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 September 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 September 30, 2023						Nine months ended September 30, 2023
High yield bonds						ICE BAML High Yield Master II Index						U.S.						0.5						6.0
High yield bonds						ICE BAML European Currency High Yield Index						Europe						1.8						6.2
Leveraged loans						Credit Suisse Leveraged Loan Index (“CSLLI”)						U.S.						3.4						9.9
Leveraged loans						Credit Suisse Western European Leveraged Loan Index						Europe						3.5						10.4
Equities						S&P 500 Index						U.S.						(3.3)						13.1
Equities						MSCI All Country World Ex-U.S. Index						Non-U.S.						(3.8)						5.3
Real estate equities						FTSE NAREIT All Equity REITs Index						U.S.						(8.3)						(5.6)
Real estate equities						FTSE EPRA/NAREIT Developed Europe Index						Europe						4.4						(3.4)

During the third quarter of 2023, global markets endured heightened volatility following a strong first half of the year, which may continue into the fourth quarter amid the escalated conflict in the Middle East. Elevated inflation and the prospect of having higher interest rates for a longer period continues to have an impact on investor sentiment and investment opportunities. Despite these challenges, U.S. and European leveraged loans returned positive performance relative to other alternative asset classes.

Alternatively, the equity markets have been negatively impacted by these factors as it has created downward pressure on valuations and muted the opportunities for realizations. Particularly in the private equity markets, the environment has contributed to a prolonged slowdown in deal activity, and we believe potential liquidity constraints from investors will increase the need for flexible capital solutions. This challenging growth environment underscores the importance of investing in resilient industries with long-term secular tailwinds where we have expertise. Our focus continues to be on investment opportunities in the healthcare and services sectors, with limited exposure to energy, and we continue to invest opportunistically in consumer

and industrials. Asset selectivity, deliberate portfolio construction, a flexible investment mandate and a differentiated view to drive value creation through earnings growth will be instrumental in delivering attractive returns to investors.

The commercial real estate markets continued to be impacted by the macroeconomic environment during the third quarter of 2023. There has been moderate recovery in Europe, which has experienced particular challenges related to the ongoing war in Ukraine that have influenced investor sentiment. European and U.S. real estate deal activity was subdued with limited transactional liquidity. Given the higher interest rate environment, property valuations remain soft, with capitalization rate yields continuing to widen. However, we believe certain of these market trends will be offset by continued strong fundamentals, such as occupancy and rental rates, in property types that include multifamily and industrial.

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 September 30, 2023, 1% of our total AUM was invested in debt and equity investments in the energy sector (of which less than 1% of our total AUM was invested in midstream investments and also includes oil and gas exploration) and less than 1% of our total AUM was invested in renewable energy investments.

We believe our portfolios across all strategies are well positioned for a rising interest rate environment. On a market value basis, approximately 86% of our debt assets and 56% of our total assets were floating rate instruments as of September 30, 2023.

Recent Transactions

On October 2, 2023, Ares completed the acquisition of Crescent Point Capital, a leading Asia-focused private equity firm with approximately $3.7 billion in assets under management as of September 30, 2023.

In October 2023, Ares formed a strategic partnership with Vinci Partners Investments Ltd. (“Vinci”) (NASDAQ: VINP), a Brazilian alternative asset manager, to collaborate on distribution, product development and other business opportunities in Latin America. Ares made a $100.0 million investment in convertible preferred shares issued by Vinci to accelerate the growth of Vinci’s platform.

Managing Business Performance

Operating Metrics

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

Assets Under Management

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

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

						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total AUM
Balance at 6/30/2023						$	250,141					$	35,453					$	64,771					$	23,002					$	4,206					$	377,573
Net new par/equity commitments						13,459						47						1,158						361						1,201						16,226
Net new debt commitments						5,543						—						—						—						—						5,543
Capital reductions						(581)						(2)						(1)						—						—						(584)
Distributions						(1,536)						(801)						(984)						(289)						(108)						(3,718)
Redemptions						(468)						—						(454)						(1)						(15)						(938)
Net allocations among investment strategies						765						—						—						—						(765)						—
Change in fund value						1,558						(408)						(575)						182						83						840
Balance at 9/30/2023						$	268,881					$	34,289					$	63,915					$	23,255					$	4,602					$	394,942
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total AUM
Balance at 6/30/2022						$	211,730					$	33,412					$	62,577					$	23,892					$	2,702					$	334,313
Net new par/equity commitments						3,054						1,337						2,166						441						1,738						8,736
Net new debt commitments						5,074						—						404						—						—						5,478
Capital reductions						(547)						(2)						(224)						—						—						(773)
Distributions						(2,068)						(82)						(511)						(1,084)						(696)						(4,441)
Redemptions						(329)						—						(180)						—						—						(509)
Net allocations among investment strategies						728						—						—						—						(728)						—
Change in fund value						(2,211)						601						763						(460)						(81)						(1,388)
Balance at 9/30/2022						$	215,431					$	35,266					$	64,995					$	22,789					$	2,935					$	341,416
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total AUM
Balance at 12/31/2022						$	225,579					$	34,749					$	66,061					$	21,961					$	3,647					$	351,997
Net new par/equity commitments						32,435						97						3,747						1,750						5,339						43,368
Net new debt commitments						9,801						—						150						—						—						9,951
Capital reductions						(3,013)						(7)						(405)						—						—						(3,425)
Distributions						(4,944)						(1,601)						(3,960)						(842)						(306)						(11,653)
Redemptions						(2,279)						—						(1,409)						(1)						(554)						(4,243)
Net allocations among investment strategies						3,319						—						—						—						(3,319)						—
Change in fund value						7,983						1,051						(269)						387						(205)						8,947
Balance at 9/30/2023						$	268,881					$	34,289					$	63,915					$	23,255					$	4,602					$	394,942
						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						13,481						2,137						8,589						2,386						2,460						29,053
Net new debt commitments						11,597						—						2,953						—						—						14,550
Capital reductions						(1,006)						(206)						(521)						—						—						(1,733)
Distributions						(4,139)						(602)						(2,526)						(2,209)						(785)						(10,261)
Redemptions						(1,134)						—						(398)						—						—						(1,532)
Net allocations among investment strategies						1,301						—						—						—						(1,301)						—
Change in fund value						(6,074)						533						2,795						294						(367)						(2,819)
Balance at 9/30/2022						$	215,431					$	35,266					$	64,995					$	22,789					$	2,935					$	341,416

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

			AUM: $394.9						AUM: $341.4

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

(1) Includes $15.2 billion and $14.0 billion of AUM of funds from which we indirectly earn management fees as of September 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 September 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.

Fee Paying Assets Under Management

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

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

						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total
Balance at 6/30/2023						$	161,751					$	18,954					$	41,134					$	17,795					$	2,775					$	242,409
Commitments						2,174						—						569						383						1,197						4,323
Deployment/subscriptions/increase in leverage						5,354						553						1,203						10						102						7,222
Capital reductions						(801)						—						—						—						—						(801)
Distributions						(1,742)						(139)						(982)						(188)						(108)						(3,159)
Redemptions						(555)						—						(454)						(1)						—						(1,010)
Net allocations among investment strategies						928						—						—						—						(928)						—
Change in fund value						(96)						—						(660)						(109)						(192)						(1,057)
Change in fee basis						—						—						—						(21)						(213)						(234)
Balance at 9/30/2023						$	167,013					$	19,368					$	40,810					$	17,869					$	2,633					$	247,693
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total
Balance at 6/30/2022						$	135,423					$	17,691					$	39,231					$	17,554					$	1,392					$	211,291
Commitments						1,712						—						1,133						412						1,299						4,556
Deployment/subscriptions/increase in leverage						7,381						1,486						835						96						—						9,798
Capital reductions						(513)						—						—						—						—						(513)
Distributions						(2,172)						(206)						(566)						(221)						(420)						(3,585)
Redemptions						(471)						—						(180)						—						—						(651)
Net allocations among investment strategies						669						—						—						—						(669)						—
Change in fund value						(1,749)						(3)						(235)						(170)						(141)						(2,298)
Change in fee basis						—						(14)						3						49						—						38
Balance at 9/30/2022						$	140,280					$	18,954					$	40,221					$	17,720					$	1,461					$	218,636
						Credit Group						Private Equity Group						Real Assets Group						Secondaries Group						Other						Total
Balance at 12/31/2022						$	151,275					$	18,447					$	41,607					$	17,668					$	2,064					$	231,061
Commitments						4,699						—						2,036						626						4,818						12,179
Deployment/subscriptions/increase in leverage						15,949						2,157						2,413						310						150						20,979
Capital reductions						(2,680)						—						(329)						—						—						(3,009)
Distributions						(5,808)						(1,232)						(2,711)						(456)						(298)						(10,505)
Redemptions						(2,406)						—						(1,422)						(1)						—						(3,829)
Net allocations among investment strategies						3,513						—						—						—						(3,513)						—
Change in fund value						2,471						—						(882)						(221)						(375)						993
Change in fee basis						—						(4)						98						(57)						(213)						(176)
Balance at 9/30/2023						$	167,013					$	19,368					$	40,810					$	17,869					$	2,633					$	247,693
						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						9,101						—						5,394						1,919						2,004						18,418
Deployment/subscriptions/increase in leverage						23,742						3,699						3,266						415						(38)						31,084
Capital reductions						(3,525)						—						(91)						—						—						(3,616)
Distributions						(5,236)						(1,182)						(1,829)						(1,081)						(494)						(9,822)
Redemptions						(1,344)						—						(408)						—						—						(1,752)
Net allocations among investment strategies						1,171						—						—						—						(1,171)						—
Change in fund value						(4,895)						(4)						1,243						749						(669)						(3,576)
Change in fee basis						(844)						(248)						(824)						(2,777)						(238)						(4,931)
Balance at 9/30/2022						$	140,280					$	18,954					$	40,221					$	17,720					$	1,461					$	218,636

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

			FPAUM: $247.7						FPAUM: $218.6

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

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

(2)Includes $56.8 billion and $54.9 billion from funds that primarily invest in illiquid strategies as of September 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.

Perpetual Capital Assets Under Management

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

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

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

Available Capital and Assets Under Management Not Yet Paying Fees

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 September 30, 2023, AUM Not Yet Paying Fees includes $65.7 billion of AUM available for future deployment that could generate approximately $647.4 million in potential incremental annual management fees. As of September 30, 2022, AUM Not Yet Paying Fees included $45.8 billion of AUM available for future deployment that could generate approximately $441.3 million in potential incremental annual management fees.

Incentive Eligible Assets Under Management and Incentive Generating Assets Under Management

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

As of September 30, 2023, perpetual capital IGAUM generating fee related performance revenues totaled $14.3 billion, composed of $13.9 billion within the Credit 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 subject to reversal. As of September 30, 2022, perpetual capital IGAUM from which we generated fee related performance revenues totaled $24.0 billion, composed of $10.2 billion within the Credit Group and $13.8 billion within the Real Assets Group.

Fund Performance Metrics

Fund performance information for our 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 or incentive fees upon the achievement of performance hurdles. The fund performance information reflected in this discussion and analysis is not indicative of our overall performance. An investment in Ares is not an investment in any of our funds. Past performance is not indicative of future results. As with any investment, there is always the potential for gains as well as the possibility of losses. There can be no assurance that any of these funds or our other existing and future funds will achieve similar returns.

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

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

Consolidation and Deconsolidation of Ares Funds

Consolidated Funds represented approximately 4% of our AUM as of September 30, 2023, 2% of our management fees and 2% of our carried interest and incentive fees for the nine months ended September 30, 2023. As of September 30, 2023, we consolidated 26 CLOs, nine private funds and two SPACs, and as of September 30, 2022, we consolidated 25 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 consolidation 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 nine months ended September 30, 2023, we deconsolidated one private fund as a result of significant change in ownership. During the nine months ended September 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.

Results of Operations

Consolidated Results of Operations

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 September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Total revenues			$	671,255					$	801,290					$	(130,035)					(16)%						$	2,577,903					$	2,117,719					$	460,184					22%
Total expenses			(560,960)						(898,102)						337,142						38						(2,027,334)						(2,062,654)						35,320						2
Total other income, net			116,577						36,434						80,143						220						299,394						112,932						186,462						165
Less: Income tax expense (benefit)			29,898						(11,599)						(41,497)						NM						113,418						22,272						(91,146)						NM
Net income (loss)			196,974						(48,779)						245,753						NM						736,545						145,725						590,820						NM
Less: Net income attributable to non-controlling interests in Consolidated Funds			80,289						16,340						63,949						NM						174,663						48,700						125,963						259
Net income (loss) attributable to Ares Operating Group entities			116,685						(65,119)						181,804						NM						561,882						97,025						464,857						NM
Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities			758						93						665						NM						(332)						35						(367)						NM
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities			54,104						(29,666)						83,770						NM						261,838						46,942						214,896						NM
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders			$	61,823					$	(35,546)					97,369						NM						$	300,376					$	50,048					250,328						NM

Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 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 September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Revenues
Management fees			$	637,517					$	548,458					$	89,059					16%						$	1,853,304					$	1,546,350					$	306,954					20%
Carried interest allocation			(28,126)						192,186						(220,312)						NM						541,828						417,779						124,049						30
Incentive fees			16,454						8,882						7,572						85						33,327						29,979						3,348						11
Principal investment income			9,339						11,582						(2,243)						(19)						38,985						15,521						23,464						151
Administrative, transaction and other fees			36,071						40,182						(4,111)						(10)						110,459						108,090						2,369						2
Total revenues			$	671,255					$	801,290					(130,035)						(16)						$	2,577,903					$	2,117,719					460,184						22

Management Fees. Capital deployment in direct lending funds within the Credit Group led to a rise in FPAUM and additional management fees of $40.2 million and $120.2 million for the three and nine months ended September 30, 2023, respectively, compared to the three and nine months ended September 30, 2022. Part I Fees contributed $26.4 million and $91.1 million to the increase for the three and nine months ended September 30, 2023, respectively, compared to the three and nine months ended September 30, 2022. The increases in Part I Fees were primarily due to the 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. Of the total increases in Part I Fees over the comparative periods, ASIF contributed $1.3 million as it began generating fees during the third quarter 2023. Within the Real Assets Group, the non-traded REITs contributed additional management fees of $12.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 from additional capital raised. Also, the acquisition of AMP Capital’s infrastructure debt platform (the “Infrastructure Debt Acquisition”), as well as deployment

primarily in Ares Infrastructure Debt Fund V L.P. (“IDF V”), contributed additional management fees of $8.7 million for the nine months ended September 30, 2023 compared to the nine months ended September 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 September 30, 2023			Primary Drivers			Three months ended September 30, 2022			Primary Drivers
Credit funds			$	125.0		Primarily from four direct lending funds and one alternative credit fund with $22.0 billion of IGAUM generating returns in excess of their hurdle rates. Ares Capital Europe V, L.P. (“ACE V”) and our sixth flagship European direct lending fund generated carried interest allocation of $46.6 million and $6.2 million, respectively, driven by net investment income on an increasing invested capital base. Ares Pathfinder Fund, L.P. (“Pathfinder I”) generated carried interest allocation of $25.2 million driven by market appreciation of certain investments and net investment income during the period. Ares Private Credit Solutions, L.P. (“PCS I”) and Ares Capital Europe IV, L.P. (“ACE IV”) generated carried interest allocation of $13.7 million and $5.5 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.			$	43.1		Primarily from two direct lending funds with $13.3 billion of IGAUM generating returns in excess of their hurdle rates. ACE V generated $17.6 million of carried interest allocation driven by net investment income on an increasing invested capital base. ACE IV generated carried interest allocation of $12.5 million, driven by net investment income during the period.
Private equity funds			(162.4)			Reversal of unrealized carried interest allocation of $90.7 million, $58.6 million, $31.6 million and $21.8 million from Ares Corporate Opportunities Fund V, L.P. (“ACOF V”), Ares Special Situations Fund IV, L.P. (“SSF IV”), Ares Special Opportunities Fund, L.P.’s (“ASOF I”), and Ares Corporate Opportunities Fund IV, L.P. (“ACOF IV”), respectively, primarily driven by lower stock prices of Savers Value Village, Inc. (“SVV”) and a publicly-traded portfolio company in the services industry and lower operating performance metrics of certain portfolio companies that primarily operate in the healthcare and services industries. The reversal was partially offset by unrealized appreciation of $42.2 million from Ares Corporate Opportunities Fund VI, L.P. (“ACOF VI”) primarily driven by improving operating performance metrics from portfolio companies that primarily operate in the retail and services industries and market appreciation of an investment in a services company.			130.4			Appreciation across several portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in industries such as retail, healthcare and energy, generated carried interest allocation of $45.1 million from ACOF V, $20.4 million from ACOF VI, $28.0 million from SSF IV and $35.6 million from ASOF I.
Real assets funds			7.5			IDF V generated carried interest allocation of $8.4 million driven by net investment income during the period. Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $4.1 million from Ares European Property Enhancement Partners III, SCSp. (“EPEP III”), and $1.4 million from US Real Estate Fund IX, L.P. (“US IX”). Ares Energy Investors Fund V, L.P. (“EIF V”) also generated $3.5 million of carried interest allocation driven by appreciation of certain investments. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $5.7 million from Ares U.S. Real Estate Fund X, L.P. (“US X”) and $4.3 million from Ares European Real Estate Fund IV, L.P. (“EF IV”) primarily driven by lower valuations and operating income of certain properties.			33.7			Ares Climate Infrastructure Partners, L.P. (“ACIP”) and EIF V generated carried interest allocation of $30.0 million and $29.8 million, respectively, due to market appreciation of certain investments. Appreciation from properties within Ares U.S. Real Estate Fund VIII, L.P. (“US VIII”), driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $3.5 million. In addition, realized gains from the sale of properties generated carried interest allocation of $6.4 million from Ares U.S. Real Estate Opportunity Fund III, L.P. (“AREOF III”). The activity was partially offset by the reversal of unrealized carried interest of $32.2 million from Ares European Real Estate Fund V, L.P. (“EF V”), driven by a lower stock price for one of its publicly traded investments, and $5.7 million from EF IV due to lower valuations of certain properties.
Secondaries funds			1.8			Market appreciation of certain portfolio investments held in Landmark Equity Partners XVII, L.P. (“LEP XVII”) and Landmark Equity Partners XVI, L.P. (“LEP XVI”) that generated carried interest allocation of $5.6 million and $1.6 million, respectively. The appreciation was partially offset by the reversal of unrealized carried interest of $6.1 million from Landmark Real Estate Partners VIII, L.P. (“LREP VIII”), driven primarily by market depreciation of certain portfolio investments.			(15.0)			Depreciation across several investments in “LEP XVI, primarily driven by the impact of foreign exchange revaluations on underlying limited partnership interests, led to the reversal of unrealized carried interest of $20.7 million, partially offset by market appreciation of certain investments in LREP VIII that generated carried interest allocation of $11.6 million.
Carried interest allocation			$	(28.1)					$	192.2

			Nine months ended September 30, 2023			Primary Drivers			Nine months ended September 30, 2022			Primary Drivers
Credit funds			$	347.9		Primarily from four direct lending funds and one alternative credit fund with $22.0 billion of IGAUM generating returns in excess of their hurdle rates. ACE V and our sixth flagship European direct lending fund generated carried interest allocation of $125.3 million and $11.1 million, respectively, driven by net investment income on an increasing invested capital base. Pathfinder I generated carried interest allocation of $59.9 million driven by market appreciation of certain investments and net investment income during the period. ACE IV and PCS I generated carried interest allocation of $45.6 million and $36.2 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.			$	134.7		Primarily from four direct lending funds and one alternative credit fund with $19.7 billion of IGAUM generating returns in excess of their hurdle rates. ACE V and Pathfinder I generated carried interest allocation of $53.8 million and $25.9 million, respectively, driven by net investment income on an increasing invested capital base. ACE IV, Ares Capital Europe III, L.P. (“ACE III”) and PCS I generated carried interest allocation of $32.8 million, $10.2 million and $10.2 million, respectively, primarily driven by net investment income during the period.
Private equity funds			161.2			ACOF VI generated carried interest allocation of $123.2 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. In addition, appreciation of SSF IV and ASOF I’s investments, predominately in SVV following its initial public offering, generated carried interest allocation of $63.3 million and $53.7 million, respectively. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $40.8 million and $32.5 million from ACOF V and ACOF IV, respectively, 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.			127.7			Appreciation across several portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in industries such as services, technology, retail, healthcare and energy, generated carried interest allocation of $84.8 million from ACOF V, $51.3 million from ACOF VI, $23.6 million from SSF IV and $39.3 million from ASOF I. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $24.5 million and $58.6 million from Ares Corporate Opportunities Fund III, L.P. (“ACOF III”) and ACOF IV, respectively, primarily driven by lower stock prices for certain publicly traded investments.
Real assets funds			32.1			IDF V generated carried interest allocation of $23.0 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 $12.9 million from two U.S. real estate equity funds, $3.6 million from AREOF III and $3.1 million from US IX. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $12.2 million from EF V and one European real estate equity fund primarily driven by lower valuations of certain properties.			110.8			ACIP and EIF V generated carried interest allocation of $34.1 million and $24.4 million, respectively, due to market appreciation of certain investments. Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $17.6 million from US IX, $15.7 million from US VIII and $9.4 million from US X. In addition, realized gains from the sale of properties generated carried interest allocation of $29.7 million from AREOF III. The activity was partially offset by the reversal of unrealized carried interest of $42.2 million from EF V, driven by a lower stock price for one of its publicly traded investments.
Secondaries funds			0.6			Market appreciation of certain investments held in LREP VIII.			44.6			Market appreciation of certain investments held in LREP VIII that generated carried interest allocation of $37.8 million.
Carried interest allocation			$	541.8					$	417.8

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

			Three months ended September 30, 2023			Primary Drivers			Three months ended September 30, 2022			Primary Drivers
Credit funds			$	11.8		Incentive fees generated from an alternative credit fund.			$	0.1		Incentive fees generated from a U.S. CLO.
Real assets funds			2.5			Incentive fees generated from an industrial real estate fund.			8.6			Incentive fees generated from an industrial real estate fund and ACRE.
Secondaries funds			2.2			Incentive fees generated from APMF.			0.2			Incentive fees generated from APMF.
Incentive fees			$	16.5					$	8.9
			Nine months ended September 30, 2023			Primary Drivers			Nine months ended September 30, 2022			Primary Drivers
Credit funds			$	18.7		Incentive fees generated from three alternative credit funds.			$	15.9		Incentive fees generated from three direct lending funds and one alternative credit fund.
Real assets funds			8.9			Incentive fees generated from an industrial real estate fund.			13.5			Incentive fees generated from an industrial real estate fund and ACRE.
Secondaries funds			5.7			Incentive fees generated from APMF.			0.6			Incentive fees generated from a private equity secondaries fund and APMF.
Incentive fees			$	33.3					$	30.0

Principal Investment Income. The activity for the three and nine months ended September 30, 2023 was primarily composed of: (i) appreciation of certain investments within funds in our corporate private equity, alternative credit and European direct lending strategies; (ii) dividend income from a European real estate fund and LREP VIII; partially offset by (iii) unrealized losses of certain investments within our real estate secondaries strategy. The nine months ended September 30, 2023 also included: (i) appreciation of certain investments within funds in our special opportunities and infrastructure debt strategies; and (ii) dividend income from an open-ended core alternative credit fund and SSF IV.

The activity for the three and nine months ended September 30, 2022 was primarily due to appreciation of various investments across funds in our infrastructure opportunities and special opportunities strategies. The activity for the nine months ended September 30, 2022 also included dividend income from various investments across funds in our U.S. and European direct lending strategies and realizations from the sale of underlying properties held by funds in our U.S. real estate equity strategy.

Administrative, Transaction and Other Fees. The decrease in administrative, transaction and other fees for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily driven by: (i) lower acquisition and development fees of $5.9 million, resulting from a reduction in activity; (ii) a decrease of $2.1 million in facilitation fees from the 1031 exchange program associated with our non-traded REITs; partially offset by (iii) administrative fees of $4.0 million from a commercial finance fund that are no longer eliminated as the fund was deconsolidated during the second quarter of 2023; and (iv) higher administrative service fees of $1.9 million from certain private funds that pay on invested capital, driven by deployment.

The increase in administrative, transaction and other fees for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily driven by: (i) higher administrative fees of $8.9 million from the commercial finance fund discussed above; (ii) higher credit transaction fees of $8.8 million within the infrastructure debt strategy that are generated periodically and relate to the arrangement and origination of loans; (iii) an increase of $4.9 million in administrative service fees from certain private funds that pay on invested capital, driven by deployment; partially offset by (v) lower acquisition and development fees of $9.5 million; and (vi) a decrease of $7.6 million in facilitation fees from the 1031 exchange program associated with our non-traded REITs.

Expenses.

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Expenses
Compensation and benefits			$	367,502					$	425,419					$	57,917					14%						$	1,095,833					$	1,155,031					$	59,198					5%
Performance related compensation			(25,448)						142,934						168,382						NM						401,990						316,818						(85,172)						(27)
General, administrative and other expenses			211,842						319,352						107,510						34						501,340						562,441						61,101						11
Expenses of Consolidated Funds			7,064						10,397						3,333						32						28,171						28,364						193						1
Total expenses			$	560,960					$	898,102					1,459,062						NM						$	2,027,334					$	2,062,654					4,089,988						NM

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 following table presents compensation expense related to the earnouts ($ in thousands):

						Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
						2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Black Creek Acquisition						$	—					$	130,592					$	130,592					100%						$	—					$	218,101					$	218,101					100%
Infrastructure Debt Acquisition						589						2,823						2,234						79						1,831						7,081						5,250						74
Landmark Acquisition						—						(36,719)						(36,719)						(100)						—						(20,994)						(20,994)						(100)
						$	589					$	96,696					96,107						99						$	1,831					$	204,188					202,357						99

The maximum contingent payment associated with the Black Creek Acquisition earnout was achieved and the incremental expense was recorded during the third quarter of 2022.

The revenue target for an infrastructure debt fund from the Infrastructure Debt Acquisition earnout was achieved and the associated liability was settled with a combination of cash and restricted units during the first quarter of 2023. Compensation expense related to the achieved portion of the award was $2.2 million and $5.5 million for the three and nine months ended September 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 $2.8 million that was recognized during the three and nine months ended September 30, 2023, respectively. Compensation expense related to the remaining infrastructure debt funds where the earnout has not yet been achieved was $0.6 million for both the three months ended September 30, 2023 and 2022, and $1.8 million and $1.6 million for the nine months ended September 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.

Conversely, the earnout associated with a Landmark private equity secondaries fund was not achieved because revenue targets associated with fundraising did not meet certain thresholds. As a result, the associated compensation expense was reversed during the third quarter of 2022.

The decreases in compensation and benefits for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 were partially offset by: (i) increases in salary expense of $17.9 million and $56.9 million, respectively, primarily attributable to headcount growth to support the expansion of our business; (ii) higher Part I Fees compensation of $14.4 million and $50.9 million, respectively; and (iii) higher equity-based compensation expense of $13.9 million and $42.1 million, respectively, as discussed below. Average headcount increased by 17% to 2,621 professionals for the year-to-date period in 2023 from 2,238 professionals for the same period in 2022.

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

						Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,																		Favorable (Unfavorable)
						2023						2022						$ Change						% Change						2023						2022												$ Change						% Change
Awards that do not recur annually:
Multi-year future grants						$	13,182					$	11,099					$	(2,083)					(19)%						$	38,436					$	32,271											$	(6,165)					(19)%
Other awards that do not recur annually						2,410						1,622						(788)						(49)						7,345						5,803												(1,542)						(27)
Total awards that do not recur annually						15,592						12,721						(2,871)						(23)						45,781						38,074												(7,707)						(20)
Recurring annual awards:
Discretionary awards						30,847						24,142						(6,705)						(28)						89,447						69,275												(20,172)						(29)
Bonus awards						15,537						11,255						(4,282)						(38)						58,281						44,054												(14,227)						(32)
Total recurring annual awards						46,384						35,397						(10,987)						(31)						147,728						113,329												(34,399)						(30)
Equity-based compensation expense						$	61,976					$	48,118					(13,858)						(29)						$	193,509					$	151,403											(42,106)						(28)

The increases in equity-based compensation expense for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 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 nine months ended September 30, 2023 and 2022, respectively, in connection with bonus 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. The decreases in general, administrative and other expenses were primarily attributable to the decreases in amortization expense associated with intangible assets of $115.7 million and $102.8 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. During the third quarter of 2023, we recognized a non-cash impairment charge of $65.7 million to the fair value of certain client relationships from Landmark in connection with lower expected FPAUM in a private equity secondaries fund from existing investors. In connection with a merger agreement effective March 31, 2023 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. For the nine months ended September 30, 2023, our results reflected non-cash impairment charges of: (i) $7.8 million to the carrying value of SSG’s trade name; and (ii) $5.3 million to the fair value of management contracts of certain funds in connection with lower than expected future fee revenue generated from these funds, of which $4.6 million was 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 $1.7 million and $6.5 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

In addition, placement fees decreased by $7.4 million and $9.0 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. The decreases were primarily attributable to commitments to US X and ASOF II in the prior year, partially offset by fundraising efforts for our sixth flagship European direct lending fund in the current year. Separately, we expect to incur higher marketing expenses in future periods as we continue to develop our distribution relationships and expand our retail product offerings. These expenses contributed $2.0 million of the increase for the three and nine months ended September 30, 2023 when compared to the same periods in 2022 and will fluctuate with sales volumes.

The decreases in general, administrative and other expenses were partially offset by increases in travel, marketing and certain fringe benefits, which collectively increased by $4.4 million and $21.8 million for the three and nine months ended September 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. Occupancy costs, information services and information technology costs have also increased during the comparative periods, to support our growing headcount and the expansion of our business. Collectively, these expenses increased by $5.5 million and $17.8 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. Additionally, professional service fees have increased by $10.1 million for the nine months ended September 30, 2023 compared to the same period in 2022 primarily due to the reorganization of our income tax compliance function and consulting fees to support various ongoing initiatives to enhance our operations.

Other income, net.

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Other income (expense)
Net realized and unrealized gains (losses) on investments			$	(1,770)					$	4,431					$	(6,201)					NM						$	5,226					$	10,765					$	(5,539)					(51)%
Interest and dividend income			4,752						2,086						2,666						128						11,281						5,064						6,217						123
Interest expense			(25,975)						(18,307)						(7,668)						(42)						(76,800)						(51,174)						(25,626)						(50)
Other income (expense), net			5,742						2,601						3,141						121						(1,068)						10,194						(11,262)						NM
Net realized and unrealized gains (losses) on investments of Consolidated Funds			79,591						(30)						79,621						NM						188,717						8,031						180,686						NM
Interest and other income of Consolidated Funds			255,600						158,415						97,185						61						712,992						396,080						316,912						80
Interest expense of Consolidated Funds			(201,363)						(112,762)						(88,601)						(79)						(540,954)						(266,028)						(274,926)						(103)
Total other income, net			$	116,577					$	36,434					80,143						220						$	299,394					$	112,932					186,462						165

Net Realized and Unrealized Gains (Losses) on Investments. The activity for the three and nine months ended September 30, 2023 primarily includes unrealized losses from certain U.S. strategic initiative related investments and unrealized gains from investments within APMF to varying degrees. Certain strategic initiative related investments made in connection with our acquisition of SSG also contributed unrealized gains for the nine months ended September 30, 2023.

The activity for the three and nine months ended September 30, 2022 also reflects unrealized gains from the same strategic initiative related investments made in connection with our acquisition of SSG, while the nine months ended September 30, 2022 was partially offset by unrealized losses from our investments in the subordinated notes of U.S. CLOs.

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 nine months ended September 30, 2023 compared to the same periods in 2022.

Other Income (Expense), Net. The activity for the three and nine months ended September 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 gains for the three months ended September 30, 2023 were primarily attributable to the Euro strengthening against the U.S. dollar and British pound. Despite the gains during the third quarter of 2023, we recognized transaction losses for the nine months ended September 30, 2023 primarily due to the Euro weakening against the U.S. dollar and British pound for the year-to-date period. Transaction gains for the three and nine months ended September 30, 2022 were primarily attributable to the British pound weakening against the Euro.

Income Tax Expense (Benefit)

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Income (loss) before taxes			$	226,872					$	(60,378)					$	287,250					NM						$	849,963					$	167,997					$	681,966					NM
Less: Income tax expense (benefit)			29,898						(11,599)						(41,497)						NM						113,418						22,272						(91,146)						NM
Net income (loss)			$	196,974					$	(48,779)					245,753						NM						$	736,545					$	145,725					590,820						NM

The increases in income tax expense were attributable to higher pre-tax income allocable to AMC for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022*.* The calculation of income taxes is also sensitive to any changes in weighted average daily ownership.

The following table summarizes the weighted average daily ownership for the AMC common stockholders:

						Three months ended September 30,												Nine months ended September 30,
						2023						2022						2023						2022
Weighted average daily ownership for the AMC common stockholders						61.03		%				59.74		%				60.52		%				59.64		%

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.

Redeemable and Non-Controlling Interests.

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Net income (loss)			$	196,974					$	(48,779)					$	245,753					NM						$	736,545					$	145,725					$	590,820					NM
Less: Net income attributable to non-controlling interests in Consolidated Funds			80,289						16,340						63,949						NM						174,663						48,700						125,963						259
Net income (loss) attributable to Ares Operating Group entities			116,685						(65,119)						181,804						NM						561,882						97,025						464,857						NM
Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities			758						93						665						NM						(332)						35						(367)						NM
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities			54,104						(29,666)						83,770						NM						261,838						46,942						214,896						NM
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders			$	61,823					$	(35,546)					97,369						NM						$	300,376					$	50,048					250,328						NM

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 (loss) attributable to non-controlling interests in AOG entities is generally allocated based on the weighted average daily ownership of the other AOG unitholders, except for income (loss) generated from certain joint venture partnerships. Net income (loss) is allocated to other strategic distribution partners with whom we have established joint ventures based on the respective ownership percentages and based on the activity of certain membership interests.

The following table summarizes the allocation of net income based on ownership percentages of our strategic distribution partners:

						Three months ended September 30,												Nine months ended September 30,
						2023						2022						2023						2022
Net income allocation						$	4,229					$	5,475					$	7,197					$	6,499

The changes in net income (loss) 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 following table summarizes the weighted average daily ownership for the non-controlling AOG unitholders:

						Three months ended September 30,												Nine months ended September 30,
						2023						2022						2023						2022
Weighted average daily ownership for the non-controlling AOG unitholders						38.97		%				40.26		%				39.48		%				40.36		%

Consolidated Results of Operations of the Consolidated Funds

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

						Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,																								Favorable (Unfavorable)
						2023						2022						$ Change						% Change						2023						2022																								$ Change						% Change
Expenses of the Consolidated Funds						$	(7,064)					$	(10,397)					$	3,333					32%						$	(28,171)					$	(28,364)																							$	193					1%
Net realized and unrealized gains (losses) on investments of Consolidated Funds						79,591						(30)						79,621						NM						188,717						8,031																								180,686						NM
Interest and other income of Consolidated Funds						255,600						158,415						97,185						61						712,992						396,080																								316,912						80
Interest expense of Consolidated Funds						(201,363)						(112,762)						(88,601)						(79)						(540,954)						(266,028)																								(274,926)						(103)
Income before taxes						126,764						35,226						91,538						260						332,584						109,719																								222,865						203
Income tax expense of Consolidated Funds						(4,140)						(149)						(3,991)						NM						(4,699)						(197)																								(4,502)						NM
Net income						122,624						35,077						87,547						250						327,885						109,522																								218,363						199
Less: Revenues attributable to Ares Management Corporation eliminated upon consolidation						34,779						13,484						21,295						158						143,907						69,487																								74,420						107
Less: Other income (expense), net attributable to Ares Management Corporation eliminated upon consolidation						7,588						5,267						2,321						44						9,721						(8,424)																								18,145						NM
General, administrative and other expense attributable to Ares Management Corporation eliminated upon consolidation						32						14						(18)						(129)						406						241																								(165)						(68)
Net income attributable to non-controlling interests in Consolidated Funds						$	80,289					$	16,340					63,949						NM						$	174,663					$	48,700																							125,963						259

The results of operations of the Consolidated Funds primarily represent activities from certain funds that we are deemed to control. When a fund is consolidated, we reflect the revenues and expenses of the entity on a gross basis, subject to eliminations from consolidation. Substantially all of our results of operations related to the Consolidated Funds are attributable to ownership interests that third parties hold in those funds. The Consolidated Funds are not necessarily the same funds in each year presented due to changes in ownership, changes in limited partners’ or investor rights, and the creation or termination of funds and entities. Accordingly, such amounts may not be comparable for the periods presented, and in any event have no material impact on net income attributable to Ares Management Corporation.

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 September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
						2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings:
Credit Group						$	303,433					$	241,365					$	62,068					26%						$	866,403					$	674,978					$	191,425					28%
Private Equity Group						28,771						18,183						10,588						58						80,399						54,214						26,185						48
Real Assets Group						51,136						46,382						4,754						10						160,716						134,844						25,872						19
Secondaries Group						24,518						22,214						2,304						10						71,262						80,111						(8,849)						(11)
Other						3,464						458						3,006						NM						7,454						747						6,707						NM
Operations Management Group						(137,090)						(95,444)						(41,646)						(44)						(391,219)						(286,287)						(104,932)						(37)
Fee Related Earnings						$	274,232					$	233,158					41,074						18						$	795,015					$	658,607					136,408						21
Realized Income:
Credit Group						$	309,776					$	251,949					$	57,827					23%						$	912,402					$	714,827					$	197,575					28%
Private Equity Group						19,991						14,204						5,787						41						86,264						47,631						38,633						81
Real Assets Group						51,675						55,630						(3,955)						(7)						157,543						166,595						(9,052)						(5)
Secondaries Group						23,050						20,884						2,166						10						67,227						80,245						(13,018)						(16)
Other						(3,040)						(3,482)						442						13						(1,552)						(8,383)						6,831						81
Operations Management Group						(136,999)						(95,743)						(41,256)						(43)						(390,929)						(288,211)						(102,718)						(36)
Realized Income						$	264,453					$	243,442					21,011						9						$	830,955					$	712,704					118,251						17

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 September 30,												Nine months ended September 30,
			2023						2022						2023						2022
Income (loss) before taxes			$	226,872					$	(60,378)					$	849,963					$	167,997
Adjustments:
Depreciation and amortization expense			105,524						219,339						194,174						297,795
Equity compensation expense			61,976						47,516						192,964						150,677
Acquisition-related compensation expense(1)			589						96,697						1,831						204,189
Acquisition and merger-related expense			2,414						1,852						10,126						12,046
Placement fee adjustment			944						9,729						(6,032)						7,611
Other (income) expense, net			286						(1,059)						589						934
Income before taxes of non-controlling interests in consolidated subsidiaries			(5,007)						(5,616)						(6,892)						(6,583)
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations			(84,429)						(16,489)						(179,362)						(48,897)
Total performance (income) loss—unrealized			31,400						(170,789)						(384,533)						(280,290)
Total performance related compensation—unrealized			(38,650)						124,466						261,996						207,115
Total net investment (income) loss—unrealized			(37,466)						(1,826)						(103,869)						110
Realized Income			264,453						243,442						830,955						712,704
Total performance income—realized			(17,797)						(29,984)						(189,568)						(143,946)
Total performance related compensation—realized			10,504						18,858						133,472						91,491
Total investment (income) loss—realized			17,072						842						20,156						(1,642)
Fee Related Earnings			$	274,232					$	233,158					$	795,015					$	658,607

(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.

Results of Operations by Segment

Credit Group—Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022

Fee Related Earnings:

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

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Management fees			$	443,961					$	361,073					$	82,888					23%						$	1,272,273					$	1,016,696					$	255,577					25%
Fee related performance revenues			44						—						44						NM						866						12,628						(11,762)						(93)
Other fees			6,822						8,160						(1,338)						(16)						24,834						20,559						4,275						21
Compensation and benefits			(123,953)						(108,618)						(15,335)						(14)						(363,091)						(318,017)						(45,074)						(14)
General, administrative and other expenses			(23,441)						(19,250)						(4,191)						(22)						(68,479)						(56,888)						(11,591)						(20)
Fee Related Earnings			$	303,433					$	241,365					62,068						26						$	866,403					$	674,978					191,425						28

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 I, 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 management fees of $23.3 million and $82.7 million for the three and nine months ended September 30, 2023, respectively, compared to the three and nine months ended September 30, 2022. Management fees from ARCC, excluding Part I Fees described below, increased by $3.6 million and $13.7 million for the three and nine months ended September 30, 2023, respectively, compared to the three and nine months ended September 30, 2022 primarily due to an increase in the average size of ARCC’s portfolio.

Excluding one-time catch-up fees, management fees from Ares SSG Capital Partners VI, L.P. (“SSG Fund VI”) increased by $3.9 million and $10.6 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 primarily due to new capital commitments. The increase for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was also due to the incremental management fees we retained 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 nine months ended September 30, 2023, compared to the same periods in 2022 primarily due to the net addition of three CLOs since September 30, 2022.

Part I Fees increased for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 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 Part I Fees were also driven by pre-incentive fee net investment income from ASIF that generated Part I Fees of $1.3 million beginning in the third quarter of 2023.

The increases in effective management fee rate for the three and nine months ended September 30, 2023 compared to the same periods in 2022 were primarily driven by the increase in Part I Fees’ contribution to the 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 nine months ended September 30, 2023 compared to the nine months ended September 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 decrease in other fees for the three months ended September 30, 2023 compared to the same period in 2022 was primarily driven by a decrease of $3.2 million in transaction fees, representing a portion of the loan origination income generated from certain credit funds, partially offset by higher administrative service fees of $1.8 million mostly earned from certain private funds that pay on invested capital, driven by additional deployment. The higher administrative service fees also contributed to an increase of $4.6 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Compensation and Benefits. The increases in compensation and benefits for the three and nine months ended September 30, 2023 compared to the same periods in 2022 were primarily driven by: (i) higher Part I Fees compensation of $14.4 million and $50.9 million, respectively; and (ii) an increase in salary expense of $4.7 million and $12.3 million, respectively, primarily attributable to headcount growth to support the expansion of our business. The increase in compensation and benefits for the nine months ended September 30, 2023 compared to the same period in 2022 was partially offset by: (i) lower incentive-based compensation of $11.9 million. Our discretionary incentive-based compensation is based on our operating performance. Amounts are expected to fluctuate until payments are finalized in the fourth quarter; and (ii) lower fee related performance compensation of $7.7 million corresponding to the decrease in fee related performance revenues. The increases described above for the year-to-date period included $3.3 million of expenses 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 13% to 552 investment and investment support professionals for the year-to-date period in 2023 from 490 professionals for the same period in 2022 as we continued to add professionals primarily to support our growing direct lending and Asia credit platforms.

General, Administrative and Other Expenses. Certain expenses have increased during the current period, primarily from occupancy costs, which support our growing headcount that are based in higher cost locations, and from information services such as research and market data, which fluctuate with transaction and underwriting volumes. Collectively, these expenses increased by $1.8 million and $5.6 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. Additionally, we expect to incur higher marketing expenses in future periods as we continue to develop our distribution relationships and expand our retail product offerings. These expenses contributed $2.0 million of the increase for the three and nine months ended September 30, 2023 when compared to the same periods in 2022 and will fluctuate with sales volumes. For the nine months ended September 30, 2023, travel and marketing have also increased by $3.0 million when compared to the same period in 2022, as marketing efforts continued to increase driven by more investor meetings and events. The increases described above for the year-to-date period included $0.7 million of expenses 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 Credit Group’s RI ($ in thousands):

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	303,433					$	241,365					$	62,068					26%						$	866,403					$	674,978					$	191,425					28%
Performance income—realized			12,223						3,045						9,178						NM						81,576						58,941						22,635						38
Performance related compensation—realized			(7,181)						(1,737)						(5,444)						NM						(51,218)						(35,675)						(15,543)						(44)
Realized net performance income			5,042						1,308						3,734						285						30,358						23,266						7,092						30
Investment income—realized			1,475						4,495						(3,020)						(67)						19,546						6,517						13,029						200
Interest and other investment income—realized			5,136						8,847						(3,711)						(42)						17,226						21,257						(4,031)						(19)
Interest expense			(5,310)						(4,066)						(1,244)						(31)						(21,131)						(11,191)						(9,940)						(89)
Realized net investment income			1,301						9,276						(7,975)						(86)						15,641						16,583						(942)						(6)
Realized Income			$	309,776					$	251,949					57,827						23						$	912,402					$	714,827					197,575						28

Realized net performance income for the three and nine months ended September 30, 2023 was primarily attributable to incentive fees from an alternative credit fund. In addition, the nine months ended September 30, 2023 included tax distributions from ACE V, ACE III, ACE IV and PCS I and incentive fees from two alternative credit funds.

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

Realized net investment income for the three and nine months ended September 30, 2023 and 2022 was primarily attributable to interest income generated from our CLO investments. In addition, the nine months ended September 30, 2023 included realized gains from the sale of our investment in a commercial finance fund and income recognized in connection with distributions from the same fund that will not recur given the sale of this investment.

Realized net investment income for the three and nine months ended September 30, 2022 was also attributable to: (i) realizations from the settlement of forward contracts entered into to hedge our exposure to foreign currency fluctuations, primarily from the Euro; and (ii) distributions from a U.S. direct lending fund and a European direct lending fund. In addition, the nine months ended September 30, 2022 included liquidating distributions from a European direct lending fund and included income recognized in connection with distributions from a commercial finance 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.

Credit Group—Performance Income

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

			As of September 30, 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			$	95,580					$	57,348					$	38,232					$	100,774					$	60,465					$	40,309
ACE IV			192,459						119,325						73,134						168,204						104,286						63,918
ACE V			222,417						133,450						88,967						115,969						69,581						46,388
PCS I			124,868						73,786						51,082						98,143						57,994						40,149
Pathfinder I			148,756						126,443						22,313						88,879						75,547						13,332
Other credit funds			167,619						94,202						73,417						93,640						52,482						41,158
Total Credit Group			$	951,699					$	604,554					$	347,145					$	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 September 30, 2023
						Waterfall Type						Accrued Performance Income						Change in Unrealized						Realized						Other Adjustments						Accrued Performance Income
Accrued Carried Interest
ACE III						European						$	100,774					$	(798)					$	(4,284)					$	(112)					$	95,580
ACE IV						European						168,204						45,614						(20,912)						(447)						192,459
ACE V						European						115,969						125,349						(18,585)						(316)						222,417
PCS I						European						98,143						36,196						(9,876)						405						124,868
Pathfinder I						European						88,879						59,877						—						—						148,756
Other credit funds						European						91,997						80,690						(8,660)						1,864						165,891
Other credit funds						American						1,643						962						(1,325)						448						1,728
Total accrued carried interest												665,609						347,890						(63,642)						1,842						951,699
Other credit funds						Incentive						—						17,934						(17,934)						—						—
Total Credit Group												$	665,609					$	365,824					$	(81,576)					$	1,842					$	951,699

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 6/30/2023									$	44,718					$	27,814					$	105,443					$	60,485					$	11,356					$	325					$	250,141
Net new par/equity commitments									1,075						3,234						7,410						1,602						176						(38)						13,459
Net new debt commitments									665						—						4,123						555						200						—						5,543
Capital reductions									(248)						—						(193)						(140)						—						—						(581)
Distributions									(70)						(169)						(630)						(550)						(117)						—						(1,536)
Redemptions									(312)						(108)						(48)						—						—						—						(468)
Net allocations among investment strategies									(2)						767						—						—						—						—						765
Change in fund value									88						544						1,577						(652)						1						—						1,558
Balance at 9/30/2023									$	45,914					$	32,082					$	117,682					$	61,300					$	11,616					$	287					$	268,881
									Liquid Credit						Alternative Credit						U.S. Direct Lending						European Direct Lending						Asia Credit						Other						Total Credit Group
Balance at 6/30/2022									$	42,113					$	19,249					$	92,710					$	47,839					$	9,819					$	—					$	211,730
Net new par/equity commitments									457						1,187						1,249						61						100						—						3,054
Net new debt commitments									403						—						3,299						—						1,372						—						5,074
Capital reductions									(53)						(45)						(433)						(16)						—						—						(547)
Distributions									(30)						(607)						(728)						(279)						(424)						—						(2,068)
Redemptions									(346)						100						(83)						—						—						—						(329)
Net allocations among investment strategies									(2)						730						—						—						—						—						728
Change in fund value									(368)						(269)						242						(1,900)						84						—						(2,211)
Balance at 9/30/2022									$	42,174					$	20,345					$	96,256					$	45,705					$	10,951					$	—					$	215,431
									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									1,859						7,536						11,573						10,939						241						287						32,435
Net new debt commitments									1,131						341						7,357						772						200						—						9,801
Capital reductions									(513)						—						(1,179)						(1,321)						—						—						(3,013)
Distributions									(270)						(851)						(2,100)						(1,401)						(322)						—						(4,944)
Redemptions									(1,077)						(984)						(218)						—						—						—						(2,279)
Net allocations among investment strategies									(32)						3,351						—						—						—						—						3,319
Change in fund value									952						1,326						3,922						1,669						114						—						7,983
Balance at 9/30/2023									$	45,914					$	32,082					$	117,682					$	61,300					$	11,616					$	287					$	268,881
									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									2,088						3,464						5,930						392						1,607						—						13,481
Net new debt commitments									2,970						—						6,101						1,154						1,372						—						11,597
Capital reductions									(171)						(45)						(757)						(28)						(5)						—						(1,006)
Distributions									(71)						(845)						(1,679)						(845)						(699)						—						(4,139)
Redemptions									(762)						(199)						(173)						—						—						—						(1,134)
Net allocations among investment strategies									(5)						1,306						—						—						—						—						1,301
Change in fund value									(2,210)						(760)						985						(4,070)						(19)						—						(6,074)
Balance at 9/30/2022									$	42,174					$	20,345					$	96,256					$	45,705					$	10,951					$	—					$	215,431
(1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy.

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

			AUM: $268.9						AUM: $215.5

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

(1) Includes $15.2 billion and $14.0 billion of AUM of funds from which we indirectly earn management fees as of September 30, 2023 and 2022, respectively, and includes $1.3 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2023 and 2022.

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 6/30/2023						$	43,448					$	19,903					$	60,446					$	32,323					$	5,631											$	161,751
Commitments						1,152						—						846						—						176												2,174
Deployment/subscriptions/increase in leverage						1						967						3,100						1,104						182												5,354
Capital reductions						(263)						—						(486)						(51)						(1)												(801)
Distributions						(71)						(209)						(1,052)						(145)						(265)												(1,742)
Redemptions						(313)						(108)						(63)						(71)						—												(555)
Net allocations among investment strategies						(2)						930						—						—						—												928
Change in fund value						50						34						636						(701)						(115)												(96)
Balance at 9/30/2023						$	44,002					$	21,517					$	63,427					$	32,459					$	5,608											$	167,013
						Liquid Credit						Alternative Credit						U.S. Direct Lending						European Direct Lending						Asia Credit												Total Credit Group
Balance at 6/30/2022						$	40,222					$	12,413					$	51,769					$	25,319					$	5,700											$	135,423
Commitments						1,242						23						441						—						6												1,712
Deployment/subscriptions/increase in leverage						—						1,904						2,355						2,302						820												7,381
Capital reductions						(65)						—						(113)						(327)						(8)												(513)
Distributions						(37)						(480)						(977)						(161)						(517)												(2,172)
Redemptions						(354)						100						(83)						(134)						—												(471)
Net allocations among investment strategies						(2)						671						—						—						—												669
Change in fund value						(346)						(359)						146						(1,178)						(12)												(1,749)
Balance at 9/30/2022						$	40,660					$	14,272					$	53,538					$	25,821					$	5,989											$	140,280
						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						2,450						65						1,943						—						241												4,699
Deployment/subscriptions/increase in leverage						282						4,036						7,012						3,562						1,057												15,949
Capital reductions						(528)						—						(1,818)						(141)						(193)												(2,680)
Distributions						(268)						(1,319)						(2,483)						(308)						(1,430)												(5,808)
Redemptions						(1,080)						(901)						(233)						(192)						—												(2,406)
Net allocations among investment strategies						(33)						3,546						—						—						—												3,513
Change in fund value						988						186						1,438						(23)						(118)												2,471
Balance at 9/30/2023						$	44,002					$	21,517					$	63,427					$	32,459					$	5,608											$	167,013
						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						5,136						354						1,858						—						1,753												9,101
Deployment/subscriptions/increase in leverage						6						5,471						9,675						6,742						1,848												23,742
Capital reductions						(212)						(25)						(1,507)						(1,539)						(242)												(3,525)
Distributions						(96)						(728)						(2,802)						(514)						(1,096)												(5,236)
Redemptions						(769)						(143)						(173)						(259)						—												(1,344)
Net allocations among investment strategies						(5)						1,176						—						—						—												1,171
Change in fund value						(2,073)						(574)						359						(2,456)						(151)												(4,895)
Change in fee basis						—						(1)						—						—						(843)												(844)
Balance at 9/30/2022						$	40,660					$	14,272					$	53,538					$	25,821					$	5,989											$	140,280

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

			FPAUM: $167.0						FPAUM: $140.3

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

(1)Includes $33.4 billion and $29.9 billion from funds that primarily invest in illiquid strategies as of September 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.

Credit Group—Fund Performance Metrics as of September 30, 2023

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

The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group as of September 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						$	27,291					N/A						4.8						N/A						11.4						N/A						12.0						U.S. Direct Lending
CADC(3)			2017						4,719						N/A						3.9						N/A						9.7						N/A						6.0						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.

The following table presents the performance data of the Credit Group’s significant drawdown funds as of September 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						$	5,082					$	922					$	872					$	272					$	762					$	1,034					1.3x						1.2x						8.9						6.7						U.S. Direct Lending
SDL I Levered									2,045						2,022						840						1,773						2,613						1.4x						1.3x						15.2						11.2
ACE IV Unlevered(7)			2018						9,908						2,851						2,214						634						2,096						2,730						1.3x						1.2x						8.2						5.9						European Direct Lending
ACE IV Levered(7)									4,819						3,775						1,384						3,680						5,064						1.4x						1.3x						11.8						8.6
Funds Deploying Capital
ACE V Unlevered(8)			2020						16,633						7,026						4,983						408						5,214						5,622						1.2x						1.1x						11.4						8.4						European Direct Lending
ACE V Levered(8)									6,376						4,525						551						4,842						5,393						1.3x						1.2x						17.7						12.6
PCS II			2020						5,553						5,114						3,348						186						3,453						3,639						1.1x						1.1x						8.7						6.4						U.S. Direct Lending
Pathfinder I			2020						4,280						3,683						2,496						169						2,926						3,095						1.3x						1.2x						20.2						14.6						Alternative Credit
SDL II Unlevered			2021						15,570						1,989						1,117						98						1,135						1,233						1.1x						1.1x						11.8						9.1						U.S. Direct Lending
SDL II Levered									6,047						3,375						469						3,451						3,920						1.2x						1.2x						19.9						14.9
Open-ended core alternative credit fund(9)			2021						4,605						4,229						2,465						206						2,478						2,684						1.1x						1.1x						10.3						7.3						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 9.7% and 7.1%, 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 13.1% and 9.4%, 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 13.3% and 9.9%, 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 18.6% and 13.5%, respectively. The gross and net MoIC for ACE V (G) Levered are 1.3x and 1.2x, respectively. The gross and net IRR for ACE V (D) Levered are 16.4% and 12.0%, respectively. The gross and net MoIC for ACE V (D) Levered are 1.2x and 1.2x, respectively. The gross and net IRR for ACE V (Y) Unlevered are 11.4% and 8.2%, respectively. The gross and net MoIC for ACE V (Y) Unlevered are 1.2x and 1.1x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE V Unlevered and ACE V Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate.

(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 10.2% and 7.3%, respectively. The gross and net MoIC for the Constrained Class are 1.1x and 1.1x, respectively.

Private Equity Group—Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022

Fee Related Earnings:

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

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Management fees			$	56,447					$	52,316					$	4,131					8%						$	166,622					$	145,669					$	20,953					14%
Other fees			810						556						254						46						2,221						1,261						960						76
Compensation and benefits			(20,364)						(26,865)						6,501						24						(63,022)						(70,724)						7,702						11
General, administrative and other expenses			(8,122)						(7,824)						(298)						(4)						(25,422)						(21,992)						(3,430)						(16)
Fee Related Earnings			$	28,771					$	18,183					10,588						58						$	80,399					$	54,214					26,185						48

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 $7.3 million and $29.0 million for the three and nine months ended September 30, 2023, respectively, compared to the three and nine months ended September 30, 2022 primarily driven by deployment. The increases in management fees were partially offset by decreases from ACOF IV of $1.5 million and $4.5 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 as the fund stopped paying management fees during the fourth quarter of 2022. Management fees from ASOF I also decreased by $1.5 million and $2.0 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 due to asset realizations that reduced the fee base.

The increases in effective management fee rate for the three and nine months ended September 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.

Compensation and Benefits. Compensation and benefits decreased for the three and nine months ended September 30, 2023 compared to the same periods in 2022 primarily due to lower incentive-based compensation of $5.4 million and $8.4 million, respectively. Our discretionary incentive-based compensation is based on our operating performance. Amounts are expected to fluctuate until payments are finalized in the fourth quarter. The decreases over the comparative periods were partially offset by higher salaries and related employee benefits, which reflect changes in staffing and merit increases.

Average headcount increased slightly by 3% to 122 investment and investment support professionals for the year-to-date period in 2023 from 119 professionals for the same period in 2022.

General, Administrative and Other Expenses. Placement fees increased by $0.8 million and $2.7 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 primarily driven by new 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 year, primarily from occupancy costs which support our professionals that are based in higher cost locations, and from information services such as research and market data, which fluctuate with transaction and underwriting volumes. Collectively, these expenses increased by $1.1 million for the nine months ended September 30, 2023 when compared to the same period in 2022.

Realized Income:

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

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	28,771					$	18,183					$	10,588					58%						$	80,399					$	54,214					$	26,185					48%
Performance income—realized			(15)						—						(15)						NM						88,120						2,212						85,908						NM
Performance related compensation—realized			15						(5)						20						NM						(68,812)						(1,791)						(67,021)						NM
Realized net performance income			—						(5)						5						NM						19,308						421						18,887						NM
Investment income (loss)—realized			(4,631)						8						(4,639)						NM						(1,668)						2,283						(3,951)						NM
Interest and other investment income—realized			679						201						478						238						4,403						1,898						2,505						132
Interest expense			(4,828)						(4,183)						(645)						(15)						(16,178)						(11,185)						(4,993)						(45)
Realized net investment loss			(8,780)						(3,974)						(4,806)						(121)						(13,443)						(7,004)						(6,439)						(92)
Realized Income			$	19,991					$	14,204					5,787						41						$	86,264					$	47,631					38,633						81

Realized net performance income for the nine months ended September 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 nine months ended September 30, 2023 and 2022 was primarily attributable to interest expense exceeding investment 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 net investment loss for the three and nine months ended September 30, 2023 also reflects realized losses from two corporate private equity funds, including the liquidation of one of those funds and the disposition of its remaining assets. The activity for the nine months ended September 30, 2023 was partially offset by realized gains from the partial sale of ACOF IV’s investment in AZEK.

Private Equity Group—Performance Income

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

			As of September 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			$	186,883					$	149,506					$	37,377					$	282,624					$	226,099					$	56,525
ACOF V			702,166						561,733						140,433						742,962						594,369						148,593
ACOF VI			270,422						216,337						54,085						147,185						117,748						29,437
ASOF I			355,624						248,937						106,687						326,471						228,529						97,942
Other funds			172,556						119,889						52,667						108,997						75,583						33,414
Total Private Equity Group			$	1,687,651					$	1,296,402					$	391,249					$	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 September 30, 2023
						Waterfall Type						Accrued Carried Interest						Change in Unrealized						Realized						Other Adjustments						Accrued Carried Interest
ACOF IV						American						$	282,624					$	(32,447)					$	(63,294)					$	—					$	186,883
ACOF V						American						742,962						(40,796)						—						—						702,166
ACOF VI						American						147,185						123,237						—						—						270,422
ASOF I						European						326,471						53,740						(24,587)						—						355,624
Other funds						European						92,509						64,405						—						6,284						163,198
Other funds						American						16,488						(6,891)						(239)						—						9,358
Total Private Equity Group												$	1,608,239					$	161,248					$	(88,120)					$	6,284					$	1,687,651

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												Other						Total Private Equity Group
Balance at 6/30/2023						$	21,041					$	14,412											$	—					$	35,453
Net new par/equity commitments						—						—												47						47
Capital reductions						(2)						—												—						(2)
Distributions						(781)						(20)												—						(801)
Change in fund value						(365)						(43)												—						(408)
Balance at 9/30/2023						$	19,893					$	14,349											$	47					$	34,289
						Corporate Private Equity						Special Opportunities												Other						Total Private Equity Group
Balance at 6/30/2022						$	21,270					$	12,142											$	—					$	33,412
Net new par/equity commitments						—						1,337												—						1,337
Capital reductions						(2)						—												—						(2)
Distributions						(79)						(3)												—						(82)
Change in fund value						367						234												—						601
Balance at 9/30/2022						$	21,556					$	13,710											$	—					$	35,266
						Corporate Private Equity						Special Opportunities												Other						Total Private Equity Group
Balance at 12/31/2022						$	21,029					$	13,720											$	—					$	34,749
Net new par/equity commitments						50						—												47						97
Capital reductions						(7)						—												—						(7)
Distributions						(1,432)						(169)												—						(1,601)
Change in fund value						253						798												—						1,051
Balance at 9/30/2023						$	19,893					$	14,349											$	47					$	34,289
						Corporate Private Equity						Special Opportunities												Other						Total Private Equity Group
Balance at 12/31/2021						$	21,639					$	11,765											$	—					$	33,404
Net new par/equity commitments						—						2,137												—						2,137
Capital reductions						(6)						(200)												—						(206)
Distributions						(469)						(133)												—						(602)
Change in fund value						392						141												—						533
Balance at 9/30/2022						$	21,556					$	13,710											$	—					$	35,266

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

			AUM: $34.3						AUM: $35.2

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

(1) Includes $1.2 billion and $1.1 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2023 and 2022, respectively.

Private Equity Group—Fee Paying AUM

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

						Corporate Private Equity						Special Opportunities																		Total Private Equity Group
Balance at 6/30/2023						$	11,277					$	7,677																	$	18,954
Deployment/subscriptions/increase in leverage						59						494																		553
Distributions						(38)						(101)																		(139)
Balance at 9/30/2023						$	11,298					$	8,070																	$	19,368
						Corporate Private Equity						Special Opportunities																		Total Private Equity Group
Balance at 6/30/2022						$	12,116					$	5,575																	$	17,691
Deployment/subscriptions/increase in leverage						21						1,465																		1,486
Distributions						(25)						(181)																		(206)
Change in fund value						(2)						(1)																		(3)
Change in fee basis						(14)						—																		(14)
Balance at 9/30/2022						$	12,096					$	6,858																	$	18,954
						Corporate Private Equity						Special Opportunities																		Total Private Equity Group
Balance at 12/31/2022						$	11,281					$	7,166																	$	18,447
Deployment/subscriptions/increase in leverage						59						2,098																		2,157
Distributions						(38)						(1,194)																		(1,232)
Change in fee basis						(4)						—																		(4)
Balance at 9/30/2023						$	11,298					$	8,070																	$	19,368
						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						38						3,661																		3,699
Distributions						(163)						(1,019)																		(1,182)
Change in fund value						(4)						—																		(4)
Change in fee basis						(248)						—																		(248)
Balance at 9/30/2022						$	12,096					$	6,858																	$	18,954

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

			FPAUM: $19.4						FPAUM: $19.0

						Invested capital									Capital commitments

Private Equity Group—Fund Performance Metrics as of September 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 nine months ended September 30, 2023.

The following table presents the performance data of the Private Equity Group’s significant drawdown funds as of September 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						$	8,946					$	7,850					$	7,473					$	3,491					$	8,303					$	11,794					1.6x						1.4x						12.6						8.5						Corporate Private Equity
Funds Deploying Capital
ASOF I			2019						5,739						3,518						5,477						4,225						3,827						8,052						1.8x						1.6x						26.6						20.6						Special Opportunities
ACOF VI			2020						7,089						5,743						4,718						393						6,115						6,508						1.3x						1.2x						24.0						17.5						Corporate Private Equity
ASOF II			2021						7,240						7,128						5,124						1,037						4,380						5,417						1.1x						1.0x						6.9						4.3						Special Opportunities

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

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

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

(4)The net MoIC is calculated at the fund-level. The net MoIC is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or performance fees. The net MoIC is after giving effect to management fees, carried interest, as applicable, and other expenses. The net MoICs are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net MoIC would be 1.3x for ACOF V and 1.2x 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 8.6% for ACOF V and 16.1% for ACOF VI.

Real Assets Group—Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022

Fee Related Earnings:

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

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Management fees			$	92,754					$	91,013					$	1,741					2%						$	285,463					$	254,233					$	31,230					12%
Fee related performance revenues			—						855						(855)						(100)						334						2,178						(1,844)						(85)
Other fees			6,308						11,493						(5,185)						(45)						24,616						27,924						(3,308)						(12)
Compensation and benefits			(37,608)						(46,947)						9,339						20						(116,232)						(121,183)						4,951						4
General, administrative and other expenses			(10,318)						(10,032)						(286)						(3)						(33,465)						(28,308)						(5,157)						(18)
Fee Related Earnings			$	51,136					$	46,382					4,754						10						$	160,716					$	134,844					25,872						19

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

Management fees from Infrastructure Debt Fund V (“IDF V”) increased by $2.0 million and $6.7 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 primarily driven by deployment of capital. Our second climate infrastructure fund, which launched during the second quarter of 2023, contributed additional management fees of $1.4 million driven by new capital commitments for the three and nine months ended September 30, 2023. Management fees from Ares Real Estate Income Trust, Inc. (“AREIT”) and Ares Industrial Real Estate Income Trust, Inc. (“AIREIT”) also collectively increased by $0.7 million and $12.4 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 due to additional capital raised.

One-time fees from funds within the Real Assets Group for the nine months ended September 30, 2023 consisted of: (i) $3.3 million of make-whole termination fees 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; (ii) $0.5 million of catch-up fees from our fourth U.S. opportunistic real estate equity fund; and (iii) 0.2 million of catch-up fees from our sixth European real estate equity fund. One-time catch-up fees for the three and nine months ended September 30, 2022 were $1.8 million and $4.8 million, respectively, from US X.

Excluding one-time catch-up fees previously discussed, management fees for the three and nine months ended September 30, 2023 compared to the same periods in 2022 increased by: (i) $2.1 million and $6.3 million, respectively, for our fourth U.S. opportunistic real estate equity fund; (ii) $0.6 million and $2.5 million, respectively, for our sixth European real estate fund; and (iii) $0.8 million and $2.6 million, respectively, for US X, which closed in the third quarter of 2022. The increases in management fees for these funds were primarily driven by new capital commitments. Management fees from our most recent real estate equity funds increase once capital is invested and deployment in these funds has also contributed to the increases in fees over the comparative periods.

The increases in effective management fee rate for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 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 decreases in other fees for the three and nine months ended September 30, 2023 compared to the same periods in 2022 were primarily attributable to: (i) $5.9 million and $9.5 million, respectively, in acquisition and development fees resulting from a reduction in activity; and (ii) $0.8 million and $2.7 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. The decreases for the three and nine months ended September 30, 2023 compared to the same periods in 2022 were partially offset by higher credit transaction fees of $1.8 million and $8.2 million, respectively. Credit transaction fees are generated periodically within the infrastructure debt strategy and relate to the arrangement and origination of loans.

Compensation and Benefits. The decreases in compensation and benefits for the three and nine months ended September 30, 2023 compared to the same periods in 2022 was primarily driven by lower incentive-based compensation of $10.6 million and $18.6 million, respectively. Our discretionary incentive-based compensation is based on our operating performance. Amounts are expected to fluctuate until payments are finalized in the fourth quarter. The decreases over the comparative periods were also driven by lower fee related performance compensation of $0.5 million and $2.0 million, respectively, corresponding to the decreases in fee related performance revenues. The decreases over the comparative periods were partially offset by higher salary expense of $3.0 million and $9.4 million, respectively, primarily attributable to headcount growth.

Average headcount increased by 17% to 353 investment and investment support professionals for the year-to-date period in 2023 from 303 professionals for the same period in 2022.

General, Administrative and Other Expenses. Certain expenses have increased during the current period, primarily from occupancy costs which support our growing headcount that are based in higher cost locations, from information services such as research and market data, which fluctuate with transaction and underwriting volumes and higher information technology costs related to maintenance and support. Collectively, these expenses increased by $1.3 million and $2.8 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. The increases in expenses were partially offset by decreases in recruiting fees of $1.0 million and $1.3 million, respectively, for the comparative periods.

For the nine months ended September 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 $1.8 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) placement fees of $1.0 million in connection with our fundraising efforts primarily attributable to new commitments in IDF V and our fourth U.S. opportunistic real estate equity fund. The increases described above include $1.5 million of expense for the nine months ended September 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.

Realized Income:

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

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	51,136					$	46,382					$	4,754					10%						$	160,716					$	134,844					$	25,872					19%
Performance income—realized			5,589						26,939						(21,350)						(79)						14,412						78,637						(64,225)						(82)
Performance related compensation—realized			(3,338)						(17,115)						13,777						80						(8,764)						(50,510)						41,746						83
Realized net performance income			2,251						9,824						(7,573)						(77)						5,648						28,127						(22,479)						(80)
Investment income (loss)—realized			(875)						339						(1,214)						NM						(4,196)						4,224						(8,420)						NM
Interest and other investment income—realized			3,148						2,180						968						44						7,362						7,597						(235)						(3)
Interest expense			(3,985)						(3,095)						(890)						(29)						(11,987)						(8,197)						(3,790)						(46)
Realized net investment income (loss)			(1,712)						(576)						(1,136)						197						(8,821)						3,624						(12,445)						NM
Realized Income			$	51,675					$	55,630					(3,955)						(7)						$	157,543					$	166,595					(9,052)						(5)

Realized net performance income for the three and nine months ended September 30, 2023 and 2022 included incentive fees generated from an open-ended industrial real estate fund. Realized net performance income for the three and nine months ended September 30, 2023 also included realizations from a U.S. real estate equity fund while the three and nine months ended September 30, 2022 included realizations from US VIII, both driven by multifamily property sales.

Realized net investment loss for the three and nine months ended September 30, 2023 was primarily attributable to: (i) interest expense exceeding investment income during the periods; and (ii) realized losses recognized from a real estate debt vehicle, where financing costs are exceeding investment returns due to limited investment opportunities. This activity was partially offset by distributions of investment income from multiple real estate equity and real estate debt vehicles 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.

Real Assets Group—Performance Income

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

			As of September 30, 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			$	32,935					$	21,078					$	11,857					$	36,822					$	23,566					$	13,256
US IX			89,959						55,774						34,185						86,905						53,881						33,024
EF IV			56,893						34,137						22,756						61,791						37,075						24,716
AREOF III			45,029						27,018						18,011						41,463						24,878						16,585
EIF V			94,462						70,610						23,852						94,398						70,562						23,836
Other real assets funds			199,073						126,544						72,529						171,489						108,002						63,487
Total Real Assets Group			$	518,351					$	335,161					$	183,190					$	492,868					$	317,964					$	174,904

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

												As of December 31, 2022						Activity during the period																		As of September 30, 2023
						Waterfall Type						Accrued Performance Income						Change in Unrealized						Realized						Other Adjustments						Accrued Performance Income
Accrued Carried Interest
US VIII						European						$	36,822					$	(1,426)					$	(2,461)					$	—					$	32,935
US IX						European						86,905						3,054						—						—						89,959
EF IV						American						61,791						(4,898)						—						—						56,893
AREOF III						European						41,463						3,566						—						—						45,029
EIF V						European						94,398						64						—						—						94,462
Other real assets funds						European						114,782						40,042						(2,462)						(749)						151,613
Other real assets funds						American						56,707						(8,304)						(926)						(17)						47,460
Total accrued carried interest												492,868						32,098						(5,849)						(766)						518,351
Other real assets funds						Incentive						—						8,563						(8,563)						—						—
Total Real Assets Group												$	492,868					$	40,661					$	(14,412)					$	(766)					$	518,351

Real Assets Group—Assets Under Management

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

			U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 6/30/2023			$	29,447					$	8,592					$	11,125					$	5,504					$	10,103					$	64,771
Net new par/equity commitments			345						538						50						225						—						1,158
Capital reductions			—						—						(1)						—						—						(1)
Distributions			(169)						(103)						(64)						(87)						(561)						(984)
Redemptions			(359)						—						(95)						—						—						(454)
Change in fund value			(305)						(247)						25						60						(108)						(575)
Balance at 9/30/2023			$	28,959					$	8,780					$	11,040					$	5,702					$	9,434					$	63,915
			U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 6/30/2022			$	30,271					$	8,558					$	11,372					$	4,316					$	8,060					$	62,577
Net new par/equity commitments			1,170						20						99						366						511						2,166
Net new debt commitments			200						—						204						—						—						404
Capital reductions			(200)						—						(24)						—						—						(224)
Distributions			(248)						(50)						(49)						(112)						(52)						(511)
Redemptions			(180)						—						—						—						—						(180)
Change in fund value			121						(495)						68						751						318						763
Balance at 9/30/2022			$	31,134					$	8,033					$	11,670					$	5,321					$	8,837					$	64,995
			U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 12/31/2022			$	31,460					$	8,561					$	11,161					$	5,194					$	9,685					$	66,061
Net new par/equity commitments			1,988						553						525						681						—						3,747
Net new debt commitments			—						—						150						—						—						150
Capital reductions			(245)						—						(160)						—						—						(405)
Distributions			(2,635)						(175)						(195)						(290)						(665)						(3,960)
Redemptions			(912)						—						(497)						—						—						(1,409)
Change in fund value			(697)						(159)						56						117						414						(269)
Balance at 9/30/2023			$	28,959					$	8,780					$	11,040					$	5,702					$	9,434					$	63,915
			U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 12/31/2021			$	24,677					$	6,827					$	9,659					$	4,756					$	—					$	45,919
Acquisitions			—						—						—						—						8,184						8,184
Net new par/equity commitments			4,467						2,038						955						431						698						8,589
Net new debt commitments			1,305						419						1,229						—						—						2,953
Capital reductions			(434)						—						(87)						—						—						(521)
Distributions			(1,301)						(409)						(144)						(433)						(239)						(2,526)
Redemptions			(308)						—						(90)						—						—						(398)
Change in fund value			2,728						(842)						148						567						194						2,795
Balance at 9/30/2022			$	31,134					$	8,033					$	11,670					$	5,321					$	8,837					$	64,995

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

			AUM: $63.9						AUM: $65.0

			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 September 30, 2023 and 2022.

Real Assets Group—Fee Paying AUM

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

						U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 6/30/2023						$	20,732					$	5,963					$	3,368					$	4,878					$	6,193					$	41,134
Commitments						344						—						—						225						—						569
Deployment/subscriptions/increase in leverage						110						96						84						119						794						1,203
Distributions						(136)						64						(59)						(478)						(373)						(982)
Redemptions						(359)						—						(95)						—						—						(454)
Change in fund value						(311)						(152)						40						(6)						(231)						(660)
Balance at 9/30/2023						$	20,380					$	5,971					$	3,338					$	4,738					$	6,383					$	40,810
						U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 6/30/2022						$	19,934					$	5,352					$	3,953					$	4,474					$	5,518					$	39,231
Commitments						1,113						20						—						—						—						1,133
Deployment/subscriptions/increase in leverage						52						171						11						106						495						835
Distributions						(136)						(11)						(51)						(154)						(214)						(566)
Redemptions						(180)						—						—						—						—						(180)
Change in fund value						119						(315)						74						—						(113)						(235)
Change in fee basis						3						—						—						—						—						3
Balance at 9/30/2022						$	20,905					$	5,217					$	3,987					$	4,426					$	5,686					$	40,221
						U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 12/31/2022						$	21,788					$	5,634					$	3,691					$	4,524					$	5,970					$	41,607
Commitments						1,345						15						(5)						681						—						2,036
Deployment/subscriptions/increase in leverage						155						297						298						272						1,391						2,413
Capital reductions						(245)						(29)						(55)						—						—						(329)
Distributions						(965)						9						(198)						(732)						(825)						(2,711)
Redemptions						(912)						—						(510)						—						—						(1,422)
Change in fund value						(786)						(53)						117						(7)						(153)						(882)
Change in fee basis						—						98						—						—						—						98
Balance at 9/30/2023						$	20,380					$	5,971					$	3,338					$	4,738					$	6,383					$	40,810
						U.S. Real Estate Equity						European Real Estate Equity						Real Estate Debt						Infrastructure Opportunities						Infrastructure Debt						Total Real Assets Group
Balance at 12/31/2021						$	15,687					$	4,916					$	3,516					$	4,496					$	—					$	28,615
Acquisitions						—						—						—						—						4,855						4,855
Commitments						3,661						1,627						106						—						—						5,394
Deployment/subscriptions/increase in leverage						663						427						574						306						1,296						3,266
Capital reductions						—						(10)						(81)						—						—						(91)
Distributions						(759)						(246)						(185)						(376)						(263)						(1,829)
Redemptions						(308)						—						(100)						—						—						(408)
Change in fund value						1,966						(678)						157						—						(202)						1,243
Change in fee basis						(5)						(819)						—						—						—						(824)
Balance at 9/30/2022						$	20,905					$	5,217					$	3,987					$	4,426					$	5,686					$	40,221

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

			FPAUM: $40.8						FPAUM: $40.2

			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 September 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 nine months ended September 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 September 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						$	5,239					N/A						(0.8)						N/A						(3.6)						N/A						7.0						U.S. Real Estate Equity
AIREIT(3)			2017						7,887						N/A						(3.9)						N/A						(7.5)						N/A						10.8						U.S. Real Estate Equity
Open-ended industrial real estate fund(4)			2017						5,185						(1.8)						(1.7)						(6.2)						(5.8)						21.3						17.4						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 September 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						$	3,315					$	4,012					$	4,417					$	2,005					$	3,005					$	5,010					1.2x						1.2x						7.8						5.7						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 6.9% and 4.8%, 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 7.9% and 5.7%, 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 5.8% and 3.8%, 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 5.9% and 4.4%, respectively. The gross and net MoIC for the single investor U.S. Dollar parallel fund are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of fund's closing. All other values for IDF IV are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate.

Secondaries Group—Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022

Fee Related Earnings:

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

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Management fees			$	42,949					$	44,385					$	(1,436)					(3)%						$	124,597					$	135,090					$	(10,493)					(8)%
Fee related performance revenues			2,168						235						1,933						NM						5,737						235						5,502						NM
Other fees			8						—						8						NM						13						—						13						NM
Compensation and benefits			(16,066)						(19,191)						3,125						16						(46,101)						(45,964)						(137)						—
General, administrative and other expenses			(4,541)						(3,215)						(1,326)						(41)						(12,984)						(9,250)						(3,734)						(40)
Fee Related Earnings			$	24,518					$	22,214					2,304						10						$	71,262					$	80,111					(8,849)						(11)

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

Management fees decreased during the three and nine months ended September 30, 2023 compared to the same periods in 2022 primarily due to one-time catch-up fees from Landmark Equity Partners XVII, L.P. (“LEP XVII”) of $4.0 million and $7.4 million, respectively, that were recognized in the prior year periods. The decreases in management fees were partially offset by: (i) additional management fees from our ninth real estate secondaries fund, of $0.9 million and $2.6 million, respectively, generated from new commitments before giving effect to the net increases from one-time catch-up fees of $1.2 million and $3.3 million, respectively; and (ii) higher management fees from APMF of $1.1 million and $2.3 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. Management fees from Landmark Equity Partners

XV, L.P. (“LEP XV”) decreased by $7.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 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.

The increase in effective management fee rate for the three months ended September 30, 2023 compared to the same period in 2022 was primarily due to the higher fee rate for APMF following the expiration of the contractually reduced rate.

Fee Related Performance Revenues. Fee related performance revenues reflects incentive fees recognized from APMF for the nine months ended September 30, 2023, and 2022. 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 decrease in compensation and benefits for the three months ended September 30, 2023 compared to the same period in 2022 was primarily driven by lower incentive-based compensation of $4.6 million. Our discretionary incentive-based compensation is based on our operating performance. Amounts are expected to fluctuate until payments are finalized in the fourth quarter. The decrease was partially offset by (i) higher salary expense of $1.1 million which primarily attributable to headcount growth; and (ii) higher fee related performance compensation of $0.9 million corresponding to the increases in fee related performance revenues.

For the nine months ended September 30, 2023 compared to the same period in 2022, compensation and benefits increased slightly over the comparative periods, primarily driven by (i) higher salary expense and employer related taxes of $3.3 million which primarily attributable to headcount growth; and (ii) higher fee related performance compensation of $3.1 million corresponding to the increases in fee related performance revenues, partially offset by lower incentive-based compensation of $6.2 million.

Average headcount increased by 11% to 103 investment and investment support professionals for the year-to-date period in 2023 from 93 professionals for the same period in 2022.

General, Administrative and Other Expenses. Travel and marketing collectively increased by $0.9 million and $2.4 million for the three and nine months ended September 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, recruiting fees have increased during each comparative period as we continue 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 September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	24,518					$	22,214					$	2,304					10%						$	71,262					$	80,111					$	(8,849)					(11)%
Performance income—realized			—						—						—						—						5,460						4,156						1,304						31
Performance related compensation—realized			—						(1)						1						NM						(4,678)						(3,515)						(1,163)						(33)
Realized net performance income			—						(1)						1						NM						782						641						141						22
Interest and other investment income—realized			552						424						128						30						1,959						3,268						(1,309)						(40)
Interest expense			(2,020)						(1,753)						(267)						(15)						(6,776)						(3,775)						(3,001)						(79)
Realized net investment loss			(1,468)						(1,329)						(139)						10						(4,817)						(507)						(4,310)						NM
Realized Income			$	23,050					$	20,884					2,166						10						$	67,227					$	80,245					(13,018)						(16)

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

Realized investment income for the nine months ended September 30, 2023 reflects dividend income received from APMF.

Realized net investment income for the nine months ended September 30, 2022 included dividend income received from LREP VIII and an infrastructure secondaries 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.

Secondaries Group—Performance Income

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

			As of September 30, 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			$	134,827					$	115,277					$	19,550					$	141,122					$	120,659					$	20,463
LREP VIII			106,291						91,410						14,881						109,928						94,538						15,390
Other secondaries funds			59,748						50,121						9,627						58,135						49,726						8,409
Total Secondaries Group			$	300,866					$	256,808					$	44,058					$	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 September 30, 2023
						Waterfall Type						Accrued Carried Interest						Change in Unrealized						Realized												Accrued Carried Interest
Accrued Carried Interest
LEP XVI						European						$	141,122					$	(6,295)					$	—											$	134,827
LREP VIII						European						109,928						923						(4,560)												106,291
Other secondaries funds						European						58,135						2,513						(900)												59,748
Total Secondaries Group												$	309,185					$	(2,859)					$	(5,460)											$	300,866

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 6/30/2023			$	12,583					$	7,757					$	1,674					$	938					$	50					$	23,002
Net new par/equity commitments			36						148						202						—						(25)						361
Distributions			(131)						(136)						(22)						—						—						(289)
Redemptions			(1)						—						—						—						—						(1)
Change in fund value			243						(63)						2						—						—						182
Balance at 9/30/2023			$	12,730					$	7,706					$	1,856					$	938					$	25					$	23,255
			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						Credit Secondaries						Other						Total Secondaries Group
Balance at 6/30/2022			$	14,707					$	7,522					$	1,663					$	—					$	—					$	23,892
Net new par/equity commitments			239						202						—						—						—						441
Distributions			(891)						(189)						(4)						—						—						(1,084)
Change in fund value			(627)						155						12						—						—						(460)
Balance at 9/30/2022			$	13,428					$	7,690					$	1,671					$	—					$	—					$	22,789
			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						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			78						507						202						938						25						1,750
Distributions			(450)						(298)						(94)						—						—						(842)
Redemptions			(1)						—						—						—						—						(1)
Change in fund value			334						(55)						108						—						—						387
Balance at 9/30/2023			$	12,730					$	7,706					$	1,856					$	938					$	25					$	23,255
			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			887						1,425						74						—						—						2,386
Distributions			(1,178)						(876)						(155)						—						—						(2,209)
Change in fund value			(313)						479						128						—						—						294
Balance at 9/30/2022			$	13,428					$	7,690					$	1,671					$	—					$	—					$	22,789
(1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy.

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

AUM: $23.2						AUM: $22.8

			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 September 30, 2023 and 2022, respectively.

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 6/30/2023			$	10,846					$	5,695					$	1,254					$	—											$	17,795
Commitments			36						147						200						—												383
Deployment/subscriptions/increase in leverage			(6)						14						2						—												10
Distributions			(33)						(134)						(21)						—												(188)
Redemptions			(1)						—						—						—												(1)
Change in fund value			22						(150)						19						—												(109)
Change in fee basis			(3)						(18)						—						—												(21)
Balance at 9/30/2023			$	10,861					$	5,554					$	1,454					$	—											$	17,869
			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						Credit Secondaries												Total Secondaries Group
Balance at 6/30/2022			$	11,201					$	5,074					$	1,279					$	—											$	17,554
Commitments			212						200						—						—												412
Deployment/subscriptions/increase in leverage			9						78						9						—												96
Distributions			(29)						(188)						(4)						—												(221)
Change in fund value			(263)						111						(18)						—												(170)
Change in fee basis			50						(1)						—						—												49
Balance at 9/30/2022			$	11,180					$	5,274					$	1,266					$	—											$	17,720
			Private Equity Secondaries						Real Estate Secondaries						Infrastructure Secondaries						Credit Secondaries												Total Secondaries Group
Balance at 12/31/2022			$	11,062					$	5,313					$	1,293					$	—											$	17,668
Commitments			78						348						200						—												626
Deployment/subscriptions/increase in leverage			61						232						17						—												310
Distributions			(89)						(287)						(80)						—												(456)
Redemptions			(1)						—						—						—												(1)
Change in fund value			(206)						(39)						24						—												(221)
Change in fee basis			(44)						(13)						—						—												(57)
Balance at 9/30/2023			$	10,861					$	5,554					$	1,454					$	—											$	17,869
			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			806						1,039						74						—												1,919
Deployment/subscriptions/increase in leverage			67						323						25						—												415
Distributions			(88)						(866)						(127)						—												(1,081)
Change in fund value			(191)						834						106						—												749
Change in fee basis			(1,332)						(1,445)						—						—												(2,777)
Balance at 9/30/2022			$	11,180					$	5,274					$	1,266					$	—											$	17,720

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

FPAUM: $17.9						FPAUM: $17.7

			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.

Secondaries Group—Fund Performance Metrics as of September 30, 2023

Two significant funds, LEP XVI and LREP VIII, collectively contributed approximately 42% of the Secondaries Group’s management fees for the nine months ended September 30, 2023.

The following table presents the performance data of the Secondaries Group’s significant drawdown funds as of September 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						$	4,841					$	4,896					$	3,571					$	1,990					$	3,020					$	5,010					1.5x						1.4x						29.8						20.2						Private Equity Secondaries
LREP VIII(7)			2016						3,258						3,300						2,306						1,403						1,714						3,117						1.5x						1.4x						22.7						15.5						Real Estate Secondaries

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

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

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

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

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

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

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

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

Operations Management Group—Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022

Fee Related Earnings:

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

			Three months ended September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Other fees			$	5,717					$	7,547					$	(1,830)					(24)%						$	18,205					$	19,721					$	(1,516)					(8)%
Compensation and benefits			(90,347)						(61,084)						(29,263)						(48)						(261,325)						(196,492)						(64,833)						(33)
General, administrative and other expenses			(52,460)						(41,907)						(10,553)						(25)						(148,099)						(109,516)						(38,583)						(35)
Fee Related Earnings			$	(137,090)					$	(95,444)					(41,646)						(44)						$	(391,219)					$	(286,287)					(104,932)						(37)

Other Fees. The decreases in other fees for the three and nine months ended September 30, 2023 compared to the same periods in 2022 were primarily driven by decreases in: (i) facilitation fees from the 1031 exchange program associated with our non-traded REITs of $2.1 million and $7.6 million, respectively; and (ii) sales-based, net distribution fees associated with our non-traded REITs of $1.0 million and $2.0 million, respectively. The decreases in other fees for the three and nine months ended September 30, 2023 compared to the same periods in 2022 were partially offset by asset-based, net distribution fees associated with our non-traded REITs of $1.1 million and $4.6 million, respectively. The nine months ended September 30, 2023 also included 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.

Compensation and Benefits. The increases in compensation and benefits for the three and nine months ended September 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; and (ii) the expansion of our business operations teams to support the growth of our business and other strategic initiatives. In addition, incentive-based compensation increased by $17.0 million and $34.5 million, respectively, over the comparative periods. Our discretionary incentive-based compensation is based on our operating performance. Amounts are expected to fluctuate until payments are finalized in the fourth quarter. Average headcount increased by 21% to 1,466 operations management professionals for the year-to-date period in 2023 from 1,215 professionals for the same period in 2022.

The increases described above for the year-to-date period included $2.2 million of expenses 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 $5.9 million for the first two quarters of 2023, with a corresponding increase in general, administrative and other expenses. As this reorganization occurred at the end of the second quarter of 2022, we did not have comparable results for the nine months ended September 30, 2023.

Employee commissions are earned in connection with the sale and distribution of fund shares in our non-traded, retail channel products and private placements of our exchange programs. Employee commissions have decreased over the comparative periods primarily due to the lower sales volumes from our non-traded REITs and have begun to trend up with increased sales volumes from ASIF.

General, Administrative and Other Expenses. Travel and marketing collectively increased by $2.3 million and $7.5 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 as we conducted more in-person company meetings and events with a focus on promoting collaboration. Separately, as we build out our retail distribution infrastructure and capabilities through Ares Wealth Management Solutions, LLC (“AWMS”) to support our prospective sales and AUM growth, we expect marketing and distribution expenses, including travel, to increase in future periods. AWMS has contributed $0.9 million and $3.1 million, respectively, to increases in travel and marketing over the comparative periods. Additionally, professional service fees increased by $4.5 million and $8.4 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 primarily due to consulting fees to support various ongoing initiatives to enhance our operations. 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 $1.7 million and $6.6 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

Separately, certain other expenses also increased by $2.3 million for the nine months ended September 30, 2023 when compared to the same period 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. In addition, tax related service fees increased by $7.3 million for the nine months ended September 30, 2023 when compared to the same period in 2022 due to the reorganization of our income tax compliance function during the third quarter of 2022.

The increases described above for the year-to-date period included $0.9 million of expenses 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 September 30,												Favorable (Unfavorable)												Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change						2023						2022						$ Change						% Change
Fee Related Earnings			$	(137,090)					$	(95,444)					$	(41,646)					(44)%						$	(391,219)					$	(286,287)					$	(104,932)					(37)%
Interest and other investment income (loss)—realized			114						(171)						285						NM						350						(1,450)						1,800						NM
Interest expense			(23)						(128)						105						82						(60)						(474)						414						87
Realized net investment income (loss)			91						(299)						390						NM						290						(1,924)						2,214						NM
Realized Income			$	(136,999)					$	(95,743)					(41,256)						(43)						$	(390,929)					$	(288,211)					(102,718)						(36)

Liquidity and Capital Resources

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

Sources and Uses of Liquidity

Our sources of liquidity are (1) cash on hand, (2) net working capital, (3) cash from operations, including management fees and fee related performance revenues, which are collected monthly, quarterly or semi-annually, and net realized performance income, which may be unpredictable as to amount and timing, (4) fund distributions related to our investments that are unpredictable as to amount and timing and (5) net borrowing from the Credit Facility. As of September 30, 2023, our cash and cash equivalents were $311.8 million, and we had $765.0 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 September 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 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

The following tables summarize our condensed consolidated statements of cash flows by activities attributable to the Company and 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.

			Nine months ended September 30,
			2023						2022
Net cash provided by operating activities			$	724,913					$	640,805
Net cash used in the Consolidated Funds’ operating activities, net of eliminations			(398,122)						(1,184,410)
Net cash provided by (used in) operating activities			326,791						(543,605)
Net cash used in the Company’s investing activities			(44,177)						(330,046)
Net cash used in the Company’s financing activities			(759,178)						(266,540)
Net cash provided by the Consolidated Funds’ financing activities, net of eliminations			417,575						1,193,621
Net cash provided by (used in) financing activities			(341,603)						927,081
Effect of exchange rate changes			(19,171)						(35,585)
Net change in cash and cash equivalents			$	(78,160)					$	17,845

The Consolidated Funds had no effect on cash flows attributable to the Company for the periods presented and are excluded from the discussion below. The following discussion focuses on cash flow by activities attributable to the Company.

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.

			Nine months ended September 30,												Favorable (Unfavorable)
			2023						2022						$ Change						% Change
Core operating activities			$	967,285					$	722,508					$	244,777					34%
Net realized performance income			42,800						85,646						(42,846)						(50)
Net cash used in investment related activities			(285,172)						(167,349)						(117,823)						70
Net cash provided by operating activities			$	724,913					$	640,805					84,108						13

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 nine months ended September 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) distributions received from our capital investments and (iv) 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.

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

Investing Activities

			Nine months ended September 30,
			2023						2022
Purchase of furniture, equipment and leasehold improvements, net of disposals			$	(44,177)					$	(28,388)
Acquisitions, net of cash acquired			—						(301,658)
Net cash used in investing activities			$	(44,177)					$	(330,046)

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

Financing Activities

			Nine months ended September 30,
			2023						2022
Net borrowings of Credit Facility			$	65,000					$	30,000
Proceeds from issuance of senior notes			—						488,915
Class A and non-voting common stock dividends			(446,252)						(334,864)
AOG unitholder distributions			(313,833)						(273,356)
Stock option exercises			80,426						14,531
Taxes paid related to net share settlement of equity awards			(145,421)						(194,223)
Other financing activities			902						2,457
Net cash used in the Company’s financing activities			$	(759,178)					$	(266,540)

As a result of generating higher fee related earnings, we increased the level of dividends paid to a growing shareholder base of Class A and non-voting common stockholders and distributions paid to AOG unitholders, resulting in net cash used in the Company’s financing activities for the nine months ended September 30, 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 nine months ended September 30, 2023 and 2022, we net settled and did not issue 1.6 million shares and 2.5 million shares, respectively. Net cash provided by the Company’s financing activities also included cash received from stock options exercises with 4.8 million and 0.8 million options exercised for the nine months ended September 30, 2023 and 2022, respectively.

Net cash provided by the Company’s financing activities for the nine months ended September 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.

Capital Resources

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

We are required to maintain minimum net capital balances for regulatory purposes for our broker-dealer entities. These net capital requirements are met in part by retaining cash, cash equivalents and investment securities. Additionally, certain of our subsidiaries operating outside the U.S. are also subject to capital adequacy requirements in each of the applicable jurisdictions. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of September 30, 2023, we were required to maintain approximately $63.9 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 Benefit Payment”). 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, prior to the amendment, 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 $165.6 million and $118.5 million as of September 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.