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5. Investments
A summary of the carrying value of total investments is as follows:
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|
|
June 30, |
|
|
December 31, |
|
|
(in millions) |
|
2019 |
|
|
2018 |
|
|
Debt securities: |
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|
|
|
|
|
|
|
|
Held-to-maturity investments |
|
$ |
213 |
|
|
$ |
188 |
|
|
Trading securities (debt securities of consolidated sponsored investment
funds of $143 and $233 at June 30, 2019 and December 31, 2018,
respectively) |
|
|
180 |
|
|
|
265 |
|
|
Total debt securities |
|
|
393 |
|
|
|
453 |
|
|
Equity securities at FVTNI(1) (equity securities of consolidated sponsored investment
funds of $309 and $291 at June 30, 2019 and December 31, 2018, respectively) |
|
|
537 |
|
|
|
452 |
|
|
Equity method investments(2) |
|
|
846 |
|
|
|
781 |
|
|
Federal Reserve Bank stock(3) |
|
|
93 |
|
|
|
92 |
|
|
Carried interest(4) |
|
|
12 |
|
|
|
18 |
|
|
Other investments(5) |
|
|
108 |
|
|
|
— |
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|
Total investments |
|
$ |
1,989 |
|
|
$ |
1,796 |
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(1) |
Fair value recorded through net income (“FVTNI”). |
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(2) |
Equity method investments primarily include BlackRock’s direct investments in BlackRock sponsored investment funds. |
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(3) |
At June 30, 2019 and December 31, 2018, there were no indicators of impairment of Federal Reserve Bank stock, which is held for regulatory purposes and is restricted from sale. |
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(4) |
Carried interest of consolidated sponsored investment funds accounted for as voting rights entities (“VREs”) represents allocations to BlackRock’s general partner capital accounts from certain funds. These balances are subject to change upon cash distributions, additional allocations or reallocations back to limited partners within the respective funds. |
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(5) |
Other investments include BlackRock’s investments in nonmarketable equity securities, which are measured at cost, adjusted for observable price changes. See Note 2, Significant Accounting Policies, in the 2018 Form 10-K for more information on investments in nonmarketable equity securities. |
Held-to-Maturity Investments
The carrying value of held-to-maturity investments was $213 million and $188 million at June 30, 2019 and December 31, 2018, respectively. Held-to-maturity investments included foreign government debt held primarily for regulatory purposes and certain investments in CLOs. The amortized cost (carrying value) of these investments approximated fair value (primarily a Level 2 input). At June 30, 2019, $44 million of these investments mature between five to ten years and $169 million mature after ten years.
Equity and Trading Debt Securities
A summary of the cost and carrying value of equity and trading debt securities is as follows:
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June 30, 2019 |
|
|
December 31, 2018 |
|
|
(in millions) |
Cost |
|
|
Carrying
Value |
|
|
Cost |
|
|
Carrying
Value |
|
|
Trading debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt |
$ |
122 |
|
|
$ |
122 |
|
|
$ |
144 |
|
|
$ |
140 |
|
|
Government debt |
|
7 |
|
|
|
7 |
|
|
|
69 |
|
|
|
67 |
|
|
Asset/mortgage-backed debt |
|
51 |
|
|
|
51 |
|
|
|
67 |
|
|
|
58 |
|
|
Total trading debt securities |
$ |
180 |
|
|
$ |
180 |
|
|
$ |
280 |
|
|
$ |
265 |
|
|
Equity securities at FVTNI: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan mutual funds |
$ |
6 |
|
|
$ |
22 |
|
|
$ |
21 |
|
|
$ |
34 |
|
|
Equity securities/multi-asset mutual funds |
|
473 |
|
|
|
515 |
|
|
|
420 |
|
|
|
418 |
|
|
Total equity securities at FVTNI |
$ |
479 |
|
|
$ |
537 |
|
|
$ |
441 |
|
|
$ |
452 |
|
|
|
|
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PennyMac
In addition, the Company accounts for its interest in PennyMac Financial Services, Inc. (“PennyMac”) as an equity method investment. At June 30, 2019 and December 31, 2018, the Company’s investment in PennyMac is included in other assets on the condensed consolidated statements of financial condition. The carrying value and market value of the Company’s interest (approximately 20% or 16 million shares) were approximately $414 million and $345 million, respectively, at June 30, 2019 and approximately $397 million and $331 million, respectively, at December 31, 2018. The market value of the Company’s interest reflected the PennyMac stock price at June 30, 2019 and December 31, 2018, respectively (a Level 1 input). The Company performed an other-than-temporary impairment analysis as of June 30, 2019 and believes the shortfall of market value versus carrying value is temporary.
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