DERIVATIVES AND HEDGING

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The fair value of freestanding derivatives consisted of the following:


	Assets				Liabilities
	Notional		Fair Value		Notional		Fair Value
As of September 30, 2020
Foreign-currency forward contracts	$	19,980	$	221	$	(261,846)	$	(8,733)



As of December 31, 2019
Foreign-currency forward contracts	$	—	$	—	$	(156,281)	$	(1,703)

Realized and unrealized gains and losses arising from freestanding derivatives were recorded in the condensed consolidated statements of operations as follows:


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019

Investment income	$	(6,503)	$	16,206	$	(4,906)	$	11,429
General and administrative expense (1)	(3,288)		5,274		(5,926)		5,287
Total	$	(9,791)	$	21,480	$	(10,832)	$	16,716

(1) To the extent that the Company’s freestanding derivatives are utilized to hedge its foreign-currency exposure to investment income and management fees earned from consolidated funds, the related hedged items are eliminated in consolidation, with the derivative impact (a positive number reflects a reduction in expenses) reflected in consolidated general and administrative expense.

There were no derivatives outstanding that were designated as hedging instruments for accounting purposes as of September 30, 2020 and December 31, 2019. Additionally, the Company had not designated any derivatives as fair-value hedges or hedges of net investments in foreign operations as of September 30, 2020 and December 31, 2019.

Derivatives Held By Consolidated Funds

Certain consolidated funds utilize derivatives in their ongoing investment operations. These derivatives primarily consist of foreign-currency forward contracts and options utilized to manage currency risk, interest-rate swaps to hedge interest-rate risk, options and futures used to hedge certain exposures for specific securities, and total-return swaps utilized mainly to obtain exposure to leveraged loans or to participate in foreign markets not readily accessible. The primary risk exposure for options and futures is price, while the primary risk exposure for total-return swaps is credit. None of the derivative instruments are accounted for as a hedging instrument utilizing hedge accounting.

The fair value of derivatives held by the consolidated funds consisted of the following:


	Assets				Liabilities
	Notional		Fair Value		Notional		Fair Value
As of September 30, 2020
Foreign-currency forward contracts	$	44,310	$	319	$	(17,045)	$	(375)
Total-return and interest-rate and credit default swaps	—		—		(3,783)		(159)
Options and futures	737		20		(6,885)		(12)
Total	$	45,047	$	339	$	(27,713)	$	(546)

As of December 31, 2019
Foreign-currency forward contracts	$	166,917	$	6,890	$	(140,276)	$	(2,551)

The impact of derivatives held by the consolidated funds in the consolidated statements of operations was as follows:


	Three months ended September 30,
	2020				2019
	Net Realized Gain (Loss) on Investments		Net Change in Unrealized Appreciation (Depreciation) on Investments		Net Realized Gain (Loss) on Investments		Net Change in Unrealized Appreciation (Depreciation) on Investments

Foreign-currency forward contracts	$	192	$	417	$	(4,300)	$	(276)
Total-return and interest-rate and credit default swaps	68		(6)		—		—
Options and futures	(114)		(40)		—		—
Total	$	146	$	371	$	(4,300)	$	(276)


	Nine months ended September 30,
	2020				2019
	Net Realized Gain (Loss) on Investments		Net Change in Unrealized Appreciation (Depreciation) on Investments		Net Realized Gain (Loss) on Investments		Net Change in Unrealized Appreciation (Depreciation) on Investments

Foreign-currency forward contracts	$	(11,200)	$	(23,483)	$	(1,960)	$	412
Total-return and interest-rate and credit default swaps	68		(6)		—		—
Options and futures	(4)		(157)		—		—
Total	$	(11,136)	$	(23,646)	$	(1,960)	$	412

Balance Sheet Offsetting

The Company recognizes all derivatives as assets or liabilities at fair value in its condensed consolidated statements of financial condition. In connection with its derivative activities, the Company generally enters into agreements subject to enforceable master netting arrangements that allow the Company to offset derivative assets and liabilities in the same currency by specific derivative type or, in the event of default by the counterparty, to offset derivative assets and liabilities with the same counterparty. While these derivatives are eligible to be offset in accordance with applicable accounting guidance, the Company has elected to present derivative assets and liabilities based on gross fair value in its condensed consolidated statements of financial condition. The table below sets forth the setoff rights and related arrangements associated with derivatives held by the Company. The “gross

amounts not offset in statements of financial condition” columns represent derivatives that management has elected not to offset in the condensed consolidated statements of financial condition even though they are eligible to be offset in accordance with applicable accounting guidance.


	Gross and Net Amounts of Assets (Liabilities) Presented		Gross Amounts Not Offset in Statements of Financial Condition				Net Amount
As of September 30, 2020			Derivative Assets (Liabilities)		Cash Collateral Received (Pledged)
Derivative Assets:
Foreign-currency forward contracts	$	221	$	221	$	—	$	—


Derivative assets of consolidated funds:
Foreign-currency forward contracts	$	319	$	—	$	—	$	319
Options and futures	20		—		—		20
Total	$	560	$	221	$	—	$	339

Derivative Liabilities:
Foreign-currency forward contracts	$	(8,733)	$	(221)	$	—	$	(8,512)
Derivative liabilities of consolidated funds:
Foreign-currency forward contracts	(375)		—		—		(375)
Total-return and interest-rate and credit default swaps	(159)		—		—		(159)
Options and futures	(12)		—		—		(12)
Subtotal	(546)		—		—		(546)
Total	$	(9,279)	$	(221)	$	—	$	(9,058)


	Gross and Net Amounts of Assets (Liabilities) Presented		Gross Amounts Not Offset in Statements of Financial Condition				Net Amount
As of December 31, 2019			Derivative Assets (Liabilities)		Cash Collateral Received (Pledged)
Derivative Assets:



Derivative assets of consolidated funds:
Foreign-currency forward contracts	$	6,890	$	—	$	—	$	6,890




Derivative Liabilities:
Foreign-currency forward contracts	$	(1,703)	$	—	$	—	$	(1,703)
Derivative liabilities of consolidated funds:
Foreign-currency forward contracts	(2,551)		—		—		(2,551)
Total	$	(4,254)	$	—	$	—	$	(4,254)