the Customer ExAlt Trusts. The decrease in investments in alternative assets since March 31, 2023, was primarily driven by the transfer of $56.7 million in NAV to settle the Customer ExAlt Trust loan payable, as further described in Note 10, combined with $46.3 million in distributions.

The NAV calculation reflects the most current report of NAV and other data received from firm/fund sponsors. If no such report has been received, Ben estimates NAV based upon the last NAV calculation reported by the investment manager and adjusts it for capital calls and distributions made in the intervening time frame. Ben also considers whether adjustments to the NAV are necessary, in certain circumstances, in which management is aware of specific material events, changes in market conditions, and other relevant factors that have affected the value of an investment during the period between the date of the most recent NAV calculation reported by the investment manager or sponsor and the measurement date. Public equity securities known to be owned within an alternative investment fund, based on the most recent information reported by the general partners, are marked to market using quoted market prices on the balance sheet reporting date.

The underlying interests in alternative assets are primarily limited partnership interests. The transfer of the investments in private equity funds generally requires the consent of the corresponding private equity fund manager, and the transfer of certain fund investments is subject to rights of first refusal or other preemptive rights, potentially further limiting the ExAlt PlanTM from transferring an investment in a private equity fund. The investments are not subject to redemption with the funds. Distributions from funds are received as the underlying investments are liquidated. Timing of liquidation is currently unknown.

Portfolio Information

Our portfolio of alternative asset investments, held by certain of the Customer ExAlt Trusts by asset class of each fund as of March 31, 2024 and 2023, is summarized below (in thousands):


	Alternative Investments Portfolio Summary
	March 31, 2024				March 31, 2023
Asset Class	Carrying Value		Unfunded Commitments		Carrying Value		Unfunded Commitments
Venture Capital	$	139,495	$	2,548	$	165,933	$	2,810
Private Equity	116,462		38,401		145,073		47,218
Natural Resources	17,553		3,340		27,756		5,240
Private Real Estate	8,760		2,907		10,391		4,800
Hedge Funds	6,095		245		24,935		337
Other(1)	5,551		382		11,763		730
Total	$	293,916	$	47,823	$	385,851	$	61,135

(1) “Other” includes earnouts, escrow, net other assets, and private debt strategies.

As of March 31, 2024, the Customer ExAlt Trusts collectively had exposure to 257 professionally managed alternative asset investment funds, comprised of 901 underlying investments, 91 percent of which are investments in private companies.

Public Equity Securities

Investment in public equity securities primarily represents ownership by both Ben and certain of the Customer ExAlt Trusts in public companies. These investments are carried at fair value, which is determined using quoted market prices. Any realized gains and losses are recorded on a trade-date basis. Realized and unrealized gains and losses are recognized in gain (loss) on financial instruments, net in the consolidated statements of comprehensive income (loss). As of March 31, 2024 and March 31, 2023, the fair value of investments in public equity securities was $4.9 million and $8.8 million, respectively. The balance as of March 31, 2023 included an investment in GWG Holdings’ common stock held by Ben and the Customer ExAlt Trusts totaling $3.7 million. On August 1, 2023, GWG Holdings’ plan of reorganization was declared effective, and the securities held by the Company was exchanged for equity interests in the GWG Wind Down Trust (as defined herein). The interests in the GWG Wind Down Trust are reflected as an investment in “other equity securities and interests”. Refer to Note 6 for a reconciliation of the gain (loss) on financial instruments, net for each of the periods presented herein.

Put Options

On April 1, 2022, Ben, through CT Risk Management, L.L.C., made aggregate payments of $5.0 million to purchase put options in the S&P 500 Index with an aggregate notional amount of $141.3 million. Half of the notional expires in April 2024, while the other half expires in April 2025. On April 27, 2022, CT Risk Management, L.L.C., sold an equity interest for $2.4 million to the third-party involved in a participation loan transaction described in Note 10 and utilized the proceeds to purchase additional put options similar to the put options purchased on April 1, 2022. These put options were sold in September 2023 for $1.0 million, resulting in a recognized loss at the time of sale of $0.7 million.

The put options were designed to protect the NAV of the interests in alternative assets, which generate the collateral to certain of the ExAlt Loans in Ben Liquidity’s loan portfolio or the loans related to the participation loan transaction and provide for distributions to the Customer ExAlt Trusts’ ultimate beneficiary, against market risk. The options are carried at fair value, which is determined using quoted market prices. Any realized gains and losses are recorded on a trade-date basis. Realized and unrealized gains and losses are recognized in gain (loss) on financial instruments, net in the consolidated statements of comprehensive income (loss).

No options were held as of March 31, 2024. As of March 31, 2023, the fair value of the put options was $4.0 million. For the years ended March 31, 2024 and 2023, Ben recognized net losses of $3.0 million and $3.5 million, respectively, on the put options, of which approximately $2.0 million and $2.5 million, respectively, is attributable to Ben or Ben’s loan portfolio, with the remainder attributable principally to the loan involved in the participation loan transaction. Refer to Note 6 for a reconciliation of the gain (loss) on financial instruments, net for each of the periods presented herein.

Debt Securities Available-for-Sale

As of March 31, 2024, investments in debt securities represent ownership in privately held debt securities. Investments in debt securities are classified and accounted for as available-for-sale, with unrealized gains and losses presented as a separate component of equity under the accumulated other comprehensive income (loss) line item.

Prior to August 1, 2023, investments in debt securities also included ownership in corporate debt securities, specifically, L Bonds of GWG Holdings (“L Bonds”) held by certain of the Customer ExAlt Trusts. The L Bonds had a maturity date of August 8, 2023. However, upon the effectiveness of GWG Holdings’ plan of reorganization on August 1, 2023, the investments in L Bonds converted to equity interests in the GWG Wind Down Trust, which are reflected in “other equity securities and interests,” as of March 31, 2024.

The amortized cost, estimated fair value, and unrealized gains and losses on investments in debt securities classified as available-for-sale as of March 31, 2024 and 2023 are summarized as follows:


	March 31, 2024
(Dollars in thousands)	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Other debt securities	$	2,685	$	1,337	$	(1,060)	$	2,962
Total available-for-sale debt securities	$	2,685	$	1,337	$	(1,060)	$	2,962

	March 31, 2023
(Dollars in thousands)	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities (L Bonds)	$	64,313	$	17,433	$	(7,924)	$	73,822
Other debt securities	2,685		1,347		(956)		3,076
Total available-for-sale debt securities	$	66,998	$	18,780	$	(8,880)	$	76,898

The table below indicates the length of time individual debt securities have been in a continuous loss position as of March 31, 2024 and 2023:


	March 31, 2024				March 31, 2023
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate debt securities (L Bonds):

Twelve months or longer	$	—	$	—	$	73,822	$	7,924
Other debt securities:
Less than twelve months	—		—		2,078		956
Twelve months or longer	1,964		1,060		—		—
Total available-for-sale debt securities with unrealized losses	$	1,964	$	1,060	$	75,900	$	8,880

The noncredit-related portion of the net unrealized gains of $4.1 million and $11.2 million for the years ended March 31, 2024 and 2023, respectively, was recognized as a component of accumulated other comprehensive income (loss).

During the year ended March 31, 2024, there were no credit-related loss on its investment in debt securities available-for-sale. During the year ended March 31, 2023, the Company determined the credit-related portion on its investment in debt securities available-for-sale was $12.6 million, which is recorded in the provision for credit losses on the consolidated statements of comprehensive income (loss). The Company determined these losses were credit-related as it does not expect to recover the entire amortized cost basis of the security.

The following table is a rollforward of credit-related losses recognized in earnings for the periods presented below:


	Year Ended March 31,
(Dollars in thousands)	2024		2023
Balance, beginning of period	$	31,290	$	18,669

Increase in credit-related loss amounts previously recognized	—		12,621
Balance, end of period	$	31,290	$	31,290

The contractual maturities of available-for-sale debt securities as of March 31, 2024 and 2023 are as follows:


	March 31, 2024				March 31, 2023
(Dollars in thousands)	Amortized Cost Basis		Fair Value		Amortized Cost Basis		Fair Value
Due in one year or less	$	1,687	$	1,964	$	66,000	$	75,900

No fixed maturity	998		998		998		998
	$	2,685	$	2,962	$	66,998	$	76,898

Other Equity Securities and Interests

Ben and certain of the Customer ExAlt Trusts hold investments in equity securities of private companies with a readily determinable fair value, including those of the GWG Wind Down Trust. On August 1, 2023, GWG Holdings’ plan of reorganization was declared effective and our investments in its common stock and L Bonds (previously accounted for as public equity securities and available-for-sale debt securities, respectively) were then exchanged for an investment in the GWG Holdings Wind Down Trust. The fair value of these equity interests was $0.6 million and $17.4 million as of March 31, 2024 and August 1, 2023, respectively. Refer to Note 6 for a reconciliation of the gain (loss) on financial instruments, net for each of the periods presented herein.

Additionally, certain of the Customer ExAlt Trusts hold investments in equity securities that do not have a readily determinable fair value. These equity securities are measured using the measurement alternative for equity investments that do not have readily determinable fair values at cost, less impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The value of these equity securities was $26.8 million and $21.6 million as of March 31, 2024 and 2023, respectively. The increase in value is primarily due to new investments held as of March 31, 2024 that were not held as of March 31, 2023. Additionally, during the year ended March 31, 2023, one security received an upward adjustment of $10.8 million based upon observable price changes, including a recent equity offering and stock to stock transactions. Such adjustment also represents the cumulative adjustment. Refer to Note 6 for a reconciliation of the gain (loss) on financial instruments, net for each of the periods presented herein, which reflects any upward or downward adjustments to these equity securities for the periods presented herein. During the year ended March 31, 2024, an impairment of $37.8 million was recognized, which is reflected in the gain (loss) on financial instruments, net line item on the consolidated statements of comprehensive income (loss). This impairment primarily relates to a new investment that was entered into during the third quarter, that was subsequently written off in the fourth quarter. There were no impairments to these equity securities during the year ended March 31, 2023.