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FAIR VALUE

12 Months Ended

Dec. 31, 2019

Financial Instrument Valuations

The valuation techniques used by the Company to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation techniques applied to investments held by the Company and by the Consolidated Funds vary depending on the nature of the investment.

CLOs and CLO loan obligations: The fair value of CLOs held by the Company are estimated based on either a third-party pricing service or broker quote and are classified as Level III. The Company measures its CLO loan obligations of the Consolidated Funds by first determining whether the fair values of the financial assets or financial liabilities of its consolidated CLOs are more observable.

Corporate debt, bonds, bank loans and derivative instruments: The fair value of corporate debt, bonds, bank loans and derivative instruments is estimated based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs. These investments are generally classified as Level II. The Company obtains prices from independent pricing services that generally utilize broker quotes and may use various other pricing techniques, which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. If management is only able to obtain a single broker quote, or utilizes a pricing model, such securities will generally be classified as Level III.

Equity and equity-related securities: Securities traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. Securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.

Partnership interests: The Company generally values its investments using the NAV per share equivalent calculated by the investment manager as a practical expedient to determining an independent fair value or estimates based on various valuation models of third-party pricing services, as well as internal models. The Company does not categorize within the fair value hierarchy investments where fair value is measured using the net asset value per share practical expedient.

Certain investments of the Company are valued at NAV per share of the fund. In limited circumstances, the Company may determine, based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, the Company will estimate the fair value in good faith and in a manner that it reasonably chooses, in accordance with the requirements of GAAP. As of December 31, 2019 and 2018, NAV per share represents the fair value of the investments for the Company and discounted cash flow analysis is used to determine the fair value for an investment held by the Consolidated Funds.

The substantial majority of the Company's private commingled funds are closed-ended, and accordingly, do not permit investors to redeem their interests other than in limited circumstances that are beyond the control of the Company, such as instances in which retaining the interest could cause the investor to violate a law, regulation or rule. Investors in open-ended and evergreen funds have the right to withdraw their capital, subject to the terms of the respective constituent documents, over periods generally ranging from one month to three years. In addition, separately managed investment vehicles for a single fund investor may allow such investors to terminate the fund at the discretion of the investor pursuant to the terms of the applicable constituent documents of such vehicle.

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 the Consolidated Funds as of December 31, 2019:


Financial Instruments of the Company	Level I		Level II		Level III		Investments Measured at NAV		Total
Assets, at fair value
Investments:
Collateralized loan obligations and other fixed income	$	—	$	—	$	69,183	$	—	$	69,183
Common stock and other equity securities	—		1,043		14,704		—		15,747
Partnership interests	—		—		35,192		1,632		36,824
Total investments, at fair value	—		1,043		119,079		1,632		121,754
Derivatives-foreign exchange contracts	—		4,023		—		—		4,023
Total assets, at fair value	$	—	$	5,066	$	119,079	$	1,632	$	125,777
Liabilities, at fair value
Derivatives-foreign exchange contracts	$	—	$	(113)	$	—	$	—	$	(113)
Total liabilities, at fair value	$	—	$	(113)	$	—	$	—	$	(113)


Financial Instruments of the Consolidated Funds	Level I		Level II		Level III		Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds	$	—	$	207,966	$	4,410	$	212,376
Loans	—		7,728,014		334,726		8,062,740
Investments in CLO warehouse	—		44,435		—		44,435
Total fixed income investments	—		7,980,415		339,136		8,319,551
Equity securities	26,396		—		85,988		112,384
Partnership interests	—		—		296,012		296,012
Total investments, at fair value	26,396		7,980,415		721,136		8,727,947

Derivatives-foreign exchange contracts	—		667		—		667


Total assets, at fair value	$	26,396	$	7,981,082	$	721,136	$	8,728,614
Liabilities, at fair value
Derivatives:
Foreign exchange contracts	$	—	$	(670)	$	—	$	(670)
Asset swaps-other	—		—		(4,106)		(4,106)
Total derivative liabilities, at fair value	—		(670)		(4,106)		(4,776)
Loan obligations of CLOs	—		(7,973,748)		—		(7,973,748)
Total liabilities, at fair value	$	—	$	(7,974,418)	$	(4,106)	$	(7,978,524)

The tables below summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of December 31, 2018:


Financial Instruments of the Company	Level I		Level II		Level III		Investments Measured at NAV		Total
Assets, at fair value
Investments:
Collateralized loan obligations and other fixed income	$	—	$	—	$	60,824	$	—	$	60,824
Common stock and other equity securities	280		1,004		10,397		—		11,681
Partnership interests	—		—		35,192		861		36,053
Total investments, at fair value	280		1,004		106,413		861		108,558
Derivatives-foreign exchange contracts	—		1,066		—		—		1,066
Total assets, at fair value	$	280	$	2,070	$	106,413	$	861	$	109,624
Liabilities, at fair value
Derivatives-foreign exchange contracts	$	—	$	(869)	$	—	$	—	$	(869)
Total liabilities, at fair value	$	—	$	(869)	$	—	$	—	$	(869)


Financial Instruments of the Consolidated Funds	Level I		Level II		Level III		Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds	$	—	$	316,850	$	1,649	$	318,499
Loans	—		6,340,440		546,309		6,886,749
Total fixed income investments	—		6,657,290		547,958		7,205,248
Equity securities	45,718		—		150,752		196,470
Partnership interests	—		—		271,447		271,447
Total investments, at fair value	45,718		6,657,290		970,157		7,673,165
Derivatives:
Foreign exchange contracts	—		1,881		—		1,881
Asset swaps-other	—		—		1,328		1,328
Total derivative assets, at fair value	—		1,881		1,328		3,209
Total assets, at fair value	$	45,718	$	6,659,171	$	971,485	$	7,676,374
Liabilities, at fair value
Derivatives:
Foreign exchange contracts	$	—	$	(1,864)	$	—	$	(1,864)
Asset swaps-other	—		—		(648)		(648)
Total derivative liabilities, at fair value	—		(1,864)		(648)		(2,512)
Loan obligations of CLOs	—		(6,678,091)		—		(6,678,091)
Total liabilities, at fair value	$	—	$	(6,679,955)	$	(648)	$	(6,680,603)

The following tables set forth a summary of changes in the fair value of the Level III measurements for the year ended December 31, 2019:


	Level III Assets
Level III Assets of the Company	Equity Securities		Fixed Income		Partnership Interests		Total
Balance, beginning of period	$	10,397	$	60,824	$	35,192	$	106,413
Deconsolidation of fund	—		10,021		—		10,021

Purchases(1)	3,000		27,795		—		30,795
Sales/settlements(2)	—		(31,387)		—		(31,387)
Realized and unrealized appreciation, net	1,307		1,930		—		3,237
Balance, end of period	$	14,704	$	69,183	$	35,192	$	119,079
Increase in net unrealized appreciation included in earnings related to financial assets still held at the reporting date	$	1,307	$	1,365	$	—	$	2,672


Level III Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	150,752	$	547,958	$	271,447	$	680	$	970,837
Deconsolidation of fund	—		(184,919)		—		—		(184,919)
Transfer in	—		56,914		—		—		56,914
Transfer out	—		(187,925)		—		—		(187,925)
Purchases(1)	1,363		432,760		13,000		—		447,123
Sales/settlements(2)	(40,857)		(333,220)		(22,000)		(431)		(396,508)
Amortized discounts/premiums	—		361		—		(129)		232
Realized and unrealized appreciation (depreciation), net	(25,270)		7,207		33,565		(4,226)		11,276
Balance, end of period	$	85,988	$	339,136	$	296,012	$	(4,106)	$	717,030
Increase (decrease) in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	(24,690)	$	783	$	33,565	$	(4,400)	$	5,258

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

(2)Sales/settlements 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 year ended December 31, 2018:


	Level III Assets
Level III Assets of the Company	Equity Securities		Fixed Income		Partnership Interests		Total
Balance, beginning of period	$	—	$	195,158	$	44,769	$	239,927
Deconsolidation of fund	—		78		—		78
Transfer in	250		—		—		250
Purchases(1)	1,000		92,797		—		93,797
Sales/settlements(2)	—		(222,934)		—		(222,934)
Realized and unrealized appreciation (depreciation), net	9,147		(4,275)		(9,577)		(4,705)
Balance, end of period	$	10,397	$	60,824	$	35,192	$	106,413
Increase (decrease) in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	9,147	$	(3,923)	$	(9,577)	$	(4,353)


Level III Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	162,577	$	267,889	$	232,332	$	904	$	663,702
Consolidation of fund	506		46,829		—		—		47,335
Transfer in	—		86,995		—		—		86,995
Transfer out	—		(45,647)		—		—		(45,647)
Purchases(1)	203		492,142		25,000		—		517,345
Sales/settlements(2)	(21,141)		(283,620)		(5,000)		(186)		(309,947)
Amortized discounts/premiums	—		380		—		(140)		240
Realized and unrealized appreciation (depreciation), net	8,607		(17,010)		19,115		102		10,814
Balance, end of period	$	150,752	$	547,958	$	271,447	$	680	$	970,837
Increase (decrease) in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	8,686	$	(13,157)	$	19,115	$	(57)	$	14,587

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

(2)Sales/settlements 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.

The following table summarizes the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of December 31, 2019:

Level III Measurements of the Company

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Assets

Equity securities

14,704

Transaction price(1)

N/A

Partnership interests

32,661

Transaction price(1)

N/A

2,531

Other

N/A

Collateralized loan obligations

22,265

Broker quotes and/or 3rd party pricing services

N/A

Other fixed income

46,918

Other

N/A

Total

119,079

Level III Measurements of the Consolidated Funds

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Weighted Average

Assets

Equity securities

431

Enterprise value market multiple analysis

EBITDA multiple(2)

8.2x - 21.3x

16.1x

40,745

Other

Net income multiple

36.2x

Illiquidity discount

25.0%

44,812

Transaction price(1)

N/A

Partnership interest

296,012

Discounted cash flow

Discount rate

19.6%

Fixed income securities

271,919

Broker quotes and/or 3rd party pricing services

N/A

67,217

Income approach

Yield

4.8% - 14.3%

9.7%

Total assets

721,136

Liabilities

Derivatives instruments

(4,106)

Broker quotes and/or 3rd party pricing services

N/A

Total liabilities

(4,106)

(1)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 Company’s and the Consolidated Funds' Level III measurements as of December 31, 2018:

Level III Measurements of the Company

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Assets

Equity securities

10,397

Transaction price(1)

N/A

Partnership interests

35,192

Discounted cash flow

Discount rate

8.0%

Collateralized loan obligations

20,824

Broker quotes and/or 3rd party pricing services

N/A

Other fixed income

40,000

Other

N/A

Total

106,413

Level III Measurements of the Consolidated Funds

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Weighted Average

Assets

Equity securities

23,871

Enterprise value market multiple analysis

EBITDA multiple(2)

7.2x - 22.9x

7.7x

41,562

Other

Net income multiple

38.8x

Illiquidity discount

25.0%

271,447

Discounted cash flow

Discount rate

20.8%

85,319

Transaction price(1)

N/A

Fixed income securities

441,368

Broker quotes and/or 3rd party pricing services

N/A

106,590

Income approach

Yield

1.0% - 14.8%

9.6%

Derivative instruments

1,328

Broker quotes and/or 3rd party pricing services

N/A

Total assets

971,485

Liabilities

Derivatives instruments

(648)

Broker quotes and/or 3rd party pricing services

N/A

Total liabilities

(648)

(1)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 has an insurance-related investment in a private fund managed by a third party that is valued using net asset value (“NAV”) per share. The terms and conditions of this fund do not allow for redemptions without certain events or approvals that are outside the Company's control. This investment had a fair value of $1.6 million and $0.8 million as of December 31, 2019 and December 31, 2018, respectively. The Company has no unfunded commitments for this investment.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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