Fair Value (Tables)

3 Months Ended

Mar. 31, 2014

Valuation of the Financial Assets and Liabilities by the Fair Value Hierarchy

The following tables summarize the valuation of the Company’s financial assets and liabilities by the fair value hierarchy as of March 31, 2014 and December 31, 2013, respectively:



	As of March 31, 2014
	Level I⁽⁵⁾		Level II⁽⁵⁾		Level III		Total
Assets
Investment in AAA Investments⁽¹⁾	$	—	$	—	$	2,147,415	$	2,147,415
Investments held by Apollo Senior Loan Fund⁽¹⁾	—		29,909		—		29,909
Investments in HFA and Other⁽¹⁾	—		—		59,324		59,324
Athene and AAA Services Derivatives⁽²⁾	—		—		206,476		206,476
Investments of VIEs, at fair value⁽⁴⁾	4,378		12,412,705		1,837,451		14,254,534
Total Assets	$	4,378	$	12,442,614	$	4,250,666	$	16,697,658

Liabilities
Debt of VIEs, at fair value⁽⁴⁾	$	—	$	2,105,935	$	10,422,320	$	12,528,255
Contingent Consideration Obligations⁽³⁾	—		—		126,473		126,473
Total Liabilities	$	—	$	2,105,935	$	10,548,793	$	12,654,728



	As of December 31, 2013
	Level I⁽⁵⁾		Level II⁽⁵⁾		Level III		Total
Assets
Investment in AAA Investments⁽¹⁾	$	—	$	—	$	1,942,051	$	1,942,051
Investments held by Apollo Senior Loan Fund⁽¹⁾	—		28,711		892		29,603
Investments in HFA and Other⁽¹⁾	—		—		40,373		40,373
Athene and AAA Services Derivatives⁽²⁾	—		—		130,709		130,709
Investments of VIEs, at fair value⁽⁴⁾	3,455		12,203,370		1,919,537		14,126,362
Total Assets	$	3,455	$	12,232,081	$	4,033,562	$	16,269,098

Liabilities
Debt of VIEs, at fair value⁽⁴⁾	$	—	$	2,429,815	$	9,994,147	$	12,423,962
Contingent Consideration Obligations⁽³⁾	—		—		135,511		135,511
Total Liabilities	$	—	$	2,429,815	$	10,129,658	$	12,559,473


(1)	See note 3 for further disclosure regarding the investment in AAA Investments, investments held by Apollo Senior Loan Fund, and investments in HFA and Other.


(2)	See note 13 for further disclosure regarding the Athene Services Derivative and the AAA Services Derivative.


(3)	See note 14 for further disclosure regarding Contingent Consideration Obligations.


(4)	See note 4 for further disclosure regarding VIEs.


(5)	All level I and II investments and liabilities were valued using third party pricing.

Transfers between Level I and Level II and Level II and Level III

The following table summarizes the fair value transfers of financial assets between Level II and Level III for positions that existed as of March 31, 2014 and 2013, respectively:



	For the Three Months Ended March 31,
	2014	2013
Transfers from Level III into Level II⁽¹⁾	$309,942	$338,294
Transfers from Level II into Level III⁽¹⁾	141,353	272,593


(1)	Transfers between Level II and III were a result of subjecting the broker quotes on these investments to various criteria which include the number and quality of broker quotes, the standard deviation of obtained broker quotes and the percentage deviation from independent pricing services.

Changes in Fair Value in Financial Assets, Measured at Fair Value and Characterized as Level III Investments

The following tables summarize the changes in fair value in financial assets, which are measured at fair value and characterized as Level III investments, for the three months ended March 31, 2014 and 2013:



	For the Three Months Ended March 31, 2014
	Investment in AAA Investments		Investments held by Apollo Senior Loan Fund			Investments in HFA and Other			Athene and AAA Services Derivatives		Investments of Consolidated VIEs			Total
Balance, Beginning of Period	$	1,942,051	$	892		$	40,373		$	130,709	$	1,919,537		$	4,033,562
Elimination of investments attributable to consolidation of VIEs	—		—			—			—		(14,620		)	(14,620		)
Fees	—		—			—			61,728		—			61,728
Purchases	—		—			871			—		265,063			265,934
Sale of investments/Distributions	—		(6		)	(78		)	—		(181,435		)	(181,519		)
Net realized losses	—		—			—			—		(954		)	(954		)
Changes in net unrealized gains	205,364		28			18,158			14,039		17,535			255,124
Transfer into Level III	—		—			—			—		141,353			141,353
Transfer out of Level III	—		(914		)	—			—		(309,028		)	(309,942		)
Balance, End of Period	$	2,147,415	$	—		$	59,324		$	206,476	$	1,837,451		$	4,250,666
Change in net unrealized gains included in Net Gains from Investment Activities related to investments still held at reporting date	$	205,364	$	28		$	18,158		$	—	$	—		$	223,550
Change in net unrealized gains included in Net Gains from Investment Activities of Consolidated VIEs related to investments still held at reporting date	—		—			—			—		14,491			14,491
Change in net unrealized gains included in Other Income, net related to assets still held at reporting date	—		—			—			14,039		—			14,039



	For the Three Months Ended March 31, 2013
	Investment in AAA Investments			Investments held by Apollo Senior Loan Fund			Investments in HFA and Other			Athene and AAA Services Derivatives		Investments of Consolidated VIEs			Total
Balance, Beginning of Period	$	1,666,448		$	590		$	50,311		$	2,126	$	1,643,465		$	3,362,940
Elimination of investments attributable to consolidation of VIEs	—			—			—			—		(3,902		)	(3,902		)
Fees	—			—			—			22,001		—			22,001
Purchases	—			22			1,435			—		384,161			385,618
Sale of investments/Distributions	(62,189		)	—			(902		)	—		(186,861		)	(249,952		)
Net realized losses	—			—			—			—		(4,442		)	(4,442		)
Changes in net unrealized gains (losses)	47,770			9			4,563			—		(1,353		)	50,989
Transfer into Level III	—			—			—			—		272,593			272,593
Transfer out of Level III	—			(621		)	—			—		(337,673		)	(338,294		)
Balance, End of Period	$	1,652,029		$	—		$	55,407		$	24,127	$	1,765,988		$	3,497,551
Change in net unrealized gains included in Net Gains from Investment Activities related to investments still held at reporting date	$	47,770		$	9		$	4,563		$	—	$	—		$	52,342
Change in net unrealized losses included in Net Gains from Investment Activities of Consolidated VIEs related to investments still held at reporting date	—			—			—			—		(8,655		)	(8,655		)

Changes in Fair Value in Financial Liabilities, Measured at Fair Value and Characterized as Level III Liabilities

The following table summarizes the changes in fair value in financial liabilities, which are measured at fair value and characterized as Level III liabilities:



	For the Three Months Ended March 31,
	2014										2013
	Debt of Consolidated VIEs			Contingent Consideration Obligations				Total			Debt of Consolidated VIEs			Contingent Consideration Obligations				Total
Balance, Beginning of Period	$	9,994,147		$	135,511			$	10,129,658		$	11,834,955		$	142,219			$	11,977,174
Elimination of debt attributable to consolidation of VIEs	(15,394		)	—				(15,394		)	(3,937		)	—				(3,937		)
Additions	750,966			—				750,966			332,250			—				332,250
Payments	(558,608		)	(14,558		)		(573,166		)	(911,775		)	(24,419		)		(936,194		)
Net realized (gains) losses	(357		)	—				(357		)	7,603			—				7,603
Changes in net unrealized losses / fair value	5,633			5,520			⁽¹⁾	11,153			88,236			13,431			⁽¹⁾	101,667
Transfers into Level III	316,252			—				316,252			—			—				—
Transfers out of Level III	(70,319		)	—				(70,319		)	—			—				—
Balance, End of Period	$	10,422,320		$	126,473			$	10,548,793		$	11,347,332		$	131,231			$	11,478,563
Change in net unrealized losses included in Net Gains from Investment Activities of consolidated VIEs related to liabilities still held at reporting date	$	4,996		$	—			$	4,996		$	87,186		$	—			$	87,186


(1)	Changes in fair value of contingent consideration obligations are recorded in profit sharing expense in the condensed consolidated statements of operations.

Quantitative Inputs and Assumptions used for Financial Assets and Liabilities Categorized in Level III

The following tables summarize the quantitative inputs and assumptions used for financial assets and liabilities categorized in Level III of the fair value hierarchy as of March 31, 2014 and December 31, 2013:



	As of March 31, 2014
	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted Average
Financial Assets
Investments of Consolidated Apollo Funds:
AAA Investments⁽¹⁾	$	2,147,415	Net Asset Value	N/A	N/A	N/A
Investments in HFA and Other	59,324		Third Party Pricing⁽²⁾	N/A	N/A	N/A
Athene and AAA Services Derivatives	206,476		Transaction	Private Placement Price	$26.00	$26.00
Investments of Consolidated VIEs:
Bank Debt Term Loans	60,760		Other	N/A	N/A	N/A
Bank Debt Term Loans	22,270		Market Comparable Companies	Comparable Multiples	5.0x	5.0x
Stocks	6,103		Market Comparable Companies	Comparable Multiples	6.5x - 11.2x	8.0x
Corporate loans/ bonds	1,748,318		Third Party Pricing⁽²⁾	N/A	N/A	N/A
Total Investments of Consolidated VIEs	1,837,451
Total Financial Assets	$	4,250,666
Financial Liabilities
Liabilities of Consolidated VIEs:
Subordinated Notes	$	835,484	Discounted Cash Flow	Discount Rate	10.0% - 12.0%	11.1%
				Default Rate	1.0% - 1.5%	1.3%
				Recovery Rate	75.0%	75.0%
Senior Secured Notes	2,148,989		Discounted Cash Flow	Discount Rate	1.7% - 2.0%	1.8%
				Default Rate	2.0%	2.0%
				Recovery Rate	20.0% - 70.0%	65.0%
Senior Secured and Subordinated Notes	7,437,847		Third Party Pricing⁽²⁾	N/A	N/A	N/A
Total Liabilities of Consolidated VIEs	10,422,320
Contingent Consideration Obligation	126,473		Discounted Cash Flow	Discount Rate	10.5% - 18.5%	15.4%
Total Financial Liabilities	$	10,548,793


(1)	The following table summarizes a look-through of the Company’s Level III investments by valuation methodology of the underlying securities held by AAA Investments:



	As of March 31, 2014
					% of Investment of AAA Investments
Approximate values based on net asset value of the underlying funds, which are based on the funds underlying investments that are valued using the following:
Transaction	$	2,168,531		⁽³⁾	100	%
Total Investments	2,168,531				100	%
Other net liabilities⁽⁴⁾	(21,116		)
Total Net Assets	$	2,147,415


(2)	These securities are valued primarily using broker quotes.


(3)	Represents the investment by AAA Investments in Athene, which is valued using the price at which the Athene Holding shares were offered in the Athene Private Placement. The unobservable inputs and respective ranges used are the same as noted for the Athene and AAA Services Derivatives in the table above. See note 17 for discussion of the Athene Private Placement.

(4)

Balances include other assets, liabilities and general partner interests of AAA Investments. Balance at March 31, 2014 is primarily comprised of net assets allocated to the general partner of $122.6 million less $99.0 million in note receivable from an affiliate. Carrying values approximate fair value for other assets and liabilities. The note receivable from an affiliate is a Level III asset valued using the price at which the Athene Holding shares were offered in the Athene Private Placement. The unobservable inputs and respective ranges used are the same as noted for the Athene and AAA Services Derivatives in the table above.



	As of December 31, 2013
	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted Average
Financial Assets
Investments of Consolidated Apollo Funds:
AAA Investments⁽¹⁾	$	1,942,051	Net Asset Value	N/A	N/A	N/A
Apollo Senior Loan Fund	892		Third Party Pricing⁽²⁾	N/A	N/A	N/A
Investments in HFA and Other	40,373		Third Party Pricing⁽²⁾	N/A	N/A	N/A
Athene and AAA Services Derivatives	130,709		Discounted Cash Flows	Discount Rate	15.0%	15.0%
Athene and AAA Services Derivatives	130,709		Discounted Cash Flows	Implied Multiple	1.1x	1.1x
Investments of Consolidated VIEs:
Bank Debt Term Loans	18,467		Other	N/A	N/A	N/A
Stocks	7,938		Market Comparable Companies	Comparable Multiples	6.0x - 9.5x	7.9x
Corporate loans/ bonds	1,893,132		Third Party Pricing⁽²⁾	N/A	N/A	N/A
Total Investments of Consolidated VIEs	1,919,537
Total Financial Assets	$	4,033,562
Financial Liabilities
Liabilities of Consolidated VIEs:
Subordinated Notes	$	835,149	Discounted Cash Flow	Discount Rate	10.0% - 12.0%	10.8%
				Default Rate	1.0% - 1.5%	1.3%
				Recovery Rate	75.0%	75.0%
Senior Secured Notes	2,132,576		Discounted Cash Flow	Discount Rate	1.9% - 2.2%	2.0%
				Default Rate	2.0%	2.0%
				Recovery Rate	30.0% - 70.0%	65.2%
Senior Secured and Subordinated Notes	7,026,422		Third Party Pricing⁽²⁾	N/A	N/A	N/A
Total Liabilities of Consolidated VIEs	9,994,147
Contingent Consideration Obligation	135,511		Discounted Cash Flow	Discount Rate	10.5% - 18.5%	15.3%
Total Financial Liabilities	$	10,129,658


(1)	The following table summarizes a look-through of the Company’s Level III investments by valuation methodology of the underlying securities held by AAA Investments:



	As of December 31, 2013
					% of Investment of AAA Investments
Approximate values based on net asset value of the underlying funds, which are based on the funds underlying investments that are valued using the following:
Discounted Cash Flow	$	1,950,010		⁽³⁾	100	%
Total Investments	1,950,010				100	%
Other net liabilities⁽⁴⁾	(7,959		)
Total Net Assets	$	1,942,051


(2)	These securities are valued primarily using broker quotes.


(3)	Represents the investment by AAA Investments in Athene, which is valued using a discounted cash flow model. The unobservable inputs and respective ranges used in the discounted cash flow model are the same as noted for the Athene and AAA Services Derivatives in the table above.

(4)

Balances include other assets, liabilities and general partner interests of AAA Investments. Balance at December 31, 2013 is primarily comprised of net assets allocated to the general partner of $102.1 million less $89.0 million in note receivable from an affiliate. Carrying values approximate fair value for other assets and liabilities (except for the note receivable from an affiliate) and, accordingly, extended valuation procedures are not required. The note receivable from an affiliate is a Level III asset valued using a discounted cash flow model. The unobservable inputs and respective ranges used in the discounted cash flow model are the same as noted for the Athene and AAA Services Derivatives in the table above.

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring and/or nonrecurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset.

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