•

Equity securities, at fair value included $2.35 billion as of December 2020 and $3.22 billion as of December 2019 of investments in funds that are measured at NAV.

Debt Instruments, at Fair Value.

Debt instruments, at fair value primarily includes mezzanine, senior and distressed debt.

The table below presents information about debt instruments, at fair value.



	As of December

$ in millions		2020	2019
Corporate debt securities		$10,991	$10,838
Securities backed by real estate		1,940	2,619
Money market instruments		2,185	1,681
Other		1,865	1,432
Total		$16,981	$16,570

In the table above:

•

Money market instruments includes time deposits, investments in money market funds, commercial paper and certificates of deposit.

•

Other included $1.31 billion as of December 2020 and $983 million as of December 2019 of investments in credit funds that are measured at NAV.

Investments in Funds at Net Asset Value Per Share.

Equity securities and debt instruments,

at fair value include investments in funds that are measured at NAV of the investment fund. The firm uses NAV to measure the fair value of fund investments when (i) the fund investment does not have a readily determinable fair value and (ii) the NAV of the investment fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the investments at fair value.

Substantially all of the firm’s investments in funds at NAV consist of investments in firm-sponsored private equity, credit, real estate and hedge funds where the firm

co-invests

with third-party investors.

Private equity funds primarily invest in a broad range of industries worldwide, including leveraged buyouts, recapitalizations, growth investments and distressed investments. Credit funds generally invest in loans and other fixed income instruments and are focused on providing private high-yield capital for leveraged and management buyout transactions, recapitalizations, financings, refinancings, acquisitions and restructurings for private equity firms, private family companies and corporate issuers. Real estate funds invest globally, primarily in real estate companies, loan portfolios, debt recapitalizations and property. Private equity, credit and real estate funds are

closed-end

funds in which the firm’s investments are generally not eligible for redemption. Distributions will be received from these funds as the underlying assets are liquidated or distributed, the timing of which is uncertain.

The firm also invests in hedge funds, primarily multi-disciplinary hedge funds that employ a fundamental

bottom-up

investment approach across various asset classes and strategies. The firm’s investments in hedge funds primarily include interests where the underlying assets are illiquid in nature, and proceeds from redemptions will not be received until the underlying assets are liquidated or distributed, the timing of which is uncertain.

Private equity, hedge and real estate funds described above are primarily “covered funds” as defined in the Volcker Rule of the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Board of Governors of the Federal Reserve System (FRB) extended the conformance period to July 2022 for the firm’s investments in, and relationships with, certain legacy “illiquid funds” (as defined in the Volcker Rule) that were in place prior to December 2013. This extension is applicable to substantially all of the firm’s remaining investments in, and relationships with, such covered funds. Substantially all of the credit funds described above are not covered funds.

The table below presents the fair value of investments in funds at NAV and the related unfunded commitments.



$ in millions	Fair Value of Investments	Unfunded Commitments
As of December 2020
Private equity funds	$2,042	$ 557
Credit funds	1,312	680
Hedge funds	102	–
Real estate funds	208	213
Total	$3,664	$1,450
As of December 2019
Private equity funds	$2,767	$ 765
Credit funds	983	820
Hedge funds	125	–
Real estate funds	331	196
Total	$4,206	$1,781

Available-for-Sale

Securities

Available-for-sale

securities are accounted for at fair value, and the related unrealized fair value gains and losses are included in accumulated other comprehensive income/(loss) unless designated in a fair value hedging relationship. See Note 7 for information about

available-for-sale

securities that are designated in a hedging relationship.

The table below presents information about

available-for-sale

securities by tenor.



$ in millions	Amortized Cost	Fair Value	Weighted Average Yield
As of December 2020
Less than 1 year	$ 25	$ 25	0.08%
1 year to 5 years	35,831	36,158	0.70%
5 years to 10 years	7,454	7,732	1.19%
Total U.S. government obligations	43,310	43,915	0.78%
5 years to 10 years	1,739	1,744	0.10%
Greater than 10 years	353	357	0.74%
Total non-U.S. government obligations	2,092	2,101	0.21%
Total available-for-sale securities	$45,402	$46,016	0.76%
As of December 2019
Less than 1 year	$ 25	$ 25	0.10%
1 year to 5 years	14,038	14,016	1.53%
5 years to 10 years	3,505	3,510	1.85%
Greater than 10 years	1,469	1,543	2.65%
Total U.S. government obligations	19,037	19,094	1.68%
Total available-for-sale securities	$19,037	$19,094	1.68%

In the table above:

•

Available-for-sale

securities were classified in level 1 of the fair value hierarchy as of both December 2020 and December 2019.

•

The firm sold

available-for-sale

securities of $4.49 billion (realized gains of $319 million) during 2020 and $9.58 billion (realized gains of $181 million) during 2019. Such gains were included in the consolidated statements of earnings.

•

The gross unrealized gains included in accumulated other comprehensive income/(loss) were $631 million as of December 2020 and $137 million as of December 2019. The gross unrealized losses included in accumulated other comprehensive income/(loss) were not material as of both December 2020 and December 2019.

•

Beginning in January 2020,

available-for-sale

securities are reviewed to determine if an allowance for credit losses should be recorded in the consolidated statements of earnings. The firm considers various factors in such determination, including market conditions, changes in issuer credit ratings, severity of the unrealized losses, and the intent and ability to hold the security until recovery. See Note 3 for further information about the adoption of CECL. Prior to January 2020, such securities were reviewed for other-than-temporary impairment. The firm did not record any provision for credit losses on such securities during 2020 and there was no other-than-temporary impairment during 2019.

Fair Value of Investments by Level

The table below presents investments accounted for at fair value by level within the fair value hierarchy.



$ in millions	Level 1	Level 2	Level 3	Total
As of December 2020
Government and agency obligations:
U.S.	$43,915	$ –	$ –	$43,915
Non-U.S.	2,109	48	–	2,157
Corporate debt securities	70	5,635	5,286	10,991
Securities backed by real estate	–	942	998	1,940
Money market instruments	781	1,404	–	2,185
Other debt obligations	–	–	497	497
Equity securities	517	7,270	9,642	17,429
Subtotal	$47,392	$15,299	$16,423	$79,114
Investments in funds at NAV				3,664
Total investments				$82,778
As of December 2019
Government and agency obligations:
U.S.	$19,094	$ –	$ –	$19,094
Non-U.S.	–	36	–	36
Corporate debt securities	48	7,325	3,465	10,838
Securities backed by real estate	–	2,024	595	2,619
Money market instruments	732	949	–	1,681
Other debt obligations	–	94	319	413
Equity securities	251	7,786	10,903	18,940
Subtotal	$20,125	$18,214	$15,282	$53,621
Investments in funds at NAV				4,206
Total investments				$57,827

See Note 4 for an overview of the firm’s fair value measurement policies and the valuation techniques and significant inputs used to determine the fair value of investments.

Significant Unobservable Inputs

The table below presents the amount of level 3 investments, and ranges and weighted averages of significant unobservable inputs used to value such investments.

As of December 2020

As of December 2019

$ in millions

Amount or
Range

Weighted

Average

Amount or

Range

Weighted

Average

Corporate debt securities

Level 3 assets

$5,286

$3,465

Yield

4.5% to 19.5%

10.2%

5.5% to 29.8%

12.0%

Recovery rate

10.0% to 70.0%

50.7%

25.0% to 100.0%

68.5%

Duration (years)

3.0 to 7.7

4.2

2.9 to 5.9

5.0

Multiples

0.6x to 29.3x

6.9x

0.6x to 24.4x

7.0x

Securities backed by real estate

Level 3 assets

$998

$595

Yield

8.2% to 52.4%

17.5%

9.4% to 20.3%

16.0%

Recovery rate

21.6% to 57.8%

33.7%

33.1% to 34.4%

33.5%

Duration (years)

0.4 to 3.6

2.7

0.4 to 3.0

0.9

Other debt obligations

Level 3 assets

$497

$319

Yield

1.7% to 6.2%

3.5%

3.4% to 5.2%

4.5%

Duration (years)

0.2 to 10.3

6.4

4.0 to 8.0

6.7

Equity securities

Level 3 assets

$9,642

$10,903

Multiples

0.6x to 27.9x

9.0x

0.8x to 36.0x

8.0x

Discount rate/yield

4.0% to 38.5%

13.5%

2.1% to 20.3%

13.4%

Capitalization rate

3.7% to 14.1%

6.3%

3.6% to 15.1%

6.1%

In the table above:

•

Ranges represent the significant unobservable inputs that were used in the valuation of each type of investment.

•

Weighted averages are calculated by weighting each input by the relative fair value of the investment.

•

The ranges and weighted averages of these inputs are not representative of the appropriate inputs to use when calculating the fair value of any one investment. For example, the highest multiple for private equity securities is appropriate for valuing a specific private equity security but may not be appropriate for valuing any other private equity security. Accordingly, the ranges of inputs do not represent uncertainty in, or possible ranges of, fair value measurements of level 3 investments.

•

Increases in yield, discount rate, capitalization rate or duration used in the valuation of level 3 investments would have resulted in a lower fair value measurement, while increases in recovery rate or multiples would have resulted in a higher fair value measurement as of both December 2020 and December 2019. Due to the distinctive nature of each level 3 investment, the interrelationship of inputs is not necessarily uniform within each product type.

•

Corporate debt securities, securities backed by real estate and other debt obligations are valued using discounted cash flows, and equity securities are valued using market comparables and discounted cash flows.

•

The fair value of any one instrument may be determined using multiple valuation techniques. For example, market comparables and discounted cash flows may be used together to determine fair value. Therefore, the level 3 balance encompasses both of these techniques.

Level 3 Rollforward

The table below presents a summary of the changes in fair value for level 3 investments.



	Year Ended December

$ in millions		2020		2019
Beginning balance		$15,282		$13,548
Net realized gains/(losses)		215		252
Net unrealized gains/(losses)		(443	)	1,295
Purchases		1,815		1,322
Sales		(1,550	)	(986	)
Settlements		(1,570	)	(1,192	)
Transfers into level 3		4,708		2,646
Transfers out of level 3		(2,034	)	(1,603	)
Ending balance		$16,423		$15,282

In the table above:

•

Changes in fair value are presented for all investments that are classified in level 3 as of the end of the period.

•

Net unrealized gains/(losses) relates to investments that were still held at

period-end.

•

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. If an investment was transferred to level 3 during a reporting period, its entire gain or loss for the period is classified in level 3.

•

For level 3 investments, increases are shown as positive amounts, while decreases are shown as negative amounts.

The table below presents information, by product type, for investments included in the summary table above.



	Year Ended December

$ in millions		2020		2019
Corporate debt securities
Beginning balance		$ 3,465		$ 2,540
Net realized gains/(losses)		110		64
Net unrealized gains/(losses)		(96	)	198
Purchases		636		297
Sales		(302	)	(43	)
Settlements		(678	)	(274	)
Transfers into level 3		2,661		1,106
Transfers out of level 3		(510	)	(423	)
Ending balance		$ 5,286		$ 3,465
Securities backed by real estate
Beginning balance		$ 595		$ 457
Net realized gains/(losses)		22		27
Net unrealized gains/(losses)		(96	)	–
Purchases		233		238
Sales		–		(82	)
Settlements		(83	)	(98	)
Transfers into level 3		327		63
Transfers out of level 3		–		(10	)
Ending balance		$ 998		$ 595
Other debt obligations
Beginning balance		$ 319		$ 216
Net realized gains/(losses)		15		1
Net unrealized gains/(losses)		1		1
Purchases		113		118
Sales		–		(9	)
Settlements		(45	)	(8	)
Transfers into level 3		94		–
Ending balance		$ 497		$ 319
Equity securities
Beginning balance		$10,903		$10,335
Net realized gains/(losses)		68		160
Net unrealized gains/(losses)		(252	)	1,096
Purchases		833		669
Sales		(1,248	)	(852	)
Settlements		(764	)	(812	)
Transfers into level 3		1,626		1,477
Transfers out of level 3		(1,524	)	(1,170	)
Ending balance		$ 9,642		$10,903

Level 3 Rollforward Commentary

Year Ended December 2020.

The net realized and unrealized losses on level 3 investments of $228 million (reflecting $215 million of net realized gains and $443 million of net unrealized losses) for 2020 included losses of $428 million reported in other principal transactions and $200 million reported in interest income.

The net unrealized losses on level 3 investments for 2020 reflected losses on certain private equity, corporate debt securities and securities backed by real estate, principally driven by corporate performance.

Transfers into level 3 investments during 2020 primarily reflected transfers of certain corporate debt securities from level 2 (principally due to reduced price transparency as a result of a lack of market evidence, including fewer transactions in these instruments, and certain unobservable yield and duration inputs becoming significant to the valuation of these instruments) and transfers of certain private equity securities from level 2 (principally due to reduced price transparency as a result of a lack of market evidence, including fewer transactions in these instruments).

Transfers out of level 3 investments during 2020 primarily reflected transfers of certain private equity securities and corporate debt securities to level 2 (principally due to increased price transparency as a result of market evidence, including market transactions in these instruments).

Year Ended December 2019.

The net realized and unrealized gains on level 3 investments of $1.55 billion (reflecting $252 million of net realized gains and $1.30 billion of net unrealized gains) for 2019 included gains of $1.44 billion reported in other principal transactions and $108 million reported in interest income.

The net unrealized gains on level 3 investments for 2019 primarily reflected gains on private equity securities, principally driven by corporate performance and company-specific events.

Transfers into level 3 investments during 2019 primarily reflected transfers of certain private equity securities and corporate debt securities from level 2 (principally due to reduced price transparency as a result of a lack of market evidence, including fewer transactions in these instruments).

Transfers out of level 3 investments during 2019 primarily reflected transfers of certain private equity securities and corporate debt securities to level 2 (principally due to increased price transparency as a result of market evidence, including market transactions in these instruments).

Held-to-Maturity

Securities

Held-to-maturity

securities are accounted for at amortized cost.

The table below presents information about

held-to-maturity

securities by type and tenor.



$ in millions	Amortized Cost	Fair Value	Weighted Average Yield
As of December 2020
Less than 1 year	$ 501	$ 513	2.53%
1 year to 5 years	2,529	2,695	2.34%
5 years to 10 years	1,531	1,675	2.25%
Total U.S. government obligations	4,561	4,883	2.33%
5 years to 10 years	4	3	2.56%
Greater than 10 years	736	751	1.08%
Total securities backed by real estate	740	754	1.08%
Total held-to-maturity securities	$5,301	$5,637	2.15%
As of December 2019
1 year to 5 years	$3,534	$3,613	2.40%
5 years to 10 years	1,534	1,576	2.25%
Total U.S. government obligations	5,068	5,189	2.35%
Less than 1 year	6	6	4.16%
Greater than 10 years	751	769	1.67%
Total securities backed by real estate	757	775	1.69%
Total held-to-maturity securities	$5,825	$5,964	2.27%

In the table above:

•

Substantially all of the securities backed by real estate consist of securities backed by residential real estate.

•

As these securities are not accounted for at fair value, they are not included in the firm’s fair value hierarchy in Notes 4 through 10. Had these securities been included in the firm’s fair value hierarchy, U.S. government obligations would have been classified in level 1 and securities backed by real estate would have been primarily classified in level 2 of the fair value hierarchy as of both December 2020 and December 2019.

•

The gross unrealized gains were $340 million as of December 2020 and $141 million as of December 2019. The gross unrealized losses were not material as of both December 2020 and December 2019.

•

Beginning in January 2020,

held-to-maturity

securities are reviewed to determine if an allowance for credit losses should be recorded in the consolidated statements of earnings. The firm considers various factors in such determination, including market conditions, changes in issuer credit ratings, historical credit losses and sovereign guarantees. See Note 3 for further information about the adoption of CECL. Prior to January 2020, such securities were reviewed for other-than-temporary impairment. Provision for credit losses on such securities was not material during 2020 and there was no other-than-temporary impairment during 2019.