Fair Value Measurement

3 Months Ended

Mar. 31, 2023

3. 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, 2023:


(Dollars in millions)	Level I		Level II		Level III		Total
Assets
Investments of Consolidated Funds(1):
Equity securities(2)	$	—	$	—	$	435.5	$	435.5
Bonds	—		—		593.2		593.2
Loans	—		—		5,481.7		5,481.7



	—		—		6,510.4		6,510.4
Investments in CLOs and other:
Investments in CLOs	—		—		544.8		544.8
Other investments(3)	1.5		41.9		76.1		119.5

	1.5		41.9		620.9		664.3
Corporate treasury investments

Commercial paper and other	—		102.0		—		102.0
	—		102.0		—		102.0
Foreign currency forward contracts	—		2.1		—		2.1

Subtotal	$	1.5	$	146.0	$	7,131.3	$	7,278.8
Investments measured at net asset value							569.6
Total							$	7,848.4
Liabilities
Loans payable of Consolidated Funds(4)	$	—	$	—	$	5,647.9	$	5,647.9




Foreign currency forward contracts	—		1.6		—		1.6
Total(5)	$	—	$	1.6	$	5,647.9	$	5,649.5

(1)This balance excludes $556.9 million related to investments of consolidated funds that are included in investments measured at net asset value.

(2)This balance includes $382.7 million related to investments that have been bridged by the Company to investment funds and are accounted for as consolidated VIEs as of March 31, 2023.

(3)The Level III balance excludes $50.3 million related to three corporate investments 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.

(4)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 interest held by the Company and (ii) the carrying value of any beneficial interests that represent compensation for services.

(5)Total liabilities balance excludes $280.5 million of senior notes measured at amortized cost and a $157.5 million revolving credit balance, both 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, 2022:


(Dollars in millions)	Level I		Level II		Level III		Total
Assets
Investments of Consolidated Funds(1):
Equity securities(2)	$	—	$	—	$	430.6	$	430.6
Bonds	—		—		594.9		594.9
Loans	—		—		5,352.9		5,352.9



	—		—		6,378.4		6,378.4

Investments in CLOs	—		—		526.1		526.1
Other investments(3)	1.6		41.6		79.4		122.6


Corporate treasury investments

Commercial paper and other	—		20.0		—		20.0
	—		20.0		—		20.0
Foreign currency forward contracts	—		2.2		—		2.2
Subtotal	$	1.6	$	63.8	$	6,983.9	$	7,049.3
Investments measured at net asset value							528.5
Total							$	7,577.8
Liabilities
Loans payable of Consolidated Funds(4)	$	—	$	—	$	5,491.6	$	5,491.6



Foreign currency forward contracts	—		3.2		—		3.2
Total(5)	$	—	$	3.2	$	5,491.6	$	5,494.8

(1)This balance excludes $516.0 million related to investments of consolidated funds that are included in investments measured at net asset value.

(2)This balance includes $377.4 million related to investments that have been bridged by the Company to investment funds and are accounted for as consolidated VIEs as of December 31, 2022.

(3)The Level III balance excludes $58.2 million related to two corporate investments 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.

(4)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.

(5)Total liabilities balance excludes $235.6 million of senior notes measured at amortized cost and a $178.0 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, 2023
	Investments of Consolidated Funds
	Equity securities		Bonds		Loans				Investments in CLOs			Other investments	Total
Balance, beginning of period	$	430.6	$	594.9	$	5,352.9	$	526.1		$	79.4		$	6,983.9



Purchases	5.4		29.8		237.3		—			—			272.5
Sales and distributions	—		(47.0)		(169.7)		(7.9)			(0.9)			(225.5)
Settlements	—		(4.1)		(101.6)		—			—			(105.7)
Realized and unrealized gains (losses), net
Included in earnings	(0.5)		11.4		116.0		19.1			(2.4)			143.6
Included in other comprehensive income	—		8.2		46.8		7.5			—			62.5
Balance, end of period	$	435.5	$	593.2	$	5,481.7	$	544.8		$	76.1		$	7,131.3
Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date	$	(0.4)	$	8.5	$	107.3	$	19.1		$	(3.3)		$	131.2
Changes in unrealized gains (losses) included in other comprehensive income related to financial assets still held at the reporting date	$	—	$	8.7	$	48.6	$	7.5		$	—		$	64.8




















	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 Liabilities
	Loans Payable of Consolidated Funds
	Three Months Ended March 31,
	2023		2022
Balance, beginning of period	$	5,491.6	$	5,811.0

Borrowings	0.6		1,108.4
Paydowns	(2.1)		(415.4)
Sales	(38.1)		(669.5)
Realized and unrealized (gains) losses, net
Included in earnings	141.4		(46.2)
Included in other comprehensive income	54.5		(106.2)
Balance, end of period	$	5,647.9	$	5,682.1
Changes in unrealized (gains) losses included in earnings related to financial liabilities still held at the reporting date	$	142.4	$	(49.8)
Changes in unrealized (gains) losses included in other comprehensive income related to financial liabilities still held at the reporting date	$	54.5	$	(102.6)

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, 2023:

Fair Value at

Valuation Technique(s)

Unobservable Input(s)

Range
(Weighted Average)

(Dollars in millions)

March 31, 2023

Assets

Investments of Consolidated Funds:

Equity securities

2.5

Consensus Pricing

Indicative Quotes ($ per share)

0.00 - 392.50 (0.08)

365.4

Discounted Cash Flow

Discount Rates

10% - 10% (10%)

Terminal Growth Rate

0% - 7% (5%)

Comparable Multiple

EBITDA Multiple

12.7x - 12.7x (12.7x)

TCF Multiple

24.5x - 24.5x (24.5x)

50.0

Discounted Cash Flow

Discount Rates

10% - 10% (10%)

Terminal Growth Rate

0% - 7% (5%)

Comparable Multiple

TCF Multiple

24.5x - 24.5x (24.5x)

0.3

Comparable Multiple

EBITDA Multiple

13.8x - 19.0x (17.8x)

17.3

Other(1)

N/A

Bonds

593.2

Consensus Pricing

Indicative Quotes (% of Par)

40 - 107 (89)

Loans

5,121.2

Consensus Pricing

Indicative Quotes (% of Par)

0 - 102 (94)

11.4

Discounted Cash Flow

Discount Rates

8% - 13% (13%)

329.7

Discounted Cash Flow

Discount Rates

7% - 10% (8%)

8.4

Consensus Pricing

Indicative Quotes (% of Par)

98% -98% (98%)

10.5

Consensus Pricing

Indicative Quotes (% of Par)

86% - 86% (86%)

0.5

Other(1)

N/A

6,510.4

Investments in CLOs:

Senior secured notes

476.6

Consensus Pricing with Discounted Cash Flow

Indicative Quotes (% of Par)

72 - 100 (95)

Discount Margins (Basis Points)

170 - 1,365 (314)

Default Rates

2% - 3% (2%)

Recovery Rates

60% - 60% (60%)

Subordinated notes and preferred shares

68.2

Consensus Pricing with Discounted Cash Flow

Indicative Quotes (% of Par)

0 - 86 (55)

Discount Rates

15% - 25% (20%)

Default Rates

2% - 3% (2%)

Recovery Rates

60% - 60% (60%)

Other investments:

BDC preferred shares

73.6

Market Yield Analysis

Market Yields

11% - 11% (11%)

Aviation subordinated notes

2.5

Discounted Cash Flow

Discount Rates

21% - 21% (21%)

Total

7,131.3

Liabilities

Loans payable of Consolidated Funds:

Senior secured notes

5,451.1

Other(1)

N/A

Subordinated notes and preferred shares

196.8

Consensus Pricing with Discounted Cash Flow

Indicative Quotes (% of Par)

21 - 99 (39)

Discount Rates

15% - 25% (20%)

Default Rates

2% - 3% (3%)

Recovery Rates

60% - 60% (60%)

Total

5,647.9

(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, 2022:

Fair Value at

Valuation Technique(s)

Unobservable Input(s)

Range
(Weighted Average)

(Dollars in millions)

December 31, 2022

Assets

Investments of Consolidated Funds:

Equity securities

3.1

Consensus Pricing

Indicative Quotes ($ per share)

0.00 - 4.73 (0.18)

363.5

Discounted Cash Flow

Discount Rates

10% - 10% (10%)

Terminal Growth Rate

0% - 7% (5%)

Comparable Multiple

EBITDA Multiple

12.7x - 12.7x (12.7x)

TCF Multiple

23.8x - 23.8x (23.8x)

64.0

Other(1)

N/A

Bonds

594.9

Consensus Pricing

Indicative Quotes (% of Par)

46 - 105 (88)

Loans

5,043.4

Consensus Pricing

Indicative Quotes (% of Par)

0 - 100 (91)

11.8

Discounted Cash Flow

Discount Rates

0% - 9% (1%)

248.7

Discounted Cash Flow

Discount Rates

7% - 10% (8%)

37.4

Consensus Pricing

Indicative Quotes (% of Par)

97% - 98% (97%)

11.1

Consensus Pricing

Indicative Quotes (% of Par)

91% - 91% (91%)

0.5

Other(1)

N/A

6,378.4

Investments in CLOs:

Senior secured notes

462.1

Discounted Cash Flow with Consensus Pricing

Indicative Quotes (% of Par)

67 - 100 (93)

Discount Margins (Basis Points)

170 - 1,800 (386)

Default Rates

2% - 3% (2%)

Recovery Rates

50% - 70% (60%)

Subordinated notes and preferred shares

64.0

Discounted Cash Flow with Consensus Pricing

Indicative Quotes (% of Par)

0 - 82 (40)

Discount Rate

15% - 25% (20%)

Default Rates

2% - 3% (2%)

Recovery Rates

50% - 70% (60%)

Other investments:

BDC preferred shares

76.9

Market Yield Analysis

Market Yields

11% - 11% (11%)

Aviation subordinated notes

2.5

Discounted Cash Flow

Discount Rates

21% - 21% (21%)

Total

6,983.9

Liabilities

Loans payable of Consolidated Funds:

Senior secured notes

5,303.3

Other(2)

N/A

Subordinated notes and preferred shares

188.3

Discounted Cash Flow with Consensus Pricing

Indicative Quotes (% of Par)

21 - 96 (38)

Discount Rates

15% - 25% (20%)

Default Rates

2% - 3% (3%)

Recovery Rates

50% - 70% (60%)

Total

5,491.6

(1) Fair value approximates transaction price that was in close proximity to the reporting date.

(2) 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 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 discount rates, default rates, recovery rates and indicative quotes. Significant increases in discount rates or default rates in isolation would result in a significantly lower fair value measurement. Significant decreases in recovery rates or indicative quotes 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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