v2.4.0.8

FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2013

FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

8. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

The following tables summarize the valuation of the Partnership’s financial assets and liabilities by the fair value hierarchy:

		September 30, 2013
		Level I				Level II				Level III				Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds		$	—			$	—			$	1,096,331			$	1,096,331
Equity Securities			110,951				16,828				246,489				374,268
Partnership and LLC Interests			—				7,892				652,430				660,322
Debt Instruments			—				1,143,086				59,531				1,202,617
Assets of Consolidated CLO Vehicles
Corporate Loans			—				7,749,081				1,051,267				8,800,348
Corporate Bonds			—				143,415				2,671				146,086
Freestanding Derivatives — Foreign Currency Contracts			—				30,954				—				30,954
Freestanding Derivatives — Interest Rate Contracts			—				3,653				—				3,653
Other			14				994				13,340				14,348
Total Investments of Consolidated Blackstone Funds			110,965				9,095,903				3,122,059				12,328,927
Blackstone’s Treasury Cash Management Strategies			169,860				850,250				46,060				1,066,170
Money Market Funds			229,914				—				—				229,914
Freestanding Derivatives
Interest Rate Contracts			5,007				39,538				—				44,545
Foreign Currency Contracts			—				1,490				—				1,490
Loans and Receivables			—				—				98,077				98,077
Other Investments			63,671				7,204				15,263				86,138
		$	579,417			$	9,994,385			$	3,281,459			$	13,855,261
Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes		$	—			$	—			$	8,641,507			$	8,641,507
Subordinated Notes			—				—				605,380				605,380
Freestanding Derivatives — Foreign Currency Contracts			—				8,775				—				8,775
Freestanding Derivatives
Interest Rate Contracts			4,535				138				—				4,673
Foreign Currency Contracts			—				1,398				—				1,398
Credit Default Swaps			—				4,534				—				4,534
Securities Sold, Not Yet Purchased			—				101,581				—				101,581
		$	4,535			$	116,426			$	9,246,887			$	9,367,848

		December 31, 2012
		Level I				Level II				Level III				Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds		$	—			$	1,799			$	890,465			$	892,264
Equity Securities			95,898				28,654				217,060				341,612
Partnership and LLC Interests			212				12,375				581,151				593,738
Debt Instruments			—				903,123				17,724				920,847
Assets of Consolidated CLO Vehicles
Corporate Loans			—				9,775,070				1,278,443				11,053,513
Corporate Bonds			—				146,625				15,831				162,456
Freestanding Derivatives — Foreign Currency Contracts			—				37,898				—				37,898
Freestanding Derivatives — Interest Rate Contracts			—				6,132				—				6,132
Other			—				1,260				17,025				18,285
Total Investments of Consolidated Blackstone Funds			96,110				10,912,936				3,017,699				14,026,745
Blackstone’s Treasury Cash Management Strategies			672,766				737,708				1,206				1,411,680
Money Market Funds			129,549				—				—				129,549
Freestanding Derivatives
Interest Rate Contracts			486				54,784				—				55,270
Foreign Currency Contracts			—				74				—				74
Loans and Receivables			—				—				30,663				30,663
Other Investments			12,443				6,783				26,898				46,124
		$	911,354			$	11,712,285			$	3,076,466			$	15,700,105
Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes		$	—			$	—			$	10,695,136			$	10,695,136
Subordinated Notes			—				—				846,471				846,471
Freestanding Derivatives — Foreign Currency Contracts			—				17,101				—				17,101
Freestanding Derivatives — Interest Rate Contracts			—				772				—				772
Freestanding Derivatives
Interest Rate Contracts			277				3,839				—				4,116
Foreign Currency Contracts			—				81				—				81
Securities Sold, Not Yet Purchased			—				226,425				—				226,425
		$	277			$	248,218			$	11,541,607			$	11,790,102

(a) Pursuant to GAAP consolidation guidance, the Partnership is required to consolidate all VIEs in which it has been identified as the primary beneficiary, including certain CLO vehicles, and other funds in which a consolidated entity of the Partnership, as the general partner of the fund, is presumed to have control. While the Partnership is required to consolidate certain funds, including CLO vehicles, for GAAP purposes, the Partnership has no ability to utilize the assets of these funds and there is no recourse to the Partnership for their liabilities since these are client assets and liabilities.

The following table summarizes the fair value transfers between Level I and Level II for positions that existed as of September 30, 2013 and 2012, respectively:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Transfers from Level I into Level II (a)		$	—			$	288			$	31			$	45,440
Transfers from Level II into Level I (b)		$	41,155			$	45			$	1,308			$	846

(a) Transfers out of Level I represent those financial instruments for which restrictions exist and adjustments were made to an otherwise observable price to reflect fair value at the reporting date.

(b) Transfers into Level I represent those financial instruments for which an unadjusted quoted price in an active market became available for the identical asset.

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of September 30, 2013:

Fair Value

Valuation Techniques

Unobservable Inputs

Ranges

Weighted Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Investment Funds

$

1,096,331

NAV as Fair Value

N/A

N/A

N/A

Equity Securities

166,586

Discounted Cash Flows

Discount Rate Revenue CAGR Exit Multiple - EBITDA Exit Multiple - P/E

8.1% - 25.0% 0.9% - 43.4% 5.0x - 13.0x 8.5x - 19.0x

11.0% 6.0% 9.6x 10.1x

76,633

Transaction Price

N/A

N/A

N/A

265

Market Comparable Companies

EBITDA Multiple

7.2x - 7.8x

7.3x

58

Third Party Pricing

N/A

N/A

N/A

2,947

Other

N/A

N/A

N/A

Partnership and LLC Interests

635,164

Discounted Cash Flows

Discount Rate Revenue CAGR Exit Multiple - EBITDA Exit Capitalization Rate

5.0% - 22.5% -0.5% - 39.3% 3.0x - 23.3x 4.3% - 10.5%

8.9% 5.5% 9.9x 7.0%

8,419

Transaction Price

N/A

N/A

N/A

7,919

Third Party Pricing

N/A

N/A

N/A

928

Other

N/A

N/A

N/A

Debt Instruments

14,328

Discounted Cash Flows

Discount Rate Revenue CAGR Exit Multiple - EBITDA Exit Capitalization Rate Default Rate Recovery Rate Recovery Lag Pre-payment Rate Reinvestment Rate

8.4% - 20.0% 1.6% - 3.7% 5.8x - 11.5x 6.8% - 7.5% 2.0% 66.0% 12 months 20.0% LIBOR + 400 bps

16.5% 2.5% 10.6x 6.9% N/A N/A N/A N/A N/A

44,397

Third Party Pricing

N/A

N/A

N/A

528

Transaction Price

N/A

N/A

N/A

278

Market Comparable Companies

EBITDA Multiple

6.3x - 7.9x

6.3x

Assets of Consolidated CLO Vehicles

$

749,162

Third Party Pricing

N/A

N/A

N/A

256,496

Market Comparable Companies

EBITDA Multiple

2.0x - 11.4x

6.9x

61,564

Discounted Cash Flows

Discount Rate Revenue CAGR Exit Multiple - EBITDA

7.0% - 13.0% 5.6% 7.0x

7.3% N/A N/A

56

Transaction Price

N/A

N/A

N/A

Total Investments of Consolidated Blackstone Funds

3,122,059

Blackstone’s Treasury Cash Management Strategies

19,386

Third Party Pricing

N/A

N/A

N/A

16,855

Discounted Cash Flows

Default Rate Recovery Rate Recovery Lag Pre-payment Rate Reinvestment Rate Discount Rate

2.0% 30.0% - 70.0% 12 months 20.0% LIBOR + 400 bps 5.8% - 7.3%

N/A 66.0% N/A N/A N/A 6.4%

9,819

NAV as Fair Value

N/A

N/A

N/A

Loans and Receivables

98,077

Discounted Cash Flows

Discount Rate

12.0% - 13.0%

12.4%

Other Investments

7,898

Transaction Price

N/A

N/A

N/A

3,738

NAV as Fair Value

N/A

N/A

N/A

3,627

Discounted Cash Flows

Discount Rate

12.5%

N/A

Total

$

3,281,459

Financial Liabilities

Liabilities of Consolidated CLO Vehicles

$

9,246,887

Discounted Cash Flows

Default Rate

2.0% - 3.0%

2.1%

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

5.0% - 40.0%

19.0%

Discount Rate

0.2% - 44.9%

2.7%

Reinvestment Rate

LIBOR + 400 bps

N/A

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of December 31, 2012:

Fair Value

Valuation Techniques

Unobservable Inputs

Ranges

Weighted Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Investment Funds

$

890,465

NAV as Fair Value

N/A

N/A

N/A

Equity Securities

151,899

Discounted Cash Flows

Discount Rate Revenue CAGR Exit Multiple - EBITDA Exit Multiple - P/E

8.4% - 25.1% 0.7% - 83.4% 5.8x - 11.5x 8.5x - 17.0x

11.2% 5.6% 9.2x 10.1x

61,479

Transaction Price

N/A

N/A

N/A

1,602

Market Comparable Companies

Book Value Multiple EBITDA Multiple

0.9x 5.0x - 8.7x

N/A 7.8x

200

Third Party Pricing

N/A

N/A

N/A

1,880

Other

N/A

N/A

N/A

Partnership and LLC Interests

562,678

Discounted Cash Flows

Discount Rate Revenue CAGR Exit Multiple - EBITDA Exit Capitalization Rate

5.3% - 22.6% -8.2% - 62.0% 4.5x - 15.4x 1.0% - 10.5%

8.9% 5.3% 10.0x 7.0%

13,316

Transaction Price

N/A

N/A

N/A

5,157

Third Party Pricing

N/A

N/A

N/A

Debt Instruments

13,056

Discounted Cash Flows

Discount Rate Revenue CAGR Exit Multiple - EBITDA Exit Capitalization Rate Default Rate Recovery Rate Recovery Lag Pre-payment Rate Reinvestment Rate

7.8% - 42.0% 2.9% - 5.1% 9.5x 7.0% - 7.5% 2.0% 70.0% 12 months 20.0% LIBOR + 400 bps

15.6% 3.8% N/A 7.1% N/A N/A N/A N/A N/A

4,004

Third Party Pricing

N/A

N/A

N/A

664

Market Comparable Companies

EBITDA Multiple

6.5x - 7.5x

6.7x

Assets of Consolidated CLO Vehicles

900,146

Third Party Pricing

N/A

N/A

N/A

278,972

Market Comparable Companies

EBITDA Multiple Liquidity Discount

2.0x - 13.0x 1.0% - 25.0%

6.5x 8.4%

132,171

Discounted Cash Flows

Discount Rate

7.0% - 15.7%

9.3%

10

Transaction Price

N/A

N/A

N/A

Total Investments of Consolidated Blackstone Funds

3,017,699

Blackstone’s Treasury Cash Management Strategies

1,006

Discounted Cash Flows

Default Rate Recovery Rate Recovery Lag Pre-payment Rate Discount Rate Reinvestment Rate

2.0% 70.0% 12 months 20.0% 12.0% LIBOR + 400 bps

N/A N/A N/A N/A N/A N/A

200

Transaction Price

N/A

N/A

N/A

Loans and Receivables

$

30,620

Discounted Cash Flows

Discount Rate

11.8% - 25.9%

13.7%

43

Market Comparable Companies

EBITDA Multiple

8.7x

N/A

Other Investments

17,901

NAV as Fair Value

N/A

N/A

N/A

5,647

Discounted Cash Flows

Discount Rate

12.5%

N/A

3,350

Transaction Price

N/A

N/A

N/A

Total

$

3,076,466

Financial Liabilities

Liabilities of Consolidated CLO Vehicles

$

11,541,607

Discounted Cash Flows

Default Rate

2.0% - 5.0%

2.1%

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

5.0% - 20.0%

18.0%

Discount Rate

1.1% - 50.0%

3.9%

Reinvestment Rate

LIBOR + 400 bps

N/A

N/A		Not applicable.
CAGR		Compound annual growth rate.
EBITDA		Earnings before interest, taxes, depreciation and amortization.
Exit Multiple		Ranges include the last twelve months EBITDA, forward EBITDA and price/earnings exit multiples.
(a)		Unobservable inputs were weighted based on the fair value of the investments included in the range.

The significant unobservable inputs used in the fair value measurement of the assets, Blackstone’s Treasury Cash Management Strategies, debt instruments and obligations of consolidated CLO vehicles are discount rates, default rates, recovery rates, recovery lag, pre-payment rates and reinvestment rates. Increases (decreases) in any of the discount rates, default rates, recovery lag and pre-payment rates in isolation would result in a lower (higher) fair value measurement. Increases (decreases) in any of the recovery rates and reinvestment rates in isolation would result in a higher (lower) fair value measurement. Generally, a change in the assumption used for default rates may be accompanied by a directionally similar change in the assumption used for recovery lag and a directionally opposite change in the assumption used for recovery rates and pre-payment rates.

The significant unobservable inputs used in the fair value measurement of equity securities, partnership and LLC interests, debt instruments, assets of consolidated CLO vehicles and loans and receivables are discount rates, exit capitalization rates, exit multiples, book value multiples, EBITDA multiples, liquidity discount and revenue compound annual growth rates. Increases (decreases) in any of discount rates and exit capitalization rates in isolation can result in a lower (higher) fair value measurement. Increases (decreases) in any of exit multiples, book value multiples and revenue compound annual growth rates in isolation can result in a higher (lower) fair value measurement.

Since December 31, 2012, there have been no changes in valuation techniques within Level II and Level III that have had a material impact on the valuation of financial instruments.

The following tables summarize the changes in financial assets and liabilities measured at fair value for which the Partnership has used Level III inputs to determine fair value and does not include gains or losses that were reported in Level III in prior years or for instruments that were transferred out of Level III prior to the end of the respective reporting period. Total realized and unrealized gains and losses recorded for Level III investments are reported in Investment Income (Loss) and Net Gains (Losses) from Fund Investment Activities in the Condensed Consolidated Statements of Operations.

		Level III Financial Assets at Fair Value Three Months Ended September 30,
		2013																2012
		Investments of Consolidated Funds				Loans  and Receivables				Other Investments  (c)				Total				Investments of Consolidated Funds				Loans and Receivables				Other Investments  (c)				Total
Balance, Beginning of Period		$	2,890,319			$	107,731			$	47,914			$	3,045,964			$	2,540,156			$	104,207			$	21,362			$	2,665,725
Transfer In Due to Consolidation and Acquisition (a)			—				—				—				—				1,036				—				2,180				3,216
Transfer Out Due to Deconsolidation			(96	)			—				—				(96	)			—				—				—				—
Transfer In to Level III (b)			226,144				—				8,868				235,012				436,233				—				—				436,233
Transfer Out of Level III (b)			(270,059	)			—				(3,180	)			(273,239	)			(159,482	)			—				—				(159,482	)
Purchases			349,209				127,370				23,225				499,804				209,642				5,956				1,350				216,948
Sales			(154,446	)			(138,937	)			(15,038	)			(308,421	)			(181,324	)			(100,728	)			(99	)			(282,151	)
Settlements			—				2,293				(253	)			2,040				—				(79	)			—				(79	)
Realized Gains (Losses), Net			13,861				—				(157	)			13,704				13,671				(308	)			99				13,462
Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date			67,127				(380	)			(56	)			66,691				76,224				(1,753	)			(479	)			73,992
Balance, End of Period		$	3,122,059			$	98,077			$	61,323			$	3,281,459			$	2,936,156			$	7,295			$	24,413			$	2,967,864

		Level III Financial Assets at Fair Value Nine Months Ended September 30,
		2013																2012
		Investments of Consolidated Funds				Loans and Receivables				Other Investments  (c)				Total				Investments of Consolidated Funds				Loans and Receivables				Other Investments  (c)				Total
Balance, Beginning of Period		$	3,017,699			$	30,663			$	28,104			$	3,076,466			$	2,103,769			$	8,555			$	20,164			$	2,132,488
Transfer In Due to Consolidation and Acquisition (a)			—				—				11,960				11,960				123,601				—				2,180				125,781
Transfer Out Due to Deconsolidation			(152,823	)			—				—				(152,823	)			(1,599	)			—				—				(1,599	)
Transfer In to Level III (b)			684,621				—				8,868				693,489				575,238				—				—				575,238
Transfer Out of Level III (b)			(377,527	)			—				(4,894	)			(382,421	)			(135,729	)			—				—				(135,729	)
Purchases			673,179				233,890				129,259				1,036,328				564,076				148,864				1,450				714,390
Sales			(959,115	)			(168,399	)			(110,767	)			(1,238,281	)			(464,193	)			(149,979	)			(639	)			(614,811	)
Settlements			—				2,312				(1,822	)			490				—				(46	)			—				(46	)
Realized Gains (Losses), Net			(4,913	)			43				14,472				9,602				(5,772	)			(308	)			738				(5,342	)
Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date			240,938				(432	)			(13,857	)			226,649				176,765				209				520				177,494
Balance, End of Period		$	3,122,059			$	98,077			$	61,323			$	3,281,459			$	2,936,156			$	7,295			$	24,413			$	2,967,864

		Level III Financial Liabilities at Fair Value Three Months Ended September 30,
		2013												2012
		Collateralized Loan Obligations Senior Notes				Collateralized Loan Obligations Subordinated Notes				Total				Collateralized Loan Obligations Senior Notes				Collateralized Loan Obligations Subordinated Notes				Total
Balance, Beginning of Period		$	9,189,948			$	618,682			$	9,808,630			$	10,534,253			$	701,648			$	11,235,901
Issuances			1,503				922				2,425				10,844				1,459				12,303
Settlements			(787,918	)			(180	)			(788,098	)			(338,222	)			(572	)			(338,794	)
Realized (Gains) Losses, Net			2,833				—				2,833				(60	)			—				(60	)
Changes in Unrealized (Gains) Losses Included in Earnings Related to Liabilities Still Held at the Reporting Date			235,141				(14,044	)			221,097				405,687				108,789				514,476
Balance, End of Period		$	8,641,507			$	605,380			$	9,246,887			$	10,612,502			$	811,324			$	11,423,826

		Level III Financial Liabilities at Fair Value Nine Months Ended September 30,
		2013												2012
		Collateralized Loan Obligations Senior Notes				Collateralized Loan Obligations Subordinated Notes				Total				Collateralized Loan Obligations Senior Notes				Collateralized Loan Obligations Subordinated Notes				Total
Balance, Beginning of Period		$	10,695,136			$	846,471			$	11,541,607			$	7,449,766			$	630,236			$	8,080,002
Transfer In Due to Consolidation and Acquisition (a)			—				—				—				3,419,084				149,225				3,568,309
Transfer Out Due to Deconsolidation			(1,100,842	)			(150,925	)			(1,251,767	)			—				—				—
Issuances			2,558				1,697				4,255				14,073				2,211				16,284
Settlements			(1,492,295	)			(526	)			(1,492,821	)			(609,440	)			(3,470	)			(612,910	)
Realized (Gains) Losses, Net			2,833				—				2,833				(17	)			—				(17	)
Changes in Unrealized (Gains) Losses Included in Earnings Related to Liabilities Still Held at the Reporting Date			534,117				(91,337	)			442,780				339,036				33,122				372,158
Balance, End of Period		$	8,641,507			$	605,380			$	9,246,887			$	10,612,502			$	811,324			$	11,423,826

(a) Represents the transfer into Level III of financial assets and liabilities held by CLO vehicles as a result of the acquisition of management contracts and the Harbourmaster acquisition.

(b) Transfers in and out of Level III financial assets and liabilities were due to changes in the observability of inputs used in the valuation of such assets and liabilities.

(c) Represents Blackstone’s Treasury Cash Management Strategies and Other Investments.

X

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 21

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