Slide 1: Important Notice
Important Notice This presentation contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Actual outcomes and results could differ materially from those suggested by this presentation du
Slide 2: Third Quarter Highlights
Third Quarter Highlights *Additional metric established in Q2-16 to provide transparency on AUM from which the company directly earns management fees. For definition of FPAUM, please refer to the “Glossary” slide in the appendix. Net inflows represents gross commitments less redemptions. Includes AR
Slide 3: Gross New Capital Commitments – Third Quarter
Confidential – Not for Publication or Distribution Gross New Capital Commitments – Third Quarter(1) 1. Represents gross new commitments during Q3-16, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts. 4 $ in millions Q3 2016 Comment
Slide 4: Assets Under Management
Assets Under Management Note: For definitions of AUM, FEAUM and FPAUM please refer to the “Glossary” slide in the appendix. Asset growth reflects a combination of net new capital raised, asset appreciation and asset acquisition. AUM of $97.3 billion as of September 30, 2016 increased 6.3% year over
Slide 5: AUM, FEAUM and FPAUM Duration
AUM, FEAUM and FPAUM Duration As of September 30, 2016, approximately 76% of AUM, 72% of FEAUM and 70% of FPAUM had a duration greater than 3 years AUM 6 FPAUM FEAUM 13% 14% 24% 25% 7% 17% 15% 7% 30% 20% 6% 22% 17% 6% 27% 20% 6% 24% 0 0 0 0 0 0 Permanent Capital 10 or more years 7 to 9 years 3 to 6
Slide 6: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM • • Incentive Eligible AUM of $51.2 billion as of September 30, 2016 grew 27.5% year over year and 3.6% quarter over quarter Incentive Generating AUM of $17.0 billion as of September 30, 2016 declined by $5.3 billion year over year and grew $2.3 bi
Slide 7: Available Capital and AUM Not Yet Earning Fees Summary
Available Capital and AUM Not Yet Earning Fees Summary Available Capital as of September 30, 2016 increased 12.9% year over year and 0.9% quarter over quarter Available Capital increased from $21.7 billion in Q3-15 to $24.5 billion in Q3-16 The increase was primarily driven by $7.85 billion of total
Slide 8: AUM Not Yet Earning Fees Detail
AUM Not Yet Earning Fees Detail As of September 30, 2016, AUM Not Yet Earning Fees of $18.4 billion could generate approximately $218.9 million in potential incremental annual management fees, of which $189.1 million relates to the $15.8 billion of AUM Available for Future Deployment* $15.8 billion
Slide 9: Capital Deployment
Capital Deployment(1) Total gross invested capital during Q3-16 of $2.7 billion compared to $3.1 billion in Q3-15 Of the total amount, $1.8 billion was related to deployment in our drawdown funds Total gross invested capital for the nine months ended September 30, 2016 of $7.4 billion compared to $8
Slide 10: GAAP Statements of Operations
GAAP Statements of Operations Management fees (includes ARCC Part I Fees of $33,260, $90,884 and $31,680, $89,972 for the three and nine months ended September 30, 2016 and 2015, res pectively) $163,609 $158,051 $480,563 $473,341 Performance fees 164,482 (22,223) 337,686 160,351 Administrative and o
Slide 11: Stand Alone Financial Summary
Stand Alone Financial Summary 1. Includes ARCC Part I Fees of $33.3 million and $31.7 million for the three months ended September 30, 2016 and September 30, 2015, respectively, and $90.9 million and $90.0 million for the nine months ended September 30, 2016 and September 30, 2015, respectively. 2.
Slide 12: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis
GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis I ncome (l os s ) before ta xes Adjustments: $125,425 $(32,085) $199,457 $71,916 Amorti za ti on of i nta ngi bl es 6,378 10,062 20,762 37,600 Depreci a ti on expens e 2,148 1,840 5,940 5,063 Equi ty compens a ti on expens es 8,476 8,407
Slide 13: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.)
GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.) Sta nd Al one performa nce fee i ncome - rea l i zed $132,837 $7,632 $220,790 $102,332 Performa nce fee i ncome - rea l i zed ea rned from Cons ol i da ted Funds - - - (1,113) Performa nce fee - rea l i zed recl a s s (1) (2,170)
Slide 14: Credit Group
Credit Group(1) Management fees increased 7% compared to Q3-15, primarily driven by new commitments to CLOs and U.S. and E.U. Direct Lending mandates, an increase in ARCC fee paying assets and deployment in our illiquid funds. The increase was partially offset by distributions from fund run-off and
Slide 15: Private Equity Group
Private Equity Group(1) Management fees declined compared to Q3-15 driven by several special situations and power and energy infrastructure funds that stepped down in fee basis as they proceeded beyond their reinvestment periods ACOF V fees not yet activated Performance Related Earnings increased by
Slide 16: Real Estate Group
Real Estate Group(1) • Management fees increased 14% compared to Q3-15, primarily driven by new fund commitments, including $1.8 million in catch-up fees for our second E.U. value-add real estate fund, partially offset by distributions in funds past their investment periods Performance Related Earni
Slide 17: Distributable Earnings per Unit Data
Distributable Earnings per Unit Data 1. Exchangeable into common units. 2. The current provision for income taxes of Ares Management, L.P. on Distributable Earnings (DE) represents the current provision for income taxes on pre-tax net income or loss (reduced by the pro forma interest expense attribu
Slide 18: Balance Sheet Highlights
Balance Sheet Highlights $336.8 million in cash and cash equivalents, $279.6 million in debt obligations and no amounts drawn against the $1.03 billion revolving credit facility as of September 30, 2016 Substantial balance sheet value related to investments in Ares managed vehicles and net performan
Slide 19: Corporate Data
Corporate Data Board of Directors Michael Arougheti Co-Founder and President of Ares Paul G. Joubert Founding Partner of EdgeAdvisors and Investing Partner in Common Angels Ventures David Kaplan Co-Founder and Partner of Ares, Co-Head of Private Equity Group John Kissick Co-Founder and Partner of Ar
Slide 20: Corporate Data
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Slide 21: Financial Details – Segments
Financial Details – Segments 23 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis” on slides 13-14. $ in thousands Private Real Operations Total Credit Equity Estate Tot
Slide 22: Financial Details – Segments
Financial Details – Segments 24 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis” on slides 13-14. $ in thousands Private Real Operations Total Credit Equity Estate Tot
Slide 23: AUM, FEAUM and FPAUM Rollforward
AUM, FEAUM and FPAUM Rollforward Note: For definitions of AUM, FEAUM and FPAUM please refer to the “Glossary” slide in the appendix. 1. Asset growth involved a combination of net new capital raised, asset appreciation and asset acquisition. • AUM increased 2.8% from Q2-16 driven by $3.9 billion in c
Slide 24: AUM, FEAUM and FPAUM by Strategy
by Strategy(1) AUM, FEAUM and FPAUM Syndi ca ted Loa ns $17.0 27% $15.5 32% $15.5 37% Hi gh Yi el d 5.0 8% 5.0 10% 5.0 12% Credi t Opportuni ti es 3.4 5% 2.7 5% 2.7 6% Structured Credi t 4.1 7% 3.0 6% 3.0 7% U.S. Di rect Lendi ng(2) 22.6 36% 18.3 37% 11.0 26% E.U. Di rect Lendi ng 9.9 16% 4.7 10% 4.
Slide 25: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy Note: Reflects the balance sheet of Ares Management, L.P. and its consolidated subsidiaries, excluding the effect of Consolidated Funds. *Through CLO Note Holdings 27 $ in thousands September 30, 2016 December 31, 2015 Private Equity ACOF I $737 $632 ACOF II 5,5
Slide 26: Significant Fund Performance Metrics
Significant Fund Performance Metrics* The following table presents the performance data for our significant funds in the Credit Group that are not drawdown funds: 28 Year of Inception AUM (in millions)(1) Gross Net Gross Net Gross Net Investment Strategy Credit ARCC 2004 $10,583 N/A 2.1% N/A 7.9% N/
Slide 27: Significant Fund Performance Metrics
Significant Fund Performance Metrics* The following table presents the performance data for our significant funds, all of which are drawdown funds: Year of AUM Original Capital Cumulative Realized Unrealized Inception (in millions)(6) Commitments Invested Capital Proceeds Value Total Value Gross Net
Slide 28: Significant Fund Performance Metrics Endnotes
Significant Fund Performance Metrics Endnotes AUM equals the sum of the NAV for such fund, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital. Returns are time-weighted rates of return and include the reinvestment of income and oth
Slide 29: Significant Fund Performance Metrics Endnotes (cont’d)
Significant Fund Performance Metrics Endnotes (cont’d) The net IRR for the U.S. power and infrastructure funds is an annualized since inception net 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. The cash flow dates used
Slide 30: Weighted Average Unit Information
Weighted Average Unit Information GAAP Units Adjusted Common Units GAAP Units Adjusted Common Units Ares Management, L.P. weighted average common units 80,793,984 80,793,984 80,715,723 80,715,723 Ares Operating Group Units exchangeable into common units(1) 130,852,861 - 132,350,586 - Dilutive effect
Slide 31: Additional Information
Additional Information Distributions Targeted Net Returns(1) Capital Base by Duration(1) Ares declared a quarterly distribution of $0.20 per common unit, payable to common unitholders of record at the close of business on November 21, 2016, payable on December 5, 2016 A distribution of $0.4375 per S
Slide 32: Stand Alone – Financial Data
Stand Alone –Financial Data(1) *As of July 1, 2016, the special situations strategy moved out of our Credit Group and into our Private Equity Group. Historical results have been adjusted to conform with the current presentation. 1. Stand Alone results represent the operating segments plus OMG but ex
Slide 33: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis
GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis Income before ta xes Adjustments: $81,484 $556,915 Amorti za ti on of i nta ngi bl es 46,228 27,610 Depreci a ti on expens e 6,941 7,347 Equi ty compens a ti on expens es 32,244 83,230 Acqui s i ti on a nd merger-rel a ted expens es 34,86
Slide 34: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.)
GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.) Confidential – Not for Publication or Distribution $ in thousands 2015 2014(1) Performance fee and net investment income reconciliation: Stand Alone performance fee income - realized $121,946 $146,494 Performance fee income - real
Slide 35: Glossary
Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance fee on the investment income from ARCC. ARCC Part II Fees ARCC Part II Fees refers to fees based on ARCC's net capital gains, which are paid annually. Ares Operating Group Units Ares Operating Group Unit refers to, collecti
Slide 36: Glossary (cont’d)
Glossary (cont’d) Fee Earning Assets Under Management Fee earning AUM (or “FEAUM”) refers to the AUM on which we directly or indirectly earn management fees. Fee earning AUM is equal to the sum of all the individual fee bases of our funds that contribute directly or indirectly to our management fees
Slide 37: Glossary (cont’d)
Glossary (cont’d) 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
Slide 38: Glossary (cont’d)
Glossary (cont’d) Total ee Revenue ‘fund refers tothe funds, aeraive ate companies, co-nvestment vehicles nd other ents and account that are managed ocomanaged by he Ares ‘Operating Group and which are stucured to py les lal nudes ands manoged by hy Hil Aset Management LP, a whaly owned porto compan