CONSOLIDATED INVESTMENT PRODUCTS | 1yr: 2.3% Spread over Libor ** 102 - 801bps 228 bps ____________ * Excluded from the table above are certain equity and debt securities held by consolidated private equity funds valued using recent private market transactions ( June 30, 2015 : $51.0 million ; December 31, 2014 : $85.0 million ) and third party appraisals ( June 30, 2015 : $1.0 million ; December 31, 2014 : $5.7 million ). At December 31, 2014 , certain tranches of the consolidated CLOs are valued using third party pricing information. Quantitative unobservable inputs for such valuations were not developed or adjusted by the company. Investments in other private equity funds as of June 30, 2015 of $403.6 million (as of December 31, 2014 : $410.0 million ) are also excluded from the table above as they are valued using the NAV practical expedient. The NAVs that have been provided are derived from the fair values of the underlying investments as of the consolidation date. ** Lower spreads relate to the more senior tranches in the CLO note structure; higher spreads relate to the less senior tranches. *** Assumed default rates listed in the table above apply to CLOs established prior to 2012. A default rate of 2.0% was assumed for CLOs established after January 1, 2012. The table below summarizes as of June 30, 2015 and December 31, 2014 , the nature of investments that are valued using the NAV as a practical expedient and any related liquidation restrictions or other factors which may impact the ultimate value realized: June 30, 2015 December 31, 2014 in millions, except term data Fair Value Total Unfunded Commitments Weighted Average Remaining Term (2) Fair Value Total Unfunded Commitments Weighted Average Remaining Term (2) Private equity funds (1) $403.6 $201.9 2.4 years $410.0 $196.3 2.6 years ____________ (1) These investments are not subject to redemption; however, for certain funds, the investors may sell or transfer their interest, which may require approval by the general partner of the underlying funds. (2) These investments are expected to be returned through distributions as a result of liquidations of the funds' underlying assets over the weighted average periods indicated. The following narrative will indicate the sensitivity of inputs illustrating the impact of significant increases to the inputs. An opposite impact would result for significant decreases in these inputs: • For investments held by consolidated private equity funds, significant increases in discounts in isolation would result in significantly lower fair value measurements, while significant increases in revenue multiple assumptions in isolation would result in significantly higher fair value measurements. An increase in discount assumptions would result in a directionally opposite change in the assumptions for revenue multiple resulting in lower fair value measurements." id="sjs-B4">CONSOLIDATED INVESTMENT PRODUCTS The following table presents the balances related to CIP that are included on the Condensed Consolidated Balance Sheets as well as Invesco's net interest in the CIP for each period presented. As of $ in millions June 30, 2015 December 31, 2014 Cash and cash equivalents of CIP 314.8 404.0 Accounts receivable and other assets of CIP 109.5 161.3 Investments of CIP 6,185.1 5,762.8 Less: Debt of CIP (5,432.1 ) (5,149.6 ) Less: Other liabilities of CIP (326.8 ) (280.9 ) Less: Retained earnings (12.5 ) (20.3 ) Less: Retained earnings appropriated for investors in CIP — (17.6 ) Less: Accumulated other comprehensive income, net of tax 12.5 20.2 Less: Equity attributable to nonredeemable noncontrolling interests (739.9 ) (781.2 ) Invesco's net interests in CIP 110.6 98.7 Invesco's net economic interests as a percentage of investments of CIP 1.8 % 1.7 % The company's risk with respect to each investment in CIP is limited to its equity ownership and any uncollected management and performance fees. Therefore, the gains or losses of CIP have not had a significant impact on the company's net income attributable to Invesco Ltd., liquidity or capital resources. The company has no right to the benefits from, nor does it bear the risks associated with, these investments, beyond the company's minimal direct investments in, and management and performance fees generated from, the investment products. If the company were to liquidate, these investments would not be available to the general creditors of the company, and as a result, the company does not consider investments held by CIP to be company assets. Additionally, the collateral assets of consolidated collateralized loan obligations (CLOs) are held solely to satisfy the obligations of the CLOs, and the investors in the consolidated CLOs have no recourse to the general credit of the company for the notes issued by the CLOs. At June 30, 2015 , the company's maximum risk of loss in significant VIEs in which the company is not the primary beneficiary is presented in the table below. $ in millions Footnote Reference Carrying Value Company's Maximum Risk of Loss CLO investments 3 1.3 1.3 Partnership and trust investments 20.8 20.8 Investments in Invesco Mortgage Capital Inc. 30.8 30.8 Total 52.9 During the six months ended June 30, 2015 , the company invested in and consolidated one new VIE and one new VOE. The table below illustrates the summary balance sheet amounts related to these products before consolidation into the company. The balances below are reflective of the balances existing at the consolidation date after the initial funding of the investments by the company and unrelated third-party investors. The current period activity for the consolidated funds, including the initial funding and subsequent investment of initial cash balances into underlying investments of CIP, is reflected in the company’s Condensed Consolidated Financial Statements. Balance Sheet information - newly consolidated VIEs/VOEs For the six months ended June 30, 2015 $ in millions VIEs VOEs Cash and cash equivalents of CIP 209.2 10.0 Accounts receivable and other assets of CIP 1.5 — Investments of CIP 567.0 — Total assets 777.7 10.0 Debt of CIP 601.4 — Other liabilities of CIP 176.3 — Total liabilities 777.7 — Total equity — 10.0 Total liabilities and equity 777.7 10.0 The following tables reflect the impact of consolidation of investment products into the Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014 , and the Condensed Consolidated Statements of Income for the three and six months ended June 30 , 2015 and 2014 . Summary of Balance Sheet Impact of CIP As of June 30, 2015 $ in millions CLOs - VIEs Other VIEs VOEs Adjustments (1) Impact of CIP Accounts receivable — — — (5.2 ) (5.2 ) Investments — — — (105.4 ) (105.4 ) Cash and cash equivalents of CIP 275.2 4.5 34.7 0.4 314.8 Accounts receivable of CIP 96.9 0.3 12.3 — 109.5 Investments of CIP 5,538.5 72.3 647.7 (73.4 ) 6,185.1 Total assets 5,910.6 77.1 694.7 (183.6 ) 6,498.8 Debt of CIP 5,583.4 — — (151.3 ) 5,432.1 Other liabilities of CIP 327.2 0.9 3.9 (5.2 ) 326.8 Total liabilities 5,910.6 0.9 3.9 (156.5 ) 5,758.9 Retained earnings 12.5 — — — 12.5 Accumulated other comprehensive income, net of tax (12.5 ) — — — (12.5 ) Equity attributable to nonredeemable noncontrolling interests in consolidated entities — 76.2 690.8 (27.1 ) 739.9 Total liabilities and equity 5,910.6 77.1 694.7 (183.6 ) 6,498.8 ____________ (1) Adjustments include the elimination of intercompany transactions between the company and its CIP, primarily the elimination of the company's equity at risk recorded as investments by the company (before consolidation) against either equity (private equity funds) or subordinated debt (CLOs) of the funds. As of December 31, 2014 $ in millions CLOs - VIEs Other VIEs VOEs Adjustments (1) Impact of CIP Accounts receivable — — — (3.8 ) (3.8 ) Investments — — — (94.9 ) (94.9 ) Cash and cash equivalents of CIP 378.8 5.0 21.5 (1.3 ) 404.0 Accounts receivable of CIP 155.7 0.1 5.5 — 161.3 Investments of CIP 5,063.5 53.4 730.2 (84.3 ) 5,762.8 Total assets 5,598.0 58.5 757.2 (184.3 ) 6,229.4 Debt of CIP 5,302.9 — — (153.3 ) 5,149.6 Other liabilities of CIP 277.4 0.4 6.9 (3.8 ) 280.9 Total liabilities 5,580.3 0.4 6.9 (157.1 ) 5,430.5 Retained earnings 20.3 — — — 20.3 Retained earnings appropriated for investors in CIP 17.6 — — — 17.6 Accumulated other comprehensive income, net of tax (20.2 ) — — — (20.2 ) Equity attributable to nonredeemable noncontrolling interests in consolidated entities — 58.1 750.3 (27.2 ) 781.2 Total liabilities and equity 5,598.0 58.5 757.2 (184.3 ) 6,229.4 ____________ (1) Adjustments include the elimination of intercompany transactions between the company and its CIP, primarily the elimination of the company's equity at risk recorded as investments by the company (before consolidation) against either equity (private equity and real estate partnership funds) or subordinated debt (CLOs) of the funds. Summary of Income Statement Impact of CIP Three months ended June 30, 2015 $ in millions CLOs - VIEs Other VIEs VOEs Adjustments (2) Impact of CIP Total operating revenues — — — (10.4 ) (10.4 ) Total operating expenses 9.8 0.4 1.7 (10.4 ) 1.5 Operating income (9.8 ) (0.4 ) (1.7 ) — (11.9 ) Equity in earnings of unconsolidated affiliates — — — 0.5 0.5 Interest and dividend income — — — (0.8 ) (0.8 ) Other gains and losses, net — — — (1.2 ) (1.2 ) Interest and dividend income of CIP 71.4 — 0.3 (6.6 ) 65.1 Interest expense of CIP (54.7 ) — — 7.4 (47.3 ) Other gains/(losses) of CIP, net (6.9 ) 0.6 (15.0 ) 1.6 (19.7 ) Income from continuing operations before income taxes — 0.2 (16.4 ) 0.9 (15.3 ) Income tax provision — — — — — Income from continuing operations, net of income taxes — 0.2 (16.4 ) 0.9 (15.3 ) Income from discontinued operations, net of income taxes — — — — — Net income — 0.2 (16.4 ) 0.9 (15.3 ) Net (income)/loss attributable to noncontrolling interests in consolidated entities — (0.2 ) 15.9 — 15.7 Net income attributable to Invesco Ltd. — — (0.5 ) 0.9 0.4 Three months ended June 30, 2014 $ in millions CLOs - VIEs Other VIEs VOEs Adjustments (2) Impact of CIP Total operating revenues — 0.1 — (8.7 ) (8.6 ) Total operating expenses 8.9 0.2 1.3 (8.7 ) 1.7 Operating income (8.9 ) (0.1 ) (1.3 ) — (10.3 ) Equity in earnings of unconsolidated affiliates — — — (2.2 ) (2.2 ) Interest and dividend income — — — (0.6 ) (0.6 ) Other gains and losses, net — — — (4.7 ) (4.7 ) Interest and dividend income of CIP 50.1 — — (2.1 ) 48.0 Interest expense of CIP (33.1 ) — — 2.8 (30.3 ) Other gains/ (losses) of CIP, net (18.1 ) (0.2 ) 52.3 2.8 36.8 Income from continuing operations before income taxes (10.0 ) (0.3 ) 51.0 (4.0 ) 36.7 Income tax provision — — — — — Income from continuing operations, net of income taxes (10.0 ) (0.3 ) 51.0 (4.0 ) 36.7 Income from discontinued operations, net of income taxes — — — — — Net income (10.0 ) (0.3 ) 51.0 (4.0 ) 36.7 Net (income)/loss attributable to noncontrolling interests in consolidated entities 9.8 0.3 (48.8 ) — (38.7 ) Net income attributable to Invesco Ltd. (0.2 ) — 2.2 (4.0 ) (2.0 ) Six months ended June 30, 2015 $ in millions CLOs - VIEs Other VIEs VOEs Adjustments (2) Impact of CIP Total operating revenues — — — (19.7 ) (19.7 ) Total operating expenses 30.1 0.6 2.7 (19.7 ) 13.7 Operating income (30.1 ) (0.6 ) (2.7 ) — (33.4 ) Equity in earnings of unconsolidated affiliates — — — (1.2 ) (1.2 ) Interest and dividend income — — — (2.2 ) (2.2 ) Other gains and losses, net — — — (3.9 ) (3.9 ) Interest and dividend income of CIP 134.9 — 0.9 (10.5 ) 125.3 Interest expense of CIP (105.1 ) — — 12.7 (92.4 ) Other gains/(losses) of CIP, net 0.3 4.8 3.1 (3.5 ) 4.7 Income from continuing operations before income taxes — 4.2 1.3 (8.6 ) (3.1 ) Income tax provision — — — — — Income from continuing operations, net of income taxes — 4.2 1.3 (8.6 ) (3.1 ) Income from discontinued operations, net of income taxes — — — — — Net income — 4.2 1.3 (8.6 ) (3.1 ) Net (income)/loss attributable to noncontrolling interests in consolidated entities — (4.1 ) (0.6 ) — (4.7 ) Net income attributable to Invesco Ltd. — 0.1 0.7 (8.6 ) (7.8 ) Six months ended June 30, 2014 $ in millions CLOs - VIEs Other VIEs VOEs Adjustments (2) Impact of CIP Total operating revenues — 0.1 — (17.1 ) (17.0 ) Total operating expenses 26.8 0.5 4.1 (17.1 ) 14.3 Operating income (26.8 ) (0.4 ) (4.1 ) — (31.3 ) Equity in earnings of unconsolidated affiliates — — — (3.4 ) (3.4 ) Interest and dividend income — — — (1.5 ) (1.5 ) Other gains and losses, net — — — (4.7 ) (4.7 ) Interest and dividend income of CIP 102.0 — — (5.7 ) 96.3 Interest expense of CIP (67.9 ) — — 7.3 (60.6 ) Other gains/ (losses) of CIP, net (47.3 ) (1.2 ) 103.9 7.9 63.3 Income from continuing operations before income taxes (40.0 ) (1.6 ) 99.8 (0.1 ) 58.1 Income tax provision — — — — — Income from continuing operations, net of income taxes (40.0 ) (1.6 ) 99.8 (0.1 ) 58.1 Income from discontinued operations, net of income taxes — — — — — Net income (40.0 ) (1.6 ) 99.8 (0.1 ) 58.1 Net (income)/loss attributable to noncontrolling interests in consolidated entities 40.0 1.6 (96.5 ) 0.1 (54.8 ) Net income attributable to Invesco Ltd. — — 3.3 — 3.3 ____________ (2) Adjustments include the elimination of intercompany transactions between the company and its CIP, primarily the elimination of management and performance fees expensed by the funds and recorded as operating revenues (before consolidation) by the company. These also include the reclassification of the company's gain or loss (representing the changes in the fair value of the company's holding in the consolidated CLOs) from other comprehensive income into other gains/losses upon consolidation. The carrying values of investments held at June 30, 2015 and December 31, 2014 , and notes issued as of December 31, 2014 , are also their fair values. The company adopted ASU 2014-13 on January 1, 2015, and accordingly the notes issued by consolidated CLOs are no longer carried at fair value but are now measured under the measurement alternative discussed in Note 1 , "Accounting Policies - Accounting Pronouncements Recently Adopted and Pending Accounting Pronouncements." The following tables present the fair value hierarchy levels of certain CIP balances which are measured at fair value as of June 30, 2015 and December 31, 2014 : As of June 30, 2015 $ in millions Fair Value Measurements Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: CLO collateral assets: Bank loans 5,388.3 — 5,388.3 — Bonds 74.8 — 74.8 — Equity securities 1.9 — 1.9 — Private equity fund assets: Equity securities 288.7 1.1 7.3 280.3 Debt securities 27.8 — — 27.8 Investments in other private equity funds 403.6 — — 403.6 Total assets at fair value 6,185.1 1.1 5,472.3 711.7 As of December 31, 2014 $ in millions Fair Value Measurements Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: CLO collateral assets: Bank loans 4,883.9 — 4,883.9 — Bonds 88.9 — 88.9 — Equity securities 6.4 — 6.4 — Private equity fund assets: Equity securities 337.9 9.7 — 328.2 Debt Securities 35.7 — — 35.7 Investments in other private equity funds 410.0 — — 410.0 Total assets at fair value 5,762.8 9.7 4,979.2 773.9 Liabilities: CLO notes (5,149.6 ) — — (5,149.6 ) Total liabilities at fair value (5,149.6 ) — — (5,149.6 ) The following tables show a reconciliation of the beginning and ending fair value measurements for level 3 assets and liabilities using significant unobservable inputs: Three months ended June 30, 2015 Six months ended June 30, 2015 $ in millions Level 3 Assets Level 3 Liabilities Level 3 Assets Level 3 Liabilities Beginning balance 759.0 — 773.9 (5,149.6 ) Adjustment for adoption of ASU 2014-13 — — — 5,149.6 Purchases 0.5 — 34.1 — Sales (35.1 ) — (96.9 ) — Issuances — — — — Settlements — — — — Gains and losses included in the Condensed Consolidated Statements of Income* (12.7 ) — 9.0 — Transfers to Levels 1 and 2** — — (8.4 ) — Ending balance 711.7 — 711.7 — Three months ended June 30, 2014 Six months ended June 30, 2014 $ in millions Level 3 Assets Level 3 Liabilities Level 3 Assets Level 3 Liabilities Beginning balance 560.7 (4,762.7 ) 500.9 (4,181.7 ) Purchases 96.9 — 139.6 — Sales (18.9 ) — (50.4 ) — Issuances — — 1.8 (714.1 ) Settlements — 136.3 — 297.7 Deconsolidation of CIP — 339.0 — 339.0 Gains and losses included in the Condensed Consolidated Statements of Income* 52.4 (14.1 ) 99.2 (42.4 ) Ending balance 691.1 (4,301.5 ) 691.1 (4,301.5 ) ____________ * Included in gains/(losses) of CIP, net in the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2015 are $35.2 million and $44.8 million in net unrealized losses attributable to investments still held at June 30, 2015 by CIP ( three and six months ended June 30, 2014 : $ 51.7 million and $81.3 million in net unrealized gains attributable to investments still held at June 30, 2014 ). ** During the six months ended June 30, 2015 , $7.8 million ( six months ended June 30, 2014 : zero ) of equity securities held by consolidated private equity funds were transferred from Level 3 to Level 2 due to the legal lock up requirements of of securities following the public offering of the underlying companies. During the six months ended June 30, 2015 , $0.6 million ( six months ended June 30, 2014 : zero ) of equity securities held by consolidated private equity funds were transferred from Level 3 to Level 1 following the public offering of the underlying companies. For transfers due to public offerings, the company's policy is to use the fair value of the transferred security at the end of the period. Unforeseen events might occur that would subsequently change the fair values of the investments (and therefore the debt of CLOs, since it is measured as a calculated value based upon the fair value of the assets of CLOs with effect from January 1, 2015), but the impact of such changes would be limited to the change in the fair values of the company's minimal investments in these products. The impact of any gains or losses resulting from valuation changes in the investments of non-CLO CIP attributable to the interests of third parties are offset by resulting changes in gains and losses attributable to noncontrolling interests in consolidated entities and therefore do not have a material effect on the financial condition, operating results (including earnings per share), liquidity or capital resources of the company's common shareholders. Similarly, any gains or losses resulting from valuation changes in the investments of CLOs attributable to the interests of third parties are offset by the calculated value of the notes issued by the CLOs (offsetting in other gains/(losses) of CIP) and therefore also do not have a material effect on the financial condition, operating results (including earnings per share), liquidity or capital resources of the company's common shareholders. Value of consolidated CLOs The company elected the fair value option for collateral assets held and notes issued by its consolidated CLOs to eliminate the measurement and recognition inconsistency that would otherwise arise from measuring assets and liabilities and recognizing the related gains and losses on different accounting bases. On January 1, 2015 the company adopted ASU 2014-13 and has elected the measurement alternative for the consolidated CLOs under which the notes issued by the CLOs are measured based on the fair value of the assets of the CLOs. Accordingly, the discussion below related to the fair value of notes issued by consolidated CLOs is applicable for the prior comparative period only. The collateral assets held by consolidated CLOs are primarily invested in senior secured bank loans, bonds, and equity securities. Bank loan investments, which comprise the majority of consolidated CLO portfolio collateral, are senior secured corporate loans from a variety of industries, including but not limited to the aerospace and defense, broadcasting, technology, utilities, household products, healthcare, oil and gas, and finance industries. Bank loan investments mature at various dates between 2015 and 2023 , pay interest at Libor plus a spread of up to 10.0% , and typically range in S&P credit rating categories from BBB down to unrated. Interest income on bank loans and bonds is recognized based on the unpaid principal balance and stated interest rate of these investments on an accrual basis. At June 30, 2015 , the unpaid principal balance exceeds the fair value of the senior secured bank loans and bonds by approximately $40.5 million ( December 31, 2014 : the unpaid principal balance exceeded the fair value of the senior secured bank loans and bonds by approximately $56.2 million ). Less than 0.1% of the collateral assets are in default as of June 30, 2015 ( December 31, 2014 : less than 0.1% of the collateral assets were in default). CLO investments are valued based on price quotations provided by third party pricing sources. These third party sources aggregate indicative price quotations daily to provide the company with a price for the CLO investments. The company has developed internal controls to review the reasonableness and completeness of these price quotations on a daily basis. If necessary, price quotations are challenged through the third-party pricing source price challenge process. For the six months ended June 30, 2015 and the year ended December 31, 2014 , there were no price quotation challenges by the company. In addition, the company's internal valuation committee conducts an annual due diligence review of all independent third-party pricing sources to review the provider's valuation methodology as well as ensure internal controls exist over the valuation of the CLO investments. In the event that the third-party pricing source is unable to price an investment, other relevant factors, data and information are considered, including: i) information relating to the market for the investment, including price quotations for and trading in the investment and interests in similar investments, the market environment, and investor attitudes towards the investment and interests in similar investments; ii) the characteristics of and fundamental analytical data relating to the investment, including, for senior secured corporate loans, the cost, size, current interest rate, period until next interest rate reset, maturity and base lending rate, the terms and conditions of the senior secured corporate loan and any related agreements, and the position of the senior secured corporate loan in the borrower's debt structure; iii) the nature, adequacy and value of the senior secured corporate loan's collateral, including the CLO's rights, remedies and interests with respect to the collateral; iv) for senior secured corporate loans, the creditworthiness of the borrower, based on an evaluation of its financial condition, financial statements and information about the business, cash flows, capital structure and future prospects; v) the reputation and financial condition of the agent and any intermediate participants in the senior secured corporate loan; and vi) general economic and market conditions affecting the fair value of the senior secured corporate loan. Notes issued by consolidated CLOs mature at various dates between 2020 and 2027 and have a weighted average maturity of 9.6 years. The notes are issued in various tranches with different risk profiles. The interest rates are generally variable rates based on Libor plus a pre-defined spread, which varies from 0.21% for the more senior tranches to 6.70% for the more subordinated tranches. The investors in this debt are not affiliated with the company and have no recourse to the general credit of the company for this debt . Notes issued by CLOs are recorded at fair value at December 31, 2014 using an income approach, driven by cash flows expected to be received from the portfolio collateral assets. Fair value is determined using current information, notably market yields and projected cash flows of collateral assets based on forecasted default and recovery rates that a market participant would use in determining the current fair value of the notes, taking into account the overall credit quality of the issuers and the company's past experience in managing similar securities. Market yields, default rates and recovery rates used in the company's estimate of fair value vary based on the nature of the investments in the underlying collateral pools. In periods of rising market yields, default rates and lower debt recovery rates, the fair value, and therefore the carrying value, of the notes may be adversely affected. The current liquidity constraints within the market for CLO products require the use of certain unobservable inputs for CLO valuation. Once the undiscounted cash flows of the collateral assets have been determined, the company applies appropriate discount rates that a market participant would use to determine the discounted cash flow valuation of the notes. Fair value of consolidated private equity funds Consolidated private equity funds are generally structured as partnerships. Generally, the investment strategy of underlying holdings in these partnerships is to seek capital appreciation through direct investments in public or private companies with compelling business models or ideas or through investments in partnership investments that also invest in similar private or public companies. Various strategies may be used. Companies targeted could be distressed organizations, targets of leveraged buyouts or fledgling companies in need of venture capital. Investors generally may not redeem their investment until the partnership liquidates. Generally, the partnerships have a life that ranges from seven to twelve years unless dissolved earlier. The general partner may extend the partnership term up to a specified period of time as stated in the Partnership Agreement. Some partnerships allow the limited partners to cause an earlier termination upon the occurrence of certain events as specified in the Partnership Agreement. For private equity partnerships, fair value is determined by reviewing each investment for the sale of additional securities of an issuer to sophisticated investors or for investee financial conditions and fundamentals. Publicly traded portfolio investments are carried at market value as determined by their most recent quoted sale, or if there is no recent sale, at their most recent bid price. For these investments held by CIP, level 1 classification indicates that fair values have been determined using unadjusted quoted prices in active markets for identical assets that the partnership has the ability to access. Level 2 classification may indicate that fair values have been determined using quoted prices in active markets but give effect to certain lock-up restrictions surrounding the holding period of the underlying investments. The fair value of level 3 investments held are derived from inputs that are unobservable and which reflect the limited partnerships' own determinations about the assumptions that market participants would use in pricing the investments, including assumptions about risk. These inputs are developed based on the partnership's own data, which is adjusted if information indicates that market participants would use different assumptions. The partnerships which invest directly into private equity portfolio companies (direct private equity funds) take into account various market conditions, subsequent rounds of financing, liquidity, financial condition, purchase multiples paid in other comparable third-party transactions, the price of securities of other companies comparable to the portfolio company, and operating results and other financial data of the portfolio company, as applicable. The partnerships which invest into other private equity funds take into account information received from those underlying funds, including their reported net asset values and evidence as to their fair value approach, including consistency of their fair value application. These investments do not trade in active markets and represent illiquid long-term investments that generally require future capital commitments. The partnerships' reported share of the underlying net asset values of the underlying funds is used as a practical expedient, as allowed by ASC Topic 820, in arriving at fair value. Quantitative Information about Level 3 Fair Value Measurements The following tables show significant unobservable inputs used in the fair value measurement of level 3 assets and liabilities at June 30, 2015 and December 31, 2014 : Assets and Liabilities * Fair Value at June 30, 2015 ($ in millions) Valuation Technique Unobservable Inputs Range Weighted Average (by fair value) Private Equity Funds --Equity Securities 256.1 Market Comparable Revenue Multiple 2 - 4x 3.1x Discount 25% 25.0% Published valuation and/or broker quotes for similar types of assets $26-100 million $49.3 million Assets and Liabilities * Fair Value at December 31, 2014 ($ in millions) Valuation Technique Unobservable Inputs Range Weighted Average (by fair value) Private Equity Funds --Equity Securities 273.2 Market Comparable Revenue Multiple 2 - 4x 4.0x Discount 25% - 36% 30.9% Published valuation and/or broker quotes for similar types of assets $27-104 million $45.9 million CLO Notes (5,149.6) Discounted Cash Flow- USD Assumed Default Rate*** 0.4% - 2.3% <1yr: 0.4% >1yr: 2.3% Spread over Libor ** 102 - 801bps 228 bps ____________ * Excluded from the table above are certain equity and debt securities held by consolidated private equity funds valued using recent private market transactions ( June 30, 2015 : $51.0 million ; December 31, 2014 : $85.0 million ) and third party appraisals ( June 30, 2015 : $1.0 million ; December 31, 2014 : $5.7 million ). At December 31, 2014 , certain tranches of the consolidated CLOs are valued using third party pricing information. Quantitative unobservable inputs for such valuations were not developed or adjusted by the company. Investments in other private equity funds as of June 30, 2015 of $403.6 million (as of December 31, 2014 : $410.0 million ) are also excluded from the table above as they are valued using the NAV practical expedient. The NAVs that have been provided are derived from the fair values of the underlying investments as of the consolidation date. ** Lower spreads relate to the more senior tranches in the CLO note structure; higher spreads relate to the less senior tranches. *** Assumed default rates listed in the table above apply to CLOs established prior to 2012. A default rate of 2.0% was assumed for CLOs established after January 1, 2012. The table below summarizes as of June 30, 2015 and December 31, 2014 , the nature of investments that are valued using the NAV as a practical expedient and any related liquidation restrictions or other factors which may impact the ultimate value realized: June 30, 2015 December 31, 2014 in millions, except term data Fair Value Total Unfunded Commitments Weighted Average Remaining Term (2) Fair Value Total Unfunded Commitments Weighted Average Remaining Term (2) Private equity funds (1) $403.6 $201.9 2.4 years $410.0 $196.3 2.6 years ____________ (1) These investments are not subject to redemption; however, for certain funds, the investors may sell or transfer their interest, which may require approval by the general partner of the underlying funds. (2) These investments are expected to be returned through distributions as a result of liquidations of the funds' underlying assets over the weighted average periods indicated. The following narrative will indicate the sensitivity of inputs illustrating the impact of significant increases to the inputs. An opposite impact would result for significant decreases in these inputs: • For investments held by consolidated private equity funds, significant increases in discounts in isolation would result in significantly lower fair value measurements, while significant increases in revenue multiple assumptions in isolation would result in significantly higher fair value measurements. An increase in discount assumptions would result in a directionally opposite change in the assumptions for revenue multiple resulting in lower fair value measurements. |