Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

321K characters. Original on sec.gov · Markdown

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Ares Management Corporation is a Delaware corporation. Unless the context otherwise requires, references to “Ares,” “we,” “us,” “our,” and the “Company” are intended to mean the business and operations of Ares Management Corporation and its consolidated subsidiaries. The following discussion analyzes the financial condition and results of operations of the Company. “Consolidated Funds” refers collectively to certain Ares funds, co-investment entities, CLOs and special purpose acquisition companies that are required under generally accepted accounting principles in the United States (“GAAP”) to be consolidated in our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Additional terms used by the Company are defined in the Glossary and throughout the Management's Discussion and Analysis in this Quarterly Report on Form 10-Q.

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of Ares Management Corporation and the related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and the related notes included in the 2021 Annual Report on Form 10-K of Ares Management Corporation and the related notes.

Amounts and percentages presented throughout our discussion and analysis of financial condition and results of operations may reflect rounded results in thousands (unless otherwise indicated) and consequently, totals may not appear to sum. In addition, illustrative charts may not be presented at scale.

Trends Affecting Our Business

We believe that our disciplined investment philosophy across our distinct but complementary investment groups contributes to the stability of our performance throughout market cycles. For the three months ended March 31, 2022, approximately 94% of our management fees were derived from perpetual capital vehicles and other long-dated funds. Our funds have a stable base of committed capital enabling us to invest in assets with a long-term focus over different points in a market cycle and to take advantage of market volatility. However, our results of operations, including the fair value of our AUM, are affected by a variety of factors, particularly in the United States and Western Europe, including conditions in the global financial markets and the economic and political environments.

The continued escalation of the military conflict and humanitarian crisis in Ukraine, rising commodity pressures, and persistent interest-rate volatility shifted sentiment to a broad risk-off environment during the first quarter of 2022. Specifically, the ICE BAML High Yield Master II Index, a high yield bond index, returned a negative 4.5% in the first quarter of 2022, as spreads widened amid higher interest rates, the Federal Reserve’s further indication of future interest rate hikes, and the Russia-Ukraine crisis’ effects on commodity inflation. Meanwhile, the Credit Suisse Leveraged Loan Index (“CSLLI”), a leveraged loan index, returned a negative 0.1% for the first quarter of 2022, as demand for floating rate instruments remained robust against the backdrop of rising interest rate risk.

In Europe, high yield bond and leveraged loan spreads widened alongside their U.S. counterparts amid a volatile and complex macroeconomic backdrop. The ICE BAML European Currency High Yield Index returned a negative 4.7% in the quarter, while the Credit Suisse Western European Leveraged Loan Index returned a negative 0.5% for the quarter, as a result of signals from the European Central Bank and investor concerns and the risk-off sentiment in high yield gradually impacted the loan market as the conflict in Ukraine escalated during the quarter.

The global equity markets have experienced heightened volatility, ongoing supply chain issues, continued high inflation and growing expectations for tightening monetary conditions from global central banks. In the U.S., the S&P 500 Index returned a negative 5.0% for the quarter. Outside of the U.S., the MSCI All Country World ex USA Index returned a negative 5.4% for the quarter.

The private equity market started the first quarter of 2022 off strong as activity was buoyed by elevated valuations, a robust private equity secondary market and low interest rates. As the quarter progressed, the market experienced heightened volatility that is expected to stay, at least in the near-term. Continued asset selectivity, portfolio construction, portfolio diversification and a differentiated view to drive value creation are instrumental in delivering attractive returns to investors. Recent events have had a more pronounced impact on causing downturns in certain industries, including but not limited to the energy, hospitality, travel, retail and restaurant industries, which are industries in which some of our funds have made investments. As of March 31, 2022, approximately 2% of our total AUM was invested in the energy sector (including oil and gas exploration and midstream investments) and approximately 2% in the retail sector.

Table of Contents

2021 also marked a year of recovery for U.S. & European commercial real estate, however the start of 2022 has brought challenges particularly around inflation and rising interest rates. Higher inflation globally helped nominal real estate rent growth and values, although higher interest rates caused by the prospect of monetary tightening are likely to raise financing costs incrementally. The FTSE EPRA/NAREIT Developed Europe and the FTSE NAREIT All Equity REITs indices returned a negative 5.5% and a negative 5.9%, respectively, for the quarter.

We believe our portfolio is well positioned for potential volatility caused by changes in rates. On a market value basis, approximately 91% of our debt assets and 63% of our total assets were floating rate instruments as of March 31, 2022, which we believe helps mitigate volatility associated with changes in interest rates.

Managing Business Performance

Operating Metrics

We measure our business performance using certain operating metrics that are common to the alternative asset management industry, which are discussed below.

Assets Under Management

AUM refers to the assets we manage and is viewed as a metric to measure our investment and fundraising performance as it reflects assets generally at fair value plus available uncalled capital.

The tables below present rollforwards of our total AUM by segment ($ in millions):





























	Credit Group		Private Equity Group		Real Assets Group		Secondary Solutions Group		Strategic Initiatives		Total AUM
Balance at 12/31/2021	$	192,710	$	33,404	$	45,919	$	22,119	$	11,623	$	305,775
Acquisitions	—		—		8,184		199		—		8,383
Net new par/equity commitments	4,159		570		3,058		1,080		1,184		10,051
Net new debt commitments	2,340		—		1,105		—		—		3,445
Capital reductions	(397)		(3)		(262)		—		(5)		(667)
Distributions	(1,003)		(383)		(1,128)		(575)		(154)		(3,243)
Redemptions	(410)		—		(136)		—		—		(546)
Change in fund value	(476)		(23)		1,787		645		(112)		1,821
Balance at 3/31/2022	$	196,923	$	33,565	$	58,527	$	23,468	$	12,536	$	325,019
Average AUM(1)	$	194,818	$	33,485	$	56,315	$	22,794	$	12,081	$	319,493

	Credit Group		Private Equity Group		Real Assets Group		Secondary Solutions Group		Strategic Initiatives		Total AUM
Balance at 12/31/2020	$	145,472	$	23,954	$	18,293	$	—	$	9,261	$	196,980

Net new par/equity commitments(2)	4,519		(21)		730		—		700		5,928
Net new debt commitments	2,543		—		1,880		—		—		4,423
Capital reductions	(545)		(2)		(232)		—		—		(779)
Distributions	(740)		(582)		(223)		—		(131)		(1,676)
Redemptions	(536)		—		—		—		—		(536)
Change in fund value	403		2,024		327		—		64		2,818
Balance at 3/31/2021	$	151,116	$	25,373	$	20,775	$	—	$	9,894	$	207,158
Average AUM(3)	$	148,296	$	24,664	$	19,536	$	—	$	9,578	$	202,074

(1) Represents the average of beginning and ending balances except for the infrastructure debt funds within the Real Assets Group, which represents the average calculated using AUM on the date of the Infrastructure Debt Acquisition and the subsequent quarter-end.
(2) Reallocation of capital among the segments may occur for pools of capital with investment mandates in more than one investment strategy. This reallocation activity is presented within net new par/equity commitments and may result in balances presented to be negative.
(3) Represents the average of beginning and ending balances.

Table of Contents

The components of our AUM are presented below as of ($ in billions):


			AUM: $325.0						AUM: $207.2


			FPAUM						AUM not yet paying fees						Non-fee paying(1)

(1) Includes $12.0 billion and $9.1 billion of AUM of funds from which we indirectly earn management fees as of March 31, 2022 and 2021, respectively and includes $3.4 billion and $2.5 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2022 and 2021, respectively.

Please refer to “— Results of Operations by Segment” for a more detailed presentation of AUM by segment for each of the periods presented

Table of Contents

Fee Paying Assets Under Management

FPAUM refers to AUM from which we directly earn management fees and is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees.

The tables below present rollforwards of our total FPAUM by segment ($ in millions):






























	Credit Group		Private Equity Group		Real Assets Group		Secondary Solutions Group		Strategic Initiatives		Total
Balance at 12/31/2021	$	117,390	$	16,689	$	28,615	$	18,364	$	6,787	$	187,845
Acquisitions	—		—		4,855		131		—		4,986
Commitments	2,250		—		2,184		697		1,464		6,595
Subscriptions/deployment/increase in leverage	6,919		115		909		69		455		8,467
Capital reductions	(2,585)		—		—		—		(11)		(2,596)
Distributions	(1,701)		(446)		(891)		(472)		(257)		(3,767)
Redemptions	(396)		—		(138)		—		—		(534)
Change in fund value	(441)		—		1,418		738		(330)		1,385
Change in fee basis	—		(217)		(825)		(1,457)		(836)		(3,335)
Balance at 3/31/2022	$	121,436	$	16,141	$	36,127	$	18,070	$	7,272	$	199,046
Average FPAUM(1)	$	119,415	$	16,416	$	34,800	$	18,218	$	7,030	$	195,879

	Credit Group		Private Equity Group		Real Assets Group		Secondary Solutions Group		Strategic Initiatives		Total
Balance at 12/31/2020	$	88,017	$	17,493	$	13,931	$	—	$	6,596	$	126,037

Commitments(2)	1,585		79		496		—		(231)		1,929
Subscriptions/deployment/increase in leverage	4,539		592		337		—		538		6,006
Capital reductions	(837)		—		(32)		—		(1)		(870)
Distributions	(1,322)		(576)		(141)		—		(256)		(2,295)
Redemptions	(646)		—		—		—		—		(646)
Change in fund value	279		(1)		(92)		—		(20)		166
Change in fee basis	—		(2,739)		—		—		—		(2,739)
Balance at 3/31/2021	$	91,615	$	14,848	$	14,499	$	—	$	6,626	$	127,588
Average FPAUM(3)	$	89,817	$	16,171	$	14,216	$	—	$	6,611	$	126,815

(1) Represents the average of beginning and ending balances except for the infrastructure debt funds within the Real Assets Group, which represents the average calculated using AUM on the date of the Infrastructure Debt Acquisition and the subsequent quarter-end.
(2) Reallocation of capital among the segments may occur for pools of capital with investment mandates in more than one investment strategy. This reallocation activity is presented within commitments and may result in balances presented to be negative.
(3) Represents the average of beginning and ending balances.

The charts below present FPAUM by its fee basis ($ in billions):


			FPAUM: $199.0						FPAUM: $127.6


			Invested capital/other(1)						Market value(2)						Collateral balances (at par)						Capital commitments

(1)Other consists of ACRE's FPAUM, which is based on ACRE’s stockholders’ equity.

(2)Includes $48.6 billion and $24.8 billion from funds that primarily invest in illiquid strategies as of March 31, 2022 and 2021, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.

Table of Contents

Please refer to “— Results of Operations by Segment” for detailed information by segment of the activity affecting total FPAUM for each of the periods presented.

Incentive Eligible Assets Under Management, Incentive Generating Assets Under Management and Available Capital

IEAUM generally represents the NAV plus uncalled equity or total assets plus uncalled debt, as applicable, of our funds from which we are entitled to receive carried interest and incentive fees, excluding capital committed by us and our professionals (from which we do not earn carried interest and incentive fees). With respect to ARCC's AUM, only ARCC Part II Fees may be generated from IEAUM.

IGAUM generally represents the AUM of our funds that are currently generating carried interest and incentive fees on a realized or unrealized basis. It represents the basis on which we are entitled to receive carried interest and incentive fees. The basis is typically the NAV or total assets of the fund, excluding amounts on which we do not earn carried interest and incentive fees, such as capital committed by us and our professionals. ARCC is only included in IGAUM when ARCC Part II Fees are being generated.

The charts below present our IEAUM and IGAUM by segment ($ in billions):


			Credit						Private Equity						Real Assets						Secondary Solutions						Strategic Initiatives

Table of Contents

The charts below present our available capital and AUM not yet paying fees by segment ($ in billions):


			Credit						Private Equity						Real Assets						Secondary Solutions						Strategic Initiatives

As of March 31, 2022, AUM Not Yet Paying Fees includes $58.2 billion of AUM available for future deployment which could generate approximately $557.0 million in potential incremental annual management fees. As of March 31, 2021, AUM Not Yet Paying Fees includes $37.6 billion of AUM available for future deployment which could generate approximately $395.7 million in potential incremental annual management fees.

The chart below presents our perpetual capital AUM by segment ($ in billions):


			Credit						Real Assets						Strategic Initiatives

As of March 31, 2022, perpetual capital AUM included 75% from commingled funds and 25% from managed accounts. As of March 31, 2021, perpetual capital AUM included 64% from commingled funds and 36% from managed accounts.

Table of Contents

Management Fees By Type

We view the duration of funds we manage as a metric to measure the stability of our future management fees. For the three months ended March 31, 2022 and 2021, 94% and 95%, respectively of management fees were earned from perpetual capital or long-dated funds. The charts below present the composition of our segment management fees by the initial fund duration:


			Long-Dated Funds(1)						Perpetual Capital - Commingled Funds						Perpetual Capital - Managed Accounts						Other

(1) Long-dated funds generally have a contractual life of five years or more at inception.

Fund Performance Metrics

Fund performance information for our investment funds considered to be “significant funds” is included throughout this discussion with analysis to facilitate an understanding of our results of operations for the periods presented. Our significant funds are commingled funds that contributed at least 1% of our total management fees or represented at least 1% of the Company’s total FPAUM for the past two consecutive quarters. In addition to management fees, each of our significant funds may generate carried interest and incentive fees upon the achievement of performance hurdles. The fund performance information reflected in this discussion and analysis is not indicative of our overall performance. An investment in Ares is not an investment in any of our funds. Past performance is not indicative of future results. As with any investment, there is always the potential for gains as well as the possibility of losses. There can be no assurance that any of these funds or our other existing and future funds will achieve similar returns.

Fund performance metrics for significant funds may be marked as “NM” as it is not considered meaningful due to the limited time since the initial investment and/or early stage of capital deployment.

To further facilitate an understanding of the impact a significant fund may have on our results, we present our drawdown funds as either harvesting investments or deploying capital to indicate the fund's stage in its life cycle. A fund harvesting investments is generally not seeking to deploy capital into new investment opportunities, while a fund deploying capital is generally seeking new investment opportunities.

Table of Contents

Consolidation and Deconsolidation of Ares Funds

Consolidated Funds represented approximately 4% of our AUM as of March 31, 2022, 2% of our management fees and less than 1% of our carried interest and incentive fees for the three months ended March 31, 2022. As of March 31, 2022, we consolidated 23 CLOs, 10 private funds and one SPAC, and as of March 31, 2021, we consolidated 21 CLOs, nine private funds and one SPAC.

The activity of the Consolidated Funds is reflected within the unaudited condensed consolidated financial statement line items indicated by reference thereto. The impact of the Consolidated Funds also typically will decrease management fees, carried interest allocation and incentive fees reported under GAAP to the extent these amounts are eliminated upon consolidation.

The assets and liabilities of our Consolidated Funds are held within separate legal entities and, as a result, the liabilities of our Consolidated Funds are typically non-recourse to us. Generally, the consolidation of our Consolidated Funds has a significant gross-up effect on our assets, liabilities and cash flows but has no net effect on the net income attributable to us or our stockholders' equity, except where a reallocation of ownership occurs based on specific redemption or liquidation preference terms. The net economic ownership interests of our Consolidated Funds, to which we have no economic rights, are reflected as redeemable and non-controlling interests in the Consolidated Funds in our unaudited condensed consolidated financial statements. Redeemable interest in Consolidated Funds represent the shares issued by Ares Acquisition Corporation (“AAC”) that are redeemable for cash by the public shareholders in connection with AAC’s failure to complete a business combination or tender offer associated with stockholder approval provisions.

We generally deconsolidate funds and CLOs when we are no longer deemed to have a controlling interest in the entity. During the three months ended March 31, 2022 and 2021, we did not deconsolidate any entities.

The performance of our Consolidated Funds is not necessarily consistent with, or representative of, the combined performance trends of all of our funds.

For the actual impact that consolidation had on our results and further discussion on consolidation and deconsolidation of funds, see “Note 16. Consolidation” to our unaudited condensed consolidated financial statements included herein.

Table of Contents

Results of Operations

Consolidated Results of Operations

We consolidate funds and entities where we are deemed to hold a controlling financial interest. The Consolidated Funds are not necessarily the same entities in each year presented due to changes in ownership, changes in limited partners' or investor rights, and the creation and termination of funds and entities. The consolidation of these funds and entities had no effect on net income attributable to us for the periods presented. As such, we separate the analysis of the Consolidated Funds and evaluate that activity in total. The following table and discussion sets forth information regarding our consolidated results of operations ($ in thousands):



	Three months ended March 31,	Favorable (Unfavorable)
		2022		2021		$ Change		% Change
Revenues
Management fees		$	477,332	$	320,273	$	157,059	49	%
Carried interest allocation		178,289		297,535		(119,246)		(40)
Incentive fees		16,422		2,820		13,602		NM
Principal investment income		8,326		25,100		(16,774)		(67)
Administrative, transaction and other fees		34,630		12,660		21,970		174
Total revenues		714,999		658,388		56,611		9
Expenses
Compensation and benefits		357,243		231,850		(125,393)		(54)
Performance related compensation		129,405		221,432		92,027		42
General, administrative and other expenses		120,523		67,656		(52,867)		(78)

Expenses of Consolidated Funds		4,513		4,171		(342)		(8)
Total expenses		611,684		525,109		(86,575)		(16)
Other income (expense)
Net realized and unrealized gains on investments		8,109		5,433		2,676		49
Interest and dividend income		1,502		960		542		56
Interest expense		(15,646)		(6,695)		(8,951)		(134)
Other income (expense), net		1,784		(4,149)		5,933		NM
Net realized and unrealized gains on investments of Consolidated Funds		15,968		16,422		(454)		(3)
Interest and other income of Consolidated Funds		120,290		115,839		4,451		4
Interest expense of Consolidated Funds		(74,013)		(71,025)		(2,988)		(4)
Total other income		57,994		56,785		1,209		2
Income before taxes		161,309		190,064		(28,755)		(15)
Income tax expense		20,411		25,754		5,343		21
Net income		140,898		164,310		(23,412)		(14)

Less: Net income attributable to non-controlling interests in Consolidated Funds		47,382		49,858		(2,476)		(5)
Net income attributable to Ares Operating Group entities		93,516		114,452		(20,936)		(18)
Less: Net income attributable to redeemable interest in Ares Operating Group entities		399		32		367		NM
Less: Net income attributable to non-controlling interests in Ares Operating Group entities		47,254		56,042		(8,788)		(16)
Net income attributable to Ares Management Corporation		45,863		58,378		(12,515)		(21)
Less: Series A Preferred Stock dividends paid		—		5,425		(5,425)		(100)

Net income attributable to Ares Management Corporation Class A and non-voting common stockholders		$	45,863	$	52,953	(7,090)		(13)

NM - Not Meaningful

Table of Contents

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Consolidated Results of Operations of the Company

Management Fees. Management fees increased by $157.1 million, or 49%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily driven by higher FPAUM from capital deployment in direct lending funds. Management fees also increased by $44.5 million, $27.3 million and $5.0 million in connection with the Landmark Acquisition, Black Creek Acquisition and Infrastructure Debt Acquisition, respectively. For detail regarding the fluctuations of management fees within each of our segments see “—Results of Operations by Segment.”

Carried Interest Allocation. Carried interest allocation decreased by $119.2 million, or 40%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The activity was principally composed of the following ($ in millions):










	Three months ended March 31, 2022		Primary Drivers	Three months ended March 31, 2021		Primary Drivers
Credit funds	$	74.3	Primarily from four direct lending funds and one alternative credit fund with $18.9 billion of IGAUM generating returns in excess of their hurdle rates. Ares Private Credit Solutions, L.P. ("PCS"), Ares Capital Europe IV, L.P. (“ACE IV”) and Ares Capital Europe V, L.P. (“ACE V”) generated carried interest allocation of $10.6 million, $9.6 million and $20.4 million, respectively. The carried interest allocation generated by these funds was driven by net investment income on an increasing invested capital base. Ares Capital Europe III, L.P. (“ACE III”) generated carried interest allocation of $6.5 million primarily driven by net investment income during the period. In addition, Ares Pathfinder Fund, L.P. (“Pathfinder”) generated carried interest allocation of $14.3 million that was driven by market appreciation of various investments.	$	85.6	Primarily from four direct lending funds and one alternative credit fund with $11.7 billion of IGAUM generating returns in excess of their hurdle rates, primarily consisting of: $15.5 million from PCS, $27.9 million from ACE IV and $12.0 million from Pathfinder. The carried interest allocation generated by these funds was driven by net investment income on an increasing invested capital base. In addition, ACE III generated carried interest allocation of $9.5 million primarily driven by net investment income during the period.
Private equity funds	(3.2)		Market depreciation across several investments that led to the reversal of unrealized carried interest allocation of $51.6 million for Ares Corporate Opportunities Fund IV, L.P. (“ACOF IV”) primarily due to market depreciation of its investment in the AZEK Company (“AZEK”) driven by global equity market volatility. The market depreciation was partially offset by market appreciation across several portfolio company investments, primarily operating in services, technology, retail and healthcare industries that generated carried interest allocation of $17.0 million from Ares Corporate Opportunities Fund V, L.P. (“ACOF V”), $21.0 million from Ares Special Opportunities Fund, L.P. (“ASOF”) and $11.3 million from Ares Corporate Opportunities Fund VI, L.P. (“ACOF VI”).	183.6		ACOF IV generated carried interest allocation of $105.8 million primarily due to market appreciation of its investment in AZEK following its initial public offering. In addition, market appreciation across several investments generated carried interest allocation of $43.3 million from ASOF and $18.4 million from ACOF VI.
Real assets funds	54.5		Market appreciation from properties within real estate equity funds, primarily driven by gains from several industrial and multifamily assets, generated carried interest allocation of $16.8 million from Ares US Real Estate Opportunity Fund III, L.P. (“AREOF III”), $9.7 million from US Real Estate Fund VIII, L.P. (“US VIII”), $16.7 million from US Real Estate Fund IX, L.P. ("US IX") and $13.6 million from four real estate equity funds. The market appreciation was partially offset by market depreciation that led to the reversal of unrealized carried interest allocation of $15.7 million from Ares Energy Investors Fund V, L.P. (“EIF V”) primarily due to lower valuations in certain investments due to volatility in the energy markets.	28.0		Market appreciation from properties within real estate equity funds, primarily driven by industrial and multifamily assets, generated carried interest allocation of $9.2 million from US IX and $8.1 million from US VIII.
Secondary solutions funds	52.7		Market appreciation of certain investments held in Landmark Equity Partners XVI, L.P. (“LEP XVI”) and Landmark Real Estate Partners VIII, L.P. (“LREP VIII”) that generated carried interest allocation of $15.8 million and $24.4 million, respectively.	—		N/A
Strategic initiatives funds	—		N/A	0.3		Market appreciation of investments in an Asian secured lending fund.
Carried interest allocation	$	178.3		$	297.5

Table of Contents

Incentive Fees. Incentive fees increased by $13.6 million to $16.4 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The activity was principally composed of the following ($ in millions):







	Three months ended March 31, 2022		Primary Drivers	Three months ended March 31, 2021		Primary Drivers
Credit funds	$	15.4	Incentive fees that were recognized during the period from three direct lending funds and one alternative credit fund.	$	2.1	Incentive fees that crystallized during the period from two direct lending funds.
Real assets funds	1.0		Incentive fees generated from an industrial real estate fund and ACRE.	0.7		Incentive fees generated from ACRE.
Incentive fees	$	16.4		$	2.8

Principal Investment Income. Principal investment income decreased by $16.8 million, or 67%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The activity for the three months ended March 31, 2022 was primarily driven by increasing operating income from underlying properties associated with funds in our U.S. real estate equity and real estate secondaries strategies. The activity for the three months ended March 31, 2022 was also driven by market appreciation of various investments across funds in our private equity secondaries and special opportunities strategies. The activity for the three months ended March 31, 2021 was primarily driven by market appreciation of ACOF IV’s investment in AZEK and of various investments in ACOF III and ACOF VI.

Administrative, Transaction and Other Fees. Administrative, transaction and other fees increased by $22.0 million, or 174%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily due to new fee streams following the completion of the Black Creek Acquisition. Black Creek serves as an integrated property development and real estate investment management specialist, generating various property-related fees, such as acquisition, development and property management, and the distribution of shares in our non-traded REITs. These fees collectively contributed $13.7 million for the three months ended March 31, 2022. We also earn fees from the Black Creek funds that we manage for administrative services, which contributed $7.6 million for the three months ended March 31, 2022. In addition, certain private funds pay administrative fees on invested capital and an increase in deployment resulted in an increase to this fee base. Administrative fees from private funds increased by $1.6 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Compensation and Benefits. Compensation and benefits increased by $125.4 million, or 54%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily driven by (i) headcount growth to support the expansion of our business and (ii) strategic initiatives and acquisitions. Average headcount for the quarter-to-date period increased by 45% to 2,113 professionals for the 2022 period from 1,460 professionals for the same period in 2021.

Headcount growth attributable to the Landmark Acquisition and Black Creek Acquisition contributed $48.9 million in recurring employment related costs to the three months ended March 31, 2022. Headcount growth attributable to the Infrastructure Debt Acquisition contributed $2.5 million in recurring employment related costs for the period from February 10, 2022 through March 31, 2022 and will increase ratably in future reporting periods. The performance-based, acquisition-related compensation arrangements (“earnouts”) that were established in connection with the Landmark Acquisition, Black Creek Acquisition and Infrastructure Debt Acquisition also contributed $48.0 million to the three months ended March 31, 2022. The earnouts are based on the achievement of revenue targets for certain funds. As all earnouts are subject to the continued and future services of senior professionals and advisors, they are required to be recorded as compensation expense and recognized ratably over the respective service periods. See “Note 9. Commitments and Contingencies” for a further description of the contingent liabilities related to these arrangements.

Table of Contents

The following table presents equity compensation expense based on the different types of restricted unit awards. Amounts presented include recurring expense, accelerated expense recognized in connection with the achievement of a performance condition and reversal of previously recognized expense resulting from forfeitures ($ in thousands):



	Three months ended March 31,			Favorable (Unfavorable)
		2022			2021		$ Change	% Change
Non-recurring awards:
Multi-year future grants		$	10,896		$	7,114	(3,782)	(53)
Performance-based awards		—			11,562		11,562	100

Other non-recurring awards		1,820			6,230		4,410	71
Total non-recurring awards		12,716			24,906		12,190	49
Recurring annual awards:
Discretionary awards		20,968			17,175		(3,793)	(22)
Bonus awards		19,966			13,568		(6,398)	(47)
Total recurring annual awards		40,934			30,743		(10,191)	(33)
Equity compensation expense, net		$	53,650		$	55,649	1,999	4

Equity compensation expense decreased by $2.0 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease was primarily attributable to equity compensation expense recognized during the three months ended March 31, 2021 related to performance-based awards with market conditions that were granted to certain executive officers in the first quarter of 2021 and to one-time time-based awards granted to certain employees that substantially vested prior to 2022. The decrease in equity compensation expense was partially offset by the increase in awards granted as part of the recurring annual award programs. During the three months ended March 31, 2022, additional multi-year future grants were approved with grant dates in 2023, 2024 and 2025. Given that these future restricted units have been communicated to the recipient, we account for these awards as if they have been granted and recognize the compensation expense on a straight-line basis over the service period.

For detail regarding the fluctuations of compensation and benefits within each of our segments see “—Results of Operations by Segment.”

Performance Related Compensation. Performance related compensation decreased by $92.0 million, or 42%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Changes in performance related compensation are directly associated with the changes in carried interest allocation and incentive fees described above and may include performance allocations to charitable organizations as part of our philanthropic initiatives.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $52.9 million, or 78%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The Landmark Acquisition, Black Creek and Infrastructure Debt Acquisition have contributed $33.3 million in general, administrative and other expenses to the three months ended March 31, 2022. These expenses were driven by amortization expense of $22.8 million for the three months ended March 31, 2022 related to the intangible assets recorded in connection with the Landmark Acquisition, Black Creek Acquisition and Infrastructure Debt Acquisition. These expenses also included certain recurring operating expenses, including occupancy costs, information services and information technology and office services of $10.5 million. The impact from the Landmark Acquisition, Black Creek Acquisition and Infrastructure Debt Acquisition has been excluded from the discussion below.

Certain expenses have increased during the current period, including occupancy costs to support our growing headcount and information services and information technology to support the expansion of our business. Collectively, these expenses increased by $3.1 million for the three months ended March 31, 2022, when compared to the same period in 2021. Placement fees have also increased by $2.5 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily due to new commitments to Ares Private Credit Solutions II, L.P. (“PCS II”) and our second special opportunities fund.

There continue to be positive developments in the recovery from the COVID-19 pandemic that have reduced restrictions on travel and gathering. Those operating expenses that were impacted by the pandemic, particularly marketing sponsorships and events, increased after the first half of 2021. Our operating expenses, most notably travel, marketing and certain office services and fringe benefits, increased by $7.4 million for the three months ended March 31, 2022, when compared to the same period in 2021. However, travel expenses were $2.5 million lower for the three months ended March 31, 2022 when compared to the pre-pandemic period in 2019 despite the significant addition in headcount and the number of funds that we manage.

Table of Contents

Net Realized and Unrealized Gains on Investments. Net realized and unrealized gains on investments increased by $2.7 million, or 49%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The activity for three months ended March 31, 2022 was primarily attributable to unrealized gains from certain strategic initiative related investments made in connection with our acquisition of SSG. The activity for three months ended March 31, 2021 was primarily attributable to unrealized gains on certain strategic initiative related investments and on our U.S. CLO investments.

Interest Expense. Interest expense increased by $9.0 million, or 134%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The issuance of the 2052 Senior Notes in January 2022 increased interest expense by $3.6 million for the three months ended March 31, 2022 and is expected to result in interest expense of $4.6 million for the full quarter prospectively. The issuance of the 2051 Subordinated Notes on the last day of the second quarter of 2021 increased interest expense by $4.7 million for three months ended March 31, 2022 when compared to the same period in 2021.

Other Income (Expense), Net. Other income (expense), net increased by $5.9 million to $1.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Other income (expense), net includes transaction gains (losses) associated with currency fluctuations impacting the revaluation of non-functional currency balances and was based on the fluctuations in currency exchange rates for the three months ended March 31, 2022 and 2021. Transaction gains during the three months ended March 31, 2022 were primarily attributable to the British pound weakening against the U.S. dollar, while transaction losses during the three months ended March 31, 2021 were primarily attributable to the British pound strengthening against Euro.

Other income, net also includes the change in fair value of a contingent obligation recognized in connection with the Black Creek Acquisition. The purchase agreement with Black Creek contains a provision that requires us to record a contingent consideration liability that is dependent on the achievement of revenue targets for certain Black Creek funds. For the three months ended March 31, 2022, we recorded $1.0 million in expense for the revaluation of this contingent obligation. See “Note 9. Commitments and Contingencies” for a further description of the contingency.

Income Tax Expense Income tax expense decreased by $5.3 million, or 21%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease over the comparative periods was primarily driven by the 19% decrease in income before taxes for the Company and its consolidated subsidiaries*.* The decrease in income tax expense was also attributable to a lower tax rate for the three months ended March 31, 2022, driven by higher equity-based compensation from the vesting of performance-based awards during the three months ended March 31, 2021. The decrease in income tax expense was partially offset by the increase in weighted average daily ownership. The weighted average daily ownership for AMC common stockholders increased from 57.1% for the three months ended March 31, 2021 to 59.5% for the three months ended March 31, 2022. The changes in ownership were primarily driven by the issuance of Class A common stock in connection with stock option exercises, vesting of restricted stock awards and private and public offerings of Class A and non-voting common stock. The increase in the weighted average daily ownership for the AMC common stockholders was partially offset by the issuance of AOG Units in connection with the Landmark Acquisition and the Black Creek Acquisition that increased the ownership of AOG Units not held by AMC.

Redeemable and Non-Controlling Interests. Net income attributable to redeemable and non-controlling interests in AOG entities represents results attributable to the holders of AOG Units and other ownership interests that are not held by AMC. In connection with the SSG Acquisition, the former owners of SSG retained an ownership interest in a subsidiary of an AOG entity that is reflected as redeemable interest in AOG entities. Net income attributable to redeemable interest in AOG entities is allocated based on the ownership percentage for periods presented.

Net income attributable to non-controlling interests in AOG entities is generally allocated based on the weighted average daily ownership of the other AOG unitholders, except for income (loss) generated from certain joint venture partnerships. Net income (loss) is allocated to other strategic distribution partners with whom we have established joint ventures based on the respective ownership percentages and based on the activity of certain membership interests. For the three months ended March 31, 2022 and 2021, net income of $4.6 million and net loss of $0.7 million, respectively, was allocated based on ownership percentages of the strategic distribution partners and the activity of those membership interests.

Net income attributable to non-controlling interests in AOG entities decreased by $8.8 million, or 16%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The changes in the comparative periods are a result of the respective changes in income before taxes and weighted average daily ownership. The weighted average daily ownership for the non-controlling AOG unitholders decreased from 42.9% for the three months ended March 31, 2021 to 40.5% for the three months ended March 31, 2022.

Table of Contents

Consolidated Results of Operations of the Consolidated Funds

The following table presents the results of operations of the Consolidated Funds ($ in thousands):



	Three months ended March 31,			Favorable (Unfavorable)
		2022			2021		$ Change		% Change
Expenses of the Consolidated Funds		$	(4,513)		$	(4,171)	$	(342)	(8)%
Net realized and unrealized gains on investments of Consolidated Funds		15,968			16,422		(454)		(3)
Interest and other income of Consolidated Funds		120,290			115,839		4,451		4
Interest expense of Consolidated Funds		(74,013)			(71,025)		(2,988)		(4)
Income before taxes		57,732			57,065		667		1
Income tax expense of Consolidated Funds		(25)			(28)		3		11
Net income		57,707			57,037		670		1
Less: Revenues attributable to Ares Management Corporation eliminated upon consolidation		22,446			17,371		5,075		29
Less: Other expense, net attributable to Ares Management Corporation eliminated upon consolidation		(12,121)			(10,192)		(1,929)		(19)
Net income attributable to non-controlling interests in Consolidated Funds		$	47,382		$	49,858	(2,476)		(5)

The results of operations of the Consolidated Funds primarily represents activity from certain CLOs that we are deemed to control. Expenses primarily reflect professional fees that were incurred as a result of debt issuance costs related to the issuance of new, refinanced or restructured CLOs. These fees were expensed in the period incurred, as CLO debt is recorded at fair value on our Consolidated Statements of Financial Condition. As of March 31, 2022 and March 31, 2021, we consolidated 23 and 21 CLOs, respectively. Expenses, interest and other income and interest expense remained relatively flat for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Revenues and other expense attributable to AMC represents management fees, incentive fees, principal investment income and administrative, transaction and other fees that are attributable to AMC’s proportional share in the activity of the Consolidated Funds and is eliminated from the respective components of AMC's results upon consolidation. The increase in revenues attributable to AMC for the three months ended March 31, 2022 when compared to the same period in 2021, primarily attributable to higher principal investment income from an Asian corporate private equity fund.

Segment Analysis

For segment reporting purposes, revenues and expenses are presented before giving effect to the results of our Consolidated Funds and the results attributable to non-controlling interests of joint ventures that we consolidate. As a result, segment revenues from management fees, fee related performance revenues, performance income and investment income are different than those presented on a consolidated basis in accordance with GAAP. Revenues recognized from Consolidated Funds are eliminated in consolidation and results attributable to the non-controlling interests of joint ventures have been excluded by us. Furthermore, expenses and the effects of other income (expense) are different than related amounts presented on a consolidated basis in accordance with GAAP due to the exclusion of the results of Consolidated Funds and the non-controlling interests of joint ventures.

Non-GAAP Financial Measures

We use the following non-GAAP measures to make operating decisions, assess performance and allocate resources:

Fee Related Earnings (“FRE”)
Realized Income (“RI”)

These non-GAAP financial measures supplement and should be considered in addition to and not in lieu of, the results of operations, which are discussed further under “—Components of Consolidated Results of Operations” and are prepared in accordance with GAAP. On January 1, 2022, we changed our segment composition and established the Real Assets Group. The Real Assets Group consists of the activities of the former Real Estate Group and the infrastructure and power strategy, now referred to as infrastructure opportunities, that was formerly presented within the Private Equity Group. The Real Assets Group also includes infrastructure debt following the Infrastructure Debt Acquisition. We reclassified activities from the infrastructure opportunities strategy in the Private Equity Group and from the former Real Estate Group to the Real Assets Group to better align the segment presentation with how the asset classes within the investment strategies are managed. Historical periods have been modified to conform to the current period presentation. The following table sets forth FRE and RI by reportable segment and OMG ($ in thousands):

Table of Contents



	Three months ended March 31,	Favorable (Unfavorable)
		2022		2021		$ Change		% Change
Fee Related Earnings:
Credit Group		$	198,885	$	148,204	$	50,681	34%
Private Equity Group		20,400		17,912		2,488		14
Real Assets Group		39,437		17,283		22,154		128
Secondary Solutions Group		29,786		—		29,786		NM
Strategic Initiatives		7,737		8,927		(1,190)		(13)
Operations Management Group		(90,575)		(63,063)		(27,512)		(44)
Fee Related Earnings		$	205,670	$	129,263	76,407		59
Realized Income:
Credit Group		$	204,395	$	150,749	$	53,646	36%
Private Equity Group		20,558		21,871		(1,313)		(6)
Real Assets Group		55,362		20,313		35,049		173
Secondary Solutions Group		29,965		—		29,965		NM
Strategic Initiatives		2,763		6,658		(3,895)		(59)
Operations Management Group		(91,026)		(62,798)		(28,228)		(45)
Realized Income		$	222,017	$	136,793	85,224		62

NM - Not Meaningful

Income before provision for income taxes is the GAAP financial measure most comparable to RI and FRE. The following table presents the reconciliation of income before taxes as reported in the Condensed Consolidated Statements of Operations to RI and FRE of the reportable segments and OMG ($ in thousands):


	Three months ended March 31,
	2022		2021
Income before taxes	$	161,309	$	190,064
Adjustments:
Depreciation and amortization expense	38,126		14,100
Equity compensation expense	53,017		55,649
Acquisition-related compensation expense(1)	48,001		—

Acquisition and merger-related expense	9,042		8,590
Placement fees	(693)		297
Other (income) expense, net	1,981		(473)
Net (income) expense of non-controlling interests in consolidated subsidiaries	(4,989)		689
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations	(47,407)		(49,886)
Total performance income—unrealized	(133,532)		(224,954)
Total performance related compensation—unrealized	91,198		160,337
Total net investment (income) loss—unrealized	5,964		(17,620)
Realized Income	222,017		136,793
Total performance income—realized	(43,868)		(74,945)
Total performance related compensation—realized	28,575		59,857
Total investment (income) loss—realized	(1,054)		7,558
Fee Related Earnings	$	205,670	$	129,263

(1)Represents components of the purchase agreements associated with earnouts in connection with the Landmark Acquisition, the Black Creek Acquisition and the Infrastructure Debt Acquisition that are recorded as compensation expense and are presented within compensation and benefits in the Company’s Condensed Consolidated Statements of Operations.

Table of Contents

For the specific components and calculations of these non-GAAP measures, as well as a reconciliation of the reportable segments to the most comparable measures in accordance with GAAP, see “Note 15. Segment Reporting”, to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Discussed below are our results of operations for our reportable segments and OMG.

Results of Operations by Segment

Credit Group—Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Fee Related Earnings:

The following table presents the components of the Credit Group's FRE ($ in thousands):


	Three months ended March 31,	Favorable (Unfavorable)
			2022		2021		$ Change		% Change
Management fees			$	303,159	$	232,877	$	70,282	30%
Fee related performance revenues			12,353		1,370		10,983		NM
Other fees			5,766		5,969		(203)		(3)
Compensation and benefits			(105,696)		(81,203)		(24,493)		(30)
General, administrative and other expenses			(16,697)		(10,809)		(5,888)		(54)
Fee Related Earnings			$	198,885	$	148,204	50,681		34

NM - Not Meaningful

Management Fees. The chart below presents Credit Group management fees and effective management fee rates ($ in millions):

Management fees on existing funds increased primarily from deployment of capital with Pathfinder, ACE V, SDL and PCS II collectively generating additional fees of $26.9 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Management fees from ARCC, excluding Part I Fees described below, increased by $15.3 million over the period primarily due to an increase in the average size of ARCC's portfolio. The remaining increases in management fees from funds in existence in both periods was primarily driven by deployment of capital in other direct lending funds and SMAs. Part I Fees increased primarily due to an increase in pre-incentive fee net investment income generated by ARCC and CADC, driven by an increase in originations and in the average size of their portfolios. Management fees from

Table of Contents

CLOs also increased primarily due to the net addition of four CLOs for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The launch of Ares Senior Direct Lending Fund II, L.P. (“SDL II”) subsequent to the first quarter of 2021 also contributed to the increase in management fees, generating fees of $7.8 million for the three months ended March 31, 2022.

The decrease in effective management fee rate for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily driven by deployment in SDL and SDL II that have fee rates below 1.00%. The decrease was also driven by the decrease in Part I Fees' contribution to the effective management fee rate due to the proportional increase in fees from other credit funds.

Fee Related Performance Revenues. Fee related performance revenues increased by $11.0 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily attributable to fee related performance revenues from three direct lending funds for the three months ended March 31, 2022 compared to one direct lending fund for the three months ended March 31, 2021.

Compensation and Benefits. Compensation and benefits increased by $24.5 million, or 30%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily driven by (i) an increase in fee related performance compensation of $7.4 million from direct lending SMAs, (ii) increase in payroll related taxes of $7.2 million primarily attributable to the increase in restricted unit awards that vested, (iii) headcount growth and merit increases and (iv) higher Part I Fees compensation of $2.7 million for the three months ended March 31, 2022, when compared to the same period in 2021.

Average headcount for the quarter-to-date period increased by 4% to 433 investment and investment support professionals for the first quarter of 2022 period from 416 professionals for the same period in 2021 as we added additional professionals to support our growing U.S. and European direct lending and alternative credit platforms.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $5.9 million, or 54%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. In connection with our fundraising efforts, placement fees and certain intermediary fees have collectively increased by $2.0 million for the three months ended March 31, 2022 when compared to the same period in 2021. The increase was primarily associated with new commitments to PCS II and SDL II. Certain expenses have also increased during the current period, including information services and information technology to support the expansion of our business. Collectively, these expenses increased by $0.7 million for the three months ended March 31, 2021, when compared to the same period in 2021.

There continue to be positive developments in the recovery from the COVID-19 pandemic that have reduced restrictions on travel and gathering. Those operating expenses that were impacted by the pandemic, particularly marketing sponsorships and events, increased after the first half of 2021. Our operating expenses, most notably travel, entertainment and marketing sponsorships, and certain office services and fringe benefits, increased by $2.7 million for the three months ended March 31, 2022, when compared to the same period in 2021.

Realized Income:

The following table presents the components of the Credit Group's RI ($ in thousands):


	Three months ended March 31,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change
Fee Related Earnings	$	198,885	$	148,204	$	50,681	34	%
Performance income—realized	7,363		2,446		4,917		201
Performance related compensation—realized	(4,580)		(2,055)		(2,525)		(123)
Realized net performance income	2,783		391		2,392		NM
Investment income—realized	415		—		415		NM
Interest and other investment income—realized	5,726		3,669		2,057		56
Interest expense	(3,414)		(1,515)		(1,899)		(125)
Realized net investment income	2,727		2,154		573		27
Realized Income	$	204,395	$	150,749	53,646		36

NM - Not Meaningful

Table of Contents

Realized net performance income for the three months ended March 31, 2022 was primarily attributable to distributions from two European direct lending funds and incentive fees on one alternative credit fund. Realized net performance income for the three months ended March 31, 2021 was primarily attributable to incentive fees on one direct lending fund.

Realized net investment income for the three months ended March 31, 2022 and 2021 was primarily attributable to interest income generated from our CLO investments. Realized net investment income for the three months ended March 31, 2022 also included income recognized in connection with distributions from a commercial finance fund. Realized net investment income for the three months ended March 31, 2022 and 2021 also included interest expense allocations based on the cost basis of investments. Interest expense increased over the comparative period primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.

Credit Group—Performance Income

The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Credit Group. Accrued net performance income excludes net performance income realized but not yet received as of the reporting date ($ in thousands):


	As of March 31, 2022						As of December 31, 2021


	Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income		Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income
ACE III	$	106,095	$	63,657	$	42,438	$	99,551	$	59,731	$	39,820
ACE IV	156,193		96,840		59,353		146,580		90,879		55,701
ACE V	71,931		43,159		28,772		51,482		30,889		20,593
PCS	142,378		84,150		58,228		132,050		77,780		54,270
PCS II	13,942		8,224		5,718		9,053		5,345		3,708
Other credit funds	170,187		119,511		50,676		156,717		105,064		51,653
Total Credit Group	$	660,726	$	415,541	$	245,185	$	595,433	$	369,688	$	225,745

The following table presents the change in accrued performance income for the Credit Group ($ in thousands):












		As of December 31, 2021		Activity during the period						As of March 31, 2022
	Waterfall Type	Accrued Performance Income		Change in Unrealized		Realized		Other Adjustments		Accrued Performance Income
Accrued Carried Interest
ACE III	European	$	99,551	$	6,544	$	—	$	—	$	106,095
ACE IV	European	146,580		9,613		—		—		156,193
ACE V	European	51,482		20,449		—		—		71,931
PCS	European	132,050		10,616		—		(288)		142,378
PCS II	European	9,053		4,798		—		91		13,942
Other credit funds	European	156,453		22,316		(4,268)		(4,578)		169,923
Other credit funds	American	264		—		—		—		264
Total accrued carried interest		595,433		74,336		(4,268)		(4,775)		660,726

Other credit funds	Incentive	—		3,095		(3,095)		—		—
Total Credit Group		$	595,433	$	77,431	$	(7,363)	$	(4,775)	$	660,726

Table of Contents

Credit Group—Assets Under Management

The tables below present rollforwards of AUM for the Credit Group ($ in millions):




























	Syndicated Loans		High Yield		Multi-Asset Credit		Alternative Credit		U.S. Direct Lending		European Direct Lending		Total Credit Group
Balance at 12/31/2021	$	31,491	$	3,632	$	5,212	$	17,424	$	85,849	$	49,102	$	192,710

Net new par/equity commitments	256		159		564		1,588		1,526		66		4,159
Net new debt commitments	1,010		—		—		—		1,330		—		2,340
Capital reductions	(73)		—		—		—		(324)		—		(397)
Distributions	(26)		(3)		9		(145)		(562)		(276)		(1,003)
Redemptions	(66)		(86)		(20)		(203)		(35)		—		(410)
Change in fund value	(207)		(149)		(88)		(70)		613		(575)		(476)
Balance at 3/31/2022	$	32,385	$	3,553	$	5,677	$	18,594	$	88,397	$	48,317	$	196,923
Average AUM(1)	$	31,938	$	3,593	$	5,445	$	18,009	$	87,123	$	48,710	$	194,818

	Syndicated Loans		High Yield		Multi-Asset Credit		Alternative Credit		U.S. Direct Lending		European Direct Lending		Total Credit Group
Balance at 12/31/2020	$	27,967	$	2,863	$	2,953	$	12,897	$	56,516	$	42,276	$	145,472

Net new par/equity commitments	115		101		393		1,230		1,067		1,613		4,519
Net new debt commitments	722		—		—		—		1,821		—		2,543
Capital reductions	(59)		—		—		—		(451)		(35)		(545)
Distributions	(39)		—		(3)		(97)		(339)		(262)		(740)
Redemptions	(89)		(82)		(78)		(235)		(41)		(11)		(536)
Change in fund value	(175)		45		67		148		778		(460)		403
Balance at 3/31/2021	$	28,442	$	2,927	$	3,332	$	13,943	$	59,351	$	43,121	$	151,116
Average AUM(1)	$	28,205	$	2,895	$	3,143	$	13,420	$	57,934	$	42,699	$	148,296

(1) Represents the average of beginning and ending balances.

The components of our AUM for the Credit Group are presented below ($ in billions):


			AUM: $196.9						AUM: $151.1


						FPAUM						AUM not yet paying fees						Non-fee paying(1)

(1) Includes $12.0 billion and $9.1 billion of AUM of funds from which we indirectly earn management fees as of March 31, 2022 and 2021, respectively, and includes $1.0 billion and $0.9 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2022 and 2021, respectively.

Table of Contents

Credit Group—Fee Paying AUM

The tables below present rollforwards of fee paying AUM for the Credit Group ($ in millions):






























	Syndicated Loans		High Yield		Multi-Asset Credit		Alternative Credit		U.S. Direct Lending		European Direct Lending		Total Credit Group
Balance at 12/31/2021	$	30,327	$	3,632	$	4,714	$	8,742	$	46,128	$	23,847	$	117,390

Commitments	248		159		584		286		973		—		2,250
Subscriptions/deployment/increase in leverage	1		—		5		2,454		2,473		1,986		6,919
Capital reductions	(73)		—		—		(11)		(1,344)		(1,157)		(2,585)
Distributions	(13)		(3)		(9)		(223)		(1,216)		(237)		(1,701)
Redemptions	(66)		(86)		(16)		(147)		(35)		(46)		(396)
Change in fund value	(123)		(149)		(89)		14		208		(302)		(441)

Balance at 3/31/2022	$	30,301	$	3,553	$	5,189	$	11,115	$	47,187	$	24,091	$	121,436
Average FPAUM(1)	$	30,314	$	3,593	$	4,952	$	9,929	$	46,658	$	23,969	$	119,415

	Syndicated Loans		High Yield		Multi-Asset Credit		Alternative Credit		U.S. Direct Lending		European Direct Lending		Total Credit Group
Balance at 12/31/2020	$	27,171	$	2,861	$	2,457	$	6,331	$	32,337	$	16,860	$	88,017

Commitments	138		101		415		481		450		—		1,585
Subscriptions/deployment/increase in leverage	—		—		—		618		902		3,019		4,539
Capital reductions	(59)		—		(18)		—		(725)		(35)		(837)
Distributions	(10)		—		(7)		(102)		(1,054)		(149)		(1,322)
Redemptions	(88)		(82)		(78)		(235)		(32)		(131)		(646)
Change in fund value	(352)		45		64		(49)		423		148		279

Balance at 3/31/2021	$	26,800	$	2,925	$	2,833	$	7,044	$	32,301	$	19,712	$	91,615
Average FPAUM(1)	$	26,986	$	2,893	$	2,645	$	6,688	$	32,319	$	18,286	$	89,817

(1) Represents the average of beginning and ending balances.

The charts below present FPAUM for the Credit Group by its fee basis ($ in billions):


			FPAUM: $121.4						FPAUM: $91.6


			Invested capital						Market value(1)						Collateral balances (at par)

(1)Includes $27.3 billion and $20.9 billion from funds that primarily invest in illiquid strategies as of March 31, 2022 and 2021, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.

Table of Contents

Credit Group—Fund Performance Metrics as of March 31, 2022

ARCC contributed approximately 41% of the Credit Group’s total management fees for the three months ended March 31, 2022. In addition, nine other significant funds, ACE III, ACE IV, ACE V, CADC, PCS, PCS II, SDL, SDL II and an open-ended secured finance fund, collectively contributed approximately 27% of the Credit Group’s management fees for the three months ended March 31, 2022.

The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group as of March 31, 2022 ($ in millions):


					Returns(%)(1)
	Year of Inception	AUM		Year-To-Date		Since Inception(2)		Primary Investment Strategy
Fund				Gross	Net	Gross	Net
ARCC(3)	2004	$	25,291		N/A	2.7	N/A	12.1	U.S. Direct Lending
CADC(4)	2017	3,591			N/A	1.2	N/A	6.5	U.S. Direct Lending
Open-ended secured finance fund(5)	2018	2,053			0.9	0.8	3.3	2.6	Alternative 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 assume dividends are reinvested at the closest quarter-end NAV to the relevant quarterly ex-dividend dates. Additional information related to ARCC can be found in its financial statements filed with the SEC, which are not part of this report.

(4)Returns are shown for institutional share class. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to CADC can be found in its financial statements filed with the SEC, which are not part of this report.

(5)Gross returns do not reflect the deduction of management fees or other expenses. Net returns are calculated by subtracting the applicable management fees and other expenses from the gross returns on a monthly basis. This fund is a master/feeder structure and its AUM and returns include activity from its' investment in an affiliated Ares fund. Returns presented in the table are expressed in U.S. Dollars and are for the master fund, excluding the share class hedges. The year-to-date, and since inception returns (gross / net) for the pound sterling hedged Cayman feeder, the fund's sole feeder, are as follows: 1.0% / 0.8%, 2.1% / 1.5%.

Table of Contents

The following table presents the performance data of our significant drawdown funds as of March 31, 2022 ($ in millions):


	Year of Inception	AUM		Original Capital Commitments		Capital Invested to Date			Realized Value(1)			Unrealized Value(2)			Total Value			MoIC		IRR(%)		Primary Investment Strategy
Fund								Gross(3)			Net(4)			Gross(5)			Net(6)
Funds Harvesting Investments
ACE III(7)	2015	$	5,033	$	2,822	$	2,455		$	1,029		$	2,460		$	3,489		1.6x	1.4x	11.9	8.6	European Direct Lending
PCS	2017	3,733		3,365		2,649			1,350			2,108			3,458			1.4x	1.3x	13.3	9.6	U.S. Direct Lending
Funds Deploying Capital
ACE IV Unlevered(8)	2018	10,357		2,851		2,332			397			2,286			2,683			1.2x	1.1x	8.6	6.1	European Direct Lending
ACE IV Levered(8)		4,819		3,921		858			3,980			4,838			1.3x			1.2x	12.8	9.4
SDL Unlevered	2018	5,879		922		718			142			768			910			1.1x	1.1x	9.4	7.1	U.S. Direct Lending
SDL Levered		2,045		1,703		491			1,606			2,097			1.3x			1.2x	18.5	13.8
ACE V Unlevered(9)	2020	15,191		7,026		2,762			36			2,896			2,932			1.1x	1.1x	14.9	11.2	European Direct Lending
ACE V Levered(9)		6,376		2,504		60			2,703			2,763			1.1x			1.1x	24.6	18.9
PCS II	2020	5,193		5,114		1,650			—			1,733			1,733			1.1x	1.0x	NM	NM	U.S Direct Lending
SDL II Unlevered	2021	13,265		1,989		408			—			423			423			1.0x	1.0x	NM	NM	U.S Direct Lending
SDL II Levered		5,936		1,236		—			1,315			1,315			1.1x			1.1x	NM	NM

Fund performance metrics for significant funds may be marked as “NMˮ as it is not considered meaningful due to the limited time since the initial investment and/or early stage of capital deployment.

(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. There can be no assurance that unrealized values will be realized at the valuations indicated.

(3)The gross multiple of invested capital (“MoIC”) is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(5)The gross IRR is an annualized since inception gross 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. Gross IRR reflects returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(6)The net IRR 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. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(7)ACE III is made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net IRR and MoIC presented in the table are for the Euro denominated feeder fund. The gross and net IRR for the U.S. dollar denominated feeder fund are 12.7% and 9.3%, respectively. The gross and net MoIC for the U.S. dollar denominated feeder fund are 1.6x and 1.4x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE III are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate.

(8)ACE IV is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE IV (E) Unlevered, ACE IV (G) Unlevered, ACE IV (E) Levered and ACE IV (G) Levered. The gross and net IRR and MoIC presented in the table are for ACE IV (E) Unlevered and ACE IV (E) Levered. Metrics for ACE IV (E) Levered are inclusive of a U.S. dollar denominated feeder fund, which has not been presented separately The gross and net IRR for ACE IV (G) Unlevered are 10.0% and 7.1%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.2x and 1.2x, respectively. The gross and net IRR for ACE IV (G) Levered are 13.9% and 10.0%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.3x and 1.2x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE IV Unlevered and ACE IV Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate.

(9)ACE V is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE V (E) Unlevered, ACE V (G) Unlevered, ACE V (E) Levered, and ACE V (G) Levered. The gross and net MoIC presented in the table are for ACE V (E) Unlevered and ACE V (E) Levered. Metrics for ACE V (E) Unlevered are inclusive of a Japanese yen denominated feeder fund, which has not been presented separately. Metrics for ACE V (E) Levered are inclusive of a U.S. dollar denominated feeder fund, which has not been presented separately. The gross and net IRR for ACE V (G) Unlevered are 14.7% and 11.0%, respectively. The gross and net MoIC for ACE V (G) Unlevered are 1.1x and 1.1x, respectively. The gross and net IRR for ACE V (G) Levered are 23.7% and 16.9%, respectively. The gross and net MoIC for ACE V (G) Levered are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE V Unlevered and ACE V Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate. IRRs are presented on a non-annualized basis.

Table of Contents

Private Equity Group—Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Fee Related Earnings:

The following table presents the components of the Private Equity Group's FRE ($ in thousands):



	Three months ended March 31,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change
Management fees	$	45,957	$	39,138	$	6,819	17%
Other fees	297		108		189		175
Compensation and benefits	(19,566)		(16,848)		(2,718)		(16)
General, administrative and other expenses	(6,288)		(4,486)		(1,802)		(40)
Fee Related Earnings	$	20,400	$	17,912	2,488		14

Management Fees. The chart below presents Private Equity Group management fees and effective management fee rates ($ in millions):

Management fees increased for three months ended March 31, 2022 compared to three months ended March 31, 2021 primarily due to new commitments in ACOF VI, deployment in ASOF and our second special opportunities fund by $4.8 million, $4.5 million and $0.5 million, respectively. The increase in management fees was partially offset by a decrease of $2.2 million from ACOF IV and ACOF V due to distributions resulting in reductions to its fee bases.

The increase in effective management fee rate for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily driven by additional commitments to ACOF VI and increased deployment in ASOF, both of which have a higher effective management fee rate than the Private Equity Group’s average effective management fee rate.

Compensation and Benefits. Compensation and benefits increased by $2.7 million, or 16%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily driven by higher incentive compensation resulting from increased fee revenues and increase in payroll related taxes due to merit increases for the three months ended March 31, 2022, when compared to the same period in 2021.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $1.8 million, or 40%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. In connection with our fundraising efforts, placement fees increased by $0.9 million for the three months ended March 31, 2022, when compared to the same period in 2021. The increase was primarily associated with new commitments to our second special opportunities fund.

There continue to be positive developments in the recovery from the COVID-19 pandemic that have reduced restrictions on travel and gathering. Those operating expenses that were impacted by the pandemic, particularly marketing sponsorships and events, increased after the first half of 2021. Our operating expenses, most notably travel and entertainment, and certain office services and fringe benefits, increased by $0.3 million for the three months ended March 31, 2022, when compared to the same period in 2021.

Table of Contents

Realized Income:

The following table presents the components of the Private Equity Group's RI ($ in thousands):


	Three months ended March 31,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change
Fee Related Earnings	$	20,400	$	17,912	$	2,488	14	%
Performance income—realized	2,212		71,218		(69,006)		(97)
Performance related compensation—realized	(1,786)		(57,026)		55,240		97
Realized net performance income	426		14,192		(13,766)		(97)
Investment income (loss)—realized	1,603		(8,898)		10,501		NM
Interest and other investment income—realized	1,502		118		1,384		NM
Interest expense	(3,373)		(1,453)		(1,920)		(132)
Realized net investment loss	(268)		(10,233)		9,965		97
Realized Income	$	20,558	$	21,871	(1,313)		(6)

NM - Not Meaningful

Realized net performance income for the three months ended March 31, 2021 was primarily attributable to realizations from a partial sale of ACOF IV's position in AZEK.

Realized net investment loss for the three months ended March 31, 2022 was attributable to interest expense allocations based on the cost basis of investments exceeding limited realization activity during the quarter. Interest expense has increased over the comparative period primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively. Realized net investment loss for the three months ended March 31, 2021 was primarily attributable to realized losses recognized in connection with an Asian corporate private equity fund’s sale of its investment in a dairy farm company, partially offset by realizations from a partial sale of ACOF IV’s position in AZEK.

Private Equity Group—Performance Income

The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Private Equity Group ($ in thousands):


	As of March 31, 2022						As of December 31, 2021


	Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income		Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income
ACOF III	$	30,087	$	24,070	$	6,017	$	43,510	$	34,808	$	8,702
ACOF IV	334,042		267,233		66,809		387,901		310,321		77,580
ACOF V	683,115		546,492		136,623		666,074		532,859		133,215
ACOF VI	84,593		67,674		16,919		73,261		58,608		14,653

ASOF	359,831		251,882		107,949		338,857		237,200		101,657

Other funds	46,570		30,206		16,364		33,526		21,787		11,739
Total Private Equity Group	$	1,538,238	$	1,187,557	$	350,681	$	1,543,129	$	1,195,583	$	347,546

Table of Contents

The following table presents the change in accrued carried interest for the Private Equity Group ($ in thousands):


		As of December 31, 2021		Activity during the period						As of March 31, 2022
	Waterfall Type	Accrued Carried Interest		Change in Unrealized		Realized		Other Adjustments		Accrued Carried Interest
ACOF III	American	$	43,510	$	(13,423)	$	—	$	—	$	30,087
ACOF IV	American	387,901		(51,647)		(2,212)		—		334,042
ACOF V	American	666,074		17,041		—		—		683,115
ACOF VI	American	73,261		11,332		—		—		84,593
ASOF	European	338,857		20,974		—		—		359,831
Other funds	European	7,356		7,242		—		493		15,091
Other funds	American	26,170		5,309		—		—		31,479
Total Private Equity Group		$	1,543,129	$	(3,172)	$	(2,212)	$	493	$	1,538,238

Private Equity Group—Assets Under Management

The tables below present rollforwards of AUM for the Private Equity Group ($ in millions):




























	Corporate Private Equity		Special Opportunities		Total Private Equity Group
Balance at 12/31/2021	$	21,639	$	11,765	$	33,404

Net new par/equity commitments	—		570		570

Capital reductions	(3)		—		(3)
Distributions	(285)		(98)		(383)

Change in fund value	(145)		122		(23)
Balance at 3/31/2022	$	21,206	$	12,359	$	33,565
Average AUM(1)	$	21,423	$	12,062	$	33,485

	Corporate Private Equity		Special Opportunities		Total Private Equity Group
Balance at 12/31/2020	$	18,233	$	5,721	$	23,954

Net new par/equity commitments	29		(50)		(21)

Capital reductions	(2)		—		(2)
Distributions	(582)		—		(582)

Change in fund value	1,705		319		2,024
Balance at 3/31/2021	$	19,383	$	5,990	$	25,373
Average AUM(1)	$	18,808	$	5,856	$	24,664


(1) Represents the average of beginning and ending balances.

Table of Contents

The components of our AUM for the Private Equity Group are presented below ($ in billions):


			AUM: $33.6						AUM: $25.4


			FPAUM						Non-fee paying(1)						AUM not yet paying fees

(1) Includes $1.3 billion and $1.1 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2022 and 2021, respectively.

Private Equity Group—Fee Paying AUM

The tables below present rollforwards of fee paying AUM for the Private Equity Group ($ in millions):






























	Corporate Private Equity		Special Opportunities		Total Private Equity Group
Balance at 12/31/2021	$	12,473	$	4,216	$	16,689


Subscriptions/deployment/increase in leverage	17		98		115

Distributions	(87)		(359)		(446)


Change in fee basis	(217)		—		(217)
Balance at 3/31/2022	$	12,186	$	3,955	$	16,141
Average FPAUM(1)	$	12,330	$	4,086	$	16,416

	Corporate Private Equity		Special Opportunities		Total Private Equity Group
Balance at 12/31/2020	$	14,770	$	2,723	$	17,493

Commitments	79		—		79
Subscriptions/deployment/increase in leverage	108		484		592

Distributions	(410)		(166)		(576)

Change in fund value	(1)		—		(1)
Change in fee basis	(2,739)		—		(2,739)
Balance at 3/31/2021	$	11,807	$	3,041	$	14,848
Average FPAUM(1)	$	13,289	$	2,882	$	16,171

(1) Represents the average of beginning and ending balances.

Table of Contents

The charts below present FPAUM for the Private Equity Group by its fee basis ($ in billions):


			FPAUM: $16.1						FPAUM: $14.8


						Invested capital									Capital commitments

Private Equity Group—Fund Performance Metrics as of March 31, 2022

Three significant funds, ACOF V, ASOF and ACOF VI, collectively contributed approximately 80% of the Private Equity Group’s management fees for the three months ended March 31, 2022.

The following table presents the performance data of our significant drawdown funds as of March 31, 2022 ($ in millions):


	Year of Inception	AUM		Original Capital Commitments		Capital Invested to Date			Realized Value(1)			Unrealized Value(2)			Total Value			MoIC		IRR(%)		Primary Investment Strategy
Fund								Gross(3)			Net(4)			Gross(5)			Net(6)


Funds Deploying Capital
ACOF V	2017	$	9,220	$	7,850	$	7,396		$	3,132		$	8,424		$	11,556		1.6x	1.4x	16.2	11.5	Corporate Private Equity
ASOF	2019	5,536		3,518		4,965			2,784			4,113			6,897			1.6x	1.5x	46.3	36.0	Special Opportunities
ACOF VI	2020	6,140		5,743		2,789			291			3,092			3,383			1.2x	1.1x	23.7	37.7	Corporate 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 financings.

(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 unrealized investments will be realized at the valuations indicated.

(3)For the corporate private equity funds, the gross MoIC is calculated at the investment-level and is based on the interests of all partners. The gross MoIC is before giving effect to management fees, carried interest, as applicable, and other expenses. For the special opportunities funds, the gross MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. The gross MoICs for the corporate private equity and special opportunities funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross MoIC would be 1.5x for ACOF V, 1.2x for ACOF VI, and 1.6x for ASOF, respectively.

(4)The net MoIC for ASOF is calculated at the fund-level. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. The net MoIC for the corporate private equity funds is calculated at the investment level. For all funds, the net MoIC is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or performance fees. The net MoIC is after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The net MoICs for the corporate private equity and special opportunities funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net MoIC would be 1.3x for ACOF V, 1.1x for ACOF VI, and 1.4x for ASOF.

(5)For the corporate private equity 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 investments at the end of the measurement period. Gross IRRs reflect returns to all partners. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses. For the special opportunities funds the gross IRR is an annualized since inception gross 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. Gross IRRs reflect returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross IRRs for the corporate private equity and special opportunities funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross IRRs would be 16.1% for ACOF V, 22.2% for ACOF VI, and 44.9% for ASOF.

(6)The net IRR 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. Net IRRs reflect returns to the fee-paying limited partners and if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculation are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees, carried interest as applicable, and other expenses and exclude commitments by the general partner and non-fee paying limited partners who do not pay either management fees or carried interest. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. The net IRRs for the corporate private equity and special opportunities funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net IRRs would be 11.6% for ACOF V, 27.1% for ACOF VI, and 34.9% for ASOF.

Table of Contents

Real Assets Group—Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Fee Related Earnings:

The following table presents the components of the Real Assets Group's FRE ($ in thousands):



	Three months ended March 31,	Favorable (Unfavorable)
		2022		2021		$ Change		% Change
Management fees		$	72,487	$	39,825	$	32,662	82%
Fee related performance revenues		358		666		(308)		(46)
Other fees		7,866		648		7,218		NM
Compensation and benefits		(33,637)		(20,179)		(13,458)		(67)
General, administrative and other expenses		(7,637)		(3,677)		(3,960)		(108)
Fee Related Earnings		$	39,437	$	17,283	22,154		128

NM - Not Meaningful

Management Fees. The chart below presents Real Assets Group management fees and effective management fee rates ($ in millions):

Management fees increased for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to funds from the Black Creek Acquisition and Infrastructure Debt Acquisition. The Infrastructure Debt Acquisition closed on February 10, 2022 and fees earned from funds in this strategy are expected to increase ratably in future reporting periods. Management fees from Ares Climate Infrastructure Partners, L.P. (“ACIP”) increased by $2.6 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to additional commitments. Management fees from real estate debt funds increased by $2.2 million for the period primarily due to the continued fundraising and subsequent deployment within these open-ended funds.

The decrease in effective management fee rate for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to the increase in funds with effective management fees rates below 0.75%, including funds within our infrastructure debt strategy, our newly managed core/core-plus and industrial U.S. real estate equity funds and our real estate debt funds driven by increased deployment. The decrease in effective management fee rate is partially offset by an increase in management fees from other real estate equity funds. Our most recent real estate equity funds pay a fee

Table of Contents

on committed capital that increases once that capital is invested. As a result, our effective management fee rate decreases immediately following capital raising and increases as capital is subsequently deployed.

Other Fees. Other fees increased by $7.2 million to $7.9 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase primarily represents fees that were generated under the investment management agreements that we acquired in the Black Creek Acquisition, including property-related fees, such as acquisition, development and property management.

Compensation and Benefits. Compensation and benefits increased by $13.5 million, or 67%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in salaries and benefits was primarily driven by compensation and benefit expenses of $9.5 million and $2.0 million, respectively, associated with the investment and investment support professionals hired as part of the Black Creek Acquisition and Infrastructure Debt Acquisition. Compensation and benefit expenses in relation to the professionals hired as part of the Infrastructure Debt Acquisition will increase ratably in future reporting periods.

Average headcount for the quarter-to-date period increased by 119% to 278 investment and investment support professionals for the first quarter of 2022 period from 127 professionals for the same period in 2021, including 133 professionals from the Black Creek Acquisition and the Infrastructure Debt Acquisition.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $4.0 million, or 108%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The change was principally driven by an increase in expenses of $3.0 million, primarily occupancy costs and information technology to support the expanding platform following the Black Creek Acquisition and Infrastructure Debt Acquisition, by higher travel, entertainment and marketing sponsorships expenses and by higher placement fees, primarily associated with new commitments to ACIP and our open-ended industrial real estate fund.

Realized Income:

The following table presents the components of the Real Assets Group's RI ($ in thousands):


	Three months ended March 31,	Favorable (Unfavorable)

		2022		2021		$ Change		% Change
Fee Related Earnings		$	39,437	$	17,283	$	22,154	128%
Performance income—realized		34,293		1,281		33,012		NM
Performance related compensation—realized		(22,209)		(776)		(21,433)		NM
Realized net performance income		12,084		505		11,579		NM
Investment income—realized		3,453		1,506		1,947		129
Interest and other investment income—realized		2,777		2,354		423		18
Interest expense		(2,389)		(1,335)		(1,054)		(79)
Realized net investment income		3,841		2,525		1,316		52
Realized Income		$	55,362	$	20,313	35,049		173

NM - Not Meaningful

Realized net performance income and realized net investment income for the three months ended March 31, 2022 were primarily attributable to distributions from US VIII driven by sales of investments in two multifamily properties.

Realized net performance income for the three months ended March 31, 2021 was primarily generated from the sale of a property held in a European real estate equity fund. Realized net investment income for the three months ended March 31, 2021 was primarily attributable to a distribution from a real estate debt vehicle.

Realized net investment income for the three months ended March 31, 2022 and 2021 also included interest expense allocations based on the cost basis of investments. Interest expense increased over the comparative period primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.

Table of Contents

Real Assets Group—Performance Income

The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Real Assets Group. Accrued net performance income excludes net performance income realized but not yet received as of the reporting date ($ in thousands):


	As of March 31, 2022						As of December 31, 2021


	Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income		Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income
US VIII	$	64,184	$	41,078	$	23,106	$	88,112	$	56,391	$	31,721
US IX	126,813		78,624		48,189		110,074		68,246		41,828
EF IV	72,335		43,402		28,933		70,600		42,361		28,239
EF V	71,143		49,800		21,343		69,946		48,962		20,984
AREOF III	41,034		24,620		16,414		24,204		14,523		9,681
EIF V	46,851		35,021		11,830		62,592		46,787		15,805
Other real assets funds	139,419		86,666		52,753		110,155		68,599		41,556
Other fee generating funds(1)	3,763		—		3,763		3,777		—		3,777
Total Real Assets Group	$	565,542	$	359,211	$	206,331	$	539,460	$	345,869	$	193,591

(1)Relates to investment income from AREA Sponsor Holdings LLC that is reclassified for segment reporting to align with the character of the underlying income generated.

The following table presents the change in accrued performance income for the Real Assets Group ($ in thousands):












		As of December 31, 2021		Activity during the period						As of March 31, 2022
	Waterfall Type	Accrued Performance Income		Change in Unrealized		Realized		Other Adjustments		Accrued Performance Income
Accrued Carried Interest
US VIII	European	$	88,112	$	9,714	$	(33,642)	$	—	$	64,184
US IX	European	110,074		16,739		—		—		126,813
EF IV	American	70,600		1,735		—		—		72,335
EF V	American	69,946		1,197		—		—		71,143
AREOF III	European	24,204		16,830		—		—		41,034
EIF V	European	62,592		(15,741)		—		—		46,851
Other real assets funds	European	41,186		13,116		—		5,376		59,678
Other real assets funds	American	68,969		10,772		—		—		79,741

Other fee generating funds(1)	American	3,777		(14)		—		—		3,763
Total accrued carried interest		539,460		54,348		(33,642)		5,376		565,542

Other real estate funds	Incentive	—		651		(651)		—		—
Total Real Assets Group		$	539,460	$	54,999	$	(34,293)	$	5,376	$	565,542

(1)Relates to investment income from AREA Sponsor Holdings LLC that is reclassified for segment reporting to align with the character of the underlying income generated.

Table of Contents

Real Assets Group—Assets Under Management

The tables below present rollforwards of AUM for the Real Assets Group ($ in millions):




























			U.S. Real Estate Equity			European Real Estate Equity			Real Estate Debt			Infrastructure Opportunities			Infrastructure Debt			Total Real Assets Group
Balance at 12/31/2021	$	24,677		$	6,827		$	9,659		$	4,756		$	—		$	45,919
Acquisitions	—			—			—			—			8,184			8,184
Net new par/equity commitments	1,598			1,183			227			—			50			3,058
Net new debt commitments	705			—			400			—			—			1,105
Capital reductions	(234)			—			(28)			—			—			(262)
Distributions	(750)			(308)			(47)			(23)			—			(1,128)
Redemptions	(91)			—			(45)			—			—			(136)
Change in fund value	2,056			(19)			59			(309)			—			1,787
Balance at 3/31/2022	$	27,961		$	7,683		$	10,225		$	4,424		$	8,234		$	58,527
Average AUM(1)	$	26,319		$	7,255		$	9,942		$	4,590		$	8,209		$	56,315

			U.S. Real Estate Equity			European Real Estate Equity			Real Estate Debt			Infrastructure Opportunities			Infrastructure Debt			Total Real Assets Group
Balance at 12/31/2020	$	4,404		$	4,811		$	5,593		$	3,485		$	—		$	18,293

Net new par/equity commitments	433			94			203			—			—			730
Net new debt commitments	—			—			1,880			—			—			1,880
Capital reductions	—			—			(232)			—			—			(232)
Distributions	(43)			(96)			(32)			(52)			—			(223)

Change in fund value	115			(39)			38			213			—			327
Balance at 3/31/2021	$	4,909		$	4,770		$	7,450		$	3,646		$	—		$	20,775
Average AUM(2)	$	4,657		$	4,791		$	6,522		$	3,566		$	—		$	19,536

(1) Represents the average of beginning and ending balances except for the infrastructure debt funds within the Real Assets Group, which represents the average calculated using AUM on the date of the Infrastructure Debt Acquisition and the subsequent quarter-end.
(2) Represents the average of beginning and ending balances.

The components of our AUM for the Real Assets Group are presented below ($ in billions):


			AUM: $58.5						AUM: $20.8


			FPAUM						Non-fee paying(1)						AUM not yet paying fees

(1) Includes $0.5 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2022 and 2021

Table of Contents

Real Assets Group—Fee Paying AUM

The tables below present rollforwards of fee paying AUM for the Real Assets Group ($ in millions):






























	U.S. Real Estate Equity		European Real Estate Equity		Real Estate Debt		Infrastructure Opportunities		Infrastructure Debt		Total Real Assets Group
Balance at 12/31/2021	$	15,687	$	4,916	$	3,516	$	4,496	$	—	$	28,615
Acquisitions	—		—		—		—		4,855		4,855
Commitments	1,026		1,155		3		—		—		2,184
Subscriptions/deployment/increase in leverage	355		94		369		48		43		909

Distributions	(416)		(208)		(46)		(221)		—		(891)
Redemptions	(91)		—		(47)		—		—		(138)
Change in fund value	1,484		(126)		60		—		—		1,418
Change in fee basis	(6)		(819)		—		—		—		(825)
Balance at 3/31/2022	$	18,039	$	5,012	$	3,855	$	4,323	$	4,898	$	36,127
Average FPAUM(1)	$	16,863	$	4,964	$	3,686	$	4,410	$	4,877	$	34,800

	U.S. Real Estate Equity		European Real Estate Equity		Real Estate Debt		Infrastructure Opportunities		Infrastructure Debt		Total Real Assets Group
Balance at 12/31/2020	$	3,659	$	4,088	$	2,505	$	3,679	$	—	$	13,931

Commitments	301		94		101		—		—		496
Subscriptions/deployment/increase in leverage	119		10		208		—		—		337
Capital reductions	—		—		(32)		—		—		(32)
Distributions	(43)		(54)		(44)		—		—		(141)

Change in fund value	—		(122)		30		—		—		(92)

Balance at 3/31/2021	$	4,036	$	4,016	$	2,768	$	3,679	$	—	$	14,499
Average FPAUM(2)	$	3,848	$	4,052	$	2,637	$	3,679	$	—	$	14,216

(1) Represents the average of beginning and ending balances except for the infrastructure debt funds within the Real Assets Group, which represents the average calculated using FPAUM on the date of the Infrastructure Debt Acquisition and the subsequent quarter-end.
(2) Represents the average of beginning and ending balances.

The charts below present FPAUM for the Real Assets Group by its fee basis ($ in billions):


			FPAUM: $36.1						FPAUM: $14.5


			Market value(1)						Invested capital/other(2)						Capital commitments

(1)Amounts represent FPAUM from funds that primarily invest in illiquid strategies. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.

(2)Other consists of ACRE's FPAUM, which is based on ACRE’s stockholders’ equity.

Real Assets Group—Fund Performance Metrics as of March 31, 2022

Five significant funds, Ares Industrial Real Estate Income Trust, Inc. (“AIREIT”), Ares Real Estate Income Trust, Inc. (“AREIT”), EF V, Infrastructure Debt Fund IV (“IDF IV”) and an open-ended industrial real estate fund, collectively contributed approximately 45% of the Real Assets Group’s management fees for the three months ended March 31, 2022.

The following table presents the performance data for our significant funds that are not drawdown funds in the Real Assets Group as of March 31, 2022 ($ in millions):


					Returns(%)(1)
	Year of Inception	AUM		Year-To-Date			Since Inception(2)		Primary Investment Strategy
Fund				Gross		Net	Gross	Net
AREIT(3)	2012	$	4,261			N/A	7.5	N/A	8.0	U.S. Real Estate Equity
AIREIT(4)	2017	6,857				N/A	17.2	N/A	14.7	U.S. Real Estate Equity
Open-ended industrial real estate fund(5)	2017	5,676				19.8	16.7	32.2	26.5	U.S. Real Estate Equity

(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. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. The inception date used in the calculation of the since inception return is the date in which the first shares of common stock were sold after converting to a NAV-based REIT. Additional information related to AREIT can be found in its financial statements filed with the SEC, which are not part of this report.

(4)Returns are shown for institutional share class. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to AIREIT can be found in its financial statements filed with the SEC, which are not part of this report.

(5)Gross returns do not reflect the deduction of management fees, incentive fees, as applicable, or other expenses. Net returns are calculated by subtracting the applicable management fees, incentive fees, as applicable and other expenses from the gross returns on a quarterly basis.

The following table presents the performance data of our significant drawdown funds as of March 31, 2022 ($ in millions):


	Year of Inception	AUM		Original Capital Commitments		Capital Invested to Date			Realized Value(1)			Unrealized Value(2)			Total Value			MoIC		IRR(%)		Primary Investment Strategy
Fund								Gross(3)			Net(4)			Gross(5)			Net(6)
Fund Harvesting Investments
IDF IV(7)	2018	$	3,349	$	4,012	$	3,726		$	1,032		$	3,364		$	4,396		1.2x	1.1x	9.4	7.1	Infrastructure Debt
Fund Deploying Capital
EF V(8)	2018	2,123		1,968		1,300			479			1,274			1,753			1.4x	1.2x	22.2	14.5	European Real Estate Equity

(1)Realized value includes distributions of operating income, sales and financing proceeds received.

(3)The gross MoIC is calculated at the investment level and is based on the interests of all partners. The gross MoIC for all funds is before giving effect to management fees, carried interest and other expenses, as applicable.

(4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying partners and, if applicable, excludes interests attributable to the non fee-paying partners and/or the general partner which does not pay management fees, carried interest or has such fees rebated outside of the fund. The net MoIC is after giving effect to management fees, carried interest as applicable and other expenses. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(5)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 investments at the end of the measurement period. Gross IRRs reflect returns to all partners. Cash flows used in the gross IRR calculation are assumed to occur at quarter-end. The gross IRRs are calculated before giving effect to management fees, carried interest and other expenses, as applicable.

(6)The net IRR 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. Net IRRs reflect returns to the fee-paying partners and, if applicable, exclude interests attributable to the non fee-paying partners and/or the general partner which does not pay management fees or carried interest or has such fees rebated outside of the fund. The cash flow dates used in the net IRR calculation are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees, carried interest as applicable, and other expenses. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(7)IDF IV is made up of U.S. Dollar hedged, U.S. Dollar unhedged, Euro unhedged, and Yen hedged parallel funds. Gross IRRs and MoICs are not calculated for individual parallel funds. The gross asset level IRRs and MoICs presented in the table represent the gross IRR and gross MoIC for the combined fund. The gross IRR and MoIC are presented in U.S. Dollars with the investment cash flows converted from the currency of the underlying asset to U.S. Dollars at the spot exchange rate prevailing at the date of the first cash flow for each investment. The net IRR and MoIC presented in the table are for the U.S. Dollar hedged parallel fund. The net IRRs for the U.S. Dollar unhedged, Euro unhedged and Yen hedged parallel funds are 6.9%, 6.8% and 6.1%, respectively. The net MoICs for the U.S. Dollar unhedged, Euro unhedged and Yen hedged parallel funds are 1.1x, 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of fund's closing. All other values for IDF IV are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate.

(8)EF V is made up of two parallel funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net IRR and MoIC presented in the table are for the Euro denominated parallel fund. The gross and net MoIC for the U.S. Dollar denominated parallel fund are 1.4x and 1.2x, respectively. The gross and net IRR for the U.S. Dollar denominated parallel fund are 22.3% and 15.0%, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of fund's closing. All other values for EF V are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate.

Table of Contents

Secondary Solutions Group—Three Months Ended March 31, 2022

The following table presents the components of the Secondary Solutions Group's FRE and RI ($ in thousands):


	Three months ended March 31, 2022

Management fees	$	44,504

Compensation and benefits	(11,640)
General, administrative and other expenses	(3,078)
Fee Related Earnings	$	29,786

Realized net investment income	179
Realized Income	$	29,965

Secondary Solutions Group—Management Fees

The activity for the period presented represents management fees primarily from the Landmark Acquisition that closed on June 2, 2021. The effective management fee rate for the period was 0.90%.

Secondary Solutions Group—Performance Income

In the Secondary Solutions Group, we are entitled to carried interest from the funds with closings subsequent to the completion of the Landmark Acquisition and to carried interest we acquired through the purchase of an ownership interest in certain Landmark GP entities. The following table presents accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Secondary Solutions Group ($ in thousands):


	As of March 31, 2022						As of December 31, 2021
	Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income		Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income
LEP XVI	$	175,251	$	148,964	$	26,287	$	159,490	$	135,566	$	23,924
LREP VIII	105,211		89,429		15,782		80,772		68,656		12,116



Other fee generating funds	65,905		55,645		10,260		58,013		49,108		8,905


Total Secondary Solutions Group	$	346,367	$	294,038	$	52,329	$	298,275	$	253,330	$	44,945

The following table presents the change in accrued carried interest for the Secondary Solutions Group ($ in thousands):


		As of December 31, 2021		Activity during the period				As of March 31, 2022
	Waterfall Type	Accrued Carried Interest		Change in Unrealized		Realized		Accrued Carried Interest
LEP XVI	European	$	159,490	$	15,761	$	—	$	175,251
LREP VIII	European	80,772		24,439		—		105,211



Other fee generating funds	European	58,013		7,892		—		65,905
Total Secondary Solutions Group		$	298,275	$	48,092	$	—	$	346,367

Table of Contents

Secondary Solutions Group—Assets Under Management

The table below presents the rollforward of AUM for the Secondary Solutions Group ($ in millions):





























	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondary Solutions Group
Balance at 12/31/2021	$	13,833	$	6,662	$	1,624	$	22,119
Acquisitions	199		—		—		199
Net new par/equity commitments	168		912		—		1,080


Distributions	(109)		(420)		(46)		(575)

Change in fund value	214		376		55		645
Balance at 3/31/2022	$	14,305	$	7,530	$	1,633	$	23,468
Average AUM(1)	$	14,069	$	7,096	$	1,629	$	22,794













(1) Represents the average of beginning and ending balances.

The components of our AUM for the Secondary Solutions Group are presented below ($ in billions):


			AUM: $23.5


			FPAUM						AUM not yet paying fees						Non-fee paying(1)

(1) Includes $0.4 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2022.

Table of Contents

Secondary Solutions Group—Fee Paying AUM

The table below presents the rollforward of fee paying AUM for the Secondary Solutions Group ($ in millions):






























	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondary Solutions Group
Balance at 12/31/2021	$	11,787	$	5,389	$	1,188	$	18,364
Acquisitions	131		—		—		131
Commitments	117		580		—		697
Subscriptions/deployment/increase in leverage	57		—		12		69

Distributions	(11)		(417)		(44)		(472)

Change in fund value	(154)		841		51		738
Change in fee basis	(33)		(1,424)		—		(1,457)
Balance at 3/31/2022	$	11,894	$	4,969	$	1,207	$	18,070
Average FPAUM(1)	$	11,841	$	5,179	$	1,198	$	18,218













(1) Represents the average of beginning and ending balances.

The chart below presents FPAUM for the Secondary Solutions Group by its fee basis ($ in billions):


			FPAUM: $18.1


			Invested capital/other						Market value(1)						Capital commitments

Table of Contents

Secondary Solutions Group—Fund Performance Metrics as of March 31, 2022

Secondary Solutions includes three significant funds, Landmark Equity Partners XV, L.P. (“LEP XV”), LEP XVI and LREP VIII, that collectively contributed approximately 59% of the Secondary Solutions Group’s management fees for the three months ended March 31, 2022.

The following table presents the performance data of our significant drawdown funds as of March 31, 2022 ($ in millions):


	Year of Inception	AUM		Original Capital Commitments		Capital Invested to Date			Realized Value(1)			Unrealized Value(2)			Total Value			MoIC		IRR(%)		Primary Investment Strategy
Fund								Gross(3)			Net(4)			Gross(5)			Net(6)
Funds Harvesting Investments
LEP XV(7)	2013	$	2,072	$	3,250	$	2,628		$	2,480		$	1,357		$	3,837		1.6x	1.5x	19.6	14.1	Private Equity Secondaries
LEP XVI(7)	2016	5,898		4,896		2,706			1,694			2,757			4,451			1.8x	1.6x	60.1	40.4	Private Equity Secondaries
LREP VIII(7)	2016	3,753		3,300		1,745			837			1,701			2,538			1.6x	1.5x	32.3	22.7	Real Estate Secondaries

For all funds in the Secondary Solutions Group, returns are calculated from results that are generally reported on a three month lag and may not include the impact of economic and market activities occurring in the current reporting period.

(1)Realized value represents the sum of all cash distributions to all limited partners and if applicable, exclude tax and incentive distributions made to the general partner.

(2)Unrealized value represents the limited partners' share of fund's NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated.

(3)The gross MoIC is calculated at the fund-level and is based on the interests of all partners. If applicable, limiting the gross MoIC to exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest would have no material impact on the result. The gross MoIC is before giving effect to management fees, carried interest as applicable and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund's governing documentation. The gross fund-level MoIC would have generally been lower had such fund called capital from its partners instead of utilizing the credit facility.

(4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees and other expenses, carried interest and credit facility interest expense, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund's governing documentation. The net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(5)The gross IRR is an annualized since inception gross 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. Gross IRR reflects returns to all partners. If applicable, limiting the gross IRR to exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest would have no material impact on the result. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund's governing documents. The gross fund-level IRR would generally have been lower had such fund called capital from its partners instead of utilizing the credit facility.

(6)The net IRR 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. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and other expenses, carried interest and credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund's governing documents. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(7)The results of each fund is presented on a combined basis with the affiliated parallel funds or accounts, given that the investments are substantially the same.

Strategic Initiatives—Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Fee Related Earnings:

The following table presents the components of Strategic Initiatives’ FRE ($ in thousands):


	Three months ended March 31,	Favorable (Unfavorable)
			2022		2021		$ Change		% Change
Management fees			$	16,814	$	15,623	$	1,191	8%
Other fees			50		79		(29)		(37)
Compensation and benefits			(7,401)		(4,740)		(2,661)		(56)
General, administrative and other expenses			(1,726)		(2,035)		309		15
Fee Related Earnings			$	7,737	$	8,927	(1,190)		(13)

Table of Contents

Management Fees. The chart below presents Strategic Initiatives management fees and effective management fee rates ($ in millions):

Management fees increased for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily driven by deployment from SLO III and higher asset base in our insurance strategy. Management fees from the Asian special situations strategy decreased for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to the reduction in fee basis for SSG Fund V as a result of our sixth Asian special situations fund beginning to pay fees in the first quarter of 2022. The decrease was partially offset by fees from our sixth Asian special situations fund.

The decrease in effective management fee rate for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily driven by the growing fee base of our insurance strategy, which has an effective management fee rate of 0.30%. The effective management fee rate also decreased due to the reduction in fee basis for SSG Fund V, which no longer charges fees on its uninvested capital base following the launch of our sixth Asian special situations fund.

Compensation and Benefits. Compensation and benefits increased by $2.7 million, or 56%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in salaries and benefits for the three months ended March 31, 2022 was driven by headcount growth to support our strategic initiatives and merit increases. Average headcount for the quarter-to-date period increased by 30% to 56 investment and investment support professionals for the first quarter of 2022 period from 43 professionals for the same period in 2021.

Table of Contents

Realized Income:

The following table presents the components of Strategic Initiatives RI ($ in thousands):


	Three months ended March 31,	Favorable (Unfavorable)
			2022		2021		$ Change		% Change
Fee Related Earnings			$	7,737	$	8,927	$	(1,190)	(13)%



Investment income—realized			861		—		861		NM
Interest and other investment income (loss)—realized			3		33		(30)		(91)
Interest expense			(5,838)		(2,302)		(3,536)		(154)
Realized net investment loss			(4,974)		(2,269)		(2,705)		(119)
Realized Income			$	2,763	$	6,658	(3,895)		(59)

NM - Not Meaningful

Realized net investment loss for the three months ended March 31, 2022 and 2021 was primarily attributable to interest expense allocations based on the cost basis of investments. Interest expense has increased over the comparative period primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.

Strategic Initiatives—Assets Under Management

The tables below present rollforwards of AUM for Strategic Initiatives ($ in millions):





























	Asian Special Situations		Asian Secured Lending		APAC Direct Lending		Insurance		SPACs		Total Strategic Initiatives
Balance at 12/31/2021	$	6,239	$	2,456	$	—	$	1,928	$	1,000	$	11,623

Net new par/equity commitments(1)	860		10		362		(48)		—		1,184

Capital reductions	—		(5)		—		—		—		(5)
Distributions	(143)		(19)		—		8		—		(154)

Change in fund value	(6)		29		—		(135)		—		(112)
Balance at 3/31/2022	$	6,950	$	2,471	$	362	$	1,753	$	1,000	$	12,536
Average AUM(2)	$	6,595	$	2,464	$	181	$	1,841	$	1,000	$	12,081

	Asian Special Situations		Asian Secured Lending		APAC Direct Lending		Insurance		SPACs		Total Strategic Initiatives
Balance at 12/31/2020	$	5,154	$	1,864	$	—	$	2,243	$	—	$	9,261

Net new par/equity commitments(1)	2		—		—		(302)		1,000		700


Distributions	(115)		—		—		(16)		—		(131)

Change in fund value	78		8		—		(22)		—		64
Balance at 3/31/2021	$	5,119	$	1,872	$	—	$	1,903	$	1,000	$	9,894
Average AUM(2)	$	5,137	$	1,868	$	—	$	2,073	$	500	$	9,578

(1) Reallocation of capital among the segments may occur for pools of capital with investment mandates in more than one investment strategy. This reallocation activity is presented within net new par/equity commitments and may result in balances presented to be negative.
(2) Represents the average of beginning and ending balances.

Table of Contents

The components of our AUM for Strategic Initiatives are presented below ($ in billions):


			AUM: $12.5						AUM: $9.9


			FPAUM						AUM not yet paying fees						Non-fee paying(1)

(1) Includes $0.2 billion and $0.1 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2022 and 2021.

Strategic Initiatives—Fee Paying AUM

The tables below present rollforwards of fee paying AUM for Strategic Initiatives ($ in millions):































	Asian Special Situations		Asian Secured Lending		APAC Direct Lending		Insurance		Total Strategic Initiatives
Balance at 12/31/2021	$	3,605	$	1,115	$	—	$	2,067	$	6,787

Commitments(1)	1,472		—		—		(8)		1,464
Subscriptions/deployment/increase in leverage	210		245		—		—		455
Capital reductions	(2)		(9)		—		—		(11)
Distributions	(209)		(47)		—		(1)		(257)

Change in fund value	2		(121)		—		(211)		(330)
Change in fee basis	(836)		—		—		—		(836)
Balance at 3/31/2022	$	4,242	$	1,183	$	—	$	1,847	$	7,272
Average FPAUM(2)	$	3,924	$	1,149	$	—	$	1,957	$	7,030

	Asian Special Situations		Asian Secured Lending		APAC Direct Lending		Insurance		Total Strategic Initiatives
Balance at 12/31/2020	$	3,614	$	739	$	—	$	2,243	$	6,596

Commitments(1)	—		—		—		(231)		(231)
Subscriptions/deployment/increase in leverage	362		176		—		—		538
Capital reductions	(1)		—		—		—		(1)
Distributions	(210)		(32)		—		(14)		(256)

Change in fund value	—		—		—		(20)		(20)

Balance at 3/31/2021	$	3,765	$	883	$	—	$	1,978	$	6,626
Average FPAUM(2)	$	3,690	$	811	$	—	$	2,110	$	6,611

(1) Reallocation of capital among the segments may occur for pools of capital with investment mandates in more than one investment strategy. This reallocation activity is presented within commitments and may result in balances presented to be negative.
(2) Represents the average of beginning and ending balances.

Table of Contents

The charts below present FPAUM for Strategic Initiatives by its fee basis ($ in billions):


			FPAUM: $7.3						FPAUM: $6.6


			Market value						Invested capital/other						Capital commitments

Strategic Initiatives—Fund Performance Metrics as of March 31, 2022

Strategic Initiatives includes one significant fund, SSG Capital Partners V, L.P. (“SSG Fund V”), that contributed approximately 27% of the management fees reported in Strategic Initiatives for the three months ended March 31, 2022.

The following table presents the performance data of our significant drawdown fund as of March 31, 2022 ($ in millions):


	Year of Inception	AUM		Original Capital Commitments		Capital Invested to Date			Realized Value(1)			Unrealized Value(2)			Total Value			MoIC		IRR(%)		Primary Investment Strategy
Fund								Gross(3)			Net(4)			Gross(5)			Net(6)
Fund Deploying Capital
SSG Fund V	2018	$	2,124	$	1,878	$	1,602		$	1,063		$	777		$	1,840		1.2x	1.1x	34.7	20.2	Asian Special Situations

(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.

(3)The gross MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest as applicable and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees and other expenses, carried interest and credit facility interest expense, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(5)The gross IRR is an annualized since inception gross 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. Gross IRR reflects returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. The gross fund-level IRR would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

(6)The net IRR 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. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and other expenses, carried interest and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.

Table of Contents

Operations Management Group—Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Fee Related Earnings:

The following table presents the components of the Operations Management Group’s FRE ($ in thousands):



	Three months ended March 31,	Favorable (Unfavorable)
		2022		2021		$ Change		% Change
Other fees		$	5,876	$	—	$	5,876	NM
Compensation and benefits		(64,067)		(44,407)		(19,660)		(44)
General, administrative and other expenses		(32,384)		(18,656)		(13,728)		(74)
Fee Related Earnings		$	(90,575)	$	(63,063)	(27,512)		(44)

NM - Not Meaningful

Other Fees. Other fees of $5.9 million for the three months ended March 31, 2022 represents fees earned through Ares Wealth Management Solutions, LLC (“AWMS”) primarily from asset-based fees that we earn from our non-traded REITs and accompanying 1031 exchange programs. Other fees also includes trade-based fees from the sale and distribution of our non-traded REITs, net of amounts reallowed to participating broker-dealers.

Compensation and Benefits. Compensation and benefits increased by $19.7 million, or 44%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase continues to be driven by (i) the headcount growth from the Infrastructure Debt Acquisition, Black Creek Acquisition and Landmark Acquisition, (ii) the expansion of our strategy and relationship management teams to support global fundraising, and (iii) the expansion of our business operations teams to support the growth of our business and other strategic initiatives. In connection with the sale and distribution of shares in our non-traded REITs, we incurred employee commission expense of $6.9 million during the three months ended March 31, 2022.

Average headcount for the quarter-to-date period increased by 51% to 1,136 operations management professionals from 754 professionals for the same period in 2021. Average headcount for our operations management professionals increased by 203 professionals from the Infrastructure Debt Acquisition, Landmark Acquisition and Black Creek Acquisition, including AWMS.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $13.7 million, or 74%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The change included an increase in general, administrative and other expenses of $3.1 million from the Landmark Acquisition, Black Creek Acquisition and Infrastructure Debt Acquisition for the three months ended March 31, 2022. The impact from the acquisitions has been excluded from the discussion below.

Certain expenses have also increased during the current period, including occupancy costs to support our growing headcount and information services and information technology to support the expansion of our business. Collectively, these expenses increased by $2.4 million for the three months ended March 31, 2021, when compared to the same period in 2021. The increase was also driven by higher professional service fees, recruiting fees and insurance costs of $4.0 million for the three months ended March 31, 2022, largely to support the expanding platform. The three months ended March 31, 2022 also included a $0.8 million charitable contribution to the AltFinance program that launched in the second quarter of 2021. AltFinance is an initiative designed to diversify the alternative investment industry by attracting, training and providing career opportunities for college students attending historically black colleges and universities, and we expect to make annual charitable contributions of $3.0 million to the initiative for at least the 10 years following the launch of the program.

There continue to be positive developments in the recovery from the COVID-19 pandemic that have reduced restrictions on travel and gathering. Those operating expenses that were impacted by the pandemic, particularly marketing sponsorships and events, increased after the first half of 2021. Our operating expenses, most notably travel, entertainment and marketing sponsorships, and certain office services and fringe benefits, increased by $2.3 million for the three months ended March 31, 2022, when compared to the same period in 2021.

Table of Contents

Realized Income:

The following table presents the components of the OMG's RI ($ in thousands):



	Three months ended March 31,	Favorable (Unfavorable)
		2022		2021		$ Change		% Change
Fee Related Earnings		$	(90,575)	$	(63,063)	$	(27,512)	(44)%

Interest and other investment income (loss)—realized		(284)		355		(639)		NM
Interest expense		(167)		(90)		(77)		(86)
Realized net investment income (loss)		(451)		265		(716)		NM
Realized Income		$	(91,026)	$	(62,798)	(28,228)		(45)

NM - Not Meaningful

Liquidity and Capital Resources

Management assesses liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. Management believes that the Company is well-positioned and its liquidity will continue to be sufficient for its foreseeable working capital needs, contractual obligations, dividend payments, pending acquisitions and strategic initiatives.

Sources and Uses of Liquidity

Our sources of liquidity are (1) cash on hand, (2) net working capital, (3) cash from operations, including management fees and fee related performance revenues, which are collected monthly, quarterly or semi-annually, and net realized performance income, which may be unpredictable as to amount and timing, (4) fund distributions related to our investments that are unpredictable as to amount and timing and (5) net borrowing from the Credit Facility. As of March 31, 2022, our cash and cash equivalents were $346.0 million, and we had $370.0 million borrowings outstanding under our Credit Facility. Our ability to draw from the Credit Facility is subject to a leverage and other covenants. We remain in compliance with all covenants as of March 31, 2022. We believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for the foreseeable future. Cash flows from management fees may be impacted by a slowdown or declines in deployment, declines or write downs in valuations, or a slowdown or negatively impacted fundraising. In addition, management fees may be subject to deferral and fee related performance revenues may be subject to hold backs. Declines or delays and transaction activity may impact our fund distributions and net realized performance income which could adversely impact our cash flows and liquidity. Market conditions may make it difficult to extend the maturity or refinance our existing indebtedness or obtain new indebtedness with similar terms.

We expect that our primary liquidity needs will continue to be to (1) provide capital to facilitate the growth of our existing investment management businesses, (2) fund our investment commitments, (3) provide capital to facilitate our expansion into businesses that are complementary to our existing investment management businesses as well as other strategic growth initiatives, (4) pay operating expenses, including cash compensation to our employees, and make payments under the tax receivable agreement (“TRA”), (5) fund capital expenditures, (6) service our debt, (7) pay income taxes, (8) make dividend payments to our Class A and non-voting common stockholders in accordance with our dividend policy and (9) pay distributions to AOG unitholders.

In the normal course of business, we expect to pay dividends to our Class A and non-voting common stockholders that are aligned with our expected fee related earnings after an allocation of current taxes paid. For the purposes of determining this amount, we allocate the current taxes paid to FRE and to realized incentive and investment income in a manner that may be disproportional to earnings generated by these metrics and the actual taxes paid on these metrics should they be considered separately. Additionally, our methodology uses the tax benefits from certain expenses that are not included in these non-GAAP metrics, such as equity-based compensation from the vesting of restricted units and the exercise of stock options and from the amortization of intangible assets, among others. We allocate the taxes by multiplying the statutory tax rate currently in effect by our realized performance and net investment income and removing this amount from total current taxes. The remaining current tax paid is the amount that we allocate to FRE. We use this method to allocate the current provision for income taxes to approximate the amount of cash that is available to pay dividends to our stockholders. If cash flows from operations were insufficient to fund dividends over a sustained period of time, we expect that we would suspend or reduce paying such dividends. In addition, there is no assurance that dividends would continue at the current levels or at all.

Table of Contents

Our ability to obtain debt financing and complete stock offerings provides us with additional sources of liquidity. For further discussion of financing transactions occurring in the current period, see “Cash Flows” within this section and “Note 8. Debt” and “Note 14. Equity and Redeemable Interest” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Our unaudited condensed consolidated financial statements reflect the cash flows of our operating businesses as well as those of our Consolidated Funds. The assets of our Consolidated Funds, on a gross basis, are significantly larger than the assets of our operating businesses and therefore have a substantial effect on our reported cash flows. The primary cash flow activities of our Consolidated Funds include: (1) raising capital from third-party investors, which is reflected as non-controlling interests of our Consolidated Funds, (2) financing certain investments by issuing debt, (3) purchasing and selling investment securities, (4) generating cash through the realization of certain investments, (5) collecting interest and dividend income and (6) distributing cash to investors. Our Consolidated Funds are generally accounted for as investment companies under GAAP; therefore, the character and classification of all Consolidated Fund transactions are presented as cash flows from operations. Liquidity available at our Consolidated Funds is typically not available for corporate liquidity needs, and debt of the Consolidated Funds is non–recourse to the Company except to the extent of the Company's investment in the fund.

Cash Flows

We consolidate funds where we are deemed to hold a controlling interest. The Consolidated Funds are not necessarily the same entities in each year presented due to changes in ownership, changes in limited partners' rights and the creation or termination of funds. The consolidation of these funds had no effect on cash flows attributable to us for the periods presented. As such, we evaluate the activity of the Consolidated Funds and the eliminations resulting from consolidation separately. The following tables and discussion summarize our condensed consolidated statements of cash flows by activities attributable to the Company and to our Consolidated Funds. For more details on the activity of the Company and Consolidated Funds, refer to “Note 16. Consolidation” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.


	Three months ended March 31,
($ in thousands)	2022		2021
Net cash provided by operating activities	$	262,732	$	137,408
Net cash used in the Consolidated Funds' operating activities, net of eliminations	(38,582)		(878,526)
Net cash provided by (used in) operating activities	224,150		(741,118)
Net cash used in the Company's investing activities	(310,148)		(3,284)
Net cash provided by (used in) the Company's financing activities	53,205		(63,442)
Net cash provided by the Consolidated Funds' financing activities, net of eliminations	39,832		880,653
Net cash provided by financing activities	93,037		817,211
Effect of exchange rate changes	(4,652)		(2,749)
Net change in cash and cash equivalents	$	2,387	$	70,060

Operating Activities

In the table below cash flows from operations have been summarized to present (i) cash generated from our core operating activities, primarily consisting of profits generated principally from management fees and fee related performance revenues after covering for operating expenses and fee related performance compensation, (ii) net realized performance income and (iii) net cash from investment related activities including purchases, sales and net realized investment income. We generated meaningful cash flow from operations in each period presented.


	Three months ended March 31,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change
Core operating activities	$	226,592	$	161,093	$	65,499	41%
Net realized performance income	87,214		5,010		82,204		NM
Net cash used in investment related activities	(51,074)		(28,695)		(22,379)		78
Net cash provided by operating activities	$	262,732	$	137,408	125,324		91

NM - Not Meaningful

Cash generated from our core operating activities continues to increase as a result of growing fee revenues and an expanding fee related earnings margin. Net realized performance income, which represents a source of cash, also increased when compared to the prior year period primarily as a result of receiving payment for incentive fees that were realized in the

Table of Contents

prior period. Our incentive fee realizations were higher in the fourth quarter of 2021 compared to the fourth quarter of 2020, which resulted in an increase in cash payments received over the comparative periods. Net cash used in investment related activities primarily represents net purchases associated with funding capital commitments in our investment portfolio, which represent a use of cash. Our capital commitments continue to increase with our growing assets under management.

Net cash used in the Consolidated Funds’ operating activities continues to be principally attributable to net purchases of investment securities by recently launched funds during both periods. Net cash used in the Consolidated Funds’ operating activities for the three months ended March 31, 2021 included the purchase of U.S. Treasury securities following the initial public offering of our SPAC.

Our working capital needs are generally rising to support the growth of our business, while the capital requirements needed to support fund-related activities vary based upon the specific investment activities being conducted during such period.

Investing Activities


	Three months ended March 31,
	2022		2021
Purchase of furniture, equipment and leasehold improvements, net of disposals	$	(8,524)	$	(3,284)
Acquisitions, net of cash acquired	(301,624)		—
Net cash used in investing activities	$	(310,148)	$	(3,284)

Net cash used in the Company's investing activities was principally composed of cash used to complete the Infrastructure Debt Acquisition in the current period. We also used cash to purchase furniture, fixtures, equipment and leasehold improvements during both years to support the growth in our staffing levels and expanding our global presence.

Financing Activities


	Three months ended March 31,
	2022		2021

Net borrowings (repayments) of Credit Facility	$	(45,000)	$	168,000
Proceeds from issuance of senior notes	488,915		—

Class A and non-voting common stock dividends	(111,406)		(74,684)
AOG unitholder distributions	(100,480)		(67,084)
Series A Preferred Stock dividends	—		(5,425)


Stock option exercises	3,347		—
Taxes paid related to net share settlement of equity awards	(183,027)		(84,590)
Other financing activities	856		341
Net cash provided by (used in) the Company's financing activities	$	53,205	$	(63,442)

Net cash provided by the Company’s financing activities for the three months ended March 31, 2022 included net proceeds from the issuance of the 2052 Senior Notes. These proceeds were used primarily to fund the Infrastructure Debt Acquisition. As a result of generating higher fee related earnings, we increased the level of dividends paid to a growing shareholder base of Class A and non-voting common stockholders and distributions paid to AOG unitholders.

In connection with the vesting of restricted units that are granted to our employees under the Equity Incentive Plan, we withhold shares equal to the fair value of our employee’s withholding tax liabilities and pay the taxes on their behalf. This use of cash increased from the prior period primarily as a result of our appreciating stock price, which is the basis on which employee compensation is recognized, and a higher number of restricted units that vested in the current period. The net settlement of shares minimizes the dilutive impact of our Equity Incentive Plan as fewer shares are issued upon vesting. For the three months ended March 31, 2022 and 2021, we retained and did not issue 2.3 million shares and 1.8 million shares, respectively.

Net cash used in the Company’s financing activities for three months ended March 31, 2021 was principally composed of cash used to pay dividends and distributions to Class A common stockholders and AOG unitholders, respectively.

Table of Contents


	Three months ended March 31,
	2022		2021
Contributions from redeemable and non-controlling interests in Consolidated Funds, net of eliminations	$	82,930	$	941,935
Distributions to non-controlling interests in Consolidated Funds, net of eliminations	(34,958)		(38,829)
Borrowings under loan obligations by Consolidated Funds	49,317		7,000
Repayments under loan obligations by Consolidated Funds	(57,457)		(29,453)
Net cash provided by the Consolidated Funds' financing activities	$	39,832	$	880,653

Net cash provided by the Consolidated Funds’ financing activities for the three months ended March 31, 2022 was principally attributable to contributions to a Consolidated Fund to fund investments in limited partnership interests in private equity funds managed by the Company.

Net cash provided by the Consolidated Funds’ financing activities for the three months ended March 31, 2021 was principally attributable to contributions from shareholders in the initial public offering of our SPAC.

Capital Resources

We intend to use a portion of our available liquidity to pay cash dividends to our Class A and non-voting common stockholders on a quarterly basis in accordance with our dividend policy. Our ability to make cash dividends is dependent on a myriad of factors, including among others: general economic and business conditions; our strategic plans and prospects; our business and investment opportunities; timing of capital calls by our funds in support of our commitments; our financial condition and operating results; working capital requirements and other anticipated cash needs; contractual restrictions and obligations; legal, tax and regulatory restrictions; restrictions on the payment of distributions by our subsidiaries to us and other relevant factors.

We are required to maintain minimum net capital balances for regulatory purposes for our broker-dealer entities and certain subsidiaries operating outside the U.S. These net capital requirements in the U.S. are met in part by retaining cash, cash equivalents and investment securities. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of March 31, 2022, we were required to maintain approximately $46.4 million in net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We remain in compliance with all regulatory requirements.

Holders of AOG Units, subject to the terms of the exchange agreement, may exchange their AOG Units for shares of our Class A common stock on a one-for-one basis. These exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of AMC that otherwise would not have been available. These increases in tax basis may increase depreciation and amortization for U.S. income tax purposes and thereby reduce the amount of tax that we would otherwise be required to pay in the future. We entered into the TRA that provides payment to the TRA recipients of 85% of the amount of actual cash savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that we actually realize as a result of these increases in tax basis and of certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA and interest accrued thereon. Future payments under the TRA in respect of subsequent exchanges are expected to be substantial. The TRA liability balance was $99.0 million and $100.5 million as of March 31, 2022 and December 31, 2021, respectively.

For a discussion of our debt obligations, including the debt obligations of our consolidated funds, see "Note 8. Debt,” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Table of Contents

Critical Accounting Estimates

We prepare our unaudited condensed consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our unaudited condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates or judgments, however, are both subjective and subject to change, and actual results may differ from our assumptions and estimates. Actual results may also differ from our estimates and judgments due to risks and uncertainties. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. For a summary of our significant accounting policies, see “Note 2. Summary of Significant Accounting Policies,” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021. For a summary of our critical accounting estimates, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates" in our Annual Report on Form 10-K.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements and their impact on the Company can be found in “Note 2. Summary of Significant Accounting Policies,” of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Commitments and Contingencies

In the normal course of business, we enter into contractual obligations that may require future cash payments. We may also engage in off-balance sheet arrangements, including transactions in derivatives, guarantees, capital commitments to funds, indemnifications and potential contingent repayment obligations. For further discussion of our derivatives, guarantees, capital commitments, indemnification arrangements and contingent obligations, see “Note 7. Derivative Financial Instruments” and “Note 9. Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous: Item 1. Financial Statements · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk