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 SPACs 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 June 30, 2023, approximately 95% of our management fees were derived from perpetual capital vehicles and 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 from operations, including the fair value of our AUM, are affected by a variety of factors. Conditions in the global financial markets and economic and political environments may impact our business, particularly in the U.S., Western Europe and Asia.

The following table presents returns of selected market indices:

																		Returns (%)
Type of Index						Name of Index						Region						Three months ended June 30, 2023						Six months ended June 30, 2023
High yield bonds						ICE BAML High Yield Master II Index						U.S.						1.6						5.4
High yield bonds						ICE BAML European Currency High Yield Index						Europe						1.5						4.3
Leveraged loans						Credit Suisse Leveraged Loan Index (“CSLLI”)						U.S.						3.1						6.3
Leveraged loans						Credit Suisse Western European Leveraged Loan Index						Europe						3.0						6.7
Equities						S&P 500 Index						U.S.						8.7						16.9
Equities						MSCI All Country World Ex-U.S. Index						Non-U.S.						3.3						11.8
Real estate equities						FTSE NAREIT All Equity REITs Index						U.S.						1.2						3.0
Real estate equities						FTSE EPRA/NAREIT Developed Europe Index						Europe						(3.1)						(7.5)

Global markets rallied during the first half of 2023, driven by normalization of the macroeconomic environment. Leveraged credit spreads continued to tighten as interest rates and inflationary pressures have showed signs of moderation and private credit activity remained resilient throughout the quarter as there has been consistent demand for alternative sources of capital.

Volatility in the private equity markets continued due to elevated interest rates, which impacts the cost of financing available for leveraged buyout transactions. Valuations also 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 June 30, 2023, we had minimal exposure as 1.4% of our total AUM was invested in the energy sector (of which 1.2% of our total AUM was invested in midstream investments and also includes oil and gas exploration) and 2.3% of our total AUM was invested in the retail sector. We believe that the current environment could lead to opportunities for distressed investments. Continued asset

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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 continued to be impacted by the macroeconomic environment in the first half of 2023, particularly in Europe with the ongoing war in Ukraine continuing to influence investor sentiment. Pan-European and U.S. real estate deal activity was subdued with limited transactional liquidity. Property valuations remain depressed 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.

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 June 30, 2023.

Recent Transactions

On July 17, 2023, Ares entered into a definitive agreement to acquire 100% of Crescent Point Capital, a leading Asia-focused private equity firm with approximately $3.8 billion of AUM as of March 31, 2023. The transaction is expected to close in the fourth quarter of 2023 and is subject to customary closing conditions, including regulatory approvals.

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Managing Business Performance

Operating Metrics

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

Assets Under Management

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

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

						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other**(1)**						Total AUM
Balance at 3/31/2023						$	235,143					$	34,647					$	64,114					$	22,894					$	3,497					$	360,295
Net new par/equity commitments						9,936						—						1,824						142						2,493						14,395
Net new debt commitments						2,835						—						150						—						—						2,985
Capital reductions						(352)						(2)						(1)						—						—						(355)
Distributions						(1,882)						(473)						(1,314)						(129)						(112)						(3,910)
Redemptions						(434)						—						(418)						—						—						(852)
Net allocations among investment strategies						1,739						—						—						—						(1,739)						—
Change in fund value						3,156						1,281						416						95						67						5,015
Balance at 6/30/2023						$	250,141					$	35,453					$	64,771					$	23,002					$	4,206					$	377,573
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total AUM
Balance at 3/31/2022						$	206,706					$	33,565					$	58,527					$	23,468					$	2,753					$	325,019
Net new par/equity commitments						5,203						230						3,365						865						604						10,267
Net new debt commitments						4,183						—						1,444						—						—						5,627
Capital reductions						(58)						(202)						(34)						—						—						(294)
Distributions						(944)						(138)						(887)						(551)						(62)						(2,582)
Redemptions						(394)						—						(83)						—						—						(477)
Net allocations among investment strategies						443						—						—						—						(443)						—
Change in fund value						(3,409)						(43)						245						110						(150)						(3,247)
Balance at 6/30/2022						$	211,730					$	33,412					$	62,577					$	23,892					$	2,702					$	334,313
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other**(1)**						Total AUM
Balance at 12/31/2022						$	225,579					$	34,749					$	66,061					$	21,961					$	3,647					$	351,997
Net new par/equity commitments						18,977						50						2,589						1,389						4,139						27,144
Net new debt commitments						4,258						—						150						—						—						4,408
Capital reductions						(2,433)						(5)						(405)						—						—						(2,843)
Distributions						(3,409)						(800)						(2,976)						(554)						(198)						(7,937)
Redemptions						(1,810)						—						(956)						—						(539)						(3,305)
Net allocations among investment strategies						2,554						—						—						—						(2,554)						—
Change in fund value						6,425						1,459						308						206						(289)						8,109
Balance at 6/30/2023						$	250,141					$	35,453					$	64,771					$	23,002					$	4,206					$	377,573
						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						10,427						800						6,423						1,945						722						20,317
Net new debt commitments						6,523						—						2,549						—						—						9,072
Capital reductions						(460)						(204)						(297)						—						—						(961)
Distributions						(2,071)						(521)						(2,015)						(1,126)						(90)						(5,823)
Redemptions						(804)						—						(219)						—						—						(1,023)
Net allocations among investment strategies						573						—						—						—						(573)						—
Change in fund value						(3,863)						(67)						2,033						755						(285)						(1,427)
Balance at 6/30/2022						$	211,730					$	33,412					$	62,577					$	23,892					$	2,702					$	334,313
(1) Equity commitments and distributions reported during the first quarter of 2023 were each overstated by $1.8 billion for our insurance platform presented within Other. These amounts have been properly reflected in the current period and had no impact on AUM, FPAUM, net flows or any other amounts for any period presented.

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

			AUM: $377.6						AUM: $334.3

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

(1) Includes $14.9 billion and $12.4 billion of AUM of funds from which we indirectly earn management fees as of June 30, 2023 and 2022, respectively and includes $3.6 billion and $3.4 billion of non-fee paying AUM based on our general partner commitment as of June 30, 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.

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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**(1)**						Total
Balance at 3/31/2023						$	153,749					$	18,750					$	40,928					$	17,747					$	2,735					$	233,909
Commitments						1,444						—						870						136						1,975						4,425
Deployment/subscriptions/increase in leverage						6,315						901						988						193						(118)						8,279
Capital reductions						(347)						—						(50)						—						—						(397)
Distributions						(1,931)						(693)						(1,096)						(73)						(104)						(3,897)
Redemptions						(473)						—						(431)						—						—						(904)
Net allocations among investment strategies						1,770						—						—						—						(1,770)						—
Change in fund value						1,224						—						(173)						(220)						57						888
Change in fee basis						—						(4)						98						12						—						106
Balance at 6/30/2023						$	161,751					$	18,954					$	41,134					$	17,795					$	2,775					$	242,409
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total
Balance at 3/31/2022						$	126,861					$	16,141					$	36,127					$	18,070					$	1,847					$	199,046
Commitments						3,796						—						2,077						811						587						7,271
Deployment/subscriptions/increase in leverage						8,986						2,099						1,522						251						(38)						12,820
Capital reductions						(415)						—						(90)						—						—						(505)
Distributions						(1,133)						(530)						(370)						(388)						(46)						(2,467)
Redemptions						(476)						—						(91)						—						—						(567)
Net allocations among investment strategies						403						—						—						—						(403)						—
Change in fund value						(2,591)						(3)						56						179						(317)						(2,676)
Change in fee basis						(8)						(16)						—						(1,369)						(238)						(1,631)
Balance at 6/30/2022						$	135,423					$	17,691					$	39,231					$	17,554					$	1,392					$	211,291
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other**(1)**						Total
Balance at 12/31/2022						$	151,275					$	18,447					$	41,607					$	17,668					$	2,064					$	231,061
Commitments						2,526						—						1,467						243						3,621						7,857
Deployment/subscriptions/increase in leverage						10,595						1,604						1,210						299						49						13,757
Capital reductions						(1,881)						—						(329)						—						—						(2,210)
Distributions						(4,066)						(1,093)						(1,730)						(266)						(190)						(7,345)
Redemptions						(1,850)						—						(969)						—						—						(2,819)
Net allocations among investment strategies						2,586						—						—						—						(2,586)						—
Change in fund value						2,566						—						(220)						(112)						(183)						2,051
Change in fee basis						—						(4)						98						(37)						—						57
Balance at 6/30/2023						$	161,751					$	18,954					$	41,134					$	17,795					$	2,775					$	242,409
						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						7,391						—						4,261						1,508						706						13,866
Deployment/subscriptions/increase in leverage						16,360						2,213						2,432						320						(38)						21,287
Capital reductions						(3,011)						—						(91)						—						—						(3,102)
Distributions						(3,062)						(975)						(1,261)						(861)						(74)						(6,233)
Redemptions						(872)						—						(229)						—						—						(1,101)
Net allocations among investment strategies						503						—						—						—						(503)						—
Change in fund value						(3,153)						(2)						1,476						918						(528)						(1,289)
Change in fee basis						(843)						(234)						(827)						(2,826)						(238)						(4,968)
Balance at 6/30/2022						$	135,423					$	17,691					$	39,231					$	17,554					$	1,392					$	211,291
(1) Commitments and distributions reported during the first quarter of 2023 were each overstated by $1.8 billion for our insurance platform presented within Other. These amounts have been properly reflected in the current period and had no impact on AUM, FPAUM, net flows or any other amounts for any period presented.

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

			FPAUM: $242.4						FPAUM: $211.3

			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 $56.2 billion and $54.0 billion from funds that primarily invest in illiquid strategies as of June 30, 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.

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

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

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

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

			Credit						Private Equity						Real Assets						Secondaries						Other

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

			Credit						Private Equity						Real Assets						Secondaries						Other

As of June 30, 2023, AUM Not Yet Paying Fees includes $55.6 billion of AUM available for future deployment that could generate approximately $551.6 million in potential incremental annual management fees. As of June 30, 2022, AUM Not Yet Paying Fees included $52.7 billion of AUM available for future deployment that could generate approximately $505.2 million in potential incremental annual management fees.

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

As of June 30, 2023, perpetual capital IGAUM generating fee related performance revenues totaled $14.8 billion, composed of $13.7 billion within the Credit Group, $0.7 billion within the Real Assets Group and $0.4 billion within the Secondaries Group. Fee related performance revenues are not recognized by us until such fees are crystallized and no longer

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subject to reversal. As of June 30, 2022, perpetual capital IGAUM from which we generated fee related performance revenues totaled $19.0 billion, composed of $9.7 billion within the Credit Group and $9.3 billion within the Real Assets Group.

Management Fees By Type

We view the duration of funds we manage as a metric to measure the stability of our future management fees. For both the three months ended June 30, 2023 and 2022, 95% 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:

			Perpetual Capital - Publicly-Traded Vehicles						Perpetual Capital - Managed Accounts						Perpetual Capital - Private Commingled Vehicles						Perpetual Capital - Non-Traded Vehicles						Long-Dated Funds(1)						Other

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

Fund Performance Metrics

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

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

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

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Consolidation and Deconsolidation of Ares Funds

Consolidated Funds represented approximately 4% of our AUM as of June 30, 2023, 2% of our management fees and 1% of our carried interest and incentive fees for the six months ended June 30, 2023. As of June 30, 2023, we consolidated 26 CLOs, nine private funds and two SPACs, and as of June 30, 2022, we consolidated 24 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 I”) and Ares Acquisition Corporation II (NYSE: AACT) (“AAC II”), our sponsored SPACs, that are redeemable for cash by the public shareholders in connection with their 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 six months ended June 30, 2023, we deconsolidated one private fund as a result of significant change in ownership. During the six months ended June 30, 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 June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Total revenues			$	1,093,286					$	601,430					$	491,856					82%						$	1,906,648					$	1,316,429					$	590,219					45%
Total expenses			(837,738)						(552,868)						(284,870)						(52)						(1,466,374)						(1,164,552)						(301,822)						(26)
Total other income, net			126,421						18,504						107,917						NM						182,817						76,498						106,319						139
Income tax expense			(49,714)						(13,460)						(36,254)						(269)						(83,520)						(33,871)						(49,649)						(147)
Net income			332,255						53,606						278,649						NM						539,571						194,504						345,067						177
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds			67,681						(15,022)						82,703						NM						94,374						32,360						62,014						192
Net income attributable to Ares Operating Group entities			264,574						68,628						195,946						286						445,197						162,144						283,053						175
Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities			734						(457)						1,191						NM						(1,090)						(58)						(1,032)						NM
Less: Net income attributable to non-controlling interests in Ares Operating Group entities			119,326						29,354						89,972						NM						207,734						76,608						131,126						171
Net income attributable to Ares Management Corporation Class A and non-voting common stockholders			$	144,514					$	39,731					104,783						264						$	238,553					$	85,594					152,959						179

Three and Six Months Ended June 30, 2023 Compared to Three and Six Months Ended June 30, 2022

Consolidated Results of Operations of the Company

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

Revenues.

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Revenues
Management fees			$	615,271					$	520,560					$	94,711					18%						$	1,215,787					$	997,892					$	217,895					22%
Carried interest allocation			418,466						47,304						371,162						NM						569,954						225,593						344,361						153
Incentive fees			7,950						4,675						3,275						70						16,873						21,097						(4,224)						(20)
Principal investment income (loss)			6,888						(4,387)						11,275						NM						29,646						3,939						25,707						NM
Administrative, transaction and other fees			44,711						33,278						11,433						34						74,388						67,908						6,480						10
Total revenues			$	1,093,286					$	601,430					491,856						82						$	1,906,648					$	1,316,429					590,219						45

Management Fees. Capital deployment in direct lending funds within the Credit Group led to a rise in FPAUM and additional management fees of $38.0 million and $79.8 million for the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 2022. Part I Fees contributed to an increase of $29.8 million and $65.0 million for the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 2022 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 and 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 $3.8 million and $11.8 million for the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 2022 from

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additional capital raised. In addition, the acquisition of AMP Capital’s infrastructure debt platform (the “Infrastructure Debt Acquisition”), which was completed on February 10, 2022, contributed additional fees of $2.1 million and $8.1 million for the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 2022. For detail regarding the fluctuations of management fees within each of our segments see “—Results of Operations by Segment.”

Carried Interest Allocation. The activity was principally composed of the following ($ in millions):

			Three months ended June 30, 2023			Primary Drivers			Three months ended June 30, 2022			Primary Drivers
Credit funds			$	106.4		Primarily from three direct lending funds and one alternative credit fund with $22.1 billion of IGAUM generating returns in excess of their hurdle rates. Ares Capital Europe V, L.P. (“ACE V”) generated carried interest allocation of $33.9 million driven by net investment income on an increasing invested capital base. Ares Pathfinder Fund, L.P. (“Pathfinder”) generated carried interest allocation of $31.2 million driven by market appreciation of certain investments and net investment income during the period. Ares Capital Europe IV, L.P. (“ACE IV”) and Ares Private Credit Solutions, L.P. (“PCS I”) generated carried interest allocation of $16.1 million and $7.9 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.			$	17.3		Primarily from three direct lending funds and one alternative credit fund with $17.1 billion of IGAUM generating returns in excess of their hurdle rates. ACE V generated $15.7 million of carried interest allocation driven by net investment income on an increasing invested capital base. ACE IV and Ares Capital Europe III, L.P. (“ACE III”) generated carried interest allocation of $10.7 million and $2.4 million, respectively, driven by net investment income during the period. Pathfinder generated carried interest allocation of $10.9 million that was primarily driven by market appreciation of various investments. The activity was partially offset by a reversal of unrealized carried interest allocation from two direct lending funds due to lower net investment income and from two alternative credit funds due to market depreciation of investments during the period.
Private equity funds			275.5			Appreciation of Ares Corporate Opportunities Fund V, L.P. (“ACOF V”), Ares Special Situations Fund IV, L.P. (“SSF IV”) and Ares Special Opportunities Fund, L.P.’s (“ASOF I”) investments, predominately in Savers Value Village, Inc. (“SVV”) following its initial public offering, generated carried interest allocation of $86.3 million, $68.8 million and $60.1 million, respectively. The carried interest allocation generated from these funds was also due to appreciation across several other portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in the services and retail industries. In addition, Ares Corporate Opportunities Fund VI, L.P. (“ACOF VI”) generated carried interest allocation of $70.9 million, driven by improving operating performance metrics from portfolio companies that primarily operate in the retail and healthcare industries and market appreciation of an investment in a services company. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $10.4 million from Ares Corporate Opportunities Fund IV, L.P. (“ACOF IV”) primarily driven by lower operating performance metrics of a portfolio company that operates in the healthcare industry and lower stock price of a publicly-traded portfolio company that operates in the retail industry.			0.4			Market appreciation across several portfolio company investments that primarily operate in the services, technology, retail and healthcare industries, generated carried interest allocation of $22.7 million from ACOF V and $19.5 million from ACOF VI. Conversely, the declining macroeconomic environment caused broad decreases in valuations of the publicly traded investments of our funds. SSF IV and ASOF I had a reversal of unrealized carried interest of $13.4 million and $17.3 million, respectively. ACOF IV had a reversal of unrealized carried interest of $8.9 million primarily due to the decrease in valuation of its investment in the AZEK Company (“AZEK”).
Real assets funds			37.3			Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $6.4 million from Ares European Property Enhancement Partners III, SCSp. (“EPEP III”), $4.8 million from US Real Estate Fund IX, L.P. (“US IX”), $4.5 million from Ares U.S. Real Estate Opportunity Fund III, L.P. (“AREOF III”) and $3.5 million from US Real Estate Fund X, L.P. (“US X”). Ares Infrastructure Debt Fund V L.P. (“IDF V”) generated carried interest allocation of $8.3 million driven by net investment income. Ares Energy Investors Fund V, L.P. (“EIF V”) also generated $4.4 million of carried interest allocation driven by net investment income during the period.			22.8			Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $6.5 million from AREOF III, $2.4 million from US Real Estate Fund VIII, L.P. (“US VIII”), $3.2 million from US IX and $6.4 million from four real estate equity funds. EIF V also generated $10.4 million of carried interest allocation due to market appreciation of certain investments.
Secondaries funds			(0.7)			Reversal of unrealized carried interest from Landmark Equity Partners XVI, L.P. (“LEP XVI”), driven primarily by market depreciation of certain portfolio investments.			6.8			Market appreciation of certain investments in a private equity secondaries fund, Landmark Real Estate Partners VIII, L.P. (“LREP VIII”) and LEP XVI that generated carried interest allocation of $2.0 million, $1.8 million and $1.5 million, respectively.
Carried interest allocation			$	418.5					$	47.3

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			Six months ended June 30, 2023			Primary Drivers			Six months ended June 30, 2022			Primary Drivers
Credit funds			$	222.9		Primarily from three direct lending funds and one alternative credit fund with $22.1 billion of IGAUM generating returns in excess of their hurdle rates. ACE V generated carried interest allocation of $78.7 million driven by net investment income on an increasing invested capital base. ACE IV and PCS I generated carried interest allocation of $40.2 million and $22.5 million, respectively, primarily driven by net investment income during the period. Pathfinder generated carried interest allocation of $34.7 million driven by market appreciation of certain investments and net investment income during the period. Our credit funds have benefited from rising interest rates on predominately floating-rate loans.			$	91.6		Primarily from four direct lending funds and one alternative credit fund with $19.1 billion of IGAUM generating returns in excess of their hurdle rates. ACE V generated carried interest allocation of $36.1 million driven by net investment income on an increasing invested capital base. ACE IV, PCS I and ACE III generated carried interest allocation of $20.3 million, $9.8 million and $9.0 million, respectively, primarily driven by net investment income during the period. In addition, Pathfinder generated carried interest allocation of $25.2 million that was driven by market appreciation of various investments. The activity was partially offset by a reversal of unrealized carried interest allocation from one U.S. direct lending fund due to lower net investment income and from two alternative credit funds due to market depreciation of investments during the period.
Private equity funds			323.7			Appreciation of SSF IV, ASOF I and ACOF V’s investments, predominately in SVV following its initial public offering, generated carried interest allocation of $121.9 million, $85.4 million and $49.9 million, respectively. The carried interest allocation generated from these funds was also due to appreciation across several other portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in the services and retail industries. In addition, ACOF VI generated carried interest allocation of $81.0 million, driven by improving operating performance of portfolio companies that primarily operate in the retail and healthcare industries and market appreciation of an investment in a services company. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $10.6 million from ACOF IV primarily driven by lower operating performance metrics and market depreciation of a portfolio company that operates in the healthcare industry and lower stock price of a publicly-traded portfolio company that operates in the retail industry.			(2.7)			The declining macroeconomic environment caused broad decreases in valuations of the publicly traded investments of our funds. ACOF IV had a reversal of unrealized carried interest of $60.6 million primarily from its diminishing investment in AZEK. Conversely, market appreciation across several portfolio company investments that primarily operate in industries such as services, technology, retail and healthcare, generated carried interest allocation of $39.7 million from ACOF V, $3.7 million from ASOF I and $30.9 million from ACOF VI.
Real assets funds			24.6			IDF V generated carried interest allocation of $14.6 million driven by net investment income. Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $9.5 million from two U.S. real estate equity funds, $5.6 million from AREOF III and $2.4 million from US X. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $9.6 million from two European real estate equity funds primarily driven by market depreciation of certain properties.			77.3			Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $23.3 million from AREOF III, $12.1 million from US VIII, $19.9 million from US IX and $19.8 million from four real estate equity funds. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $5.4 million from EIF V.
Secondaries funds			(1.2)			Reversal of unrealized carried interest from LEP XVI of $8.2 million, driven primarily by market depreciation of certain portfolio investments. The reversal was partially offset by appreciation of certain investments of LREP VIII, which generated carried interest allocation of $6.8 million.			59.4			Market appreciation of certain investments held in LREP VIII, and LEP XVI that generated carried interest allocation of $26.3 million and $18.5 million, respectively. Three private equity secondaries funds also generated carried interest allocation of $7.6 million.
Carried interest allocation			$	570.0					$	225.6

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

			Three months ended June 30, 2023			Primary Drivers			Three months ended June 30, 2022			Primary Drivers
Credit funds			$	5.8		Incentive fees generated from two alternative credit funds.			$	0.4		Incentive fees generated from one direct lending fund.
Real assets funds			1.9			Incentive fees generated from an industrial real estate fund and ACRE.			3.9			Incentive fees generated from an industrial real estate fund and ACRE.
Secondaries funds			0.3			Incentive fees generated from APMF.			0.4			Incentive fees generated from a private equity secondaries fund.
Incentive fees			$	8.0					$	4.7
			Six months ended June 30, 2023			Primary Drivers			Six months ended June 30, 2022			Primary Drivers
Credit funds			$	7.0		Incentive fees generated from two alternative credit funds.			$	15.8		Incentive fees generated from three direct lending funds and one alternative credit fund.
Real assets funds			6.3			Incentive fees generated from an industrial real estate fund and ACRE.			4.9			Incentive fees generated from an industrial real estate fund and ACRE.
Secondaries funds			3.6			Incentive fees generated from APMF.			0.4			Incentive fees generated from a private equity secondaries fund.
Incentive fees			$	16.9					$	21.1

Principal Investment Income (Loss). The activity for the three and six months ended June 30, 2023 was primarily composed of: (i) appreciation of certain investments in funds within our corporate private equity and special opportunities strategies; (ii) dividend income from various investments in funds within our special opportunities strategy; partially offset by (iii) unrealized losses in certain investments of LREP VIII. The six months ended June 30, 2023 also included appreciation of certain investments in funds within our European direct lending strategy.

The activity for the three and six months ended June 30, 2022 was driven by a declining macroeconomic environment that negatively impacted the global equity and credit markets, leading to a broad decrease in valuations. In spite of a weak second quarter, the results from the first quarter contributed to the positive result for the six months ended June 30, 2022 primarily due to realizations from the sale of underlying properties held by funds in our U.S. real estate equity strategy and market appreciation of various investments across funds in our infrastructure debt and U.S. and European direct lending strategies.

Administrative, Transaction and Other Fees. The increases in administrative, transaction and other fees for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 primarily resulted from: (i) higher transaction fees of $7.2 million and $9.3 million, respectively, mostly from $6.7 million of transaction fees generated within the infrastructure debt strategy during the second quarter of 2023 and from certain credit funds; (ii) an increase of $4.9 million in administrative fees from a commercial finance fund that are no longer eliminated as the fund was deconsolidated during the second quarter of 2023; (iii) an increase of $1.7 million and $3.4 million, respectively, in net asset-based distribution fees associated with our non-traded REITs; and (iv) an increase of $1.4 million and $3.1 million, respectively, in administrative service fees from certain private funds that pay on invested capital, driven by deployment.

The increases in administrative, transaction and other fees for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 were partially offset by decreases in: (i) facilitation fees from the 1031 exchange program associated with our non-traded REITs of $2.9 million and $5.5 million, respectively; (ii) acquisition and development fees resulting from decreased activity of $2.5 million and $3.6 million, respectively; and (iii) program administration fees resulting from the management and creation of our 1031 exchange program that is used by our non-traded REITs, of $0.8 million and $1.8 million, respectively.

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Expenses.

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Expenses
Compensation and benefits			$	367,550					$	375,775					$	8,225					2%						$	728,331					$	729,612					$	1,281					0%
Performance related compensation			315,780						41,073						(274,707)						NM						427,438						173,884						(253,554)						(146)
General, administrative and other expenses			141,153						122,566						(18,587)						(15)						289,498						243,089						(46,409)						(19)
Expenses of Consolidated Funds			13,255						13,454						199						1						21,107						17,967						(3,140)						(17)
Total expenses			$	837,738					$	552,868					(284,870)						(52)						$	1,466,374					$	1,164,552					(301,822)						(26)

Compensation and Benefits. The decreases in compensation and benefits were primarily driven by the performance-based, acquisition-related compensation arrangements (“earnouts”) that were established in connection with the acquisition of Landmark Partners, LLC (the “Landmark Acquisition”), the acquisition of Black Creek Group’s real estate investment advisory and distribution business (the “Black Creek Acquisition”) and Infrastructure Debt Acquisition, which were based on the achievement of revenue targets for certain funds. As these earnouts are subject to the continued and future services of senior professionals and advisors, they are required to be recorded as compensation expense and recognized ratably over the respective service periods. The associated compensation expense decreased by $58.9 million and $106.3 million for the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 2022.

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 $49.8 million and $87.5 million for the three and six months ended June 30, 2022, respectively.

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 $6.9 million and $15.7 million for the three and six months ended June 30, 2022, respectively.

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. Compensation expense related to the achieved portion of the award was $2.2 million and $3.3 million for the three and six months ended June 30, 2022, respectively. 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 and $1.8 million that was recognized during the three and six months ended June 30, 2023, respectively. Compensation expense related to the other infrastructure debt funds subject to the Infrastructure Debt earnout was $0.6 million and $0.7 million for the three months ended June 30, 2023 and 2022, respectively, and $1.2 million and $1.0 million for the six months ended June 30, 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 decreases in compensation and benefits for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 were partially offset by: (i) increases in salary expense of $18.0 million and $38.9 million, respectively, primarily attributable to headcount growth to support the expansion of our business; (ii) higher Part I Fees compensation of $16.8 million and $36.5 million, respectively; and (iii) higher equity-based compensation expense of $12.6 million and $28.2 million, respectively, as discussed below. Average headcount increased by 19% to 2,577 professionals for the year-to-date period in 2023 from 2,170 professionals for the same period in 2022.

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

						Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,																		Favorable (Unfavorable)
						2023						2022						$ Change						% Change						2023						2022												$ Change						% Change
Awards that do not recur annually:
Multi-year future grants						$	13,039					$	10,979					$	(2,060)					(19)%						$	25,254					$	21,171											$	(4,083)					(19)%
Other awards that do not recur annually						2,388						1,657						(731)						(44)						4,936						4,181												(755)						(18)
Total awards that do not recur annually						15,427						12,636						(2,791)						(22)						30,190						25,352												(4,838)						(19)
Recurring annual awards:
Discretionary awards						30,395						24,166						(6,229)						(26)						58,600						45,135												(13,465)						(30)
Bonus awards						16,460						12,833						(3,627)						(28)						42,743						32,799												(9,944)						(30)
Total recurring annual awards						46,855						36,999						(9,856)						(27)						101,343						77,934												(23,409)						(30)
Equity-based compensation expense						$	62,282					$	49,635					(12,647)						(25)						$	131,533					$	103,286											(28,247)						(27)

The increases in equity-based compensation expense for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 were primarily attributable to the increase in awards granted under our recurring annual award programs, which included the acceleration of $10.0 million and $7.5 million of expense for the six months ended June 30, 2023 and 2022, respectively, in connection with awards made to certain individuals that meet immediate vesting conditions based on the combination of their age and years of service.

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. Travel, marketing and certain fringe benefits, collectively increased by $3.9 million and $15.4 million for the three and six months ended June 30, 2023, respectively, compared to the same periods 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 driven by more investor meetings and events. Certain expenses have also increased during the comparative periods, 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 $6.4 million and $12.3 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022. Additionally, professional service fees have increased by $3.1 million and $8.4 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 primarily to support the expanding platform and the reorganization of our income tax compliance function.

In addition, amortization expense increased by $8.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. In connection with a merger agreement to acquire the remaining 20% ownership interest in SSG Capital Holdings Limited and its operating subsidiaries’ (“SSG” and subsequently rebranded as “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 during the first quarter of 2023. During the second quarter of 2023, we recognized non-cash impairment charges of $5.1 million to the fair value of management contracts of certain funds in connection with lower than expected future fee revenue generated from these funds. The majority of the impairment charges was recognized due to the shortened investment period of an infrastructure debt fund as we directed existing limited partner commitments to other investment vehicles within the strategy. During the third quarter of 2022, we recognized non-cash impairment charges of $181.6 million in connection with intangible assets associated with Landmark’s trade name, management contracts of certain Landmark funds, Black Creek funds and SSG funds and resulted in the amortization expense associated with these intangible assets to decrease in subsequent periods. Excluding the non-cash impairment charges described above, amortization expense decreased by $5.2 million and $4.7 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022.

Acquisition-related costs decreased by $2.5 million for the six months ended June 30, 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.

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Other income, net.

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Other income (expense)
Net realized and unrealized gains (losses) on investments			$	5,481					$	(1,775)					$	7,256					NM						$	6,996					$	6,334					$	662					10%
Interest and dividend income			2,690						1,476						1,214						82						6,529						2,978						3,551						119
Interest expense			(25,839)						(17,221)						(8,618)						(50)						(50,825)						(32,867)						(17,958)						(55)
Other income (expense), net			(5,887)						5,809						(11,696)						NM						(6,810)						7,593						(14,403)						NM
Net realized and unrealized gains (losses) on investments of Consolidated Funds			98,426						(7,907)						106,333						NM						109,126						8,061						101,065						NM
Interest and other income of Consolidated Funds			234,454						117,375						117,079						100						457,392						237,665						219,727						92
Interest expense of Consolidated Funds			(182,904)						(79,253)						(103,651)						(131)						(339,591)						(153,266)						(186,325)						(122)
Total other income, net			$	126,421					$	18,504					107,917						NM						$	182,817					$	76,498					106,319						139

Net Realized and Unrealized Gains (Losses) on Investments. The activity for the three and six months ended June 30, 2023 was primarily attributable to unrealized gains from APMF, partially offset by unrealized losses from our investments in the subordinated notes of U.S. CLOs. The activity for the three and six months ended June 30, 2023 and 2022 also included unrealized gains from certain strategic initiative related investments made in connection with our acquisition of SSG.

The activity for the three months ended June 30, 2022 was attributable to unrealized losses on our investments in the subordinated notes of U.S. CLOs. The activity for the three and six months ended June 30, 2022 was driven by a declining macroeconomic environment that negatively impacted the global equity and credit markets, leading to a broad decrease in valuations.

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 and six months ended June 30, 2023 compared to the same periods in 2022.

Other Income (Expense), Net. The activity for the three and six months ended June 30, 2023 and 2022 largely represents 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 $6.0 million and $6.9 million for the three and six months ended June 30, 2023, respectively, were primarily attributable to the British pound strengthening against the Euro and U.S. dollar, while transaction gains of $5.8 million and $8.8 million for the three and six months ended June 30, 2022, respectively, were primarily attributable to the British pound weakening against Euro and U.S. dollar.

Income Tax Expense.

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Income before taxes			$	381,969					$	67,066					$	314,903					NM						$	623,091					$	228,375					$	394,716					173%
Income tax expense			(49,714)						(13,460)						(36,254)						(269)						(83,520)						(33,871)						(49,649)						(147)
Net income			$	332,255					$	53,606					278,649						NM						$	539,571					$	194,504					345,067						177

Income Tax Expense The increases in income tax expense were attributable to higher pre-tax income allocable to AMC for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022*.* 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 59.7% and 59.6% for the three and six months ended June 30, 2022, respectively, to 60.4% and 60.3% for the three and six months ended June 30, 2023, respectively. The changes in ownership were primarily driven by the issuance of Class A common stock in connection with stock option exercises, vesting of restricted stock awards and the completion of the SSG Buyout. The increase in the weighted average daily ownership for AMC common 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.

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Redeemable and Non-Controlling Interests.

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Net income			$	332,255					$	53,606					$	278,649					NM						$	539,571					$	194,504					$	345,067					177%
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds			67,681						(15,022)						82,703						NM						94,374						32,360						62,014						192
Net income attributable to Ares Operating Group entities			264,574						68,628						195,946						286						445,197						162,144						283,053						175
Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities			734						(457)						1,191						NM						(1,090)						(58)						(1,032)						NM
Less: Net income attributable to non-controlling interests in Ares Operating Group entities			119,326						29,354						89,972						NM						207,734						76,608						131,126						171
Net income attributable to Ares Management Corporation Class A and non-voting common stockholders			$	144,514					$	39,731					104,783						264						$	238,553					$	85,594					152,959						179

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 our acquisition of SSG, 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 first quarter, 100% of the income associated with Ares SSG’s fee generating business is attributable to AOG entities beginning in the second quarter. Following the SSG Buyout, legacy owners of SSG retained an ownership interest in certain non-controlled investments that will continue to be reflected as redeemable interests, and the income generated by these investments will continue to be allocated based on ownership. 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. We allocated net income (loss) based on ownership percentages of the strategic distribution partners and the activity of those membership interests as follows: net loss of $4.5 million and net income of $3.0 million for the three and six months ended June 30, 2023, respectively, and net loss of $3.6 million and net income of $1.0 million for the three and six months ended June 30, 2022, respectively.

The changes in net income attributable to non-controlling interests in AOG entities over the comparative periods is a result of the respective changes in income before taxes and weighted average daily ownership. The weighted average daily ownership for the non-controlling AOG unitholders decreased from 40.3% and 40.4% for the three and six months ended June 30, 2022 to 39.6% and 39.8% for the three and six months ended June 30, 2023, respectively.

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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 June 30,												Favorable (Unfavorable)												Six months ended June 30,																								Favorable (Unfavorable)
						2023						2022						$ Change						% Change						2023						2022																								$ Change						% Change
Expenses of the Consolidated Funds						$	(13,255)					$	(13,454)					$	199					1%						$	(21,107)					$	(17,967)																							$	(3,140)					(17)%
Net realized and unrealized gains (losses) on investments of Consolidated Funds						98,426						(7,907)						106,333						NM						109,126						8,061																								101,065						NM
Interest and other income of Consolidated Funds						234,454						117,375						117,079						100						457,392						237,665																								219,727						92
Interest expense of Consolidated Funds						(182,904)						(79,253)						(103,651)						(131)						(339,591)						(153,266)																								(186,325)						(122)
Income before taxes						136,721						16,761						119,960						NM						205,820						74,493																								131,327						176
Income tax expense of Consolidated Funds						(81)						(23)						(58)						(252)						(559)						(48)																								(511)						NM
Net income						136,640						16,738						119,902						NM						205,261						74,445																								130,816						176
Less: Revenues attributable to Ares Management Corporation eliminated upon consolidation						76,440						33,557						42,883						128						109,128						56,003																								53,125						95
Less: Other income (expense), net attributable to Ares Management Corporation eliminated upon consolidation						(7,450)						(1,570)						(5,880)						NM						2,133						(13,691)																								15,824						NM
General, administrative and other expense attributable to Ares Management Corporation eliminated upon consolidation						31						227						196						86						374						227																								(147)						(65)
Net income (loss) attributable to non-controlling interests in Consolidated Funds						$	67,681					$	(15,022)					82,703						NM						$	94,374					$	32,360																							62,014						192

The results of operations of the Consolidated Funds primarily represent activities 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 June 30, 2023 and June 30, 2022, we consolidated 26 and 24 CLOs, respectively. The expenses for the three and six months ended June 30, 2023 were primarily driven by professional service fees incurred by AAC I in connection with a potential business combination, partially offset by lower expenses due to the deconsolidation of a commercial finance fund during the second quarter of 2023. For the three and six months ended June 30, 2022, expenses were primarily driven by professional fees incurred from the issuance of a new U.S. CLO.

The increases in net realized and unrealized gains on investments over the comparative periods were primarily driven by the increase in value of certain investments from a fund invested in insurance companies, a European liquid credit vehicle and a private equity fund, partially offset by the unrealized losses from the increase in value of warrant liabilities of AAC I and by lower unrealized gains from certain investments of an Asian corporate private equity fund in the current year periods. The increases in interest and other income and in 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 second 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 increases in revenues attributable to AMC for the three and six months ended June 30, 2023 compared to the same periods in 2022 were 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 and six months ended June 30, 2023 primarily consisted of unrealized losses on our investment in AAC II, partially offset by unrealized gain on our investment in a vehicle that primarily invests in private equity strategies. The activity for the six months ended June 30, 2023 also included unrealized gains on our investment in AAC I. The activity for the three and six months ended June 30, 2022 primarily consisted of unrealized losses on our investments in the subordinated notes of CLOs and AAC I.

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Segment Analysis

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

Non-GAAP Financial Measures

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

• Fee Related Earnings (“FRE”)

• Realized Income (“RI”)

These non-GAAP financial measures supplement and should be considered in addition to and not in lieu of, the results of operations, which are discussed further under “—Components of Consolidated Results of Operations” and are prepared in accordance with GAAP. 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 June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
						2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings:
Credit Group						$	285,661					$	226,909					$	58,752					26%						$	562,970					$	433,613					$	129,357					30%
Private Equity Group						28,174						15,631						12,543						80						51,628						36,031						15,597						43
Real Assets Group						55,918						49,025						6,893						14						109,580						88,462						21,118						24
Secondaries Group						21,314						28,111						(6,797)						(24)						46,744						57,897						(11,153)						(19)
Other						2,709						371						2,338						NM						3,990						289						3,701						NM
Operations Management Group						(127,630)						(100,268)						(27,362)						(27)						(254,129)						(190,843)						(63,286)						(33)
Fee Related Earnings						$	266,146					$	219,779					46,367						21						$	520,783					$	425,449					95,334						22
Realized Income:
Credit Group						$	324,617					$	250,716					$	73,901					29%						$	602,626					$	462,878					$	139,748					30%
Private Equity Group						42,341						12,869						29,472						229						66,273						33,427						32,846						98
Real Assets Group						53,725						55,603						(1,878)						(3)						105,868						110,965						(5,097)						(5)
Secondaries Group						19,827						29,396						(9,569)						(33)						44,177						59,361						(15,184)						(26)
Other						(987)						103						(1,090)						NM						1,488						(4,901)						6,389						NM
Operations Management Group						(127,313)						(101,442)						(25,871)						(26)						(253,930)						(192,468)						(61,462)						(32)
Realized Income						$	312,210					$	247,245					64,965						26						$	566,502					$	469,262					97,240						21

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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 June 30,												Six months ended June 30,
			2023						2022						2023						2022
Income before taxes			$	381,969					$	67,066					$	623,091					$	228,375
Adjustments:
Depreciation and amortization expense			42,991						40,330						88,650						78,456
Equity compensation expense			62,284						50,144						130,988						103,161
Acquisition-related compensation expense(1)			600						59,491						1,242						107,492
Acquisition and merger-related expense			2,757						1,152						7,712						10,194
Placement fee adjustment			(3,744)						(1,425)						(6,976)						(2,118)
Other expense, net			212						12						303						1,993
(Income) loss before taxes of non-controlling interests in consolidated subsidiaries			3,786						4,022						(1,885)						(967)
(Income) loss before taxes of non-controlling interests in Consolidated Funds, net of eliminations			(67,762)						14,999						(94,933)						(32,408)
Total performance (income) loss—unrealized			(288,220)						24,031						(415,933)						(109,501)
Total performance related compensation—unrealized			215,496						(8,549)						300,646						82,649
Total net investment (income) loss—unrealized			(38,159)						(4,028)						(66,403)						1,936
Realized Income			312,210						247,245						566,502						469,262
Total performance income—realized			(140,635)						(70,094)						(171,771)						(113,962)
Total performance related compensation—realized			99,109						44,058						122,968						72,633
Total investment (income) loss—realized			(4,538)						(1,430)						3,084						(2,484)
Fee Related Earnings			$	266,146					$	219,779					$	520,783					$	425,449

(1)Represents contingent obligations (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 and Six Months Ended June 30, 2023 Compared to Three and Six Months Ended June 30, 2022

Fee Related Earnings:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Management fees			$	422,662					$	338,134					$	84,528					25%						$	828,312					$	655,623					$	172,689					26%
Fee related performance revenues			222						275						(53)						(19)						822						12,628						(11,806)						(93)
Other fees			9,142						6,633						2,509						38						18,012						12,399						5,613						45
Compensation and benefits			(122,922)						(98,688)						(24,234)						(25)						(239,138)						(209,399)						(29,739)						(14)
General, administrative and other expenses			(23,443)						(19,445)						(3,998)						(21)						(45,038)						(37,638)						(7,400)						(20)
Fee Related Earnings			$	285,661					$	226,909					58,752						26						$	562,970					$	433,613					129,357						30

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, an open-end core alternative credit fund, ACE V, Ares Private Credit Solutions II, L.P. (“PCS II”) and Ares Senior Direct Lending Fund II, L.P. (“SDL II”) collectively generating additional fees of $28.7 million and $59.4 million for the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 2022. Management fees from ARCC, excluding Part I Fees described below, increased by $4.1 million and $10.2 million for the three and six months ended June 30, 2023,

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respectively, compared to the three and six months ended June 30, 2022 primarily due to an increase in the average size of ARCC’s portfolio. Excluding one-time catch-up fees, management fees from our sixth Asian special situations fund increased by $3.3 million and $6.0 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 primarily due to new limited partner capital commitments and to the incremental fees attributable to us following the completion of the SSG Buyout on March 31, 2023. 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 and six months ended June 30, 2023 compared to the same periods in 2022 primarily due to the net addition of five CLOs since June 30, 2022.

Part I Fees increased for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 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 and by the impact of rising interest rates, given their primarily floating-rate loan portfolios.

The increases in effective management fee rate for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 were primarily driven by the increases 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 six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily attributable to timing of incentive fees recognized from direct lending funds in the prior year period once the associated performance conditions were met and the fees were no longer subject to reversal.

Other Fees. The increases in other fees for the three and six months ended June 30, 2023 compared to the same periods in 2022 were primarily driven by: (i) higher transaction fees of $0.9 million and $2.9 million, respectively, representing a portion of the loan origination income generated from certain credit funds; and (ii) higher administrative service fees of $1.7 million and $2.8 million, respectively, mostly earned from certain private funds that pay on invested capital, driven by additional deployment.

Compensation and Benefits. The increases in compensation and benefits for the three and six months ended June 30, 2023 compared to the same periods in 2022 were primarily driven by: (i) higher Part I Fees compensation of $16.8 million and $36.5 million, respectively; and (ii) an increase in salary expense of $4.5 million and $7.6 million, respectively, primarily attributable to headcount growth to support the expansion of our business. The increase in compensation and benefits for the six months ended June 30, 2023 compared to the same period in 2022 was partially offset by: (i) lower fee related performance compensation of $8.0 million corresponding to the decreases in fee related performance revenues; (ii) decrease in payroll related taxes of $2.7 million, primarily attributable to fewer restricted units vesting during 2023; and (iii) lower incentive-based compensation that we believe will increase throughout the remainder of the current year and exceed prior year levels. The increases described above included $1.6 million of expense recognized in connection with the SSG Buyout which did not have comparable results as the transaction closed on March 31, 2023.

Average headcount increased by 12% to 532 investment and investment support professionals for the year-to-date period in 2023 from 477 professionals for the same period in 2022 as we continued to add professionals primarily to support our growing U.S. direct lending and Asia credit platforms.

General, Administrative and Other Expenses. Occupancy costs, information technology and information services collectively increased by $2.6 million and $4.4 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022, to support our growing headcount and the expansion of our business. Travel and marketing have also increased by $0.9 million and $2.7 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022, as marketing efforts continued to increase driven by more investor meetings and events. The increases described above included $0.4 million of expense recognized in connection with the SSG Buyout which did not have comparable results as the transaction closed on March 31, 2023.

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Realized Income:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	285,661					$	226,909					$	58,752					26%						$	562,970					$	433,613					$	129,357					30%
Performance income—realized			62,760						48,533						14,227						29						69,353						55,896						13,457						24
Performance related compensation—realized			(39,040)						(29,358)						(9,682)						(33)						(44,037)						(33,938)						(10,099)						(30)
Realized net performance income			23,720						19,175						4,545						24						25,316						21,958						3,358						15
Investment income—realized			17,565						1,607						15,958						NM						18,071						2,022						16,049						NM
Interest and other investment income—realized			5,672						6,682						(1,010)						(15)						12,090						12,410						(320)						(3)
Interest expense			(8,001)						(3,657)						(4,344)						(119)						(15,821)						(7,125)						(8,696)						(122)
Realized net investment income			15,236						4,632						10,604						229						14,340						7,307						7,033						96
Realized Income			$	324,617					$	250,716					73,901						29						$	602,626					$	462,878					139,748						30

Realized net performance income for the three and six months ended June 30, 2023 and 2022 was primarily attributable to tax distributions from ACE III, ACE IV and PCS I. Realized net performance income for the three and six months ended June 30, 2023 also included tax distributions from ACE V and incentive fees from two alternative credit funds. Realized net performance income for the three and six months ended June 30, 2022 also included incentive fees from one alternative credit fund.

Realized net investment income for the three and six months ended June 30, 2023 was primarily attributable to realized gains from the sale of our investment in a commercial finance fund. The activity for the three and six months ended June 30, 2023 and 2022 included realized net investment income attributable to interest income generated from our CLO investments. Realized net investment income for the six months ended June 30, 2023 and June 30, 2022 also included income recognized in connection with distributions from a commercial finance fund and will not recur given the sale of this investment, as described above. Realized net investment income for the three and six months ended June 30, 2022 also included liquidating distributions from a European direct lending fund. Interest expense, which is allocated among our segments 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.

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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 June 30, 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			$	101,718					$	61,031					$	40,687					$	100,774					$	60,465					$	40,309
ACE IV			187,009						115,946						71,063						168,204						104,286						63,918
ACE V			175,786						105,472						70,314						115,969						69,581						46,388
PCS I			110,984						65,580						45,404						98,143						57,994						40,149
Pathfinder			123,569						105,034						18,535						88,879						75,547						13,332
Other credit funds			126,590						71,882						54,708						93,640						52,482						41,158
Total Credit Group			$	825,656					$	524,945					$	300,711					$	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 June 30, 2023
						Waterfall Type						Accrued Performance Income						Change in Unrealized						Realized						Other Adjustments						Accrued Performance Income
Accrued Carried Interest
ACE III						European						$	100,774					$	5,340					$	(4,284)					$	(112)					$	101,718
ACE IV						European						168,204						40,163						(20,912)						(446)						187,009
ACE V						European						115,969						78,718						(18,585)						(316)						175,786
PCS I						European						98,143						22,520						(9,876)						197						110,984
Pathfinder						European						88,879						34,690						—						—						123,569
Other credit funds						European						91,997						40,770						(8,147)						1,008						125,628
Other credit funds						American						1,643						701						(1,325)						(57)						962
Total accrued carried interest												665,609						222,902						(63,129)						274						825,656
Other credit funds						Incentive						—						6,224						(6,224)						—						—
Total Credit Group												$	665,609					$	229,126					$	(69,353)					$	274					$	825,656

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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 3/31/2023									$	44,496					$	23,817					$	100,212					$	55,034					$	11,334					$	250					$	235,143
Net new par/equity commitments									383						2,013						2,387						5,013						65						75						9,936
Net new debt commitments									—						341						2,494						—						—						—						2,835
Capital reductions									(203)						—						(149)						—						—						—						(352)
Distributions									(59)						(434)						(766)						(453)						(170)						—						(1,882)
Redemptions									(220)						(136)						(78)						—						—						—						(434)
Net allocations among investment strategies									(33)						1,772						—						—						—						—						1,739
Change in fund value									354						441						1,343						891						127						—						3,156
Balance at 6/30/2023									$	44,718					$	27,814					$	105,443					$	60,485					$	11,356					$	325					$	250,141
									Liquid Credit						Alternative Credit						U.S. Direct Lending						European Direct Lending						Asia Credit						Other						Total Credit Group
Balance at 3/31/2022									$	41,615					$	18,594					$	88,397					$	48,317					$	9,783					$	—					$	206,706
Net new par/equity commitments									653						854						3,155						266						275						—						5,203
Net new debt commitments									1,556						—						1,473						1,154						—						—						4,183
Capital reductions									(45)						—						(1)						(12)						—						—						(58)
Distributions									(25)						(126)						(389)						(290)						(114)						—						(944)
Redemptions									(244)						(95)						(55)						—						—						—						(394)
Net allocations among investment strategies									—						443						—						—						—						—						443
Change in fund value									(1,397)						(421)						130						(1,596)						(125)						—						(3,409)
Balance at 6/30/2022									$	42,113					$	19,249					$	92,710					$	47,839					$	9,819					$	—					$	211,730
									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									785						4,302						4,163						9,337						65						325						18,977
Net new debt commitments									466						341						3,234						217						—						—						4,258
Capital reductions									(265)						—						(987)						(1,181)						—						—						(2,433)
Distributions									(201)						(682)						(1,470)						(851)						(205)						—						(3,409)
Redemptions									(764)						(876)						(170)						—						—						—						(1,810)
Net allocations among investment strategies									(30)						2,584						—						—						—						—						2,554
Change in fund value									863						782						2,346						2,321						113						—						6,425
Balance at 6/30/2023									$	44,718					$	27,814					$	105,443					$	60,485					$	11,356					$	325					$	250,141
									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									1,632						2,276						4,681						331						1,507						—						10,427
Net new debt commitments									2,567						—						2,802						1,154						—						—						6,523
Capital reductions									(118)						—						(325)						(12)						(5)						—						(460)
Distributions									(41)						(238)						(951)						(566)						(275)						—						(2,071)
Redemptions									(415)						(299)						(90)						—						—						—						(804)
Net allocations among investment strategies									(3)						576						—						—						—						—						573
Change in fund value									(1,844)						(490)						744						(2,170)						(103)						—						(3,863)
Balance at 6/30/2022									$	42,113					$	19,249					$	92,710					$	47,839					$	9,819					$	—					$	211,730
(1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy.

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

			AUM: $250.1						AUM: $211.7

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

(1) Includes $14.9 billion and $12.4 billion of AUM of funds from which we indirectly earn management fees as of June 30, 2023 and 2022, respectively, and includes $1.2 billion of non-fee paying AUM based on our general partner commitment as of June 30, 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 3/31/2023						$	42,632					$	16,261					$	57,899					$	31,206					$	5,751											$	153,749
Commitments						883						40						456						—						65												1,444
Deployment/subscriptions/increase in leverage						27						2,082						2,497						1,100						609												6,315
Capital reductions						(203)						—						(54)						(87)						(3)												(347)
Distributions						(92)						(232)						(694)						(122)						(791)												(1,931)
Redemptions						(223)						(136)						(78)						(36)						—												(473)
Net allocations among investment strategies						(34)						1,804						—						—						—			0									1,770
Change in fund value						458						84						420						262						—												1,224
Balance at 6/30/2023						$	43,448					$	19,903					$	60,446					$	32,323					$	5,631											$	161,751
						Liquid Credit						Alternative Credit						U.S. Direct Lending						European Direct Lending						Asia Credit												Total Credit Group
Balance at 3/31/2022						$	39,043					$	11,115					$	47,187					$	24,091					$	5,425											$	126,861
Commitments						2,905						171						445						—						275												3,796
Deployment/subscriptions/increase in leverage						—						1,112						4,847						2,454						573												8,986
Capital reductions						(74)						(14)						(49)						(55)						(223)												(415)
Distributions						(38)						(49)						(608)						(115)						(323)												(1,133)
Redemptions						(247)						(95)						(55)						(79)						—												(476)
Net allocations among investment strategies						—						403						—						—						—												403
Change in fund value						(1,367)						(230)						2						(977)						(19)												(2,591)
Change in fee basis						—						—						—						—						(8)												(8)
Balance at 6/30/2022						$	40,222					$	12,413					$	51,769					$	25,319					$	5,700											$	135,423
						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						1,299						65						1,097						—						65												2,526
Deployment/subscriptions/increase in leverage						281						3,069						3,912						2,458						875												10,595
Capital reductions						(265)						—						(1,333)						(91)						(192)												(1,881)
Distributions						(197)						(1,110)						(1,432)						(162)						(1,165)												(4,066)
Redemptions						(767)						(792)						(170)						(121)						—												(1,850)
Net allocations among investment strategies						(30)						2,616						—						—						—			0									2,586
Change in fund value						936						151						804						678						(3)												2,566
Balance at 6/30/2023						$	43,448					$	19,903					$	60,446					$	32,323					$	5,631											$	161,751
						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						3,896						331						1,417						—						1,747												7,391
Deployment/subscriptions/increase in leverage						6						3,566						7,320						4,440						1,028												16,360
Capital reductions						(147)						(25)						(1,394)						(1,212)						(233)												(3,011)
Distributions						(58)						(248)						(1,825)						(352)						(579)												(3,062)
Redemptions						(414)						(243)						(90)						(125)						—												(872)
Net allocations among investment strategies						(3)						506						—						—						—												503
Change in fund value						(1,731)						(216)						213						(1,279)						(140)												(3,153)
Change in fee basis						—						—						—						—						(843)												(843)
Balance at 6/30/2022						$	40,222					$	12,413					$	51,769					$	25,319					$	5,700											$	135,423

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

			FPAUM: $161.7						FPAUM: $135.4

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

(1)Includes $32.1 billion and $29.6 billion from funds that primarily invest in illiquid strategies as of June 30, 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 June 30, 2023

ARCC contributed approximately 38% of the Credit Group’s total management fees for the six months ended June 30, 2023. In addition, eight other significant funds, CADC, Ares Senior Direct Lending Fund, L.P. (“SDL”), ACE IV, ACE V, PCS II, Pathfinder, SDL II and an open-ended core alternative credit fund, collectively contributed approximately 28% of the Credit Group’s management fees for the six months ended June 30, 2023.

The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group as of June 30, 2023 ($ in millions):

															Returns(%)
			Year of Inception						AUM						Current Quarter												Year-To-Date												Since Inception**(1)**												Primary Investment Strategy
Fund									Gross						Net						Gross						Net						Gross						Net
ARCC(2)			2004						$	26,230					N/A						3.3						N/A						6.3						N/A						11.9						U.S. Direct Lending
CADC(3)			2017						4,497						N/A						2.7						N/A						5.6						N/A						5.6						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 the Credit Group’s significant drawdown funds as of June 30, 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						$	5,122					$	922					$	872					$	253					$	762					$	1,015					1.2x						1.2x						8.5						6.4						U.S. Direct Lending
SDL I Levered									2,045						2,022						779						1,764						2,543						1.4x						1.3x						14.8						10.8
ACE IV Unlevered(7)			2018						10,258						2,851						2,288						611						2,188						2,799						1.3x						1.2x						8.4						6.1						European Direct Lending
ACE IV Levered(7)									4,819						3,870						1,326						3,822						5,148						1.4x						1.3x						12.1						8.8
Funds Deploying Capital
ACE V Unlevered(8)			2020						16,994						7,026						5,148						298						5,377						5,675						1.1x						1.1x						11.3						8.3						European Direct Lending
ACE V Levered(8)									6,376						4,669						417						4,890						5,307						1.2x						1.1x						17.6						12.4
PCS II			2020						5,412						5,114						3,180						142						3,189						3,331						1.1x						1.1x						6.4						4.2						U.S. Direct Lending
Pathfinder			2020						4,160						3,683						2,496						169						2,832						3,001						1.3x						1.2x						20.2						14.7						Alternative Credit
SDL II Unlevered			2021						15,413						1,989						1,026						72						1,040						1,112						1.1x						1.1x						11.3						8.6						U.S. Direct Lending
SDL II Levered									6,047						3,237						356						3,288						3,644						1.2x						1.1x						19.6						14.5
Open-ended core alternative credit fund(9)			2021						3,494						3,479						2,463						151						2,476						2,627						1.1x						1.1x						9.8						7.0						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 9.8% and 7.2%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.4x and 1.3x, respectively. The gross and net IRR for ACE IV (G) Levered are 13.3% and 9.6%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.5x and 1.4x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund’s closing. All other values for ACE 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 12.6% and 9.3%, respectively. The gross and net MoIC for ACE V (G) Unlevered are 1.2x and 1.1x, respectively. The gross and net IRR for ACE V (G) Levered are 17.9% and 12.7%, respectively. The gross and net MoIC for ACE V (G) Levered are 1.2x and 1.2x, respectively. The gross and net IRR for ACE V (D) Levered are 16.3% and 11.7%, 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 10.5% and 7.4%, 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 9.4% and 6.7%, respectively. The gross and net MoIC for the Constrained Class are 1.1x and 1.1x, respectively.

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Private Equity Group—Three and Six Months Ended June 30, 2023 Compared to Three and Six Months Ended June 30, 2022

Fee Related Earnings:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Management fees			$	55,518					$	47,396					$	8,122					17%						$	110,175					$	93,353					$	16,822					18%
Other fees			738						408						330						81						1,411						705						706						100
Compensation and benefits			(20,348)						(24,293)						3,945						16						(42,658)						(43,859)						1,201						3
General, administrative and other expenses			(7,734)						(7,880)						146						2						(17,300)						(14,168)						(3,132)						(22)
Fee Related Earnings			$	28,174					$	15,631					12,543						80						$	51,628					$	36,031					15,597						43

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

Management fees from Ares Special Opportunities Fund II, L.P. (“ASOF II”) increased by $10.4 million and $21.7 million for the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 2022 primarily driven by deployment. Management fees from ACOF IV decreased by $1.5 million and $3.0 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 as the fund stopped paying fees during the fourth quarter of 2022.

The increases in effective management fee rate for the three and six months ended June 30, 2023 compared to the same periods in 2022 were 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.

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Compensation and Benefits. Although salary and benefits costs have modestly increased during the 2023 comparative periods to reflect changes in staffing and merit increases, compensation and benefits have decreased for the three and six months ended June 30, 2023 compared to the same periods in 2022, primarily driven by lower incentive-based compensation that we believe will increase throughout the remainder of the current year to better align with the growth in revenues.

Average headcount increased slightly by 2% to 118 investment and investment support professionals for the year-to-date period in 2023 from 116 professionals for the same period in 2022.

General, Administrative and Other Expenses. Amortization of placement fees increased by $0.8 million and $1.9 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 primarily driven by new limited partner capital commitments to ASOF II subsequent to the second quarter of 2022 and through its final close in the fourth quarter of 2022. Certain expenses have also increased during the current period, primarily from occupancy costs to support our professionals that are based in higher cost locations and from additional research subscriptions used by our investment professionals. Collectively, these expenses increased by $0.5 million and $1.1 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022.

Travel and marketing collectively decreased by $0.9 million for the three months ended June 30, 2023 compared to the same period in 2022 due to the timing of annual marketing events that occurred during the first quarter of 2023 but were held in the second quarter in the prior year.

Realized Income:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	28,174					$	15,631					$	12,543					80%						$	51,628					$	36,031					$	15,597					43%
Performance income—realized			69,678						—						69,678						NM						88,135						2,212						85,923						NM
Performance related compensation—realized			(53,723)						—						(53,723)						NM						(68,827)						(1,786)						(67,041)						NM
Realized net performance income			15,955						—						15,955						NM						19,308						426						18,882						NM
Investment income—realized			2,084						672						1,412						210						2,963						2,275						688						30
Interest and other investment income—realized			1,863						195						1,668						NM						3,724						1,697						2,027						119
Interest expense			(5,735)						(3,629)						(2,106)						(58)						(11,350)						(7,002)						(4,348)						(62)
Realized net investment loss			(1,788)						(2,762)						974						35						(4,663)						(3,030)						(1,633)						(54)
Realized Income			$	42,341					$	12,869					29,472						229						$	66,273					$	33,427					32,846						98

Realized net performance income for the three and six months ended June 30, 2023 was primarily attributable to realized gains from the partial sale of ACOF IV’s investment in AZEK and to a tax distribution from ASOF I.

Realized net investment loss for the three and six months ended June 30, 2023 and 2022 largely represents interest expense exceeding net investment and other income during these periods. Interest expense, which is allocated among our segments 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 investment income for the three and six months ended June 30, 2023 also includes realized gains from the partial sale of ACOF IV’s investment in AZEK.

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Private Equity Group—Performance Income

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

			As of June 30, 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			$	208,696					$	166,957					$	41,739					$	282,624					$	226,099					$	56,525
ACOF V			792,824						634,259						158,565						742,962						594,369						148,593
ACOF VI			228,190						182,552						45,638						147,185						117,748						29,437
ASOF I			387,247						271,073						116,174						326,471						228,529						97,942
Other funds			234,334						166,300						68,034						108,997						75,583						33,414
Total Private Equity Group			$	1,851,291					$	1,421,141					$	430,150					$	1,608,239					$	1,242,328					$	365,911

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 June 30, 2023
						Waterfall Type						Accrued Carried Interest						Change in Unrealized						Realized						Other Adjustments						Accrued Carried Interest
ACOF IV						American						$	282,624					$	(10,634)					$	(63,294)					$	—					$	208,696
ACOF V						American						742,962						49,862						—						—						792,824
ACOF VI						American						147,185						81,005						—						—						228,190
ASOF I						European						326,471						85,363						(24,587)						—						387,247
Other funds						European						92,509						123,517						—						7,490						223,516
Other funds						American						16,488						(5,416)						(254)						—						10,818
Total Private Equity Group												$	1,608,239					$	323,697					$	(88,135)					$	7,490					$	1,851,291

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Private Equity Group—Assets Under Management

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

						Corporate Private Equity						Special Opportunities						Total Private Equity Group
Balance at 3/31/2023						$	20,656					$	13,991					$	34,647
Capital reductions						(2)						—						(2)
Distributions						(385)						(88)						(473)
Change in fund value						772						509						1,281
Balance at 6/30/2023						$	21,041					$	14,412					$	35,453
						Corporate Private Equity						Special Opportunities						Total Private Equity Group
Balance at 3/31/2022						$	21,206					$	12,359					$	33,565
Net new par/equity commitments						—						230						230
Capital reductions						(2)						(200)						(202)
Distributions						(105)						(33)						(138)
Change in fund value						171						(214)						(43)
Balance at 6/30/2022						$	21,270					$	12,142					$	33,412
						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						(5)						—						(5)
Distributions						(651)						(149)						(800)
Change in fund value						618						841						1,459
Balance at 6/30/2023						$	21,041					$	14,412					$	35,453
						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						—						800						800
Capital reductions						(4)						(200)						(204)
Distributions						(390)						(131)						(521)
Change in fund value						25						(92)						(67)
Balance at 6/30/2022						$	21,270					$	12,142					$	33,412

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

			AUM: $35.5						AUM: $33.4

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

(1) Includes $1.3 billion and $1.2 billion of non-fee paying AUM based on our general partner commitment as of June 30, 2023 and 2022, respectively.

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Private Equity Group—Fee Paying AUM

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

						Corporate Private Equity						Special Opportunities						Total Private Equity Group
Balance at 3/31/2023						$	11,281					$	7,469					$	18,750
Deployment/subscriptions/increase in leverage						—						901						901
Distributions						—						(693)						(693)
Change in fee basis						(4)						—						(4)
Balance at 6/30/2023						$	11,277					$	7,677					$	18,954
						Corporate Private Equity						Special Opportunities						Total Private Equity Group
Balance at 3/31/2022						$	12,186					$	3,955					$	16,141
Deployment/subscriptions/increase in leverage						—						2,099						2,099
Distributions						(51)						(479)						(530)
Change in fund value						(3)						—						(3)
Change in fee basis						(16)						—						(16)
Balance at 6/30/2022						$	12,116					$	5,575					$	17,691
						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						—						1,604						1,604
Distributions						—						(1,093)						(1,093)
Change in fee basis						(4)						—						(4)
Balance at 6/30/2023						$	11,277					$	7,677					$	18,954
						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						2,196						2,213
Distributions						(138)						(837)						(975)
Change in fund value						(2)						—						(2)
Change in fee basis						(234)						—						(234)
Balance at 6/30/2022						$	12,116					$	5,575					$	17,691

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

			FPAUM: $19.0						FPAUM: $17.7

						Invested capital									Capital commitments

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Private Equity Group—Fund Performance Metrics as of June 30, 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 six months ended June 30, 2023.

The following table presents the performance data of the Private Equity Group’s significant drawdown funds as of June 30, 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						$	9,461					$	7,850					$	7,415					$	3,492					$	8,701					$	12,193					1.6x						1.4x						14.2						9.9						Corporate Private Equity
Funds Deploying Capital
ASOF I			2019						5,902						3,518						5,404						3,944						4,183						8,127						1.8x						1.6x						30.2						23.6						Special Opportunities
ACOF VI			2020						6,881						5,743						4,398						371						5,562						5,933						1.3x						1.2x						25.4						18.3						Corporate Private Equity
ASOF II			2021						7,065						7,128						4,603						884						3,798						4,682						1.0x						1.0x						0.6						(2.1)						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 1.4x for ACOF V and 1.2x 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 and the fund’s residual value at the end of the measurement period. Gross IRRs reflect returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross IRRs 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 10.0% for ACOF V and 16.6% for ACOF VI.

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Real Assets Group—Three and Six Months Ended June 30, 2023 Compared to Three and Six Months Ended June 30, 2022

Fee Related Earnings:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Management fees			$	95,239					$	90,733					$	4,506					5%						$	192,709					$	163,220					$	29,489					18%
Fee related performance revenues			334						965						(631)						(65)						334						1,323						(989)						(75)
Other fees			11,846						8,565						3,281						38						18,308						16,431						1,877						11
Compensation and benefits			(40,638)						(40,599)						(39)						—						(78,624)						(74,236)						(4,388)						(6)
General, administrative and other expenses			(10,863)						(10,639)						(224)						(2)						(23,147)						(18,276)						(4,871)						(27)
Fee Related Earnings			$	55,918					$	49,025					6,893						14						$	109,580					$	88,462					21,118						24

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 $3.8 million and $11.8 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 due to additional capital raised in these funds. Management fees from Infrastructure Debt Fund IV (“IDF IV”) and IDF V collectively increased by $2.4 million and $7.5 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 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.

One-time catch-up fees from funds within the Real Assets Group consisted of the following: (i) $0.4 million and $0.5 million for the three and six months ended June 30, 2023, respectively, from our fourth U.S. opportunistic real estate equity fund; (ii) $0.2 million for the six months ended June 30, 2023 and $0.7 million for the three months ended June 30, 2022 from

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our sixth European real estate equity fund; and (iii) $5.3 million and $3.9 million for the three and six months ended June 30, 2022, respectively, from US X.

For the three and six months ended June 30, 2023 compared to the same periods in 2022, management fees, excluding one-time catch-up fees previously discussed, increased by: (i) $2.1 million and $4.2 million, respectively, for our fourth U.S. opportunistic real estate equity fund; (ii) $0.1 million and $1.9 million, respectively, for our sixth European real estate fund; and (iii) $1.3 million and $2.7 million, respectively, for US X. The increases in management fees for these funds was primarily driven by new limited partner capital commitments. Our most recent real estate equity funds pay a fee on committed capital that increases once that capital is invested.

Management fees for the six months ended June 30, 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. industrial real estate equity funds, which resulted in the acceleration of contractual management fees.

The increases in effective management fee rate for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 were 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 increases in other fees for the three and six months ended June 30, 2023 compared to the same periods in 2022 were primarily attributable to $6.7 million of transaction fees, which are generated periodically within the infrastructure debt strategy and represent a portion of the loan origination income from those transactions. The increases in other fees were partially offset by decreases for three and six months ended June 30, 2023 compared to the same periods in 2022 of: (i) $2.5 million and $3.6 million, respectively, in acquisition and development fees resulted from decreased activity; and (ii) $0.8 million and $1.8 million, respectively, related to program administration fees resulting from the management and creation of our 1031 exchange program that is used by our non-traded REITs.

Compensation and Benefits. The increases in compensation and benefits for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 were primarily driven by increases in salary expense of $2.8 million and $6.4 million, respectively, primarily attributable to 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. The increase in compensation and benefits for the six months ended June 30, 2023 when compared to the same period in 2022 was partially offset by lower incentive-based compensation that we believe will increase throughout the remainder of the current year and will exceed prior year levels. Compensation and benefits for the six months ended June 30, 2023 also included the full period of expense attributable to the infrastructure debt platform which did not have comparable results as the Infrastructure Debt Acquisition closed on February 10, 2022.

Average headcount increased by 20% to 348 investment and investment support professionals for the year-to-date period in 2023 from 290 professionals for the same period in 2022.

General, Administrative and Other Expenses. Certain expenses have increased during the current period, primarily from occupancy costs to support our growing headcount that are based in higher cost locations and from additional research subscriptions used by our investment professionals. Collectively, these expenses increased by $0.6 million and $1.6 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022. For the six months ended June 30, 2023 compared to the same period in 2022, the increase in general, administrative and other expenses was also driven by: (i) travel, marketing and certain fringe benefits, which collectively increased by $1.6 million, as we continued to increase marketing efforts driven by more investor meetings and events and conducted more in-person company meetings and events with a focus on promoting collaboration; and (ii) amortization of placement fees of $0.9 million primarily attributable to new commitments in US X and IDF V in connection with our fundraising efforts. The increases described above include $1.5 million of expense for the six months ended June 30, 2023 compared to the same period in 2022, recognized in connection with the Infrastructure Debt Acquisition which did not have comparable results as the transaction closed on February 10, 2022.

During the second quarter of 2022, we also recognized $0.5 million in one-time expenses related to transition services that were provided by the seller in connection with the Infrastructure Debt Acquisition.

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Realized Income:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	55,918					$	49,025					$	6,893					14%						$	109,580					$	88,462					$	21,118					24%
Performance income—realized			2,737						17,405						(14,668)						(84)						8,823						51,698						(42,875)						(83)
Performance related compensation—realized			(1,668)						(11,186)						9,518						85						(5,426)						(33,395)						27,969						84
Realized net performance income			1,069						6,219						(5,150)						(83)						3,397						18,303						(14,906)						(81)
Investment income (loss)—realized			(1,549)						432						(1,981)						NM						(3,321)						3,885						(7,206)						NM
Interest and other investment income—realized			2,393						2,640						(247)						(9)						4,214						5,417						(1,203)						(22)
Interest expense			(4,106)						(2,713)						(1,393)						(51)						(8,002)						(5,102)						(2,900)						(57)
Realized net investment income (loss)			(3,262)						359						(3,621)						NM						(7,109)						4,200						(11,309)						NM
Realized Income			$	53,725					$	55,603					(1,878)						(3)						$	105,868					$	110,965					(5,097)						(5)

Realized net performance income for the three and six months ended June 30, 2023 was primarily attributable to incentive fees generated from an open-ended industrial real estate fund.

Realized net investment loss for the three and six months ended June 30, 2023 largely represents interest expense exceeding net investment and other income during the periods. Interest expense, which is allocated among our segments 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 and six months ended June 30, 2023 also included realized losses recognized from a real estate debt vehicle, where carrying costs are exceeding investment returns as a result of limited investment opportunities. The activity for the three and six months ended June 30, 2023 was partially offset by distributions of net investment income from multiple real estate equity and real estate debt vehicles.

Realized net performance income and realized net investment income for the three and six months ended June 30, 2022 were primarily attributable to realizations from US VIII driven by multifamily property sales. Realized net performance income for the three and six months ended June 30, 2022 also included incentive fees generated from an open-ended industrial real estate fund. Realized net investment income for the three and six months ended June 30, 2022 was also attributable to distributions of net investment income from an infrastructure opportunities and real estate debt vehicles.

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 June 30, 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			$	34,040					$	21,786					$	12,254					$	36,822					$	23,566					$	13,256
US IX			88,560						54,907						33,653						86,905						53,881						33,024
EF IV			61,235						36,742						24,493						61,791						37,075						24,716
AREOF III			47,074						28,245						18,829						41,463						24,878						16,585
EIF V			90,976						68,004						22,972						94,398						70,562						23,836
Other real assets funds			193,235						122,533						70,702						171,489						108,002						63,487
Total Real Assets Group			$	515,120					$	332,217					$	182,903					$	492,868					$	317,964					$	174,904

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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 June 30, 2023
						Waterfall Type						Accrued Performance Income						Change in Unrealized						Realized						Other Adjustments						Accrued Performance Income
Accrued Carried Interest
US VIII						European						$	36,822					$	(699)					$	(2,083)					$	—					$	34,040
US IX						European						86,905						1,655						—						—						88,560
EF IV						American						61,791						(556)						—						—						61,235
AREOF III						European						41,463						5,611						—						—						47,074
EIF V						European						94,398						(3,422)						—						—						90,976
Other real assets funds						European						114,782						32,112						—						484						147,378
Other real assets funds						American						56,707						(10,124)						(709)						(17)						45,857
Total accrued carried interest												492,868						24,577						(2,792)						467						515,120
Other real assets funds						Incentive						—						6,031						(6,031)						—						—
Total Real Assets Group												$	492,868					$	30,608					$	(8,823)					$	467					$	515,120

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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 3/31/2023			$	29,838					$	8,533					$	10,826					$	5,175					$	9,742					$	64,114
Net new par/equity commitments			1,055						—						313						456						—						1,824
Net new debt commitments			—						—						150						—						—						150
Capital reductions			—						—						(1)						—						—						(1)
Distributions			(958)						(59)						(69)						(186)						(42)						(1,314)
Redemptions			(298)						—						(120)						—						—						(418)
Change in fund value			(190)						118						26						59						403						416
Balance at 6/30/2023			$	29,447					$	8,592					$	11,125					$	5,504					$	10,103					$	64,771
			U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 3/31/2022			$	27,961					$	7,683					$	10,225					$	4,424					$	8,234					$	58,527
Net new par/equity commitments			1,699						835						629						65						137						3,365
Net new debt commitments			400						419						625						—						—						1,444
Capital reductions			—						—						(34)						—						—						(34)
Distributions			(303)						(51)						(48)						(299)						(186)						(887)
Redemptions			(38)						—						(45)						—						—						(83)
Change in fund value			552						(328)						20						126						(125)						245
Balance at 6/30/2022			$	30,271					$	8,558					$	11,372					$	4,316					$	8,060					$	62,577
			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			1,643						15						475						456						—						2,589
Net new debt commitments			—						—						150						—						—						150
Capital reductions			(245)						—						(160)						—						—						(405)
Distributions			(2,466)						(72)						(131)						(203)						(104)						(2,976)
Redemptions			(554)						—						(402)						—						—						(956)
Change in fund value			(391)						88						32						57						522						308
Balance at 6/30/2023			$	29,447					$	8,592					$	11,125					$	5,504					$	10,103					$	64,771
			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			3,297						2,018						856						65						187						6,423
Net new debt commitments			1,105						419						1,025						—						—						2,549
Capital reductions			(234)						—						(63)						—						—						(297)
Distributions			(1,054)						(359)						(95)						(321)						(186)						(2,015)
Redemptions			(129)						—						(90)						—						—						(219)
Change in fund value			2,609						(347)						80						(184)						(125)						2,033
Balance at 6/30/2022			$	30,271					$	8,558					$	11,372					$	4,316					$	8,060					$	62,577

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

			AUM: $64.8						AUM: $62.6

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

(1) Includes $0.6 billion of non-fee paying AUM based on our general partner commitment as of June 30, 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 3/31/2023						$	21,300					$	5,685					$	3,365					$	4,570					$	6,008					$	40,928
Commitments						419						—						(5)						456						—						870
Deployment/subscriptions/increase in leverage						26						183						175						106						498						988
Capital reductions						—						(29)						(21)						—						—						(50)
Distributions						(433)						—						(76)						(254)						(333)						(1,096)
Redemptions						(298)						—						(133)						—						—						(431)
Change in fund value						(282)						26						63						—						20						(173)
Change in fee basis						—						98						—						—						—						98
Balance at 6/30/2023						$	20,732					$	5,963					$	3,368					$	4,878					$	6,193					$	41,134
						U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 3/31/2022						$	18,039					$	5,012					$	3,855					$	4,323					$	4,898					$	36,127
Commitments						1,522						452						103						—						—						2,077
Deployment/subscriptions/increase in leverage						255						163						194						151						759						1,522
Capital reductions						—						(10)						(80)						—						—						(90)
Distributions						(207)						(27)						(88)						—						(48)						(370)
Redemptions						(38)						—						(53)						—						—						(91)
Change in fund value						363						(238)						22						—						(91)						56
Balance at 6/30/2022						$	19,934					$	5,352					$	3,953					$	4,474					$	5,518					$	39,231
						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						1,001						15						(5)						456						—						1,467
Deployment/subscriptions/increase in leverage						45						201						214						153						597						1,210
Capital reductions						(245)						(29)						(55)						—						—						(329)
Distributions						(830)						(55)						(139)						(255)						(451)						(1,730)
Redemptions						(554)						—						(415)						—						—						(969)
Change in fund value						(473)						99						77						—						77						(220)
Change in fee basis						—						98						—						—						—						98
Balance at 6/30/2023						$	20,732					$	5,963					$	3,368					$	4,878					$	6,193					$	41,134
						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						2,548						1,607						106						—						—						4,261
Deployment/subscriptions/increase in leverage						611						257						563						199						802						2,432
Capital reductions						—						(10)						(81)						—						—						(91)
Distributions						(623)						(235)						(134)						(221)						(48)						(1,261)
Redemptions						(129)						—						(100)						—						—						(229)
Change in fund value						1,848						(364)						83						—						(91)						1,476
Change in fee basis						(8)						(819)						—						—						—						(827)
Balance at 6/30/2022						$	19,934					$	5,352					$	3,953					$	4,474					$	5,518					$	39,231

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

			FPAUM: $41.1						FPAUM: $39.2

			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 June 30, 2023

Four significant funds, AIREIT, AREIT, IDF IV and an open-ended industrial real estate fund, collectively contributed approximately 42% of the Real Assets Group’s management fees for the six months ended June 30, 2023.

The following table presents the performance data for our significant funds that are not drawdown funds in the Real Assets Group as of June 30, 2023 ($ in millions):

															Returns(%)
			Year of Inception						AUM						Current Quarter												Year-To-Date												Since Inception**(1)**												Primary Investment Strategy
Fund									Gross						Net						Gross						Net						Gross						Net
AREIT(2)			2012						$	5,174					N/A						(1.7)						N/A						(2.8)						N/A						7.2						U.S. Real Estate Equity
AIREIT(3)			2017						8,164						N/A						(2.8)						N/A						(3.7)						N/A						12.1						U.S. Real Estate Equity
Open-ended industrial real estate fund(4)			2017						5,339						(1.9)						(1.8)						(4.5)						(4.2)						22.7						18.6						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 the Real Assets Group’s significant drawdown fund as of June 30, 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						$	3,764					$	4,012					$	4,419					$	1,706					$	3,233					$	4,939					1.2x						1.1x						7.4						5.3						Infrastructure Debt

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

(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 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. 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 6.8% and 4.7%, 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 7.1% and 4.9%, respectively. The gross and net MoIC for the Euro unhedged parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the Yen hedged parallel fund are 5.6% and 3.7%, 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 5.7% and 4.3%, 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 and Six Months Ended June 30, 2023 Compared to Three and Six Months Ended June 30, 2022

Fee Related Earnings:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Management fees			$	41,785					$	46,201					$	(4,416)					(10)%						$	81,648					$	90,705					$	(9,057)					(10)%
Fee related performance revenues			298						—						298						NM						3,569						—						3,569						NM
Other fees			5						—						5						NM						5						—						5						NM
Compensation and benefits			(16,623)						(15,133)						(1,490)						(10)						(30,035)						(26,773)						(3,262)						(12)
General, administrative and other expenses			(4,151)						(2,957)						(1,194)						(40)						(8,443)						(6,035)						(2,408)						(40)
Fee Related Earnings			$	21,314					$	28,111					(6,797)						(24)						$	46,744					$	57,897					(11,153)						(19)

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”) decreased by $3.6 million and $7.3 million for the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 2022 primarily due to the change in fee base to reported value, which largely reflects the NAV of each funds’ limited partnership interests, from called capital plus unfunded commitments. Management fees also decreased due to one-time catch-up fees from Landmark Equity Partners XVII, L.P. (“LEP XVII”) of $3.4 million and $4.4 million that were recognized during the three and six months ended June 30, 2022, respectively. The decreases in management fees were partially offset by increases for the three and six months ended June 30, 2023 compared to the same periods in 2022 driven by: (i) additional fees from our ninth real estate secondaries fund, excluding one-time catch-up fees during the periods, of $1.0 million and $4.2 million, respectively,

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generated from new commitments; and (ii) higher fees from APMF of $1.0 million and $1.2 million, respectively, as we contractually agreed to a reduced fee rate of 0.25% from inception through March 31, 2023 that subsequently increased to 1.40% beginning in the second quarter of 2023.

The decreases in effective management fee rates for the three and six months ended June 30, 2023 compared to the same periods in 2022 were primarily driven by the reduction in fee base of LEP XV.

Fee Related Performance Revenues. Fee related performance revenues reflects incentive fees recognized from APMF for the six months ended June 30, 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 increases in compensation and benefits for the three and six months ended June 30, 2023 compared to the same periods in 2022 were primarily driven by higher salary expense of $0.9 million and $1.6 million, respectively, primarily attributable to headcount growth. For the six months ended June 30, 2023 compared to the same period in 2022, the increase in compensation and benefits was also driven by higher fee related performance compensation of $2.1 million corresponding to the increases in fee related performance revenues.

Average headcount increased by 6% to 101 investment and investment support professionals for the year-to-date period in 2023 from 95 professionals for the same period in 2022.

General, Administrative and Other Expenses. Travel and marketing collectively increased by $0.7 million and $1.6 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 driven by more in-person company meetings and events and by distribution fees from APMF that are expected to fluctuate with sales and the growth in assets. Additionally, professional service fees have increased by $0.2 million and $0.3 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022, primarily due to recruiting fees to hire professionals that will support anticipated future growth of our investment offerings.

Realized Income:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	21,314					$	28,111					$	(6,797)					(24)%						$	46,744					$	57,897					$	(11,153)					(19)%
Performance income—realized			5,460						4,156						1,304						31						5,460						4,156						1,304						31
Performance related compensation—realized			(4,678)						(3,514)						(1,164)						(33)						(4,678)						(3,514)						(1,164)						(33)
Realized net performance income			782						642						140						22						782						642						140						22
Interest and other investment income—realized			182						2,200						(2,018)						(92)						1,407						2,844						(1,437)						(51)
Interest expense			(2,451)						(1,557)						(894)						(57)						(4,756)						(2,022)						(2,734)						(135)
Realized net investment income (loss)			(2,269)						643						(2,912)						NM						(3,349)						822						(4,171)						NM
Realized Income			$	19,827					$	29,396					(9,569)						(33)						$	44,177					$	59,361					(15,184)						(26)

Realized net performance income for the three and six months ended June 30, 2023 and 2022 was primarily attributable to tax distributions from LREP VIII.

Realized net investment loss for the three and six months ended June 30, 2023 largely represents interest expense exceeding net investment and other income during the period. Interest expense, which is allocated among our segments 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 six months ended June 30, 2023 was partially offset by dividend income received from APMF.

Realized net investment income for the three and six months ended June 30, 2022 was primarily attributable to distributions from an infrastructure secondaries fund.

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Secondaries Group—Performance Income

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

			As of June 30, 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			$	133,256					$	113,934					$	19,322					$	141,122					$	120,659					$	20,463
LREP VIII			112,151						96,450						15,701						109,928						94,538						15,390
Other secondaries funds			55,235						47,174						8,061						58,135						49,726						8,409
Total Secondaries Group			$	300,642					$	257,558					$	43,084					$	309,185					$	264,923					$	44,262

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 June 30, 2023
						Waterfall Type						Accrued Carried Interest						Change in Unrealized						Realized												Accrued Carried Interest
Accrued Carried Interest
LEP XVI						European						$	141,122					$	(7,866)					$	—											$	133,256
LREP VIII						European						109,928						6,783						(4,560)												112,151
Other secondaries funds						European						58,135						(2,000)						(900)												55,235
Total Secondaries Group												$	309,185					$	(3,083)					$	(5,460)											$	300,642

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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 3/31/2023			$	12,670					$	7,667					$	1,569					$	938					$	50					$	22,894
Net new par/equity commitments			21						121						—						—						—						142
Distributions			(60)						(67)						(2)						—						—						(129)
Change in fund value			(48)						36						107						—						—						95
Balance at 6/30/2023			$	12,583					$	7,757					$	1,674					$	938					$	50					$	23,002
			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						Credit Secondaries						Other						Total Secondaries Group
Balance at 3/31/2022			$	14,305					$	7,530					$	1,633					$	—					$	—					$	23,468
Net new par/equity commitments			480						311						74						—						—						865
Distributions			(178)						(267)						(106)						—						—						(551)
Change in fund value			100						(52)						62						—						—						110
Balance at 6/30/2022			$	14,707					$	7,522					$	1,663					$	—					$	—					$	23,892
			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			42						359						—						938						50						1,389
Distributions			(319)						(163)						(72)						—						—						(554)
Change in fund value			91						9						106						—						—						206
Balance at 6/30/2023			$	12,583					$	7,757					$	1,674					$	938					$	50					$	23,002
			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			648						1,223						74						—						—						1,945
Distributions			(287)						(687)						(152)						—						—						(1,126)
Change in fund value			314						324						117						—						—						755
Balance at 6/30/2022			$	14,707					$	7,522					$	1,663					$	—					$	—					$	23,892
(1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy.

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

AUM: $23.0						AUM: $23.9

			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 June 30, 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						Credit Secondaries												Total Secondaries Group
Balance at 3/31/2023			$	10,998					$	5,473					$	1,276					$	—											$	17,747
Commitments			21						115						—						—												136
Deployment/subscriptions/increase in leverage			—						186						7						—												193
Distributions			(16)						(57)						—						—												(73)
Change in fund value			(150)						(41)						(29)						—												(220)
Change in fee basis			(7)						19						—						—												12
Balance at 6/30/2023			$	10,846					$	5,695					$	1,254					$	—											$	17,795
			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						Credit Secondaries												Total Secondaries Group
Balance at 3/31/2022			$	11,894					$	4,969					$	1,207					$	—											$	18,070
Commitments			478						259						74						—												811
Deployment/subscriptions/increase in leverage			1						246						4						—												251
Distributions			(48)						(260)						(80)						—												(388)
Change in fund value			225						(120)						74						—												179
Change in fee basis			(1,349)						(20)						—						—												(1,369)
Balance at 6/30/2022			$	11,201					$	5,074					$	1,279					$	—											$	17,554
			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						Credit Secondaries												Total Secondaries Group
Balance at 12/31/2022			$	11,062					$	5,313					$	1,293					$	—											$	17,668
Commitments			42						201						—						—												243
Deployment/subscriptions/increase in leverage			67						217						15						—												299
Distributions			(55)						(153)						(58)						—												(266)
Change in fund value			(227)						111						4						—												(112)
Change in fee basis			(43)						6						—						—												(37)
Balance at 6/30/2023			$	10,846					$	5,695					$	1,254					$	—											$	17,795
			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						Credit Secondaries												Total Secondaries Group
Balance at 12/31/2021			$	11,787					$	5,389					$	1,188					$	—											$	18,364
Acquisitions			131						—						—						—												131
Commitments			595						839						74						—												1,508
Deployment/subscriptions/increase in leverage			58						246						16						—												320
Distributions			(59)						(678)						(124)						—												(861)
Change in fund value			71						722						125						—												918
Change in fee basis			(1,382)						(1,444)						—						—												(2,826)
Balance at 6/30/2022			$	11,201					$	5,074					$	1,279					$	—											$	17,554

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

FPAUM: $17.8						FPAUM: $17.6

			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 June 30, 2023

Two significant funds, LEP XVI and LREP VIII, collectively contributed approximately 43% of the Secondaries Group’s management fees for the six months ended June 30, 2023.

The following table presents the performance data of the Secondaries Group’s significant drawdown funds as of June 30, 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						$	4,820					$	4,896					$	3,433					$	1,990					$	2,871					$	4,861					1.6x						1.4x						32.0						21.7						Private Equity Secondaries
LREP VIII(7)			2016						3,417						3,300						2,182						1,350						1,682						3,032						1.5x						1.4x						24.5						17.0						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 and Six Months Ended June 30, 2023 Compared to Three and Six Months Ended June 30, 2022

Fee Related Earnings:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Other fees			$	7,848					$	6,298					$	1,550					25%						$	12,488					$	12,174					$	314					3%
Compensation and benefits			(86,011)						(71,341)						(14,670)						(21)						(170,978)						(135,408)						(35,570)						(26)
General, administrative and other expenses			(49,467)						(35,225)						(14,242)						(40)						(95,639)						(67,609)						(28,030)						(41)
Fee Related Earnings			$	(127,630)					$	(100,268)					(27,362)						(27)						$	(254,129)					$	(190,843)					(63,286)						(33)

Other Fees. The increases in other fees for the three and six months ended June 30, 2023 compared to the same periods in 2022 were primarily driven by: (i) net asset-based distribution fees associated with our non-traded REITs of $1.7 million and $3.4 million, respectively; (ii) broker-dealer advisory fees of $2.0 million earned in connection with the initial public offering of AAC II during the second quarter of 2023; and (iii) administrative fees reimbursement for expenses that have been excluded from FRE of $1.1 million. The increases in other fees for the three and six months ended June 30, 2023 compared to the same periods in 2022 were partially offset by decreases in facilitation fees from the 1031 exchange program associated with our non-traded REITs of $2.9 million and $5.5 million, respectively.

Compensation and Benefits. The increases in compensation and benefits for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 were 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 continue to increase throughout the year and exceed prior year levels. Average headcount increased by 23% to 1,452 operations management professionals for the year-to-date period in 2023 from 1,176 professionals for the same period in 2022.

The increases described above included $1.0 million of expense recognized in connection with the SSG Buyout which did not have comparable results as the transaction closed on March 31, 2023.

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 reduced salary expense by $2.3 million and $5.9 million for the three and six months ended June 30, 2023, respectively, with a corresponding increase in general, administrative and other expenses. As this reorganization occurred at the end of the second quarter of 2022, the results will be more comparable beginning with the third quarter of 2023.

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 Ares Wealth Management Solutions, LLC’s (“AWMS”) compensation structure and instead have been replaced with other forms of compensation that are not aligned with the sales volumes of our retail products. This change in the compensation structure will limit expense volatility associated with those sales in future periods.

General, Administrative and Other Expenses. Professional service fees increased by $4.8 million and $11.2 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 primarily due to the reorganization of our income tax compliance function. Additionally, travel and marketing collectively increased by $2.7 million and $7.4 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 driven by more investor meetings and events and conducted more in-person company meetings and events with a focus on promoting collaboration. The increases for travel and marketing over the comparative periods were also inclusive of $0.3 million and $2.2 million, respectively, from AWMS, driven by more meetings and events as marketing and communication efforts continued to increase with our expanding retail distribution platform. 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. Separately, certain other expenses also increased by $1.5 million and $2.3 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 as we increased training to develop the skills of our employees, onboarded individuals participating in our summer internship program and conducted more in-person company meetings and events, including events held globally to celebrate Ares’ 25th anniversary.

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Certain expenses have also increased during the current year to support our growing headcount and the expansion of our business. Most notably, occupancy costs, information technology and information services have collectively increased by $2.8 million and $5.1 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022.

The increases described above included $0.5 million of expense recognized in connection with the SSG Buyout which did not have comparable results as the transaction closed on March 31, 2023.

Realized Income:

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

			Three months ended June 30,												Favorable (Unfavorable)												Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	(127,630)					$	(100,268)					$	(27,362)					(27)%						$	(254,129)					$	(190,843)					$	(63,286)					(33)%
Interest and other investment income (loss)—realized			328						(995)						1,323						NM						236						(1,279)						1,515						NM
Interest expense			(11)						(179)						168						94						(37)						(346)						309						89
Realized net investment income (loss)			317						(1,174)						1,491						NM						199						(1,625)						1,824						NM
Realized Income			$	(127,313)					$	(101,442)					(25,871)						(26)						$	(253,930)					$	(192,468)					(61,462)						(32)

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 June 30, 2023, our cash and cash equivalents were $276.8 million, and we had $725.0 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 June 30, 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

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

Cash Flows

We consolidate funds where we are deemed to hold a controlling interest. The Consolidated Funds are not necessarily the same entities in each year presented due to changes in ownership, changes in limited partners’ rights and the creation or termination of funds. The consolidation of these funds had no effect on cash flows attributable to us for the periods presented. As such, we evaluate the activity of the Consolidated Funds and the eliminations resulting from consolidation separately. The following tables and discussion summarize our condensed consolidated statements of cash flows by activities attributable to the Company and to our Consolidated Funds. For more details on the activity of the Company and Consolidated Funds, refer to “Note 14. Consolidation” within our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

			Six months ended June 30,
			2023						2022
Net cash provided by operating activities			$	467,676					$	358,175
Net cash used in the Consolidated Funds’ operating activities, net of eliminations			(459,156)						(926,373)
Net cash provided by (used in) operating activities			8,520						(568,198)
Net cash used in the Company’s investing activities			(21,127)						(320,125)
Net cash used in the Company’s financing activities			(564,377)						(116,458)
Net cash provided by the Consolidated Funds’ financing activities, net of eliminations			466,876						931,952
Net cash provided by (used in) financing activities			(97,501)						815,494
Effect of exchange rate changes			(3,052)						(17,959)
Net change in cash and cash equivalents			$	(113,160)					$	(90,788)

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.

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			Six months ended June 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change
Core operating activities			$	700,914					$	416,026					$	284,888					68%
Net realized performance income			39,337						80,849						(41,512)						(51)
Net cash used in investment related activities			(272,575)						(138,700)						(133,875)						97
Net cash provided by operating activities			$	467,676					$	358,175					109,501						31

Cash generated from our core operating activities increased as a result of growing fee revenues and sustained profitability. 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 used in investment related activities for the six months ended June 30, 2023 primarily represents: (i) purchases associated with funding capital commitments and strategic initiative related investments in our investment portfolio; (ii) interest payments on our debt obligations; offset by (iii) sales of our capital investments to employees. 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 used in the Consolidated Funds’ operating activities for six months ended June 30, 2023 and 2022 was principally attributable to net purchases of investment securities by recently launched funds during each period. The activity for the six months ended June 30, 2023 included the purchase of U.S. Treasury securities following the initial public offering of AAC II and the sale of U.S. Treasury securities associated with the redemption of Class A ordinary shares in AAC I by public shareholders.

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

			Six months ended June 30,
			2023						2022
Purchase of furniture, equipment and leasehold improvements, net of disposals			$	(21,127)					$	(18,448)
Acquisitions, net of cash acquired			—						(301,677)
Net cash used in investing activities			$	(21,127)					$	(320,125)

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 six months ended June 30, 2022 also included cash used to complete the Infrastructure Debt Acquisition.

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Financing Activities

			Six months ended June 30,
			2023						2022
Net borrowings (repayments) of Credit Facility			$	25,000					$	(20,000)
Proceeds from issuance of senior notes			—						488,915
Class A and non-voting common stock dividends			(294,604)						(222,912)
AOG unitholder distributions			(215,897)						(183,454)
Stock option exercises			53,140						8,644
Taxes paid related to net share settlement of equity awards			(133,570)						(189,485)
Other financing activities			1,554						1,834
Net cash used in the Company’s financing activities			$	(564,377)					$	(116,458)

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 six months ended June 30, 2023 and 2022.

In connection with the vesting of restricted units that are granted to our employees under the 2023 Equity Incentive Plan (the “Equity Incentive Plan,” which replaced the Third Amended and Restated 2014 Equity Incentive Plan during the second quarter of 2023), we withhold shares equal to the fair value of our employees tax withholding liabilities and pay the taxes on their behalf in cash and thus net issue fewer shares. This use of cash decreased from the prior year primarily as a result of fewer restricted units that vested in the current year. However, such decrease was partially offset by our higher stock price, which resulted in employees recognizing additional compensation. A greater number of restricted units vested in the prior year primarily due to certain awards that vested in their entirety on the fifth anniversary of their applicable grant dates. For the six months ended June 30, 2023 and 2022, we net settled and did not issue 1.5 million shares and 2.4 million shares, respectively. Net cash provided by the Company’s financing activities also included cash received from stock options exercises with 3.2 million and 0.5 million options exercised for the six months ended June 30, 2023 and 2022, respectively.

Net cash provided by the Company’s financing activities for the six months ended June 30, 2022 also included net proceeds from the issuance of the 2052 Senior Notes. These proceeds were used primarily to fund the Infrastructure Debt Acquisition.

			Six months ended June 30,
			2023						2022
Contributions from redeemable and non-controlling interests in Consolidated Funds, net of eliminations			$	680,991					$	218,280
Distributions to non-controlling interests in Consolidated Funds, net of eliminations			(35,925)						(53,638)
Redemptions of redeemable interest in Consolidated Funds			(538,985)						—
Borrowings under loan obligations by Consolidated Funds			535,464						814,183
Repayments under loan obligations by Consolidated Funds			(174,669)						(46,873)
Net cash provided by the Consolidated Funds’ financing activities			$	466,876					$	931,952

Net cash provided by the Consolidated Funds’ financing activities for the six months ended June 30, 2023 was primarily attributable to the borrowing of one newly issued CLO and the contributions from shareholders in the initial public offering of AAC II. Net cash used in the Consolidated Funds’ financing activities included the redemption of Class A ordinary shares in AAC I by public shareholders.

Net cash provided by the Consolidated Funds’ financing activities for the six months ended June 30, 2022 was primarily attributable to the borrowings of one newly issued CLO.

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.

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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 June 30, 2023, we were required to maintain approximately $65.8 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 (“Tax Receivable Benefit” (as defined in the TRA)). Pursuant to an amendment to the TRA, with an effective date of May 1, 2023, to the extent Ares Owners Holdings L.P. would have been a TRA recipient of certain Tax Benefit Payments under the TRA, for taxable exchanges on or after May 1, 2023, Ares Owners Holdings L.P. will no longer be entitled to any Tax Benefit Payment for such exchanges. Future payments under the TRA in respect of subsequent exchanges are expected to be substantial. The TRA liability balance was $132.5 million and $118.5 million as of June 30, 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.

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.

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