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 vehicles, 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 2022 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.

“Period-over-period analysis of current year compared to prior year may be deemed to be not meaningful and is designated as “NM” within the discussion and analysis of financial condition and results of operations.

Trends Affecting Our Business

We believe that our disciplined investment philosophy across our distinct but complementary investment groups contributes to the stability of our performance throughout market cycles. For the three months ended March 31, 2023, 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 U.S., Western Europe and Asia, including conditions in the global financial markets and the economic and political environments.

Global markets started the year strong but remained volatile during the first quarter of 2023. Leveraged credit spreads tightened near quarter-end as certain actions by governments and central banks alleviated fears from the recent strain on the banking system. In the U.S., the ICE BAML High Yield Master II Index, a high yield bond index, returned 3.7% for the quarter, while the Credit Suisse Leveraged Loan Index (“CSLLI”), a leveraged loan index, returned 3.1% for the quarter. In Europe, the ICE BAML European Currency High Yield Index returned 2.7% for the quarter, while the Credit Suisse Western European Leveraged Loan Index returned 3.6% for the quarter.

Asian markets also started off the year with positive sentiments on the growth outlook as global energy costs fell and China’s economy reopened. Amid volatility in the public markets in the region, private credit activity in the region remained active and resilient throughout the quarter as there has been consistent demand for alternative sources of capital.

The global equity markets rallied to start the year strong after broad declines in 2022. The S&P 500 Index returned 7.5%, while the MSCI All Country World Index ex USA returned 6.9%, for the quarter.

Volatility in the private equity markets continued due to sustained increases in interest rates, which impacted the cost of financing available for leveraged buyout transactions. Valuations continue to experience downward pressure from the macroeconomic environment. The current market environment has had a more pronounced negative impact on certain industries, including energy and retail, which are industries in which some of our funds have made investments. As of March 31, 2023, approximately 2% of our total AUM was invested in the energy sector (of which approximately 1% of our total AUM was invested in midstream investments and also includes oil and gas exploration) and approximately 2% of our total AUM was invested in the retail sector. We believe that the current environment could lead to opportunities for distressed investments in the near to medium term. Continued asset selectivity, portfolio diversification and a differentiated view to drive value creation, will be instrumental in delivering attractive returns to investors.

The commercial real estate markets also continued to be impacted by the macroeconomic environment in the first quarter of 2023. Pan-European and U.S. real estate deal activity was subdued with limited transactional liquidity. Property

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valuations have continued to adjust downwards, with capitalization rate compressions waning and yields widening. However, we believe certain 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 Developed Europe and the FTSE NAREIT All Equity REITs indices declined 4.5% and returned 1.7%, respectively, for the quarter.

We believe our portfolios across all strategies are well positioned for a rising interest rate environment. On a market value basis, approximately 87% of our debt assets and 58% of our total assets were floating rate instruments as of March 31, 2023.

Recent Transactions

On April 25, 2023, Ares Acquisition Corporation II (NYSE: AACT), Ares’ second sponsored SPAC, consummated its initial public offering. The initial public offering generated gross proceeds of $500.0 million, which includes the partial exercise of the underwriters’ option to purchase additional shares at the initial public offering price to cover over-allotments.

Managing Business Performance

Operating Metrics

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

Assets Under Management

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

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

						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total AUM
Balance at 12/31/2022						$	225,579					$	34,749					$	66,061					$	21,961					$	3,647					$	351,997
Net new par/equity commitments						9,859						50						765						1,246						2,662						14,582
Net new debt commitments						1,423						—						—						—						—						1,423
Capital reductions						(2,081)						(3)						(403)						—						—						(2,487)
Distributions						(1,530)						(327)						(1,663)						(424)						(1,917)						(5,861)
Redemptions						(1,376)						—						(538)						—						(539)						(2,453)
Change in fund value						3,269						178						(108)						111						(356)						3,094
Balance at 3/31/2023						$	235,143					$	34,647					$	64,114					$	22,894					$	3,497					$	360,295
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total AUM
Balance at 12/31/2021						$	201,405					$	33,404					$	45,919					$	22,119					$	2,928					$	305,775
Acquisitions						—						—						8,184						199						—						8,383
Net new par/equity commitments(1)						5,391						570						3,058						1,080						(48)						10,051
Net new debt commitments						2,340						—						1,105						—						—						3,445
Capital reductions						(402)						(3)						(262)						—						—						(667)
Distributions						(1,165)						(383)						(1,128)						(575)						8						(3,243)
Redemptions						(410)						—						(136)						—						—						(546)
Change in fund value						(453)						(23)						1,787						645						(135)						1,821
Balance at 3/31/2022						$	206,706					$	33,565					$	58,527					$	23,468					$	2,753					$	325,019
(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 are presented below ($ in billions):

			AUM: $360.3						AUM: $325.0

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

(1) Includes $14.6 billion and $12.0 billion of AUM of funds from which we indirectly earn management fees as of March 31, 2023 and 2022, respectively and includes $3.7 billion and $3.4 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2023 and 2022, 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.

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

						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total
Balance at 12/31/2022						$	151,275					$	18,447					$	41,607					$	17,668					$	2,064					$	231,061
Commitments						1,900						—						596						107						1,553						4,156
Deployment/subscriptions/increase in leverage						4,281						703						221						110						—						5,315
Capital reductions						(1,533)						—						(279)						—						—						(1,812)
Distributions						(2,139)						(400)						(632)						(197)						(642)						(4,010)
Redemptions						(1,377)						—						(538)						—						—						(1,915)
Change in fund value						1,342						—						(47)						108						(240)						1,163
Change in fee basis						—						—						—						(49)						—						(49)
Balance at 3/31/2023						$	153,749					$	18,750					$	40,928					$	17,747					$	2,735					$	233,909
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total
Balance at 12/31/2021						$	122,110					$	16,689					$	28,615					$	18,364					$	2,067					$	187,845
Acquisitions						—						—						4,855						131						—						4,986
Commitments(1)						3,722						—						2,184						697						(8)						6,595
Deployment/subscriptions/increase in leverage						7,374						115						909						69						—						8,467
Capital reductions						(2,596)						—						—						—						—						(2,596)
Distributions						(1,957)						(446)						(891)						(472)						(1)						(3,767)
Redemptions						(396)						—						(138)						—						—						(534)
Change in fund value						(560)						—						1,418						738						(211)						1,385
Change in fee basis						(836)						(217)						(825)						(1,457)						—						(3,335)
Balance at 3/31/2022						$	126,861					$	16,141					$	36,127					$	18,070					$	1,847					$	199,046
(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 bases ($ in billions):

			FPAUM: $233.9						FPAUM: $199.0

			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 $55.3 billion and $48.6 billion from funds that primarily invest in illiquid strategies as of March 31, 2023 and 2022, 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						Other

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

			Credit						Private Equity						Real Assets						Secondaries						Other

As of March 31, 2023, AUM Not Yet Paying Fees includes $50.5 billion of AUM available for future deployment that could generate approximately $483.0 million in potential incremental annual management fees. As of March 31, 2022, AUM Not Yet Paying Fees included $58.2 billion of AUM available for future deployment that could generate approximately $557.0 million in potential incremental annual management fees.

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

			Credit						Real Assets						Secondaries						Other

As of March 31, 2023, perpetual capital AUM of $95.4 billion included 75% from commingled funds and 25% from managed accounts and perpetual capital IGAUM from which we are generating fee related performance revenues totaled $12.9 billion, composed of $12.6 billion from managed accounts within the Credit Group and $0.3 billion from commingled funds within the Secondaries Group. As of March 31, 2022, perpetual capital AUM of $82.7 billion included 75% from commingled funds and 25% from managed accounts.

Management Fees By Type

We view the duration of funds we manage as a metric to measure the stability of our future management fees. For the three months ended March 31, 2023 and 2022, 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.

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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.

Consolidation and Deconsolidation of Ares Funds

Consolidated Funds represented approximately 5% of our AUM as of March 31, 2023, 2% of our management fees and 2% of our carried interest and incentive fees for the three months ended March 31, 2023. As of March 31, 2023, we consolidated 25 CLOs, 10 private funds and one SPAC, and as of March 31, 2022, we consolidated 23 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 accounting for a redemption or liquidation preference requires the reallocation of ownership based on specific terms of a profit sharing agreement. 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 within our unaudited condensed consolidated financial statements. Redeemable interest in Consolidated Funds represent the shares issued by Ares Acquisition Corporation (NYSE: AAC) (“AAC”) that are redeemable for cash by the public shareholders in connection with AAC’s failure to complete a business combination or tender offer associated with stockholder approval provisions.

We generally deconsolidate funds and CLOs when we are no longer deemed to have a controlling interest in the entity. During the three months ended March 31, 2023 and 2022, we did not deconsolidate any entities.

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

For the actual impact that consolidation had on our results and further discussion on consolidation and deconsolidation of funds, see “Note 14. Consolidation” within 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. Although the consolidated results presented below include the results of our operations together with those of the Consolidated Funds and other joint ventures, we separate our analysis of those items primarily impacting the Company from those of the Consolidated Funds.

The following table presents our summarized consolidated results of operations ($ in thousands):

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Total revenues																											$	813,362					$	714,999					$	98,363					14%
Total expenses																											(628,636)						(611,684)						(16,952)						(3)
Total other income, net																											56,396						57,994						(1,598)						(3)
Income tax expense																											(33,806)						(20,411)						(13,395)						(66)
Net income																											207,316						140,898						66,418						47
Less: Net income attributable to non-controlling interests in Consolidated Funds																											26,693						47,382						(20,689)						(44)
Net income attributable to Ares Operating Group entities																											180,623						93,516						87,107						93
Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities																											(1,824)						399						(2,223)						NM
Less: Net income attributable to non-controlling interests in Ares Operating Group entities																											88,408						47,254						41,154						87
Net income attributable to Ares Management Corporation Class A and non-voting common stockholders																											$	94,039					$	45,863					48,176						105

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Consolidated Results of Operations of the Company

The following discussion sets forth information regarding our consolidated results of operations:

Revenues.

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Revenues
Management fees																											$	600,516					$	477,332					$	123,184					26%
Carried interest allocation																											151,488						178,289						(26,801)						(15)
Incentive fees																											8,923						16,422						(7,499)						(46)
Principal investment income																											22,758						8,326						14,432						173
Administrative, transaction and other fees																											29,677						34,630						(4,953)						(14)
Total revenues																											$	813,362					$	714,999					98,363						14

Management Fees. Capital deployment in direct lending funds within the Credit Group led to a rise in FPAUM and additional management fees of $41.8 million over the comparative periods. Part I Fees contributed to an increase of $35.2 million for the comparative periods 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, given their primarily floating-rate loan portfolios. Within the Real Assets Group, the non-traded REITs contributed additional fees of $8.0 million from additional capital raised and the acquisition of AMP Capital’s infrastructure debt platform (the “Infrastructure Debt Acquisition”), which was completed on February 10, 2022, contributed additional fees of $6.0 million for the three months ended March 31, 2023 when compared to the three months ended March 31, 2022. 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. The activity was principally composed of the following ($ in millions):

			Three months ended March 31, 2023			Primary Drivers			Three months ended March 31, 2022			Primary Drivers
Credit funds			$	116.7		Primarily from four direct lending funds and one alternative credit fund with $23.8 billion of IGAUM generating returns in excess of their hurdle rates. Ares Capital Europe V, L.P. (“ACE V”) generated carried interest allocation of $44.8 million driven by net investment income on an increasing invested capital base. Ares Capital Europe IV, L.P. (“ACE IV”), Ares Private Credit Solutions, L.P. (“PCS I”), Ares Capital Europe III, L.P. (“ACE III”) and Ares Pathfinder Fund, L.P. (“Pathfinder”) generated carried interest allocation of $24.0 million, $14.6 million, $9.3 million and $3.4 million, respectively, primarily driven by net investment income during the period. Our credit funds have benefited from rising interest rates on predominately floating-rate loans.			$	74.3		Primarily from four direct lending funds and one alternative credit fund with $18.9 billion of IGAUM generating returns in excess of their hurdle rates. ACE V, PCS I and ACE IV generated carried interest allocation of $20.4 million, $10.6 million and $9.6 million, respectively. 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 $6.5 million primarily driven by net investment income during the period. In addition, Pathfinder generated carried interest allocation of $14.3 million that was primarily driven by market appreciation of various investments.
Private equity funds			48.2			Appreciation across several portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in industries such as services and retail, generated carried interest allocation of $53.1 million from Ares Special Situations Fund IV, L.P. (“SSF IV”), $25.3 million from Ares Special Opportunities Fund, L.P. (“ASOF I”) and $10.1 million from Ares Corporate Opportunities Fund VI, L.P. (“ACOF VI”). The appreciation was partially offset by the reversal of unrealized carried interest allocation of $36.5 million and $2.1 million from Ares Corporate Opportunities Fund V, L.P. (“ACOF V”) and Ares Corporate Opportunities Fund III, L.P. (“ACOF III”), respectively, primarily driven by lower operating performance metrics and market depreciation of certain portfolio companies that primarily operate in the healthcare industry.			(3.2)			Market depreciation across several investments that led to the reversal of unrealized carried interest allocation of $51.6 million for Ares Corporate Opportunities Fund IV, L.P. (“ACOF IV”) primarily due to market depreciation of its investment in the AZEK Company (“AZEK”) driven by global equity market volatility. The market depreciation was partially offset by market appreciation across several portfolio company investments, primarily operating in services, technology, retail and healthcare industries that generated carried interest allocation of $17.0 million from ACOF V, $21.0 million from ASOF I and $11.3 million from ACOF VI.
Real assets funds			(12.8)			Reversal of unrealized carried interest of $16.5 million from three European real estate equity funds and $5.6 million from three U.S. real estate equity funds primarily driven by market depreciation of certain properties. In addition, reversal of unrealized carried interest of $7.8 million from Ares Energy Investors Fund V, L.P. (“EIF V”) primarily due to lower valuations in certain investments. Increased operating income and market appreciation of certain properties generated carried interest allocation of $7.5 million from two U.S. real estate equity funds and $1.1 million from Ares U.S. Real Estate Opportunity Fund III, L.P. (“AREOF III”). Ares Climate Infrastructure Partners, L.P. (“ACIP”) generated carried interest allocation of $4.6 million driven by market appreciation of certain investments and Ares Infrastructure Debt Fund V L.P. (“IDF V”) generated carried interest allocation of $6.4 million driven by net investment income.			54.5			Market appreciation from properties within real estate equity funds, primarily driven by gains from several industrial and multifamily assets, generated carried interest allocation of $16.8 million from AREOF III, $9.7 million from U.S. Real Estate Fund VIII, L.P. (“US VIII”), $16.7 million from U.S. Real Estate Fund IX, L.P. (“US IX”) and $13.6 million from four real estate equity funds. The market appreciation was partially offset by market depreciation that led to the reversal of unrealized carried interest allocation of $15.7 million from EIF V primarily due to lower valuations in certain investments due to volatility in the energy markets.
Secondaries funds			(0.6)			Reversal of unrealized carried interest from Landmark Equity Partners XVI, L.P. (“LEP XVI”), driven primarily by market depreciation of certain portfolio investments.			52.7			Market appreciation of certain investments held in LEP XVI and Landmark Real Estate Partners VIII, L.P. (“LREP VIII”) that generated carried interest allocation of $15.8 million and $24.4 million, respectively.
Carried interest allocation			$	151.5					$	178.3

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Incentive Fees. The activity was principally composed of the following ($ in millions):

			Three months ended March 31, 2023			Primary Drivers			Three months ended March 31, 2022			Primary Drivers
Credit funds			$	1.1		Incentive fee adjustments from various direct lending vehicles following the measurement period.			$	15.4		Incentive fees from three direct lending vehicles and an alternative credit vehicle.
Real assets funds			4.5			Incentive fees generated from an industrial real estate fund.			1.0			Incentive fees generated from an industrial real estate fund and ACRE.
Secondaries funds			3.3			Incentive fees generated from APMF.			—			N/A
Incentive fees			$	8.9					$	16.4

Principal Investment Income. The activity for the three months ended March 31, 2023 was primarily composed of market appreciation of certain special opportunities and European direct lending investments and dividend income from various investments in funds within our special opportunities strategy.

The activity for the three months ended March 31, 2022 was primarily driven by (i) increasing operating income from underlying properties associated with funds in our U.S. real estate equity and real estate secondaries strategies and (ii) market appreciation of various investments across funds in our private equity secondaries and special opportunities strategies.

Administrative, Transaction and Other Fees. The decrease in administrative, transaction and other fees primarily resulted from lower administrative service fees generated from ARCC and our non-traded REITs of $5.7 million for the three months ended March 31, 2023 compared to the same period in 2022. In addition, there was a decrease in facilitation fees, which are generated when investors contribute real property through a like-kind 1031 exchange for fund shares, of $2.6 million for the three months ended March 31, 2023 compared to the same period in 2022.

The decrease in administrative, transaction and other fees was partially offset by an increase in (i) transaction fees of $2.1 million from a portion of the loan origination income that were mostly generated from certain affiliated credit funds and (ii) administrative service fees of $1.7 million earned from certain private funds that pay on invested capital, where the increase in fees was due to increase in fee basis from additional deployment for the three months ended March 31, 2023 compared to the same period in 2022.

Expenses.

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Expenses
Compensation and benefits																											$	360,781					$	357,243					$	(3,538)					(1)%
Performance related compensation																											111,658						129,405						17,747						14
General, administrative and other expenses																											148,345						120,523						(27,822)						(23)
Expenses of Consolidated Funds																											7,852						4,513						(3,339)						(74)
Total expenses																											$	628,636					$	611,684					(16,952)						(3)

Compensation and Benefits. The increase in compensation and benefits was primarily driven by (i) increase in salary expense of $20.9 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily attributable to headcount growth to support the expansion of our business, (ii) higher Part I Fees compensation of $19.7 million for the three months ended March 31, 2023 compared to the same period in 2022 and (iii) higher equity-based compensation expense of $15.6 million as discussed below. Average headcount for the quarter-to-date period increased by 21% to 2,558 professionals for the 2023 period from 2,113 professionals for the same period in 2022.

The increase in compensation and benefits is partially offset by a decrease of $47.4 million in compensation expense recognized in relation to the performance-based, acquisition-related compensation arrangements (“earnouts”) that were established in connection with the Landmark Acquisition, Black Creek Acquisition and Infrastructure Debt Acquisition, which were 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.

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The revenue targets for the Black Creek Acquisition earnout were achieved and the maximum contingent payment was recorded during the third quarter of 2022. Compensation expense related to the Black Creek earnout was $37.7 million for the three months ended March 31, 2022.

In connection with the fundraising for an acquired Landmark private equity secondaries fund, the revenue targets on which the Landmark earnout were contingent were not achieved and the associated compensation expense was reversed during the third quarter of 2022. Compensation expense related to the Landmark earnout was $8.9 million for the three months ended March 31, 2022.

The revenue target for one of the infrastructure debt funds from the Infrastructure Debt Acquisition earnout was achieved during the fourth quarter of 2022. In connection with the achievement of the earnout for the one infrastructure debt fund, a portion of the associated liability was paid in cash and the remaining portion was equity-settled. The excess fair value of $14.8 million over the liability at the time the earnout was achieved will be recognized over the remaining four year service period as equity-based compensation expense, including $0.9 million that was recognized during the three months ended March 31, 2023. Compensation expense related to the other infrastructure debt funds subject to the Infrastructure Debt earnout was $0.6 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively. See “Note 7. Commitments and Contingencies” for a further description of the contingent liabilities related to the Infrastructure Debt Acquisition arrangement.

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

															Three months ended March 31,																		Favorable (Unfavorable)
																														2023						2022												$ Change						% Change
Awards that do not recur annually:
Multi-year future grants																														$	12,216					$	10,192											$	(2,024)					(20)%
Other awards that do not recur annually																														2,547						2,524												(23)						(1)
Total awards that do not recur annually																														14,763						12,716												(2,047)						(16)
Recurring annual awards:
Discretionary awards																														28,206						20,968												(7,238)						(35)
Bonus awards																														26,283						19,966												(6,317)						(32)
Total recurring annual awards																														54,489						40,934												(13,555)						(33)
Equity-based compensation expense																														$	69,252					$	53,650											(15,602)						(29)

The increase in equity-based compensation expense was primarily attributable to the increase in awards granted under our recurring annual award programs, which included one-time expenses of $10.0 million and $7.5 million for the three months ended March 31, 2023 and 2022, respectively, in association with immediate vesting of certain awards.

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

Performance Related Compensation. Changes in performance related compensation are directly associated with the changes in carried interest allocation and incentive fees described above and include associated payroll-related tax expenses and performance allocations to charitable organizations as part of our philanthropic initiatives.

General, Administrative and Other Expenses. In connection with a merger agreement to acquire the remaining 20% ownership interest in the Ares SSG fee-generating business that was retained by the former owners of SSG (the “SSG Buyout”), we made the decision to rebrand Ares SSG as Asia credit and discontinued the ongoing use of the SSG trade name. As a result, the Company recorded a non-cash impairment charge of $7.8 million representing the carrying value of SSG’s trade name for the three months ended March 31, 2023.

Other operating expenses, most notably travel and marketing sponsorships, collectively increased by $10.3 million for the three months ended March 31, 2023 compared to the same period in 2022 as we (i) conducted more in-person company meetings and events with a focus on promoting collaboration and (ii) continued to increase our marketing efforts, primarily to grow our retail distribution platform through Ares Wealth Management Solutions, LLC (“AWMS”) over the comparative periods. 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 $5.9 million for the three months ended March 31, 2023 compared to the same period in 2022. Additionally, professional service fees have increased by $4.9 million for the three months ended March 31, 2023,

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primarily due to professional service fees to support the expanding platform and to the reorganization of our income tax compliance function.

Acquisition-related costs decreased by $4.1 million for the three months ended March 31, 2023 compared to the same period in 2022 due to timing of strategic opportunities. 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.

Other income, net.

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Other income (expense)
Net realized and unrealized gains on investments																											$	1,515					$	8,109					$	(6,594)					(81)%
Interest and dividend income																											3,839						1,502						2,337						156
Interest expense																											(24,986)						(15,646)						(9,340)						(60)
Other income (expense), net																											(923)						1,784						(2,707)						NM
Net realized and unrealized gains on investments of Consolidated Funds																											10,700						15,968						(5,268)						(33)
Interest and other income of Consolidated Funds																											222,938						120,290						102,648						85
Interest expense of Consolidated Funds																											(156,687)						(74,013)						(82,674)						(112)
Total other income, net																											$	56,396					$	57,994					(1,598)						(3)

Net Realized and Unrealized Gains on Investments. The activity for the three months ended March 31, 2023 and 2022 was primarily attributable to unrealized gains from certain strategic investments made in connection with our acquisition of SSG and to unrealized losses from our investments in the subordinated notes of U.S. CLOs. The activity for the three months ended March 31, 2023 was also attributable to unrealized gains from APMF.

Interest Expense. Higher average interest rates, driven by rising SOFR rates, and a higher average outstanding balance of the Credit Facility contributed to an increase in interest expense for the three months ended March 31, 2023 compared to the same period in 2022.

Other Income (Expense), Net. The activity for the three months ended March 31, 2023 and 2022 included transaction gains (losses) associated with currency fluctuations impacting the revaluation of assets and liabilities denominated in foreign currencies other than an entity’s functional currency. Transaction losses of $0.9 million for the three months ended March 31, 2023 were primarily attributable to the British pound strengthening against the Euro, while transaction gains of $3.1 million during the three months ended March 31, 2022 were primarily attributable to the British pound weakening against Euro.

Other income (expense), net also included $1.0 million of expense for the three months ended March 31, 2022 related to 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 dependent on the achievement of revenue targets for certain funds that were acquired in the Black Creek Acquisition. The revenue targets for the Black Creek earnout were fully achieved and the maximum contingent payment was recorded during the third quarter of 2022.

Income Tax Expense.

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Income before taxes																											$	241,122					$	161,309					$	79,813					49%
Income tax expense																											(33,806)						(20,411)						(13,395)						(66)
Net income																											$	207,316					$	140,898					66,418						47

Income Tax Expense The increase in income tax expense was attributable to higher net income allocable to AMC for the three months ended March 31, 2023 compared to the three months ended March 31, 2022*.* The increase in income before taxes for the three months ended March 31, 2023 compared to the same period in the prior year was primarily attributable to income attributable to AMC as income attributable to non-controlling interests in Consolidated Funds, which is generally not subject to corporate income taxes, decreased over the comparative period. The calculation of income taxes is also sensitive to any changes in weighted average daily ownership. The weighted average daily ownership for AMC common stockholders increased from 59.5% for the three months ended March 31, 2022 to 60.1% for the three months ended March 31, 2023. 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 AMC common

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stockholders was partially offset by the issuance of AOG Units in connection with the settlement of the Black Creek earnout that increased the ownership of AOG Units not held by AMC.

Redeemable and Non-Controlling Interests.

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Net income																											$	207,316					$	140,898					$	66,418					47%
Less: Net income attributable to non-controlling interests in Consolidated Funds																											26,693						47,382						(20,689)						(44)
Net income attributable to Ares Operating Group entities																											180,623						93,516						87,107						93
Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities																											(1,824)						399						(2,223)						NM
Less: Net income attributable to non-controlling interests in Ares Operating Group entities																											88,408						47,254						41,154						87
Net income attributable to Ares Management Corporation Class A and non-voting common stockholders																											$	94,039					$	45,863					48,176						105

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 (loss) attributable to redeemable interest in AOG entities is allocated based on the ownership percentage for periods presented. In connection with the SSG Buyout, a portion of the redeemable interest in AOG entities was purchased on March 31, 2023 and the Company now owns 100% of Ares SSG’s fee-generating business. As the SSG Buyout was completed on the last day of the quarter, there was no impact to the allocation of income for the periods presented. In future periods, 100% of the income associated with Ares SSG’s fee generating business will be attributable to AOG entities and the remaining redeemable interest in AOG entities from ownership in certain investments that were not included in the SSG Buyout will continue to be allocated based on ownership percentage.

Net income attributable to non-controlling interests in AOG entities is generally allocated based on the weighted average daily ownership of the other AOG unitholders, except for income (loss) generated from certain joint venture partnerships. Net income (loss) is allocated to other strategic distribution partners with whom we have established joint ventures based on the respective ownership percentages and based on the activity of certain membership interests. Net income of $7.5 million and $4.6 million for the three months ended March 31, 2023 and 2022, respectively, was allocated based on ownership percentages of the strategic distribution partners and the activity of those membership interests.

The change over the comparative period is a result of the respective change in income before taxes and weighted average daily ownership. The weighted average daily ownership for the non-controlling AOG unitholders decreased from 40.5% for the three months ended March 31, 2022 to 39.9% for the three months ended March 31, 2023.

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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 March 31,																								Favorable (Unfavorable)
																														2023						2022																								$ Change						% Change
Expenses of the Consolidated Funds																														$	(7,852)					$	(4,513)																							$	(3,339)					(74)%
Net realized and unrealized gains on investments of Consolidated Funds																														10,700						15,968																								(5,268)						(33)
Interest and other income of Consolidated Funds																														222,938						120,290																								102,648						85
Interest expense of Consolidated Funds																														(156,687)						(74,013)																								(82,674)						(112)
Income before taxes																														69,099						57,732																								11,367						20
Income tax expense of Consolidated Funds																														(478)						(25)																								(453)						NM
Net income																														68,621						57,707																								10,914						19
Less: Revenues attributable to Ares Management Corporation eliminated upon consolidation																														32,688						22,446																								10,242						46
Less: Other income (expense), net attributable to Ares Management Corporation eliminated upon consolidation (loss)																														9,583						(12,121)																								21,704						NM
General, administrative and other expense attributable to Ares Management Corporation eliminated upon consolidation																														343						—																								(343)						NM
Net income attributable to non-controlling interests in Consolidated Funds																														$	26,693					$	47,382																							(20,689)						(44)

The results of operations of the Consolidated Funds primarily represents activity from certain CLOs that we are deemed to control. Expenses primarily reflect professional service 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 Condensed Consolidated Statements of Financial Condition. As of March 31, 2023 and March 31, 2022, we consolidated 25 and 23 CLOs, respectively. The increase in expenses for the three months ended March 31, 2023 compared to the same period in 2022 was driven by higher professional service fees incurred by AAC in connection with a potential business combination. The lower net realized and unrealized gains on investments over the comparative periods was primarily driven by the decline in value of certain investments from an Asian corporate private equity fund. The increases in interest and other income and interest expense were primarily attributable to the impact from rising interest rates on our consolidated CLOs. Interest and other income and interest expense also increased due to two consolidated CLOs that were launched subsequent to the first quarter of 2022. The CSLLI returned 3.1% for the first quarter of 2023 compared to a negative return of 0.1% for the first quarter of 2022.

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 of the results of the Consolidated Funds that is eliminated from the respective components of AMC’s results upon consolidation. The increase in revenues attributable to AMC for the three months ended March 31, 2023 compared to the same period in 2022 was primarily attributable to higher principal investment income and carried interest allocation from a fund invested in insurance companies.

Other income (expense), net attributable to AMC for the three months ended March 31, 2023 and 2022 was primarily attributable to unrealized gains and losses on our investment in AAC that were recognized during each period.

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.

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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. We operate through our distinct operating segments. On March 31, 2023, we executed the SSG Buyout. We rebranded Ares SSG as Ares Asia and the Ares SSG credit business, including the Asian special situations, Asian secured lending and APAC direct lending strategies, as Asia credit. Asia credit has been reclassified effective January 1, 2023 and is now presented within the Credit Group. In connection with this reclassification, we will no longer use Strategic Initiatives to describe all other operating segments, instead reporting the collective results as Other. Historical periods have been modified to conform to the current period presentation. The following table sets forth FRE and RI by reportable segment and OMG ($ in thousands):

																		Three months ended March 31,												Favorable (Unfavorable)
																														2023						2022						$ Change						% Change
Fee Related Earnings:
Credit Group																														$	277,309					$	206,704					$	70,605					34%
Private Equity Group																														23,454						20,400						3,054						15
Real Assets Group																														53,662						39,437						14,225						36
Secondaries Group																														25,430						29,786						(4,356)						(15)
Other																														1,281						(82)						1,363						NM
Operations Management Group																														(126,499)						(90,575)						(35,924)						(40)
Fee Related Earnings																														$	254,637					$	205,670					48,967						24
Realized Income:
Credit Group																														$	278,009					$	212,162					$	65,847					31%
Private Equity Group																														23,932						20,558						3,374						16
Real Assets Group																														52,143						55,362						(3,219)						(6)
Secondaries Group																														24,350						29,965						(5,615)						(19)
Other																														2,475						(5,004)						7,479						NM
Operations Management Group																														(126,617)						(91,026)						(35,591)						(39)
Realized Income																														$	254,292					$	222,017					32,275						15

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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 within the Condensed Consolidated Statements of Operations to RI and FRE of the reportable segments and OMG ($ in thousands):

			Three months ended March 31,
			2023						2022
Income before taxes			$	241,122					$	161,309
Adjustments:
Depreciation and amortization expense			45,659						38,126
Equity compensation expense			68,704						53,017
Acquisition-related compensation expense(1)			642						48,001
Acquisition and merger-related expense			4,955						9,042
Placement fee adjustment			(3,232)						(693)
Other expense, net			91						1,981
Net income of non-controlling interests in consolidated subsidiaries			(5,671)						(4,989)
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations			(27,171)						(47,407)
Total performance income—unrealized			(127,713)						(133,532)
Total performance related compensation—unrealized			85,150						91,198
Total net investment (income) loss—unrealized			(28,244)						5,964
Realized Income			254,292						222,017
Total performance income—realized			(31,136)						(43,868)
Total performance related compensation—realized			23,859						28,575
Total investment (income) loss—realized			7,622						(1,054)
Fee Related Earnings			$	254,637					$	205,670

(1)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 within the Company’s Condensed Consolidated Statements of Operations.

For the specific components and calculations of these non-GAAP measures, as well as additional reconciliations to the most comparable measures in accordance with GAAP, see “Note 13. Segment Reporting” within 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 Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Fee Related Earnings:

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

												Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Management fees																											$	405,650					$	317,489					$	88,161					28%
Fee related performance revenues																											600						12,353						(11,753)						(95)
Other fees																											8,870						5,766						3,104						54
Compensation and benefits																											(116,216)						(110,711)						(5,505)						(5)
General, administrative and other expenses																											(21,595)						(18,193)						(3,402)						(19)
Fee Related Earnings																											$	277,309					$	206,704					70,605						34

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, our open-end core alternative credit fund, ACE V, PCS II and Ares Senior Direct Lending Fund II, L.P. (“SDL II”) collectively generating additional fees of $30.8 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. Management fees from ARCC, excluding Part I Fees described below, increased by $6.0 million for the three months ended March 31, 2023, primarily due to an increase in the average size of ARCC’s portfolio. The remaining increase 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 for the three months ended March 31, 2023 compared to the same period in 2022 primarily due to the net addition of eight CLOs subsequent to March 31, 2022.

Part I Fees increased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to an increase in pre-incentive fee net investment income generated by ARCC and CADC, driven by an increase

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in the average size of their portfolios as well as the impact of rising interest rates, given their primarily floating-rate loan portfolios.

The increase in effective management fee rate for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily driven by the increase in Part I Fees contribution to the effective management fee rate and deployment in ACE V, which has a higher effective management fee rate than the Credit Group’s average effective management fee rate.

Fee Related Performance Revenues. 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. The decrease for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily attributable to timing of incentive fees recognized from direct lending funds once the associated performance conditions were met and the fees were no longer subject to reversal.

Other Fees. The increase in other fees for the three months ended March 31, 2023 compared to the same period in 2022 was primarily driven by (i) higher transaction fees, which generally represents fees from a portion of the loan origination income generated from certain affiliated credit funds, of $2.0 million and (ii) higher administrative service fees of $1.1 million earned from certain private funds that pay on invested capital, driven by additional deployment.

Compensation and Benefits. The increase in compensation and benefits was primarily driven by (i) higher Part I Fees compensation of $19.7 million for the three months ended March 31, 2023 compared to the same period in 2022 and (ii) increase in salary expense of $3.1 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily attributable to headcount growth to support the expansion of our business. The increase in compensation and benefits for the three months ended March 31, 2023 compared to the same period in 2022 was partially offset by (i) lower fee related performance compensation of $7.8 million in correspondence with the decrease in fee related performance revenues, (ii) a decrease in payroll related taxes of $4.3 million from the same period in 2022, primarily attributable to fewer restricted units vesting during 2023 and (iii) lower incentive-based compensation that we believe will increase throughout the year and exceed prior year levels.

Average headcount for the quarter-to-date period increased by 15% to 545 investment and investment support professionals for the 2023 period from 473 professionals for the same period in 2022 as we continued to add professionals to support our growing U.S. and European direct lending, alternative credit and Asia credit platforms.

General, Administrative and Other Expenses. Travel and marketing collectively increased by $1.8 million for the three months ended March 31, 2023 compared to the same period in 2022, as marketing efforts continued to increase driven by more investor meetings and events. Certain expenses, primarily the occupancy costs, information technology and information services, have also increased by $1.8 million for the three months ended March 31, 2023 compared to the same period in 2022, to support headcount growth and our expanding credit platform.

Realized Income:

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

												Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Fee Related Earnings																											$	277,309					$	206,704					$	70,605					34%
Performance income—realized																											6,593						7,363						(770)						(10)
Performance related compensation—realized																											(4,997)						(4,580)						(417)						(9)
Realized net performance income																											1,596						2,783						(1,187)						(43)
Investment income—realized																											506						415						91						22
Interest and other investment income—realized																											6,418						5,728						690						12
Interest expense																											(7,820)						(3,468)						(4,352)						(125)
Realized net investment income (loss)																											(896)						2,675						(3,571)						NM
Realized Income																											$	278,009					$	212,162					65,847						31

Realized net performance income was primarily attributable to distributions from a U.S. direct lending fund and a European direct lending fund for three months ended March 31, 2023. Realized net performance income for the three months ended March 31, 2022 was primarily attributable to distributions from two European direct lending funds and incentive fees on

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one alternative credit fund.

Realized net investment loss for the three months ended March 31, 2023 largely represents interest expense exceeding net investment and other income during the period. Interest expense, which is allocated based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility. The activity for the three months ended March 31, 2023 and 2022 included realized net investment income attributable to interest income generated from our CLO investments and income recognized in connection with distributions from a commercial finance fund.

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 March 31, 2023																		As of December 31, 2022
			Accrued Performance Income						Accrued Performance Compensation						Accrued Net Performance Income						Accrued Performance Income						Accrued Performance Compensation						Accrued Net Performance Income
ACE III			$	110,062					$	66,038					$	44,024					$	100,774					$	60,465					$	40,309
ACE IV			191,834						118,937						72,897						168,204						104,286						63,918
ACE V			158,398						95,038						63,360						115,969						69,581						46,388
PCS I			112,984						66,765						46,219						98,143						57,994						40,149
Pathfinder			92,328						78,478						13,850						88,879						75,547						13,332
Other credit funds			110,968						63,806						47,162						93,640						52,482						41,158
Total Credit Group			$	776,574					$	489,062					$	287,512					$	665,609					$	420,355					$	245,254

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

												As of December 31, 2022						Activity during the period																		As of March 31, 2023
						Waterfall Type						Accrued Performance Income						Change in Unrealized						Realized						Other Adjustments						Accrued Performance Income
Accrued Carried Interest
ACE III						European						$	100,774					$	9,288					$	—					$	—					$	110,062
ACE IV						European						168,204						24,035						(405)						—						191,834
ACE V						European						115,969						44,839						(2,410)						—						158,398
PCS I						European						98,143						14,619						—						222						112,984
Pathfinder						European						88,879						3,449						—						—						92,328
Other credit funds						European						91,997						19,579						(1,757)						48						109,867
Other credit funds						American						1,643						842						(1,327)						(57)						1,101
Total accrued carried interest												665,609						116,651						(5,899)						213						776,574
Other credit funds						Incentive						—						694						(694)						—						—
Total Credit Group												$	665,609					$	117,345					$	(6,593)					$	213					$	776,574

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Credit Group—Assets Under Management

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

									Liquid Credit						Alternative Credit						U.S. Direct Lending						European Direct Lending						Asia Credit						Other**(1)**						Total Credit Group
Balance at 12/31/2022									$	43,864					$	21,363					$	98,327					$	50,642					$	11,383					$	—					$	225,579
Net new par/equity commitments									405						3,104						1,776						4,324						—						250						9,859
Net new debt commitments									466						—						740						217						—						—						1,423
Capital reductions									(62)						—						(838)						(1,181)						—						—						(2,081)
Distributions									(143)						(251)						(704)						(397)						(35)						—						(1,530)
Redemptions									(545)						(739)						(92)						—						—						—						(1,376)
Change in fund value									511						340						1,003						1,429						(14)						—						3,269
Balance at 3/31/2023									$	44,496					$	23,817					$	100,212					$	55,034					$	11,334					$	250					$	235,143
									Liquid Credit						Alternative Credit						U.S. Direct Lending						European Direct Lending						Asia Credit						Other						Total Credit Group
Balance at 12/31/2021									$	40,335					$	17,424					$	85,849					$	49,102					$	8,695					$	—					$	201,405
Net new par/equity commitments									979						1,588						1,526						66						1,232						—						5,391
Net new debt commitments									1,010						—						1,330						—						—						—						2,340
Capital reductions									(73)						—						(324)						—						(5)						—						(402)
Distributions									(20)						(145)						(562)						(276)						(162)						—						(1,165)
Redemptions									(172)						(203)						(35)						—						—						—						(410)
Change in fund value									(444)						(70)						613						(575)						23						—						(453)
Balance at 3/31/2022									$	41,615					$	18,594					$	88,397					$	48,317					$	9,783					$	—					$	206,706
(1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy.

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

			AUM: $235.1						AUM: $206.7

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

(1) Includes $14.6 billion and $12.0 billion of AUM of funds from which we indirectly earn management fees as of March 31, 2023 and 2022, respectively, and includes $1.3 billion and $1.2 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2023 and 2022, respectively.

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Credit Group—Fee Paying AUM

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

						Liquid Credit						Alternative Credit						U.S. Direct Lending						European Direct Lending						Asia Credit												Total Credit Group
Balance at 12/31/2022						$	42,191					$	15,904					$	57,568					$	29,561					$	6,051											$	151,275
Commitments						419						840						641						—						—												1,900
Deployment/subscriptions/increase in leverage						254						987						1,415						1,359						266												4,281
Capital reductions						(62)						—						(1,279)						(3)						(189)												(1,533)
Distributions						(105)						(882)						(738)						(40)						(374)												(2,139)
Redemptions						(544)						(656)						(92)						(85)						—												(1,377)
Change in fund value						479						68						384						414						(3)												1,342
Balance at 3/31/2023						$	42,632					$	16,261					$	57,899					$	31,206					$	5,751											$	153,749
						Liquid Credit						Alternative Credit						U.S. Direct Lending						European Direct Lending						Asia Credit												Total Credit Group
Balance at 12/31/2021						$	38,673					$	8,742					$	46,128					$	23,847					$	4,720											$	122,110
Commitments						991						286						973						—						1,472												3,722
Deployment/subscriptions/increase in leverage						6						2,454						2,473						1,986						455												7,374
Capital reductions						(73)						(11)						(1,344)						(1,157)						(11)												(2,596)
Distributions						(25)						(223)						(1,216)						(237)						(256)												(1,957)
Redemptions						(168)						(147)						(35)						(46)						—												(396)
Change in fund value						(361)						14						208						(302)						(119)												(560)
Change in fee basis						—						—						—						—						(836)												(836)
Balance at 3/31/2022						$	39,043					$	11,115					$	47,187					$	24,091					$	5,425											$	126,861

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

			FPAUM: $153.7						FPAUM: $126.9

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

(1)Includes $30.9 billion and $27.3 billion from funds that primarily invest in illiquid strategies as of March 31, 2023 and 2022, 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 March 31, 2023

ARCC contributed approximately 38% of the Credit Group’s total management fees for the three months ended March 31, 2023. In addition, eight other significant funds, CADC, SDL I, ACE IV, ACE V, PCS II, Pathfinder, SDL II and our open-ended core alternative credit fund, collectively contributed approximately 28% of the Credit Group’s management fees for the three months ended March 31, 2023.

The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group as of March 31, 2023 ($ in millions):

																								Returns(%)
			Year of Inception						AUM												Quarter-To-Date												Since Inception**(1)**												Primary Investment Strategy
Fund																					Gross						Net						Gross						Net
ARCC(2)			2004						$	25,720																	N/A						2.9						N/A						11.8						U.S. Direct Lending
CADC(3)			2017						4,373																		N/A						2.8						N/A						5.4						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 March 31, 2023 ($ 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 Investment
SDL I Unlevered			2018						$	5,168					$	922					$	872					$	224					$	765					$	989					1.2x						1.2x						8.3						6.3						U.S. Direct Lending
SDL I Levered									2,045						2,022						716						1,781						2,497						1.3x						1.2x						14.9						10.8
ACE IV Unlevered(7)			2018						10,208						2,851						2,265						564						2,176						2,740						1.3x						1.2x						8.5						6.1						European Direct Lending
ACE IV Levered(7)									4,819						3,848						1,230						3,838						5,068						1.4x						1.3x						12.4						9.1
Funds Deploying Capital
ACE V Unlevered(8)			2020						16,846						7,026						5,101						216						5,320						5,536						1.1x						1.1x						11.7						8.6						European Direct Lending
ACE V Levered(8)									6,376						4,642						314						4,945						5,259						1.2x						1.1x						18.9						13.2
PCS II			2020						5,291						5,114						3,170						99						3,111						3,210						1.0x						1.0x						3.3						1.1						U.S. Direct Lending
Pathfinder			2020						4,026						3,683						2,246						140						2,479						2,619						1.2x						1.2x						18.7						13.3						Alternative Credit
SDL II Unlevered			2021						13,751						1,989						995						47						1,006						1,053						1.1x						1.1x						10.3						7.6						U.S. Direct Lending
SDL II Levered									6,047						2,778						246						2,804						3,050						1.1x						1.1x						18.1						13.0
Open-ended core alternative credit fund(9)			2021						3,509						3,479						2,213						100						2,241						2,341						1.1x						1.1x						9.8						7.1						Alternative Credit

(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 IV is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE IV (E) Unlevered, ACE IV (G) Unlevered, ACE IV (E) Levered and ACE IV (G) Levered. The gross and net IRR and MoIC presented in the table are for ACE IV (E) Unlevered and ACE IV (E) Levered. Metrics for ACE IV (E) Levered are inclusive of a U.S. dollar denominated feeder fund, which has not been presented separately The gross and net IRR for ACE IV (G) Unlevered are 10.0% and 7.3%, 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 13.7% and 9.9%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.5x 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.

(8)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, and two feeder funds: ACE V (D) Levered and ACE V (Y) Unlevered. ACE V (E) Levered includes the ACE V (D) Levered feeder fund and ACE V (E) Unlevered includes the ACE V (Y) Unlevered feeder fund. The gross and net IRR and gross and net MoIC presented in the table are for ACE V (E) Unlevered and ACE V (E) Levered. Metrics for ACE V (E) Levered exclude the ACE V (D) Levered feeder fund and metrics for ACE V (E) Unlevered exclude the ACE V (Y) Unlevered feeder fund. The gross and net IRR for ACE V (G) Unlevered are 13.9% and 10.2%, 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 19.5% and 13.9%, respectively. The gross and net MoIC for ACE V (G) Levered are 1.2x and 1.1x, respectively. The gross and net IRR for ACE V (D) Levered are 17.6% and 12.7%, respectively. The gross and net MoIC for ACE V (D) Levered are 1.2x and 1.1x, respectively. The gross and net IRR for ACE V (Y) Unlevered are 12.1% and 8.7%, respectively. The gross and net MoIC for ACE V (Y) Unlevered are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE V Unlevered and ACE V Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate.

(9)Performance for the open-ended core alternative credit fund, a perpetual capital vehicle, is presented as a drawdown fund as investor commitments to the fund are drawn sequentially in order of closing date, typically over a period of approximately 12 to 18 months. The fund is made up of a Class M (“Main Class”) and a Class C (“Constrained Class”). The Main Class includes investors electing to participate in all investments and the Constrained Class includes investors electing to be excluded from exposure to liquid investments. The gross and net IRR and gross and net MoIC presented in the table are for the Main Class. The gross and net IRRs for the Constrained Class are 9.7% and 7.0%, respectively. The gross and net MoIC for the Constrained Class are 1.1x and 1.1.x, respectively.

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Private Equity Group—Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Fee Related Earnings:

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

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Management fees																											$	54,657					$	45,957					$	8,700					19%
Other fees																											673						297						376						127
Compensation and benefits																											(22,310)						(19,566)						(2,744)						(14)
General, administrative and other expenses																											(9,566)						(6,288)						(3,278)						(52)
Fee Related Earnings																											$	23,454					$	20,400					3,054						15

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

Management fees increased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily driven by deployment in Ares Special Opportunities Fund II, L.P. (“ASOF II”), which contributed $11.2 million to the increase in management fees. Management fees from ACOF IV decreased by $1.5 million for the three months ended March 31, 2023 compared to three months ended March 31, 2022 as the fund stopped paying fees during the fourth quarter of 2022.

The increase in effective management fee rate for the three months ended March 31, 2023 compared to the same period in 2022 was primarily driven by deployment of capital in ASOF II, which has a higher effective management fee rate than the Private Equity Group’s average effective management fee rate.

Compensation and Benefits. The increase in compensation and benefits was primarily driven by non-recurring payments of $2.0 million during the three months ended March 31, 2023 compared to the same period in 2022. The increase in compensation and benefits was also driven by headcount growth as we added professionals to support our growing special opportunities platform. Average headcount for the quarter-to-date period increased by 11% to 128 investment and investment support professionals for the 2023 period from 115 professionals for the same period in 2022.

General, Administrative and Other Expenses. Travel and marketing collectively increased by $1.0 million for the three months ended March 31, 2023 compared to the same period in 2022 due to the timing of annual marketing events that occurred during the three months ended March 31, 2023 but were held in the second quarter in the previous year. In connection with our fundraising efforts, amortization of placement fees increased by $1.1 million for the three months ended March 31, 2023

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compared to the same period in 2022, primarily driven by the amortization of new commitments to ASOF II and ACOF VI subsequent to the first quarter of 2022.

Realized Income:

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

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Fee Related Earnings																											$	23,454					$	20,400					$	3,054					15%
Performance income—realized																											18,457						2,212						16,245						NM
Performance related compensation—realized																											(15,104)						(1,786)						(13,318)						NM
Realized net performance income																											3,353						426						2,927						NM
Investment income—realized																											879						1,603						(724)						(45)
Interest and other investment income—realized																											1,861						1,502						359						24
Interest expense																											(5,615)						(3,373)						(2,242)						(66)
Realized net investment loss																											(2,875)						(268)						(2,607)						NM
Realized Income																											$	23,932					$	20,558					3,374						16

Realized net performance income for the three months ended March 31, 2023 was primarily attributable to realized gains from the partial sale of ACOF IV’s investment in AZEK.

Realized net investment loss for the three months ended March 31, 2023 and 2022 largely represents interest expense exceeding net gains during these periods. Interest expense, which is allocated based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility.

Private Equity Group—Performance Income

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

			As of March 31, 2023																		As of December 31, 2022
			Accrued Performance Income						Accrued Performance Compensation						Accrued Net Performance Income						Accrued Performance Income						Accrued Performance Compensation						Accrued Net Performance Income
ACOF IV			$	264,974					$	211,979					$	52,995					$	282,624					$	226,099					$	56,525
ACOF V			706,500						565,199						141,301						742,962						594,369						148,593
ACOF VI			157,279						125,823						31,456						147,185						117,748						29,437
ASOF I			350,961						245,672						105,289						326,471						228,529						97,942
Other funds			162,014						113,988						48,026						108,997						75,583						33,414
Total Private Equity Group			$	1,641,728					$	1,262,661					$	379,067					$	1,608,239					$	1,242,328					$	365,911

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

												As of December 31, 2022						Activity during the period																		As of March 31, 2023
						Waterfall Type						Accrued Carried Interest						Change in Unrealized						Realized						Other Adjustments						Accrued Carried Interest
ACOF IV						American						$	282,624					$	(264)					$	(17,386)					$	—					$	264,974
ACOF V						American						742,962						(36,462)						—						—						706,500
ACOF VI						American						147,185						10,094						—						—						157,279
ASOF I						European						326,471						25,307						(817)						—						350,961
Other funds						European						92,509						51,618						(254)						3,782						147,655
Other funds						American						16,488						(2,129)						—						—						14,359
Total Private Equity Group												$	1,608,239					$	48,164					$	(18,457)					$	3,782					$	1,641,728

Private Equity Group—Assets Under Management

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

						Corporate Private Equity						Special Opportunities						Total Private Equity Group
Balance at 12/31/2022						$	21,029					$	13,720					$	34,749
Net new par/equity commitments						50						—						50
Capital reductions						(3)						—						(3)
Distributions						(266)						(61)						(327)
Change in fund value						(154)						332						178
Balance at 3/31/2023						$	20,656					$	13,991					$	34,647
						Corporate Private Equity						Special Opportunities						Total Private Equity Group
Balance at 12/31/2021						$	21,639					$	11,765					$	33,404
Net new par/equity commitments						—						570						570
Capital reductions						(3)						—						(3)
Distributions						(285)						(98)						(383)
Change in fund value						(145)						122						(23)
Balance at 3/31/2022						$	21,206					$	12,359					$	33,565

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

			AUM: $34.6						AUM: $33.6

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

(1) Includes $1.3 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2023 and 2022.

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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 12/31/2022						$	11,281					$	7,166					$	18,447
Deployment/subscriptions/increase in leverage						—						703						703
Distributions						—						(400)						(400)
Balance at 3/31/2023						$	11,281					$	7,469					$	18,750
						Corporate Private Equity						Special Opportunities						Total Private Equity Group
Balance at 12/31/2021						$	12,473					$	4,216					$	16,689
Deployment/subscriptions/increase in leverage						17						98						115
Distributions						(87)						(359)						(446)
Change in fee basis						(217)						—						(217)
Balance at 3/31/2022						$	12,186					$	3,955					$	16,141

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

			FPAUM: $18.8						FPAUM: $16.1

						Invested capital									Capital commitments

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Private Equity Group—Fund Performance Metrics as of March 31, 2023

Four significant funds, ACOF V, ASOF I, ACOF VI and ASOF II, collectively contributed approximately 88% of the Private Equity Group’s management fees for the three months ended March 31, 2023.

The following table presents the performance data of our significant drawdown funds as of March 31, 2023 ($ 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
ACOF V			2017						$	9,014					$	7,850					$	7,415					$	3,428					$	8,308					$	11,736					1.6x						1.4x						13.8						9.4						Corporate Private Equity
Funds Deploying Capital
ASOF I			2019						5,626						3,518						5,390						3,641						4,154						7,795						1.7x						1.6x						30.0						23.2						Special Opportunities
ACOF VI			2020						6,531						5,743						4,283						358						5,048						5,406						1.2x						1.2x						23.1						16.0						Corporate Private Equity
ASOF II			2021						6,977						7,128						3,986						466						3,464						3,930						1.0x						0.9x						NM						NM						Special Opportunities

(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)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 gross MoICs are also calculated before giving effect to any bridge financings. 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. 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, carried interest, as applicable, and other expenses. The net MoICs are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net MoIC would be 1.3x for ACOF V and 1.1x for ACOF VI. 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’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 are also calculated before giving effect to any bridge financings. 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 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 Schedule I investors 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 are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net IRRs would be 9.5% for ACOF V and 14.6% for ACOF VI.

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Real Assets Group—Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Fee Related Earnings:

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

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Management fees																											$	97,470					$	72,487					$	24,983					34%
Fee related performance revenues																											—						358						(358)						(100)
Other fees																											6,462						7,866						(1,404)						(18)
Compensation and benefits																											(37,986)						(33,637)						(4,349)						(13)
General, administrative and other expenses																											(12,284)						(7,637)						(4,647)						(61)
Fee Related Earnings																											$	53,662					$	39,437					14,225						36

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

Management fees from Ares Real Estate Income Trust, Inc. (“AREIT”) and Ares Industrial Real Estate Income Trust, Inc. (“AIREIT”) collectively increased by $8.0 million due to additional capital raised in these funds. Management fees from Infrastructure Debt Fund IV (“IDF IV”) and IDF V collectively increased by $5.2 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to fees earned for the full period following the close of the Infrastructure Debt Acquisition on February 10, 2022 and deployment within IDF V. Excluding one-time catch-up fees of $0.2 million for the three months ended March 31, 2023, management fees from our sixth European real estate equity fund increased by $2.5 million for the three months ended March 31, 2023 compared to the same period in 2022. Excluding one-time catch-up fees of $0.3 million for the three months ended March 31, 2022, management fees from Ares U.S. Real Estate Fund X, L.P. (“US X”) increased by $3.1 million for the three months ended March 31, 2023 compared to the same period in 2022. The increase in management fees over the comparative periods from our sixth European real estate equity fund and US X was driven by new commitments to those funds. Excluding one-time catch-up fees of $0.2 million, the launch of our fourth U.S. opportunistic real estate equity fund contributed $1.9 million to the increase in management fees for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Our most recent real estate equity funds pay a fee on

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committed capital that increases once that capital is invested. Management fees for the three months ended March 31, 2023 also included one-time make-whole termination fees of $3.3 million driven by the early termination of the advisory agreements of two U.S. real estate equity funds, which resulted in the acceleration of contractual management fees.

The increase in effective management fee rate for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to additional capital raised in our non-traded REITs, which have effective management fee rates between 1.10% and 1.25%.

Other Fees. The decrease in other fees for the three months ended March 31, 2023 compared to the same period in 2022 primarily resulted from a $1.0 million decrease in program administration fees, which are advisory services fees resulting from the management and creation of our 1031 exchange program that is used by our non-traded REITs.

Compensation and Benefits. The increase in compensation and benefits was primarily driven by headcount growth to support the expansion of our business as we added professionals to our growing U.S. real estate equity and infrastructure debt platforms. Average headcount for the quarter-to-date period increased by 25% to 347 investment and investment support professionals for three months ended March 31, 2023 from 278 professionals for the same period in 2022. The increase in compensation and benefits was partially offset by lower incentive-based compensation that we believe will increase throughout the year and exceed prior year levels.

General, Administrative and Other Expenses. Travel and marketing collectively increased by $1.6 million for the three months ended March 31, 2023 compared to the same period in 2022, driven by continued increase in marketing and communication efforts driven by more meetings and events with an expanding group of investors. In connection with our fundraising efforts, amortization of placement fees increased by $0.9 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily attributable to new commitments to US X and IDF V. Certain expenses, primarily the occupancy costs, information technology and information services, have also increased by $1.0 million for the three months ended March 31, 2023 compared to the same period in 2022, to support the expanding platform. Expenses for the three months ended March 31, 2023 also reflect the full period following the Infrastructure Debt Acquisition.

Realized Income:

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

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Fee Related Earnings																											$	53,662					$	39,437					$	14,225					36%
Performance income—realized																											6,086						34,293						(28,207)						(82)
Performance related compensation—realized																											(3,758)						(22,209)						18,451						83
Realized net performance income																											2,328						12,084						(9,756)						(81)
Investment income (loss)—realized																											(1,772)						3,453						(5,225)						NM
Interest and other investment income—realized																											1,821						2,777						(956)						(34)
Interest expense																											(3,896)						(2,389)						(1,507)						(63)
Realized net investment income (loss)																											(3,847)						3,841						(7,688)						NM
Realized Income																											$	52,143					$	55,362					(3,219)						(6)

Realized net performance income for the three months ended March 31, 2023 was primarily attributable to incentive fees from an open-ended industrial real estate fund.

Realized net investment loss for the three months ended March 31, 2023 largely represents interest expense exceeding net gains during the period. Interest expense, which is allocated based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility. Realized net investment loss for the three months ended March 31, 2023 also included realized losses recognized from a real estate debt vehicle, driven by interest expense with no associated investment income during the period. The activity for the three months ended March 31, 2023 was partially offset by distributions of net investment income from an infrastructure opportunities and an infrastructure debt vehicle.

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Realized net performance income and realized net investment income for the three months ended March 31, 2022 were primarily attributable to distributions from US VIII, driven by sales of investments in two multifamily properties. Realized net investment income for the three months ended March 31, 2022 also included operating income recognized from a real estate debt vehicle.

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 March 31, 2023																		As of December 31, 2022
			Accrued Performance Income						Accrued Performance Compensation						Accrued Net Performance Income						Accrued Performance Income						Accrued Performance Compensation						Accrued Net Performance Income
US VIII			$	33,796					$	21,629					$	12,167					$	36,822					$	23,566					$	13,256
US IX			83,763						51,933						31,830						86,905						53,881						33,024
EF IV			61,464						36,879						24,585						61,791						37,075						24,716
AREOF III			42,610						25,566						17,044						41,463						24,878						16,585
EIF V			86,586						64,723						21,863						94,398						70,562						23,836
Other real assets funds			170,613						108,842						61,771						165,972						104,140						61,832
Total Real Assets Group			$	478,832					$	309,572					$	169,260					$	492,868					$	317,964					$	174,904

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

												As of December 31, 2022						Activity during the period																		As of March 31, 2023
						Waterfall Type						Accrued Performance Income						Change in Unrealized						Realized						Other Adjustments						Accrued Performance Income
Accrued Carried Interest
US VIII						European						$	36,822					$	(1,416)					$	(1,610)					$	—					$	33,796
US IX						European						86,905						(3,142)						—						—						83,763
EF IV						American						61,791						(327)						—						—						61,464
AREOF III						European						41,463						1,147						—						—						42,610
EIF V						European						94,398						(7,812)						—						—						86,586
Other real assets funds						European						114,782						15,332						—						346						130,460
Other real assets funds						American						56,707						(16,554)						—						—						40,153
Total accrued carried interest												492,868						(12,772)						(1,610)						346						478,832
Other real assets funds						Incentive						—						4,476						(4,476)						—						—
Total Real Assets Group												$	492,868					$	(8,296)					$	(6,086)					$	346					$	478,832

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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 12/31/2022			$	31,460					$	8,561					$	11,161					$	5,194					$	9,685					$	66,061
Net new par/equity commitments			588						15						162						—						—						765
Capital reductions			(245)						—						(158)						—						—						(403)
Distributions			(1,508)						(14)						(62)						(17)						(62)						(1,663)
Redemptions			(256)						—						(282)						—						—						(538)
Change in fund value			(201)						(29)						5						(2)						119						(108)
Balance at 3/31/2023			$	29,838					$	8,533					$	10,826					$	5,175					$	9,742					$	64,114
			U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 12/31/2021			$	24,677					$	6,827					$	9,659					$	4,756					$	—					$	45,919
Acquisitions			—						—						—						—						8,184						8,184
Net new par/equity commitments			1,598						1,183						227						—						50						3,058
Net new debt commitments			705						—						400						—						—						1,105
Capital reductions			(234)						—						(28)						—						—						(262)
Distributions			(750)						(308)						(47)						(23)						—						(1,128)
Redemptions			(91)						—						(45)						—						—						(136)
Change in fund value			2,056						(19)						59						(309)						—						1,787
Balance at 3/31/2022			$	27,961					$	7,683					$	10,225					$	4,424					$	8,234					$	58,527

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

			AUM: $64.1						AUM: $58.5

			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 March 31, 2023 and 2022, 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 12/31/2022						$	21,788					$	5,634					$	3,691					$	4,524					$	5,970					$	41,607
Commitments						581						15						—						—						—						596
Deployment/subscriptions/increase in leverage						19						18						39						46						99						221
Capital reductions						(245)						—						(34)						—						—						(279)
Distributions						(396)						(55)						(63)						—						(118)						(632)
Redemptions						(256)						—						(282)						—						—						(538)
Change in fund value						(191)						73						14						—						57						(47)
Balance at 3/31/2023						$	21,300					$	5,685					$	3,365					$	4,570					$	6,008					$	40,928
						U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 12/31/2021						$	15,687					$	4,916					$	3,516					$	4,496					$	—					$	28,615
Acquisitions						—						—						—						—						4,855						4,855
Commitments						1,026						1,155						3						—						—						2,184
Deployment/subscriptions/increase in leverage						355						94						369						48						43						909
Distributions						(416)						(208)						(46)						(221)						—						(891)
Redemptions						(91)						—						(47)						—						—						(138)
Change in fund value						1,484						(126)						60						—						—						1,418
Change in fee basis						(6)						(819)						—						—						—						(825)
Balance at 3/31/2022						$	18,039					$	5,012					$	3,855					$	4,323					$	4,898					$	36,127

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

			FPAUM: $40.9						FPAUM: $36.1

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

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

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

Real Assets Group—Fund Performance Metrics as of March 31, 2023

Four significant funds, AIREIT, AREIT, IDF IV and an open-ended industrial real estate fund, collectively contributed approximately 41% of the Real Assets Group’s management fees for the three months ended March 31, 2023.

The following table presents the performance data for our significant funds that are not drawdown funds in the Real Assets Group as of March 31, 2023 ($ in millions):

																											Returns(%)
			Year of Inception						AUM												Quarter-To-Date												Since Inception**(1)**												Primary Investment Strategy
Fund																					Gross						Net						Gross						Net
AREIT(2)			2012						$	5,181																	N/A						(1.1)						N/A						7.6						U.S. Real Estate Equity
AIREIT(3)			2017						8,316																		N/A						(0.9)						N/A						13.2						U.S. Real Estate Equity
Open-ended industrial real estate fund(4)			2017						5,370																		(2.6)						(2.4)						24.4						20.0						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 March 31, 2023 ($ 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						$	3,621					$	4,012					$	4,440					$	1,708					$	3,405					$	5,113					1.2x						1.2x						9.1						6.8						Infrastructure Debt

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

(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)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.

(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)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 8.2% and 5.9%, respectively. The gross and net MoIC for the U.S. Dollar unhedged parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the Euro unhedged parallel fund are 9.2% and 6.8%, 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 7.7% and 5.4%, respectively. The gross and net MoIC for the Yen hedged parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the single investor U.S. Dollar parallel fund are 7.6% and 5.4%, respectively. The gross and net MoIC for the single investor U.S. Dollar parallel fund are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of 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 Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Fee Related Earnings:

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

															Three months ended March 31,												Favorable (Unfavorable)
($ in thousands)																											2023						2022						$ Change						% Change
Management fees																											$	39,863					$	44,504					$	(4,641)					(10)%
Fee related performance revenues																											3,271						—						3,271						NM
Compensation and benefits																											(13,412)						(11,640)						(1,772)						(15)
General, administrative and other expenses																											(4,292)						(3,078)						(1,214)						(39)
Fee Related Earnings																											$	25,430					$	29,786					(4,356)						(15)

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

Management fees from Landmark Equity Partners XV, L.P. (“LEP XV”) and LREP VIII decreased by $3.7 million and $1.6 million, respectively, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. 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. The decrease was partially offset by management fees from new commitments to our ninth real estate secondaries fund that generated additional fees of $1.3 million, excluding one-time catch-up fees from both periods. Excluding one-time catch-up fees of $1.5 million for the three months ended March 31, 2022, management fees from Landmark Equity Partners XVII, L.P. (“LEP XVII”) increased by $0.8 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 due to new commitments.

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The decrease in effective management fee rate for the three months ended March 31, 2023 compared to the same period in 2022 was primarily driven by APMF, which launched subsequent to March 31, 2022, as we contractually agreed to reduce the management fee rate to 0.25% until March 31, 2023, after which the management fee rate will increase to 1.40%.

Fee Related Performance Revenues. Fee related performance revenues reflects incentive fees recognized from APMF for the three months ended March 31, 2023. Incentive fees from APMF are calculated based on 12.5% of its investment return each quarter, including income and net appreciation, subject to certain net loss carry-forward provisions.

Compensation and Benefits. The increase in compensation and benefits for the three months ended March 31, 2023 compared to the same period in 2022 was primarily driven by (i) higher fee related performance compensation of $2.0 million and (ii) increase in salaries and benefits, primarily attributable to headcount growth to support the expansion of our business. Average headcount for the quarter-to-date period increased by 5% to 100 investment and investment support professionals for the three months ended March 31, 2023 from 95 professionals for the same period in 2022. The increase in compensation and benefits was partially offset by the reduction in non-recurring payments.

General, Administrative and Other Expenses. Travel and marketing collectively increased by $0.9 million for the three months ended March 31, 2023 compared to the same period in 2022, as we continued to increase our marketing efforts. Additionally, professional service fees have increased by $0.2 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to recruiting fees to support the expanding platform.

Realized Income:

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

															Three months ended March 31,												Favorable (Unfavorable)
($ in thousands)																											2023						2022						$ Change						% Change
Fee Related Earnings																											$	25,430					$	29,786					$	(4,356)					(15)%
Interest and other investment income—realized																											1,225						644						581						90
Interest expense																											(2,305)						(465)						(1,840)						NM
Realized net investment income (loss)																											(1,080)						179						(1,259)						NM
Realized Income																											$	24,350					$	29,965					(5,615)						(19)

Realized net investment loss for the three months ended March 31, 2023 largely represents interest expense exceeding realization activity during the period. Interest expense, which is allocated based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility. The three months ended March 31, 2023 also included dividend income received from APMF, while the three months ended March 31, 2022 included dividend income received from a real estate secondaries fund.

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 March 31, 2023																		As of December 31, 2022
			Accrued Performance Income						Accrued Performance Compensation						Accrued Net Performance Income						Accrued Performance Income						Accrued Performance Compensation						Accrued Net Performance Income
LEP XVI			$	139,573					$	119,335					$	20,238					$	141,122					$	120,659					$	20,463
LREP VIII			109,630						94,282						15,348						109,928						94,538						15,390
Other secondaries funds			58,209						49,790						8,419						58,135						49,726						8,409
Total Secondaries Group			$	307,412					$	263,407					$	44,005					$	309,185					$	264,923					$	44,262

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

												As of December 31, 2022						Activity during the period																		As of March 31, 2023
						Waterfall Type						Accrued Carried Interest						Change in Unrealized						Realized												Accrued Carried Interest
Accrued Carried Interest
LEP XVI						European						$	141,122					$	(1,549)					$	—											$	139,573
LREP VIII						European						109,928						(298)						—												109,630
Other secondaries funds						European						58,135						74						—												58,209
Total Secondaries Group												$	309,185					$	(1,773)					$	—											$	307,412

Secondaries Group—Assets Under Management

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

			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						Credit Secondaries						Other**(1)**						Total Secondaries Group
Balance at 12/31/2022			$	12,769					$	7,552					$	1,640					$	—					$	—					$	21,961
Net new par/equity commitments			21						237						—						938						50						1,246
Distributions			(258)						(96)						(70)						—						—						(424)
Change in fund value			138						(26)						(1)						—						—						111
Balance at 3/31/2023			$	12,670					$	7,667					$	1,569					$	938					$	50					$	22,894
			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						Credit Secondaries						Other						Total Secondaries Group
Balance at 12/31/2021			$	13,833					$	6,662					$	1,624					$	—					$	—					$	22,119
Acquisitions			199						—						—						—						—						199
Net new par/equity commitments			168						912						—						—						—						1,080
Distributions			(109)						(420)						(46)						—						—						(575)
Change in fund value			214						376						55						—						—						645
Balance at 3/31/2022			$	14,305					$	7,530					$	1,633					$	—					$	—					$	23,468
(1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy.

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

AUM: $23.0						AUM: $23.5

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

(1) Includes $0.5 billion and $0.4 billion of non-fee paying AUM based on our general partner commitment as of March 31, 2023 and 2022, respectively.

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Secondaries Group—Fee Paying AUM

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

			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries																		Total Secondaries Group
Balance at 12/31/2022			$	11,062					$	5,313					$	1,293																	$	17,668
Commitments			21						86						—																		107
Deployment/subscriptions/increase in leverage			71						32						7																		110
Distributions			(43)						(96)						(58)																		(197)
Change in fund value			(78)						152						34																		108
Change in fee basis			(35)						(14)						—																		(49)
Balance at 3/31/2023			$	10,998					$	5,473					$	1,276																	$	17,747
			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			117						580						—																		697
Deployment/subscriptions/increase in leverage			57						—						12																		69
Distributions			(11)						(417)						(44)																		(472)
Change in fund value			(154)						841						51																		738
Change in fee basis			(33)						(1,424)						—																		(1,457)
Balance at 3/31/2022			$	11,894					$	4,969					$	1,207																	$	18,070

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

FPAUM: $17.8						FPAUM: $18.1

			Market value(1)						Capital commitments						Invested capital/other

(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.

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Secondaries Group—Fund Performance Metrics as of March 31, 2023

Two significant funds, LEP XVI and LREP VIII, collectively contributed approximately 44% of the Secondaries Group’s management fees for the three months ended March 31, 2023.

The following table presents the performance data of our significant drawdown funds as of March 31, 2023 ($ 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 XVI(7)			2016						$	4,883					$	4,896					$	3,203					$	1,929					$	2,659					$	4,588					1.6x						1.4x						34.1						22.9						Private Equity Secondaries
LREP VIII(7)			2016						3,453						3,300						2,182						1,324						1,734						3,058						1.5x						1.4x						26.4						18.5						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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Operations Management Group—Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Fee Related Earnings:

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

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Other fees																											$	4,640					$	5,876					$	(1,236)					(21)%
Compensation and benefits																											(84,967)						(64,067)						(20,900)						(33)
General, administrative and other expenses																											(46,172)						(32,384)						(13,788)						(43)
Fee Related Earnings																											$	(126,499)					$	(90,575)					(35,924)						(40)

Other Fees. The decrease in other fees for the three months ended March 31, 2023 compared to the same period in 2022 was driven by a $2.6 million decrease in sales-based facilitation fees, which are generated when investors contribute real property through a like-kind 1031 exchange for fund shares. The decrease in other fees was partially offset by net distribution fees that increased by $1.7 million from the prior year comparative period. Net distribution fees represent asset-based fees that are offset by amounts reallowed to participating broker-dealers.

Compensation and Benefits. The increase in compensation and benefits was primarily driven by (i) the expansion of our strategy and relationship management teams to support global fundraising, (ii) the expansion of our business operations teams to support the growth of our business and other strategic initiatives and (iii) higher incentive-based compensation that we believe will increase throughout the year and exceed prior year levels. Average headcount for the quarter-to-date period increased by 25% to 1,415 operations management professionals from 1,136 professionals for the same period in 2022.

Our engagement of a third party subject matter expert to support the reorganization of our income tax compliance function during the third quarter of 2022 further reduced salaries and benefits by $3.5 million for the three months ended March 31, 2023, leading to a corresponding increase in general, administrative and other expenses. The impact of this reorganization is expected to continue through the third quarter.

Employee commissions, which are earned in connection with the sale and distribution of fund shares in our non-traded REITs and private placements of our exchange programs, have been de-emphasized as a component of AWMS’ compensation structure; therefore, sales volumes of our retail products will create limited expense volatility in future periods.

General, Administrative and Other Expenses. Travel and marketing collectively increased by $4.7 million for the three months ended March 31, 2023 compared to the same period in 2022, inclusive of $1.9 million from AWMS, driven by more meetings and events as marketing and communication efforts continued to increase with our expanding retail distribution platform. We also conducted more in-person company meetings and events with a focus on promoting collaboration. 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.

Additionally, professional service fees have increased by $6.4 million for the three months ended March 31, 2023, primarily due to the reorganization of our income tax compliance function and to legal and recruiting fees to support the expanding platform. Certain expenses have also increased during the current year to support the growing headcount. Most notably, occupancy costs and information technology costs increased by $2.3 million for the three months ended March 31, 2023 compared to the same period in 2022.

Realized Income:

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

															Three months ended March 31,												Favorable (Unfavorable)
																											2023						2022						$ Change						% Change
Fee Related Earnings																											$	(126,499)					$	(90,575)					$	(35,924)					(40)%
Interest and other investment loss—realized																											(92)						(284)						192						68
Interest expense																											(26)						(167)						141						84
Realized net investment loss																											(118)						(451)						333						74
Realized Income																											$	(126,617)					$	(91,026)					(35,591)						(39)

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Liquidity and Capital Resources

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

Sources and Uses of Liquidity

Our sources of liquidity are (1) cash on hand, (2) net working capital, (3) cash from operations, including management fees and fee related performance revenues, which are collected monthly, quarterly or semi-annually, and net realized performance income, which may be unpredictable as to amount and timing, (4) fund distributions related to our investments that are unpredictable as to amount and timing and (5) net borrowing from the Credit Facility. As of March 31, 2023, our cash and cash equivalents were $272.2 million, and we had $795.0 million borrowings outstanding under our Credit Facility. Our ability to draw from the Credit Facility is subject to leverage and other covenants. We remain in compliance with all covenants as of March 31, 2023. We believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for the foreseeable future. Cash flows from management fees may be impacted by a slowdown or declines in deployment, declines or write downs in valuations, or a slowdown or negatively impacted fundraising. In addition, management fees may be subject to deferral and fee related performance revenues may be subject to hold backs. Declines or delays and transaction activity may impact our fund distributions and net realized performance income which could adversely impact our cash flows and liquidity. Market conditions may make it difficult to extend the maturity or refinance our existing indebtedness or obtain new indebtedness with similar terms.

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

In the normal course of business, we expect to pay dividends to our Class A and non-voting common stockholders that are aligned with our expected fee related earnings after an allocation of current taxes paid. For the purposes of determining this amount, we allocate the current taxes paid to FRE and to realized incentive and investment income in a manner that may be 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 6. Debt” and “Note 12. Equity and Redeemable Interest” within 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.

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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 14. Consolidation” within our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

			Three months ended March 31,
($ in thousands)			2023						2022
Net cash provided by operating activities			$	148,315					$	262,732
Net cash provided by (used in) the Consolidated Funds’ operating activities, net of eliminations			559,257						(38,582)
Net cash provided by operating activities			707,572						224,150
Net cash used in the Company’s investing activities			(8,877)						(310,148)
Net cash provided by (used in) the Company’s financing activities			(260,400)						53,205
Net cash provided by (used in) the Consolidated Funds’ financing activities, net of eliminations			(560,744)						39,832
Net cash provided by (used in) financing activities			(821,144)						93,037
Effect of exchange rate changes			4,711						(4,652)
Net change in cash and cash equivalents			$	(117,738)					$	2,387

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, net realized investment income and interest payments. We generated meaningful cash flow from operations in each period presented.

			Three months ended March 31,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change
Core operating activities			$	135,392					$	256,012					$	(120,620)					(47)%
Net realized performance income			5,037						58,284						(53,247)						(91)
Net cash provided by (used in) investment related activities			7,886						(51,564)						59,450						(115)
Net cash provided by operating activities			$	148,315					$	262,732					(114,417)						(44)

Although our fee revenues have continued to grow, cash generated from our core operating activities has decreased primarily due to timing of cash collection, including deferring cash collection of our fourth quarter 2022 Part I Fees from the first quarter of 2023 to April 2023. 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 2022, which resulted in a decrease in cash payments received over the comparative periods.

Net cash provided by (used in) investment related activities for the three months ended March 31, 2023 primarily represents sales of capital commitments to employees, purchases associated with funding capital commitments in our investment portfolio and interest payments on our debt obligations. Although our capital commitments continue to increase with our growing assets under management, cash generated from our investment related activities has exceeded cash used in investment related activities for the three months ended March 31, 2023. Our investment related activities may fluctuate depending on timing of capital investments and distributions of each fund from year to year. For further discussion of our capital commitments, see “Note 7. Commitments and Contingencies,” within our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Net cash provided by the Consolidated Funds’ operating activities for the three months ended March 31, 2023 was primarily attributable to sale of U.S. Treasury securities associated with the redemption of Class A ordinary shares in AAC by

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public shareholders. Net cash used in the Consolidated Funds’ operating activities for three months ended March 31, 2022 was principally attributable to net purchases of investment securities by recently launched funds during the period.

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

Investing Activities

			Three months ended March 31,
			2023						2022
Purchase of furniture, equipment and leasehold improvements, net of disposals			$	(8,877)					$	(8,524)
Acquisitions, net of cash acquired			—						(301,624)
Net cash used in investing activities			$	(8,877)					$	(310,148)

Net cash used in the Company’s investing activities was principally composed of cash to purchase furniture, fixtures, equipment and leasehold improvements during both years to support the growth in our staffing levels and to expand our global presence. Net cash used in the Company’s investing activities for the three months ended March 31, 2022 also included cash used to complete the Infrastructure Debt Acquisition.

Financing Activities

			Three months ended March 31,
			2023						2022
Net borrowings (repayments) of Credit Facility			$	95,000					$	(45,000)
Proceeds from issuance of senior notes			—						488,915
Class A and non-voting common stock dividends			(145,386)						(111,406)
AOG unitholder distributions			(106,246)						(100,480)
Stock option exercises			9,180						3,347
Taxes paid related to net share settlement of equity awards			(113,431)						(183,027)
Other financing activities			483						856
Net cash provided by (used in) the Company’s financing activities			$	(260,400)					$	53,205

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 three months ended March 31, 2023.

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 year primarily as a result of a lower number of restricted units that vested in the current year, partially offset by our higher stock price, which is the basis on which employee compensation is recognized. The restricted units that vested in the prior year period were higher primarily due to certain awards that vested in their entirety on the fifth anniversary of the grant date. The net settlement of shares minimizes the dilutive impact of our Equity Incentive Plan as fewer shares are issued upon vesting. For the three months ended March 31, 2023 and 2022, we retained and did not issue 1.4 million shares and 2.3 million shares, respectively.

Net cash provided by the Company’s financing activities for the three months ended March 31, 2022 also included net proceeds from the issuance of the 2052 Senior Notes. These proceeds were used primarily to fund the Infrastructure Debt Acquisition.

			Three months ended March 31,
			2023						2022
Contributions from redeemable and non-controlling interests in Consolidated Funds, net of eliminations			$	93,585					$	82,930
Distributions to non-controlling interests in Consolidated Funds, net of eliminations			(20,933)						(34,958)
Redemptions of redeemable interest in Consolidated Funds			(538,985)						—
Borrowings under loan obligations by Consolidated Funds			2,914						49,317
Repayments under loan obligations by Consolidated Funds			(97,325)						(57,457)
Net cash provided by (used in) the Consolidated Funds’ financing activities			$	(560,744)					$	39,832

Net cash used in the Consolidated Funds’ financing activities for the three months ended March 31, 2023 was primarily attributable to the redemption of Class A ordinary shares in AAC by public shareholders.

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

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 the applicable jurisdictions. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of March 31, 2023, we were required to maintain approximately $52.3 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 $114.0 million and $118.5 million as of March 31, 2023 and December 31, 2022, respectively.

For a discussion of our debt obligations, including the debt obligations of our consolidated funds, see “Note 6. Debt,” within 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. 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, 2022. 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,” within our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

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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. Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.