Quarterly report pursuant to sections 13 or 15(d)

Investments and Fair Value Measurements

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Investments and Fair Value Measurements
 6 Months Ended
Jun. 30, 2013
Text Block [Abstract]  
Investments and Fair Value Measurements
4. INVESTMENTS AND FAIR VALUE MEASUREMENTS

Investments include $84 and $1,968 as of June 30, 2013 and December 31, 2012, respectively, representing the Company’s equity method investments in affiliated investment funds which have been established and managed by the Company and its affiliates. The Company’s financial interest in these funds can range up to 2%. Despite the Company’s insignificant financial interest, the Company exercises significant influence over these funds as the Company typically serves as the general partner, managing member or equivalent for these funds. During 2007, the Silvercrest Funds granted rights to the unaffiliated investors in each respective fund to provide that a simple majority of the fund’s unaffiliated investors will have the right, without cause, to remove the general partner or equivalent of that fund or to accelerate the liquidation date of that fund in accordance with certain procedures. At June 30, 2013 and 2012, the Company determined none of the Silvercrest Funds were required to be consolidated. Investments measured and reported at fair value are classified and disclosed in one of the following categories. The Company’s involvement with these entities began on the dates that they were formed, which range from July 2003 to July 2008.

Fair Value Measurements

GAAP establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

 

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Level I: Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments in Level I include listed equities and listed derivatives.

 

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Level II: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments which are generally included in Level II include corporate bonds and loans, less liquid and restricted equity securities, certain over-the counter derivatives, and certain fund of hedge funds investments in which the Company has the ability to redeem its investment at net asset value at, or within three months of, the reporting date.

 

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Level III: Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. Investments that are included in Level III generally include general and limited partnership interests in private equity and real estate funds, credit-oriented funds, certain over-the-counter derivatives, funds of hedge funds which use net asset value per share to determine fair value in which the Company may not have the ability to redeem its investment at net asset value at, or within three months of, the reporting date, distressed debt and non-investment grade residual interests in securitizations and collateralized debt obligations.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

The following table summarizes the classification of the Company’s financial assets in the fair value hierarchy as of June 30, 2013:

 

     Level I      Level II      Level III      Total  

Assets

            

Cash equivalents – Money Market Funds

    $ 1,191       $ —         $ —         $ 1,191   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

The following table summarizes the classification of the Company’s financial assets in the fair value hierarchy as of December 31, 2012:

 

     Level I      Level II      Level III      Total  

Assets

            

Cash equivalents – Money Market Funds

    $ 1,020       $ —         $ —         $ 1,020   
  

 

 

     

 

 

     

 

 

     

 

 

  

At June 30, 2013 and December 31, 2012, financial instruments that are not held at fair value are categorized in the table below:

 

 

     June 30, 2013      December 31, 2012         
     Carrying
Amount 		     Fair
Value		      Carrying
Amount 		     Fair
Value		      Fair  Value
Hierarchy 		 

Financial Assets:

               

Cash

    $ 12,699       $ 12,699       $ 12,392       $ 12,392      

Restricted Certificates of Deposit and Escrow

    $ 1,191       $ 1,191       $ 1,020       $ 1,020         Level 1  (1) 

Financial liabilities:

               

Notes Payable

    $ 9,606       $ 9,606       $ 3,315       $ 3,315         Level 2  (2) 

 

(1) Restricted certificates of deposit and escrow consists of money market funds that are carried at either cost or amortized cost that approximates fair value due to their short-term maturities. The money market funds are valued through the use of quoted market prices, or $1.00, which is generally the net asset value of the funds.
(2) The carrying value of notes payable approximates fair value, which is determined based on interest rates currently available to the Company for similar debt.