Investments includes debt instruments and equity securities that are accounted for at fair value and are generally held by the firm in connection with its long-term investing activities. In addition, investments includes debt securities classified as

available-for-sale

and

held-to-maturity

that are generally held in connection with the firm’s asset-liability management activities. Investments also consists of equity securities that are accounted for under the equity method.

The table below presents information about investments.

Equity securities, at fair value

Debt instruments, at fair value

Available-for-sale

securities, at fair value

Investments, at fair value

Held-to-maturity

securities

Equity method investments

Equity Securities and Debt Instruments, at Fair Value

Equity securities and debt instruments, at fair value are accounted for at fair value either under the fair value option or in accordance with other U.S. GAAP, and the related fair value gains and losses are recognized in the consolidated statements of earnings.

Equity Securities, at Fair Value.

Equity securities, at fair value consists of the firm’s public and private equity investments in corporate and real estate entities.

The table below presents information about equity securities, at fair value.

Equity securities, at fair value

Equity securities, at fair value included investments accounted for at fair value under the fair value option where the firm would otherwise apply the equity method of accounting of $5.81 billion as of December 2021 and $7.14 billion as of December 2020. Gains recognized as a result of changes in the fair value of equity securities for which the fair value option was elected were $2.12 billion for 2021 and $573 million for 2020. These gains are included in other principal transactions.

Equity securities, at fair value included $1.80 billion as of December 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.

Corporate debt securities

Securities backed by real estate

Money market instruments

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

Other included $1.67 billion as of December 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 December 2021, the firm’s total investments in funds at NAV of $3.47 billion included $903

million of investments in covered funds for which compliance with the Volcker Rule will need to be achieved by July 2022.

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.

Private equity funds

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.

Greater than 10 years

Total U.S. government obligations

Total non-U.S. government obligations

Total

available-for-sale

securities

Total U.S. government obligations

Greater than 10 years

Total

non-U.S.

government obligations

Total

available-for-sale

securities

Available-for-sale

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

The weighted average yield for

available-for-sale

securities is computed using the effective interest rate of each security at the end of the period, weighted based on the fair value of each security.

The gross unrealized gains included in accumulated other comprehensive income/(loss) were $118 million and the gross unrealized losses included in accumulated other comprehensive income/(loss) were $779 million as of December 2021 and primarily related to U.S. government obligations in a continuous unrealized loss position for less than a year. 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. Net unrealized gains/(losses) included in other comprehensive income/(loss) were $(1.28) billion ($(955) million, net of tax) for 2021 and $557 million ($417 million, net of tax) for 2020.

If the fair value of available-for-sale securities is less than amortized cost, such securities are considered impaired. If the firm has the intent to sell the debt security, or if it is more likely than not that the firm will be required to sell the debt security before recovery of its amortized cost, the difference between the amortized cost (net of allowance, if any) and the fair value of the securities is recognized as an impairment loss in earnings. The firm did not record any such impairment losses during either 2021 or 2020. Impaired available-for-sale debt securities that the firm has the intent and ability to hold are reviewed to determine if an allowance for credit losses should be recorded. The firm considers various factors in such determination, including market conditions, changes in issuer credit ratings and severity of the unrealized losses. The firm did not record any provision for credit losses on such securities during either 2021 or 2020.

The table below presents gross realized gains/(losses) and the proceeds from the sales of available-for-sale securities.

Gross realized gains

Gross realized losses

In the table above, the realized gains/(losses) were reclassified from accumulated other comprehensive income/(loss) to other principal transactions in the consolidated statements of earnings.

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 2021
Government and agency obligations:
U.S.	$46,322	$ –	$ –	$46,322
Non-U.S.	2,612	–	–	2,612
Corporate debt securities	65	5,201	4,527	9,793
Securities backed by real estate	–	1,202	1,078	2,280
Money market instruments	41	1,355	–	1,396
Other debt obligations	–	35	382	417
Equity securities	2,135	7,088	7,915	17,138
Subtotal	$51,175	$14,881	$13,902	$79,958
Investments in funds at NAV				3,469
Total investments				$83,427
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 December 2021

As of December 2020

$ in millions

Amount or

Range

Weighted
Average

Amount or

Range

Weighted
Average

Corporate debt securities

Level 3 assets

$4,527

$5,286

Yield

2.0% to 29.0%

10.8%

4.5% to 19.5%

10.2%

Recovery rate

9.1% to 76.0%

59.1%

10.0% to 70.0%

50.7%

Duration (years)

1.4 to 6.4

3.8

3.0 to 7.7

4.2

Multiples

0.5x to 28.2x

6.9x

0.6x to

29.3x

6.9x

Securities backed by real estate

Level 3 assets

$1,078

$998

Yield

8.3% to 20.3%

13.1%

8.2% to 52.4%

17.5%

Recovery rate

55.1% to 61.0%

56.4%

21.6% to 57.8%

33.7%

Duration (years)

0.1 to 2.6

1.2

0.4 to 3.6

2.7

Other debt obligations

Level 3 assets

$382

$497

Yield

2.3% to 10.6%

3.2%

1.7% to 6.2%

3.5%

Duration (years)

0.9 to 9.3

4.8

0.2 to 10.3

6.4

Equity securities

Level 3 assets

$7,915

$9,642

Multiples

0.4x to 30.5x

10.1x

0.6x to 27.9x

9.0x

Discount rate/yield

2.0% to 35.0%

14.1%

4.0% to 38.5%

13.5%

Capitalization rate

3.5% to 14.0%

5.7%

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 December 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.



	Year Ended December

$ in millions		2021		2020
Beginning balance		$16,423		$15,282
Net realized gains/(losses)		449		215
Net unrealized gains/(losses)		1,263		(443	)
Purchases		1,600		1,815
Sales		(2,135	)	(1,550	)
Settlements		(3,265	)	(1,570	)
Transfers into level 3		3,080		4,708
Transfers out of level 3		(3,513	)	(2,034	)
Ending balance		$13,902		$16,423

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		2021		2020
Corporate debt securities
Beginning balance		$ 5,286		$ 3,465
Net realized gains/(losses)		167		110
Net unrealized gains/(losses)		311		(96	)
Purchases		431		636
Sales		(594	)	(302	)
Settlements		(1,876	)	(678	)
Transfers into level 3		1,871		2,661
Transfers out of level 3		(1,069	)	(510	)
Ending balance		$ 4,527		$ 5,286
Securities backed by real estate
Beginning balance		$ 998		$ 595
Net realized gains/(losses)		45		22
Net unrealized gains/(losses)		6		(96	)
Purchases		182		233
Sales		(44	)	–
Settlements		(234	)	(83	)
Transfers into level 3		142		327
Transfers out of level 3		(17	)	–
Ending balance		$ 1,078		$ 998
Other debt obligations
Beginning balance		$ 497		$ 319
Net realized gains/(losses)		12		15
Net unrealized gains/(losses)		1		1
Purchases		63		113
Settlements		(96	)	(45	)
Transfers into level 3		–		94
Transfers out of level 3		(95	)	–
Ending balance		$ 382		$ 497
Equity securities
Beginning balance		$ 9,642		$10,903
Net realized gains/(losses)		225		68
Net unrealized gains/(losses)		945		(252	)
Purchases		924		833
Sales		(1,497	)	(1,248	)
Settlements		(1,059	)	(764	)
Transfers into level 3		1,067		1,626
Transfers out of level 3		(2,332	)	(1,524	)
Ending balance		$ 7,915		$ 9,642

Level 3 Rollforward Commentary

Year Ended December 2021.

The net realized and unrealized gains on level 3 investments of $1.71 billion (reflecting $449 million of net realized gains and $1.26 billion of net unrealized gains) for 2021 included gains of $1.53 billion reported in other principal transactions and $180 million reported in interest income.

The net unrealized gains on level 3 investments for 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 2021 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 market 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 market transactions in these instruments).

Transfers out of level 3 investments during 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 of these instruments).

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 (in each case, 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).

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 2021
1 year to 5 years	$4,054	$4,200	2.30%
Total U.S. government obligations	4,054	4,200	2.30%
5 years to 10 years	3	3	2.78%
Greater than 10 years	642	670	1.03%
Total securities backed by real estate	645	673	1.04%
Total held-to-maturity securities	$4,699	$4,873	2.13%
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 December 2021 and December 2020.

•

The weighted average yield for held-to-maturity securities is computed using the effective interest rate of each security at the end of the period, weighted based on the amortized cost of each security.

•

The gross unrealized gains were $175 million as of December 2021 and $340 million as of December 2020. The gross unrealized losses were not material as of both December 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 2021 or 2020.