FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2016

FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

8. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

The following tables summarize the valuation of the Partnership’s financial assets and liabilities by the fair value hierarchy:

	March 31, 2016
	Level I		Level II		Level III		NAV		Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds	$	—	$	—	$	—	$	149,071	$	149,071
Equity Securities		71,851		53,317		82,724		—		207,892
Partnership and LLC Interests		32,642		75,005		445,697		—		553,344
Debt Instruments		—		168,597		19,251		—		187,848
Assets of Consolidated CLO Vehicles
Corporate Loans		—		3,174,768		189,026		—		3,363,794
Corporate Bonds		—		412,073		—		—		412,073
Freestanding Derivatives — Foreign
Currency Contracts		—		11,562		—		—		11,562
Total Investments of Consolidated Blackstone Funds		104,493		3,895,322		736,698		149,071		4,885,584
Blackstone’s Treasury Cash Management Strategies
Equity Securities		143,882		—		—		—		143,882
Debt Instruments		—		1,101,627		30,855		116,544		1,249,026
Other		—		—		—		195,286		195,286
Total Blackstone’s Treasury Cash
Management Strategies		143,882		1,101,627		30,855		311,830		1,588,194
Money Market Funds		170,680		—		—		—		170,680
Net Investment Hedges — Foreign Currency Contracts		—		9		—		—		9
Freestanding Derivatives
Interest Rate Contracts		452		448		—		—		900
Foreign Currency Contracts		—		2,902		—		—		2,902
Credit Default Swaps		—		12		—		—		12
Loans and Receivables		—		—		287,858		—		287,858
Other Investments		135,956		—		99,409		17,718		253,083
	$	555,463	$	5,000,320	$	1,154,820	$	478,619	$	7,189,222

	March 31, 2016
	Level I		Level II		Level III		Total
Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)	$	—	$	3,467,956	$	—	$	3,467,956
Subordinated Notes (b)		—		86,063		—		86,063
Freestanding Derivatives — Foreign Currency Contracts		—		2,846		—		2,846
Freestanding Derivatives — Credit Default Swaps		—		7,647		—		7,647
Net Investment Hedges — Foreign Currency Contracts		—		1,677		—		1,677
Freestanding Derivatives
Interest Rate Contracts		1,899		3,866		—		5,765
Foreign Currency Contracts		—		1,063		—		1,063
Securities Sold, Not Yet Purchased		—		105,857		—		105,857
	$	1,899	$	3,676,975	$	—	$	3,678,874

	December 31, 2015
	Level I		Level II		Level III		NAV		Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds	$	—	$	—	$	—	$	155,512	$	155,512
Equity Securities		82,734		53,250		80,849		—		216,833
Partnership and LLC Interests		—		101,399		472,391		—		573,790
Debt Instruments		—		179,465		20,381		—		199,846
Assets of Consolidated CLO Vehicles
Corporate Loans		—		2,886,792		200,771		—		3,087,563
Corporate Bonds		—		379,000		—		—		379,000
Freestanding Derivatives — Foreign Currency Contracts		—		1,400		—		—		1,400
Total Investments of Consolidated Blackstone Funds		82,734		3,601,306		774,392		155,512		4,613,944
Blackstone’s Treasury Cash Management Strategies
Equity Securities		240,464		—		—		—		240,464
Debt Instruments		—		1,069,915		54,657		115,657		1,240,229
Other		—		—		—		201,566		201,566
Total Blackstone’s Treasury Cash Management Strategies		240,464		1,069,915		54,657		317,223		1,682,259
Money Market Funds		460,233		—		—		—		460,233
Net Investment Hedges — Foreign Currency Contracts		—		319		—		—		319
Freestanding Derivatives
Interest Rate Contracts		1,806		406		—		—		2,212
Foreign Currency Contracts		—		2,088		—		—		2,088
Loans and Receivables		—		—		261,994		—		261,994
Other Investments		40,261		—		101,184		17,707		159,152
	$	825,498	$	4,674,034	$	1,192,227	$	490,442	$	7,182,201

	December 31, 2015
	Level I		Level II		Level III		Total
Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)	$	—	$	3,225,064	$	—	$	3,225,064
Subordinated Notes (b)		—		98,371		—		98,371
Freestanding Derivatives — Foreign Currency Contracts		—		6,490		—		6,490
Freestanding Derivatives — Credit Default Swaps		—		6,275		—		6,275
Net Investment Hedges — Foreign Currency Contracts		—		1		—		1
Freestanding Derivatives
Interest Rate Contracts		835		3,453		—		4,288
Foreign Currency Contracts		—		2,042		—		2,042
Credit Default Swaps		—		2,411		—		2,411
Securities Sold, Not Yet Purchased		—		176,667		—		176,667
	$	835	$	3,520,774	$	—	$	3,521,609

(a) Pursuant to GAAP consolidation guidance, the Partnership is required to consolidate all VIEs in which it has been identified as the primary beneficiary, including certain CLO vehicles, and other funds in which a consolidated entity of the Partnership, as the general partner of the fund, has a controlling financial interest. While the Partnership is required to consolidate certain funds, including CLO vehicles, for GAAP purposes, the Partnership has no ability to utilize the assets of these funds and there is no recourse to the Partnership for their liabilities since these are client assets and liabilities.

(b) Senior and subordinate notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (a) the fair value of any beneficial interests held by Blackstone, and (b) the carrying value of any beneficial interests that represent compensation for services.

The following table summarizes the fair value transfers between Level I and Level II for positions that existed as of March 31, 2016 and 2015, respectively:

	Three Months Ended March 31,
	2016		2015
Transfers from Level I into Level II (a)	$	2,114	$	—
Transfers from Level II into Level I (b)	$	28,346	$	5,688

(a) Transfers out of Level I represent those financial instruments for which restrictions exist and adjustments were made to an otherwise observable price to reflect fair value at the reporting date.

(b) Transfers into Level I represent those financial instruments for which an unadjusted quoted price in an active market became available for the identical asset.

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of March 31, 2016:

	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted- Average (a)
Financial Assets
Investments of Consolidated Blackstone Funds
Equity Securities	$	69,289	Discounted Cash Flows	Discount Rate	7.4% - 25.0%	13.1%
				Revenue CAGR	-1.5% - 20.2%	8.1%
				Exit Multiple - EBITDA	4.0x - 18.2x	9.6x
				Exit Multiple - P/E	10.5x - 17.0x	11.3x
				Exit Capitalization Rate	5.5% - 11.4%	8.9%
		5,878	Other	N/A	N/A	N/A
		5,869	Transaction Price	N/A	N/A	N/A
		1,661	Market Comparable Companies	EBITDA Multiple	6.1x	N/A
				Book Value Multiple	0.9x	N/A
		27	Third Party Pricing	N/A	N/A	N/A
Partnership and LLC Interests		413,719	Discounted Cash Flows	Discount Rate	2.1% - 29.2%	9.5%
				Revenue CAGR	-13.8% - 67.1%	8.4%
				Exit Multiple - EBITDA	0.1x - 23.5x	10.3x
				Exit Multiple - P/E	9.3x	N/A
				Exit Capitalization Rate	3.0% - 12.1%	6.4%
		14,342	Third Party Pricing	N/A	N/A	N/A
		9,671	Transaction Price	N/A	N/A	N/A
		7,965	Other	N/A	N/A	N/A
Debt Instruments		14,794	Third Party Pricing	N/A	N/A	N/A
		4,071	Discounted Cash Flows	Discount Rate	8.3% - 52.7%	14.4%
				Revenue CAGR	6.8%	N/A
				Exit Multiple - EBITDA	12.0x	N/A
				Exit Capitalization Rate	1.0% - 8.3%	5.3%
		386	Transaction Pricing	N/A	N/A	N/A
Assets of Consolidated CLO Vehicles		172,442	Third Party Pricing	N/A	N/A	N/A
		16,584	Market Comparable Companies	EBITDA Multiple	4.0x - 15.0x	7.2x
Total Investments of Consolidated Blackstone Funds		736,698
Blackstone’s Treasury Cash Management Strategies	$	15,663	Discounted Cash Flows	Default Rate	1.0% - 2.0%	1.9%
				Recovery Rate	30.0% - 70.0%	69.4%
				Recovery Lag	12 Months	N/A
				Pre-payment Rate	20.0%	N/A
				Reinvestment Rate	LIBOR + 350 bps	LIBOR + 394 bps
					LIBOR + 400 bps
				Discount Rate	8.4% - 13.5%	9.5%
		15,192	Third Party Pricing	N/A	N/A	N/A
Loans and Receivables		222,726	Discounted Cash Flows	Discount Rate	6.8% - 24.8%	12.2%
		47,514	Transaction Price	N/A	N/A	N/A
		17,618	Third Party Pricing	N/A	N/A	N/A
Other Investments		83,210	Discounted Cash Flows	Discount Rate	1.7% - 19.7%	3.9%
				Default Rate	2.0%	N/A
				Recovery Rate	70.0%	N/A
				Recovery Lag	12 Months	N/A
				Pre-payment Rate	20.0%	N/A
				Reinvestment Rate	LIBOR + 400 bps	N/A
		16,199	Transaction Price	N/A	N/A	N/A
Total	$	1,154,820

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of December 31, 2015:

	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted Average (a)
Financial Assets
Investments of Consolidated Blackstone Funds
Equity Securities	$	66,962	Discounted Cash Flows	Discount Rate	7.8% - 25.0%	13.6%
				Revenue CAGR	-5.0% - 61.5%	10.2%
				Exit Multiple - EBITDA	5.0x - 18.2x	9.6x
				Exit Multiple - P/E	10.5x - 17.0x	11.2x
				Exit Capitalization Rate	5.5% - 11.4%	9%
		5,426	Other	N/A	N/A	N/A
		6,722	Transaction Price	N/A	N/A	N/A
		1,710	Market Comparable	EBITDA Multiple	6.5x - 8.0x	6.6x
			Companies	Book Value Multiple	0.9x	N/A
		29	Third Party Pricing	N/A	N/A	N/A
Partnership and LLC Interests		423,588	Discounted Cash Flows	Discount Rate	2.1% - 25.8%	9.3%
				Revenue CAGR	-24.1% - 31.8%	8.6%
				Exit Multiple - EBITDA	0.1x - 23.8x	9.8x
				Exit Multiple - P/E	9.3x	N/A
				Exit Capitalization Rate	2.7% - 12.1%	6.3%
		30,437	Transaction Price	N/A	N/A	N/A
		16,963	Third Party Pricing	N/A	N/A	N/A
		1,403	Other	N/A	N/A	N/A
Debt Instruments	$	16,217	Third Party Pricing	N/A	N/A	N/A
		4,086	Discounted Cash Flows	Discount Rate	6.5% - 52.7%	14.1%
				Revenue CAGR	16.8%	N/A
				Exit Multiple -  EBITDA	12.0x	N/A
				Exit Capitalization Rate	1.0% - 8.3%	5.8%
		78	Transaction Price	N/A	N/A	N/A
Assets of Consolidated CLO Vehicles		180,988	Third Party Pricing	N/A	N/A	N/A
		19,783	Market Comparable Companies	EBITDA Multiple	4.5x - 7.0x	6.5x
Total Investments of Consolidated Blackstone Funds		774,392
Blackstone’s Treasury Cash Management Strategies		32,004	Discounted Cash Flows	Default Rate	1.0% - 2.0%	1.9%
				Recovery Rate	30.0% - 70.0%	67.0%
				Recovery Lag	12 months	N/A
				Pre-payment Rate	20.0%	N/A
				Reinvestment Rate	LIBOR + 400 bps	N/A
				Discount Rate	5.8% - 14.0%	8.6%
		22,653	Third Party Pricing	N/A	N/A	N/A
Loans and Receivables		241,897	Discounted Cash Flows	Discount Rate	6.7% - 20.6%	11.0%
		20,097	Third Party Pricing	N/A	N/A	N/A
Other Investments		81,984	Discounted Cash Flows	Discount Rate	1.4% - 12.5%	3.3%
				Default Rate	2.0%	N/A
				Recovery Rate	70.0%	N/A
				Recovery Lag	12 months	N/A
				Pre-payment Rate	20.0%	N/A
				Reinvestment Rate	LIBOR + 400 bps	N/A
		19,200	Transaction Price	N/A	N/A	N/A
Total	$	1,192,227

N/A Not applicable.

CAGR Compound annual growth rate.

EBITDA Earnings before interest, taxes, depreciation and amortization.

Exit Multiple Ranges include the last twelve months EBITDA, forward EBITDA and price/earnings exit multiples.

Third Party Pricing Third Party Pricing is generally determined on the basis of prices between market participants provided by reputable dealers or pricing services.

(a) Unobservable inputs were weighted based on the fair value of the investments included in the range.

The significant unobservable inputs used in the fair value measurement of the Blackstone’s Treasury Cash Management Strategies, debt instruments and other investments are discount rates, default rates, recovery rates, recovery lag, pre-payment rates and reinvestment rates. Increases (decreases) in any of the discount rates, default rates, recovery lag and pre-payment rates in isolation would result in a lower (higher) fair value measurement. Increases (decreases) in any of the recovery rates and reinvestment rates in isolation would result in a higher (lower) fair value measurement. Generally, a change in the assumption used for default rates may be accompanied by a directionally similar change in the assumption used for recovery lag and a directionally opposite change in the assumption used for recovery rates and pre-payment rates.

The significant unobservable inputs used in the fair value measurement of equity securities, partnership and LLC interests, debt instruments, assets of consolidated CLO vehicles and loans and receivables are discount rates, exit capitalization rates, exit multiples, EBITDA multiples and revenue compound annual growth rates. Increases (decreases) in any of discount rates and exit capitalization rates in isolation can result in a lower (higher) fair value measurement. Increases (decreases) in any of exit multiples and revenue compound annual growth rates in isolation can result in a higher (lower) fair value measurement.

Since December 31, 2015, there have been no changes in valuation techniques within Level II and Level III that have had a material impact on the valuation of financial instruments.

The following tables summarize the changes in financial assets and liabilities measured at fair value for which the Partnership has used Level III inputs to determine fair value and does not include gains or losses that were reported in Level III in prior years or for instruments that were transferred out of Level III prior to the end of the respective reporting period. Total realized and unrealized gains and losses recorded for Level III investments are reported in Investment Income (Loss) and Net Gains (Losses) from Fund Investment Activities in the Condensed Consolidated Statements of Operations.

	Level III Financial Assets at Fair Value Three Months Ended March 31,
	2016												2015
	Investments of Consolidated Funds			Loans and Receivables			Other Investments (a)			Total			Investments of Consolidated Funds			Loans and Receivables			Other Investments (a)			Total
Balance, Beginning of Period	$	774,392		$	261,994		$	155,841		$	1,192,227		$	2,394,823		$	40,397		$	189,385		$	2,624,605
Transfer Out Due to Deconsolidation		—			—			—			—			(1,460,538	)		—			—			(1,460,538	)
Transfer In to Level III (b)		54,626			—			290			54,916			9,314			—			17,125			26,439
Transfer Out of Level III (b)		(61,879	)		—			(4,005	)		(65,884	)		(12,353	)		—			(22,684	)		(35,037	)
Purchases		63,932			298,381			—			362,313			83,503			6,186			24,933			114,622
Sales		(92,578	)		(267,556	)		(20,007	)		(380,141	)		(92,074	)		(4,071	)		(35,153	)		(131,298	)
Settlements		—			(4,294	)		(140	)		(4,434	)		—			(1,144	)		(103	)		(1,247	)
Changes in Gains (Losses) Included in Earnings and Other Comprehensive Income (Loss)		(1,795	)		(667	)		(1,715	)		(4,177	)		(2,227	)		(677	)		(9,705	)		(12,609	)
Balance, End of Period	$	736,698		$	287,858		$	130,264		$	1,154,820		$	920,448		$	40,691		$	163,798		$	1,124,937
Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date	$	(18,484	)	$	(667	)	$	(1,300	)	$	(20,451	)	$	6,352		$	(806	)	$	1,348		$	6,894

	Level III Financial Liabilities at Fair Value Three Months Ended March 31, 2015 (c)
	Collateralized Loan Obligations Senior Notes			Collateralized Loan Obligations Subordinated Notes			Total
Balance, Beginning of Period	$	6,448,352		$	348,752		$	6,797,104
Transfer Out Due to Deconsolidation		(4,168,405	)		(261,934	)		(4,430,339	)
Transfer Out Due to Amended CLO Guidance (d)		(2,279,947	)		(86,818	)		(2,366,765	)
Balance, End of Period	$	—		$	—		$	—

(a) Represents Blackstone’s Treasury Cash Management Strategies and Other Investments.

(b) Transfers in and out of Level III financial assets and liabilities were due to changes in the observability of inputs used in the valuation of such assets and liabilities.

(c) There were no Level III financial liabilities as of and for the three months ended March 31, 2016. There were no changes in unrealized (gains) losses included in earnings related to liabilities still held at either March 31, 2016 or March 31, 2015.

(d) Transfers out due to amended CLO measurement guidance represents the transfer out of Level III for liabilities of consolidated CLO vehicles for which fair value is based on the more observable fair value of CLO assets. Such liabilities are classified as Level II within the fair value hierarchy.