Ares Management Corporation · NYSE:ARES
Ares Management — FY2020 Earnings Presentation
43 slides from Ares Management's earnings presentation, Feb 11, 2021
Slide 1: Earnings Presentation Fourth Quarter and Full Year 2020
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 Fourth Quarter and Full Year 2020 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: Fourth Quarter and Full Year 2020 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 Fourth Quarter and Full Year 2020
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 $71.9 $81.3 $88.0 $17.0 $17.7 $21.2 $8.0 $9.4 $10.2$4.3 $6.6 $96.9 $112.7 $126.0 Q4-19 Q3-20 Q4-20 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 of
Slide 6: Management Fees by Duration and Fund Type
6 35% 4% 10% 28% 10% 10% 3% 49% 35% 6% 7% 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% 11% 16% 24% 11% 17% 6% 12% 10% 21% 24% 13% 15% 5% AUM and FPAUM by Duration As of December 31, 2020, approximately 67% of AUM and 66% of FPAUM had a duration longer than 3 years ∙ Initial duration exceeded 7 years for approximately 74% of AUM based on each fund's first close Permanent Capital
Slide 8: Available Capital and AUM Not Yet Paying Fees
8 $22.0 $28.4 $33.4 $2.5 $6.2 $2.7 $2.6 $2.4 $1.7 $2.3 $2.2 $27.1 $39.3 $40.0 Q4-19 Q3-20 Q4-20 Available Capital and AUM Not Yet Paying Fees Available Capital as of December 31, 2020 was $56.3 billion, an increase of 62.7% from prior year ∙ The increase of $21.7 billion was driven primarily by fund
Slide 9: AUM Not Yet Paying Fees Available for Future Deployment
9 $2.5 $0.4 $32.1 $2.0 $1.0 $2.0 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of December 31, 2020, AUM Not Yet Paying Fees of $40.0 billion could generate approximately $428.3 million in potential incremental annual management fees, of which $400.9 million rela
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
10 Q4-19 Q3-20 Q4-20 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit Private Equity Real Estate Strategic Initiatives(3) Total Incentive Generating AUM $24.6 $6.3 $3.4 $— $34.3 + Uninvested IEAUM 33.0 8.7 4.0 0.8 46.5 + IEAUM below hurdle 9.0 9.0 2.2 0.2 20
Slide 11: Capital Deployment
11 $6.5 $1.8 $1.2 $0.4 Q4-20 Capital Deployment Breakdown Capital Deployment(1) ($ 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 Three months ended December 31, Year ended December 31, $ in thousands, except share data 2020 2019 2020 2019 Revenues Management fees (includes ARCC Part I Fees of $57,269, $184,141 and $48,060, $164,396 for the three months and year ended December 31, 2020 and 2019, respectively) $327,458 $265,
Slide 13: RI and Other Measures Financial Summary
13 RI and Other Measures Financial Summary 1. Includes ARCC Part I Fees of $57.3 million and $48.1 million for Q4-20 and Q4-19, respectively, and $184.1 million and $164.4 million for FY-20 and FY-19 respectively. 2. For Q4-20, Q4-19, and FY-20, FY-19, 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 December 31, Year ended December 31, $ in thousands 2020 2019 2020 2019 Realized Income and Fee Related Earnings: Income before taxes $275,153 $101,261 $379,478 $425,180 Adjustments: Amortization of intangibles(1)
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 slides 23-24 for complete financial results. 2. Includes ARCC Part I Fees of $57.3 million and $48
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, ~40 portfolio companies, ~50 infrastructure and power assets and ~20 active funds and related co-investment vehicles as of December 31, 2020. 1. This tab
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, ~210 properties and ~40 active funds and related co-investment vehicles as of December 31, 2020. 1. This table is a financial summary only and segment results a
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 December 31, 2020. 2. Amount represents the current corporate taxes paid by Ares for the periods presented and exclude the effects for Q4-20, Q4-19 and FY-20, FY-19, of $14.7 million, $(4
Slide 20: Balance Sheet Highlights
20 44% 35% 21% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income ∙ As of December 31, 2020, our balance sheet included $539.8 million in cash and cash equivalents and $643.0 million in debt obligations with no amounts drawn a
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 December 31, 2020 $ in thousands Credit Group P
Slide 24: Financial Details – Segments, Year Ended December 31, 2020
24 Year Ended December 31, 2020 $ in thousands Credit Group Private Equity Group Real Estate Group Strategic Initiatives Operations Management Group Total(1) Management fees (Credit Group includes ARCC Part I Fees of $184,141) $841,138 $221,160 $97,680 $26,587 $— $1,186,565 Other fees 18,644 178 974
Slide 25: AUM Rollforward
25 AUM Rollforward Credit ∙ AUM increased by 31.6% from Q4-19, primarily driven by new commitments to U.S. and European direct lending, including closings for our fifth flagship European direct lending fund, to syndicated loans, including the acquisition of Crestline Denali in Q1-20, and to alternat
Slide 26: FPAUM Rollforward
26 FPAUM Rollforward Credit ∙ FPAUM increased by 22.4% from Q4-19, primarily driven by deployment in U.S. and European direct lending funds paid on invested capital, new commitments and the acquisition of Crestline Denali in Q1-20 to the syndicated loans strategy Private Equity(1) ∙ FPAUM increased
Slide 27: AUM and FPAUM by Strategy
27 AUM and FPAUM by Strategy 1. AUM includes ARCC, IHAM and Senior Direct Lending Program ("SDLP") AUM of $19.1 billion, $5.3 billion and $3.8 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC- registered investment adviser, manages 21 funds and serves as the sub-manager or
Slide 28: Balance Sheet Investments by Strategy
28 Balance Sheet Investments by Strategy(1) $ in millions December 31, 2020 December 31, 2019 Credit Syndicated Loans(2) $107.7 $104.7 Multi-Asset Credit 6.6 3.9 Alternative Credit 23.0 21.0 U.S. Direct Lending 53.5 61.3 European Direct Lending 35.7 32.8 Credit $226.5 $223.7 Private Equity ACOF IV $
Slide 29: Significant Fund Performance Metrics
29 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 December 31, 2020 unless otherwise noted. The
Slide 30: Significant Fund Performance Metrics (cont'd)
30 Note: Past performance is not indicative of future results. AUM and Net Returns are as of December 31, 2020 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 comp
Slide 31: Significant Fund Performance Metrics Endnotes: Credit
31 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 32: Significant Fund Performance Metrics Endnotes: Private Equity
32 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 33: Significant Fund Performance Metrics Endnotes: Real Estate
33 Real Estate 1. Realized value includes distributions of operating income, sales and financing proceeds received. 2. Unrealized value represents the fair value of remaining investments. There can be no assurance that unrealized investments will be realized at the valuations indicated. 3. The gross
Slide 34: Supplemental Performance Metrics
34 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 December 31, 2020 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized V
Slide 35: Supplemental Performance Metrics Endnotes
35 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 36: Supplemental Performance Metrics Endnotes (cont'd)
36 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 37: Weighted Average Shares
37 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 38: RI and Other Measures – Financial Data
38 RI and Other Measures – Financial Data(1) Year ended December 31, $ in thousands 2020 2019 2018 Credit Group(2) $841,138 $713,853 $564,899 Private Equity Group 221,160 211,614 198,182 Real Estate Group 97,680 87,063 73,663 Strategic Initiatives 26,587 — — Management fees 1,186,565 1,012,530 836,7
Slide 39: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
39 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Year ended December 31, $ in thousands 2020 2019 2018 Realized Income and Fee Related Earnings: Income before taxes $379,478 $425,180 $184,341 Adjustments: Amortization of intangibles(1) 21,195 23,460 9,032 Depreciation expense 19,4
Slide 40: GAAP to Non-GAAP Reconciliation (cont'd)
40 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 41: Glossary
41 Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance income on the net investment income of Ares Capital Corporation (NASDAQ: ARCC) (“ARCC”). Such fees from ARCC are classified as management fees as they are predictable and recurring in nature, not subject to contingent re
Slide 42: Glossary (cont'd)
42 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 43: Glossary (cont'd)
43 Glossary (cont’d) Performance Income Performance Income refers to income we earn based on the performance of a fund that is generally based on certain specific hurdle rates as defined in the fund’s investment management or partnership agreements and may be either an incentive fee or carried inter