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Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2019
Derivative Financial Instruments
6.     Derivative Financial Instruments
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Blackstone and the consolidated Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain risk management objectives and for general investment purposes. Blackstone may enter into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. Additionally, Blackstone may also enter into derivative contracts in order to hedge its foreign currency risk exposure against the effects of a portion of its
non-U.S.
dollar denominated currency net investments. 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.
Net Investment Hedges
Blackstone uses foreign currency forward contracts to hedge portions of Blackstone’s net investments in foreign operations. The gains and losses due to change in fair value attributable to changes in spot exchange rates on foreign currency derivatives designated as net investment hedges were recognized in Other Comprehensive Income, Net of Tax - Currency Translation Adjustment.
 
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.
                                                                                                                                                                                                                                                         
 
  
June 30, 2019
  
December 31, 2018
 
  
Assets
  
Liabilities
  
Assets
  
Liabilities
 
  
 
 
Fair
 
 
 
Fair
 
 
 
Fair
 
 
 
Fair
 
 
  
Notional
 
Value
 
Notional
 
Value
 
Notional
 
Value
 
Notional
 
Value
 
Freestanding Derivatives
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Blackstone
    
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
  
Interest Rate Contracts
    $
1,000,426
      $
38,299
      $
488,463
      $
47,845
      $
798,137
      $
43,632
      $
844,620
      $
39,164
  
Foreign Currency Contracts
    
167,699
      
615
      
106,500
      
444
      
224,841
      
1,286
      
245,371
      
1,636
  
Credit Default Swaps
    
2,204
      
81
      
29,205
      
1,200
      
—
      
—
      
34,060
      
4,004
  
Investments of
Consolidated Blackstone
Funds
    
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
  
Foreign Currency Contracts
    
29,931
      
863
      
78,769
      
814
      
108,271
      
524
      
16,952
      
164
  
Interest Rate Contracts
    
—
      
—
      
28,000
      
1,382
      
—
      
—
      
10,000
      
311
  
Credit Default Swaps
    
12,612
      
535
      
59,888
      
2,435
      
20,952
      
55
      
46,685
      
5,710
  
Total Return Swaps
    
10,851
      
15
      
22,567
      
382
      
—
      
—
      
31,440
      
1,855
  
Equity Options
    
1
      
173
      
1
      
19
      
—
      
—
      
—
      
—
  
                                                                 
 
    $
     1,223,724
      $
     40,581
      $
       813,393
      $
    54,521
      $
   1,152,201
      $
       45,497
      $
     1,229,128
       $
    52,844
  
                                                                 
 
 
 
 
 
 
The table below summarizes the impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:
                                 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Net Investment Hedges - Foreign Currency Contracts
 
 
 
 
 
 
 
 
 
 
 
 
Hedge Ineffectiveness
 
$
—
 
 
$
—
 
 
$
—
 
 
$
(8
)
                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freestanding Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Realized Gains (Losses)
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Contracts
 
$
(416
)
 
$
449
 
 
$
(2,664
)
 
$
2,070
 
Foreign Currency Contracts
 
 
(1,526
)
 
 
12,321
 
 
 
146
 
 
 
8,238
 
Credit Default Swaps
 
 
881
 
 
 
(107
)
 
 
1,991
 
 
 
(508
)
Total Return Swaps
 
 
(275
)
 
 
173
 
 
 
(395
)
 
 
174
 
Equity Options
 
 
(124
)
 
 
—
 
 
 
(132
)
 
 
—
 
                                 
 
$
(1,460
)
 
$
12,836
 
 
$
(1,054
)
 
$
9,974
 
                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Change in Unrealized Gains (Losses)
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Contracts
 
$
(2,892
)
 
$
37,261
 
 
$
(11,155
)
 
$
(39
 )
Foreign Currency Contracts
 
 
1,773
 
 
 
1,456
 
 
 
209
 
 
 
(2,272
 )
Credit Default Swaps
 
 
(294
)
 
 
615
 
 
 
3,647
 
 
 
488
 
Total Return Swaps
 
 
393
 
 
 
(5
)
 
 
1,371
 
 
 
52
 
Equity Options
 
 
115
 
 
 
—
 
 
 
65
 
 
 
—
 
                                 
 
$
(905
)
 
$
39,327
 
 
$
(5,863
)
 
$
(1,771
)
                                 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 30, 2019 and December 31, 2018, Blackstone had not designated any derivatives as cash flow hedges.