Cash Instruments (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value, Cash Instruments, Measurement Inputs, Disclosure

The tables below present the ranges of significant unobservable inputs used to value the firm’s level 3 cash instruments.


Level 3 Cash Instruments	Level 3 Assets as of March 2014 (in millions)	Valuation Techniques and Significant Unobservable Inputs	Range of Significant Unobservable Inputs (Weighted Average) as of March 2014
Loans and securities backed by commercial real estate Ÿ Collateralized by a single commercial real estate property or a portfolio of properties Ÿ May include tranches of varying levels of subordination	$2,626	Discounted cash flows:
		Ÿ Yield	2.5% to 29.6% (10.6%)
		Ÿ Recovery rate	26.0% to 95.6% (71.1%)
		Ÿ Duration (years)	0.2 to 4.9 (1.9)
		Ÿ Basis	(5) points to 19 points (4 points)
Loans and securities backed by residential real estate Ÿ Collateralized by portfolios of residential real estate Ÿ May include tranches of varying levels of subordination	$2,065	Discounted cash flows:
		Ÿ Yield	3.4% to 30.2% (9.8%)
		Ÿ Cumulative loss rate	0.0% to 89.7% (23.4%)
		Ÿ Duration (years)	1.2 to 17.7 (3.6)
Bank loans and bridge loans	$9,687	Discounted cash flows:
		Ÿ Yield	1.0% to 27.9% (8.5%)
		Ÿ Recovery rate	40.0% to 92.1% (55.9%)
		Ÿ Duration (years)	0.3 to 6.6 (1.9)
Non-U.S. government and agency obligations Corporate debt securities State and municipal obligations Other debt obligations	$3,559	Discounted cash flows:
		Ÿ Yield	1.7% to 32.5% (8.9%)
		Ÿ Recovery rate	0.0% to 84.0% (64.1%)
		Ÿ Duration (years)	0.7 to 16.8 (4.7)
Equities and convertible debentures (including private equity investments and investments in real estate entities)	$15,807 ¹	Comparable multiples:
		Ÿ Multiples	0.7x to 22.7x (6.8x)
		Discounted cash flows:
		Ÿ Discount rate/yield	5.0% to 34.5% (15.1%)
		Ÿ Long-term growth rate/compound annual growth rate	(3.5)% to 19.0% (7.3%)
		Ÿ Capitalization rate	4.2% to 11.3% (7.3%)

1.	The fair value of any one instrument may be determined using multiple valuation techniques. For example, market comparables and discounted cash flows may be used together to determine fair value. Therefore, the level 3 balance encompasses both of these techniques.


Level 3 Cash Instruments	Level 3 Assets as of December 2013 (in millions)	Valuation Techniques and Significant Unobservable Inputs	Range of Significant Unobservable Inputs (Weighted Average) as of December 2013
Loans and securities backed by commercial real estate Ÿ Collateralized by a single commercial real estate property or a portfolio of properties Ÿ May include tranches of varying levels of subordination	$2,692	Discounted cash flows:
		Ÿ Yield	2.7% to 29.1% (10.1%)
		Ÿ Recovery rate	26.2% to 88.1% (74.4%)
		Ÿ Duration (years)	0.6 to 5.7 (2.0)
		Ÿ Basis	(9) points to 20 points (5 points)
Loans and securities backed by residential real estate Ÿ Collateralized by portfolios of residential real estate Ÿ May include tranches of varying levels of subordination	$1,961	Discounted cash flows:
		Ÿ Yield	2.6% to 25.8% (10.1%)
		Ÿ Cumulative loss rate	9.8% to 56.6% (24.9%)
		Ÿ Duration (years)	1.4 to 16.7 (3.6)
Bank loans and bridge loans	$9,324	Discounted cash flows:
		Ÿ Yield	1.0% to 39.6% (9.3%)
		Ÿ Recovery rate	40.0% to 85.0% (54.9%)
		Ÿ Duration (years)	0.5 to 5.3 (2.1)
Non-U.S. government and agency obligations Corporate debt securities State and municipal obligations Other debt obligations	$3,977	Discounted cash flows:
		Ÿ Yield	1.5% to 40.2% (8.9%)
		Ÿ Recovery rate	0.0% to 70.0% (61.9%)
		Ÿ Duration (years)	0.6 to 16.1 (4.2)
Equities and convertible debentures (including private equity investments and investments in real estate entities)	$14,685 ¹	Comparable multiples:
		Ÿ Multiples	0.6x to 18.8x (6.9x)
		Discounted cash flows:
		Ÿ Discount rate/yield	6.0% to 29.1% (14.6%)
		Ÿ Long-term growth rate/compound annual growth rate	1.0% to 19.0% (8.1%)
		Ÿ Capitalization rate	4.6% to 11.3% (7.1%)

1.	The fair value of any one instrument may be determined using multiple valuation techniques. For example, market comparables and discounted cash flows may be used together to determine fair value. Therefore, the level 3 balance encompasses both of these techniques.

Cash Instruments by Level

The tables below present, by level within the fair value hierarchy, cash instrument assets and liabilities, at fair value. Cash instrument assets and liabilities are included in “Financial instruments owned, at fair value” and “Financial instruments sold, but not yet purchased, at fair value,” respectively.

Cash Instrument Assets at Fair Value as of March 2014

in millions

Level 1

Level 2

Level 3

Total

Commercial paper, certificates of deposit, time deposits and other money market instruments

$ 216

$ 8,557

$ —

$ 8,773

U.S. government and federal agency obligations

33,764

43,236

—

77,000

Non-U.S. government and agency obligations

30,760

8,962

39,767

Mortgage and other asset-backed loans and securities ¹:

Loans and securities backed by commercial real estate

—

2,910

2,626

5,536

Loans and securities backed by residential real estate

—

7,292

2,065

9,357

Bank loans and bridge loans

—

7,670

9,687

17,357

Corporate debt securities ²

202

17,796

2,632

20,630

State and municipal obligations

—

1,086

242

1,328

Other debt obligations ²

—

2,678

640

3,318

Equities and convertible debentures

62,488

9,025

15,807

87,320

Commodities

—

4,301

—

4,301

Total

$127,430

$113,513

$33,744

$274,687

Cash Instrument Liabilities at Fair Value as of March 2014

in millions

Level 1

Level 2

Level 3

Total

U.S. government and federal agency obligations

$ 18,841

$ 17

$ —

$ 18,858

Non-U.S. government and agency obligations

22,305

1,828

—

24,133

Mortgage and other asset-backed loans and securities:

Loans and securities backed by residential real estate

—

Bank loans and bridge loans

—

685

193

878

Corporate debt securities

5,442

5,444

Other debt obligations

—

Equities and convertible debentures

30,770

403

31,182

Commodities

—

1,852

—

1,852

Total

$ 71,917

$ 10,229

$ 204

$ 82,350

1.	Includes $187 million and $482 million of collateralized debt obligations (CDOs) backed by real estate in level 2 and level 3, respectively.

2.	Includes $417 million and $1.42 billion of CDOs and collateralized loan obligations (CLOs) backed by corporate obligations in level 2 and level 3, respectively.

3.	Includes $14.11 billion of private equity investments, $1.35 billion of investments in real estate entities and $348 million of convertible debentures.


	Cash Instrument Assets at Fair Value as of December 2013
in millions		Level 1	Level 2	Level 3		Total
Commercial paper, certificates of deposit, time deposits and other money market instruments		$ 216	$ 8,392	$ —		$ 8,608

U.S. government and federal agency obligations		29,582	41,490	—		71,072

Non-U.S. government and agency obligations		29,451	11,453	40		40,944

Mortgage and other asset-backed loans and securities ¹:
Loans and securities backed by commercial real estate		—	3,904	2,692		6,596

Loans and securities backed by residential real estate		—	7,064	1,961		9,025

Bank loans and bridge loans		—	8,076	9,324		17,400

Corporate debt securities ²		240	14,299	2,873		17,412

State and municipal obligations		—	1,219	257		1,476

Other debt obligations ²		—	2,322	807		3,129

Equities and convertible debentures		76,945	9,394	14,685	³	101,024

Commodities		—	4,556	—		4,556
Total		$136,434	$112,169	$32,639		$281,242

	Cash Instrument Liabilities at Fair Value as of December 2013
in millions		Level 1	Level 2	Level 3		Total
U.S. government and federal agency obligations		$ 20,871	$ 49	$ —		$ 20,920

Non-U.S. government and agency obligations		25,325	1,674	—		26,999

Mortgage and other asset-backed loans and securities:
Loans and securities backed by commercial real estate		—	—	1		1

Loans and securities backed by residential real estate		—	2	—		2

Bank loans and bridge loans		—	641	284		925

Corporate debt securities		10	5,241	2		5,253

State and municipal obligations		—	50	1		51

Other debt obligations		—	3	1		4

Equities and convertible debentures		22,107	468	8		22,583

Commodities		—	966	—		966
Total		$ 68,313	$ 9,094	$ 297		$ 77,704

1.	Includes $295 million and $411 million of CDOs backed by real estate in level 2 and level 3, respectively.

2.	Includes $451 million and $1.62 billion of CDOs and CLOs backed by corporate obligations in level 2 and level 3, respectively.

3.	Includes $12.82 billion of private equity investments, $1.37 billion of investments in real estate entities and $491 million of convertible debentures.

Cash Instruments, Level 3 Rollforward

The tables below present changes in fair value for all cash instrument assets and liabilities categorized as level 3 as of the end of the period. Purchases in the tables below include both originations and secondary market purchases.

Level 3 Cash Instrument Assets at Fair Value for the Three Months Ended March 2014

in millions

Balance,

beginning

of period

Net

realized

gains/

(losses)

Net unrealized

gains/(losses)

relating to

instruments

still held at

period-end

Purchases

Sales

Settlements

Transfers

into

level 3

Transfers

out of

level 3

Balance,

end of

period

Non-U.S. government and agency obligations

$ 40

$ —

$ 13

$ (15

)

$ (1

)

$ 8

$ —

$ 45

Mortgage and other asset-backed loans and securities:

Loans and securities backed by commercial real estate

2,692

150

(58

)

(264

)

274

(273

)

2,626

Loans and securities backed by residential real estate

1,961

121

(54

)

(69

)

161

(168

)

2,065

Bank loans and bridge loans

9,324

140

1,342

(646

)

(884

)

658

(342

)

9,687

Corporate debt securities

2,873

312

(296

)

(297

)

197

(281

)

2,632

State and municipal obligations

257

(53

)

—

242

Other debt obligations

807

(101

)

(72

)

(94

)

640

Equities and convertible debentures

14,685

457

624

(221

)

(245

)

1,501

(1,016

)

15,807

Total

$32,639

$244

$831

$2,654

$(1,444

)

$(1,833

)

$2,827

$(2,174

)

$33,744

Level 3 Cash Instrument Liabilities at Fair Value for the Three Months Ended March 2014

in millions

Balance,

beginning

of period

Net

realized

(gains)/

losses

Net unrealized

(gains)/losses

relating to

instruments

still held at

period-end

Purchases

Sales

Settlements

Transfers

into

level 3

Transfers

out of

level 3

Balance,

end of

period

Total

$ 297

$ (3

)

$ (41

)

$ (54

)

$ 12

$ 3

$ 11

$ (21

)

$ 204

1.	The aggregate amounts include gains of approximately $128 million, $773 million and $174 million reported in “Market making,” “Other principal transactions” and “Interest income,” respectively.


	Level 3 Cash Instrument Assets at Fair Value for the Three Months Ended March 2013
in millions		Balance, beginning of period	Net realized gains/ (losses)		Net unrealized gains/(losses) relating to instruments still held at period-end		Purchases		Sales		Settlements		Transfers into level 3	Transfers out of level 3		Balance, end of period
Non-U.S. government and agency obligations		$ 26	$ 3		$ 2		$ 28		$ (9	)	$ (1	)	$ 1	$ (3	)	$ 47

Mortgage and other asset-backed loans and securities:
Loans and securities backed by commercial real estate		3,389	36		91		50		(249	)	(277	)	318	(194	)	3,164

Loans and securities backed by residential real estate		1,619	38		25		268		(172	)	(56	)	104	(143	)	1,683

Bank loans and bridge loans		11,235	153		97		1,460		(543	)	(1,361	)	1,688	(1,041	)	11,688

Corporate debt securities		2,821	116		157		301		(728	)	(141	)	116	(200	)	2,442

State and municipal obligations		619	2		1		19		(269	)	(1	)	—	(37	)	334

Other debt obligations		1,185	19		21		192		(210	)	(201	)	61	(212	)	855

Equities and convertible debentures		14,855	70		481		185		(378	)	(543	)	1,000	(446	)	15,224
Total		$35,749	$437	¹	$875	¹	$2,503		$(2,558	)	$(2,581	)	$3,288	$(2,276	)	$35,437

	Level 3 Cash Instrument Liabilities at Fair Value for the Three Months Ended March 2013
in millions		Balance, beginning of period	Net realized (gains)/ losses		Net unrealized (gains)/losses relating to instruments still held at period-end		Purchases		Sales		Settlements		Transfers into level 3	Transfers out of level 3		Balance, end of period
Total		$ 642	$ (4	)	$ (11	)	$ (147	)	$ 97		$ 3		$ 22	$ (161	)	$ 441

1.	The aggregate amounts include gains of approximately $317 million, $687 million and $308 million reported in “Market making,” “Other principal transactions” and “Interest income,” respectively.

Investments in Funds that Calculate Net Asset Value Per Share

The tables below present the fair value of the firm’s investments in, and unfunded commitments to, funds that calculate NAV.


	As of March 2014
in millions		Fair Value of Investments	Unfunded Commitments
Private equity funds		$ 7,707	$2,378

Credit funds		3,388	1,683

Hedge funds		1,426	—

Real estate funds		1,644	408
Total		$14,165	$4,469

	As of December 2013
in millions		Fair Value of Investments	Unfunded Commitments
Private equity funds		$ 7,446	$2,575

Credit funds		3,624	2,515

Hedge funds		1,394	—

Real estate funds		1,908	471
Total		$14,372	$5,561

- Definition

Tabular disclosure of the fair value of investees that calculate net asset value per share (including by unit, membership interest, or other equity (ownership interest) unit measure) (alternative investments), whether measured at fair value on a recurring or nonrecurring basis, by major category of assets and liabilities (as defined), including, for example, (i) fair value measurements at the reporting date, (ii) the level within the fair value hierarchy in which the fair value measurements fall, (iii) a reconciliation of beginning and ending balances for those alternative investments that are measured at fair value using unobservable inputs (Level 3 - fair value hierarchy fair value measurement inputs), (iv) the inputs and valuation techniques used to measure fair value, (v) a discussion of changes to valuation techniques and inputs, if any, during the period, (vi) a description of the nature and risk associated with the alternative investments, and (vii) a discussion of the probability that any of the alternative investments are to be sold.

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