•

Equity securities, at fair value included $2.50 billion as of June 2021 and $2.35 billion as of December 2020 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

$ in millions		June 2021	December 2020
Corporate debt securities		$11,217	$10,991
Securities backed by real estate		2,213	1,940
Money market instruments		1,927	2,185
Other		2,050	1,865
Total		$17,407	$16,981

In the table above:

•

Money market instruments primarily includes time deposits and investments in money market funds.

•

Other included $1.49 billion as of June 2021 and $1.31 billion as of December 2020 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 and hedge 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). Substantially all of the credit and real estate funds described above are not covered funds. 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. As of June 2021, the firm’s total investments in funds at NAV of $3.99 billion included

$1.65

billion of investments that were in covered funds.

The firm expects to achieve compliance for these covered funds through ongoing harvesting of underlying fund investments in the ordinary course or through structural modifications to these funds. To the extent that the firm is not able to achieve compliance through these measures, the firm will be required to sell its interests in such funds by July 2022. If that occurs, the firm may receive a value for its interests that is less than the then carrying value as there could be a limited secondary market for these investments and the firm may be unable to sell them in orderly transactions.

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 June 2021
Private equity funds	$2,137	$ 625
Credit funds	1,490	685
Hedge funds	83	–
Real estate funds	278	206
Total	$3,988	$1,516
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

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 June 2021
Less than 1 year	$ 25	$ 25	0.03%
1 year to 5 years	37,089	37,003	0.51%
5 years to 10 years	7,453	7,503	1.18%
Total U.S. government obligations	44,567	44,531	0.62%
5 years to 10 years	1,759	1,710	0.10%
Greater than 10 years	357	328	0.74%
Total non-U.S. government obligations	2,116	2,038	0.21%
Total available-for-sale securities	$46,683	$46,569	0.61%
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%

In the table above:

•

Available-for-sale

securities were classified in level 1 of the fair value hierarchy as of both June 2021 and December 2020.

•

The firm sold

available-for-sale

securities of $3.22 billion (realized gains of $3 million) during the three months ended June 2021, $2.04 billion (realized gains of $54 million) during the three months ended June 2020, $13.42 billion (realized gains of $133 million) during the six months ended June 2021 and $3.49 billion (realized gains of $319 million) during the six months ended June 2020. Such gains were included in the consolidated statements of earnings.

•

The gross unrealized gains included in accumulated other comprehensive income/(loss) were $273 million and the gross unrealized losses included in accumulated other comprehensive income/(loss) were $387 million as of June 2021. The gross unrealized gains included in accumulated other comprehensive income/(loss) were $631 million and the gross unrealized losses included in accumulated other comprehensive income/(loss) were not material as of December 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. The firm did not record any provision for credit losses on such securities during either the three or six months ended June 2021 or June 2020.

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 June 2021
Government and agency obligations:
U.S.	$44,531	$ –	$ –	$44,531
Non-U.S.	2,041	55	–	2,096
Corporate debt securities	83	6,176	4,958	11,217
Securities backed by real estate	–	1,096	1,117	2,213
Money market instruments	766	1,161	–	1,927
Other debt obligations	–	–	502	502
Equity securities	406	8,386	9,755	18,547
Subtotal	$47,827	$16,874	$16,332	$81,033
Investments in funds at NAV				3,988
Total investments				$85,021
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

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 June 2021

As of December 2020

$ in millions

Amount or

Range

Weighted
Average

Amount or

Range

Weighted
Average

Corporate debt securities

Level 3 assets

$4,958

$5,286

Yield

7.0% to 14.6%

9.4%

4.5% to 19.5%

10.2%

Recovery rate

9.1% to 76.0%

59.9%

10.0% to 70.0%

50.7%

Duration (years)

2.6 to 7.3

4.4

3.0 to 7.7

4.2

Multiples

0.5x to 20.9x

7.6x

0.6x to 29.3x

6.9x

Securities backed by real estate

Level 3 assets

$1,117

$998

Yield

8.3% to 28.2%

16.8%

8.2% to 52.4%

17.5%

Recovery rate

20.9% to 57.8%

32.9%

21.6% to 57.8%

33.7%

Duration (years)

0.5 to 3.2

3.1

0.4 to 3.6

2.7

Other debt obligations

Level 3 assets

$502

$497

Yield

2.4% to 9.6%

4.3%

1.7% to 6.2%

3.5%

Duration (years)

1.3 to 9.5

5.6

0.2 to 10.3

6.4

Equity securities

Level 3 assets

$9,755

$9,642

Multiples

0.5x to 33.8x

12.1x

0.6x to 27.9x

9.0x

Discount rate/yield

4.8% to 50.1%

15.4%

4.0% to 38.5%

13.5%

Capitalization rate

3.8% to 13.1%

6.2%

3.7% to 14.1%

6.3%

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 June 2021 and December 2020. 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.



	Three Months Ended June					Six Months Ended June

$ in millions		2021		2020			2021		2020
Beginning balance		$17,049		$19,408			$16,423		$15,282
Net realized gains/(losses)		85		40			245		121
Net unrealized gains/(losses)		1,106		(135	)		1,894		(1,395	)
Purchases		558		344			971		811
Sales		(422	)	(110	)		(778	)	(1,186	)
Settlements		(1,174	)	(192	)		(1,734	)	(504	)
Transfers into level 3		873		428			1,522		5,937
Transfers out of level 3		(1,743	)	(1,867	)		(2,211	)	(1,150	)
Ending balance		$16,332		$17,916			$16,332		$17,916

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.



	Three Months Ended June					Six Months Ended June

$ in millions		2021		2020			2021		2020
Corporate debt securities
Beginning balance		$ 5,314		$ 7,149			$ 5,286		$ 3,465
Net realized gains/(losses)		25		27			127		78
Net unrealized gains/(losses)		179		35			295		(406	)
Purchases		27		181			215		244
Sales		(155	)	(33	)		(281	)	(209	)
Settlements		(437	)	(72	)		(678	)	(226	)
Transfers into level 3		506		87			844		3,800
Transfers out of level 3		(501	)	(802	)		(850	)	(174	)
Ending balance		$ 4,958		$ 6,572			$ 4,958		$ 6,572
Securities backed by real estate
Beginning balance		$ 1,039		$ 775			$ 998		$ 595
Net realized gains/(losses)		13		7			27		17
Net unrealized gains/(losses)		36		(28	)		36		(104	)
Purchases		168		7			208		94
Settlements		(111	)	(26	)		(211	)	(43	)
Transfers into level 3		–		159			87		321
Transfers out of level 3		(28	)	(14	)		(28	)	–
Ending balance		$ 1,117		$ 880			$ 1,117		$ 880
Other debt obligations
Beginning balance		$ 523		$ 428			$ 497		$ 319
Net realized gains/(losses)		4		4			8		7
Net unrealized gains/(losses)		3		1			2		17
Purchases		11		14			39		4
Sales		(11	)	(15	)		(12	)	–
Settlements		(28	)	(3	)		(32	)	(9	)
Transfers into level 3		–		–			–		91
Ending balance		$ 502		$ 429			$ 502		$ 429
Equity securities
Beginning balance		$10,173		$11,056			$ 9,642		$10,903
Net realized gains/(losses)		43		2			83		19
Net unrealized gains/(losses)		888		(143	)		1,561		(902	)
Purchases		352		142			509		469
Sales		(256	)	(62	)		(485	)	(977	)
Settlements		(598	)	(91	)		(813	)	(226	)
Transfers into level 3		367		182			591		1,725
Transfers out of level 3		(1,214	)	(1,051	)		(1,333	)	(976	)
Ending balance		$ 9,755		$10,035			$ 9,755		$10,035

Level 3 Rollforward Commentary

Three Months Ended June 2021.

The net realized and unrealized gains on level 3 investments of $1.19 billion (reflecting $85 million of net realized gains and $1.11 billion of net unrealized gains) for the three months ended June 2021 included gains of $1.12 billion reported in other principal transactions and $66 million reported in interest income.

The net unrealized gains on level 3 investments for the three months ended June 2021 primarily reflected gains on certain private equity securities and corporate debt securities (in each case, principally driven by corporate performance and company-specific events).

Transfers into level 3 investments during the three months ended June 2021 primarily reflected transfers of certain corporate debt securities and private equity securities from level 2 (in each case, principally due to reduced price transparency as a result of a lack of market evidence, including fewer market transactions in these instruments).

Transfers out of level 3 investments during the three months ended June 2021 primarily reflected transfers of certain private equity securities to level 2 (principally due to increased price transparency as a result of market evidence, including market transactions in these instruments) and transfers of certain corporate debt securities to level 2 (principally due to certain unobservable yield and duration inputs no longer being significant to the valuation of these instruments and increased price transparency as a result of market evidence, including market transactions in these instruments).

Six Months Ended June 2021.

The net realized and unrealized gains on level 3 investments of $2.14 billion (reflecting $245 million of net realized gains and $1.89 billion of net unrealized gains) for the six months ended June 2021 included gains of $2.02 billion reported in other principal transactions and $116 million reported in interest income.

The net unrealized gains on level 3 investments for the six months ended June 2021 primarily reflected gains on certain private equity securities and corporate debt securities (in each case, principally driven by corporate performance and company-specific events).

Transfers into level 3 investments during the six months ended June 2021 primarily reflected transfers of certain corporate debt securities and private equity securities from level 2 (in each case, principally due to reduced price transparency as a result of a lack of market evidence, including fewer market transactions in these instruments).

Transfers out of level 3 investments during the six months ended June 2021 primarily reflected transfers of certain private equity securities to level 2 (principally due to increased price transparency as a result of market evidence, including market transactions in these instruments) and transfers of certain corporate debt securities to level 2 (principally due to certain unobservable yield and duration inputs no longer being significant to the valuation of these instruments and increased price transparency as a result of market evidence, including market transactions in these instruments).

Three Months Ended June 2020.

The net realized and unrealized losses on level 3 investments of $95 million (reflecting $40 million of net realized gains and $135 million of net unrealized losses) for the three months ended June 2020 included gains/(losses) of $(170) million reported in other principal transactions and $75 million reported in interest income.

The net unrealized losses on level 3 investments for the three months ended June 2020 primarily reflected losses on certain private equity securities (principally driven by corporate performance).

Transfers into level 3 investments during the three months ended June 2020 primarily reflected transfers of certain private equity securities and securities backed by real estate from level 2 (in each case, principally due to reduced price transparency as a result of lack of market evidence, including fewer transactions in these instruments).

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

Six Months Ended June 2020.

The net realized and unrealized losses on level 3 investments of $1.27 billion (reflecting $121 million of net realized gains and $1.40 billion of net unrealized losses) for the six months ended June 2020 included gains/(losses) of $(1.41) billion reported in other principal transactions and $132 million reported in interest income.

The net unrealized losses on level 3 investments for the six months ended June 2020 primarily reflected losses on certain private equity securities (principally driven by corporate performance), and corporate debt securities (principally driven by the impact of wider credit spreads and corporate performance).

Transfers into level 3 investments during the six months ended June 2020 primarily reflected transfers of certain corporate debt securities from level 2 (principally due to certain unobservable yield and duration inputs becoming significant to the valuation of these instruments), and 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 the six months ended June 2020 primarily reflected transfers of certain private equity securities and corporate debt securities to level 2 (in each case, 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 June 2021
Less than 1 year	$ 501	$ 506	2.53%
1 year to 5 years	4,057	4,283	2.30%
Total U.S. government obligations	4,558	4,789	2.33%
5 years to 10 years	3	3	2.65%
Greater than 10 years	699	724	1.11%
Total securities backed by real estate	702	727	1.12%
Total held-to-maturity securities	$5,260	$5,516	2.17%
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%

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 June 2021 and December 2020.

•

The gross unrealized gains were $257 million as of June 2021 and $340 million as of December 2020. The gross unrealized losses were not material as of both June 2021 and December 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. Provision for credit losses on such securities was not material during either the three or six months ended June 2021 or June 2020.