v2.4.1.9

FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2015

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:

		March 31, 2015
		Level I				Level II				Level III				Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds		$	—			$	—			$	1,170,378			$	1,170,378
Equity Securities			65,706				87,343				186,687				339,736
Partnership and LLC Interests			—				183,675				1,562,341				1,746,016
Debt Instruments			—				1,473,038				86,561				1,559,599
Assets of Consolidated CLO Vehicles
Corporate Loans			—				5,387,924				514,245				5,902,169
Corporate Bonds			—				322,696				—				322,696
Freestanding Derivatives — Foreign Currency Contracts			—				5,118				—				5,118
Freestanding Derivatives — Interest Rate Contracts			—				2,033				—				2,033
Other			14				19,010				56,363				75,387
Total Investments of Consolidated Blackstone Funds			65,720				7,480,837				3,576,575				11,123,132
Blackstone’s Treasury Cash Management Strategies
Investment Funds			276,611				—				—				276,611
Equity Securities			69,849				—				—				69,849
Debt Instruments			—				1,158,707				64,816				1,223,523
Other			—				51,618				10,095				61,713
Total Blackstone’s Treasury Cash Management Strategies			346,460				1,210,325				74,911				1,631,696
Money Market Funds			260,002				—				—				260,002
Freestanding Derivatives
Interest Rate Contracts			191				260				—				451
Foreign Currency Contracts			—				1,647				—				1,647
Credit Default Swaps			—				308				—				308
Loans and Receivables			—				—				40,691				40,691
Other Investments			35,379				7,014				111,676				154,069
		$	707,752			$	8,700,391			$	3,803,853			$	13,211,996
Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes		$	—			$	—			$	6,587,954			$	6,587,954
Subordinated Notes			—				—				345,793				345,793
Freestanding Derivatives — Foreign Currency Contracts			—				36,138				—				36,138
Freestanding Derivatives — Credit Default Swaps			—				543				—				543
Net Investment Hedges — Foreign Currency Contracts			—				408				—				408
Freestanding Derivatives
Interest Rate Contracts			2,813				4,645				—				7,458
Foreign Currency Contracts			—				2,593				—				2,593
Credit Default Swaps			—				1,464				—				1,464
Securities Sold, Not Yet Purchased			—				162,111				—				162,111
		$	2,813			$	207,902			$	6,933,747			$	7,144,462

		December 31, 2014
		Level I				Level II				Level III				Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds		$	—			$	—			$	1,103,210			$	1,103,210
Equity Securities			58,934				114,115				179,311				352,360
Partnership and LLC Interests			—				187,140				1,496,422				1,683,562
Debt Instruments			—				1,502,314				105,970				1,608,284
Assets of Consolidated CLO Vehicles
Corporate Loans			—				5,691,517				588,075				6,279,592
Corporate Bonds			—				292,690				—				292,690
Freestanding Derivatives — Foreign Currency Contracts			—				8,915				—				8,915
Freestanding Derivatives — Interest Rate Contracts			—				2,281				—				2,281
Other			13				19,455				25,045				44,513
Total Investments of Consolidated Blackstone Funds			58,947				7,818,427				3,498,033				11,375,407
Blackstone’s Treasury Cash Management Strategies
Investment Funds			307,111				—				—				307,111
Equity Securities			71,746				—				—				71,746
Debt Instruments			—				1,141,301				84,894				1,226,195
Other			—				50,850				10,159				61,009
Total Blackstone’s Treasury Cash Management Strategies			378,857				1,192,151				95,053				1,666,061
Money Market Funds			198,278				—				—				198,278
Net Investment Hedges — Foreign Currency Contracts			—				523				—				523
Freestanding Derivatives
Interest Rate Contracts			263				144				—				407
Foreign Currency Contracts			—				2,798				—				2,798
Credit Default Swaps			—				85				—				85
Loans and Receivables			—				—				40,397				40,397
Other Investments			31,731				7,310				107,210				146,251
		$	668,076			$	9,021,438			$	3,740,693			$	13,430,207
Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes		$	—			$	—			$	6,448,352			$	6,448,352
Subordinated Notes			—				—				348,752				348,752
Freestanding Derivatives — Foreign Currency Contracts			—				21,875				—				21,875
Freestanding Derivatives — Credit Default Swaps			—				2,514				—				2,514
Freestanding Derivatives
Interest Rate Contracts			1,357				3,233				—				4,590
Foreign Currency Contracts			—				681				—				681
Credit Default Swaps			—				868				—				868
Securities Sold, Not Yet Purchased			—				85,878				—				85,878
		$	1,357			$	115,049			$	6,797,104			$	6,913,510

(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 March 31, 2015 and 2014, respectively:

		Three Months Ended March 31,
		2015				2014
Transfers from Level I into Level II (a)		$	—			$	—
Transfers from Level II into Level I (b)		$	5,688			$	18,029

(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 March 31, 2015:

Fair Value

Valuation Techniques

Unobservable Inputs

Ranges

Weighted- Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Investment Funds

$

1,170,378

NAV as Fair Value

N/A

N/A

N/A

Equity Securities

118,199

Discounted Cash Flows

Discount Rate

8.4% - 24.6%

11.9%

Revenue CAGR

1.1% - 102.6%

7.0%

Exit Multiple - EBITDA

5.0x - 17.0x

10.0x

Exit Multiple - P/E

7.5x - 17.0x

14.9x

64,167

Transaction Price

N/A

N/A

N/A

1,617

Market Comparable Companies

EBITDA Multiple

6.5x - 7.8x

6.9x

39

Third Party Pricing

N/A

N/A

N/A

2,665

Other

N/A

N/A

N/A

Partnership and LLC Interests

684,685

Discounted Cash Flows

Discount Rate

4.4% - 24.2%

8.9%

Revenue CAGR

-8.1% - 63.5%

5.4%

Exit Multiple - EBITDA

3.0x - 23.0x

10.2x

Exit Multiple - P/E

0.5x

N/A

Exit Capitalization Rate

2.0% - 14.2%

6.1%

25,825

Transaction Price

N/A

N/A

N/A

851,108

Third Party Pricing

N/A

N/A

N/A

723

Other

N/A

N/A

N/A

Debt Instruments

8,622

Discounted Cash Flows

Discount Rate

9.1% - 29.3%

14.4%

Revenue CAGR

5.6% - 20.0%

16.5%

Exit Multiple - EBITDA

5.8x - 9.5x

8.6x

Exit Capitalization Rate

1.0% - 6.6%

5.9%

75,346

Third Party Pricing

N/A

N/A

N/A

2,414

Transaction Pricing

N/A

N/A

N/A

179

Market Comparable Companies

EBITDA Multiple

5.9x - 7.9x

6.0x

Assets of Consolidated CLO Vehicles

491,928

Third Party Pricing

N/A

N/A

N/A

76,754

Market Comparable Companies

EBITDA Multiple

3.5x - 7.5x

5.4x

1,926

Discounted Cash Flows

Discount Rate

3.8%

N/A

Total Investments of Consolidated Blackstone Funds

3,576,575

Blackstone’s Treasury Cash Management Strategies

$

28,238

Discounted Cash Flows

Default Rate

1.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

30.0%

N/A

Reinvestment Rate

LIBOR + 450 bps

N/A

Discount Rate

5.8% - 10.2%

6.8%

33,437

Third Party Pricing

N/A

N/A

N/A

3,141

Transaction Price

N/A

N/A

N/A

10,095

NAV as Fair Value

N/A

N/A

N/A

Loans and Receivables

19,878

Discounted Cash Flows

Discount Rate

16.9% - 17.4%

17.3%

20,813

Transaction Price

N/A

N/A

N/A

Other Investments

16,612

Transaction Price

N/A

N/A

N/A

82,370

Discounted Cash Flows

Discount Rate

1.6% - 12.5%

3.3%

Default Rate

2.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Reinvestment Rate

LIBOR + 450 bps

N/A

12,694

NAV as Fair Value

N/A

N/A

N/A

Total

$

3,803,853

Financial Liabilities

Liabilities of Consolidated CLO Vehicles

$

6,933,747

Discounted Cash Flows

Default Rate

2.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Discount Rate

0.6% - 29.0%

2.9%

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, 2014:

Fair Value

Valuation Techniques

Unobservable Inputs

Ranges

Weighted- Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Investment Funds

$

1,103,210

NAV as Fair Value

N/A

N/A

N/A

Equity Securities

106,727

Discounted Cash Flows

Discount Rate

8.4% - 24.7%

11.8%

Revenue CAGR

0.7% - 24.4%

7.1%

Exit Multiple - EBITDA

5.0x - 13.0x

10.1x

Exit Multiple -P/E

10.5x - 17.0x

11.2x

67,706

Transaction Price

N/A

N/A

N/A

163

Market Comparable Companies

EBITDA Multiple

6.7x - 7.6x

6.9x

45

Third Party Pricing

N/A

N/A

N/A

4,670

Other

N/A

N/A

N/A

Partnership and LLC Interests

485,748

Discounted Cash Flows

Discount Rate

4.4% - 21.5%

9.5%

Revenue CAGR

-4.4% - 41.7%

6.5%

Exit Multiple - EBITDA

1.0x - 19.1x

9.7x

Exit Capitalization Rate

2.0% - 19.1%

6.8%

996,199

Transaction Price

N/A

N/A

N/A

13,793

Third Party Pricing

N/A

N/A

N/A

682

Other

N/A

N/A

N/A

Debt Instruments

9,570

Discounted Cash Flows

Discount Rate

8.8% - 24.7%

16.1%

Revenue CAGR

4.7% - 6.8%

5.0%

Exit Multiple - EBITDA

5.9x - 11.3x

11.0x

Exit Capitalization Rate

1.0% - 12.4%

9.3%

Default Rate

2%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20%

N/A

Reinvestment Rate

LIBOR + 400 bps

N/A

95,542

Third Party Pricing

N/A

N/A

N/A

686

Transaction Price

N/A

N/A

N/A

172

Market Comparable Companies

EBITDA Multiple

6.6x - 7.9x

6.6x

Assets of Consolidated CLO Vehicles

318,636

Third Party Pricing

N/A

N/A

N/A

290,658

Market Comparable Companies

EBITDA Multiple

3.8x - 15.0x

6.1x

3,826

Discounted Cash Flows

Discount Rate

8.0%

N/A

Total Investments of Consolidated Blackstone Funds

3,498,033

Blackstone’s Treasury Cash Management Strategies

$

26,167

Discounted Cash Flows

Default Rate

1.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

30.0%

N/A

Reinvestment Rate

LIBOR + 450 bps

N/A

Discount Rate

5.8% - 10.0%

7.2%

54,257

Third Party Pricing

N/A

N/A

N/A

10,159

NAV as Fair Value

N/A

N/A

N/A

4,470

Transaction Price

N/A

N/A

N/A

Loans and Receivables

26,247

Discounted Cash Flows

Discount Rate

10.5% - 12.2%

10.9%

14,150

Transaction Price

N/A

N/A

N/A

Other Investments

11,887

Transaction Price

N/A

N/A

N/A

2,719

NAV as Fair Value

N/A

N/A

N/A

92,604

Discounted Cash Flows

Discount Rate

1.3% - 12.5%

2.9%

Default Rate

2.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Reinvestment Rate

LIBOR + 400 bps

N/A

Total

$

3,740,693

Financial Liabilities

Liabilities of Consolidated CLO Vehicles

$

6,797,104

Discounted Cash Flows

Default Rate

2.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Discount Rate

0.3% - 19.3%

2.3%

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 Blackstone’s Treasury Cash Management Strategies, debt instruments, other investments and liabilities 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, EBITDA multiples 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 and revenue compound annual growth rates in isolation can result in a higher (lower) fair value measurement.

Since December 31, 2014, 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 and Net Gains from Fund Investment Activities in the Condensed Consolidated Statements of Operations.

		Level III Financial Assets at Fair Value Three Months Ended March 31,
		2015																2014
		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		$	3,498,033			$	40,397			$	202,263			$	3,740,693			$	3,358,752			$	137,788			$	58,598			$	3,555,138
Transfer In Due to Consolidation and Acquisition (a)			—				—				—				—				276,806				—				—				276,806
Transfer In (Out) Due to Deconsolidation			—				—				—				—				(83,867	)			—				—				(83,867	)
Transfer In to Level III (b)			129,848				—				26,930				156,778				195,607				—				3,679				199,286
Transfer Out of Level III (b)			(202,401	)			—				(22,684	)			(225,085	)			(244,308	)			—				(1,009	)			(245,317	)
Purchases			288,222				6,186				24,933				319,341				159,613				81,241				77,637				318,491
Sales			(147,181	)			(4,071	)			(35,352	)			(186,604	)			(290,782	)			(156,719	)			(4,067	)			(451,568	)
Settlements			—				(1,144	)			(103	)			(1,247	)			—				(1,170	)			(155	)			(1,325	)
Changes in Gains (Losses) Included in Earnings and Other Comprehensive Income			10,054				(677	)			(9,400	)			(23	)			17,015				—				102				17,117
Balance, End of Period		$	3,576,575			$	40,691			$	186,587			$	3,803,853			$	3,388,836			$	61,140			$	134,785			$	3,584,761
Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date		$	29,891			$	(806	)		$	1,514			$	30,599			$	23,986			$	433			$	2,126			$	26,545

		Level III Financial Liabilities at Fair Value Three Months Ended March 31,
		2015												2014
		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		$	6,448,352			$	348,752			$	6,797,104			$	8,302,572			$	610,435			$	8,913,007
Transfer In Due to Consolidation and Acquisition (a)			—				—				—				472,019				86,182				558,201
Transfer Out to Deconsolidation			—				—				—				(639,091	)			(39,798	)			(678,889	)
Issuances			888,960				42,199				931,159				—				—				—
Settlements			(266,317	)			—				(266,317	)			(388,987	)			(110	)			(389,097	)
Changes in (Gains) Losses Included in Earnings and Other Comprehensive Income			(483,041	)			(45,158	)			(528,199	)			2,538				—				2,538
Balance, End of Period		$	6,587,954			$	345,793			$	6,933,747			$	7,749,051			$	656,709			$	8,405,760
Changes in Unrealized (Gains) Losses Included in Earnings Related to Liabilities Still Held at the Reporting Date		$	(26,169	)		$	19,698			$	(6,471	)		$	46,472			$	(37,521	)		$	8,951

(a) Represents the transfer into Level III of financial assets and liabilities as a result of the consolidation of certain fund entities, 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

-URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611



Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 10

-URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611



Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 28

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612



Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258



Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 30

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612



Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 16

-URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611

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