Ares Management Corporation · NYSE:ARES
Ares Management — FY2021 Earnings Presentation
49 slides from Ares Management's earnings presentation, Feb 11, 2022
Slide 1: Ares Management Corporation Reports Fourth Quarter and Full Year 2021 Results
Ares Management Corporation Reports Fourth Quarter and Full Year 2021 Results NEW YORK--Ares Management Corporation (NYSE:ARES) today reported its financial results for its fourth quarter and full year ended December 31, 2021. GAAP net income attributable to Ares Management Corporation was $124.1 mi
Slide 2: Conference Call and Webcast Information
Conference Call and Webcast Information Ares will host a conference call on February 11, 2022 at 12:00 p.m. (Eastern Time) to discuss fourth quarter and full year results. All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link loca
Slide 3: Earnings Presentation Fourth Quarter and Full Year 2021
Earnings Presentation Fourth Quarter and Full Year 2021
Slide 4: 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 5: Fourth Quarter and Full Year 2021 Highlights
Fourth Quarter and Full Year 2021 Highlights ∙ Total Assets Under Management (“AUM”) of $305.8 billion ∙ Total Fee Paying AUM (“FPAUM”) of $187.8 billion ∙ Available Capital of $90.4 billion Assets Under ∙ AUM Not Yet Paying Fees available for future deployment of $53.0 billion Management ∙ Raised $
Slide 6: Gross New Capital Commitments
Gross New Capital Commitments(1) $ in billions Q4 2021 FY 2021 Full Year Commentary Credit Group Primarily new and additional equity commitments to various funds, including final commitments for Ares Private U.S. Direct Lending $6.0 $21.4 Credit Solutions II, L.P. (“PCS II”) of $3.2 billion bringing
Slide 7: Assets Under Management
Assets Under Management AUM as of December 31, 2021 was $305.8 billion, an increase of 55% from prior year(1) ∙ The increase of $108.8 billion was primarily driven by: ◦ fundraising from SDL II and PCS II in U.S. direct lending, ACE V in European direct lending, our second special opportunities fund
Slide 8: Perpetual Capital
Perpetual Capital Perpetual Capital as of December 31, 2021 was $76.6 billion, an increase of 69% from prior year ∙ The increase of $31.2 billion was primarily driven by fundraising in U.S. direct lending, European direct lending and alternative credit and by the acquisition of Black Creek in Real E
Slide 9: AUM and Management Fees by Type
AUM and Management Fees by Type For the year ended December 31, 2021: ∙ 88% of assets under management were perpetual capital or long-dated funds ∙ 95% of management fees were earned from perpetual capital or long-dated funds AUM by Type Management Fees by Type 5% 12% 18% 35% 7% 88% 95% 53% 7% 63% P
Slide 10: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of December 31, 2021 was $90.4 billion, an increase of 61% from prior year ∙ The increase of $34.1 billion was primarily driven by: ◦ fundraising from ACE V, SDL II, PCS II, ACOF VI, our second special opportunities fund and the init
Slide 11: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of December 31, 2021, AUM Not Yet Paying Fees of $57.9 billion could generate approximately $568.4 million in potential incremental annual management fees, of which $517.1 million relates to the $53.0 billion of AUM available for future deployment(1) ∙ The $53.0 billion of
Slide 12: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of December 31, 2021 was $183.1 billion, an increase of 56% from prior year ∙ The increase of $66.1 billion was primarily driven by: ◦ capital raising across U.S. and European direct lending, alternative credit, corporate
Slide 13: Capital Deployment
Capital Deployment(1) Total Gross Invested Capital during FY-21 was $81.0 billion compared to $39.9 billion during FY-20 ∙ Of the total amount, $46.7 billion was related to deployment by our drawdown funds compared to $21.4 billion for the same period in 2020, and $32.4 billion was related to deploy
Slide 14: GAAP Statements of Operations
GAAP Statements of Operations Quarter ended December 31, Year ended December 31, $ in thousands, except share data 2021 2020 2021 2020 Revenues Management fees $475,226 $327,458 $1,611,047 $1,150,608 Carried interest allocation 462,844 264,228 2,073,551 505,608 Incentive fees 313,456 33,626 332,876
Slide 15: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary Quarter ended December 31, Year ended December 31, $ in thousands, except share data (and as otherwise noted) 2021 2020 % Change 2021 2020 % Change (1) Management fees $481,029 $334,984 44% $1,635,277 $1,186,565 38% Fee related performance revenues 134,610 26,
Slide 16: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Quarter ended December 31, Year ended December 31, $ in thousands 2021 2020 2021 2020 Realized Income and Fee Related Earnings: Income before taxes $308,861 $275,153 $1,065,690 $379,478 Adjustments: Amortization of intangibles 28,795 9
Slide 17: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Quarter ended December 31, Year ended December 31, $ in thousands 2021 2020 2021 2020 Performance income and net investment income reconciliation: Carried interest allocation $462,844 $264,228 $2,073,551 $505,608 Incentive fee
Slide 18: Credit Group
Credit Group(1) ∙ Management and other fees increased by 30% and 28% for Q4-21 and FY-21, respectively, compared to Q4-20 and FY-20, primarily driven by deployment in funds in the U.S. and European direct lending strategies ∙ Fee related performance revenues increased for Q4-21 and FY-21 compared to
Slide 19: Private Equity Group
Private Equity Group(1) ∙ Management and other fees decreased by 1% for Q4-21 compared to Q4-20, primarily due to the step down in fee rate and fee basis for ACOF V as a result of the initiation of fees for ACOF VI in Q4-20. Q4-21 also included $4.5 million in catch-up fees from ACIP. Management and
Slide 20: Real Estate Group
Real Estate Group(1) ∙ Management and other fees increased for Q4-21 and FY-21 compared to Q4-20 and FY-20, primarily due to the acquisition of Black Creek and increase in management fees generated from EPEP III ∙ Fee related performance revenues increased for Q4-21 and FY-21 compared to Q4-20 and F
Slide 21: Secondary Solutions
Secondary Solutions(1) ∙ On June 2, 2021, Ares completed the acquisition of Landmark, increasing AUM by $19.5 billion. Following the acquisition, Landmark’s results are presented within the newly formed segment named Secondary Solutions. The Secondary Solutions Group invests in secondary markets acr
Slide 22: Strategic Initiatives
Strategic Initiatives(1) ∙ Management and other fees increased by 32% and 149% for Q4-21 and FY-21, respectively, compared to Q4-20 and FY-20, primarily driven by the acquisition of F&G Reinsurance Ltd, rebranded as Aspida Life Re Ltd (“Aspida Life Re“) post-acquisition, that occurred at the end of
Slide 23: Realized Income per Share Data
Realized Income per Share Data Quarter ended December 31, Year ended December 31, $ in thousands, except share data 2021 2020 2021 2020 After-tax Realized Income Realized Income before taxes $340,321 $186,155 $882,937 $581,956 Entity level foreign, state and local taxes (5,080) (4,919) (14,435) (10,
Slide 24: Balance Sheet
Balance Sheet Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income ∙ As of December 31, 2021, our balance sheet included $343.7 million in cash and cash equivalents and $1,503.7 million in debt obligations, including $415.0 mill
Slide 25: Corporate Data
Corporate Data Board of Directors Executive Officers Research Coverage Investor Relations Contacts Michael Arougheti Michael Arougheti Bank of America Merrill Lynch Carl Drake Co-Founder, Chief Executive Officer Co-Founder, Chief Executive Officer Craig Siegenthaler Partner/Head of Public Markets an
Slide 26: Appendix
Appendix
Slide 27: Financial Details – Segments
Financial Details – Segments Quarter ended December 31, 2021 Private Real Secondary Solutions Operations Credit Equity Estate Strategic Management $ in thousands Group Group Group Group Initiatives Group Total(1) Management fees $305,906 $60,263 $53,236 $43,983 $17,641 $— $481,029 Fee related perfor
Slide 28: Financial Details – Segments
Financial Details – Segments Year ended December 31, 2021 Private Real Secondary Operations Credit Equity Estate Solutions Strategic Management $ in thousands Group Group Group(1) Group(2) Initiatives Group Total(3) Management fees $1,070,608 $231,282 $168,838 $97,945 $66,604 $— $1,635,277 Fee relat
Slide 29: Weighted Average Shares
Weighted Average Shares Q4-21 Q4-20 Common Shares, Common Shares, Total Shares As Adjusted(3) Total Shares As Adjusted(3) Weighted average shares of Class A and non-voting common stock 171,515,209 171,515,209 144,592,791 144,592,791 Ares Operating Group Units exchangeable into shares of Class A comm
Slide 30: AUM Rollforward
AUM Rollforward Q4-21 AUM Rollforward Secondary Strategic $ in millions Credit Private Equity Real Estate Solutions Initiatives Total Q3-21 Ending Balance $181,233 $32,696 $36,501 $20,743 $10,836 $282,009 Net new par/equity commitments 4,961 5,903 1,430 1,100 750 14,144 Net new debt commitments 8,65
Slide 31: FPAUM Rollforward
FPAUM Rollforward Q4-21 FPAUM Rollforward Secondary Strategic $ in millions Credit Private Equity Real Estate Solutions Initiatives Total Q3-21 Ending Balance $106,402 $20,249 $21,939 $17,185 $6,892 $172,667 Commitments 3,796 833 835 974 (65) 6,373 Subscriptions/deployment/increase in leverage 10,31
Slide 32: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of December 31, 2021 $ in billions AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $31.5 16% $30.3 26% High Yield 3.7 2 3.6 3 Multi-Asset Credit 5.2 3 4.7 4 Alternative Credit 17.4 9 8.8 8 U.S. Direct Lending(1) 85.8 45 46.1 39 European Direct Lending 49.1 25 23.9 20 Cre
Slide 33: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions December 31, 2021 December 31, 2020 Credit Syndicated Loans(2) $103.8 $107.7 Multi-Asset Credit 12.0 6.6 Alternative Credit 27.5 23.0 U.S. Direct Lending 116.8 53.5 European Direct Lending 33.0 35.7 Credit $293.1 $226.5 Private Equity ACOF Asia
Slide 34: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: As of December 31, 2021 Returns(%)(1) Current Quarter Year -to-Date Since Inception (2) Primary Investment ($ in millions) Year of Inception AUM Gross Net Gro
Slide 35: Significant Fund Performance Metrics (cont’d)
Significant Fund Performance Metrics (cont’d) The following table presents the performance data for our significant drawdown funds: As of December 31, 2021 Original Capital MOIC IRR(%) Year of Capital Invested Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Commitments to
Slide 36: Significant Fund Performance Metrics (cont’d)
Significant Fund Performance Metrics (cont’d) The following table presents the performance data for our significant drawdown funds (cont'd): As of December 31, 2021 Capital MOIC IRR(%) Year of Original Capital Invested to Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Com
Slide 37: Significant Fund Performance Metrics (cont’d)
Significant Fund Performance Metrics (cont’d) The following table presents the performance data for our significant drawdown funds (cont'd): As of December 31, 2021 Capital MOIC IRR(%) Year of Original Capital Invested to Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Com
Slide 38: Significant Fund Performance Metrics Endnotes
Significant Fund Performance Metrics Endnotes 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 return
Slide 39: Significant Fund Performance Metrics Endnotes (cont’d)
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.
Slide 40: Significant Fund Performance Metrics Endnotes (cont’d)
Significant Fund Performance Metrics Endnotes (cont’d) Real Estate 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.
Slide 41: Significant Fund Performance Metrics Endnotes (cont’d)
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 partner
Slide 42: Supplemental Performance Metrics
Supplemental Performance Metrics The following table presents the performance data for commingled funds that were previously reported as significant funds: As of December 31, 2021 Original MOIC IRR(%) Year of Capital Capital Invested Realized Unrealized Total Primary Investment ($ in millions) Incep
Slide 43: Supplemental Performance Metrics Endnotes
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 all
Slide 44: Supplemental Performance Metrics Endnotes (cont’d)
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 investme
Slide 45: Supplemental Performance Metrics Endnotes (cont’d)
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 the
Slide 46: 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 47: Glossary (cont’d)
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 and fee related performance revenues, is sufficient to cover operating expenses and
Slide 48: Glossary (cont’d)
Glossary (cont’d) Operations Management In addition to our operating segments, we have an Operations Management Group (the “OMG”) that consists of shared Group resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance
Slide 49: Glossary (cont’d)
Glossary (cont’d) 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 o