Investments

Merchant Banking Funds

The Company has invested in certain previously sponsored merchant banking funds: Greenhill Capital Partners (“GCP I”) and Greenhill Capital Partners II (“GCP II”), which are families of merchant banking funds. In addition, the Company has a limited partnership interest in Greenhill Capital Partners III ("GCP III").

The Company recognized a gain at the time of the exit from the merchant banking business, which is amortizing over a five year period ending in 2014. For each of the three month periods ended March 31, 2013 and 2012, deferred gains of approximately $0.1 million were recognized, respectively.

As of March 31, 2013, the Company continues to retain control only of the general partner of GCP I and GCP II and consolidates the results of each such general partner. As the general partner, the Company is entitled to receive from those funds a portion of the override of the profits realized from investments. The Company recognizes profit overrides related to certain merchant banking funds at the time certain performance hurdles are achieved. The Company did not recognize any profit overrides for the three months ended March 31, 2013 and 2012.

The carrying value of the Company’s investments in merchant banking funds are as follows (in thousands):



	As of March 31,		As of December 31,
	2013		2012
	(unaudited)		(audited)
Investment in GCP II	$	10,988	$	11,173
Investment in GCP III	1,367		1,367
Investment in GCP I	2,246		2,247
Investment in other merchant banking funds	1,985		1,985
Total investments in merchant banking funds	$	16,586	$	16,772

The investment in GCP II included $0.9 million and $1.1 million at March 31, 2013 and December 31, 2012, respectively, related to the noncontrolling interests in the general partner of GCP II. The investment in GCP I included $0.3 million at both March 31, 2013 and December 31, 2012, related to the noncontrolling interests in the managing general partner of GCP I held directly by the limited partners of its general partner.

Investments in other merchant banking funds includes the Company's investment in Barrow Street III, a real estate investment fund, which we committed $5.0 million to in 2005. At March 31, 2013, $0.1 million of the Company's commitment remains unfunded and may be drawn any time prior to the expiration of the fund in June 2015.

Approximately $0.3 million of the Company’s compensation payable related to profit overrides for unrealized gains of GCP I at March 31, 2013 and December 31, 2012. This amount may increase or decrease depending on the change in the fair value of GCP I, and is payable, subject to clawback, at the time cash proceeds are realized.

The Company committed $5.0 million to GCP III, of which $3.4 million remains unfunded at March 31, 2013. The unfunded amount may be drawn through November 2016. Thereafter, up to 15% of the commitment amount, to the extent not yet funded, may be drawn for follow-on investments.

Other Investments

The Company has other investments including investments in Iridium and certain deferred compensation plan investments related to Greenhill Australia. The Company’s other investments are as follows (in thousands):



	As of March 31,		As of December 31,
	2013		2012
	(unaudited)		(audited)
Iridium common stock	$	25,592	$	34,165
Deferred compensation plan investments	38		50
Total other investments	$	25,630	$	34,215

Iridium

At March 31, 2013, the Company owned 4,244,016 shares of Iridium common stock (NASDAQ:IRDM) with a quoted market price of $6.03 and had fully diluted share ownership in Iridium of approximately 6%. At December 31, 2012, the Company owned 5,084,016 shares of Iridium common stock and had a fully diluted ownership of approximately 7%.

At March 31, 2013 and 2012, the carrying value of the investment in Iridium common stock was valued at its closing quoted market price. The Company’s investment in Iridium is accounted for as a trading security as the Company does not maintain or exercise significant influence over Iridium.

Deferred compensation plan investments

In connection with the acquisition of Caliburn Partnership Pty Limited ("Caliburn"), the Company assumed amounts due under Caliburn's deferred compensation plan. Under this plan, a portion of certain employees' compensation was deferred and invested in cash, or at the election of each respective employee, in certain mutual fund investments. These investments will be distributed to those employees of Greenhill Australia over a period ending in 2016. The invested assets relating to this plan have been recorded on the condensed consolidated statements of financial condition as components of both cash and cash equivalents and other investments. The deferred compensation liability relating to the plan has been recorded on the condensed consolidated statements of financial condition as a component of compensation payable. Subsequent to the acquisition, the Company discontinued future participation in the plan.

Investment revenues

The Company’s investment revenues, by source, are as follows:



	For the Three Months Ended March 31,
	2013			2012
	(in thousands, unaudited)
Net realized and unrealized gains on investments in merchant banking funds	—			705
Net realized and unrealized gains (losses) on investment in Iridium	(2,081		)	8,300
Deferred gain on sale of certain merchant banking assets	49			65
Interest income	176			365
Total investment revenues	$	(1,856	)	$	9,435

Fair Value Hierarchy

The following tables set forth by level, assets and liabilities measured at fair value on a recurring basis. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. There were no transfers between Level 1 and Level 2 investments in the fair value measurement hierarchy during the three month periods ended March 31, 2013 and 2012.

Assets Measured at Fair Value on a Recurring Basis as of March 31, 2013



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2013
	(in thousands)
Assets
Iridium common stock	$	25,592	$	—	$	—	$	25,592
Deferred compensation plan investments	—		38		—		38
Total investments	$	25,592	$	38	$	—	$	25,630

Assets Measured at Fair Value on a Recurring Basis as of December 31, 2012



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2012
	(in thousands)
Assets
Iridium common stock	$	34,165	$	—	$	—	$	34,165
Deferred compensation plan investments	—		50		—		50
Total investments	$	34,165	$	50	$	—	$	34,215

Level 3 Gains and Losses

There were no Level 3 investments during the three month periods ended March 31, 2013 and 2012.