Ares Investor Presentation - December 2019 - Ares :: Investor Resources
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Ares Investor Presentation
December 2019
1Disclaimer
The information contained in this presentation is summary information that is intended to be considered in the context of Ares Management Corporation (NYSE: ARES) (“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. These materials contain information about Ares, its affiliated funds and certain of their respective personnel and affiliates, information about their
respective historical performance and general information about the market. You should not view information related to the past performance of Ares and its affiliated funds or information about
the market, as indicative of future results, the achievement of which cannot be assured. Certain Ares Fund securities may be offered through our affiliate, Ares Investor Services LLC (“AIS”), a broker-
dealer registered with the SEC, and a member of FINRA and SIPC.
Nothing in these materials should be construed as a recommendation to invest in any securities that may be issued by Ares or as legal, accounting or tax advice. None of Ares, its affiliated funds or
any affiliate of Ares or its affiliated funds makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and nothing contained
herein shall be relied upon as a promise or representation whether as to the past or future performance. Certain information set forth herein includes estimates, projections 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, projections or targets or that all assumptions relating to such estimates, projections or targets have been considered or stated or that
such estimates, projections or targets will be realized.
These materials are not intended as an offer to sell, or the solicitation of an offer to purchase, any security, the offer and/or sale of which can only be made by definitive offering documentation. Any
offer or solicitation with respect to any securities that may be issued by Ares will be made only by means of definitive offering memoranda or prospectus, which will be provided to prospective
investors and will contain material information that is not set forth herein, including risk factors relating to any such investment.
Statements included herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or Ares’ future
performance or financial condition. These statements are based on certain assumptions about future events or conditions and involve a number of risks and uncertainties. These statements are not
guarantees of future performance, condition or results. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described
from time to time in our filings with the SEC. Ares undertakes no duty to update any forward-looking statements made herein.
An investment in Ares will be discrete from an investment in any funds or other investment programs managed by Ares and the results or performance of such other investment programs is not
indicative of the results or performance that will be achieved by Ares or such investment programs. Moreover, neither the realized returns nor the unrealized values attributable to one Ares fund are
directly applicable to an investment in any other Ares fund.
An investment in Ares may be volatile and can suffer from adverse or unexpected market moves or other adverse events. Investors may suffer the loss of their entire investment. The information set
forth herein is as of the date of this presentation unless otherwise indicated and Ares undertakes no duty to update any of the information set forth herein.
Management uses certain non-GAAP financial performance measures 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 Ares 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. Please refer to the Appendix for
definitions and explanations of these non-GAAP measures and reconciliations to the most directly comparable GAAP measures. Amounts and percentages may reflect rounding adjustments and
consequently totals may not appear to sum.
Some funds managed by Ares or its affiliates may be unregistered private investment partnerships, funds or pools that may invest and trade in many different markets, strategies and instruments and
are not subject to the same regulatory requirements as mutual funds, including mutual fund requirements to provide certain periodic and standardized pricing and valuation information to investors.
Fees vary and may potentially be high. In addition, in light of the various investment strategies of such other investment partnerships, funds and/or pools, it is noted that such other investment
programs may have portfolio investments inconsistent with those of the strategy or investment vehicle proposed herein. For the definitions of certain terms used in this presentation, please refer to
the “Glossary” slide in the appendix.
This may contain information from BofA Merrill Lynch, used with permission. BOFA MERRILL LYNCH IS LICENSING THE ICE BOFAML INDICES AND RELATED DATA “AS IS,” MAKES NO WARRANTIES
REGARDING SAME, DOES NOT GUARANTEE THE SUITABILITY, QUALITY, ACCURACY, TIMELINESS, AND/OR COMPLETENESS OF THE ICE BOFAML INDICES OR ANY DATA INCLUDED IN, RELATED TO, OR
DERIVED THEREFROM, ASSUMES NO LIABILITY IN CONNECTION WITH THEIR USE, AND DOES NOT SPONSOR, ENDORSE, OR RECOMMEND ARES MANAGEMENT, OR ANY OF ITS PRODUCTS OR SERVICES.
REF: AM-00358
2Overview of Ares Management
With Approximately $144 Billion in Assets Under Management, Ares Management Corporation is a
Leading Global Alternative Asset Manager With Three Distinct but Complementary Investment Groups
Profile Global Footprint
Founded: 1997
AUM: $144bn
Employees: 1,200+
Investment Professionals: ~465
Global Offices: 20+
Direct Institutional Relationships: 935+
Listing: NYSE – Market Capitalization:(1) ~$7.3bn
The Ares Edge Credit Private Equity Real Estate
Founded with consistent Deep management team
credit based approach to with integrated and AUM $106.3bn $25.5bn $12.5bn
investments collaborative approach
Direct Lending Corporate Private Equity Real Estate Equity
Strategies
Liquid Credit Special Opportunities Real Estate Debt
20+ year track record of Pioneer and a leader in
compelling risk adjusted leveraged finance and
Alternative Credit Energy Opportunities
returns through market private credit
cycles
Infrastructure and Power
Note: As of September 30, 2019. AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital
Corporation and registered investment adviser. Past performance is not indicative of future results.
1. As of November 1, 2019.
3Ares Investment Thesis
High Growth Financial Services Company Well-positioned to Deliver Attractive Shareholder Returns by
Executing on a Straightforward Business Model
Leading Platform Stable and Diversified Model Compelling Growth Story
✓ Global and scaled investing ✓ High-quality and diverse ✓ Attractive industry
presence with unique origination revenues primarily compromised fundamentals
capability of management fees
✓ New product offerings and
✓ Three complementary businesses ✓ Dividend supported by stable and expansion of distribution
drive synergies growing fee related earnings channels
✓ Long track record of ✓ Consistent management fee ✓ Strong fundraising
demonstrated investment growth through cycles
performance ✓ Strategic growth through
opportunistic M&A
✓ Long-lived, locked-up capital
✓ Continuity of management and
investment professionals ✓ Scalable model facilitates ✓ Path to shareholder value
operating margin expansion creation through FRE growth and
✓ Broad, supportive and growing retention of PRE
investor base
Past performance is not indicative of future results. 4Creating “Ecosystems”
We Believe the Breadth and Scale of Our Activities Drives Value and Investment Performance
Corporate Assets Real Assets
Liquid Securities /
Secondary Markets
Self Originated Credit /
Asset Financing
Equity /
Asset Ownership
Sourcing Benefits Evaluation Benefits Execution Benefits
Complete capital structure solutions drive Information and research advantages Disciplined structuring and pricing
originations • Differentiated information enhances • Active investment role improves control
• Broad offering to help meet client needs investment decisions over outcomes
Deep domain experience and networks • Shared research across the platform Capital structure arbitrage
• Highly experienced teams and large Better relative value lens • Bring flexible capital to most attractive
market presence facilitate transaction flow • Identify attractive risk adjusted returns tranche of the capital structure
Power of incumbency across capital structures and markets Liquid / Illiquid market arbitrage
• Large portfolio and strong relationships • Exploit inefficiencies in primary AND
provide attractive future opportunities secondary markets
5History of Growth
Growth Every Year in Number of Funds and Investors, AUM and Management Fee Revenues
# of Funds and Investors(1) AUM(2) Management Fee Revenue(3)
($ in billions) ($ in millions)
$144
# Funds 242
$963
# Investors
$106
202
$745
$82
150 $598
937
783
624 $49
84
$324
$25
38 $170
166 182
2008 2011 2014 2017 Q3-19 2008 2011 2014 2017 Q3-19 2008 2011 2014 2017 LTM
Q3-19
Note: There can be no guarantee that Ares can or will sustain such growth.
1. Represents direct institutional investors.
2. AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and a registered investment adviser.
3. Includes quarterly performance income on the investment income of Ares Capital Corporation ("ARCC Part I Fees").
6Diversified & Growing Investor Base
We Believe Our Deep and Expanding Investor Relationships Can Be Attributed to Our Performance
AUM Mix by Investor(1) Direct AUM Mix by Geography(1)
($ in billions) ($ in billions)
$144.3 $99.9
Middle East,
$7.3, 7% Other, $0.4,
1%
Institutional
Institutional Direct
Intermediarie $99.9
s, $17.8, 12% ~69% Asia &
Pension,
Australia,
$39.7, 28%
Public $14.1, 14%
Entities
and Related,
$26.6, 19% North
America,
$55.8, 56%
Other, Insurance, Europe,
$6.2, 4% $16.5, 11% $22.3, 22%
Bank/Private Bank,
Endowment, Sovereign $16.1, 11%
$1.7, 1% Wealth,
$12.3, 9%
Investment
Manager,
$7.4, 5%
Note:
1. As of September 30, 2019. Includes funds managed or co-managed by Ares. Also includes funds managed by Ivy Hill Asset Management, L.P. Percentages may not
add to 100% due to rounding.
7Investors Are Deepening Relationships with Ares
Increasing Growth and Cross-Selling Across Platform with New and Existing Investors
Institutional Direct Investors Additional Investors Investing Across Funds
In addition to institutional direct investors, Ares has Ares has cross marketed its existing investors into new funds…
225,000+ retail investors across public funds(1) 360
CAGR 39
937 18%
21%
12% 321
24% 76
5
30% 71
2012 Q3-19
25% 2-5 Funds > 5 Funds
12%
Experienced in Cross-Selling Across Investment Groups
AUM ($ in billions)
…and into multiple strategies across platform
29%
$52.3
$14.8
211
26%
$37.5
$9.6
2012 Q3-19 2012 Q3-19
Pension High Net Worth 2 Groups 3 Groups
Bank/Private Bank Insurance
Investment Manager Endowment/Foundation
Sovereign Wealth Fund Sub-Advisory / Other
Ares
Note: Past performance is not indicative of future results. There can be no guarantee that Ares can or will sustain such growth.
1. As of April 8, 2019 for ARCC, February 26, 2019 for ACRE and April 15, 2019 for ARDC. 8Diversified and Stable Business & Revenue Model
Revenue Model Supports Stability and Growth of Earnings
9Stable and Diversified Management Fee Driven Business Model
Consistent 85%+ Fee Revenue from Stable, Cross-Platform Management Fees
Total Unconsolidated Fee Revenue Composition(1)
$1,070mm
$967mm 8%
2%
$843mm 11% 8%
3% Realized Net Performance Income
$767mm 9%
8%
3% Other Fees
$712mm 20%
$670mm 12%
8% 8% Mgmt. Fees: Real
10% 1% 2%
21% Estate
1% 9% 9%
Mgmt. Fees: Private
13% 24% Equity
21% 19% Mgmt. Fees:
14% Credit
62%
57%
56%
61% 58%
62%
2014 2015 2016 2017 2018 LTM Q3-19
89% in Mgmt. Fees 91% in Mgmt. Fees 86% in Mgmt. Fees 88% in Mgmt. Fees 87% in Mgmt. Fees 90% in Mgmt. Fees
1. Total fee revenue is calculated as management fees plus realized net performance income and other fees. Percentage of management fees includes the following amounts
attributable to ARCC Part I Fees: 20% in 2014, 19% in 2015, 18% in 2016, 14% in 2017, 15% for 2018 and 16% in LTM Q3 2019; Management fees have been adjusted for the
movement of our special situations strategy from our Credit Group into our Private Equity Group that became effective July 1, 2016. All other periods have been adjusted to conform
with the current presentation.
10Stable Management Fee Revenue Growth Through Cycles
Ares has Experienced Consistent Management Fee Growth Regardless of Market Volatility
(Indexed at 100)1 ($ in millions)
700 $1,000
’07-’09 Management Fee
CAGR: 28%
600
$800
500
$600
400
300
$400
200
$200
100
0 $0
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 LTM
Q3-19
Management Fees MSCI World Index High Yield(2) VIX(3)
Note:
1. Benchmarks initial data point at 100 with changes compared to initial data point.
2. Represents the ICE BofAML U.S. High Yield Master II Index (“HOAO”) yield to worst per Yieldbook.
3. Represents CBOE Volatility Index.
11Stable, Long Duration AUM
AUM and Management Fees Supported by Long-Dated Assets
AUM Mix by Duration(1) Management Fee Mix by Duration(1)
• The initial duration was greater than 7 years for approximately 74% • Management fees supported by long duration AUM, which also
of AUM benefit from mark-to-market insulation
• 82% of management fees with a duration of > 3 years
• 70% of AUM has a duration of > 3 years o 36% of management fees from permanent capital vehicles
4% 70% > 3 years 1% 82% > 3 years
17% 13% 11%
6%
10% 36%
9%
13%
22%
34% 4%
20%
Permanent Capital 10 or more years 7 to 9 years 3 to 6 years Fewer than 3 years Differentiated Managed Managed Accounts
Accounts(2)
Note: AUM amounts include funds managed by Ivy Hill Asset Management, L.P.
1. As of September 30, 2019.
2. Differentiated managed accounts have been managed by the firm for longer than three years, are investing in illiquid strategies or are co-investments structured to pay management
fees.
12Significant Capacity for Investment and Growth in Incentive Eligible AUM
Well Positioned for Growth Across Market Cycles
$28.2
$26.4
$1.7
$1.7 $2.6
$2.1
$18.0 As of September 30, 2019,
AUM Not Yet $15.5 $0.9 $14.5 $26.4 billion of our total AUM
Earning Fees $0.9 $0.9
$9.3 $2.2 $24.8
was Not Yet Earning
$bn $9.2 $7.2 $21.7 Management Fees
$1.9 $11.4
$5.8 $7.3 $7.7
2014 2015 2016 2017 2018 Q3-19
$86.2
$78.4 $7.8
$7.5
$60.4 $21.4
$18.9
$50.7 $7.1
$45.8 As of September 30, 2019, Our
Incentive Eligible AUM $6.6 Incentive Eligible AUM totaled
$37.4 $6.8 $19.6
$bn $19.5 $86.2 billion
$16.7 $57.0
$11.0 $52.0
$33.7
$20.0 $22.2 $24.7
2014 2015 2016 2017 2018 Q3-19
Credit Private Equity Real Estate
Note: As of July 1, 2016, the special opportunities strategy moved out of our Credit Group and into our Private Equity Group. Historical results have been adjusted to
conform with the current presentation. No assurance can be made that such results will be achieved.
13AUM Not Yet Earning Fees
As of September 30, 2019, AUM Not Yet Earning Fees of $26.4 billion could generate approximately $253.2 million in potential incremental annual
management fees, of which $235.6 million relates to the $24.2 billion of AUM available for future deployment(1)
• The $24.2 billion of AUM Not Yet Earning Fees available for future deployment includes approximately $18.5 billion relating to U.S. and European
direct lending funds, $2.5 billion in alternative credit funds and $2.0 billion in our Real Estate Group funds
AUM Not Yet Earning Fees Available for Future
AUM Not Yet Earning Fees: $26.4 billion
Deployment: $24.2 billion
$24.2 billion of AUM Not Yet Earning Fees
was available for future deployment
($ in millions) ($ in millions)
Capital Available for Future Deployment
Capital Available for Deployment for Follow-on Investments (2)
Funds in or Expected to Be in Wind-down Credit Private Equity Real Estate
1. No assurance can be made that such results will be achieved. Assumes the AUM Not Yet Earning Fees as of September 30, 2019 is invested and such fees are paid on an annual basis. Does not reflect any associated reductions
in management fees from certain existing funds, some of which may be material. There is no assurance such capital will be invested. Reference to $253.2 million includes approximately $32.4 million in potential incremental
management fees from deploying undrawn/available credit facilities at ARCC (in excess of its current leverage up to its target leverage of 1.25x debt to equity). Effective June 21, 2019, ARCC has increased its target leverage to a
range of 0.9x to 1.25x debt to equity, as provided for in the 2018 Small Business Credit Availability Act. No assurance can be made that such capital will be invested. Note that no potential ARCC Part I Fees are reflected in any of
the amounts above.
2. Capital available for deployment for follow-on investments represents capital committed to funds that are past their investment periods but have capital available to be called for follow-on investments in existing portfolio
companies. As of September 30, 2019, capital available for deployment for follow-on investments could generate approximately $17.6 million in potential management fees. There is no assurance such capital will be invested.
14Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM as of September 30, 2019 was $86.2 billion, an increase of 13.0% from prior year
• The increase of $10 billion was primarily driven by capital raising across U.S. and European direct lending funds in our Credit Group
Incentive Generating AUM(1) as of September 30, 2019 was $38.7 billion, an increase of 4.1% from prior year
• The increase was primarily driven by ACOF V exceeding its hurdle rate in our Private Equity Group, as well as deployment of capital within funds
exceeding hurdle rates as of September 30, 2019
Of the $59.0 billion of Incentive Eligible AUM that is currently invested, 65.6% is Incentive Generating
• Excluding the ARCC Part II fees(2) that are based on capital gains from the largely debt oriented ARCC portfolio, 86.1% of Incentive Eligible AUM that
is currently invested is Incentive Generating
Q3-19 Incentive Generating to Incentive Eligible
Incentive Eligible AUM
AUM Reconciliation
($ in millions)
($ in millions) Private Real
Credit Total
Equity Estate
Incentive
Generating AUM $20,438 $15,127 $3,116 $38,681
+ Uninvested
IEAUM 19,052 4,905 3,273 27,230
+ IEAUM below
hurdle 3,477 1,385 1,395 6,257
+ARCC Part II Fees
below Hurdle(2) 14,058 — — 14,058
Incentive Eligible
AUM $57,025 $21,417 $7,784 $86,226
Credit Private Equity Real Estate
1. Incentive Generating AUM includes $9.9 billion of AUM from funds generating unrealized incentive income that is not recognized as revenue by Ares until such fees are
crystallized or no longer subject to reversal.
2. ARCC Part II Fees are paid in arrears as of the end of each calendar year when the cumulative aggregate realized capital gains exceed the cumulative aggregate realized capital
losses and aggregate unrealized capital depreciation, less the aggregate amount of Part II Fees paid in all prior years since inception. As of September 30, 2019, this calculation
resulted in ARCC being below the required hurdle for payment to Ares of any ARCC Part II Fees byMultiple Growth Opportunities in Attractive Industry
Leveraging the Ares Platform to Capitalize on Industry Tailwinds for Further Growth
Growth Accelerators
Levers to Drive
Organic Growth • Future acquisitions
facilitated by more liquid
stock currency
Industry Trends • Fundraising growth and
increased cross-selling • Opportunistically expand
Platform Attributes • Rotation from liquid to during market dislocations
illiquid assets • New product offerings and
• Global, scaled investment investment solutions • Strategic acquisitions and
platform • Banks leaving void for portfolio purchases
private capital to fill • New distribution channels
• Diverse product offerings • Team lift-outs and strategic
and unique investment • Retailization of alternatives
• Geographic expansion joint ventures and
sourcing capabilities partnerships
• Growing pension liability
• Demonstrated track record gap and insurance yield • Deployment of dry powder
of investment performance demand
• Realization of returns from
• Experienced and cohesive • Consolidation of LP incentive eligible AUM
team relationships
Note: Past performance is not indicative of future results and there can be no assurance that any historical trends will continue.
16Growing Global Demand for Alternatives
Investors Look To Alternative Investing as an Attractive and Needed Complement to Traditional Portfolio Allocations
The Secular Shift Toward a Low Interest Environment Limits Ability For Consequently, The Increasing Asset Liability Gap for Pension Funds
Traditional Portfolio Allocations to Reach Target Returns(1) Highlights Urgent Need for Higher Returning Investment Alternatives(2)
Pension Assets as a Percentage of Liabilities
102%
10.0
100%
95%
Highest U.S. Public Pension Expected Return (8.00%)(3)
8.0
89%
90% 87%
Yield / Return (%)
86%
85% 85%
6.0 84%
Lowest U.S. Public Pension Expected Return (5.25%) (3)
80% 78%
4.0 76%
74%
72%72% 73%73% 72%72% 72%
2.0 70%
0.0 60%
10yr Treasury Rate
We believe the increasing gap between pension assets and liabilities driven by a low
interest rate environment demonstrates the need for higher yielding investments that are
less correlated to traded markets
1. Source: Macrotrends. Data as of 10/22/2019.
2. Center for Retirement Research at Boston College. March 2019.
3. National Association of State Retirement Administrators.
17Market Shift Toward Private Capital
Private Equity Markets Continue to Take Share Vs. Public Equity Markets and the Opportunity for Further Growth Exists
Private Companies Far Outweigh Public Companies Which is
U.S. & European Public Vs Private Dollar Volume(1)
Exaggerated in The Middle Market Segments(2)
20,000
2018 was the first year when private dollar volume Number of U.S. Public and Private
$800 17,941
Companies by Annual Revenue
exceeded that of public IPO and follow on capital raises
$700
15,000
$600
$500
10,170
10,000
$400
$300
5,000
$200
3,035
$100 1,565 1,370 1,309
517 589 480 482
$0 0
$50mm – $100mm – $250mm – $500mm – $1+bn
2014 2015 2016 2017 2018 $100mm $500mm
$250mm $1bn
IPO & Follow On $ Volume Private Equity $ Volume Private Companies Public Companies
1. Source: North American and European public market follow on and IPO data per Refinitv and PE transaction volume data per Preqin.
2. Source: World Economic Forum as of April 2018.
18Growth of Alternative Assets
Investors are Continuing t0 Move into Alternative Asset Classes in Search for Higher Returning Assets
Private Equity, Private Debt and Infrastructure are Expected to Projected Growth of Private Capital by Selected Segment(2)
Draw the Most Interest from Investors Over the Long Term
Investors intending to increase allocation over the long term(1)
2018 2023
Natural Resources/
50% Infrastructure
48%
46% $0.7tn +157% → $1.8tn
Private Debt
36%
$0.8tn +75% → $1.4tn
29%
Private Equity
$3.6tn +36% → $4.9tn
Real Estate
$0.9tn +33% → $1.2tn
Hedge Funds
$3.6tn +31% → $4.7tn
Infrastructure Private Debt Private Equity Real Estate Natural
Resources
Note: There can be no guarantee that Ares can or will sustain such growth, or that any estimates will be realized.
1. Preqin Investor Outlook Alternative Assets H1-19.
2. Source: Preqin as of 2019. 19Ares’ AUM Growing in Excess of Alternative and Traditional Markets
Ares’ AUM Growth Has Been 2x the Growth Rate of Alternatives
Global, Alternative and Ares AUM(1)
+9%
CAGR
Ares AUM
+24% CAGR +23% +6%
($ in trillions) CAGR
CAGR +7%
($ in billions)
Alternative AUM CAGR
+12% CAGR $21
$150 +4% $150
CAGR
Global AUM
$125 +8% CAGR $125
$14
$100 $11 $100
$75 $144 $145 $75
$6
$5 $106
$98 $111
$50 $50
$3
$59 $64 $60
$25 $25
$37
$18
$0 $7 $0
20042004 20072007 20122012 20172017 Q3-19 2020E 2025E
Global AUM Alternative AUM Ares AUM
(Global/Alternative AUM $ in trillions) (Ares AUM $ in billions)
Note: There can be no guarantee that Ares can or will sustain such growth, or that any estimates will be realized.
1. PWC Report October, 2018 - Asset & Wealth Management Revolution: Pressure on Profitability. Data excludes High Net Worth and Mass Affluent segments.
20Strong Growth in Fund Families
Performance has Driven Strong Investor Demand for Larger Subsequent Funds and New Strategies
Private Equity: Ares Corporate Opportunities Funds Credit: Ares Capital Europe Funds(1)
($ in millions) ($ in millions)
$7,584
$7,850
$4,840
$3,510
$1,750
$751 $481
(2)
Fund: ACOF I ACOF III ACOF V Fund: ACE I ACE II ACE III ACE IV
Vintage: Aug '02 Feb '08 Dec '15 Vintage: Jun '07 Aug '12 Jul '15 Jan '18
Real Estate: Ares US Real Estate Funds Credit: ARCC AUM Credit: Ares Private Credit Solutions Fund
($ in millions) $1,040 ($ in millions) Permanent Capital Vehicle ($ in millions)
$16,977 Raised $3.4Bn for Inaugural Fund, ~$1Bn in
$824 Excess of Target, with 60% new clients
$756
$3,365
$450
$256
$183 $0
Fund: Fund I Fund III Fund VII Fund VIII Fund IX As of: Dec '04 Sep '19 Fund: - PCS
Vintage: Sep '93 Mar '98 Aug '07 Sep '13 May '17 Vintage: - Jan '17
Note: As of September 30, 2019, AUM amounts include funds managed by Ivy Hill Asset Management, L.P. Past performance is not indicative of future results. There can be no
guarantee that Ares can or will sustain such growth. Funds shown represent final fund close amounts.
1. Reflects equity commitments converted to USD at 1.1669 EUR/USD.
2. Reflects both debt and equity commitments.
21Multiple Avenues for Growth
Ares is Making Substantial Investments in Strategies to Offer More Client Solutions and is Expanding Into New Channels
to Reach New Investors
• Larger subsequent funds
• Cross-market our strategies to existing clients
• Growth of business development and investor
relations groups
Organic
1 • Enter adjacent asset classes
• Continue to develop differentiated solutions
New Products
2 • Insurance
• Sub-advisory partners
• Traded and non-traded retail
3 New Channels • Intermediary relationships
• Family offices and high-net-worth
4 New Geographies • Continued expansion in Europe and Asia
• Potential new international markets
5
New Partnerships
• Strategic partnerships
• Joint ventures
6
Strategic Mergers and
Acquisitions • • Strategic
Acquisitions acquisitions
of scale
• Tuck-in opportunities
• Portfolio purchases
• Management team lift-outs
• Opportunistic portfolio purchases
22Growth in Key Financial Metrics
Well Positioned for Future Opportunities
History of Increased Performance Strong Balance Sheet Enables Growth
($ in millions)
2014 Q3-19 LTM
Management Fees1 Balance Sheet Investments
$963
($ in millions) by Strategy
Assets 9/30/19
Cash $152 $49
$598 $137
$247
Investments 726
Net Performance $293
344
Fee Related Earnings Income Receivable
$303
($ in millions)
Credit Real Estate
$147 Private Equity Other
Debt Capitalization Maturity 9/30/19
Credit Facility ($1,065) 2024 $0
Realized Income $421
($ in millions) Senior Notes 2024 246
$273
Total Debt Obligations $246
Note: Past performance is not indicative of future results. There can be no guarantee that Ares can or will sustain such growth.
1. Management fees include ARCC Part I Fees. 23Path to Shareholder Value Creation
Shareholder Value Driven by Diversity and Composition of our AUM and Growth in our Fee Related Earnings Plus
Reinvestment of our Realized Performance Related Earnings
Fee Related Earnings Realized Performance Related Earnings
16% CAGR since end of 2014 $118 million avg. annual Realized Performance Related Earnings(1)
• Diversity and composition of AUM drive stable earnings
• Realize accrued net performance fees
• Record level of deployable AUM not yet earning fees
• Realize income from balance sheet investments(2)
• Increased fee opportunities from ARCC
• Increase new performance fees by deploying record
level of un-invested incentive eligible AUM
• Increased sizes of successor funds drive earnings growth
• Convert incentive eligible AUM into incentive
• Increased core and adjacent fund strategies raising new generating AUM through deployment
AUM
• New fundraising of incentive eligible AUM
• Scale efficiencies to drive margin expansion
Steady, annual qualified dividend pegged to after-tax Fee Related Earnings(3) with retained
earnings invested in organic & inorganic growth
Note: Past performance is not indicative of future results. There can be no guarantee that Ares can or will sustain such growth.
1. Represents three year average for the period from 10/1/2016 through 9/30/2019.
2. Ares balance sheet investments have generated gross IRRs since inception (annualized) of approximately 10.7%.
3. The declaration, payment, and determination of the amount of future dividends, if any, is at the sole discretion of our Board of Directors, which may change our
dividend policy at any time.
24Our Approach to Current Market Conditions
We are Taking a Defensive Posture in our Investing Strategies, and our Approach is Supported by our
Successful Playbook During Past Cycles
Disciplined Approach to Achieving Targeted Returns in Current Market
✓ Maintaining significant dry ✓ Use conservative matched
powder leverage
✓ Taking defensive investment ✓ Focusing on strongly performing
approach incumbent borrowers
✓ Heightened focus on selectivity ✓ Capitalizing on scale advantages
✓ Using flexible investing strategies ✓ Leveraging industry
specialization
✓ Staying senior in capital structure
as appropriate ✓ Performing enhanced due
diligence techniques
We leverage our credit and management fee centric business model, our long-term, locked up capital,
flexible strategies and asset light balance sheet to navigate well through business cycles
25Appendix Confidential – Not for Publication or Distribution 26
Ares Credit Group
Integrated Scaled Global Platform Combines Direct Origination, Deep Fundamental Credit
Research and Broad Perspective of Relative Value
$106.3 billion AUM(1) Advantages
32 Partners averaging 25 years of experience
Access to Differentiated
Deep Investment Ability to Express
~275 dedicated investment professionals Information to Inform
Opportunity Set Relative Value
Credit Decisions
Origination, Research & Investment Management Leading Platform of Liquid Credit, Alternative Credit & Direct Lending Strategies
16 portfolio managers Middle
Syndicated Alternative Market Cash Private Mezz/
60+ industry research and alternative credit professionals Loans Credit Opportunistic
Flow Loans
~130 direct origination professionals
15 distressed and restructuring specialists
Asset Based Project
High Yield Lending Finance
Syndication, Trading & Servicing
5 trading professionals in the U.S. and Europe Liquid Credit Illiquid Credit
7 dedicated capital markets professionals
33 direct lending professionals focused solely on asset management
Accolades(2)
Investor Relations & Business Operations
Established investor relations and client service across the Americas, Global Fundraising, BDC
ARCC Received Most Honored
Europe, Asia, Australia and the Middle East Designation & Highest Top Quartile Rankings Lender of the Year (Americas), Lender
for Several Funds (Europe) (Europe), & Fundraising
Rankings for Best Investor (Europe) of the Year
Relations Program 2Q’19 2018
2018
We have experienced teams across the platform that are positioned for excellence in investing and client service
Note: As of September 30, 2019, unless otherwise noted.
1. 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. The performance, awards/ratings noted herein relate only to selected funds/strategies and may not be representative of any given client’s experience and should not be viewed as indicative
of Ares’ past performance or its funds’ future performance. All investments involve risk, including loss of principal.
Please see the Notes at the end of this presentation.
Confidential – Not for Publication or Distribution 27Ares Private Equity Group
We Seek to Deliver Consistent Investment Performance in our Differentiated Private Equity Fund Families
Across Various Market Environments
$25.5 billion AUM(1) Multi-Asset Class Expertise / Flexible Capital
28 Partners – Average 25 Years of Experience Structured
Stressed / Recap Growth
~115 dedicated investment professionals Distressed Solutions Equity
Several Dedicated Coverage Pods:
Rescue Structured
Financing Equity Buyouts
Consumer / Retail Energy
Healthcare Industrials Credit Equity
Services / Special
Technology Opportunities Los Angeles Headquartered with Well-Established Local Market Presence
China Europe Boston
London
New York
San Francisco Chicago
Shanghai
Los Angeles Chengdu
Infrastructure &
Hong Kong
Power
Robust Differentiated Systematic Approach
Sourcing Model Market Intelligence to Value Creation
1. As of September 30, 2019.
Confidential – Not for Publication or Distribution 28Ares Real Estate Group
Global Real Estate Equity and Debt Platform That Combines Local Relationships, Differentiated Market Intelligence
and Deep Property Level Experience Having Invested ~$20 Billion of Capital in 700+ Deals Since 1993
$12.5 billion AUM Leading Platform of Real Estate Strategies
13 Partners – Average 23 Years of Experience US Senior Debt US & Europe Value-Add
75 Investment Professionals
Specialized Expertise Across Property Types US & Europe
US Mezzanine Debt Opportunistic
Multifamily Industrial Office
Debt Equity
Retail Hospitality
Global Real Estate Platform with Local Reach
Accolades(1)
Legend
New York London Amsterdam(4)
San Francisco Ares Real Estate Office(2)
Chicago Frankfurt
Washington, D.C. Ares Real Estate Market
Top 15 Real Estate Rated Special
Servicing Platform Paris Coverage Location(3)
Manager Based on Los Angeles Luxembourg
2014-19 Equity Raised 2016 - 2019 Atlanta Additional Business
Madrid
Infrastructure/Support
Office
Access to Real-Time Property Disciplined Approach to Value
Cycle-Tested Team & Results
Market & Corporate Trends Creation and Risk Mitigation
As of September 30, 2019. Please see the Notes at the end of this presentation.
1. The performance, awards/ratings noted herein relate only to selected funds/strategies and may not be representative of any given client’s experience and should not be viewed as indicative of Ares’ past performance or its funds’
future performance. All investments involve risk, including loss of principal.
2. Includes Ares Management Corporation (“ARES”) principal and originating offices where real estate activities take place.
3. In Spain and Germany, Ares Real Estate Group does not maintain a physical office, but has an investment professional dedicated to this market.
4. Non-Ares location providing administrative and support functions to the Ares Real Estate Group
Confidential – Not for Publication or Distribution 29Significant Fund Performance Metrics
The following table presents the performance data for the significant fund in the Credit Group that is not a drawdown fund:
As of September 30, 2019
Returns (%)(1)
Current Quarter Year-To-Date Since Inception(2)
Year of Inception AUM (in millions) Gross Net Gross Net Gross Net Investment Strategy
ARCC(3) 2004 $16,977 N/A 2.4% N/A 8.4% N/A 11.8% U.S. Direct Lending
Note: Past performance is not indicative of future results. AUM and Net Returns are as of September 30, 2019 unless otherwise noted. The above table includes fund performance metrics for significant funds
which includes those that contributed at least 1% of total management fees for the nine months ended September 30, 2019 or comprised 1% or more of Ares' total FPAUM as of September 30, 2019, and for which
we have sole discretion for investment decisions within the fund. Please see significant fund performance endnotes on slides 37-38 for additional information. Return information presented may not reflect actual
returns earned by investors in the applicable fund. ARCC is a publicly traded vehicle.
30
Confidential – Not for Publication or DistributionSignificant Fund Performance Metrics (cont’d)
The following table presents the performance data for all our significant drawdown funds:
As of September 30, 2019
Credit
Cumulative MOIC IRR
Year of Original Capital Invested Realized Unrealized
($ in millions) Inception AUM Commitments Capital Proceeds(4) Value(5) Total Value Gross(6) Net(7) Gross(8) Net(9) Primary Investment Strategy
CSF III 2010 $1,152 $1,135 $1,209 $617 $1,128 $1,745 1.5x 1.4x 9.1% 7.8% European & U.S. Direct Lending
ACE III(10) 2015 4,859 2,822 2,428 535 2,501 3,036 1.3x 1.2x 13.7% 10.1% European Direct Lending
PCS 2017 3,592 3,365 1,678 130 1,776 1,906 1.2x 1.1x 13.6% 9.5% U.S Direct Lending
ACE IV Unlevered(11) 2,851 1,190 20 1,234 1,254 1.1x 1.1x 13.3% 9.7%
2018 8,745 European Direct Lending
ACE IV Levered(11) 4,819 2,007 50 2,127 2,177 1.1x 1.1x 20.3% 15.1%
SDL Unlevered(12) 922 170 3 175 178 1.1x 1.0x N/A N/A
2018 4,202 U.S Direct Lending
SDL Levered(12) 2,045 377 7 398 405 1.1x 1.1x N/A N/A
Private Equity
Cumulative MOIC IRR
Year of Original Capital Invested Realized Unrealized
($ in millions) Inception AUM Commitments Capital Proceeds(1) Value(2) Total Value Gross(3) Net(4) Gross(5) Net(6) Primary Investment Strategy
ACOF III 2008 $3,155 $3,510 $3,908 $7,659 $2,893 $10,552 2.7x 2.3x 29.1% 20.9% Corporate Private Equity
USPF IV 2010 1,618 1,688 2,120 1,227 1,581 2,808 1.3x 1.2x 8.4% 5.0% Infrastructure and Power
ACOF IV 2012 5,625 4,700 4,180 2,709 4,882 7,591 1.8x 1.6x 18.3% 11.8% Corporate Private Equity
EIF V 2015 855 801 794 275 690 965 1.2x 1.1x 14.3% 8.0% Infrastructure and Power
SSF IV(7) 2015 1,545 1,515 3,050 1,676 1,341 3,017 1.0x 0.9x (1.0)% (2.9)% Special Opportunities
ACOF V 2017 8,420 7,850 5,669 186 6,481 6,667 1.2x 1.1x 15.8% 8.0% Corporate Private Equity
First flagship energy
opportunities fund* 2018 1,125 1,000 733 6 902 908 1.2x 1.1x N/A N/A Energy Opportunities
Real Estate
Cumulative MOIC IRR
Year of Original Capital Invested Realized Unrealized
($ in millions) Inception AUM Commitments Capital Proceeds(1) Value(2) Total Value Gross(3) Net(4) Gross(5) Net(6) Primary Investment Strategy
EF IV(7) 2014 $1,029 $1,302 $1,087 $821 $881 1,702 1.6x 1.3x 19.2% 13.5% European Real Estate Equity
US IX* 2017 1,035 1,040 687 26 680 706 1.1x 1.0x N/A N/A U.S. Real Estate Equity
EF V(8)* 2018 1,921 1,968 339 41 336 377 1.1x 1.0x N/A N/A European Real Estate Equity
Note: Past performance is not indicative of future results. AUM and Net Returns are as of September 30, 2019 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 nine months ended September 30, 2019 or comprised 1% or more of Ares' total FPAUM as
of September 30, 2019, and for which we have sole discretion for investment decisions within the fund. Please see significant fund performance endnotes on slides 37-38 for additional
information. Return information presented may not reflect actual returns earned by investors in the applicable fund.
* We do not present fund performance metrics for significant funds with less than two years of investment performance, which begins on the date of the fund's first investment, except for
those significant funds which pay management fees on invested capital, in which case performance is shown at the earlier of (i) the one year anniversary of the fund's first investment or (ii) the
date on which the fund has invested at least 50% of its capital.
31
Confidential – Not for Publication or DistributionGAAP Statements of Operations
$ in thousands, except share data For the Nine Months Ended Year Ended December 31,
9.30.19 9.30.18 2018 2017 2016 2015 2014
Revenues
Management fees $714,096 $588,071 $802,502 $722,419 $642,068 $634,399 $486,477
Carried interest allocation 503,808 72,587 42,410 620,454 494,580 146,038 63,884
Incentive fees 28,747 13,683 63,380 16,220 23,272 4,577 27,528
Principal investment income (loss) 45,992 (684) (1,455) 64,444 55,168 11,290 6,527
Administrative, transaction and other fees 35,866 37,372 51,624 56,406 39,285 29,428 26,000
Total revenues 1,328,509 711,029 958,461 1,479,943 1,254,373 825,732 610,416
Expenses
Compensation and benefits 485,232 419,225 570,380 514,109 447,725 414,454 456,372
Performance related compensation 388,424 30,479 30,254 479,722 387,846 111,683 170,028
General, administrative and other expenses 195,988 155,523 215,964 196,730 159,776 224,798 166,839
Transaction support expense — — — 275,177 — — —
Expenses of Consolidated Funds 30,865 49,261 53,764 39,020 21,073 18,105 66,800
Total expenses 1,100,509 654,488 870,362 1,504,758 1,016,420 769,040 860,039
Other income (expense)
Net realized and unrealized gains (losses) on investments 5,519 7,970 (1,884) 8,262 (7,629) 12,913 26,206
Interest and dividend income 5,526 6,511 7,028 7,043 4,493 6,851 6,639
Interest expense (16,073) (17,088) (21,448) (21,219) (17,981) (18,949) (8,617)
Debt extinguishment expense — — — — — (11,641) —
Other income (expense), net (1,570) (1,487) (851) 19,470 35,650 21,680 (2,422)
Net realized and unrealized gains (losses) on investments of Consolidated Funds 3,256 26,839 (1,583) 100,124 (2,057) (24,616) 513,270
Interest and other income of Consolidated Funds 303,312 250,117 337,875 187,721 138,943 117,373 937,835
Interest expense of Consolidated Funds (204,051) (163,942) (222,895) (126,727) (91,452) (78,819) (666,373)
Total other income 95,919 108,920 96,242 174,674 59,967 24,792 806,538
Income (loss) before taxes 323,919 165,461 184,341 149,859 297,920 81,484 556,915
Income tax expense (benefit) 35,590 29,659 32,202 (23,052) 11,019 19,064 11,253
Net income 288,329 135,802 152,139 172,911 286,901 62,420 545,662
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds
41,878 23,418 20,512 60,818 3,386 (5,686) 417,793
Less: Net income attributable to redeemable interests in Consolidated Funds — — — — — — 2,565
Less: Net income attributable to redeemable interests in Ares Operating Group entities
— — — — 456 338 731
Less: Net income attributable to non-controlling interests in Ares Operating Group entities 136,032 67,301 74,607 35,915 171,251 48,390 89,585
Net income attributable to Ares Management Corporation 110,419 45,083 57,020 76,178 111,808 19,378 34,988
Less: Series A Preferred Stock dividends paid 16,275 16,275 21,700 21,700 12,176 — —
Net income attributable to Ares Management Corporation Class A common stockholders $94,144 $28,808 $35,320 $54,478 $99,632 $19,378 $34,988
Net income attributable to Ares Management Corporation per share of Class A common stock:
Basic $0.84 $0.25 $0.30 $0.62 $1.22 $0.23 $0.43
Diluted $0.81 $0.25 $0.30 $0.62 $1.20 $0.23 $0.43
Weighted-average shares of class A common stock:
Basic 105,546,219 94,168,582 96,023,147 81,838,007 80,749,671 80,673,360 80,358,036
Diluted 116,418,136 94,168,582 96,023,147 81,838,007 82,937,030 80,673,360 80,358,036
Dividend declared and paid per share of Class A common stock $0.96 $1.05 $1.33 $1.13 $0.83 $0.88 $0.42
32RI and Other Measures Financial Summary
$ in thousands, except share data (unless otherwise noted) For the Nine Months Ended Year Ended December 31,
9.30.2019 9.30.2018 2018 2017 2016 2015 2014
(1)
Management fees $739,269 $612,792 $836,744 $744,825 $659,451 $650,918 $598,046
Other fees 13,029 17,166 24,288 22,431 12,351 4,599 6,300
Compensation and benefits expenses(2) (391,247) (333,487) (456,255) (413,735) (384,715) (360,622) (354,362)
General, administrative and other expenses(3) (126,083) (109,559) (149,465) (136,531) (114,737) (117,903) (102,720)
Fee Related Earnings $234,968 $186,912 $255,315 $216,990 $172,350 $176,992 $147,264
Realized net performance income $35,393 $54,510 $105,610 $75,457 $94,734 $56,757 $65,895
Realized net investment income 26,989 30,123 34,474 32,993 33,244 24,836 59,660
Realized Income $297,350 $271,545 $395,396 $325,440 $300,328 $258,585 $272,819
After-tax Realized Income, net of Series A Preferred Stock dividends (4) $256,582 $239,584 $345,926 $273,624 $248,686 $224,417 $242,849
After-tax Realized Income per share of Class A common stock, net of Series A Preferred Stock
$1.01 $1.01 $1.42 $1.08 $0.98 $0.83 $0.93
Dividend(5)
Other Data
Total fee revenue(6) $774,662 $667,302 $942,354 $820,282 $754,185 $707,675 $662,941
Effective management fee rate(7) 1.09% 1.06% 1.07% 1.06% 1.09% 1.15% 1.17%
Note: All historical filings can be found on the SEC’s website.
1. Includes ARCC Part I Fees of $116.3 million and $91.7 million for YTD 2019 and YTD 2018, respectively.
2. Includes compensation and benefits expenses attributable to the Operations Management Group of $100.7 million and $92.8 million for YTD 2019 and YTD 2018, respectively, which are not allocated to
an operating segment.
3. Includes G&A expenses attributable to Operations Management Group of $61.9 million and $55.7 million for YTD 2019 and YTD 2018, respectively, which are not allocated to an operating segment.
4. For the nine months ended September 30, 2019 and 2018, after-tax Realized Income includes current income tax related to: (i) realized performance income of $7.0 million and $8.4 million, respectively
and (ii) FRE of $17.4 million and $7.2 million, respectively. Of the current tax related to FRE, this includes (a) entity level taxes of $4.7 million and $6.2 million, respectively, and (iv) corporate level tax
expense of $12.7 million, and $1.0 million, respectively.
5. Calculation of after-tax Realized Income per share of Class A common stock uses total average shares of Class A common stock outstanding and proportional dilutive effects of the Ares' equity-based
awards.
6. Total fee revenue is calculated as management fees plus realized net performance income.
7. Effective management fee rate represents the quotient of management fees and the aggregate fee bases for the periods presented. The effective rate shown excludes the effect of one-time catch-up
fees.
33GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
$ in thousands For the Nine Months Ended Year Ended December 31,
9.30.19 9.30.18 2018 2017 2016 2015 2014
Realized Income and Fee Related Earnings:
Income (loss) before taxes $323,919 $165,461 $184,341 $149,859 $297,920 $81,484 $556,915
Adjustments:
Depreciation and amortization expense 35,609 20,234 25,087 30,481 34,853 53,169 34,956
Equity compensation expenses(1) 73,974 67,534 89,724 69,711 39,065 32,244 83,230
Acquisition and merger-related expenses 10,757 (19) 2,936 259,899 (16,902) 34,864 11,043
Placement fees and underwriting costs 17,319 9,710 20,343 19,765 6,424 8,825 14,753
Offering costs — 3 3 688 — — —
Other (income) expense, net(2) (460) 13,561 13,486 (1,730) (1,728) 110 3,384
Net expense of non-controlling interests in consolidated subsidiaries 2,608 2,178 3,343 1,739 — — —
(Income) loss before taxes of non-controlling interests in Consolidated Funds, net of
(41,178) (23,500) (20,643) (62,705) (2,649) 5,682 (415,075)
eliminations
Unconsolidated performance (income) loss – unrealized (426,411) 127,224 247,212 (325,915) (228,472) (31,647) (94,883)
Unconsolidated performance related compensation – unrealized 311,936 (132,294) (221,343) 237,392 189,582 46,492 89,429
Unconsolidated net investment (income) loss – unrealized (10,723) 21,453 50,907 (53,744) (17,765) 27,362 (10,933)
Realized Income $297,350 $271,545 $395,396 $325,440 $300,328 $258,585 $272,819
Unconsolidated performance income - realized $(111,881) $(217,283) $(357,207) $(317,787) $(292,998) $(121,948) $(146,494)
Unconsolidated performance related compensation - realized 76,488 162,773 251,597 242,330 198,264 65,191 80,599
Unconsolidated net investment income - realized (26,989) (30,123) (34,474) (32,993) (33,244) (24,836) (59,660)
Fee Related Earnings $234,968 $186,912 $255,312 $216,990 $172,350 $176,992 $147,264
Note: This table is a reconciliation of income before provision for income taxes on a GAAP basis to RI and FRE on an unconsolidated 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.
1. For the nine months ended September 30, 2019 and 2018, equity compensation expense was attributable to the following: (i) IPO awards and other non-recurring awards of $31.0 million and
$40.0 million, respectively; (ii) annual bonus awards of $20.9 million and $14.6 million, respectively; and (iii) discretionary awards of $22.1 million and $12.9 million, respectively.
2. 2018 period includes $11.8 million payment to ARCC for rent and utilities for the years ended 2017, 2016, 2015 and 2014, and the first quarter of 2018.
34GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.)
$ in thousands For the Nine Months Ended Year Ended December 31,
9.30.19 9.30.18 2018 2017 2016 2015 2014
Performance income and net investment income reconciliation:
Carried interest allocation $503,808 $72,587 $42,410 $620,454 $494,580 $146,038 $63,884
Incentive fees 28,747 13,683 63,380 16,220 23,272 4,577 27,528
Carried interest allocation and incentive fees $532,555 $86,270 $105,790 $636,674 $517,852 $150,615 $91,412
Performance income - realized earned from Consolidated Funds $5,184 $4,000 4,000 8,089 — 1,769 95,308
Performance income (loss) - reclass (1) 533 (211) 205 1,936 $2,479 7,398 14,587
Unconsolidated performance (income) loss - unrealized (426,411) 127,224 247,212 (325,915) (228,472) (31,647) (94,883)
Performance (income) loss - unrealized earned from Consolidated Funds — — — (2,997) 1,139 (6,187) 40,070
Performance income - realized $111,881 $217,283 $357,207 $317,787 $292,998 $121,948 $146,494
Total consolidated other income (expense) $95,919 $108,920 $96,242 $174,674 $59,967 $24,792 $806,538
Net investment income from Consolidated Funds (102,499) (111,710) (115,151) (153,810) (37,484) (16,455) (780,490)
Performance (income) loss - reclass (1) (553) 211 (205) (1,936) (2,479) (7,398) (14,587)
Principal investment income 45,336 9,544 1,047 89,031 50,408 2,043 55,748
Change in value of contingent consideration — — — (20,156) (17,675) (21,064) —
Other (income) expense, net (460) 1,725 1,650 (1,730) (1,728) 110 3,384
Merger-related expenses — — — — — 15,446 —
Offering costs — 3 3 688 — — —
Other income of non-controlling interests in consolidated subsidiaries (31) (23) (19) (24) — — —
Investment (income) loss - unrealized (13,415) 21,046 50,809 (55,487) (14,456) 27,362 (10,935)
Interest and other investment (income) loss - unrealized 2,692 407 98 1,743 (3,309) — —
Total realized net investment income $26,989 $30,123 $34,474 $32,993 $33,244 $24,836 $59,658
Note: These tables reconcile consolidated carried interest allocation and incentive fees reported in accordance with GAAP to unconsolidated realized performance income and consolidated GAAP other
income to unconsolidated realized net investment income. 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 income for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within net realized and unrealized gains on investments in Ares' Consolidated
Statements of Operations.
35AUM and FPAUM Fee Basis Analysis
Components of AUM
$ in millions
Q3-19 Q4-18 Q3-18
$1,828 $1,871 $1,762
$22,783 $18,742 $18,119
$26,370 $28,180 $25,834
$93,317 $81,870 $79,364
AUM: $144,298 AUM: $130,663 AUM: $125,079
(1)
Fee Paying AUM AUM Not Yet Earnings Fees Non-Fee Paying General Partner and Affiliates
FPAUM by Fee Basis
$ in millions
Q3-19 Q4-18 Q3-18
$17,421 $12,532 $13,250 $12,024
$15,618 $15,373
$33,069 $24,935
$26,474
$30,295 $26,528
$27,032
FPAUM: $93,317 FPAUM: $81,870 FPAUM: $79,364
Capital Commitments Invested Capital Market Value/Other Collateral Balances (at par)
1. Includes $7.6 billion, $6.7 billion and $6.7 billion of AUM of funds from which we indirectly earn management fees as of September 30, 2019, December 31, 2018 and September 30,
2018, respectively. 36Significant Fund Performance Metrics Endnotes
Credit
1. 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.
2. Since inception returns are annualized.
3. 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.
4. 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.
5. 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.
6. 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 carried interest. The gross MoIC is before giving effect to management fees, carried interest, other expenses and taxes, as
applicable.
7. 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 carried interest. The net MoIC is after giving effect to management fees, carried interest, as applicable, and other expenses. The funds may utilize a credit
facility during the investment period and for general cash management purposes. The net MoIC would have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
8. 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 carried interest. The cash
flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, other expenses and taxes, as
applicable.
9. 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 which does not pay management fees or carried interest. 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, carried interest, as applicable, and other expenses. The
funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would likely have been lower had such fund called capital from its limited partners
instead of utilizing the credit facility.
10. ACE III is made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net IRR and MoIC presented in the chart are for the Euro denominated feeder fund. The
gross and net IRR for the U.S. dollar denominated feeder fund are 15.1% and 11.4%, respectively. The gross and net MoIC for the U.S. dollar 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 III are for the combined fund and are converted to U.S. dollars at the
prevailing quarter-end exchange rate.
11. ACE IV is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE IV (E) Unlevered, ACE IV (G) Unlevered, ACE IV (E) Levered, and ACE IV (G) Levered. The gross and
net IRR and MoIC presented in the chart are for ACE IV (E) Unlevered and ACE IV (E) Levered. Metrics for ACE IV (E) Levered are inclusive of a U.S. dollar denominated feeder fund, which has not been presented
separately. The gross and net IRR for ACE IV (G) Unlevered are 16.6% and 11.0%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.1x and 1.1.x, respectively. The gross and net IRR for ACE IV
(G) Levered are 22.0% and 15.7%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.1x and 1.1.x, 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 IV Unlevered and ACE IV Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the
prevailing quarter-end exchange rate.
12. Given the limited amount of time that has elapsed from the date of the first capital call, gross and net fund-level IRRs for SDL Unlevered and SDL Levered have been omitted as such information would not
currently be meaningful for investors.
Private Equity
1. Realized proceeds represent the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments. Realized proceeds excludes any proceeds related
to bridge financings.
2. Unrealized value represents the fair market value of remaining investments. Unrealized value does not take into account any bridge financings. There can be no assurance that unrealized investments will be
realized at the valuations indicated.
3. 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, carried interest, other expenses and taxes, as
applicable. The gross MoIC for the corporate private equity funds is also calculated before giving effect to any bridge financings. Inclusive of bridge financings, gross MoIC would be 1.7x for ACOF IV and 1.2x for
ACOF V.
4. The net MoIC for the infrastructure and power and SSF IV 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 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, carried interest, as applicable, and other expenses. The funds may utilize a credit facility during the investment period and for
general cash management purposes. The net MoIC would have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
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