Other Investments

Other investments comprised the following at December 31, 2017 and 2016. See Note 1(c), "Significant Accounting Policies - Investments - Other Investments," for a description of our accounting policy for these assets:



Year ended December 31, (U.S. dollars in thousands)	2017		2016
Hedge funds	$	205,770	$	331,972
Private investments	191,986		175,579
Overseas deposits	570,742		493,594
Structured transactions	172,982		142,698
Other	22,383		20,721
Total other investments	$	1,163,863	$	1,164,564

(a) Hedge Funds and Private Investments

At December 31, 2017 and 2016, the hedge fund portfolio, accounted for as other investments, employed four strategies as noted above in Note 5, "Investments in Affiliates."

In general, the funds in which the Company is invested require at least 30 days notice of redemption, and may be redeemed on a monthly, quarterly, semi-annual, annual or longer basis, depending upon the specific terms of each fund.

Certain hedge funds have a lock-up period and/or may also have the ability to impose a redemption gate as noted in Note 5, "Investments in Affiliates." The fair value of the Company's holdings in hedge funds that are subject to lockups and/or that have redemption gate provisions in their governing documents at December 31, 2017 and 2016 was $178.0 million and $223.3 million, respectively. The Company did not have any holdings in funds where a redemption gate was imposed at December 31, 2017 or 2016.

Certain hedge funds may be allowed to invest a portion of their assets in illiquid securities, such as private equity or private debt, as noted in Note 5, "Investments in Affiliates." At December 31, 2017 and 2016, the fair value of hedge funds held in side-pockets was $9.2 million and $11.3 million, respectively. The underlying assets within these positions are generally expected to be liquidated over a period of approximately two to four years.

The following represents an analysis of the net unrealized gains for the indicated years ended December 31, 2017 and 2016, and the net realized gains as of December 31, 2017, 2016 and 2015, on the Company's hedge funds and private investments:



Year ended December 31, (U.S. dollars in thousands)	Net Unrealized Gains (Losses)				Net Realized Gains (Losses)
Year ended December 31, (U.S. dollars in thousands)	2017		2016		2017		2016		2015
Hedge funds	$	100,103	$	134,114	$	15,322	$	12,212	$	12,769
Private investments	60,624		36,775		13,994		8,636		9,342
Total	$	160,727	$	170,889	$	29,316	$	20,848	$	22,111

(b) Overseas Deposits

Overseas deposits include investments in private funds related to Lloyd's syndicates in which the underlying instruments are primarily government and government-related/supported and corporate fixed income securities. The funds themselves do not trade on an exchange and therefore are not included within AFS securities. Also included in overseas deposits are restricted cash and cash equivalent balances held by Lloyd's syndicates for solvency purposes. Given the restricted nature of these cash balances, they are not included within the cash and cash equivalents category in the Consolidated Balance Sheet.

National Indemnity Endorsement

On June 9, 2009, XL Specialty Insurance Company ("XL Specialty"), a wholly-owned subsidiary of the Company, entered into an agreement with National Indemnity Company, an insurance company subsidiary of Berkshire Hathaway Inc. ("National Indemnity"). Under the agreement, and a related reinsurance agreement, National Indemnity agreed to issue endorsements to certain directors and officers liability insurance policies known as "Side A" coverage policies underwritten by XL Specialty (the "Facility") during an eighteen month period that ended on December 31, 2011.

In connection with the Facility, XLIB purchased a payment obligation (the "Obligation") in an aggregate principal amount of $150.0 million from National Indemnity. At December 31, 2017, the outstanding Obligation was recorded in other investments at a carrying value of $142.8 million, pays a coupon of 3.5%, and is being accreted to $150.0 million over the 11.5 years term of the payment obligation. The difference between the estimated fair value of the Obligation and the cost of that Obligation at the time of the transaction was approximately $21.9 million and was recorded in Other Assets. This difference, together with fees of $2.5 million, was amortized in relation to the earning of the underlying policies written.

Other Structured Transactions

On July 17, 2009, XLIB purchased notes with an aggregate face amount of $155.0 million. On October 29, 2014, XLIB purchased notes with an aggregate face amount of $81.9 million. The issuer of both series of notes was a structured credit vehicle that held corporate debt and preferred equity securities, including some securities issued by European financial institutions, as well as project finance debt securities, among other assets. During the year ended December 31, 2015 the Company recorded OTTI of $8.6 million. During the fourth quarter of 2015, XLIB entered into transactions whereby it acquired the underlying corporate debt and preferred equity securities in return for the cancellation of the notes. The acquired securities are included in the available for sale fixed maturities and equity securities portfolios. In connection with the cancellation of the notes, the Company recorded realized investment losses of $6.7 million.

See Note 18(b), "Commitments and Contingencies - Other Investments," for further information regarding commitments related to other investments.