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FAIR VALUE

3 Months Ended

Mar. 31, 2022

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 rate, yield curve, volatility, prepayment risk, loss severity, credit risk and default rate.

•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 following tables summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of March 31, 2022:


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	$	—	$	—	$	51,458	$	—	$	51,458
Common stock and other equity securities	—		1,471		114,499		—		115,970
Partnership interests	—		—		2,575		6,016		8,591
Total investments, at fair value	—		1,471		168,532		6,016		176,019
Derivatives-foreign currency forward contracts and interest rate swaps	—		5,457		—		—		5,457
Total assets, at fair value	$	—	$	6,928	$	168,532	$	6,016	$	181,476
Liabilities, at fair value
Derivatives-foreign currency forward contracts	$	—	$	(203)	$	—	$	—	$	(203)
Contingent consideration	—		—		(10,550)		—		(10,550)
Total liabilities, at fair value	$	—	$	(203)	$	(10,550)	$	—	$	(10,753)


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	$	—	$	547,060	$	329,547	$	—	$	876,607
Loans	—		8,932,367		529,754		—		9,462,121
U.S. Treasury securities	1,000,615		—		—		—		1,000,615
Collateralized loan obligations	—		10,000		—		—		10,000
Total fixed income investments	1,000,615		9,489,427		859,301		—		11,349,343
Equity securities	640		—		351,140		—		351,780
Partnership interests	—		—		241,123		719,936		961,059





Total assets, at fair value	$	1,001,255	$	9,489,427	$	1,451,564	$	719,936	$	12,662,182
Liabilities, at fair value
Derivatives:
Warrants	$	(8,240)	$	—	$	—	$	—	$	(8,240)
Asset swaps	—		—		(3,162)		—		(3,162)
Total derivative liabilities, at fair value	(8,240)		—		(3,162)		—		(11,402)
Loan obligations of CLOs	—		(10,397,615)		—		—		(10,397,615)
Total liabilities, at fair value	$	(8,240)	$	(10,397,615)	$	(3,162)	$	—	$	(10,409,017)

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, 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	$	—	$	—	$	52,397	$	—	$	52,397
Common stock and other equity securities	—		1,440		108,949		—		110,389
Partnership interests	—		—		2,575		6,016		8,591
Total investments, at fair value	—		1,440		163,921		6,016		171,377
Derivatives-foreign currency forward contracts	—		5,682		—		—		5,682
Total assets, at fair value	$	—	$	7,122	$	163,921	$	6,016	$	177,059
Liabilities, at fair value
Derivatives-foreign currency forward contracts	$	—	$	(328)	$	—	$	—	$	(328)
Contingent consideration	—		—		(57,435)		—		(57,435)
Total liabilities, at fair value	$	—	$	(328)	$	(57,435)	$	—	$	(57,763)


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	$	—	$	525,393	$	331,732	$	—	$	857,125
Loans	—		9,499,469		411,220		—		9,910,689
U. S. Treasury Securities	1,000,285		—		—		—		1,000,285
Total fixed income investments	1,000,285		10,024,862		742,952		—		11,768,099
Equity securities	956		133		339,183		—		340,272
Partnership interests	—		—		238,673		469,634		708,307





Total assets, at fair value	$	1,001,241	$	10,024,995	$	1,320,808	$	469,634	$	12,816,678
Liabilities, at fair value
Derivatives:
Derivatives-foreign exchange contracts	$	(17,822)	$	—	$	—	$	—	$	(17,822)
Asset swaps	—		—		(3,105)		—		(3,105)
Total derivative liabilities, at fair value	(17,822)		—		(3,105)		—		(20,927)
Loan obligations of CLOs	—		(10,657,661)		—		—		(10,657,661)
Total liabilities, at fair value	$	(17,822)	$	(10,657,661)	$	(3,105)	$	—	$	(10,678,588)

The following tables set forth a summary of changes in the fair value of the Level III measurements for the three months ended March 31, 2022:



Level III Assets and Liabilities of the Company	Equity Securities		Fixed Income		Partnership Interests		Contingent Consideration		Total
Balance, beginning of period	$	108,949	$	52,397	$	2,575	$	(57,435)	$	106,486
Transfer in due to changes in consolidation	1,491		—		—		—		1,491


Sales/settlements(1)	(213)		(885)		—		47,873		46,775
Change in fair value	—		—		—		(988)		(988)
Realized and unrealized appreciation (depreciation), net	4,272		(54)		—		—		4,218
Balance, end of period	$	114,499	$	51,458	$	2,575	$	(10,550)	$	157,982
Change in net unrealized appreciation/depreciation and fair value included in earnings related to financial assets and liabilities still held at the reporting date	$	4,272	$	(54)	$	—	$	(988)	$	3,230


Level III Net Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	339,183	$	742,952	$	238,673	$	(3,105)	$	1,317,703

Transfer in	—		171,945		—		—		171,945
Transfer out	—		(90,417)		—		—		(90,417)
Purchases(2)	7,320		143,577		24,000		—		174,897
Sales/settlements(1)	(10,189)		(97,975)		(21,500)		(2)		(129,666)
Amortized discounts/premiums	—		654		—		—		654
Realized and unrealized appreciation (depreciation), net	14,826		(11,435)		(50)		(55)		3,286
Balance, end of period	$	351,140	$	859,301	$	241,123	$	(3,162)	$	1,448,402
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	20	$	(9,031)	$	(50)	$	(112)	$	(9,173)

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

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

The following tables set forth a summary of changes in the fair value of the Level III measurements for the three months ended March 31, 2021:



Level III Assets of the Company	Equity Securities		Fixed Income		Partnership Interests		Total
Balance, beginning of period	$	88,412	$	53,349	$	2,575	$	144,336


Sales/settlements(1)	—		(1,539)		—		(1,539)
Realized and unrealized appreciation, net	821		1,720		—		2,541
Balance, end of period	$	89,233	$	53,530	$	2,575	$	145,338
Change in net unrealized appreciation included in earnings related to financial assets still held at the reporting date	$	821	$	1,720	$	—	$	2,541


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 in	2,289		221,555		—		—		223,844
Transfer out	(33)		(209,002)		—		—		(209,035)
Purchases(2)	8,308		137,655		1,000		—		146,963
Sales/settlements(1)	(424)		(127,350)		—		185		(127,589)
Amortized discounts/premiums	—		770		—		—		770
Realized and unrealized appreciation (depreciation), net	(549)		(5,553)		10,595		(3,346)		1,147
Balance, end of period	$	230,634	$	560,380	$	243,452	$	(2,101)	$	1,032,365
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	(582)	$	(863)	$	10,594	$	(2,705)	$	6,444

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

(2)Purchases include paid-in-kind interest and securities received 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 March 31, 2022:

Level III Measurements of the Company

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Weighted Average

Assets

Equity securities

14,610

Transaction price(1)

N/A

53,462

Discounted cash flow

Discount rates

14% - 20%

14.3%

46,426

Market approach

Multiple of book value

1.4x

Partnership interests

2,575

Other

N/A

Collateralized loan obligations

29,876

Broker quotes and/or 3rd party pricing services

N/A

Other fixed income

21,583

Other

N/A

Total assets

168,532

Liabilities

Contingent consideration

(10,550)

Monte Carlo simulation

Discount rates

8.5%

Volatility

18.0%

Total liabilities

(10,550)

Level III Measurements of the Consolidated Funds

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Weighted Average

Assets

Equity securities

1,196

Market approach

EBITDA multiple(2)

7.0x - 55.8x

17.6x

116,792

Market approach

Multiple of book value

1.0x - 1.2x

1.1x

147,078

Discounted cash flow

Discount rate

20.0%

352

Other

N/A

Broker quotes and/or 3rd party pricing services

N/A

85,711

Transaction price(1)

N/A

Partnership interest

241,123

Discounted cash flow

Discount rate

18.4%

Fixed income securities

716,870

Broker quotes and/or 3rd party pricing services

N/A

140,539

Income approach

Yield

1.5% -21.8%

12.8%

1,891

Transaction price

N/A

Total assets

1,451,564

Liabilities

Derivative instruments

(3,162)

Broker quotes and/or 3rd party pricing services

N/A

Total liabilities

(3,162)

(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, 2021:

Level III Measurements of the Company

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Weighted Average

Assets

Equity securities

14,610

Transaction price(1)

N/A

50,690

Discounted cash flow

Discount rates

14.0% - 20.0%

14.3%

43,649

Market approach

Multiple of book value

1.4x

Partnership interests

2,575

Other

N/A

Collateralized loan obligations

30,815

Broker quotes and/or 3rd party pricing services

N/A

Other fixed income

21,582

Other

N/A

Total assets

163,921

Liabilities

Contingent Consideration

(9,562)

Monte Carlo simulation

Discount rates

8.5%

Volatility

18%

(47,873)

Other

N/A

Total liabilities

(57,435)

Level III Measurements of the Consolidated Funds

Fair Value

Valuation Technique(s)

Significant Unobservable Input(s)

Range

Weighted Average

Assets

Equity securities

1,261

Market approach

EBITDA multiple(2)

1.0x - 64.4x

17.5x

140,185

Market approach

Multiple of book value

1.0x- 1.2x

1.1x

123,685

Discounted cash flow

Discount rate

20.0%

Broker quotes and/or 3rd party pricing services

N/A

74,041

Transaction price(1)

N/A

Partnership interests

238,673

Discounted cash flow

Discount rate

23.4%

Fixed income securities

614,754

Broker quotes and/or 3rd party pricing services

N/A

128,198

Income approach

Yield

3.5% - 16.2%

6.7%

Total assets

1,320,808

Liabilities

Derivative instruments

(3,105)

Broker quotes and/or 3rd party pricing services

N/A

Total liabilities

(3,105)

(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 as of March 31, 2022 and December 31, 2021. The Company has no unfunded commitments for this investment.

The Consolidated Funds have limited partnership interests in private equity funds managed by the Company that are valued using NAV per share. The terms and conditions of these funds do not allow for redemptions without certain events or approvals that are outside the Company's control. As of March 31, 2022, these investments had a fair value of $719.9 million and unfunded commitments of $958.5 million. As of December 31, 2021, these investments had a fair value of $469.6 million and unfunded commitments of $1,200.0 million.

- 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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