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FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2020

The short-term nature of cash and cash-equivalents, receivables and accounts payable causes each of their carrying values to approximate fair value. The fair value of short-term investments included in cash and cash-equivalents is a Level I valuation. The Company’s other financial assets and financial liabilities by fair-value hierarchy level are set forth below. Please see notes 10 and 18 for the fair value of the Company’s outstanding debt obligations and amounts due from/to affiliates, respectively.


	As of March 31, 2020														As of December 31, 2019
	Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
Assets
U.S. Treasury and other securities ⁽¹⁾	$	8,611	$	—	$	—	$	8,611	$	9,232	$	—	$	—	$	9,232
Corporate investments	—		3,066		25,683		28,749		—		4,717		30,311		35,028
Foreign-currency forward contracts ⁽²⁾	—		3,295		—		3,295		—		—		—		—

Total assets	$	8,611	$	6,361	$	25,683	$	40,655	$	9,232	$	4,717	$	30,311	$	44,260

Liabilities

Foreign-currency forward contracts ⁽³⁾	$	—	$	—	$	—	$	—	$	—	$	(1,703)	$	—	$	(1,703)

(1) Carrying value approximates fair value due to the short-term nature.

(2) Amounts are included in other assets in the condensed consolidated statements of financial condition.

(3) Amounts are included in accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition, except for $94 as of December 31, 2019, which is included within corporate investments in the condensed consolidated statements of financial condition.

Summary of Changes in Fair Value of Level III Investments

The table below sets forth a summary of changes in the fair value of Level III financial instruments:


	Three months ended March 31,
	2020						2019
	Corporate Investments		Contingent Liability		Corporate Investments		Contingent Liability

Beginning balance	$	30,311	$	—	$	45,426	$	(6,657)
Contributions or additions	1,790		—		—		—
Distributions	(2,459)		—		—		—
Net gain (loss) included in earnings	(3,959)		—		2,997		81
Ending balance	$	25,683	$	—	$	48,423	$	(6,576)

Net change in unrealized gains (losses) attributable to financial instruments still held at end of period	$	(3,959)	$	—	$	2,997	$	81

The table below sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the Company’s Level III financial instruments:

Fair Value as of

Significant Unobservable Input

Financial Instrument

March 31, 2020

December 31, 2019

Valuation Technique

Range

Weighted Average

Corporate investment – Limited partnership interests

25,683

30,311

Market approach
(value of underlying assets)

Not applicable

Summary of Changes in Fair Value of Level III Investments

The table below sets forth a summary of changes in the fair value of Level III financial instruments:


	Three months ended March 31,
	2020						2019
	Corporate Investments		Contingent Liability		Corporate Investments		Contingent Liability

Beginning balance	$	30,311	$	—	$	45,426	$	(6,657)
Contributions or additions	1,790		—		—		—
Distributions	(2,459)		—		—		—
Net gain (loss) included in earnings	(3,959)		—		2,997		81
Ending balance	$	25,683	$	—	$	48,423	$	(6,576)

Net change in unrealized gains (losses) attributable to financial instruments still held at end of period	$	(3,959)	$	—	$	2,997	$	81

The table below sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the Company’s Level III financial instruments:

Fair Value as of

Significant Unobservable Input

Financial Instrument

March 31, 2020

December 31, 2019

Valuation Technique

Range

Weighted Average

Corporate investment – Limited partnership interests

25,683

30,311

Market approach
(value of underlying assets)

Not applicable

The following tables set forth a summary of changes in the fair value of Level III investments:


	Corporate Debt – Bank Debt		Corporate Debt – All Other		Equities – Common Stock		Equities – Preferred Stock		Real Estate		Total
Three months ended March 31, 2020
Beginning balance	$	77,736	$	103,172	$	130,437	$	657	$	230,741	$	542,743

Transfers into Level III	117,176		53,522		33		—		—		170,731
Transfers out of Level III	(1,127)		(12,093)		—		—		—		(13,220)
Purchases	37,421		12,858		264,909		—		38,663		353,851
Sales	(174)		(3,014)		—		—		—		(3,188)
Realized losses, net	(3)		(58)		—		—		—		(61)
Unrealized depreciation, net	(31,234)		(12,107)		(31,148)		(326)		—		(74,815)
Ending balance	$	199,795	$	142,280	$	364,231	$	331	$	269,404	$	976,041
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period	$	(23,552)	$	(7,325)	$	(3,868)	$	(312)	$	9,941	$	(25,116)
Three months ended March 31, 2019
Beginning balance	$	136,055	$	185,378	$	3,063	$	1,426	$	—	$	325,922
Transfers into Level III	17,510		8,754		5,410		—		—		31,674
Transfers out of Level III	(33,820)		(6,280)		—		—		—		(40,100)
Purchases	7,097		17,158		—		—		—		24,255
Sales	(10,017)		(6,801)		(127)		—		—		(16,945)
Realized gains (losses), net	(9)		(361)		26		—		—		(344)
Unrealized appreciation (depreciation), net	(1,871)		3,353		(948)		56		—		590
Ending balance	$	114,945	$	201,201	$	7,424	$	1,482	$	—	$	325,052
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period	$	(3,758)	$	2,761	$	(948)	$	56	$	—	$	(1,889)

Valuation of Investments and Other Financial Instruments

The table below summarizes the investments and other financial instruments of the consolidated funds by fair-value hierarchy level:


	As of March 31, 2020																					As of December 31, 2019
			Level I			Level II			Level III			Total			Level I			Level II			Level III			Total
Assets
Investments:
Corporate debt – bank debt	$	—		$	4,893,169		$	199,795		$	5,092,964		$	—		$	5,911,523		$	149,642		$	6,061,165
Corporate debt – all other	—			881,413			142,280			1,023,693			—			903,246			31,266			934,512
Equities – common stock	379			96			364,231			364,706			552			345			130,437			131,334
Equities – preferred stock				—			331			331			—			—			657			657
Real estate	—			3,048			269,404			272,452			—			—			230,741			230,741
Total investments	379			5,777,726			976,041			6,754,146			552			6,815,114			542,743			7,358,409
Derivatives:
Foreign-currency forward contracts	—			7,892			—			7,892			27			6,863			—			6,890
Options and futures	—			726			—			726			—			—			—			—
Total derivatives ⁽¹⁾	—			8,618			—			8,618			27			6,863			—			6,890
Total assets	$	379		$	5,786,344		$	976,041		$	6,762,764		$	579		$	6,821,977		$	542,743		$	7,365,299

Liabilities
CLO debt obligations:
Senior secured notes	$	—		$	(5,126,069)		$	—		$	(5,126,069)		$	—		$	(5,613,846)		$	—		$	(5,613,846)
Subordinated notes	—			(104,536)			—			(104,536)			—			(154,153)			—			(154,153)
Total CLO debt obligations ⁽²⁾	—			(5,230,605)			—			(5,230,605)			—			(5,767,999)			—			(5,767,999)


Derivatives:
Foreign-currency forward contracts	—			(27,353)			—			(27,353)			(202)			(2,349)			—			(2,551)
Options and futures	(122)			—			—			(122)			—			—			—			—
Total derivatives ⁽³⁾	(122)			(27,353)			—			(27,475)			(202)			(2,349)			—			(2,551)
Total liabilities	$	(122)		$	(5,257,958)		$	—		$	(5,258,080)		$	(202)		$	(5,770,348)		$	—		$	(5,770,550)

(1) Amounts are included in other assets under “assets of consolidated funds” in the condensed consolidated statements of financial condition.

(2) The fair value of CLO liabilities is classified based on the more observable fair value of CLO assets. Please see notes 2 and 10 for more information.

(3) Amounts are included in accounts payable, accrued expenses and other liabilities under “liabilities of consolidated funds” in the condensed consolidated statements of financial condition

Summary of Valuation Techniques and Quantitative Information

The following table sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the consolidated funds’ Level III investments as of March 31, 2020:

Investment Type

Fair Value

Valuation Technique

Significant Unobservable

Inputs⁽¹⁾⁽²⁾

Range

Weighted Average ⁽³⁾

Credit-oriented investments:

Consumer discretionary:

15,395

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

Financials:

118,178

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

Health care:

24,000

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

Real estate:

56,043

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

78,835

Recent transaction price⁽⁸⁾

Quoted prices

Not applicable

Other:

49,624

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

Equity investments:

99,630

Discounted cash flow ⁽⁴⁾

Discount rate

6% – 8%

218,356

Recent transaction price ⁽⁸⁾

Quoted prices

Not applicable

46,576

Market approach

(comparable companies) ⁽⁶⁾

Earnings multiple ⁽⁷⁾

5x - 7x

Real estate investments:

269,404

Recent transaction price ⁽⁸⁾

Quoted prices

Not applicable

Total Level III
investments

976,041

Investment Type

Fair Value

Valuation Technique

Significant Unobservable

Inputs⁽¹⁾⁽²⁾

Range

Weighted Average ⁽³⁾

Credit-oriented investments:

Consumer discretionary:

16,836

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

Financials:

17,274

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

Health care:

26,863

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

Real estate:

16,755

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

71,906

Recent transaction price ⁽⁴⁾

Quoted prices

Not applicable

Other:

31,274

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

Equity investments:

130,341

Discounted cash flow ⁽⁴⁾

Discount rate

6% – 8%

753

Recent market information ⁽⁵⁾

Quoted prices

Not applicable

Real estate-oriented:

230,741

Recent transaction price ⁽⁵⁾

Quoted prices

Not applicable

Total Level III
investments

542,743

(1) The discount rate is the significant unobservable input used in the fair-value measurement of performing credit-oriented investments in which the consolidated funds do not have a controlling interest in the underlying issuer, as well as certain equity investments and real estate loan portfolios. An increase (decrease) in the discount rate would result in a lower (higher) fair-value measurement.

(2) Multiple of either earnings or underlying assets is the significant unobservable input used in the market approach for the fair-value measurement of distressed credit-oriented investments, credit-oriented investments in which the consolidated funds have a controlling interest in the underlying issuer, equity investments and certain real estate-oriented investments. An increase (decrease) in the multiple would result in a higher (lower) fair-value measurement.

(3) The weighted average is based on the fair value of the investments included in the range.

(4) A discounted cash-flow method is generally used to value performing credit-oriented investments in which the consolidated funds do not have a controlling interest in the underlying issuer, as well as certain equity investments, real estate-oriented investments and real estate loan portfolios.

(5) Certain investments are valued using vendor prices or broker quotes for the subject or similar securities. Generally, investments valued in this manner are classified as Level III because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities, or may require adjustment for investment-specific factors or restrictions.

(6) A market approach is generally used to value distressed investments and investments in which the consolidated funds have a controlling interest in the underlying issuer.

(7) Earnings multiples are based on comparable public companies and transactions with comparable companies. The Company typically utilizes multiples of EBITDA; however, in certain cases the Company may use other earnings multiples believed to be most relevant to the investment. The Company typically applies the multiple to trailing twelve-months’ EBITDA. However, in certain cases other earnings measures, such as pro forma EBITDA, may be utilized if deemed to be more relevant.

(8) Certain investments are valued based on recent transactions, generally defined as investments purchased or sold within six months of the valuation date. The fair value may also be based on a pending transaction expected to close after the valuation date.