Ares Management Corporation · NYSE:ARES
Ares Management — Investor Day (2021)
36 slides from Ares Management's investor day presentation, 2021
Slide 1: Financial Review & Outlook
Financial Review & Outlook Jarrod Phillips Chief Financial Officer Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution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: Differentiated Business Model is Well Positioned for Continued Growth
Differentiated Business Model is Well Positioned for Continued Growth We believe we operate a distinctive business model in our sector which provides growth and stability advantages Management Fee Centric Business Model Economies of Long Dated, Long Scale Driving Duration Capital Margin Expansion Di
Slide 5: We Have Built a Market Leading Business With Strong Growth Potential
We Have Built a Market Leading Business With Strong Growth Potential Core functions hitting in all areas across the firm Annual Fundraising AUM Drawdown Deployment Fee Related Earnings ($ in billions) ($ in billions) ($ in billions) ($ in millions) $56 $262 $28.2 $510 $23 $94 $177 $9.0 2015 Q2-21 LT
Slide 6: Building Blocks of Growing Earnings and Dividend
Building Blocks of Growing Earnings and Dividend Management Fee Related AUM Fees Earnings Dividend Long term sticky Management fee centric Leading to high quality, Which drives AUM leads to… model, stable fees… growing FRE… dividend growth Ares Management Corporation Investor Day 2021 - Not for Publ
Slide 7: Management Fees Driven by Long Dated, Sticky Capital
Management Fees Driven by Long Dated, Sticky Capital Ares operates a management fee centric business primarily driven by long dated, closed end funds Locked Up and Insulated from Redemptions Management Fees by Fund Type 5% • Management fees are largely derived from long dated sticky capital Fees Ins
Slide 8: Stable and Diversified Management Fee Driven Business Model
Stable and Diversified Management Fee Driven Business Model Consistent 85%-90% Fee Revenue from Stable, Diversified and Cross-Platform Management Fees Total Unconsolidated Fee Revenue Composition1 Our Effective Management Fee rate has consistently ranged between 1% and 1.1% past 5 years ($ in millio
Slide 9: Diversified Credit Business Enhances Earnings Stability and Growth Opportunities
Diversified Credit Business Enhances Earnings Stability and Growth Opportunities We believe our credit franchise provides strategic business model advantages Less Risk, Greater Scale Leads to Less Efficient Deployment Credit is More of a Diversity with Competitive Cyclical of Capital Growth Business
Slide 10: Our Model Produces Consistent Growth Even in Volatile Markets
Our Model Produces Consistent Growth Even in Volatile Markets Our business has shown notable stability during periods of significant volatility Indexed $ in at 1001 millions 700 $1,400 Management Fees 600 $1,200 grew at a 500 $1,000 28% CAGR 400 $800 during the GFC 300 $600 and 20% CAGR 200 $400 dur
Slide 11: We Believe we are Well Positioned to Continue Growing our AUM
We Believe we are Well Positioned to Continue Growing our AUM Our AUM has been growing at a 21% growth rate and we are targeting further growth through year-end 2025 Historical AUM Growth Growth Driven by ($ in billions) $500+ AUM $275 + $262 • Diversified and growing investor base +15% $197 CAGR •
Slide 12: Growth in Shadow AUM and Related Management Fee Pipeline
Growth in Shadow AUM and Related Management Fee Pipeline With significant amounts of AUM Not Yet Paying Fees, implied management fees represent 30% of LTM management fees Shadow AUM Currently Available For Deployment and Implied Management Fees (Shadow AUM $ in billions) (Management Fees $ in millio
Slide 13: Deployment Continues to Scale With Our AUM Growth
Deployment Continues to Scale With Our AUM Growth Deployment continues to scale as we grow our business and platform in new and adjacent segments ($ in billions) Q2-21 LTM Deployment1 $28.2 SI $1.8 • Deployment has grown at more than a 20% CAGR since 2015 RE $4.3 • We are deploying nearly 3x the amo
Slide 14: Fee Related Earnings Growth is Driven by AUM and Margin Expansion
Fee Related Earnings Growth is Driven by AUM and Margin Expansion Fee Related Earnings have increased over 25% annually over the past 5 years due to AUM growth, maturation of sub-scale strategies and operational scale efficiencies Fee Related Earnings (FRE) & Margin Trends/Targets 60% ($ in millions
Slide 15: Ares Dividend Tied To Robust FRE Performance
Ares Dividend Tied To Robust FRE Performance Our dividend growth is pegged to the growth of after-tax FRE Dividend & FRE Growth LTM After-Tax FRE per Share Growth 39% 31% 27% 25% 23% 14% Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 2018 to 2019 2019 to 2020 LTM Q2-20 to LTM Q2-21 Divi
Slide 16: Path to Shareholder Value Creation
Path to Shareholder Value Creation Stable and growing FRE continues to fuel dividend growth and increasing realized net performance income can be reinvested Realized Net Performance Fees and Fee Related Earnings Realized Net Investment Income • Diversity and composition of AUM drive • Realize accrue
Slide 17: Strong IEAUM Growth Underpins Future Performance Fees
Strong IEAUM Growth Underpins Future Performance Fees We have consistently generated strong annual growth in Incentive Eligible and Incentive Generating AUM Incentive Eligible and Net Accrued Performance Income Incentive Generating AUM ($ in billions) ($ in millions) 151.3 $615.6 62.8 • Net accrued
Slide 18: Growth of European Waterfall Style Funds
Growth of European Waterfall Style Funds The significant growth of our incentive eligible European Style funds of more than 5x in the last 5-years, which is not reflected in our current earnings, is expected to drive significant future performance income1 Cumulative European Waterfall Growth in IGAU
Slide 19: European Waterfall Funds Expected to Significantly Enhance Performance Income
European Waterfall Funds Expected to Significantly Enhance Performance Income We estimate our EU-Style funds could generate ~$1.5B or $4.95 per share of Realized Net Performance Income Estimated Realized Net Performance Income1 - Current Funds ($ in millions, except per share, pre-tax amounts) $1.27
Slide 20: European and American Funds Expected to Significantly Enhance Performance Income
European and American Funds Expected to Significantly Enhance Performance Income We estimate our EU-Style funds could generate ~$1.5B or $4.95 per share of Realized Net Performance Income on top of another estimated ~$1.5B or $4.95 per share in American Style funds from IEAUM funds already raised Es
Slide 21: Balance Sheet Lite Model Allows for Flexibility and Available Capital
Balance Sheet Lite Model Allows for Flexibility and Available Capital Substantial Available Liquidity Allows Flexibility and Stability Throughout Market Cycles Improved Credit Metrics with Consistent Growth ($ in millions) $1,800 18.8x 20.0x 17.0x $1,600 16.5x • A- / BBB+ rated balance sheet 15.0x $
Slide 22: Our Balance Sheet Lite Model Enhances Growth With Less Capital
Our Balance Sheet Lite Model Enhances Growth With Less Capital AUM as a Multiple of Balance LTM Management Fees as % of Balance Sheet Investments Sheet Investments Fewer Conflicts of Interest 240x 129% Lower Volatility During Periods of 75% Market Disruptions 130x Higher Return on Capital ARES Peer
Slide 23: Key Takeaways
Key Takeaways • Over 95% of our management fees are insulated from redemptions leading to a predictable revenue stream Management Fee Centric Business • Targeting a 45% FRE margin with continued efficiencies Model of scale, deployment growth and benefits from acquisitions and investments • Targeting
Slide 24: Appendix
Appendix Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 25: 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 26: 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 27: 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 28: 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 29: Glossary
Glossary Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 30: 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 31: 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 32: 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 33: Endnotes – Financial Review & Outlook
Endnotes – Financial Review & Outlook Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 34: Financial Review & Outlook Endnotes
Financial Review & Outlook Endnotes We Have Built a Market Leading Business With Strong Growth Potential 1. AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and registered investment adviser. Stable and Diversified Man
Slide 35: Financial Review & Outlook Endnotes
Financial Review & Outlook Endnotes Path to Shareholder Value Creation 1. The declaration, payment, and determination of the amount of future dividends, if any, is at the sole discretion of our Board of Directors, which may change our dividend policy at any time. Growth of European Waterfall Style F
Slide 36: Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution