CONSOLIDATION |
CONSOLIDATION
Investments in Consolidated Variable Interest Entities The Company consolidates entities in which the Company has a variable interest and, as the general partner or investment manager, has both the power to direct the most significant activities and a potentially significant economic interest. Investments in the consolidated VIEs are reported at their carrying value, which approximates fair value, and represents the Company’s maximum exposure to loss. Investments in Non-Consolidated Variable Interest Entities The Company holds interests in certain VIEs that are not consolidated as the Company is not the primary beneficiary. The Company's interest in such entities generally is in the form of direct equity interests, fixed fee arrangements or both. The maximum exposure to loss represents the potential loss of assets by the Company relating to these non-consolidated entities. Investments in the non-consolidated VIEs are carried at fair value. The Company's interests and the Consolidated Funds' interests in consolidated and non-consolidated VIEs, as presented in the Condensed Consolidated Statements of Financial Condition, and their respective maximum exposure to loss relating to non-consolidated VIEs are as follows: | | | | | | | | | | As of September 30, | | As of December 31, | | 2018 | | 2017 | Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs | $ | 206,850 |
| | $ | 251,376 |
| Maximum exposure to loss attributable to the Company's investment in consolidated VIEs | 190,316 |
| | 175,620 |
| Assets of consolidated VIEs | 8,404,540 |
| | 6,231,245 |
| Liabilities of consolidated VIEs | 7,649,028 |
| | 5,538,054 |
|
| | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | | 2018 | | 2017 | | 2018 | | 2017 | Net income attributable to non-controlling interests related to consolidated VIEs | $ | 13,169 |
| | $ | 18,195 |
| | $ | 23,418 |
| | $ | 25,403 |
|
CONSOLIDATING SCHEDULES The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company's financial condition as of September 30, 2018 and December 31, 2017 and results from operations for the three and nine months ended September 30, 2018 and 2017. | | | | | | | | | | | | | | | | | | As of September 30, 2018 | | Consolidated Company Entities | | Consolidated Funds | | Eliminations | | Consolidated | Assets | |
| | |
| | |
| | |
| Cash and cash equivalents | $ | 122,192 |
| | $ | — |
| | $ | — |
| | $ | 122,192 |
| Investments ($947,267 of accrued carried interest) | 1,605,964 |
| | — |
| | (190,316 | ) | | 1,415,648 |
| Due from affiliates | 191,983 |
| | — |
| | (7,997 | ) | | 183,986 |
| Deferred tax asset, net | 16,240 |
| | — |
| | — |
| | 16,240 |
| Other assets | 102,411 |
| | — |
| | — |
| | 102,411 |
| Intangible assets, net | 32,756 |
| | — |
| | — |
| | 32,756 |
| Goodwill | 143,827 |
| | — |
| | — |
| | 143,827 |
| Assets of Consolidated Funds | |
| | |
| | |
| |
|
| Cash and cash equivalents | — |
| | 760,581 |
| | — |
| | 760,581 |
| Investments, at fair value | — |
| | 7,515,383 |
| | — |
| | 7,515,383 |
| Due from affiliates | — |
| | 14,658 |
| | — |
| | 14,658 |
| Dividends and interest receivable | — |
| | 16,534 |
| | — |
| | 16,534 |
| Receivable for securities sold | — |
| | 95,490 |
| | — |
| | 95,490 |
| Other assets | — |
| | 1,894 |
| | — |
| | 1,894 |
| Total assets | $ | 2,215,373 |
| | $ | 8,404,540 |
| | $ | (198,313 | ) | | $ | 10,421,600 |
| Liabilities | |
| | |
| | |
| | |
| Accounts payable, accrued expenses and other liabilities | $ | 76,648 |
| | $ | — |
| | $ | — |
| | $ | 76,648 |
| Accrued compensation | 127,481 |
| | — |
| | — |
| | 127,481 |
| Due to affiliates | 59,456 |
| | — |
| | — |
| | 59,456 |
| Performance related compensation payable | 688,100 |
| | — |
| | — |
| | 688,100 |
| Debt obligations | 350,789 |
| | — |
| | — |
| | 350,789 |
| Liabilities of Consolidated Funds | |
| | |
| | |
| |
|
| Accounts payable, accrued expenses and other liabilities | — |
| | 77,752 |
| | — |
| | 77,752 |
| Due to affiliates | — |
| | 7,997 |
| | (7,997 | ) | | — |
| Payable for securities purchased | — |
| | 531,615 |
| | — |
| | 531,615 |
| CLO loan obligations, at fair value | — |
| | 6,897,920 |
| | (13,224 | ) | | 6,884,696 |
| Fund borrowings | — |
| | 133,744 |
| | — |
| | 133,744 |
| Total liabilities | 1,302,474 |
| | 7,649,028 |
| | (21,221 | ) | | 8,930,281 |
| Commitments and contingencies |
|
| |
|
| |
|
| |
|
| Preferred equity (12,400,000 shares issued and outstanding) | 298,761 |
| | — |
| | — |
| | 298,761 |
| Non-controlling interest in Consolidated Funds | — |
| | 755,512 |
| | (177,092 | ) | | 578,420 |
| Non-controlling interest in Ares Operating Group entities | 319,820 |
| | — |
| | — |
| | 319,820 |
| Controlling interest in Ares Management, L.P.: | |
| | |
| | |
| |
|
| Shareholders' equity (101,489,282 shares issued and outstanding) | 301,721 |
| | — |
| | — |
| | 301,721 |
| Accumulated other comprehensive loss, net of tax | (7,403 | ) | | — |
| | — |
| | (7,403 | ) | Total controlling interest in Ares Management, L.P. | 294,318 |
| | — |
| | — |
| | 294,318 |
| Total equity | 912,899 |
|
| 755,512 |
|
| (177,092 | ) |
| 1,491,319 |
| Total liabilities and equity | $ | 2,215,373 |
|
| $ | 8,404,540 |
|
| $ | (198,313 | ) |
| $ | 10,421,600 |
|
| | | | | | | | | | | | | | | | | | As of December 31, 2017 | | As adjusted | | Consolidated Company Entities | | Consolidated Funds | | Eliminations | | Consolidated | Assets | | | |
| | |
| | |
| Cash and cash equivalents | $ | 118,929 |
| | $ | — |
| | $ | — |
| | $ | 118,929 |
| Investments ($1,077,236 of accrued carried interest) | 1,900,191 |
| | — |
| | (175,620 | ) | | 1,724,571 |
| Due from affiliates | 171,701 |
| | — |
| | (5,951 | ) | | 165,750 |
| Deferred tax asset, net | 8,326 |
| | — |
| | — |
| | 8,326 |
| Other assets | 135,674 |
| | — |
| | (5,333 | ) | | 130,341 |
| Intangible assets, net | 40,465 |
| | — |
| | — |
| | 40,465 |
| Goodwill | 143,895 |
| | — |
| | — |
| | 143,895 |
| Assets of Consolidated Funds | | | |
| | |
| |
|
| Cash and cash equivalents | — |
| | 556,500 |
| | — |
| | 556,500 |
| Investments, at fair value | — |
| | 5,582,842 |
| | — |
| | 5,582,842 |
| Due from affiliates | — |
| | 15,884 |
| | — |
| | 15,884 |
| Dividends and interest receivable | — |
| | 12,568 |
| | — |
| | 12,568 |
| Receivable for securities sold | — |
| | 61,462 |
| | — |
| | 61,462 |
| Other assets | — |
| | 1,989 |
| | — |
| | 1,989 |
| Total assets | $ | 2,519,181 |
|
| $ | 6,231,245 |
|
| $ | (186,904 | ) |
| $ | 8,563,522 |
| Liabilities | | | |
| | |
| | |
| Accounts payable, accrued expenses and other liabilities | $ | 81,955 |
| | $ | — |
| | $ | — |
| | $ | 81,955 |
| Accrued compensation | 27,978 |
| | — |
| | — |
| | 27,978 |
| Due to affiliates | 39,184 |
| | — |
| | — |
| | 39,184 |
| Performance related compensation payable | 822,084 |
| | — |
| | — |
| | 822,084 |
| Debt obligations | 616,176 |
| | — |
| | — |
| | 616,176 |
| Liabilities of Consolidated Funds | | | |
| | |
| |
|
| Accounts payable, accrued expenses and other liabilities | — |
| | 64,316 |
| | — |
| | 64,316 |
| Due to affiliates | — |
| | 11,285 |
| | (11,285 | ) | | — |
| Payable for securities purchased | — |
| | 350,145 |
| | — |
| | 350,145 |
| CLO loan obligations, at fair value | — |
| | 4,974,110 |
| | (10,916 | ) | | 4,963,194 |
| Fund borrowings | — |
| | 138,198 |
| | — |
| | 138,198 |
| Total liabilities | 1,587,377 |
|
| 5,538,054 |
|
| (22,201 | ) |
| 7,103,230 |
| Commitments and contingencies |
|
| |
|
| |
|
| |
|
| Preferred equity (12,400,000 shares issued and outstanding) | 298,761 |
| | — |
| | — |
| | 298,761 |
| Non-controlling interest in Consolidated Funds | — |
| | 693,191 |
| | (164,703 | ) | | 528,488 |
| Non-controlling interest in Ares Operating Group entities | 358,186 |
| | — |
| | — |
| | 358,186 |
| Controlling interest in Ares Management, L.P.: | |
| | |
| | |
| | |
| Shareholders' equity (82,280,033 shares issued and outstanding) | 279,065 |
| | — |
| | — |
| | 279,065 |
| Accumulated other comprehensive loss, net of tax | (4,208 | ) | | — |
| | — |
| | (4,208 | ) | Total controlling interest in Ares Management, L.P. | 274,857 |
| | — |
| | — |
| | 274,857 |
| Total equity | 931,804 |
|
| 693,191 |
|
| (164,703 | ) |
| 1,460,292 |
| Total liabilities and equity | $ | 2,519,181 |
|
| $ | 6,231,245 |
|
| $ | (186,904 | ) | | $ | 8,563,522 |
|
| | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, 2018 | | Consolidated Company Entities | | Consolidated Funds | | Eliminations | | Consolidated | Revenues | |
| | |
| | |
| | |
| Management fees (includes ARCC Part I Fees of $33,377) | $ | 213,662 |
| | $ | — |
| | $ | (9,138 | ) | | $ | 204,524 |
| Carried interest allocation | 31,902 |
| |
|
| | — |
| | 31,902 |
| Incentive fees | 872 |
| |
|
| | — |
| | 872 |
| Principal investment income | (7,886 | ) | | — |
| | 422 |
| | (7,464 | ) | Administrative, transaction and other fees | 10,943 |
| | — |
| | — |
| | 10,943 |
| Total revenues | 249,493 |
|
| — |
|
| (8,716 | ) |
| 240,777 |
| Expenses | |
| | |
| | |
| | | Compensation and benefits | 145,594 |
| | — |
| | — |
| | 145,594 |
| Performance related compensation | 17,606 |
| | — |
| | — |
| | 17,606 |
| General, administrative and other expense | 51,155 |
| | — |
| | — |
| | 51,155 |
| Expenses of the Consolidated Funds | — |
| | 21,971 |
| | (9,138 | ) | | 12,833 |
| Total expenses | 214,355 |
|
| 21,971 |
|
| (9,138 | ) |
| 227,188 |
| Other income (expense) | |
| | |
| | |
| | | Net realized and unrealized gain on investments | 6,540 |
| | — |
| | (998 | ) | | 5,542 |
| Interest and dividend income | 901 |
| | — |
| | (93 | ) | | 808 |
| Interest expense | (4,143 | ) | | — |
| | — |
| | (4,143 | ) | Other income, net | 725 |
| | — |
| | 86 |
| | 811 |
| Net realized and unrealized gain on investments of the Consolidated Funds | — |
| | 4,686 |
| | 751 |
| | 5,437 |
| Interest and other income of the Consolidated Funds | — |
| | 93,062 |
| | — |
| | 93,062 |
| Interest expense of the Consolidated Funds | — |
| | (63,103 | ) | | 340 |
| | (62,763 | ) | Total other income | 4,023 |
|
| 34,645 |
|
| 86 |
|
| 38,754 |
| Income before taxes | 39,161 |
|
| 12,674 |
|
| 508 |
|
| 52,343 |
| Income tax expense | 5,118 |
| | 13 |
| | — |
| | 5,131 |
| Net income | 34,043 |
|
| 12,661 |
|
| 508 |
|
| 47,212 |
| Less: Net income attributable to non-controlling interests in Consolidated Funds | — |
| | 12,661 |
| | 508 |
| | 13,169 |
| Less: Net income attributable to non-controlling interests in Ares Operating Group entities | 18,133 |
| | — |
| | — |
| | 18,133 |
| Net income attributable to Ares Management, L.P. | 15,910 |
|
| — |
|
| — |
|
| 15,910 |
| Less: Preferred equity dividend paid | 5,425 |
| | — |
| | — |
| | 5,425 |
| Net income attributable to Ares Management, L.P. common shareholders | $ | 10,485 |
|
| $ | — |
|
| $ | — |
|
| $ | 10,485 |
|
| | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, 2017 | | As adjusted | | Consolidated Company Entities | | Consolidated Funds | | Eliminations | | Consolidated | Revenues | |
| | |
| | |
| | |
| Management fees (includes ARCC Part I Fees of $24,036) | $ | 188,628 |
| | $ | — |
| | $ | (5,451 | ) | | $ | 183,177 |
| Carried interest allocation | 82,534 |
| | — |
| | — |
| | 82,534 |
| Incentive fees | 5,845 |
| | — |
| | (1,371 | ) | | 4,474 |
| Principal investment income | 14,374 |
| | — |
| | (9,643 | ) | | 4,731 |
| Administrative, transaction and other fees | 13,486 |
| | — |
| | — |
| | 13,486 |
| Total revenues | 304,867 |
|
| — |
|
| (16,465 | ) |
| 288,402 |
| Expenses | |
| | |
| | |
| | | Compensation and benefits | 129,347 |
| | — |
| | — |
| | 129,347 |
| Performance related compensation | 58,637 |
| | — |
| | — |
| | 58,637 |
| General, administrative and other expense | 47,104 |
| | — |
| | — |
| | 47,104 |
| Expenses of the Consolidated Funds | — |
| | 25,862 |
| | (6,823 | ) | | 19,039 |
| Total expenses | 235,088 |
|
| 25,862 |
|
| (6,823 | ) |
| 254,127 |
| Other income (expense) | |
| | |
| | |
| | | Net realized and unrealized gain on investments | 5,101 |
| | — |
| | (872 | ) | | 4,229 |
| Interest and dividend income | 1,986 |
| | — |
| | (225 | ) | | 1,761 |
| Interest expense | (5,343 | ) | | — |
| | — |
| | (5,343 | ) | Other expense, net | (2,492 | ) | | — |
| | — |
| | (2,492 | ) | Net realized and unrealized gain on investments of the Consolidated Funds | — |
| | 48,058 |
| | (12,118 | ) | | 35,940 |
| Interest and other income of the Consolidated Funds | — |
| | 48,181 |
| | — |
| | 48,181 |
| Interest expense of Consolidated Funds | — |
| | (41,012 | ) | | 12,885 |
| | (28,127 | ) | Total other income (expense) | (748 | ) | | 55,227 |
| | (330 | ) | | 54,149 |
| Income before taxes | 69,031 |
|
| 29,365 |
|
| (9,972 | ) |
| 88,424 |
| Income tax expense | 3,354 |
| | 1,198 |
| | — |
| | 4,552 |
| Net income | 65,677 |
| | 28,167 |
| | (9,972 | ) | | 83,872 |
| Less: Net income attributable to non-controlling interests in Consolidated Funds | — |
| | 28,167 |
| | (9,972 | ) | | 18,195 |
| Less: Net income attributable to non-controlling interests in Ares Operating Group entities | 37,839 |
| | — |
| | — |
| | 37,839 |
| Net income attributable to Ares Management, L.P. | 27,838 |
|
| — |
|
| — |
|
| 27,838 |
| Less: Preferred equity dividend paid | 5,425 |
| | — |
| | — |
| | 5,425 |
| Net income attributable to Ares Management, L.P. common shareholders | $ | 22,413 |
|
| $ | — |
|
| $ | — |
|
| $ | 22,413 |
|
| | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, 2018 | | Consolidated Company Entities | | Consolidated Funds | | Eliminations | | Consolidated | Revenues | |
| | |
| | |
| | |
| Management fees (includes ARCC Part I Fees of $91,660) | $ | 612,792 |
| | $ | — |
| | $ | (24,721 | ) | | $ | 588,071 |
| Carried interest allocation | 72,587 |
| | — |
| | — |
| | 72,587 |
| Incentive fees | 17,683 |
| | — |
| | (4,000 | ) | | 13,683 |
| Principal investment income | 9,544 |
| | — |
| | (10,228 | ) | | (684 | ) | Administrative, transaction and other fees | 37,372 |
| | — |
| | — |
| | 37,372 |
| Total revenues | 749,978 |
|
| — |
|
| (38,949 | ) |
| 711,029 |
| Expenses | |
| | |
| | |
| | | Compensation and benefits | 419,225 |
| | — |
| | — |
| | 419,225 |
| Performance related compensation | 30,479 |
| | — |
| | — |
| | 30,479 |
| General, administrative and other expense | 155,523 |
| | — |
| | — |
| | 155,523 |
| Expenses of the Consolidated Funds | — |
| | 77,982 |
| | (28,721 | ) | | 49,261 |
| Total expenses | 605,227 |
|
| 77,982 |
|
| (28,721 | ) |
| 654,488 |
| Other income (expense) | |
| | |
| | |
| | | Net realized and unrealized gain on investments | 9,800 |
| | — |
| | (1,830 | ) | | 7,970 |
| Interest and dividend income | 6,604 |
| | — |
| | (93 | ) | | 6,511 |
| Interest expense | (17,088 | ) | | — |
| | — |
| | (17,088 | ) | Other expense, net | (2,106 | ) | | — |
| | 619 |
| | (1,487 | ) | Net realized and unrealized gain on investments of the Consolidated Funds | — |
| | 26,053 |
| | 786 |
| | 26,839 |
| Interest and other income of the Consolidated Funds | — |
| | 250,117 |
| | — |
| | 250,117 |
| Interest expense of consolidated Funds | — |
| | (165,080 | ) | | 1,138 |
| | (163,942 | ) | Total other income (expense) | (2,790 | ) |
| 111,090 |
|
| 620 |
|
| 108,920 |
| Income before taxes | 141,961 |
|
| 33,108 |
|
| (9,608 | ) |
| 165,461 |
| Income tax expense | 29,577 |
| | 82 |
| | — |
| | 29,659 |
| Net income | 112,384 |
|
| 33,026 |
|
| (9,608 | ) |
| 135,802 |
| Less: Net income attributable to non-controlling interests in Consolidated Funds | — |
| | 33,026 |
| | (9,608 | ) | | 23,418 |
| Less: Net income attributable to non-controlling interests in Ares Operating Group entities | 67,301 |
| | — |
| | — |
| | 67,301 |
| Net income attributable to Ares Management, L.P. | 45,083 |
|
| — |
|
| — |
|
| 45,083 |
| Less: Preferred equity dividend paid | 16,275 |
| | — |
| | — |
| | 16,275 |
| Net income attributable to Ares Management, L.P. common shareholders | $ | 28,808 |
|
| $ | — |
|
| $ | — |
|
| $ | 28,808 |
|
| | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, 2017 | | As Adjusted | | Consolidated Company Entities | | Consolidated Funds | | Eliminations | | Consolidated | Revenues | |
| | |
| | |
| | |
| Management fees (includes ARCC Part I Fees of $76,436) | $ | 550,969 |
| | $ | — |
| | $ | (14,979 | ) | | $ | 535,990 |
| Carried interest allocation | 469,363 |
| | — |
| | (1,014 | ) | | 468,349 |
| Incentive fees | 14,600 |
| | — |
| | (2,745 | ) | | 11,855 |
| Principal investment income | 61,709 |
| | — |
| | (16,084 | ) | | 45,625 |
| Administrative, transaction and other fees | 43,024 |
| | — |
| | — |
| | 43,024 |
| Total revenues | 1,139,665 |
| | — |
| | (34,822 | ) | | 1,104,843 |
| Expenses | |
| | |
| | |
| | | Compensation and benefits | 384,905 |
| | — |
| | — |
| | 384,905 |
| Performance related compensation | 361,044 |
| | — |
| | — |
| | 361,044 |
| General, administrative and other expense | 145,193 |
| | — |
| | — |
| | 145,193 |
| Transaction support expense | 275,177 |
| | — |
| | — |
| | 275,177 |
| Expenses of the Consolidated Funds | — |
| | 45,196 |
| | (17,724 | ) | | 27,472 |
| Total expenses | 1,166,319 |
| | 45,196 |
| | (17,724 | ) | | 1,193,791 |
| Other income (expense) | |
| | |
| | |
| | | Net realized and unrealized gain (loss) on investments | 3,810 |
| | — |
| | (5,281 | ) | | (1,471 | ) | Interest and dividend income | 7,045 |
| | — |
| | (1,898 | ) | | 5,147 |
| Interest expense | (15,576 | ) | | — |
| | — |
| | (15,576 | ) | Other income, net | 16,826 |
| | — |
| | — |
| | 16,826 |
| Net realized and unrealized gain on investments of the Consolidated Funds | — |
| | 79,450 |
| | (24,187 | ) | | 55,263 |
| Interest and other income of the Consolidated Funds | — |
| | 127,999 |
| | — |
| | 127,999 |
| Interest expense of Consolidated Funds | — |
| | (116,927 | ) | | 30,603 |
| | (86,324 | ) | Total other income | 12,105 |
| | 90,522 |
| | (763 | ) | | 101,864 |
| Income (loss) before taxes | (14,549 | ) | | 45,326 |
| | (17,861 | ) | | 12,916 |
| Income tax expense (benefit) | (30,521 | ) | | 2,062 |
| | — |
| | (28,459 | ) | Net income | 15,972 |
| | 43,264 |
| | (17,861 | ) | | 41,375 |
| Less: Net income attributable to non-controlling interests in Consolidated Funds | — |
| | 43,264 |
| | (17,861 | ) | | 25,403 |
| Less: Net loss attributable to non-controlling interests in Ares Operating Group entities | (20,610 | ) | | — |
| | — |
| | (20,610 | ) | Net income attributable to Ares Management, L.P. | 36,582 |
| | — |
| | — |
| | 36,582 |
| Less: Preferred equity dividend paid | 16,275 |
| | — |
| | — |
| | 16,275 |
| Net income attributable to Ares Management, L.P. common shareholders | $ | 20,307 |
|
| $ | — |
|
| $ | — |
|
| $ | 20,307 |
|
|