[Cover Page Information](index=1&type=section&id=Cover%20Page%20Information) This section provides general filing information, registered securities, filer status, and outstanding shares [General Information](index=1&type=section&id=General%20Information) This section identifies the filing as a Form 10-Q Quarterly Report for Ares Management Corporation for Q2 2021 - The document is a Form 10-Q Quarterly Report for Ares Management Corporation, covering the period ended June 30, 2021[3](index=3&type=chunk) - The registrant is a Delaware corporation with Commission File No. 001-36429[3](index=3&type=chunk) [Securities Registered](index=1&type=section&id=Securities%20Registered) Class A common stock, par value $0.01 per share, is registered on the NYSE under trading symbol ARES - Class A common stock, par value **$0.01** per share, is registered on the New York Stock Exchange under trading symbol ARES[2](index=2&type=chunk) [Filer Status and Outstanding Shares](index=1&type=section&id=Filer%20Status%20and%20Outstanding%20Shares) Ares Management Corporation is a Large Accelerated Filer, with **163.5 million** Class A common shares outstanding as of August 2, 2021 - The registrant is a Large Accelerated Filer and has complied with all filing requirements[3](index=3&type=chunk) Outstanding Shares as of August 2, 2021 | Class of Stock | Shares Outstanding | | :-------------------- | :----------------- | | Class A common stock | 163,459,152 | | Non-voting common stock | 3,489,911 | | Class B common stock | 1,000 | | Class C common stock | 120,908,190 | [Table of Contents](index=2&type=section&id=Table%20of%20Contents) This section provides an organized listing of all chapters and sub-sections within the report [Preliminary Information](index=3&type=section&id=Preliminary%20Information) This section covers forward-looking statements, organizational structure, and non-GAAP financial measures [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) The report contains forward-looking statements subject to risks and uncertainties, with actual results potentially differing materially - The report contains forward-looking statements identifiable by words like 'outlook,' 'believes,' 'expects,' etc[6](index=6&type=chunk) - These statements are subject to risks and uncertainties, and actual results may vary materially[6](index=6&type=chunk) - The company does not undertake to publicly update or review any forward-looking statement, except as required by law[6](index=6&type=chunk) [Organizational Structure and Consolidation Principles](index=3&type=section&id=Organizational%20Structure%20and%20Consolidation%20Principles) Ares Management Corporation reorganized its operating group on April 1, 2021, and consolidates entities with majority voting interest or as primary VIE beneficiary - On April 1, 2021, Ares completed an internal reorganization, merging Ares Offshore and Ares Investments with Ares Holdings, making Ares Holdings the sole entity in the Ares Operating Group[7](index=7&type=chunk) - Under GAAP, the company consolidates entities where it holds a majority voting interest or is the primary beneficiary of VIEs, including Ares-affiliated funds and CLOs[9](index=9&type=chunk) - Consolidation reflects assets, liabilities, revenues, expenses, and cash flows on a gross basis, with net income attributable to third-party investors presented as non-controlling interests[9](index=9&type=chunk) [Non-GAAP Financial Information](index=4&type=section&id=Non-GAAP%20Financial%20Information) The report presents non-GAAP financial measures like Fee Related Earnings (FRE) and Realized Income (RI) to assess segment performance, excluding consolidated funds - Results are presented on a 'segment basis' (deconsolidating funds and removing proportional results of consolidated joint ventures) and 'unconsolidated reporting basis' (combined segment results with Operations Management Group)[10](index=10&type=chunk) - These non-GAAP measures (e.g., FRE, RI) are used by management to assess segment performance and are not substitutes for GAAP measures[10](index=10&type=chunk)[15](index=15&type=chunk) - The Operations Management Group (OMG) provides shared infrastructure and administrative support, with its expenses not allocated to reportable segments[10](index=10&type=chunk) [Glossary](index=5&type=section&id=Glossary) This section defines key financial and operational terms used throughout the report, including AUM, FPAUM, FRE, and RI [Key Terms and Definitions](index=5&type=section&id=Key%20Terms%20and%20Definitions) This section defines key financial metrics like AUM, FPAUM, FRE, and RI, noting potential incomparability with other companies' measures - AUM generally refers to assets managed, including NAV, drawn/undrawn debt, and uncalled committed capital[12](index=12&type=chunk) - FPAUM refers to AUM from which management fees are directly earned, based on various fee bases[13](index=13&type=chunk) - FRE (non-GAAP) assesses core operating performance by comparing recurring revenue (primarily management fees) to operating expenses, excluding performance income and certain other items[13](index=13&type=chunk) - RI (non-GAAP) evaluates business performance by removing fluctuations of unrealized income and losses, focusing on operating performance and segment contribution[14](index=14&type=chunk) - The definitions of AUM, FPAUM, FRE, and RI may not be comparable to those used by other companies or regulatory bodies[15](index=15&type=chunk) [PART I—FINANCIAL INFORMATION](index=8&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and related notes [Item 1. Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) This section presents the condensed consolidated financial statements, including statements of financial condition, operations, comprehensive income, changes in equity, and cash flows [Condensed Consolidated Statements of Financial Condition](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) The Condensed Consolidated Statements of Financial Condition show a significant increase in total assets and liabilities from December 31, 2020, to June 30, 2021 Condensed Consolidated Statements of Financial Condition (Amounts in Thousands) | Metric | June 30, 2021 (unaudited) | December 31, 2020 | | :-------------------------------------- | :------------------------ | :---------------- | | **Assets** | | | | Cash and cash equivalents | $582,906 | $539,812 | | Investments | $2,916,226 | $1,682,759 | | Other assets | $1,868,450 | $812,419 | | Assets of Consolidated Funds: | | | | Cash and cash equivalents | $848,875 | $522,377 | | U.S. Treasury securities, at fair value | $1,000,057 | — | | Investments, at fair value | $10,592,646 | $10,877,097 | | **Total assets** | **$18,639,587** | **$15,168,992** | | **Liabilities** | | | | Performance related compensation payable| $1,608,141 | $813,378 | | Debt obligations | $1,088,050 | $642,998 | | Liabilities of Consolidated Funds: | | | | Payable for securities purchased | $1,329,530 | $514,946 | | CLO loan obligations, at fair value | $9,296,585 | $9,958,076 | | **Total liabilities** | **$14,181,617** | **$12,596,852** | | **Total equity** | **$3,441,115** | **$2,471,774** | - Total assets increased by **$3.47 billion** (22.9%) from December 31, 2020, to June 30, 2021, primarily due to higher investments and U.S. Treasury securities within Consolidated Funds[19](index=19&type=chunk) - Total liabilities increased by **$1.58 billion** (12.6%) over the same period, driven by higher performance-related compensation payable and debt obligations[19](index=19&type=chunk) [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The Condensed Consolidated Statements of Operations show substantial revenue growth for Q2 and H1 2021, primarily from increased carried interest allocation, leading to higher net income Condensed Consolidated Statements of Operations (Amounts in Thousands) | Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :------------------------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Revenues** | | | | | | Management fees | $367,286 | $266,867 | $687,559 | $530,716 | | Carried interest allocation | $852,521 | $303,278 | $1,150,056 | $72,402 | | Incentive fees | $15,904 | $331 | $18,724 | $(2,918) | | Total revenues | **$1,294,819** | **$602,758** | **$1,953,207** | **$616,167** | | **Expenses** | | | | | | Compensation and benefits | $269,689 | $185,131 | $501,539 | $365,215 | | Performance related compensation | $656,381 | $237,108 | $877,813 | $69,209 | | Total expenses | **$1,024,732** | **$483,567** | **$1,549,841** | **$565,526** | | Net income attributable to Ares Management Corporation | $141,644 | $56,371 | $200,022 | $25,335 | | Net income attributable to Ares Management Corporation Class A and non-voting common stockholders | $124,980 | $50,946 | $177,933 | $14,485 | | Basic EPS | $0.70 | $0.36 | $1.07 | $0.08 | | Diluted EPS | $0.69 | $0.35 | $1.03 | $0.08 | - Total revenues for the three months ended June 30, 2021, increased by **115% YoY**, primarily driven by a **181% increase in carried interest allocation**[22](index=22&type=chunk) - Net income attributable to Ares Management Corporation Class A and non-voting common stockholders increased by **145% YoY** for the three months ended June 30, 2021, and by **1128%** for the six months ended June 30, 2021[22](index=22&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) The Condensed Consolidated Statements of Comprehensive Income show a significant increase in comprehensive income for Q2 and H1 2021, reflecting improved net income and foreign currency adjustments Condensed Consolidated Statements of Comprehensive Income (Amounts in Thousands) | Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :------------------------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $271,319 | $216,676 | $435,629 | $(59,121) | | Foreign currency translation adjustments, net of tax | $3,458 | $2,687 | $(7,115) | $(11,521) | | Total comprehensive income (loss) | $274,777 | $219,363 | $428,514 | $(70,642) | | Comprehensive income attributable to Ares Management Corporation | $142,402 | $55,983 | $200,235 | $20,145 | - Comprehensive income attributable to Ares Management Corporation increased by **154% YoY** for the three months ended June 30, 2021, and by **894%** for the six months ended June 30, 2021[25](index=25&type=chunk) [Condensed Consolidated Statements of Changes in Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) The Condensed Consolidated Statements of Changes in Equity reflect significant activity, including Series A Preferred Stock redemption and common stock issuance, leading to a substantial increase in total equity Key Changes in Equity (Amounts in Thousands) | Metric | Balance at Dec 31, 2020 | Balance at June 30, 2021 | | :-------------------------------------- | :---------------------- | :----------------------- | | Series A Preferred Stock | $298,761 | — | | Class A Common Stock | $1,472 | $1,631 | | Non-voting Common Stock | — | $35 | | Class C Common Stock | $1,124 | $1,176 | | Additional Paid-in-Capital | $1,043,669 | $1,750,144 | | Retained Earnings | $(151,824) | $(131,400) | | Total Stockholders' Equity | $1,193,685 | $1,622,282 | | Non-Controlling Interest in AOG Entities| $738,369 | $1,257,628 | | Non-Controlling Interest in Consolidated Funds | $539,720 | $561,205 | | Redeemable Interest in Consolidated Funds | — | $916,824 | | **Total Equity** | **$2,471,774** | **$3,441,115** | - Total equity increased by **$969.3 million** (39.2%) from December 31, 2020, to June 30, 2021[28](index=28&type=chunk) - The Series A Preferred Stock was fully redeemed by June 30, 2021, with a redemption premium of **$11.2 million**[28](index=28&type=chunk) - Issuances of common stock and capital contributions significantly increased additional paid-in-capital and non-controlling interests in AOG entities[28](index=28&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows show a net change in cash of **$43.1 million** for H1 2021, with financing activities providing cash while operating and investing activities used significant amounts Condensed Consolidated Statements of Cash Flows (Amounts in Thousands) | Cash Flow Activity | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :------------------------------------------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(1,069,043) | $(150,839) | | Net cash used in investing activities | $(786,096) | $(43,924) | | Net cash provided by financing activities | $1,894,872 | $962,230 | | Effect of exchange rate changes | $3,361 | $(15,811) | | Net change in cash and cash equivalents | $43,094 | $751,656 | | Cash and cash equivalents, beginning of period | $539,812 | $138,384 | | Cash and cash equivalents, end of period | $582,906 | $890,040 | - Net cash used in operating activities significantly increased from **$(150.8) million** in H1 2020 to **$(1,069.0) million** in H1 2021, largely due to adjustments related to non-controlling interests in Consolidated Funds[36](index=36&type=chunk) - Net cash used in investing activities increased from **$(43.9) million** in H1 2020 to **$(786.1) million** in H1 2021, primarily due to acquisitions (e.g., Landmark Acquisition)[36](index=36&type=chunk) - Net cash provided by financing activities nearly doubled from **$962.2 million** in H1 2020 to **$1,894.9 million** in H1 2021, driven by proceeds from stock issuance and subordinated notes[36](index=36&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes on accounting policies, business combinations, goodwill, investments, fair value, debt, and other financial disclosures [Note 1. ORGANIZATION](index=14&type=section&id=Note%201.%20ORGANIZATION) Ares Management Corporation reorganized its operating group on April 1, 2021, and consolidates various investment entities, impacting gross financials but not net income - Ares Management Corporation is a global alternative investment manager with integrated groups across Credit, Private Equity, Real Estate, Secondary Solutions, and Strategic Initiatives[39](index=39&type=chunk) - An internal reorganization on April 1, 2021, merged Ares Offshore and Ares Investments with Ares Holdings, simplifying the Ares Operating Group structure[41](index=41&type=chunk) - The company consolidates certain Ares funds, co-investment entities, CLOs, and a SPAC (AAC), which significantly increases reported assets, liabilities, revenues, expenses, and cash flows but has no direct effect on net income attributable to Ares Management Corporation[42](index=42&type=chunk) - Non-controlling interests in AOG entities represent equity and net income attributable to owners of AOG Units not held by the Company, including Ares Owners Holdings L.P. and strategic joint ventures[43](index=43&type=chunk) - The company completed the acquisition of a majority interest in SSG Capital Holdings Limited on July 1, 2020, which now operates as Ares SSG, an alternative investment manager in Asia Pacific[45](index=45&type=chunk) [Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=16&type=section&id=Note%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis of presentation, accounting for business combinations and U.S. Treasury securities, and the impact of COVID-19 and recent accounting pronouncements - Financial statements are unaudited and prepared in accordance with GAAP for interim financial information, excluding some annual disclosures[47](index=47&type=chunk) - Management's estimates and assumptions are subject to higher variability due to the ongoing COVID-19 pandemic[48](index=48&type=chunk) - Business combinations are accounted for using the acquisition method, allocating purchase price to acquired assets and assumed liabilities at fair value, with any excess recorded as goodwill[49](index=49&type=chunk) - U.S. Treasury securities held by consolidated SPACs (like AAC) are recorded at fair value, with interest income and fair value changes recognized in the Consolidated Statements of Operations[50](index=50&type=chunk) - The company is evaluating the impact of ASU 2020-04 and ASU 2021-01 on reference rate reform, which provides optional expedients for contracts and hedging relationships affected by LIBOR discontinuation[54](index=54&type=chunk) [Note 3. BUSINESS COMBINATIONS](index=17&type=section&id=Note%203.%20BUSINESS%20COMBINATIONS) On June 2, 2021, Ares acquired Landmark Partners, LLC for **$1.1 billion**, expanding into the secondaries market and resulting in **$417.2 million** in goodwill and significant intangible assets - On June 2, 2021, Ares acquired 100% of Landmark Partners, LLC for **$1.1 billion**, expanding into the secondaries market[55](index=55&type=chunk) Landmark Acquisition Consideration Transferred | Component | Amount (Thousands) | | :-------- | :----------------- | | Cash | $803,829 | | Equity | $299,640 | | Total | $1,103,469 | Landmark Acquisition: Fair Values of Assets Acquired and Liabilities Assumed (Thousands) | Asset/Liability | Fair Value (Thousands) | | :------------------------------ | :--------------------- | | Cash | $25,685 | | Other tangible assets | $22,826 | | Management contracts | $425,880 | | Client relationships | $197,160 | | Trade name | $86,200 | | Total identifiable assets acquired | $757,751 | | Accounts payable, accrued expenses and other liabilities | $71,466 | | Net identifiable assets acquired | $686,285 | | Goodwill | $417,184 | | Net assets acquired | $1,103,469 | - Landmark's revenues and net income of **$12.9 million** and **$4.8 million**, respectively, are included in the Company's Consolidated Statements of Operations for the three months ended June 30, 2021[60](index=60&type=chunk) [Note 4. GOODWILL AND INTANGIBLE ASSETS](index=21&type=section&id=Note%204.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Finite-lived intangible assets and goodwill significantly increased due to the Landmark Acquisition, leading to higher amortization expense and **$417.2 million** goodwill allocated to the Secondary Solutions Group Finite Lived Intangible Assets, Net (Amounts in Thousands) | Asset | June 30, 2021 | December 31, 2020 | | :------------------------- | :------------ | :---------------- | | Management contracts | $636,737 | $210,857 | | Client relationships | $222,301 | $25,141 | | Trade name | $97,279 | $11,079 | | Total intangible assets | $956,317 | $247,077 | | Less: accumulated amortization | $(55,916) | $(28,082) | | Intangible assets, net | $902,666 | $222,088 | - Amortization expense for intangible assets increased significantly to **$17.3 million** for Q2 2021 (from **$1.6 million** in Q2 2020) and **$27.9 million** for H1 2021 (from **$2.6 million** in H1 2020), primarily due to the Landmark Acquisition[65](index=65&type=chunk) Goodwill by Segment (Amounts in Thousands) | Segment | Balance as of Dec 31, 2020 | Acquisitions | Balance as of June 30, 2021 | | :-------------------------- | :------------------------- | :----------- | :-------------------------- | | Credit Group | $32,196 | — | $32,196 | | Private Equity Group | $58,600 | — | $58,600 | | Real Estate Group | $53,120 | $20 | $53,140 | | Secondary Solutions Group | — | $417,184 | $417,175 | | Strategic Initiatives | $227,131 | $(491) | $226,640 | | **Total** | **$371,047** | **$417,184** | **$787,751** | - Goodwill increased by **$416.7 million** (112.3%) from December 31, 2020, to June 30, 2021, with the entire Landmark Acquisition goodwill allocated to the Secondary Solutions Group[67](index=67&type=chunk) [Note 5. INVESTMENTS](index=22&type=section&id=Note%205.%20INVESTMENTS) The company's total investments increased significantly, driven by equity method investments and accrued carried interest, with Consolidated Funds allocating **$1 billion** to U.S. Treasury securities Company's Investments (Amounts in Thousands) | Investment Type | June 30, 2021 | December 31, 2020 | | :---------------------------------------------------------------------------- | :------------ | :---------------- | | Equity method investments: | | | | Equity method private investment partnership interests - principal | $513,055 | $366,471 | | Equity method - carried interest | $2,207,763 | $1,145,853 | | Total equity method investments | $2,859,361 | $1,628,403 | | Collateralized loan obligations and other fixed income, at fair value | $55,840 | $53,349 | | Common stock, at fair value | $1,025 | $1,007 | | **Total investments** | **$2,916,226**| **$1,682,759** | - Total investments increased by **$1.23 billion** (73.3%) from December 31, 2020, to June 30, 2021, largely due to a **92.7% increase in accrued carried interest**[69](index=69&type=chunk) - Net gains from equity method investments were **$53.8 million** for Q2 2021 (vs. **$21.7 million** in Q2 2020) and **$80.4 million** for H1 2021 (vs. **$7.2 million** net losses in H1 2020)[70](index=70&type=chunk) Investments of Consolidated Funds (Amounts in Thousands) | Investment Type | June 30, 2021 | December 31, 2020 | | :-------------------------------------------- | :------------ | :---------------- | | Fixed income investments: | | | | Bonds | $440,894 | $397,494 | | Loans | $9,644,514 | $10,012,948 | | U.S. Treasury securities | $1,000,057 | — | | Investments in CLO warehouse | $10,000 | — | | Total fixed income investments | $11,095,465 | $10,410,442 | | Equity securities | $234,038 | $227,031 | | Partnership interests | $263,200 | $239,624 | | **Total investments, at fair value** | **$11,592,703**| **$10,877,097** | - Consolidated Funds' investments increased by **$715.6 million** (6.6%) from December 31, 2020, to June 30, 2021, primarily due to **$1 billion** in U.S. Treasury securities from the AAC SPAC IPO[74](index=74&type=chunk) [Note 6. FAIR VALUE](index=23&type=section&id=Note%206.%20FAIR%20VALUE) This note details fair value measurements using a three-level hierarchy, with significant Level III classifications for company and Consolidated Funds' investments, highlighting reliance on unobservable inputs - Fair value measurements are classified into Level I (quoted prices in active markets), Level II (observable inputs other than Level I), and Level III (significant unobservable inputs)[75](index=75&type=chunk)[76](index=76&type=chunk) Company's Financial Instruments Measured at Fair Value (June 30, 2021, Amounts in Thousands) | Asset/Liability Type | Level I | Level II | Level III | Measured at NAV | Total | | :------------------------------------------------- | :------ | :------- | :-------- | :-------------- | :------- | | Investments: Collateralized loan obligations and other fixed income | — | — | $55,840 | — | $55,840 | | Investments: Common stock and other equity securities | — | $1,025 | $107,240 | — | $108,265 | | Investments: Partnership interests | — | — | $2,575 | $4,575 | $7,150 | | Derivatives-foreign exchange contracts and interest rate contracts | — | $3,024 | — | — | $3,024 | | Total assets, at fair value | — | $4,049 | $165,655 | $4,575 | $174,279 | | Liabilities: Derivatives-foreign exchange contracts | — | $(700) | — | — | $(700) | Consolidated Funds' Financial Instruments Measured at Fair Value (June 30, 2021, Amounts in Thousands) | Asset/Liability Type | Level I | Level II | Level III | Measured at NAV | Total | | :------------------------------------------------- | :---------- | :---------- | :-------- | :-------------- | :----------- | | Investments: Fixed income investments: Bonds | — | $440,893 | $1 | — | $440,894 | | Investments: Fixed income investments: Loans | — | $9,189,089 | $455,425 | — | $9,644,514 | | Investments: Fixed income investments: U.S. Treasury securities | $1,000,057 | — | — | — | $1,000,057 | | Investments: Equity securities | $3,540 | $1,198 | $229,300 | — | $234,038 | | Investments: Partnership interests | — | — | $255,278 | $7,922 | $263,200 | | Total assets, at fair value | $1,003,597 | $9,641,180 | $940,151 | $7,922 | $11,592,850 | | Liabilities: Loan obligations of CLOs | — | $(9,296,585)| — | — | $(9,296,585) | - Transfers out of Level III generally occurred when investments experienced more significant market activity, allowing for valuation using observable inputs. Transfers into Level III occurred when market activity was less significant, limiting observable inputs[96](index=96&type=chunk) [Note 7. DERIVATIVE FINANCIAL INSTRUMENTS](index=32&type=section&id=Note%207.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) The company and Consolidated Funds use derivative instruments, primarily foreign exchange and interest rate contracts, to mitigate credit and foreign exchange risk, recognized at fair value - Derivative instruments are used to mitigate credit and foreign exchange risk and are recognized at fair value[106](index=106&type=chunk) Company's Derivative Contracts (Amounts in Thousands) | Derivative Type | June 30, 2021 Notional | June 30, 2021 Assets Fair Value | June 30, 2021 Liabilities Fair Value | Dec 31, 2020 Notional | Dec 31, 2020 Assets Fair Value | Dec 31, 2020 Liabilities Fair Value | | :--------------------------- | :--------------------- | :------------------------------ | :----------------------------------- | :-------------------- | :----------------------------- | :---------------------------------- | | Foreign exchange contracts | $74,514 | $3,019 | $700 | $30,040 | $1,440 | $1,565 | | Interest rate contracts | $20,073 | $5 | — | — | — | — | | **Total derivatives, at fair value** | **$94,587** | **$3,024** | **$700** | **$30,040** | **$1,440** | **$1,565** | Consolidated Funds' Derivative Contracts (Amounts in Thousands) | Derivative Type | June 30, 2021 Notional | June 30, 2021 Assets Fair Value | June 30, 2021 Liabilities Fair Value | Dec 31, 2020 Notional | Dec 31, 2020 Assets Fair Value | Dec 31, 2020 Liabilities Fair Value | | :--------------------------- | :--------------------- | :------------------------------ | :----------------------------------- | :-------------------- | :----------------------------- | :---------------------------------- | | Warrants | — | — | $25,000 | — | — | — | | Asset swap - other | $51,687 | $147 | $1,805 | $7,600 | $1,104 | $44 | | **Total derivatives, at fair value** | **$51,687** | **$147** | **$26,805** | **$7,600** | **$1,104** | **$44** | [Note 8. DEBT](index=33&type=section&id=Note%208.%20DEBT) Ares Management Corporation's debt increased significantly with **$450 million** in 2051 Subordinated Notes. Consolidated CLOs have substantial loan obligations, and all debt covenants were in compliance as of June 30, 2021 Company's Debt Obligations (Amounts in Thousands) | Debt Obligation | Maturity | June 30, 2021 Carrying Value | June 30, 2021 Interest Rate | December 31, 2020 Carrying Value | December 31, 2020 Interest Rate | | :------------------------ | :-------- | :--------------------------- | :-------------------------- | :------------------------------- | :------------------------------ | | Credit Facility (Revolver)| 3/31/2026 | — | — % | — | — % | | 2024 Senior Notes | 10/8/2024 | $247,627 | 4.21 % | $247,285 | 4.21 % | | 2030 Senior Notes | 6/15/2030 | $395,935 | 3.28 % | $395,713 | 3.28 % | | 2051 Subordinated Notes | 6/30/2051 | $444,488 | 4.13 % | — | — % | | **Total debt obligations**| | **$1,088,050** | | **$642,998** | | - Total debt obligations increased by **$445.1 million** (69.2%) from December 31, 2020, to June 30, 2021, primarily due to the issuance of 2051 Subordinated Notes[111](index=111&type=chunk) Loan Obligations of Consolidated CLOs (Amounts in Thousands) | Loan Obligation | June 30, 2021 Fair Value | Dec 31, 2020 Fair Value | | :------------------------ | :----------------------- | :---------------------- | | Senior secured notes | $9,029,021 | $9,665,804 | | Subordinated notes | $267,564 | $292,272 | | **Total loan obligations**| **$9,296,585** | **$9,958,076** | - Loan obligations of Consolidated CLOs decreased by **$661.5 million** (6.6%) from December 31, 2020, to June 30, 2021[116](index=116&type=chunk) - All debt covenants for the company and Consolidated Funds were in compliance as of June 30, 2021[112](index=112&type=chunk)[118](index=118&type=chunk) [Note 9. COMMITMENTS AND CONTINGENCIES](index=35&type=section&id=Note%209.%20COMMITMENTS%20AND%20CONTINGENCIES) Ares Management Corporation has **$716.4 million** in unfunded commitments, a **$300 million** contingent liability for the Landmark MIP, and **$275.7 million** in potential performance income repayment obligations - Unfunded commitments to invest in funds or support strategic initiatives totaled **$716.4 million** as of June 30, 2021 (down from **$784.2 million** at Dec 31, 2020)[123](index=123&type=chunk) - A management incentive program (MIP) was established for Landmark professionals, with a contingent liability not exceeding **$300 million**, based on fundraising targets. As of June 30, 2021, the fair value of this liability was **$236.0 million**[124](index=124&type=chunk)[125](index=125&type=chunk) - Performance income is subject to potential repayment if funds do not achieve certain return thresholds. As of June 30, 2021, this amount was approximately **$275.7 million**, with **$215.8 million** reimbursable by professionals[126](index=126&type=chunk)[129](index=129&type=chunk) Lease Liabilities (Amounts in Thousands) | Lease Type | June 30, 2021 | December 31, 2020 | | :---------------------- | :------------ | :---------------- | | Operating lease liabilities | $198,289 | $180,236 | | Finance lease obligations | $893 | $1,273 | | **Total lease liabilities** | **$199,182** | **$181,509** | - Weighted-average remaining lease terms are **5.7 years** for operating leases and **2.5 years** for finance leases as of June 30, 2021[139](index=139&type=chunk) [Note 10. RELATED PARTY TRANSACTIONS](index=37&type=section&id=Note%2010.%20RELATED%20PARTY%20TRANSACTIONS) Substantially all of Ares Management Corporation's revenue is from affiliated funds, with various receivables from and payables to affiliates, including tax receivable agreement liabilities - Substantially all of the Company's revenue is earned from its affiliates, including management fees, carried interest allocation, incentive fees, principal investment income, and administrative expense reimbursements[140](index=140&type=chunk) Due from Affiliates (Amounts in Thousands) | Category | June 30, 2021 | December 31, 2020 | | :-------------------------------------------------------------------- | :------------ | :---------------- | | Management fees receivable from non-consolidated funds | $280,435 | $308,581 | | Incentive fee receivable from non-consolidated funds | $693 | $21,495 | | Payments made on behalf of and amounts due from non-consolidated funds and employees | $89,502 | $75,811 | | **Due from affiliates—Company** | **$370,630** | **$405,887** | | Amounts due from portfolio companies and non-consolidated funds | $4,348 | $17,172 | | **Due from affiliates—Consolidated Funds** | **$4,348** | **$17,172** | Due to Affiliates (Amounts in Thousands) | Category | June 30, 2021 | December 31, 2020 | | :-------------------------------------------------------------------- | :------------ | :---------------- | | Management fee received in advance and rebates payable to non-consolidated funds | $3,200 | $4,808 | | Tax receivable agreement liability | $61,736 | $62,505 | | Undistributed carried interest and incentive fees | $11,158 | $27,322 | | Payments made by non-consolidated funds on behalf of and payable by the Company | $22,350 | $5,551 | | **Due to affiliates—Company** | **$98,444** | **$100,186** | [Note 11. INCOME TAXES](index=38&type=section&id=Note%2011.%20INCOME%20TAXES) Ares Management Corporation reported a significant increase in income tax expense for Q2 and H1 2021, driven by higher taxable income and increased AMC common stockholder ownership, with a net deferred tax asset of **$1.6 million** Income Tax Expense (Amounts in Thousands) | Period | Income Tax Expense | | :----------------------------------- | :----------------- | | Three months ended June 30, 2021 | $48,458 | | Three months ended June 30, 2020 | $24,421 | | Six months ended June 30, 2021 | $74,212 | | Six months ended June 30, 2020 | $3,805 | - Income tax expense increased by **98% YoY** for Q2 2021 and by **1849% YoY** for H1 2021[146](index=146&type=chunk) - The increase is primarily due to higher taxable income and an increase in AMC common stockholders' weighted average daily ownership from **53.7%** (Q2 2020) to **59.1%** (Q2 2021) and from **52.1%** (H1 2020) to **58.1%** (H1 2021)[147](index=147&type=chunk)[303](index=303&type=chunk) - A net deferred tax asset of **$1.6 million** was recorded as of June 30, 2021, a decrease from **$70.0 million** at December 31, 2020[148](index=148&type=chunk) [Note 12. EARNINGS PER SHARE](index=39&type=section&id=Note%2012.%20EARNINGS%20PER%20SHARE) Ares Management Corporation's basic and diluted EPS for Class A and non-voting common stock significantly increased for Q2 and H1 2021, reflecting improved net income, with the treasury stock method being more dilutive - Earnings per share for Class A and non-voting common stock is presented on a combined basis due to their same economic rights[150](index=150&type=chunk) Net Income Per Share of Class A and Non-Voting Common Stock | Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.70 | $0.36 | $1.07 | $0.08 | | Diluted EPS | $0.69 | $0.35 | $1.03 | $0.08 | - Basic EPS increased by **94.4% YoY** for Q2 2021 and by **1237.5% YoY** for H1 2021[156](index=156&type=chunk) - Diluted EPS increased by **97.1% YoY** for Q2 2021 and by **1187.5% YoY** for H1 2021[156](index=156&type=chunk) - The treasury stock method was the more dilutive method for Q2 2021 and H1 2021, while the two-class method was more dilutive for H1 2020[151](index=151&type=chunk) [Note 13. EQUITY COMPENSATION](index=40&type=section&id=Note%2013.%20EQUITY%20COMPENSATION) Equity-based compensation expense significantly increased due to performance-based restricted units and accelerated expense, with substantial future compensation expense expected to be recognized - The Equity Incentive Plan's available shares reset to **44,510,451** on January 1, 2021, with **40,075,772** shares remaining available as of June 30, 2021[157](index=157&type=chunk) Equity-Based Compensation Expense (Amounts in Thousands) | Category | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restricted units | $46,742 | $28,386 | $90,829 | $56,768 | | Restricted units with a market condition | $22,762 | $297 | $34,324 | $4,429 | | Options | — | — | — | $43 | | **Equity-based compensation expense** | **$69,504** | **$28,683** | **$125,153** | **$61,240** | - Equity-based compensation expense increased by **142% YoY** for Q2 2021 and by **104% YoY** for H1 2021[159](index=159&type=chunk) - The increase was primarily due to performance-based restricted units granted in Q1 2021, including **$14.0 million** accelerated expense from Tranche I vesting, and future grants approved for 2022-2024[163](index=163&type=chunk)[166](index=166&type=chunk)[169](index=169&type=chunk)[296](index=296&type=chunk) - Total compensation expense expected to be recognized for restricted units is approximately **$573.6 million** over a weighted average period of **3.4 years**[165](index=165&type=chunk) - Net cash proceeds from stock option exercises were **$14.0 million** for H1 2021, with **$4.0 million** in tax benefits[171](index=171&type=chunk) [Note 14. EQUITY AND REDEEMABLE INTEREST](index=44&type=section&id=Note%2014.%20EQUITY%20AND%20REDEEMABLE%20INTEREST) Ares Management Corporation's common stock includes Class A, B, C, and non-voting shares. The company raised **$828.2 million** from stock offerings in April 2021, redeemed Series A Preferred Stock, and saw increased redeemable interests in Consolidated Funds due to the AAC SPAC IPO - The company's common stock includes Class A, Class B, Class C, and non-voting common stock, with non-voting common stock having the same economic rights as Class A[172](index=172&type=chunk) - In April 2021, the company issued **3,489,911** shares of non-voting common stock and **1,234,200** shares of Class A common stock to SMBC in a private placement, generating **$250.0 million**[174](index=174&type=chunk) - A public offering of **10,925,000** shares of Class A common stock in April 2021 generated approximately **$578.2 million**[175](index=175&type=chunk) Changes in Common Stock (Shares) | Class of Stock | Balance - Jan 1, 2021 | Issuance of stock | Exchanges of AOG Units | Stock option exercises, net | Vesting of restricted stock awards, net | Balance - June 30, 2021 | | :-------------------- | :-------------------- | :---------------- | :--------------------- | :-------------------------- | :-------------------------------------- | :---------------------- | | Class A Common Stock | 147,182,562 | 12,159,200 | 283,724 | 751,091 | 2,675,211 | 163,051,788 | | Non-Voting Common Stock | — | 3,489,911 | — | — | — | 3,489,911 | | Class B Common Stock | 1,000 | — | — | — | — | 1,000 | | Class C Common Stock | 112,447,618 | 5,419,413 | (283,724) | — | — | 117,583,307 | | **Total** | **259,631,180** | **21,068,524** | **—** | **751,091** | **2,675,211** | **284,126,006** | - The Series A Preferred Stock was fully redeemed on June 30, 2021, for **$310.0 million**, including a **$5.4 million** dividend payment[180](index=180&type=chunk) - Redeemable interest in Consolidated Funds increased from **$0** at December 31, 2020, to **$916.8 million** at June 30, 2021, primarily due to the AAC SPAC IPO[184](index=184&type=chunk) [Note 15. SEGMENT REPORTING](index=46&type=section&id=Note%2015.%20SEGMENT%20REPORTING) Ares Management Corporation operates through Credit, Private Equity, Real Estate, Secondary Solutions, and Strategic Initiatives segments, using non-GAAP measures like FRE and RI to assess performance, excluding Consolidated Funds - The company's operating segments include Credit Group, Private Equity Group, Real Estate Group, Secondary Solutions Group, and Strategic Initiatives[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - The Secondary Solutions Group was formed in Q2 2021 following the Landmark Acquisition, focusing on secondary markets across alternative asset classes[188](index=188&type=chunk) - The Operations Management Group (OMG) provides shared infrastructure and administrative support to operating segments, with its expenses not allocated to segments[190](index=190&type=chunk) - FRE (non-GAAP) assesses core operating performance by comparing recurring revenue to operating expenses, excluding performance income and certain other items[191](index=191&type=chunk) - RI (non-GAAP) evaluates business performance by removing fluctuations of unrealized income and losses, focusing on operating performance and segment contribution[192](index=192&type=chunk) Fee Related Earnings (FRE) by Segment (Amounts in Thousands) | Segment | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Credit Group | $169,068 | $115,600 | $316,740 | $229,857 | | Private Equity Group | $19,876 | $26,852 | $43,762 | $53,890 | | Real Estate Group | $12,070 | $7,497 | $23,114 | $17,037 | | Secondary Solutions Group | $7,750 | — | $7,750 | — | | Strategic Initiatives | $9,642 | — | $18,569 | — | | Operations Management Group | $(71,503) | $(52,992) | $(134,566) | $(110,723) | | **Total Fee Related Earnings**| **$146,903** | **$96,957** | **$275,369** | **$190,061** | - Total FRE increased by **52% YoY** for Q2 2021 and by **45% YoY** for H1 2021[315](index=315&type=chunk) Realized Income (RI) by Segment (Amounts in Thousands) | Segment | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Credit Group | $199,458 | $119,781 | $350,207 | $237,172 | | Private Equity Group | $44,850 | $40,714 | $74,539 | $101,621 | | Real Estate Group | $16,390 | $8,142 | $28,885 | $28,227 | | Secondary Solutions Group | $7,747 | — | $7,747 | — | | Strategic Initiatives | $10,067 | — | $16,725 | — | | Operations Management Group | $(71,565) | $(53,389) | $(134,363) | $(117,627) | | **Total Realized Income** | **$206,947** | **$115,248** | **$343,740** | **$249,393** | - Total RI increased by **80% YoY** for Q2 2021 and by **38% YoY** for H1 2021[315](index=315&type=chunk) [Note 16. CONSOLIDATION](index=56&type=section&id=Note%2016.%20CONSOLIDATION) Ares Management Corporation consolidates VIEs where it has control and significant economic interest, with investments at fair value representing maximum loss exposure, noting that Consolidated Funds' liabilities are typically non-recourse - The company consolidates VIEs where it has power to direct significant activities and a potentially significant economic interest, with investments reported at fair value[213](index=213&type=chunk) Company's Interests in Consolidated and Non-Consolidated VIEs (Amounts in Thousands) | Metric | June 30, 2021 | December 31, 2020 | | :------------------------------------------------------------------ | :------------ | :---------------- | | Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs | $274,629 | $224,203 | | Maximum exposure to loss attributable to the Company's investment in consolidated VIEs | $388,140 | $391,963 | | Assets of consolidated VIEs | $11,724,508 | $11,580,003 | | Liabilities of consolidated VIEs | $10,837,725 | $10,716,438 | - The consolidation of funds has a significant gross-up effect on assets, liabilities, and cash flows but no net effect on net income attributable to Ares Management Corporation or stockholders' equity[278](index=278&type=chunk) - Liabilities of Consolidated Funds are typically non-recourse to Ares Management Corporation, except for the company's direct investment in the fund[278](index=278&type=chunk)[443](index=443&type=chunk) [Note 17. SUBSEQUENT EVENTS](index=65&type=section&id=Note%2017.%20SUBSEQUENT%20EVENTS) Subsequent to June 30, 2021, Ares Management Corporation acquired Black Creek Group's U.S. real estate business, adding **$13.7 billion** in AUM, and declared a **$0.47** per share quarterly dividend - On July 1, 2021, Ares completed the acquisition of Black Creek Group's U.S. real estate investment advisory and distribution business, adding **$13.7 billion** of AUM[241](index=241&type=chunk) - The board of directors declared a quarterly dividend of **$0.47** per share for Class A and non-voting common stock, payable on September 30, 2021[241](index=241&type=chunk) [Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations](index=66&type=section&id=Item%202.%20Management's%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) This section discusses the company's financial condition, results of operations, and key business trends, including liquidity, capital resources, and segment performance [Trends Affecting Our Business](index=66&type=section&id=Trends%20Affecting%20Our%20Business) Ares Management Corporation's business is influenced by global financial markets and economic conditions, with Q2 2021 showing continued recovery across capital markets and increasing real estate values - Approximately **90%** of management fees are derived from permanent capital vehicles, CLOs, and closed-end funds, providing a stable capital base[245](index=245&type=chunk) - Global capital markets continued recovery in Q2 2021, with inflationary concerns mitigated by improving global growth and easing pandemic restrictions[246](index=246&type=chunk) - U.S. high yield bond spreads tightened (ICE BAML High Yield Master II Index returned **2.8%** in Q2 2021, **3.7% YTD**)[247](index=247&type=chunk) - U.S. leveraged loans rallied (Credit Suisse Leveraged Loan Index returned **1.4%** in Q2 2021, **3.5% YTD**)[247](index=247&type=chunk) - Global equity markets recovered (S&P 500 Index returned **8.5%** in Q2 2021, **15.2% YTD**; MSCI All Country World ex USA Index returned **5.5%** in Q2 2021, **9.2% YTD**)[249](index=249&type=chunk) - Real estate values increased, with the industrial subsector leading recovery (FTSE EPRA/NAREIT Developed Europe returned **8.3%** in Q2 2021, **7.3% YTD**; FTSE NAREIT All Equity REITs indices returned **11.2%** in Q2 2021, **19.6% YTD**)[250](index=250&type=chunk) [Recent Transactions](index=67&type=section&id=Recent%20Transactions) On July 1, 2021, Ares acquired Black Creek Group's U.S. real estate business, adding **$13.7 billion** in AUM focused on core and core-plus strategies - On July 1, 2021, Ares acquired Black Creek Group's U.S. real estate investment advisory and distribution business[251](index=251&type=chunk) - Black Creek Group had **$13.7 billion** of AUM as of June 30, 2021, in core and core-plus real estate strategies[251](index=251&type=chunk) [Managing Business Performance](index=67&type=section&id=Managing%20Business%20Performance) Ares Management Corporation measures business performance using key operating metrics like AUM, FPAUM, IEAUM, IGAUM, and available capital, reflecting investment and fundraising performance, fee generation, and future performance income potential - AUM is a key metric for measuring investment and fundraising performance, reflecting assets generally at fair value plus available uncalled capital[252](index=252&type=chunk) Total AUM by Segment (Amounts in Millions) | Segment | Balance at 3/31/2021 | Acquisitions | Net new par/equity commitments | Net new debt commitments | Capital reductions | Distributions | Redemptions | Change in fund value | Balance at 6/30/2021 | | :-------------------------- | :------------------- | :----------- | :----------------------------- | :----------------------- | :----------------- | :------------ | :---------- | :------------------- | :------------------- | | Credit Group | $151,116 | — | $11,430 | $5,420 | $(1,565) | $(820) | $(438) | $2,444 | $167,587 | | Private Equity Group | $29,019 | — | $340 | — | $(2) | $(1,395) | — | $2,770 | $30,732 | | Real Estate Group | $17,129 | — | $1,938 | $525 | — | $(492) | $(7) | $632 | $19,725 | | Secondary Solutions Group | — | $19,513 | $100 | — | — | $(125) | — | $(12) | $19,476 | | Strategic Initiatives | $9,894 | — | $480 | $29 | — | $(250) | — | $213 | $10,366 | | **Total AUM** | **$207,158** | **$19,513** | **$14,288** | **$5,974** | **$(1,567)** | **$(3,082)** | **$(445)** | **$6,047** | **$247,886** | - Total AUM increased by **$40.7 billion** (19.6%) from March 31, 2021, to June 30, 2021, primarily due to the Landmark Acquisition (**$19.5 billion**) and net new commitments[255](index=255&type=chunk) - FPAUM refers to AUM from which management fees are directly earned, representing the sum of individual fee bases of funds[257](index=257&type=chunk) Total FPAUM by Segment (Amounts in Millions) | Segment | Balance at 3/31/2021 | Acquisitions | Commitments | Subscriptions/deployment/increase in leverage | Capital reductions | Distributions | Redemptions | Change in fund value | Change in fee basis | Balance at 6/30/2021 | | :-------------------------- | :------------------- | :----------- | :---------- | :-------------------------------------------- | :----------------- | :------------ | :---------- | :------------------- | :------------------ | :------------------- | | Credit Group | $91,615 | — | $2,255 | $6,542 | $(448) | $(990) | $(353) | $967 | — | $99,588 | | Private Equity Group | $18,527 | — | $340 | $674 | — | $(615) | — | $1 | $(195) | $18,732 | | Real Estate Group | $10,820 | — | $1,067 | $387 | — | $(388) | $(7) | $70 | $(132) | $11,817 | | Secondary Solutions Group | — | $16,839 | $100 | $2 | — | — | — | $(2) | $(12) | $16,927 | | Strategic Initiatives | $6,626 | — | $(68) | $585 | $(179) | $(421) | — | $78 | — | $6,621 | | **Total FPAUM** | **$127,588** | **$16,839** | **$3,694** | **$8,190** | **$(627)** | **$(2,414)** | **$(360)** | **$1,114** | **$(339)** | **$153,685** | - Total FPAUM increased by **$26.1 billion** (20.4%) from March 31, 2021, to June 30, 2021, primarily due to the Landmark Acquisition (**$16.8 billion**) and subscriptions/deployment[259](index=259&type=chunk) - IEAUM represents AUM from which performance income may be generated, while IGAUM refers to AUM currently generating performance income[263](index=263&type=chunk)[264](index=264&type=chunk) - As of June 30, 2021, AUM not yet paying fees of **$42.6 billion** could generate approximately **$400.9 million** in potential incremental annual management fees[270](index=270&type=chunk) - For Q2 2021, **76%** of segment management fees were from funds with three or more years in duration, indicating stable future management fees[272](index=272&type=chunk) [Consolidation and Deconsolidation of Ares Funds](index=76&type=section&id=Consolidation%20and%20Deconsolidation%20of%20Ares%20Funds) Ares Manageme

Ares Management Corporation (NYSE:ARES) Q2 2021 Earnings Conference Call July 29, 2021 12:00 PM ET Company Participants Carl Drake – Head-Public Company Investor Relations Michael Arougheti – Chief Operating Officer and Chief Financial Officer Mike McFerran – Chief Operating Officer and Chief Financial Officer Conference Call Participants Robert Lee – KBW Alex Blostein – Goldman Sachs Gerry O'Hara – Jefferies Kenneth Lee – RBC Capital Markets Michael Cyprys – Morgan Stanley Operator Welcome to Ares Managem ...

PART I—FINANCIAL INFORMATION [Financial Information - Unaudited](index=8&type=section&id=Item%201.%20Financial%20Information%20-%20Unaudited) The company's Q1 2021 financials show a significant turnaround with $658.4 million in revenue and $58.4 million in net income, driven by strong carried interest and asset growth Condensed Consolidated Statements of Operations (Q1 2021 vs Q1 2020) | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Total Revenues** | **$658,388** | **$13,409** | | Management fees | $320,273 | $263,849 | | Carried interest allocation | $297,535 | ($230,876) | | **Total Expenses** | **$525,109** | **$81,959** | | Compensation and benefits | $231,850 | $180,084 | | Performance related compensation | $221,432 | ($167,899) | | **Income (loss) before taxes** | **$190,064** | **($296,413)** | | **Net income (loss)** | **$164,310** | **($275,797)** | | Net income (loss) attributable to Ares Management Corporation | $58,378 | ($31,036) | | **Basic EPS (Class A)** | **$0.33** | **($0.33)** | | **Diluted EPS (Class A)** | **$0.32** | **($0.33)** | Condensed Consolidated Statements of Financial Condition | Metric | As of March 31, 2021 (in thousands) | As of December 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$16,535,929** | **$15,168,992** | | Cash and cash equivalents | $609,872 | $539,812 | | Investments | $1,931,978 | $1,682,759 | | Assets of Consolidated Funds | $12,514,530 | $11,552,171 | | **Total Liabilities** | **$13,084,629** | **$12,596,852** | | Debt obligations | $811,279 | $642,998 | | Liabilities of Consolidated Funds | $10,830,988 | $10,641,755 | | **Total Equity** | **$2,420,568** | **$2,471,774** | - In February 2021, the company's first sponsored SPAC, Ares Acquisition Corporation (AAC), completed its IPO, raising **$1.0 billion** and is consolidated in the financial statements[36](index=36&type=chunk) - The company completed its acquisition of a majority interest in SSG Capital Holdings Limited on July 1, 2020, which now operates as **Ares SSG**[39](index=39&type=chunk) [Management's Discussion And Analysis Of Financial Condition And Results Of Operations](index=51&type=section&id=Item%202.%20Management's%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) Management attributes strong Q1 2021 performance to favorable markets, driving AUM to $207.2 billion and a 38% YoY increase in Fee Related Earnings to $128.5 million - Market performance in Q1 2021 was strong, driven by vaccine rollouts and accommodative monetary/fiscal support, with U.S. leveraged loans returning **2.0%** and high yield bonds returning **0.9%**[216](index=216&type=chunk)[218](index=218&type=chunk) - In March 2021, Ares agreed to acquire Landmark Partners and in April 2021 raised approximately **$828.2 million** through a private placement and public offering of Class A common stock[221](index=221&type=chunk) AUM and FPAUM Rollforward (in millions) | Metric | Balance at 12/31/2020 | Net New Commitments/Subscriptions | Distributions/Redemptions | Change in Fund Value/Fee Basis | Balance at 3/31/2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | **AUM** | **$196,980** | $10,351 | ($2,991) | $2,818 | **$207,158** | | **FPAUM** | **$126,037** | $7,935 | ($3,811) | ($2,573) | **$127,588** | - As of March 31, 2021, AUM not yet paying fees was **$40.2 billion**, which could generate approximately **$423.1 million** in potential incremental annual management fees[241](index=241&type=chunk) Segment Fee Related Earnings (FRE) and Realized Income (RI) (Q1 2021 vs Q1 2020) | ($ in thousands) | FRE Q1 2021 | FRE Q1 2020 | RI Q1 2021 | RI Q1 2020 | | :--- | :--- | :--- | :--- | :--- | | Credit Group | $147,672 | $114,257 | $150,749 | $117,391 | | Private Equity Group | $23,886 | $27,038 | $29,689 | $60,907 | | Real Estate Group | $11,044 | $9,540 | $12,495 | $20,085 | | Strategic Initiatives | $8,927 | — | $6,658 | — | | Operations Management Group | ($63,063) | ($57,731) | ($62,798) | ($64,238) | | **Total** | **$128,466** | **$93,104** | **$136,793** | **$134,145** | [Quantitative and Qualitative Disclosures about Market Risk](index=88&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk exposure stems from its advisory role where fees are sensitive to fund investment values, alongside credit and interest rate risks - The company's primary exposure to market risk is related to its role as general partner or investment adviser, with sensitivity to movements in the **fair value of fund investments**[402](index=402&type=chunk) - Credit risk exists with counterparties and is minimized by dealing with reputable financial institutions and employing a **rigorous, credit-oriented investment approach**[404](index=404&type=chunk)[406](index=406&type=chunk) - There have been **no material changes** in the company's market risks for the three months ended March 31, 2021[406](index=406&type=chunk) [Controls And Procedures](index=89&type=section&id=Item%204.%20Controls%20And%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls during the quarter - The principal executive officer and principal financial officer concluded that as of March 31, 2021, the company's disclosure controls and procedures were **effective at the reasonable assurance level**[407](index=407&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, these controls[408](index=408&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=90&type=section&id=Item%201.%20Legal%20Proceedings) The company reports it is not subject to any material pending legal proceedings as of March 31, 2021 - As of March 31, 2021, the company was **not subject to any material pending legal proceedings**[410](index=410&type=chunk) [Risk Factors](index=90&type=section&id=Item%201A.%20Risk%20Factors) The primary risk factor is the ongoing COVID-19 pandemic, which could negatively impact portfolio companies in challenged sectors, fundraising, and operations - The **COVID-19 pandemic** has caused severe disruptions in the U.S. and global economies and could continue to negatively impact the company, its funds, and their portfolio companies[413](index=413&type=chunk) - The pandemic has had a particularly severe impact on industries such as energy, hospitality, travel, and retail, where some of the company's funds have investments[414](index=414&type=chunk)[422](index=422&type=chunk) - As of March 31, 2021, approximately **2% of total AUM** was invested in the energy sector and approximately **2%** in the retail sector, which were challenged by the pandemic[422](index=422&type=chunk)[423](index=423&type=chunk) - An extended period of remote working could strain technology resources and introduce operational risks, including **heightened cybersecurity risks**[427](index=427&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=93&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities and no shares were repurchased under its $150 million program during the quarter Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | Jan 2021 | — | $— | — | $150,000,000 | | Feb 2021 | — | $— | — | $150,000,000 | | Mar 2021 | — | $— | — | $150,000,000 | | **Total** | **—** | **$—** | **—** | **$150,000,000** | [Defaults Upon Senior Securities](index=93&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - **None reported**[435](index=435&type=chunk) [Mine Safety Disclosure](index=93&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This item is not applicable to the company - **Not applicable**[435](index=435&type=chunk) [Other Information](index=93&type=section&id=Item%205.%20Other%20Information) The company discloses that an affiliated portfolio company terminated pre-existing contracts with two OFAC-designated entities that generated de minimis revenue - An affiliated portfolio company, Daisy Group Limited, had customer contracts with OFAC-designated Melli Bank Plc and Persia International Bank Plc that pre-dated Ares' investment, generated minimal revenue (£74,774), and **have been terminated**[433](index=433&type=chunk)[434](index=434&type=chunk) [Exhibits](index=94&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including amended corporate governance documents and required CEO and CFO certifications - The report includes several key exhibits, such as the Second Amended and Restated Certificate of Incorporation, the Fourth Amended and Restated Limited Partnership Agreement of Ares Holdings L.P., and **certifications from the CEO and CFO**[437](index=437&type=chunk)

Financial Data and Key Metrics Changes - Ares Management reported AUM exceeding $200 billion, marking a nearly 40% year-over-year growth compared to Q1 2020 [8][23] - Fee-related earnings (FRE) totaled $128.5 million, an increase of 38% year-over-year, with a record margin of 38.4%, reflecting a nearly 500 basis point improvement [21][8] - Management fees reached $327 million, up approximately 20% from Q1 2020 [21] Business Line Data and Key Metrics Changes - The company raised over $10 billion in capital during the quarter, including $3.7 billion for the Ares Pathfinder Fund and $1.7 billion for the Real Estate Opportunity Fund III, which exceeded its target by 13% [9][10] - Deployment for the quarter was strong, with over $10 billion of gross invested capital, including nearly $9 billion from drawdown funds, representing a 60% increase from Q1 2020 [13] Market Data and Key Metrics Changes - The European direct lending fund ACE V raised €11 billion, surpassing its €9 billion target and representing a 70% increase compared to the predecessor fund [11] - Ares Capital Corp. raised $1.6 billion in debt and equity, while Ares Commercial Real Estate raised $640 million, indicating strong growth prospects in the commercial mortgage sector [10] Company Strategy and Development Direction - Ares Management aims to maintain a growth rate of 15% or more in FRE for the foreseeable future, driven by strong fundraising, deployment, investment performance, and realizations [7][8] - The company is focused on expanding its product offerings and geographical reach to provide differentiated investment solutions, particularly in the alternative asset management landscape [27][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the constructive market backdrop and the company's ability to capitalize on strong fundraising and deployment opportunities as the economy recovers [7][8] - The company anticipates continued growth in its private market alternatives as investor appetite increases [12][27] Other Important Information - Ares Management declared a quarterly common dividend of $0.47 per share, a 17.5% increase from the previous year [5][6] - The company announced the acquisition of Landmark Partners, expected to close in the current quarter, which is seen as timely given the growth in the secondary market for alternatives [16][17] Q&A Session Summary Question: Initiatives in the high net worth channel - Management highlighted the established brand in the high net worth segment and the growth in AUM in this channel, which has seen a 42% CAGR over the last five years [31] Question: Update on M&A priorities - Management indicated that M&A would focus on acquiring capabilities or relationships that complement existing strengths, with a particular interest in infrastructure and real estate [34][36] Question: Pace of deployment related to incentive-eligible AUM - Management noted that the market is recovering post-pandemic, leading to healthy transaction activity, and expects continued deployment opportunities across the platform [38] Question: Competitive landscape in private credit in Europe - Management emphasized the origination advantages and scale of capital as key competitive moats, with no significant impact on spreads or credit quality despite increased competition [42][44] Question: Update on ACOF V performance - Management reported strong performance in ACOF V, particularly in healthcare and energy sectors, with expectations for continued increases in IRR [49] Question: Capital management and plans for retiring preferred equity - Management stated that the recent equity raise positions the company well for liquidity, allowing for the retirement of preferred equity and support for both organic and inorganic growth opportunities [54] Question: Contribution of Ares in seed or anchor capital - Management reiterated a balance sheet-light model, with individual commitments from team members increasing, reducing the need for balance sheet capital [73]

PART I [Business](index=8&type=section&id=Item%201.%20Business) Ares Management is a global alternative investment manager operating across Credit, Private Equity, Real Estate, and Strategic Initiatives - As of December 31, 2020, Ares is a leading global alternative investment manager with **$197.0 billion of AUM** and over 1,450 employees across more than 25 offices[19](index=19&type=chunk) - The company's investor base includes over 1,090 direct institutional relationships, with **73% of AUM ($143.1 billion)** attributable to this channel[91](index=91&type=chunk) - Separately Managed Accounts (SMAs) represent **$45.0 billion, or 31%**, of the direct institutional AUM[94](index=94&type=chunk) - The company is subject to extensive regulation by governmental agencies in the U.S. and foreign jurisdictions, including the **SEC, FINRA, the UK's FCA, and Luxembourg's CSSF**[125](index=125&type=chunk)[128](index=128&type=chunk)[136](index=136&type=chunk) AUM Growth (2010-2020) | Metric | Value | | :--- | :--- | | AUM as of Dec 31, 2020 | $197.0 billion | | AUM a decade earlier | $42.0 billion | | 5-Year CAGR | 16% | | 10-Year CAGR | 17% | 2020 Fundraising and Deployment | Metric | Value (2020) | | :--- | :--- | | Gross New Capital Raised | $41.2 billion | | Capital Deployed (excluding permanent capital) | $26.7 billion | AUM by Investment Group (as of Dec 31, 2020) | Investment Group | AUM (billions) | | :--- | :--- | | Credit Group | $145.5 | | Private Equity Group | $27.4 | | Real Estate Group | $14.8 | | Strategic Initiatives | $9.3 | [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, market conditions, regulations, and reliance on key personnel - The **COVID-19 pandemic** poses significant risks, having caused severe disruptions in the global economy, affecting industries where Ares and its funds operate[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - Difficult market and political conditions, including interest rate changes and geopolitical events, can **reduce the value of investments** and hamper fund performance[172](index=172&type=chunk)[173](index=173&type=chunk) - The business is dependent on the ability to **raise capital** from investors; poor fund performance or economic deterioration could materially reduce revenues[184](index=184&type=chunk)[185](index=185&type=chunk) - The departure of **key personnel** could result in the loss of investment opportunities and trigger "key person" provisions in fund agreements[186](index=186&type=chunk)[188](index=188&type=chunk) - A significant portion of management fees are derived from **Ares Capital Corporation (ARCC)**, and a decline in its assets could adversely affect revenues[203](index=203&type=chunk)[204](index=204&type=chunk)[206](index=206&type=chunk) - **Cybersecurity incidents** and data breaches pose a significant threat, potentially causing operational disruptions and reputational damage[487](index=487&type=chunk)[491](index=491&type=chunk)[494](index=494&type=chunk) - The company may be obligated to repay previously distributed carried interest under **"clawback" provisions**, with a potential contingent repayment of approximately **$326.4 million** as of December 31, 2020[383](index=383&type=chunk)[384](index=384&type=chunk) [Unresolved Staff Comments](index=87&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are **no unresolved staff comments** as of the filing date[502](index=502&type=chunk) [Properties](index=88&type=section&id=Item%202.%20Properties) The company's principal executive offices and all other global offices are located in leased spaces - The company's principal executive offices are in leased space at 2000 Avenue of the Stars, 12th Floor, Los Angeles, California[503](index=503&type=chunk) [Legal Proceedings](index=88&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2020, the company was not subject to any material pending legal proceedings - The company reports **no material pending legal proceedings** as of December 31, 2020[504](index=504&type=chunk) [Mine Safety Disclosures](index=88&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's business operations - Mine safety disclosures are **not applicable** to the company's business[505](index=505&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=88&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details market information, dividend policies, and stock repurchase programs for the company's equity securities - The company's Class A common stock trades on the New York Stock Exchange under the symbol **"ARES"**[506](index=506&type=chunk) - A stock repurchase program authorizing up to **$150 million** of Class A common stock was renewed in February 2021, with no shares repurchased in Q4 2020[510](index=510&type=chunk) - Dividends on the 7.00% Series A Preferred Stock are paid quarterly, totaling approximately **$21.7 million** in both 2020 and 2019[511](index=511&type=chunk) Dividend per Class A Common Share | Year | Annual Dividend per Share | | :--- | :--- | | 2019 | $1.28 | | 2020 | $1.60 | | 2021 (Intended) | $1.88 ($0.47/quarter) | [Selected Financial Data](index=91&type=section&id=Item%206.%20Selected%20Financial%20Data) The company has omitted the tabular disclosure for Selected Financial Data as permitted by recent SEC rule changes - The company has opted not to present the Selected Financial Data table and directs readers to its consolidated financial statements[523](index=523&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=92&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial results for 2020, highlighting strong fundraising and performance amid market volatility from COVID-19 - Key business trends in 2020 were dominated by the **COVID-19 pandemic**, which caused significant market volatility, followed by a rebound in the second half of the year[528](index=528&type=chunk) - As of December 31, 2020, the company had **$40.0 billion of AUM not yet paying fees**, representing approximately **$428.3 million** in potential annual management fee revenue[532](index=532&type=chunk) - The company's primary sources of liquidity are cash on hand (**$539.8 million** as of Dec 31, 2020), cash from operations, and an undrawn revolving credit facility[721](index=721&type=chunk) AUM and FPAUM Growth (2019-2020) | Metric | Dec 31, 2019 | Dec 31, 2020 | Growth | | :--- | :--- | :--- | :--- | | Total AUM | $148.9 B | $197.0 B | 32% | | Fee Paying AUM (FPAUM) | $96.9 B | $126.0 B | 30% | Consolidated Results of Operations (2020 vs. 2019) | Metric ($ in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Total Revenues | $1,764,046 | $1,765,438 | | Total Expenses | $1,450,486 | $1,462,797 | | Income Before Taxes | $379,478 | $425,180 | | Net Income Attributable to AMC | $152,142 | $148,884 | Non-GAAP Financial Measures (2020 vs. 2019) | Metric ($ in thousands) | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Fee Related Earnings (FRE) | $424,450 | $323,659 | 31% | | Realized Income (RI) | $581,956 | $503,486 | 16% | [Quantitative and Qualitative Disclosures about Market Risk](index=139&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk exposures relate to fair value changes, foreign exchange rates, and interest rates - Only **4% of segment management fees** for 2020 were from open-ended liquid credit strategies with fees subject to market value changes, mitigating the overall impact[768](index=768&type=chunk)[769](index=769&type=chunk) - A hypothetical **10% decrease in the fair value** of direct investments would result in a decline of **$69.1 million** in principal investment income[772](index=772&type=chunk) - A hypothetical **10% decline in foreign currencies** against the U.S. dollar would not have a material impact on management fees or performance income[775](index=775&type=chunk) - The company is exposed to interest rate risk through its **$1.065 billion variable-rate revolving credit facility**, which had no borrowings outstanding as of December 31, 2020[776](index=776&type=chunk) [Financial Statements and Supplementary Data](index=141&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates the company's consolidated financial statements and notes by reference from the F-pages of the report - The required financial statements and supplementary data are **incorporated by reference** to the F-pages of the 10-K report[782](index=782&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=141&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - There were **no changes in or disagreements with accountants** on accounting and financial disclosure[782](index=782&type=chunk) [Controls and Procedures](index=141&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were **effective** at a reasonable assurance level as of December 31, 2020[783](index=783&type=chunk) - There were **no material changes** in internal control over financial reporting during the fourth quarter of 2020[784](index=784&type=chunk) - The independent registered public accounting firm, Ernst & Young LLP, issued an **unqualified audit report** on the effectiveness of the company's internal control[786](index=786&type=chunk)[789](index=789&type=chunk) [Other Information](index=144&type=section&id=Item%209B.%20Other%20Information) The company amended certain executive equity awards to align "double-trigger" vesting provisions with more recent grants - On February 22, 2021, the company amended certain executive equity awards to make their **"double-trigger" vesting provisions** consistent with more recent awards[795](index=795&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=144&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Required information is incorporated by reference from the company's 2021 Proxy Statement - Information regarding directors, executive officers, and corporate governance is **incorporated by reference** from the 2021 proxy statement[796](index=796&type=chunk) [Executive Compensation](index=144&type=section&id=Item%2011.%20Executive%20Compensation) Required information is incorporated by reference from the company's 2021 Proxy Statement - Information regarding executive compensation is **incorporated by reference** from the 2021 proxy statement[797](index=797&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=144&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Required information is incorporated by reference from the company's 2021 Proxy Statement - Information regarding security ownership is **incorporated by reference** from the 2021 proxy statement[798](index=798&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=144&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Required information is incorporated by reference from the company's 2021 Proxy Statement - Information regarding certain relationships, related transactions, and director independence is **incorporated by reference** from the 2021 proxy statement[799](index=799&type=chunk) [Principal Accounting Fees and Services](index=144&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Required information is incorporated by reference from the company's 2021 Proxy Statement - Information regarding principal accounting fees and services is **incorporated by reference** from the 2021 proxy statement[800](index=800&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=145&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and all exhibits filed as part of the Form 10-K report - This section includes the consolidated financial statements and a **list of all exhibits** filed with the report[803](index=803&type=chunk)[804](index=804&type=chunk) [Form 10-K Summary](index=148&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports that there is no Form 10-K summary - This item is reported as **"None"**[811](index=811&type=chunk) Financial Statements [Consolidated Statements of Financial Condition](index=154&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Total assets grew to $15.2 billion in 2020, driven by an increase in investments and CLO loan obligations Consolidated Balance Sheet Highlights (as of Dec 31) | Metric ($ in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $539,812 | $138,384 | | Total Investments | $1,682,759 | $1,663,664 | | Assets of Consolidated Funds | $11,573,373 | $9,459,350 | | **Total Assets** | **$15,168,992** | **$12,014,196** | | Debt obligations | $642,998 | $316,609 | | Liabilities of Consolidated Funds | $10,641,755 | $8,642,995 | | **Total Liabilities** | **$12,596,852** | **$10,155,598** | | **Total Equity** | **$2,471,774** | **$1,858,598** | [Consolidated Statements of Operations](index=155&type=section&id=Consolidated%20Statements%20of%20Operations) Total revenues remained flat at $1.76 billion in 2020, with higher management fees offset by lower carried interest Consolidated Income Statement Highlights (Year Ended Dec 31) | Metric ($ in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Management fees | $1,150,608 | $979,417 | | Carried interest allocation | $505,608 | $621,872 | | **Total Revenues** | **$1,764,046** | **$1,765,438** | | Compensation and benefits | $767,252 | $653,352 | | Performance related compensation | $404,116 | $497,181 | | **Total Expenses** | **$1,450,486** | **$1,462,797** | | **Income Before Taxes** | **$379,478** | **$425,180** | | **Net Income Attributable to AMC** | **$152,142** | **$148,884** | | **Basic EPS (Class A)** | **$0.89** | **$1.11** | | **Diluted EPS (Class A)** | **$0.87** | **$1.06** | [Consolidated Statements of Cash Flows](index=158&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from financing activities drove a significant increase in year-end cash to $539.8 million Consolidated Cash Flow Highlights (Year Ended Dec 31) | Metric ($ in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($425,659) | ($2,083,021) | | Net Cash Used in Investing Activities | ($136,764) | ($16,796) | | Net Cash Provided by Financing Activities | $943,895 | $2,122,330 | | **Net Change in Cash and Cash Equivalents** | **$401,428** | **$28,137** | | **Cash and Cash Equivalents, End of Period** | **$539,812** | **$138,384** | [Notes to Consolidated Financial Statements](index=159&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, segment reporting, and extensive use of Level III inputs for fair value measurements - The company consolidates entities where it has a controlling financial interest, including numerous **CLOs and private funds**[848](index=848&type=chunk)[857](index=857&type=chunk) - A significant portion of investments are valued using **Level III inputs**, requiring management judgment and identified as a Critical Audit Matter[825](index=825&type=chunk)[868](index=868&type=chunk) - As of December 31, 2020, the company had **$371.0 million in goodwill** and **$222.1 million in net intangible assets**, primarily from acquisitions[928](index=928&type=chunk)[935](index=935&type=chunk) - The company had **$643.0 million in corporate debt** as of December 31, 2020, while its Consolidated Funds had separate, non-recourse loan obligations of **$10.0 billion**[995](index=995&type=chunk)[1001](index=1001&type=chunk) - The company's ownership of the Ares Operating Group (AOG) was **56.69%** as of December 31, 2020, up from 49.70% in 2019[1077](index=1077&type=chunk)

Ares Management Corporation (NYSE:ARES) Q4 2020 Earnings Conference Call February 11, 2021 12:00 PM ET Company Participants Carl Drake - Investor Relations Michael Arougheti - Co-Founder, Director, Chief Executive Officer and President Michael McFerran - Partner, Chief Operating Officer and Chief Financial Officer Conference Call Participants Craig Siegenthaler - Credit Suisse Chris Harris - Wells Fargo Michael Carrier - Bank of America Merrill Lynch Gerald O'Hara - Jefferies Alex Blostein - Goldman Sachs ...