Ares Management Corporation · NYSE:ARES
Ares Management — Q4 2023 Earnings Presentation
47 slides from Ares Management's earnings presentation, Feb 8, 2024
Slide 1: Earnings Presentation Fourth Quarter and Full Year 2023
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 Fourth Quarter and Full Year 2023 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 (“Aresˮ) (NYSE: ARES) for the benef
Slide 3: Fourth Quarter and Full Year 2023 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 Q4-23 and FY-23 Financial Results Corporate Actions Recent Developments Fourth Quarter and
Slide 4: Gross capital raised by strategy
4 $ in billions Q4 2023 FY 2023 Full Year Commentary Credit Group U.S. Direct Lending $3.7 $18.5 Equity and debt commitments to various funds, including equity commitments of $8.3 billion and debt commitments of $2.0 billion for our third U.S. senior direct lending fund Business Development Companie
Slide 5: Assets Under Management
5 Q4-22 Q3-23 Q4-23 Assets Under Management 1. AUM amounts include vehicles managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of ARCC and a SEC-registered investment adviser (“IHAMˮ). AUM as of December 31, 2023 was $418.8 billion, an increase of 19% from prior year(1) • T
Slide 6: Perpetual Capital
6 Q4-22 Q3-23 Q4-23 $0.3 Perpetual Capital Perpetual Capital AUM Perpetual Capital as of December 31, 2023 was $104.3 billion, an increase of 13% from prior year • The increase of $11.6 billion was primarily driven by: ◦ commitments in our U.S. direct lending and alternative credit strategies, capit
Slide 7: AUM and Management Fees by Type
7 8% 7% 5% 5% 62% 13% 26% 8% 6% 5% 50% 5% AUM and Management Fees by Type 87% 1. Long-dated funds generally have a contractual life of five years or more at inception. For the year ended December 31, 2023: • 87% of assets under management were perpetual capital or long-dated funds • 95% of managemen
Slide 8: Available Capital and AUM Not Yet Paying Fees
8 $84.6 $104.6 Q4-22 Q3-23 Q4-23 Available Capital and AUM Not Yet Paying Fees Available Capital as of December 31, 2023 was $111.4 billion, an increase of 32% from prior year • The increase of $26.8 billion was primarily driven by: ◦ commitments to the U.S. and European direct lending and alternati
Slide 9: AUM Not Yet Paying Fees Available for Future Deployment
9 $62.9 $10.7 $0.7 $52.0 $3.6 $5.6 $1.7 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of December 31, 2023, AUM Not Yet Paying Fees includes $62.9 billion of AUM available for future deployment that could generate approximately $621.6 million in potential increme
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
10 Q4-22 Q3-23 Q4-23 $15.1 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit Private Equity Real Assets Secondaries Other Total Incentive Generating AUM $69.6 $25.1 $14.7 $7.4 $0.5 $117.3 + Uninvested IEAUM 54.6 9.1 10.8 7.0 0.5 82.0 + IEAUM below hurdle 6.0
Slide 11: Fee Related Performance Revenues
11 Fee Related Performance Revenues Fee related performance revenues were $180.4 million during FY-23, generated primarily in our U.S. and European direct lending strategies U.S. Real Estate Equity U.S. Direct Lending European Direct Lending Real Estate Debt Private Equity Secondaries Alternative Cr
Slide 12: Gross Capital Deployment
12 Q4-23 Gross Capital Deployment Capital Deployment(1) ($ in billions) 1. Capital deployment figures include deployment from perpetual capital vehicles. Capital Deployment in Drawdown Funds ($ in billions) Total Gross Invested Capital during Q4-23 was $24.0 billion compared to $21.8 billion during
Slide 13: GAAP Consolidated Statements of Operations
13 Quarter ended December 31, Year ended December 31, $ in thousands, except share data 2023 2022 2023 2022 Revenues Management fees $697,846 $590,083 $2,551,150 $2,136,433 Carried interest allocation 76,751 40,233 618,579 458,012 Incentive fees 243,300 271,208 276,627 301,187 Principal investment i
Slide 14: RI and Other Measures Financial Summary
14 RI and Other Measures Financial Summary Quarter ended December 31, Year ended December 31, $ in thousands, except share data (and as otherwise noted) 2023 2022 % Change 2023 2022 % Change Management fees(1) $703,493 $592,958 19% $2,571,513 $2,152,528 19% Fee related performance revenues 173,512 2
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
15 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Quarter ended December 31, Year ended December 31, $ in thousands 2023 2022 2023 2022 Realized Income and Fee Related Earnings: Income before taxes $483,100 $342,809 $1,333,063 $510,806 Adjustments: Amortization of intangibles(1) 30
Slide 16: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
16 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 17: Credit Group
17 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. Please refer to “Financial Details - Segmentsˮ on slide 25-26 for complete financial results. 2. Composite returns are calculated by ass
Slide 18: Private Equity Group
18 Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~115 investment professionals, ~75 portfolio companies and ~65 active funds and related co-investment vehicles as of December 31, 2023. Included within these amounts, the acquisition o
Slide 19: Real Assets Group
19 Real Assets Group(1) Note: Past performance is not indicative of future results. The Real Assets Group had ~310 investment professionals, ~505 properties, ~65 infrastructure assets and ~65 active funds and related co- investment vehicles as of December 31, 2023. 1. This table is a financial summa
Slide 20: Secondaries Group
20 Secondaries Group(1) Note: Past performance is not indicative of future results. The Secondaries Group had ~85 investment professionals, ~900 limited partnership interests and ~75 active funds and related co- investment vehicles as of December 31, 2023. 1. This table is a financial summary only a
Slide 21: Realized Income per Share Data
21 Realized Income per Share Data Quarter ended December 31, Year ended December 31, $ in thousands, except share data 2023 2022 2023 2022 After-tax Realized Income Realized Income before taxes $434,573 $418,323 $1,265,528 $1,131,027 Entity level foreign, state and local taxes (9,808) (4,913) (28,60
Slide 22: Balance Sheet
22 38% 40% 19% 5% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income • As of December 31, 2023, our balance sheet included $348.3 million in cash and cash equivalents and $2,965.5 million in debt obligations, including $895.0
Slide 23: Corporate Data
23 Corporate Data Board of Directors Michael Arougheti Co-Founder, Chief Executive Officer and President of Ares Ashish Bhutani Former Chairman and Chief Executive Officer of Lazard Asset Management and Former Vice Chairman of Lazard Ltd Antoinette Bush Senior Advisor to News Corp Kipp deVeer Head o
Slide 24: 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
Slide 25: Financial Details – Segments
25 Financial Details – Segments 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. Please refer to “GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basisˮ on slides 15-16. 2. Includes fee related performance compensation of $1
Slide 26: Financial Details – Segments (Year ended December 31, 2023)
26 Year ended December 31, 2023 $ in thousands Credit Group Private Equity Group Real Assets Group Secondaries Group Other Operations Management Group Total(1) Management fees $1,749,796 $230,251 $389,437 $174,942 $27,087 $— $2,571,513 Fee related performance revenues 167,333 — 334 12,782 — — 180,44
Slide 27: Weighted Average Shares
27 Weighted Average Shares 1. Represents proportional dilutive impact based upon the weighted average percentage of Ares Operating Group owned by Ares Management Corporation (61.75% and 60.12% as of December 31, 2023 and 2022, respectively). 2. Represents units exchangeable for shares of Class A com
Slide 28: AUM change by segment
28 Credit • AUM increased by 26% from Q4-22, primarily driven by commitments to U.S. direct lending funds, our sixth European direct lending fund and Pathfinder II Private Equity • AUM increased by 13% from Q4-22, primarily driven by the acquisition of Crescent Point and by commitments to our sevent
Slide 29: FPAUM change by segment
29 Credit • FPAUM increased by 17% from Q4-22, primarily driven by deployment of capital in funds across U.S. and European direct lending and alternative credit, capital raised by our business development companies and the addition of four CLOs Private Equity • FPAUM increased by 17% from Q4-22, pri
Slide 30: AUM and FPAUM by Strategy
30 AUM and FPAUM by Strategy 1. AUM includes ARCC, IHAM and Senior Direct Lending Program ("SDLP") AUM of $28.0 billion, $10.9 billion and $4.2 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC- registered investment adviser, manages 20 vehicles as of December 31, 2023. SDLP
Slide 31: Balance Sheet Investments by Strategy
31 Balance Sheet Investments by Strategy(1) $ in millions As of December 31, 2023 As of December 31, 2022 Credit Liquid Credit(2) $127.3 $93.0 Alternative Credit 37.8 54.6 U.S. Direct Lending 84.6 111.9 European Direct Lending 55.7 33.4 Asia Credit 32.9 18.7 Credit $338.3 $311.6 Private Equity Corpo
Slide 32: Significant Fund Performance Metrics
32 Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: Note: Past performance is not indicative of future results. AUM and net returns are as of December 31, 2023 unless otherwise noted. The above table include
Slide 33: Significant Fund Performance Metrics (cont'd)
33 Significant Fund Performance Metrics (cont’d) Note: Past performance is not indicative of future results. Fund performance metrics for significant funds may be marked as “NMˮ as they may not be considered meaningful due to the limited time since the initial investment and/or early stage of capita
Slide 34: Note: Past performance is not indicative of future results. Fund performance metrics for significant
34 Note: Past performance is not indicative of future results. Fund performance metrics for significant funds may be marked as “NMˮ as they may not be considered meaningful due to the limited time since the initial investment and/or early stage of capital deployment. AUM and net returns are as of De
Slide 35: Significant Fund Performance Metrics Endnotes – Credit
35 Credit 1. Since inception returns are annualized. 2. Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Net returns are calculated using the fund’s NAV and assu
Slide 36: Significant Fund Performance Metrics Endnotes (cont'd)
36 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 37: Significant Fund Performance Metrics Endnotes – Real Assets
37 Real Assets 1. Since inception returns are annualized. 2. Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower r
Slide 38: Significant Fund Performance Metrics Endnotes (cont'd)
38 Significant Fund Performance Metrics Endnotes (cont’d) Secondaries 1. Realized value represents the sum of all cash distributions to all limited partners and if applicable, exclude tax and incentive distributions made to the general partner. 2. Unrealized value represents the limited partners’ sh
Slide 39: Supplemental Performance Metrics
39 Supplemental Performance Metrics Note: Past performance is not indicative of future results. AUM and net returns are as of December 31, 2023 unless otherwise noted. Please refer to supplemental performance metric endnotes on slide 41 for additional information. Return information presented may no
Slide 40: Supplemental Performance Metrics (cont'd)
40 Supplemental Performance Metrics (cont'd) The following table presents the performance data for commingled funds that were previously reported as significant funds: As of December 31, 2023 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Value(2
Slide 41: Supplemental Performance Metrics Endnotes
41 Supplemental Performance Metrics Endnotes Credit 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 al
Slide 42: Supplemental Performance Metrics Endnotes (cont'd)
42 Supplemental Performance Metrics Endnotes (cont’d) Private Equity (cont’d) 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 IRRs reflect returns to the fee-p
Slide 43: Supplemental Performance Metrics Endnotes (cont'd)
43 Supplemental Performance Metrics Endnotes (cont’d) Secondaries 1. Realized value represents the sum of all cash distributions to all limited partners and if applicable, exclude tax and incentive distributions made to the general partner. 2. Unrealized value represents the limited partners' share
Slide 44: Glossary
44 Glossary Ares Operating Group Entities Ares Operating Group entities or an "AOG Entity" refers to, collectively, Ares Holdings, L.P. (“Ares Holdingsˮ) and any future entity designated by our board of directors in its sole discretion as an Ares Operating Group entity. Ares Operating Group Unit Are
Slide 45: Glossary (cont'd)
45 Glossary (cont’d) Fee Related Earnings Fee Related Earnings or “FREˮ, a non-GAAP measure, is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees and fee related performance revenues, is sufficient to cover operating expenses
Slide 46: Glossary (cont'd)
46 Glossary (cont’d) Operations Management Group In addition to our reportable segments, we have an Operations Management Group (the “OMGˮ) that consists of shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/fin
Slide 47: Glossary (cont'd)
47 Glossary (cont’d) Realized Income Realized Income or “RIˮ, 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 fluctuation