FAIR VALUE

Fair Value Measurements

GAAP establishes a hierarchal disclosure framework that prioritizes the inputs used in measuring financial instruments at fair value into three levels based on their market observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or for which fair value can be measured based on actively quoted prices generally have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.

Financial assets and liabilities measured and reported at fair value are classified as follows:


•	Level I—Quoted prices in active markets for identical instruments.

•

Level II—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in inactive markets; and model‑derived valuations with directly or indirectly observable significant inputs. Level II inputs include prices in markets with few transactions, non-current prices, prices for which little public information exists or prices that vary substantially over time or among brokered market makers. Other inputs include interest rates, yield curves, volatilities, prepayment risks, loss severities, credit risks and default rates.


•	Level III—Valuations that rely on one or more significant unobservable inputs. These inputs reflect the Company’s assessment of the assumptions that market participants would use to value the instrument based on the best information available.

In some instances, an instrument may fall into more than one level of the fair value hierarchy. In such instances, the instrument’s level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair value measurement. The Company’s assessment of the significance of an input requires judgment and considers factors specific to the instrument. The Company accounts for the transfer of assets into or out of each fair value hierarchy level as of the beginning of the reporting period.

Fair Value of Financial Instruments Held by the Company and Consolidated Funds

The tables below summarize the financial assets and financial liabilities measured at fair value for the Company and Consolidated Funds as of June 30, 2017:



Financial Instruments of the Company	Level I		Level II			Level III			Investments Measured at NAV		Total
Investments, at fair value
Fixed income-collateralized loan obligations	$	—	$	—		$	164,807		$	—	$	164,807
Equity securities	236		998			—			—		1,234
Partnership interests	—		—			33,410			377,829		411,239
Total investments, at fair value	236		998			198,217			377,829		577,280
Derivative assets, at fair value
Foreign exchange contracts	—		384			—			—		384
Total derivative assets, at fair value	—		384			—			—		384
Total assets, at fair value	$	236	$	1,382		$	198,217		$	377,829	$	577,664
Liabilities, at fair value
Derivative liabilities:
Foreign exchange contracts	$	—	$	(3,737	)	$	—		$	—	$	(3,737	)
Total derivative liabilities	—		(3,737		)	—			—		(3,737		)
Contingent consideration	—		—			(1,940		)	—		(1,940		)
Total liabilities, at fair value	$	—	$	(3,737	)	$	(1,940	)	$	—	$	(5,677	)



Financial Instruments of the Consolidated Funds	Level I		Level II			Level III		Total
Investments, at fair value
Fixed income investments:
Bonds	$	—	$	96,698		$	8,833	$	105,531
Loans	—		2,732,616			173,466		2,906,082
Collateralized loan obligations	—		5,856			5,280		11,136
Total fixed income investments	—		2,835,170			187,579		3,022,749
Equity securities	55,039		—			146,274		201,313
Partnership interests	—		—			217,740		217,740
Total investments, at fair value	55,039		2,835,170			551,593		3,441,802
Derivative assets, at fair value
Other	—		—			2,809		2,809
Total derivative assets, at fair value	—		—			2,809		2,809
Total assets, at fair value	$	55,039	$	2,835,170		$	554,402	$	3,444,611
Liabilities, at fair value
Loan obligations of CLOs	$	—	$	(3,093,598	)	$	—	$	(3,093,598	)
Total liabilities, at fair value	$	—	$	(3,093,598	)	$	—	$	(3,093,598	)

The tables below summarize the financial assets and financial liabilities measured at fair value for the Company and Consolidated Funds as of December 31, 2016:



Financial Instruments of the Company	Level I		Level II		Level III			Investments Measured at NAV		Total
Investments, at fair value
Fixed income-collateralized loan obligations	$	—	$	—	$	89,111		$	—	$	89,111
Equity securities	100		—		—			—		100
Partnership interests	—		—		33,410			325,715		359,125
Total investments, at fair value	100		—		122,521			325,715		448,336
Derivative assets, at fair value
Foreign exchange contracts	—		3,171		—			—		3,171
Total derivative assets, at fair value	—		3,171		—			—		3,171
Total assets, at fair value	$	100	$	3,171	$	122,521		$	325,715	$	451,507
Liabilities, at fair value
Contingent considerations	$	—	$	—	$	(22,156	)	$	—	$	(22,156	)
Total liabilities, at fair value	$	—	$	—	$	(22,156	)	$	—	$	(22,156	)



Financial Instruments of the Consolidated Funds	Level I		Level II			Level III			Total
Investments, at fair value
Fixed income investments:
Bonds	$	—	$	104,886		$	37,063		$	141,949
Loans	—		2,606,423			199,217			2,805,640
Collateralized loan obligations	—		—			5,973			5,973
Total fixed income investments	—		2,711,309			242,253			2,953,562
Equity securities	56,662		17,569			130,690			204,921
Partnership interests	—		—			171,696			171,696
Other	—		24			—			24
Total investments, at fair value	56,662		2,728,902			544,639			3,330,203
Derivative assets, at fair value
Foreign exchange contracts	—		529			—			529
Other	—		—			291			291
Total derivative assets, at fair value	—		529			291			820
Total assets, at fair value	$	56,662	$	2,729,431		$	544,930		$	3,331,023
Liabilities, at fair value
Other derivative liabilities	$	—	$	—		$	(2,999	)	$	(2,999	)
Loan obligations of CLOs	—		(3,031,112		)	—			(3,031,112		)
Total liabilities, at fair value	$	—	$	(3,031,112	)	$	(2,999	)	$	(3,034,111	)

The following tables set forth a summary of changes in the fair value of the Level III measurements for the three months ended June 30, 2017:



	Level III Assets								Level III Liabilities
Level III Assets and Liabilities of the Company	Fixed Income			Partnership Interests		Total			Contingent Considerations
Balance, beginning of period	$	108,253		$	33,410	$	141,663		$	1,909
Purchases(1)	60,242			—		60,242			—
Sales(2)	(3,324		)	—		(3,324		)	—
Realized and unrealized appreciation (depreciation), net	(364		)	—		(364		)	31
Balance, end of period	$	164,807		$	33,410	$	198,217		$	1,940
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	(625	)	$	—	$	(625	)	$	31



Level III Assets of Consolidated Funds	Equity Securities		Fixed Income			Partnership Interests			Derivatives, Net			Total
Balance, beginning of period	$	142,358	$	278,829		$	196,690		$	845		$	618,722
Transfer in	444		18,356			—			—			18,800
Transfer out	—		(108,757		)	—			—			(108,757		)
Purchases(1)	—		56,292			50,000			—			106,292
Sales(2)	—		(60,481		)	(30,000		)	—			(90,481		)
Settlements, net	—		—			—			(888		)	(888		)
Amortized discounts/premiums	—		(78		)	—			(100		)	(178		)
Realized and unrealized appreciation, net	3,472		3,418			1,050			2,952			10,892
Balance, end of period	$	146,274	$	187,579		$	217,740		$	2,809		$	554,402
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	3,472	$	(277	)	$	1,050		$	3,145		$	7,390


(1)	Purchases include paid‑in‑kind interest and securities received in connection with restructurings.


(2)	Sales include distributions, principal redemptions and securities disposed of in connection with restructurings.

The following tables set forth a summary of changes in the fair value of the Level III measurements for the three months ended June 30, 2016:



	Level III Assets									Level III Liabilities
Level III Assets and Liabilities of the Company	Fixed Income			Partnership Interests			Total			Contingent Considerations
Balance, beginning of period	$	54,118		$	58,203		$	112,321		$	41,059
Purchases(1)	4			1,667			1,671			—
Sales(2)	(1,517		)	—			(1,517		)	—
Realized and unrealized appreciation (depreciation), net	1,550			(15,124		)	(13,574		)	(24		)
Balance, end of period	$	54,155		$	44,746		$	98,901		$	41,035
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	718		$	(15,123	)	$	(14,405	)	$	(24	)



Level III Assets of Consolidated Funds	Equity Securities			Fixed Income			Partnership Interests		Derivatives, Net			Total
Balance, beginning of period	$	141,805		$	212,209		$	103,621	$	(4,127	)	$	453,508
Transfer in	—			83,608			—		—			83,608
Transfer out	(15,384		)	(31,290		)	—		—			(46,674		)
Purchases(1)	9,668			32,622			5,800		—			48,090
Sales(2)	—			(48,276		)	—		—			(48,276		)
Settlements, net	—			—			—		88			88
Amortized discounts/premiums	—			255			—		(206		)	49
Realized and unrealized appreciation (depreciation), net	7,245			(11,756		)	6,019		2,169			3,677
Balance, end of period	$	143,334		$	237,372		$	115,440	$	(2,076	)	$	494,070
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	7,245		$	(2,340	)	$	6,020	$	1,967		$	12,892


(1)	Purchases include paid‑in‑kind interest and securities received in connection with restructurings.


(2)	Sales include distributions, principal redemptions and securities disposed of in connection with restructurings.

The following tables set forth a summary of changes in the fair value of the Level III measurements for the six months ended June 30, 2017:



	Level III Assets									Level III Liabilities
Level III Assets and Liabilities of the Company	Fixed Income			Partnership Interests			Total			Contingent Considerations
Balance, beginning of period	$	89,111		$	33,410		$	122,521		$	22,156
Purchases(1)	80,684			169			80,853			—
Sales(2)	(5,241		)	—			(5,241		)	—
Realized and unrealized appreciation (depreciation), net	253			(169		)	84			(20,216		)
Balance, end of period	$	164,807		$	33,410		$	198,217		$	1,940
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	(155	)	$	—		$	(155	)	$	61



Level III Assets of Consolidated Funds	Equity Securities			Fixed Income			Partnership Interests			Derivatives, Net			Total
Balance, beginning of period	$	130,690		$	242,253		$	171,696		$	(2,708	)	$	541,931
Transfer in	—			34,182			—			—			34,182
Transfer out	(6,160		)	(108,806		)	—			—			(114,966		)
Purchases(1)	6,692			93,111			73,000			—			172,803
Sales(2)	—			(76,714		)	(30,000		)	—			(106,714		)
Settlements, net	—			—			—			1,966			1,966
Amortized discounts/premiums	—			46			—			216			262
Realized and unrealized appreciation, net	15,052			3,507			3,044			3,335			24,938
Balance, end of period	$	146,274		$	187,579		$	217,740		$	2,809		$	554,402
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	15,749		$	(785	)	$	3,044		$	3,914		$	21,922


(1)	Purchases include paid‑in‑kind interest and securities received in connection with restructurings.


(2)	Sales include distributions, principal redemptions and securities disposed of in connection with restructurings.

The following tables set forth a summary of changes in the fair value of the Level III measurements for the six months ended June 30, 2016:



	Level III Assets									Level III Liabilities
Level III Assets and Liabilities of the Company	Fixed Income			Partnership Interests			Total			Contingent Considerations
Balance, beginning of period	$	55,752		$	51,703		$	107,455		$	40,831
Purchases(1)	7			8,167			8,174			—
Sales(2)	(2,293		)	—			(2,293		)	—
Realized and unrealized appreciation (depreciation), net	689			(15,124		)	(14,435		)	204
Balance, end of period	$	54,155		$	44,746		$	98,901		$	41,035
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	(455	)	$	(15,123	)	$	(15,578	)	$	204



Level III Assets of Consolidated Funds	Equity Securities			Fixed Income			Partnership Interests			Derivatives, Net			Total
Balance, beginning of period	$	129,809		$	249,490		$	86,902		$	(10,307	)	$	455,894
Transfer in	—			72,636			—			—			72,636
Transfer out	(344		)	(68,427		)	—			—			(68,771		)
Purchases(1)	9,668			45,951			13,100			—			68,719
Sales(2)	—			(46,865		)	(300		)	—			(47,165		)
Settlements, net	—			—			—			589			589
Amortized discounts/premiums	—			696			—			84			780
Realized and unrealized appreciation (depreciation), net	4,201			(16,109		)	15,738			7,558			11,388
Balance, end of period	$	143,334		$	237,372		$	115,440		$	(2,076	)	$	494,070
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	4,202		$	(7,566	)	$	15,654		$	6,878		$	19,168


(1)	Purchases include paid‑in‑kind interest and securities received in connection with restructurings.


(2)	Sales include distributions, principal redemptions and securities disposed of in connection with restructurings.

The Company recognizes transfers between the levels as of the beginning of the period. Transfers out of Level III were generally attributable to certain investments that experienced a more significant level of market activity during the period and thus were valued using observable inputs either from independent pricing services or multiple brokers. Transfers into Level III were generally attributable to certain investments that experienced a less significant level of market activity during the period and thus were only able to obtain one or fewer quotes from a broker or independent pricing service. For the six months ended June 30, 2017, two of the Company's investments totaling $7.5 million were transferred from a Level II to a Level I fair value measurement. The investments transferred are equity securities that were previously thinly traded that now have significant levels of market activity to support quoted market prices as of June 30, 2017. For the six months ended June 30, 2016, there were no transfers between Level I and Level II fair value measurements.

The following table summarizes the quantitative inputs and assumptions used for the Company’s Level III measurements as of June 30, 2017:



	Fair Value		Valuation Technique(s)	Significant Unobservable Input(s)	Range
Assets
Partnership interests	$	33,410	Other	N/A	N/A
Collateralized loan obligations	164,807		Broker quotes and/or 3rd party pricing services	N/A	N/A
Total	$	198,217
Liabilities
Contingent consideration liability	$	1,940	Discounted cash flow	Discount rate	6.4%
Total	$	1,940

The following table summarizes the quantitative inputs and assumptions used for the Company’s Level III measurements as of December 31, 2016:



	Fair Value		Valuation Technique(s)	Significant Unobservable Input(s)	Range
Assets
Partnership interests	$	33,410	Other	N/A	N/A
Collateralized loan obligations	89,111		Broker quotes and/or 3rd party pricing services	N/A	N/A
Total	$	122,521
Liabilities
Contingent consideration liabilities
	$	20,278	Other	N/A	N/A
	1,878		Discounted cash flow	Discount rate	6.5%
Total	$	22,156

The following table summarizes the quantitative inputs and assumptions used for the Consolidated Funds’ Level III measurements as of June 30, 2017:



	Fair Value		Valuation Technique(s)	Significant Unobservable Input(s)	Range	Weighted Average
Assets
Equity securities
	$	46,707	Enterprise value market multiple analysis	EBITDA multiple(2)	2.3x - 7.9x	2.5x
	61,215		Market approach (comparable companies)	Net income multiple Illiquidity discount	30.0x - 45.0x 25.0%	36.5x 25.0%
	271		Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
	217,740		Discounted cash flow	Discount rate	17.0%	17.0%
	38,081		Recent transaction price(1)	N/A	N/A	N/A
Fixed income securities
	134,462		Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
	52,909		Income approach	Yield	6.0% - 14.3%	9.4%
	208		Market approach (comparable companies)	EBITDA multiple(2)	5.6x	5.6x
Derivative instruments of Consolidated Funds	2,809		Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
Total assets	$	554,402


(1)	Recent transaction price consists of securities recently purchased or restructured. The Company determined that there was no change to the valuation based on the underlying assumptions used at the closing of such transactions.


(2)	“EBITDA” in the table above is a non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.

The following table summarizes the quantitative inputs and assumptions used for the Consolidated Funds’ Level III measurements as of December 31, 2016:



	Fair Value			Valuation Technique(s)	Significant Unobservable Input(s)	Range	Weighted Average
Assets
Equity securities
	$	43,011		Enterprise value market multiple analysis	EBITDA multiple(2)	2.0x - 11.2x	2.3x
	32,598			Market approach (comparable companies)	Net income multiple Illiquidity discount	30.0x - 40.0x 25.0%	35.0x 25.0%
	421			Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
	171,696			Discounted cash flow	Discount rate	20%	20%
	54,660			Recent transaction price(1)	N/A	N/A	N/A
Fixed income securities
	170,231			Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
	6,693			Enterprise value market multiple analysis	EBITDA multiple(2)	7.1x	7.1x
	5,473			Income approach	Collection rates	1.2x	1.2x
	28,595			Income approach	Yield	6.0% - 13.6%	10.9%
	24,052			Discounted cash flow	Discount rate	7.8% - 15.3%	11.1%
	1,776			Market approach (comparable companies)	EBITDA multiple(2)	6.5x	6.5x
	4,887			Recent transaction price(1)	N/A	N/A	N/A
	546			Market approach	EBITDA multiple(2)	6.1x	6.1x
Derivative instruments of Consolidated Funds	291			Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
Total assets	$	544,930
Liabilities
Derivatives instruments of Consolidated Funds	$	(2,999	)	Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
Total liabilities	$	(2,999	)


(1)	Recent transaction price consists of securities purchased or restructured. The Company determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions.


(2)	“EBITDA” in the table above is a non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.

The Company's investments valued using net asset value (“NAV”) per share have terms and conditions that do not allow for redemption without certain events or approvals that are outside the Company's control. A summary of fair value by segment and the remaining unfunded commitment are presented below:



	As of June 30, 2017				As of December 31, 2016
Segment	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Credit Group	$	62,812	$	71,352	$	53,131	$	30,896
Private Equity Group	217,531		329,962		181,096		96,687
Real Estate Group	79,028		55,355		71,669		35,708
Non-core investments(1)	18,458		32,435		19,819		34,500
Totals	$	377,829	$	489,104	$	325,715	$	197,791

(1) Non-core investments are held at the Company's Operations Management Group ("OMG").