Fair Value Disclosures (Tables)

3 Months Ended

Feb. 29, 2020

Fair Value Disclosures [Abstract]

Financial Assets and Liabilities Accounted for at Fair Value on Recurring Basis

The following is a summary of our financial assets and liabilities that are accounted for at fair value on a recurring basis, excluding Investments at fair value based on net asset value (“NAV”) of $890.1 million and $570.3 million at February 29, 2020 and November 30, 2019, respectively, by level within the fair value hierarchy (in thousands):

	February 29, 2020
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total
Assets:
Financial instruments owned:
Corporate equity securities	$	3,343,000	$	157,818	$	103,643	$	—		$	3,604,461
Corporate debt securities	—		2,841,022		25,090		—			2,866,112
Collateralized debt obligations and collateralized loan obligations	—		97,325		20,952		—			118,277
U.S. government and federal agency securities	1,541,590		98,176		—		—			1,639,766
Municipal securities	—		775,960		—		—			775,960
Sovereign obligations	1,552,798		1,194,447		—		—			2,747,245
Residential mortgage-backed securities	—		1,080,695		16,970		—			1,097,665
Commercial mortgage-backed securities	—		441,669		4,264		—			445,933
Other asset-backed securities	—		260,009		41,903		—			301,912
Loans and other receivables	—		2,651,109		54,321		—			2,705,430
Derivatives	864		3,290,943		23,244		(2,717,442		)	597,609
Investments at fair value	—		51,609		55,270		—			106,879
Total financial instruments owned, excluding Investments at fair value based on NAV	$	6,438,252	$	12,940,782	$	345,657	$	(2,717,442	)	$	17,007,249
Securities received as collateral	$	15,004	$	—	$	—	$	—		$	15,004
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	2,124,882	$	2,897	$	4,275	$	—		$	2,132,054
Corporate debt securities	—		1,772,490		767		—			1,773,257
U.S. government and federal agency securities	1,577,052		—		—		—			1,577,052
Sovereign obligations	1,070,355		808,136		—		—			1,878,491
Commercial mortgage-backed securities	—		—		35		—			35
Loans	—		1,813,027		7,859		—			1,820,886
Derivatives	37		3,410,455		134,087		(2,849,172		)	695,407
Total financial instruments sold, not yet purchased	$	4,772,326	$	7,807,005	$	147,023	$	(2,849,172	)	$	9,877,182
Short-term borrowings	$	—	$	20,164	$	—	$	—		$	20,164
Obligation to return securities received as collateral	$	15,004	$	—	$	—	$	—		$	15,004
Long-term debt	$	—	$	811,251	$	543,463	$	—		$	1,354,714

(1) Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.

	November 30, 2019
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)			Total
Assets:
Financial instruments owned:
Corporate equity securities	$	2,325,116	$	218,403	$	58,301	$	—		$	2,601,820
Corporate debt securities	—		2,472,213		7,490		—			2,479,703
Collateralized debt obligations and collateralized loan obligations	—		124,225		20,081		—			144,306
U.S. government and federal agency securities	2,101,624		158,618		—		—			2,260,242
Municipal securities	—		742,326		—		—			742,326
Sovereign obligations	1,330,026		1,405,827		—		—			2,735,853
Residential mortgage-backed securities	—		1,069,066		17,740		—			1,086,806
Commercial mortgage-backed securities	—		424,060		6,110		—			430,170
Other asset-backed securities	—		303,847		42,563		—			346,410
Loans and other receivables	—		2,395,211		64,240		—			2,459,451
Derivatives	2,809		1,812,659		14,889		(1,432,806		)	397,551
Investments at fair value	—		32,688		75,738		—			108,426
Total financial instruments owned, excluding Investments at fair value based on NAV	$	5,759,575	$	11,159,143	$	307,152	$	(1,432,806	)	$	15,793,064
Securities purchased under agreements to resell	$	—	$	—	$	25,000	$	—		$	25,000
Securities received as collateral	$	9,500	$	—	$	—	$	—		$	9,500
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	2,755,601	$	7,438	$	4,487	$	—		$	2,767,526
Corporate debt securities	—		1,471,142		340		—			1,471,482
U.S. government and federal agency securities	1,851,981		—		—		—			1,851,981
Sovereign obligations	1,363,475		941,065		—		—			2,304,540
Commercial mortgage-backed securities	—		—		35		—			35
Loans	—		1,600,228		9,463		—			1,609,691
Derivatives	871		2,066,064		92,057		(1,631,787		)	527,205
Total financial instruments sold, not yet purchased	$	5,971,928	$	6,085,937	$	106,382	$	(1,631,787	)	$	10,532,460
Short-term borrowings	$	—	$	20,981	$	—	$	—		$	20,981
Obligation to return securities received as collateral	$	9,500	$	—	$	—	$	—		$	9,500
Long-term debt	$	—	$	735,216	$	480,069	$	—		$	1,215,285

(1)

Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.

Investments Measured at Fair Value Based on Net Asset Value Per Share

The following tables present information about our investments in entities that have the characteristics of an investment company (in thousands):

	February 29, 2020
	Fair Value (1)		Unfunded Commitments
Equity Long/Short Hedge Funds (2)	$	303,941	$	—
Equity Funds (3)	28,777		11,823
Commodity Funds (4)	14,650		—
Multi-asset Funds (5)	542,609		—
Other Funds (6)	160		—
Total	$	890,137	$	11,823

	November 30, 2019
	Fair Value (1)		Unfunded Commitments
Equity Long/Short Hedge Funds (2)	$	291,593	$	—
Equity Funds (3)	27,952		12,108
Commodity Funds (4)	16,025		—
Multi-asset Funds (5)	234,583		—
Other Funds (6)	157		—
Total	$	570,310	$	12,108

(1) Where fair value is calculated based on NAV, fair value has been derived from each of the funds’ capital statements.

(2) This category includes investments in hedge funds that invest, long and short, primarily in both public and private equity securities in domestic and international markets. At both February 29, 2020 and November 30, 2019, approximately 6% of the fair value of investments in this category are redeemable quarterly with 60 days prior written notice.

(3) At February 29, 2020 and November 30, 2019, the investments in this category include investments in equity funds that invest in the equity of various U.S. and foreign private companies in the energy, technology, internet service and telecommunication service industries. These investments cannot be redeemed; instead, distributions are received through the liquidation of the underlying assets of the funds which are primarily expected to be liquidated in approximately one to nine years.

(4) This category includes investments in a hedge fund that invests, long and short, primarily in commodities. Investments in this category are redeemable quarterly with 60 days prior written notice.

(5) This category includes investments in hedge funds that invest, long and short, primarily in multi-asset securities in domestic and international markets in both the public and private sectors. At February 29, 2020 and November 30, 2019, investments representing approximately 2% and 5%, respectively, of the fair value of investments in this category are redeemable monthly with 30 days prior written notice.

(6)

This category includes investments in a fund that invests in loans secured by a first trust deed on property, domestic and international public high yield debt, private high yield investments, senior bank loans, public leveraged equities, distressed debt and private equity investments and there are no redemption provisions. This category also includes investments in a fund of funds that invests in various private equity funds that are managed by us and have no redemption provisions. Investments in the fund of funds are gradually being liquidated, however, the timing of when the proceeds will be received is uncertain.

Summary of Changes in Fair Value of Financial Assets and Liabilities Classified as Level 3

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the three months ended February 28, 2019 (in thousands):

	Three Months Ended February 28, 2019
	Balance at November 30, 2018		Total gains/losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at February 28, 2019		For instruments still held at February 28, 2019, changes in unrealized gains/(losses) included in:
																						earnings (1)			other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	51,040	$	4,830		$	1,410		$	(2,411	)	$	(66	)	$	—	$	(37	)	$	54,766	$	4,945		$	—
Corporate debt securities	9,484		466			3,568			(3,233		)	(834		)	—		1,479			10,930		498			—
CDOs and CLOs	25,815		(8,153		)	49,201			(32,759		)	—			—		(1,538		)	32,566		(3,814		)	—
RMBS	19,603		462			975			—			(27		)	—		(50		)	20,963		494			—
CMBS	10,886		136			12			—			(41		)	—		1,827			12,820		96			—
Other ABS	53,175		(2,290		)	29,195			(30,060		)	(12,320		)	—		(1,814		)	35,886		(1,763		)	—
Loans and other receivables	46,985		814			40,061			(27,142		)	(1,990		)	—		19,323			78,051		130			—
Investments at fair value	113,831		(786		)	27,767			—			—			—		—			140,812		(786		)	—
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	—	$	(2	)	$	—		$	80		$	—		$	—	$	—		$	78	$	2		$	—
Corporate debt securities	522		(241		)	—			—			—			—		449			730		241			—
CMBS	—		70			—			—			—			—		—			70		(70		)	—
Loans	6,376		(229		)	(1,411		)	504			—			—		(1,820		)	3,420		338			—
Net derivatives (2)	21,614		(5,348		)	(2,804		)	3,084			169			—		12,260			28,975		3,333			—
Long-term debt	200,745		(16,701		)	—			—			(5,665		)	92,016		12,744			283,139		4,045			12,656

(1) Realized and unrealized gains/losses are reported in Principal transactions revenues in our Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes are included in our Consolidated Statement of Comprehensive Income, net of tax.

(2)

Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased—Derivatives.

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the three months ended February 29, 2020 (in thousands):

	Three Months Ended February 29, 2020
			Total gains/losses (realized and unrealized) (1)														Net transfers into/  (out of) Level 3					For instruments still held at February 29, 2020, changes in unrealized gains/(losses) included in:
	Balance at November 30, 2019					Purchases			Sales			Settlements			Issuances					Balance at February 29, 2020		Earnings (1)			Other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	58,301	$	(8,195	)	$	2,792		$	(1,934	)	$	—		$	—	$	52,679		$	103,643	$	(8,206	)	$	—
Corporate debt securities	7,490		1,269			1,478			(503		)	(601		)	—		15,957			25,090		879			—
CDOs and CLOs	20,081		(2,069		)	17,594			(17,833		)	—			—		3,179			20,952		(1,823		)	—
RMBS	17,740		(280		)	—			—			(3		)	—		(487		)	16,970		(250		)	—
CMBS	6,110		(306		)	—			—			(1,401		)	—		(139		)	4,264		571			—
Other ABS	42,563		(4,159		)	81,323			(72,032		)	(1,974		)	—		(3,818		)	41,903		(3,797		)	—
Loans and other receivables	64,240		(3,781		)	12,940			(13,042		)	(7,087		)	—		1,051			54,321		(5,109		)	—
Investments at fair value	75,738		(20,392		)	—			(76		)	—			—		—			55,270		(20,392		)	—
Securities purchased under agreements to resell	25,000		—			—			—			(25,000		)	—		—			—		—			—
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	4,487	$	291		$	(513	)	$	—		$	—		$	—	$	10		$	4,275	$	65		$	—
Corporate debt securities	340		(189		)	(13,832		)	14,079			369			—		—			767		(35		)	—
CMBS	35		—			—			—			—			—		—			35		—			—
Loans	9,463		1			(9,872		)	2,781			—			—		5,486			7,859		(1		)	—
Net derivatives (2)	77,168		(17,528		)	(278		)	5,627			192			—		45,662			110,843		17,460			—
Long-term debt	480,069		(9,016		)	—			—			—			128,475		(56,065		)	543,463		(5,590		)	14,606

(1) Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in our Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes are included in our Consolidated Statements of Comprehensive Income, net of tax.

(2)

Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased—Derivatives.

Quantitative Information about Significant Unobservable Inputs Used in Level 3 Fair Value Measurements

The tables below present information on the valuation techniques, significant unobservable inputs and their ranges for our financial assets and liabilities, subject to threshold levels related to the market value of the positions held, measured at fair value on a recurring basis with a significant Level 3 balance. The range of unobservable inputs could differ significantly across different firms given the range of products across different firms in the financial services sector. The inputs are not representative of the inputs that could have been used in the valuation of any one financial instrument (i.e., the input used for valuing one financial instrument within a particular class of financial instruments may not be appropriate for valuing other financial instruments within that given class). Additionally, the ranges of inputs presented below should not be construed to represent uncertainty regarding the fair values of our financial instruments; rather, the range of inputs is reflective of the differences in the underlying characteristics of the financial instruments in each category.

For certain categories, we have provided a weighted average of the inputs allocated based on the fair values of the financial instruments comprising the category. We do not believe that the range or weighted average of the inputs is indicative of the reasonableness of uncertainty of our Level 3 fair values. The range and weighted average are driven by the individual financial instruments within each category and their relative distribution in the population. The disclosed inputs when compared with the inputs as disclosed in other periods should not be expected to necessarily be indicative of changes in our estimates of unobservable inputs for a particular financial instrument as the population of financial instruments comprising the category will vary from period to period based on purchases and sales of financial instruments during the period as well as transfers into and out of Level 3 each period.

February 29, 2020
Financial Instruments Owned:	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input / Range				Weighted Average
Corporate equity securities	$	78,543
Non-exchange traded securities			Market approach	Price	$1		-	$213	$	105
				Underlying stock price	$3		-	$5	$	4
Corporate debt securities	$	25,090	Market approach	Price	$69		-	$78	$69
			Scenario Analysis	Estimated recovery percentage	22	%	-	85%	41		%
CDOs and CLOs	$	20,952	Discounted cash flows	Constant prepayment rate	20%				—
				Constant default rate	1	%	-	2%	2		%
				Loss severity	25	%	-	70%	28		%
				Discount rate/yield	13	%	-	30%	17		%
RMBS	$	16,970	Discounted cash flows	Cumulative loss rate	2%				—
				Duration (years)	6				—
				Discount rate/yield	3%				—
CMBS	$	4,264	Scenario analysis	Estimated recovery percentage	44%				—
Other ABS	$	41,903	Discounted cash flows	Cumulative loss rate	7	%	-	31%	14		%
				Duration (years)	0.5		-	2.8	1.6
				Discount rate/yield	7	%	-	14%	11		%
			Market approach	Price	$100				—
Loans and other receivables	$	52,815	Market approach	Price	$29		-	$101	$89
			Scenario analysis	Estimated recovery percentage	63	%	-	100%	79		%
Derivatives	$	22,216
Interest rate swaps			Market approach	Basis points upfront	0		-	12	6
Investments at fair value	$	28,927
Private equity securities			Market approach	Price	$8		-	$168	$	132
Financial Instruments Sold, Not Yet Purchased:
Corporate equity securities	$	4,275	Market approach	Transaction level	$1				—
Loans	$	5,074	Market approach	Price	$50				—
			Scenario analysis	Estimated recovery percentage	63%				—
Derivatives	$	134,087
Equity options			Volatility benchmarking	Volatility	21	%	-	60%	42		%
Interest rate swaps			Market approach	Basis points upfront	0		-	18	9
Cross currency swaps				Basis points upfront	2				—
Unfunded commitments				Price	$83				—
Long-term debt
Structured notes	$	543,463	Market approach	Price	$90		-	$102	$	94
				Price	€72		-	€105	€	91

November 30, 2019
Financial Instruments Owned	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input / Range				Weighted Average
Corporate equity securities	$	29,017
Non-exchange-traded securities			Market approach	Price	$1		-	$140	$	55
				Underlying stock price	$3		-	$5	$	4
Corporate debt securities	$	7,490	Scenario Analysis	Estimated recovery percentage	23	%	-	85%	46		%
				Volatility	44%				—
				Credit Spread	750				—
				Underlying stock price	£0.4				—
CDOs and CLOs	$	20,081	Discounted cash flows	Constant prepayment rate	20%				—
				Constant default rate	1	%	-	2%	2		%
				Loss severity	25	%	-	37%	29		%
				Discount rate/yield	12	%	-	21%	15		%
RMBS	$	17,740	Discounted cash flows	Cumulative loss rate	2%				—
				Duration (years)	6.3				—
				Discount rate/yield	3%				—
CMBS	$	6,110	Discounted cash flows	Cumulative loss rate	7.3%				—
				Duration (years)	0.2				—
				Discount rate/yield	85%				—
			Scenario analysis	Estimated recovery percentage	44%				—
Other ABS	$	42,563	Discounted cash flows	Cumulative loss rate	7	%	-	31%	16		%
				Duration (years)	0.5		-	3.0	1.5
				Discount rate/yield	7	%	-	15%	11		%
Loans and other receivables	$	62,734	Market approach	Price	$36		-	$100	$	90
			Scenario analysis	Estimated recovery percentage	87	%	-	104%	99		%
Derivatives	$	13,826
Interest rate swaps			Market approach	Basis points upfront	0		-	16	6
Unfunded commitments				Price	$88				—
Equity options			Volatility benchmarking	Volatility	45%				—
Investments at fair value	$	75,736
Private equity securities			Market approach	Price	$8		-	$250	$	125
Securities purchased under agreements to resell	$	25,000
			Market Approach	Spread to 6 month LIBOR	500				—
				Duration (years)	1.5				—
Financial Instruments Sold, Not Yet Purchased:
Corporate equity securities	$	4,487	Market approach	Transaction level	$1				—
Loans	$	9,463	Market approach	Price	$50		-	$100	$	88
			Scenario analysis	Estimated recovery percentage	1%				—
Derivatives	$	92,057
Equity options			Volatility benchmarking	Volatility	21	%	-	61%	43		%
Interest rate swaps			Market approach	Basis points upfront	0		-	22	13
Cross currency swaps				Basis points upfront	2				—
Unfunded commitments				Price	$88				—
Long-term debt
Structured notes	$	480,069	Market approach	Price	$84		-	$108	$	96
				Price	€74		-	€103	€91

Summary of Gains (Losses) Due to Changes in Instrument Specific Credit Risk and Summary of Contractual Principal Exceeds Fair Value for Loans and Other Receivables

The following is a summary of gains (losses) due to changes in instrument specific credit risk on loans, other receivables and debt instruments and gains (losses) due to other changes in fair value on Long-term debt and Short-term borrowings measured at fair value under the fair value option (in thousands):

	Three Months Ended
	February 29, 2020			February 28, 2019
Financial instruments owned:
Loans and other receivables	$	1,739		$	(7,335	)
Financial instruments sold, not yet purchased:
Loans	$	(610	)	$	—
Loan commitments	(661		)	79
Long-term debt:
Changes in instrument specific credit risk (1)	$	29,432		$	23,483
Other changes in fair value (2)	(37,642		)	(10,643		)
Short-term borrowings:
Changes in instrument specific credit risk (1)	$	57		$	—
Other changes in fair value (2)	12			—

(1) Changes in instrument-specific credit risk related to structured notes are included in our Consolidated Statements of Comprehensive Income, net of tax.

(2) Other changes in fair value are included in Principal transactions revenues in our Consolidated Statements of Earnings.

The following is a summary of the amount by which contractual principal exceeds fair value for loans and other receivables, long-term debt and short-term borrowings measured at fair value under the fair value option (in thousands):

	February 29, 2020		November 30, 2019
Financial instruments owned:
Loans and other receivables (1)	$	1,551,028	$	1,546,516
Loans and other receivables on nonaccrual status and/or 90 days or greater past due (1) (2)	267,678		197,215
Long-term debt and short-term borrowings	72,301		74,408

(1) Interest income is recognized separately from other changes in fair value and is included in Interest revenues in our Consolidated Statements of Earnings.

(2) Amounts include loans and other receivables 90 days or greater past due by which contractual principal exceeds fair value of $29.1 million and $22.2 million at February 29, 2020 and November 30, 2019, respectively.