Fair Value

12 Months Ended

Dec. 31, 2011

Fair Value [Abstract]

Fair Value

8. Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The three broad levels of fair value hierarchy are as follows:

• Level 1-Quoted prices in active markets are available for identical assets or liabilities as of the reported date.

• Level 2-Quoted prices in markets that are not active or other pricing inputs that are either directly or indirectly observable as of the reported date.

• Level 3-Prices or valuation techniques that are both significant to the fair value measurement and unobservable as of the reported date. These financial instruments do not have two-way markets and are measured using management's best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Assets Measured at Fair Value on a Recurring Basis

The following table summarizes the valuation of our financial instruments by pricing observability levels as of December 31, 2011 and 2010:

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(in thousands)
Money markets	$	340,548	$	-	$	-	$	340,548
U.S. Treasury bills		-		1,277,944		-		1,277,944
U.K. Treasury bills		-		119		-		119
Equity securities
Growth		107,802		189		-		107,991
Value		60,096		9		-		60,105
Blend		118,208		-		-		118,208
Other(1)		45,583		-		-		45,583
Fixed Income securities
Taxable(2)		110,062		14,488		-		124,550
Tax-exempt(3)		15,366		743		-		16,109
Other		17		-		-		17
Derivatives		127		3,494		-		3,621
Long exchange-traded options		14,322		-		-		14,322
Private equity		11,592		-		64,466		76,058
Total assets measured at fair value	$	823,723	$	1,296,986	$	64,466	$	2,185,175
Securities sold not yet purchased
Short equities-corporate	$	34,469	$	-	$	-	$	34,469
Short exchange-traded options		3,567		-		-		3,567
Other		1,271		-		-		1,271
Derivatives		2,054		5,205		-		7,259
Total liabilities measured at fair value	$	41,361	$	5,205	$	-	$	46,566

	December 31, 2010
	Level 1		Level 2		Level 3		Total
	(in thousands)
Money markets	$	323,104	$	-	$	-	$	323,104
U.S. Treasury bills		-		1,137,578		-		1,137,578
U.K. Treasury bills		-		7,911		-		7,911
Equity securities
Growth		97,161		188		69		97,418
Value		73,579		-		-		73,579
Blend		93,590		-		-		93,590
Other(1)		28,868		5,051		-		33,919
Fixed Income securities
Taxable(2)		130,122		21,491		-		151,613
Tax-exempt(3)		9,310		750		-		10,060
Other		17		-		-		17
Derivatives		16		1,628		-		1,644
Long exchange-traded options		9,027		-		-		9,027
Private equity		24,432		23,811		59,345		107,588
Total assets measured at fair value	$	789,226	$	1,198,408	$	59,414	$	2,047,048
Securities sold not yet purchased
Short equities-corporate	$	42,914	$	-	$	-	$	42,914
Short exchange-traded options		7,622		-		-		7,622
Other		3		-		-		3
Derivatives		318		3,235		-		3,553
Total liabilities measured at fair value	$	50,857	$	3,235	$	-	$	54,092

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(1) Primarily long positions in corporate equities traded through our options desk.

(2) Primarily corporate and government securities.

(3) Primarily municipal bonds.

Following is a description of the fair value methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

• Money markets: We invest excess cash in various money market funds that are valued based on quoted prices in active markets; these are included in Level 1 of the valuation hierarchy.

• Treasury bills: We hold United States Treasury Bills, which are segregated in a special reserve bank custody account as required by Rule 15c3-3 of the Exchange Act. We also hold United Kingdom Treasury Bills. These securities are valued based on quoted yields in secondary markets and are included in Level 2 of the valuation hierarchy.

• Equity and fixed income securities: Our equity and fixed income securities consist principally of company-sponsored mutual funds with net asset values and various separately-managed portfolios consisting primarily of equity and fixed income securities with quoted prices in active markets, which are included in Level 1 of the valuation hierarchy. In addition, some securities are valued based on observable inputs from recognized pricing vendors, which are included in Level 2 of the valuation hierarchy. Also, as of December 31, 2010, an insignificant amount of securities are included in Level 3 of the valuation hierarchy.

• Derivatives: We hold exchange-traded futures with counterparties that are included in Level 1 of the valuation hierarchy. In addition, we also hold currency forward contracts, interest rate swaps, credit default swaps and total return swaps with counterparties that are included in Level 2 of the valuation hierarchy.

• Options: We hold long exchange-traded options that are included in Level 1 of the valuation hierarchy.

• Private equity: The valuation of non-public private equity investments owned by our consolidated venture capital fund requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such investments. Private equity investments are valued initially at cost. The carrying values of private equity investments are adjusted either up or down from cost to reflect expected exit values as evidenced by financing and sale transactions with third parties, or when determination of a valuation adjustment is confirmed through ongoing review in accordance with our valuation policies and procedures. A variety of factors are reviewed and monitored to assess positive and negative changes in valuation including, but not limited to, current operating performance and future expectations of investee companies, industry valuations of comparable public companies, changes in market outlooks and the third party financing environment over time. In determining valuation adjustments resulting from the investment review process, particular emphasis is placed on current company performance and market conditions. Non-public equity investments are included in Level 3 of the valuation hierarchy because they trade infrequently and, therefore, their fair value is unobservable. Publicly-traded equity investments owned by our consolidated venture capital fund are included in Level 1 of the valuation hierarchy. If they contain trading restrictions, publicly-traded equity investments are included in Level 2 of the valuation hierarchy. One of our private securities went public in the first quarter of 2011 and, due to a trading restriction period, $3.6 million was transferred from a Level 3 classification to a Level 2 classification. During the second quarter of 2011, the trading restriction period for one of our public securities lapsed, and, as a result, $20.6 million was transferred from a Level 2 classification to a Level 1 classification. During the third quarter of 2011, the trading restriction period for one of our public securities lapsed, and, as a result, $3.7 million was transferred from a Level 2 classification to a Level 1 classification.

• Securities sold not yet purchased: Securities sold not yet purchased, primarily reflecting short positions in equities and exchange-traded options, are included in Level 1 of the valuation hierarchy.

Effective January 1, 2011, we adopted the second part of ASU 2010-06, Improving Disclosures about Fair Value Measurements, which requires that purchases, sales, issuances and settlements be presented separately within the Level 3 reconciliation.The following table summarizes the change in carrying value associated with Level 3 financial instruments carried at fair value:

	December 31, 2011			December 31, 2010
	(in thousands)
Balance as of beginning of period	$	59,414		$	98,559
Transfers in (out), net		(3,588	)		(23,974	)
Purchases		10,002			9,423
Sales		(214	)		(37,101	)
Realized gains (losses), net		(3,106	)		16,802
Unrealized gains (losses), net		1,958			(4,295	)
Balance as of end of period	$	64,466		$	59,414

Transfers into and out of all levels of the fair value hierarchy are reflected at end-of-period fair values. Realized and unrealized gains and losses on Level 3 financial instruments are recorded in investment gains and losses in the consolidated statements of income. A majority of the Level 3 investments are private equity investments owned by our consolidated venture capital fund, of which we own 10% and non-controlling interests own 90%.

Assets Measured at Fair Value on a Nonrecurring Basis

There were no impairments recognized for goodwill, intangible assets or other long-lived assets as of December 31, 2011.