Ares Management Corporation · NYSE:ARES
Ares Management — Q2 2021 Earnings Presentation
44 slides from Ares Management's earnings presentation, Jul 29, 2021
Slide 1: Earnings Presentation Second Quarter 2021
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 Second Quarter 2021 Exhibit 99.2
Slide 2: Important Notice
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
Slide 3: Second Quarter 2021 Highlights
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 Second Quarter 2021 Highlights 1.
Slide 4: Gross New Capital Commitments
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 have been co
Slide 5: Assets Under Management
5 $78.7 $91.6 $99.6 $17.5 $18.6 $18.8 $9.3 $10.8 $11.8 $16.9 $6.6 $6.6 $105.5 $127.6 $153.7 Q2-20 Q1-21 Q2-21 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”). A
Slide 6: Management Fees by Duration and Fund Type
6 34% 8% 11% 23% 10% 12% 2% 50% 34% 6% 7% 2% 1% Management Fees by Duration and Fund Type 76% 1. Differentiated managed accounts have been managed by Ares 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
Slide 7: Available Capital and AUM Not Yet Paying Fees
7 $19.0 $33.7 $38.9 $6.4 $3.0 $2.5 $2.4 $1.8 $2.5 $1.0 $1.7 $2.2 $27.8 $40.2 $47.1 Q2-20 Q1-21 Q2-21 Available Capital and AUM Not Yet Paying Fees Available Capital as of June 30, 2021 was $76.0 billion, an increase of 93.9% from prior year • The increase of $36.8 billion was primarily driven by: ◦
Slide 8: AUM Not Yet Paying Fees
8 $4.2 $0.3 $36.2 $1.8 $1.6 $0.9 $2.1 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of June 30, 2021, AUM Not Yet Paying Fees of $47.1 billion could generate approximately $451.7 million in potential incremental annual management fees, of which $400.9 million rel
Slide 9: Incentive Eligible AUM and Incentive Generating AUM
9 Q2-20 Q1-21 Q2-21 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit Private Equity Real Estate Secondary Solutions Strategic Initiatives(3) Total Incentive Generating AUM $36.1 $16.1 $6.2 $4.2 $0.2 $62.8 + Uninvested IEAUM 42.6 7.4 5.3 6.4 2.3 64.0 + IEAUM
Slide 10: Capital Deployment
10 $8.1 $1.0 $1.3 $0.1 $0.2 Q2-21 Capital Deployment BreakdownCapital Deployment(1) ($ 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 cap
Slide 11: GAAP Statements of Operations
11 Three months ended June 30, Six months ended June 30, $ in thousands, except share data 2021 2020 2021 2020 Revenues Management fees $367,286 $266,867 $687,559 $530,716 Carried interest allocation 852,521 303,278 1,150,056 72,402 Incentive fees 15,904 331 18,724 (2,918) Principal investment incom
Slide 12: RI and Other Measures Financial Summary
12 RI and Other Measures Financial Summary 1. Includes Part I Fees of $59.3 million and $41.3 million for Q2-21 and Q2-20, respectively, and $105.8 million and $85.2 million for YTD-21 and YTD-20, respectively. 2. For Q2-21, Q2-20, and YTD-21, YTD-20, after-tax Realized Income includes current incom
Slide 13: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
13 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Three months ended June 30, Six months ended June 30, $ in thousands 2021 2020 2021 2020 Realized Income and Fee Related Earnings: Income (loss) before taxes $319,777 $241,097 $509,841 $(55,316) Adjustments: Amortization of intangib
Slide 14: GAAP to Non-GAAP Reconciliation (cont'd)
14 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 re
Slide 15: Credit Group
15 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 22-23 for complete financial results. 2. Net returns are calculated using the fund's NAV and
Slide 16: Private Equity Group
16 Corporate Private Equity 15.3% Special Opportunities 14.7% Q2-21 gross returns(2) Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~110 investment professionals, ~45 portfolio companies, ~35 infrastructure and power assets and ~20 ac
Slide 17: Real Estate Group
17 Real Estate Group(1) Note: Past performance is not indicative of future results. The Real Estate Group had ~85 investment professionals, ~240 properties and ~45 active funds and related co-investment vehicles as of June 30, 2021. 1. This table is a financial summary only and segment results are s
Slide 18: Realized Income per Share Data
18 Realized Income per Share Data 1. Ares had 12,400,000 shares of 7% Series A Preferred Stock outstanding as of June 30, 2021. 2. Amount represents the current corporate taxes paid by Ares for the periods presented and exclude the effects for Q2-21 and Q2-20, of $39.0 million and $19.9 million, res
Slide 19: Balance Sheet
19 34% 44% 19% 3% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income ∙ As of June 30, 2021, our balance sheet included $582.9 million in cash and cash equivalents and $1,088.1 million in debt obligations with no amounts drawn
Slide 20: Corporate Data
20 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
Slide 21: Appendix
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
Slide 22: Financial Details – Segments
22 Financial Details – Segments 1. Represents results of Landmark following the acquisition close date of June 2, 2021. 2. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Ba
Slide 23: Financial Details – Segments, Six Months
23 Six months ended June 30, 2021 $ in thousands Credit Group Private Equity Group Real Estate Group Secondary Solutions Group(1) Strategic Initiatives Operations Management Group Total(2) Management fees $493,111 $101,428 $60,442 $12,898 $32,419 $— $700,298 Other fees 12,696 356 923 — 80 — 14,055 C
Slide 24: AUM Rollforward
24 AUM Rollforward Credit ∙ AUM increased by 42.7% from Q2-20, 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 15.5% from Q2-20, primarily driven by new c
Slide 25: FPAUM Rollforward
25 FPAUM Rollforward Credit ∙ FPAUM increased by 26.5% from Q2-20, 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 7.2% from Q2-20, primarily driven by deploy
Slide 26: AUM and FPAUM by Strategy
26 AUM and FPAUM by Strategy 1. AUM includes ARCC, IHAM and Senior Direct Lending Program ("SDLP") AUM of $22.8 billion, $5.5 billion and $2.9 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC-registered investment adviser, manages 19 funds and serves as the sub-manager or s
Slide 27: Balance Sheet Investments by Strategy
27 Balance Sheet Investments by Strategy(1) $ in millions June 30, 2021 December 31, 2020 Credit Syndicated Loans(2) $101.7 $107.7 Multi-Asset Credit 7.1 6.6 Alternative Credit 23.3 23.0 U.S. Direct Lending 62.6 53.5 European Direct Lending 47.2 35.7 Credit $241.9 $226.5 Private Equity ACOF IV $28.6
Slide 28: Significant Fund Performance Metrics
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 June 30, 2021 unless otherwise noted. The abo
Slide 29: Significant Fund Performance Metrics
29 Note: Past performance is not indicative of future results. AUM and Net Returns are as of June 30, 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 comprise
Slide 30: Significant Fund Performance Metrics
30 Note: Past performance is not indicative of future results. AUM and Net Returns are as of June 30, 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 comprise
Slide 31: Significant Fund Performance Endnotes – Credit
31 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 a
Slide 32: Significant Fund Performance Endnotes – Private Equity
32 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 financing
Slide 33: Significant Fund Performance Endnotes – Real Estate
33 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 unreali
Slide 34: Significant Fund Performance Endnotes – Strategic Initiatives
34 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. Th
Slide 35: Supplemental Performance Metrics
35 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 June 30, 2021 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Value
Slide 36: Supplemental Performance Metrics Endnotes
36 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
Slide 37: Supplemental Performance Metrics Endnotes (cont'd)
37 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 inves
Slide 38: Weighted Average Shares
38 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 an
Slide 39: RI and Other Measures – Financial Data
39 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 a
Slide 40: GAAP to Non-GAAP Reconciliation – Year Ended December 31
40 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 com
Slide 41: GAAP to Non-GAAP Reconciliation (cont'd)
41 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 re
Slide 42: Glossary
42 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 a
Slide 43: Glossary (cont'd)
43 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
Slide 44: Glossary (cont'd)
44 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 Managem