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Fair Value Measurement
 9 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]  
Fair Value Measurement
Fair Value Measurement
The fair value measurement accounting guidance establishes a hierarchal disclosure framework which ranks the observability of market price inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, will generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.
Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:
Level I – inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The type of financial instruments included in Level I include unrestricted securities, including equities and derivatives, listed in active markets. The Partnership does not adjust the quoted price for these instruments, even in situations where the Partnership holds a large position and a sale could reasonably impact the quoted price.
Level II – inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The type of financial instruments in this category includes less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs. Investments in hedge funds are classified in this category when their net asset value is redeemable without significant restriction.
Level III – inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately-held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs. Investments in fund of funds are generally included in this category.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.
In certain cases, debt and equity securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices, market transactions in comparable investments and various relationships between investments.
 
The following table summarizes the Partnership’s assets and liabilities measured at fair value on a recurring basis by the above fair value hierarchy levels as of September 30, 2015:
 
(Dollars in millions)
Level I
 
Level II
 
Level III
 
Total
Assets
 
 
 
 
 
 
 
Investments of Consolidated Funds:
 
 
 
 
 
 
 
Equity securities
$
237.1

 
$
71.8

 
$
956.0

 
$
1,264.9

Bonds
—

 
—

 
1,229.2

 
1,229.2

Loans
—

 
—

 
15,482.2

 
15,482.2

Partnership and LLC interests(1)
—

 
—

 
3,350.2

 
3,350.2

Hedge funds
—

 
2,660.3

 
—

 
2,660.3

Other
—

 
—

 
3.3

 
3.3

 
237.1

 
2,732.1

 
21,020.9

 
23,990.1

Trading securities
—

 
—

 
1.6

 
1.6

Foreign currency forward contracts
—

 
13.3

 
—

 
13.3

Restricted securities of Consolidated Funds
7.8

 
—

 
8.7

 
16.5

Total
$
244.9

 
$
2,745.4

 
$
21,031.2

 
$
24,021.5

Liabilities
 
 
 
 
 
 
 
Loans payable of Consolidated Funds
$
—

 
$
—

 
$
16,665.1

 
$
16,665.1

Derivative instruments of the CLOs
—

 
—

 
25.8

 
25.8

Contingent consideration(2)
—

 
—

 
16.6

 
16.6

Loans payable of a consolidated real estate VIE
—

 
—

 
109.1

 
109.1

Interest rate swaps
—

 
1.4

 
—

 
1.4

Foreign currency forward contracts
—

 
9.3

 
—

 
9.3

Total
$
—

 
$
10.7

 
$
16,816.6

 
$
16,827.3

 
(1)
Balance represents Fund Investments that the Partnership consolidates one fiscal quarter in arrears.
(2)
Balance relates to contingent cash and equity consideration associated with the acquisitions of Claren Road, AlpInvest, ESG, Carlyle Commodity Management L.L.C. (“Carlyle Commodity Management”, formerly, Vermillion) and Metropolitan, excluding employment-based contingent consideration (see Note 9).
The following table summarizes the Partnership’s assets and liabilities measured at fair value on a recurring basis by the above fair value hierarchy levels as of December 31, 2014:
 
(Dollars in millions)
Level I
 
Level II
 
Level III
 
Total
Assets
 
 
 
 
 
 
 
Investments of Consolidated Funds:
 
 
 
 
 
 
 
Equity securities
$
346.8

 
$
156.8

 
$
1,968.5

 
$
2,472.1

Bonds
—

 
—

 
1,235.8

 
1,235.8

Loans
—

 
—

 
15,084.9

 
15,084.9

Partnership and LLC interests(1)
—

 
—

 
3,481.0

 
3,481.0

Hedge funds
—

 
3,753.5

 
—

 
3,753.5

Other
—

 
—

 
1.5

 
1.5

 
346.8

 
3,910.3

 
21,771.7

 
26,028.8

Trading securities
—

 
—

 
3.3

 
3.3

Restricted securities of Consolidated Funds
4.0

 
—

 
8.6

 
12.6

Total
$
350.8

 
$
3,910.3

 
$
21,783.6

 
$
26,044.7

Liabilities
 
 
 
 
 
 
 
Loans payable of Consolidated Funds
$
—

 
$
—

 
$
16,052.2

 
$
16,052.2

Derivative instruments of the CLOs
—

 
—

 
17.2

 
17.2

Contingent consideration(2)
—

 
—

 
51.1

 
51.1

Loans payable of a consolidated real estate VIE
—

 
—

 
146.2

 
146.2

Interest rate swaps
—

 
3.2

 
—

 
3.2

Total
$
—

 
$
3.2

 
$
16,266.7

 
$
16,269.9

 
(1)
Balance represents Fund Investments that the Partnership consolidates one fiscal quarter in arrears.
(2)
Balance relates to contingent cash and equity consideration associated with the acquisitions of Claren Road, AlpInvest, ESG, Carlyle Commodity Management and Metropolitan, excluding employment-based contingent consideration (see Note 9).
 
Transfers from Level II to Level I during the nine months ended September 30, 2015 were due to the expiration of transferability restrictions on certain equity securities of Consolidated Funds that were previously classified as Level II. There were no transfers from Level II to Level I during the nine months ended September 30, 2014.

Investment professionals with responsibility for the underlying investments are responsible for preparing the investment valuations pursuant to the policies, methodologies and templates prepared by the Partnership’s valuation group, which is a team made up of dedicated valuation professionals reporting to the Partnership’s chief accounting officer. The valuation group is responsible for maintaining the Partnership’s valuation policy and related guidance, templates and systems that are designed to be consistent with the guidance found in ASC 820, Fair Value Measurement. These valuations, inputs and preliminary conclusions are reviewed by the fund accounting teams. The valuations are then reviewed and approved by the respective fund valuation subcommittees, which are comprised of the respective fund head(s), segment head, chief financial officer and chief accounting officer, as well as members of the valuation group. The valuation group compiles the aggregate results and significant matters and presents them for review and approval by the global valuation committee, which is comprised of the Partnership’s co-chief executive officers, president and chief operating officer, chief risk officer, chief financial officer, chief accounting officer, deputy chief investment officers for Corporate Private Equity, the business segment heads, and observed by the chief compliance officer, the director of internal audit and the Partnership’s audit committee. Additionally, each quarter a sample of valuations are reviewed by external valuation firms.
In the absence of observable market prices, the Partnership values its investments using valuation methodologies applied on a consistent basis. For some investments little market activity may exist. Management’s determination of fair value is then based on the best information available in the circumstances and may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for non-performance and liquidity risks. Investments for which market prices are not observable include private investments in the equity of operating companies and real estate properties, and certain debt positions. The valuation technique for each of these investments is described below:
Private Equity and Real Estate Investments – The fair values of private equity investments are determined by reference to projected net earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), the discounted cash flow method, public market or private transactions, valuations for comparable companies or sales of comparable assets, and other measures which, in many cases, are unaudited at the time received. The methods used to estimate the fair value of real estate investments include the discounted cash flow method and/or capitalization rate (“cap rate”) analysis. Valuations may be derived by reference to observable valuation measures for comparable companies or transactions (e.g., applying a key performance metric of the investment such as EBITDA or net operating income to a relevant valuation multiple or cap rate observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar models. Adjustments to observable valuation measures are frequently made upon the initial investment to calibrate the initial investment valuation to industry observable inputs. Such adjustments are made to align the investment to observable industry inputs for differences in size, profitability, projected growth rates, geography and capital structure if applicable. The adjustments are reviewed with each subsequent valuation to assess how the investment has evolved relative to the observable inputs. Additionally, the investment may be subject to certain specific risks and/or development milestones which are also taken into account in the valuation assessment. Option pricing models and similar tools do not currently drive a significant portion of private equity or real estate valuations and are used primarily to value warrants, derivatives, certain restrictions and other atypical investment instruments.
Credit-Oriented Investments – The fair values of credit-oriented investments are generally determined on the basis of prices between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices, market transactions in comparable investments and various relationships between investments. Specifically, for investments in distressed debt and corporate loans and bonds, the fair values are generally determined by valuations of comparable investments. In some instances, the Partnership may utilize other valuation techniques, including the discounted cash flow method.

CLO Investments and CLO Loans Payable – The Partnership has elected the fair value option to measure the loans payable of the CLOs at fair value, as the Partnership has determined that measurement of the loans payable issued by the CLOs at fair value better correlates with the value of the assets held by the CLOs, which are held to provide the cash flows for the note obligations. The investments of the CLOs are also carried at fair value.
The fair values of the CLO loan and bond assets are primarily based on quotations from reputable dealers or relevant pricing services. In situations where valuation quotations are unavailable, the assets are valued based on similar securities, market index changes, and other factors. The Partnership corroborates quotations from pricing services either with other available pricing data or with its own models. Generally, the loan and bond assets of the CLOs are not actively traded and are classified as Level III.
The fair values of the CLO loans payable and the CLO structured asset positions are determined based on both discounted cash flow analyses and third-party quotes. Those analyses consider the position size, liquidity, current financial condition of the CLOs, the third-party financing environment, reinvestment rates, recovery lags, discount rates and default forecasts and are compared to broker quotations from market makers and third party dealers.
Loans Payable of a Consolidated Real Estate VIE – The Partnership has elected the fair value option to measure the loans payable of a consolidated real estate VIE at fair value. The fair values of the loans are primarily based on discounted cash flows analyses, which consider the liquidity and current financial condition of the consolidated real estate VIE. These loans are classified as Level III.
Fund Investments – The Partnership’s investments in external funds are valued based on its proportionate share of the net assets provided by the third party general partners of the underlying fund partnerships based on the most recent available information which typically has a lag of up to 90 days. The terms of the investments generally preclude the ability to redeem the investment. Distributions from these investments will be received as the underlying assets in the funds are liquidated, the timing of which cannot be readily determined.
The changes in financial instruments measured at fair value for which the Partnership has used Level III inputs to determine fair value are as follows (Dollars in millions):

 
Financial Assets
 
Three Months Ended September 30, 2015
 
Investments of Consolidated Funds
 
 
 
 
 
 
 
Equity
securities
 
Bonds
 
Loans
 
Partnership
 and LLC interests
 
Other
 
Trading securities and other
 
Restricted
securities of
Consolidated
Funds
 
Total
Balance, beginning of period
$
1,023.8

 
$
1,193.7

 
$
15,460.9

 
$
3,390.1

 
$
4.0

 
$
2.0

 
$
8.7

 
$
21,083.2

Transfers out (1)
(115.1
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(115.1
)
Purchases
32.6

 
177.8

 
2,948.7

 
112.3

 
—

 
—

 
—

 
3,271.4

Sales
(21.0
)
 
(117.1
)
 
(1,543.2
)
 
(390.3
)
 
—

 
—

 
—

 
(2,071.6
)
Settlements
—

 
—

 
(1,195.6
)
 
—

 
—

 
—

 
—

 
(1,195.6
)
Realized and unrealized gains (losses), net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Included in earnings
11.1

 
(27.7
)
 
(204.7
)
 
121.3

 
(0.7
)
 
(0.4
)
 
—

 
(101.1
)
Included in other comprehensive income
24.6

 
2.5

 
16.1

 
116.8

 
—

 
—

 
—

 
160.0

Balance, end of period
$
956.0

 
$
1,229.2

 
$
15,482.2

 
$
3,350.2

 
$
3.3

 
$
1.6

 
$
8.7

 
$
21,031.2

Changes in unrealized gains
(losses) included in earnings
related to financial assets still
held at the reporting date
$
3.3

 
$
(24.9
)
 
$
(199.8
)
 
$
(98.5
)
 
$
(0.7
)
 
$
(0.1
)
 
$
—

 
$
(320.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Assets
 
Nine Months Ended September 30, 2015
 
Investments of Consolidated Funds
 
 
 
 
 
 
 
Equity
securities
 
Bonds
 
Loans
 
Partnership
and LLC
interests
 
Other
 
Trading securities and other
 
Restricted
securities of
Consolidated
Funds
Total
Balance, beginning of period
$
1,968.5

 
$
1,235.8

 
$
15,084.9

 
$
3,481.0

 
$
1.5

 
$
3.3

 
$
8.6

 
$
21,783.6

Transfers out (1)
(115.1
)
 
—

 
—

 
—

 
—

 
—

 
(3.9
)
 
(119.0
)
Purchases
60.6

 
403.2

 
6,223.0

 
350.8

 
—

 
—

 
3.9

 
7,041.5

Sales
(1,043.3
)
 
(324.9
)
 
(2,682.1
)
 
(884.2
)
 
—

 
—

 
—

 
(4,934.5
)
Settlements
—

 
—

 
(2,693.1
)
 
—

 
—

 
—

 
—

 
(2,693.1
)
Realized and unrealized
gains (losses), net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Included in earnings
261.0

 
(4.4
)
 
(88.3
)
 
809.8

 
1.9

 
(1.7
)
 
0.1

 
978.4

Included in other comprehensive income
(175.7
)
 
(80.5
)
 
(362.2
)
 
(407.2
)
 
(0.1
)
 
—

 
—

 
(1,025.7
)
Balance, end of period
$
956.0

 
$
1,229.2

 
$
15,482.2

 
$
3,350.2

 
$
3.3

 
$
1.6

 
$
8.7

 
$
21,031.2

Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date
$
(299.2
)

$
(4.9
)

$
(112.7
)

$
349.2


$
2.1


$
(1.4
)

$
(0.1
)

$
(67.0
)
 

 

Financial Assets

Three Months Ended September 30, 2014
 
Investments of Consolidated Funds
 
 
 
 
 
 
 
Equity
securities
 
Bonds
 
Loans
 
Partnership
and LLC
interests
 
Other
 
Trading
securities and
other
 
Restricted securities of Consolidated Funds
 
Total
Balance, beginning of period
$
2,582.4

 
$
1,345.8

 
$
14,344.7

 
$
3,761.8

 
$
1.5

 
$
4.7

 
$
8.4

 
$
22,049.3

Transfers out (1)
(47.7
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(47.7
)
Purchases
1.1

 
167.2

 
2,572.3

 
101.3

 
—

 
—

 
—

 
2,841.9

Sales
(4.1
)
 
(180.5
)
 
(607.3
)
 
(252.1
)
 
(0.8
)
 
(0.2
)
 
—

 
(1,045.0
)
Settlements
—

 
—

 
(1,054.2
)
 
—

 
—

 
—

 
—

 
(1,054.2
)
Realized and unrealized gains (losses), net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Included in earnings
44.0

 
(2.8
)
 
(47.0
)
 
199.8

 
0.2

 
(0.8
)
 
0.1

 
193.5

Included in other comprehensive income
(190.2
)
 
(80.9
)
 
(391.3
)
 
(22.5
)
 
(0.1
)
 
—

 
—

 
(685.0
)
Balance, end of period
$
2,385.5

 
$
1,248.8

 
$
14,817.2

 
$
3,788.3

 
$
0.8

 
$
3.7

 
$
8.5

 
$
22,252.8

Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date
$
55.5

 
$
(3.0
)
 
$
(50.0
)
 
$
44.7

 
$
0.2

 
$
(0.8
)
 
$
0.1

 
$
46.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Assets
 
Nine Months Ended September 30, 2014
 
Investments of Consolidated Funds
 
 
 
 
 
 
 
Equity
securities
 
Bonds
 
Loans
 
Partnership
and LLC 
interests
 
Other
 
Trading
securities and
other
 
Restricted securities of Consolidated Funds
 
Total
Balance, beginning of period
$
2,714.1

 
$
1,249.5

 
$
14,067.8

 
$
3,815.2

 
$
2.0

 
$
6.9

 
$
8.6

 
$
21,864.1

Transfers in (1)
4.5

 
—

 
—

 
—

 
—

 
—

 
—

 
4.5

Transfers out (1)
(135.2
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(135.2
)
Purchases
27.5

 
557.2

 
6,331.7

 
274.3

 
—

 
—

 
—

 
7,190.7

Sales
(430.6
)
 
(486.2
)
 
(1,805.4
)
 
(931.4
)
 
(0.8
)
 
(3.8
)
 
—

 
(3,658.2
)
Settlements
—

 
—

 
(3,285.7
)
 
—

 
—

 
—

 
—

 
(3,285.7
)
Realized and unrealized gains (losses), net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Included in earnings
389.7

 
14.4

 
(65.9
)
 
584.7

 
(0.3
)
 
0.6

 
(0.1
)
 
923.1

Included in other comprehensive income
(184.5
)
 
(86.1
)
 
(425.3
)
 
45.5

 
(0.1
)
 
—

 
—

 
(650.5
)
Balance, end of period
$
2,385.5

 
$
1,248.8

 
$
14,817.2

 
$
3,788.3

 
$
0.8

 
$
3.7

 
$
8.5

 
$
22,252.8

Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date
$
81.8

 
$
9.3

 
$
(36.3
)
 
$
31.6

 
$
0.1

 
$
0.6

 
$
(0.1
)
 
$
87.0

 
(1)
Transfers into and out of Level III financial assets were due to changes in the observability of market inputs used in the valuation of such assets. Transfers are measured as of the beginning of the period in which the transfer occurs.
 
Financial Liabilities
 
Three Months Ended September 30, 2015
 
Loans Payable
of Consolidated
Funds
 
Derivative
Instruments of
Consolidated
Funds
 
Contingent
Consideration
 
Loans Payable of
a consolidated
real estate VIE
 
Total
Balance, beginning of period
$
16,727.5

 
$
29.1

 
$
47.9

 
$
112.4

 
$
16,916.9

Initial consolidation of funds
584.2

 
—

 
—

 
—

 
584.2

Borrowings
959.5

 
—

 
—

 
—

 
959.5

Paydowns
(1,315.9
)
 
—

 
(21.4
)
 
(20.4
)
 
(1,357.7
)
Sales
—

 
(0.9
)
 
—

 
—

 
(0.9
)
Realized and unrealized (gains) losses, net


 


 


 


 


Included in earnings
(303.8
)

(2.4
)

(10.0
)

12.8


(303.4
)
Included in other comprehensive income
13.6


—


0.1


4.3


18.0

Balance, end of period
$
16,665.1

 
$
25.8

 
$
16.6

 
$
109.1

 
$
16,816.6

Changes in unrealized (gains) losses included in earnings related to financial liabilities still held at the reporting date
$
(324.7
)

$
3.3


$
(10.6
)

$
12.8


$
(319.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Liabilities
 
Nine Months Ended September 30, 2015
 
Loans Payable
of Consolidated
Funds
 
Derivative
Instruments of
Consolidated
Funds
 
Contingent
Consideration
 
Loans Payable of
a consolidated
real estate VIE
 
Total
Balance, beginning of period
$
16,052.2

 
$
17.2

 
$
51.1

 
$
146.2

 
$
16,266.7

Initial consolidation of funds
1,248.6

 
—

 
—

 
—

 
1,248.6

Borrowings
2,584.6

 
—

 
—

 
—

 
2,584.6

Paydowns
(2,627.6
)
 
—

 
(22.5
)
 
(53.1
)
 
(2,703.2
)
Sales
—

 
(5.6
)
 
—

 
—

 
(5.6
)
Realized and unrealized (gains) losses, net
 
 
 
 
 
 
 
 
 
Included in earnings
(198.8
)
 
15.1

 
(11.8
)
 
43.9

 
(151.6
)
Included in other comprehensive income
(393.9
)
 
(0.9
)
 
(0.2
)
 
(27.9
)
 
(422.9
)
Balance, end of period
$
16,665.1

 
$
25.8

 
$
16.6

 
$
109.1

 
$
16,816.6

Changes in unrealized (gains) losses included in earnings related to financial liabilities still held at the reporting date
$
(244.8
)

$
(12.3
)

$
(12.4
)

$
43.9


$
(225.6
)

 
 
Financial Liabilities
 
Three Months Ended September 30, 2014
 
Loans Payable
of Consolidated
Funds
 
Derivative
Instruments of
Consolidated
Funds
 
Contingent
Consideration
 
Loans Payable of a consolidated real estate VIE
 
Total
Balance, beginning of period
$
16,136.4

 
$
15.2

 
$
120.2

 
$
147.7

 
$
16,419.5

Initial consolidation of funds
811.0

 
—

 
—

 
—

 
811.0

Borrowings
592.6

 
—

 
—

 
8.8

 
601.4

Paydowns
(673.6
)
 
—

 
(21.9
)
 
(19.5
)
 
(715.0
)
Sales
—

 
(0.6
)
 
—

 
—

 
(0.6
)
Realized and unrealized losses, net
 
 
 
 
 
 
 
 
 
Included in earnings
53.3

 
4.4

 
(27.6
)
 
9.1

 
39.2

Included in other comprehensive income
(498.8
)
 
(1.2
)
 
(0.4
)
 
14.0

 
(486.4
)
Balance, end of period
$
16,420.9

 
$
17.8

 
$
70.3

 
$
160.1

 
$
16,669.1

Changes in unrealized (gains) losses included in earnings related to financial liabilities still held at the reporting date
$
16.5

 
$
(3.9
)
 
$
(27.6
)
 
$
9.1

 
$
(5.9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Liabilities
 
Nine Months Ended September 30, 2014
 
Loans Payable
of Consolidated
Funds
 
Derivative
Instruments of
Consolidated
Funds
 
Contingent
Consideration
 
Loans Payable of a consolidated real estate VIE
 
Total
Balance, beginning of period
$
15,220.7

 
$
13.1

 
$
178.8

 
$
122.1

 
$
15,534.7

Initial consolidation of funds
811.0

 
—

 
—

 
—

 
811.0

Borrowings
3,066.9

 
—

 
—

 
45.5

 
3,112.4

Paydowns
(2,308.7
)
 
—

 
(95.6
)
 
(61.4
)
 
(2,465.7
)
Sales
—

 
(3.9
)
 
—

 
—

 
(3.9
)
Realized and unrealized losses, net
 
 
 
 
 
 
 
 
 
Included in earnings
171.5

 
9.9

 
(12.5
)
 
35.5

 
204.4

Included in other comprehensive income
(540.5
)
 
(1.3
)
 
(0.4
)
 
18.4

 
(523.8
)
Balance, end of period
$
16,420.9

 
$
17.8

 
$
70.3

 
$
160.1

 
$
16,669.1

Changes in unrealized (gains) losses included in earnings related to financial liabilities still held at the reporting date
$
18.2

 
$
(8.0
)
 
$
(12.5
)
 
$
35.5

 
$
33.2


Realized and unrealized gains and losses included in earnings for Level III investments for trading securities are included in investment income (loss), and such gains and losses for investments of Consolidated Funds and loans payable and derivative instruments of the CLOs are included in net investment gains (losses) of Consolidated Funds in the condensed consolidated statements of operations.

Realized and unrealized gains and losses included in earnings for Level III contingent consideration liabilities are included in other non-operating expense (income), and such gains and losses for loans payable of a consolidated real estate VIE are included in interest and other expenses of a consolidated real estate VIE in the condensed consolidated statement of operations.

Gains and losses included in other comprehensive income for all Level III financial asset and liabilities are included in accumulated other comprehensive loss, partners’ capital appropriated for Consolidated Funds, non-controlling interests in consolidated entities and non-controlling interests in Carlyle Holdings in the condensed consolidated balance sheets.
 
The following table summarizes quantitative information about the Partnership’s Level III inputs as of September 30, 2015:
 
 
Fair Value at
 
Valuation Technique(s)
 
Unobservable Input(s)
 
Range
(Weighted Average)
(Dollars in millions)
September 30, 2015
 
 
 
Assets
 
 
 
 
 
 
 
Investments of Consolidated Funds:
 
 
 
 
 
 
 
Equity securities
$
938.3

 
Comparable Multiple
 
LTM EBITDA Multiple
 
4.6x - 15.6x (11.3x)
 
17.7

 
Consensus Pricing
 
Indicative Quotes ($ per share)
 
$0 - $245 ($0)
 
 
 
 
 
 
 
 
Bonds
1,229.2

 
Consensus Pricing
 
Indicative Quotes (% of Par)
 
1 - 142 (98)
Loans
15,427.6

 
Consensus Pricing
 
Indicative Quotes (% of Par)
 
2 - 138 (98)
 
54.6

 
Market Yield Analysis
 
Market Yield
 
5% - 16% (11%)
Partnership and LLC interests
3,350.2

 
NAV of Underlying Fund(1)
 
N/A
 
N/A
Other
3.3

 
Counterparty Pricing
 
Indicative Quotes
(% of Notional Amount)
 
0 - 15 (5)
 
21,020.9

 
 
 
 
 
 
Trading securities and other
1.6

 
Comparable Multiple
 
LTM EBITDA Multiple
 
5.8x - 5.8x (5.8x)
 


 

 

 

Restricted securities of Consolidated Funds
8.7

 
Consensus Pricing
 
Indicative Quotes (% of Par)
 
87 - 87 (87)
Total
$
21,031.2

 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Loans payable of Consolidated Funds:
 
 
 
 
 
 
 
Senior secured notes
$
15,460.0

 
Discounted Cash Flow with Consensus Pricing
 
Discount Rates
 
 1% - 11% (3%)
 
 
 
 
 
Default Rates
 
 1% - 4% (3%)
 
 
 
 
 
Recovery Rates
 
60% - 75% (66%)
 
 
 
 
 
Indicative Quotes (% of Par)
 
35 - 102 (98)
Subordinated notes and preferred shares
1,186.2

 
Discounted Cash Flow with Consensus Pricing
 
Discount Rates
 
8% - 15% (11%)
 
 
 
 
 
Default Rates
 
 1% - 4% (2%)
 
 
 
 
 
Recovery Rates
 
 60% - 75% (66%)
 
 
 
 
 
Indicative Quotes (% of Par)
 
1 - 116 (59)
Combination notes
18.9

 
Consensus Pricing
 
Indicative Quotes (% of Par)
 
90 - 96 (94)
Loans payable of a consolidated real estate VIE
109.1

 
Discounted Cash Flow
 
Discount to Expected Payment
 
0% - 100% (32%)
 
 
 
 
 
Discount Rate
 
20% - 30% (23%)
Derivative instruments of the CLOs
25.8

 
Counterparty Pricing
 
Indicative Quotes
(% of Notional Amount)
 
6 - 35 (20)
Contingent consideration(2)
16.6

 
Discounted Cash Flow
 
Assumed % of Total Potential Contingent Payments
 
0% - 100% (6%)
 
 
 
 
 
Discount Rate
 
5% - 21% (11%)
Total
$
16,816.6

 
 
 
 
 
 
 
(1)
Represents the Partnership’s investments in funds that are valued using NAV of the underlying fund.
(2)
Related to contingent cash consideration associated with the acquisitions of Claren Road, AlpInvest, ESG, Carlyle Commodity Management, and Metropolitan (see Note 9).









The following table summarizes quantitative information about the Partnership’s Level III inputs as of December 31, 2014:
 
 
Fair Value at
 
Valuation Technique(s)
 
Unobservable Input(s)
 
Range
(Weighted Average)
(Dollars in millions)
December 31, 2014
 
 
 
Assets
 
 
 
 
 
 
 
Investments of Consolidated Funds:
 
 
 
 
 
 
 
Equity securities
$
1,783.7

 
Comparable Multiple
 
LTM EBITDA Multiple
 
4.8x- 16.2x (12.1x)
 
168.7

 
Comparable Multiple
 
Forward EBITDA Multiple
 
8.4x-8.4x (8.4x)
 
16.1

 
Consensus Pricing
 
Indicative Quotes
($ per share)
 
$0 - $246 ($0)
 
 
 
 
 
 
 
 
Bonds
1,235.8

 
Consensus Pricing
 
Indicative Quotes (% of Par)
 
1 - 133 (99)
Loans
14,873.4

 
Consensus Pricing
 
Indicative Quotes (% of Par)
 
0 - 126 (98)
 
211.5

 
Market Yield Analysis
 
Market Yield
 
5% - 17% (11%)
Partnership and LLC interests
3,481.0

 
NAV of Underlying Fund(1)
 
N/A
 
N/A
Other
1.5

 
Counterparty Pricing
 
Indicative Quotes
(% of Notional Amount)
 
0 - 6 (3)
 
21,771.7

 
 
 
 
 
 
Trading securities and other
3.0

 
Comparable Multiple
 
LTM EBITDA Multiple
 
5.8x - 5.8x (5.8x)
 
0.3

 
Discounted Cash Flow
 
Discount Rate
 
10% - 10% (10%)
Restricted securities of Consolidated Funds
8.6

 
Consensus Pricing
 
Indicative Quotes (% of Par)
 
87 - 87 (87)
Total
$
21,783.6

 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Loans payable of Consolidated Funds:
 
 
 
 
 
 
 
Senior secured notes
$
14,757.5

 
Discounted Cash Flow with Consensus Pricing
 
Discount Rates
 
 1% - 11% (3%)
 
 
 
 
 
Default Rates
 
 1% - 3% (2%)
 
 
 
 
 
Recovery Rates
 
63% - 75% (68%)
 
 
 
 
 
Indicative Quotes (% of Par)
 
35 - 100 (98)
Subordinated notes and preferred shares
1,278.8

 
Discounted Cash Flow with Consensus Pricing
 
Discount Rates
 
 8% - 15% (10%)
 
 
 
 
 
Default Rates
 
 1% - 3% (2%)
 
 
 
 
 
Recovery Rates
 
 63% - 75% (68%)
 
 
 
 
 
Indicative Quotes (% of Par)
 
1 - 132 (63)
Combination notes
15.9

 
Consensus Pricing
 
Indicative Quotes (% of Par)
 
97 - 98 (98)
Loans payable of a consolidated real estate VIE
146.2

 
Discounted Cash Flow
 
Discount to Expected Payment
 
0% - 100% (36%)
 
 
 
 
 
Discount Rate
 
23% - 33% (26%)
Derivative instruments of the CLOs
17.2

 
Counterparty Pricing
 
Indicative Quotes
(% of Notional Amount)
 
2 - 22 (11)
Contingent consideration(2)
51.1

 
Discounted Cash Flow
 
Assumed % of Total Potential Contingent Payments
 
0% - 100% (20%)
 
 
 
 
 
Discount Rate
 
5% - 18% (13%)
Total
$
16,266.7

 
 
 
 
 
 
 
(1)
Represents the Partnership’s investments in funds that are valued using the NAV of the underlying fund.
(2)
Related to contingent cash consideration associated with the acquisitions of Claren Road, AlpInvest, ESG, Carlyle Commodity Management and Metropolitan (see Note 9).





The significant unobservable inputs used in the fair value measurement of the Partnership’s investments in equity securities include EBITDA, indicative quotes and discount rates. Significant decreases in EBITDA multiples or indicative quotes in isolation would result in a significantly lower fair value measurement. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Partnership’s investments in bonds and loans are market yields and indicative quotes. Significant increases in market yields in isolation would result in a significantly lower fair value measurement. Significant decreases in indicative quotes in isolation would result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Partnership’s trading securities and other investments include EBITDA multiples and discount rates. Significant decreases in EBITDA multiples in isolation would result in a significantly lower fair value measurement. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Partnership’s restricted securities of Consolidated Funds include indicative quotes. Significant decreases in indicative quotes in isolation would result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Partnership’s loans payable of Consolidated Funds are discount rates, default rates, recovery rates and indicative quotes. Significant increases in discount rates or default rates in isolation would result in a significantly lower fair value measurement, while a significant increase in recovery rates and indicative quotes in isolation would result in a significantly higher fair value.
The significant unobservable inputs used in the fair value measurement of the Partnership’s loans payable of a consolidated real estate VIE are discount to expected payment and discount rate. A significant increase in either of these inputs in isolation would result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Partnership’s derivative instruments of Consolidated Funds include indicative quotes. Significant decreases in indicative quotes in isolation would result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Partnership’s contingent consideration are an assumed percentage of total potential contingent payments and discount rate. A significant decrease in the assumed percentage of total potential contingent payments or increase in discount rate in isolation would result in a significantly lower fair value measurement.