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Fair Value Measurement

3 Months Ended

Mar. 31, 2022

5. Fair Value Measurement

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis by the above fair value hierarchy levels as of March 31, 2022:


(Dollars in millions)	Level I		Level II		Level III		Total
Assets
Investments of Consolidated Funds:
Equity securities	$	—	$	—	$	11.3	$	11.3
Bonds	—		—		565.2		565.2
Loans	—		—		5,612.5		5,612.5



	—		—		6,189.0		6,189.0

Investments in CLOs	—		—		560.4		560.4
Other investments(1)	1.5		44.9		76.0		122.4






Foreign currency forward contracts	—		2.1		—		2.1

Subtotal	$	1.5	$	47.0	$	6,825.4	$	6,873.9
Investments measured at net asset value(2)							238.4
Total							$	7,112.3
Liabilities
Loans payable of Consolidated Funds(3)	$	—	$	—	$	5,682.1	$	5,682.1




Foreign currency forward contracts	—		1.3		—		1.3
Total(4)	$	—	$	1.3	$	5,682.1	$	5,683.4

(1)The Level III balance excludes a $54.9 million corporate investment in equity securities which the Company has elected to account for under the measurement alternative for equity securities without readily determinable fair values pursuant to ASC 321, Investments – Equity Securities. As a non-recurring fair value measurement, the fair value of these equity securities is excluded from the tabular Level III rollforward disclosures.

(2)Balance represents Fund Investments that the Company reports based on the most recent available information which typically has a lag of up to 90 days, of which $223.6 million relates to investments of consolidated funds.

(3)Senior and subordinated notes issued by CLO vehicles are valued based on the more observable fair value of the CLO financial assets, less (i) the fair value of any beneficial interests held by the Company and (ii) the carrying value of any beneficial interests that represent compensation for services.

(4)Total liabilities balance excludes a $33.7 million revolving credit balance related to loans payable of consolidated funds.

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis by the above fair value hierarchy levels as of December 31, 2021:


(Dollars in millions)	Level I		Level II		Level III		Total
Assets
Investments of Consolidated Funds:
Equity securities	$	—	$	—	$	17.9	$	17.9
Bonds	—		—		599.5		599.5
Loans	—		—		5,898.1		5,898.1



	—		—		6,515.5		6,515.5

Investments in CLOs	—		—		361.1		361.1
Other investments(1)	1.5		45.6		78.7		125.8






Foreign currency forward contracts	—		1.4		—		1.4
Subtotal	$	1.5	$	47.0	$	6,955.3	$	7,003.8
Investments measured at net asset value(2)							161.7
Total							$	7,165.5
Liabilities
Loans payable of Consolidated Funds(3)	$	—	$	—	$	5,811.0	$	5,811.0



Foreign currency forward contracts	—		0.7		—		0.7
Total(4)	$	—	$	0.7	$	5,811.0	$	5,811.7

(1)The Level III balance excludes a corporate investment in equity securities which the Company has elected to account for under the measurement alternative for equity securities without readily determinable fair values pursuant to ASC 321, Investments – Equity Securities. In December 2021, the Company remeasured this investment to a fair value of $54.9 million due to an observable price change. As a non-recurring fair value measurement, the fair value of these equity securities is excluded from the tabular Level III rollforward disclosures.

(2)Balance represents Fund Investments that the Company reports based on the most recent available information which typically has a lag of up to 90 days, of which $145.5 million relates to investments of consolidated funds.

(4)Total liabilities balance excludes a $79.0 million revolving credit balance related to loans payable of consolidated funds.

The changes in financial instruments measured at fair value for which the Company has used Level III inputs to determine fair value are as follows (Dollars in millions):




















	Financial Assets
	Three Months Ended March 31, 2022
	Investments of Consolidated Funds
	Equity securities		Bonds		Loans				Investments in CLOs			Other investments	Total
Balance, beginning of period	$	17.9	$	599.5	$	5,898.1	$	361.1		$	78.7		$	6,955.3



Purchases	0.1		182.5		766.0		227.6			0.9			1,177.1
Sales and distributions	(6.8)		(186.9)		(731.0)		(14.1)			(2.0)			(940.8)
Settlements	—		(0.3)		(162.8)		—			—			(163.1)
Realized and unrealized gains (losses), net
Included in earnings	0.4		(13.8)		(53.9)		(9.6)			(1.6)			(78.5)
Included in other comprehensive income	(0.3)		(15.8)		(103.9)		(4.6)			—			(124.6)
Balance, end of period	$	11.3	$	565.2	$	5,612.5	$	560.4		$	76.0		$	6,825.4
Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date	$	0.3	$	(14.5)	$	(59.4)	$	(9.6)		$	(1.6)		$	(84.8)
Changes in unrealized gains (losses) included in other comprehensive income related to financial assets still held at the reporting date	$	(0.2)	$	(10.8)	$	(87.0)	$	(4.6)		$	—		$	(102.6)




















	Financial Assets
	Three Months Ended March 31, 2021
	Investments of Consolidated Funds
	Equity securities		Bonds		Loans		Investments in CLOs		Other investments(1)		Total
Balance, beginning of period	$	9.4	$	550.4	$	5,497.1	$	489.4	$	81.4	$	6,627.7



Purchases	0.1		151.0		755.3		29.0		—		935.4
Sales and distributions	(0.6)		(155.4)		(676.2)		(54.8)		(15.2)		(902.2)
Settlements	—		(3.6)		(238.3)		—		—		(241.9)
Realized and unrealized gains (losses), net
Included in earnings	0.9		4.4		87.2		(4.0)		9.4		97.9
Included in other comprehensive income	(0.3)		(21.6)		(154.1)		3.3		—		(172.7)
Balance, end of period	$	9.5	$	525.2	$	5,271.0	$	462.9	$	75.6	$	6,344.2
Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date	$	0.7	$	3.2	$	79.1	$	(4.0)	$	9.1	$	88.1
Changes in unrealized gains (losses) included in other comprehensive income related to financial assets still held at the reporting date	$	(0.3)	$	(16.6)	$	(134.3)	$	3.3	$	—	$	(147.9)

(1) The beginning balance of Other Investments has been revised to reflect the exclusion of Fund Investments measured at fair value using the NAV per share practical expedient from the fair value hierarchy.


















	Financial Liabilities
	Loans Payable of Consolidated Funds
	Three Months Ended March 31,
	2022		2021
Balance, beginning of period	$	5,811.0	$	5,563.0

Borrowings	1,108.4		105.4
Paydowns	(415.4)		(144.4)
Sales	(669.5)		—
Realized and unrealized (gains) losses, net
Included in earnings	(46.2)		77.0
Included in other comprehensive income	(106.2)		(160.3)
Balance, end of period	$	5,682.1	$	5,440.7
Changes in unrealized (gains) losses included in earnings related to financial liabilities still held at the reporting date	$	(49.8)	$	77.0
Changes in unrealized (gains) losses included in other comprehensive income related to financial liabilities still held at the reporting date	$	(102.6)	$	(158.3)

Realized and unrealized gains and losses included in earnings for Level III investments for investments in CLOs and other investments are included in investment income (loss), and such gains and losses for investments of Consolidated Funds and loans payable of the Consolidated Funds are included in net investment gains (losses) of Consolidated Funds in the unaudited condensed consolidated statements of operations.

Gains and losses included in other comprehensive income for all Level III financial asset and liabilities are included in accumulated other comprehensive loss and non-controlling interests in consolidated entities.

The following table summarizes quantitative information about the Company’s Level III inputs as of March 31, 2022:

Fair Value at

Valuation Technique(s)

Unobservable Input(s)

Range
(Weighted Average)

(Dollars in millions)

March 31, 2022

Assets

Investments of Consolidated Funds:

Equity securities

11.3

Consensus Pricing

Indicative Quotes ($ per share)

0.00 - 0.42 (0.42)

Bonds

565.2

Consensus Pricing

Indicative Quotes (% of Par)

86 - 112 (96)

Loans

5,580.0

Consensus Pricing

Indicative Quotes (% of Par)

25 - 105 (97)

32.5

Discounted Cash Flow

Discount Rates

5% - 8% (6%)

6,189.0

Investments in CLOs:

Senior secured notes

470.7

Consensus Pricing with Discounted Cash Flow

Indicative Quotes (% of Par)

84 - 100 (98)

Discount Margins (Basis Points)

20 - 1,430 (236)

Default Rates

1% - 2% (1%)

Recovery Rates

50% - 70% (60%)

Subordinated notes and preferred shares

89.7

Consensus Pricing with Discounted Cash Flow

Indicative Quotes (% of Par)

39 - 85 (69)

Discount Rates

14% - 22% (19%)

Default Rates

1% - 2% (1%)

Recovery Rates

50% - 70% (60%)

Other investments:

BDC preferred shares

73.3

Market Yield Analysis

Market Yield

9% - 9% (9%)

Aviation subordinated notes

2.7

Discounted Cash Flow

Discount Rates

21% - 21% (21%)

Total

6,825.4

Liabilities

Loans payable of Consolidated Funds:

Senior secured notes

5,470.1

Other (1)

N/A

Subordinated notes and preferred shares

212.0

Consensus Pricing with Discounted Cash Flow

Indicative Quotes (% of Par)

32 - 108 (55)

Discount Rates

15% - 25% (21%)

Default Rates

2% - 2% (2%)

Recovery Rates

50% - 70% (60%)

Total

5,682.1

(1) Senior and subordinated notes issued by CLO vehicles are classified based on the more observable fair value of the CLO financial assets, less (i) the fair value of any beneficial interests held by the Company and (ii) the carrying value of any beneficial interests that represent compensation for services.

The following table summarizes quantitative information about the Company’s Level III inputs as of December 31, 2021:


	Fair Value at		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
(Dollars in millions)	December 31, 2021
Assets
Investments of Consolidated Funds:
Equity securities	$	17.9	Consensus Pricing	Indicative Quotes ($ per share)	0.00 - 84.22 (0.63)

Bonds	599.5		Consensus Pricing	Indicative Quotes (% of Par)	93 - 107 (99)
Loans	5,766.0		Consensus Pricing	Indicative Quotes (% of Par)	35 - 106 (98)
	65.1		Discounted Cash Flow	Discount Rates	4% - 8% (5%)
	67.0		Market Yield Analysis	Market Yields	3% - 8% (5%)

	6,515.5
Investments in CLOs:
Senior secured notes	289.7		Discounted Cash Flow with Consensus Pricing	Indicative Quotes (% of Par)	86 - 101 (99)
				Discount Margins (Basis Points)	50 - 1,330 (245)
				Default Rates	1% - 2% (1%)
				Recovery Rates	50% - 70% (60%)
Subordinated notes and preferred shares	71.5		Discounted Cash Flow with Consensus Pricing	Indicative Quotes (% of Par)	46 - 97 (63)
				Discount Rate	14% - 22% (19%)
				Default Rates	1% - 2% (1%)
				Recovery Rates	50% - 70% (60%)
Other investments:
BDC preferred shares	72.5		Market Yield Analysis	Market Yield	7% - 7% (7%)
Aviation subordinated notes	6.1		Discounted Cash Flow	Discount Rates	18% - 18% (18%)

Total	$	6,955.3
Liabilities
Loans payable of Consolidated Funds:
Senior secured notes	$	5,561.1	Other (1)	N/A	N/A

Subordinated notes and preferred shares	249.9		Discounted Cash Flow with Consensus Pricing	Indicative Quotes (% of Par)	40 - 97 (61)
				Discount Rates	14% - 22% (19%)
				Default Rates	1% - 2% (1%)
				Recovery Rates	50% - 70% (60%)

Total	$	5,811.0

The significant unobservable inputs used in the fair value measurement of investments of the Company’s consolidated funds are indicative quotes. Significant decreases in indicative quotes in isolation would result in a significantly lower fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Company’s investments in CLOs and other investments include indicative quotes, discount margins, discount rates, default rates, and recovery rates. Significant decreases in indicative quotes or recovery rates in isolation would result in a significantly lower fair value measurement. Significant increases in discount margins, discount rates or default rates in isolation would result in a significantly lower fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Company’s loans payable of Consolidated Funds are indicative quotes, discount rates, default rates, and recovery rates. Significant increases in discount rates or default rates in isolation would result in a significantly lower fair value measurement. Significant decreases in indicative quotes or recovery rates in isolation would result in a significantly lower fair value measurement.

- 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.

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