DERIVATIVE FINANCIAL INSTRUMENTS

In the normal course of business, the Company and the Consolidated Funds are exposed to certain risks relating to their ongoing operations and use various types of derivative instruments primarily to mitigate against credit and foreign exchange risk. The derivative instruments used by the Company and Consolidated Funds include warrants, currency options, interest rate swaps, credit default swaps and forward contracts. The derivative instruments are not designated as hedging instruments under the accounting standards for derivatives and hedging. The Company recognizes all of its derivative instruments at fair value as either assets or liabilities in the Consolidated Statements of Financial Condition within other assets or accounts payable, accrued expenses and other liabilities, respectively.

By using derivatives, the Company and the Consolidated Funds are exposed to counterparty credit risk if counterparties to the derivative contracts do not perform as expected. If a counterparty fails to perform, the Company's counterparty credit risk is equal to the amount reported as a derivative asset in the Consolidated Statements of Financial Condition. The Company minimizes counterparty credit risk through credit approvals, limits, monitoring procedures, executing master netting arrangements and obtaining collateral, where appropriate.

To the extent the master netting arrangements and other criteria meet the applicable requirements, which includes determining the legal enforceability of the arrangements, the Company may choose to offset the derivative assets and liabilities in the same currency by specific derivative type, or in the event of default by the counterparty, offset derivative assets and liabilities with the same counterparty. The Company generally presents derivative and other financial instruments on a gross basis within the Consolidated Statements of Financial Condition, with certain instruments subject to enforceable master netting arrangements that could allow for the derivative and other financial instruments to be offset. The Consolidated Funds present derivative and other financial instruments on a net basis. This election is determined at management's discretion on a fund by fund basis. The Company has retained each Consolidated Fund's presentation upon consolidation.

Qualitative Disclosures of Derivative Financial Instruments

Derivative instruments are marked-to-market daily based upon quotations from pricing services or by the Company and the change in value, if any, is recorded as an unrealized gain (loss) within net realized and unrealized gain (loss) on investments in the Consolidated Statements of Operations. Upon settlement of the instrument, the Company records the realized gain (loss) within net realized and unrealized gain (loss) on investments in the Consolidated Statements of Operations.

Significant derivative instruments utilized by the Company and the Consolidated Funds during the reporting periods presented include the following:

Forward Foreign Currency Contracts: The Company and the Consolidated Funds enter into foreign currency forward exchange contracts to hedge against foreign currency exchange rate risk on certain non-U.S. dollar denominated cash flows. When entering into a forward currency contract, the Company and the Consolidated Funds agree to receive and/or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed-upon future date. Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Consolidated Statements of Financial Condition. The Company and the Consolidated Funds bear the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. In addition, the potential inability of the counterparties to meet the terms of their contracts poses a risk to the Company and the Consolidated Funds.

Interest Rate Swaps: The Company and the Consolidated Funds enter into interest rate swap contracts to mitigate their interest rate risk exposure to higher floating interest rates. Interest rate swaps represent an agreement between two counterparties to exchange cash flows based on the difference in two interest rates, applied to the notional principal amount for a specified period. The payment flows are generally netted, with the difference being paid by one party to the other. The interest rate swap contracts effectively mitigate the Company and the Consolidated Funds’ exposure to interest rate risk by converting a portion of the Company and the Consolidated Funds’ floating rate debt to a fixed rate basis.

Credit Default Swaps: In prior years, the Consolidated Funds entered into credit default swap contracts for investment purposes and to manage credit risk, receiving in return a periodic stream of payments over the term of the contract. The Consolidated Funds also purchased credit default swap contracts to mitigate the risk of default by issuers of debt securities held. As a purchaser of a credit default swap contract, the Consolidated Fund received the notional or other agreed upon value from the counterparty, and in return, the Consolidated Fund made periodic payments to the counterparty over the term of the contract. The Consolidated Funds no longer enter into or purchase credit default swap contracts.

Quantitative Disclosures of Derivative Financial Instruments

The following tables identify the fair value and notional amounts of derivative contracts by major product type on a gross basis for the Company and the Consolidated Funds as of December 31, 2016 and 2015. These amounts may be offset (to the extent that there is a legal right to offset) and presented on a net basis within other assets or accounts payable, accrued expenses and other liabilities in the Consolidated Statements of Financial Condition:



	As of December 31, 2016								As of December 31, 2015
	Assets				Liabilities				Assets				Liabilities
The Company	Notional(1)		Fair Value		Notional(1)		Fair Value		Notional(1)		Fair Value		Notional(1)			Fair Value
Interest rate contracts	$	—	$	—	$	—	$	—	$	—	$	—	$	(250,000	)	$	(214	)
Foreign exchange contracts	62,830		3,171		—		—		94,634		1,339		(53,245		)	(176		)
Total derivatives, at fair value	$	62,830	$	3,171	$	—	$	—	$	94,634	$	1,339	$	(303,245	)	$	(390	)



	As of December 31, 2016										As of December 31, 2015
	Assets				Liabilities						Assets				Liabilities
Consolidated Funds	Notional(1)		Fair Value		Notional(1)			Fair Value			Notional(1)		Fair Value		Notional(1)			Fair Value
Foreign exchange contracts	$	25,304	$	529	$	—		$	—		$	—	$	—	$	(25,572	)	$	(369	)
Other financial instruments	3,575		291		(204		)	(2,999		)	—		—		(4,063		)	(10,307		)
Total derivatives, at fair value	28,879		820		(204		)	(2,999		)	—		—		(29,635		)	(10,676		)
Other—equity(2)	253		24		—			—			522		159		—			—
Total	$	29,132	$	844	$	(204	)	$	(2,999	)	$	522	$	159	$	(29,635	)	$	(10,676	)


(1)	Represents the total contractual amount of derivative assets and liabilities outstanding.


(2)	Includes the fair value of warrants which are presented as equity securities within investments of the Consolidated Funds in the Consolidated Statements of Financial Condition.

The following tables present a summary of net realized gains (losses) and unrealized appreciation (depreciation) on the Company's derivative instruments, which are included within net realized and unrealized gain (loss) on investments in the Consolidated Statements of Operations, for the years ended December 31, 2016, 2015 and 2014:



	For the Year Ended December 31,
The Company	2016			2015			2014
Net realized gain (loss) on derivatives
Interest rate contracts—Swaps	$	(337	)	$	(1,318	)	$	(1,368	)
Foreign exchange contracts:
Purchased options	—			2,022			—
Foreign currency forward contracts	1,783			8,379			3,330
Net realized gain on derivatives	$	1,446		$	9,083		$	1,962
Net change in unrealized appreciation (depreciation) on derivatives
Interest rate contracts—Swaps	$	214		$	633		$	407
Foreign exchange contracts:
Purchased options	—			(1,057		)	1,076
Foreign currency forward contracts	2,008			(2,556		)	5,034
Total net change in unrealized appreciation (depreciation) on derivatives	$	2,222		$	(2,980	)	$	6,517



	For the Year Ended December 31,
Consolidated Funds	2016			2015			2014
Net realized gain (loss) on derivatives of Consolidated Funds
Interest rate contracts:
Swaps	$	—		$	—		$	(513	)
Interest rate caps/floor	—			—			276
Equity contracts:
Warrants(1)	—			—			3,583
Foreign exchange contracts:
Purchased options	—			—			341
Foreign currency forward contracts	(1,008		)	3,752			(15,763		)
Written options	—			—			(116		)
Credit contracts—Swaps	—			—			(33,044		)
Other—Swaps	(1,322		)	(4,332		)	(2,463		)
Net realized gain (loss) on derivatives of Consolidated Funds	$	(2,330	)	$	(580	)	$	(47,699	)
Net change in unrealized appreciation (depreciation) on derivatives of Consolidated Funds
Interest rate contracts:
Swaps	$	—		$	—		$	1,471
Interest rate caps/floor	—			—			269
Equity contracts:
Warrants(1)	26			(71		)	(13,190		)
Foreign currency forward contracts	—			—			(1,906		)
Foreign exchange contracts:
Purchased options	—			—			1,668
Foreign currency forward contracts	900			(1,867		)	11,775
Written options	—			—			(402		)
Swaps	—			—			842
Credit contracts—Swaps	—			—			10,032
Other:
Purchased options	—			—			16
Swaps	7,685			(2,934		)	(1,142		)
Total net change in unrealized appreciation (depreciation) on derivatives of Consolidated Funds	$	8,611		$	(4,872	)	$	9,433


(1)	Realized and unrealized gains (losses) on warrants are also reflected in the changes presented on the investment footnote table.

The table below sets forth the rights of offset and related arrangements associated with the Company's derivative and other financial instruments as of December 31, 2016 and 2015. The column titled "Gross Amounts Not Offset in the Statement of Financial Position" in the table below relates to derivative instruments that are eligible to be offset in accordance with applicable accounting guidance but for which management has elected not to offset in the Consolidated Statements of Financial Condition.



							Gross Amount Not Offset in the Statement of Financial Position
The Company as of December 31, 2016	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in Assets (Liabilities)		Net Amounts of Assets (Liabilities) Presented		Financial Instruments		Net Amount
Assets:
Derivatives	$	3,171	$	—	$	3,171	$	—	$	3,171
Liabilities:
Derivatives	—		—		—		—		—
Net derivatives assets	$	3,171	$	—	$	3,171	$	—	$	3,171



									Gross Amount Not Offset in the Statement of Financial Position
The Company as of December 31, 2015	Gross Amounts of Recognized Assets (Liabilities)			Gross Amounts Offset in Assets (Liabilities)		Net Amounts of Assets (Liabilities) Presented			Financial Instruments			Net Amount
Assets:
Derivatives	$	1,339		$	—	$	1,339		$	(176	)	$	1,163
Liabilities:
Derivatives	(390		)	—		(390		)	176			(214		)
Net derivatives assets	$	949		$	—	$	949		$	—		$	949

The table below sets forth the rights of offset and related arrangements associated with the Consolidated Funds' derivative and other financial instruments as of December 31, 2016 and 2015. The column titled "Gross Amounts Not Offset in the Statement of Financial Position" in the table below relates to derivative instruments that are eligible to be offset in accordance with applicable accounting guidance but for which management has elected not to offset in the Consolidated Statements of Financial Condition.



										Gross Amounts Not Offset in the Statement of Financial Position
Consolidated Funds as of December 31, 2016	Gross Amounts of Recognized Assets (Liabilities)			Gross Amounts Offset in Assets (Liabilities)			Net Amounts of Assets (Liabilities) Presented			Financial Instruments		Net Amount
Assets:
Derivatives	$	2,243		$	(1,423	)	$	820		$	—	$	820
Liabilities:
Derivatives	(4,422		)	1,423			(2,999		)	—		(2,999		)
Net derivatives liabilities	$	(2,179	)	$	—		$	(2,179	)	$	—	$	(2,179	)



										Gross Amounts Not Offset in the Statement of Financial Position
Consolidated Funds as of December 31, 2015	Gross Amounts of Recognized Assets (Liabilities)			Gross Amounts Offset in Assets (Liabilities)			Net Amounts of Assets (Liabilities) Presented			Financial Instruments		Net Amount
Assets:
Derivatives	$	85		$	(85	)	$	—		$	—	$	—
Liabilities:
Derivatives	(10,761		)	85			(10,676		)	—		(10,676		)
Net derivatives liabilities	$	(10,676	)	$	—		$	(10,676	)	$	—	$	(10,676	)