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Investments
 12 Months Ended
Dec. 31, 2023
Equity Method Investments and Joint Ventures [Abstract]  
Investments
4. Investments
The Company's equity and debt investments are represented by the following:
(In thousands)December 31, 2023December 31, 2022
Equity method investments (1)
Principal investments$1,194,417 $410,511 
Carried interest allocation676,421 341,749 
Other equity investments71,417 115,024 
CLO subordinated notes50,927 50,927 
Loans receivable— 133,307 
1,993,182 1,051,518 
Equity investments of consolidated funds
Marketable equity securities66,297 139,076 
Other investments416,614 46,769 
$2,476,093 $1,237,363 
__________
(1)    Equity method investments in the Investment Management segment are $726.1 million at December 31, 2023 and $393.4 million at December 31, 2022..
Equity Method Investments
Principal Investments
Principal investments represent investments in the Company's sponsored investment vehicles, accounted for as equity method investments as the Company exerts significant influence in its role as general partner. The Company typically has a small percentage interest in its sponsored funds as general partner or special limited partner (presented in the Investment Management segment). The Company also has additional investment as general partner affiliate alongside the funds' limited partners, primarily with respect to the Company's flagship value-add funds, InfraBridge funds and funds invested in DataBank (presented within Corporate and Other).
The Company's proportionate share of net income (loss) from investments in its sponsored investment vehicles, primarily unrealized gain (loss) from changes in fair value of the underlying fund investments, is recorded in principal investment income on the consolidated statements of operations.
Carried Interest Allocation
Carried interest allocation represents a disproportionate allocation of returns to the Company, as general partner or special limited partner (which may be paid to the special limited partner entity owned by the Company in place of the general partner entity), based upon the extent to which cumulative performance of a sponsored fund exceeds minimum return hurdles. Carried interest allocation generally arises when appreciation in value of the underlying investments of the fund exceeds the minimum return hurdles, after factoring in a return of invested capital and a return of certain costs of the fund pursuant to terms of the governing documents of the fund. The amount of carried interest allocation recognized is based upon the cumulative performance of the fund if it were liquidated as of the reporting date. Unrealized carried interest allocation is driven primarily by changes in fair value of the underlying investments of the fund, which may be affected by various factors, including but not limited to: the financial performance of the portfolio company, economic conditions, foreign exchange rates, comparable transactions in the market, and equity prices for publicly traded securities. For funds that have exceeded the minimum return hurdle but have not returned all capital to the limited partners, unrealized carried interest allocation may be subject to reversal over time as preferred returns continue to accrue on unreturned capital. Realization of carried interest allocation occurs upon disposition of all underlying investments of the fund, or in part with each disposition.
Generally, carried interest allocation is distributed upon profitable disposition of an investment if at the time of distribution, cumulative returns of the fund exceed minimum return hurdles. Depending on the final realized value of all investments at the end of the life of a fund (and, with respect to certain funds, periodically during the life of the fund), if it is determined that cumulative carried interest allocation distributed has exceeded the final carried interest allocation amount earned (or amount earned as of the calculation date), the Company is obligated to return the excess carried interest allocation received. Therefore, carried interest allocation distributed may be subject to clawback if decline in investment values results in cumulative performance of the fund falling below minimum return hurdles in the interim period. If it is determined that the Company has a clawback obligation, a liability would be established based upon a hypothetical liquidation of the net assets of the fund at reporting date. The actual determination and required payment of any clawback obligation would generally occur after final disposition of the investments of the fund or otherwise as set forth in the governing documents of the fund.
Carried interest allocation on the balance sheet date represents unrealized carried interest allocation in connection with sponsored funds that are currently in the early stage of their lifecycle. Carried interest allocation is presented gross of management allocation.
Carried Interest Distributed
Carried interest of $28.4 million in 2023 and $152.5 million in 2022 was distributed and recognized in carried interest allocation on the consolidated statement of operations. Of the distributed carried interest, $0.8 million in 2023 and $119.8 million in 2022 was allocated to current and former employees and to Wafra (Note 9), recorded as either carried interest compensation, other loss, or amounts attributable to noncontrolling interests (Note 16). There was no carried interest distribution in 2021.
Clawback Obligation
The Company did not have a liability for clawback obligations on carried interest allocation distributed as of December 31, 2023 and 2022.
With respect to funds that have distributed carried interest, if in the event all of their investments are deemed to have no value, the likelihood of which is remote, all of the carried interest distributed to-date of $180.9 million would be subject to clawback as of December 31, 2023, of which $120.6 million would be the responsibility of the employee/former employee recipients and Wafra. For this purpose, a portion of carried interest distributed is generally held back from employees and former employees at the time of distribution. The amount withheld resides in entities outside of the Company. Generally, the Company, through the OP, has guaranteed the clawback obligation of its subsidiaries that act as general partner or special limited partner of its respective sponsored funds, for the benefit of these funds and their limited partners.
Other Equity Investments
Other equity investments include investments warehoused potentially for future sponsored funds, a marketable equity security and equity interest in a non-traded REIT (Note 10), as well as an investment in a managed account. These investments are generally carried at fair value or under the measurement alternative, which is at cost, adjusted for impairment and observable price changes. Dividends or other distributions from these investments are recorded in other income, while changes in the value of these investments are recorded in other gain (loss) on the consolidated statements of operations.
Debt Investments
Debt investments are composed of subordinated notes in a third party collateralized loan obligation ("CLO") and at December 31, 2022, loans receivable. Interest income from debt investments are recorded in other income.
CLO Subordinated Notes
In the third quarter of 2022, bank syndicated loans that the Company previously warehoused were transferred into a third party warehouse entity at their acquisition price totaling $232.7 million, and securitized through the issuance of CLO securities. The corresponding warehouse facility of $172.5 million was concurrently repaid. The CLO is sponsored and managed by the third party. The Company acquired all of the subordinated notes of the CLO, which are classified as AFS debt securities. The CLO has a stated legal final maturity of 2035.
Following the end of the non-call period in October 2024, the subordinated notes may be redeemed by the Company (in whole, not in part) upon redemption of the secured notes by secured noteholders (in whole, not in part), if there is sufficient proceeds from sale of collateral assets, including payment of expenses therewith. The redemption price for the subordinated notes is equal to its share of excess interest and principal proceeds payable.
The balance of the CLO subordinated notes is summarized as follows:
Amortized Cost without Allowance for Credit Loss
Allowance for Credit LossGross Cumulative Unrealized
(in thousands)GainsLosses
Fair Value
At December 31, 2023 and 2022$50,927 $— $— $— $50,927 
In estimating fair value of the CLO subordinated notes, the Company used a benchmarking approach by looking to the implied credit spreads derived from observed prices on recent comparable CLO issuances, and also considering the current size and diversification of the CLO collateral pool, and projected return on the subordinated notes. Based upon these data points, the Company determined that the issued price of the subordinated notes in September 2022 was a reasonable representation of its fair value at December 31, 2023 and 2022, classified as Level 3 of the fair value hierarchy.
Loans Receivable
At December 31, 2023, there was no outstanding balance on loans receivable. Activities in the loans receivable balance is discussed in Note 10.
Equity Investments of Consolidated Funds
The Company consolidates sponsored funds in which it has more than an insignificant equity interest in the fund as general partner, as discussed in Note 15. Equity investments of consolidated funds are composed primarily of marketable equity securities held by funds in the liquid securities strategy and investment in Vantage SDC post-deconsolidation. Equity investments of consolidated funds are carried at fair value with changes in fair value recorded in other gain (loss) on the consolidated statements of operations.
Combined Financial Information of Equity Method Investees
The following tables present selected combined financial information of the Company's equity method investees, excluding investees classified as discontinued operations. Amounts presented represent combined totals at the investee level and not the Company's proportionate share.
Selected Combined Balance Sheet Information
(In thousands)December 31, 2023December 31, 2022
Total assets$38,062,830 $22,507,463 
Total liabilities413,270 79,053 
Owners' equity37,649,560 22,428,410 
Selected Combined Statements of Operations Information
 Year Ended December 31,
(In thousands)202320222021
Total revenues$117,846 $23,232 $39,760 
Net income (loss)2,976,972 2,150,989 771,962