Derivative Instruments

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company’s investment strategy allows for the use of derivative instruments. The Company’s derivative instruments are recorded on its consolidated balance sheets at fair value. The Company utilizes exchange traded U.S. Treasury note, Eurodollar and other futures contracts and commodity futures to manage portfolio duration or replicate investment positions in its portfolios and the Company routinely utilizes foreign currency forward contracts, currency options, index futures contracts and other derivatives as part of its total return objective. In addition, certain of the Company’s investments are managed in portfolios which incorporate the use of foreign currency forward contracts which are intended to provide an economic hedge against foreign currency movements.

In addition, the Company purchases to-be-announced mortgage backed securities (“TBAs”) as part of its investment strategy. TBAs represent commitments to purchase a future issuance of agency mortgage backed securities. For the period between purchase of a TBA and issuance of the underlying security, the Company’s position is accounted for as a derivative. The Company purchases TBAs in both long and short positions to enhance investment performance and as part of its overall investment strategy.

The following table summarizes information on the fair values and notional values of the Company’s derivative instruments:


	Estimated Fair Value
	Asset Derivatives		Liability Derivatives		Notional Value (1)
June 30, 2021
Futures contracts (2)	$	36,277	$	(21,515)	$	2,907,342
Foreign currency forward contracts (2)	8,242		(20,729)		1,573,973

Other (2)	53,969		(25,060)		4,838,552
Total	$	98,488	$	(67,304)

December 31, 2020
Futures contracts (2)	$	11,046	$	(4,496)	$	3,099,796
Foreign currency forward contracts (2)	52,716		(6,202)		1,656,729

Other (2)	113,621		(98,007)		5,763,919
Total	$	177,383	$	(108,705)

(1) Represents the absolute notional value of all outstanding contracts, consisting of long and short positions.

(2) The fair value of asset derivatives are included in ‘other assets’ and the fair value of liability derivatives are included in ‘other liabilities.’

The Company did not hold any derivatives which were designated as hedging instruments at June 30, 2021 or December 31, 2020.

The Company’s derivative instruments can be traded under master netting agreements, which establish terms that apply to all derivative transactions with a counterparty. In the event of a bankruptcy or other stipulated event of default, such agreements provide that the non-defaulting party may elect to terminate all outstanding derivative transactions, in which case all individual derivative positions (loss or gain) with a counterparty are closed out and netted and replaced with a single amount, usually referred to as the termination amount, which is expressed in a single currency. The resulting single net amount, where positive, is payable to the party “in-the-money” regardless of whether or not it is the defaulting party, unless the parties have agreed that only the non-defaulting party is entitled to receive a termination payment where the net amount is positive and is in its favor. Contractual close-out netting reduces derivatives credit exposure from gross to net exposure.

At June 30, 2021, asset derivatives and liability derivatives of $89.9 million and $66.7 million, respectively, were subject to a master netting agreement, compared to $138.8 million and $93.0 million, respectively, at December 31, 2020. The remaining derivatives included in the preceding table were not subject to a master netting agreement.

Realized and unrealized contract gains and losses on the Company’s derivative instruments are reflected in ‘net realized gains (losses)’ in the consolidated statements of income, as summarized in the following table:


Derivatives not designated as	June 30,
hedging instruments:	2021		2020

Three Months Ended
Net realized gains (losses):
Futures contracts	$	(54,759)	$	(1,607)
Foreign currency forward contracts	1,295		3,523
TBAs	—		264
Other (1)	2,355		(3,016)
Total	$	(51,109)	$	(836)

Six Months Ended
Net realized gains (losses):
Futures contracts	$	(7,321)	$	94,337
Foreign currency forward contracts	(20,776)		(7,347)
TBAs	—		1,009
Other (1)	13,104		38,354
Total	$	(14,993)	$	126,353

(1) Includes realized gains and losses on swaps, options and other derivatives contracts.