DERIVATIVE FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2014

DERIVATIVE FINANCIAL INSTRUMENTS

6. DERIVATIVE FINANCIAL INSTRUMENTS

Blackstone and the Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain risk management objectives and for general investment purposes. Additionally, Blackstone may enter into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. As a result of the use of derivative contracts, Blackstone and the consolidated Blackstone Funds are exposed to the risk that counterparties will fail to fulfill their contractual obligations. To mitigate such counterparty risk, Blackstone and the consolidated Blackstone Funds enter into contracts with certain major financial institutions, all of which have investment grade ratings. Counterparty credit risk is evaluated in determining the fair value of derivative instruments.

Freestanding Derivatives

Freestanding derivatives are instruments that Blackstone and certain of the consolidated Blackstone Funds have entered into as part of their overall risk management and investment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include interest rate swaps, foreign exchange contracts, equity swaps, options, futures and other derivative contracts.

The table below summarizes the aggregate notional amount and fair value of the derivative financial instruments. The notional amount represents the absolute value amount of all outstanding derivative contracts.

	March 31, 2014								December 31, 2013
	Assets				Liabilities				Assets				Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Freestanding Derivatives
Blackstone — Other Interest Rate Contracts	$	1,825,971	$	4,834	$	1,509,350	$	1,545	$	1,994,276	$	8,521	$	1,083,140	$	2,676
Foreign Currency Contracts		93,600		846		111,512		737		166,066		1,480		163,787		1,015
Total Return Swaps		—		—		—		—		326,929		342		—		—
Credit Default Swaps		—		—		34,000		2,763		—		—		10,000		591
Investments of Consolidated Blackstone Funds
Foreign Currency Contracts		324,312		24,919		163,567		12,197		396,569		30,830		239,037		10,018
Interest Rate Contracts		25,684		2,857		—		—		62,193		3,726		—		—
Credit Default Swaps		—		—		113,119		7,912		—		—		—		—
Total	$	2,269,567	$	33,456	$	1,931,548	$	25,154	$	2,946,033	$	44,899	$	1,495,964	$	14,300

The table below summarizes the impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:

	Three Months Ended March 31,
	2014			2013
Freestanding Derivatives
Realized Gains (Losses)
Interest Rate Contracts	$	(833	)	$	(526	)
Foreign Currency Contracts		1,439			(1,236	)
Credit Default Swaps		286			8
Total	$	892		$	(1,754	)
Net Change in Unrealized Gains (Losses)
Interest Rate Contracts	$	(2,542	)	$	(6,686	)
Foreign Currency Contracts		(8,117	)		7,379
Credit Default Swaps		1,813			(23	)
Total	$	(8,846	)	$	670

As of March 31, 2014 and December 31, 2013, the Partnership had not designated any derivatives as cash flow hedges or hedges of net investments in foreign operations.