Item 1. Financial Statements

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Item 1. Financial Statements

Ares Management Corporation

Condensed Consolidated Statements of Financial Condition

(Amounts in Thousands, Except Share Data)


	As of
	September 30, 2022		December 31, 2021
	(unaudited)
Assets
Cash and cash equivalents	$	361,500	$	343,655
Investments (includes accrued carried interest of $3,290,381 and $2,998,421 at September 30, 2022 and December 31, 2021, respectively)	4,112,393		3,684,264
Due from affiliates	561,503		670,383
Other assets	275,189		334,755
Right-of-use operating lease assets	159,686		167,652
Intangible assets, net	1,238,108		1,422,818
Goodwill	996,740		787,972
Assets of Consolidated Funds:
Cash and cash equivalents	683,976		1,049,191
U.S. Treasury securities, at fair value	1,005,094		1,000,285
Investments, at fair value	11,569,191		11,816,393
Due from affiliates	7,736		7,234
Receivable for securities sold	189,823		281,132
Other assets	45,387		39,430
Total assets	$	21,206,326	$	21,605,164
Liabilities
Accounts payable, accrued expenses and other liabilities	$	305,131	$	279,673
Accrued compensation	595,330		310,222
Due to affiliates	122,307		198,553
Performance related compensation payable	2,402,019		2,190,352
Debt obligations	2,018,462		1,503,709
Operating lease liabilities	193,180		205,075
Liabilities of Consolidated Funds:
Accounts payable, accrued expenses and other liabilities	121,994		103,258

Payable for securities purchased	419,726		1,118,456
CLO loan obligations, at fair value	10,313,881		10,657,661
Fund borrowings	149,546		127,771
Total liabilities	16,641,576		16,694,730
Commitments and contingencies
Redeemable interest in Consolidated Funds	1,004,994		1,000,000
Redeemable interest in Ares Operating Group entities	92,108		96,008
Non-controlling interests in Consolidated Funds	834,710		591,452
Non-controlling interests in Ares Operating Group entities	1,121,277		1,397,747
Stockholders' Equity

Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (172,402,437 shares and 168,351,305 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively)	1,724		1,684
Non-voting common stock, $0.01 par value, 500,000,000 shares authorized (3,489,911 shares issued and outstanding at September 30, 2022 and December 31, 2021)	35		35
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding at September 30, 2022 and December 31, 2021)	—		—
Class C common stock, $0.01 par value, 499,999,000 shares authorized (118,275,157 shares and 118,609,332 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively)	1,183		1,186
Additional paid-in-capital	1,911,736		1,913,559
Accumulated deficit	(374,198)		(89,382)
Accumulated other comprehensive loss, net of tax	(28,819)		(1,855)
Total stockholders' equity	1,511,661		1,825,227
Total equity	3,467,648		3,814,426
Total liabilities, redeemable interest, non-controlling interests and equity	$	21,206,326	$	21,605,164

See accompanying notes to the unaudited condensed consolidated financial statements.

Ares Management Corporation

Condensed Consolidated Statements of Operations

(Amounts in Thousands, Except Share Data)

(unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Revenues
Management fees	$	548,458	$	448,262	$	1,546,350	$	1,135,821
Carried interest allocation	192,186		460,651		417,779		1,610,707
Incentive fees	8,882		696		29,979		19,420
Principal investment income	11,582		14,250		15,521		86,477
Administrative, transaction and other fees	40,182		24,860		108,090		49,501
Total revenues	801,290		948,719		2,117,719		2,901,926
Expenses
Compensation and benefits	425,419		335,569		1,155,031		837,108
Performance related compensation	142,934		331,141		316,818		1,208,954
General, administrative and other expenses	319,352		134,453		562,441		285,471

Expenses of Consolidated Funds	10,397		12,104		28,364		31,575
Total expenses	898,102		813,267		2,062,654		2,363,108
Other income (expense)
Net realized and unrealized gains on investments	4,431		8,334		10,765		18,744
Interest and dividend income	2,086		1,376		5,064		6,818
Interest expense	(18,307)		(11,523)		(51,174)		(25,125)
Other income, net	2,601		36,654		10,194		30,686
Net realized and unrealized gains (losses) on investments of Consolidated Funds	(30)		34,245		8,031		44,720
Interest and other income of Consolidated Funds	158,415		104,028		396,080		333,745
Interest expense of Consolidated Funds	(112,762)		(61,578)		(266,028)		(191,577)
Total other income, net	36,434		111,536		112,932		218,011
Income (loss) before taxes	(60,378)		246,988		167,997		756,829
Income tax expense (benefit)	(11,599)		30,275		22,272		104,487
Net income (loss)	(48,779)		216,713		145,725		652,342
Less: Net income attributable to non-controlling interests in Consolidated Funds	16,340		47,370		48,700		102,255
Net income (loss) attributable to Ares Operating Group entities	(65,119)		169,343		97,025		550,087
Less: Net income attributable to redeemable interest in Ares Operating Group entities	93		324		35		693
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities	(29,666)		84,293		46,942		264,646
Net income (loss) attributable to Ares Management Corporation	(35,546)		84,726		50,048		284,748
Less: Series A Preferred Stock dividends paid	—		—		—		10,850
Less: Series A Preferred Stock redemption premium	—		—		—		11,239
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders	$	(35,546)	$	84,726	$	50,048	$	262,659
Net income (loss) per share of Class A and non-voting common stock:
Basic	$	(0.22)	$	0.49	$	0.23	$	1.55
Diluted	$	(0.22)	$	0.45	$	0.23	$	1.48
Weighted-average shares of Class A and non-voting common stock:
Basic	175,631,144		168,931,621		175,010,241		161,071,151
Diluted	175,631,144		186,522,157		175,010,241		177,143,438

Substantially all revenue is earned from affiliated funds of the Company.

See accompanying notes to the unaudited condensed consolidated financial statements.

Ares Management Corporation

Condensed Consolidated Statements of Comprehensive Income

(Amounts in Thousands)

(unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	(48,779)	$	216,713	$	145,725	$	652,342
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax	(29,611)		(11,324)		(71,648)		(18,439)
Total comprehensive income (loss)	(78,390)		205,389		74,077		633,903
Less: Comprehensive income attributable to non-controlling interests in Consolidated Funds	7,141		42,015		24,506		89,784
Less: Comprehensive loss attributable to redeemable interest in Ares Operating Group entities	(840)		(32)		(2,225)		(67)
Less: Comprehensive income (loss) attributable to non-controlling interests in Ares Operating Group entities	(37,518)		81,947		28,712		262,492
Comprehensive income (loss) attributable to Ares Management Corporation	$	(47,173)	$	81,459	$	23,084	$	281,694

See accompanying notes to the unaudited condensed consolidated financial statements.

Ares Management Corporation

Condensed Consolidated Statements of Changes in Equity

(Amounts in Thousands)

(unaudited)


	Series A Preferred Stock		Class A Common Stock		Non-voting Common Stock		Class C Common Stock		Additional Paid-in-Capital		Accumulated deficit		Accumulated Other Comprehensive Income (loss)		Non-Controlling Interest in Ares Operating Group Entities		Non-Controlling Interest in Consolidated Funds		Total Equity
Balance at December 31, 2021	$	—	$	1,684	$	35	$	1,186	$	1,913,559	$	(89,382)	$	(1,855)	$	1,397,747	$	591,452	$	3,814,426

Changes in ownership interests and related tax benefits	—		28		—		(1)		(110,577)		—		—		(90,843)		19,202		(182,191)
Issuances of common stock	—		1		—		—		12,834		—		—		—		—		12,835
Capital contributions	—		—		—		—		—		—		—		1,079		82,930		84,009
Dividends/Distributions	—		—		—		—		—		(111,406)		—		(100,480)		(34,958)		(246,844)
Net income	—		—		—		—		—		45,863		—		47,254		47,382		140,499
Currency translation adjustment, net of tax	—		—		—		—		—		—		(4,164)		(2,803)		(5,095)		(12,062)
Equity compensation	—		—		—		—		31,896		—		—		21,706		—		53,602
Stock option exercises	—		2		—		—		3,345		—		—		—		—		3,347
Balance at March 31, 2022	—		1,715		35		1,185		1,851,057		(154,925)		(6,019)		1,273,660		700,913		3,667,621

Changes in ownership interests and related tax benefits	—		—		—		(1)		(5,599)		—		—		(3,135)		5,815		(2,920)

Capital contributions	—		—		—		—		—		—		—		969		135,350		136,319

Dividends/Distributions	—		—		—		—		—		(111,506)		—		(82,958)		(18,680)		(213,144)
Net income (loss)	—		—		—		—		—		39,731		—		29,354		(15,022)		54,063
Currency translation adjustment, net of tax	—		—		—		—		—		—		(11,173)		(7,575)		(9,900)		(28,648)
Equity compensation	—		—		—		—		29,569		—		—		19,990		—		49,559
Stock option exercises	—		3		—		—		5,294		—		—		—		—		5,297
Balance at June 30, 2022	—		1,718		35		1,184		1,880,321		(226,700)		(17,192)		1,230,305		798,476		3,668,147

Changes in ownership interests and related tax benefits	—		3		—		(1)		(3,173)		—		—		(4,354)		(479)		(8,004)

Capital contributions	—		—		—		—		—		—		—		1,549		80,366		81,915
Dividends/Distributions	—		—		—		—		—		(111,952)		—		(88,041)		(50,794)		(250,787)
Net income (loss)	—		—		—		—		—		(35,546)		—		(29,666)		16,340		(48,872)
Currency translation adjustment, net of tax	—		—		—		—		—		—		(11,627)		(7,852)		(9,199)		(28,678)
Equity compensation	—		—		—		—		28,704		—		—		19,336		—		48,040
Stock option exercises	—		3		—		—		5,884		—		—		—		—		5,887
Balance at September 30, 2022	$	—	$	1,724	$	35	$	1,183	$	1,911,736	$	(374,198)	$	(28,819)	$	1,121,277	$	834,710	$	3,467,648

See accompanying notes to the unaudited condensed consolidated financial statements.

Ares Management Corporation

Condensed Consolidated Statements of Changes in Equity

(Amounts in Thousands)

(unaudited)


	Series A Preferred Stock		Class A Common Stock		Non-voting Common Stock		Class C Common Stock		Additional Paid-in-Capital		Accumulated deficit		Accumulated Other Comprehensive Income (loss)		Non-Controlling Interest in Ares Operating Group Entities		Non-Controlling Interest in Consolidated Funds		Total Equity
Balance at December 31, 2020	$	298,761	$	1,472	$	—	$	1,124	$	1,043,669	$	(151,824)	$	483	$	738,369	$	539,720	$	2,471,774

Changes in ownership interests and related tax benefits	—		26		—		(2)		(41,686)		—		—		(44,477)		—		(86,139)

Capital contributions	—		—		—		—		—		—		—		—		11,011		11,011
Dividends/Distributions	(5,425)		—		—		—		—		(74,684)		—		(67,084)		(38,829)		(186,022)
Net income	5,425		—		—		—		—		52,953		—		56,042		49,858		164,278
Currency translation adjustment, net of tax	—		—		—		—		—		—		(545)		(366)		(9,072)		(9,983)
Equity compensation	—		—		—		—		31,752		—		—		23,897		—		55,649

Balance at March 31, 2021	298,761		1,498		—		1,122		1,033,735		(173,555)		(62)		706,381		552,688		2,420,568

Changes in ownership interests and related tax benefits	—		3		—		—		(165,886)		—		—		143,867		—		(22,016)
Issuances of common stock	—		122		35		—		827,273		—		—		—		—		827,430
Capital contributions	—		—		—		54		—		—		—		317,595		34,994		352,643
Redemption of preferred stock	(310,000)		—		—		—		—		—		—		—		—		(310,000)
Dividends/Distributions	(5,425)		—		—		—		—		(82,825)		—		(63,585)		(33,460)		(185,295)
Net income	16,664		—		—		—		—		124,980		—		124,311		5,027		270,982
Currency translation adjustment, net of tax	—		—		—		—		—		—		758		558		1,956		3,272
Equity compensation	—		—		—		—		41,003		—		—		28,501		—		69,504
Stock option exercises	—		8		—		—		14,019		—		—		—		—		14,027
Balance at June 30, 2021	—		1,631		35		1,176		1,750,144		(131,400)		696		1,257,628		561,205		3,441,115

Changes in ownership interests and related tax benefits	—		38		—		(21)		79,787		—		—		(187,454)		—		(107,650)

Capital contributions	—		—		—		33		—		—		—		211,444		(126,339)		85,138
Dividends/Distributions	—		—		—		—		—		(82,307)		—		(68,083)		(12,481)		(162,871)
Net income	—		—		—		—		—		84,726		—		84,293		47,370		216,389
Currency translation adjustment, net of tax	—		—		—		—		—		—		(3,267)		(2,346)		(5,355)		(10,968)
Equity compensation	—		—		—		—		38,607		—		—		27,384		—		65,991
Stock option exercises	—		7		—		—		13,375		—		—		—		—		13,382
Balance at September 30, 2021	—		1,676		35		1,188		1,881,913		(128,981)		(2,571)		1,322,866		464,400		3,540,526

Changes in ownership interests and related tax benefits	—		3		—		(2)		(5,504)		—		—		(9,671)		13,487		(1,687)

Capital contributions	—		—		—		—		—		—		—		9,981		113,978		123,959
Dividends/Distributions	—		—		—		—		—		(84,490)		—		(70,448)		(14,127)		(169,065)
Net income	—		—		—		—		—		124,089		—		125,794		18,114		267,997
Currency translation adjustment, net of tax	—		—		—		—		—		—		716		526		(4,400)		(3,158)
Equity compensation	—		—		—		—		27,348		—		—		18,699		—		46,047
Stock option exercises	—		5		—		—		9,802		—		—		—		—		9,807
Balance at December 31, 2021	$	—	$	1,684	$	35	$	1,186	$	1,913,559	$	(89,382)	$	(1,855)	$	1,397,747	$	591,452	$	3,814,426

See accompanying notes to the unaudited condensed consolidated financial statements.

Ares Management Corporation

Condensed Consolidated Statements of Cash Flows

(Amounts in Thousands)

(unaudited)


	Nine months ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	145,725	$	652,342

Adjustments to reconcile net income to net cash used in operating activities	320,950		71,133








Adjustments to reconcile net income to net cash used in operating activities allocable to non-controlling interests in Consolidated Funds	(1,128,425)		(1,688,085)





Cash flows due to changes in operating assets and liabilities	313,649		(149,438)





Cash flows due to changes in operating assets and liabilities allocable to redeemable and non-controlling interest in Consolidated Funds	(195,504)		(729,703)




Net cash used in operating activities	(543,605)		(1,843,751)
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements, net of disposals	(28,388)		(15,152)
Acquisitions, net of cash acquired	(301,658)		(1,057,426)
Net cash used in investing activities	(330,046)		(1,072,578)
Cash flows from financing activities:
Net proceeds from issuance of Class A and non-voting common stock	—		827,430
Proceeds from Credit Facility	940,000		468,000
Proceeds from issuance of senior and subordinated notes	488,915		450,000

Repayments of Credit Facility	(910,000)		(318,000)

Dividends and distributions	(608,220)		(438,568)
Series A Preferred Stock dividends	—		(10,850)
Redemption of Series A Preferred Stock	—		(310,000)

Stock option exercises	14,531		27,409
Taxes paid related to net share settlement of equity awards	(194,223)		(221,287)
Other financing activities	2,457		1,976
Allocable to redeemable and non-controlling interests in Consolidated Funds:
Contributions from redeemable and non-controlling interests in Consolidated Funds	298,646		919,666
Distributions to non-controlling interests in Consolidated Funds	(104,432)		(84,770)
Borrowings under loan obligations by Consolidated Funds	1,120,680		1,456,887
Repayments under loan obligations by Consolidated Funds	(121,273)		(74,909)
Net cash provided by financing activities	927,081		2,692,984
Effect of exchange rate changes	(35,585)		(20,763)
Net change in cash and cash equivalents	17,845		(244,108)
Cash and cash equivalents, beginning of period	343,655		539,812
Cash and cash equivalents, end of period	$	361,500	$	295,704
Supplemental disclosure of non-cash financing activities:
Issuance of AOG Units and Class A common stock in connection with acquisitions	$	12,835	$	511,069

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

1. ORGANIZATION

Ares Management Corporation (the “Company”), a Delaware corporation, together with its subsidiaries, is a leading global alternative investment manager operating integrated groups across Credit, Private Equity, Real Assets, Secondaries and Strategic Initiatives. Information about segments should be read together with “Note 15. Segment Reporting.” Subsidiaries of the Company serve as the general partners and/or investment managers to various investment funds and managed accounts within each investment group (the “Ares Funds”). These subsidiaries provide investment advisory services to the Ares Funds in exchange for management fees.

The accompanying unaudited financial statements include the condensed consolidated results of the Company and its subsidiaries. In this Quarterly Report, Ares Holdings L.P. (“Ares Holdings”) is a subsidiary that is referred to as the “Ares Operating Group” or “AOG”. The Company, indirectly through its wholly owned subsidiary, Ares Holdco LLC, is the general partner of the Ares Operating Group entity. The Company operates and controls all of the businesses and affairs of and conducts all of its material business activities through the Ares Operating Group.

The Company and its wholly owned subsidiaries manages or controls certain entities that have been consolidated in the accompanying financial statements as described in “Note 2. Summary of Significant Accounting Policies.” These entities include Ares funds, co-investment vehicles, collateralized loan obligations or funds (collectively “CLOs”) and a special purpose acquisition company (“SPAC”) (collectively, the “Consolidated Funds”).

Including the results of the Consolidated Funds significantly increases the reported amounts of the assets, liabilities, revenues, expenses and cash flows in the accompanying consolidated financial statements. However, the Consolidated Funds results included herein have no direct effect on the net income attributable to Ares Management Corporation or to Stockholders' Equity, except where a reallocation of ownership occurs based on specific terms of a profit sharing agreement, such as a redemption or liquidation preference. Instead, economic ownership interests of the investors in the Consolidated Funds are reflected as redeemable and non-controlling interests in Consolidated Funds. Further, cash flows allocable to redeemable and non-controlling interest in Consolidated Funds are specifically identifiable in the Condensed Consolidated Statements of Cash Flows.

Redeemable Interest and Non-Controlling Interests in Ares Operating Group Entities

The non-controlling interests in AOG entities represent a component of equity and net income attributable to the owners of the Ares Operating Group Units (“AOG Units”) that are not held directly or indirectly by the Company. These owners consist predominantly of Ares Owners Holdings L.P. but also include other strategic distribution partnerships with whom the Company has established joint ventures and other non-controlling strategic investors. Non-controlling interests in AOG entities are adjusted for contributions to and distributions from AOG during the reporting period and are allocated income from the AOG entities either based on their historical ownership percentage for the proportional number of days in the reporting period or based on the activity associated with certain membership interests.

On July 1, 2020, the Company completed its acquisition of a majority interest in SSG Capital Holdings Limited and its operating subsidiaries (“SSG”) (“SSG Acquisition”). In connection with the SSG Acquisition, the former owners of SSG retained an ownership interest in the operations acquired by the Company. In certain circumstances, the Company may acquire full ownership of SSG pursuant to a contractual arrangement that may be initiated by the Company or by the former owners of SSG. Since the acquisition of the remaining interest in SSG is not within the Company's sole discretion, the ownership interest held by the former owners of SSG is classified as a redeemable interest and represents mezzanine equity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements are prepared in accordance with the generally accepted accounting principles in the United States (“GAAP”) for interim financial information and instructions to the Quarterly Report on Form 10-Q. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent, and that all such adjustments are of a normal recurring

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”).

The unaudited condensed consolidated financial statements include the accounts and activities of the AOG entities, their consolidated subsidiaries and certain Consolidated Funds. All intercompany balances and transactions have been eliminated upon consolidation.

The Company has reclassified certain prior period amounts to conform to the current year presentation.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on its unaudited condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The amendments in this update provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. An entity may elect to adopt the amendments in ASU 2020-04 and ASU 2021-01 at any time after March 12, 2020 but no later than December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company has concluded this guidance will not have a material impact on its unaudited condensed consolidated financial statements.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

3. BUSINESS COMBINATIONS

Acquisition of Landmark Partners, LLC (collectively with its subsidiaries, “Landmark”)

On June 2, 2021, a subsidiary of the Company completed the acquisition of 100% of the equity interests of Landmark, a subsidiary of BrightSphere Investment Group Inc. (NYSE: BSIG) and Landmark Investment Holdings L.P., in accordance with the purchase agreement entered into on March 30, 2021 (the “Landmark Acquisition”). As a result of the Landmark Acquisition, the Company expanded into the secondaries market with Landmark’s focus of managing private equity, real estate and infrastructure secondaries funds. Following the completion of the Landmark Acquisition, the results of Landmark are included in a newly created Secondaries Group segment.

The acquisition date fair value of the consideration transferred totaled $1.1 billion, which consisted of the following:


Cash	$	803,309
Equity(1)	299,420
Total	$	1,102,729

(1)5,415,278 AOG Units were issued in connection with the Landmark Acquisition and increased Ares Owners Holdings L.P.’s ownership interest in the AOG entities.

The following is a summary of the fair values of assets acquired and liabilities assumed for the Landmark Acquisition as of June 2, 2021, based upon third party valuations of certain intangible assets. The fair value of assets acquired and liabilities assumed are estimated to be:


Cash	$	25,645
Other tangible assets	23,403
Intangible assets:
Management contracts	425,880
Client relationships	197,160
Trade name	86,200
Total intangible assets	709,240
Total identifiable assets acquired	758,288
Accounts payable, accrued expenses and other liabilities	73,216

Net identifiable assets acquired	685,072
Goodwill	417,657
Net assets acquired	$	1,102,729

The carrying value of goodwill associated with Landmark was $417.7 million as of the acquisition date and is entirely allocated to the Secondaries Group segment. The goodwill is attributable primarily to expected synergies and the assembled workforce of Landmark.

In connection with the Landmark Acquisition, the Company allocated $425.9 million, $197.2 million and $86.2 million of the purchase price to the fair value of the management contracts, client relationships and trade name, respectively. The acquired management contracts and client relationships had a weighted average amortization period as of the acquisition date of 7.4 years and 11.8 years, respectively. At the acquisition date, the trade name was determined to have an indefinite useful life and was not subject to amortization as the Company intended to operate under its brand name into perpetuity. During the three months ended September 30, 2022, the Company recognized non-cash impairment charges on certain of the intangible assets from the Landmark Acquisition. See “Note 4. Goodwill and Intangible Assets” for further discussion.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Supplemental information of the Company’s consolidated results on an unaudited pro forma basis, as if the Landmark Acquisition had been consummated as of January 1, 2020, is as follows:


	Three months ended September 30,			Nine months ended September 30,
		2021			2021
Total revenues		$	948,719		$	2,966,540
Net income attributable to Ares Management Corporation Class A and non-voting common stockholders		$	87,542		$	257,361

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable. These results are not necessarily indicative of the Company’s consolidated financial condition or statements of operations in future periods or the results that actually would have been realized had the Company and Landmark been a combined entity during the periods presented. These pro forma amounts have been calculated after applying the following adjustments that were directly attributable to the Landmark Acquisition:

adjustments to include the impact of the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2020, together with the consequential tax effects;
adjustments to include the AOG Units issued as consideration for the Landmark Acquisition, as if they were issued on January 1, 2020, and the resulting change in ownership attributable to Ares Management Corporation;
adjustments to reflect the pro-rata economic ownership attributable to Ares Management Corporation;
adjustments to reflect the tax effects of the Landmark Acquisition and the related adjustments as if Landmark had been included in the Company’s results as of January 1, 2020; and
adjustments to include Landmark Acquisition related transaction costs in earnings in 2020.

Acquisition of Black Creek Group

On July 1, 2021, a subsidiary of the Company completed the acquisition of 100% of the equity interests of Black Creek Group’s U.S. real estate investment advisory and distribution business (“Black Creek”) in accordance with the purchase agreement entered into on May 20, 2021 (the “Black Creek Acquisition”). Black Creek is a leading real estate investment management firm that operates in core and core-plus real estate strategies across two non-traded Real Estate Investment Trusts (“REITs”) and various institutional fund vehicles. Following the completion of the Black Creek Acquisition, the results of Black Creek are included within the Real Assets Group segment.

Acquisition of AMP Capital’s Infrastructure Debt Platform (“Infrastructure Debt Acquisition”)

On February 10, 2022, a subsidiary of the Company completed the acquisition of AMP Capital’s Infrastructure Debt platform in accordance with the purchase agreement entered into on December 23, 2021 (the “Infrastructure Debt Acquisition”). The Infrastructure Debt Acquisition adds complementary investment capabilities to Ares’ current activities in the rapidly growing infrastructure asset class. Following the completion of the Infrastructure Debt Acquisition, the results of the infrastructure debt platform are presented within the Real Assets Group. See “Note 15. Segment Reporting” for further discussion on the Company’s change in segment composition during the first quarter of 2022.

The acquisition date fair value of the consideration transferred totaled $328.6 million, consisting of $315.8 million in cash and $12.8 million of restricted units of Class A common stock that were granted and vested on the acquisition close date.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

4. GOODWILL AND INTANGIBLE ASSETS

Intangible Assets, Net

The following table summarizes the carrying value, net of accumulated amortization, of the Company's intangible assets:



	Weighted Average Amortization Period as of September 30, 2022 In Years		As of September 30,			As of December 31,
		2022			2021
Management contracts	5.2		$	586,077		$	641,737
Client relationships	9.9		262,301			229,501
Trade name	7.8		11,079			11,079
Other	2.1		500			500
Finite-lived intangible assets			859,957			882,817
Foreign currency translation			(2,972)			1,792
Total finite-lived intangible assets			856,985			884,609
Less: accumulated amortization			(186,677)			(115,791)
Finite-lived intangible assets, net			670,308			768,818
Management contracts			567,800			567,800
Trade name			—			86,200
Indefinite-lived intangible assets			567,800			654,000
Intangible assets, net			$	1,238,108		$	1,422,818

In connection with the Infrastructure Debt Acquisition, the Company allocated $68.7 million and $32.8 million of the purchase price to the fair value of the acquired management contracts and client relationships, respectively. The acquired management contracts and client relationships had a weighted average amortization period from the date of acquisition of 5.2 years and 8.4 years, respectively.

During the three months ended September 30, 2022, the Company decided to rebrand its secondaries group as Ares Secondaries and to discontinue the ongoing use of the Landmark trade name. As a result, the Company recorded an impairment charge equal to the Landmark trade name’s carrying value of $86.2 million.

Separately, in connection with lower than expected fundraising for an acquired Landmark private equity secondaries fund, the Company recorded a non-cash impairment charge of $88.4 million to the fair value of a management contract during the three months ended September 30, 2022. The primary indicator of impairment was lower fee paying assets under management from the acquired Landmark private equity secondaries fund. Also connected to the lower fundraising projections associated with the acquired Landmark private equity secondaries fund, the Company reversed all previously recorded expenses associated with the Landmark management incentive plan. See “Note 9. Commitments and Contingencies” for further discussion. In addition, the Company recorded non-cash impairment charges of $3.7 million, $3.1 million, and $0.2 million to the fair value of management contracts acquired in connection with the Landmark Acquisition, the Black Creek Acquisition and the SSG Acquisition, respectively. The primary indicator of impairment was the shorter expected lives of certain funds as a result of returning capital to fund investors sooner than initially planned. The impairment charges for the intangible assets acquired in connection with the Landmark Acquisition, the Black Creek Acquisition and the SSG Acquisition are included within the Secondaries Group, the Real Assets Group and Strategic Initiatives, respectively.

The Company expects lower future cash flows to be generated by these management contracts over the remaining useful lives of the funds. The Company determined that the carrying value of the intangible assets exceeded the expected undiscounted future cash flows and recorded impairment charges equal to the difference between its carrying value of each asset and the asset’s estimated fair value, which was calculated using a discounted cash flow methodology.

The non-cash impairment charges represents an acceleration of amortization expense and totaled $181.6 million for the three and nine months ended September 30, 2022. Amortization expense associated with intangible assets, excluding the accelerated amortization from the non-cash impairment charges described above, was $32.7 million and $32.8 million for the three months ended September 30, 2022 and 2021, respectively, and $101.5 million and $60.7 million for the nine months ended September 30, 2022 and 2021, respectively. Amortization expense is presented within general, administrative and other

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

expenses in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2022, the Company removed $210.6 million of impaired and fully amortized intangible assets.

Goodwill

The following table summarizes the carrying value of the Company’s goodwill:


	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total



Balance as of December 31, 2021	$	32,196	$	58,600	$	53,339	$	417,738	$	226,099	$	787,972
Acquisitions	—		—		213,424		(96)		—		213,328
Reallocation	—		(10,530)		10,530		—		—		—
Foreign currency translation	—		—		—		(35)		(4,525)		(4,560)
Balance as of September 30, 2022	$	32,196	$	48,070	$	277,293	$	417,607	$	221,574	$	996,740

In connection with the Infrastructure Debt Acquisition, the Company allocated $213.4 million of the purchase price to goodwill.

In connection with the establishment of the Real Assets Group described in “Note 15. Segment Reporting,” the Company had an associated change in its reporting units and reallocated goodwill of $10.5 million from the Private Equity Group to the Real Assets Group using a relative fair value allocation approach. The former Real Estate Group has been transferred in its entirety to the Real Assets Group and the total goodwill of $53.3 million has been reallocated from the former Real Estate Group to the Real Assets Group accordingly.

There was no impairment of goodwill recorded during the nine months ended September 30, 2022 and 2021. The impact of foreign currency translation is reflected within other comprehensive income (loss).

5. INVESTMENTS

The Company’s investments are comprised of the following:


					Percentage of total investments
	September 30,		December 31,		September 30,		December 31,

	2022		2021		2022		2021
Equity method investments:
Equity method - carried interest	$	3,290,381	$	2,998,421	80.0	%	81.4	%
Equity method private investment partnership interests - principal	526,110		473,887		12.8		12.9
Equity method private investment partnership interests and other (held at fair value)	125,499		117,539		3.0		3.2
Equity method private investment partnership interests and other	47,564		40,580		1.2		1.1
Total equity method investments	3,989,554		3,630,427		97.0		98.6

Collateralized loan obligations	24,243		30,815		0.6		0.8
Other fixed income	21,582		21,582		0.4		0.5
Collateralized loan obligations and other fixed income, at fair value	45,825		52,397		1.0		1.3

Common stock, at fair value	77,014		1,440		2.0		0.1
Total investments	$	4,112,393	$	3,684,264

Equity Method Investments

The Company’s equity method investments include investments that are not consolidated but over which the Company exerts significant influence. The Company evaluates each of its equity method investments to determine if any were significant as defined by guidance from the SEC. As of and for the three and nine months ended September 30, 2022 and 2021, no individual equity method investment held by the Company met the significance criteria.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The Company recognized net gains related to its equity method investments of $16.2 million and $18.9 million for the three months ended September 30, 2022 and 2021, respectively, and net gains of $25.1 million and $99.3 million for the nine months ended September 30, 2022 and 2021, respectively. The net gains were included within principal investment income, net realized and unrealized gains on investments, and interest and dividend income in the Condensed Consolidated Statements of Operations.

With respect to the Company's equity method investments, the material assets are expected to generate either long-term capital appreciation and/or interest income, the material liabilities are debt instruments collateralized by, or related to, the financing of the assets and net income is materially comprised of the changes in fair value of these net assets.

Investments of the Consolidated Funds

Investments held in the Consolidated Funds are summarized below:


	Fair Value at				Percentage of total investments as of

	September 30,		December 31,		September 30,		December 31,
	2022		2021		2022		2021
Fixed income investments:
Bonds	$	751,385	$	857,125	6.0	%	6.7%
Loans	8,986,386		9,910,689		71.4		77.3
U.S. Treasury securities	1,005,094		1,000,285		8.0		7.8

Total fixed income investments	10,742,865		11,768,099		85.4		91.8
Equity securities	698,236		340,272		5.6		2.7
Partnership interests	1,133,184		708,307		9.0		5.5
Total investments, at fair value	$	12,574,285	$	12,816,678

As of September 30, 2022 and December 31, 2021, no single issuer or investment, including derivative instruments and underlying portfolio investments of the Consolidated Funds, had a fair value that exceeded 5.0% of the Company’s total assets.

6. FAIR VALUE

Fair Value Measurements

GAAP establishes a hierarchical disclosure framework that prioritizes the inputs used in measuring financial instruments at fair value into three levels based on their market price observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or for which fair value can be measured based on actively quoted prices generally have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.

Financial assets and liabilities measured and reported at fair value are classified as follows:

*•*Level I—Quoted prices in active markets for identical instruments.

*•*Level II—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in inactive markets; and model-derived valuations with directly or indirectly observable significant inputs. Level II inputs include prices in markets with few transactions, non-current prices, prices for which little public information exists or prices that vary substantially over time or among brokered market makers. Other inputs include interest rate, yield curve, volatility, prepayment risk, loss severity, credit risk and default rate.

*•*Level III—Valuations that rely on one or more significant unobservable inputs. These inputs reflect the Company’s assessment of the assumptions that market participants would use to value the instrument based on the best information available.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

In some instances, an instrument may fall into more than one level of the fair value hierarchy. In such instances, the instrument’s level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair value measurement. The Company’s assessment of the significance of an input requires judgment and considers factors specific to the instrument. The Company accounts for the transfer of assets into or out of each fair value hierarchy level as of the beginning of the reporting period.

Fair Value of Financial Instruments Held by the Company and Consolidated Funds

The following tables summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of September 30, 2022:


Financial Instruments of the Company	Level I		Level II		Level III		Investments Measured at NAV		Total
Assets, at fair value
Investments:
Collateralized loan obligations and other fixed income	$	—	$	—	$	45,825	$	—	$	45,825
Common stock and other equity securities	—		77,014		117,272		—		194,286
Partnership interests	—		—		2,575		5,652		8,227
Total investments, at fair value	—		77,014		165,672		5,652		248,338
Derivatives-foreign currency forward contracts	—		9,247		—		—		9,247
Total assets, at fair value	$	—	$	86,261	$	165,672	$	5,652	$	257,585
Liabilities, at fair value
Derivatives-foreign currency forward contracts	$	—	$	(6,581)	$	—	$	—	$	(6,581)
Contingent consideration	—		—		(11,000)		—		(11,000)
Total liabilities, at fair value	$	—	$	(6,581)	$	(11,000)	$	—	$	(17,581)


Financial Instruments of the Consolidated Funds	Level I		Level II		Level III		Investments Measured at NAV		Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds	$	—	$	495,501	$	255,884	$	—	$	751,385
Loans	—		8,321,661		664,725		—		8,986,386
U.S. Treasury securities	1,005,094		—		—		—		1,005,094

Total fixed income investments	1,005,094		8,817,162		920,609		—		10,742,865
Equity securities	646		—		526,051		171,539		698,236
Partnership interests	—		—		252,634		880,550		1,133,184
Total investments, at fair value	1,005,740		8,817,162		1,699,294		1,052,089		12,574,285
Derivatives:
Derivatives-foreign exchange contracts	—		536		—		—		536

Total derivative assets, at fair value	—		536		—		—		536
Total assets, at fair value	$	1,005,740	$	8,817,698	$	1,699,294	$	1,052,089	$	12,574,821
Liabilities, at fair value
Derivatives:
Warrants	$	(2,000)	$	—	$	—	$	—	$	(2,000)
Forward foreign currency contracts	—		(496)		—		—		(496)
Asset swaps	—		—		(3,353)		—		(3,353)
Total derivative liabilities, at fair value	(2,000)		(496)		(3,353)		—		(5,849)
Loan obligations of CLOs	—		(10,313,881)		—		—		(10,313,881)
Total liabilities, at fair value	$	(2,000)	$	(10,314,377)	$	(3,353)	$	—	$	(10,319,730)

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of December 31, 2021:


Financial Instruments of the Company	Level I		Level II		Level III		Investments Measured at NAV		Total
Assets, at fair value
Investments:
Collateralized loan obligations and other fixed income	$	—	$	—	$	52,397	$	—	$	52,397
Common stock and other equity securities	—		1,440		108,949		—		110,389
Partnership interests	—		—		2,575		6,016		8,591
Total investments, at fair value	—		1,440		163,921		6,016		171,377
Derivatives-foreign currency forward contracts	—		5,682		—		—		5,682
Total assets, at fair value	$	—	$	7,122	$	163,921	$	6,016	$	177,059
Liabilities, at fair value
Derivatives-foreign currency forward contracts	$	—	$	(328)	$	—	$	—	$	(328)
Contingent consideration	—		—		(57,435)		—		(57,435)
Total liabilities, at fair value	$	—	$	(328)	$	(57,435)	$	—	$	(57,763)


Financial Instruments of the Consolidated Funds	Level I		Level II		Level III		Investments Measured at NAV		Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds	$	—	$	525,393	$	331,732	$	—	$	857,125
Loans	—		9,499,469		411,220		—		9,910,689
U. S. Treasury Securities	1,000,285		—		—		—		1,000,285
Total fixed income investments	1,000,285		10,024,862		742,952		—		11,768,099
Equity securities	956		133		339,183		—		340,272
Partnership interests	—		—		238,673		469,634		708,307





Total assets, at fair value	$	1,001,241	$	10,024,995	$	1,320,808	$	469,634	$	12,816,678
Liabilities, at fair value
Derivatives:
Derivatives-foreign exchange contracts	$	(17,822)	$	—	$	—	$	—	$	(17,822)
Asset swaps	—		—		(3,105)		—		(3,105)
Total derivative liabilities, at fair value	(17,822)		—		(3,105)		—		(20,927)
Loan obligations of CLOs	—		(10,657,661)		—		—		(10,657,661)
Total liabilities, at fair value	$	(17,822)	$	(10,657,661)	$	(3,105)	$	—	$	(10,678,588)

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables set forth a summary of changes in the fair value of the Level III measurements for the three months ended September 30, 2022:



Level III Assets and Liabilities of the Company	Equity Securities		Fixed Income		Partnership Interests		Contingent Consideration		Total
Balance, beginning of period	$	113,881	$	46,356	$	2,575	$	(10,748)	$	152,064

Purchases(1)	894		—		—		—		894
Change in fair value	—		—		—		(252)		(252)
Sales/settlements(2)	(1,179)		(505)		—		—		(1,684)
Realized and unrealized appreciation(depreciation), net	3,676		(26)		—		—		3,650
Balance, end of period	$	117,272	$	45,825	$	2,575	$	(11,000)	$	154,672
Change in net unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date	$	7,111	$	(26)	$	—	$	(252)	$	6,833


Level III Net Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	480,914	$	1,076,254	$	250,123	$	(3,035)	$	1,804,256

Transfer in	—		171,687		—		—		171,687
Transfer out	—		(350,079)		—		—		(350,079)
Purchases(1)	49,024		173,253		31,258		—		253,535
Sales/settlements(2)	(64)		(132,226)		(22,328)		—		(154,618)
Amortized discounts/premiums	—		521		—		—		521
Realized and unrealized appreciation(depreciation), net	(3,823)		(18,801)		(6,419)		(318)		(29,361)
Balance, end of period	$	526,051	$	920,609	$	252,634	$	(3,353)	$	1,695,941
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	(3,836)	$	(9,067)	$	5,421	$	(447)	$	(7,929)

(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.

(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables set forth a summary of changes in the fair value of the Level III measurements for the three months ended September 30, 2021:



Level III Assets and Liabilities of the Company	Equity Securities		Fixed Income		Partnership Interests		Contingent Consideration		Total
Balance, beginning of period	$	107,240	$	55,840	$	2,575	$	—	$	165,655

Established in connection with acquisition	—		—		—		(34,200)		(34,200)
Purchases(1)	—		708		—		—		708
Sales/settlements(2)	—		(2,904)		—		—		(2,904)
Realized and unrealized appreciation (depreciation), net	1,157		663		—		(7,213)		(5,393)
Balance, end of period	$	108,397	$	54,307	$	2,575	$	(41,413)	$	123,866
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	1,157	$	675	$	—	$	(7,213)	$	(5,381)


Level III Net Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	229,300	$	455,426	$	255,278	$	(1,658)	$	938,346

Transfer in	—		18,792		—		—		18,792
Transfer out	—		(209,282)		—		—		(209,282)
Purchases(1)	27,346		219,180		—		—		246,526
Sales/settlements(2)	(313)		(88,584)		(30,000)		625		(118,272)
Amortized discounts/premiums	—		394		—		—		394
Realized and unrealized appreciation (depreciation), net	2,913		6,750		12,280		(155)		21,788
Balance, end of period	$	259,246	$	402,676	$	237,558	$	(1,188)	$	898,292
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	2,912	$	1,607	$	12,280	$	(63)	$	16,736

(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.

(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables set forth a summary of changes in the fair value of the Level III measurements for the nine months ended September 30, 2022:



Level III Assets and Liabilities of the Company	Equity Securities		Fixed Income		Partnership Interests		Contingent Consideration		Total
Balance, beginning of period	$	108,949	$	52,397	$	2,575	$	(57,435)	$	106,486
Transfer in due to changes in consolidation	1,491		—		—		—		1,491
Purchases(1)	894		—		—		—		894

Sales/settlements(2)	(2,326)		(2,383)		—		47,873		43,164
Change in fair value	—		—		—		(1,438)		(1,438)
Realized and unrealized appreciation (depreciation), net	8,264		(4,189)		—		—		4,075
Balance, end of period	$	117,272	$	45,825	$	2,575	$	(11,000)	$	154,672
Change in net unrealized appreciation/depreciation and fair value included in earnings related to financial assets and liabilities still held at the reporting date	$	10,330	$	(4,189)	$	—	$	(1,438)	$	4,703


Level III Net Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	339,183	$	742,952	$	238,673	$	(3,105)	$	1,317,703

Transfer in	—		321,939		—		—		321,939
Transfer out	—		(213,658)		—		—		(213,658)
Purchases(1)	166,667		551,408		58,258		—		776,333
Sales/settlements(2)	(28,444)		(405,904)		(52,828)		—		(487,176)
Amortized discounts/premiums	—		1,274		—		—		1,274
Realized and unrealized appreciation (depreciation), net	48,645		(77,402)		8,531		(248)		(20,474)
Balance, end of period	$	526,051	$	920,609	$	252,634	$	(3,353)	$	1,695,941
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	22,304	$	(69,982)	$	344	$	(643)	$	(47,977)

(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.

(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables set forth a summary of changes in the fair value of the Level III measurements for the nine months ended September 30, 2021:



Level III Assets of the Company	Equity Securities		Fixed Income		Partnership Interests		Contingent Consideration		Total
Balance, beginning of period	$	88,412	$	53,349	$	2,575	$	—	$	144,336
Transfer in due to changes in consolidation	—		7,623		—		—		7,623
Established in connection with acquisition	—		—		—		(34,200)		(34,200)
Purchases(1)	19,278		1,689		—		—		20,967
Sales/settlements(2)	—		(12,120)		—		—		(12,120)
Realized and unrealized appreciation (depreciation), net	707		3,766		—		(7,213)		(2,740)
Balance, end of period	$	108,397	$	54,307	$	2,575	$	(41,413)	$	123,866
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	707	$	2,315	$	—	$	(7,213)	$	(4,191)


Level III Net Assets of Consolidated Funds	Equity Securities		Fixed Income		Partnership Interests		Derivatives, Net		Total
Balance, beginning of period	$	221,043	$	542,305	$	231,857	$	1,060	$	996,265
Transfer out due to changes in consolidation	(157)		(49,326)		—		—		(49,483)
Transfer in	2,195		47,818		—		—		50,013
Transfer out	(33)		(216,177)		—		—		(216,210)
Purchases(1)	36,201		437,426		13,000		—		486,627
Sales/settlements(2)	(876)		(371,006)		(32,000)		301		(403,581)
Amortized discounts/premiums	1		1,464		—		—		1,465
Realized and unrealized appreciation (depreciation), net	872		10,172		24,701		(2,549)		33,196
Balance, end of period	$	259,246	$	402,676	$	237,558	$	(1,188)	$	898,292
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date	$	790	$	2,700	$	24,701	$	(1,670)	$	26,521

(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.

(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.

Transfers out of Level III were generally attributable to certain investments that experienced a more significant level of market activity during the period and thus were valued using observable inputs either from independent pricing services or multiple brokers. Transfers into Level III were generally attributable to certain investments that experienced a less significant level of market activity during the period and thus were only able to obtain one or fewer quotes from a broker or independent pricing service.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables summarize the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of September 30, 2022:


Level III Measurements of the Company	Fair Value		Valuation Technique(s)	Significant Unobservable Input(s)	Range	Weighted Average
Assets
Equity securities
	$	15,504	Transaction price(1)	N/A	N/A	N/A
	56,154		Discounted cash flow	Discount rate	16.0%	16.0%
	45,614		Market approach	Multiple of book value	1.4x	1.4x
Partnership interests	2,575		Other	N/A	N/A	N/A
Collateralized loan obligations	24,243		Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
Other fixed income	21,582		Other	N/A	N/A	N/A
Total assets	$	165,672
Liabilities
Contingent consideration	$	(11,000)	Other	N/A	N/A	N/A


Total liabilities	$	(11,000)


Level III Measurements of the Consolidated Funds	Fair Value		Valuation Technique(s)	Significant Unobservable Input(s)	Range	Weighted Average
Assets
Equity securities
	$	2,168	Market approach	EBITDA multiples(2)	9.3x - 55.9x	12.8x
	216,820		Market approach	Multiple of book values	1.0x - 27.5x	5.5x
	199,536		Discounted cash flow	Discount rate	20.0%	20.0%
	551		Other	N/A	N/A	N/A
	19		Yield analysis	Yields	12.5% - 15.2%	12.9%
	74		Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A


	106,883		Transaction price(1)	N/A	N/A	N/A
Partnership interest	252,634		Discounted cash flow	Discount rate	23.4%	23.4%
Fixed income securities
	799,759		Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A

	107,133		Yield analysis	Yields	5.6% - 23.0%	10.8%
	12,394		Transaction price	N/A	N/A	N/A
	1,323		Other	N/A	N/A	N/A




Total assets	$	1,699,294
Liabilities
Derivative instruments	$	(3,353)	Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
Total liabilities	$	(3,353)

(1)Transaction price consists of securities purchased or restructured. The Company determined that there was no change to the valuation based on the underlying assumptions used at the closing of such transactions.

(2)“EBITDA” in the table above is a non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables summarize the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of December 31, 2021:


Level III Measurements of the Company	Fair Value		Valuation Technique(s)	Significant Unobservable Input(s)	Range	Weighted Average
Assets
Equity securities
	$	14,610	Transaction price(1)	N/A	N/A	N/A
	50,690		Discounted cash flow	Discount rates	14.0% - 20.0%	14.3%
	43,649		Market approach	Multiple of book value	1.4x	1.4x
Partnership interests	2,575		Other	N/A	N/A	N/A

Collateralized loan obligations	30,815		Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
Other fixed income	21,582		Other	N/A	N/A	N/A
Total assets	$	163,921
Liabilities
Contingent Consideration	$	(9,562)	Monte Carlo simulation	Discount rate	8.5%	8.5%
				Volatility	18%	18%
	(47,873)		Other	N/A	N/A	N/A
Total liabilities	$	(57,435)


Level III Measurements of the Consolidated Funds	Fair Value		Valuation Technique(s)	Significant Unobservable Input(s)	Range	Weighted Average
Assets
Equity securities
	$	1,261	Market approach	EBITDA multiples(2)	1.0x - 64.4x	17.5x
	140,185		Market approach	Multiple of book values	1.0x- 1.2x	1.1x
	123,685		Discounted cash flow	Discount rate	20.0%	20.0%
	11		Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
	74,041		Transaction price(1)	N/A	N/A	N/A
Partnership interests	238,673		Discounted cash flow	Discount rate	23.4%	23.4%
Fixed income securities
	614,754		Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
	128,198		Income approach	Yields	3.5% - 16.2%	6.7%



Total assets	$	1,320,808
Liabilities
Derivative instruments	$	(3,105)	Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
Total liabilities	$	(3,105)

(1)Transaction price consists of securities purchased or restructured. The Company determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions.

(2)“EBITDA” in the table above is a non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.

The Company has an insurance-related investment in a private fund managed by a third party that is valued using NAV per share. The terms and conditions of this fund do not allow for redemptions without certain events or approvals that are outside the Company's control. This investment had a fair value of $5.7 million and $6.0 million as of September 30, 2022 and December 31, 2021, respectively. The Company has no unfunded commitments for this investment.

The Consolidated Funds have limited partnership interests in private equity funds managed by the Company that are valued using NAV per share. The terms and conditions of these funds do not allow for redemptions without certain events or approvals that are outside the Company's control. As of September 30, 2022, these investments had a fair value of $1,052.1 million and unfunded commitments of $811.3 million. As of December 31, 2021, these investments had a fair value of $469.6 million and unfunded commitments of $1,200.0 million.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

7. DERIVATIVE FINANCIAL INSTRUMENTS

In the normal course of business, the Company and the Consolidated Funds are exposed to certain risks relating to their ongoing operations and use various types of derivative instruments primarily to mitigate against interest rate and foreign exchange risk. The derivative instruments are not designated as hedging instruments under the accounting standards for derivatives and hedging. The Company recognizes all of its derivative instruments at fair value as either assets or liabilities in the Condensed Consolidated Statements of Financial Condition within other assets or accounts payable, accrued expenses and other liabilities, respectively. These amounts may be offset to the extent that there is a legal right to offset and if elected by management.

The following tables identify the fair value and notional amounts of derivative contracts by major product type on a gross basis for the Company and the Consolidated Funds:


	As of September 30, 2022								As of December 31, 2021
	Assets				Liabilities				Assets				Liabilities
The Company	Notional(1)		Fair Value		Notional(1)		Fair Value		Notional(1)		Fair Value		Notional(1)		Fair Value
Foreign currency forward contracts	$	80,239	$	9,247	$	175,453	$	6,581	$	409,018	$	5,682	$	11,011	$	328

Total derivatives, at fair value(2)	$	80,239	$	9,247	$	175,453	$	6,581	$	409,018	$	5,682	$	11,011	$	328


	As of September 30, 2022								As of December 31, 2021
	Assets				Liabilities				Assets				Liabilities
Consolidated Funds	Notional(1)		Fair Value		Notional(1)		Fair Value		Notional(1)		Fair Value		Notional(1)		Fair Value
Foreign currency forward contracts	$	536	$	536	$	496	$	496	$	—	$	—	$	—	$	—
Warrants	—		—		230,000		2,000		—		—		230,000		17,822
Asset swaps	55,963		—		49,475		3,353		56,000		—		49,516		3,105
Total derivatives, at fair value(3)	$	56,499	$	536	$	279,971	$	5,849	$	56,000	$	—	$	279,516	$	20,927

(1)Represents the total contractual amount of derivative assets and liabilities outstanding.

(2)As of September 30, 2022 and December 31, 2021, the Company had the right to, but elected not to, offset $6.6 million and $0.3 million of its derivative liabilities.

(3)As of September 30, 2022 and December 31, 2021, the Consolidated Funds offset an immaterial amount of their derivative assets and liabilities.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

8. DEBT

The following table summarizes the Company’s and its subsidiaries’ debt obligations:


					As of September 30, 2022			As of December 31, 2021


	Debt Origination Date	Maturity	Original Borrowing Amount		Carrying Value		Interest Rate	Carrying Value		Interest Rate
Credit Facility(1)	Revolving	3/31/2027	N/A		$	445,000	3.87%	$	415,000	1.25%
2024 Senior Notes(2)	10/8/2014	10/8/2024	$	250,000	248,511		4.21	247,979		4.21
2030 Senior Notes(3)	6/15/2020	6/15/2030	400,000		396,490		3.28	396,156		3.28
2052 Senior Notes(4)	1/21/2022	2/1/2052	500,000		483,750		3.77	—		—
2051 Subordinated Notes(5)	6/30/2021	6/30/2051	450,000		444,711		4.13	444,574		4.13
Total debt obligations					$	2,018,462		$	1,503,709

(1)On March 31, 2022, the Company amended the Credit Facility to, among other things, increase the revolver commitments from $1.090 billion to $1.275 billion with an accordion feature of $375.0 million, replace the LIBOR based-rate with a Secured Overnight Financing Rate (“SOFR”) based-rate plus an applicable credit spread adjustment and extend the maturity date from March 2026 to March 2027. On July 6, 2022, the Company increased the revolver commitments from $1.275 billion to $1.325 billion via the accordion. The AOG entities are borrowers under the Credit Facility. The Credit Facility has a variable interest rate based on SOFR or a base rate plus an applicable margin, which is subject to adjustment based on the achievement of certain environmental, social and governance-related targets, with an unused commitment fee paid quarterly, which is subject to change with the Company’s underlying credit agency rating. As of September 30, 2022, base rate loans bear interest calculated based on the base rate and the SOFR loans bear interest calculated based on SOFR plus 1.00%. The unused commitment fee is 0.10% per annum. There is a base rate and SOFR floor of zero.

(2)The 2024 Senior Notes were issued in October 2014 by Ares Finance Co. LLC, an indirect subsidiary of the Company, at 98.27% of the face amount with interest paid semi-annually. The Company may redeem the 2024 Senior Notes prior to maturity, subject to the terms of the indenture governing the 2024 Notes.

(3)The 2030 Senior Notes were issued in June 2020 by Ares Finance Co. II LLC, an indirect subsidiary of the Company, at 99.77% of the face amount with interest paid semi-annually. The Company may redeem the 2030 Senior Notes prior to maturity, subject to the terms of the indenture governing the 2030 Notes.

(4)The 2052 Senior Notes were issued in January 2022 by Ares Finance Co. IV LLC, an indirect subsidiary of the Company, at 97.78% of the face amount with interest paid semi-annually. The Company may redeem the 2052 Senior Notes prior to maturity, subject to the terms of the indenture governing the 2052 Notes.

(5)The 2051 Subordinated Notes were issued in June 2021 by Ares Finance Co. III LLC, an indirect subsidiary of the Company with interest paid semi-annually at a fixed-rate of 4.125%. Beginning June 30, 2026, the interest rate will reset on every fifth year based on the five-year U.S. Treasury Rate plus 3.237%. The Company may redeem the 2051 Subordinated Notes prior to maturity or defer interest payments up to five consecutive years, subject to the terms of the indenture governing the 2051 Subordinated Notes.

As of September 30, 2022, the Company and its subsidiaries were in compliance with all covenants under the debt obligations.

The Company typically incurs and pays debt issuance costs when entering into a new debt obligation or when amending an existing debt agreement. Debt issuance costs related to the 2024, 2030 and 2052 Senior Notes (the “Senior Notes”) and 2051 Subordinated Notes are recorded as a reduction of the corresponding debt obligation, and debt issuance costs related to the Credit Facility are included in other assets in the Condensed Consolidated Statements of Financial Condition. All debt issuance costs are amortized over the remaining term of the related obligation into interest expense in the Condensed Consolidated Statements of Operations.

The following table presents the activity of the Company's debt issuance costs:


	Credit Facility		Senior Notes		Subordinated Notes




Unamortized debt issuance costs as of December 31, 2021	$	5,274	$	3,689	$	5,426
Debt issuance costs incurred	1,517		5,436		—
Amortization of debt issuance costs	(957)		(582)		(137)

Unamortized debt issuance costs as of September 30, 2022	$	5,834	$	8,543	$	5,289

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Loan Obligations of the Consolidated CLOs

Loan obligations of the Consolidated Funds that are CLOs (“Consolidated CLOs”) represent amounts due to holders of debt securities issued by the Consolidated CLOs. The Company measures the loan obligations of the Consolidated CLOs using the fair value of the financial assets of its Consolidated CLOs.

The following loan obligations were outstanding and classified as liabilities of the Consolidated CLOs:


	As of September 30, 2022				As of December 31, 2021


	Fair Value of Loan Obligations		Weighted Average Interest Rate	Weighted Average Remaining Maturity In Years	Fair Value of Loan Obligations		Weighted Average Interest Rate	Weighted Average Remaining Maturity In Years
Senior secured notes	$	9,664,638	3.41%	8.8	$	10,016,638	1.93%	9.4
Subordinated notes(1)	649,243		N/A	7.0	641,023		N/A	8.1
Total loan obligations of Consolidated CLOs	$	10,313,881			$	10,657,661

(1)The notes do not have contractual interest rates; instead, holders of the notes receive distributions from the excess cash flows generated by each Consolidated CLO.

Loan obligations of the Consolidated CLOs are collateralized by the assets held by the Consolidated CLOs, consisting of cash and cash equivalents, corporate loans, corporate bonds and other securities. The assets of one Consolidated CLO may not be used to satisfy the liabilities of another Consolidated CLO. Loan obligations of the Consolidated CLOs include floating rate notes, deferrable floating rate notes, revolving lines of credit and subordinated notes. Amounts borrowed under the notes are repaid based on available cash flows subject to priority of payments under each Consolidated CLO’s governing documents. Based on the terms of these facilities, the creditors of the facilities have no recourse to the Company.

Credit Facilities of the Consolidated Funds

Certain Consolidated Funds maintain credit facilities to fund investments between capital drawdowns. These facilities generally are collateralized by the unfunded capital commitments of the Consolidated Funds’ limited partners, bear an annual commitment fee based on unfunded commitments and contain various affirmative and negative covenants and reporting obligations, including restrictions on additional indebtedness, liens, margin stock, affiliate transactions, dividends and distributions, release of capital commitments and portfolio asset dispositions. The creditors of these facilities have no recourse to the Company and only have recourse to a subsidiary of the Company to the extent the debt is guaranteed by such subsidiary. As of September 30, 2022 and December 31, 2021, the Consolidated Funds were in compliance with all covenants under such credit facilities.

The Consolidated Funds had the following revolving bank credit facilities outstanding:


				As of September 30, 2022			As of December 31, 2021


Consolidated Funds' Debt Facilities	Maturity Date	Total Capacity		Outstanding Loan(1)		Effective Rate	Outstanding Loan(1)		Effective Rate

	10/13/2022	$	112,817	$	77,496	4.04%	$	71,500	1.59%
	7/1/2023	18,000		15,550		4.69	16,271		1.73
	7/23/2024	75,000		56,500		5.97	40,000		3.09
	9/24/2026	150,000		—		N/A	—		N/A
	9/12/2027	54,000		—		N/A	—		N/A
Total borrowings of Consolidated Funds				$	149,546		$	127,771

(1)The fair values of the borrowings approximate the carrying value as the interest rate on the borrowings is a floating rate.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

9. COMMITMENTS AND CONTINGENCIES

Indemnification Arrangements

Consistent with standard business practices in the normal course of business, the Company enters into contracts that contain indemnities for affiliates of the Company, persons acting on behalf of the Company or such affiliates and third parties. The terms of the indemnities vary from contract to contract and the Company’s maximum exposure under these arrangements cannot be determined and has not been recorded in the Condensed Consolidated Statements of Financial Condition. As of September 30, 2022, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

Commitments

As of September 30, 2022 and December 31, 2021, the Company had aggregate unfunded commitments to invest in funds it manages or to support certain strategic initiatives of $605.7 million and $677.3 million, respectively.

Guarantees

The Company has entered into agreements with financial institutions to guarantee credit facilities held by certain funds. In the ordinary course of business, the guarantee of credit facilities held by funds may indicate control and result in consolidation of the fund. As of September 30, 2022 and December 31, 2021, the Company’s maximum exposure to losses from guarantees was $76.7 million and $209.7 million, respectively.

Contingent Liabilities

In connection with the Landmark Acquisition, the Company established a management incentive program (the “Landmark MIP”) with certain professionals of Landmark. The Landmark MIP represents a contingent liability not to exceed $300.0 million and is based on the achievement of revenue targets from the fundraising of certain Landmark funds during a measurement period. The Landmark MIP has been remeasured each period with incremental changes in fair value included within compensation and benefits expense in the Condensed Consolidated Statements of Operations. In connection with current fundraising expectations for an acquired Landmark private equity secondaries fund, the revenue targets on which the Landmark MIP is contingent are not expected to be achieved so the Company reversed all previously recorded expenses of $36.7 million associated with the Landmark MIP during the three months ended September 30, 2022. The reversal of expense was recorded within compensation and benefits expense in the Condensed Consolidated Statements of Operations.

The purchase agreement with Black Creek contains provisions obligating the Company to make payments in an aggregate amount not to exceed $275.0 million to certain senior professionals and advisors upon the achievement of certain revenue targets through a measurement period no later than December 31, 2024. The revenue targets were achieved and the maximum contingent payment was recorded during the three months ended September 30, 2022.

Of the total contingent liability, 96% required continued service through the measurement period and is accounted for as compensation expense instead of as a component of purchase consideration. The fair value of this contingent liability was remeasured at each reporting date with compensation expense recorded ratably over the service period, which was the Black Creek Acquisition date through the achievement date. As of September 30, 2022 and December 31, 2021, the fair value of the contingent liability was $264.0 million and $229.5 million, respectively. As of September 30, 2022 and December 31, 2021, the Company has recorded $264.0 million and $45.9 million, respectively, within accrued compensation in the Condensed Consolidated Statements of Financial Condition. Compensation expense of $130.6 million and $218.1 million for the three and nine months ended September 30, 2022, respectively, and $13.5 million for the three and nine months ended September 30, 2021 is presented within compensation and benefits in the Condensed Consolidated Statements of Operations.

The remaining 4% portion of the contingent liability did not require continued service through the measurement period and is accounted for as contingent consideration that is a component of purchase consideration. The fair value of this contingent liability was remeasured at each reporting date with changes in fair value recorded within other expense over the service period. As of September 30, 2022 and December 31, 2021, the fair value of the contingent liability was $11.0 million and $9.6 million, respectively. Other expense of $0.3 million and $1.4 million for the three and nine months ended September 30, 2022,

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

respectively, and of $3.0 million for each of the three and nine months ended September 30, 2021, is presented within other income (expense), net in the Condensed Consolidated Statements of Operations.

In connection with the Infrastructure Debt Acquisition, the Company established a management incentive program (the “Infrastructure Debt MIP”) with certain professionals. The Infrastructure Debt MIP represents a contingent liability not to exceed $48.5 million and is based on the achievement of revenue targets from the fundraising of certain infrastructure debt funds during the measurement periods.

The Company expects to settle each portion of the liability with a combination of 15% cash and 85% equity awards. Expense associated with the cash components are recognized ratably over the respective measurement periods, which will end on the final fundraising date for each of the infrastructure debt funds included in the Infrastructure Debt MIP agreement. Expense associated with the equity component is recognized ratably over the service periods, which will continue for four years beyond each of the measurement period end dates. The Infrastructure Debt MIP is remeasured each period with incremental changes in fair value included within compensation and benefits expense in the Condensed Consolidated Statements of Operations. At each of the measurement period end dates, the cash component will be paid and restricted units for the portion of the Infrastructure Debt MIP award earned will be granted at fair value. The unpaid liability at the respective measurement period end dates will be reclassified from liability to additional paid-in-capital and any difference between the fair value of the Infrastructure Debt MIP award earned at the respective measurement period end date and the previously recorded compensation expense will be recognized over the remaining four year service period as equity-based compensation expense. As of September 30, 2022, the fair value of the contingent liability was estimated to be $39.2 million. Compensation expense of $2.8 million and $7.1 million for the three and nine months ended September 30, 2022, respectively, is presented within compensation and benefits in the Condensed Consolidated Statements of Operations with an equal offset presented within accrued compensation in the Condensed Consolidated Statements of Financial Condition.

Carried Interest

Carried interest is affected by changes in the fair values of the underlying investments in the funds that are advised by the Company. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, but not limited to, public equity market volatility, industry trading multiples and interest rates. Generally, if at the termination of a fund (and increasingly at interim points in the life of a fund), the fund has not achieved investment returns that (in most cases) exceed the preferred return threshold or (in all cases) the general partner receives net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, the Company will be obligated to repay carried interest that was received by the Company in excess of the amounts to which the Company is entitled. This contingent obligation is normally reduced by income taxes paid by the Company related to its carried interest.

Senior professionals of the Company who have received carried interest distributions are responsible for funding their proportionate share of any contingent repayment obligations. However, the governing agreements of certain of the Company's funds provide that if a current or former professional does not fund his or her respective share for such fund, then the Company may have to fund additional amounts beyond what was received in carried interest, although the Company will generally retain the right to pursue any remedies under such governing agreements against those carried interest recipients who fail to fund their obligations.

Additionally, at the end of the life of the funds there could be a payment due to a fund by the Company if the Company has recognized more carried interest than was ultimately earned. The general partner obligation amount, if any, will depend on final realized values of investments at the end of the life of the fund.

At September 30, 2022 and December 31, 2021, if the Company assumed all existing investments were worthless, the amount of carried interest subject to potential repayment, net of tax distributions, which may differ from the recognition of revenue, would have been approximately $185.3 million and $194.6 million, respectively, of which approximately $145.0 million and $153.3 million, respectively, is reimbursable to the Company by certain professionals who are the recipients of such carried interest. Management believes the possibility of all of the investments becoming worthless is remote. As of September 30, 2022 and December 31, 2021, if the funds were liquidated at their fair values, there would be no contingent repayment obligation or liability.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Litigation

From time to time, the Company is named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, the Company does not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect its results of operations, financial condition or cash flows.

Leases

The Company leases office space and certain office equipment. The Company's leases have remaining lease terms of one to eleven years. The tables below present certain supplemental quantitative disclosures regarding the Company's leases:


		As of September 30,		As of December 31,

	Classification	2022		2021
Operating lease assets	Right-of-use operating lease assets	$	159,686	$	167,652
Finance lease assets	Other assets(1)	543		1,011
Total lease assets		$	160,229	$	168,663

Operating lease liabilities	Operating lease liabilities	$	193,180	$	205,075
Finance lease obligations	Accounts payable, accrued expenses and other liabilities	393		936
Total lease liabilities		$	193,573	$	206,011

(1) Finance lease assets are recorded net of accumulated amortization of $2.0 million and $1.6 million as of September 30, 2022 and December 31, 2021, respectively.


Maturity of lease liabilities	Operating Leases		Finance Leases
2022	$	10,732	$	68
2023	40,866		166
2024	43,390		161
2025	41,842		10
2026	29,819		—
After 2026	39,882		—
Total future payments	206,531		405
Less: interest	13,351		12
Total lease liabilities	$	193,180	$	393


		Three months ended September 30,				Nine months ended September 30,
	Classification	2022		2021		2022		2021
Operating lease expense	General, administrative and other expenses	$	11,168	$	9,697	$	31,302	$	27,203
Finance lease expense:
Amortization of finance lease assets	General, administrative and other expenses	144		154		488		408
Interest on finance lease liabilities	Interest expense	3		7		12		24
Total lease expense		$	11,315	$	9,858	$	31,802	$	27,635



	Nine months ended September 30,
Other information	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	33,156	$	26,704
Operating cash flows for finance leases	19		34
Financing cash flows for finance leases	525		463
Leased assets obtained in exchange for new finance lease liabilities	13		189
Leased assets obtained in exchange for new operating lease liabilities	20,687		55,461

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)


	As of September 30,		As of December 31,

Lease term and discount rate	2022		2021
Weighted-average remaining lease terms (in years):
Operating leases	5.4		6.0
Finance leases	2.2		1.8
Weighted-average discount rate:
Operating leases	2.77	%	1.81	%
Finance leases	2.88	%	2.94	%

10. RELATED PARTY TRANSACTIONS

Substantially all of the Company’s revenue is earned from its affiliates. The related accounts receivable are included within due from affiliates in the Condensed Consolidated Statements of Financial Condition, except that accrued carried interest allocations, which is predominantly due from affiliated funds, is presented separately within investments in the Condensed Consolidated Statements of Financial Condition.

The Company has investment management agreements with the Ares Funds that it manages. In accordance with these agreements, these Ares Funds may bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the Ares Funds.

The Company has also entered into agreements to be reimbursed for its expenses incurred in providing administrative services to certain related parties, including our public vehicles, and with certain private funds that pay administrative fees based on invested capital. The Company is also party to agreements with certain real estate funds which pay fees to the Company to provide various services, such as administration, acquisition, development, property management and the distribution of fund shares in our non-traded REITs, among others.

Employees and other related parties may be permitted to participate in co-investment vehicles that generally invest in Ares funds alongside fund investors. Participation is limited by law to individuals who qualify under applicable securities laws. These co-investment vehicles generally do not require these individuals to pay management fees, carried interest or incentive fees.

The Company considers its professionals and non-consolidated funds to be affiliates. Amounts due from and to affiliates were composed of the following:


	As of September 30,		As of December 31,

	2022		2021
Due from affiliates:
Management fees receivable from non-consolidated funds	$	439,961	$	372,249
Incentive fee receivable from non-consolidated funds	8,134		211,243
Payments made on behalf of and amounts due from non-consolidated funds and employees	113,408		86,891
Due from affiliates—Company	$	561,503	$	670,383
Amounts due from non-consolidated funds	$	7,736	$	7,234
Due from affiliates—Consolidated Funds	$	7,736	$	7,234
Due to affiliates:
Management fee received in advance and rebates payable to non-consolidated funds	$	5,744	$	10,160
Tax receivable agreement liability	98,975		100,542
Undistributed carried interest and incentive fees	12,724		66,494
Payments made by non-consolidated funds on behalf of and payable by the Company	4,864		21,357
Due to affiliates—Company	$	122,307	$	198,553

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Due from Ares Funds and Portfolio Companies

In the normal course of business, the Company pays certain expenses on behalf of Consolidated Funds and non-consolidated funds for which it is reimbursed. Amounts advanced on behalf of Consolidated Funds are eliminated in consolidation. Certain expenses initially paid by the Company, primarily professional services, travel and other costs associated with particular portfolio company holdings, are subject to reimbursement by the portfolio companies.

11. INCOME TAXES

The Company’s income tax provision includes corporate income taxes and other entity level income taxes, as well as income taxes incurred by certain affiliated funds that are consolidated in these financial statements. For the three and nine months ended September 30, 2022, the Company recorded income tax benefit and income tax expense of $11.6 million and $22.3 million, respectively. For the three and nine months ended September 30, 2021, the Company recorded income tax expense of $30.3 million and $104.5 million, respectively.

The Company’s effective income tax rate is dependent on many factors, including the estimated nature and amounts of income and expenses allocated to the non-controlling interests without being subject to federal, state and local income taxes at the corporate level. Additionally, the Company’s effective tax rate is influenced by the amount of income tax provision recorded for any affiliated funds and co-investment entities that are consolidated in the Company's condensed consolidated financial statements. For the three and nine months ended September 30, 2022 and 2021, the Company recorded its interim income tax provision utilizing the estimated annual effective tax rate.

The income tax effects of temporary differences give rise to significant portions of deferred tax assets and liabilities, which are presented on a net basis. As of September 30, 2022 and December 31, 2021, the Company recorded a net deferred tax asset of $63.2 million and $39.4 million, respectively, within other assets in the Condensed Consolidated Statements of Financial Condition.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by U.S. federal, state, local and foreign tax authorities. With limited exceptions, the Company is no longer subject to income tax audits by taxing authorities for any years prior to 2018. Although the outcome of tax audits is always uncertain, the Company does not believe the outcome of any future audit will have a material adverse effect on the Company’s condensed consolidated financial statements.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

12. EARNINGS PER SHARE

For the nine months ended September 30, 2022, the Company had Class A and non-voting common stock outstanding. The non-voting common stock has the same economic rights as the Class A common stock; therefore, earnings per share is presented on a combined basis. Income of the Company has been allocated on a proportionate basis to the two common stock classes.

Basic earnings per share of Class A and non-voting common stock is computed by using the two-class method. Diluted earnings per share of Class A and non-voting common stock is computed using the more dilutive method of either the two-class method or the treasury stock method.

For the three and nine months ended September 30, 2022, the two-class method was the more dilutive method. For the three and nine months ended September 30, 2021, the treasury stock method was the more dilutive method.

The computation of diluted earnings per share excludes the following AOG Units as their effect would have been anti-dilutive:


	Three months ended September 30,		Nine months ended September 30,
	2022	2021	2022	2021

Restricted units	—	450	—	167
AOG Units	—	119,855,724	—	115,394,058

The following table presents the computation of basic and diluted earnings per common share:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Basic earnings per share of Class A and non-voting common stock:
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders	$	(35,546)	$	84,726	$	50,048	$	262,659
Distributions on unvested restricted units	(3,555)		(1,440)		(10,601)		(8,142)
Undistributed earnings allocable to participating unvested restricted units	—		(306)		—		(2,858)
Net income (loss) available to Class A and non-voting common stockholders	$	(39,101)	$	82,980	$	39,447	$	251,659
Basic weighted-average shares of Class A and non-voting common stock	175,631,144		168,931,621		175,010,241		161,071,151
Basic earnings (loss) per share of Class A and non-voting common stock	$	(0.22)	$	0.49	$	0.23	$	1.55

Diluted earnings per share of Class A and non-voting common stock:
Net income (loss) available to Class A and non-voting common stockholders	$	(35,546)	$	84,726	$	50,048	$	262,659
Distributions on unvested restricted units	(3,555)		—		(10,601)		—
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders	$	(39,101)	$	84,726	$	39,447	$	262,659
Effect of dilutive shares:
Restricted units	—		12,273,068		—		10,807,242
Options	—		5,317,468		—		5,265,045

Diluted weighted-average shares of Class A and non-voting common stock	175,631,144		186,522,157		175,010,241		177,143,438
Diluted earnings (loss) per share of Class A and non-voting common stock	$	(0.22)	$	0.45	$	0.23	$	1.48

Dividend declared and paid per Class A and non-voting common stock	$	0.61	$	0.47	$	1.83	$	1.41

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

13. EQUITY COMPENSATION

Equity Incentive Plan

Equity-based compensation is granted under the Company's 2014 Equity Incentive Plan (as amended, the “Equity Incentive Plan”). The total number of shares available to be issued under the Equity Incentive Plan resets based on a formula defined in the Equity Incentive Plan and may increase on January 1 of each year. On January 1, 2022, the total number of shares available for issuance under the Equity Incentive Plan reset to 49,293,000 shares and as of September 30, 2022, 44,524,646 shares remained available for issuance.

Generally, unvested restricted units are forfeited upon termination of employment in accordance with the Equity Incentive Plan. The Company recognizes forfeitures as a reversal of previously recognized compensation expense in the period the forfeiture occurs.

Equity-based compensation expense, net of forfeitures, recorded by the Company is presented in the following table:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Restricted units	$	48,117	$	36,390	$	151,403	$	127,219
Restricted units with a market condition	—		29,601		—		63,925
Equity-based compensation expense	$	48,117	$	65,991	$	151,403	$	191,144

Restricted Units

Each restricted unit represents an unfunded, unsecured right of the holder to receive a share of the Company's Class A common stock on a specific date. The restricted units generally vest and are settled in shares of Class A common stock either (i) at a rate of one-third per year, beginning on the third anniversary of the grant date, (ii) at a rate of one quarter per year, beginning on the second anniversary of the grant date or the holder's employment commencement date, or (iii) at a rate of one-third per year, beginning on the first anniversary of the grant date in each case generally subject to the holder’s continued employment as of the applicable vesting date (subject to accelerated vesting upon certain qualifying terminations of employment or retirement eligibility provisions). Compensation expense associated with restricted units is recognized on a straight-line basis over the requisite service period of the award.

Restricted units are delivered net of the holder's payroll related taxes upon vesting. For the nine months ended September 30, 2022, 5.4 million restricted units vested and 3.0 million shares of Class A common stock were delivered to the holders. For the nine months ended September 30, 2021, 8.2 million restricted units vested and 4.4 million shares of Class A common stock were delivered to the holders.

The holders of restricted units, other than awards that have not yet been issued as described in the subsequent sections, generally have the right to receive as current compensation an amount in cash equal to (i) the amount of any dividend paid with respect to a share of Class A common stock multiplied by (ii) the number of restricted units held at the time such dividends are declared (“Dividend Equivalent”). During the nine months ended September 30, 2022, the Company declared dividends of $0.61 per share to Class A common stockholders at the close of business on March 17, 2022, June 16, 2022 and September 16, 2022. For the three and nine months ended September 30, 2022, Dividend Equivalents were made to the holders of restricted units in the aggregate amount of $7.9 million and $23.9 million, respectively, which are presented as dividends in the Condensed Consolidated Statements of Changes in Equity. When units are forfeited, the cumulative amount of Dividend Equivalents previously paid is reclassified to compensation and benefits expense in the Condensed Consolidated Statements of Operations.

During the first quarter of 2022, the Company approved the future grant of restricted units to certain senior executives in each of 2023, 2024 and 2025, subject to the holder’s continued employment and acceleration in certain instances. The vesting period of these awards are at a rate of 25% per year, beginning on the second anniversary of the grant date. Given that these future restricted units have been communicated to the recipient, the Company accounts for these awards as if they have been granted and recognizes the compensation expense on a straight-line basis over the service period. The restricted units that have been approved and communicated but not yet granted are not eligible to receive a Dividend Equivalent until the grant date.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table presents unvested restricted units' activity:


	Restricted Units	Weighted Average Grant Date Fair Value Per Unit
Balance - January 1, 2022	18,323,036	$	36.43
Granted	4,050,786	74.62
Vested	(5,333,182)	26.89
Forfeited	(222,432)	53.83
Balance - September 30, 2022	16,818,208	$	48.43

The total compensation expense expected to be recognized in all future periods associated with the restricted units is approximately $589.5 million as of September 30, 2022 and is expected to be recognized over the remaining weighted average period of 3.6 years.

Options

Upon exercise, each option entitles the holders to purchase from the Company one share of Class A common stock at the stated exercise price. The term of the options is generally ten years, beginning on the grant date.

A summary of options activity during the nine months ended September 30, 2022 is presented below:


	Options	Weighted Average Exercise Price		Weighted Average Remaining Life (in years)	Aggregate Intrinsic Value
Balance - January 1, 2022	6,306,282	$	19.00	2.3	$	392,692
Granted	—			—	—
Exercised	(784,782)	19.00		—	—
Expired	—	—		—	—
Forfeited	—	—		—	—
Balance - September 30, 2022	5,521,500	$	19.00	1.6	$	237,148
Exercisable at September 30, 2022	5,521,500	$	19.00	1.6	$	237,148

Net cash proceeds from exercises of stock options were $14.5 million for the nine months ended September 30, 2022. The Company realized tax benefits of approximately $6.1 million from those exercises.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

14. EQUITY AND REDEEMABLE INTEREST

Common Stock

The Company's common stock consists of Class A, Class B, Class C and non-voting common stock, each $0.01 par value per share. The non-voting common stock has the same economic rights as the Class A common stock. Sumitomo Mitsui Banking Corporation (“SMBC”) is the sole holder of the non-voting common stock. The Class B common stock and Class C common stock are non-economic and holders are not entitled to dividends from the Company or to receive any assets of the Company in the event of any dissolution, liquidation or winding up of the Company. Ares Management GP LLC is the sole holder of the Class B common stock and Ares Voting LLC (“Ares Voting”) is the sole holder of the Class C common stock.

In February 2022, the Company's board of directors authorized the renewal of the stock repurchase program that allows for the repurchase of up to $150 million of shares of Class A common stock. Under the program, shares may be repurchased from time to time in open market purchases, privately negotiated transactions or otherwise, including in reliance on Rule 10b5-1 of the Securities Act. The program is scheduled to expire in March 2023. Repurchases under the program, if any, will depend on the prevailing market conditions and other factors. During the nine months ended September 30, 2022 and 2021, the Company did not repurchase any shares as part of the stock repurchase program.

The following table presents the changes in each class of common stock:


	Class A Common Stock	Non-Voting Common Stock	Class B Common Stock	Class C Common Stock	Total
Balance - December 31, 2021	168,351,305	3,489,911	1,000	118,609,332	290,451,548
Exchanges of AOG Units	305,040	—	—	(305,040)	—
Redemptions of AOG Units	—	—	—	(25,000)	(25,000)
Stock option exercises, net of shares withheld for tax	772,228	—	—	—	772,228

Vesting of restricted stock awards, net of shares withheld for tax	2,973,864	—	—	—	2,973,864
Cancellation of AOG Units	—	—	—	(4,135)	(4,135)
Balance - September 30, 2022	172,402,437	3,489,911	1,000	118,275,157	294,168,505

The following table presents each partner's AOG Units and corresponding ownership interest in each of the Ares Operating Group entities, as well as its daily average ownership of AOG Units in each of the Ares Operating Group entities:


							Daily Average Ownership
	As of September 30, 2022			As of December 31, 2021			Three months ended September 30,				Nine months ended September 30,
	AOG Units	Direct Ownership Interest		AOG Units	Direct Ownership Interest		2022		2021		2022		2021
Ares Management Corporation	175,892,348	59.79	%	171,841,216	59.16	%	59.74	%	58.50	%	59.64	%	58.26	%
Ares Owners Holdings, L.P.	118,275,157	40.21		118,609,332	40.84		40.26		41.50		40.36		41.74
Total	294,167,505	100.00	%	290,450,548	100.00	%

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Redeemable Interest

The following table summarizes the activities associated with the redeemable interest in Ares Operating Group entities:



	Total







Balance - December 31, 2021	$	96,008
Changes in ownership interests and related tax benefits	231

Net income	399
Currency translation adjustment, net of tax	(331)
Equity compensation	48
Distributions	(8)
Balance - March 31, 2022	96,347
Changes in ownership interests and related tax benefits	(1,445)
Net loss	(457)
Currency translation adjustment, net of tax	(996)
Equity compensation	77

Distributions	(8)
Balance- June 30, 2022	93,518
Changes in ownership interests and related tax benefits	1,214
Net income	93
Currency translation adjustment, net of tax	(933)
Equity compensation	77
Distributions	(1,861)
Balance- September 30, 2022	$	92,108

The following table summarizes the activities associated with the redeemable interest in Consolidated Funds:


	Total


Balance - December 31, 2021	$	1,000,000
Change in redemption value	—
Balance - March 31, 2022	1,000,000
Change in redemption value	—
Balance - June 30, 2022	1,000,000
Change in redemption value	4,994
Balance - September 30, 2022	$	1,004,994

15. SEGMENT REPORTING

The Company operates through its distinct operating segments. On January 1, 2022, the Company changed its 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. The Company 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. The Company has modified historical results to conform with its current presentation. During the three months ended September 30, 2022, the Company decided to rename the Secondary Solutions Group segment to the Secondaries Group. The segment name change did not result in any change to the composition of the Company’s segments and therefore did not result in any change to historical results. The Company operating segments are summarized below:

Credit Group: The Credit Group manages credit strategies across the liquid and illiquid spectrum, including syndicated loans, high yield bonds, multi-asset credit, alternative credit investments and direct lending. The syndicated loans strategy focuses on evaluating individual credit opportunities related primarily to non-investment grade senior secured loans and primarily targets first lien secured debt, with a secondary focus on second lien secured loans and subordinated and other unsecured loans. The high yield bond strategy seeks to deliver a diversified portfolio of liquid, traded non-investment grade corporate bonds, including secured, unsecured and subordinated debt instruments. Multi-asset credit is a “go anywhere”

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

strategy designed to offer investors a flexible solution to global credit investing by allowing us to tactically allocate between multiple asset classes in various market conditions. The alternative credit strategy seeks to capitalize on asset-focused investment opportunities that fall outside of traditional, well-defined markets such as corporate debt, real estate and private equity. The alternative credit strategy emphasizes downside protection and capital preservation through a focus on investments that tend to share the following key attributes: asset security, covenants, structural protections and cash flow velocity. The direct lending strategy is one of the largest self-originating direct lenders to the U.S. and European markets and has a multi-channel origination strategy designed to address a broad set of investment opportunities in the middle market. The direct lending team maintains a flexible investment strategy with the capability to invest in first lien senior secured loans (including “unitranche” loans which are loans that combine senior and subordinated debt, generally in a first lien position), second lien senior secured loans, subordinated debt, preferred equity and non-control equity co-investments in private middle market companies. U.S. direct lending activities are managed through a publicly traded business development company, ARCC, as well as through private commingled funds and separately managed accounts (“SMAs”).

Private Equity Group: The Private Equity Group broadly categorizes its investment strategies as corporate private equity and special opportunities. In the corporate private equity strategy, the Company targets four principal transactions types: (i) prudently leveraged control buyouts; (ii) growth equity; (iii) rescue capital; and (iv) distressed-for-control. This differentiated strategy, together with the broad resources of the Ares platform, widens our universe of potential investment opportunities and allows us to remain active across various market environments and to be highly selective in making investments by identifying the most attractive relative value opportunities. The corporate private equity strategy also includes our energy opportunities fund which serves as a companion fund and employs our flexible capital strategy to provide creative capital solutions across the energy industry. In the special opportunities strategy, the Company employs an “all weather” flexible capital strategy to finance debt and non-control equity solutions in middle market companies undergoing transformational change or stress. The strategy seeks to consistently invest in a range of private, special-situation opportunities and flex into distressed public market debt when attractive.

Real Assets Group: The Real Assets Group manages comprehensive equity and debt strategies across real estate and infrastructure investments.

The real estate strategy focuses on activities categorized as core/core-plus, value-add, opportunistic and debt. Real estate equity strategies involve high-quality properties and locations and de-risked developments with an opportunity to create value through repositioning, lease-up, re-tenanting, redevelopment, and/or complex recapitalizations. The U.S. core/core-plus investment activities focuses on the acquisition of assets with strong long-term cash flow potential and durable tenancy diversified across end-user industries and geographies. The value-add investment activities focus on acquiring underperforming, income-producing, institutional-quality assets that can be improved through select value-creation initiatives across the U.S. and Europe. The opportunistic activities focus on capitalizing on distressed and special situations, repositioning underperforming assets and undertaking select development and redevelopment projects across the U.S. and Europe. The real estate debt strategy primarily focuses on directly originating a wide range of financing opportunities in the U.S. and Europe leveraging the Real Asset Group’s diverse sources of capital. In addition to managing private commingled funds and SMAs investing in equity and debt strategies, the real estate strategy also makes investments through Ares Real Estate Income Trust, Inc. (“AREIT”) and Ares Industrial Real Estate Income Trust, Inc. (“AIREIT”), its non-traded REITs, and ACRE, a publicly traded commercial mortgage REIT.

The infrastructure strategy focuses on investment strategies broadly categorized as infrastructure opportunities and infrastructure debt. Infrastructure opportunities is a market leader in infrastructure and power investing with a focus on climate infrastructure, natural gas generation and energy transportation sectors. The infrastructure opportunities strategy targets essential infrastructure assets and companies with stable cash flow profiles through long-term contracts and high-barriers to entry. The infrastructure debt strategy was formed during the first quarter of 2022 in connection with the Infrastructure Debt Acquisition. The infrastructure debt strategy targets global assets and businesses with defensive characteristics across the digital, transport, energy and utility sectors. Leveraging the established long standing relationships, the strategy seeks to generate exclusive deal flow and high-quality investment opportunities.

Secondaries Group: The Secondaries Group was formed during the second quarter of 2021 in connection with the Landmark Acquisition. The Secondaries Group invests in secondary markets across a range of alternative asset class strategies, including private equity, real estate and infrastructure. The Company acquires interests across a range of partnership vehicles, including funds, multi-asset portfolios and single asset joint ventures. Activities within each strategy include recapitalizing and restructuring the funds, including transactions that can address pending fund maturity, strategy change or the need for additional equity capital. The private equity secondaries strategy targets opportunities in non-competitive channels and makes investments

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

in durable, performing assets with attractive capital structures. In the real estate secondaries strategy, the Company seeks broad diversification by property sector and geography and to drive investment results through underwriting, transaction structuring and portfolio construction. In the infrastructure secondaries strategy, the Company focuses on achieving diversification through a portfolio that provides inflation protection and exposure to uncorrelated assets.

Strategic Initiatives: Strategic Initiatives represents an all-other category that includes operating segments and strategic investments that seek to expand the Company’s reach and its scale in new and existing global markets. Strategic Initiatives includes activities from (i) Ares SSG, the Asia-Pacific platform that makes credit and special situations investments through its local originating presence on behalf of its institutional client base, (ii) Ares Insurance Solutions (“AIS”), the Company’s insurance platform that provides solutions to insurance clients including asset management, capital solutions and corporate development and (iii) Ares Acquisition Corporation (NYSE: AAC) (“AAC”), the Company’s first sponsored SPAC, among others.

The OMG consists of shared resource groups to support the Company’s operating segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, legal, compliance, human resources, strategy, relationship management and distribution. The OMG includes Ares Wealth Management Solutions, LLC (“AWMS”) that facilitates the product development, distribution, marketing and client management activities for investment offerings in the global wealth management channel. Additionally, the OMG provides services to certain of the Company’s managed funds and vehicles, which reimburse the OMG for expenses equal to the costs of services provided. The OMG’s revenues and expenses are not allocated to the Company’s reportable segments but the Company does consider the financial results of the OMG when evaluating its financial performance.

Segment Profit Measures: These measures supplement and should be considered in addition to, and not in lieu of, the Condensed Consolidated Statements of Operations prepared in accordance with GAAP.

Fee related earnings (“FRE”) is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees and fee related performance revenues, is sufficient to cover operating expenses and to generate profits. FRE differs from income before taxes computed in accordance with GAAP as it excludes net performance income, investment income from the Consolidated Funds and non-consolidated funds and certain other items that the Company believes are not indicative of its core operating performance. Fee related performance revenues, together with fee related performance compensation, is presented within FRE because it represents incentive fees from perpetual capital vehicles that is measured and received on a recurring basis and not dependent on realization events from the underlying investments. Fee related performance revenues and fee related performance compensation were previously presented within realized net performance income. Historical periods have been modified to conform to the current period presentation.

Realized income (“RI”) is an operating metric used by management to evaluate performance of the business based on operating performance and the contribution of each of the business segments to that performance, while removing the fluctuations of unrealized income and expenses, which may or may not be eventually realized at the levels presented and whose realizations depend more on future outcomes than current business operations. RI differs from income before taxes by excluding (i) operating results of the Consolidated Funds, (ii) depreciation and amortization expense, (iii) the effects of changes arising from corporate actions, (iv) unrealized gains and losses related to carried interest, incentive fees and investment performance and (v) certain other items that the Company believes are not indicative of operating performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with mergers, acquisitions and capital activities, underwriting costs and expenses incurred in connection with corporate reorganization. RI is reduced by deferred placement fees, which represent the portion of placement fees that have been deferred and amortized over the expected life of each fund's life for segment purposes but have been expensed up front in accordance with GAAP. For periods in which the amortization of placement fees for segment purposes is higher than the GAAP expense, a placement fee adjustment is presented as a reduction to RI. Management believes RI is a more appropriate metric to evaluate the Company's current business operations.

Management makes operating decisions and assesses the performance of each of the Company’s business segments based on financial and operating metrics and other data that is presented before giving effect to the consolidation of any of the Consolidated Funds. Consequently, all segment data excludes the assets, liabilities and operating results related to the Consolidated Funds and non-consolidated funds. Total assets by segments is not disclosed because such information is not used by the Company’s chief operating decision maker in evaluating the segments.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables present the financial results for the Company’s operating segments, as well as the OMG:


	Three months ended September 30, 2022
	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total Segments		OMG		Total
Management fees	$	345,871	$	52,316	$	91,013	$	44,385	$	18,183	$	551,768	$	—	$	551,768
Fee related performance revenues	—		—		855		235		—		1,090		—		1,090
Other fees	8,143		556		11,493		—		67		20,259		7,547		27,806
Compensation and benefits	(102,839)		(26,865)		(46,947)		(19,191)		(7,859)		(203,701)		(61,084)		(264,785)
General, administrative and other expenses	(18,257)		(7,824)		(10,032)		(3,215)		(1,486)		(40,814)		(41,907)		(82,721)
Fee related earnings	232,918		18,183		46,382		22,214		8,905		328,602		(95,444)		233,158
Performance income—realized	3,045		—		26,939		—		—		29,984		—		29,984
Performance related compensation—realized	(1,737)		(5)		(17,115)		(1)		—		(18,858)		—		(18,858)
Realized net performance income (loss)	1,308		(5)		9,824		(1)		—		11,126		—		11,126
Investment income—realized	4,495		8		339		—		—		4,842		—		4,842
Interest and other investment income (expense)—realized	8,893		201		2,180		424		1,096		12,794		(171)		12,623
Interest expense	(3,904)		(4,183)		(3,095)		(1,753)		(5,244)		(18,179)		(128)		(18,307)
Realized net investment income (loss)	9,484		(3,974)		(576)		(1,329)		(4,148)		(543)		(299)		(842)
Realized income	$	243,710	$	14,204	$	55,630	$	20,884	$	4,757	$	339,185	$	(95,743)	$	243,442

	Three months ended September 30, 2021
	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total Segments		OMG		Total
Management fees	$	271,591	$	56,817	$	67,934	$	41,064	$	16,544	$	453,950	$	—	$	453,950
Fee related performance revenues	—		—		579		—		—		579		—		579
Other fees	5,798		370		3,681		—		2		9,851		3,446		13,297
Compensation and benefits	(86,502)		(23,220)		(33,070)		(11,955)		(5,316)		(160,063)		(66,107)		(226,170)
General, administrative and other expenses	(14,930)		(4,984)		(6,674)		(2,593)		(1,774)		(30,955)		(28,142)		(59,097)
Fee related earnings	175,957		28,983		32,450		26,516		9,456		273,362		(90,803)		182,559
Performance income—realized	6,332		34,316		4,114		—		—		44,762		—		44,762
Performance related compensation—realized	(3,079)		(27,483)		(2,809)		—		—		(33,371)		—		(33,371)
Realized net performance income	3,253		6,833		1,305		—		—		11,391		—		11,391
Investment income—realized	618		1,878		1,841		—		1,025		5,362		—		5,362
Interest and other investment income (expense)—realized	4,716		4,861		918		699		163		11,357		(270)		11,087
Interest expense	(2,392)		(2,505)		(1,904)		(427)		(4,135)		(11,363)		(160)		(11,523)
Realized net investment income (loss)	2,942		4,234		855		272		(2,947)		5,356		(430)		4,926
Realized income	$	182,152	$	40,050	$	34,610	$	26,788	$	6,509	$	290,109	$	(91,233)	$	198,876

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)



	Nine months ended September 30, 2022
	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total Segments		OMG		Total
Management fees	$	972,201	$	145,669	$	254,233	$	135,090	$	52,377	$	1,559,570	$	—	$	1,559,570
Fee related performance revenues	12,628		—		2,178		235		—		15,041		—		15,041
Other fees	20,528		1,261		27,924		—		181		49,894		19,721		69,615
Compensation and benefits	(301,822)		(70,724)		(121,183)		(45,964)		(22,059)		(561,752)		(196,492)		(758,244)
General, administrative and other expenses	(52,734)		(21,992)		(28,308)		(9,250)		(5,575)		(117,859)		(109,516)		(227,375)
Fee related earnings	650,801		54,214		134,844		80,111		24,924		944,894		(286,287)		658,607
Performance income—realized	58,941		2,212		78,637		4,156		—		143,946		—		143,946
Performance related compensation—realized	(35,675)		(1,791)		(50,510)		(3,515)		—		(91,491)		—		(91,491)
Realized net performance income	23,266		421		28,127		641		—		52,455		—		52,455
Investment income—realized	6,519		2,283		4,224		—		858		13,884		—		13,884
Interest and other investment income (expense)—realized	21,006		1,898		7,597		3,268		6,613		40,382		(1,450)		38,932
Interest expense	(10,856)		(11,185)		(8,197)		(3,775)		(16,687)		(50,700)		(474)		(51,174)
Realized net investment income (loss)	16,669		(7,004)		3,624		(507)		(9,216)		3,566		(1,924)		1,642
Realized income	$	690,736	$	47,631	$	166,595	$	80,245	$	15,708	$	1,000,915	$	(288,211)	$	712,704

	Nine months ended September 30, 2021
	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total Segments		OMG		Total
Management fees	$	764,702	$	135,930	$	150,691	$	53,962	$	48,963	$	1,154,248	$	—	$	1,154,248
Fee related performance revenues	1,331		—		1,938		—		—		3,269		—		3,269
Other fees	18,494		726		4,604		—		82		23,906		3,446		27,352
Compensation and benefits	(253,597)		(62,047)		(73,438)		(16,244)		(15,440)		(420,766)		(158,943)		(579,709)
General, administrative and other expenses	(37,716)		(15,351)		(14,212)		(3,452)		(5,580)		(76,311)		(69,872)		(146,183)
Fee related earnings	493,214		59,258		69,583		34,266		28,025		684,346		(225,369)		458,977
Performance income—realized	76,924		159,479		10,317		—		—		246,720		—		246,720
Performance related compensation—realized	(48,619)		(127,706)		(6,983)		—		—		(183,308)		—		(183,308)
Realized net performance income	28,305		31,773		3,334		—		—		63,412		—		63,412
Investment income (loss)—realized	1,858		(4,387)		13,877		—		1,347		12,695		—		12,695
Interest and other investment income—realized	14,354		9,825		4,783		701		2,824		32,487		170		32,657
Interest expense	(5,372)		(5,434)		(4,528)		(432)		(8,962)		(24,728)		(397)		(25,125)
Realized net investment income (loss)	10,840		4		14,132		269		(4,791)		20,454		(227)		20,227
Realized income	$	532,359	$	91,035	$	87,049	$	34,535	$	23,234	$	768,212	$	(225,596)	$	542,616

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table presents the components of the Company’s operating segments’ revenue, expenses and realized net investment income:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Segment revenues
Management fees	$	551,768	$	453,950	$	1,559,570	$	1,154,248
Fee related performance revenues	1,090		579		15,041		3,269
Other fees	20,259		9,851		49,894		23,906
Performance income—realized	29,984		44,762		143,946		246,720
Total segment revenues	$	603,101	$	509,142	$	1,768,451	$	1,428,143
Segment expenses
Compensation and benefits	$	203,701	$	160,063	$	561,752	$	420,766
General, administrative and other expenses	40,814		30,955		117,859		76,311
Performance related compensation—realized	18,858		33,371		91,491		183,308
Total segment expenses	$	263,373	$	224,389	$	771,102	$	680,385
Segment realized net investment income (expense)
Investment income—realized	$	4,842	$	5,362	$	13,884	$	12,695
Interest and other investment income —realized	12,794		11,357		40,382		32,487
Interest expense	(18,179)		(11,363)		(50,700)		(24,728)
Total segment realized net investment income (expense)	$	(543)	$	5,356	$	3,566	$	20,454

The following table reconciles the Company's consolidated revenues to segment revenue:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Total consolidated revenue	$	801,290	$	948,719	$	2,117,719	$	2,901,926
Performance income—unrealized	(170,654)		(415,317)		(280,037)		(1,381,697)
Management fees of Consolidated Funds eliminated in consolidation	11,682		11,051		34,523		33,416

Incentive fees of Consolidated Funds eliminated in consolidation	—		—		34		1,528
Administrative, transaction and other fees of Consolidated Funds eliminated in consolidation	3,946		4,264		13,030		13,157
Administrative fees(1)	(16,099)		(15,632)		(50,947)		(34,754)
OMG revenue	(7,681)		(3,446)		(19,974)		(3,446)
Performance income reclass(2)	—		680		(14)		1,285

Principal investment income, net of eliminations	(11,582)		(14,250)		(15,521)		(86,477)
Net income of non-controlling interests in consolidated subsidiaries	(7,801)		(6,927)		(30,362)		(16,795)
Total consolidation adjustments and reconciling items	(198,189)		(439,577)		(349,268)		(1,473,783)
Total segment revenue	$	603,101	$	509,142	$	1,768,451	$	1,428,143

(1)Represents administrative fees from expense reimbursements that are presented in administrative, transaction and other fees in the Company’s Condensed Consolidated Statements of Operations and are netted against the respective expenses for segment reporting.

(2)Related to performance income for AREA Sponsor Holdings LLC, an investment pool. Changes in value of this investment are reflected within net realized and unrealized gains (losses) on investments in the Company’s Condensed Consolidated Statements of Operations.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table reconciles the Company's consolidated expenses to segment expenses:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Total consolidated expenses	$	898,102	$	813,267	$	2,062,654	$	2,363,108
Performance related compensation-unrealized	(124,466)		(296,044)		(207,115)		(1,022,393)
Expenses of Consolidated Funds added in consolidation	(22,129)		(23,206)		(63,071)		(66,653)
Expenses of Consolidated Funds eliminated in consolidation	11,746		11,102		34,948		35,078
Administrative fees(1)	(15,574)		(15,632)		(50,422)		(34,754)
OMG expenses	(102,991)		(94,249)		(306,008)		(228,815)
Acquisition and merger-related expense	(1,852)		(754)		(12,046)		(18,364)
Equity compensation expense	(48,041)		(65,991)		(151,202)		(191,144)
Acquisition-related compensation expense(2)	(96,697)		(28,194)		(204,189)		(32,824)
Placement fees	(9,729)		(32,413)		(7,611)		(33,740)
Depreciation and amortization expense(3)	(219,339)		(36,668)		(297,795)		(71,742)

Expense of non-controlling interests in consolidated subsidiaries	(5,657)		(6,829)		(27,041)		(17,372)
Total consolidation adjustments and reconciling items	(634,729)		(588,878)		(1,291,552)		(1,682,723)
Total segment expenses	$	263,373	$	224,389	$	771,102	$	680,385

(2)Represents contingent obligations resulting from 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.

(3)The three and nine months ended September 30, 2022 include non-cash impairment charges of $181.6 million recorded on certain intangible assets.

The following table reconciles the Company's consolidated other income to segment realized net investment income:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Total consolidated other income	$	36,434	$	111,536	$	112,932	$	218,011
Investment (income) loss—unrealized	57		(3,609)		9,995		(60,588)
Interest and other investment (income) loss—unrealized	(4,600)		(1,405)		(16,661)		3,057
Other income from Consolidated Funds added in consolidation, net	(38,434)		(76,287)		(132,852)		(178,195)
Other expense from Consolidated Funds eliminated in consolidation, net	(1,922)		(4,973)		(13,655)		(13,783)
OMG other expense	3,016		37		8,700		646
Performance income reclass(1)	—		(680)		14		(1,285)
Principal investment income	9,438		20,719		37,421		96,448
Other (income) expense, net	(1,060)		(34,812)		934		(34,666)
Other income of non-controlling interests in consolidated subsidiaries	(3,472)		(5,170)		(3,262)		(9,191)
Total consolidation adjustments and reconciling items	(36,977)		(106,180)		(109,366)		(197,557)
Total segment realized net investment income (expense)	$	(543)	$	5,356	$	3,566	$	20,454

(1)Related to performance income for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within net realized and unrealized gains (losses) on investments in the Company’s Condensed Consolidated Statements of Operations.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table presents the reconciliation of income before taxes as reported in the Condensed Consolidated Statements of Operations to segment results of RI and FRE:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Income (loss) before taxes	$	(60,378)	$	246,988	$	167,997	$	756,829
Adjustments:
Depreciation and amortization expense(1)	219,339		36,668		297,795		71,742
Equity compensation expense	47,516		65,991		150,677		191,144
Acquisition-related compensation expense(2)	96,697		28,194		204,189		32,824

Acquisition and merger-related expense	1,852		754		12,046		18,364
Placement fees	9,729		32,413		7,611		33,740
OMG expense, net	98,325		90,840		294,734		226,015
Other (income) expense, net	(1,059)		(34,812)		934		(34,666)
Net income of non-controlling interests in consolidated subsidiaries	(5,616)		(5,268)		(6,583)		(8,614)
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations	(16,489)		(47,372)		(48,897)		(102,331)
Total performance income—unrealized	(170,654)		(415,317)		(280,037)		(1,381,697)
Total performance related compensation—unrealized	124,466		296,044		207,115		1,022,393
Total investment income—unrealized	(4,543)		(5,014)		(6,666)		(57,531)
Realized income	339,185		290,109		1,000,915		768,212
Total performance income—realized	(29,984)		(44,762)		(143,946)		(246,720)
Total performance related compensation—realized	18,858		33,371		91,491		183,308
Total investment income—realized	543		(5,356)		(3,566)		(20,454)
Fee related earnings	$	328,602	$	273,362	$	944,894	$	684,346

(1)The three and nine months ended September 30, 2022 include non-cash impairment charges of $181.6 million recorded on certain intangible assets.

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

16. CONSOLIDATION

Investments in Consolidated Variable Interest Entities

The Company consolidates entities in which the Company has a variable interest and as the general partner or investment manager, has both the power to direct the most significant activities and a potentially significant economic interest. Investments in the consolidated VIEs are reported at fair value and represent the Company’s maximum exposure to loss.

Investments in Non-Consolidated Variable Interest Entities

The Company holds interests in certain VIEs that are not consolidated as the Company is not the primary beneficiary. The Company's interest in such entities generally is in the form of direct equity interests, fixed fee arrangements or both. The maximum exposure to loss represents the potential loss of assets by the Company relating to these non-consolidated entities. Investments in the non-consolidated VIEs are carried at fair value.

The Company's interests in consolidated and non-consolidated VIEs, as presented in the Condensed Consolidated Statements of Financial Condition, and its respective maximum exposure to loss relating to non-consolidated VIEs are as follows:


	As of September 30,		As of December 31,

	2022		2021
Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs(1)	$	377,935	$	353,768
Maximum exposure to loss attributable to the Company's investment in consolidated VIEs(1)	533,941		583,192
Assets of consolidated VIEs	12,501,069		13,197,321
Liabilities of consolidated VIEs	11,173,216		12,018,655

(1)As of September 30, 2022 and December 31, 2021, the Company's maximum exposure of loss for CLO securities was equal to the cumulative fair value of our capital interest in CLOs that are managed and totaled $82.2 million and $103.8 million, respectively.


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net income attributable to non-controlling interests related to consolidated VIEs	$	8,733	$	38,597	$	28,470	$	84,285

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Consolidating Schedules

The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company's financial condition, results from operations and cash flows:


	As of September 30, 2022
	Consolidated Company Entities		Consolidated Funds		Eliminations		Consolidated
Assets
Cash and cash equivalents	$	361,500	$	—	$	—	$	361,500
Investments (includes $3,290,381 of accrued carried interest)	4,638,092		—		(525,699)		4,112,393
Due from affiliates	744,981		—		(183,478)		561,503
Other assets	275,189		—		—		275,189
Right-of-use operating lease assets	159,686		—		—		159,686
Intangible assets, net	1,238,108		—		—		1,238,108
Goodwill	996,740		—		—		996,740
Assets of Consolidated Funds
Cash and cash equivalents	—		683,976		—		683,976
U.S. Treasury securities, at fair value	—		1,005,094		—		1,005,094
Investments, at fair value	—		11,564,696		4,495		11,569,191
Due from affiliates	—		17,537		(9,801)		7,736
Receivable for securities sold	—		189,823		—		189,823
Other assets	—		45,387		—		45,387
Total assets	$	8,414,296	$	13,506,513	$	(714,483)	$	21,206,326
Liabilities
Accounts payable, accrued expenses and other liabilities	$	314,932	$	—	$	(9,801)	$	305,131
Accrued compensation	595,330		—		—		595,330
Due to affiliates	122,307		—		—		122,307
Performance related compensation payable	2,402,019		—		—		2,402,019
Debt obligations	2,018,462		—		—		2,018,462

Operating lease liabilities	193,180		—		—		193,180
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities	—		123,527		(1,533)		121,994
Due to affiliates	—		178,983		(178,983)		—
Payable for securities purchased	—		419,726		—		419,726
CLO loan obligations, at fair value	—		10,343,840		(29,959)		10,313,881
Fund borrowings	—		149,546		—		149,546
Total liabilities	5,646,230		11,215,622		(220,276)		16,641,576
Commitments and contingencies
Redeemable interest in Consolidated Funds	—		1,004,994		—		1,004,994
Redeemable interest in Ares Operating Group entities	92,108		—		—		92,108
Non-controlling interest in Consolidated Funds	—		1,285,897		(451,187)		834,710
Non-controlling interest in Ares Operating Group entities	1,138,659		—		(17,382)		1,121,277
Stockholders' Equity

Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (172,402,437 shares issued and outstanding)	1,724		—		—		1,724
Non-voting common stock, $0.01 par value, 500,000,000 shares authorized (3,489,911 shares issued and outstanding)	35		—		—		35
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding)	—		—		—		—
Class C common stock, $0.01 par value, 499,999,000 shares authorized (118,275,157 shares issued and outstanding)	1,183		—		—		1,183
Additional paid-in-capital	1,937,374		—		(25,638)		1,911,736
Accumulated deficit	(374,198)		—		—		(374,198)
Accumulated other comprehensive loss, net of tax	(28,819)		—		—		(28,819)
Total stockholders' equity	1,537,299		—		(25,638)		1,511,661
Total equity	2,675,958		1,285,897		(494,207)		3,467,648
Total liabilities, redeemable interest, non-controlling interests and equity	$	8,414,296	$	13,506,513	$	(714,483)	$	21,206,326

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)


	As of December 31, 2021
	Consolidated Company Entities		Consolidated Funds		Eliminations		Consolidated
Assets
Cash and cash equivalents	$	343,655	$	—	$	—	$	343,655
Investments (includes $2,998,421 of accrued carried interest)	4,271,836		—		(587,572)		3,684,264
Due from affiliates	696,963		—		(26,580)		670,383
Other assets	338,685		—		(3,930)		334,755
Right-of-use operating lease assets	167,652		—		—		167,652
Intangible assets, net	1,422,818		—		—		1,422,818
Goodwill	787,972		—		—		787,972
Assets of Consolidated Funds
Cash and cash equivalents	—		1,049,191		—		1,049,191
U.S. Treasury securities, at fair value	—		1,000,285		—		1,000,285
Investments, at fair value	—		11,812,093		4,300		11,816,393
Due from affiliates	—		16,761		(9,527)		7,234
Receivable for securities sold	—		281,132		—		281,132
Other assets	—		39,430		—		39,430
Total assets	$	8,029,581	$	14,198,892	$	(623,309)	$	21,605,164
Liabilities
Accounts payable, accrued expenses and other liabilities	$	289,200	$	—	$	(9,527)	$	279,673
Accrued compensation	310,222		—		—		310,222
Due to affiliates	198,553		—		—		198,553
Performance related compensation payable	2,190,352		—		—		2,190,352
Debt obligations	1,503,709		—		—		1,503,709
Operating lease liabilities	205,075		—		—		205,075
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities	—		117,139		(13,881)		103,258
Due to affiliates	—		26,210		(26,210)		—
Payable for securities purchased	—		1,118,456		—		1,118,456
CLO loan obligations, at fair value	—		10,698,681		(41,020)		10,657,661
Fund borrowings	—		127,771		—		127,771
Total liabilities	4,697,111		12,088,257		(90,638)		16,694,730
Commitments and contingencies
Redeemable interest in Consolidated Funds	—		1,000,000		—		1,000,000
Redeemable interest in Ares Operating Group entities	96,008		—		—		96,008
Non-controlling interest in Consolidated Funds	—		1,110,635		(519,183)		591,452
Non-controlling interest in Ares Operating Group entities	1,403,255		—		(5,508)		1,397,747
Stockholders' Equity

Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (168,351,305 shares issued and outstanding)	1,684		—		—		1,684
Non-voting common stock, $0.01 par value, 500,000,000 shares authorized (3,489,911 shares issued and outstanding)	35		—		—		35
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding)	—		—		—		—
Class C common stock, $0.01 par value, 499,999,000 shares authorized (118,609,332 shares issued and outstanding)	1,186		—		—		1,186
Additional paid-in-capital	1,921,539		—		(7,980)		1,913,559
Accumulated deficit	(89,382)		—		—		(89,382)
Accumulated other comprehensive loss, net of tax	(1,855)		—		—		(1,855)
Total stockholders' equity	1,833,207		—		(7,980)		1,825,227
Total equity	3,236,462		1,110,635		(532,671)		3,814,426
Total liabilities, redeemable interest, non-controlling interests and equity	$	8,029,581	$	14,198,892	$	(623,309)	$	21,605,164

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)


	Three months ended September 30, 2022
	Consolidated Company Entities		Consolidated Funds		Eliminations		Consolidated
Revenues
Management fees	$	560,140	$	—	$	(11,682)	$	548,458
Carried interest allocation	192,186		—		—		192,186
Incentive fees	8,882		—		—		8,882
Principal investment income	9,438		—		2,144		11,582
Administrative, transaction and other fees	44,128		—		(3,946)		40,182
Total revenues	814,774		—		(13,484)		801,290
Expenses
Compensation and benefits	425,419		—		—		425,419
Performance related compensation	142,934		—		—		142,934
General, administrative and other expense	319,366		—		(14)		319,352
Expenses of the Consolidated Funds	—		22,129		(11,732)		10,397
Total expenses	887,719		22,129		(11,746)		898,102
Other income (expense)
Net realized and unrealized gains on investments	5,433		—		(1,002)		4,431
Interest and dividend income	5,820		—		(3,734)		2,086
Interest expense	(18,307)		—		—		(18,307)
Other income, net	3,132		—		(531)		2,601
Net realized and unrealized losses on investments of the Consolidated Funds	—		(3,760)		3,730		(30)
Interest and other income of the Consolidated Funds	—		157,884		531		158,415
Interest expense of the Consolidated Funds	—		(115,690)		2,928		(112,762)
Total other income (expense), net	(3,922)		38,434		1,922		36,434
Income (loss) before taxes	(76,867)		16,305		184		(60,378)
Income tax expense (benefit)	(11,748)		149		—		(11,599)
Net income (loss)	(65,119)		16,156		184		(48,779)
Less: Net income attributable to non-controlling interests in Consolidated Funds	—		16,156		184		16,340
Net loss attributable to Ares Operating Group entities	(65,119)		—		—		(65,119)
Less: Net income attributable to redeemable interest in Ares Operating Group entities	93		—		—		93
Less: Net loss attributable to non-controlling interests in Ares Operating Group entities	(29,666)		—		—		(29,666)



Net loss attributable to Ares Management Corporation Class A and non-voting common stockholders	$	(35,546)	$	—	$	—	$	(35,546)

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)


	Three months ended September 30, 2021
	Consolidated Company Entities		Consolidated Funds		Eliminations		Consolidated
Revenues
Management fees	$	459,313	$	—	$	(11,051)	$	448,262
Carried interest allocation	460,651		—		—		460,651
Incentive fees	696		—		—		696
Principal investment income	20,719		—		(6,469)		14,250
Administrative, transaction and other fees	29,124		—		(4,264)		24,860
Total revenues	970,503		—		(21,784)		948,719
Expenses
Compensation and benefits	335,569		—		—		335,569
Performance related compensation	331,141		—		—		331,141
General, administrative and other expense	134,453		—		—		134,453
Expenses of the Consolidated Funds	—		23,206		(11,102)		12,104
Total expenses	801,163		23,206		(11,102)		813,267
Other income (expense)
Net realized and unrealized gains on investments	2,759		—		5,575		8,334
Interest and dividend income	2,702		—		(1,326)		1,376
Interest expense	(11,523)		—		—		(11,523)
Other income, net	36,338		—		316		36,654
Net realized and unrealized gains on investments of the Consolidated Funds	—		36,695		(2,450)		34,245
Interest and other income of the Consolidated Funds	—		104,344		(316)		104,028
Interest expense of the Consolidated Funds	—		(64,752)		3,174		(61,578)
Total other income, net	30,276		76,287		4,973		111,536
Income before taxes	199,616		53,081		(5,709)		246,988
Income tax expense	30,273		2		—		30,275
Net income	169,343		53,079		(5,709)		216,713
Less: Net income attributable to non-controlling interests in Consolidated Funds	—		53,079		(5,709)		47,370
Net income attributable to Ares Operating Group entities	169,343		—		—		169,343
Less: Net income attributable to redeemable interest in Ares Operating Group entities	324		—		—		324
Less: Net income attributable to non-controlling interests in Ares Operating Group entities	84,293		—		—		84,293



Net income attributable to Ares Management Corporation Class A common stockholders	$	84,726	$	—	$	—	$	84,726

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)


	Nine months ended September 30, 2022
	Consolidated Company Entities		Consolidated Funds		Eliminations		Consolidated
Revenues
Management fees	$	1,580,873	$	—	$	(34,523)	$	1,546,350
Carried interest allocation	417,779		—		—		417,779
Incentive fees	30,013		—		(34)		29,979
Principal investment income	37,421		—		(21,900)		15,521
Administrative, transaction and other fees	121,120		—		(13,030)		108,090
Total revenues	2,187,206		—		(69,487)		2,117,719
Expenses
Compensation and benefits	1,155,031		—		—		1,155,031
Performance related compensation	316,818		—		—		316,818
General, administrative and other expense	562,682		—		(241)		562,441
Expenses of the Consolidated Funds	—		63,071		(34,707)		28,364
Total expenses	2,034,531		63,071		(34,948)		2,062,654
Other income (expense)
Net realized and unrealized gains (losses) on investments	(9,926)		—		20,691		10,765
Interest and dividend income	17,605		—		(12,541)		5,064
Interest expense	(51,174)		—		—		(51,174)
Other income, net	9,920		—		274		10,194
Net realized and unrealized gains on investments of the Consolidated Funds	—		12,445		(4,414)		8,031
Interest and other income of the Consolidated Funds	—		396,354		(274)		396,080
Interest expense of the Consolidated Funds	—		(275,947)		9,919		(266,028)
Total other income (expense)	(33,575)		132,852		13,655		112,932
Income before taxes	119,100		69,781		(20,884)		167,997
Income tax expense	22,075		197		—		22,272
Net income	97,025		69,584		(20,884)		145,725
Less: Net income attributable to non-controlling interests in Consolidated Funds	—		69,584		(20,884)		48,700
Net income attributable to Ares Operating Group entities	97,025		—		—		97,025
Less: Net income attributable to redeemable interest in Ares Operating Group entities	35		—		—		35
Less: Net income attributable to non-controlling interests in Ares Operating Group entities	46,942		—		—		46,942



Net income attributable to Ares Management Corporation Class A and non-voting common stockholders	$	50,048	$	—	$	—	$	50,048

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)


	Nine months ended September 30, 2021
	Consolidated Company Entities		Consolidated Funds		Eliminations		Consolidated
Revenues
Management fees	$	1,169,237	$	—	$	(33,416)	$	1,135,821
Carried interest allocation	1,610,707		—		—		1,610,707
Incentive fees	20,948		—		(1,528)		19,420
Principal investment income	96,448		—		(9,971)		86,477
Administrative, transaction and other fees	62,658		—		(13,157)		49,501
Total revenues	2,959,998		—		(58,072)		2,901,926
Expenses
Compensation and benefits	837,108		—		—		837,108
Performance related compensation	1,208,954		—		—		1,208,954
General, administrative and other expense	285,471		—		—		285,471
Expenses of the Consolidated Funds	—		66,653		(35,078)		31,575
Total expenses	2,331,533		66,653		(35,078)		2,363,108
Other income (expense)
Net realized and unrealized gains on investments	10,602		—		8,142		18,744
Interest and dividend income	9,695		—		(2,877)		6,818
Interest expense	(25,125)		—		—		(25,125)
Other income, net	30,861		—		(175)		30,686
Net realized and unrealized gains on investments of the Consolidated Funds	—		46,541		(1,821)		44,720
Interest and other income of the Consolidated Funds	—		333,570		175		333,745
Interest expense of the Consolidated Funds	—		(201,916)		10,339		(191,577)
Total other income	26,033		178,195		13,783		218,011
Income before taxes	654,498		111,542		(9,211)		756,829
Income tax expense	104,411		76		—		104,487
Net income	550,087		111,466		(9,211)		652,342
Less: Net income attributable to non-controlling interests in Consolidated Funds	—		111,466		(9,211)		102,255
Net income attributable to Ares Operating Group entities	550,087		—		—		550,087
Less: Net income attributable to redeemable interest in Ares Operating Group entities	693		—		—		693
Less: Net income attributable to non-controlling interests in Ares Operating Group entities	264,646		—		—		264,646
Net income attributable to Ares Management Corporation	284,748		—		—		284,748
Less: Series A Preferred Stock dividends paid	10,850		—		—		10,850
Less: Series A Preferred Stock redemption premium	11,239		—		—		11,239
Net income attributable to Ares Management Corporation Class A common stockholders	$	262,659	$	—	$	—	$	262,659

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)


	Nine months ended September 30, 2022
	Consolidated Company Entities		Consolidated Funds		Eliminations		Consolidated
Cash flows from operating activities:
Net income	$	97,025	$	69,584	$	(20,884)	$	145,725

Adjustments to reconcile net income to net cash provided by operating activities	382,823		—		(61,873)		320,950








Adjustments to reconcile net income to net cash used in operating activities allocable to non-controlling interests in Consolidated Funds	—		(1,132,839)		4,414		(1,128,425)




Cash flows due to changes in operating assets and liabilities	160,957		—		152,692		313,649





Cash flows due to changes in operating assets and liabilities allocable to redeemable and non-controlling interest in Consolidated Funds	—		(427,022)		231,518		(195,504)




Net cash provided by (used in) operating activities	640,805		(1,490,277)		305,867		(543,605)
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements, net of disposals	(28,388)		—		—		(28,388)
Acquisitions, net of cash acquired	(301,658)		—		—		(301,658)
Net cash used in investing activities	(330,046)		—		—		(330,046)
Cash flows from financing activities:

Proceeds from Credit Facility	940,000		—		—		940,000
Proceeds from senior notes	488,915		—		—		488,915
Repayments of Credit Facility	(910,000)		—		—		(910,000)

Dividends and distributions	(608,220)		—		—		(608,220)



Stock option exercises	14,531		—		—		14,531
Taxes paid related to net share settlement of equity awards	(194,223)		—		—		(194,223)
Other financing activities	2,457		—		—		2,457
Allocable to redeemable and non-controlling interests in Consolidated Funds:
Contributions from redeemable and non-controlling interests in Consolidated Funds	—		362,752		(64,106)		298,646
Distributions to non-controlling interests in Consolidated Funds	—		(227,886)		123,454		(104,432)
Borrowings under loan obligations by Consolidated Funds	—		1,120,680		—		1,120,680
Repayments under loan obligations by Consolidated Funds	—		(121,273)		—		(121,273)
Net cash provided by (used in) financing activities	(266,540)		1,134,273		59,348		927,081
Effect of exchange rate changes	(26,374)		(9,211)		—		(35,585)
Net change in cash and cash equivalents	17,845		(365,215)		365,215		17,845
Cash and cash equivalents, beginning of period	343,655		1,049,191		(1,049,191)		343,655
Cash and cash equivalents, end of period	$	361,500	$	683,976	$	(683,976)	$	361,500
Supplemental disclosure of non-cash financing activities:
Issuance of Class A common stock in connection with acquisitions	$	12,835	$	—	$	—	$	12,835

Table of Contents

Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)


	Nine months ended September 30, 2021
	Consolidated Company Entities		Consolidated Funds		Eliminations		Consolidated
Cash flows from operating activities:
Net income	$	550,087	$	111,466	$	(9,211)	$	652,342
Adjustments to reconcile net income to net cash provided by (used in) operating activities	(28,467)		—		99,600		71,133







Adjustments to reconcile net income to net cash used in operating activities allocable to non-controlling interests in Consolidated Funds	—		(1,697,529)		9,444		(1,688,085)





Cash flows due to changes in operating assets and liabilities	(153,361)		—		3,923		(149,438)





Cash flows due to changes in operating assets and liabilities allocable to non-controlling interest in Consolidated Funds	—		343,253		(1,072,956)		(729,703)




Net cash provided by (used in) operating activities	368,259		(1,242,810)		(969,200)		(1,843,751)
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements, net of disposals	(15,152)		—		—		(15,152)
Acquisitions, net of cash acquired	(1,057,426)		—		—		(1,057,426)
Net cash used in investing activities	(1,072,578)		—		—		(1,072,578)
Cash flows from financing activities:
Net proceeds from issuance of Class A and non-voting common stock	827,430		—		—		827,430
Proceeds from Credit Facility	468,000		—		—		468,000
Proceeds from subordinated notes	450,000		—		—		450,000

Repayments of Credit Facility	(318,000)		—		—		(318,000)
Dividends and distributions	(438,568)		—		—		(438,568)
Series A Preferred Stock dividends	(10,850)		—		—		(10,850)
Redemption of Series A Preferred Stock	(310,000)		—		—		(310,000)
Stock option exercises	27,409		—		—		27,409
Taxes paid related to net share settlement of equity awards	(221,287)		—		—		(221,287)
Other financing activities	1,976		—		—		1,976
Allocable to non-controlling interests in Consolidated Funds:
Contributions from non-controlling interests in Consolidated Funds	—		1,027,454		(107,788)		919,666
Distributions to non-controlling interests in Consolidated Funds	—		(102,701)		17,931		(84,770)
Borrowings under loan obligations by Consolidated Funds	—		1,456,887		—		1,456,887
Repayments under loan obligations by Consolidated Funds	—		(74,909)		—		(74,909)
Net cash provided by financing activities	476,110		2,306,731		(89,857)		2,692,984
Effect of exchange rate changes	(15,899)		(4,864)		—		(20,763)
Net change in cash and cash equivalents	(244,108)		1,059,057		(1,059,057)		(244,108)
Cash and cash equivalents, beginning of period	539,812		522,377		(522,377)		539,812
Cash and cash equivalents, end of period	$	295,704	$	1,581,434	$	(1,581,434)	$	295,704
Supplemental disclosure of non-cash financing activities
Issuance of AOG Units in connection with acquisitions	$	511,069	$	—	$	—	$	511,069

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Ares Management Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

17. SUBSEQUENT EVENTS

The Company evaluated all events or transactions that occurred after September 30, 2022 through the date the unaudited condensed consolidated financial statements were issued. During this period, the Company had the following material subsequent events that require disclosure:

In October 2022, the Company's board of directors declared a quarterly dividend of $0.61 per share of Class A and non-voting common stock payable on December 30, 2022 to common stockholders of record at the close of business on December 16, 2022.

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