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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2014
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements The following table summarizes the Company's financial assets and liabilities that are measured at fair value on a recurring basis:
|  |  | Fair Value Measurements
| December 31, 2013 |
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Other Unobservable Inputs (Level 3)
Financial Assets |  |  |  |  |  |  |
Cash equivalents | $ | 39.0 |  |  | $ | 39.0 |  |  | $ | — |  |  | $ | — |
Investments in marketable securities(1) |  |  |  |  |  |  |
Trading securities | 22.5 |  |  | 22.5 |  |  | — |  |  | — |
Available-for-sale securities | 135.4 |  |  | 135.4 |  |  | — |  |  | — |
Other investments | 164.3 |  |  | 14.1 |  |  | 18.4 |  |  | 131.8 |
Financial Liabilities |  |  |  |  |  |  |
Contingent payment arrangements(2) | $ | 50.2 |  |  | $ | — |  |  | $ | — |  |  | $ | 50.2 |
Obligations to related parties(2) | 76.9 |  |  | — |  |  | — |  |  | 76.9 |
Interest rate swaps(3) | 2.5 |  |  | — |  |  | 2.5 |  |  | — |
|  |  | Fair Value Measurements
| September 30, 2014 |
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Other Unobservable Inputs (Level 3)
Financial Assets |  |  |  |  |  |  |
Cash equivalents | $ | 32.4 |  |  | $ | 32.4 |  |  | $ | — |  |  | $ | — |
Investments in marketable securities(1) |  |  |  |  |  |  |
Trading securities | 22.1 |  |  | 22.1 |  |  | — |  |  | — |
Available-for-sale securities | 136.0 |  |  | 136.0 |  |  | — |  |  | — |
Other investments | 171.1 |  |  | 20.3 |  |  | 13.1 |  |  | 137.7 |
Financial Liabilities |  |  |  |  |  |  |
Contingent payment arrangements(2) | $ | 57.0 |  |  | $ | — |  |  | $ | — |  |  | $ | 57.0 |
Obligations to related parties(2) | 92.7 |  |  | — |  |  | — |  |  | 92.7 |
Interest rate swaps(3) | 1.6 |  |  | — |  |  | 1.6 |  |  | — |
___________________________________________________________
(1) | Principally investments in equity securities.
(2) | Amounts are presented within Other liabilities in the accompanying Consolidated Balance Sheets.
(3) | The fair value of the Company's interest rate swaps is presented within Other liabilities in the accompanying Consolidated Balance Sheets. As of December 31, 2013 and September 30, 2014, the Company had posted collateral with its counterparties of $3.6 million and $3.0 million, respectively. Gains (losses) on these interest rate swaps for the three and nine months ended September 30, 2013 were $(0.0) million and $1.3 million, respectively, and $0.5 million and $0.9 million, respectively, for the three and nine months ended September 30, 2014. These gains have been reported in the Consolidated Statements of Comprehensive Income.
The following is a description of the significant financial assets and liabilities measured at fair value and the fair value methodologies used. Cash equivalents consist primarily of highly liquid investments in daily redeeming money market funds which are classified as Level 1. Investments in marketable securities consist primarily of investments in publicly traded securities and in funds advised by Affiliates which are valued using net asset value ("NAV"). Publicly traded securities and investments in daily redeeming funds that calculate NAVs are classified as Level 1. Other investments consist primarily of funds advised by Affiliates and are valued using NAV. Investments in daily redeeming funds that calculate NAVs are classified as Level 1. Investments in funds that permit redemptions monthly or quarterly are classified as Level 2. Investments in funds that are subject to longer redemption restrictions are classified as Level 3. The fair value of Level 3 assets is determined using NAV one quarter in arrears (adjusted for current period calls and distributions). Contingent payment arrangements represent the present value of the expected future settlement of contingent payment arrangements related to the Company's investments in consolidated Affiliates. The significant unobservable inputs that are used in the fair value measurement of these obligations are growth and discount rates. Increases in the growth rate result in a higher obligation while an increase in the discount rate results in a lower obligation. Obligations to related parties include agreements to repurchase Affiliate equity and liabilities offsetting certain investments which are held by the Company but economically attributable to a related party. The significant unobservable inputs that are used in the fair value measurement of the agreements to repurchase Affiliate equity are growth and discount rates. Increases in the growth rate result in a higher obligation while an increase in the discount rate results in a lower obligation. The liability to a related party is measured based upon certain investments held by the Company, the fair value of which is determined using NAV one quarter in arrears. Interest rate swaps use model-derived valuations in which all significant inputs are observable in active markets to determine the fair value of these derivatives. It is the Company's policy to value financial assets or liabilities transferred as of the beginning of the period in which the transfer occurs. There were no significant transfers of financial assets or liabilities between Level 1 and Level 2 in the three and nine months ended September 30, 2013 and 2014, respectively. Level 3 Financial Assets and Liabilities The following table presents the changes in Level 3 assets and liabilities for the three and nine months ended September 30, 2013 and 2014:
| For the Three Months Ended September 30, |
| 2013 |  |  | 2014 |
| Other Investments |  | Contingent Payment Arrangements |  | Obligations to Related Parties |  |  | Other Investments |  | Contingent Payment Arrangements |  | Obligations to Related Parties |
Balance, beginning of period | $ | 124.4 |  |  | $ | 44.3 |  |  | $ | 96.6 |  |  |  | $ | 139.5 |  |  | $ | 55.1 |  |  | $ | 98.4 |  |
Net gains/losses | 4.2 |  | (1) | 1.8 |  | (2) | 1.0 |  | (3) |  | 2.7 |  | (1) | 1.9 |  | (2) | 1.3 |  | (3)
Purchases and issuances | 2.2 |  |  | — |  |  | 23.1 |  |  |  | 3.7 |  |  | — |  |  | 11.1 |  |
Settlements and reductions | (4.5 | ) |  | — |  |  | (22.0 | ) |  |  | (8.2 | ) |  | — |  |  | (18.1 | ) |
Net transfers in and/or out of Level 3 | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |
Balance, end of period | $ | 126.3 |  |  | $ | 46.1 |  |  | $ | 98.7 |  |  |  | $ | 137.7 |  |  | $ | 57.0 |  |  | $ | 92.7 |  |
Net unrealized gains/losses relating to instruments still held at the reporting date | $ | 4.7 |  |  | $ | 1.8 |  |  | $ | (0.1 | ) |  |  | $ | 4.4 |  |  | $ | 1.9 |  |  | $ | 0.2 |  |
| For the Nine Months Ended September 30, |
| 2013 |  |  | 2014 |
| Other Investments |  | Contingent Payment Arrangements |  | Obligations to Related Parties |  |  | Other Investments |  | Contingent Payment Arrangements |  | Obligations to Related Parties |
Balance, beginning of period | $ | 118.9 |  |  | $ | 31.0 |  |  | $ | 77.8 |  |  |  | $ | 131.8 |  |  | $ | 50.2 |  |  | $ | 76.9 |  |
Net gains/losses | 9.2 |  | (1) | 15.1 |  | (2) | 3.2 |  | (3) |  | 13.7 |  | (1) | 6.8 |  | (2) | 5.8 |  | (3)
Purchases and issuances | 9.9 |  |  | — |  |  | 55.1 |  |  |  | 10.5 |  |  | — |  |  | 72.1 |  |
Settlements and reductions | (11.7 | ) |  | — |  |  | (37.4 | ) |  |  | (18.3 | ) |  | — |  |  | (62.1 | ) |
Net transfers in and/or out of Level 3 | — |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | — |  |
Balance, end of period | $ | 126.3 |  |  | $ | 46.1 |  |  | $ | 98.7 |  |  |  | $ | 137.7 |  |  | $ | 57.0 |  |  | $ | 92.7 |  |
Net unrealized gains/losses relating to instruments still held at the reporting date | $ | 11.1 |  |  | $ | 15.1 |  |  | $ | 0.1 |  |  |  | $ | 17.1 |  |  | $ | 6.8 |  |  | $ | 2.2 |  |
___________________________________________________________
(1) | Gains and losses on Other investments are recorded in Investment and other income.
(2) | Accretion and changes to payment estimates under the Company's contingent payment arrangements are recorded in Imputed interest expense and contingent payment arrangements and foreign currency translation adjustments related to such arrangements are recorded as Other comprehensive income.
(3) | Gains and losses associated with agreements to repurchase Affiliate equity are recorded in Imputed interest expense and contingent payment arrangements. Gains and losses related to liabilities offsetting certain investments are recorded in Investment and other income.
The following table presents certain quantitative information about the significant unobservable inputs used in valuing the Company's Level 3 financial liabilities:
| Quantitative Information about Level 3 Fair Value Measurements
| Valuation Techniques |  | Unobservable Input |  | Fair Value at December 31, 2013 |  | Range at December 31, 2013 |  | Fair Value at September 30, 2014 |  | Range at September 30, 2014
Contingent payment arrangements | Discounted cash flow |  | Growth rates |  | $ | 50.2 |  |  | 3% – 11% |  | $ | 57.0 |  |  | 1% – 9%
|  |  | Discount rates |  |  |  |  | 14% – 18% |  |  |  |  | 12% – 17%
Affiliate equity repurchase obligations | Discounted cash flow |  | Growth rates |  | 4.0 |  |  | 8% |  | 20.5 |  |  | 3% – 10%
|  |  | Discount rates |  |  |  |  | 15% |  |  |  |  | 15% – 16%
Investments in Certain Entities that Calculate Net Asset Value The Company uses the NAV of certain investments as their fair value. The NAVs that have been provided by the investees have been derived from the fair values of the underlying investments as of the measurement dates. The following table summarizes, as of December 31, 2013 and September 30, 2014, the nature of these investments and any related liquidity restrictions or other factors which may impact the ultimate value realized:
| December 31, 2013 |  | September 30, 2014
Category of Investment | Fair Value |  | Unfunded Commitments |  | Fair Value |  | Unfunded Commitments
Private equity fund-of-funds(1) | $ | 131.8 |  |  | $ | 62.9 |  |  | $ | 137.7 |  |  | $ | 70.6 |
Other funds(2) | 82.3 |  |  | — |  |  | 81.0 |  |  | — |
| $ | 214.1 |  |  | $ | 62.9 |  |  | $ | 218.7 |  |  | $ | 70.6 |
___________________________________________________________
(1) | These funds primarily invest in a broad range of private equity funds, as well as making direct investments. Distributions will be received as the underlying assets are liquidated over the life of the funds.
(2) | These are multi-disciplinary funds that invest across various asset classes and strategies, including long/short equity, credit and real estate. Investments are generally redeemable on a daily or quarterly basis.
There are no current plans to sell any of these investments. Other Financial Assets and Liabilities Not Carried at Fair Value The carrying amount of cash, cash equivalents, receivables, and payables and accrued liabilities approximates fair value because of the short-term nature of these instruments. The carrying value of notes receivable approximates fair value because interest rates and other terms are at market rates. The carrying value of senior bank debt approximates fair value because the debt has variable interest based on selected short-term rates. The following table summarizes the Company's other financial liabilities not carried at fair value:
| December 31, 2013 |  | September 30, 2014 |  |
| Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value |  | Fair Value Hierarchy
Senior notes | $ | 340.0 |  |  | $ | 325.0 |  |  | $ | 736.7 |  |  | $ | 764.0 |  |  | Level 2
Convertible securities | 518.7 |  |  | 963.9 |  |  | 302.6 |  |  | 533.1 |  |  | Level 2

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- 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=28364263&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=28364263&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=25499696&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=28364263&loc=d3e13504-108611 + Details
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