Ares Management Corporation · NYSE:ARES
Ares Management — Q4 2021 Earnings Presentation
47 slides from Ares Management's earnings presentation, Feb 11, 2022
Slide 1: Earnings Presentation Fourth Quarter and Full Year 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 Fourth Quarter and Full Year 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: Fourth Quarter and Full Year 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 Fourth Quarter and Full Year 2021
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 $88.0 $106.4 $117.4 $21.2 $20.3 $21.2 $10.2 $21.9 $24.1 $17.2 $18.3 $6.6 $6.9 $6.8 $126.0 $172.7 $187.8 Q4-20 Q3-21 Q4-21 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 advis
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 December 31, 2021 was $76.6 billion, an increase of 69% from prior year ∙ The increase of $31.2 b
Slide 7: AUM and Management Fees by Type
7 18% 7% 63% 12% 35% 7% 53% 5% AUM and Management Fees by Type 88% 1. Long-dated funds generally have a contractual life of five years or more at inception. For the year ended December 31, 2021: ∙ 88% of assets under management were perpetual capital or long-dated funds ∙ 95% of management fees were
Slide 8: Available Capital and AUM Not Yet Paying Fees
8 $33.4 $45.5 $43.2 $2.7 $2.6 $6.8 $1.7 $3.5 $3.4$1.3 $1.3 $2.2 $2.4 $3.2 $40.0 $55.3 $57.9 Q4-20 Q3-21 Q4-21 Available Capital and AUM Not Yet Paying Fees Available Capital as of December 31, 2021 was $90.4 billion, an increase of 61% from prior year ∙ The increase of $34.1 billion was primarily dr
Slide 9: AUM Not Yet Paying Fees
9 $40.0 $6.2 $2.5 $1.2 $3.1 $53.0$4.6 $0.3 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of December 31, 2021, AUM Not Yet Paying Fees of $57.9 billion could generate approximately $568.4 million in potential incremental annual management fees, of which $517.1 mi
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
10 Q4-20 Q3-21 Q4-21 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit Private Equity Real Estate Secondary Solutions Strategic Initiatives Total Incentive Generating AUM $64.0 $20.5 $17.5 $5.4 $0.2 $107.6 + Uninvested IEAUM 42.2 13.0 5.8 7.0 2.4 70.4 + IEAUM
Slide 11: Capital Deployment
11 $21.3 $2.6 $6.2 $1.4 $0.5 Q4-21 Gross Capital Deployment Capital Deployment(1) ($ in billions) 1. Capital deployment figures include deployment from perpetual capital vehicles. Capital Deployment in Drawdown Funds ($ in billions) Total Gross Invested Capital during FY-21 was $81.0 billion compare
Slide 12: Consolidated Statements of Operations
12 Quarter ended December 31, Year ended December 31, $ in thousands, except share data 2021 2020 2021 2020 Revenues Management fees $475,226 $327,458 $1,611,047 $1,150,608 Carried interest allocation 462,844 264,228 2,073,551 505,608 Incentive fees 313,456 33,626 332,876 37,902 Principal investment
Slide 13: RI and Other Measures Financial Summary
13 RI and Other Measures Financial Summary 1. Includes Part I Fees of $67.9 million and $57.3 million for Q4-21 and Q4-20, respectively, and $227.8 million and $184.1 million for FY-21 and FY-20, respectively. 2. Includes fee related performance compensation of $84.9 million and $17.3 million for Q4
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
14 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Quarter ended December 31, Year ended December 31, $ in thousands 2021 2020 2021 2020 Realized Income and Fee Related Earnings: Income before taxes $308,861 $275,153 $1,065,690 $379,478 Adjustments: Amortization of intangibles 28,79
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 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, ~45 infrastructure and power assets and ~20 active funds and related co-investment vehicles as of December 31, 2021. 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 ~205 investment professionals, ~510 properties and ~45 active funds and related co-investment vehicles as of December 31, 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, ~850 limited partnership interests and ~60 active funds and related co-investment vehicles as of December 31, 2021. 1. This table is a financial summa
Slide 20: Strategic Initiatives
20 Strategic Initiatives(1) ∙ Management and other fees increased by 32% and 149% for Q4-21 and FY-21, respectively, compared to Q4-20 and FY-20, primarily driven by the acquisition of F&G Reinsurance Ltd, rebranded as Aspida Life Re Ltd (“Aspida Life Re“) post-acquisition, that occurred at the end
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 December 31, 2021. 2. Amount represents the current corporate taxes paid by Ares for the periods presented and exclude the effects for Q4-21 and Q4-20, of $(2.6) million and $14.7 million
Slide 22: Balance Sheet
22 28% 45% 21% 6% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income ∙ As of December 31, 2021, our balance sheet included $343.7 million in cash and cash equivalents and $1,503.7 million in debt obligations, including $415.0
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 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. 2. Includes fee related performance compensation of $54.2 million
Slide 26: Financial Details – Segments (Year ended December 31, 2021)
26 Year ended December 31, 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 $1,070,608 $231,282 $168,838 $97,945 $66,604 $— $1,635,277 Fee related performance revenues 86
Slide 27: Weighted Average Shares
27 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 28: AUM Rollforward
28 AUM Rollforward Credit ∙ AUM increased by 32% from Q4-20, primarily driven by new commitments to U.S. and European direct lending, including closings for ACE V, SDL II and PCS II, to alternative credit strategies and by issuances of new CLOs in the syndicated loans strategy Private Equity ∙ AUM i
Slide 29: FPAUM Rollforward
29 FPAUM Rollforward Credit ∙ FPAUM increased by 33% from Q4-20, 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 remained flat from Q4-20, primarily driven by deploy
Slide 30: AUM and FPAUM by Strategy
30 AUM and FPAUM by Strategy 1. AUM includes ARCC, IHAM and Senior Direct Lending Program ("SDLP") AUM of $24.1 billion, $8.4 billion and $3.4 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 31: Balance Sheet Investments by Strategy
31 Balance Sheet Investments by Strategy(1) $ in millions December 31, 2021 December 31, 2020 Credit Syndicated Loans(2) $103.8 $107.7 Multi-Asset Credit 12.0 6.6 Alternative Credit 27.5 23.0 U.S. Direct Lending 116.8 53.5 European Direct Lending 33.0 35.7 Credit $293.1 $226.5 Private Equity ACOF As
Slide 32: Significant Fund Performance Metrics
32 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 December 31, 2021 unless otherwise noted. The above table include
Slide 33: Significant Fund Performance Metrics (cont'd)
33 Significant Fund Performance Metrics (cont’d) Note: Past performance is not indicative of future results. AUM and Net Returns are as of December 31, 2021 unless otherwise noted. The above table includes fund performance metrics for significant funds which includes commingled funds that contribute
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 December 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 comp
Slide 35: Significant Fund Performance Metrics (cont'd)
35 Note: Past performance is not indicative of future results. AUM and Net Returns are as of December 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 comp
Slide 36: Significant Fund Performance Metrics Endnotes – Credit
36 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 37: Significant Fund Performance Metrics Endnotes (cont'd) Private Equity
37 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 38: Significant Fund Performance Metrics Endnotes – Real Estate
38 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. Returns are shown for institutional share class.
Slide 39: Significant Fund Performance Metrics Endnotes – Strategic Initiatives
39 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 40: Supplemental Performance Metrics
40 Supplemental Performance Metrics The following table presents the performance data for commingled funds that were previously reported as significant funds: As of December 31, 2021 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Value(2) Total V
Slide 41: Supplemental Performance Metrics Endnotes – Credit
41 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 42: Supplemental Performance Metrics Endnotes (cont'd) Private Equity
42 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 43: Supplemental Performance Metrics Endnotes (cont'd) Strategic Initiatives
43 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 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 and fee related performance revenues, is sufficient to cover operating expenses
Slide 46: Glossary (cont'd)
46 Glossary (cont’d) Operations Management Group In addition to our operating segments, we have an Operations Management Group (the “OMG”) that consists of shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/fina
Slide 47: Glossary (cont'd)
47 Glossary (cont’d) Realized Income Realized Income or “RI”, a non-GAAP measure, is an operating metric used by management to evaluate performance of the business based on operating performance and the contribution of each of the business segments to that performance, while removing the fluctuation