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FAIR VALUE

9 Months Ended

Sep. 30, 2021

6. FAIR VALUE

Fair Value Measurements

GAAP establishes a hierarchical disclosure framework that prioritizes the inputs used in measuring financial instruments at fair value into three levels based on their market price 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.

Contingent consideration: The Company generally determines the fair value of its contingent consideration liabilities by using a Monte Carlo simulation model. The model considers a range of assumptions including historical experience, prior period performance, current progress towards targets, probability-weighted scenarios, and management's own assumptions. The discount rate used is determined based on the weighted average cost of capital for the Company. The fair value of the

Company's contingent consideration liabilities are classified as Level III. Liabilities recorded in connection with the Company’s contingent consideration are included within accounts payable, accrued expenses and other liabilities in the Condensed Consolidated Statements of Financial Condition and the associated changes in fair value are included within other income (expense), net in the Condensed Consolidated Statements of Operations.

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

The following tables summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of September 30, 2021:


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	$	—	$	—	$	54,307	$	—	$	54,307
Common stock and other equity securities	—		1,410		108,397		—		109,807
Partnership interests	—		—		2,575		6,043		8,618
Total investments, at fair value	—		1,410		165,279		6,043		172,732
Derivatives-foreign exchange contracts and interest rate contracts	—		4,361		—		—		4,361
Total assets, at fair value	$	—	$	5,771	$	165,279	$	6,043	$	177,093
Liabilities, at fair value
Derivatives-foreign exchange contracts	—		(265)		—		—		(265)
Contingent consideration	—		—		(41,413)		—		(41,413)
Total liabilities, at fair value	$	—	$	(265)	$	(41,413)	$	—	$	(41,678)


Financial Instruments of the Consolidated Funds	Level I		Level II		Level III		Investments Measured at NAV		Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds	$	—	$	406,253	$	27,973	$	—	$	434,226
Loans	—		9,015,066		374,703		—		9,389,769
U.S. Treasury securities	1,000,165		—		—		—		1,000,165
Investments in CLO warehouse	—		28,500		—		—		28,500
Total fixed income investments	1,000,165		9,449,819		402,676		—		10,852,660
Equity securities	3,366		1,590		259,246		—		264,202
Partnership interests	—		—		237,558		6,599		244,157
Total investments, at fair value	$	1,003,531	$	9,451,409	$	899,480	$	6,599	$	11,361,019
Derivatives:

Asset swaps-other	—		—		325		—		325
Total derivative assets, at fair value	—		—		325		—		325
Total assets, at fair value	$	1,003,531	$	9,451,409	$	899,805	$	6,599	$	11,361,344
Liabilities, at fair value
Derivatives:
Warrants	$	(17,000)	$	—	$	—	$	—	$	(17,000)
Asset swaps-other	—		—		(1,513)		—		(1,513)
Total derivative liabilities, at fair value	(17,000)		—		(1,513)		—		(18,513)
Loan obligations of CLOs	—		(10,174,794)		—		—		(10,174,794)
Total liabilities, at fair value	$	(17,000)	$	(10,174,794)	$	(1,513)	$	—	$	(10,193,307)

The following tables summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of December 31,2020:


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	$	—	$	—	$	53,349	$	—	$	53,349
Common stock and other equity securities	—		1,007		88,412		—		89,419
Partnership interests	—		—		2,575		1,209		3,784
Total investments, at fair value	—		1,007		144,336		1,209		146,552
Derivatives-foreign exchange contracts	—		1,440		—		—		1,440
Total assets, at fair value	$	—	$	2,447	$	144,336	$	1,209	$	147,992
Liabilities, at fair value
Derivatives-foreign exchange contracts	$	—	$	(1,565)	$	—	$	—	$	(1,565)
Total liabilities, at fair value	$	—	$	(1,565)	$	—	$	—	$	(1,565)


Financial Instruments of the Consolidated Funds	Level I		Level II		Level III		Investments Measured at NAV		Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds	$	—	$	397,485	$	9	$	—	$	397,494
Loans	—		9,470,651		542,297		—		10,012,948

Total fixed income investments	—		9,868,136		542,306		—		10,410,442
Equity securities	5,749		239		221,043		—		227,031
Partnership interests	—		—		231,857		7,767		239,624
Total investments, at fair value	5,749		9,868,375		995,206		7,767		10,877,097
Derivatives:

Asset swaps-other	—		—		1,104		—		1,104

Total assets, at fair value	$	5,749	$	9,868,375	$	996,310	$	7,767	$	10,878,201
Liabilities, at fair value
Derivatives:

Asset swaps-other	$	—	$	—	$	(44)	$	—	$	(44)

Loan obligations of CLOs	—		(9,958,076)		—		—		(9,958,076)
Total liabilities, at fair value	$	—	$	(9,958,076)	$	(44)	$	—	$	(9,958,120)

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, 2021:



Level III Assets and Liabilities of the Company	Equity Securities		Fixed Income		Partnership Interests		Contingent Consideration		Total
Balance, beginning of period	$	107,240	$	55,840	$	2,575	$	—	$	165,655

Established in connection with acquisition	—		—		—		(34,200)		(34,200)
Purchases(1)	—		708		—		—		708
Sales/settlements(2)	—		(2,904)		—		—		(2,904)
Realized and unrealized appreciation (depreciation), net	1,157		663		—		(7,213)		(5,393)
Balance, end of period	$	108,397	$	54,307	$	2,575	$	(41,413)	$	123,866
Change in net unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	1,157	$	675	$	—	$	(7,213)	$	(5,381)


Level III Net Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	229,300	$	455,426	$	255,278	$	(1,658)	$	938,346

Transfer in	—		18,792		—		—		18,792
Transfer out	—		(209,282)		—		—		(209,282)
Purchases(1)	27,346		219,180		—		—		246,526
Sales/settlements(2)	(313)		(88,584)		(30,000)		625		(118,272)
Amortized discounts/premiums	—		394		—		—		394
Realized and unrealized appreciation (depreciation), net	2,913		6,750		12,280		(155)		21,788
Balance, end of period	$	259,246	$	402,676	$	237,558	$	(1,188)	$	898,292
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	2,912	$	1,607	$	12,280	$	(63)	$	16,736

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

(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 three months ended September 30, 2020:



Level III Assets of the Company	Equity Securities		Fixed Income		Partnership Interests		Total
Balance, beginning of period	$	14,704	$	67,355	$	2,575	$	84,634
Transfer in due to changes in consolidation	72,967		—		—		72,967
Purchases(1)	—		5,983		—		5,983
Sales/settlements(2)	—		(899)		—		(899)
Realized and unrealized appreciation (depreciation), net	(1,746)		3,175		—		1,429
Balance, end of period	$	85,925	$	75,614	$	2,575	$	164,114
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	(1,746)	$	3,175	$	—	$	1,429


Level III Net Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	42,259	$	586,287	$	312,636	$	1,402	$	942,584

Transfer in	—		96,671		—		—		96,671
Transfer out	—		(230,326)		—		—		(230,326)
Purchases(1)	150		118,558		—		—		118,708
Sales/settlements(2)	(25)		(73,010)		(2,000)		705		(74,330)
Amortized discounts/premiums	—		(135)		—		140		5
Realized and unrealized appreciation (depreciation), net	828		15,836		(1,402)		(393)		14,869
Balance, end of period	$	43,212	$	513,881	$	309,234	$	1,854	$	868,181
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	878	$	13,690	$	(1,402)	$	(604)	$	12,562

(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 nine months ended September 30, 2021:



Level III Assets and Liabilities of the Company	Equity Securities		Fixed Income		Partnership Interests		Contingent Consideration		Total
Balance, beginning of period	$	88,412	$	53,349	$	2,575	$	—	$	144,336
Transfer in due to changes in consolidation	—		7,623		—		—		7,623
Established in connection with acquisition	—		—		—		(34,200)		(34,200)
Purchases(1)	19,278		1,689		—		—		20,967
Sales/settlements(2)	—		(12,120)		—		—		(12,120)
Realized and unrealized appreciation (depreciation), net	707		3,766		—		(7,213)		(2,740)
Balance, end of period	$	108,397	$	54,307	$	2,575	$	(41,413)	$	123,866
Change in net unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	707	$	2,315	$	—	$	(7,213)	$	(4,191)


Level III Net Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	221,043	$	542,305	$	231,857	$	1,060	$	996,265
Transfer out due to changes in consolidation	(157)		(49,326)		—		—		(49,483)
Transfer in	2,195		47,818		—		—		50,013
Transfer out	(33)		(216,177)		—		—		(216,210)
Purchases(1)	36,201		437,426		13,000		—		486,627
Sales/settlements(2)	(876)		(371,006)		(32,000)		301		(403,581)
Amortized discounts/premiums	1		1,464		—		—		1,465
Realized and unrealized appreciation (depreciation), net	872		10,172		24,701		(2,549)		33,196
Balance, end of period	$	259,246	$	402,676	$	237,558	$	(1,188)	$	898,292
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	790	$	2,700	$	24,701	$	(1,670)	$	26,521

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

(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 nine months ended September 30, 2020:



Level III Assets and Liabilities of the Company	Equity Securities		Fixed Income		Partnership Interests		Total
Balance, beginning of period	$	14,704	$	69,183	$	35,192	$	119,079
Transfer in due to changes in consolidation	72,967		3,686		—		76,653
Purchases(1)	—		7,285		—		7,285
Sales/settlements(2)	—		(1,587)		(32,430)		(34,017)
Realized and unrealized depreciation, net	(1,746)		(2,953)		(187)		(4,886)
Balance, end of period	$	85,925	$	75,614	$	2,575	$	164,114
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	(1,746)	$	(1,917)	$	5,511	$	1,848


Level III Net Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	85,988	$	339,136	$	296,012	$	(4,106)	$	717,030
Transfer in (out) due to changes in consolidation	(635)		392,672		—		—		392,037
Transfer in	—		146,839		—		—		146,839
Transfer out	—		(350,078)		—		—		(350,078)
Purchases(1)	551		256,514		64,000		—		321,065
Sales/settlements(2)	(714)		(249,027)		(58,000)		813		(306,928)
Amortized discounts/premiums	—		777		—		291		1,068
Realized and unrealized appreciation (depreciation), net	(41,978)		(22,952)		7,222		4,856		(52,852)
Balance, end of period	$	43,212	$	513,881	$	309,234	$	1,854	$	868,181
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	(41,930)	$	(25,701)	$	7,222	$	4,439	$	(55,970)

(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.

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 tables summarize the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of September 30, 2021:

Level III Measurements of the Company

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Weighted Average

Assets

Equity securities

14,704

Transaction price(1)

N/A

46,765

Discounted cash flow

Discount Rates

14.0% - 20.0%

15.3%

46,928

Market approach

Multiple of Book Value

1.5x

N/A

Partnership interests

2,575

Other

N/A

Collateralized loan obligations

32,724

Broker quotes and/or 3rd party pricing services

N/A

Other fixed income

21,583

Other

N/A

Total assets

165,279

Liabilities

Contingent consideration

(8,600)

Monte Carlo simulation

Discount Rates

N/A

Volatility

17%

N/A

(32,813)

Other

N/A

Total liabilities

(41,413)

Level III Measurements of the Consolidated Funds

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Weighted Average

Assets

Equity securities

896

Market approach

EBITDA multiple(2)

1.8x - 83.3x

15.3x

Broker quotes and/or 3rd party pricing services

N/A

258,336

Transaction price(1)

N/A

Partnership interest

237,558

Discounted cash flow

Discount rate

22.4%

Fixed income securities

261,064

Broker quotes and/or 3rd party pricing services

N/A

98,055

Income approach

Yield

1.8%-54.7%

6.5%

14,791

Transaction price

N/A

28,766

Other

N/A

Derivative instruments

325

Broker quotes and/or 3rd party pricing services

N/A

Total assets

899,805

Liabilities

Derivative instruments

(1,513)

Broker quotes and/or 3rd party pricing services

N/A

Total liabilities

(1,513)

(1)Transaction price consists of securities 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 tables summarize the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of December 31, 2020:

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

32,905

Discounted Cash Flow

Discount Rates

14.0% - 20.0%

40,803

Market Approach

Multiple of Book Value

1.6x

Partnership interests

2,575

Other

N/A

Collateralized loan obligations

31,766

Broker quotes and/or 3rd party pricing services

N/A

Other fixed income

21,583

Other

N/A

Total

144,336

Level III Measurements of the Consolidated Funds

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Weighted Average

Assets

Equity securities

438

Market approach

EBITDA multiple(2)

2.9x - 19.5x

13.4x

32,528

Other

Net income multiple

30.0x

Illiquidity discount

25.0%

Broker quotes and/or 3rd party pricing services

N/A

188,044

Transaction price(1)

N/A

Partnership interests

231,857

Discounted cash flow

Discount rate

23.8%

Fixed income securities

384,419

Broker quotes and/or 3rd party pricing services

N/A

6,605

Market approach

EBITDA multiple(2)

6.5x - 7.8x

6.9x

122,962

Income approach

Yield

2.7% - 48.1%

7.9%

28,320

Other

N/A

Derivative instruments

1,104

Broker quotes and/or 3rd party pricing services

N/A

Total assets

996,310

Liabilities

Derivative instruments

(44)

Broker quotes and/or 3rd party pricing services

N/A

Total liabilities

(44)

(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 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 $6.0 million and $1.2 million as of September 30, 2021 and December 31, 2020. 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.

+ References + Details