Ares Management Corporation · NYSE:ARES
Ares Management — Investor Day (2021)
44 slides from Ares Management's investor day presentation, 2021
Slide 1: Credit Overview & Outlook
Credit Overview & Outlook Kipp deVeer Head of Credit Group and Chief Executive Officer of Ares Capital Corporation Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 2: Important Notice
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 (“A
Slide 3: Important Notice
Important Notice Dated information: This video may contain dated information. Viewers are cautioned that this video and the associated presentation is maintained here solely for the purposes of providing historical background about Ares Management Corporation. As the video may contain dated informat
Slide 4: Ares Credit Group Overview
Ares Credit Group Overview We believe we are one of the largest non-investment grade credit platforms globally $167.6B Platform Attributes In Credit AUM1 Alternative Credit A Global Leader in Non-Investment Grade Credit 8% Liquid Credit 22% U.S. Direct Lending Significant Scale Globally By Strategy
Slide 5: Platform Leadership
Platform Leadership We maintain a strong leadership position in each of our respective businesses 20+ year Track Record of Investing Through Cycles #1 Global Leader in Direct Lending1 #1 in Private Debt Capital Raised2 Top 5 Global CLO Manager3 One of the Largest Syndicated Loan One of the Largest D
Slide 6: Large Addressable Global Credit Market
Large Addressable Global Credit Market We have developed a broad product suite of strategies that participate across large addressable markets Addressable Market* Ares Share of the Addressable Market** Key Drivers Liquid <1% Credit1 $4.2T Scaling and Global Bank Growth of Private U.S. Retrenchment $
Slide 7: Favorable Global Demand Drivers for Credit
Favorable Global Demand Drivers for Credit Bank Consolidation and Regulation 52% reduction in the number of U.S. and EU banks since 1998 1 Growth in Private Equity Drives Direct lending dry powder is only 19% of PE buyout dry powder 2 Growth in Private Credit Issuer Low Rate Environment Low global i
Slide 8: We Are Expanding Our Strategies and AUM to Meet Market Opportunity
We Are Expanding Our Strategies and AUM to Meet Market Opportunity Expansion of key fund series and larger commingled funds have driven AUM growth Expansion of Key Fund Series + Growth in Average Commingled Fund Size = Growth in Assets Under Management 1 ($ in billions) ($ in billions) 20152 Q2-21 H
Slide 9: Integrated and Leading Platform Supports Global Position
Integrated and Leading Platform Supports Global Position Collaboration across the Credit group drives synergies in idea generation, diligence, sourcing and trading Cross pollination of IC Differentiated perspective members across strategies Direct Lending Experience in asset-backed Depth of due dili
Slide 10: Market Leader in Global Liquid Credit for 20+ Years
Market Leader in Global Liquid Credit for 20+ Years The liquid credit team invests in a wide range of strategies and capabilities across the global credit markets $36.4B In Global Liquid Credit AUM Significant Capabilities Multi-Credit 11% A Leading institutional bank loan manager Euro HY Bond & 40
Slide 11: Investment Performance Has Supported AUM Growth
Investment Performance Has Supported AUM Growth • Top Quartile absolute risk • Top quartile performer for adjusted gross returns since U.S. Leveraged Loans1 inception for U.S. High Yield1 Leveraged • 20+ year history managing • Benchmark outperformance High Yield Loans bank loans since inception5 •
Slide 12: Leading Global Direct Lending Platform
Leading Global Direct Lending Platform Over our 17+ year history, we have deployed $120 billion in capital3 with near zero annualized realized loss rates5,6 $116.7B U.S. Direct Lending EU Direct Lending In Global Direct Lending AUM1 2004 Founded 2007 U.S. Direct Lending EU Direct 59% Assets Under Le
Slide 13: Attractive Performance Across All Strategies
Attractive Performance Across All Strategies Demonstrated track record across strategies, risk-return profiles and regions Ares Capital Corp. U.S. Senior Direct Lending EU Direct Lending SDL I ACE IV 13% Levered Levered Annualized Total Stock Based Return1 19% 14% Gross IRR2 Gross IRR2 /14% Net IRR3
Slide 14: Leading Scale in Direct Lending Globally
Leading Scale in Direct Lending Globally We believe that Ares is one of the only managers with a market leading and truly global Direct Lending platform Global Focus Global Team Global Footprint Direct Lending AUM1 Direct Lending Investment Professionals1 Direct Lending Offices1 Over $100B 200+ 10+
Slide 15: Expansion of the Global Direct Lending Platform
Expansion of the Global Direct Lending Platform We have expanded our direct lending products and strategies over the past 5 years Ares Direct Lending AUM and Strategy Growth Diverse and Growing Platform since 2015 ($ in billions) $117 $16 $12 3x growth in the number of $1+ billion fund series $19 $1
Slide 16: Established New Flagship Funds and Growing Successor Fund Size
Established New Flagship Funds and Growing Successor Fund Size Growth of Existing Funds Growth of New Adjacent Funds Ares Capital Europe Strategy Senior Direct Lending Strategy (€ in billions) ($ in billions) € 15.4 Final Close $8.5 First Close € 8.8 $4.9 € 4.3 € 0.8 € 1.4 ACE I ACE II ACE III ACE I
Slide 17: A Market Leader in Global Alternative Credit
A Market Leader in Global Alternative Credit The Alternative Credit Team invests in large, diversified portfolios of assets that generate contractual cash flows $14.5B In Alternative Credit AUM* Liquid Alternative Credit Assets1 45% 1,685+ 1.0bps realized annualized investments since inception4 loss
Slide 18: Alternative Credit Addresses Needs Traditional Markets Do Not Fulfill
Alternative Credit Addresses Needs Traditional Markets Do Not Fulfill Our flexible, scaled capital is proving to be a distinct competitive advantage today Ability to Develop Differentiated Asset-Focused Solutions Creative Bespoke Solutions Flexible Capital No Ratings Requirement Industry Exp
Slide 19: Alternative Credit AUM Growth
Alternative Credit AUM Growth The Alternative Credit team manages ~$14.5 billion1 Alternative Credit AUM across dedicated funds Alternative Credit AUM Growth Diverse and Growing Platform ($ in billions) $14.5 1 Flagship Liquid and Illiquid Funds Access to Alternative Credit in Evergreen Format Scale
Slide 20: We Continue to Diversify and Scale Our Investing
We Continue to Diversify and Scale Our Investing Total Credit Deployment1 Key Points Liquid Credit $28 U.S. Direct Lending EU Direct Lending Deployment per investment professional Alternative Credit $20 has increased over 2x since 2015 $18 Q2-21 Annualized $16 ($ in billions) $12 $9 $8 2021 run-rate
Slide 21: Our Market Presence and Profitability are Also Expanding with Scale
Our Market Presence and Profitability are Also Expanding with Scale Credit AUM1 by Investment Professional Enhanced Scaling of the Credit Group ($ in millions) $574 100% growth AUM by Investment Professional In AUM per investment professional since 20151 ($ mm) $281 87% growth In the number of deals
Slide 22: Future Growth Drivers of the Ares Credit Group
Future Growth Drivers of the Ares Credit Group Ares is well positioned in large and growing end markets that are supported by increasing retail and institutional demand Internal Drivers Product and Distribution Expansion Larger Successor Funds Continued Deployment of Dry Powder • New products and ad
Slide 23: Appendix
Appendix Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 24: GAAP Statement Of Operations
GAAP Statement Of Operations Year Ended December 31, $ in thousands, except share data Q2-21 LTM 2020 2019 2018 2017 2016 2015 2014 Revenues Management fees $1,307,451 $1,150,608 $979,417 $802,502 $722,419 $642,068 $634,399 $486,477 Carried interest allocation 1,583,262 505,608 621,872 42,410 620,45
Slide 25: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary Year Ended December 31, $ in thousands, except share data (and as otherwise noted) Q2-21 LTM 2020 2019 2018 2017 2016 2015 2014 Management fees(1) $1,335,413 $1,186,565 $1,012,530 $836,744 $744,825 $659,451 $650,918 $598,046 Other fees 25,993 19,948 18,078 24,
Slide 26: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Year Ended December 31, $ in thousands Q2-21 LTM 2020 2019 2018 2017 2016 2015 2014 Realized Income and Fee Related Earnings: Income before taxes $944,635 $379,478 $425,180 $184,341 $149,859 $297,920 $81,484 $556,915 Adjustments: Amort
Slide 27: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Year Ended December 31, $ in thousands Q2-21 LTM 2020 2019 2018 2017 2016 2015 2014 Performance income and net investment income reconciliation: Carried interest allocation $1,583,262 $505,608 $621,872 $42,410 $620,454 $494,58
Slide 28: Glossary
Glossary Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 29: Glossary
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 amou
Slide 30: Glossary
Glossary 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
Slide 31: Glossary
Glossary 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
Slide 32: Endnotes – Credit Overview & Outlook
Endnotes – Credit Overview & Outlook Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 33: Credit Overview & Outlook Index Definitions
Credit Overview & Outlook Index Definitions Indices are provided for illustrative purposes only and not indicative of any investment. They have not been selected to represent appropriate benchmarks or targets for the strategy. Rather, the indices shown are provided solely to illustrate the performan
Slide 34: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes Ares Credit Group Overview 1. AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and a registered investment adviser. Platform Leadership 1. Private Debt Investor selected Ares Manageme
Slide 35: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes Large Addressable Global Credit Market 1. Source: CSLLI, WELLI (Hedged to USD) and HW00 Global HY Index. Certain broadly syndicated loans are held within CLO structures which are part of the investable universe for alternative credit. As of March 31, 2021. 2. Size
Slide 36: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes Large Addressable Global Credit Market (cont’d) 3. Size of the EU Direct Lending Addressable Market detailed below: • Based on Ares’ own data calculations using information from Deloitte, S&P Global Market Intelligence, Preqin and Ares’ own observations. The addres
Slide 37: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes Favorable Global Demand Drivers for Credit 1. Sources: From 1998 to Q1-21. Sources: Federal Deposit Insurance Corp Quarterly Banking Profile, Q1-21 and European Central Bank, Q1-21. 2. Source: Preqin. As of June 2021. 3. Source: Hamilton Lane 2021 Market Overview.
Slide 38: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes Investment Performance Has Supported AUM Growth (cont’d) 2. As of June 30, 2021 generated a gross alpha of 69bps annualized since inception. Represented by the Ares Structured European Loan Aggregate Composite ("Composite”). All returns are expressed in Euros. • Th
Slide 39: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes Investment Performance Has Supported AUM Growth (cont’d) 5. See notes below • As of June 30, 2021. For the since inception period, total gross and net returns for U.S. High Yield Composite were 7.59% and 7.06%, vs. 6.98% for the ICE BofA US High Yield Master II Con
Slide 40: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes Leading Global Direct Lending Platform 1. As of June 30, 2021. US. Direct Lending and Total Direct Lending AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and a registered investment
Slide 41: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes Attractive Performance Across Strategies 1. Annualized total shareholder return since IPO in October 2004. Total return is calculated assuming investors did not participate in ARCC’s rights offering issuance in March 2008. Source: SNL Financial. 2. The gross IRR is
Slide 42: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes A Market Leader in Global Alternative Credit 1. Select Liquid Alternative Credit assets include CLO debt securities, consumer loans and leases, small business loans and leases, trade receivables, whole business securitizations, equipment leases, wireless towers, da
Slide 43: Credit Overview & Outlook Endnotes
Credit Overview & Outlook Endnotes A Market Leader in Global Alternative Credit (cont’d) • Represents the asset-level Internal Rate of Return (IRR) of selected investments. IRR is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. I
Slide 44: Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution