Edgar Filing: Blackstone Group L.P.

Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-33551

LOGO

The Blackstone Group L.P.

(Exact name of Registrant as specified in its charter)

Delaware

20-8875684

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

345 Park Avenue

New York, New York 10154

(Address of principal executive offices)(Zip Code)

(212) 583-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer x		Accelerated filer ¨
Non-accelerated filer ¨		Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of the Registrant’s voting common units representing limited partner interests outstanding as of April 30, 2015 was 548,301,316. The number of the Registrant’s non-voting common units representing limited partner interests outstanding as of April 30, 2015 was 59,083,468.

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS		5

	Unaudited Condensed Consolidated Financial Statements — March 31, 2015 and 2014:

	Condensed Consolidated Statements of Financial Condition as of March 31, 2015 and December 31, 2014		6

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014		7

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014		8

	Condensed Consolidated Statements of Changes in Partners’ Capital for the Three Months Ended March 31, 2015 and 2014		9

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014		11

	Notes to Condensed Consolidated Financial Statements		13

ITEM 1A.	UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS OF FINANCIAL CONDITION		54

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		56

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		114

ITEM 4.	CONTROLS AND PROCEDURES		118

PART II.	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS		119

ITEM 1A.	RISK FACTORS		119

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		120

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		120

ITEM 4.	MINE SAFETY DISCLOSURES		120

ITEM 5.	OTHER INFORMATION		120

ITEM 6.	EXHIBITS		121



SIGNATURES					122

Forward-Looking Statements

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “indicator,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 and in this report, as such factors may be updated from time to time in our periodic filings with the United States Securities and Exchange Commission (“SEC”), which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other periodic filings. The forward-looking statements speak only as of the date of this report, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Website and Social Media Disclosure

We use our website (www.blackstone.com), Facebook page (www.facebook.com/blackstone), Twitter (www.twitter.com/blackstone), LinkedIn (www.linkedin.com/company/the-blackstone-group), Instagram (instagram.com/Blackstone) and YouTube (www.youtube.com/user/blackstonegroup) accounts as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about Blackstone when you enroll your e-mail address by visiting the “Contact Us/Email Alerts” section of our website at ir.blackstone.com and the “Alerts & Subscriptions” page under “News & Views” at www.blackstone.com. The contents of our website, any alerts and social media channels are not, however, a part of this report.

In this report, references to “Blackstone,” the “Partnership”, “we,” “us” or “our” refer to The Blackstone Group L.P. and its consolidated subsidiaries. Unless the context otherwise requires, references in this report to the ownership of Mr. Stephen A. Schwarzman, our founder, and other Blackstone personnel include the ownership of personal planning vehicles and family members of these individuals.

“Blackstone Funds,” “our funds” and “our investment funds” refer to the private equity funds, real estate funds, funds of hedge funds, credit-focused funds, collateralized loan obligation (“CLO”) and collateralized debt obligation (“CDO”) vehicles, real estate investment trusts and registered investment companies that are managed by Blackstone. “Our carry funds” refer to the private equity funds, real estate funds and certain of the credit-focused funds (with multi-year drawdown, commitment-based structures that only pay carry on the realization of an investment) that are managed by Blackstone. Blackstone’s Private Equity segment comprises its management of corporate private equity funds (including our sector and regional focused funds), which we refer to collectively as our Blackstone Capital Partners (“BCP”) funds, certain multi-asset class investment funds which we collectively refer to as our Blackstone Tactical Opportunities Accounts (“Tactical Opportunities”), and Strategic Partners Fund Solutions (“Strategic Partners”), a secondary private fund of funds business. We refer to our real estate opportunistic funds as our Blackstone Real Estate Partners (“BREP”) funds and our real estate debt investment funds as our Blackstone Real Estate Debt Strategies (“BREDS”) funds. We refer to our core+ real estate funds which invest with a more modest risk profile and lower leverage as Blackstone Property Partners (“BPP”) funds. We refer to our listed real estate investment trusts as “REITs”. “Our hedge funds” refer to our funds of hedge funds, certain of our real estate debt investment funds and certain other credit-focused funds which are managed by Blackstone.

“Assets under management” refers to the assets we manage. Our Assets Under Management equals the sum of:

(a)

the fair value of the investments held by our carry funds and our side-by-side and co-investment entities managed by us, plus the capital that we are entitled to call from investors in those funds and entities pursuant to the terms of their respective capital commitments, including capital commitments to funds that have yet to commence their investment periods,

(b)

the net asset value of our funds of hedge funds, hedge funds and certain registered investment companies,

(c)

the invested capital or fair value of assets we manage pursuant to separately managed accounts,

(d)

the amount of debt and equity outstanding for our CLOs and CDOs during the reinvestment period,

(e)

the aggregate par amount of collateral assets, including principal cash, for our CLOs and CDOs after the reinvestment period,

(f)

the gross amount of assets (including leverage) for certain of our credit-focused registered investment companies, and

(g)

the fair value of common stock, preferred stock, convertible debt, or similar instruments issued by our public REIT.

Our carry funds are commitment-based drawdown structured funds that do not permit investors to redeem their interests at their election. Our funds of hedge funds and hedge funds generally have structures that afford an investor the right to withdraw or redeem their interests on a periodic basis (for example, annually or quarterly), in most cases upon advance written notice, with the majority of our funds requiring from 60 days up to 95 days’ notice, depending on the fund and the liquidity profile of the underlying assets. Investment advisory agreements related to separately managed accounts may generally be terminated by an investor on 30 to 90 days’ notice.

“Fee-earning assets under management” refers to the assets we manage on which we derive management and/or performance fees. Our Fee-Earning Assets Under Management equals the sum of:

(a)

for our Private Equity segment funds and Real Estate segment carry funds including certain real estate debt investment funds and certain of our Hedge Fund Solutions funds, the amount of capital commitments, remaining invested capital, fair value or par value of assets held, depending on the fee terms of the fund,

(b)

for our credit-focused carry funds, the amount of remaining invested capital (which may include leverage) or net asset value, depending on the fee terms of the fund,

(c)

the remaining invested capital of co-investments managed by us on which we receive fees,

(d)

the net asset value of our funds of hedge funds, hedge funds and certain registered investment companies,

(e)

the invested capital or fair value of assets we manage pursuant to separately managed accounts,

(f)

the net proceeds received from equity offerings and accumulated core earnings of our REITs, subject to certain adjustments,

(g)

the aggregate par amount of collateral assets, including principal cash, of our CLOs and CDOs, and

(h)

the gross amount of assets (including leverage) for certain of our credit-focused registered investment companies.

Our calculations of assets under management and fee-earning assets under management may differ from the calculations of other asset managers, and as a result this measure may not be comparable to similar measures presented by other asset managers. In addition, our calculation of assets under management includes commitments to, and the fair value of, invested capital in our funds from Blackstone and our personnel, regardless of whether such commitments or invested capital are subject to fees. Our definitions of assets under management or fee-earning assets under management are not based on any definition of assets under management or fee-earning assets under management that is set forth in the agreements governing the investment funds that we manage.

For our carry funds, total assets under management includes the fair value of the investments held, whereas fee-earning assets under management includes the amount of capital commitments, the remaining amount of invested capital at cost depending on whether the investment period has or has not expired or the fee terms of the fund. As such, fee-earning assets under management may be greater than total assets under management when the aggregate fair value of the remaining investments is less than the cost of those investments.

This report does not constitute an offer of any Blackstone Fund.

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands, Except Unit Data)


	March 31, 2015			December 31, 2014
Assets
Cash and Cash Equivalents	$	1,135,472		$	1,412,472
Cash Held by Blackstone Funds and Other		1,969,621			1,808,092
Investments (including assets pledged of $111,206 and $45,764 at March 31, 2015 and December 31, 2014, respectively)		22,896,254			22,765,589
Accounts Receivable		1,259,037			559,321
Reverse Repurchase Agreements		79,628			—
Due from Affiliates		1,146,008			1,128,408
Intangible Assets, Net		434,033			458,833
Goodwill		1,787,392			1,787,392
Other Assets		458,044			338,557
Deferred Tax Assets		1,241,112			1,252,230

Total Assets	$	32,406,601		$	31,510,894

Liabilities and Partners’ Capital
Loans Payable	$	9,063,490		$	8,937,638
Due to Affiliates		1,460,362			1,490,088
Accrued Compensation and Benefits		2,432,830			2,439,257
Securities Sold, Not Yet Purchased		162,111			85,878
Repurchase Agreements		87,085			29,907
Accounts Payable, Accrued Expenses and Other Liabilities		1,246,739			1,194,579

Total Liabilities		14,452,617			14,177,347

Commitments and Contingencies

Redeemable Non-Controlling Interests in Consolidated Entities		2,510,047			2,441,854

Partners’ Capital
The Blackstone Group L.P. Partners’ Capital
Partners’ Capital (common units: 609,185,546 issued and outstanding as of March 31, 2015; 595,624,855 issued and outstanding as of December 31, 2014)		7,396,962			6,999,830
Appropriated Partners’ Capital		103,838			81,301
Accumulated Other Comprehensive Loss		(42,014	)		(20,864	)

Total The Blackstone Group L.P. Partners’ Capital		7,458,786			7,060,267
Non-Controlling Interests in Consolidated Entities		3,404,810			3,415,356
Non-Controlling Interests in Blackstone Holdings		4,580,341			4,416,070

Total Partners’ Capital		15,443,937			14,891,693

Total Liabilities and Partners’ Capital	$	32,406,601		$	31,510,894

continued…

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands)

The following presents the portion of the consolidated balances presented above attributable to consolidated Blackstone Funds which are variable interest entities. The following assets may only be used to settle obligations of these consolidated Blackstone Funds and these liabilities are only the obligations of these consolidated Blackstone Funds and they do not have recourse to the general credit of Blackstone.


	March 31, 2015		December 31, 2014
Assets
Cash Held by Blackstone Funds and Other	$	1,344,326	$	1,325,094
Investments		7,424,060		7,759,322
Accounts Receivable		612,415		131,996
Due from Affiliates		33,464		65,124
Other Assets		52,911		48,441

Total Assets	$	9,467,176	$	9,329,977

Liabilities
Loans Payable	$	6,914,687	$	6,787,100
Due to Affiliates		194,197		182,107
Accounts Payable, Accrued Expenses and Other		705,041		697,149

Total Liabilities	$	7,813,925	$	7,666,356

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in Thousands, Except Unit and Per Unit Data)


	Three Months Ended March 31,
	2015			2014
Revenues
Management and Advisory Fees, Net	$	603,498		$	573,160

Performance Fees
Realized
Carried Interest		1,206,425			333,623
Incentive Fees		27,992			43,794
Unrealized
Carried Interest		374,481			330,394
Incentive Fees		61,860			64,233

Total Performance Fees		1,670,758			772,044

Investment Income
Realized		187,710			153,026
Unrealized		15,771			13,500

Total Investment Income		203,481			166,526

Interest and Dividend Revenue		21,499			14,069
Other		(5,656	)		869

Total Revenues		2,493,580			1,526,668

Expenses
Compensation and Benefits
Compensation		559,559			485,351
Performance Fee Compensation
Realized
Carried Interest		292,248			149,398
Incentive Fees		12,227			23,635
Unrealized
Carried Interest		74,380			40,730
Incentive Fees		24,961			23,531

Total Compensation and Benefits		963,375			722,645
General, Administrative and Other		130,973			135,554
Interest Expense		31,370			24,667
Fund Expenses		23,232			4,985

Total Expenses		1,148,950			887,851

Other Income
Net Gains from Fund Investment Activities		238,972			70,155

Income Before Provision for Taxes		1,583,602			708,972
Provision for Taxes		99,344			54,097

Net Income		1,484,258			654,875
Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities		56,358			45,792
Net Income Attributable to Non-Controlling Interests in Consolidated Entities		153,222			43,961
Net Income Attributable to Non-Controlling Interests in Blackstone Holdings		645,230			299,505

Net Income Attributable to The Blackstone Group L.P.	$	629,448		$	265,617

Distributions Declared Per Common Unit	$	0.78		$	0.58

Net Income Per Common Unit
Common Units, Basic	$	1.01		$	0.44

Common Units, Diluted	$	1.00		$	0.44

Weighted-Average Common Units Outstanding
Common Units, Basic		625,276,969			601,527,299

Common Units, Diluted		631,232,041			605,669,164

Revenues Earned from Affiliates
Management and Advisory Fees, Net	$	47,763		$	74,032

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)


	Three Months Ended March 31,
	2015			2014
Net Income	$	1,484,258		$	654,875
Other Comprehensive Loss, Net of Tax — Currency Translation Adjustment		(50,271	)		(1,166	)

Comprehensive Income		1,433,987			653,709
Less
Comprehensive Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities		56,358			45,792
Comprehensive Income Attributable to Non-Controlling Interests in Consolidated Entities		124,101			43,843
Comprehensive Income Attributable to Non-Controlling Interests in Blackstone Holdings		645,230			299,505

Comprehensive Income Attributable to The Blackstone Group L.P.	$	608,298		$	264,569

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Changes in Partners’ Capital (Unaudited)

(Dollars in Thousands, Except Unit Data)


			The Blackstone Group L.P.
	Common Units		Partners’ Capital			Appro- priated Partners’ Capital			Accumulated Other Compre- hensive Income (Loss)			Total			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Blackstone Holdings			Total Partners’ Capital			Redeemable Non- Controlling Interests in Consolidated Entities
Balance at December 31, 2014		595,624,855	$	6,999,830		$	81,301		$	(20,864	)	$	7,060,267		$	3,415,356		$	4,416,070		$	14,891,693		$	2,441,854
Consolidation of Fund Entity		—		—			—			—			—			—			—			—			—
Net Income		—		629,448			—			—			629,448			153,222			645,230			1,427,900			56,358
Allocation of Income of Consolidated CLO Entities		—		—			51,658			—			51,658			(51,658	)		—			—			—
Currency Translation Adjustment		—		—			—			(21,150	)		(21,150	)		(29,121	)		—			(50,271	)		—
Allocation of Currency Translation Adjustment of Consolidated CLO Entities		—		—			(29,121	)		—			(29,121	)		29,121			—			—			—
Capital Contributions		—		—			—			—			—			141,668			—			141,668			178,838
Capital Distributions		—		(482,249	)		—			—			(482,249	)		(243,615	)		(488,711	)		(1,214,575	)		(167,003	)
Transfer of Non-Controlling Interests in Consolidated Entities		—		—			—			—			—			(10,163	)		—			(10,163	)		—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders		—		9,113			—			—			9,113			—			—			9,113			—
Equity-Based Compensation		—		130,134			—			—			130,134			—			122,236			252,370			—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		7,956,871		(27,632	)		—			—			(27,632	)		—			—			(27,632	)		—
Excess Tax Benefits Related to Equity-Based Compensation, Net		—		23,834			—			—			23,834			—			—			23,834			—
Change in The Blackstone Group L.P.’s Ownership Interest		—		68,361			—			—			68,361			—			(68,361	)		—			—
Conversion of Blackstone Holdings Partnership Unitsto Blackstone Common Units		5,603,820		46,123			—			—			46,123			—			(46,123	)		—			—

Balance at March 31, 2015		609,185,546	$	7,396,962		$	103,838		$	(42,014	)	$	7,458,786		$	3,404,810		$	4,580,341		$	15,443,937		$	2,510,047

continued…

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Changes in Partners’ Capital (Unaudited)

(Dollars in Thousands, Except Unit Data)


			The Blackstone Group L.P.
	Common Units		Partners’ Capital			Appro- priated Partners’ Capital			Accumulated Other Compre- hensive Income (Loss)			Total			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Blackstone Holdings			Total Partners’ Capital			Redeemable Non- Controlling Interests in Consolidated Entities
Balance at December 31, 2013		572,592,279	$	6,002,592		$	300,708		$	3,466		$	6,306,766		$	2,464,047		$	3,656,416		$	12,427,229		$	1,950,442
Transition and Acquisition Adjustments Relating to Consolidation of CLO Entities		—		—			8,398			—			8,398			—			—			8,398			—
Consolidation of Fund Entity		—		—			—			—			—			4,511			—			4,511			30,922
Net Income		—		265,617			—			—			265,617			43,961			299,505			609,083			45,792
Allocation of Losses of Consolidated CLO Entities		—		—			(39,019	)		—			(39,019	)		39,019			—			—			—
Currency Translation Adjustment		—		—			—			(1,048	)		(1,048	)		(118	)		—			(1,166	)		—
Allocation of Currency Translation Adjustment of Consolidated CLO Entities		—		—			(118	)		—			(118	)		118			—			—			—
Reclassification of Currency Translation Adjustment Due to Deconsolidation of CLO Entities		—		(2,695	)		—			—			(2,695	)		—			—			(2,695	)		—
Capital Contributions		—		—			—			—			—			147,862			—			147,862			282,641
Capital Distributions		—		(341,318	)		—			—			(341,318	)		(135,987	)		(367,544	)		(844,849	)		(133,443	)
Transfer of Non-Controlling Interests in Consolidated Entities		—		—			—			—			—			(212	)		—			(212	)		—
Purchase of Interests from Certain Non-Controlling Interest Holders		—		(6	)		—			—			(6	)		—			—			(6	)		—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders		—		12,645			—			—			12,645			—			—			12,645			—
Equity-Based Compensation		—		142,117			—			—			142,117			—			133,128			275,245			—
Relinquished with Deconsolidation and Liquidation of Partnership		—		—			(35,460	)		—			(35,460	)		(55	)		—			(35,515	)		—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		4,759,747		(19,129	)		—			—			(19,129	)		—			—			(19,129	)		—
Excess Tax Benefits Related to Equity-Based Compensation, Net		—		14,006			—			—			14,006			—			—			14,006			—
Change in The Blackstone Group L.P.’s Ownership Interest		—		(10,354	)		—			—			(10,354	)		—			10,354			—			—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units		6,739,766		45,050			—			—			45,050			—			(45,050	)		—			—

Balance at March 31, 2014		584,091,792	$	6,108,525		$	234,509		$	2,418		$	6,345,452		$	2,563,146		$	3,686,809		$	12,595,407		$	2,176,354

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)


	Three Months Ended March 31,
	2015			2014
Operating Activities
Net Income	$	1,484,258		$	654,875
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Blackstone Funds Related
Unrealized Appreciation on Investments Allocable to Non-Controlling Interests in Consolidated Entities		(185,229	)		(108,233	)
Net Realized Gains on Investments		(1,475,429	)		(543,367	)
Changes in Unrealized (Gains) Losses on Investments Allocable to The Blackstone Group L.P.		(61,241	)		3,833
Non-Cash Performance Fees		(314,889	)		(276,508	)
Non-Cash Performance Fee Compensation		403,816			237,294
Equity-Based Compensation Expense		272,335			194,645
Excess Tax Benefits Related to Equity-Based Compensation		(23,834	)		(16,513	)
Amortization of Intangibles		24,800			26,258
Other Non-Cash Amounts Included in Net Income		107,467			53,939
Cash Flows Due to Changes in Operating Assets and Liabilities
Cash Held by Blackstone Funds and Other		(292,648	)		(52,120	)
Cash Relinquished in Deconsolidation and Liquidation of Partnership		(1,356	)		(75,327	)
Accounts Receivable		(186,510	)		364,988
Reverse Repurchase Agreements		(79,628	)		(13,724	)
Due from Affiliates		72,202			275,550
Other Assets		(120,946	)		(81,645	)
Accrued Compensation and Benefits		(436,354	)		(288,791	)
Securities Sold, Not Yet Purchased		76,698			70,318
Accounts Payable, Accrued Expenses and Other Liabilities		(473,287	)		(223,761	)
Repurchase Agreements		57,152			(138,678	)
Due to Affiliates		(115,946	)		(28,278	)
Treasury Cash Management Strategies
Investments Purchased		(1,063,714	)		(808,884	)
Cash Proceeds from Sale of Investments		1,120,428			1,020,997
Blackstone Funds Related
Investments Purchased		(761,891	)		(1,652,358	)
Cash Proceeds from Sale or Pay Down of Investments		2,609,213			2,385,748

Net Cash Provided by Operating Activities		635,467			980,258

Investing Activities
Purchase of Furniture, Equipment and Leasehold Improvements		(3,275	)		(6,123	)
Changes in Restricted Cash		5,843			5,841

Net Cash Provided by (Used in) Investing Activities		2,568			(282	)

continued…

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)


	Three Months Ended March 31,
	2015			2014
Financing Activities
Distributions to Non-Controlling Interest Holders in Consolidated Entities	$	(406,503	)	$	(258,361	)
Contributions from Non-Controlling Interest Holders in Consolidated Entities		309,868			419,332
Purchase of Interests from Certain Non-Controlling Interest Holders		—			(6	)
Payments Under Tax Receivable Agreement		(82,830	)		(80,565	)
Net Settlement of Vested Common Units and Repurchase of Common and Blackstone Holdings Partnership Units		(27,632	)		(19,129	)
Excess Tax Benefits Related to Equity-Based Compensation		23,834			16,513
Proceeds from Loans Payable		23			2,206
Repayment and Repurchase of Loans Payable		(2,410	)		(6,488	)
Distributions to Unitholders		(970,960	)		(708,862	)
Blackstone Funds Related
Proceeds from Loans Payable		507,832			—
Repayment of Loans Payable		(266,317	)		(389,097	)

Net Cash Used in Financing Activities		(915,095	)		(1,024,457	)

Effect of Exchange Rate Changes on Cash and Cash Equivalents		60			4

Net Decrease in Cash and Cash Equivalents		(277,000	)		(44,477	)
Cash and Cash Equivalents, Beginning of Period		1,412,472			831,998

Cash and Cash Equivalents, End of Period	$	1,135,472		$	787,521

Supplemental Disclosure of Cash Flows Information
Payments for Interest	$	49,484		$	49,282

Payments for Income Taxes	$	70,609		$	47,547

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Non-Cash Contributions from Non-Controlling Interest Holders	$	601		$	10,933

Non-Cash Distributions to Non-Controlling Interest Holders	$	(4,115	)	$	(11,069	)

Net Activities Related to Capital Transactions of Consolidated Blackstone Funds	$	268		$	808

Net Assets Related to the Consolidation of CLO Vehicles	$	—		$	8,398

Net Assets Related to the Consolidation of Certain Fund Entities	$	—		$	35,433

Transfer of Interests to Non-Controlling Interest Holders	$	(10,163	)	$	(212	)

Change in The Blackstone Group L.P.’s Ownership Interest	$	68,361		$	(10,354	)

Net Settlement of Vested Common Units	$	51,228		$	22,325

Conversion of Blackstone Holdings Partnership Units to Common Units	$	46,123		$	45,050

Acquisition of Ownership Interests from Non-Controlling Interest Holders
Deferred Tax Asset	$	(54,313	)	$	(46,023	)

Due to Affiliates	$	45,200		$	33,378

Partners’ Capital	$	9,113		$	12,645

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

1.	ORGANIZATION

The Blackstone Group L.P., together with its subsidiaries (“Blackstone” or the “Partnership”), is a leading global manager of private capital and provider of financial advisory services. The alternative asset management business includes the management of private equity funds, real estate funds, real estate investment trusts (“REITs”), funds of hedge funds, hedge funds, credit-focused funds, collateralized loan obligation (“CLO”) vehicles, collateralized debt obligation (“CDO”) vehicles, separately managed accounts and registered investment companies (collectively referred to as the “Blackstone Funds”). Blackstone also provides various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory, capital markets and fund placement services. Blackstone’s business is organized into five segments: private equity, real estate, hedge fund solutions, credit and financial advisory.

The Partnership was formed as a Delaware limited partnership on March 12, 2007. The Partnership is managed and operated by its general partner, Blackstone Group Management L.L.C., which is in turn wholly owned and controlled by one of Blackstone’s founders, Stephen A. Schwarzman (the “Founder”), and Blackstone’s other senior managing directors. The activities of the Partnership are conducted through its holding partnerships: Blackstone Holdings I L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P. and Blackstone Holdings IV L.P. (collectively, “Blackstone Holdings”, “Blackstone Holdings Partnerships” or the “Holding Partnerships”). The Partnership, through its wholly owned subsidiaries, is the sole general partner in each of these Holding Partnerships.

Generally, holders of the limited partner interests in the four Holding Partnerships may, four times each year, exchange their limited partnership interests (“Partnership Units”) for Blackstone common units, on a one-to-one basis, exchanging one Partnership Unit in each of the four Holding Partnerships for one Blackstone common unit.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Partnership have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in audited financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission.

The condensed consolidated financial statements include the accounts of the Partnership, its wholly owned or majority-owned subsidiaries, the consolidated entities which are considered to be variable interest entities and for which the Partnership is considered the primary beneficiary, and certain partnerships or similar entities which are not considered variable interest entities but in which the general partner is presumed to have control.

All intercompany balances and transactions have been eliminated in consolidation.

Restructurings within consolidated CLOs are treated as investment purchases or sales, as applicable, in the Condensed Consolidated Statements of Cash Flows.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Consolidation

The Partnership consolidates all entities that it controls through a majority voting interest or otherwise, including those Blackstone Funds in which the general partner is presumed to have control. Although the Partnership has a non-controlling interest in Blackstone Holdings, the limited partners do not have the right to dissolve the partnerships or have substantive kick out rights or participating rights that would overcome the presumption of control by the Partnership. Accordingly, the Partnership consolidates Blackstone Holdings and records non-controlling interests to reflect the economic interests of the limited partners of Blackstone Holdings.

In addition, the Partnership consolidates all variable interest entities (“VIE”) in which it is the primary beneficiary. An enterprise is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (a) whether an entity in which the Partnership holds a variable interest is a VIE and (b) whether the Partnership’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (for example, management and performance related fees), would give it a controlling financial interest. Performance of that analysis requires the exercise of judgment. VIEs qualify for the deferral of the consolidation guidance if all of the following conditions have been met:

(a)

The entity has all of the attributes of an investment company,

(b)

The reporting entity does not have explicit or implicit obligations to fund any losses of the entity that could potentially be significant to the entity, and

(c)

The entity is not a securitization or asset-backed financing entity or an entity that was formerly considered a qualifying special purpose entity.

Where the VIEs have qualified for the deferral of the current consolidation guidance, the analysis is based on previous consolidation guidance. This guidance requires an analysis to determine (a) whether an entity in which the Partnership holds a variable interest is a variable interest entity and (b) whether the Partnership’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (for example, management and performance related fees), would be expected to absorb a majority of the variability of the entity. Under both guidelines, the Partnership determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and reconsiders that conclusion continually. In evaluating whether the Partnership is the primary beneficiary, Blackstone evaluates its economic interests in the entity held either directly by the Partnership and its affiliates or indirectly through employees. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that the Partnership is not the primary beneficiary, a quantitative analysis may also be performed. Investments and redemptions (either by the Partnership, affiliates of the Partnership or third parties) or amendments to the governing documents of the respective Blackstone Funds could affect an entity’s status as a VIE or the determination of the primary beneficiary. At each reporting date, the Partnership assesses whether it is the primary beneficiary and will consolidate or deconsolidate accordingly.

Assets of consolidated variable interest entities that can only be used to settle obligations of the consolidated VIE and liabilities of a consolidated VIE for which creditors (or beneficial interest holders) do not have recourse to the general credit of Blackstone are presented in a separate section in the Condensed Consolidated Statements of Financial Condition.

Blackstone’s other disclosures regarding VIEs are discussed in Note 9. “Variable Interest Entities”.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Fair Value of Financial Instruments

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

•

Level I — Quoted prices are available in active markets for identical financial instruments as of the reporting date. The type of financial instruments in Level I include listed equities, listed derivatives and mutual funds with quoted prices. The Partnership does not adjust the quoted price for these investments, even in situations where Blackstone holds a large position and a sale could reasonably impact the quoted price.

•

Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Financial instruments which are generally included in this category include corporate bonds and loans, government and agency securities, less liquid and restricted equity securities, certain over-the-counter derivatives where the fair value is based on observable inputs, and certain funds of hedge funds and proprietary investments in which Blackstone has the ability to redeem its investment at net asset value at, or within three months of, the reporting date.

•

Level III — Pricing inputs are unobservable for the financial instruments and includes situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category generally include general and limited partnership interests in private equity and real estate funds, credit-focused funds, distressed debt and non-investment grade residual interests in securitizations, certain corporate bonds and loans held within CLO vehicles, certain over-the-counter derivatives where the fair value is based on unobservable inputs and certain funds of hedge funds that use net asset value per share to determine fair value in which Blackstone may not have the ability to redeem its investment at net asset value at, or within three months of, the reporting date. Blackstone may not have the ability to redeem its investment at net asset value at, or within three months of, the reporting date if an investee fund manager has the ability to limit the amount of redemptions irrespective of whether such ability has been exercised. Senior and subordinate notes issued by CLO vehicles are classified within Level III of the fair value hierarchy.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

Transfers between levels of the fair value hierarchy are recognized at the beginning of the reporting period.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Level II Valuation Techniques

Financial instruments classified within Level II of the fair value hierarchy comprise debt instruments, including certain corporate loans and bonds held by Blackstone’s consolidated CLO vehicles, those held within Blackstone’s Treasury Cash Management Strategies and debt securities sold, not yet purchased and interests in investment funds. Certain equity securities and derivative instruments valued using observable inputs are also classified as Level II.

The valuation techniques used to value financial instruments classified within Level II of the fair value hierarchy are as follows:

•

Debt Instruments and Equity Securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments. The valuation of certain equity securities is based on an observable price for an identical security adjusted for the effect of a restriction.

•

Investment Funds held by the consolidated Blackstone Funds are valued using net asset value per share as described in Level III Valuation Techniques — Funds of Hedge Funds. Certain investments in investment funds are classified within Level II of the fair value hierarchy as the investment can be redeemed at, or within three months of, the reporting date.

•

Freestanding Derivatives and Derivative Instruments Designated as Fair Value Hedges are valued using contractual cash flows and observable inputs comprising yield curves, foreign currency rates and credit spreads.

Level III Valuation Techniques

In the absence of observable market prices, Blackstone values its investments using valuation methodologies applied on a consistent basis. For some investments little market activity may exist; management’s determination of fair value is then based on the best information available in the circumstances, and may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for non-performance and liquidity risks. Investments for which market prices are not observable include private investments in the equity of operating companies, real estate properties, certain funds of hedge funds and credit-focused investments.

Private Equity Investments — The fair values of private equity investments are determined by reference to projected net earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), the discounted cash flow method, public market or private transactions, valuations for comparable companies and other measures which, in many cases, are based on unaudited information at the time received. Valuations may be derived by reference to observable valuation measures for comparable companies or transactions (for example, multiplying a key performance metric of the investee company such as EBITDA by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to EBITDA or price/earnings exit multiples.

Real Estate Investments — The fair values of real estate investments are determined by considering projected operating cash flows, sales of comparable assets, if any, and replacement costs, among other measures. The methods used to estimate the fair value of real estate investments include the discounted cash flow method and/or

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

capitalization rates (“cap rates”) analysis. Valuations may be derived by reference to observable valuation measures for comparable companies or assets (for example, multiplying a key performance metric of the investee company or asset, such as EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to an exit EBITDA multiple or capitalization rate. Additionally, where applicable, projected distributable cash flow through debt maturity will be considered in support of the investment’s fair value.

Funds of Hedge Funds — The investments of consolidated Blackstone Funds in funds of hedge funds (“Investee Funds”) are valued at net asset value (“NAV”) per share of the Investee Fund. In limited circumstances, the Partnership may determine, based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, the Partnership will estimate the fair value in good faith and in a manner that it reasonably chooses, in accordance with the requirements of GAAP.

Certain investments of Blackstone and of the consolidated Blackstone funds of hedge funds and credit-focused funds measure their investments in underlying funds at fair value using NAV per share without adjustment. The terms of the investee’s investment generally provide for minimum holding periods or lock-ups, the institution of gates on redemptions or the suspension of redemptions or an ability to side pocket investments, at the discretion of the investee’s fund manager, and as a result, investments may not be redeemable at, or within three months of, the reporting date. A side pocket is used by hedge funds and funds of hedge funds to separate investments that may lack a readily ascertainable value, are illiquid or are subject to liquidity restriction. Redemptions are generally not permitted until the investments within a side pocket are liquidated or it is deemed that the conditions existing at the time that required the investment to be included in the side pocket no longer exist. As the timing of either of these events is uncertain, the timing at which the Partnership may redeem an investment held in a side pocket cannot be estimated. Investments for which fair value is measured using NAV per share are reflected within the fair value hierarchy based on the existence of redemption restrictions, if any, as described above. Further disclosure on instruments for which fair value is measured using NAV per share is presented in Note 5. “Net Asset Value as Fair Value”.

Credit-Focused Investments — The fair values of credit-focused investments are generally determined on the basis of prices between market participants provided by reputable dealers or pricing services. In some instances, Blackstone may utilize other valuation techniques, including the discounted cash flow method or a market approach.

Credit-Focused Liabilities — Credit-focused liabilities comprise senior and subordinate loans issued by Blackstone’s consolidated CLO vehicles. Such liabilities are valued using a discounted cash flow method.

Level III Valuation Process

Investments classified within Level III of the fair value hierarchy are valued on a quarterly basis, taking into consideration any changes in Blackstone’s weighted-average cost of capital assumptions, discounted cash flow projections and exit multiple assumptions, as well as any changes in economic and other relevant conditions, and valuation models are updated accordingly. The valuation process also includes a review by an independent valuation party, at least annually for all investments, and quarterly for certain investments, to corroborate the values determined by management. The valuations of Blackstone’s investments are reviewed quarterly by a valuation committee that is chaired by Blackstone’s Vice Chairman and includes senior heads of each of Blackstone’s businesses, as well as representatives of legal and finance. Each quarter, the valuations of Blackstone’s investments are also reviewed by the Audit Committee in a meeting attended by the chairman of the valuation committee. The valuations are further tested by comparison to actual sales prices obtained on disposition of the investments.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Investments, at Fair Value

The Blackstone Funds are accounted for as investment companies under the American Institute of Certified Public Accountants Accounting and Auditing Guide, Investment Companies, and reflect their investments, including majority-owned and controlled investments (the “Portfolio Companies”), at fair value. Such consolidated funds’ investments are reflected in Investments on the Condensed Consolidated Statements of Financial Condition at fair value, with unrealized gains and losses resulting from changes in fair value reflected as a component of Net Gains (Losses) from Fund Investment Activities in the Condensed Consolidated Statements of Operations. Fair value is the amount that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e., the exit price).

Blackstone’s principal investments are presented at fair value with unrealized appreciation or depreciation and realized gains and losses recognized in the Condensed Consolidated Statements of Operations within Investment Income (Loss).

For certain instruments, the Partnership has elected the fair value option. Such election is irrevocable and is applied on an investment by investment basis at initial recognition. The Partnership has applied the fair value option for certain loans and receivables and certain investments in private debt securities that otherwise would not have been carried at fair value with gains and losses recorded in net income. Accounting for these financial instruments at fair value is consistent with how the Partnership accounts for its other principal investments. Loans extended to third parties are recorded within Accounts Receivable within the Condensed Consolidated Statements of Financial Condition. Debt securities for which the fair value option has been elected are recorded within Investments. The methodology for measuring the fair value of such investments is consistent with the methodology applied to private equity, real estate, credit-focused and funds of hedge funds investments. Changes in the fair value of such instruments are recognized in Investment Income (Loss) in the Condensed Consolidated Statements of Operations. Interest income on interest bearing loans and receivables and debt securities on which the fair value option has been elected is based on stated coupon rates adjusted for the accretion of purchase discounts and the amortization of purchase premiums. This interest income is recorded within Interest and Dividend Revenue.

In addition, the Partnership has elected the fair value option for the assets and liabilities of CLO vehicles that are consolidated as of January 1, 2010, as a result of the initial adoption of variable interest entity consolidation guidance. The Partnership has also elected the fair value option for CLO vehicles consolidated as a result of the acquisitions of CLO management contracts or the acquisition of the share capital of CLO managers. The adjustment resulting from the difference between the fair value of assets and liabilities for each of these events is presented as a transition and acquisition adjustment to Appropriated Partners’ Capital. Assets of the consolidated CLOs are presented within Investments within the Condensed Consolidated Statements of Financial Condition and Liabilities within Loans Payable for the amounts due to unaffiliated third parties and Due to Affiliates for the amounts held by non-consolidated affiliates. The methodology for measuring the fair value of such assets and liabilities is consistent with the methodology applied to private equity, real estate and credit-focused investments. Changes in the fair value of consolidated CLO assets and liabilities and related interest, dividend and other income subsequent to adoption and acquisition are presented within Net Gains (Losses) from Fund Investment Activities. Expenses of consolidated CLO vehicles are presented in Fund Expenses. Amounts attributable to Non-Controlling Interests in Consolidated Entities have a corresponding adjustment to Appropriated Partners’ Capital.

The Partnership has elected the fair value option for certain proprietary investments that would otherwise have been accounted for using the equity method of accounting. The fair value of such investments is based on quoted prices in an active market or using the discounted cash flow method. Changes in fair value are recognized in Investment Income (Loss) in the Condensed Consolidated Statements of Operations.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Further disclosure on instruments for which the fair value option has been elected is presented in Note 7. “Fair Value Option” to the Condensed Consolidated Financial Statements.

Security and loan transactions are recorded on a trade date basis.

Equity Method Investments

Investments in which the Partnership is deemed to exert significant influence, but not control, are accounted for using the equity method of accounting. Under the equity method of accounting, the Partnership’s share of earnings (losses) from equity method investments is included in Investment Income (Loss) in the Condensed Consolidated Statements of Operations. The carrying amounts of equity method investments are reflected in Investments in the Condensed Consolidated Statements of Financial Condition. As the underlying investments of the Partnership’s equity method investments in Blackstone Funds are reported at fair value, the carrying value of the Partnership’s equity method investments approximates fair value.

Reverse Repurchase and Repurchase Agreements

Securities purchased under agreements to resell (“reverse repurchase agreements”) and securities sold under agreements to repurchase (“repurchase agreements”), comprised primarily of U.S. and non-U.S. government and agency securities, asset-backed securities and corporate debt, represent collateralized financing transactions. Such transactions are recorded in the Condensed Consolidated Statements of Financial Condition at their contractual amounts and include accrued interest. The carrying value of repurchase and reverse repurchase agreements approximates fair value.

The Partnership manages credit exposure arising from reverse repurchase agreements and repurchase agreements by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide the Partnership, in the event of a counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.

The Partnership takes possession of securities purchased under reverse repurchase agreements and is permitted to repledge, deliver or otherwise use such securities. The Partnership also pledges its financial instruments to counterparties to collateralize repurchase agreements. Financial instruments pledged that can be repledged, delivered or otherwise used by the counterparty are recorded in Investments in the Condensed Consolidated Statements of Financial Condition.

Blackstone does not offset assets and liabilities relating to reverse repurchase agreements and repurchase agreements in its Condensed Consolidated Statements of Financial Condition. Additional disclosures relating to offsetting are discussed in Note 11. “Offsetting of Assets and Liabilities”.

Securities Sold, Not Yet Purchased

Securities Sold, Not Yet Purchased consist of equity and debt securities that the Partnership has borrowed and sold. The Partnership is required to “cover” its short sale in the future by purchasing the security at prevailing market prices and delivering it to the counterparty from which it borrowed the security. The Partnership is exposed to loss in the event that the price at which a security may have to be purchased to cover a short sale exceeds the price at which the borrowed security was sold short.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Securities Sold, Not Yet Purchased are recorded at fair value in the Condensed Consolidated Statements of Financial Condition.

Derivative Instruments

The Partnership recognizes all derivatives as assets or liabilities on its Condensed Consolidated Statements of Financial Condition at fair value. On the date the Partnership enters into a derivative contract, it designates and documents each derivative contract as one of the following: (a) a hedge of a recognized asset or liability (“fair value hedge”), (b) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), (c) a hedge of a net investment in a foreign operation, or (d) a derivative instrument not designated as a hedging instrument (“freestanding derivative”). For a fair value hedge, Blackstone records changes in the fair value of the derivative and, to the extent that it is highly effective, changes in the fair value of the hedged asset or liability attributable to the hedged risk, in current period earnings in General, Administrative and Other in the Condensed Consolidated Statements of Operations. Changes in the fair value of derivatives designated as hedging instruments caused by factors other than changes in the risk being hedged, which are excluded from the assessment of hedge effectiveness, are recognized in current period earnings. Gains or losses on a derivative instrument that is designated as, and is effective as, an economic hedge of a net investment in a foreign operation is reported in the cumulative translation adjustment section of other comprehensive income to the extent it is effective as a hedge. The ineffective portion of a net investment hedge is recognized in current period earnings.

The Partnership formally documents at inception its hedge relationships, including identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and the Partnership’s evaluation of effectiveness of its hedged transaction. At least monthly, the Partnership also formally assesses whether the derivative it designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in estimated fair values or cash flows of the hedged items using either the regression analysis or the dollar offset method. For net investment hedges, the Partnership uses a method based on changes in spot rates to measure effectiveness. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued. The Partnership may also at any time remove a designation of a fair value hedge. The fair values of hedging derivative instruments are reflected within Other Assets in the Condensed Consolidated Statements of Financial Condition.

For freestanding derivative contracts, the Partnership presents changes in fair value in current period earnings. Changes in the fair value of derivative instruments held by consolidated Blackstone Funds are reflected in Net Gains (Losses) from Fund Investment Activities or, where derivative instruments are held by the Partnership, within Investment Income (Loss) in the Condensed Consolidated Statements of Operations. The fair value of freestanding derivative assets are recorded within Investments and freestanding derivative liabilities are recorded within Accounts Payable, Accrued Expenses and Other Liabilities in the Condensed Consolidated Statements of Financial Condition.

The Partnership has elected to not offset derivative assets and liabilities or financial assets in its Condensed Consolidated Statements of Financial Condition, including cash, that may be received or paid as part of collateral arrangements, even when an enforceable master netting agreement is in place that provides the Partnership, in the event of counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.

Blackstone’s other disclosures regarding derivative financial instruments are discussed in Note 6.“Derivative Financial Instruments”.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Blackstone’s disclosures regarding offsetting are discussed in Note 11. “Offsetting of Assets and Liabilities”.

Affiliates

Blackstone considers its Founder, senior managing directors, employees, the Blackstone Funds and the Portfolio Companies to be affiliates.

Distributions

Distributions are reflected in the condensed consolidated financial statements when declared.

Recent Accounting Developments

In June 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance on revenue from contracts with customers. The guidance requires that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity is required to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, an entity may include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved.

The guidance introduces new qualitative and quantitative disclosure requirements about contracts with customers including revenue and impairments recognized, disaggregation of revenue and information about contract balances and performance obligations. Information is required about significant judgments and changes in judgments in determining the timing of satisfaction of performance obligations and determining the transaction price and amounts allocated to performance obligations. Additional disclosures are required about assets recognized from the costs to obtain or fulfill a contract.

The amended guidance is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period. The guidance may have a material impact on Blackstone’s consolidated financial statements if it is determined that both performance fees and carried interest are forms of variable consideration that may not be included in the transaction price. This may significantly delay the recognition of carried interest income and performance fees.

In June 2014, the FASB issued amended guidance on transfers and servicing. Under the amended guidance, repurchase transactions previously accounted for as sales should be accounted for as secured borrowings. There are additional disclosures relating to repurchase agreements, secured lending transactions and repurchase-to-maturity transactions that are accounted for as secured borrowings including a disaggregation of the gross obligations by the class of collateral pledged, the remaining contractual tenor of the agreements and a discussion of the potential risks associated with the agreements and the related collateral pledged.

The accounting guidance is effective for the first interim or annual period beginning after December 15, 2014. Adoption did not have a material impact on Blackstone’s financial statements. The amended disclosure guidance is effective for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. The amended disclosure requirements are not expected to have a material impact on Blackstone’s financial statements.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

In August 2014, the FASB issued amended guidance on the measurement of financial assets and financial liabilities of a consolidated collateralized financing entity. Under the amended guidance, a reporting entity that consolidates a collateralized financing entity may elect to measure the financial assets and the financial liabilities using the more observable of the fair value of the financial assets and the fair value of the financial liabilities. When this measurement alternative is elected, a reporting entity’s consolidated net income (loss) should reflect the reporting entity’s own economic interest in the collateralized financing entity, including (a) changes in the fair value of the beneficial interests retained by the reporting entity and (b) beneficial interests that represent compensation for services. When this measurement alternative is not elected, the amendments clarify that the fair value of financial assets and financial liabilities should be measured in accordance with existing fair value guidance and any difference in the fair value of financial assets and financial liabilities should be reflected in earnings and attributed to the reporting entity in the consolidated statement of income (loss). The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted as of the beginning of the annual period. The guidance is expected to impact the measurement of the financial assets or financial liabilities of Blackstone’s consolidated collateralized loan obligation vehicles and have a material impact on the recognition of appropriated partners’ capital. However, the impact on net income attributable to The Blackstone Group L.P. is not expected to be material.

In February 2015, the FASB issued amended guidance on consolidation. The amended guidance modifies the analysis that companies must perform in order to determine whether a legal entity should be consolidated. The amended guidance simplifies current consolidation rules by (a) reducing the number of consolidation models, (b) eliminating the risk that a reporting entity may have to consolidate a legal entity solely based on a fee arrangement with another legal entity, (c) placing more weight on the risk of loss in order to identify the party that has a controlling financial interest, (d) reducing the number of instances that related party guidance needs to be applied when determining the party that has a controlling financial interest, and changing rules for companies in certain industries that ordinarily employ limited partnership or VIE structures. The amended guidance is effective for public entities for interim and annual periods beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Partnership is evaluating the impact on its consolidated financial statements.

In April 2015, the FASB issued amended guidance to simplify the presentation of debt issuance costs. The amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments are effective for fiscal years beginning after December 15, 2015 and interim periods within those years. The amended guidance is not expected to have a material impact on Blackstone’s financial statements.

In May 2015, the FASB issued amended guidance on the disclosures for investments in certain entities that calculate net asset value per share (or its equivalent). The amendments remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient.

The guidance is effective for fiscal years beginning after December 15, 2015 and for interim periods within those years. The guidance shall be applied retrospectively for all periods presented. Early application is permitted. The guidance is not expected to have a material impact on Blackstone’s financial statements.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

3.	INTANGIBLE ASSETS

Intangible Assets, Net consists of the following:


	March 31, 2015			December 31, 2014
Finite-Lived Intangible Assets/Contractual Rights	$	1,464,017		$	1,464,017
Accumulated Amortization		(1,029,984	)		(1,005,184	)

Intangible Assets, Net	$	434,033		$	458,833

Amortization expense associated with Blackstone’s intangible assets was $24.8 million for the three months ended March 31, 2015 and $26.3 million for the three months ended March 31, 2014.

Amortization of Intangible Assets held at March 31, 2015 is expected to be $96.1 million, $85.6 million, $46.5 million, $46.5 million, and $46.4 million for each of the years ending December 31, 2015, 2016, 2017, 2018, and 2019, respectively. Blackstone’s intangible assets as of March 31, 2015 are expected to amortize over a weighted-average period of 6.7 years.

4.	INVESTMENTS

Investments consists of the following:


	March 31, 2015		December 31, 2014
Investments of Consolidated Blackstone Funds	$	11,123,132	$	11,375,407
Equity Method Investments		3,144,959		3,240,825
Blackstone’s Treasury Cash Management Strategies		1,631,696		1,666,061
Performance Fees		6,842,398		6,337,045
Other Investments		154,069		146,251

	$	22,896,254	$	22,765,589

Blackstone’s share of Investments of Consolidated Blackstone Funds totaled $671.1 million and $704.9 million at March 31, 2015 and December 31, 2014, respectively.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Investments of Consolidated Blackstone Funds

The following table presents the Realized and Net Change in Unrealized Gains (Losses) on investments held by the consolidated Blackstone Funds and a reconciliation to Other Income — Net Gains from Fund Investment Activities in the Condensed Consolidated Statements of Operations:


	Three Months Ended March 31,
	2015		2014
Realized Gains	$	65,658	$	13,713
Net Change in Unrealized Gains (Losses)		109,247		(27,214	)

Realized and Net Change in Unrealized Gains (Losses) from Consolidated Blackstone Funds		174,905		(13,501	)
Interest and Dividend Revenue Attributable to Consolidated Blackstone Funds		64,067		83,656

Other Income — Net Gains from Fund Investment Activities	$	238,972	$	70,155

Equity Method Investments

Blackstone’s equity method investments include its investments in private equity funds, real estate funds, funds of hedge funds and credit-focused funds and other proprietary investments, which are not consolidated but in which the Partnership exerts significant influence.

Blackstone evaluates each of its equity method investments to determine if any were significant as defined by guidance from the United States Securities and Exchange Commission. As of and for the three months ended March 31, 2015 and 2014, no individual equity method investment held by Blackstone met the significance criteria. As such, Blackstone is not required to present separate financial statements for any of its equity method investments.

The Partnership recognized net gains related to its equity method investments of $161.3 million and $97.2 million for the three months ended March 31, 2015 and 2014, respectively.

Blackstone’s Treasury Cash Management Strategies

The portion of Blackstone’s Treasury Cash Management Strategies included in Investments represents the Partnership’s liquid investments in government, other investment and non-investment grade securities and other investments. These strategies are primarily managed by third party institutions. The following table presents the realized and net change in unrealized gains (losses) on investments held by Blackstone’s Treasury Cash Management Strategies:


	Three Months Ended March 31,
	2015			2014
Realized Gains (Losses)	$	(161	)	$	3,094
Net Change in Unrealized Gains		11,111			8,970

	$	10,950		$	12,064

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Performance Fees

Performance Fees allocated to the general partner in respect of performance of certain Carry Funds, funds of hedge funds and credit-focused funds were as follows:


	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total
Performance Fees, December 31, 2014	$	2,215,584		$	3,721,751		$	15,031		$	384,679		$	6,337,045
Performance Fees Allocated as a Result of Changes in Fund Fair Values		949,515			674,475			12,353			7,115			1,643,458
Foreign Exchange Loss		—			(43,947	)		—			—			(43,947	)
Fund Distributions		(402,044	)		(666,321	)		(12,696	)		(13,097	)		(1,094,158	)

Performance Fees, March 31, 2015	$	2,763,055		$	3,685,958		$	14,688		$	378,697		$	6,842,398

Other Investments

Other Investments consist primarily of proprietary investment securities held by Blackstone. The following table presents Blackstone’s realized and net change in unrealized gains (losses) in other investments:


	Three Months Ended March 31,
	2015		2014
Realized Gains	$	22	$	6,307
Net Change in Unrealized Gains (Losses)		371		(6,504	)

	$	393	$	(197	)

5.	NET ASSET VALUE AS FAIR VALUE

A summary of fair value by strategy type alongside the remaining unfunded commitments and ability to redeem such investments as of March 31, 2015 is presented below:


Strategy	Fair Value		Unfunded Commitments		Redemption Frequency (if currently eligible)	Redemption Notice Period
Diversified Instruments	$	186,184	$	1,415	(a)	(a)
Credit Driven		345,381		—	(b)	(b)
Event Driven		197,613		—	(c)	(c)
Equity		369,338		—	(d)	(d)
Commodities		64,911		—	(e)	(e)
Private Equity		140,290		—	(f)	(f)

	$	1,303,717	$	1,415

(a)

Diversified Instruments include investments in funds that invest across multiple strategies. Investments representing 81% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. Investments representing 13% of the fair value of the investments in this category represent investments in hedge funds that are in the process of liquidating. Distributions from these

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

funds will be received as underlying investments are liquidated. The time at which this redemption restriction may lapse cannot be estimated. The remaining 6% of investments in this category are redeemable as of the reporting date. As of the reporting date, the investee fund manager had elected to side-pocket 7% of Blackstone’s investments in this category.

(b)

The Credit Driven category includes investments in hedge funds that invest primarily in domestic and international bonds. Investments representing 66% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. Investments representing 30% of the fair value of the investments in this category are redeemable as of the reporting date. Investments representing 3% of the total fair value in the credit driven category are subject to redemption restrictions such as the investee fund manager’s ability to limit the amount of redemptions. The remaining 1% of the investments in this category are in the process of liquidating. Distributions from these funds will be received as underlying investments are liquidated. The time at which this redemption restriction may lapse cannot be estimated.

(c)	The Event Driven category includes investments in hedge funds whose primary investing strategy is to identify certain event-driven investments. Withdrawals are not permitted in this category. Distributions will be received as the underlying investments are liquidated.

(d)	The Equity category includes investments in hedge funds that invest primarily in domestic and international equity securities. Withdrawals are generally not permitted for the investments in this category. Distributions will be received as the underlying investments are liquidated.

(e)

The Commodities category includes investments in commodities-focused funds that primarily invest in futures and physical-based commodity driven strategies. Withdrawals are not permitted for investments representing 96% of the fair value of investments in this category. Distributions will be received as the underlying investments are liquidated. The remaining 4% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date.

(f)	The Private Equity category includes investments in private equity funds that primarily invest in private equity, revenue interests and other private investments. Withdrawals are not permitted for investments in this category.

6.	DERIVATIVE FINANCIAL INSTRUMENTS

Blackstone and the 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

To manage the potential exposure from adverse changes in currency exchange rates arising from Blackstone’s net investment in foreign operations, during December 2014, Blackstone entered into several foreign currency forward contracts to hedge a portion of the net investment in Blackstone’s non-U.S. dollar denominated foreign operations.

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

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

foreign currency derivatives designated as net investment hedges were recognized in Other Comprehensive Income (Loss), Net of Tax — Currency Translation Adjustment. For the three months ended March 31, 2015 the resulting gain was $7.3 million.

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.


	March 31, 2015								December 31, 2014
	Assets				Liabilities				Assets				Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Net Investment Hedges
Foreign Currency Contracts	$	—	$	—	$	53,280	$	408	$	62,078	$	523	$	—	$	—

Freestanding Derivatives
Blackstone — Other Interest Rate Contracts	$	109,405	$	451	$	780,146	$	7,458	$	223,886	$	407	$	879,412	$	4,590
Foreign Currency Contracts		158,470		1,647		224,625		2,593		192,163		2,798		148,873		681
Credit Default Swaps		19,500		308		56,000		1,464		19,500		85		56,000		868
Investments of Consolidated Blackstone Funds
Foreign Currency Contracts		135,520		5,118		302,609		36,138		199,364		8,915		250,244		21,875
Interest Rate Contracts		20,193		2,033		—		—		22,659		2,281		—		—
Credit Default Swaps		—		—		83,060		543		—		—		91,372		2,514

		443,088		9,557		1,446,440		48,196		657,572		14,486		1,425,901		30,528

Total	$	443,088	$	9,557	$	1,499,720	$	48,604	$	719,650	$	15,009	$	1,425,901	$	30,528

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The table below summarizes the impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:


	Three Months Ended March 31,
	2015			2014
Net Investment Hedges — Foreign Currency Contracts
Hedge Ineffectiveness	$	240		$	—

Freestanding Derivatives
Realized Gains (Losses)
Interest Rate Contracts	$	(3,514	)	$	(833	)
Foreign Currency Contracts		14,073			1,439
Credit Default Swaps		1,826			286

Total	$	12,385		$	892

Freestanding Derivatives
Net Change in Unrealized Gains (Losses)
Interest Rate Contracts	$	(995	)	$	(2,542	)
Foreign Currency Contracts		(23,025	)		(8,117	)
Credit Default Swaps		(2,922	)		1,813

Total	$	(26,942	)	$	(8,846	)

As of March 31, 2015 and December 31, 2014, the Partnership had not designated any derivatives as cash flow hedges.

7.	FAIR VALUE OPTION

The following table summarizes the financial instruments for which the fair value option has been elected:


	March 31, 2015		December 31, 2014
Assets
Loans and Receivables	$	40,691	$	40,397
Equity and Preferred Securities		103,971		102,907
Assets of Consolidated CLO Vehicles
Corporate Loans		5,902,169		6,279,592
Corporate Bonds		322,696		292,690
Other		75,387		44,513

	$	6,444,914	$	6,760,099

Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes	$	6,587,954	$	6,448,352
Subordinated Notes		345,793		348,752

	$	6,933,747	$	6,797,104

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table presents the realized and net change in unrealized gains (losses) on financial instruments on which the fair value option was elected:


	Three Months Ended March 31,
	2015						2014
	Realized Gains (Losses)			Net Change in Unrealized Gains (Losses)			Realized Gains (Losses)			Net Change in Unrealized Gains (Losses)
Assets
Loans and Receivables	$	—		$	(1,875	)	$	—		$	—
Equity and Preferred Securities		(185	)		(2,828	)		(584	)		5,118
Assets of Consolidated CLO Vehicles
Corporate Loans		6,656			67,619			(38,242	)		15,059
Corporate Bonds		(1,105	)		3,916			1,098			252
Other		1,955			(376	)		14,997			(3,118	)

	$	7,321		$	66,456		$	(22,731	)	$	17,311

Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes	$	—		$	(28,071	)	$	(2,538	)	$	(55,874	)
Subordinated Notes		—			20,565			—			36,955

	$	—		$	(7,506	)	$	(2,538	)	$	(18,919	)

The following table presents information for those financial instruments for which the fair value option was elected:


	March 31, 2015								December 31, 2014
				For Financial Assets Past Due (a)								For Financial Assets Past Due (a)
	Excess (Deficiency) of Fair Value Over Principal			Fair Value		Excess (Deficiency) of Fair Value Over Principal			Excess (Deficiency) of Fair Value Over Principal			Fair Value		Excess (Deficiency) of Fair Value Over Principal
Loans and Receivables	$	(7,273	)	$	—	$	—		$	(5,323	)	$	—	$	—
Assets of Consolidated CLO Vehicles
Corporate Loans		(83,924	)		2,875		(25,514	)		(197,580	)		4,369		(21,876	)
Corporate Bonds		(2,324	)		—		—			(7,814	)		—		—

	$	(93,521	)	$	2,875	$	(25,514	)	$	(210,717	)	$	4,369	$	(21,876	)

(a)	Corporate Loans and Corporate Bonds within CLO assets are classified as past due if contractual payments are more than one day past due.

As of December 31, 2014, no Loans and Receivables for which the fair value option was elected were past due or in non-accrual status. As of March 31, 2015 and December 31, 2014, no Corporate Bonds included within the Assets of Consolidated CLO Vehicles for which the fair value option was elected were past due or in non-accrual status.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

8.	FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

The following tables summarize the valuation of the Partnership’s financial assets and liabilities by the fair value hierarchy:


	March 31, 2015
	Level I		Level II		Level III		Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds	$	—	$	—	$	1,170,378	$	1,170,378
Equity Securities		65,706		87,343		186,687		339,736
Partnership and LLC Interests		—		183,675		1,562,341		1,746,016
Debt Instruments		—		1,473,038		86,561		1,559,599
Assets of Consolidated CLO Vehicles
Corporate Loans		—		5,387,924		514,245		5,902,169
Corporate Bonds		—		322,696		—		322,696
Freestanding Derivatives — Foreign Currency Contracts		—		5,118		—		5,118
Freestanding Derivatives — Interest Rate Contracts		—		2,033		—		2,033
Other		14		19,010		56,363		75,387

Total Investments of Consolidated Blackstone Funds		65,720		7,480,837		3,576,575		11,123,132

Blackstone’s Treasury Cash Management Strategies
Investment Funds		276,611		—		—		276,611
Equity Securities		69,849		—		—		69,849
Debt Instruments		—		1,158,707		64,816		1,223,523
Other		—		51,618		10,095		61,713

Total Blackstone’s Treasury Cash Management Strategies		346,460		1,210,325		74,911		1,631,696
Money Market Funds		260,002		—		—		260,002
Freestanding Derivatives
Interest Rate Contracts		191		260		—		451
Foreign Currency Contracts		—		1,647		—		1,647
Credit Default Swaps		—		308		—		308
Loans and Receivables		—		—		40,691		40,691
Other Investments		35,379		7,014		111,676		154,069

	$	707,752	$	8,700,391	$	3,803,853	$	13,211,996

Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes	$	—	$	—	$	6,587,954	$	6,587,954
Subordinated Notes		—		—		345,793		345,793
Freestanding Derivatives — Foreign Currency Contracts		—		36,138		—		36,138
Freestanding Derivatives — Credit Default Swaps		—		543		—		543
Net Investment Hedges — Foreign Currency Contracts		—		408		—		408
Freestanding Derivatives
Interest Rate Contracts		2,813		4,645		—		7,458
Foreign Currency Contracts		—		2,593		—		2,593
Credit Default Swaps		—		1,464		—		1,464
Securities Sold, Not Yet Purchased		—		162,111		—		162,111

	$	2,813	$	207,902	$	6,933,747	$	7,144,462

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	December 31, 2014
	Level I		Level II		Level III		Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds	$	—	$	—	$	1,103,210	$	1,103,210
Equity Securities		58,934		114,115		179,311		352,360
Partnership and LLC Interests		—		187,140		1,496,422		1,683,562
Debt Instruments		—		1,502,314		105,970		1,608,284
Assets of Consolidated CLO Vehicles
Corporate Loans		—		5,691,517		588,075		6,279,592
Corporate Bonds		—		292,690		—		292,690
Freestanding Derivatives — Foreign Currency Contracts		—		8,915		—		8,915
Freestanding Derivatives — Interest Rate Contracts		—		2,281		—		2,281
Other		13		19,455		25,045		44,513

Total Investments of Consolidated Blackstone Funds		58,947		7,818,427		3,498,033		11,375,407

Blackstone’s Treasury Cash Management Strategies
Investment Funds		307,111		—		—		307,111
Equity Securities		71,746		—		—		71,746
Debt Instruments		—		1,141,301		84,894		1,226,195
Other		—		50,850		10,159		61,009

Total Blackstone’s Treasury Cash Management Strategies		378,857		1,192,151		95,053		1,666,061
Money Market Funds		198,278		—		—		198,278
Net Investment Hedges — Foreign Currency Contracts		—		523		—		523
Freestanding Derivatives
Interest Rate Contracts		263		144		—		407
Foreign Currency Contracts		—		2,798		—		2,798
Credit Default Swaps		—		85		—		85
Loans and Receivables		—		—		40,397		40,397
Other Investments		31,731		7,310		107,210		146,251

	$	668,076	$	9,021,438	$	3,740,693	$	13,430,207

Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes	$	—	$	—	$	6,448,352	$	6,448,352
Subordinated Notes		—		—		348,752		348,752
Freestanding Derivatives — Foreign Currency Contracts		—		21,875		—		21,875
Freestanding Derivatives — Credit Default Swaps		—		2,514		—		2,514
Freestanding Derivatives
Interest Rate Contracts		1,357		3,233		—		4,590
Foreign Currency Contracts		—		681		—		681
Credit Default Swaps		—		868		—		868
Securities Sold, Not Yet Purchased		—		85,878		—		85,878

	$	1,357	$	115,049	$	6,797,104	$	6,913,510

(a)

Pursuant to GAAP consolidation guidance, the Partnership is required to consolidate all VIEs in which it has been identified as the primary beneficiary, including certain CLO vehicles, and other funds in which a consolidated entity of the Partnership, as the general partner of the fund, is presumed to have control. While the Partnership is required to consolidate certain funds, including CLO vehicles, for GAAP purposes, the Partnership has no ability to utilize the assets of these funds and there is no recourse to the Partnership for their liabilities since these are client assets and liabilities.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table summarizes the fair value transfers between Level I and Level II for positions that existed as of March 31, 2015 and 2014, respectively:


	Three Months Ended March 31,
	2015		2014
Transfers from Level I into Level II (a)	$	—	$	—
Transfers from Level II into Level I (b)	$	5,688	$	18,029

(a)	Transfers out of Level I represent those financial instruments for which restrictions exist and adjustments were made to an otherwise observable price to reflect fair value at the reporting date.

(b)	Transfers into Level I represent those financial instruments for which an unadjusted quoted price in an active market became available for the identical asset.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of March 31, 2015:

Fair Value

Valuation
Techniques

Unobservable
Inputs

Ranges

Weighted-
Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Investment Funds

1,170,378

NAV as Fair Value

N/A

Equity Securities

118,199

Discounted Cash Flows

Discount Rate

8.4% - 24.6%

11.9%

Revenue CAGR

1.1% - 102.6%

7.0%

Exit Multiple - EBITDA

5.0x - 17.0x

10.0x

Exit Multiple - P/E

7.5x - 17.0x

14.9x

64,167

Transaction Price

N/A

1,617

Market Comparable Companies

EBITDA Multiple

6.5x - 7.8x

6.9x

Third Party Pricing

N/A

2,665

Other

N/A

Partnership and LLC Interests

684,685

Discounted Cash Flows

Discount Rate

4.4% - 24.2%

8.9%

Revenue CAGR

-8.1% - 63.5%

5.4%

Exit Multiple - EBITDA

3.0x - 23.0x

10.2x

Exit Multiple - P/E

0.5x

N/A

Exit Capitalization Rate

2.0% - 14.2%

6.1%

25,825

Transaction Price

N/A

851,108

Third Party Pricing

N/A

723

Other

N/A

Debt Instruments

8,622

Discounted Cash Flows

Discount Rate

9.1% - 29.3%

14.4%

Revenue CAGR

5.6% - 20.0%

16.5%

Exit Multiple - EBITDA

5.8x - 9.5x

8.6x

Exit Capitalization Rate

1.0% - 6.6%

5.9%

75,346

Third Party Pricing

N/A

2,414

Transaction Pricing

N/A

179

Market Comparable Companies

EBITDA Multiple

5.9x - 7.9x

6.0x

Assets of Consolidated CLO Vehicles

491,928

Third Party Pricing

N/A

76,754

Market Comparable Companies

EBITDA Multiple

3.5x - 7.5x

5.4x

1,926

Discounted Cash Flows

Discount Rate

3.8%

N/A

Total Investments of Consolidated Blackstone Funds

3,576,575

continued …

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Fair Value

Valuation
Techniques

Unobservable
Inputs

Ranges

Weighted-
Average (a)

Blackstone’s Treasury Cash Management Strategies

28,238

Discounted Cash Flows

Default Rate

1.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

30.0%

N/A

Reinvestment Rate

LIBOR + 450 bps

N/A

Discount Rate

5.8% - 10.2%

6.8%

33,437

Third Party Pricing

N/A

3,141

Transaction Price

N/A

10,095

NAV as Fair Value

N/A

Loans and Receivables

19,878

Discounted Cash Flows

Discount Rate

16.9% - 17.4%

17.3%

20,813

Transaction Price

N/A

Other Investments

16,612

Transaction Price

N/A

82,370

Discounted Cash Flows

Discount Rate

1.6% - 12.5%

3.3%

Default Rate

2.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Reinvestment Rate

LIBOR + 450 bps

N/A

12,694

NAV as Fair Value

N/A

Total

3,803,853

Financial Liabilities

Liabilities of Consolidated CLO Vehicles

6,933,747

Discounted Cash Flows

Default Rate

2.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Discount Rate

0.6% - 29.0%

2.9%

Reinvestment Rate

LIBOR + 400 bps

N/A

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of December 31, 2014:

Fair Value

Valuation
Techniques

Unobservable
Inputs

Ranges

Weighted-
Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Investment Funds

1,103,210

NAV as Fair Value

N/A

Equity Securities

106,727

Discounted Cash Flows

Discount Rate

8.4% - 24.7%

11.8%

Revenue CAGR

0.7% - 24.4%

7.1%

Exit Multiple -
EBITDA

5.0x - 13.0x

10.1x

Exit Multiple -P/E

10.5x - 17.0x

11.2x

67,706

Transaction Price

N/A

163

Market Comparable Companies

EBITDA Multiple

6.7x - 7.6x

6.9x

Third Party Pricing

N/A

4,670

Other

N/A

Partnership and LLC Interests

485,748

Discounted Cash Flows

Discount Rate

4.4% - 21.5%

9.5%

Revenue CAGR

-4.4% - 41.7%

6.5%

Exit Multiple -
EBITDA

1.0x - 19.1x

9.7x

Exit Capitalization
Rate

2.0% - 19.1%

6.8%

996,199

Transaction Price

N/A

13,793

Third Party Pricing

N/A

682

Other

N/A

Debt Instruments

9,570

Discounted Cash Flows

Discount Rate

8.8% - 24.7%

16.1%

Revenue CAGR

4.7% - 6.8%

5.0%

Exit Multiple -
EBITDA

5.9x - 11.3x

11.0x

Exit Capitalization
Rate

1.0% - 12.4%

9.3%

Default Rate

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20%

N/A

Reinvestment Rate

LIBOR + 400 bps

N/A

95,542

Third Party Pricing

N/A

686

Transaction Price

N/A

172

Market Comparable Companies

EBITDA Multiple

6.6x - 7.9x

6.6x

Assets of Consolidated CLO Vehicles

318,636

Third Party Pricing

N/A

290,658

Market Comparable Companies

EBITDA Multiple

3.8x - 15.0x

6.1x

3,826

Discounted Cash Flows

Discount Rate

8.0%

N/A

Total Investments of Consolidated Blackstone Funds

3,498,033

continued …

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Fair Value

Valuation
Techniques

Unobservable
Inputs

Ranges

Weighted-
Average (a)

Blackstone’s Treasury Cash Management Strategies

26,167

Discounted Cash Flows

Default Rate

1.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

30.0%

N/A

Reinvestment Rate

LIBOR + 450 bps

N/A

Discount Rate

5.8% - 10.0%

7.2%

54,257

Third Party Pricing

N/A

10,159

NAV as Fair Value

N/A

4,470

Transaction Price

N/A

Loans and Receivables

26,247

Discounted Cash Flows

Discount Rate

10.5% - 12.2%

10.9%

14,150

Transaction Price

N/A

Other Investments

11,887

Transaction Price

N/A

2,719

NAV as Fair Value

N/A

92,604

Discounted Cash Flows

Discount Rate

1.3% - 12.5%

2.9%

Default Rate

2.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Reinvestment Rate

LIBOR + 400 bps

N/A

Total

3,740,693

Financial Liabilities

Liabilities of Consolidated CLO Vehicles

6,797,104

Discounted Cash Flows

Default Rate

2.0%

N/A

Recovery Rate

30.0% - 70.0%

66.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Discount Rate

0.3% - 19.3%

2.3%

Reinvestment Rate

LIBOR + 400 bps

N/A

N/A	Not applicable.

CAGR	Compound annual growth rate.

EBITDA

Earnings before interest, taxes, depreciation and amortization.

Exit Multiple

Ranges include the last twelve months EBITDA, forward EBITDA and price/earnings exit multiples.

(a)	Unobservable inputs were weighted based on the fair value of the investments included in the range.

The significant unobservable inputs used in the fair value measurement of the Blackstone’s Treasury Cash Management Strategies, debt instruments, other investments and liabilities of consolidated CLO vehicles are discount rates, default rates, recovery rates, recovery lag, pre-payment rates and reinvestment rates. Increases (decreases) in any of the discount rates, default rates, recovery lag and pre-payment rates in isolation would result in a lower (higher) fair value measurement. Increases (decreases) in any of the recovery rates and reinvestment rates in isolation would result in a higher (lower) fair value measurement. Generally, a change in the assumption used for default rates may be accompanied by a directionally similar change in the assumption used for recovery lag and a directionally opposite change in the assumption used for recovery rates and pre-payment rates.

The significant unobservable inputs used in the fair value measurement of equity securities, partnership and LLC interests, debt instruments, assets of consolidated CLO vehicles and loans and receivables are discount rates, exit capitalization rates, exit multiples, EBITDA multiples and revenue compound annual growth rates. Increases

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

(decreases) in any of discount rates and exit capitalization rates in isolation can result in a lower (higher) fair value measurement. Increases (decreases) in any of exit multiples and revenue compound annual growth rates in isolation can result in a higher (lower) fair value measurement.

Since December 31, 2014, there have been no changes in valuation techniques within Level II and Level III that have had a material impact on the valuation of financial instruments.

The following tables summarize the changes in financial assets and liabilities measured at fair value for which the Partnership has used Level III inputs to determine fair value and does not include gains or losses that were reported in Level III in prior years or for instruments that were transferred out of Level III prior to the end of the respective reporting period. Total realized and unrealized gains and losses recorded for Level III investments are reported in Investment Income and Net Gains from Fund Investment Activities in the Condensed Consolidated Statements of Operations.


	Level III Financial Assets at Fair Value Three Months Ended March 31,
	2015												2014
	Investments of Consolidated Funds			Loans and Receivables			Other Investments (c)			Total			Investments of Consolidated Funds			Loans and Receivables			Other Investments (c)			Total
Balance, Beginning of Period	$	3,498,033		$	40,397		$	202,263		$	3,740,693		$	3,358,752		$	137,788		$	58,598		$	3,555,138
Transfer In Due to Consolidation and Acquisition (a)		—			—			—			—			276,806			—			—			276,806
Transfer In (Out) Due to Deconsolidation		—			—			—			—			(83,867	)		—			—			(83,867	)
Transfer In to Level III (b)		129,848			—			26,930			156,778			195,607			—			3,679			199,286
Transfer Out of Level III (b)		(202,401	)		—			(22,684	)		(225,085	)		(244,308	)		—			(1,009	)		(245,317	)
Purchases		288,222			6,186			24,933			319,341			159,613			81,241			77,637			318,491
Sales		(147,181	)		(4,071	)		(35,352	)		(186,604	)		(290,782	)		(156,719	)		(4,067	)		(451,568	)
Settlements		—			(1,144	)		(103	)		(1,247	)		—			(1,170	)		(155	)		(1,325	)
Changes in Gains (Losses) Included in Earnings and Other Comprehensive Income		10,054			(677	)		(9,400	)		(23	)		17,015			—			102			17,117

Balance, End of Period	$	3,576,575		$	40,691		$	186,587		$	3,803,853		$	3,388,836		$	61,140		$	134,785		$	3,584,761

Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date	$	29,891		$	(806	)	$	1,514		$	30,599		$	23,986		$	433		$	2,126		$	26,545

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	Level III Financial Liabilities at Fair Value Three Months Ended March 31,
	2015									2014
	Collateralized Loan Obligations Senior Notes			Collateralized Loan Obligations Subordinated Notes			Total			Collateralized Loan Obligations Senior Notes			Collateralized Loan Obligations Subordinated Notes			Total
Balance, Beginning of Period	$	6,448,352		$	348,752		$	6,797,104		$	8,302,572		$	610,435		$	8,913,007
Transfer In Due to Consolidation and Acquisition (a)		—			—			—			472,019			86,182			558,201
Transfer Out to Deconsolidation		—			—			—			(639,091	)		(39,798	)		(678,889	)
Issuances		888,960			42,199			931,159			—			—			—
Settlements		(266,317	)		—			(266,317	)		(388,987	)		(110	)		(389,097	)
Changes in (Gains) Losses Included in Earnings and Other Comprehensive Income		(483,041	)		(45,158	)		(528,199	)		2,538			—			2,538

Balance, End of Period	$	6,587,954		$	345,793		$	6,933,747		$	7,749,051		$	656,709		$	8,405,760

Changes in Unrealized (Gains) Losses Included in Earnings Related to Liabilities Still Held at the Reporting Date	$	(26,169	)	$	19,698		$	(6,471	)	$	46,472		$	(37,521	)	$	8,951

(a)	Represents the transfer into Level III of financial assets and liabilities as a result of the consolidation of certain fund entities, the acquisition of management contracts and the Harbourmaster acquisition.

(b)	Transfers in and out of Level III financial assets and liabilities were due to changes in the observability of inputs used in the valuation of such assets and liabilities.

(c)	Represents Blackstone’s Treasury Cash Management Strategies and Other Investments.

9.	VARIABLE INTEREST ENTITIES

Pursuant to GAAP consolidation guidance, the Partnership consolidates certain VIEs in which it is determined that the Partnership is the primary beneficiary either directly or indirectly, through a consolidated entity or affiliate. VIEs include certain private equity, real estate, credit-focused or funds of hedge funds entities and CLO vehicles. The purpose of such VIEs is to provide strategy specific investment opportunities for investors in exchange for management and performance based fees. The investment strategies of the Blackstone Funds differ by product; however, the fundamental risks of the Blackstone Funds have similar characteristics, including loss of invested capital and loss of management fees and performance based fees. In Blackstone’s role as general partner, collateral manager or investment adviser, it generally considers itself the sponsor of the applicable Blackstone Fund. The Partnership does not provide performance guarantees and has no other financial obligation to provide funding to consolidated VIEs other than its own capital commitments.

The assets of consolidated variable interest entities may only be used to settle obligations of these consolidated Blackstone Funds. In addition, there is no recourse to the Partnership for the consolidated VIEs’ liabilities including the liabilities of the consolidated CLO vehicles.

The Partnership holds variable interests in certain VIEs which are not consolidated as it is determined that the Partnership is not the primary beneficiary. The Partnership’s involvement with such entities is in the form of direct equity interests and fee arrangements. The maximum exposure to loss represents the loss of assets recognized by Blackstone relating to non-consolidated entities, any amounts due to non-consolidated entities and any clawback obligation relating to previously distributed Carried Interest. The assets and liabilities recognized in the

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Partnership’s Condensed Consolidated Statements of Financial Condition related to the Partnership’s interest in these non-consolidated VIEs and the Partnership’s maximum exposure to loss relating to non-consolidated VIEs were as follows:


	March 31, 2015		December 31, 2014
Investments	$	813,764	$	776,079
Accounts Receivable		103,400		125,316
Due from Affiliates		45,788		53,751

Total VIE Assets		962,952		955,146
Due to Affiliates		94		108
Accounts Payable, Accrued Expenses and Other Liabilities		44		124
Potential Clawback Obligation		245,651		206,725

Maximum Exposure to Loss	$	1,208,741	$	1,162,103

10.

REVERSE REPURCHASE AND REPURCHASE AGREEMENTS

At March 31, 2015, the Partnership received securities, primarily U.S. and non-U.S. government and agency securities, asset-backed securities and corporate debt, with a fair value of $79.3 million as collateral for reverse repurchase agreements that could be repledged, delivered or otherwise used. Securities with a fair value of $79.3 million and cash were used to cover Securities Sold, Not Yet Purchased. The Partnership also pledged securities with a carrying value of $110.7 million and cash to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.

At December 31, 2014, the Partnership pledged securities with a carrying value of $44.8 million and cash to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.

11.

OFFSETTING OF ASSETS AND LIABILITIES

The following tables present the offsetting of assets and liabilities as of March 31, 2015:


	Gross and Net Amounts of Assets Presented in the Statement of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition
			Financial Instruments		Cash Collateral Received		Net Amount
Assets
Freestanding Derivatives	$	2,406	$	1,645	$	—	$	761
Reverse Repurchase Agreements		79,628		79,350		—		278

Total	$	82,034	$	80,995	$	—	$	1,039

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	Gross and Net Amounts of Liabilities Presented in the Statement of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition
			Financial Instruments		Cash Collateral Pledged		Net Amount
Liabilities
Net Investment Hedges	$	408	$	—	$	—	$	408
Freestanding Derivatives		12,058		1,645		8,244		2,169
Repurchase Agreements		87,085		86,616		469		—

Total	$	99,551	$	88,261	$	8,713	$	2,577

The following tables present the offsetting of assets and liabilities as of December 31, 2014:


	Gross and Net Amounts of Assets Presented in the Statement of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition
			Financial Instruments		Cash Collateral Received		Net Amount
Assets
Net Investment Hedges	$	523	$	—	$	—	$	523
Freestanding Derivatives		3,290		1,132		352		1,806

Total	$	3,813	$	1,132	$	352	$	2,329


	Gross and Net Amounts of Liabilities Presented in the Statement of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition
			Financial Instruments		Cash Collateral Pledged		Net Amount
Liabilities
Freestanding Derivatives	$	8,653	$	1,132	$	7,424	$	97
Repurchase Agreements		29,907		29,438		469		—

Total	$	38,560	$	30,570	$	7,893	$	97

Reverse Repurchase Agreements and Repurchase Agreements are presented separately on the Condensed Consolidated Statements of Financial Condition. Freestanding Derivative assets are included in Other Assets in the Condensed Consolidated Statements of Financial Condition. The following table presents the components of Other Assets:


	March 31, 2015		December 31, 2014
Furniture, Equipment and Leasehold Improvements, Net	$	132,448	$	135,740
Prepaid Expenses		220,192		102,503
Other Assets		102,998		96,501
Freestanding Derivatives		2,406		3,290
Net Investment Hedges		—		523

	$	458,044	$	338,557

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Freestanding Derivative liabilities are included in Accounts Payable, Accrued Expenses and Other Liabilities in the Condensed Consolidated Statements of Financial Condition and are not a significant component thereof.

Notional Pooling Arrangement

Blackstone has entered into a notional cash pooling arrangement with a financial institution for cash management purposes. This arrangement allows for cash withdrawals based upon aggregate cash balances on deposit at the same financial institution. Cash withdrawals cannot exceed aggregate cash balances on deposit. The net balance of cash on deposit and overdrafts is used as a basis for calculating net interest expense or income. As of March 31, 2015, the aggregate cash balance on deposit relating to the cash pooling arrangement was $1.1 billion, which was fully offset with an accompanying overdraft.

12.

BORROWINGS

The carrying value and fair value of the Blackstone issued notes, included in Loans Payable within the Condensed Consolidated Statements of Financial Condition, were:


	March 31, 2015				December 31, 2014
	Carrying Value		Fair Value (a)		Carrying Value		Fair Value (a)
Blackstone Issued 6.625%, $600 Million Par, Notes Due 8/15/2019 (b)	$	623,121	$	694,044	$	625,111	$	684,158
Blackstone Issued 5.875%, $400 Million Par, Notes Due 3/15/2021	$	398,753	$	472,400	$