Attached files
| file | filename |
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| EX-99.1 - EXHIBIT 99.1 - Ares Management Corp | a2017q1-ex991.htm |
| 8-K - 8-K - Ares Management Corp | a2017q1-form8xk.htm |
First Quarter 2017
Earnings Presentation
Exhibit 99.2
2
Important Notice
This presentation contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to
risks and uncertainties. Actual outcomes and results could differ materially from those suggested by this presentation due to the impact of many factors beyond the
control of Ares Management, L.P. (“Ares”), including those listed in the “Risk Factors” section of our filings with the Securities and Exchange Commission (“SEC”). Any
such forward-looking statements are made pursuant to the safe harbor provisions available under applicable securities laws and Ares assumes no obligation to update
or revise any such forward-looking statements.
Certain information discussed in this presentation was derived from third party sources and has not been independently verified and, accordingly, Ares makes no
representation or warranty in respect of this information.
The following slides contain summaries of certain financial and statistical information about Ares. The information contained in this presentation is summary
information that is intended to be considered in the context of Ares’ SEC filings and other public announcements that Ares may make, by press release or otherwise,
from time to time. Ares undertakes no duty or obligation to publicly update or revise the forward-looking statements or other information contained in this
presentation. In addition, this presentation contains information about Ares, its affiliated funds and certain of their respective personnel and affiliates, and their
respective historical performance. You should not view information related to the past performance of Ares and its affiliated funds, as indicative of future results.
Certain information set forth herein includes estimates and targets and involves significant elements of subjective judgment and analysis. Further, such information,
unless otherwise stated, is before giving effect to management and incentive fees and deductions for taxes. No representations are made as to the accuracy of such
estimates or targets or that all assumptions relating to such estimates or targets have been considered or stated or that such estimates or targets will be realized.
This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities of Ares.
Management uses certain non-GAAP financial measures, including assets under management, fee paying assets under management, economic net income and
distributable earnings, to evaluate Ares’ performance and that of its business segments. Management believes that these measures provide investors with a greater
understanding of Ares’ business and that investors should review the same supplemental non-GAAP financial measures that management uses to analyze Ares’
performance. The measures described herein represent those non-GAAP measures used by management, in each case, before giving effect to the consolidation of
certain funds that the company consolidates with its results in accordance with GAAP. These measures should be considered in addition to, and not in lieu of, Ares’
financial statements prepared in accordance with GAAP. The definitions and reconciliations of these measures to the most directly comparable GAAP measures, as well
as an explanation of why we use these measures, are included in the Appendix. Amounts and percentages may reflect rounding adjustments and consequently totals
may not appear to sum.
3
First Quarter Highlights
1. Net inflows represents gross commitments less redemptions.
2. Includes ARCC Part I Fees of $33.3 million for the three months ended March 31, 2017. Difference between GAAP and Stand Alone management fees represents $4.7 million from Consolidated Funds that is
eliminated upon consolidation.
3. Total pro forma units of 215,215,771 includes the sum of common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis and the dilutive effects of the Company’s equity-
based awards. Please refer to slides 18 and 31 in this presentation for further information. After-tax Economic Net Income per unit is net of the preferred unit distribution.
4. After-tax Distributable Earnings per common unit is net of the preferred unit distribution.
5. Payable on June 5, 2017 to unitholders of record as of May 22, 2017.
6. Payable on June 30, 2017 to unitholders of record as of June 15,2017.
Assets Under
Management
• Total Assets Under Management of $99.8 billion
• Total Fee Paying AUM of $69.2 billion
• Available Capital of $24.2 billion
• AUM Not Yet Earning Fees that is available for future deployment of $10.3 billion
• Raised $3.1 billion in gross new capital with net inflows of $2.5 billion(1) for the quarter ended March 31, 2017
• Added $3.6 billion of AUM through ARCC'S acquisition of ACAS
• Capital deployment of $3.6 billion for the quarter ended March 31, 2017, of which $2.6 billion was related to our drawdown funds for the period
Financial Results
Distributable
Earnings and
Distributions
• Q1-17 GAAP net loss attributable to Ares Management, L.P. of $41.1 million
◦ Q1-17 GAAP net loss reflects the recognition of a one-time transaction support payment of $275.2 million in connection with ARCC's
acquisition of ACAS
◦ Although the one-time transaction support payment was expensed, we believe the ARCC acquisition of ACAS will create significant long-term
value for Ares Management. In connection with this acquisition on January 3, 2017, our AUM increased by $3.6 billion, or $2.8 billion of
FPAUM
• Q1-17 GAAP basic and diluted loss per common unit of $0.58
• Q1-17 GAAP management fees of $172.0 million(2)
• Q1-17 Stand Alone management and other fees of $181.6 million(2)
• Q1-17 Fee Related Earnings of $46.7 million
• Q1-17 Performance Related Earnings of $29.1 million
• Q1-17 Economic Net Income of $75.9 million and after-tax Economic Net Income of $0.30 per unit(3)
• Q1-17 Distributable Earnings of $40.9 million
• Q1-17 after-tax Distributable Earnings of $0.14 per common unit(4)
• Declared Q1-17 distributions of $0.13 per common unit(5) and $0.4375 per preferred unit(6)
4
Gross New Capital Commitments – First Quarter of 2017(1)
1. Represents gross new commitments during Q1-17, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts.
$ in millions Q1 2017 Comments
Credit Group
Junior Capital Private Direct Lending Fund $1,170 Commingled fund equity commitments to a new strategy
U.S. Direct Lending 835
New and additional equity ($770mm) and debt commitments ($65mm) to various funds
and separately managed accounts
U.S. CLOs 409 Priced and closed a new U.S. CLO
E.U. Direct Lending 214 Equity commitments to separately managed accounts
Other Credit Funds 119 New and additional equity commitments to various funds
Total Credit Group $2,747
Private Equity Group
Private Equity Funds $42 Additional equity commitments to Private Equity funds
Total Private Equity Group $42
Real Estate Group
ACRE $273 Additional debt commitments
U.S. Equity 19 Additional equity commitments
Total Real Estate Group $292
Total $3,081
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5
Assets Under Management
Note: For definitions of AUM and FPAUM please refer to the “Glossary” slide in the appendix.
1. As of March 31, 2017, AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and a registered
investment adviser.
2. For Q1-17, distributions totaled $1.2 billion and redemptions totaled $0.6 billion.
AUM of $99.8 billion as of March 31, 2017 increased 6.7% year over year
• Q1-17 net new capital commitments of $3.1 billion, including $2.3 billion in equity commitments and $0.7 billion in debt commitments
◦ Of the $3.1 billion raised during the quarter, $0.6 billion is already earning fees and another $2.2 billion is expected to become FPAUM upon deployment or
initiation of the fee accrual period
• Includes $3.6 billion in AUM through Ares Capital Corporation's ("ARCC") acquisition of American Capital,Ltd ("ACAS") which closed on January 3, 2017
• AUM growth was partially offset by distributions/redemptions of $1.8 billion,(2) primarily in funds past their reinvestment periods in the Private Equity and Credit
Groups, and by reduction in leverage of $1.3 billion, primarily due to paydowns of loans in ARCC's SSLP program of $0.5 billion and run-off in CLOs
FPAUM of $69.2 billion as of March 31, 2017 increased 18.7% year over year
• Increase in FPAUM was primarily attributable to management fees turning on for ACOF V, which includes $7.6 billion of fee paying AUM (effective March 3, 2017)
and ARCC's acquistion of ACAS which included $2.8 billion of fee paying AUM
AUM ($ in billions) FPAUM ($ in billions)
Q1-16 Q4-16 Q1-17
$58.3 $60.5 $65.2
$25.1 $25.0
$24.7
$10.2
$93.6
$9.8
$95.3
$9.9
$99.8
Q1-16 Q4-16 Q1-17
$39.6 $42.7
$45.7
$12.0
$11.3
$17.2$6.7
$58.3
$6.5
$60.5 $6.3
Credit Private Equity Real Estate Credit Private Equity Real Estate
$69.2
6
AUM and FPAUM Duration
As of March 31, 2017, approximately 78% of AUM and 76% of FPAUM had a duration longer than 3 years
◦ Within our Managed Accounts category, 61% of AUM and 66% of FPAUM has been with the firm longer than 3 years as of March 31, 2017
14%
24%
7%
17%
7
%
30%
6%
22%
6%
20%
Permanent Capital 10 or more years 7 to 9 years 3 to 6 years Fewer Than 3 years Managed Accounts
78%
15%
76%
16%
15%
20%
27%
6%
16%
AUM: $99.8 billion FPAUM: $69.2 billion
18%
16%
19%
22%
4%
21%
7
Q1-16 Q4-16 Q1-17
$21,738 $24,708
$29,637
$19,294
$19,462
$19,652
$6,846
$47,878
$6,577
$50,747 $6,610
$55,899
Incentive Eligible AUM and Incentive Generating AUM
Note: For definitions of IGAUM and IEAUM please refer to the “Glossary” slide in the appendix.
1. Includes $7.1 billion of incentive eligible AUM to be invested by ACOF V.
2. ARCC Part II Fees are paid when the cumulative aggregate net capital gains exceed cumulative aggregate realized capital losses and aggregate unrealized capital depreciation less any
amounts paid in previous periods. As of March 31, 2017, the cumulative aggregate net capital gains were below the required hurdle by approximately 1.5% of the underlying portfolio of
$11.4 billion.
Incentive Eligible AUM
Incentive Eligible AUM of $55.9 billion as of March 31, 2017 grew 16.8% year over year
◦ The increase was driven by $4.1 billion related to ARCC (primarily from ARCC's acquisition of ACAS), as well as increases across structured credit and U.S.
and E.U. direct lending and private debt funds and separately managed accounts
Incentive Generating AUM of $20.2 billion as of March 31, 2017 increased by 90.8% year over year
◦ The increase was primarily driven by funds exceeding their hurdle rates in our Private Equity and Credit Groups, as well as additional fundraising and
deployment by funds in our Credit Group
Of the $35.7 billion of incentive eligible AUM that is currently invested, 56.7% is incentive generating
◦ Of the $20.2 billion of incentive eligible AUM to be invested, approximately 72.9% or $14.7 billion(1) is to be invested in funds already above their hurdles
($ in millions)
Credit Private Equity Real Estate
($ in millions)
Credit PrivateEquity
Real
Estate Total
Incentive
Generating AUM $7,823 $8,902 $3,482 $20,207
+ Uninvested
IEAUM 7,896 10,208 2,139 20,243
+ IEAUM below
hurdle 2,212 542 989 3,743
+ ARCC Part II Fees
below Hurdle(2) 11,706 - - 11,706
Incentive Eligible
AUM $29,637 $19,652 $6,610 $55,899
Q1-17 Incentive Generating to Incentive Eligible
AUM Reconciliation
8
Available Capital and AUM Not Yet Earning Fees
Available Capital as of March 31, 2017 increased 5.3% year over year
◦ The increase was primarily driven by additional debt capacity available to ARCC and new commitments to other U.S. Direct Lending funds, which was
partially offset by capital deployment in Credit, Private Equity and Real Estate groups
AUM Not Yet Earning Fees* as of March 31, 2017 decreased 21.9% year over year
◦ AUM Not Yet Earning Fees decreased from $16.5 billion as of Q1-16 to $12.9 billion as of Q1-17, driven by $7.6 billion of FPAUM for ACOF V which
began to pay management fees in Q1 2017 and was partially offset by new AUM Not Yet Earning fees raised during the quarter
Available Capital ($ in millions) AUM Not Yet Earning Fees ($ in millions)
*AUM Not Yet Earning Fees, also referred to as Shadow AUM, is our AUM that is not currently generating fees and is eligible to earn management fees upon deployment.
Q1-16 Q4-16 Q1-17
$7,907 $8,330
$10,544
$11,482 $11,876
$10,808
$3,591
$22,980
$3,029
$23,235
$2,851
$24,203
Credit Private Equity Real EstateCredit Private Equity Real Estate
Q1-16 Q4-16 Q1-17
$6,525 $7,744
$9,578
$9,082
$9,313
$2,445
$892
$16,499 $917
$17,974
$870
$12,893
9
$7,572
$2,060
$646
AUM Not Yet Earning Fees Available for Future
Deployment: $10.3 billion
AUM Not Yet Earning Fees
As of March 31, 2017, AUM Not Yet Earning Fees of $12.9 billion could generate approximately $138.1 million in potential incremental annual
management fees, of which $107.8 million relates to the $10.3 billion of AUM Available for Future Deployment*
$10.3 billion of AUM Not Yet Earning Fees was available for future deployment as of March 31, 2017
◦ The $10.3 billion includes approximately $5.9 billion relating to U.S. and E.U. direct lending and private debt funds, $1.0 billion in ACOF IV, and $1.0
billion in structured credit funds, among other funds
*No assurance can be made that such results will be achieved. Assumes the AUM not yet paying fees as of March 31, 2017 is invested and such fees are paid on an annual basis. Does not reflect any associated reductions in
management fees from certain funds, some of which may be material. Reference to $138.1 million includes approximately $24.2 million in potential incremental management fees from deploying undrawn/available credit
facilities at ARCC (in excess of 0.75X leverage), which may not be drawn due to leverage target limitations and restrictions. Excludes any potential ARCC Part I Fees.
1. Capital available for deployment for follow-on investments represents capital committed to funds that are past their investment periods but for which capital is available to be called for follow-on investments in existing
portfolio companies. There is no assurance such capital will be invested.
$10.3 billion of AUM Not Yet Earning
Fees was available for future
deployment as of March 31, 2017
($ in millions)($ in millions)
Capital Available for Future Deployment
Capital Available for Deployment for Follow-on Investments (1)
Available Capital Currently in Funds Unlikely to Be Drawn Due to Leverage Targets and
Restrictions
Funds in or Expected to Be in Wind-down
Credit Private Equity Real Estate
$10,278
$655
$1,614
$346
AUM Not Yet Earning Fees: $12.9 billion
10
$2,356
$1,030
$177
Q1-17 Capital Deployment Breakdown: $3.6 billion
Capital Deployment(1)
Total gross invested capital during Q1-17 of $3.6 billion compared to $1.4
billion in Q1-16
◦ Of the total amount, $2.6 billion was related to deployment in our
drawdown funds compared to $1.1 billion for the same period in
2016
◦ Of our drawdown funds, the most active investment strategies were
U.S. and E.U. Direct Lending and Private Equity
($ in millions)
(2)
1. Capital deployment figures exclude deployment from permanent capital vehicles.
2. Non-drawdown funds includes new capital deployed by managed accounts and CLOs but excludes recycled capital.
$2,582
$981
Drawdown Funds Non-drawdown Funds(2) Credit Private Equity Real Estate
Credit Private Equity Real Estate
Q1 2017 Capital Deployment in Drawdown Funds:
$2.6 billion
Q1-17 Strategies
• U.S. Direct Lending
• E.U. Direct Lending
• Corporate Private Equity
• U.S. Real Estate Equity
• E.U. Real Estate Equity
• Structured Credit
Q1-16 Q1-17
$766
$1,375
$185
$1,030
$138
$1,089
$177
$2,582
Q1 2017 Capital Deployment by Type: $3.6 billion
($ in millions)
11
$ in thousands, except share data Three Months Ended March 31,
2017 2016
Revenues
Management fees (includes ARCC Part I Fees of $33,257 and $28,625 for the three months ended March 31, 2017 and 2016, respectively) $172,045 $158,433
Performance fees 55,172 (29,947)
Administrative and other fees 14,440 7,529
Total revenues $241,657 $136,015
Expenses
Compensation and benefits $124,339 $110,679
Performance fee compensation 40,702 (21,330)
General, administrative and other expenses 47,338 39,962
Transaction support expense 275,177 —
Expenses of the Consolidated Funds $3,911 227
Total expenses $491,467 $129,538
Other income (expense)
Net interest and investment expense (includes interest expense of $4,879 and $4,855 for the three months ended March 31, 2017 and 2016,
respectively) $(2,135) $(3,359)
Other income, net 16,496 5,241
Net realized and unrealized gain on investments 2,655 5,142
Net interest and investment income of the Consolidated Funds (includes interest expense of $31,322 and $22,449 for the three months
ended March 31, 2017 and 2016, respectively) 10,170 7,332
Net realized and unrealized gain (loss) on investments of Consolidated Funds 32,036 (29,807)
Total other income (expense) $59,222 $(15,451)
Loss before taxes $(190,588) $(8,974)
Income tax expense (benefit) (34,264) 4,665
Net loss $(156,324) $(13,639)
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds $15,855 $(11,979)
Less: Net income attributable to redeemable interests in Ares Operating Group entities — 10
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities (131,045) 1,420
Net loss attributable to Ares Management, L.P. $(41,134) $(3,090)
Preferred equity distributions paid $5,425 —
Net loss attributable to Ares Management, L.P. common unitholders $(46,559) $(3,090)
Net loss attributable to Ares Management, L.P. per common unit
Basic $(0.58) $(0.04)
Diluted $(0.58) $(0.04)
Weighted-average common units
Basic 81,106,734 80,683,051
Diluted 81,106,734 80,683,051
Distribution declared and paid per common unit $0.28 $0.20
GAAP Statements of Operations
12
Stand Alone Financial Summary
1.Includes ARCC Part I Fees of $33.3 million and $28.6 million for Q1-17 and Q1-16, respectively, and $125.8 million and $121.1 million for Q1-17 LTM and Q1-16 LTM, respectively.
2.Includes compensation and benefits expenses attributable to OMG of $26.3 million and $26.3 million for the three months ended March 31, 2017 and 2016, respectively, and $99.5 million and $92.4 million for Q1-17 LTM and Q1-16
LTM, respectively.
3.Includes G&A expenses attributable to OMG of $19.4 million and $16.6 million for the three months ended March 31, 2017 and 2016, respectively, and $63.8 million and $59.4 million for Q1-17 LTM and Q1-16 LTM, respectively, which
are not allocated to an operating segment.
4.Non-Core/Non-Recurring Other Cash Uses includes one-time acquisition costs, non-cash depreciation and amortization and placement fees and underwriting costs associated with selected strategies. See slide 13 in this presentation for
additional details.
5.After income tax. Distributable Earnings attributable to common unitholders per unit calculation uses total common units outstanding, assuming no exchange of Ares Operating Group Units.
6.Units of 215,215,771 includes the sum of common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis and the dilutive effects of the Company’s equity-based awards.
7.Total fee revenue is calculated as management fees plus net performance fees.
8.Effective management fee rate represents the quotient of management fees and the aggregate fee base for the quarters presented.
$ in thousands, except share data (unless otherwise noted) Three Months Ended March 31, Twelve Months Ended March 31,
2017 2016 % Change 2017 2016 % Change
Management fees(1) $176,781 $162,668 9% $673,564 $651,270 3%
Other fees 4,834 707 NM 16,478 4,341 280%
Compensation and benefits expenses(2) (100,610) (95,785) 5% (389,540) (367,756) 6%
General, administrative and other expenses(3) (34,283) (28,542) 20% (120,478) (119,437) 1%
Fee Related Earnings $46,722 $39,048 20% $180,024 $168,418 7%
Net performance fees $17,364 $(9,669) NM $160,657 4,546 NM
Net investment income 11,770 (5,231) NM 68,010 (15,368) NM
Performance Related Earnings $29,134 $(14,900) NM $228,667 $(10,822) NM
Economic Net Income $75,856 $24,148 214% $408,691 $157,596 159%
(-) Unrealized net performance fees $13,860 $(14,035) NM $66,785 $(42,281) NM
(-) Unrealized net investment income (loss) 8,323 (8,568) NM 34,656 (31,315) NM
(-) Non-core/non-recurring other cash uses(4) 12,764 5,470 133% 43,316 26,617 63%
Distributable Earnings $40,909 $41,281 (1)% $263,934 $204,575 29%
(-) Preferred unit distribution $(5,425) $0 NM $(17,601) $0 NM
Distributable Earnings, net of preferred unit distribution $35,484 $41,281 (14)% $246,333 $204,575 20%
After-tax Distributable Earnings per common unit, net of preferred unit
distribution(5) $0.14 $0.15 (7)% $0.99 $0.80 24%
After-tax Economic Net Income, net of preferred unit distribution $63,798 $16,583 285% $350,775 $127,143 176%
After-tax Economic Net Income per unit, net of preferred unit
distribution(6) $0.30 $0.08 275% $1.64 $0.60 173%
Other Data
Total fee revenue(7) $194,145 $152,999 27%
Effective management fee rate(8) 1.12% 1.11% 1%
13
GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis
Note: This table is a reconciliation of income (loss) before provision for income taxes on a consolidated basis to ENI, FRE, PRE and DE on a Stand Alone basis, which shows the results of the
reportable segments on a combined basis together with the Operations Management Group. Management believes that this presentation is more meaningful than a reconciliation to the
reportable segments on a segment basis because such reconciliation would exclude the Operations Management Group. Differences may arise due to rounding.
$ in thousands Three Months Ended March 31, Twelve Months Ended March 31,
2017 2016 2017 2016
Economic Net Income and Fee Related Earnings:
Income (loss) before taxes $(190,588) $(8,974) $116,306 $26,060
Adjustments:
Amortization of intangibles 5,275 7,263 24,650 42,598
Depreciation expense 3,216 1,858 9,573 7,528
Equity compensation expenses 15,089 9,173 44,981 33,496
Acquisition and merger-related expenses 255,088 496 237,690 33,136
Placement fees and underwriting costs 3,439 930 8,933 6,710
Offering costs 660 — 660 —
Other non-cash expense, net — — (1,728) 100
(Income) loss before taxes of non-controlling interests in Consolidated Funds, net of eliminations (16,323) 13,402 (32,374) 7,968
Economic Net Income $75,856 $24,148 $408,691 $157,596
Stand Alone performance fee income - realized $(8,805) $(6,349) $(295,454) $(92,658)
Stand Alone performance fee income - unrealized (49,261) 37,348 (315,081) 74,151
Stand Alone performance fee compensation expense - realized 5,301 1,983 201,582 45,830
Stand Alone performance fee compensation expense - unrealized 35,401 (23,313) 248,296 (31,869)
Stand Alone net investment (income) loss (11,770) 5,231 (68,010) 15,368
Fee Related Earnings $46,722 $39,048 $180,024 $168,418
Stand Alone performance fee – realized $8,805 $6,349 $295,454 $92,658
Stand Alone performance fee compensation expense – realized (5,301) (1,983) (201,582) (45,830)
Stand Alone investment and other income realized, net 3,447 3,337 33,354 15,947
Less:
One-time acquisition costs (159) (260) (740) (2,203)
Dividend equivalent (3,461) (971) (7,813) (3,396)
Equity income (186) 164 520 (438)
Income tax expense (1,643) (1,615) (16,117) (6,344)
Placement fees and underwriting costs (3,439) (930) (8,933) (6,710)
Non-cash depreciation and amortization (3,216) (1,858) (9,573) (7,527)
Offering costs (660) — (660) —
Distributable Earnings $40,909 $41,281 $263,934 $204,575
Performance Related Earnings
Economic Net Income $75,856 $24,148 $408,691 $157,596
Less: Fee Related Earnings (46,722) (39,048) (180,024) (168,418)
Performance Related Earnings $29,134 $(14,900) $228,667 $(10,822)
14
GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.)
Note: These tables are a reconciliation of consolidated performance fee income, realized and unrealized performance fee income and net investment income to a Stand Alone basis, which assist in the reconciliation of GAAP Net Income
(Loss) to fee related earnings and distributable earnings. These reconciliations show the results of the reportable segments on a combined basis together with the Operations Management Group. Management believes that this
presentation is more meaningful than a reconciliation to the reportable segments on a segment basis because such reconciliation would exclude the Operations Management Group. Differences may arise due to rounding.
1. Related to performance fees for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within other (income) expense in the Company’s Condensed Consolidated Statements of Operations.
$ in thousands Three Months Ended March 31, Twelve Months Ended March 31,
2017 2016 2017 2016
Performance fee and net investment income reconciliation:
Stand Alone performance fee income - realized $8,805 $6,349 $295,454 $92,658
Performance fee income - realized earned from Consolidated Funds (3,422) — (3,422) (1,177)
Performance fee - realized reclass(1) — (171) (7,196) (6,643)
Performance fee income - realized $5,383 $6,178 $284,836 $84,838
Stand Alone performance fee income - unrealized $49,261 $(37,348) $315,081 $(74,151)
Performance fee income - unrealized earned from Consolidated Funds 552 1,624 (2,211) 5,392
Performance fee - unrealized reclass(1) (24) (401) 5,265 (336)
Performance fee income - unrealized $49,789 $(36,125) $318,135 $(69,095)
Stand Alone net investment income (loss) $11,770 $(5,231) $68,010 $(15,368)
Net investment income (loss) from Consolidated Funds 27,840 (10,564) 80,648 12,722
Performance fee - reclass(1) 24 572 1,931 6,979
Change in value of contingent consideration 20,248 (228) 38,151 5,390
Other non-cash expense — — 1,728 (100)
Offering costs (660) — (660) —
GAAP net investment income (loss) $59,222 $(15,451) $189,808 $9,623
15
Credit Group(1)
Note: Past performance is not indicative of future results. The Credit Group had ~215 investment professionals, ~1300 portfolio companies and 139 active funds as of March 31, 2017. As of July 1 2017, the special situations strategy moved
out of the Credit Group and into our Private Equity Group. Historical results have been adjusted to conform with the current presentation.
1. Segment results are shown before the unallocated support costs of the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis” on slides 13-14.
2. This table is a financial summary only. See slides 23 for complete financial results.
3. Includes ARCC Part I Fees of $33.3 million and $28.6 million for Q1-17 and Q1-16, respectively, and $125.8 million and $121.1 million for Q1-17 LTM and Q1-16 LTM, respectively.
4. The net return for E.U. direct lending is 2.0% for Q1-17. Gross and net returns for E.U. direct lending are represented by ACE II. ACE II is made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. The
gross returns are for the U.S. dollar denominated feeder fund as that is the larger of the two feeders. The gross and net returns for the Euro denominated feeder fund are 2.5% and 1.8% for Q1-17. ACE II represents the significant fund
with at least 2 years from initial investment. Returns are calculated at the fund level and are time-weighted rates of return calculated on a quarterly basis using the modified Dietz method. Returns include the reinvestment of income and
other earnings from securities or other investments and reflect the deduction of all trading expenses. Gross returns do not reflect the deduction of management fees, carried interest, if applicable, or any other expenses. Net returns are
reduced by applicable management fees, accrued carried interest, if applicable, and other expenses.
5. Net performance returns: 0.8% for U.S. Syndicated Loan funds and 1.8% for U.S. High Yield funds. Performance for Syndicated Loans is represented by our U.S. Bank Loan Aggregate Composite. Performance for High Yield is represented
by our U.S. High Yield composite.
• Management fees increased 13% for Q1-17 compared to Q1-16, primarily driven by ARCC's acquisition of ACAS and deployment in our
direct lending, structured credit and high yield funds
• Performance Related Earnings increased by $12.2 million in Q1-17 from Q1-16 driven by market appreciation in credit opportunities and
U.S. and European direct lending funds
• Distributable Earnings decreased by $2.2 million for Q1-17 compared to Q1-16, primarily due to a lack of realizations in funds compared
to Q1-16
Financial Summary and Highlights(2)
39%
Q1-17 increase in
Economic Net Income
14%
Q1-17 increase in
Fee Related Earnings
E.U. Direct Lending: 2.7%(4)
High Yield: 2.0%(5)
Syndicated Loans: 1.0%(5)
Q1-17 gross returns
$ in thousands Q1-17 Q1-16 % Change Q1-17 LTM Q1-16 LTM % Change
Management fees(3) $121,347 $107,247 13% $458,764 $432,826 6%
Fee Related Earnings $66,542 $58,137 14% $251,582 $230,020 9%
Net performance fees $4,971 $(8,415) NM $49,791 $(9,962) NM
Investment income 4,888 6,066 (19)% 41,717 8,233 NM
Interest expense (2,458) (2,448) <1% (8,619) (7,789) 11%
Net investment income 2,430 3,618 (33)% 33,098 444 NM
Performance Related Earnings $7,401 $(4,797) NM $82,889 $(9,518) NM
Economic Net Income $73,943 $53,340 39% $334,471 $220,502 52%
Distributable Earnings $64,272 $66,473 (3)% $292,765 $272,495 7%
AUM ($ in billions) $65.2 $58.3 12%
FPAUM ($ in billions) $45.7 $39.6 15%
16
Private Equity Group(1)
Note: Past performance is not indicative of future results. The Private Equity Group had ~80 investment professionals, 30 portfolio companies, 63 U.S. Power and Energy Assets and 23 active funds and related co-investment vehicles as of
March 31, 2017. As of July 1 2017, the special situations strategy moved out of the Credit Group and into our Private Equity Group. Historical results have been adjusted to conform with the current presentation.
1. Segment results are shown before the unallocated support costs of the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis” on slides 13-14.
2. This table is a financial summary only. See slides 23 for complete financial results.
3. Performance for corporate private equity portfolio is represented by the ACOF I-IV Aggregate, which is comprised of investments held by ACOF I, ACOF II, ACOF III and ACOF IV. Performance returns are gross time-weighted rates of
return calculated on a quarterly basis. Returns include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Gross returns do not reflect the deduction
of management fees, carried interest, if applicable, or any other expenses. Net returns are reduced by applicable management fees, accrued carried interest, if applicable, and other expenses. Net returns for corporate private equity
portfolio was 1.5% for Q1-17. We believe aggregated performance returns reflect overall quarterly performance returns in a strategy, but are not necessarily investable funds or products themselves.
• Management fees increased 3% for Q1-17 compared to Q1-16, primarily attributable to ACOF V, which began paying management fees
in March 2017. This increase was partially offset by the reduction in management fees attributable to the step down in fee rate and fee
basis for ACOF IV in connection with the launch of ACOF V
• Performance Related Earnings for Q1-17 increased by $29.5 million from Q1-16, primarily driven by a 2.2% gross return(3) for our
private equity portfolio due to appreciation of certain assets. Net investment income for Q1-17 increased by $19.4 million from Q1-16,
primarily due to unrealized market appreciation in our Asian corporate private equity strategy
• Distributable Earnings increased by $3.5 million for Q1-17 compared to Q1-16, primarily driven by increases in fee related earnings and
net realized investment income
Financial Summary and Highlights(2)
19%
Q1-17 growth in
Distributable Earnings
43%
Q1-17 increase in
FPAUM
2.2%
Q1-17 gross return in
Corporate Private
Equity portfolio(3)
$ in thousands Q1-17 Q1-16 % Change Q1-17 LTM Q1-16 LTM % Change
Management fees $39,819 $38,676 3% $148,933 $153,033 (3)%
Fee Related Earnings $22,743 $21,412 6% $74,710 $82,290 (9)%
Net performance fees $6,732 $(3,314) NM $94,467 $(1,146) NM
Investment income (loss) 9,277 (10,280) NM 54,296 (15,612) NM
Interest expense (1,513) (1,405) 8% (5,697) (5,661) 1%
Net investment income (loss) 7,764 (11,685) NM 48,599 (21,273) NM
Performance Related Earnings $14,496 $(14,999) NM $143,066 $(22,419) NM
Economic Net Income $37,239 $6,413 NM $217,776 $59,871 264%
Distributable Earnings $21,914 $18,371 19% $147,811 $81,226 82%
AUM ($ in billions) $24.7 $25.1 (2)%
FPAUM ($ in billions) $17.2 $12.0 43%
17
Real Estate Group(1)
Note: Past performance is not indicative of future results. The Real Estate Group had ~75 investment professionals, ~165 properties and 41 active funds as of March 31, 2017.
1. Segment results are shown before the unallocated support costs of the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis” on slides 13-14.
2. This table is a financial summary only. See slides 23 for complete financial results.
3. Returns are gross time-weighted rates of return and do not reflect the deduction of management fees or carried interest, or fund expenses, if applicable. Gross return for U.S. equity is represented by U.S. Fund VIII and gross
return for E.U. equity is represented by EF IV. EF IV is made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. The gross returns are for the U.S. dollar denominated feeder fund as that is
the larger of the two feeders. The funds shown represent the significant funds with at least 2 years from initial investment. Net returns are reduced by applicable management fees, accrued carried interest, if applicable, and
other expenses. Net returns for U.S. equity and E.U. equity were 3.1% and 4.3% for Q1-17. The gross and net returns for the Euro denominated feeder fund were 4.9% and 4.0% for Q1-17.
• Management fees declined 7% for Q1-17 compared to Q1-16, primarily driven by the wind down of one of our U.S. value-add
equity funds and partially offset by the deployment of additional capital in our U.S. opportunistic strategy
• Fee related earnings increased 35% for Q1-17 compared to Q1-16 due to lower expenses driven by one-time expenses in Q1-16
that did not recur in Q1-17
• Performance Related Earnings increased by $1.0 million for Q1-17 compared to Q1-16 primarily due to EF IV which crossed its
hurdle rate during Q4-16 and was partially offset by lower appreciation in certain funds in our U.S. equity strategy
• Distributable Earnings increased by $0.4 million for Q1-17 compared to Q1-16 primarily driven by increase in fee related earnings
and net realized investment and other income
Financial Summary and Highlights(2)
16%
Q1-17 growth in
Distributable Earnings
35%
Q1-17 increase in Fee
Related Earnings
U.S. Equity: 4.4%
E.U. Equity: 5.2%
Q1-17 Gross Returns(3)
$ in thousands Q1-17 Q1-16 % Change Q1-17 LTM Q1-16 LTM % Change
Management fees $15,615 $16,745 (7)% $65,867 $65,411 1%
Fee Related Earnings $3,139 $2,327 35% $16,969 $7,861 116%
Net performance fees $5,661 $2,060 175% $16,399 $15,654 5%
Investment income 1,158 3,559 (67)% 5,609 7,641 (27)%
Interest expense (432) (274) 58% (1,214) (981) 24%
Net investment income 726 3,285 (78)% 4,395 6,660 (34)%
Performance Related Earnings $6,387 $5,345 19% $20,794 $22,314 (7)%
Economic Net Income $9,526 $7,672 24% $37,763 $30,175 25%
Distributable Earnings $3,113 $2,678 16% $22,067 $14,811 49%
AUM ($ in billions) $9.9 $10.2 (3)%
FPAUM ($ in billions) $6.4 $6.7 (4)%
18
Economic Net Income per Unit Data
1. Pro forma units of 215,215,771 includes the sum of common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis and the dilutive effects
of the Company’s equity-based awards.
2. The Company has 12,400,000 of 7% Series A Preferred Units outstanding as March 31, 2017.
3. The provision for income taxes on ENI was calculated by multiplying (1) Ares Management, L.P.’s share of ENI that is subject to corporate level taxes (reduced by the interest expense
attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary) by (2) those subsidiaries’ effective corporate tax rate.
Three Months Ended March 31,
$ in thousands, except share data 2017 2016
Economic Net Income per unit
Economic Net Income before taxes $75,856 $24,148
(-) Entity level foreign, state and local taxes (1,646) (1,615)
Economic Net Income after entity level foreign, state and local taxes $74,210 $22,533
Economic Net Income per unit(1) $0.34 $0.11
After-tax Economic Net Income, net of preferred unit distribution
Economic Net Income after entity level, foreign, state and local taxes $74,210 $22,533
(-) Preferred unit distribution(2) (5,425) —
Economic Net Income, net of preferred unit distribution 68,785 22,533
(-) Income tax provision(3) (4,987) (5,950)
After-tax Economic Net Income, net of preferred unit distribution $63,798 $16,583
After-tax Economic Net Income (loss) per unit(1) $0.30 $0.08
After-tax Economic Net Income per common unit
Economic Net Income after entity level, foreign, state and local taxes $68,785 $22,533
x Common ownership % 38.35% 37.87%
Economic Net Income attributable to common unitholders $26,379 $8,533
(-) Income tax provision(3) (4,987) (5,950)
After-tax Economic Net Income attributable to common unitholders $21,392 $2,583
After-tax Economic Net Income per common unit $0.26 $0.03
19
Three Months Ended March 31,
2017 2016
Distributable Earnings per Ares Operating Group Unit(1) outstanding
Distributable Earnings $40,909 $41,281
(-) Preferred unit distribution(2) (5,425) -
Distributable Earnings, net of preferred unit distribution $35,484 $41,281
x Ares Operating Group Units(1) ownership % 61.57% 62.13%
Distributable Earnings attributable to Ares Operating Group Units(1) $21,848 $25,649
Distributable Earnings per Ares Operating Group Unit outstanding(1) $0.17 $0.19
Distributable Earnings per common unit outstanding
Distributable Earnings, net of preferred unit distribution $35,484 $41,281
x Common unitholder ownership % 38.43% 37.87%
Distributable Earnings attributable to common unitholders $13,636 $15,632
(-) Current provision for income taxes(3) (2,151) (3,445)
After-tax Distributable Earnings attributable to common unitholders $11,485 $12,187
Distributable Earnings per common unit, net of preferred unit distribution $0.14 $0.15
Actual Distribution per common unit $0.13 $0.15
Distributable Earnings per Unit Data
1. Exchangeable into common units.
2. The Company has 12,400,000 of 7% Series A Preferred Units outstanding as March 31, 2017.
3. The current provision for income taxes of Ares Management, L.P. on Distributable Earnings (DE) represents the current provision for income taxes on pre-tax net income or loss
(reduced by the pro forma interest expense attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary).
20
• $104.0 million in cash and cash equivalents, $488.2 million in debt obligations with $165.0 million drawn against the $1.04 billion revolving credit facility as
of March 31, 2017
• Substantial balance sheet value related to investments in Ares managed vehicles and net performance fees receivable
◦ As of March 31, 2017, investments reported on a GAAP basis were $488.5 million. On a Stand Alone basis, investments were $652.7 million(1)
◦ As of March 31, 2017, gross performance fees receivable reported on a GAAP basis were $809.0 million. On a Stand Alone basis, performance fees
receivable were $816.8 million(2)
◦ As of March 31, 2017, net performance fees receivable reported on a GAAP basis were $177.5 million. On a Stand Alone basis, performance fees
receivable were $185.3 million(2)
◦ As of March 31, 2017, net performance fees receivable reported on a GAAP basis increased 10.2% compared to the fourth quarter of 2016. On a
Stand Alone basis, net performance fees receivable increased 9.4% compared to the fourth quarter of 2016.
26%
63%
11%
25%
63%
12%
Balance Sheet
1. As of March 31, 2017, $51.4 million was invested in non-Ares managed vehicles. Difference between GAAP and Stand Alone investments represents investments of $164.2 million in Consolidated Funds that
are eliminated upon consolidation.
2. Difference between GAAP and Stand Alone gross and net performance fees receivable of $7.8 million represents fees earned from Consolidated Funds that are eliminated upon consolidation.
Q1 2017: $185,326 $ in thousands
Net Performance Fees Receivable by Group – Stand Alone Net Performance Fees Receivable by Group – GAAP
$ in thousands Q1 2017: $177,548
Credit Private Equity Real Estate Credit Private Equity Real Estate
21
Corporate Data
Board of Directors
Michael Arougheti
Co-Founder and President of Ares
Paul G. Joubert
Founding Partner of EdgeAdvisors and
Investing Partner in Common Angels
Ventures
David Kaplan
Co-Founder and Partner of Ares, Co-Head
of Private Equity Group
John Kissick
Co-Founder and Former Partner of Ares
Michael Lynton
Former Chief Executive Officer of Sony
Entertainment
Dr. Judy D. Olian
Dean of UCLA Anderson School of
Management and the John E. Anderson
Chair in Management
Antony P. Ressler
Co-Founder, Chairman and Chief Executive
Officer of Ares
Bennett Rosenthal
Co-Founder and Partner of Ares, Co-Head
of Private Equity Group
Executive Officers
Michael Arougheti
Co-Founder and President
Kipp deVeer
Partner
David Kaplan
Co-Founder and Partner
Michael McFerran
Executive Vice President, Chief Financial
Officer
Antony P. Ressler
Co-Founder and Chief Executive Officer
Bennett Rosenthal
Co-Founder and Partner
Michael Weiner
Executive Vice President, Chief Legal Officer
of Ares
Research Coverage
Autonomous
Patrick Davitt
(646) 561-6254
Bank of America Merrill Lynch
Michael Carrier
(646) 855-5004
Credit Suisse
Craig Sigenthaler
(212) 325-3104
Goldman Sachs
Alexander Blostein
(212) 357-9976
JP Morgan
Kenneth Worthington
(212) 622-6613
Keefe, Bruyette & Woods
Robert Lee
(212) 887-7732
Morgan Stanley
Michael Cyprys
(212) 761-7619
SunTrust Robinson Humphrey
Douglas Mewhirter
(404) 926-5745
Wells Fargo Securities
Christopher Harris
(443) 263-6513
Corporate Counsel
Proskauer Rose LLP
Los Angeles, CA
Corporate Headquarters
2000 Avenue of the Stars
12th Floor
Los Angeles, CA 90067
Tel: (310) 201-4100
Fax: (310) 201-4170
Independent Registered Public Accounting
Firm
Ernst & Young LLP
Los Angeles, CA
Securities Listing
NYSE: ARES
NYSE: ARES PR A
Transfer Agent
American Stock Transfer & Trust Company,
LLC
6201 15th Avenue
Brooklyn, NY 11210
Tel: (877) 681-8121
Fax: (718) 236-2641
info@amstock.com
www.amstock.com
Investor Relations Contacts
Carl Drake
Partner/Head of Ares Management, LLC
Public Investor Relations and
Communications
Tel: (678) 538-1981
cdrake@aresmgmt.com
Veronica Mendiola
Vice President
Tel: (212) 808-1150
General IR Contact
Tel (U.S.):
(800) 340-6597
Tel (International):
(212) 808-1101
IRARES@aresmgmt.com
Please visit our website at:
www.aresmgmt.com
Appendix
23
Financial Details – Segments
1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis” on
slides 13-14.
Three Months Ended March 31, 2017
$ in thousands
Credit
Group
Private
Equity
Group
Real
Estate
Group
Total
Segments
Operations
Management
Group
Total
Stand
Alone(1)
Management fees (Credit Group includes ARCC Part I Fees of $33,257) $121,347 $39,819 $15,615 $176,781 $— $176,781
Other fees 4,503 340 (9) 4,834 — 4,834
Compensation and benefits (51,342) (13,218) (9,736) (74,296) (26,314) (100,610)
General, administrative and other expenses (7,966) (4,198) (2,731) (14,895) (19,388) (34,283)
Fee Related Earnings $66,542 $22,743 $3,139 $92,424 ($45,702) $46,722
Performance fees - realized $8,778 $— $27 $8,805 $— $8,805
Performance fees - unrealized 2,936 32,237 14,088 49,261 — 49,261
Performance fee compensation - realized (5,285) — (16) (5,301) — (5,301)
Performance fee compensation - unrealized (1,458) (25,505) (8,438) (35,401) — (35,401)
Net performance fees $4,971 $6,732 $5,661 $17,364 $— $17,364
Investment income - realized $318 $579 $1,783 $2,680 $1,859 $4,539
Investment income (loss) - unrealized 4,589 8,546 (444) 12,691 (1,407) 11,284
Interest and other investment income (loss) (19) 152 (181) (48) 874 826
Interest expense (2,458) (1,513) (432) (4,403) (476) (4,879)
Net investment income $2,430 $7,764 $726 $10,920 $850 $11,770
Performance Related Earnings $7,401 $14,496 $6,387 $28,284 $850 $29,134
Economic Net Income $73,943 $37,239 $9,526 $120,708 ($44,852) $75,856
Distributable Earnings $64,272 $21,914 $3,113 $89,299 ($48,390) $40,909
Three Months Ended March 31, 2016
$ in thousands
Credit
Group
Private
Equity
Group
Real
Estate
Group
Total
Segments
Operations
Management
Group
Total
Stand
Alone(1)
Management fees (Credit Group includes ARCC Part I Fees of $28,625) $107,247 $38,676 $16,745 $162,668 $— $162,668
Other fees 109 340 258 707 — 707
Compensation and benefits (43,909) (14,364) (11,235) (69,508) (26,277) (95,785)
General, administrative and other expenses (5,310) (3,240) (3,441) (11,991) (16,551) (28,542)
Fee Related Earnings $58,137 $21,412 $2,327 $81,876 ($42,828) $39,048
Performance fees - realized $6,178 $— $171 $6,349 $— $6,349
Performance fees - unrealized (29,047) (12,423) 4,122 (37,348) — (37,348)
Performance fee compensation - realized (1,983) — — (1,983) — (1,983)
Performance fee compensation - unrealized 16,437 9,109 (2,233) 23,313 — 23,313
Net performance fees ($8,415) ($3,314) $2,060 ($9,669) $— ($9,669)
Investment income (loss) - realized $82 ($32) ($132) ($82) ($57) ($139)
Investment income (loss) - unrealized (1,595) (10,157) 2,799 (8,953) 385 (8,568)
Interest and other investment income (loss) 7,579 (91) 892 8,380 (49) 8,331
Interest expense (2,448) (1,405) (274) (4,127) (728) (4,855)
Net investment income (loss) $3,618 ($11,685) $3,285 ($4,782) ($449) ($5,231)
Performance Related Earnings ($4,797) ($14,999) $5,345 ($14,451) ($449) ($14,900)
Economic Net Income $53,340 $6,413 $7,672 $67,425 ($43,277) $24,148
Distributable Earnings $66,473 $18,371 $2,678 $87,522 ($46,241) $41,281
24
AUM and FPAUM Rollforward
Note: For definitions of AUM and FPAUM please refer to the “Glossary” slide in the appendix.
Credit
l AUM increased by 8.0% from Q4-16, primarily driven by ARCC's acquisition of ACAS and new capital commitments in liquid and direct lending strategies, partially offset by
run-off in U.S. syndicated loans and other liquid credit funds
l FPAUM increased by 7.0% from Q4-16, primarily driven by ARCC's acquisition of ACAS, capital commitments in liquid and direct lending strategies and deployment in funds
paid on invested capital, partially offset by run-off in U.S. syndicated loans and other liquid credit funds
Private Equity
l AUM decreased slightly by 1.5% from Q4-16 as strong appreciation in various corporate private equity funds was mostly offset by distributions, primarily in our power and
energy infrastructure funds
l FPAUM increased by 51.9% from Q4-16, primarily attributable to management fees turning on for ACOF V which includes $7.6 billion in fee eligible AUM, slightly offset by
change in fee basis in ACOF IV of $1.5 billion
Real Estate
l AUM increased 1.9% from Q4-16, primarily driven by new debt commitments to ACRE, offset by distributions in our U.S. and E.U. equity strategies
l FPAUM decreased by 2.8% from Q4-16, primarily driven by run-offs in value-add and opportunistic strategies in funds past their investment periods
Q1-17 Total AUM Rollforward ($ in millions) LTM Total AUM Rollforward ($ in millions)
Credit Private Equity Real Estate Total Credit Private Equity Real Estate Total
Q4-16 Ending Balance $60,466 $25,041 $9,752 $95,259 Q1-16 Ending Balance $58,263 $25,061 $10,183 $93,507
Acquisitions 3,605 — — 3,605 Acquisitions 3,605 — — 3,605
Commitments 2,740 42 292 3,074 Commitments 12,439 237 1,243 13,919
Capital reductions (1,213) (1) (52) (1,266) Capital reductions (7,580) (5) (243) (7,828)
Distributions/redemptions (996) (643) (156) (1,795) Distributions/redemptions (3,016) (3,119) (1,471) (7,606)
Changes in fund value 629 214 105 948 Changes in fund value 1,520 2,479 229 4,228
Q1-17 Ending Balance $65,231 $24,653 $9,941 $99,825 Q1-17 Ending Balance $65,231 $24,653 $9,941 $99,825
QoQ change $4,765 ($388) $189 $4,566 YoY change $6,968 ($408) ($242) $6,318
Q1-17 Total FPAUM Rollforward ($ in millions) LTM Total FPAUM Rollforward ($ in millions)
Credit Private Equity Real Estate Total Credit Private Equity Real Estate Total
Q4-16 Ending Balance $42,709 $11,314 $6,540 $60,563 Q1-16 Ending Balance $39,604 $12,010 $6,676 $58,290
Acquisitions 2,789 — — 2,789 Acquisitions 2,789 — — 2,789
Commitments 531 7,641 — 8,172 Commitments 3,951 7,800 348 12,099
Subscriptions/deployment/increase in leverage 1,016 380 55 1,451 Subscriptions/deployment/increase in leverage 3,886 480 651 5,017
Distributions/redemptions/decrease in leverage (1,819) (347) (175) (2,341) Distributions/redemptions/decrease in leverage (5,953) (954) (1,035) (7,942)
Changes in fund value 470 (279) (15) 176 Changes in fund value 1,419 (338) (111) 970
Change in fee basis — (1,527) (48) (1,575) Change in fee basis — (1,816) (172) (1,988)
Q1-17 Ending Balance $45,696 $17,182 $6,357 $69,235 Q1-17 Ending Balance $45,696 $17,182 $6,357 $69,235
QoQ change $2,987 $5,868 ($183) $8,672 YoY change $6,092 $5,172 ($319) $10,945
25
AUM and FPAUM by Strategy(1)
1. As of March 31, 2017.
2. AUM includes ARCC, IHAM, SSLP and SDLP AUM of $13.9 billion, $3.8 billion, $1.3 billion and $1.1 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC
registered investment adviser, manages 22 funds and serves as the sub-manager or sub-adviser for 2 other funds as of March 31, 2017.
Strategy ($ in billions) AUM % AUM FPAUM % FPAUM
Credit
Syndicated Loans $16.8 26% $15.6 34%
High Yield 4.6 7% 4.7 10%
Credit Opportunities 3.3 5% 2.7 6%
Structured Credit 4.3 7% 3.2 7%
U.S. Direct Lending(2) 26.3 40% 14.3 31%
E.U. Direct Lending 9.9 15% 5.2 11%
Total Credit Group $65.2 100% $45.7 100%
Private Equity
Corporate Private Equity
ACOF V $7.9 32% $7.6 —%
ACOF IV 6.1 25% 3.2 18%
ACOF III 3.6 15% 1.9 11%
ACOF I-II 0.5 2% 0.0 —%
ACOF Asia 0.2 1% 0.1 —%
U.S Power and Energy Infrastructure
Fifth Power/Infrastructure Fund 0.6 2% 0.5 3%
EIF I-IV and Co-investment Vehicles 4.1 16% 3.3 20%
Special Situations
Special Situations 1.7 7% 0.6 3%
Private Equity Group $24.7 100% $17.2 56%
Real Estate
U.S. Equity $4.0 42% $2.7 43%
E.U. Equity 3.1 31% 2.5 39%
Debt 2.8 28% 1.1 18%
Real Estate Group $9.9 100% $6.3 100%
Total $99.8 $69.2
26
Balance Sheet Investments by Strategy
Note: Reflects the balance sheet of Ares Management, L.P. and its consolidated subsidiaries, excluding the effect of Consolidation.
*Through investments in Ares CLOs.
$ in thousands March 31, 2017 December 31, 2016
Private Equity
ACOF I - II $4,788 $5,503
ACOF III 94,358 97,549
ACOF IV 40,776 37,308
ACOF V 1,156 —
ACOF Asia 74,974 71,769
U.S. Power & Energy Infrastructure 16,970 17,361
Special Situations & other 26,973 27,927
Private Equity $259,995 $257,417
Credit
Syndicated Loans* $165,567 $140,667
Credit Opportunities 4,115 4,035
Structured Credit 8,768 9,004
U.S. Direct Lending 38,984 37,696
E.U. Direct Lending 46,061 44,882
Credit Group $263,495 $236,284
Real Estate
U.S. Equity $63,526 $62,208
E.U. Equity 14,231 13,077
Real Estate $77,757 $75,285
Operations Management Group
Other $51,437 $53,229
Other $51,437 $53,229
Total $652,684 $622,215
27
Significant Fund Performance Metrics*
The following table presents the performance data for significant funds in the Credit Group that are not drawdown funds:
Note: Past performance is not indicative of future results. AUM and Net Returns as of March 31, 2017 unless otherwise noted. The above table includes fund performance metrics for significant funds which
includes those that contributed at least 1% of total management fees for the three months ended March 31, 2017 or comprised 1% or more of the Company’s total FPAUM as of March 31, 2017, and for which we
have sole discretion for investment decisions within the fund. Please see significant fund performance endnotes on slides 29-30 for additional information. Return information presented may not reflect actual
returns earned by investors in the applicable fund. ARCC is a publicly traded vehicle.
* Returns are not shown for funds until at least 2 years from initial investment and the fund is either 50% through its investing period or 50% of committed capital has been deployed.
As of March 31, 2017
Returns (%)(2)
Current Quarter Since Inception(3)
Year of
Inception
AUM(1)
(in millions) Gross Net Gross Net
Primary
Investment Strategy
Credit
ARCC 2004 $13,913 N/A 2.6% N/A 11.8% U.S. Direct Lending(4)
Sub-advised Client A 2007 $705 1.9% 1.8% 7.9% 7.6% High Yield(5)
Sub-advised Client B 2009 $670 0.9% 0.8% 6.5% 6.0% Syndicated Loans(5)
ELIS XI 2013 $654 1.1% 1.0% 3.3% 2.8% Syndicated Loans(5)
Separately Managed Account Client A 2015 $1,102 4.7% 4.6% 6.6% 6.4% Structured Credit(5)
Separately Managed Account Client B* 2016 $791 N/A N/A N/A N/A High Yield
28
Significant Fund Performance Metrics*
Note: Past performance is not indicative of future results. AUM and Net Returns as of March 31, 2017 unless otherwise noted. The above table includes fund performance metrics for significant funds which
includes those that contributed at least 1% of total management fees for the three months ended March 31, 2017 or comprised 1% or more of the Company’s total FPAUM as of March 31, 2017, and for which
we have sole discretion for investment decisions within the fund. Please see significant fund performance endnotes on slides 29-30 for additional information. Return information presented may not reflect
actual returns earned by investors in the applicable fund.
* IRRs are not shown for funds until at least 2 years from initial investment and the fund is either 50% through its investing period or 50% of committed capital has been deployed.
The following table presents the performance data for our significant funds, all of which are drawdown funds:
As of March 31, 2017
Year of
Inception
Original Capital
Commitments
Cumulative
Invested Capital
Realized
Proceeds
Unrealized
Value Total Value
MOIC IRR
Primary Investment Strategy($ in millions) AUM(1) Gross Net Gross Net
Credit
CSF 2008 $237 $1,500 $1,500 $2,288 $216 $2,504 1.9x 1.7x 12.9% 10.0% Credit Opportunities(6)(7)(8)(9)(10)(11)(12)
ACE II 2013 $1,467 $1,216 $942 $270 $889 $1,159 1.3x 1.2x 10.1% 7.3% E.U. Direct Lending(7)(8)(9)(10)(11)(12)(13)
ACE III* 2015 $3,987 $2,822 $1,132 $31 $1,197 $1,228 1.1x 1.1x N/A N/A E.U. Direct Lending(7)(8)(9)(10)(14)
Private Equity
USPF III 2007 $980 $1,350 $1,809 $1,720 $964 $2,685 1.5x 1.5x 8.9% 6.4% U.S. Power and Energy Infrastructure(15)(16)(17)(18)(19)(20)
ACOF III 2008 $3,625 $3,510 $3,867 $5,534 $3,208 $8,742 2.3x 1.9x 29.5% 21.3% Corporate Private Equity(15)(16)(17)(18)(19)(20)
USPF IV 2010 $1,953 $1,688 $1,773 $732 $1,729 $2,460 1.4x 1.3x 13.4% 10.3% U.S. Power and Energy Infrastructure(15)(16)(17)(18)(19)(20)
ACOF IV 2012 $6,147 $4,700 $3,542 $834 $4,918 $5,753 1.6x 1.4x 23.4% 15.3% Corporate Private Equity(15)(16)(17)(18)(19)(20)
ACOF V 2017 $7,880 $7,850 $500 $2 $545 $546 1.1x 1.0x N/A N/A Corporate Private Equity(15)(16)(17)(18)(19)(20)
Real Estate
EF IV 2014 $1,275 $1,302 $789 $48 $976 $1,024 1.3x 1.1x 19.6% 11.5% E.U. Real Estate Equity(12)(16)(21)(22)(23)(24)(25)
US VIII 2013 $851 $823 $572 $68 $634 $702 1.2x 1.1x 19.6% 12.8% U.S. Real Estate Equity(12)(16)(21)(22)(23)(24)
EPEP II* 2015 $704 $747 $207 $11 $216 $228 1.1x 1.0x N/A N/A E.U. Real Estate Equity(16)(22)(23)(24)
29
Significant Fund Performance Metrics Endnotes
1. AUM equals the sum of the NAV for such fund, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital.
2. Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses.
3. Since inception returns are annualized.
4. Net returns are calculated using the fund's NAV and assume dividends are reinvested at the closest quarter-end NAV to the relevant quarterly ex-dividend dates. Additional information related to ARCC can be
found in its financial statements filed with the SEC, which are not part of this presentation.
5. Gross returns do not reflect the deduction of management fees or any other expenses. Net returns are calculated by subtracting the applicable management fee from the gross returns on a monthly basis.
6. The AUM for CSF, a fund of funds, includes AUM that has been committed to other Ares funds.
7. Realized proceeds represent the sum of all cash distributions to all partners and if applicable, exclude tax and incentive distributions made to the general partner.
8. Unrealized value represents the fund's NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated.
9. The gross multiple of invested capital (“MoIC”) is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying
limited partners and/or the general partner which does not pay management fees or performance fees. The gross MoIC is before giving effect to management fees, performance fees as applicable and other
expenses.
10. The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the
general partner which does not pay management fees or performance fees. The net MoIC is after giving effect to management fees, performance fees as applicable and other expenses.
11. The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to the
fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or performance fees. The cash
flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. Gross IRRs are calculated before giving effect to management fees, performance fees as applicable, and other expenses.
12. The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-
paying limited partners and if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or performance fees. The cash flow
dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees, performance fees as applicable, and other expenses.
13. ACE II is made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net IRR and gross and net MoIC presented in the chart are for the U.S. dollar denominated
feeder fund as that is the larger of the two feeders. The gross and net IRR for the Euro denominated feeder fund are 13.1% and 9.8%, respectively. The gross and net MoIC for the Euro denominated feeder fund
are 1.4x and 1.3x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE II are for the combined fund and
are converted to U.S. dollars at the prevailing quarter-end exchange rate. The variance between the gross and net MoICs and the net IRRs for the U.S. dollar denominated and Euro denominated feeder funds is
driven by the U.S. GAAP mark-to-market reporting of the foreign currency hedging program in the U.S. dollar denominated feeder fund. The feeder fund will be holding the foreign currency hedges until maturity,
and therefore is expected to ultimately recognize a gain while mitigating the currency risk associated with the initial principal investments.
14. ACE III is made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net MoIC presented in the chart are for the Euro denominated feeder fund as that is the
larger of the two feeders. The gross and net MoIC for the U.S. dollar denominated feeder fund are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange
rate at the time of the fund's closing. All other values for ACE III are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate.
15. Realized proceeds represent the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments.
16. Unrealized value represents the fair market value of remaining investments. There can be no assurance that unrealized investments will be realized at the valuations indicated.
17. The gross MoIC is calculated at the investment-level and is based on the interests of all partners. The gross MoIC is before giving effect to management fees, performance fees as applicable and other expenses.
18. The net MoIC for the U.S. power and energy infrastructure funds is calculated at the fund-level. The net MoIC for the corporate private equity funds is calculated at the investment-level. For all funds, the net MoIC
is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management
fees or performance fees. The net MoIC is after giving effect to management fees, performance fees as applicable and other expenses.
19. The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from investments and the residual value of the investments at the end of the measurement period. Gross IRRs reflect
returns to all partners. Cash flows used in the gross IRR calculation are assumed to occur at month-end. The gross IRRs are calculated before giving effect to management fees, performance fees as applicable, and
other expenses.
30
Significant Fund Performance Metrics Endnotes (cont’d)
20. The net IRR for the U.S. power and energy infrastructure funds is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement
period. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRR for the corporate private equity funds is an annualized since inception net internal rate of return of
cash flows to and from investments and the residual value of the investments at the end of the measurement period. Cash flows used in the net IRR calculations are assumed to occur at month end. For all funds, the net
IRRs reflect returns to the fee-paying limited partners and if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or performance
fees. The net IRRs are calculated after giving effect to management fees, performance fees as applicable, and other expenses.
21. The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from investments and the residual value of the investments at the end of the measurement period. Gross IRRs reflect returns
to all partners. Cash flows used in the gross IRR calculation are assumed to occur at quarter-end. The gross IRRs are calculated before giving effect to management fees, performance fees as applicable, and other
expenses.
22. Realized proceeds include distributions of operating income, sales and financing proceeds received.
23. The gross MoIC is calculated at the investment level. For EF IV, the gross MoIC is based on the interests of the fee-paying partners and, if applicable, excludes interests attributable to the non fee-paying partners and/or
the general partner who does not pay management fees or performance fees. For US VIII and EPEP II, the gross MoIC is based on the interests of all partners. The gross MoIC for all funds is before giving effect to
management fees, performance fees as applicable and other expenses.
24. The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying partners and, if applicable, excludes interests attributable to the non fee-paying partners and/or the general partner who does
not pay management fees or performance fees. The net MoIC is after giving effect to management fees, performance fees as applicable and other expenses.
25. EF IV is made up of two parallel funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net MoIC and gross and net IRR presented in the chart are for the U.S. dollar denominated parallel
fund as that is the larger of the two funds. The gross and net IRRs for the Euro denominated parallel fund are 19.8% and 13.1%, respectively. The gross and net MoIC for the Euro denominated parallel fund are 1.3x and
1.2x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of fund's closing. All other values for EF IV are for the combined fund and are converted to U.S.
dollars at the prevailing quarter-end exchange rate.
31
Weighted Average Unit Information
1. Represents units exchangeable for Ares Management, L.P. common units on a one-for-one basis.
2. We apply the treasury stock method to determine the dilutive weighted-average common units represented by our restricted stock to be settled in common units and options to
acquire common units. Under the treasury stock method, compensation expense attributed to future services and not yet recognized is presumed to be used to acquire outstanding
common units, thus reducing the weighted-average number of units and the dilutive effect of these awards.
3. Represents proportional dilutive impact based upon the percentage of Ares Operating Group owned by Ares Management, L.P. (38.43% and 37.87% as of March 31, 2017 and 2016,
respectively).
Q1-17 Q1-16
GAAP Units Adjusted Common Units GAAP Units Adjusted Common Units
Ares Management, L.P. weighted average common units 81,106,734 81,106,734 80,683,051 80,683,051
Ares Operating Group Units exchangeable into common units(1) 130,403,174 — 132,382,815 —
Dilutive effect of unvested restricted common units(2)(3) 3,705,863 2,062,847 489,691 185,435
Total Pro Forma Units 215,215,771 83,169,581 213,555,557 80,868,486
32
Additional Information
Distributions Targeted Net Returns(1) Capital Base by Duration(1)
Credit Group: Permanent Capital: 16%
l Ares declared a quarterly distribution of $0.13 per
common unit, payable on June 5, 2017 to common
unitholders of record at the close of business on May
22, 2017
l Syndicated Loans and High Yield Bonds:
Benchmark Outperformance(2)
10 or more years: 15%
7 to 9 years: 20%
l Credit Opportunities: 8-12% 3 to 6 years: 27%
l Structured Credit: 5-15% Fewer than 3 years: 6%
l Direct Lending: 5-15%(5) Managed Accounts: 16%
l Ares declared a distribution of $0.4375 per Series
A Preferred Unit with a payment date of June 30,
2017 to preferred unitholders of record as of the
close of business on June 15, 2017
Real Estate Group: Investor Base as % of AUM(1)
l Real Estate Debt: 5-12% Public Entity & Related: 22%
l Real Estate Equity: 12-18% l 500+ institutional investors(3)
l 200,000+ retail investors across our public funds(4)
Private Equity Group:
l Corporate Private Equity: 18-22% Institutional Intermediated: 13%
l U.S. Power and Energy Infrastructure: 15-17%
l Special Situations: 15-20% Institutional Direct: 65%
l Pension: 28%
l SWF: 10%
l Bank/Private Bank: 7%
l Investment Manager: 3%
l Insurance: 10%
l Endowment: 2%
l Other: 5%
Total Direct Institutional Investors: 722
No assurance can be made that such results will be achieved.
1. As of March 31, 2017, unless otherwise noted.
2. Ares bank loan and high yield strategies are typically benchmarked against the Credit Suisse Leveraged Loan Index (“CSLLI”) and the BofA Merrill Lynch U.S. High Yield Master II Index (“H0A0”), respectively. While the other credit
strategies cited above are absolute return focused, our bank loan and high yield funds seek to outperform these respective indices over market cycles. Q1-17 returns for the CSLLI and the H0A0 were 1.20% and 2.71%,
respectively. NOTE: Certain of Ares funds are not benchmarked against any particular index due to fund specific portfolio constraints.
3. Most recent data available as of April 28, 2017.
4. As of April 27, 2017 for ARCC and ACSF, April 15, 2016 for ACRE and June 13, 2016 for ARDC.
5. Includes funds managed or co-managed by Ares. Also includes funds managed by IHAM, a wholly owned portfolio company of ARCC, and a registered investment adviser.
33
Stand Alone –Financial Data(1)
1. Stand Alone results represent the operating segments plus OMG but exclude the effect of Consolidated Funds.
2. Includes ARCC Part I Fees of $121.2 million and $121.5 million for the years ended December 31, 2016 and 2015, respectively.
3. Compensation and benefits expenses include expense reimbursements of $23.9 million and $21.6 million for the year ended December 31, 2016 and 2015, respectively, that were previously presented as
administrative and other fees.
4. G&A expenses include expense reimbursements of $3.0 million and $4.4 million for the year ended December 31, 2016 and 2015, respectively, that were previously presented as administrative and other fees.
$ in thousands Year ended December 31,
2016 2015
Credit Group $444,664 $432,769
Private Equity Group 147,790 152,104
Real Estate Group 66,997 66,045
Management fees(2) $659,451 $650,918
Other fees $12,351 $4,599
Compensation and benefits expenses(3) (384,715) (360,622)
General, administrative and other expense(4) (114,737) (117,903)
Fee Related Earnings $172,350 $176,992
Net performance fees $133,624 $41,912
Net investment income (loss) 51,009 (2,526)
Performance Related Earnings $184,633 $39,386
Economic Net Income $356,983 $216,378
Other Data
Total Fee Revenue $793,075 $692,830
Distributable Earnings $264,306 $230,589
Management Fees as % of Total Fees 83% 94%
Fee Related Earnings as % of Economic Net Income 48% 82%
Fee Related Earnings as % of Distributable Earnings 65% 77%
34
GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis
Note: This table is a reconciliation of income before provision for income taxes on a consolidated basis to ENI, FRE, PRE and DE on a Stand Alone basis, which shows the results of the
reportable segments on a combined basis together with the Operations Management Group. Management believes that this presentation is more meaningful than a reconciliation to the
reportable segments on a segment basis because such reconciliation would exclude the Operations Management Group.
$ in thousands Year ended December 31,
2016 2015
Economic net income and fee related earnings:
Income before taxes $297,920 $81,484
Adjustments:
Amortization of intangibles 26,638 46,227
Depreciation expense 8,215 6,942
Equity compensation expenses 39,065 32,244
Acquisition and merger-related expenses (16,902) 34,864
Placement fees and underwriting costs 6,424 8,825
Other non-cash expense, net (1,728) 110
(Income) loss before taxes of non-controlling interests in Consolidated Funds, net of eliminations (2,649) 5,682
Economic net income $356,983 $216,378
Stand Alone performance fee income - realized ($292,998) ($121,948)
Stand Alone performance fee income - unrealized (228,472) (31,647)
Stand Alone performance fee compensation expense - realized 198,264 65,191
Stand Alone performance fee compensation expense - unrealized 189,582 46,492
Stand Alone net investment income (51,009) 2,526
Fee related earnings $172,350 $176,992
Stand Alone performance fee – realized $292,998 $121,948
Stand Alone performance fee compensation expense – realized (198,264) (65,191)
Stand Alone investment and other income, net 33,244 24,836
Less:
One-time acquisition costs (841) (2,916)
Dividend equivalent (5,323) (3,337)
Equity income 870 (758)
Income tax expense (16,089) (5,208)
Placement fees and underwriting costs (6,424) (8,825)
Non-cash depreciation and amortization (8,215) (6,952)
Distributable earnings $264,306 $230,589
Performance related earnings
Economic net income $356,983 $216,378
Less: fee related earnings (172,350) (176,992)
Performance Related Earnings $184,633 $39,386
35
GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.)
Note: These tables are a reconciliation of consolidated performance fee income, realized and unrealized performance fee income and net investment income to a Stand Alone basis,
which assist in the reconciliation of GAAP Net Income to fee related earnings and distributable earnings. These reconciliations show the results of the reportable segments on a
combined basis together with the Operations Management Group. Management believes that this presentation is more meaningful than a reconciliation to the reportable segments on a
segment basis because such reconciliation would exclude the Operations Management Group. Differences may arise due to rounding.
1. Related to performance fees for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within other (income) expense in the Company’s Condensed
Consolidated Statements of Operations.
$ in thousands Year ended December 31,
2016 2015
Performance fee and net investment income reconciliation:
Stand Alone performance fee income - realized $292,998 $121,948
Performance fee income - realized earned from Consolidated Funds — (1,769)
Performance fee - realized reclass (7,367) (6,472)
GAAP performance fee income - realized $285,631 $113,707
Stand Alone performance fee income - unrealized $228,472 $31,647
Performance fee income - unrealized earned from Consolidated Funds (1,139) 6,187
Performance fee - unrealized reclass 4,888 (926)
GAAP performance fee income - unrealized $232,221 $36,908
Stand Alone net investment income (loss) $51,009 ($2,526)
Net investment income from Consolidated Funds 42,244 25,702
Performance fee - reclass (1) 2,479 7,398
Change in value of contingent consideration 17,675 21,064
Other non-cash expense 1,728 (110)
Merger-related expenses — (15,446)
GAAP net investment income $115,135 $36,082
36
Glossary
ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance fee on the investment income from ARCC.
ARCC Part II Fees ARCC Part II Fees refers to fees based on ARCC's net capital gains, which are paid annually.
Ares Operating Group Units Ares Operating Group Unit refers to, collectively, a partnership unit in each of the Ares Operating Group entities.
Assets Under Management Assets Under Management (or “AUM”) refers to the assets we manage. For our funds other than CLOs, our AUM represents the
sum of the net asset value of such funds, the drawn and undrawn debt (at the fund level including amounts subject to restrictions)
and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). For our
funds that are CLOs, our AUM represents subordinated notes (equity) plus all drawn and undrawn debt tranches.
Available Capital Available Capital is comprised of uncalled committed capital and undrawn amounts under credit facilities, and may include AUM
that may be cancelled or not otherwise available to invest.
Consolidated Funds Consolidated Funds refers collectively to certain Ares-affiliated funds, related co-investment entities and certain CLOs that are
required under GAAP to be consolidated in our consolidated financial statements.
Distributable Earnings Distributable earnings (or “DE”), a non-GAAP measure, is an operating metric that assesses our performance without the effects of
our consolidated funds and the impact of unrealized income and expenses, which generally fluctuate with fair value changes.
Among other things, this metric also is used to assist in determining amounts potentially available for distribution. However, the
declaration, payment, and determination of the amount of distributions to unitholders, if any, is at the sole discretion of our Board
of Directors, which may change our distribution policy at any time. Distributable earnings is calculated as the sum of Fee Related
Earnings, realized performance fees, realized performance fee compensation, realized net investment and other income, and is
reduced by expenses arising from transaction costs associated with acquisitions, placement fees and underwriting costs, expenses
incurred in connection with corporate reorganization and depreciation. Distributable earnings differs from income before taxes
computed in accordance with GAAP as it is typically presented before giving effect to unrealized performance fees, unrealized
performance fee compensation, unrealized net investment income, amortization of intangibles, and equity compensation
expense. DE is presented prior to the effect of income taxes attributable to Ares Holdings Inc, and to distributions made to our
preferred unitholders, unless otherwise noted.
Economic Net Income Economic net income (or “ENI”), a non-GAAP measure, is an operating metric used by management to evaluate total operating
performance, a decision tool for deployment of resources, and an assessment of the performance of our business segments. ENI
differs from net income by excluding (a) income tax expense, (b) operating results of our Consolidated Funds, (c) depreciation and
amortization expense, (d) the effects of changes arising from corporate actions, and (e) certain other items that we believe are not
indicative of our total operating performance. Changes arising from corporate actions include equity-based compensation
expenses, the amortization of intangible assets, transaction costs associated with mergers and acquisitions and capital
transactions, placement fees and underwriting costs and expenses incurred in connection with corporate reorganization.
37
Glossary (cont’d)
Fee Paying Assets Under
Management
Fee paying AUM (or “FPAUM”) refers to the AUM on which we directly earn management fees. Fee paying AUM is equal to the sum of all the
individual fee bases of our funds that directly contribute to our management fees.
Fee Related Earnings Fee related earnings (or “FRE”), a non-GAAP measure, refers to a component of ENI that is used to assess core operating performance by
determining whether recurring revenue, primarily consisting of management fees, is sufficient to cover operating expenses and to generate
profits. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for the items included in the calculation of ENI and
excludes performance fees, performance fee compensation, investment income from our Consolidated Funds and non-consolidated funds and
certain other items that we believe are not indicative of our performance.
Gross Invested Capital Gross Invested Capital refers to the aggregate amount of new capital invested by our funds during a given period, and includes investments made
by our draw-down funds and permanent capital vehicles (and affiliated funds) and new capital raised and invested by our open-ended managed
accounts, sub advised accounts and CLOs, but excludes capital that is reinvested (after receiving repayments of capital) by our open-ended
managed accounts, sub advised accounts and CLOs.
Incentive Generating Assets
Under Management
Incentive generating AUM (or “IGAUM”) refers to the AUM of our funds that are currently generating, on a realized or unrealized basis,
performance fee revenue. It generally represents the NAV of our funds for which we are entitled to receive a performance fee, excluding capital
committed by us and our professionals (which generally is not subject to a performance fee). With respect to ARCC, only ARCC Part II Fees may
be generated from IGAUM .
Incentive Eligible Assets
Under Management
Incentive eligible AUM (or “IEAUM”) refers to the AUM of our funds that are eligible to produce performance fee revenue, regardless of whether
or not they are currently generating performance fees. It generally represents the NAV plus uncalled equity of our funds for which we are
entitled to receive a performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance
fee).
Net Inflows of Capital Represents net new commitments during the period, including equity and debt commitments and gross inflows into our open-ended managed
accounts and sub-advised accounts, as well as equity offerings by our publicly traded vehicles minus redemptions from our open-ended funds,
managed accounts and sub-advised accounts.
Operations Management
Group
In addition to our three segments, we have an Operations Management Group (the “OMG”) that consists of five independent, shared resource
groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance,
operations/information technology, business development/corporate strategy, legal/compliance and human resources. The OMG’s expenses are
not allocated to our three reportable segments but we consider the cost structure of the OMG when evaluating our financial performance. This
information constitutes non-GAAP financial information within the meaning of Regulation G, as promulgated by the SEC. Our management uses
this information to assess the performance of our reportable segments and our Operations Management Group, and we believe that this
information enhances the ability of unitholders to analyze our performance.
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Glossary (cont’d)
Our Funds Our funds refers to the funds, alternative asset companies, co-investment vehicles and other entities and accounts that are
managed or co-managed by the Ares Operating Group, and which are structured to pay fees. It also includes funds managed by
Ivy Hill Asset Management, L.P., a wholly owned portfolio company of ARCC, and a registered investment adviser.
Performance Fees Performance fees refers to fees we earn based on the performance of a fund, which are generally based on certain specific
hurdle rates as defined in the fund’s investment management or partnership agreements and may be either an incentive fee or
carried interest.
Performance Related
Earnings
Performance related earnings (or “PRE”) , a non-GAAP measure, is used to assess our investment performance net of
performance fee compensation. PRE differs from income (loss) before taxes computed in accordance with GAAP as it only
includes performance fees, performance fee compensation and total investment and other income that we earn from our
Consolidated Funds and non-consolidated funds.
Permanent Capital Permanent capital refers to capital of our funds that do not have redemption provisions or a requirement to return capital to
investors upon exiting the investments made with such capital, except as required by applicable law, which funds currently
consist of Ares Capital Corporation (“ARCC”), Ares Commercial Real Estate Corporation (“ACRE”), and Ares Dynamic Credit
Allocation Fund, Inc. (“ARDC”); such funds may be required, or elect, to return all or a portion of capital gains and investment
income.
Senior Secured Loan Fund LLC Senior Secured Loan Fund LLC (or ‘‘SSLP’’) is a program co-managed by a subsidiary of Ares through which ARCC co-invests with
affiliates of General Electric Company.
Syndicated Loans Strategy Syndicated loans strategy refers to a diversified portfolio of liquid, traded non-investment grade secured loans to corporate
issuers, including an allocation to syndicated middle market loans.
Stand Alone Results presented on a Stand Alone basis show the results of our reportable segments on a combined segment basis together
with our Operations Management Group.
Total Fee Revenue Total fee revenue refers to the sum of segment management fees and net performance fees.