v2.4.0.8
DERIVATIVE FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2013
DERIVATIVE FINANCIAL INSTRUMENTS
6. DERIVATIVE FINANCIAL INSTRUMENTS

Blackstone and the Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain risk management objectives and for general investment purposes. Additionally, Blackstone may enter into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. As a result of the use of derivative contracts, Blackstone and the consolidated Blackstone Funds are exposed to the risk that counterparties will fail to fulfill their contractual obligations. To mitigate such counterparty risk, Blackstone and the consolidated Blackstone Funds enter into contracts with certain major financial institutions, all of which have investment grade ratings. Counterparty credit risk is evaluated in determining the fair value of derivative instruments.

Freestanding Derivatives

Freestanding derivatives are instruments that Blackstone and certain of the consolidated Blackstone Funds have entered into as part of their overall risk management and investment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include interest rate swaps, foreign exchange contracts, equity swaps, options, futures and other derivative contracts.

 

The table below summarizes the aggregate notional amount and fair value of the derivative financial instruments. The notional amount represents the absolute value amount of all outstanding derivative contracts.

 

    September 30, 2013     December 31, 2012  
    Assets     Liabilities     Assets     Liabilities  
    Notional     Fair
Value		     Notional     Fair
Value		     Notional     Fair
Value		     Notional     Fair
Value		  

Freestanding Derivatives

                

Blackstone—Other Interest Rate Contracts

   $ 1,914,476      $ 44,545      $ 1,035,600      $ 4,673      $ 689,300      $ 55,270      $ 636,555      $ 4,116   

Foreign Currency Contracts

     68,896        1,490        66,115        1,398        16,771        74        7,025        81   

Credit Default Swaps

     —         —          41,000        4,534        —          —          —          —     

Investments of Consolidated CLO Vehicles

                

Foreign Currency Contracts

     362,841        30,954        236,887        8,775        435,229        37,898        301,551        17,101   

Interest Rate Contracts

     81,505        3,653        —          —          165,517        6,132        90,500        772   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 2,427,718      $ 80,642      $ 1,379,602      $ 19,380      $ 1,306,817      $ 99,374      $ 1,035,631      $ 22,070   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The table below summarizes the impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2013     2012     2013     2012  

Fair Value Hedges — Interest Rate Swaps

         

Hedge Ineffectiveness

    $ —        $ —        $ —        $ 548   
  

 

 

    

 

 

    

 

 

    

 

 

  

Excluded from Assessment of Effectiveness

    $ —        $ —        $ —        $ (938 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized Gain

    $ —        $ —        $ —        $ 22,941   
  

 

 

    

 

 

    

 

 

    

 

 

  

Freestanding Derivatives

         

Realized Gains (Losses)

         

Interest Rate Contracts

    $ 359      $ (189 )    $ (596 )    $ (2,740 ) 

Foreign Currency Contracts

      11,847        (1,438 )      8,084        1,357   

Other

      92        8        (81 )      15   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 12,298      $ (1,619 )    $ 7,407      $ (1,368 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net Change in Unrealized Gains (Losses)

         

Interest Rate Contracts

    $ (2,512 )    $ 1,946      $ (12,005 )    $ 9,565   

Foreign Currency Contracts

      (11,553 )      (11,027 )      1,083        (11,692 ) 

Credit Default Swaps

      211        (5 )      (89 )      (46 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ (13,854 )    $ (9,086 )    $ (11,011 )    $ (2,173 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

As of September 30, 2013 and December 31, 2012, the Partnership had not designated any derivatives as cash flow hedges or hedges of net investments in foreign operations.