Ares Management Corporation · NYSE:ARES
Ares Management — Q2 2022 Earnings Presentation
47 slides from Ares Management's earnings presentation, Jul 28, 2022
Slide 1: Earnings Presentation Second Quarter 2022
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 2022 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 2022 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 Q2-22 Financial Results Corporate Actions Recent Developments Second Quarter 2022 Highligh
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 $99.6 $121.4 $129.7 $15.0 $16.1 $17.7 $15.6 $36.1 $39.2 $16.9 $18.1 $17.6 $6.6 $7.3 $7.1 $153.7 $199.0 $211.3 Q2-21 Q1-22 Q2-22 Assets Under Management 1. AUM amounts include vehicles managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of ARCC and an SEC-registered investm
Slide 6: Perpetual Capital
6 Perpetual Capital 1. Commingled funds refers to publicly managed funds, non-registered funds, illiquid funds and insurance strategies. 2. CLOs are a type of closed end vehicle. Perpetual Capital AUM Perpetual Capital as of June 30, 2022 was $86.7 billion, an increase of 60% from prior year • The i
Slide 7: AUM and Management Fees by Type
7 20% 6% 62% 12% 36% 6% 53% 5% AUM and Management Fees by Type 88% 1. Long-dated funds generally have a contractual life of five years or more at inception. For the quarter ended June 30, 2022: • 88% of assets under management were perpetual capital or long-dated funds • 95% of management fees were
Slide 8: Available Capital and AUM Not Yet Paying Fees
8 $38.9 $42.9 $38.7 $2.5 $6.8 $6.1$2.5 $7.6 $7.0 $1.0 $3.7 $3.6 $2.2 $3.7 $3.8 $47.1 $64.7 $59.2 Q2-21 Q1-22 Q2-22 Available Capital and AUM Not Yet Paying Fees Available Capital as of June 30, 2022 was $91.0 billion, an increase of 20% from prior year • The increase of $15.0 billion was primarily d
Slide 9: AUM Not Yet Paying Fees
9 $35.7 $5.4 $5.3 $3.4 $2.9 $52.7 $6.0 $0.5 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of June 30, 2022, AUM Not Yet Paying Fees includes $52.7 billion of AUM available for future deployment which could generate approximately $505.2 million in potential increm
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
10 Q2-21 Q1-22 Q2-22 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit(3) Private Equity Real Assets(3) Secondary Solutions Strategic Initiatives Total Incentive Generating AUM $41.5 $19.6 $24.5 $6.0 $0.4 $92.0 + Uninvested IEAUM 36.4 10.4 10.5 7.7 4.0 69.0 +
Slide 11: Q2-22 Gross Capital Deployment
11 Q2-22 Gross Capital Deployment Capital Deployment ($ in billions) (2) Capital Deployment in Drawdown Funds ($ in billions) Total Gross Invested Capital during Q2-22 was $24.1 billion compared to $16.5 billion during Q2-21 • Of the total amount, $12.9 billion was related to deployment by our drawd
Slide 12: GAAP Statements of Operations
12 Three months ended June 30, Six months ended June 30, $ in thousands, except share data 2022 2021 2022 2021 Revenues Management fees $520,560 $367,286 $997,892 $687,559 Carried interest allocation 47,304 852,521 225,593 1,150,056 Incentive fees 4,675 15,904 21,097 18,724 Principal investment inco
Slide 13: RI and Other Measures Financial Summary
13 RI and Other Measures Financial Summary 1. Includes Part I Fees of $59.3 million and $59.3 million for Q2-22 and Q2-21, respectively, and $110.1 million and $186.7 million for YTD-22 and YTD-21, respectively. 2. Includes fee related performance compensation of $0.9 million and $0.4 million for Q2
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
14 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Three months ended June 30, Six months ended June 30, $ in thousands 2022 2021 2022 2021 Realized Income and Fee Related Earnings: Income before taxes $67,066 $319,777 $228,375 $509,841 Adjustments: Amortization of intangibles 33,79
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
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 re
Slide 16: Credit Group
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. Please refer to “Financial Details - Segmentsˮ on slide 25-26 for complete financial results. 2. Performance for the U.S. senior direct
Slide 17: Private Equity Group
17 Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~90 investment professionals, ~45 portfolio companies and ~10 active funds and related co-investment vehicles as of June 30, 2022. 1. This table is a financial summary only and segment
Slide 18: Real Assets Group
18 Real Assets Group(1) Note: Past performance is not indicative of future results. The Real Assets Group had ~260 investment professionals, ~530 properties, ~45 infrastructure and power assets and ~65 active funds and related co-investment vehicles as of June 30, 2022. 1. This table is a financial
Slide 19: Secondary Solutions
19 Secondary Solutions(1) Note: Past performance is not indicative of future results. The Secondary Solutions Group had ~70 investment professionals, ~870 limited partnership interests and ~65 active funds and related co-investment vehicles as of June 30, 2022. 1. This table is a financial summary o
Slide 20: Strategic Initiatives
20 Strategic Initiatives(1) • Management and other fees increased by 4% for Q2-22 compared to Q2-21, primarily due to higher management fees driven by additional commitments to our sixth Asian special situations fund, including $0.3 million in catch-up fees in Q2-22 • Fee Related Earnings decreased
Slide 21: Realized Income per Share Data
21 Realized Income per Share Data Three months ended June 30, Six months ended June 30, $ in thousands, except share data 2022 2021 2022 2021 After-tax Realized Income Realized Income before taxes $247,245 $206,947 $469,262 $343,740 Entity level foreign, state and local taxes (4,438) (3,139) (7,996)
Slide 22: Balance Sheet
22 27% 42% 25% 6% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income • As of June 30, 2022, our balance sheet included $252.9 million in cash and cash equivalents and $1,968.0 million in debt obligations, including $395.0 mill
Slide 23: Corporate Data
23 Corporate Data Board of Directors Michael Arougheti Co-Founder, Chief Executive Officer and President of Ares Antoinette Bush Senior Advisor to News Corp Kipp deVeer Head of Credit Group Paul G. Joubert Founding Partner of EdgeAdvisors and Investing Partner in Converge Venture Partners David Kapl
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 14-15. 2. Includes fee related performance compensation of $0
Slide 26: Financial Details – Segments (Six months)
26 Six months ended June 30, 2022 $ in thousands Credit Group Private Equity Group Real Assets Group Secondary Solutions Group Strategic Initiatives Operations Management Group Total(1) Management fees $626,330 $93,353 $163,220 $90,705 $34,194 $— $1,007,802 Fee related performance revenues 12,628 —
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 (59.66% and 59.13% as of June 30, 2022 and 2021, respectively). 2. Represents units exchangeable for shares of Class A common
Slide 28: AUM Rollforward
28 AUM Rollforward Credit • AUM increased by 20% from Q2-21, primarily driven by new commitments to SDL II, PCS II and our open-end core alternative credit fund and by issuances of new CLOs in the syndicated loans strategy Private Equity • AUM increased by 24% from Q2-21, primarily driven by new com
Slide 29: FPAUM Rollforward
29 FPAUM Rollforward Credit • FPAUM increased by 30% from Q2-21, primarily driven by deployment in U.S. and European direct lending and alternative credit, as well as by issuances of new CLOs in the syndicated loans strategy Private Equity • FPAUM increased by 18% from Q2-21, primarily driven by dep
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 $25.6 billion, $8.8 billion and $3.6 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC- registered investment adviser, manages 21 vehicles and serves as the sub-manager
Slide 31: Balance Sheet Investments by Strategy
31 Balance Sheet Investments by Strategy(1) $ in millions June 30, 2022 December 31, 2021 Credit Syndicated Loans(2) $85.5 $103.8 Multi-Asset Credit 10.8 12.0 Alternative Credit 30.7 27.5 U.S. Direct Lending 114.1 116.8 European Direct Lending 32.7 33.0 Credit $273.8 $293.1 Private Equity Corporate
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 June 30, 2022 unless otherwise noted. The above table includes fu
Slide 33: Significant Fund Performance Metrics (cont'd)
33 Significant Fund Performance Metrics (cont’d) Note: Past performance is not indicative of future results. AUM and net returns are as of June 30, 2022 unless otherwise noted. The above table includes fund performance metrics for significant funds which includes commingled funds that contributed at
Slide 34: Significant Fund Performance Metrics (cont'd)
34 Note: Past performance is not indicative of future results. AUM and net returns are as of June 30, 2022 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 35: Significant Fund Performance Metrics (cont'd)
35 Note: Past performance is not indicative of future results. AUM and net returns are as of June 30, 2022 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 36: Significant Fund Performance Metrics Endnotes – Credit
36 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 37: Significant Fund Performance Metrics Endnotes – Private Equity
37 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 38: Significant Fund Performance Metrics Endnotes – Real Assets
38 Real Assets 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. Returns are shown for institutional share class.
Slide 39: Significant Fund Performance Metrics Endnotes – Secondary Solutions
39 Significant Fund Performance Metrics Endnotes (cont’d) Secondary Solutions 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 part
Slide 40: Supplemental Performance Metrics
40 Supplemental Performance Metrics The following table presents the performance data for commingled funds that were previously reported as significant funds: As of June 30, 2022 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Value(2) Total Value
Slide 41: Supplemental Performance Metrics Endnotes – Private Equity
41 Supplemental Performance Metrics Endnotes 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. Un
Slide 42: Supplemental Performance Metrics Endnotes – Real Assets
42 Supplemental Performance Metrics Endnotes (cont’d) Real Assets 1. For the infrastructure opportunities funds, 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 exclude
Slide 43: Supplemental Performance Metrics Endnotes – Strategic Initiatives
43 Supplemental Performance Metrics Endnotes (cont’d) 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
Slide 44: Glossary
44 Glossary ARCC Part II Fees ARCC Part II Fees refers to fees from Ares Capital Corporation (NASDAQ: ARCC) (“ARCCˮ) 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
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