0 42 65 155 112 42 4 94 109 127 127 127 0 42 65 2 87 133 71 126 163 120 163 198 Credit Privat e Equ ity Real Esta te Strate gic Initi atives BUSINES S SECTOR PALETTE GENERA L PALE TTE Earnings Presentation First Quarter 2021 Exhibit 99.2
0 42 65 155 112 42 4 94 109 127 127 127 0 42 65 2 87 133 71 126 163 120 163 198 Credit Privat e Equ ity Real Esta te Strate gic Initi atives BUSINES S SECTOR PALETTE GENERA L PALE TTE 2 Important Notice This presentation is prepared for Ares Management Corporation (NYSE: ARES) for the benefit of its public stockholders. This presentation is solely for information purposes in connection with evaluating the business, operations and financial results of Ares Management Corporation (“Ares”) and certain of its affiliates. Any discussion of specific Ares entities is provided solely to demonstrate such entities’ role within the Ares organization and their contribution to the business, operations and financial results of Ares. This presentation may not be referenced, quoted or linked by website, in whole or in part, except as agreed to in writing by Ares. 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. Forward-looking statements can be identified by the use of forward-looking words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "predicts," "intends," "plans," "estimates," "anticipates," "foresees" or negative versions of those words, other comparable words or other statements that do not relate to historical or factual matters. 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, including but not limited to the impact of the COVID-19 pandemic and the pandemic's impact on the U.S. and global economy, as well as those described in the “Risk Factors” section of our filings with the Securities and Exchange Commission (“SEC”). These factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in our periodic filings. Any such forward-looking statements are made pursuant to the safe harbor provisions available under applicable securities laws and speak only as of the date of this presentation. Ares assumes no obligation to update or revise any such forward-looking statements except as required by law. 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 and assumes no responsibility for independent verification of such 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 these 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. 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. Further, certain performance information, unless otherwise stated, is before giving effect to management fees, carried interest or incentive fees and other expenses. This presentation does not constitute, and shall not be construed as, an offer to buy or sell, or the solicitation of an offer to buy or sell, any securities, investment funds, vehicles or accounts, investment advice, or any other service by Ares of any of its affiliates or subsidiaries. Nothing in this presentation constitutes the provision of tax, accounting, financial, investment, regulatory, legal or other advice by Ares or its advisors. Management uses certain non-GAAP financial measures, including Assets Under Management, Fee Paying Assets Under Management, Fee Related Earnings and Realized Income 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 within 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. For the definitions of certain terms used in this presentation, please refer to the "Glossary" slide in the appendix. The statements contained in this presentation are made as of March 31, 2021, unless another time is specified in relation to them, and access to this presentation at any given time shall not give rise to any interpretation that there has been no change in the facts set forth in this presentation since that date.
0 42 65 155 112 42 4 94 109 127 127 127 0 42 65 2 87 133 71 126 163 120 163 198 Credit Privat e Equ ity Real Esta te Strate gic Initi atives BUSINES S SECTOR PALETTE GENERA L PALE TTE 3 Assets Under Management Financial Results Corporate Actions Recent Developments First Quarter 2021 Highlights 1. Net inflows represents gross capital commitments less redemptions. 2. Unconsolidated management fees includes $11.7 million from Consolidated Funds that are eliminated upon consolidation for GAAP for Q1-21 and excludes management fees attributable to certain joint venture partners. Unconsolidated other fees represents $6.8 million primarily of transaction-based fees earned from Credit Group funds for Q1-21. Unconsolidated other fees excludes administrative fees that are netted against the respective expenses and administrative fees attributable to certain joint venture partners. 3. After-tax Realized Income per share of Class A common stock is net of the preferred share dividend. 4. Payable on June 30, 2021 to shareholders of record as of June 16, 2021. 5. Payable on June 30, 2021 to shareholders of record as of June 15, 2021. ∙ Total Assets Under Management ("AUM") of $207.2 billion ∙ Total Fee Paying AUM ("FPAUM") of $127.6 billion ∙ Available Capital of $56.8 billion ∙ AUM Not Yet Paying Fees available for future deployment of $37.6 billion ∙ Raised $10.6 billion in gross new capital with net inflows(1) of $10.1 billion ∙ Capital deployment of $10.3 billion, including $8.9 billion by our drawdown funds ∙ Q1-21 GAAP net income attributable to Ares Management Corporation of $58.4 million ∙ Q1-21 GAAP basic earnings per share of Class A common stock of $0.33 and diluted earnings per share of Class A common stock of $0.32 ∙ Q1-21 GAAP management fees of $320.3 million ∙ Q1-21 unconsolidated management and other fees of $334.3 million(2) ∙ Q1-21 Fee Related Earnings of $128.5 million ∙ Q1-21 Realized Income of $136.8 million ∙ Q1-21 after-tax Realized Income of $0.46 per share of Class A common stock(3) ∙ Declared quarterly dividend of $0.47 per share of Class A common stock(4) ∙ Declared quarterly dividend of $0.4375 per share of Series A preferred stock(5) ∙ On March 30, 2021, a subsidiary of Ares entered into a definitive agreement to acquire 100% of Landmark Partners, LLC (collectively with its subsidiaries, “Landmark”), a leading investment manager focused on the secondary markets. Landmark manages private equity, real estate and infrastructure secondaries funds totaling approximately $18.7 billion in AUM as of December 31, 2020 ∙ In April 2021, Ares sold approximately $250.0 million of common stock, consisting of non-voting common stock and Class A common stock, to Sumitomo Mitsui Banking Corporation in a private offering and approximately $578.2 million of Class A common stock in connection with a public offering ∙ On April 29, 2021, Ares held the final closing of its fifth commingled European direct lending fund, Ares Capital Europe V (“ACE V”), at €11.0 billion, representing the largest European direct lending fund raised to date Q2 #s AUM - 158 FPAUM - 105 AC - 39 AUM NYPF 25 Raised 9B, net inflow 8B Deployment 6B NI - 56 EPS - 0.36 and 0.35 GAAP mgmt fees - 267 unconsol mgmt/other - 282 FRE - 97 RI - 115 RI per share - 0.39
4 Gross New Capital Commitments(1) 1. Represents gross new capital commitments during the period presented, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts. Commitments denominated in currencies other than U.S. dollar are converted at the prevailing quarter-end exchange rate. $ in billions Q1 2021 Comments Credit Group European Direct Lending $1.6 New and additional equity commitments to various funds ARCC and affiliates 1.9 Additional debt and equity commitments to ARCC and affiliates Alternative Credit 1.1 New and additional equity commitments to various funds including additional equity commitments of $953 million for Ares Pathfinder Fund, L.P. (“Pathfinder”), bringing total commitments to $3.7 billion U.S. Direct Lending 1.0 New and additional equity commitments to various funds CLOs 0.7 New and additional commitments to U.S. CLOs Other Credit Funds 0.6 Additional equity and debt commitments to various funds Total Credit Group $6.9 Real Estate Group U.S. Debt $2.1 Additional equity and debt commitments to various funds U.S. Equity 0.4 New and additional equity commitments, including bringing total commitments to $1.7 billion for Ares U.S. Real Estate Opportunity Fund III L.P. (“AREOF III”) European Equity 0.1 Additional equity commitments Total Real Estate Group $2.6 Strategic Initiatives Ares Acquisition Corporation (“AAC”) $1.0 New equity commitments from capital raised in the initial public offering for our first special purpose acquisition company (NYSE: AAC) Insurance 0.1 Additional equity commitments Total Strategic Initiatives $1.1 Total $10.6 CLO 56 - 0.5 Pathfinder - 0.3 2 SMA (UPS II/AFLAC) - 0.25 each US DL - ARCC 1.15 ACE V - 8.247 (ECSF IX 0.4), ECI IV A 0.2 ACOF VI - 0.3 ACIP - 0.2 SLO III - 0.3 0 42 65 155 112 42 4 94 109 127 127 127 0 42 65 2 87 133 71 126 163 120 163 198 Credit Private Equity Real Estate Strategic Initiatives CHECKS: 1) is the orde of segments listed from largest to smallest by segment? 2) check for any final closes and funds that can now be named (need full legal name) - include final close amount
5 $75.8 $88.0 $91.6 $17.0 $21.2 $18.6$9.2 $10.2 $10.8 $6.6 $6.6 $102.0 $126.0 $127.6 Q1-20 Q4-20 Q1-21 Assets Under Management 1. AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of ARCC and an SEC-registered investment adviser (“IHAM”). AUM as of March 31, 2021 was $207.2 billion, an increase of 39.4% from prior year(1) ∙ The increase of $58.6 billion was driven by capital raised within each of our segments, including ACE V, Pathfinder, our sixth flagship corporate private equity fund, ASOF, by each strategy in our Real Estate Group, by capital raised in the initial public offering of AAC, and by the acquisitions of SSG Capital Holdings Limited (“SSG”) and F&G Reinsurance Ltd (“F&G Re“) in Strategic Initiatives FPAUM as of March 31, 2021 was $127.6 billion, an increase of 25.1% from prior year ∙ The increase of $25.6 billion was primarily attributable to deployment of capital in funds across U.S. and European direct lending, alternative credit strategies and ASOF, to new commitments to the syndicated loans strategy and Real Estate equity strategies and to the acquisitions of SSG and F&G Re AUM FPAUM $112.5 $145.5 $151.1 $22.0 $27.4 $29.0 $14.1 $14.8 $17.2$9.3 $9.9 $148.6 $197.0 $207.2 Q1-20 Q4-20 Q1-21 Credit Private Equity Real Estate Strategic Initiatives ($ in billions) ($ in billions) 0 42 65 155 112 42 4 94 109 127 127 127 0 42 65 2 87 133 71 126 163 120 163 198 Credit Private Equity Real Estate Strategic Initiatives
6 33% 8% 11% 25% 8% 12% 3% 49% 33% 7% 8% 2% 1% Management Fees by Duration and Fund Type 77% 1. 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. 2. CLOs are a type of closed end vehicle. For the quarter ended March 31, 2021: ∙ 77% of management fees were earned from funds with three or more years remaining in duration ∙ 89% of management fees were earned from permanent capital, closed end funds and CLOs Duration Fund Type 89% Permanent Capital 10 or more years 7 to 9 years 3 to 6 years Fewer than 3 years Differentiated Managed Accounts(1) Managed Accounts Closed End Funds Permanent Capital CLOs (2) Managed Accounts Open End Funds Other
7 15% 13% 16% 24% 8% 18% 6% 12% 10% 19% 26% 10% 17% 6% AUM and FPAUM by Duration As of March 31, 2021, approximately 67% of AUM and 68% of FPAUM had a duration longer than 3 years ∙ Initial duration exceeded 7 years for approximately 73% of AUM based on each fund's first close Permanent Capital 10 or more years 7 to 9 years 3 to 6 years Fewer Than 3 years Differentiated Managed Accounts(1) Managed Accounts/ Other(2) 67% 68% 1. 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. 2. AUM includes the proceeds raised in the initial public offering of AAC, a special purpose acquisition company sponsored by the firm. FPAUMAUM $207.2 billion $127.6 billion
8 $18.3 $33.4 $33.7 $2.5 $2.7 $3.0 $2.3 $1.7 $1.8 $2.2 $1.7 $23.1 $40.0 $40.2 Q1-20 Q4-20 Q1-21 Available Capital and AUM Not Yet Paying Fees Available Capital as of March 31, 2021 was $56.8 billion, an increase of 71.1% from prior year ∙ The increase of $23.6 billion was driven primarily by fundraising in U.S. and European direct lending, including ACE V, in alternative credit, including Pathfinder, our sixth flagship corporate private equity fund, and from the acquisition of SSG and capital raised in the initial public offering of AAC in Strategic Initiatives AUM Not Yet Paying Fees as of March 31, 2021 was $40.2 billion, an increase of 74.0% from prior year ∙ The increase of $17.1 billion was driven primarily by new commitments in European direct lending, including ACE V, in U.S. direct lending, including our second junior capital private direct lending fund, in alternative credit, including new commitments for the final closing of Pathfinder, in the Private Equity Group, including new commitments for the final closing of ASOF, and from the acquisition of SSG in Strategic Initiatives Available Capital AUM Not Yet Paying Fees $22.6 $40.1 $40.6 $4.8 $7.8 $6.7 $5.8 $5.0 $5.7 $3.4 $3.8 $33.2 $56.3 $56.8 Q1-20 Q4-20 Q1-21 ($ in billions) ($ in billions) Credit Private Equity Real Estate Strategic Initiatives
9 $2.4 $0.2 $32.7 $2.3 $1.0 $1.6 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of March 31, 2021, AUM Not Yet Paying Fees of $40.2 billion could generate approximately $423.1 million in potential incremental annual management fees, of which $395.7 million relates to the $37.6 billion of AUM available for future deployment(1) ∙ The $37.6 billion of AUM Not Yet Paying Fees available for future deployment includes approximately $13.8 billion in European direct lending funds, $12.5 billion in U.S. direct lending funds, $5.5 billion in alternative credit funds, $1.6 billion in Ares SSG funds and $1.3 billion in special opportunities funds 1. No assurance can be made that such results will be achieved or capital will be deployed. Assumes the AUM Not Yet Paying Fees as of March 31, 2021 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. Reference to the $423.1 million and $395.7 million includes approximately $18.2 million in potential incremental management fees from deploying cash and a portion of undrawn/available credit facilities at ARCC in excess of its leverage at March 31, 2021. Note that no potential 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 March 31, 2021, capital available for deployment for follow-on investments could generate approximately $27.4 million in potential management fees. There is no assurance such capital will be invested. $37.6 billion of AUM Not Yet Paying Fees was available for future deployment ($ in billions)($ in billions) Capital Available for Future Deployment Capital Available for Deployment for Follow-on Investments (2) Funds in or Expected to Be in Wind-down AUM Not Yet Paying Fees Credit Private Equity Real Estate Strategic Initiatives $37.6 $40.2 Footnote 1: target leverage of ARCC is 1.25x
10 Q1-20 Q4-20 Q1-21 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit Private Equity Real Estate Strategic Initiatives(3) Total Incentive Generating AUM $31.6 $7.5 $4.8 $0.1 $44.0 + Uninvested IEAUM 35.1 8.1 4.1 1.9 49.2 + IEAUM below hurdle 4.3 9.9 1.3 — 15.5 ‘+ ARCC Part II Fees below Hurdle(2) 15.7 — — — 15.7 Incentive Eligible AUM $86.7 $25.5 $10.2 $2.0 $124.4 Credit Private Equity Real Estate Strategic Initiatives(3) 1. Incentive Generating AUM includes $14.7 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. Represents Incentive Eligible AUM associated with ARCC Part II Fees that 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 March 31, 2021, this calculation resulted in ARCC trailing the required hurdle for payment to Ares of any ARCC Part II Fees by 1.1% of the value of the underlying portfolio. 3. Strategic Initiatives includes AAC and only the Ares SSG funds with fund closings subsequent to our acquisition. Incentive Eligible AUM Incentive Eligible AUM as of March 31, 2021 was $124.4 billion, an increase of 47.2% from prior year ∙ The increase of $39.9 billion was primarily driven by capital raising across U.S. and European direct lending and alternative credit within the Credit Group and corporate private equity and special opportunities within the Private Equity Group Incentive Generating AUM(1) as of March 31, 2021 was $44.0 billion, an increase of 96.4% from prior year ∙ The increase was primarily driven by increases in asset values of certain funds that resulted in returns increasing above hurdle rates as of March 31, 2021, as well as additional deployment of capital within funds that are generating returns in excess of their hurdle rates as of March 31, 2021 Of the $75.2 billion of Incentive Eligible AUM that is currently invested, 58.5% is Incentive Generating AUM ∙ Excluding the Incentive Eligible AUM associated with ARCC Part II Fees,(2) which are based on capital gains from the largely debt oriented ARCC portfolio, 73.9% of Incentive Eligible AUM that is currently invested is Incentive Generating AUM Q1-21 Incentive Generating to Incentive Eligible AUM Reconciliation Consider hurdle rate for ARCC Part II fees in future periods. Discuss when ~2%. 5.2% for Q2 2020, removed. 4.0% for Q3 2020, 3% for Q4 2020 $10.2 $2.0 $86.7 $1.0 $25.5 $9.6 $24.0 $82.4 $57.1 $18.4 $9.0 $84.5 $117.0 $124.4
11 $6.2$1.9 $1.4 $0.8 Q1-21 Capital Deployment Breakdown Capital Deployment(1) ($ in billions) (2) 1. Capital deployment figures exclude deployment from permanent capital vehicles. 2. Non-drawdown funds amounts includes new capital deployed by managed accounts and CLOs but excludes recycled capital. $8.9 $1.4 Capital Deployment in Drawdown FundsQ1-21 Capital Deployment by Type ($ in billions) ($ in billions) Total Gross Invested Capital during Q1-21 was $10.3 billion compared to $6.5 billion during Q1-20 ∙ Of the total amount, $8.9 billion was related to deployment by our drawdown funds compared to $5.5 billion for the same period in 2020 ∙ Of our drawdown funds, the most active investment strategies were European direct lending, U.S. direct lending, corporate private equity, special opportunities and Ares SSG Credit Private Equity Real Estate Strategic Initiatives Credit Private Equity Real Estate Strategic Initiatives Drawdown Funds Non-drawdown Funds(2)$10.3 $10.3 Q1-20 Q4-20 Q1-21 $3.9 $1.0 $0.6 $5.5 $3.9 $1.8 $1.2 $7.3 $8.9 $1.4 $4.8 $1.9 $0.4 $0.8
12 Quarter ended March 31, $ in thousands, except share data 2021 2020 Revenues Management fees $320,273 $263,849 Carried interest allocation 297,535 (230,876) Incentive fees 2,820 (3,249) Principal investment income (loss) 25,100 (26,723) Administrative, transaction and other fees 12,660 10,408 Total revenues 658,388 13,409 Expenses Compensation and benefits 231,850 180,084 Performance related compensation 221,432 (167,899) General, administrative and other expenses 67,656 62,331 Expenses of Consolidated Funds 4,171 7,443 Total expenses 525,109 81,959 Other income (expense) Net realized and unrealized gains (losses) on investments 5,433 (8,034) Interest and dividend income 960 1,790 Interest expense (6,695) (5,306) Other income (expense), net (4,149) 5,464 Net realized and unrealized gains (losses) on investments of Consolidated Funds 16,422 (254,761) Interest and other income of Consolidated Funds 115,839 113,225 Interest expense of Consolidated Funds (71,025) (80,241) Total other income (expense) 56,785 (227,863) Income (loss) before taxes 190,064 (296,413) Income tax expense (benefit) 25,754 (20,616) Net income (loss) 164,310 (275,797) Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds 49,858 (166,406) Net income (loss) attributable to Ares Operating Group entities 114,452 (109,391) Less: Net income attributable to redeemable interest in Ares Operating Group entities 32 — Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities 56,042 (78,355) Net income (loss) attributable to Ares Management Corporation 58,378 (31,036) Less: Series A Preferred Stock dividends paid 5,425 5,425 Net income (loss) attributable to Ares Management Corporation Class A common stockholders $52,953 $(36,461) Net income (loss) per share of Class A common stock: Basic $0.33 $(0.33) Diluted $0.32 $(0.33) Weighted-average shares of Class A common stock: Basic 149,271,822 118,366,539 Diluted 163,664,384 118,366,539 GAAP Statements of Operations
13 RI and Other Measures Financial Summary 1. Includes Part I Fees of $46.5 million and $43.9 million for Q1-21 and Q1-20, respectively, and $186.7 million and $169.9 million for Q1-21 LTM and Q1-20 LTM respectively. 2. For Q1-21, Q1-20, and Q1-21 LTM, Q1-20 LTM, after-tax Realized Income includes current income tax related to: (i) realized performance and investment income of $1.1 million, $5.0 million, and $16.5 million, $22.2 million, respectively and (ii) FRE of $2.6 million, $5.0 million and $18.5 million, $22.7 million, respectively. Of the current tax related to FRE, this includes (a) entity level taxes of $3.3 million, $1.8 million and $12.2 million, $10.4 million, respectively, and (b) corporate level tax expense (benefit) of $(0.6) million, $3.2 million, and $6.3 million, $12.3 million, respectively. 3. 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. See slide 36 for additional details. 4. 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. Quarter ended March 31, LTM ended March 31, $ in thousands, except share data (and as otherwise noted) 2021 2020 % Change 2021 2020 % Change Management fees(1) $327,463 $273,778 20% $1,240,250 $1,053,296 18% Other fees 6,804 3,872 76 22,880 18,875 21 Compensation and benefits expenses (166,138) (139,360) (19) (636,744) (544,078) (17) General, administrative and other expenses (39,663) (45,186) 12 (166,574) (182,602) 9 Fee Related Earnings 128,466 93,104 38 459,812 345,491 33 Realized net performance income 15,885 33,777 (53) 113,656 126,557 (10) Realized net investment income (7,558) 7,264 NM 11,136 60,951 (82) Realized Income 136,793 134,145 2 584,604 532,999 10 After-tax Realized Income, net of Series A Preferred Stock dividends(2) $127,630 $118,769 7 $527,889 $466,416 13 After-tax Realized Income per share of Class A common stock, net of Series A Preferred Stock dividends(3) $0.46 $0.45 2 $1.87 $1.77 6 Other Data Total Fee Revenue $350,152 $311,427 12 $1,376,786 $1,198,728 15 Effective management fee rate(4) 1.02% 1.08% (6)
14 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Quarter ended March 31, LTM ended March 31, $ in thousands 2021 2020 2021 2020 Realized Income and Fee Related Earnings: Income (loss) before taxes $190,064 $(296,413) $865,955 $(7,193) Adjustments: Amortization of intangibles 8,822 1,000 29,017 23,249 Depreciation expense 5,278 4,542 20,203 17,071 Equity compensation expense(1) 55,649 32,557 146,078 102,696 Acquisition and merger-related expense 8,590 3,137 16,647 17,630 Deferred placement fees 297 5,415 14,211 29,200 Other (income) expense, net(2) (473) — 9,734 (459) Net expense (income) of non-controlling interests in consolidated subsidiaries 689 20,497 (15,991) 22,572 (Income) loss before taxes of non-controlling interests in Consolidated Funds, net of eliminations (49,886) 166,378 (244,467) 144,249 Unconsolidated performance (income) loss—unrealized (224,954) 387,657 (605,057) 231,090 Unconsolidated performance related compensation—unrealized 160,337 (285,892) 434,677 (186,396) Unconsolidated net investment (income) loss—unrealized (17,620) 95,267 (86,403) 139,290 Realized Income 136,793 134,145 584,604 532,999 Unconsolidated performance income—realized (76,981) (151,770) (472,427) (485,715) Unconsolidated performance related compensation—realized 61,096 117,993 358,771 359,158 Unconsolidated investment (income) loss—realized 7,558 (7,264) (11,136) (60,951) Fee Related Earnings $128,466 $93,104 $459,812 $345,491 Note: This table is a reconciliation of income before taxes on a GAAP basis to RI and FRE on an unconsolidated basis, which reflects the results of the reportable segments on a combined basis together with the OMG. The OMG’s expenses are not allocated to our reportable segments but management considers the cost structure of the OMG when evaluating our financial performance. Management uses this information to assess the performance of our reportable segments and OMG and believes that this information enhances the ability of shareholders to analyze our performance. 1. For Q1-21, Q1-20, and Q1-21 LTM, Q1-20 LTM, equity compensation expense was attributable to the following: (i) IPO awards and other non-recurring awards of $24.9 million, $10.5 million and $48.4 million, $34.5 million, respectively; (ii) annual bonus awards of $13.5 million, $11.5 million and $41.2 million, $31.2 million, respectively; and (iii) annual discretionary awards of $17.2 million, $10.6 million and $56.5 million, $36.9 million, respectively 2. Q1-21 LTM includes a $9.7 million non-cash unrealized guarantee expense that will reduce RI to the extent it is realized.
15 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) 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 OMG. The OMG’s expenses are not allocated to our reportable segments but management considers the cost structure of the OMG when evaluating our financial performance. Management uses this information to assess the performance of our reportable segments and OMG and believes that this information enhances the ability of shareholders to analyze our performance. 1. Related to performance income for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within net realized and unrealized gain on investments in Ares' Consolidated Statements of Operations. 2. Q1-21 LTM includes a $9.7 million non-cash unrealized guarantee expense that will reduce RI to the extent it is realized. Quarter ended March 31, LTM ended March 31, $ in thousands 2021 2020 2021 2020 Performance income and net investment income reconciliation: Carried interest allocation $297,535 $(230,876) $1,034,019 $193,703 Incentive fees 2,820 (3,249) 43,971 49,133 Carried interest allocation and incentive fees 300,355 (234,125) 1,077,990 242,836 Performance income (loss) - realized from Consolidated Funds 1,525 (45) 1,711 13,372 Performance income (loss) reclass(1) 55 (1,717) (1,954) (1,583) Unconsolidated performance (income) loss - unrealized (224,954) 387,657 (605,057) 231,090 Performance income - realized of non-controlling interests in consolidated subsidiaries — — (263) — Performance income - realized $76,981 $151,770 $472,427 $485,715 Total consolidated other income (loss) $56,785 $(227,863) $350,566 $(133,194) Net investment (income) loss from Consolidated Funds (71,428) 194,426 (350,901) 95,609 Performance (income) loss reclass(1) (55) 1,717 1,954 1,583 Principal investment income (loss) 25,095 (75,988) 105,127 (61,560) Other expense (income), net(2) (473) 22 9,782 (437) Other expense (income) of non-controlling interests in consolidated subsidiaries 138 19,683 (18,989) 19,660 Investment loss (income) - unrealized (22,168) 100,083 (81,846) 141,049 Interest and other investment loss (income) - unrealized 4,548 (4,816) (4,557) (1,759) Total realized net investment income (loss) $(7,558) $7,264 $11,136 $60,951
16 Credit Group(1) 1. This table is a financial summary only and segment results are shown before the unallocated support costs of the Operations Management Group. See “Financial Details - Segments” on slide 23 for complete financial results. 2. 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 report. 3. The net return for European direct lending was 3.0% for Q1-21. Gross and net returns for European direct lending are represented by a composite made up of the ACE II, ACE III and ACE IV levered Euro-denominated feeder funds. The gross and net returns for the composite made up of the ACE II, ACE III and ACE IV U.S. dollar denominated feeder funds were 4.6% and 3.7% for Q1-21. Returns presented above are shown for the Euro-denominated composite as this is the base denomination of the funds. Composite returns are calculated by asset-weighting the underlying fund-level returns. 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, or other expenses, as applicable. Net returns are after giving effect to applicable management fees, carried interest, as applicable, and other expenses. We believe aggregated performance returns reflect overall quarterly performance returns in a strategy, but are not necessarily investable funds or products themselves. ∙ Management and other fees increased by 19% for Q1-21 compared to Q1-20, primarily driven by deployment in funds in the U.S. and European direct lending strategies ∙ Fee Related Earnings increased by 29% for Q1-21 compared to Q1-20, primarily driven by higher management fees ∙ Realized Income increased by 28% for Q1-21 compared to Q1-20, primarily driven by increases in Fee Related Earnings 34% Q1-21 increase in in AUM 29% Q1-21 increase in Fee Related Earnings ARCC 5.2%(2) Q1-21 net return European Direct Lending 3.8%(3) Q1-21 gross return $ in thousands Q1-21 Q1-20 % Change Q1-21 LTM Q1-20 LTM % Change Management and other fees $238,846 $200,495 19% $898,133 $765,440 17% Fee Related Earnings 147,672 114,257 29 534,788 436,290 23 Realized net performance income 923 1,117 (17) 31,833 34,656 (8) Realized net investment income 2,154 2,017 7 5,420 14,783 (63) Realized Income $150,749 $117,391 28 $572,041 $485,729 18 AUM ($ in billions) $151.1 $112.5 34 FPAUM ($ in billions) $91.6 $75.8 21 Financial Summary and Highlights(1) Note: Past performance is not indicative of future results. The Credit Group had ~290 investment professionals, ~200 active funds, ~1,900 portfolio companies and ~940 alternative credit investments as of March 31, 2021. 1. This table is a financial summary only and segment results are shown before the unallocated support costs of the Operations Management Group. See “Financial Details - Segments” on slides 23-0 for complete financial results. 2. Includes ARCC Part I Fees of $46.5 million and $43.9 million for Q1-21 and Q1-20, respectively, and $46.5 million and $43.9 million for FY-20 and FY-19, respectively. The $10 million quarterly ARCC- ACAS transaction fee waiver was effective through Q3-19. Fees have increased in subsequent periods due to the expiration of the fee waiver. 3. The net returns for European direct lending was 3.0% and 8.0% for Q1-21 and FY-20, respectively. Gross and net returns for European direct lending are represented by a composite made up of the ACE II, ACE III and ACE IV levered Euro-denominated feeder funds. The gross and net returns for the composite made up of the ACE II, ACE III and ACE IV U.S. dollar denominated feeder funds were 4.6% and 3.7% for Q1-21 and 12.5% and 9.2% for FY-20. Returns presented above are shown for the Euro-denominated composite as this is the base denomination of the funds. Composite returns are calculated by asset-weighting the underlying fund-level returns. 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, or other expenses, as applicable. Net returns are after giving effect to applicable management fees, carried interest, as applicable, and other expenses. We believe aggregated performance returns reflect overall quarterly performance returns in a strategy, but are not necessarily investable funds or products themselves. 4. Net performance returns: 2.1% and 19.5% for U.S. syndicated loan funds for Q1-21 and FY-20 and 2.1% and 23.6% for U.S. high yield funds for Q1-21 and FY-20. Performance for syndicated loans is represented by the U.S. Bank Loan Aggregate Composite which includes all actual, fully discretionary, fee-paying, funds that are benchmarked to the Credit Suisse Leveraged Loan Index and primarily invested in USD denominated banks loans. Such funds may have limited allocations to high yield and structured securities. Performance for high yield is represented by the U.S. high yield Composite which includes all actual, fully discretionary, fee-paying, separately managed funds that primarily invest in U.S. high yield fixed income securities and are benchmarked to the BofA Merrill Lynch U.S. High Yield Master II Constrained Index, or a similar index. We believe aggregated performance returns reflect overall quarterly performance returns in a strategy, but are not necessarily investable funds or products themselves. ∙ Realized Income increased by 28% for Q1-21 compared to Q1-20 High Yield 2.2%(3) Syndicated Loans 2.3%(3) 1. Net performance returns: 2.1% for U.S. syndicated loan funds for Q1-21 and 2.1% for U.S. high yield funds for Q1-21. Performance for syndicated loans is represented by the U.S. Bank Loan Aggregate Composite which includes all actual, fully discretionary, fee-paying, funds that are benchmarked to the Credit Suisse Leveraged Loan Index and primarily invested in USD denominated banks loans. Such funds may have limited allocations to high yield and structured securities. Performance for high yield is represented by the U.S. high yield Composite which includes all actual, fully discretionary, fee- paying, separately managed funds that primarily invest in U.S. high yield fixed income securities and are benchmarked to the BofA Merrill Lynch U.S. High Yield Master II Constrained Index, or a similar index. We believe aggregated performance returns reflect overall quarterly performance returns in a strategy, but are not necessarily investable funds or products themselves.
17 Corporate Private Equity 16.3% Special Opportunities 9.9% Q1-21 gross returns(2) Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~110 investment professionals, ~40 portfolio companies, ~50 infrastructure and power assets and ~20 active funds and related co-investment vehicles as of March 31, 2021. 1. This table is a financial summary only and segment results are shown before the unallocated support costs of the Operations Management Group. See “Financial Details - Segments” on slide 23 for complete financial results. 2.Performance for the corporate private equity portfolio is represented by the ACOF I-V Aggregate, which is comprised of investments held by ACOF I, ACOF II, ACOF III, ACOF IV and ACOF V. Performance returns are gross asset-level time-weighted rates of return. Performance for special opportunities is represented by ASOF. Performance returns are gross fund-level time-weighted rates of return. All returns include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Returns for special opportunities are further reduced by credit facility interest expense. Gross returns do not reflect the deduction of management fees, carried interest, as applicable, or other expenses. Net returns are after giving effect to applicable management fees, carried interest, as applicable, and other expenses. The net asset-level return for the corporate private equity portfolio was 15.1% for Q1-21. The net fund-level return for special opportunities was 7.5% for Q1-21. For the corporate private equity portfolio, we believe aggregated performance returns reflect overall quarterly performance returns in a strategy, but are not necessarily investable funds or products themselves. (8)% Q1-21 LTM decrease in Fee Related Earnings ∙ Management and other fees decreased by 5% for Q1-21 compared to Q1-20, primarily due to the step down in fee rate and fee basis for ACOF V as a result of the initiation of fees for the sixth flagship corporate private equity fund in Q4-20 ∙ Fee Related Earnings decreased by 12% for Q1-21 compared to Q1-20, primarily driven by lower management fees and higher compensation and benefits ∙ Realized Income decreased by 51% for Q1-21 compared to Q1-20, primarily driven by lower realization activity from ACOF IV and lower net investment income from ACOF III in Q1-21 $ in thousands Q1-21 Q1-20 % Change Q1-21 LTM Q1-20 LTM % Change Management and other fees $49,439 $52,267 (5)% $218,510 $212,647 3% Fee Related Earnings 23,886 27,038 (12) 105,912 115,314 (8) Realized net performance income 14,192 23,230 (39) 67,692 67,293 1 Realized net investment income (loss) (8,389) 10,639 NM 7,873 46,840 (83) Realized Income $29,689 $60,907 (51) $181,477 $229,447 (21) AUM ($ in billions) $29.0 $22.0 32 FPAUM ($ in billions) $18.6 $17.0 9 32% Q1-21 increase in AUM Financial Summary and Highlights(1) 45% FY-20 increase in realized net performance income ∙ Realized Income decreased by 51% for Q1-21 compared to Q1-20 9% Q1-21 increase in FPAUM
18 Real Estate Group(1) Note: Past performance is not indicative of future results. The Real Estate Group had ~80 investment professionals, ~220 properties and ~40 active funds and related co-investment vehicles as of March 31, 2021. 1. This table is a financial summary only and segment results are shown before the unallocated support costs of the Operations Management Group. See “Financial Details - Segments” on slide 23 for complete financial results. 2. Performance for the U.S. real estate equity portfolio is represented by the U.S. real estate composite, which is comprised of DEV II, US VIII and US IX. Performance for the European real estate equity portfolio is represented by the European real estate composite, which is comprised of EPEP II, EF IV and EF V. EF IV and EF V are each made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. Gross returns do not reflect the deduction of management fees, carried interest, or other expenses, as applicable. Net returns are after giving effect to applicable management fees, carried interest, as applicable, and other expenses. Net returns for U.S. equity and European equity were 5.7% and 6.0% for Q1-21. Returns presented above are shown for the Euro-denominated composite as this is the base denomination of the funds. The gross and net returns for the dollar denominated feeder fund for European equity were 7.9% and 6.5% for Q1-21. We believe aggregated performance returns reflect overall quarterly performance returns in a strategy, but are not necessarily investable funds or products themselves. ∙ Management and other fees increased by 22% for Q1-21 compared to Q1-20, primarily driven by management fees generated from AREOF III, including $2.8 million in catch-up fees, and our third European value add real estate equity fund, including $0.6mm in catch-up fees ∙ Fee Related Earnings increased by 16% for Q1-21 compared to Q1-20, primarily driven by higher management fees ∙ Realized Income decreased by 38% for Q1-21 compared to Q1-20, primarily driven by higher monetization activity in European equity funds in Q1-20 22% Q1-21 increase in AUM 16% Q1-21 increase in Fee Related Earnings U.S. Equity 7.6% European Equity 6.8% Q1-21 gross returns(2 ) $ in thousands Q1-21 Q1-20 % Change Q1-21 LTM Q1-20 LTM % Change Management and other fees $30,280 $24,888 22% $104,046 $94,084 11% Fee Related Earnings 11,044 9,540 16 34,903 28,779 21 Realized net performance income 770 9,430 (92) 14,131 24,608 (43) Realized net investment income 681 1,115 (39) 1,568 7,478 (79) Realized Income $12,495 $20,085 (38) $50,602 $60,865 (17) AUM ($ in billions) $17.2 $14.1 22 FPAUM ($ in billions) $10.8 $9.2 17 Financial Summary and Highlights(1) ∙ Realized Income decreased by 38% for Q1-21 compared to Q1-20
19 Realized Income per Share Data 1. Ares had 12,400,000 shares of 7% Series A Preferred Stock outstanding as of March 31, 2021. 2. Amount represents the current corporate taxes paid by Ares for the periods presented and exclude the effects for Q1-21 and Q1-20, of $22.0 million and $(30.6) million, respectively, of deferred income tax (benefit) expense primarily related to net unrealized performance income and net unrealized investment income. These effects have been excluded as net unrealized performance income and net unrealized investment income have been excluded from RI. For the purposes of evaluating after-tax FRE, we first allocate the taxes to realized performance income. Taxes are allocated to realized performance income based on our 23.7% and 24.0% statutory tax rate for Q1-21 and Q1-20, respectively. The remaining portion of current corporate taxes is allocated to FRE. All differences between the current portion of taxable income and RI are attributed to FRE. For Q1-21 and Q1-20, these differences created tax benefits that totaled $28.3 million and $14.0 million, respectively, and reduced our tax rate on FRE from 23.7% to 1.7% and 8.8%, respectively. The primary differences between the current portion of taxable income and RI are related to the timing of certain items, primarily vesting of equity awards, exercise of stock options, payment of placement fees, depreciation expense and amortization. FRE tax rates may fluctuate based on the total amount of realized performance income and the amount of timing differences between the current portion of taxable income and RI. 3. Weighted average shares used for after-tax RI per share for Q1-21 and Q1-20 were 276,017,427 and 248,442,430, respectively. Please refer to slide 36 in this presentation for further information. 4. Weighted average shares used for after-tax RI per Class A common share for Q1-21 and Q1-20 were 157,483,599 and 125,300,106, respectively. See slide 36 for additional details. Quarter ended March 31, $ in thousands, except share data 2021 2020 After-tax Realized Income, net of Series A Preferred Stock dividends Realized Income before taxes $136,793 $134,145 Entity level foreign, state and local taxes (3,261) (1,797) Series A Preferred Stock dividends(1) (5,425) (5,425) Realized Income, net of Series A Preferred Stock dividends 128,107 126,923 Income taxes(2) (477) (8,154) After-tax Realized Income, net of Series A Preferred Stock dividends $127,630 $118,769 After-tax Realized Income per share(3) $0.46 $0.48 After-tax Realized Income per share of Class A common stock Realized Income, net of Series A Preferred Stock dividends $128,107 $126,923 x Average ownership % of Ares Operating Group 57.06% 50.43% Realized Income attributable to Class A common stockholders 73,098 64,013 Income taxes(2) (477) (8,154) After-tax Realized Income attributable to Class A common stockholders $72,621 $55,859 After-tax Realized Income per share of Class A common stock(4) $0.46 $0.45
20 43% 37% 20% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income ∙ As of March 31, 2021, our balance sheet included $609.9 million in cash and cash equivalents and $811.3 million in debt obligations with $168.0 million amounts drawn against our $1.065 billion revolving credit facility ∙ As of March 31, 2021, the fair value of our corporate investment portfolio was $562.3 million in accordance with GAAP. On an unconsolidated basis, our corporate investment portfolio was $903.3 million(1) ∙ As of March 31, 2021, gross accrued performance income reported on a GAAP basis was $1,392.9 million. On an unconsolidated basis, our gross accrued performance income was $1,394.4 million ∙ As of March 31, 2021, accrued performance income, net of performance related compensation reported on a GAAP basis and unconsolidated basis was $424.3 million and $425.8 million, respectively Balance Sheet 1. Unconsolidated investments includes $341.0 million of investments in Consolidated Funds that are eliminated upon consolidation for GAAP, net of investments that are attributable to non- controlling interests. Investments that are attributable to non-controlling interests primarily represent the $35.4 million of CLO investments that are attributable to the Class B Membership Interests and $14.9 million of investments in Strategic Initiatives. Corporate investment portfolio excludes accrued carried interest allocation, a component of gross accrued performance income, of $1,369.7 million. 2. As of March 31, 2021 and December 31, 2020, unconsolidated net performance income receivable was $425.8 million and $364.7 million, respectively. Unconsolidated net performance income receivable as of March 31, 2021 and December 31, 2020 included $1.5 million and $0.2 million, respectively, of net performance income receivable of Consolidated Funds attributable to the Credit Group that is eliminated upon consolidation for GAAP. Q1 2021 44% 35% 21% Q4 2020 Credit Private Equity Real Estate $364.5 million $424.3 million Net Accrued Performance Income by Group(2)
21 Corporate Data Board of Directors Michael Arougheti Co-Founder, Chief Executive Officer and President of Ares Antoinette Bush Executive Vice President and Global Head of Government Affairs of News Corp Kipp deVeer Head of Credit Group Paul G. Joubert Founding Partner of EdgeAdvisors and Investing Partner in Converge Venture Partners David Kaplan Co-Founder and Co-Chairman of Private Equity Group Michael Lynton Chairman of Snap Inc. Dr. Judy D. Olian President of Quinnipiac University Antony P. Ressler Co-Founder and Executive Chairman of Ares Bennett Rosenthal Co-Founder and Co-Chairman of Private Equity Group Executive Officers Michael Arougheti Co-Founder, Chief Executive Officer and President Ryan Berry Chief Marketing and Strategy Officer Kipp deVeer Head of Credit Group David Kaplan Co-Founder and Co-Chairman of Private Equity Group Michael McFerran Chief Operating Officer and Chief Financial Officer Antony P. Ressler Co-Founder and Executive Chairman Bennett Rosenthal Co-Founder and Co-Chairman of Private Equity Group Naseem Sagati Aghili General Counsel and Secretary Corporate Headquarters 2000 Avenue of the Stars 12th Floor Los Angeles, CA 90067 Tel: (310) 201-4100 Fax: (310) 201-4170 Corporate Counsel Kirkland & Ellis LLP Los Angeles, CA Independent Registered Public Accounting Firm Ernst & Young LLP Los Angeles, CA Research Coverage Bank of America Merrill Lynch Michael Carrier (646) 855-5004 Bank of Montreal James Fotheringham (212) 885-4180 Barclays Jeremy Campbell (212) 526-9750 Credit Suisse Craig Siegenthaler (212) 325-3104 Goldman Sachs Alexander Blostein (212) 357-9976 Jefferies Gerald O'Hara (415) 229-1510 JP Morgan Kenneth Worthington (212) 622-6613 Keefe, Bruyette & Woods Robert Lee (212) 887-7732 Morgan Stanley Michael Cyprys (212) 761-7619 Oppenheimer Chris Kotowski (212) 667-6699 RBC Capital Markets Kenneth Lee (212) 905-5995 UBS Investment Bank Adam Beatty (212) 713-2481 Wells Fargo Securities Christopher Harris (212) 214-5009 Investor Relations Contacts Carl Drake Partner/Head of Ares Management, LLC Public Investor Relations and Communications Tel: (678) 538-1981 cdrake@aresmgmt.com Greg Mason Managing Director Tel: (314) 282-2533 gmason@aresmgmt.com Cameron Rudd Vice President Tel: (678) 538-1986 crudd@aresmgmt.com 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 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 Securities Listing NYSE: ARES NYSE: ARES.PRA
0 42 65 155 112 42 4 94 109 127 127 127 0 42 65 2 87 133 71 126 163 120 163 198 Credit Private Equity Real Estate Strategic Initiative s BUSINESS SECTOR PALETTE GENERAL PALETTE Appendix 5
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 – Unconsolidated Reporting Basis” on slides 14-15. Three Months Ended March 31, 2021 $ in thousands Credit Group Private Equity Group Real Estate Group Strategic Initiatives Operations Management Group Total (1) Management fees $232,877 $49,331 $29,632 $15,623 $— $327,463 Other fees 5,969 108 648 79 — 6,804 Compensation and benefits (80,365) (20,685) (15,941) (4,740) (44,407) (166,138) General, administrative and other expenses (10,809) (4,868) (3,295) (2,035) (18,656) (39,663) Fee related earnings 147,672 23,886 11,044 8,927 (63,063) 128,466 Performance income—realized 3,816 71,218 1,947 — — 76,981 Performance related compensation—realized (2,893) (57,026) (1,177) — — (61,096) Realized net performance income 923 14,192 770 — — 15,885 Investment loss—realized — (7,170) (222) — — (7,392) Interest and other investment income —realized 3,669 444 2,028 33 355 6,529 Interest expense (1,515) (1,663) (1,125) (2,302) (90) (6,695) Realized net investment income (loss) 2,154 (8,389) 681 (2,269) 265 (7,558) Realized income $150,749 $29,689 $12,495 $6,658 $(62,798) $136,793 Three Months Ended March 31, 2020 $ in thousands Credit Group Private Equity Group Real Estate Group Strategic Initiatives Operations Management Group Total(1) Management fees $197,437 $52,157 $24,184 $— $— $273,778 Other fees 3,058 110 704 — — 3,872 Compensation and benefits (70,925) (19,596) (12,413) — (36,426) (139,360) General, administrative and other expenses (15,313) (5,633) (2,935) — (21,305) (45,186) Fee related earnings 114,257 27,038 9,540 — (57,731) 93,104 Performance income—realized 9,016 116,154 26,600 — — 151,770 Performance related compensation—realized (7,899) (92,924) (17,170) — — (117,993) Realized net performance income 1,117 23,230 9,430 — — 33,777 Investment income (loss)—realized (843) 11,470 1,290 — (5,698) 6,219 Interest and other investment income —realized 4,575 812 796 — 168 6,351 Interest expense (1,715) (1,643) (971) — (977) (5,306) Realized net investment income (loss) 2,017 10,639 1,115 — (6,507) 7,264 Realized income $117,391 $60,907 $20,085 $— $(64,238) $134,145
24 AUM Rollforward Credit ∙ AUM increased by 34.3% from Q1-20, primarily driven by new commitments to U.S. and European direct lending, including closings for ACE V, to syndicated loans and to alternative credit strategies Private Equity ∙ AUM increased by 31.8% from Q1-20, primarily driven by new commitments in the corporate private equity and special opportunities strategies Real Estate ∙ AUM increased by 21.4% from Q1-20, driven by new commitments across funds in the debt, U.S. equity and European equity strategies Strategic Initiatives ∙ AUM increased from Q1-20, driven by the acquisitions of SSG during Q3-20 and F&G Re in Q4-20 and by the capital raised in the initial public offering for AAC Q1-21 AUM Rollforward $ in millions Credit Private Equity Real Estate Strategic Initiatives Total Q4-20 Ending Balance $145,472 $27,439 $14,808 $9,261 $196,980 Net new par/equity commitments 4,519 (21) 730 700 5,928 Net new debt commitments 2,543 — 1,880 — 4,423 Capital reductions (545) (2) (232) — (779) Distributions (740) (634) (171) (131) (1,676) Redemptions (536) — — — (536) Change in fund value 403 2,237 114 64 2,818 Q1-21 Ending Balance $151,116 $29,019 $17,129 $9,894 $207,158 QoQ change $5,644 $1,580 $2,321 $633 $10,178 Q1-21 LTM AUM Rollforward $ in millions Credit Private Equity Real Estate Strategic Initiatives Total Q1-20 Ending Balance $112,512 $22,015 $14,112 $— $148,639 Acquisitions — — — 9,114 9,114 Net new par/equity commitments 26,713 5,804 1,432 905 34,854 Net new debt commitments 7,851 — 2,091 — 9,942 Capital reductions (928) (113) (605) — (1,646) Distributions (2,591) (3,207) (737) (337) (6,872) Redemptions (2,248) (5) — — (2,253) Change in fund value 9,807 4,525 836 212 15,380 Q1-21 Ending Balance $151,116 $29,019 $17,129 $9,894 $207,158 YoY change $38,604 $7,004 $3,017 $9,894 $58,519
25 FPAUM Rollforward Credit ∙ FPAUM increased by 20.9% from Q1-20, primarily driven by deployment in U.S. and European direct lending funds paid on invested capital and by new commitments to the syndicated loans strategy Private Equity ∙ FPAUM increased by 8.9% from Q1-20, primarily driven by deployment across funds in the special opportunities strategy and by the commencement of fees for the sixth flagship corporate private equity fund in Q4-20 Real Estate ∙ FPAUM increased by 17.4% from Q1-20, driven by new commitments to the U.S. and European equity strategy and deployment in debt funds Strategic Initiatives ∙ FPAUM increased from Q1-20, driven by the acquisition of SSG during Q3-20 and the acquisition of F&G Re in Q4-20 Q1-21 FPAUM Rollforward $ in millions Credit Private Equity Real Estate Strategic Initiatives Total Q4-20 Ending Balance $88,017 $21,172 $10,252 $6,596 $126,037 Commitments 1,585 79 496 (231) 1,929 Subscriptions/deployment/increase in leverage 4,539 592 337 538 6,006 Capital reductions (837) — (32) (1) (870) Distributions (1,322) (576) (141) (256) (2,295) Redemptions (646) — — — (646) Change in fund value 279 (1) (92) (20) 166 Change in fee basis — (2,739) — — (2,739) Q1-21 Ending Balance $91,615 $18,527 $10,820 $6,626 $127,588 QoQ change $3,598 $(2,645) $568 $30 $1,551 Q1-21 LTM FPAUM Rollforward $ in millions Credit Private Equity Real Estate Strategic Initiatives Total Q1-20 Ending Balance $75,760 $17,020 $9,215 $— $101,995 Acquisitions — — — 6,426 6,426 Commitments 5,576 4,317 863 (231) 10,525 Subscriptions/deployment/increase in leverage 13,581 1,825 1,078 1,255 17,739 Capital reductions (2,396) — (72) (26) (2,494) Distributions (3,948) (1,405) (434) (729) (6,516) Redemptions (2,294) — — — (2,294) Change in fund value 5,376 (32) 283 (20) 5,607 Change in fee basis (40) (3,198) (113) (49) (3,400) Q1-21 Ending Balance $91,615 $18,527 $10,820 $6,626 $127,588 YoY change $15,855 $1,507 $1,605 $6,626 $25,593
26 AUM and FPAUM by Strategy 1. AUM includes ARCC, IHAM and Senior Direct Lending Program ("SDLP") AUM of $20.7 billion, $5.6 billion and $3.5 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC- registered investment adviser, manages 20 funds and serves as the sub-manager or sub-adviser for 2 other funds as of March 31, 2021. SDLP is a program co-managed by a subsidiary of Ares through which ARCC co-invests with Varagon Capital Partners. As of March 31, 2021 $ in billions AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $28.4 19% $26.9 29% High Yield 2.9 2 2.9 3 Multi-Asset Credit 3.3 2 2.8 3 Alternative Credit 14.0 9 7.0 8 U.S. Direct Lending(1) 59.4 39 32.3 35 European Direct Lending 43.1 29 19.7 22 Credit $151.1 100% $91.6 100% Private Equity Corporate Private Equity ACOF V $8.4 29% $4.7 25% ACOF IV 4.1 14 1.2 6 Sixth Flagship Corporate Private Equity Fund 4.3 14 3.9 21 Other Corporate Private Equity 2.5 9 2.0 11 Infrastructure and Power EIF I-IV and Other Infrastructure and Power 2.8 10 3.0 16 EIF V 0.9 3 0.7 4 Special Opportunities ASOF 4.3 15 2.3 12 Other Special Opportunities 1.7 6 0.8 4 Private Equity $29.0 100% $18.6 99% Real Estate U.S. Equity $4.9 28% $4.0 37% European Equity 4.8 28 4.0 37 Debt 7.5 44 2.8 26 Real Estate $17.2 100% $10.8 100% Strategic Initiatives Asian Special Situations $5.1 52% $3.7 56% Asian Secured Lending 1.9 19 0.9 14 Insurance 1.9 19 2.0 30 AAC 1.0 10 — — Strategic Initiatives $9.9 100% $6.6 100% Total $207.2 $127.6 Insurance - FPAUM could be higher. AIS credit funds have fee basis on invested capital, so the reduction in AUM for Aspida in Insurance could be higher than FPAUM reduction
27 Balance Sheet Investments by Strategy(1) $ in millions March 31, 2021 December 31, 2020 Credit Syndicated Loans(2) $106.6 $107.7 Multi-Asset Credit 6.7 6.6 Alternative Credit 23.5 23.0 U.S. Direct Lending 58.7 53.5 European Direct Lending 35.5 35.7 Credit $231.0 $226.5 Private Equity ACOF IV $28.6 $27.8 ACOF Asia 19.5 27.0 AEVF 27.1 25.3 Other Corporate Private Equity 62.2 15.0 Infrastructure and Power 32.9 36.6 Special Opportunities 51.6 48.3 Private Equity $221.9 $180.0 Real Estate U.S. Equity $86.8 $83.1 European Equity 12.7 14.1 Debt 34.3 63.7 Real Estate $133.8 $160.9 Strategic Initiatives Ares SSG(3) $61.7 $60.9 Insurance(4) 213.9 209.7 Other Strategic Initiatives 38.4 24.8 Strategic Initiatives $314.0 $295.4 Operations Management Group $2.6 $2.6 Total $903.3 $865.4 1. As of March 31, 2021, the fair value of our corporate investment portfolio was $562.3 million in accordance with GAAP. Difference between GAAP and unconsolidated investments represents $341.0 million of investments in Consolidated Funds that are eliminated upon consolidation, net of investments that are attributable to non-controlling interests. Investments that are attributable to non-controlling interests primarily represent the $35.4 million of CLO investments that are attributable to the Class B Membership Interests and $14.9 million of investments in Strategic Initiatives. Corporate investment portfolio excludes accrued carried interest allocation, a component of gross accrued performance income, of $1,369.7 million. 2. Through investments in Ares CLOs. Represents Ares' maximum exposure of loss from its investments in CLOs. 3. Includes Ares' proportional interest in legacy investments acquired in connection with the acquisition of SSG. 4. Represents Ares’ interest in a subsidiary that acquired the outstanding common shares of F&G Re.
28 Significant Fund Performance Metrics The following table presents the performance data for the significant funds in the Credit Group that are not drawdown funds: Note: Past performance is not indicative of future results. AUM and Net Returns are as of March 31, 2021 unless otherwise noted. The above table includes fund performance metrics for significant funds which includes commingled funds that contributed at least 1% of total management fees or comprised 1% or more of Ares' total FPAUM for the past two consecutive quarterly periods. Please see significant fund performance endnotes on slide 30 for additional information. Return information presented may not reflect actual returns earned by investors in the applicable fund. ARCC is a publicly traded vehicle. * We do not present fund performance metrics for significant funds with less than two years of investment performance, which begins on the date of the fund's first investment, except for those significant funds which pay management fees on invested capital, in which case performance is shown at the earlier of (i) the one year anniversary of the fund's first investment or (ii) the date on which the fund has invested at least 50% of its capital. As of March 31, 2021 Returns(%)(1) Current Quarter Year -to-Date Since Inception (2) Primary Investment Strategy($ in millions) Year of Inception AUM Gross Net Gross Net Gross Net ARCC(3) 2004 $20,687 N/A 5.2 N/A 5.2 N/A 11.7 U.S. Direct Lending ASIF(4) 2018 1,237 1.2 1.0 1.2 1.0 3.2 2.6 Alternative Credit The following table presents the performance data for our significant drawdown funds: As of March 31, 2021 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(5) Unrealized Value(6) Total Value MOIC IRR(%) Primary Investment Strategy($ in millions) AUM Gross(7) Net(8) Gross(9) Net(10) Credit Funds Harvesting Investments ACE III(11) 2015 $5,175 $2,822 $2,563 $751 $2,634 $3,385 1.4x 1.3x 11.5 8.2 European Direct Lending Funds Deploying Capital PCS 2017 3,957 3,365 2,381 862 2,118 2,980 1.3x 1.2x 13.1 9.3 U.S Direct Lending ACE IV Unlevered(12) 2018 10,766 2,851 2,345 162 2,411 2,573 1.1x 1.1x 9.0 6.3 European Direct Lending ACE IV Levered(12) 4,819 3,897 373 4,114 4,487 1.2x 1.1x 13.2 9.5 SDL Unlevered 2018 5,154 922 602 101 548 649 1.1x 1.1x 9.8 7.2 U.S Direct Lending SDL Levered 2,045 1,336 320 1,210 1,530 1.2x 1.1x 19.0 13.7
29 Note: Past performance is not indicative of future results. AUM and Net Returns are as of March 31, 2021 unless otherwise noted. The above table includes fund performance metrics for significant funds which includes commingled funds that contributed at least 1% of total management fees or comprised 1% or more of Ares' total FPAUM for the past two consecutive quarterly periods. Please see significant fund performance endnotes on slides 31-32 for additional information. Return information presented may not reflect actual returns earned by investors in the applicable fund. * We do not present fund performance metrics for significant funds with less than two years of investment performance, which begins on the date of the fund's first investment, except for those significant funds which pay management fees on invested capital, in which case performance is shown at the earlier of (i) the one year anniversary of the fund's first investment or (ii) the date on which the fund has invested at least 50% of its capital. Significant Fund Performance Metrics (cont’d) The following table presents the performance data for our significant drawdown funds (cont'd): As of March 31, 2021 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Value(2) Total Value MOIC IRR(%) Primary Investment Strategy($ in millions) AUM Gross(3) Net(4) Gross(5) Net(6) Private Equity Funds Harvesting Investments USPF IV 2010 $1,230 $1,688 $2,121 $1,403 $1,220 $2,623 1.2x 1.1x 5.4 1.7 Infrastructure and Power ACOF IV 2012 4,107 4,700 4,251 6,635 3,401 10,036 2.4x 2.0x 21.7 15.4 Corporate Private Equity Funds Deploying Capital ACOF V 2017 8,405 7,850 6,896 995 7,209 8,204 1.2x 1.1x 8.2 4.8 Corporate Private Equity AEOF 2018 730 1,120 965 73 576 649 0.7x 0.6x (20.1) (28.3) Corporate Private Equity ASOF 2019 4,305 3,518 3,138 1,395 2,599 3,994 1.5x 1.4x 64.8 48.9 Special Opportunities Sixth flagship corporate private equity fund 2020 4,329 4,218 1,402 24 1,525 1,549 1.1x 1.1x N/A N/A Corporate Private Equity Real Estate Funds Deploying Capital EF V(7) 2018 2,141 1,968 1,007 54 1,175 1,229 1.2x 1.1x 17.7 8.6 European Real Estate Equity AREOF III 2019 1,675 1,697 330 — 334 334 1.0x 0.9x N/A N/A U.S. Real Estate Equity Strategic Initiatives Funds Deploying Capital SSG Fund IV 2016 1,336 1,181 1,372 804 721 1,525 1.2x 1.1x 13.6 8.0 Asian Special Situations SSG Fund V 2018 2,014 1,878 956 328 763 1,091 1.2x 1.1x 66.5 35.5 Asian Special Situations
30 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 report. 4. Gross returns do not reflect the deduction of management fees or other expenses. Net returns are calculated by subtracting the applicable management fees and other expenses from the gross returns on a monthly basis. ASIF is a master/feeder structure and its AUM and returns include activity from its' investment in an affiliated Ares fund. Returns presented in the table are expressed in U.S. Dollars and are for the master fund, excluding the share class hedges. The quarter, year-to-date, and since inception returns (gross / net) for the pound sterling hedged Cayman feeder, the fund's sole feeder, are as follows: 1.8% / 1.7%, 1.8% / 1.7%, 1.9% / 1.3%, respectively. 5. Realized value represents the sum of all cash distributions to all partners and if applicable, exclude tax and incentive distributions made to the general partner. 6. 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. 7. 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 and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. The gross MoIC would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facilities. 8. 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 and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. The net MoIC would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 9. 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 and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 10. 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 and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 11. 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 table are for the Euro denominated feeder fund. The gross and net IRR for the U.S. dollar denominated feeder fund are 12.8% and 9.3%, respectively. The gross and net MoIC for the U.S. dollar denominated feeder fund are 1.5x and 1.4x, 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. 12. 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 table 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 11.0% and 7.7%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.2x and 1.1x, respectively. The gross and net IRR for ACE IV (G) Levered are 15.2% and 10.8%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.2x and 1.2x, 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. Significant Fund Performance Metrics Endnotes
31 Significant Fund Performance Metrics Endnotes (cont’d) Private Equity 1. Realized value represents the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments. Realized value 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. For the corporate private equity and infrastructure and power funds, 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, as applicable, and other expenses. For the special opportunities funds, the gross 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 as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross MoICs for the corporate private equity and special opportunities funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross MoIC would be 2.2x for ACOF IV, 1.2x for ACOF V, "N/A" for the sixth flagship corporate private equity fund, 0.7x for AEOF and 1.4x for ASOF. The funds may utilize a credit facility during the investment period and for general cash management purposes. The gross MoIC would generally have been lower if such funds called capital from its limited partners instead of utilizing the credit facility. 4. The net MoIC for USPF IV and ASOF 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 and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. The net MoIC would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 5. For the corporate private equity and infrastructure and power funds, 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. The cash flow dates used in the gross IRR calculation are assumed to occur at month-end. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses. For the special opportunities funds 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 IRRs reflect 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, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross IRRs for the corporate private equity and special opportunities funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross IRRs would be 21.6% for ACOF IV, 8.3% for ACOF V, "N/A" for the sixth flagship corporate private equity fund, (20.0)% for AEOF and 64.2% for ASOF. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund- level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 6. 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 calculation 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 and exclude commitments by the general partner and non-fee paying limited partners who do not pay either management fees or carried interest. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
32 Real Estate 1. Realized value includes distributions of operating income, sales and financing proceeds received. 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 for all funds is before giving effect to management fees, carried interest and other expenses, as applicable. 4. 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 which does not pay management fees, carried interest or has such fees rebated outside of the fund. The net MoIC is after giving effect to management fees, carried interest as applicable and other expenses. Net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 5. 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, carried interest and other expenses, as applicable. 6. 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 partners and, if applicable, exclude interests attributable to the non fee-paying partners and/or the general partner which does not pay management fees or carried interest or has such fees rebated outside of the fund. The cash flow dates used in the net IRR calculation 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 generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 7. EF V is made up of two parallel funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net IRR and MoIC presented in the table are for the Euro denominated parallel fund. The gross and net MoIC and IRR presented in the chart is for the Euro denominated parallel fund. The gross and net MoIC for the U.S. Dollar denominated parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the U.S. Dollar denominated parallel fund are 18.8% and 9.6%, 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 V are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate. Strategic Initiatives 1. Realized value represents the sum of all cash distributions to all partners and if applicable, exclude tax and incentive distributions made to the general partner. 2. 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. 3. The gross 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 as applicable and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. The gross MoIC would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 4. 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 and other expenses, carried interest and credit facility interest expense, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. The net MoIC would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 5. 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, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. The gross fund-level IRR would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 6. 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 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 and other expenses, carried interest and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. Significant Fund Performance Metrics Endnotes (cont’d)
33 Supplemental Performance Metrics The following table presents the performance data for commingled funds that were previously reported as significant funds in prior years: As of March 31, 2021 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Value(2) Total Value MOIC IRR(%) Primary Investment Strategy($ in millions) AUM Gross(3) Net(4) Gross(5) Net(6) Credit ACE II(7) 2013 $592 $1,216 $970 $995 $241 $1,236 1.6x 1.4x 11.6 8.4 European Direct Lending Private Equity USPF III 2007 358 1,350 1,808 2,163 354 2,517 1.4x 1.3x 6.7 3.9 Infrastructure and Power EIF V 2015 926 801 1,072 821 683 1,504 1.4x 1.4x 18.3 12.7 Infrastructure and Power ACOF III 2008 551 3,510 3,922 10,288 303 10,591 2.7x 2.3x 28.8 20.5 Corporate Private Equity SSF IV 2015 1,599 1,515 3,504 2,656 1,165 3,821 1.2x 1.2x 5.3 3.8 Special Opportunities Real Estate US VII 2007 13 756 775 1,429 3 1,431 1.8x 1.6x 19.2 13.5 U.S. Real Estate Equity US VIII 2013 486 824 834 951 434 1,385 1.7x 1.5x 18.7 14.3 U.S. Real Estate Equity US IX 2017 1,138 1,040 882 136 994 1,130 1.3x 1.2x 14.6 11.3 U.S. Real Estate Equity EF III(7) 2008 13 1,375 1,324 1,680 2 1,682 1.3x 1.2x 7.0 3.2 European Real Estate Equity EF IV(8) 2014 714 1,299 1,221 1,258 571 1,829 1.5x 1.3x 16.0 11.0 European Real Estate Equity EPEP II(9) 2015 394 747 680 592 362 954 1.4x 1.3x 17.7 14.7 European Real Estate Equity Note: Past performance is not indicative of future results. AUM and Net Returns are as of March 31, 2021 unless otherwise noted. Please see supplemental performance metric endnotes on slides 34-35 for additional information. Return information presented may not reflect actual returns earned by investors in the applicable fund.
34 Supplemental Performance Metrics Endnotes Credit 1. 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. 2. 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. 3. 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 as applicable and other expenses. The funds may utilize a credit facility during the investment period and for general cash management purposes. The gross MoIC would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 4. 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 generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 5. 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, as applicable, and other expenses. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility 6. 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 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 generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 7. 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 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 10.5% and 7.6%, respectively. The gross and net MoIC for the U.S. dollar denominated feeder fund are 1.5x and 1.4x, 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. 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. For the corporate private equity and infrastructure and power funds, 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, as applicable, and other expenses. The gross MoICs for the corporate private equity funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross MoIC would be 2.7x for ACOF III. For the special opportunities funds, the gross 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 as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. 4. The net MoIC for USPF III, EIF V and SSF IV is calculated at the fund-level. The net MoIC for ACOF III 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 who 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.
35 Supplemental Performance Metrics Endnotes (cont’d) Private Equity (cont’d) 5. For the corporate private equity and infrastructure and power funds, 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. The cash flow dates used in the gross IRR calculation are assumed to occur at month-end. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses. The gross IRRs for the corporate private equity funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross IRR would be 28.8% for ACOF III. For the special opportunities funds 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 IRRs reflect 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, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 6. 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 carried interest. The cash flow dates used in the net IRR calculation 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 and exclude commitments by the general partner and Schedule I investors who do not pay either management fees or carried interest. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. Real Estate 1. Realized proceeds include distributions of operating income, sales and financing proceeds received. 2. Unrealized value represents the fair value of remaining investments. 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 for all funds is before giving effect to management fees, carried interest as applicable and other expenses. 4. 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 carried interest or has such fees rebated outside of the fund. The net MoIC is after giving effect to management fees, carried interest as applicable and other expenses. Net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 5. 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, carried interest as applicable, and other expenses. 6. 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 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 carried interest or has such fees rebated outside of the fund. The cash flow dates used in the net IRR calculation 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 generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. 7. EF III is made up of two parallel funds, one denominated in U.S. Dollars and one denominated in Euros. The gross and net MoIC presented in the chart is for the Euro denominated parallel fund. The gross and net MoIC for the U.S. Dollar denominated parallel fund are 1.3x and 1.1x, respectively. The gross and net IRR for the U.S. Dollar denominated parallel fund are 6.6% and 2.6%, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of fund's closing. The Realised Proceeds from the Euro denominated parallel fund are converted at the prevailing exchange rate at the time of fund's closing. All other values for our third flagship European real estate fund are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate. 8. 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 presented in the chart is for the Euro denominated parallel fund. The gross and net MoIC for the U.S. Dollar denominated parallel fund are 1.5x and 1.3x, respectively. The gross and net IRR for the U.S. Dollar denominated parallel fund are 15.8% and 11.4%, 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 our fourth flagship European real estate fund are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate. 9. EPEP II is made up of dual currency investors and Euro currency investors. The gross and net MoIC and gross and net IRR presented in the chart are for dual currency investors as dual currency investors represent the largest group of investors in the fund. Multiples exclude foreign currency gains and losses since dual currency investors fund capital contributions and receive distributions in local deal currency (GBP or EUR) and therefore, do not realize foreign currency gains or losses. The gross and net IRRs for the euro currency investors, which include foreign currency gains and losses, are 17.9% and 14.8%, respectively. The gross and net MoIC for the euro currency investors 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 fund's closing. All other values for EPEP II are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate.
36 Weighted Average Shares 1. Represents units exchangeable for shares of Class A common stock on a one-for-one basis. 2. We apply the treasury stock method to determine the dilutive weighted-average common shares represented by our restricted units to be settled in shares of Class A common stock and options to acquire shares of Class A common stock. Under the treasury stock method, compensation expense attributed to future services and not yet recognized is presumed to be used to acquire outstanding shares of Class A common stock, thus reducing the weighted-average number of shares and the dilutive effect of these awards. 3. Represents proportional dilutive impact based upon the weighted average percentage of Ares Operating Group owned by Ares Management Corporation (57.06% and 50.43% as of March 31, 2021 and 2020, respectively). 4. Excludes Class B common stock and Class C common stock as they are not entitled to any economic benefits of Ares in an event of dissolution, liquidation, or winding up of Ares. Q1-21 Q1-20 Total Shares Common Shares, As Adjusted(3) Total Shares Common Shares, As Adjusted(3) Weighted average shares of Class A common stock 149,271,822 149,271,822 118,366,539 118,366,539 Ares Operating Group Units exchangeable into shares of Class A common stock(1) 112,353,043 — 116,328,089 — Dilutive effect of unvested restricted common units(2) 9,218,424 5,259,636 7,863,084 3,965,668 Dilutive effect of unexercised options(2) 5,174,138 2,952,141 5,884,718 2,967,899 Total Weighted Average Shares Used For Realized Income(4) 276,017,427 157,483,599 248,442,430 125,300,106
37 RI and Other Measures – Financial Data(1) Year ended December 31, $ in thousands 2020 2019 Credit Group $841,138 $713,853 Private Equity Group 221,160 211,614 Real Estate Group 97,680 87,063 Strategic Initiatives 26,587 — Management fees 1,186,565 1,012,530 Other fees 19,948 18,078 Compensation and benefits expenses (609,966) (528,207) General, administrative and other expense (172,097) (178,742) Fee Related Earnings 424,450 323,659 Realized net performance income 131,548 112,136 Realized net investment income 25,958 67,691 Realized Income $581,956 $503,486 Other Data Total Fee Revenue $1,338,061 $1,142,744 Management fees as % of total fees 89% 89% Fee Related Earnings as % of Realized Income 73% 64% 1. Unconsolidated results represent the operating segments plus the Operation Management Group but exclude the effect of Consolidated Funds.
38 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Year ended December 31, $ in thousands 2020 2019 Realized Income and Fee Related Earnings: Income before taxes $379,478 $425,180 Adjustments: Amortization of intangibles(1) 21,195 23,460 Depreciation expense 19,467 17,142 Equity compensation expense 122,986 97,691 Acquisition and merger-related expense 11,194 16,266 Deferred placement fees 19,329 24,306 Other (income) expense, net(2) 10,207 (460) Net expense of non-controlling interests in consolidated subsidiaries 3,817 2,951 Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations (28,203) (39,174) Unconsolidated performance (income) loss-unrealized 7,554 (303,142) Unconsolidated performance related compensation - unrealized (11,552) 206,799 Unconsolidated net investment loss-unrealized 26,484 32,467 Realized Income 581,956 503,486 Unconsolidated performance income-realized (547,216) (402,518) Unconsolidated performance related compensation - realized 415,668 290,382 Unconsolidated investment income-realized (25,958) (67,691) Fee Related Earnings $424,450 $323,659 Note: This table is a reconciliation of income before taxes on a consolidated basis to RI and FRE on unconsolidated basis, which reflects the results of the reportable segments on a combined basis together with the OMG. The OMG’s expenses are not allocated to our reportable segments but management considers the cost structure of the OMG when evaluating our financial performance. Management uses this information to assess the performance of our reportable segments and OMG and believes that this information enhances the ability of shareholders to analyze our performance. 1. FY-19 includes a $20.0 million non-cash impairment charge on certain intangible assets. 2. FY-20 includes a $10.2 million non-cash unrealized guarantee expense that will reduce RI to the extent it is realized.
39 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont’d) 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 OMG. The OMG’s expenses are not allocated to our reportable segments but management considers the cost structure of the OMG when evaluating our financial performance. Management uses this information to assess the performance of our reportable segments and OMG and believes that this information enhances the ability of shareholders to analyze our performance. 1. Related to performance income for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within net realized and unrealized gains (losses) on investments in Ares' Consolidated Statements of Operations. 2. FY-20 includes a $10.2 million non-cash unrealized guarantee expense that will reduce RI to the extent it is realized. Year ended December 31, $ in thousands 2020 2019 Performance income and net investment income reconciliation: Carried interest allocation $505,608 $621,872 Incentive fees 37,902 69,197 Carried interest allocation and incentive fees 543,510 691,069 Performance income - realized from Consolidated Funds 141 13,851 Performance income (loss) reclass(1) (3,726) 740 Unconsolidated performance (income) loss-unrealized 7,554 (303,142) Performance income - realized of non-controlling interests in consolidated subsidiaries (263) — Performance income realized 547,216 402,518 Total consolidated other income 65,918 122,539 Net investment income from Consolidated Funds (85,047) (130,396) Performance (income) loss reclass(1) 3,726 (740) Principal investment income 4,044 44,320 Other (income) expense, net(2) 10,277 (460) Other (income) expense of non-controlling interests in consolidated subsidiaries 556 (39) Investment loss - unrealized 40,405 24,542 Interest and other investment (income) loss - unrealized (13,921) 7,925 Total realized net investment income $25,958 $67,691
40 Glossary ARCC Part II Fees ARCC Part II Fees refers to fees that 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 ARCC Part II Fees paid in all prior years since inception. Ares Operating Group Entities Ares Operating Group Entities refers to, collectively, Ares Holdings L.P., Ares Offshore Holdings L.P. and Ares Investments L.P. Ares Operating Group Unit Ares Operating Group Unit or an “AOG Unit” refers to, collectively, a partnership unit in each of the Ares Operating Group entities. Assets Under Management Assets Under Management or “AUM” generally refers to the assets we manage. For our funds other than CLOs, our AUM represents the sum of the net asset value (“NAV”) 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). NAV refers to the fair value of the assets of a fund less the fair value of the liabilities of the fund. For our funds that are CLOs, our AUM is equal to initial principal amounts adjusted for paydowns. AUM also includes the proceeds raised in the initial public offering of a special purpose acquisition company (“SPAC”) sponsored by us. AUM Not Yet Paying Fees AUM Not Yet Paying Fees (also referred to as “shadow AUM”) refers to AUM that is not currently paying fees and is eligible to earn management fees upon deployment. Available Capital Available Capital (also referred to as “dry powder”) is comprised of uncalled committed capital and undrawn amounts under credit facilities and may include AUM that may be canceled or not otherwise available to invest. Class B Membership Interests Class B Membership Interests refers to the interests that were retained by the former owners of Crestline Denali Capital LLC and represent the financial interests in the subordinated notes of the related CLOs. Consolidated Funds Consolidated Funds refers collectively to certain Ares funds, co-investment entities, CLOs and SPACs that are required under GAAP to be consolidated in our consolidated financial statements. Fee Paying AUM Fee Paying AUM or “FPAUM” refers to the AUM from which we directly earn management fees. FPAUM is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees. For our funds other than CLOs, our FPAUM represents the amount of limited partner capital commitments for certain closed-end funds within the reinvestment period, the amount of limited partner invested capital for the aforementioned closed-end funds beyond the reinvestment period and the portfolio value, gross asset value or NAV. For our funds that are CLOs, our FPAUM is equal to the gross amount of aggregate collateral balance, at par, adjusted for defaulted or discounted collateral.
41 Glossary (cont’d) Fee Related Earnings Fee Related Earnings or “FRE”, a non-GAAP measure, 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 excludes performance income, performance related compensation, investment income from our Consolidated Funds and non-consolidated funds and certain other items that we believe are not indicative of our core operating performance. Gross Invested Capital Gross Invested Capital refers to the aggregate amount of 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 Eligible AUM Incentive Eligible AUM or “IEAUM” generally refers to the AUM of our funds and other entities from which performance income may be generated, regardless of whether or not they are currently generating performance income. It generally represents the NAV plus uncalled equity or total assets plus uncalled debt, as applicable, of our funds for which we are entitled to receive performance income, excluding capital committed by us and our professionals (from which we generally do not earn performance income), as well as proceeds raised in the initial public offering of a SPAC sponsored by us. With respect to ARCC's AUM, only ARCC Part II Fees may be generated from IEAUM. Incentive Generating AUM Incentive Generating AUM or “IGAUM” refers to the AUM of our funds and other entities that are currently generating performance income on a realized or unrealized basis. It generally represents the NAV or total assets of our funds, as applicable, for which we are entitled to receive performance income, excluding capital committed by us and our professionals (from which we generally do not earn performance income). ARCC is only included in IGAUM when ARCC Part II Fees are being generated. Management Fees Management Fees refers to fees we earn for advisory services provided to our funds, which are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value, net investment income, total assets or par value of the investment portfolios managed by us. Management fees include Part I Fees, a quarterly fee based on the net investment income of certain funds, among others. Net Inflows of Capital Net Inflows of Capital refers to 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 new debt and equity issuances 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 operating segments, we have an Operations Management Group (the “OMG”) that consists of shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, strategy and relationship management, legal, compliance and human resources. The OMG’s expenses are not allocated to our reportable segments but we consider the cost structure of the OMG when evaluating our financial performance. Our management uses this information to assess the performance of our reportable segments and OMG, and we believe that this information enhances the ability of shareholders to analyze our performance.
42 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 an SEC-registered investment adviser. Part I Fees Part I Fees refers to a quarterly performance income on the net investment income of Ares Capital Corporation (NASDAQ: ARCC) (“ARCC”) and CION Ares Diversified Credit Fund (“CADC”). Such fees are classified as management fees as they are predictable and recurring in nature, not subject to contingent repayment and generally cash-settled each quarter, unless subject to a payment deferral. Performance Income Performance Income refers to income we earn based on the performance of a fund that is 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. 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. Such funds currently consist of 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. In addition, permanent capital includes certain insurance related assets that are owned or related to Aspida Life Re Ltd (“Aspida”). Realized Income Realized Income or “RI”, a non-GAAP measure, is an operating metric used by management to evaluate performance of the business based on operating performance and the contribution of each of the business segments to that performance, while removing the fluctuations of unrealized income and losses, which may or may not be eventually realized at the levels presented and whose realizations depend more on future outcomes than current business operations. RI differs from income before taxes by excluding (a) operating results of our Consolidated Funds, (b) depreciation and amortization expense, (c) the effects of changes arising from corporate actions, (d) unrealized gains and losses related to performance income and investment performance and (e) certain other items that we believe are not indicative of our operating performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with mergers, acquisitions and capital transactions, underwriting costs and expenses incurred in connection with corporate reorganization. Total Fee Revenue Total Fee Revenue refers to the total of segment management fees, other fees and realized net performance income.
