6.	DERIVATIVE FINANCIAL INSTRUMENTS

Blackstone and the consolidated Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain risk management objectives and for general investment purposes. Blackstone may enter into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. Additionally, Blackstone may also enter into derivative contracts in order to hedge its foreign currency risk exposure against the effects of a portion of its non-U.S. dollar denominated currency net investments. 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.

Net Investment Hedges

To manage the potential exposure from adverse changes in currency exchange rates arising from Blackstone’s net investment in foreign operations, during December 2014, Blackstone entered into several foreign currency forward contracts to hedge a portion of the net investment in Blackstone’s non-U.S. dollar denominated foreign operations.

Blackstone uses foreign currency forward contracts to hedge portions of Blackstone’s net investments in foreign operations. The gains and losses due to change in fair value attributable to changes in spot exchange rates on foreign currency derivatives designated as net investment hedges were recognized in Other Comprehensive Income, Net of Tax — Currency Translation Adjustment. For the three months ended March 31, 2018 the resulting loss was $1.4 million. During the three months ended March 31, 2018, Blackstone deconsolidated the foreign investment vehicle for which the foreign currency derivatives were designated as net investment hedges. As a result, $0.8 million was reclassified from Accumulated Other Comprehensive Loss on the Condensed Consolidated Statement of Financial Condition to Other Revenue on the Condensed Consolidated Statement of Operations. Following their de-designation, these foreign currency derivatives will be presented as freestanding derivatives.

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, 2018								December 31, 2017
	Assets				Liabilities				Assets				Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Net Investment Hedges
Foreign Currency Contracts	$	—	$	—	$	—	$	—	$	—	$	—	$	50,857	$	453

Freestanding Derivatives
Blackstone
Interest Rate Contracts		404,005		570		1,599,198		63,103		225,550		2,042		1,530,751		27,275
Foreign Currency Contracts		465,677		2,151		345,181		1,093		279,050		2,097		296,252		2,975
Credit Default Swaps		446		50		1,852		264		2,073		304		2,073		304
Investments of Consolidated Blackstone Funds
Foreign Currency Contracts		101,863		2,922		33,380		1,014		493,181		24,087		264,693		5,628
Credit Default Swaps		35,768		1,819		40,570		4,319		45,670		3,731		45,582		5,163
Total Return Swaps		27,520		772		—		—		25,645		526		—		—

		1,035,279		8,284		2,020,181		69,793		1,071,169		32,787		2,139,351		41,345

	$	1,035,279	$	8,284	$	2,020,181	$	69,793	$	1,071,169	$	32,787	$	2,190,208	$	41,798

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


	Three Months Ended March 31,
	2018			2017
Net Investment Hedges — Foreign Currency Contracts
Hedge Ineffectiveness	$	(8	)	$	(22	)

Freestanding Derivatives
Realized Gains (Losses)
Interest Rate Contracts	$	1,621		$	(940	)
Foreign Currency Contracts		(4,083	)		1,420
Credit Default Swaps		(401	)		5
Total Return Swaps		1			—

	$	(2,862	)	$	485

Net Change in Unrealized Gains (Losses)
Interest Rate Contracts	$	(37,300	)	$	(217	)
Foreign Currency Contracts		(3,728	)		(1,960	)
Credit Default Swaps		(127	)		1,947
Total Return Swaps		57			—

	$	(41,098	)	$	(230	)

As of March 31, 2018 and December 31, 2017, the Partnership had not designated any derivatives as cash flow hedges.