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 July 2013, the Company sold the remaining limited partnership interest in Greenhill Capital Partners III for approximately $2.0 million, which represented the book value of the investment at June 30, 2013. In connection with that sale, the purchasers assumed the remaining undrawn commitments to the fund.

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.

As of September 30, 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 or nine month periods ended September 30, 2013 and 2012.

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



	As of September 30,		As of December 31,
	2013		2012
	(unaudited)
Investment in GCP I	$	1,732	$	2,247
Investment in GCP II	7,627		11,173
Investment in GCP III	—		1,367
Investment in other merchant banking funds	1,926		1,985
Total investments in merchant banking funds	$	11,285	$	16,772

The investment in GCP I represents an interest in a previously sponsored merchant banking fund and includes $0.1 million and $0.3 million at September 30, 2013 and December 31, 2012, respectively, related to the noncontrolling interests in the managing general partner of GCP I. The investment in GCP II principally represents the capital interest in a portfolio company and also includes $0.9 million and $1.1 million at September 30, 2013 and December 31, 2012, respectively, related to the noncontrolling interests in the general partner of GCP II.

Approximately $0.3 million of the Company’s compensation payable related to profit overrides for unrealized gains of GCP I at September 30, 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.

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 September 30, 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.

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 September 30,		As of December 31,
	2013		2012
	(unaudited)
Iridium common stock	$	10,978	$	34,165
Deferred compensation plan investments	34		50
Total other investments	$	11,012	$	34,215

Iridium

At September 30, 2013, the Company owned 1,595,629 shares of Iridium common stock (NASDAQ:IRDM) with a quoted market price of $6.88 per share and had fully diluted share ownership in Iridium of approximately 2%. At December 31, 2012, the Company owned 5,084,016 shares of Iridium common stock with a quoted market price of $6.72 per share and had a fully diluted ownership of approximately 7%.

The carrying value of the investment in Iridium common stock is valued at the end of each period and 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 are being distributed to certain 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 September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
	(in thousands, unaudited)
Net realized and unrealized gains (losses) on investment in Iridium	$	(3,223	)	$	(10,826	)	$	1,347		$	(1,153	)
Net realized and unrealized gains (losses) on investments in merchant banking funds	394			161			(2,959		)	1,253
Deferred gain on sale of certain merchant banking assets	49			65			147			195
Interest income	340			590			793			1,299
Total investment revenues	$	(2,440	)	$	(10,010	)	$	(672	)	$	1,594

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 and nine month periods ended September 30, 2013 and 2012.

Assets Measured at Fair Value on a Recurring Basis as of September 30, 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 September 30, 2013
	(in thousands)
Assets
Iridium common stock	$	10,978	$	—	$	—	$	10,978
Deferred compensation plan investments	—		34		—		34
Total investments	$	10,978	$	34	$	—	$	11,012

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 and nine month periods ended September 30, 2013 and 2012.