6. Fair Value Disclosures

Fair Value Hierarchy

Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value

June 30, 2017	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Investments Measured at		Other Assets Not Held at		June 30,
(in millions)	(Level 1)		(Level 2)		(Level 3)		NAV⁽¹⁾		Fair Value⁽²⁾		2017
Assets:
Investments
Available-for-sale	$	8	$	72	$	23	$	—	$	—	$	103
Held-to-maturity securities		—		—		—		—		74		74
Trading:									.
Deferred compensation plan mutual funds		52		—		—		—		—		52
Equity securities/Multi-asset mutual funds		408		—		—		—		—		408
Debt securities / fixed income mutual funds		1		254		4		—		—		259
Total trading		461		254		4		—		—		719
Other investments:
Equity method:
Equity and fixed income mutual funds		305		—		—		10		—		315
Other		—		—		—		609		11		620
Total equity method		305		—		—		619		11		935
Cost method investments		—		—		—		—		92		92
Carried interest		—		—		—		—		19		19
Total investments		774		326		27		619		196		1,942
Separate account assets		112,370		33,545		—		—		973		146,888
Separate account collateral held under securities lending agreements:
Equity securities		20,733		—		—		—		—		20,733
Debt securities		—		5,536		—		—		—		5,536
Total separate account collateral held under securities lending agreements		20,733		5,536		—		—		—		26,269
Investments of consolidated VIEs:
Private / public equity⁽³⁾		5		5		113		77		80		280
Equity securities		300		—		—		—		—		300
Debt securities		—		316		—		—		—		316
Other		—		—		—		64		—		64
Carried interest		—		—		—		—		234		234
Total investments of consolidated VIEs		305		321		113		141		314		1,194
Total	$	134,182	$	39,728	$	140	$	760	$	1,483	$	176,293
Liabilities:
Separate account collateral liabilities under securities lending agreements	$	20,733	$	5,536	$	—	$	—	$	—	$	26,269
Other liabilities⁽⁴⁾		—		7		218		—		—		225
Total	$	20,733	$	5,543	$	218	$	—	$	—	$	26,494

⁽¹⁾	Amounts are comprised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient.

⁽²⁾

Amounts are comprised of investments held at cost or amortized cost, carried interest and certain equity method investments, which include sponsored investment funds and other assets, which are not accounted for under a fair value measure. In accordance with GAAP, certain equity method investees do not account for both their financial assets and liabilities under fair value measures; therefore, the Company’s investment in such equity method investees may not represent fair value.

⁽³⁾	Level 3 amounts primarily include direct investments in private equity companies held by private equity funds.

⁽⁴⁾	Amounts primarily include recorded contingent liabilities related to certain acquisitions (see Note 11, Commitments and Contingencies, for more information).

Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value

December 31, 2016 (in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Investments Measured at NAV⁽¹⁾		Other Assets Not Held at Fair Value⁽²⁾		December 31, 2016
Assets:
Investments
Available-for-sale	$	7	$	49	$	24	$	—	$	—	$	80
Held-to-maturity securities		—		—		—		—		51		51
Trading:
Deferred compensation plan mutual funds		59		—		—		—		—		59
Equity/Multi-asset mutual funds		308		—		—		—		—		308
Debt securities / fixed income mutual funds		1		250		7		—		—		258
Total trading		368		250		7		—		—		625
Other investments:
Equity method:
Equity and fixed income mutual funds		323		—		—		5		—		328
Other		—		—		—		394		8		402
Total equity method		323		—		—		399		8		730
Cost method investments		—		—		—		—		91		91
Carried interest		—		—		—		—		18		18
Total investments		698		299		31		399		168		1,595
Separate account assets		109,663		38,542		—		—		884		149,089
Separate account collateral held under securities lending agreements:
Equity securities		22,173		—		—		—		—		22,173
Debt securities		—		5,619		—		—		—		5,619
Total separate account collateral held under securities lending agreements		22,173		5,619		—		—		—		27,792
Investments of consolidated VIEs:
Private / public equity⁽³⁾		3		2		112		89		79		285
Equity securities		278		—		—		—		—		278
Debt securities		—		274		—		—		—		274
Other		—		—		—		63		—		63
Carried interest		—		—		—		—		108		108
Total investments of consolidated VIEs		281		276		112		152		187		1,008
Total	$	132,815	$	44,736	$	143	$	551	$	1,239	$	179,484
Liabilities:
Separate account collateral liabilities under securities lending agreements	$	22,173	$	5,619	$	—	$	—	$	—	$	27,792
Other liabilities⁽⁴⁾		—		7		115		—		—		122
Total	$	22,173	$	5,626	$	115	$	—	$	—	$	27,914

⁽¹⁾	Amounts are comprised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient.

⁽²⁾

⁽³⁾	Level 3 amounts include direct investments in private equity companies held by private equity funds.

⁽⁴⁾	Amounts primarily include recorded contingent liabilities related to certain acquisitions (see Note 11, Commitments and Contingencies, for more information).

Level 3 Assets. Level 3 investments of consolidated VIEs of $113 million and $112 million at June 30, 2017 and December 31, 2016, respectively, related to direct investments in private equity companies held by consolidated private equity funds.

Direct investments in private equity companies may be valued using the market approach or the income approach, or a combination thereof, and were valued based on an assessment of each underlying investment, incorporating evaluation of additional significant third-party financing, changes in valuations of comparable peer companies, the business environment of the companies, market indices, assumptions relating to appropriate risk adjustments for nonperformance and legal restrictions on disposition, among other factors. The fair value derived from the methods used is evaluated and weighted, as appropriate, considering the reasonableness of the range of values indicated. Under the market approach, fair value may be determined by reference to multiples of market-comparable companies or transactions, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. Under the income approach, fair value may be determined by discounting the expected cash flows to a single present value amount using current expectations about those future amounts. Unobservable inputs used in a discounted cash flow model may include projections of operating performance generally covering a five-year period and a terminal value of the private equity direct investment. For investments utilizing the discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, risk premium or discount for lack of marketability in isolation could result in a significantly lower (higher) fair value measurement. For investments utilizing the market-comparable valuation technique, a significant increase (decrease) in the EBITDA multiple in isolation could result in a significantly higher (lower) fair value measurement.

Level 3 assets may include investments in CLOs valued based on single-broker nonbinding quotes and direct private equity investments valued using the market approach or the income approach as described above.

Level 3 Liabilities. Level 3 other liabilities primarily include recorded contingent liabilities related to certain acquisitions, which were valued based upon discounted cash flow analyses using unobservable market data inputs.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended June 30, 2017

(in millions)	March 31, 2017		Realized and Unrealized Gains (Losses) in Earnings and OCI		Purchases		Sales and Maturities		Issuances and other Settlements⁽¹⁾		Transfers into Level 3		Transfers out of Level 3		June 30, 2017		Total Net Unrealized Gains (Losses) Included in Earnings⁽²⁾
Assets:
Investments:
Available-for-sale securities⁽³⁾	$	—	$	—	$	23	$	—	$	—	$	—	$	—	$	23
Trading		—		—		4		—		—		—		—		4
Total investments		—		—		27		—		—		—		—		27
Assets of consolidated VIEs - Private equity		113		—		—		—		—		—		—		113
Total Level 3 assets	$	113	$	—	$	27	$	—	$	—	$	—	$	—	$	140
Liabilities:
Other liabilities⁽⁴⁾	$	113	$	3	$	—	$	—	$	108	$	—	$	—	$	218	$	3

⁽¹⁾ Issuance and other settlements amount includes a contingent liability in connection with the acquisition of the equity infrastructure franchise of First Reserve in June 2017 (“First Reserve Transaction”).

⁽²⁾ Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.

⁽³⁾	Amounts include investments in CLOs.

⁽⁴⁾	Other liabilities amount includes contingent liabilities in connection with certain acquisitions.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Six Months Ended June 30, 2017

(in millions)	December 31, 2016		Realized and Unrealized Gains (Losses) in Earnings and OCI		Purchases		Sales and Maturities		Issuances and other Settlements⁽¹⁾		Transfers into Level 3		Transfers out of Level 3⁽²⁾			June 30, 2017		Total Net Unrealized Gains (Losses) Included in Earnings⁽³⁾
Assets:
Investments:
Available-for-sale securities⁽⁴⁾	$	24	$	—	$	23	$	—	$	—	$	—	$	(24	)	$	23
Trading		7		—		4		—		—		—		(7	)		4
Total investments		31		—		27		—		—		—		(31	)		27
Assets of consolidated VIEs - Private equity		112		1		—				—		—		—			113	$	1
Total Level 3 assets	$	143	$	1	$	27	$	—	$	—	$	—	$	(31	)	$	140
Liabilities:
Other liabilities⁽⁵⁾	$	115	$	5	$	—	$	—	$	108	$	—	$	—		$	218	$	5

⁽¹⁾ Issuance and other settlements amount includes a contingent liability related to the First Reserve Transaction.

⁽²⁾ Amounts include transfers out of Level 3 due to availability of observable market inputs from pricing vendors.

⁽³⁾ Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.

⁽⁴⁾	Amounts include investments in CLOs.

⁽⁵⁾	Other liabilities amount includes contingent liabilities in connection with certain acquisitions.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended June 30, 2016

(in millions)	March 31, 2016		Realized and Unrealized Gains (Losses) in Earnings and OCI		Purchases		Sales and Maturities			Issuances and other Settlements⁽¹⁾		Transfers into Level 3		Transfers out of Level 3			June 30, 2016		Total Net Unrealized Gains (Losses) Included in Earnings⁽²⁾
Assets:
Investments:
Available-for-sale securities⁽³⁾	$	23	$	—	$	—	$	—		$	—	$	—	$	(23	)	$	—
Trading		4		—		—		—			—		—		(1	)		3
Total investments		27		—		—		—			—		—		(24	)		3
Assets of consolidated VIEs - Private equity		192		—		—		(3	)		—		—		—			189
Total Level 3 assets	$	219	$	—	$	—	$	(3	)	$	—	$	—	$	(24	)	$	192
Liabilities:
Other liabilities⁽⁴⁾	$	49	$	3	$	—	$	—		$	75	$	—	$	—		$	121	$	3

⁽¹⁾ Issuances and other settlements amount includes a contingent liability related to the BofA^® Global Capital Management transaction in April 2016.

⁽²⁾	Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.

⁽³⁾	Amounts include investments in CLOs.

⁽⁴⁾	Other liabilities amount includes contingent liabilities in connection with certain acquisitions.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Six Months Ended June 30, 2016

	December 31,		Realized and Unrealized Gains (Losses) in Earnings				Sales and			Issuances and other		Transfers into		Transfers out of			June 30,		Total Net Unrealized Gains (Losses) Included in
(in millions)	2015		and OCI		Purchases		Maturities			Settlements⁽¹⁾		Level 3		Level 3			2016		Earnings⁽²⁾
Assets:
Investments
Available-for-sale securities⁽³⁾	$	23	$	—	$	23	$	—		$	—	$	—	$	(46	)	$	—
Trading		2		—		4		—			—		—		(3	)		3
Total investments		25		—		27		—			—		—		(49	)		3
Assets of consolidated VIEs - Private equity		196		2		—		(9	)		—		—		—			189	$	2
Total Level 3 assets	$	221	$	2	$	27	$	(9	)	$	—	$	—	$	(49	)	$	192
Liabilities:
Other liabilities⁽⁴⁾	$	48	$	2	$	—	$	—		$	75	$	—	$	—		$	121	$	2

⁽¹⁾ Issuances and other settlements amount includes a contingent liability related to the BofA Global Capital Management transaction in April 2016.

⁽²⁾	Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.

⁽³⁾	Amounts include investments in CLOs.

⁽⁴⁾	Other liabilities amount includes contingent liabilities in connection with certain acquisitions.

Realized and Unrealized Gains (Losses) for Level 3 Assets and Liabilities. Realized and unrealized gains (losses) recorded for Level 3 assets and liabilities are reported in nonoperating income (expense) on the condensed consolidated statements of income. A portion of net income (loss) for consolidated sponsored investment funds are allocated to noncontrolling interests to reflect net income (loss) not attributable to the Company.

Transfers in and/or out of Levels. Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable/unobservable, or when the carrying value of certain equity method investments no longer represents fair value as determined under valuation methodologies.

Disclosures of Fair Value for Financial Instruments Not Held at Fair Value. At June 30, 2017 and December 31, 2016, the fair value of the Company’s financial instruments not held at fair value are categorized in the table below:

	June 30, 2017				December 31, 2016
(in millions)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Fair Value Hierarchy
Financial Assets:
Cash and cash equivalents	$	5,508	$	5,508	$	6,091	$	6,091	Level 1	^{(1) (2)}
Accounts receivable		2,984		2,984		2,350		2,350	Level 1	⁽³⁾
Cash and cash equivalents of consolidated VIEs		74		74		84		84	Level 1	^{(1) (2)}
Other assets		60		60		25		25	Level 1	^{(1) (4)}

Financial Liabilities:
Accounts payable and accrued liabilities		1,520		1,520		1,094		1,094	Level 1	⁽³⁾
Long-term borrowings		4,970		5,225		4,915		5,165	Level 2	⁽⁵⁾

⁽¹⁾	Cash and cash equivalents are carried at either cost or amortized cost, which approximates fair value due to their short-term maturities.

⁽²⁾

At June 30, 2017 and December 31, 2016, approximately $136 million and $132 million, respectively, of money market funds were recorded within cash and cash equivalents on the condensed consolidated statements of financial condition. In addition, at June 30, 2017 and December 31, 2016, approximately $21 million and $13 million, respectively, of money market funds were recorded within cash and cash equivalents of consolidated VIEs. Money market funds are valued based on quoted market prices, or $1.00 per share, which generally is the NAV of the fund.

⁽³⁾	The carrying amounts of accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term nature.

⁽⁴⁾	Other assets primarily include restricted cash.

⁽⁵⁾

Long-term borrowings are recorded at amortized cost net of debt issuance costs. The fair value of the long-term borrowings, including the current portion of long-term borrowings, is estimated using market prices at the end of June 2017 and December 2016, respectively. See Note 10, Borrowings, for the fair value of each of the Company’s long-term borrowings.

Investments in Certain Entities that Calculate Net Asset Value Per Share.

As a practical expedient to value certain investments that do not have a readily determinable fair value and have attributes of an investment company, the Company uses NAV as the fair value. The following tables list information regarding all investments that use a fair value measurement to account for both their financial assets and financial liabilities in their calculation of a NAV per share (or equivalent).

June 30, 2017

(in millions)

Ref

Fair Value

Total

Unfunded

Commitments

Redemption

Frequency

Redemption

Notice Period

Equity method:⁽¹⁾

Hedge funds/funds of hedge funds

(a)

253

Daily/Monthly (21%)

Quarterly (54%)

N/R (25%)

1 – 90 days

Private equity funds

(b)

N/R

Real assets funds

(c)

261

113

Quarterly (86%)

N/R (14%)

60 days

Other

Daily/Monthly (62%)

N/R (38%)

3 – 5 days

Consolidated VIEs:

Private equity funds of funds

(d)

N/R

Hedge fund

(a)

—

Quarterly

90 days

Real assets funds

(c)

N/R

Total

760

287

December 31, 2016

(in millions)

Ref

Fair Value

Total

Unfunded

Commitments

Redemption

Frequency

Redemption

Notice Period

Equity method:⁽¹⁾

Hedge funds/funds of hedge funds

(a)

237

Daily/Monthly (21%)

Quarterly (51%)

N/R (28%)

1 – 90 days

Private equity funds

(b)

N/R

Real assets funds

(c)

Quarterly (41%)

N/R (59%)

60 days

Other

Daily/Monthly (42%)

N/R (58%)

3 – 5 days

Consolidated VIEs:

Private equity funds of funds

(d)

N/R

Hedge fund

(a)

—

Quarterly

90 days

Real assets funds

(c)

N/R

Total

551

157

N/R – not redeemable

⁽¹⁾	Comprised of equity method investments, which include investments in investment companies, which account for their financial assets and most financial liabilities under fair value measures; therefore, the Company’s investment in such equity method investees approximates fair value.

^(a)

This category includes hedge funds and funds of hedge funds that invest primarily in equities, fixed income securities, distressed credit, opportunistic and mortgage instruments and other third-party hedge funds. The fair values of the investments have been estimated using the NAV of the Company’s ownership interest in partners’ capital. It was estimated that the investments in the funds that are not subject to redemption will be liquidated over a weighted-average period of six years at June 30, 2017 and approximately one year at December 31, 2016.

^(b)

This category includes several private equity funds that initially invest in nonmarketable securities of private companies, which ultimately may become public in the future. The fair values of these investments have been estimated using capital accounts representing the Company’s ownership interest in the funds as well as other performance inputs. The Company’s investment in each fund is not subject to redemption and is normally returned through distributions as a result of the liquidation of the underlying assets of the private equity funds. It was estimated that the investments in these funds will be liquidated over a weighted-average period of approximately five years at both June 30, 2017 and December 31, 2016.

^(c)

This category includes several real assets funds that invest directly in real estate, real estate related assets and infrastructure. The fair values of the investments have been estimated using capital accounts representing the Company’s ownership interest in the funds. The Company’s investments that are not subject to redemption or are not currently redeemable are normally returned through distributions as a result of the liquidation of the underlying assets of the funds. It is estimated that the investments in these funds not subject to redemptions will be liquidated over a weighted-average period of approximately eight years at June 30, 2017 and six years at December 31, 2016. The total remaining unfunded commitments to other third-party funds were $167 million and $56 million at June 30, 2017 and December 31, 2016, respectively. The Company had contractual obligations to the consolidated funds of $137 million at both June 30, 2017 and $56 million at December 31, 2016.

⁽^d⁾ This category includes the underlying third-party private equity funds within consolidated BlackRock sponsored private equity funds of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company’s ownership interest in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption; however, for certain funds, the Company may sell or transfer its interest, which may need approval by the general partner of the underlying funds. Due to the nature of the investments in this category, the Company reduces its investment by distributions that are received through the realization of the underlying assets of the funds. It is estimated that the underlying assets of these funds will be liquidated over a weighted-average period of approximately five years at both June 30, 2017 and December 31, 2016. The total remaining unfunded commitments to other third-party funds were $20 million and $16 million at June 30, 2017 and December 31, 2016, respectively. The Company had contractual obligations to the consolidated funds of $24 million at both June 30, 2017 and December 31, 2016.