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

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

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

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

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

Trends Affecting Our Business

We believe that our disciplined investment philosophy across our distinct but complementary investment groups contributes to the stability of our performance throughout market cycles. For the three months ended September 30, 2022, approximately 95% of our management fees were derived from perpetual capital vehicles and other long-dated funds. Our funds have a stable base of committed capital enabling us to invest in assets with a long-term focus over different points in a market cycle and to take advantage of market volatility. However, our results of operations, including the fair value of our AUM, are affected by a variety of factors, particularly in the United States and Western Europe, including conditions in the global financial markets and the economic and political environments.

Global markets remained volatile during the third quarter, fueled by tightening monetary policies and geopolitical uncertainty, including the conflict in Ukraine and surrounding region. The outlook for future macroeconomic growth remained generally weak, with expectations of further softening of demand. Year-over-year inflation in the U.S. and Europe remained elevated and were further impacted by global supply chain issues and energy trade disruptions. Specifically, the ICE BAML High Yield Master II Index, a high yield bond index, declined 0.7% in the third quarter of 2022 and 14.6% in the year-to-date period. Meanwhile, the Credit Suisse Leveraged Loan Index (“CSLLI”), a leveraged loan index, returned 1.2% in the third quarter and declined 3.3% in the year-to-date period.

In Europe, high yield bonds and leveraged loans performed similarly to their U.S. counterparts. Increasing concerns of potential recession and inflationary pressures put downward pressure on the asset class in Europe. The ICE BAML European Currency High Yield Index declined 0.9% in the quarter and 15.6% in the year-to-date period, while the Credit Suisse Western European Leveraged Loan Index returned 0.8% in the quarter and declined 6.0% in the year-to-date period.

The global equity markets broadly declined during the third quarter with the weakened macroeconomic environment. The S&P 500 Index declined 4.9% in the quarter and 23.9% in the year-to-date period while the MSCI All Country World Index ex USA declined 9.9% in the quarter and 26.5% for the year-to-date period.

The private equity markets experienced heightened volatility that is expected to continue in the near-term. Continued asset selectivity, portfolio construction, portfolio diversification and a differentiated view to drive value creation are instrumental in delivering attractive returns to investors. Recent trends have had a more pronounced negative impact on certain industries, including the energy and retail industries, which are industries in which some of our funds have made investments. As of September 30, 2022, approximately 2% of our total AUM was invested in the energy sector (including oil and gas exploration and midstream investments) and approximately 2% in the retail sector.

The commercial real estate markets continued to be impacted by the macroeconomic environment, particularly the effect of rapidly rising interest rates on the asset class. Given the rise in interest rates by central banks globally, property valuations are beginning to show early signs of the cycle turning, with capitalization rate compressions waning and in certain cases yields widening. However, we believe some of these market trends will be offset by continued strong fundamentals, such as occupancy and rental rates, in certain property types, including multifamily and industrial. The FTSE EPRA/NAREIT

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Developed Europe and the FTSE NAREIT All Equity REITs indices declined 16.4% and 10.8%, respectively, for the quarter and declined 39.4% and 27.9%, respectively, for the year-to-date period.

We believe our portfolios across all strategies are well positioned for a rising interest rate environment. On a market value basis, approximately 90% of our debt assets and 59% of our total assets were floating rate instruments as of September 30, 2022.

Managing Business Performance

Operating Metrics

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

Assets Under Management

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

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


	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total AUM
Balance at 6/30/2022	$	201,911	$	33,412	$	62,577	$	23,892	$	12,521	$	334,313

Net new par/equity commitments	3,684		1,337		2,166		441		1,108		8,736
Net new debt commitments	3,702		—		404		—		1,372		5,478
Capital reductions	(547)		(2)		(224)		—		—		(773)
Distributions	(1,646)		(82)		(511)		(1,084)		(1,118)		(4,441)
Redemptions	(329)		—		(180)		—		—		(509)
Change in fund value	(2,295)		601		763		(460)		3		(1,388)
Balance at 9/30/2022	$	204,480	$	35,266	$	64,995	$	22,789	$	13,886	$	341,416


	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total AUM
Balance at 6/30/2021	$	167,587	$	26,910	$	23,547	$	19,476	$	10,366	$	247,886
Acquisitions	—		—		13,719		—		—		13,719
Net new par/equity commitments	9,050		1,653		2,401		1,130		213		14,447
Net new debt commitments	5,533		200		250		—		—		5,983
Capital reductions	(381)		(2)		(41)		—		(29)		(453)
Distributions	(944)		(1,133)		(1,065)		(535)		202		(3,475)
Redemptions	(267)		—		(28)		—		—		(295)
Change in fund value	655		1,334		1,452		672		84		4,197
Balance at 9/30/2021	$	181,233	$	28,962	$	40,235	$	20,743	$	10,836	$	282,009





	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total AUM
Balance at 12/31/2021	$	192,712	$	33,404	$	45,919	$	22,119	$	11,623	$	305,777
Acquisitions	—		—		8,184		199		—		8,383
Net new par/equity commitments	13,216		2,137		8,589		2,386		2,725		29,053
Net new debt commitments	10,225		—		2,953		—		1,372		14,550
Capital reductions	(1,001)		(206)		(521)		—		(5)		(1,733)
Distributions	(3,481)		(602)		(2,526)		(2,209)		(1,443)		(10,261)
Redemptions	(1,134)		—		(398)		—		—		(1,532)
Change in fund value	(6,057)		533		2,795		294		(386)		(2,821)
Balance at 9/30/2022	$	204,480	$	35,266	$	64,995	$	22,789	$	13,886	$	341,416


	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total AUM
Balance at 12/31/2020	$	145,472	$	23,954	$	18,293	$	—	$	9,261	$	196,980
Acquisitions	—		—		13,719		19,513		—		33,232
Net new par/equity commitments	24,999		1,704		5,337		1,231		1,393		34,664
Net new debt commitments	13,496		200		2,655		—		29		16,380
Capital reductions	(2,491)		(7)		(273)		—		(29)		(2,800)
Distributions	(2,504)		(2,827)		(2,062)		(659)		(178)		(8,230)
Redemptions	(1,242)		—		(35)		—		—		(1,277)
Change in fund value	3,503		5,938		2,601		658		360		13,060
Balance at 9/30/2021	$	181,233	$	28,962	$	40,235	$	20,743	$	10,836	$	282,009

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


			AUM: $341.4						AUM: $282.0


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

(1) Includes $14.0 billion and $8.5 billion of AUM of funds from which we indirectly earn management fees as of September 30, 2022 and 2021, respectively and includes $3.4 billion and $3.1 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021, respectively.

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

Fee Paying Assets Under Management

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

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


	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total
Balance at 6/30/2022	$	129,723	$	17,691	$	39,231	$	17,554	$	7,092	$	211,291

Commitments	2,377		—		1,133		412		634		4,556
Subscriptions/deployment/increase in leverage	6,561		1,486		835		96		820		9,798
Capital reductions	(505)		—		—		—		(8)		(513)
Distributions	(1,657)		(206)		(566)		(221)		(935)		(3,585)
Redemptions	(471)		—		(180)		—		—		(651)
Change in fund value	(1,737)		(3)		(235)		(170)		(153)		(2,298)
Change in fee basis	—		(14)		3		49		—		38
Balance at 9/30/2022	$	134,291	$	18,954	$	40,221	$	17,720	$	7,450	$	218,636


	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total
Balance at 6/30/2021	$	99,588	$	15,007	$	15,542	$	16,927	$	6,621	$	153,685
Acquisitions	—		—		7,155		—		—		7,155
Commitments	2,864		1,427		1,647		278		233		6,449
Subscriptions/deployment/increase in leverage	6,095		576		1,464		7		379		8,521
Capital reductions	(335)		—		—		—		(121)		(456)
Distributions	(1,468)		(515)		(669)		(73)		(273)		(2,998)
Redemptions	(296)		—		(28)		—		—		(324)
Change in fund value	(46)		5		588		83		53		683
Change in fee basis	—		(6)		(5)		(37)		—		(48)
Balance at 9/30/2021	$	106,402	$	16,494	$	25,694	$	17,185	$	6,892	$	172,667



	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total
Balance at 12/31/2021	$	117,390	$	16,689	$	28,615	$	18,364	$	6,787	$	187,845
Acquisitions	—		—		4,855		131		—		4,986
Commitments	8,591		—		5,394		1,919		2,514		18,418
Subscriptions/deployment/increase in leverage	21,894		3,699		3,266		415		1,810		31,084
Capital reductions	(3,283)		—		(91)		—		(242)		(3,616)
Distributions	(4,212)		(1,182)		(1,829)		(1,081)		(1,518)		(9,822)
Redemptions	(1,344)		—		(408)		—		—		(1,752)
Change in fund value	(4,744)		(4)		1,243		749		(820)		(3,576)
Change in fee basis	(1)		(248)		(824)		(2,777)		(1,081)		(4,931)
Balance at 9/30/2022	$	134,291	$	18,954	$	40,221	$	17,720	$	7,450	$	218,636


	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total
Balance at 12/31/2020	$	88,017	$	17,493	$	13,931	$	—	$	6,596	$	126,037
Acquisitions	—		—		7,155		16,839		—		23,994
Commitments(1)	6,705		1,579		3,477		378		(66)		12,073
Subscriptions/deployment/increase in leverage	17,178		1,843		2,187		9		1,504		22,721
Capital reductions	(1,618)		—		(32)		—		(302)		(1,952)
Distributions	(3,783)		(1,661)		(1,244)		(73)		(952)		(7,713)
Redemptions	(1,298)		—		(35)		—		—		(1,333)
Change in fund value	1,201		5		567		81		112		1,966
Change in fee basis	—		(2,765)		(312)		(49)		—		(3,126)
Balance at 9/30/2021	$	106,402	$	16,494	$	25,694	$	17,185	$	6,892	$	172,667



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

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


			FPAUM: $218.6						FPAUM: $172.7


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

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

(2)Includes $54.9 billion and $38.3 billion from funds that primarily invest in illiquid strategies as of September 30, 2022 and 2021, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.

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

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

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

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

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


			Credit						Private Equity						Real Assets						Secondaries						Strategic Initiatives

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


			Credit						Private Equity						Real Assets						Secondaries						Strategic Initiatives

As of September 30, 2022, AUM Not Yet Paying Fees includes $45.8 billion of AUM available for future deployment which could generate approximately $441.3 million in potential incremental annual management fees. As of September 30, 2021, AUM Not Yet Paying Fees includes $50.3 billion of AUM available for future deployment which could generate approximately $488.7 million in potential incremental annual management fees.

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


			Credit						Real Assets						Secondaries						Strategic Initiatives

As of September 30, 2022, perpetual capital AUM of $88.9 billion included 76% from commingled funds and 24% from managed accounts. As of September 30, 2021, perpetual capital AUM of $71.5 billion included 72% from commingled funds and 28% from managed accounts. As of September 30, 2022, perpetual capital IGAUM from which we will generate fee

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related performance revenues totaled $24.0 billion, composed of $10.2 billion from managed accounts within the Credit Group and $13.8 billion from commingled funds within the Real Assets Group.

Management Fees By Type

We view the duration of funds we manage as a metric to measure the stability of our future management fees. For the three months ended September 30, 2022 and 2021, 95% and 94%, respectively, of management fees were earned from perpetual capital or long-dated funds. The charts below present the composition of our segment management fees by the initial fund duration:


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

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

Fund Performance Metrics

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

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

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

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Consolidation and Deconsolidation of Ares Funds

Consolidated Funds represented approximately 4% of our AUM as of September 30, 2022, 2% of our management fees and less than 1% of our carried interest and incentive fees for the nine months ended September 30, 2022. As of September 30, 2022, we consolidated 25 CLOs and 10 private funds and one SPAC, and as of September 30, 2021, we consolidated 22 CLOs, 10 private funds and one SPAC.

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

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

We generally deconsolidate funds and CLOs when we are no longer deemed to have a controlling interest in the entity. During the nine months ended September 30, 2022, we did not deconsolidate any entities. During the nine months ended September 30, 2021, we deconsolidated one CLO as a result of a significant change in ownership.

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

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

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Results of Operations

Consolidated Results of Operations

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



	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Revenues
Management fees	$	548,458	$	448,262	$	100,196	22%	$	1,546,350	$	1,135,821	$	410,529	36%
Carried interest allocation	192,186		460,651		(268,465)		(58)	417,779		1,610,707		(1,192,928)		(74)
Incentive fees	8,882		696		8,186		NM	29,979		19,420		10,559		54
Principal investment income	11,582		14,250		(2,668)		(19)	15,521		86,477		(70,956)		(82)
Administrative, transaction and other fees	40,182		24,860		15,322		62	108,090		49,501		58,589		118
Total revenues	801,290		948,719		(147,429)		(16)	2,117,719		2,901,926		(784,207)		(27)
Expenses
Compensation and benefits	425,419		335,569		(89,850)		(27)	1,155,031		837,108		(317,923)		(38)
Performance related compensation	142,934		331,141		188,207		57	316,818		1,208,954		892,136		74
General, administrative and other expenses	319,352		134,453		(184,899)		(138)	562,441		285,471		(276,970)		(97)

Expenses of Consolidated Funds	10,397		12,104		1,707		14	28,364		31,575		3,211		10
Total expenses	898,102		813,267		(84,835)		(10)	2,062,654		2,363,108		300,454		13
Other income (expense)
Net realized and unrealized gains on investments	4,431		8,334		(3,903)		(47)	10,765		18,744		(7,979)		(43)
Interest and dividend income	2,086		1,376		710		52	5,064		6,818		(1,754)		(26)
Interest expense	(18,307)		(11,523)		(6,784)		(59)	(51,174)		(25,125)		(26,049)		(104)
Other income, net	2,601		36,654		(34,053)		(93)	10,194		30,686		(20,492)		(67)
Net realized and unrealized gains (losses) on investments of Consolidated Funds	(30)		34,245		(34,275)		NM	8,031		44,720		(36,689)		(82)
Interest and other income of Consolidated Funds	158,415		104,028		54,387		52	396,080		333,745		62,335		19
Interest expense of Consolidated Funds	(112,762)		(61,578)		(51,184)		(83)	(266,028)		(191,577)		(74,451)		(39)
Total other income, net	36,434		111,536		(75,102)		(67)	112,932		218,011		(105,079)		(48)
Income (loss) before taxes	(60,378)		246,988		(307,366)		NM	167,997		756,829		(588,832)		(78)
Income tax expense (benefit)	(11,599)		30,275		41,874		NM	22,272		104,487		82,215		79
Net income (loss)	(48,779)		216,713		(265,492)		NM	145,725		652,342		(506,617)		(78)

Less: Net income attributable to non-controlling interests in Consolidated Funds	16,340		47,370		(31,030)		(66)	48,700		102,255		(53,555)		(52)
Net income (loss) attributable to Ares Operating Group entities	(65,119)		169,343		(234,462)		NM	97,025		550,087		(453,062)		(82)
Less: Net income attributable to redeemable interest in Ares Operating Group entities	93		324		(231)		(71)	35		693		(658)		(95)
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities	(29,666)		84,293		(113,959)		NM	46,942		264,646		(217,704)		(82)
Net income (loss) attributable to Ares Management Corporation	(35,546)		84,726		(120,272)		NM	50,048		284,748		(234,700)		(82)
Less: Series A Preferred Stock dividends paid	—		—		—		—	—		10,850		(10,850)		(100)
Less: Series A Preferred Stock redemption premium	—		—		—		—	—		11,239		11,239		100
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders	$	(35,546)	$	84,726	(120,272)		NM	$	50,048	$	262,659	(212,611)		(81)

NM - Not Meaningful

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Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021

Consolidated Results of Operations of the Company

Management Fees. Management fees increased by $100.2 million, or 22%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $410.5 million, or 36%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase was primarily driven by higher FPAUM from capital deployment in direct lending funds. The Landmark Acquisition, which was completed on June 2, 2021, contributed additional fees of $80.1 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Funds from the Black Creek Acquisition, which was completed on July 1, 2021, contributed additional fees of $17.1 million and $76.9 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021 primarily driven by additional capital raised in the non-traded REITs and also fees generated for the full period for the nine months ended September 30, 2022. The Infrastructure Debt Acquisition, which was completed on February 10, 2022, contributed additional fees of $10.7 million and $25.3 million for the three and nine months ended September 30, 2022, respectively. For detail regarding the fluctuations of management fees within each of our segments see “—Results of Operations by Segment.”

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Carried Interest Allocation. Carried interest allocation decreased by $268.5 million, or 58%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $1,192.9 million, or 74%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The activity was principally composed of the following ($ in millions):


	Three months ended September 30, 2022		Primary Drivers	Three months ended September 30, 2021		Primary Drivers
Credit funds	$	43.0	Primarily from two direct lending funds with $13.3 billion of IGAUM generating returns in excess of their hurdle rates. Ares Capital Europe V L.P. (“ACE V”) generated $17.6 million of carried interest allocation driven by net investment income on an increasing invested capital base. Ares Capital Europe IV, L.P. (“ACE IV”) generated carried interest allocation of $12.5 million, driven by net investment income during the period.	$	92.6	Primarily from four direct lending funds and one alternative credit fund with $16.1 billion of IGAUM generating returns in excess of their hurdle rates. Ares Private Credit Solutions, L.P. (“PCS”) and ACE IV generated carried interest allocation of $11.7 million and $27.5 million, respectively. ACE V also generated $18.0 million of carried interest allocation. The carried interest allocation generated by these funds was driven by net investment income on an increasing invested capital base. Ares Capital Europe III (“ACE III”) generated carried interest allocation of $10.5 million driven by net investment income during the period. Ares Pathfinder Fund, L.P. (“Pathfinder”) generated carried interest allocation of $16.0 million that was driven by market appreciation of various investments.
Private equity funds	130.4		Appreciation across several portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in industries such as retail, healthcare and energy, generated carried interest allocation of $45.1 million from Ares Corporate Opportunities Fund V, L.P. (“ACOF V”), $20.4 million from Ares Corporate Opportunities Fund VI, L.P. (“ACOF VI”), $28.0 million from Ares Special Situations Fund IV, L.P. (“SSF IV”) and $35.6 million from Ares Special Opportunities Fund, L.P. (“ASOF”).	235.4		Market appreciation across several portfolio company investments, primarily operating in the services and technology, retail and healthcare industries, generated carried interest allocation of $141.5 million from ACOF V, $72.5 million from ASOF and $16.9 million from ACOF VI. Market depreciation across several investments led to a reversal of carried interest allocation for Ares Corporate Opportunities Fund IV, L.P. (“ACOF IV”) of $6.9 million, primarily due to a lower stock price for AZEK.
Real assets funds	33.7		Ares Climate Infrastructure Partners, L.P. (“ACIP”) and related vehicles and Ares Energy Investors Fund V, L.P. (“EIF V”) generated carried interest allocation of $30.0 million and $29.8 million, respectively, due to market appreciation of certain investments. Appreciation from properties within Ares U.S. Real Estate Fund VIII, L.P. (“US VIII”), driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $3.5 million. In addition, realized gains from the sale of properties generated carried interest allocation of $6.4 million from Ares U.S. Real Estate Opportunity Fund III, L.P. (“AREOF III”). The activity was partially offset by the reversal of unrealized carried interest of $32.2 million from Ares European Real Estate Fund V, L.P. (“EF V”), driven by a lower stock price for one of its publicly traded investments, and $5.7 million from Ares European Real Estate Fund IV, L.P. (“EF IV”) due to lower valuations of certain properties.	95.4		Market appreciation from properties within real estate equity funds, primarily driven by gains generated across several industrial and multifamily assets, generated carried interest allocation of $11.5 million from US VIII, $35.8 million from Ares U.S. Real Estate Fund IX, L.P (“US IX”), $12.7 million from AREOF III, $11.0 million from EF IV and $13.8 million from EF V. Market depreciation across several investments led to a reversal of carried interest allocation for EIF V of $7.1 million primarily due to a decrease in value of certain energy investments.
Secondaries funds	(15.0)		Depreciation across several investments in Landmark Equity Partners XVI, L.P. (“LEP XVI”), primarily driven by the impact of foreign exchange revaluations on underlying limited partnership interests, led to the reversal of unrealized carried interest of $20.7 million, partially offset by market appreciation of certain investments in Landmark Real Estate Partners VIII, L.P. (“LREP VIII”) that generated carried interest allocation of $11.6 million.	37.7		Market appreciation of certain investments held in LEP XVI and LREP VIII that generated carried interest allocation of $14.1 million and $17.3 million, respectively.
Strategic initiatives funds	0.1		Carried interest allocation generated from Ares SSG Secured Lending Opportunities III, L.P. ("SLO III") primarily driven by higher net investment income.	(0.4)		Reversal driven by the market influence of residential housing lending in Asia on certain investments held in SLO III.
Carried interest allocation	$	192.2		$	460.7

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	Nine months ended September 30, 2022		Primary Drivers	Nine months ended September 30, 2021		Primary Drivers
Credit funds	$	134.5	Primarily from four direct lending funds and one alternative credit fund with $19.7 billion of IGAUM generating returns in excess of their hurdle rates. ACE V and Pathfinder generated carried interest allocation of $53.8 million and $25.9 million, respectively, driven by net investment income on an increasing invested capital base. ACE IV, ACE III and PCS generated carried interest allocation of $32.8 million, $10.2 million and $10.2 million, respectively, primarily driven by net investment income during the period.	$	292.8	Primarily from four direct lending funds and one alternative credit fund with $16.1 billion of IGAUM generating returns in excess of their hurdle rates. PCS and ACE IV generated carried interest allocation of $45.3 million and $84.7 million, respectively. ACE V also generated carried interest allocation of $32.5 million. The carried interest allocation generated by these funds was driven by net investment income on an increasing invested capital base. ACE III generated carried interest allocation of $36.4 million primarily driven by net investment income during the period. In addition, Pathfinder generated carried interest allocation of $43.3 million that was driven by market appreciation of various investments.
Private equity funds	127.7		Appreciation across several portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in industries such as services, technology, retail, healthcare and energy, generated carried interest allocation of $84.8 million from ACOF V, $51.3 million from ACOF VI, $23.6 million from SSF IV and $39.3 million from ASOF. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $24.5 million and $58.6 million from Ares Corporate Opportunities Fund III, L.P. (“ACOF III”) and ACOF IV, respectively, primarily driven by lower stock prices for certain publicly traded investments.	982.6		ACOF IV generated carried interest allocation of $171.1 million primarily due to market appreciation of its investment in AZEK driven by its higher stock price. In addition, market appreciation across several portfolio company investments, primarily operating in the services and technology, retail and healthcare industries, generated carried interest allocation of $532.2 million from ACOF V, $192.4 million from ASOF and $63.9 million from ACOF VI.
Real assets funds	110.8		ACIP and related vehicles and EIF V generated carried interest allocation of $34.1 million and $24.4 million, respectively, due to market appreciation of certain investments. Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $17.6 million from US IX, $15.7 million from US VIII and $9.4 million from Ares U.S. Real Estate Fund X, L.P. (“US X”). In addition, realized gains from the sale of properties generated carried interest allocation of $29.7 million from AREOF III. The activity was partially offset by the reversal of unrealized carried interest of $42.2 million from EF V, driven by a lower stock price for one of its publicly traded investments.	236.3		Market appreciation from properties within real estate equity funds, primarily driven by gains generated across several industrial and multifamily assets, generated carried interest allocation of $33.1 million from US VIII, $61.6 million from US IX, $17.5 million from AREOF III, $10.9 million from EF IV and $61.3 million from EF V.
Secondaries funds	44.6		Market appreciation of certain investments held in LREP VIII that generated carried interest allocation of $37.8 million.	98.9		Market appreciation of certain investments held in LEP XVI and LREP VIII that generated carried interest allocation of $54.6 million and $26.1 million, respectively.
Strategic initiatives funds	0.2		Carried interest allocation generated from SLO III primarily driven by higher net investment income.	0.1		Market appreciation of certain investments held in SLO III.
Carried interest allocation	$	417.8		$	1,610.7

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Incentive Fees. Incentive fees increased by $8.2 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $10.6 million, or 54%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The activity was principally composed of the following ($ in millions):


	Three months ended September 30, 2022		Primary Drivers	Three months ended September 30, 2021		Primary Drivers
Credit funds	$	0.1	Incentive fees generated from a U.S. CLO.	$	0.1	Incentive fees generated from one alternative credit fund.
Real assets funds	8.6		Incentive fees generated from an industrial real estate fund and ACRE.	0.6		Incentive fees generated from ACRE.
Secondaries funds	0.2		Incentive fees generated from APMF.	—		N/A
Incentive fees	$	8.9		$	0.7

	Nine months ended September 30, 2022		Primary Drivers	Nine months ended September 30, 2021		Primary Drivers
Credit funds	$	15.9	Incentive fees generated from three direct lending funds and one alternative credit fund.	$	17.5	Incentive fees generated from one alternative credit fund and one CLO.
Real assets funds	13.5		Incentive fees generated from an industrial real estate fund and ACRE.	1.9		Incentive fees generated from ACRE.
Secondaries funds	0.6		Incentive fees generated from a private equity secondaries fund and APMF.	—		N/A
Incentive fees	$	30.0		$	19.4

Principal Investment Income. Principal investment income decreased by $2.7 million, or 19%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and decreased by $71.0 million, or 82%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The activity for the three and nine months ended September 30, 2022 was primarily due to appreciation of various investments across funds in our infrastructure opportunities and special opportunities strategies. The activity for the nine months ended September 30, 2022 also included dividend income from various investments across funds in our U.S. and European direct lending strategies and realizations from the sale of underlying properties held by funds in our U.S. real estate equity strategy.

The activity for the three and nine months ended September 30, 2021 was driven by market appreciation of several investments in funds within our private equity secondaries, real estate secondaries and special opportunities strategies. The activity for the nine months ended September 30, 2021 also included market appreciation of various investments within our corporate private equity extended value fund and ACOF VI.

Administrative, Transaction and Other Fees. Administrative, transaction and other fees increased by $15.3 million, or 62%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $58.6 million, or 118%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily due to higher property-related fees, such as acquisition, development and property management, and the distribution of fund shares in our non-traded REITs. These fees collectively increased by $13.6 million and $41.2 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. In addition, certain private funds pay administrative fees on invested capital and deployment will result in a higher fee base. Administrative fees from these private funds increased by $1.8 million and $5.2 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. The administrative fees from the funds that were acquired in the Black Creek Acquisition on July 1, 2021 increased by $15.4 million for the nine months ended September 30, 2022 compared to the same period in 2021.

Compensation and Benefits. Compensation and benefits increased by $89.9 million, or 27%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $317.9 million, or 38%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily driven by (i) headcount growth to support the expansion of our business, (ii) strategic initiatives and acquisitions, (iii) higher incentive compensation attributable to improved operating performance and (iv) higher employee commission expense in connection with the sale and distribution of fund shares in our non-traded REITs. Average headcount for the year-to-date period increased by 34% to 2,238 professionals for the 2022 period from 1,674 professionals for the same period in 2021.

Headcount growth attributable to our strategic acquisitions contributed $102.6 million to the increase in salaries and benefits for the nine months ended September 30, 2022 when compared to the same period in 2021, of which the Infrastructure

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Debt Acquisition that closed in the first quarter of 2022 has contributed $4.9 million and $12.7 million in recurring employment related costs for the three and nine months ended September 30, 2022, respectively.

The performance-based, acquisition-related compensation arrangements (“earnouts”) that were established in connection with the Landmark Acquisition, Black Creek Acquisition and Infrastructure Debt Acquisition are based on the achievement of revenue targets for certain funds. As all earnouts are subject to the continued and future services of senior professionals and advisors, they are required to be recorded as compensation expense and recognized ratably over the respective service periods. The revenue targets for the Black Creek earnout were achieved and the maximum contingent payment was recorded during the three months ended September 30, 2022. Compensation expense related to the Black Creek earnout was $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. Compensation expense related to the Infrastructure Debt earnout was $2.8 million and $7.1 million for the three and nine months ended September 30, 2022, respectively. In connection with current fundraising expectations for an acquired Landmark private equity secondaries fund, we determined that the revenue targets on which the Landmark earnout is contingent are not expected to be achieved. This resulted in a reversal of all previously recorded expenses of $36.7 million and $21.0 million for the three and nine months ended September 30, 2022, respectively, compared to compensation expense of $14.7 million and $19.3 million for the three and nine months ended September 30, 2021, respectively. See “Note 9. Commitments and Contingencies” for a further description of the contingent liabilities related to these arrangements.

The following table presents equity compensation expense based on the different types of restricted unit awards ($ in thousands):



	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Non-recurring awards:
Multi-year future grants	$	11,099	$	7,886	$	(3,213)	(41)	$	32,271	$	25,021	$	(7,250)	(29)
Performance-based awards	—		186		186		100	—		20,499		20,499		100
Performance-based awards - accelerated	—		29,415		29,415		100	—		43,426		43,426		100
Other non-recurring awards	1,622		5,099		3,477		68	5,803		17,832		12,029		67
Total non-recurring awards	12,721		42,586		29,865		70	38,074		106,778		68,704		64
Recurring annual awards:
Discretionary awards	24,142		11,986		(12,156)		(101)	69,275		47,938		(21,337)		(45)
Bonus awards	11,255		11,419		164		1	44,054		36,428		(7,626)		(21)
Total recurring annual awards	35,397		23,405		(11,992)		(51)	113,329		84,366		(28,963)		(34)
Equity compensation expense, net	$	48,118	$	65,991	17,873		27	$	151,403	$	191,144	39,741		21

Equity compensation expense decreased by $17.9 million and by $39.7 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. The decreases were primarily attributable to non-recurring equity compensation expense recognized during the three and nine months ended September 30, 2021 related to performance-based awards with market conditions that were granted to certain executive officers in the first quarter of 2021 and to other non-recurring awards with service conditions that substantially vested prior to 2022. The decrease in equity compensation expense was partially offset by the increase in awards granted as part of the recurring annual award programs. Additional multi-year future grants were approved in the first quarter of 2022 with grant dates in 2023, 2024 and 2025. Given that these future restricted units have been communicated to the recipient, we account for these awards as if they have been granted and recognize the compensation expense on a straight-line basis over the service period.

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

Performance Related Compensation. Performance related compensation decreased by $188.2 million, or 57%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $892.1 million, or 74%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Changes in performance related compensation are directly associated with the changes in carried interest allocation and incentive fees described above and may include performance allocations to charitable organizations as part of our philanthropic initiatives.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $184.9 million, or 138%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $277.0 million, or 97%, for the nine months ended September 30, 2022 compared to the nine months ended September 30,

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During the three months ended September 30, 2022, we recognized non-cash impairment charges of $181.6 million to certain intangible assets comprised of i) $86.2 million to the carrying value of the Landmark trade name following our decision to rebrand our secondaries group as Ares Secondaries and to discontinue the ongoing use of the Landmark trade name, ii) $88.4 million to the fair value of a management contract in connection with lower than expected FPAUM resulting from missing fundraising targets for an acquired Landmark private equity secondaries fund and iii) $7.1 million of accelerated amortization expense in connection with the impairment of certain acquired management contracts as a result of returning capital to fund investors sooner than initially planned. See “Note 4. Goodwill and Intangible Assets” for a further description of the impairment of intangible assets.

The Infrastructure Debt Acquisition, which was completed on February 10, 2022, has contributed $6.2 million and $16.0 million in general, administrative and other expenses to the three and nine months ended September 30, 2022, respectively. These expenses increased primarily due to (i) amortization expense of $4.6 million and $12.2 million related to the intangible assets recorded in connection with the acquisition and (ii) certain professional services of $0.9 million and $1.7 million for the three and nine months ended September 30, 2022, respectively. In addition, the Black Creek Acquisition and Landmark Acquisition have collectively contributed to an increase in general, administrative and other expenses of $54.4 million for the first half of 2022 compared to the same period in 2021. These expenses primarily consisted of (i) amortization expense of $33.8 million related to the intangible assets recorded in connection with the acquisitions and (ii) certain recurring operating expenses, including occupancy costs, information services, information technology and office services of $7.1 million.

Excluding the impact from the Black Creek Acquisition, Landmark Acquisition and Infrastructure Debt Acquisition, certain expenses have also increased during the current period, including occupancy costs to support our growing headcount, as well as information services and information technology costs to support the expansion of our business. Collectively, these expenses increased by $4.9 million and $10.3 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Other operating expenses, most notably travel, marketing sponsorships and certain fringe benefits, collectively increased by $11.2 million and $34.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, as travel, marketing and company events have returned to pre-pandemic levels.

Placement fees were $18.3 million for the three months ended September 30, 2022, a decrease of $21.2 million compared to the three months ended September 30, 2021, and $30.7 million for the nine months ended September 30, 2022, a decrease of $17.8 million compared to the nine months ended September 30, 2021. The activity for the three and nine months ended September 30, 2022 was primarily attributable to new commitments to Ares Special Opportunities Fund II, L.P. (“ASOF II”). The activity for the three and nine months ended September 30, 2021 was primarily attributable to new commitments to Ares Private Credit Solutions II, L.P. (“PCS II”) and Ares Senior Direct Lending Fund II, L.P. (“SDL II”).

Acquisition-related costs decreased by $6.4 million for the nine months ended September 30, 2022 compared to the same period in 2021. Acquisition-related costs generally precede a business combination, vary with the complexity of the transaction and may occur even when acquisitions are not successfully completed. The activity for the nine months ended September 30, 2022 was primarily attributable to the Infrastructure Debt Acquisition, whereas the activity for the nine months ended September 30, 2021 was largely composed of the Black Creek Acquisition and Landmark Acquisition, which were collectively larger in terms of size and scope.

Net Realized and Unrealized Gains on Investments. Net realized and unrealized gains on investments decreased by $3.9 million, or 47%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and decreased by $8.0 million, or 43%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The activity for the three and nine months ended September 30, 2022 and 2021 was primarily attributable to unrealized gains from certain strategic initiative investments made in connection with our acquisition of SSG. The activity for the nine months ended September 30, 2022 also included unrealized losses on our investments in the subordinated notes of U.S. CLOs. The CSLLI declined 3.3% for the nine months ended September 30, 2022 compared to a positive return of 4.7% for the nine months ended September 30, 2021. The activity for the three and nine months ended September 30, 2021 was also attributable to unrealized gains on our investments in the subordinated notes of U.S. CLOs.

Interest Expense. Interest expense increased by $6.8 million, or 59%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $26.0 million, or 104%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The issuance of the 2052 Senior Notes in January 2022 increased interest expense by $4.7 million and $12.9 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Higher average interest rates, driven by rising SOFR rates, and a higher average outstanding balance of the Credit Facility in the third quarter of 2022 also contributed to an increase in interest expense of $2.2 million and $3.7 million for the three and nine months ended September 30, 2022, respectively, compared to the same

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periods in the prior year. The issuance of the 2051 Subordinated Notes on the last day of the second quarter of 2021 has also increased interest expense by $9.3 million for the nine months ended September 30, 2022 compared to the same period in 2021.

Other Income, Net. Other income, net decreased by $34.1 million, or 93%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and decreased by $20.5 million, or 67%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Other income, net includes transaction gains (losses) associated with currency fluctuations impacting the revaluation of non-functional currency balances. Transaction gains of $1.9 million and $10.7 million for the three and nine months ended September 30, 2022, respectively, were primarily attributable to the British pound weakening against the Euro. The three and nine months ended September 30, 2021 included transaction gains of $1.3 million and transaction losses of $4.0 million, respectively, primarily attributable to the partial recovery of the Euro in the third quarter of 2021 against the losses incurred in the first half of 2021 from the Euro weakening against the British pound.

Other income, net also includes the change in fair value of a contingent obligation recognized in connection with the Black Creek Acquisition. The purchase agreement with Black Creek contains provisions that required us to record separate contingent consideration liabilities that are (i) dependent on the achievement of revenue targets for certain funds that were acquired in the Black Creek Acquisition and (ii) obligated us to pay the sellers 50% of the incentive fees realized for the non-traded REITs for the year ended December 31, 2021. The revenue targets for the Black Creek earnout were fully achieved and the maximum contingent payment was recorded during the three months ended September 30, 2022. For the three and nine months ended September 30, 2022, we recorded $0.3 million and $1.4 million, respectively, in expense for the revaluation of the contingent obligation related to the achievement of revenue targets compared to $3.0 million in expense for each of the three and nine months ended September 30, 2021. The three and nine months ended September 30, 2021 also included $4.2 million in expense for the revaluation of the contingent obligation related to the 50% portion of incentive fees payable to the sellers. See Note 9. Commitments and Contingencies for a further description of the contingency.

Finally, other income, net for the three and nine months ended September 30, 2021 included a $42.3 million bargain purchase gain from the Black Creek Acquisition. The bargain purchase gain resulted from the fair value of the identifiable tangible and intangible assets that we acquired exceeding the purchase consideration.

Income Tax Expense (Benefit) Income tax expense (benefit) decreased by $41.9 million to a tax benefit of $11.6 million for the three months ended September 30, 2022 and by $82.2 million, or 79%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decreases were attributable to the net losses allocable to AMC during the three months ended September 30, 2022*.* The calculation of income taxes is sensitive to any changes in weighted average daily ownership. The weighted average daily ownership for AMC common stockholders increased from 58.5% and 58.3% for the three and nine months ended September 30, 2021 to 59.7% and 59.6% for the three and nine months ended September 30, 2022. The changes in ownership were primarily driven by the issuance of Class A common stock in connection with stock option exercises and vesting of restricted stock awards. The increase in the weighted average daily ownership for the AMC common stockholders was partially offset by the issuance of AOG Units in connection with the Landmark Acquisition and the Black Creek Acquisition that increased the ownership of AOG Units not held by AMC.

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

Net income (loss) attributable to non-controlling interests in AOG entities is generally allocated based on the weighted average daily ownership of the other AOG unitholders, except for income (loss) generated from certain joint venture partnerships. Net income (loss) is allocated to other strategic distribution partners with whom we have established joint ventures based on the respective ownership percentages and based on the activity of certain membership interests. Net income of $5.5 million, $6.5 million and $4.9 million, $7.9 million for the three and nine months ended September 30, 2022 and 2021, respectively, was allocated based on ownership percentages of the strategic distribution partners and the activity of those membership interests.

Net income (loss) attributable to non-controlling interests in AOG entities decreased by $114.0 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $217.7 million, or 82%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The changes in the comparative periods are a result of the respective changes in income before taxes and weighted average daily ownership. The weighted average daily ownership for the non-controlling AOG unitholders decreased from 41.5% and 41.7% for the three and nine months ended September 30, 2021 to 40.3% and 40.4% for the three and nine months ended September 30, 2022.

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Consolidated Results of Operations of the Consolidated Funds

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



	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Expenses of the Consolidated Funds	$	(10,397)	$	(12,104)	$	1,707	14%	$	(28,364)	$	(31,575)	$	3,211	10%
Net realized and unrealized gains (losses) on investments of Consolidated Funds	(30)		34,245		(34,275)		NM	8,031		44,720		(36,689)		(82)
Interest and other income of Consolidated Funds	158,415		104,028		54,387		52	396,080		333,745		62,335		19
Interest expense of Consolidated Funds	(112,762)		(61,578)		(51,184)		(83)	(266,028)		(191,577)		(74,451)		(39)
Income before taxes	35,226		64,591		(29,365)		(45)	109,719		155,313		(45,594)		(29)
Income tax expense of Consolidated Funds	(149)		(2)		(147)		NM	(197)		(76)		(121)		(159)
Net income	35,077		64,589		(29,512)		(46)	109,522		155,237		(45,715)		(29)
Less: Revenues attributable to Ares Management Corporation eliminated upon consolidation	13,484		21,784		(8,300)		(38)	69,487		58,072		11,415		20
Less: Other income (expense), net attributable to Ares Management Corporation eliminated upon consolidation	5,267		(4,565)		9,832		NM	(8,424)		(5,090)		(3,334)		(66)
Add: General, administrative and other expense attributable to Ares Management Corporation eliminated upon consolidation	14		—		(14)		NM	241		—		(241)		NM
Net income attributable to non-controlling interests in Consolidated Funds	$	16,340	$	47,370	(31,030)		(66)	$	48,700	$	102,255	(53,555)		(52)

NM - Not Meaningful

The results of operations of the Consolidated Funds primarily represents activity from certain CLOs that we are deemed to control. Expenses primarily reflect professional fees that were incurred as a result of debt issuance costs related to the issuance of new, refinanced or restructured CLOs. These fees were expensed in the period incurred, as CLO debt is recorded at fair value on our Consolidated Statements of Financial Condition. As of September 30, 2022 and September 30, 2021, we consolidated 25 and 22 CLOs, respectively. For the three and nine months ended September 30, 2022, expenses were primarily driven by professional fees incurred from the issuance of two new U.S. CLOs during 2022. For the three and nine months ended September 30, 2021, expenses were primarily driven by professional fees incurred from the issuance of two new U.S. CLOs and the restructure of the European CLOs legal entities. Net realized and unrealized gains fluctuated for the comparative periods, primarily due to a significant change in the value of loans held by the CLOs. The CSLLI declined 3.3% for the nine months ended September 30, 2022 compared to a positive return of 4.7% for the nine months ended September 30, 2021. The increases in interest and other income and interest expense were attributable to the consolidation of three CLOs subsequent to the second quarter of 2021 and one CLO that closed during the last week of the second quarter of 2021.

Revenues, other income (expense), net and general, administrative and other expense attributable to AMC represents management fees, incentive fees, principal investment income, administrative, transaction and other fees and general, administrative and other expense that are attributable to AMC’s proportional share in the activity of the Consolidated Funds and is eliminated from the respective components of AMC’s results upon consolidation. The decrease in revenues attributable to AMC for the three months ended September 30, 2022 compared to the same period in 2021 was primarily attributable to lower principal investment income from a fund invested in insurance companies, while the increase for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily attributable to higher principal investment income from a fund invested in insurance companies and an Asian corporate private equity fund.

Other income (expense), net attributable to AMC for the three and nine months ended September 30, 2022 and 2021 was primarily attributable to unrealized losses on our investments in the subordinated notes of U.S. CLOs. Other income (expense), net attributable to AMC for the three months ended September 30, 2022 and 2021 also included unrealized losses on investments from our SPAC.

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Segment Analysis

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

Non-GAAP Financial Measures

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

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

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



	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Fee Related Earnings:
Credit Group	$	232,918	$	175,957	$	56,961	32%	$	650,801	$	493,214	$	157,587	32%
Private Equity Group	18,183		28,983		(10,800)		(37)	54,214		59,258		(5,044)		(9)
Real Assets Group	46,382		32,450		13,932		43	134,844		69,583		65,261		94
Secondaries Group	22,214		26,516		(4,302)		(16)	80,111		34,266		45,845		134
Strategic Initiatives	8,905		9,456		(551)		(6)	24,924		28,025		(3,101)		(11)
Operations Management Group	(95,444)		(90,803)		(4,641)		(5)	(286,287)		(225,369)		(60,918)		(27)
Fee Related Earnings	$	233,158	$	182,559	50,599		28	$	658,607	$	458,977	199,630		43
Realized Income:
Credit Group	$	243,710	$	182,152	$	61,558	34%	$	690,736	$	532,359	$	158,377	30%
Private Equity Group	14,204		40,050		(25,846)		(65)	47,631		91,035		(43,404)		(48)
Real Assets Group	55,630		34,610		21,020		61	166,595		87,049		79,546		91
Secondaries Group	20,884		26,788		(5,904)		(22)	80,245		34,535		45,710		132
Strategic Initiatives	4,757		6,509		(1,752)		(27)	15,708		23,234		(7,526)		(32)
Operations Management Group	(95,743)		(91,233)		(4,510)		(5)	(288,211)		(225,596)		(62,615)		(28)
Realized Income	$	243,442	$	198,876	44,566		22	$	712,704	$	542,616	170,088		31

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


	Three months ended 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
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	(170,789)		(415,317)		(280,290)		(1,381,697)
Total performance related compensation—unrealized	124,466		296,044		207,115		1,022,393
Total net investment (income) loss—unrealized	(1,826)		(5,407)		110		(57,112)
Realized Income	243,442		198,876		712,704		542,616
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) loss—realized	842		(4,926)		(1,642)		(20,227)
Fee Related Earnings	$	233,158	$	182,559	$	658,607	$	458,977

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

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

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

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Results of Operations by Segment

Credit Group—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021

Fee Related Earnings:

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


	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Management fees	$	345,871	$	271,591	$	74,280	27%	$	972,201	$	764,702	$	207,499	27%
Fee related performance revenues	—		—		—		—	12,628		1,331		11,297		NM
Other fees	8,143		5,798		2,345		40	20,528		18,494		2,034		11
Compensation and benefits	(102,839)		(86,502)		(16,337)		(19)	(301,822)		(253,597)		(48,225)		(19)
General, administrative and other expenses	(18,257)		(14,930)		(3,327)		(22)	(52,734)		(37,716)		(15,018)		(40)
Fee Related Earnings	$	232,918	$	175,957	56,961		32	$	650,801	$	493,214	157,587		32

NM - Not Meaningful

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

Management fees on existing funds increased primarily from deployment of capital with Pathfinder, ACE V and PCS II collectively generating additional fees of $20.3 million and $66.5 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. Management fees from SDL II, which launched at the end of the second quarter of 2021, increased by $9.6 million and $26.9 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. The launch of our

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open-end core alternative credit fund in the third quarter of 2021 also contributed to the increase in management fees, generating additional fees of $5.2 million and $9.1 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Management fees from ARCC, excluding Part I Fees described below, increased by $12.6 million and $42.3 million for the three and nine months ended September 30, 2022, respectively, primarily due to an increase in the average size of ARCC's portfolio. The remaining increases in management fees from funds in existence in both periods was primarily driven by deployment of capital in other direct lending funds and SMAs. Management fees from CLOs also increased primarily due to the net addition of seven and six CLOs for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

Part I Fees increased for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 primarily due to an increase in pre-incentive fee net investment income generated by ARCC and CADC, driven by an increase in the average size of their portfolios as well as the impact of rising interest rates.

The decreases in effective management fee rate for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 were primarily driven by growth in lower fee generating strategies such as CLOs and our alternative credit funds, as well as deployment in Ares Senior Direct Lending Fund L.P. (“SDL”) and SDL II that have fee rates below 1.00%.

Fee Related Performance Revenues. Fee related performance revenues increased by $11.3 million to $12.6 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.The increase was primarily attributable to fee related performance revenues from three direct lending funds for the nine months ended September 30, 2022 and one direct lending fund for the nine months ended September 30, 2021. We expect the majority of our fee related performance revenues to be recognized in the fourth quarter in connection with the typical measurement period end date of each applicable fund’s performance against the annual performance hurdles.

Compensation and Benefits. Compensation and benefits increased by $16.3 million, or 19%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $48.2 million, or 19%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily driven by higher incentive compensation attributable to increased fee revenues and improved operating performance. The increase in compensation and benefits for the three months ended September 30, 2022 compared to the same period in 2021 was partially offset by a decrease in payroll taxes of $3.9 million primarily attributable to the vesting of non-recurring equity compensation awards in the third quarter of 2021. The nine months ended September 30, 2022 also included fee related performance compensation of $7.4 million from direct lending SMAs from the first quarter of 2022 and payroll related taxes of $7.2 million primarily attributable to the increase in restricted unit awards that vested in the first quarter of 2022.

Average headcount for the year-to-date period increased by 3% to 444 investment and investment support professionals for the third quarter of 2022 from 429 professionals for the same period in 2021 as we continued to add professionals to support our growing U.S. and European direct lending and alternative credit platforms.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $3.3 million, or 22%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $15.0 million, or 40%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Travel, marketing sponsorships and certain fringe benefits collectively increased by $2.1 million and $7.5 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, as marketing and company events returned to pre-pandemic levels and travel continues to ramp up toward historical levels. In connection with our fundraising efforts, amortization of placement fees has increased by $4.4 million for the nine months ended September 30, 2022 compared to the same period in 2021. The increases were primarily associated with new commitments to PCS II and SDL II.

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Realized Income:

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


	Three months ended September 30,				Favorable (Unfavorable)				Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change		2022		2021		$ Change		% Change
Fee Related Earnings	$	232,918	$	175,957	$	56,961	32	%	$	650,801	$	493,214	$	157,587	32%
Performance income—realized	3,045		6,332		(3,287)		(52)		58,941		76,924		(17,983)		(23)
Performance related compensation—realized	(1,737)		(3,079)		1,342		44		(35,675)		(48,619)		12,944		27
Realized net performance income	1,308		3,253		(1,945)		(60)		23,266		28,305		(5,039)		(18)
Investment income—realized	4,495		618		3,877		NM		6,519		1,858		4,661		251
Interest and other investment income—realized	8,893		4,716		4,177		89		21,006		14,354		6,652		46
Interest expense	(3,904)		(2,392)		(1,512)		(63)		(10,856)		(5,372)		(5,484)		(102)
Realized net investment income	9,484		2,942		6,542		222		16,669		10,840		5,829		54
Realized Income	$	243,710	$	182,152	61,558		34		$	690,736	$	532,359	158,377		30

NM - Not Meaningful

Realized net performance income for the nine months ended September 30, 2022 and 2021 was primarily attributable to tax distributions from ACE III, ACE IV and PCS. Realized net performance income for the nine months ended September 30, 2022 also included incentive fees from an alternative credit fund, while the nine months ended September 30, 2021 also included incentive fees from an alternative credit fund and a CLO.

Realized net investment income for the three and nine months ended September 30, 2022 and 2021 was primarily attributable to interest income generated from our CLO investments. Realized net investment income for the three and nine months ended September 30, 2022 also included realizations from the settlement of forward contracts entered into to hedge our exposure to foreign currency fluctuations, primarily from the Euro, and included distributions from a U.S. direct lending fund and a European direct lending fund. In addition, the nine months ended September 30, 2022 included liquidating distributions from a European direct lending fund. Interest expense, which is allocated based on the cost basis of investments, increased over the comparative periods primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.

Credit Group—Performance Income

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


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


	Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income		Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income
ACE III	$	102,777	$	61,666	$	41,111	$	99,551	$	59,731	$	39,820
ACE IV	161,710		100,260		61,450		146,580		90,879		55,701
ACE V	105,232		63,139		42,093		51,482		30,889		20,593
PCS	117,483		69,419		48,064		132,050		77,780		54,270
PCS II	—		—		—		9,053		5,345		3,708
Other credit funds	182,996		130,415		52,581		156,717		105,064		51,653
Total Credit Group	$	670,198	$	424,899	$	245,299	$	595,433	$	369,688	$	225,745

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












		As of December 31, 2021		Activity during the period						As of September 30, 2022
	Waterfall Type	Accrued Performance Income		Change in Unrealized		Realized		Foreign Exchange and Other Adjustments		Accrued Performance Income
Accrued Carried Interest
ACE III	European	$	99,551	$	10,176	$	(7,448)	$	498	$	102,777
ACE IV	European	146,580		32,758		(18,779)		1,151		161,710
ACE V	European	51,482		53,750		—		—		105,232
PCS	European	132,050		10,209		(24,143)		(633)		117,483
PCS II	European	9,053		(8,908)		—		(145)		—
Other credit funds	European	156,453		36,571		(5,310)		(4,968)		182,746
Other credit funds	American	264		(14)		—		—		250
Total accrued carried interest		595,433		134,542		(55,680)		(4,097)		670,198

Other credit funds	Incentive	—		3,261		(3,261)		—		—
Total Credit Group		$	595,433	$	137,803	$	(58,941)	$	(4,097)	$	670,198

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Credit Group—Assets Under Management

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


	Syndicated Loans		High Yield		Multi-Asset Credit		Alternative Credit		U.S. Direct Lending		European Direct Lending		Total Credit Group
Balance at 6/30/2022	$	33,537	$	3,197	$	5,379	$	19,249	$	92,710	$	47,839	$	201,911

Net new par/equity commitments	347		36		74		1,917		1,249		61		3,684
Net new debt commitments	403		—		—		—		3,299		—		3,702
Capital reductions	(53)		—		—		(45)		(433)		(16)		(547)
Distributions	(31)		(4)		3		(607)		(728)		(279)		(1,646)
Redemptions	(76)		(134)		(136)		100		(83)		—		(329)
Change in fund value	(310)		(11)		(47)		(269)		242		(1,900)		(2,295)
Balance at 9/30/2022	$	33,817	$	3,084	$	5,273	$	20,345	$	96,256	$	45,705	$	204,480


	Syndicated Loans		High Yield		Multi-Asset Credit		Alternative Credit		U.S. Direct Lending		European Direct Lending		Total Credit Group
Balance at 6/30/2021	$	29,306	$	3,152	$	3,929	$	14,493	$	68,586	$	48,121	$	167,587

Net new par/equity commitments	151		284		427		3,173		3,795		1,220		9,050
Net new debt commitments	1,010		—		100		—		3,670		753		5,533
Capital reductions	(339)		—		—		—		(43)		1		(381)
Distributions	(21)		—		14		(273)		(392)		(272)		(944)
Redemptions	(82)		(81)		(65)		—		(39)		—		(267)
Change in fund value	(90)		36		56		123		776		(246)		655
Balance at 9/30/2021	$	29,935	$	3,391	$	4,461	$	17,516	$	76,353	$	49,577	$	181,233




	Syndicated Loans		High Yield		Multi-Asset Credit		Alternative Credit		U.S. Direct Lending		European Direct Lending		Total Credit Group
Balance at 12/31/2021	$	31,491	$	3,632	$	5,212	$	17,424	$	85,849	$	49,104	$	192,712

Net new par/equity commitments	972		259		857		4,806		5,930		392		13,216
Net new debt commitments	2,970		—		—		—		6,101		1,154		10,225
Capital reductions	(171)		—		—		(45)		(757)		(28)		(1,001)
Distributions	(80)		(9)		13		(881)		(1,679)		(845)		(3,481)
Redemptions	(257)		(308)		(197)		(199)		(173)		—		(1,134)
Change in fund value	(1,108)		(490)		(612)		(760)		985		(4,072)		(6,057)
Balance at 9/30/2022	$	33,817	$	3,084	$	5,273	$	20,345	$	96,256	$	45,705	$	204,480


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

Net new par/equity commitments	754		609		1,388		4,968		12,395		4,885		24,999
Net new debt commitments	2,306		—		100		—		7,966		3,124		13,496
Capital reductions	(603)		—		—		—		(1,801)		(87)		(2,491)
Distributions	(81)		—		8		(467)		(1,129)		(835)		(2,504)
Redemptions	(249)		(237)		(206)		(415)		(124)		(11)		(1,242)
Change in fund value	(159)		156		218		533		2,530		225		3,503
Balance at 9/30/2021	$	29,935	$	3,391	$	4,461	$	17,516	$	76,353	$	49,577	$	181,233

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


			AUM: $204.5						AUM: $181.2


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

(1) Includes $14.0 billion and $8.5 billion of AUM of funds from which we indirectly earn management fees as of September 30, 2022 and 2021, respectively, and includes $1.0 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021.

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Credit Group—Fee Paying AUM

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


	Syndicated Loans		High Yield		Multi-Asset Credit		Alternative Credit		U.S. Direct Lending		European Direct Lending		Total Credit Group
Balance at 6/30/2022	$	32,121	$	3,197	$	4,904	$	12,413	$	51,769	$	25,319	$	129,723

Commitments	1,117		36		89		694		441		—		2,377
Subscriptions/deployment/increase in leverage	—		—		—		1,904		2,355		2,302		6,561
Capital reductions	(53)		—		(12)		—		(113)		(327)		(505)
Distributions	(21)		(4)		(14)		(480)		(977)		(161)		(1,657)
Redemptions	(76)		(134)		(144)		100		(83)		(134)		(471)
Change in fund value	(287)		(11)		(48)		(359)		146		(1,178)		(1,737)

Balance at 9/30/2022	$	32,801	$	3,084	$	4,775	$	14,272	$	53,538	$	25,821	$	134,291


	Syndicated Loans		High Yield		Multi-Asset Credit		Alternative Credit		U.S. Direct Lending		European Direct Lending		Total Credit Group
Balance at 6/30/2021	$	28,211	$	3,149	$	3,423	$	7,916	$	36,101	$	20,788	$	99,588

Commitments	1,099		284		514		303		664		—		2,864
Subscriptions/deployment/increase in leverage	19		—		41		391		3,153		2,491		6,095
Capital reductions	(290)		—		—		—		(36)		(9)		(335)
Distributions	(15)		—		(34)		(201)		(1,108)		(110)		(1,468)
Redemptions	(82)		(77)		(61)		—		(40)		(36)		(296)
Change in fund value	(128)		35		53		(90)		390		(306)		(46)

Balance at 9/30/2021	$	28,814	$	3,391	$	3,936	$	8,319	$	39,124	$	22,818	$	106,402




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

Commitments	3,923		259		954		1,597		1,858		—		8,591
Subscriptions/deployment/increase in leverage	1		—		5		5,471		9,675		6,742		21,894
Capital reductions	(171)		—		(41)		(25)		(1,507)		(1,539)		(3,283)
Distributions	(50)		(9)		(42)		(795)		(2,802)		(514)		(4,212)
Redemptions	(257)		(308)		(204)		(143)		(173)		(259)		(1,344)
Change in fund value	(972)		(490)		(611)		(574)		359		(2,456)		(4,744)

Balance at 9/30/2022	$	32,801	$	3,084	$	4,775	$	14,272	$	53,538	$	25,821	$	134,291


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

Commitments	2,265		609		1,194		1,119		1,518		—		6,705
Subscriptions/deployment/increase in leverage	714		—		356		1,694		7,463		6,951		17,178
Capital reductions	(554)		—		(18)		—		(790)		(256)		(1,618)
Distributions	(37)		—		(68)		(441)		(2,656)		(581)		(3,783)
Redemptions	(249)		(234)		(189)		(294)		(99)		(233)		(1,298)
Change in fund value	(496)		155		204		(90)		1,351		77		1,201

Balance at 9/30/2021	$	28,814	$	3,391	$	3,936	$	8,319	$	39,124	$	22,818	$	106,402

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


			FPAUM: $134.3						FPAUM: $106.4


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

(1)Includes $29.9 billion and $24.6 billion from funds that primarily invest in illiquid strategies as of September 30, 2022 and 2021, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.

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Credit Group—Fund Performance Metrics as of September 30, 2022

ARCC contributed approximately 41% of the Credit Group’s total management fees for the nine months ended September 30, 2022. In addition, eight other significant funds, ACE III, ACE IV, ACE V, CADC, PCS, PCS II, SDL and SDL II, collectively contributed approximately 27% of the Credit Group’s management fees for the nine months ended September 30, 2022.

The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group as of September 30, 2022 ($ in millions):


				Returns(%)
	Year of Inception	AUM		Current Quarter		Year-To-Date		Since Inception(1)		Primary Investment Strategy
Fund		Gross		Net	Gross	Net	Gross	Net
ARCC(2)	2004	$	25,654	N/A	1.1	N/A	5.1	N/A	11.9	U.S. Direct Lending
CADC(3)	2017	4,096		N/A	1.0	N/A	(2.2)	N/A	5.2	U.S. Direct Lending

(1)Since inception returns are annualized.

(2)Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Net returns are calculated using the fund's NAV and assume dividends are reinvested at the closest quarter-end NAV to the relevant quarterly ex-dividend dates. Additional information related to ARCC can be found in its filings with the SEC, which are not part of this report.

(3)Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to CADC can be found in its filings with the SEC, which are not part of this report.

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The following table presents the performance data of our significant drawdown funds as of September 30, 2022 ($ in millions):


	Year of Inception	AUM		Original Capital Commitments		Capital Invested to Date			Realized Value(1)			Unrealized Value(2)			Total Value			MoIC		IRR(%)		Primary Investment Strategy
Fund								Gross(3)			Net(4)			Gross(5)			Net(6)
Funds Harvesting Investments
ACE III(7)	2015	$	4,613	$	2,822	$	2,249		$	1,090		$	2,179		$	3,269		1.6x	1.4x	11.7	8.5	European Direct Lending
PCS	2017	3,535		3,365		2,653			1,580			1,938			3,518			1.4x	1.3x	12.1	8.6	U.S. Direct Lending
SDL Unlevered	2018	5,468		922		872			156			810			966			1.2x	1.1x	8.5	6.4	U.S. Direct Lending
SDL Levered		2,045		2,022		584			1,856			2,440			1.3x			1.2x	16.1	11.8
Funds Deploying Capital
ACE IV Unlevered(8)	2018	9,310		2,851		2,048			451			1,966			2,417			1.2x	1.2x	8.6	6.1	European Direct Lending
ACE IV Levered(8)		4,819		3,559		993			3,556			4,549			1.4x			1.3x	12.7	9.3


ACE V Unlevered(9)	2020	14,869		7,026		3,453			94			3,616			3,710			1.1x	1.1x	14.1	10.6	European Direct Lending
ACE V Levered(9)		6,376		3,131		141			3,370			3,511			1.2x			1.1x	22.7	17.0
PCS II(10)	2020	5,232		5,114		2,405			15			2,368			2,383			1.0x	1.0x	1.0	(1.4)	U.S. Direct Lending
SDL II Unlevered	2021	13,577		1,989		642			16			650			666			1.1x	1.0x	6.9	4.8	U.S. Direct Lending
SDL II Levered		6,047		1,704		89			1,741			1,830			1.1x			1.1x	12.8	8.8

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

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

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

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

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

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

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

(7)ACE III is made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net IRR and MoIC presented in the table are for the Euro denominated feeder fund. The gross and net IRR for the U.S. dollar denominated feeder fund are 12.1% and 8.9%, respectively. The gross and net MoIC for the U.S. dollar denominated feeder fund are 1.6x and 1.5x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE III are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate.

(8)ACE IV is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE IV (E) Unlevered, ACE IV (G) Unlevered, ACE IV (E) Levered and ACE IV (G) Levered. The gross and net IRR and MoIC presented in the table are for ACE IV (E) Unlevered and ACE IV (E) Levered. Metrics for ACE IV (E) Levered are inclusive of a U.S. dollar denominated feeder fund, which has not been presented separately The gross and net IRR for ACE IV (G) Unlevered are 9.8% and 7.0%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.3x and 1.2x, respectively. The gross and net IRR for ACE IV (G) Levered are 13.5% and 9.7%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.4x and 1.3x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE IV Unlevered and ACE IV Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate.

(9)ACE V is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE V (E) Unlevered, ACE V (G) Unlevered, ACE V (E) Levered, and ACE V (G) Levered. The gross and net MoIC presented in the table are for ACE V (E) Unlevered and ACE V (E) Levered. Metrics for ACE V (E) Unlevered are inclusive of a Japanese yen denominated feeder fund, which has not been presented separately. Metrics for ACE V (E) Levered are inclusive of a U.S. dollar denominated feeder fund, which has not been presented separately. The gross and net IRR for ACE V (G) Unlevered are 14.9% and 11.0%, respectively. The gross and net MoIC for ACE V (G) Unlevered are 1.1x and 1.1x, respectively. The gross and net IRR for ACE V (G) Levered are 22.6% and 16.3%, respectively. The gross and net MoIC for ACE V (G) Levered are 1.2x and 1.1x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE V Unlevered and ACE V Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate.

(10)Gross and net fund-level IRRs for PCS II are shown on a non-annualized basis as the time elapsed from the date of the first capital call is less than one year.

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Private Equity Group—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021

Fee Related Earnings:

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


	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)

	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Management fees	$	52,316	$	56,817	$	(4,501)	(8)%	$	145,669	$	135,930	$	9,739	7%
Other fees	556		370		186		50	1,261		726		535		74
Compensation and benefits	(26,865)		(23,220)		(3,645)		(16)	(70,724)		(62,047)		(8,677)		(14)
General, administrative and other expenses	(7,824)		(4,984)		(2,840)		(57)	(21,992)		(15,351)		(6,641)		(43)
Fee Related Earnings	$	18,183	$	28,983	(10,800)		(37)	$	54,214	$	59,258	(5,044)		(9)

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

Management fees decreased for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 primarily due to one-time catch-up fees of $11.5 million that were generated from ACOF VI in the prior year period. Management fees for the three and nine months ended September 30, 2022 included increases of $2.2 million and $9.7 million, respectively, compared to the same periods in 2021 primarily driven by deployment in ASOF. ASOF II, which launched during the fourth quarter of 2021, contributed $7.4 million and $10.6 million in management fees for the three and nine months ended September 30, 2022, respectively. Management fees for ACOF IV, ACOF V and SSF IV decreased by $7.5 million for the nine months ended September 30, 2022 compared to the same period in 2021 due to various asset realizations and distributions that reduced the fee bases. The increase in management fees for the nine months ended September 30, 2022 was also partially offset by one-time catch up fees of $2.5 million generated from ACOF VI in the prior year period.

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The increase in effective management fee rate for the for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021 was primarily driven by deployment of capital in ASOF and ASOF II, each of which have a higher effective management fee rate than the Private Equity Group’s average effective management fee rate.

Compensation and Benefits. Compensation and benefits increased by $3.6 million, or 16%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $8.7 million, or 14%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily driven by higher incentive compensation.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $2.8 million, or 57%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $6.6 million, or 43%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Travel, marketing sponsorships and certain fringe benefits collectively increased by $0.6 million and $2.2 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, as marketing and company events returned to pre-pandemic levels and travel continues to ramp up toward historical levels. In connection with our fundraising efforts, amortization of placement fees has increased by $1.0 million and $3.0 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, primarily driven by new commitments to ASOF II.

Realized Income:

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


	Three months ended September 30,				Favorable (Unfavorable)				Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change		2022		2021		$ Change		% Change
Fee Related Earnings	$	18,183	$	28,983	$	(10,800)	(37)	%	$	54,214	$	59,258	$	(5,044)	(9)%
Performance income—realized	—		34,316		(34,316)		(100)		2,212		159,479		(157,267)		(99)
Performance related compensation—realized	(5)		(27,483)		27,478		100		(1,791)		(127,706)		125,915		99
Realized net performance income	(5)		6,833		(6,838)		NM		421		31,773		(31,352)		(99)
Investment income (loss)—realized	8		1,878		(1,870)		(100)		2,283		(4,387)		6,670		NM
Interest and other investment income—realized	201		4,861		(4,660)		(96)		1,898		9,825		(7,927)		(81)
Interest expense	(4,183)		(2,505)		(1,678)		(67)		(11,185)		(5,434)		(5,751)		(106)
Realized net investment income (loss)	(3,974)		4,234		(8,208)		NM		(7,004)		4		(7,008)		NM
Realized Income	$	14,204	$	40,050	(25,846)		(65)		$	47,631	$	91,035	(43,404)		(48)

NM - Not Meaningful

Realized net investment loss for the three and nine months ended September 30, 2022 largely represents interest expense exceeding limited realization activity during these periods. Interest expense, which is allocated based on the cost basis of investments, increased over the comparative periods primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.

Realized net performance income and realized net investment income for the three and nine months ended September 30, 2021 was primarily attributable to realizations from the monetization of ACOF IV’s investment in Farrow & Ball following the sale of the company and of various assets in a fund within our special opportunities strategy. Realized net performance income for the nine months ended September 30, 2021 also included realizations from partial sales of ACOF IV’s position in AZEK. For the nine months ended September 30, 2021, realized net investment income was offset by a realized loss recognized in connection with an Asian corporate private equity fund’s sale of its investment in a dairy farm company.

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Private Equity Group—Performance Income

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


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


	Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income		Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income
ACOF III	$	18,988	$	15,190	$	3,798	$	43,510	$	34,808	$	8,702
ACOF IV	327,046		261,637		65,409		387,901		310,321		77,580
ACOF V	750,833		600,666		150,167		666,074		532,859		133,215
ACOF VI	124,562		99,650		24,912		73,261		58,608		14,653
ASOF	378,132		264,692		113,440		338,857		237,200		101,657

Other funds	69,850		46,017		23,833		33,526		21,787		11,739
Total Private Equity Group	$	1,669,411	$	1,287,852	$	381,559	$	1,543,129	$	1,195,583	$	347,546

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


		As of December 31, 2021		Activity during the period						As of September 30, 2022
	Waterfall Type	Accrued Carried Interest		Change in Unrealized		Realized		Other Adjustments		Accrued Carried Interest
ACOF III	American	$	43,510	$	(24,522)	$	—	$	—	$	18,988
ACOF IV	American	387,901		(58,643)		(2,212)		—		327,046
ACOF V	American	666,074		84,759		—		—		750,833
ACOF VI	American	73,261		51,301		—		—		124,562
ASOF	European	338,857		39,275		—		—		378,132
Other funds	European	30,784		38,208		—		799		69,791
Other funds	American	2,742		(2,683)		—		—		59
Total Private Equity Group		$	1,543,129	$	127,695	$	(2,212)	$	799	$	1,669,411

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Private Equity Group—Assets Under Management

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


	Corporate Private Equity		Special Opportunities		Total Private Equity Group
Balance at 6/30/2022	$	21,270	$	12,142	$	33,412

Net new par/equity commitments	—		1,337		1,337

Capital reductions	(2)		—		(2)
Distributions	(79)		(3)		(82)

Change in fund value	367		234		601
Balance at 9/30/2022	$	21,556	$	13,710	$	35,266


	Corporate Private Equity		Special Opportunities		Total Private Equity Group
Balance at 6/30/2021	$	20,603	$	6,307	$	26,910

Net new par/equity commitments	1,453		200		1,653
Net new debt commitments	—		200		200
Capital reductions	(2)		—		(2)
Distributions	(864)		(269)		(1,133)

Change in fund value	828		506		1,334
Balance at 9/30/2021	$	22,018	$	6,944	$	28,962




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

Net new par/equity commitments	—		2,137		2,137

Capital reductions	(6)		(200)		(206)
Distributions	(469)		(133)		(602)

Change in fund value	392		141		533
Balance at 9/30/2022	$	21,556	$	13,710	$	35,266


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

Net new par/equity commitments	1,554		150		1,704
Net new debt commitments	—		200		200
Capital reductions	(7)		—		(7)
Distributions	(2,273)		(554)		(2,827)

Change in fund value	4,511		1,427		5,938
Balance at 9/30/2021	$	22,018	$	6,944	$	28,962

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


			AUM: $35.2						AUM: $29.0


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

(1) Includes $1.1 billion and $1.2 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021, respectively.

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Private Equity Group—Fee Paying AUM

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


	Corporate Private Equity		Special Opportunities		Total Private Equity Group
Balance at 6/30/2022	$	12,116	$	5,575	$	17,691


Subscriptions/deployment/increase in leverage	21		1,465		1,486

Distributions	(25)		(181)		(206)

Change in fund value	(2)		(1)		(3)
Change in fee basis	(14)		—		(14)
Balance at 9/30/2022	$	12,096	$	6,858	$	18,954


	Corporate Private Equity		Special Opportunities		Total Private Equity Group
Balance at 6/30/2021	$	11,748	$	3,259	$	15,007

Commitments	1,427		—		1,427
Subscriptions/deployment/increase in leverage	89		487		576

Distributions	(471)		(44)		(515)

Change in fund value	5		—		5
Change in fee basis	(6)		—		(6)
Balance at 9/30/2021	$	12,792	$	3,702	$	16,494




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


Subscriptions/deployment/increase in leverage	38		3,661		3,699

Distributions	(163)		(1,019)		(1,182)

Change in fund value	(4)		—		(4)
Change in fee basis	(248)		—		(248)
Balance at 9/30/2022	$	12,096	$	6,858	$	18,954


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

Commitments	1,579		—		1,579
Subscriptions/deployment/increase in leverage	535		1,308		1,843

Distributions	(1,332)		(329)		(1,661)

Change in fund value	5		—		5
Change in fee basis	(2,765)		—		(2,765)
Balance at 9/30/2021	$	12,792	$	3,702	$	16,494

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


			FPAUM: $19.0						FPAUM: $16.5


						Invested capital									Capital commitments

Private Equity Group—Fund Performance Metrics as of September 30, 2022

Three significant funds, ACOF V, ASOF and ACOF VI, collectively contributed approximately 75% of the Private Equity Group’s management fees for the nine months ended September 30, 2022.

The following table presents the performance data of our significant drawdown funds as of September 30, 2022 ($ in millions):


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


Funds Deploying Capital
ACOF V	2017	$	9,426	$	7,850	$	7,415		$	3,243		$	8,702		$	11,945		1.6x	1.4x	15.4	11.0	Corporate Private Equity
ASOF	2019	5,430		3,518		5,407			2,964			4,420			7,384			1.6x	1.5x	33.8	26.1	Special Opportunities
ACOF VI	2020	6,327		5,743		3,728			323			4,279			4,602			1.2x	1.1x	21.5	22.2	Corporate Private Equity

(1)Realized value represents the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments. Realized value excludes any proceeds related to bridge financings.

(2)Unrealized value represents the fair market value of remaining investments. Unrealized value does not take into account any bridge financings. There can be no assurance that unrealized investments will be realized at the valuations indicated.

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

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

(5)For the corporate private equity funds, the gross IRR is an annualized since inception gross internal rate of return of cash flows to and from investments and the residual value of the investments at the end of the measurement period. Gross IRRs reflect returns to all partners. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses. For the special opportunities funds the gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRRs reflect returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross IRRs for the corporate private equity funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross IRRs would be 15.3% for ACOF V and 20.1% for ACOF VI.

(6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculation are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees, carried interest as applicable, and other expenses and exclude commitments by the general partner and non-fee paying limited partners who do not pay either management fees or carried interest. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. The net IRRs for the corporate private equity funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net IRRs would be 11.1% for ACOF V and 18.4% for ACOF VI.

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Real Assets Group—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021

Fee Related Earnings:

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



	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Management fees	$	91,013	$	67,934	$	23,079	34%	$	254,233	$	150,691	$	103,542	69%
Fee related performance revenues	855		579		276		48	2,178		1,938		240		12
Other fees	11,493		3,681		7,812		212	27,924		4,604		23,320		NM
Compensation and benefits	(46,947)		(33,070)		(13,877)		(42)	(121,183)		(73,438)		(47,745)		(65)
General, administrative and other expenses	(10,032)		(6,674)		(3,358)		(50)	(28,308)		(14,212)		(14,096)		(99)
Fee Related Earnings	$	46,382	$	32,450	13,932		43	$	134,844	$	69,583	65,261		94

NM - Not Meaningful

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

Management fees increased by $27.8 million and $102.2 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021 due to funds from the Black Creek Acquisition and Infrastructure Debt Acquisition. Excluding one-time catch-up fees of $1.8 million and $4.8 million for the three and nine months ended September 30, 2022, respectively, management fees from US X increased by $2.7 million and $9.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Management fees also increased by $3.9 million and $10.5 million, for the three and nine months ended September 30, 2022, respectively, due to new commitments to our sixth European real estate equity fund. Management fees from real estate debt funds increased by $2.0 million and $6.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, primarily due to the continued fundraising and subsequent deployment within these open-ended funds. The increases in management fees were partially offset by decreases driven by one-time catch-up fees

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generated by Ares European Property Enhancement Partners III, SCSp and ACIP in the prior year periods. In addition, management fees from US IX and EF V collectively decreased by $4.6 million and $11.9 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. The fee base for US IX has been reduced due to various asset realizations and distributions and the fee base for EF V changed from committed capital to invested capital following the launch of our sixth European real estate equity fund.

The decreases in effective management fee rate for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 were primarily due to recently acquired funds with effective management fees rates below 0.75%, including funds within our infrastructure debt strategy and certain newly managed core/core-plus and industrial U.S. real estate equity funds. The decreases were also attributable to deployment in our real estate debt funds that have effective management fee rates below 0.75%. The decreases in effective management fee rates were partially offset by additional capital raised in our non-traded REITs, which have effective management fee rates between 1.10% and 1.25%.

Other Fees. Other fees increased by $7.8 million, or 212%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $23.3 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. These increases primarily represent higher fees that were generated under the investment management agreements of the funds that were acquired in the Black Creek Acquisition, including property-related fees, such as acquisition, development and property management, of $5.8 million and $17.8 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, of which $4.6 million and $6.9 million for the comparative periods related to development fees from AIREIT. These property-related fees are recognized as services are performed which may result in periodic fluctuations. Other fees also includes upfront transaction fees, referred to as facilitation fees, which are generated when investors contribute real property through a like-kind 1031 exchange for fund shares. For the three and nine months ended September 30, 2022 when compared to the same periods in 2021, we have recognized facilitation fees of $0.7 million and $3.8 million, respectively.

Compensation and Benefits. Compensation and benefits increased by $13.9 million, or 42%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $47.7 million, or 65%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily driven by headcount growth from acquisitions and to support the expansion of our business, as we continued to add professionals to support our growing U.S. real estate equity and infrastructure opportunities platforms. Headcount growth attributable to the Infrastructure Debt Acquisition contributed $3.9 million and $9.4 million in recurring employment related costs for the three and nine months ended September 30, 2022, respectively. The increase in salaries and benefits for the nine months ending September 30, 2022 included $21.7 million from the first two quarters of 2022 related to the Black Creek Acquisition which did not have comparable results as the transaction closed at the beginning of the third quarter of 2021.

Average headcount for the third quarter of 2022 increased by 29% to 328 investment and investment support professionals for the 2022 period from 255 professionals for the same period in 2021, including 25 professionals from the Infrastructure Debt Acquisition. Average headcount for the year-to-date period increased by 79% to 303 investment and investment support professionals for the third quarter of 2022 from 169 professionals for the same period in 2021, including 146 professionals from the Black Creek Acquisition and the Infrastructure Debt Acquisition.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $3.4 million, or 50%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $14.1 million, or 99%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The Infrastructure Debt Acquisition has contributed general, administrative and other expenses of $1.4 million and $3.0 million for the three and nine months ended September 30, 2022, respectively. The increase in general, administrative and other expenses for the nine months ending September 30, 2022 included $4.7 million from the first two quarters of 2022 related to the Black Creek Acquisition which did not have comparable results as the transaction closed at the beginning of the third quarter of 2021.

Excluding the impact from the acquisitions, other operating expenses, most notably travel, marketing sponsorships and certain fringe benefits, collectively increased by $2.7 million for the nine months ended September 30, 2022 compared to the same period in 2021, as travel, marketing and company events have returned to pre-pandemic levels. Certain expenses, primarily the occupancy costs, information technology and information services, have also increased by $0.7 million and $1.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, to support the expanding platform.

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Realized Income:

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


	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)

	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Fee Related Earnings	$	46,382	$	32,450	$	13,932	43%	$	134,844	$	69,583	$	65,261	94%
Performance income—realized	26,939		4,114		22,825		NM	78,637		10,317		68,320		NM
Performance related compensation—realized	(17,115)		(2,809)		(14,306)		NM	(50,510)		(6,983)		(43,527)		NM
Realized net performance income	9,824		1,305		8,519		NM	28,127		3,334		24,793		NM
Investment income—realized	339		1,841		(1,502)		(82)	4,224		13,877		(9,653)		(70)
Interest and other investment income—realized	2,180		918		1,262		137	7,597		4,783		2,814		59
Interest expense	(3,095)		(1,904)		(1,191)		(63)	(8,197)		(4,528)		(3,669)		(81)
Realized net investment income (loss)	(576)		855		(1,431)		NM	3,624		14,132		(10,508)		(74)
Realized Income	$	55,630	$	34,610	21,020		61	$	166,595	$	87,049	79,546		91

NM - Not Meaningful

Realized net performance income and realized net investment income for the three and nine months ended September 30, 2022 were primarily attributable to realizations from US VIII driven by multifamily and industrial property sales. Realized net performance income for the three and nine months ended September 30, 2022 also included incentive fees generated from an industrial real estate fund.

Realized net performance income and realized net investment income for the three and nine months ended September 30, 2021 were primarily attributable to realizations from the sale of multiple properties held in U.S. real estate equity funds. Realized net investment income for the nine months ended September 30, 2021 was also attributable to monetization of various assets in an infrastructure opportunities fund and to distributions from real estate debt vehicles, driven by operating income during the period.

Interest expense, which is allocated based on the cost basis of investments, increased over the comparative periods primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.

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Real Assets Group—Performance Income

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


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


	Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income		Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income
US VIII	$	38,159	$	24,421	$	13,738	$	88,112	$	56,391	$	31,721
US IX	127,697		79,172		48,525		110,074		68,246		41,828
EF IV	66,665		40,000		26,665		70,600		42,361		28,239
EF V	27,760		19,432		8,328		69,946		48,962		20,984
AREOF III	53,867		32,320		21,547		24,204		14,523		9,681
EIF V	87,029		65,054		21,975		62,592		46,787		15,805
Other real assets funds	186,025		114,968		71,057		113,932		68,599		45,333
Total Real Assets Group	$	587,202	$	375,367	$	211,835	$	539,460	$	345,869	$	193,591

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












		As of December 31, 2021		Activity during the period						As of September 30, 2022
	Waterfall Type	Accrued Performance Income		Change in Unrealized		Realized		Foreign Exchange and Other Adjustments		Accrued Performance Income
Accrued Carried Interest
US VIII	European	$	88,112	$	15,667	$	(65,620)	$	—	$	38,159
US IX	European	110,074		17,623		—		—		127,697
EF IV	American	70,600		(3,935)		—		—		66,665
EF V	American	69,946		(42,186)		—		—		27,760
AREOF III	European	24,204		29,663		—		—		53,867
EIF V	European	62,592		24,437		—		—		87,029
Other real assets funds	European	52,262		61,675		(709)		4,100		117,328
Other real assets funds	American	61,670		7,765		(1,000)		262		68,697
Total accrued carried interest		539,460		110,709		(67,329)		4,362		587,202
Other real assets funds	Incentive	—		11,308		(11,308)		—		—
Total Real Assets Group		$	539,460	$	122,017	$	(78,637)	$	4,362	$	587,202

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Real Assets Group—Assets Under Management

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


			U.S. Real Estate Equity			European Real Estate Equity			Real Estate Debt			Infrastructure Opportunities			Infrastructure Debt			Total Real Assets Group
Balance at 6/30/2022	$	30,271		$	8,558		$	11,372		$	4,316		$	8,060		$	62,577

Net new par/equity commitments	1,170			20			99			366			511			2,166
Net new debt commitments	200			—			204			—			—			404
Capital reductions	(200)			—			(24)			—			—			(224)
Distributions	(248)			(50)			(49)			(112)			(52)			(511)
Redemptions	(180)			—			—			—			—			(180)
Change in fund value	121			(495)			68			751			318			763
Balance at 9/30/2022	$	31,134		$	8,033		$	11,670		$	5,321		$	8,837		$	64,995


			U.S. Real Estate Equity			European Real Estate Equity			Real Estate Debt			Infrastructure Opportunities			Infrastructure Debt			Total Real Assets Group
Balance at 6/30/2021	$	5,702		$	5,648		$	8,375		$	3,822		$	—		$	23,547
Acquisitions			13,719			—			—			—			—			13,719
Net new par/equity commitments	791			1,040			246			324			—			2,401
Net new debt commitments	—			—			250			—			—			250
Capital reductions	—			—			(41)			—			—			(41)
Distributions	(488)			(180)			(39)			(358)			—			(1,065)
Redemptions	(28)			—			—			—			—			(28)
Change in fund value	1,399			57			50			(54)			—			1,452
Balance at 9/30/2021	$	21,095		$	6,565		$	8,841		$	3,734		$	—		$	40,235




			U.S. Real Estate Equity			European Real Estate Equity			Real Estate Debt			Infrastructure Opportunities			Infrastructure Debt			Total Real Assets Group
Balance at 12/31/2021	$	24,677		$	6,827		$	9,659		$	4,756		$	—		$	45,919
Acquisitions	—			—			—			—			8,184			8,184
Net new par/equity commitments	4,467			2,038			955			431			698			8,589
Net new debt commitments	1,305			419			1,229			—			—			2,953
Capital reductions	(434)			—			(87)			—			—			(521)
Distributions	(1,301)			(409)			(144)			(433)			(239)			(2,526)
Redemptions	(308)			—			(90)			—			—			(398)
Change in fund value	2,728			(842)			148			567			194			2,795
Balance at 9/30/2022	$	31,134		$	8,033		$	11,670		$	5,321		$	8,837		$	64,995


			U.S. Real Estate Equity			European Real Estate Equity			Real Estate Debt			Infrastructure Opportunities			Infrastructure Debt			Total Real Assets Group
Balance at 12/31/2020	$	4,404		$	4,811		$	5,593		$	3,485		$	—		$	18,293
Acquisitions	13,719			—			—			—			—			13,719
Net new par/equity commitments	1,985			1,917			843			592			—			5,337
Net new debt commitments	—			—			2,655			—			—			2,655
Capital reductions	—			—			(273)			—			—			(273)
Distributions	(788)			(475)			(107)			(692)			—			(2,062)
Redemptions	(28)			—			(7)			—			—			(35)
Change in fund value	1,803			312			137			349			—			2,601
Balance at 9/30/2021	$	21,095		$	6,565		$	8,841		$	3,734		$	—		$	40,235

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


			AUM: $65.0						AUM: $40.2


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

(1) Includes $0.6 billion and $0.5 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021, respectively.

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Real Assets Group—Fee Paying AUM

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


	U.S. Real Estate Equity		European Real Estate Equity		Real Estate Debt		Infrastructure Opportunities		Infrastructure Debt		Total Real Assets Group
Balance at 6/30/2022	$	19,934	$	5,352	$	3,953	$	4,474	$	5,518	$	39,231

Commitments	1,113		20		—		—		—		1,133
Subscriptions/deployment/increase in leverage	52		171		11		106		495		835

Distributions	(136)		(11)		(51)		(154)		(214)		(566)
Redemptions	(180)		—		—		—		—		(180)
Change in fund value	119		(315)		74		—		(113)		(235)
Change in fee basis	3		—		—		—		—		3
Balance at 9/30/2022	$	20,905	$	5,217	$	3,987	$	4,426	$	5,686	$	40,221


	U.S. Real Estate Equity		European Real Estate Equity		Real Estate Debt		Infrastructure Opportunities		Infrastructure Debt		Total Real Assets Group
Balance at 6/30/2021	$	4,365	$	4,339	$	3,113	$	3,725	$	—	$	15,542
Acquisitions	7,155		—		—		—		—		7,155
Commitments	721		602		—		324		—		1,647
Subscriptions/deployment/increase in leverage	931		234		299		—		—		1,464

Distributions	(114)		(158)		(103)		(294)		—		(669)
Redemptions	(28)		—		—		—		—		(28)
Change in fund value	610		(65)		43		—		—		588
Change in fee basis	—		(5)		—		—		—		(5)
Balance at 9/30/2021	$	13,640	$	4,947	$	3,352	$	3,755	$	—	$	25,694




	U.S. Real Estate Equity		European Real Estate Equity		Real Estate Debt		Infrastructure Opportunities		Infrastructure Debt		Total Real Assets Group
Balance at 12/31/2021	$	15,687	$	4,916	$	3,516	$	4,496	$	—	$	28,615
Acquisitions	—		—		—		—		4,855		4,855
Commitments	3,661		1,627		106		—		—		5,394
Subscriptions/deployment/increase in leverage	663		427		574		306		1,296		3,266
Capital reductions	—		(10)		(81)		—		—		(91)
Distributions	(759)		(246)		(185)		(376)		(263)		(1,829)
Redemptions	(308)		—		(100)		—		—		(408)
Change in fund value	1,966		(678)		157		—		(202)		1,243
Change in fee basis	(5)		(819)		—		—		—		(824)
Balance at 9/30/2022	$	20,905	$	5,217	$	3,987	$	4,426	$	5,686	$	40,221


	U.S. Real Estate Equity		European Real Estate Equity		Real Estate Debt		Infrastructure Opportunities		Infrastructure Debt		Total Real Assets Group
Balance at 12/31/2020	$	3,659	$	4,088	$	2,505	$	3,679	$	—	$	13,931
Acquisitions	7,155		—		—		—		—		7,155
Commitments	1,630		1,053		202		592		—		3,477
Subscriptions/deployment/increase in leverage	1,067		271		849		—		—		2,187
Capital reductions	—		—		(32)		—		—		(32)
Distributions	(322)		(298)		(283)		(341)		—		(1,244)
Redemptions	(28)		—		(7)		—		—		(35)
Change in fund value	611		(162)		118		—		—		567
Change in fee basis	(132)		(5)		—		(175)		—		(312)
Balance at 9/30/2021	$	13,640	$	4,947	$	3,352	$	3,755	$	—	$	25,694

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


			FPAUM: $40.2						FPAUM: $25.7


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

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

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

Real Assets Group—Fund Performance Metrics as of September 30, 2022

Four significant funds, Ares Industrial Real Estate Income Trust, Inc. (“AIREIT”), Ares Real Estate Income Trust, Inc. (“AREIT”), Infrastructure Debt Fund IV (“IDF IV”) and an open-ended industrial real estate fund, collectively contributed approximately 41% of the Real Assets Group’s management fees for the nine months ended September 30, 2022.

The following table presents the performance data for our significant funds that are not drawdown funds in the Real Assets Group as of September 30, 2022 ($ in millions):


				Returns(%)
	Year of Inception	AUM		Current Quarter		Year-To-Date		Since Inception(1)		Primary Investment Strategy
Fund		Gross		Net	Gross	Net	Gross	Net
AREIT(2)	2012	$	4,825	N/A	1.4	N/A	12.3	N/A	8.1	U.S. Real Estate Equity
AIREIT(3)	2017	8,131		N/A	1.7	N/A	26.6	N/A	14.9	U.S. Real Estate Equity
Open-ended industrial real estate fund(4)	2017	5,791		1.4	1.1	22.7	18.9	29.1	24.0	U.S. Real Estate Equity

(1)Since inception returns are annualized.

(2)Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Actual individual stockholder returns will vary. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. The inception date used in the calculation of the since inception return is the date in which the first shares of common stock were sold after converting to a NAV-based REIT. Additional information related to AREIT can be found in its filings with the SEC, which are not part of this report.

(3)Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Actual individual stockholder returns will vary. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to AIREIT can be found in its filings with the SEC, which are not part of this report.

(4)Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Gross returns do not reflect the deduction of management fees, incentive fees, as applicable, or other expenses. Net returns are calculated by subtracting the applicable management fees, incentive fees, as applicable and other expenses from the gross returns on a quarterly basis.

The following table presents the performance data of our significant drawdown fund as of September 30, 2022 ($ in millions):


	Year of Inception	AUM		Original Capital Commitments		Capital Invested to Date			Realized Value(1)			Unrealized Value(2)			Total Value			MoIC		IRR(%)		Primary Investment Strategy
Fund								Gross(3)			Net(4)			Gross(5)			Net(6)
Fund Harvesting Investments
IDF IV(7)	2018	$	3,411	$	4,012	$	4,322		$	1,628		$	3,114		$	4,742		1.2x	1.1x	7.9	5.7	Infrastructure Debt

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

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

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

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

(7)IDF IV is made up of U.S. Dollar hedged, U.S. Dollar unhedged, Euro unhedged, Yen hedged parallel funds and a single investor U.S. Dollar parallel fund. The gross and net IRR and MoIC presented in the table are for the U.S. Dollar hedged parallel fund. The gross and net IRR for the U.S. Dollar unhedged parallel fund are 6.2% and 4.0%, respectively. The gross and net MoIC for the U.S. Dollar unhedged parallel fund are 1.1x and 1.1x, respectively. The gross and net IRR for the Euro unhedged parallel fund are 10.8% and 8.5%, respectively. The gross and net MoIC for the Euro unhedged parallel fund are 1.2x and 1.2x, respectively. The gross and net IRR for the Yen hedged parallel fund are 6.8% and 4.7%, respectively. The gross and net MoIC for the Yen hedged parallel fund are 1.1x and 1.1x, respectively. The gross and net IRR for the single investor U.S. Dollar parallel fund are 4.9% and 2.9%, respectively. The gross and net MoIC for the single investor U.S. Dollar parallel fund are 1.1x and 1.0x, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of fund's closing. All other values for IDF IV are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate.

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Secondaries Group—Three and Nine Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021 and the Period June 2, 2021 through September 30, 2021

The activity for the nine months ended September 30, 2021 represents results subsequent to the Landmark Acquisition that closed on June 2, 2021 and is not comparable to the results for the nine months ended September 30, 2022.

Fee Related Earnings:

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


	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,		For the period June 2 through September 30,

($ in thousands)	2022		2021		$ Change		% Change	2022		2021
Management fees	$	44,385	$	41,064	$	3,321	8%	$	135,090	$	53,962
Fee related performance revenues	235		—		235		NM	235		—

Compensation and benefits	(19,191)		(11,955)		(7,236)		(61)	(45,964)		(16,244)
General, administrative and other expenses	(3,215)		(2,593)		(622)		(24)	(9,250)		(3,452)
Fee Related Earnings	$	22,214	$	26,516	(4,302)		(16)	$	80,111	$	34,266

NM - Not Meaningful

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

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Excluding one-time catch-up fees of $4.0 million for the three months ended September 30, 2022 and $2.3 million for the three months ended September 30, 2021, management fees increased by $2.2 million for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to new commitments to our 17th private equity secondaries fund and related vehicles. Our ninth real estate secondaries fund, excluding one-time catch up fees of $1.0 million, generated additional fees of $3.5 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The increase in management fees was partially offset by the decrease in management fees from Landmark Equity Partners XV, L.P. (“LEP XV”) and LREP VIII of $3.4 million and $2.3 million, respectively, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021; the decrease was due to the changes in fee base of both funds to reported value, which largely reflects the NAV of each funds’ limited partnership interests, from called capital plus unfunded commitments for LEP XV and from committed capital for LREP VIII.

Fee Related Performance Revenues. The activity for the three and nine months ended September 30, 2022 was attributable to fee related performance revenues from APMF.

Compensation and Benefits. Compensation and benefits increased by $7.2 million, or 61%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The increase in salaries and benefits was primarily driven by the increase in incentive compensation.

Realized Income:

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


	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,		For the period June 2 through September 30,

($ in thousands)	2022		2021		$ Change		% Change	2022		2021
Fee Related Earnings	$	22,214	$	26,516	$	(4,302)	(16)%	$	80,111	$	34,266
Performance income—realized	—		—		—		—	4,156		—
Performance related compensation—realized	(1)		—		(1)		NM	(3,515)		—
Realized net performance income	(1)		—		(1)		NM	641		—

Interest and other investment income—realized	424		699		(275)		(39)	3,268		701
Interest expense	(1,753)		(427)		(1,326)		NM	(3,775)		(432)
Realized net investment income (loss)	(1,329)		272		(1,601)		NM	(507)		269
Realized Income	$	20,884	$	26,788	(5,904)		(22)	$	80,245	$	34,535

NM - Not Meaningful

Realized net performance income for the nine months ended September 30, 2022 was primarily attributable to tax distributions from LREP VIII.

Realized net investment income for the nine months ended September 30, 2022 included dividend income received from a real estate secondaries fund and an infrastructure secondaries fund. Interest expense, which is allocated based on the cost basis of investments, increased over the comparative periods primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.

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Secondaries Group—Performance Income

In the Secondaries Group, we are entitled to carried interest from the funds with closings subsequent to the completion of the Landmark Acquisition and to carried interest we acquired through the purchase of ownership interests in certain Landmark GP entities. The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Secondaries Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands):


	As of September 30, 2022						As of December 31, 2021
	Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income		Accrued Performance Income		Accrued Performance Compensation		Accrued Net Performance Income
LEP XVI	$	154,019	$	130,916	$	23,103	$	159,490	$	135,566	$	23,924
LREP VIII	114,970		97,724		17,246		80,772		68,656		12,116



Other fee generating funds	61,472		52,251		9,221		58,013		49,108		8,905
Total Secondaries Group	$	330,461	$	280,891	$	49,570	$	298,275	$	253,330	$	44,945

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


		As of December 31, 2021		Activity during the period				As of September 30, 2022
	Waterfall Type	Accrued Carried Interest		Change in Unrealized		Realized		Accrued Carried Interest
Accrued Carried Interest
LEP XVI	European	$	159,490	$	(5,471)	$	—	$	154,019
LREP VIII	European	80,772		37,848		(3,650)		114,970



Other fee generating funds	European	58,013		3,569		(110)		61,472
Total accrued carried interest		298,275		35,946		(3,760)		330,461
Other secondaries funds	Incentive	—		396		(396)		—
Total Secondaries Group		$	298,275	$	36,342	$	(4,156)	$	330,461

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Secondaries Group—Assets Under Management

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


	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondaries Group
Balance at 6/30/2022	$	14,707	$	7,522	$	1,663	$	23,892

Net new par/equity commitments	239		202		—		441


Distributions	(891)		(189)		(4)		(1,084)

Change in fund value	(627)		155		12		(460)
Balance at 9/30/2022	$	13,428	$	7,690	$	1,671	$	22,789


	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondaries Group
Balance at 6/30/2021	$	12,316	$	5,570	$	1,590	$	19,476

Net new par/equity commitments	1,130		—		—		1,130


Distributions	(250)		(268)		(17)		(535)

Change in fund value	463		184		25		672
Balance at 9/30/2021	$	13,659	$	5,486	$	1,598	$	20,743





	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondaries Group
Balance at 12/31/2021	$	13,833	$	6,662	$	1,624	$	22,119
Acquisitions	199		—		—		199
Net new par/equity commitments	887		1,425		74		2,386


Distributions	(1,178)		(876)		(155)		(2,209)

Change in fund value	(313)		479		128		294
Balance at 9/30/2022	$	13,428	$	7,690	$	1,671	$	22,789


	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondaries Group
Balance at 12/31/2020	$	—	$	—	$	—	$	—
Acquisitions	12,275		5,641		1,597		19,513
Net new par/equity commitments	1,231		—		—		1,231


Distributions	(301)		(335)		(23)		(659)

Change in fund value	454		180		24		658
Balance at 9/30/2021	$	13,659	$	5,486	$	1,598	$	20,743

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


AUM: $22.8						AUM: $20.8


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

(1) Includes $0.4 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021.

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Secondaries Group—Fee Paying AUM

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


	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondaries Group
Balance at 6/30/2022	$	11,201	$	5,074	$	1,279	$	17,554

Commitments	212		200		—		412
Subscriptions/deployment/increase in leverage	9		78		9		96

Distributions	(29)		(188)		(4)		(221)

Change in fund value	(263)		111		(18)		(170)
Change in fee basis	50		(1)		—		49
Balance at 9/30/2022	$	11,180	$	5,274	$	1,266	$	17,720


	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondaries Group
Balance at 6/30/2021	$	10,828	$	4,928	$	1,171	$	16,927

Commitments	278		—		—		278
Subscriptions/deployment/increase in leverage	—		—		7		7

Distributions	(38)		(28)		(7)		(73)

Change in fund value	44		28		11		83
Change in fee basis	—		(37)		—		(37)
Balance at 9/30/2021	$	11,112	$	4,891	$	1,182	$	17,185





	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondaries Group
Balance at 12/31/2021	$	11,787	$	5,389	$	1,188	$	18,364
Acquisitions	131		—		—		131
Commitments	806		1,039		74		1,919
Subscriptions/deployment/increase in leverage	67		323		25		415

Distributions	(88)		(866)		(127)		(1,081)

Change in fund value	(191)		834		106		749
Change in fee basis	(1,332)		(1,445)		—		(2,777)
Balance at 9/30/2022	$	11,180	$	5,274	$	1,266	$	17,720


	Private Equity Secondaries		Real Estate Secondaries		Infrastructure Secondaries		Total Secondaries Group
Balance at 12/31/2020	$	—	$	—	$	—	$	—
Acquisitions	10,740		4,928		1,171		16,839
Commitments	378		—		—		378
Subscriptions/deployment/increase in leverage	2		—		7		9

Distributions	(38)		(28)		(7)		(73)

Change in fund value	42		28		11		81
Change in fee basis	(12)		(37)		—		(49)
Balance at 9/30/2021	$	11,112	$	4,891	$	1,182	$	17,185

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


FPAUM: $17.7						FPAUM: $17.2


			Market value(1)						Invested capital/other						Capital commitments

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Secondaries Group—Fund Performance Metrics as of September 30, 2022

Three significant funds, LEP XV, LEP XVI and LREP VIII, collectively contributed approximately 53% of the Secondaries Group’s management fees for the nine months ended September 30, 2022.

The following table presents the performance data of our significant drawdown funds as of September 30, 2022 ($ in millions):


	Year of Inception	AUM		Original Capital Commitments		Capital Invested to Date			Realized Value(1)			Unrealized Value(2)			Total Value			MoIC		IRR(%)		Primary Investment Strategy
Fund								Gross(3)			Net(4)			Gross(5)			Net(6)
Funds Harvesting Investments
LEP XV(7)	2013	$	1,457	$	3,250	$	2,629		$	2,555		$	1,192		$	3,747		1.6x	1.4x	18.2	12.8	Private Equity Secondaries
LEP XVI(7)	2016	5,321		4,896		2,962			1,739			2,839			4,578			1.7x	1.6x	45.3	30.9	Private Equity Secondaries
LREP VIII(7)	2016	3,547		3,300		1,985			1,201			1,695			2,896			1.6x	1.5x	30.6	21.8	Real Estate Secondaries

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

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

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

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

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

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

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

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

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Strategic Initiatives—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021

Fee Related Earnings:

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


	Three months ended September 30,				Favorable (Unfavorable)				Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change		2022		2021		$ Change		% Change
Management fees	$	18,183	$	16,544	$	1,639	10	%	$	52,377	$	48,963	$	3,414	7%
Other fees	67		2		65		NM		181		82		99		121
Compensation and benefits	(7,859)		(5,316)		(2,543)		(48)		(22,059)		(15,440)		(6,619)		(43)
General, administrative and other expenses	(1,486)		(1,774)		288		16		(5,575)		(5,580)		5		—
Fee Related Earnings	$	8,905	$	9,456	(551)		(6)		$	24,924	$	28,025	(3,101)		(11)

NM - Not Meaningful

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

Management fees increased for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 primarily driven by new commitments to our sixth Asian special situations fund and by additional managed assets in our insurance strategy. SLO III also contributed to the increase in management fees for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 primarily due to deployment of capital. Following the launch of our sixth Asian special situations fund in the first quarter of 2022, SSG Capital Partners V, L.P. (“SSG Fund V”) had a reduction in fee base that partially offset the increase in management fees over the comparative periods.

The decreases in effective management fee rate for the three and nine months ended September 30, 2022 compared to

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the three and nine months ended September 30, 2021 were primarily driven by the growing fee base of our insurance strategy, which has an effective management fee rate of 0.30%. The effective management fee rate also decreased due to the launch of our sixth Asian special situations fund in the first quarter of 2022. Our sixth Asian special situations fund pays a fee on both committed and invested capital. As a result, our effective management fee rate decreases immediately following capital raising and increases as capital is subsequently deployed.

Compensation and Benefits. Compensation and benefits increased by $2.5 million, or 48%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $6.6 million, or 43%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases in salaries and benefits for the three and nine months ended September 30, 2022 were primarily driven by i) our decision to acquire a team that was dedicated to supporting Ares SSG deal sourcing in India, leading to a corresponding decrease in general, administrative and other expenses; the impact of this decision is expected to continue in future periods, and ii) headcount growth across all strategies to support our strategic initiatives. Average headcount for the year-to-date period increased by 39% to 64 investment and investment support professionals, including 11 professionals from the expansion of our team in India, from 46 professionals for the same period in 2021.

General, Administrative and Other Expenses. General, administrative and other expenses remained relatively flat for the three and nine months ended September 30, 2022 compared to the same periods in 2021. As described previously, the decision to acquire the deal sourcing team in India contributed to a reduction in professional fees and was offset by increasing occupancy and information services costs to support our expanding workforce for the three and nine months ended September 30, 2022 compared to the same periods in 2021.

Realized Income:

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


	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Fee Related Earnings	$	8,905	$	9,456	$	(551)	(6)%	$	24,924	$	28,025	$	(3,101)	(11)%



Investment income-realized	—		1,025		(1,025)		(100)	858		1,347		(489)		(36)
Interest and other investment income-realized	1,096		163		933		NM	6,613		2,824		3,789		134
Interest expense	(5,244)		(4,135)		(1,109)		(27)	(16,687)		(8,962)		(7,725)		(86)
Realized net investment loss	(4,148)		(2,947)		(1,201)		41	(9,216)		(4,791)		(4,425)		(92)
Realized Income	$	4,757	$	6,509	(1,752)		(27)	$	15,708	$	23,234	(7,526)		(32)

NM - Not Meaningful

For the three and nine months ended September 30, 2022, we earned interest income from a fund invested in insurance companies. For the nine months ended September 30, 2021, we received distributions from an investment vehicle that manages a portfolio of non-performing loans.

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Strategic Initiatives—Assets Under Management

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


	Asian Special Situations		Asian Secured Lending		APAC Direct Lending		Insurance		SPACs		Total Strategic Initiatives
Balance at 6/30/2022	$	7,105	$	2,378	$	336	$	1,702	$	1,000	$	12,521

Net new par/equity commitments	—		—		100		1,008		—		1,108
Net new debt commitments	—		6		1,366		—		—		1,372

Distributions	(394)		(30)		—		(694)		—		(1,118)

Change in fund value	74		30		(20)		(81)		—		3
Balance at 9/30/2022	$	6,785	$	2,384	$	1,782	$	1,935	$	1,000	$	13,886


	Asian Special Situations		Asian Secured Lending		APAC Direct Lending		Insurance		SPACs		Total Strategic Initiatives
Balance at 6/30/2021	$	5,025	$	2,467	$	—	$	1,874	$	1,000	$	10,366

Net new par/equity commitments	—		70		—		143		—		213

Capital reductions	—		(29)		—		—		—		(29)
Distributions	252		(2)		—		(48)		—		202

Change in fund value	94		(21)		—		11		—		84
Balance at 9/30/2021	$	5,371	$	2,485	$	—	$	1,980	$	1,000	$	10,836



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

Net new par/equity commitments	1,135		10		462		1,118		—		2,725
Net new debt commitments	—		6		1,366		—		—		1,372
Capital reductions	—		(5)		—		—		—		(5)
Distributions	(598)		(101)		—		(744)		—		(1,443)

Change in fund value	9		18		(46)		(367)		—		(386)
Balance at 9/30/2022	$	6,785	$	2,384	$	1,782	$	1,935	$	1,000	$	13,886


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

Net new par/equity commitments(1)	3		620		—		(230)		1,000		1,393


Distributions	(73)		(2)		—		(103)		—		(178)

Change in fund value	287		3		—		70		—		360
Balance at 9/30/2021	$	5,371	$	2,485	$	—	$	1,980	$	1,000	$	10,836


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

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


			AUM: $13.9						AUM: $10.8


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

(1) Includes $0.3 billion and $0.1 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021, respectively.

Strategic Initiatives—Fee Paying AUM

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


	Asian Special Situations		Asian Secured Lending		APAC Direct Lending		Insurance		Total Strategic Initiatives
Balance at 6/30/2022	$	4,566	$	1,134	$	—	$	1,392	$	7,092

Commitments	—		6		—		628		634
Subscriptions/deployment/increase in leverage	181		499		140		—		820
Capital reductions	(8)		—		—		—		(8)
Distributions	(309)		(208)		—		(418)		(935)

Change in fund value	(12)		—		—		(141)		(153)

Balance at 9/30/2022	$	4,418	$	1,431	$	140	$	1,461	$	7,450


	Asian Special Situations		Asian Secured Lending		APAC Direct Lending		Insurance		Total Strategic Initiatives
Balance at 6/30/2021	$	3,618	$	1,055	$	—	$	1,948	$	6,621

Commitments	—		—		—		233		233
Subscriptions/deployment/increase in leverage	236		143		—		—		379
Capital reductions	—		(121)		—		—		(121)
Distributions	(163)		(62)		—		(48)		(273)

Change in fund value	—		—		—		53		53

Balance at 9/30/2021	$	3,691	$	1,015	$	—	$	2,186	$	6,892

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

Commitments	1,747		6		—		761		2,514
Subscriptions/deployment/increase in leverage	570		1,138		140		(38)		1,810
Capital reductions	(19)		(223)		—		—		(242)
Distributions	(611)		(485)		—		(422)		(1,518)

Change in fund value	(31)		(120)		—		(669)		(820)
Change in fee basis	(843)		—		—		(238)		(1,081)
Balance at 9/30/2022	$	4,418	$	1,431	$	140	$	1,461	$	7,450


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

Commitments(1)	—		—		—		(66)		(66)
Subscriptions/deployment/increase in leverage	952		552		—		—		1,504
Capital reductions	(180)		(122)		—		—		(302)
Distributions	(695)		(154)		—		(103)		(952)

Change in fund value	—		—		—		112		112

Balance at 9/30/2021	$	3,691	$	1,015	$	—	$	2,186	$	6,892


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

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


			FPAUM: $7.4						FPAUM: $6.9


			Market value						Invested capital/other						Capital commitments

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Operations Management Group—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021

Fee Related Earnings:

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



	Three months ended September 30,				Favorable (Unfavorable)			Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change	2022		2021		$ Change		% Change
Other fees	$	7,547	$	3,446	$	4,101	119%	$	19,721	$	3,446	$	16,275	NM
Compensation and benefits	(61,084)		(66,107)		5,023		8	(196,492)		(158,943)		(37,549)		(24)
General, administrative and other expenses	(41,907)		(28,142)		(13,765)		(49)	(109,516)		(69,872)		(39,644)		(57)
Fee Related Earnings	$	(95,444)	$	(90,803)	(4,641)		(5)	$	(286,287)	$	(225,369)	(60,918)		(27)

NM - Not Meaningful

Other Fees. Other fees increased by $4.1 million, or 119%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $16.3 million, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase is primarily due to trade-based fees from the sale and distribution of our non-traded REITs, net of amounts reallowed to participating broker-dealers.

Compensation and Benefits. Compensation and benefits decreased by $5.0 million, or 8%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and increased by $37.5 million, or 24%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease in salaries and benefits for the three months ended September 30, 2022 when compared to the same period in 2021 was primarily attributable to i) a reduction in incentive compensation from the prior year period of $10.2 million that may fluctuate on a quarterly basis before payments are determined during the fourth quarter, ii) a reduction of payroll taxes from the prior year period of $2.0 million, primarily from the vesting of non-recurring equity compensation awardsok and iii) our decision to engage a third party subject matter expert to support the reorganization of our income tax compliance function which contributed to a reduction in salaries and benefits of $2.8 million for the three months ended September 30, 2022, leading to a corresponding increase in general, administrative and other expenses. The impact of this reorganization is expected to continue in future periods.

Headcount growth attributable to the Black Creek Acquisition, including Ares Wealth Management Solutions, LLC (“AWMS”), Landmark Acquisition and Infrastructure Debt Acquisition collectively contributed $34.7 million to the increase in recurring employment related costs for the nine months ended September 30, 2022 compared to the same period in 2021. Additionally, in connection with the sale and distribution of fund shares in our non-traded REITs, we have incurred employee commission expense of $14.9 million during the nine months ended September 30, 2022 compared to the same period in 2021. The increase in salaries and benefits was further driven by (i) the expansion of our strategy and relationship management teams to support global fundraising and (ii) the expansion of our business operations teams to support the growth of our business and other strategic initiatives.

Average headcount for the third quarter of 2022 increased by 22% to 1,292 operations management professionals from 1,055 professionals for the same period in 2021, including approximately 10 professionals from the Infrastructure Debt Acquisition. Average headcount for the year-to-date period increased by 40% to 1,215 operations management professionals from 868 professionals for the same period in 2021, including 208 professionals from the Black Creek Acquisition, including AWMS, the Landmark Acquisition and the Infrastructure Debt Acquisition.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $13.8 million, or 49%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $39.6 million, or 57%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily attributable to our strategic acquisitions and activity from AWMS. The nine months ended September 30, 2022 included $8.1 million of general, administrative and other expenses associated with our acquisitions that are not comparable to the prior year period because the Infrastructure Debt Acquisition closed in the first quarter of 2022, the Black Creek Acquisition closed at the beginning of the third quarter of 2021 and the Landmark Acquisition closed in the second quarter of 2021. AWMS facilitates product development, distribution, marketing and client management activities to support investment offerings in the global wealth management channel. As we build out our retail distribution infrastructure and capabilities to support prospective sales and AUM growth, we expect marketing and distribution expenses, including travel, to increase in future periods.

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Excluding the impact from the acquisitions, certain expenses have also increased during the current period to support the growing headcount. Occupancy costs, information services and information technology costs have increased by $3.2 million and $6.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Additionally, professional service fees have increased by $6.6 million and $13.2 million for the three and nine months ended September 30, 2022, respectively, primarily due to recruiting fees to support the expanding platform and to the reorganization of our income tax compliance function.

Other operating expenses, most notably travel, marketing sponsorships and certain fringe benefits, collectively increased by $3.4 million and $9.3 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021 as travel, marketing and company events have returned to pre-pandemic levels.

Realized Income:

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



	Three months ended September 30,				Favorable (Unfavorable)				Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change		2022		2021		$ Change		% Change
Fee Related Earnings	$	(95,444)	$	(90,803)	$	(4,641)	(5)	%	$	(286,287)	$	(225,369)	$	(60,918)	(27)%

Interest and other investment income (loss)—realized	(171)		(270)		99		(37)		(1,450)		170		(1,620)		NM
Interest expense	(128)		(160)		32		20		(474)		(397)		(77)		(19)
Realized net investment loss	(299)		(430)		131		30		(1,924)		(227)		(1,697)		NM
Realized Income	$	(95,743)	$	(91,233)	(4,510)		(5)		$	(288,211)	$	(225,596)	(62,615)		(28)

NM - Not Meaningful

Liquidity and Capital Resources

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

Sources and Uses of Liquidity

Our sources of liquidity are (1) cash on hand, (2) net working capital, (3) cash from operations, including management fees and fee related performance revenues, which are collected monthly, quarterly or semi-annually, and net realized performance income, which may be unpredictable as to amount and timing, (4) fund distributions related to our investments that are unpredictable as to amount and timing and (5) net borrowing from the Credit Facility. As of September 30, 2022, our cash and cash equivalents were $361.5 million, and we had $445.0 million borrowings outstanding under our Credit Facility. Our ability to draw from the Credit Facility is subject to a leverage and other covenants. We remain in compliance with all covenants as of September 30, 2022. We believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for the foreseeable future. Cash flows from management fees may be impacted by a slowdown or declines in deployment, declines or write downs in valuations, or a slowdown or negatively impacted fundraising. In addition, management fees may be subject to deferral and fee related performance revenues may be subject to hold backs. Declines or delays and transaction activity may impact our fund distributions and net realized performance income which could adversely impact our cash flows and liquidity. Market conditions may make it difficult to extend the maturity or refinance our existing indebtedness or obtain new indebtedness with similar terms.

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

In the normal course of business, we expect to pay dividends to our Class A and non-voting common stockholders that

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

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

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

Cash Flows

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


	Nine months ended September 30,
($ in thousands)	2022		2021
Net cash provided by operating activities	$	640,805	$	368,259
Net cash used in the Consolidated Funds' operating activities, net of eliminations	(1,184,410)		(2,212,010)
Net cash used in operating activities	(543,605)		(1,843,751)
Net cash used in the Company's investing activities	(330,046)		(1,072,578)
Net cash provided by (used in) the Company's financing activities	(266,540)		476,110
Net cash provided by the Consolidated Funds' financing activities, net of eliminations	1,193,621		2,216,874
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)

Operating Activities

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

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	Nine months ended September 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change
Core operating activities	$	722,508	$	476,700	$	245,808	52%
Net realized performance income	85,646		37,628		48,018		128
Net cash used in investment related activities	(167,349)		(146,069)		(21,280)		15
Net cash provided by operating activities	$	640,805	$	368,259	272,546		74

NM - Not Meaningful

Cash generated from our core operating activities continues to increase as a result of growing fee revenues and an expanding fee related earnings margin. Net realized performance income represents a source of cash and includes incentive fees that are realized annually at the end of the measurement period, which is typically at the end of the calendar year. Cash from these realizations are generally received in the period subsequent to the measurement period. Our incentive fee realizations were higher in the fourth quarter of 2021 compared to the fourth quarter of 2020, which resulted in an increase in cash payments received over the comparative period. Net cash used in investment related activities primarily represents net purchases associated with funding capital commitments in our investment portfolio, which represent a use of cash. Our capital commitments continue to increase with our growing assets under management. For further discussion of our capital commitments, see “Note 9. Commitments and Contingencies,” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Net cash used in the Consolidated Funds’ operating activities continues to be principally attributable to net purchases of investment securities by recently launched funds during both periods. Net cash used in the Consolidated Funds’ operating activities for the nine months ended September 30, 2021 included the purchase of U.S. Treasury securities following the initial public offering of our SPAC.

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

Investing Activities


	Nine months ended September 30,
	2022		2021
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)

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

Financing Activities


	Nine months ended September 30,
	2022		2021
Net proceeds from issuance of Class A and non-voting common stock	$	—	$	827,430
Net borrowings of Credit Facility	30,000		150,000
Proceeds from issuance of senior and subordinated notes	488,915		450,000

Class A and non-voting common stock dividends	(334,864)		(239,816)
AOG unitholder distributions	(273,356)		(198,752)
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
Net cash provided by (used in) the Company's financing activities	$	(266,540)	$	476,110

As a result of generating higher fee related earnings, we increased the level of dividends paid to a growing shareholder base of Class A and non-voting common stockholders and distributions paid to AOG unitholders, resulting in net cash used in the Company’s financing activities for the nine months ended September 30, 2022. Net proceeds from the issuance of the 2052

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Senior Notes contributed to additional cash inflow for the nine months ended September 30, 2022. These proceeds were used primarily to fund the Infrastructure Debt Acquisition.

In connection with the vesting of restricted units that are granted to our employees under the Equity Incentive Plan, we withhold shares equal to the fair value of our employee’s withholding tax liabilities and pay the taxes on their behalf. This use of cash decreased from the prior period primarily as a result of a lower number of restricted units that vested in the current period, partially offset by our higher stock price, which is the basis on which employee compensation is recognized. The net settlement of shares minimizes the dilutive impact of our Equity Incentive Plan as fewer shares are issued upon vesting. For the nine months ended September 30, 2022 and 2021, we retained and did not issue 2.5 million shares and 3.8 million shares, respectively.

Net cash provided by the Company's financing activities for the nine months ended September 30, 2021 was principally composed of net proceeds from the public offering of Class A common stock, private offering of Class A common stock and non-voting common stock to SMBC and the issuance of the 2051 Subordinated Notes. These proceeds were largely used to fund the Black Creek Acquisition, Landmark Acquisition and redeem the Series A Preferred Stock.


	Nine months ended September 30,
	2022		2021
Contributions from redeemable and non-controlling interests in Consolidated Funds, net of eliminations	$	298,646	$	919,666
Distributions to non-controlling interests in Consolidated Funds, net of eliminations	(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 the Consolidated Funds' financing activities	$	1,193,621	$	2,216,874

Net cash provided by the Consolidated Funds’ financing activities for the nine months ended September 30, 2022 was primarily attributable to the borrowings of two newly issued CLOs.

Net cash provided by the Consolidated Funds’ financing activities for the nine months ended September 30, 2021 was principally attributable to contributions from shareholders in the initial public offering of our SPAC and to the borrowings of two newly issued CLOs.

Capital Resources

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

We are required to maintain minimum net capital balances for regulatory purposes for our broker-dealer entities. These net capital requirements are met in part by retaining cash, cash equivalents and investment securities. Additionally, certain of our subsidiaries operating outside the U.S. are also subject to capital adequacy requirements in each of its jurisdictions. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of September 30, 2022, we were required to maintain approximately $48.1 million in net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We remain in compliance with all regulatory requirements.

Holders of AOG Units, subject to the terms of the exchange agreement, may exchange their AOG Units for shares of our Class A common stock on a one-for-one basis. These exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of AMC that otherwise would not have been available. These increases in tax basis may increase depreciation and amortization for U.S. income tax purposes and thereby reduce the amount of tax that we would otherwise be required to pay in the future. We entered into the TRA that provides payment to the TRA recipients of 85% of the amount of actual cash savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that we actually realize as a result of these increases in tax basis and of certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA and interest accrued thereon. Future payments under the TRA in respect of subsequent exchanges are expected to be substantial. The TRA liability balance was $99.0 million and $100.5 million as of September 30, 2022 and December 31, 2021, respectively.

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

Critical Accounting Estimates

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

Recent Accounting Pronouncements

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

Commitments and Contingencies

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

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