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 September 30, 2017:



Financial Instruments of the Company	Level I		Level II			Level III		Investments Measured at NAV		Total
Assets, at fair value
Investments:
Fixed income-collateralized loan obligations	$	—	$	—		$	162,261	$	—	$	162,261
Equity securities	300		1,004			—		—		1,304
Partnership interests	—		—			36,439		381,610		418,049
Total investments, at fair value	300		1,004			198,700		381,610		581,614
Derivatives—foreign exchange contracts	—		1,310			—		—		1,310
Total assets, at fair value	$	300	$	2,314		$	198,700	$	381,610	$	582,924
Liabilities, at fair value
Derivatives—foreign exchange contracts	$	—	$	(4,194	)	$	—	$	—	$	(4,194	)
Total liabilities, at fair value	$	—	$	(4,194	)	$	—	$	—	$	(4,194	)



Financial Instruments of the Consolidated Funds	Level I		Level II			Level III			Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds	$	—	$	91,683		$	7,373		$	99,056
Loans	—		4,037,594			312,203			4,349,797
Collateralized loan obligations	—		20,000			—			20,000
Total fixed income investments	—		4,149,277			319,576			4,468,853
Equity securities	65,150		158			156,858			222,166
Partnership interests	—		—			224,010			224,010
Total investments, at fair value	65,150		4,149,435			700,444			4,915,029
Derivatives—other	—		—			1,328			1,328
Total assets, at fair value	$	65,150	$	4,149,435		$	701,772		$	4,916,357
Liabilities, at fair value
Derivatives—other	$	—	$	—		$	(201	)	$	(201	)
Loan obligations of CLOs	—		(4,476,643		)	—			(4,476,643		)
Total liabilities, at fair value	$	—	$	(4,476,643	)	$	(201	)	$	(4,476,844	)

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
Assets, at fair value
Investments:
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
Derivatives—foreign exchange contracts	—		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
Assets, at fair value
Investments:
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
Derivatives:
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
Derivatives—other	$	—	$	—		$	(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 September 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	$	164,807		$	33,410	$	198,217		$	1,940
Purchases(1)	29,911			—		29,911			—
Sales/settlements(2)	(33,062		)	—		(33,062		)	(1,000		)
Expired contingent considerations	—			—		—			(1,000		)
Realized and unrealized appreciation, net	605			3,029		3,634			60
Balance, end of period	$	162,261		$	36,439	$	198,700		$	—
Increase in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	442		$	3,029	$	3,471		$	—



Level III Assets of Consolidated Funds	Equity Securities			Fixed Income			Partnership Interests			Derivatives, Net			Total
Balance, beginning of period	$	146,274		$	187,579		$	217,740		$	2,809		$	554,402
Transfer in	—			86,420			—			—			86,420
Transfer out	(271		)	(60,550		)	—			(4		)	(60,825		)
Purchases(1)	—			139,903			15,000			—			154,903
Sales(2)	(3,701		)	(49,783		)	(15,000		)	—			(68,484		)
Additions(3)	—			14,479			—			1,393			15,872
Settlements, net	—			—			—			(3,127		)	(3,127		)
Amortized discounts/premiums	—			63			—			101			164
Realized and unrealized appreciation, net	14,556			1,465			6,270			(45		)	22,246
Balance, end of period	$	156,858		$	319,576		$	224,010		$	1,127		$	701,571
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	12,830		$	920		$	6,270		$	(2,021	)	$	17,999


(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.


(3)	Additions relate a CLO that was refinanced and restructured that is now consolidated.

The following tables set forth a summary of changes in the fair value of the Level III measurements for the three months ended September 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	$	54,155		$	44,746		$	98,901		$	41,035
Purchases(1)	4			833			837			—
Sales/settlements(2)	(943		)	—			(943		)	(1,000		)
Realized and unrealized appreciation (depreciation), net	2,721			(12,169		)	(9,448		)	(17,690		)
Balance, end of period	$	55,937		$	33,410		$	89,347		$	22,345
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	2,479		$	(6,237	)	$	(3,758	)	$	(17,690	)



Level III Assets of Consolidated Funds	Equity Securities			Fixed Income			Partnership Interests			Derivatives, Net			Total
Balance, beginning of period	$	143,334		$	237,372		$	115,440		$	(2,076	)	$	494,070
Transfer in	18,135			54,202			—			—			72,337
Transfer out	—			(70,910		)	—			—			(70,910		)
Purchases(1)	6,171			94,527			21,433			—			122,131
Sales(2)	(290		)	(45,002		)	(2,933		)	—			(48,225		)
Settlements, net	—			—			—			(543		)	(543		)
Amortized discounts/premiums	—			374			—			214			588
Realized and unrealized appreciation (depreciation), net	(2,374		)	2,077			5,260			2,275			7,238
Balance, end of period	$	164,976		$	272,640		$	139,200		$	(130	)	$	576,686
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	(59	)	$	(2,977	)	$	5,261		$	2,143		$	4,368


(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 nine months ended September 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)	110,595			169		110,764			—
Sales/settlements(2)	(38,303		)	—		(38,303		)	(1,000		)
Expired contingent considerations	—			—		—			(1,000		)
Realized and unrealized appreciation (depreciation), net	858			2,860		3,718			(20,156		)
Balance, end of period	$	162,261		$	36,439	$	198,700		$	—
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	29		$	3,029	$	3,058		$	—



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	—			48,646			—			—			48,646
Transfer out	(6,581		)	(100,228		)	—			(4		)	(106,813		)
Purchases(1)	6,692			224,600			88,000			—			319,292
Sales(2)	(3,701		)	(114,286		)	(45,000		)	—			(162,987		)
Additions(3)	—			14,479			—			1,393			15,872
Settlements, net	—			—			—			(976		)	(976		)
Amortized discounts/premiums	—			132			—			317			449
Realized and unrealized appreciation, net	29,758			3,980			9,314			3,105			46,157
Balance, end of period	$	156,858		$	319,576		$	224,010		$	1,127		$	701,571
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	19,175		$	(429	)	$	9,314		$	(787	)	$	27,273


(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.


(3)	Additions relate to a CLO that was refinanced and restructured that is now consolidated.

The following tables set forth a summary of changes in the fair value of the Level III measurements for the nine months ended September 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)	11			9,000			9,011			—
Sales/settlements(2)	(3,236		)	—			(3,236		)	(1,000		)
Realized and unrealized appreciation (depreciation), net	3,410			(27,293		)	(23,883		)	(17,486		)
Balance, end of period	$	55,937		$	33,410		$	89,347		$	22,345
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	2,043		$	(7,293	)	$	(5,250	)	$	(17,486	)



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	15,760			64,796			—			—			80,556
Transfer out	(344		)	(75,192		)	—			—			(75,536		)
Purchases(1)	15,839			132,958			34,533			—			183,330
Sales(2)	(290		)	(85,430		)	(3,233		)	—			(88,953		)
Settlements, net	—			—			—			45			45
Amortized discounts/premiums	—			1,103			—			298			1,401
Realized and unrealized appreciation (depreciation), net	4,202			(15,085		)	20,998			9,834			19,949
Balance, end of period	$	164,976		$	272,640		$	139,200		$	(130	)	$	576,686
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	4,385		$	(10,760	)	$	20,998		$	8,617		$	23,240


(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. Two of the Company's investments were transferred from a Level II to a Level I fair value measurement as of June 30, 2017 at their fair values totaling $7.5 million as of the transfer date. The investments transferred are equity securities that were previously thinly traded that began to have significant levels of market activity to support quoted market prices during the second quarter of 2017. For the nine months ended September 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 September 30, 2017:



	Fair Value		Valuation Technique(s)	Significant Unobservable Input(s)	Range
Assets
Partnership interests	$	36,439	Other	N/A	N/A
Collateralized loan obligations	162,261		Broker quotes and/or 3rd party pricing services	N/A	N/A
Total	$	198,700

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 September 30, 2017:



	Fair Value			Valuation Technique(s)	Significant Unobservable Input(s)	Range	Weighted Average
Assets
Equity securities
	$	57,562		Enterprise value market multiple analysis	EBITDA multiple(2)	2.8x	2.8x
	61,215			Market approach (comparable companies)	Net income multiple Illiquidity discount	30.0x - 45.0x 25.0%	34.7x 25.0%
	224,010			Discounted cash flow	Discount rate	18.5%	18.5%
	38,081			Recent transaction price(1)	N/A	N/A	N/A
Fixed income securities
	238,764			Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
	80,590			Income approach	Yield	4.9% - 14.3%	9.4%
	222			Market approach (comparable companies)	EBITDA multiple(2)	5.6x	5.6x
Derivative instruments of Consolidated Funds	1,328			Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
Total assets	$	701,772
Liabilities
Derivatives instruments of Consolidated Funds	$	(201	)	Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
Total liabilities	$	(201	)


(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 commitments are presented below:



	As of September 30, 2017				As of December 31, 2016
Segment	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Credit Group	$	77,220	$	79,303	$	53,131	$	30,896
Private Equity Group	188,615		91,311		181,096		96,687
Real Estate Group	83,484		48,816		71,669		35,708
Non-core investments(1)	32,291		20,023		19,819		34,500
Totals	$	381,610	$	239,453	$	325,715	$	197,791

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