Ares Management Corporation · NYSE:ARES
Ares Management — Q3 2021 Earnings Presentation
46 slides from Ares Management's earnings presentation, Oct 27, 2021
Slide 1: Earnings Presentation Third 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 Third 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: Third 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 Third 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 have been co
Slide 5: Assets Under Management
5 $81.3 $99.6 $106.4 $17.7 $18.8 $20.3 $9.4 $11.8 $21.9$16.9 $17.2 $4.3 $6.6 $6.9 $112.7 $153.7 $172.7 Q3-20 Q2-21 Q3-21 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
Slide 6: Perpetual Capital
6 Perpetual Capital 1. Commingled funds refers to publicly managed funds, non-registered funds, illiquid funds and insurance strategies. 2. CLOs are a type of closed end vehicle. Perpetual Capital as of September 30, 2021 was $71.5 billion, an increase of 73% from prior year ∙ The increase of $30.2
Slide 7: AUM and Management Fees by Type
7 18% 7% 63% 12% 32% 7% 55% 6% AUM and Management Fees by Type 88% 1. Long-dated funds generally have a contractual life of five years or more at inception. 2. Other primarily represents managed accounts or co-investment vehicles that (i) are not considered long-dated and (ii) do not meet the criter
Slide 8: Available Capital and AUM Not Yet Paying Fees
8 $28.4 $38.9 $45.5 $6.2 $2.5 $2.6 $2.4 $2.5 $3.5 $1.0 $1.3 $2.3 $2.2 $2.4 $39.3 $47.1 $55.3 Q3-20 Q2-21 Q3-21 Available Capital and AUM Not Yet Paying Fees Available Capital as of September 30, 2021 was $85.8 billion, an increase of 63% from prior year • The increase of $33.3 billion was primarily
Slide 9: AUM Not Yet Paying Fees
9 $42.2 $2.0 $2.6 $1.2 $2.3 $50.3 $4.6 $0.4 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of September 30, 2021, AUM Not Yet Paying Fees of $55.3 billion could generate approximately $539.4 million in potential incremental annual management fees, of which $488.7
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
10 Q3-20 Q2-21 Q3-21 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit Private Equity Real Estate Secondary Solutions Strategic Initiatives(2) Total Incentive Generating AUM $58.1 $17.8 $15.0 $4.4 $0.1 $95.4 + Uninvested IEAUM 44.9 8.8 6.2 6.6 2.5 69.0 + IEAU
Slide 11: Capital Deployment
11 $13.4$1.7 $2.9 $0.6 $1.0 Q3-21 Gross Capital Deployment Capital Deployment(1) ($ in billions) (2) 1. Capital deployment figures include deployment from perpetual capital vehicles. Capital Deployment in Drawdown Funds ($ in billions) Total Gross Invested Capital during Q3-21 was $19.6 billion comp
Slide 12: GAAP Financial Results
12 Three months ended September 30, Nine months ended September 30, $ in thousands, except share data 2021 2020 2021 2020 Revenues Management fees $448,262 $292,434 $1,135,821 $823,150 Carried interest allocation 460,651 168,978 1,610,707 241,380 Incentive fees 696 7,194 19,420 4,276 Principal inves
Slide 13: RI and Other Measures Financial Summary
13 RI and Other Measures Financial Summary 1. Includes Part I Fees of $54.2 million and $41.6 million for Q3-21 and Q3-20, respectively, and $160.0 million and $126.9 million for YTD-21 and YTD-20, respectively. 2. For Q3-21, Q3-20, and YTD-21, YTD-20, after-tax Realized Income includes current inco
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
14 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Three months ended September 30, Nine months ended September 30, $ in thousands 2021 2020 2021 2020 Realized Income and Fee Related Earnings: Income before taxes $246,988 $159,641 $756,829 $104,325 Adjustments: Amortization of intan
Slide 15: GAAP to Non-GAAP Reconciliation (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 25-26 for complete financial results. 2. Net returns are calculated using the fund's NAV and
Slide 17: Private Equity Group
17 Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~110 investment professionals, ~45 portfolio companies, ~50 infrastructure and power assets and ~20 active funds and related co-investment vehicles as of September 30, 2021. 1. This ta
Slide 18: Real Estate Group
18 Real Estate Group(1) Note: Past performance is not indicative of future results. The Real Estate Group had ~195 investment professionals, ~470 properties and ~50 active funds and related co-investment vehicles as of September 30, 2021. 1. This table is a financial summary only and segment results
Slide 19: Secondary Solutions
19 Secondary Solutions(1) Note: Past performance is not indicative of future results. The Secondary Solutions Group had ~65 investment professionals, 845 limited partnership interests and ~60 active funds and related co-investment vehicles as of September 30, 2021. 1. This table is a financial summa
Slide 20: Strategic Initiatives
20 Strategic Initiatives(1) ∙ Management and other fees increased by 24% for Q3-21 compared to Q3-20, primarily driven by the acquisition of Aspida Life Re that occurred in the fourth quarter of 2020 ∙ Fee Related Earnings increased by 25% for Q3-21 compared to Q3-20, primarily driven by higher mana
Slide 21: Realized Income per Share Data
21 Realized Income per Share Data 1. Ares had 12,400,000 shares of 7% Series A Preferred Stock outstanding as of September 30, 2021. 2. Amount represents the current corporate taxes paid by Ares for the periods presented and exclude the effects for Q3-21 and Q3-20, of $24.3 million and $11.2 million
Slide 22: Balance Sheet
22 32% 44% 21% 3% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income ∙ As of September 30, 2021, our balance sheet included $295.7 million in cash and cash equivalents and $1,238.3 million in debt obligations, including $150.0
Slide 23: Corporate Data
23 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 24: 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 25: Financial Details – Segments
25 Financial Details – Segments 1. Includes results of Black Creek following the acquisition close date of July 1, 2021. 2. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting B
Slide 26: Financial Details – Segments (Nine Months)
26 Nine months ended September 30, 2021 $ in thousands Credit Group Private Equity Group Real Estate Group(1) Secondary Solutions Group(2) Strategic Initiatives Operations Management Group Total(3) Management fees $764,702 $171,019 $115,602 $53,962 $48,963 $— $1,154,248 Other fees 18,494 726 4,604 —
Slide 27: AUM Rollforward
27 AUM Rollforward Credit ∙ AUM increased by 38% from Q3-20, primarily driven by new commitments to U.S. and European direct lending, including closings for ACE V, the second senior U.S. direct lending fund and PCS II, to alternative credit strategies and by issuances of new CLOs in the syndicated l
Slide 28: FPAUM Rollforward
28 FPAUM Rollforward Credit ∙ FPAUM increased by 31% from Q3-20, primarily driven by deployment in U.S. and European direct lending funds paid on invested capital and by issuances of new CLOs in the syndicated loans strategy Private Equity ∙ FPAUM increased by 14% from Q3-20, primarily driven by dep
Slide 29: AUM and FPAUM by Strategy
29 AUM and FPAUM by Strategy 1. AUM includes ARCC, IHAM and Senior Direct Lending Program ("SDLP") AUM of $23.7 billion, $5.6 billion and $2.9 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC- registered investment adviser, manages 19 funds and serves as the sub-manager or
Slide 30: Balance Sheet Investments by Strategy
30 Balance Sheet Investments by Strategy(1) $ in millions September 30, 2021 December 31, 2020 Credit Syndicated Loans(2) $104.4 $107.7 Multi-Asset Credit 12.5 6.6 Alternative Credit 22.8 23.0 U.S. Direct Lending 86.1 53.5 European Direct Lending 58.7 35.7 Credit $284.5 $226.5 Private Equity ACOF As
Slide 31: Significant Fund Performance Metrics
31 Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: Note: Past performance is not indicative of future results. AUM and Net Returns are as of September 30, 2021 unless otherwise noted. The above table includ
Slide 32: Significant Fund Performance Metrics (cont'd)
32 Significant Fund Performance Metrics (cont’d) Note: Past performance is not indicative of future results. AUM and Net Returns are as of September 30, 2021 unless otherwise noted. The above table includes fund performance metrics for significant funds which includes commingled funds that contribut
Slide 33: Significant Fund Performance Metrics (cont'd)
33 Note: Past performance is not indicative of future results. AUM and Net Returns are as of September 30, 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 com
Slide 34: Significant Fund Performance Metrics (cont'd)
34 Note: Past performance is not indicative of future results. AUM and Net Returns are as of September 30, 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 com
Slide 35: Significant Fund Performance Metrics Endnotes – Credit
35 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 36: Significant Fund Performance Metrics Endnotes – Private Equity
36 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 37: Significant Fund Performance Metrics Endnotes – Real Estate
37 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. 3. Gross returns do not reflect the deduction of ma
Slide 38: Significant Fund Performance Metrics Endnotes – Strategic Initiatives
38 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 accrued incentive allocation, if applicable. Th
Slide 39: Supplemental Performance Metrics
39 Supplemental Performance Metrics The following table presents the performance data for commingled funds that were previously reported as significant funds: As of September 30, 2021 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Value(2) Total
Slide 40: Supplemental Performance Metrics Endnotes
40 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 41: Supplemental Performance Metrics Endnotes (cont'd)
41 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 42: Supplemental Performance Metrics Endnotes (cont'd)
42 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
Slide 43: Weighted Average Shares
43 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 44: Glossary
44 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 45: Glossary (cont'd)
45 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 46: Glossary (cont'd)
46 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