Ares Management Corporation · NYSE:ARES
Ares Management — Q1 2021 Earnings Presentation
42 slides from Ares Management's earnings presentation, Apr 29, 2021
Slide 1: Earnings Presentation First Quarter 2021
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 First Quarter 2021 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: First Quarter 2021 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 Financial Results Corporate Actions Recent Developments First Quarter 2021 Highlights 1. N
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 are converte
Slide 5: Assets Under Management
5 $75.8 $88.0 $91.6 $17.0 $21.2 $18.6$9.2 $10.2 $10.8 $6.6 $6.6 $102.0 $126.0 $127.6 Q1-20 Q4-20 Q1-21 Assets Under Management 1. AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of ARCC and an SEC-registered investment adviser (“IHAM”). AUM as o
Slide 6: Management Fees by Duration and Fund Type
6 33% 8% 11% 25% 8% 12% 3% 49% 33% 7% 8% 2% 1% Management Fees by Duration and Fund Type 77% 1. Differentiated managed accounts have been managed by the firm for longer than three years, are investing in illiquid strategies or are co-investments structured to pay management fees. 2. CLOs are a type
Slide 7: AUM and FPAUM by Duration
7 15% 13% 16% 24% 8% 18% 6% 12% 10% 19% 26% 10% 17% 6% AUM and FPAUM by Duration As of March 31, 2021, approximately 67% of AUM and 68% of FPAUM had a duration longer than 3 years ∙ Initial duration exceeded 7 years for approximately 73% of AUM based on each fund's first close Permanent Capital 10 o
Slide 8: Available Capital and AUM Not Yet Paying Fees
8 $18.3 $33.4 $33.7 $2.5 $2.7 $3.0 $2.3 $1.7 $1.8 $2.2 $1.7 $23.1 $40.0 $40.2 Q1-20 Q4-20 Q1-21 Available Capital and AUM Not Yet Paying Fees Available Capital as of March 31, 2021 was $56.8 billion, an increase of 71.1% from prior year ∙ The increase of $23.6 billion was driven primarily by fundrai
Slide 9: AUM Not Yet Paying Fees Available for Future Deployment
9 $2.4 $0.2 $32.7 $2.3 $1.0 $1.6 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of March 31, 2021, AUM Not Yet Paying Fees of $40.2 billion could generate approximately $423.1 million in potential incremental annual management fees, of which $395.7 million relates
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
10 Q1-20 Q4-20 Q1-21 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit Private Equity Real Estate Strategic Initiatives(3) Total Incentive Generating AUM $31.6 $7.5 $4.8 $0.1 $44.0 + Uninvested IEAUM 35.1 8.1 4.1 1.9 49.2 + IEAUM below hurdle 4.3 9.9 1.3 — 15
Slide 11: Capital Deployment
11 $6.2$1.9 $1.4 $0.8 Q1-21 Capital Deployment Breakdown Capital Deployment(1) ($ in billions) (2) 1. Capital deployment figures exclude deployment from permanent capital vehicles. 2. Non-drawdown funds amounts includes new capital deployed by managed accounts and CLOs but excludes recycled capital.
Slide 12: GAAP Statements of Operations
12 Quarter ended March 31, $ in thousands, except share data 2021 2020 Revenues Management fees $320,273 $263,849 Carried interest allocation 297,535 (230,876) Incentive fees 2,820 (3,249) Principal investment income (loss) 25,100 (26,723) Administrative, transaction and other fees 12,660 10,408 Tot
Slide 13: RI and Other Measures Financial Summary
13 RI and Other Measures Financial Summary 1. Includes Part I Fees of $46.5 million and $43.9 million for Q1-21 and Q1-20, respectively, and $186.7 million and $169.9 million for Q1-21 LTM and Q1-20 LTM respectively. 2. For Q1-21, Q1-20, and Q1-21 LTM, Q1-20 LTM, after-tax Realized Income includes c
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
14 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Quarter ended March 31, LTM ended March 31, $ in thousands 2021 2020 2021 2020 Realized Income and Fee Related Earnings: Income (loss) before taxes $190,064 $(296,413) $865,955 $(7,193) Adjustments: Amortization of intangibles 8,822
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. See “Financial Details - Segments” on slide 23 for complete financial results. 2. Net returns are calculated using the fund's NAV and as
Slide 17: Private Equity Group
17 Corporate Private Equity 16.3% Special Opportunities 9.9% Q1-21 gross returns(2) Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~110 investment professionals, ~40 portfolio companies, ~50 infrastructure and power assets and ~20 act
Slide 18: Real Estate Group
18 Real Estate Group(1) Note: Past performance is not indicative of future results. The Real Estate Group had ~80 investment professionals, ~220 properties and ~40 active funds and related co-investment vehicles as of March 31, 2021. 1. This table is a financial summary only and segment results are
Slide 19: Realized Income per Share Data
19 Realized Income per Share Data 1. Ares had 12,400,000 shares of 7% Series A Preferred Stock outstanding as of March 31, 2021. 2. Amount represents the current corporate taxes paid by Ares for the periods presented and exclude the effects for Q1-21 and Q1-20, of $22.0 million and $(30.6) million,
Slide 20: Balance Sheet Highlights
20 43% 37% 20% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income ∙ As of March 31, 2021, our balance sheet included $609.9 million in cash and cash equivalents and $811.3 million in debt obligations with $168.0 million amount
Slide 21: Corporate Data
21 Corporate Data Board of Directors Michael Arougheti Co-Founder, Chief Executive Officer and President of Ares Antoinette Bush Executive Vice President and Global Head of Government Affairs of News Corp Kipp deVeer Head of Credit Group Paul G. Joubert Founding Partner of EdgeAdvisors and Investing
Slide 22: 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 5
Slide 23: Financial Details – Segments
23 Financial Details – Segments 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis” on slides 14-15. Three Months Ended March 31, 2021 $ in thousands Credit Group Priv
Slide 24: AUM Rollforward
24 AUM Rollforward Credit ∙ AUM increased by 34.3% from Q1-20, primarily driven by new commitments to U.S. and European direct lending, including closings for ACE V, to syndicated loans and to alternative credit strategies Private Equity ∙ AUM increased by 31.8% from Q1-20, primarily driven by new c
Slide 25: FPAUM Rollforward
25 FPAUM Rollforward Credit ∙ FPAUM increased by 20.9% from Q1-20, primarily driven by deployment in U.S. and European direct lending funds paid on invested capital and by new commitments to the syndicated loans strategy Private Equity ∙ FPAUM increased by 8.9% from Q1-20, primarily driven by deploy
Slide 26: AUM and FPAUM by Strategy
26 AUM and FPAUM by Strategy 1. AUM includes ARCC, IHAM and Senior Direct Lending Program ("SDLP") AUM of $20.7 billion, $5.6 billion and $3.5 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC- registered investment adviser, manages 20 funds and serves as the sub-manager or
Slide 27: Balance Sheet Investments by Strategy
27 Balance Sheet Investments by Strategy(1) $ in millions March 31, 2021 December 31, 2020 Credit Syndicated Loans(2) $106.6 $107.7 Multi-Asset Credit 6.7 6.6 Alternative Credit 23.5 23.0 U.S. Direct Lending 58.7 53.5 European Direct Lending 35.5 35.7 Credit $231.0 $226.5 Private Equity ACOF IV $28.
Slide 28: Significant Fund Performance Metrics
28 Significant Fund Performance Metrics The following table presents the performance data for the significant funds in the Credit Group that are not drawdown funds: Note: Past performance is not indicative of future results. AUM and Net Returns are as of March 31, 2021 unless otherwise noted. The ab
Slide 29: Significant Fund Performance Metrics (cont'd)
29 Note: Past performance is not indicative of future results. AUM and Net Returns are as of March 31, 2021 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 compris
Slide 30: Significant Fund Performance Metrics Endnotes: Credit
30 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 31: Significant Fund Performance Metrics Endnotes: Private Equity
31 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 32: Significant Fund Performance Metrics Endnotes: Real Estate
32 Real Estate 1. Realized value includes distributions of operating income, sales and financing proceeds received. 2. Unrealized value represents the fair market value of remaining investments. Unrealized value does not take into account any bridge financings. There can be no assurance that unreali
Slide 33: Supplemental Performance Metrics
33 Supplemental Performance Metrics The following table presents the performance data for commingled funds that were previously reported as significant funds in prior years: As of March 31, 2021 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Valu
Slide 34: Supplemental Performance Metrics Endnotes
34 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
Slide 35: Supplemental Performance Metrics Endnotes (cont'd)
35 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 inves
Slide 36: Weighted Average Shares
36 Weighted Average Shares 1. Represents units exchangeable for shares of Class A common stock on a one-for-one basis. 2. We apply the treasury stock method to determine the dilutive weighted-average common shares represented by our restricted units to be settled in shares of Class A common stock an
Slide 37: RI and Other Measures – Financial Data
37 RI and Other Measures – Financial Data(1) Year ended December 31, $ in thousands 2020 2019 Credit Group $841,138 $713,853 Private Equity Group 221,160 211,614 Real Estate Group 97,680 87,063 Strategic Initiatives 26,587 — Management fees 1,186,565 1,012,530 Other fees 19,948 18,078 Compensation a
Slide 38: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
38 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Year ended December 31, $ in thousands 2020 2019 Realized Income and Fee Related Earnings: Income before taxes $379,478 $425,180 Adjustments: Amortization of intangibles(1) 21,195 23,460 Depreciation expense 19,467 17,142 Equity com
Slide 39: GAAP to Non-GAAP Reconciliation (cont'd)
39 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 40: Glossary
40 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 a
Slide 41: Glossary (cont'd)
41 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, is sufficient to cover operating expenses and to generate profits. FRE differs
Slide 42: Glossary (cont'd)
42 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 Managem