Ares Management Corp
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
ARES$133.98+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001628280-24-021890
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001628280-24-035320
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 286 previous paragraphs and 304 current paragraphs.
183 unchanged; 82 reworded; 35 added; 18 removed; 3 previous and 4 current paragraphs rearranged.
Tables are not compared: 74 previous and 75 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023
Current report
Administrative, Transaction and Other Fees. The decrease for the three months ended June 30, 2024 compared to the same period in 2023 was primarily driven by: (i) lower credit transaction fees from the infrastructure debt strategy of $5.4 million, which are generated periodically; (ii) lower asset-based, net distribution fees associated with our non-traded REITs of $1.7 million; and partially offset by (iii) higher administrative service fees of $2.1 million that are based on invested capital and are primarily from certain private funds within our Credit Group.
Current report
The increases in compensation and benefits were also driven by the performance-based, acquisition-related compensation arrangement that was established in connection with the Crescent Point Acquisition in the fourth quarter of 2023. The associated compensation expense of $5.0 million and $10.0 million was recognized during the three and six months ended June 30, 2024, respectively. See “Note 7. Commitments and Contingencies” for a further description of the contingent liabilities related to the Crescent Point Acquisition arrangement.
Current report
In addition, the increases in compensation and benefits for the three and six months ended June 30, 2024 compared to the same periods in 2023 were driven by: (i) increases in salary expense of $13.5 million and $27.2 million, respectively, primarily attributable to headcount growth to support the expansion of our business; (ii) higher Part I Fee compensation of $12.4 million and $23.5 million, respectively; and partially offset by (iii) lower incentive-based compensation, which is dependent on our operating performance and is expected to fluctuate during the year. The increase for the six months ended June 30, 2024 compared to the same period in 2023 was also attributable to an increase in payroll related taxes of $10.5 million primarily due to the higher stock price associated with our restricted units that vested during the first quarter of 2024.
Current report
Average headcount increased by 12% to 2,879 professionals for the year-to-date period in 2024 from 2,577 professionals for the same period in 2023.
Current report
General, Administrative and Other Expenses. The increases in general, administrative and other expenses were primarily due to costs incurred to support fundraising for our funds and distribution of shares in our non-traded vehicles. Supplemental distribution fees increased by $13.8 million and $22.1 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. These fees will fluctuate with sales volumes and assets under management of our non-traded vehicles. We expect to incur higher supplemental distribution fees in future periods as we continue to develop our distribution relationships and expand our retail product offerings. Additionally, placement fees increased by $5.0 million and $13.7 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 primarily due to new commitments to Ares Senior Direct Lending Fund III, L.P. (“SDL III”). Marketing expenses for the comparative periods have also increased by $7.5 million and $7.6 million, respectively, driven by company sponsorships and investor events held during the second quarter of 2024, including our first firmwide annual general meeting with investors (“AGM”). In prior years, each of our business lines have hosted separate events for their investors, and as a result of holding a consolidated, firmwide AGM event this quarter, we expect the general, administrative and other expenses in the second half of the year will benefit from fewer event expenses.
Current report
In addition, certain expenses increased during the current period, including occupancy costs, information services and information technology costs. These expenses collectively increased by $9.3 million and $19.5 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 to support our growing headcount and the expansion of our business, including costs for our new corporate headquarters that we will occupy beginning in the third quarter of 2024.
Current report
The increases in general, administrative and other expenses were partially offset by the decreases in amortization expense for intangible assets of $6.5 million and $18.7 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, largely the result of non-cash impairment charges recognized in the prior year periods and the corresponding decrease in amortization expense of those intangible assets in subsequent periodsas we no longer amortize them.
Current report
Credit Group—Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023
Current report
Management fees from SDL III, which launched subsequent to the second quarter of 2023, contributed fees of$9.0 million and $14.9 million for the three and six months ended June 30, 2024, respectively. Management fees from CLOs contributed to the increase in fees for the three and six months ended June 30, 2024 compared to the same periods in 2023, primarily due to the net addition of eight CLOs since June 30, 2023.
Current report
Conversely, management fees from Ares Capital Europe III, L.P. (“ACE III”) and ASOF I, collectively decreased by $7.5 million and$14.0 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, primarilydue to the reduction in fee rates.
Current report
Fee Related Performance Revenues. The increases for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 were primarily attributable to incentive fees earned from a U.S. direct lending fund in connection with the asset redemption.
Current report
Compensation and Benefits. The increases in compensation and benefits for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 were primarily driven by: (i) higher Part I Fee compensation of $12.4 million and $23.5 million, respectively, corresponding to the increases in Part I Fees, and reduced by a portion of supplemental distribution fees we paid to distribution partners; (ii) higher fee related performance compensation of $3.9 million and $3.7 million, respectively, corresponding to the increases in fee related performance revenues; and (iii) increases in salary expense of $2.4 million and $6.2 million, respectively, primarily attributable to headcount growth to support the expansion of our business.
Current report
Fees are earned. Travel and marketing costs have also increased by $3.5 million and $4.1 million, respectively, over the comparative periods, driven by investor events held during the second quarter of 2024, including our firmwide AGM event.
Current report
Additionally, certain expenses increased during the current period, including occupancy costs, information services and information technology costs. These expenses collectively increased by $1.6 million and $3.8 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 to support our growing headcount and the expansion of our business, including costs for our new corporate headquarters that we will occupy beginning in the third quarter of 2024.
Current report
Realized net performance income for the three and six months ended June 30, 2024 and 2023 primarily included (i) tax distributions from ACE IV, ACE V, PCS I, ASOF I; and (ii) incentive fees earned from two alternative credit funds whose annual measurement period was as of the second quarter. Realized net performance income for the three and six months ended June 30, 2024 also included tax distribution from an alternative credit fund, while the realized net performance income for the three and six months ended June 30, 2023 included tax distribution from ACE III.
Current report
(9)Our sixth European direct lending fund is made up of six parallel funds, four denominated in Euros and two denominated in pound sterling: sixth European direct lending fund (E) unlevered, sixth European direct lending fund (E) II unlevered, sixth European direct lending fund (G) unlevered, sixth European direct lending fund (E) levered, sixth European direct lending fund (E) II levered, and sixth European direct lending fund (G) levered, and three feeder funds: sixth European direct lending fund (D) levered, sixth European direct lending fund (Y) unlevered and sixth European direct lending fund (D) rated notes. Sixth European direct lending fund (E) II levered includes sixth European direct lending fund (D) levered feeder fund and sixth European direct lending fund (E) II unlevered includes sixth European direct lending fund (Y) unlevered and sixth European direct lending fund (D) rated notes feeder funds. The gross and net MoIC presented in the table are for sixth European direct lending fund (E) unlevered and sixth European direct lending fund (E) levered. Metrics for sixth European direct lending fund (E) II levered exclude the sixth European direct lending fund (D) levered feeder fund and metrics for sixth European direct lending fund (E) II unlevered exclude the sixth European direct lending fund (Y) unlevered and sixth European direct lending fund (D) rated notes feeder funds. The gross and net MoIC for sixth European direct lending fund (G) unlevered are 1.1x and 1.1x, respectively. The gross and net MoIC for sixth European direct lending fund (G) levered are 1.1x and 1.0x, respectively. The gross and net MoIC for sixth European direct lending fund (E) II unlevered are 1.1x and 1.1x, respectively. The gross and net MoIC for sixth European direct lending fund (E) II levered are 1.1x and 1.1x, respectively. The gross and net MoIC for sixth European direct lending fund (D) levered are 1.1x and 1.1x, respectively. The gross and net MoIC for sixth European direct lending fund (Y) unlevered are 1.1x and 1.1x, respectively. The gross and net MoIC for sixth European direct lending fund (D) rated notes are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for sixth European direct lending fund unlevered and sixth European direct lending fund levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate.
Current report
Real Assets Group—Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023
Current report
Management fees for the six months ended June 30, 2024 compared to the same period in 2023 also decreased by: (i) $3.3 million due to make-whole termination fees that were recognized during the six months ended June 30, 2023 from the early termination of the advisory agreements of two U.S. industrial real estate equity funds; and (ii) $1.8 million from Ares Energy Investors Fund IV, L.P. (“EIF IV”) due to a decrease in invested capital.
Current report
Compensation and Benefits. The decreases in compensation and benefits for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 were primarily driven by: (i) lower incentive-based compensation, which is dependent on our operating performance and is expected to fluctuate during the year; and (ii) higher administrative fees reimbursement for expenses for the current year periods. Such decreases were partially offset by increases in salary expenses of $2.0 million and $3.5 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, primarily attributable to headcount growth to support the expansion of our business. In addition, the decrease in compensation and benefits for the six months ended June 30, 2024 compared to the same period in 2023 was further offset by an increase in payroll related taxes of $2.3 million, primarily due to the higher stock price associated with our restricted units that vested during the first quarter of 2024.
Current report
General, Administrative and Other Expenses. The increases in general, administrative and other expenses were primarily due to marketing and fundraising activities, including supplemental distribution fees charged in connection with an amended servicing arrangement with a distribution partner. These fees increased by $1.8 million and $2.0 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. Marketing expenses for the comparative periods also increased by $1.5 million and $2.1 million, respectively, driven by: (i) investor events held during the second quarter of 2024, including our firmwide AGM event; and (ii) non-reimbursable fund formation costs for our fourth U.S. opportunistic real estate equity fund. Additionally, we incurred non-recurring legal expenses of $1.5 million during the six months ended June 30, 2024.
Current report
In addition, the activity for the three and six months ended June 30, 2024 included a realized loss associated with a guarantee of a credit facility provided in connection with a historical acquisition. The realized investment losses during these periods were partially offset by dividend income from funds within our European real estate strategy.
Current report
Private Equity Group—Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023
Current report
Average headcount increased by 18% to 104 investment and investment support professionals for the year-to-date period in 2024 from 88 professionals for the same period in 2023, primarily due to the Crescent Point Acquisition.
Current report
Realized net investment loss for the three and six months ended June 30, 2024 and 2023 largely represents interest expense exceeding investment income during these periods. Interest expense, which is allocated among our segments based on the cost basis of our balance sheet investments, increased over the comparative periods primarily due to the issuance of the 2028 Senior Notes in November 2023, and to higher average SOFR rates and a higher average outstanding balance of our Credit Facility.
Current report
Secondaries Group—Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023
Current report
Management fees increased for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 primarily due to higher management fees from APMF of $4.0 million and $6.9 million, respectively, due to additional capital raised and an increase in fee rate. Beginning April 1, 2023, a fee waiver expired, resulting in a step up in the fee rate from 0.25% to 1.40% per annum.
Current report
Management fees also included catch-up fees from our third infrastructure secondaries fund of $0.9 million and $0.8 million for the three and six months ended June 30, 2024, respectively, and from LREF IX of $1.5 million and $2.1 million for the three and six months ended June 30, 2023, respectively.
Current report
Fee Related Performance Revenues. The increases for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 were primarily attributable to higher fees from APMF as a result of gains that were recognized in connection with acquiring a sizable portfolio of limited partnership interests in the second quarter of 2024.
Current report
The increase for the six months ended June 30, 2024 over the comparative period was also driven by an increase in payroll related taxes of $1.1 million, primarily due to the higher stock price associated with our restricted units that vested during the first quarter of 2024. The increases in compensation and benefits over the comparative periods were partially offset by lower incentive-based compensation, which is dependent on our operating performance and is expected to fluctuate during the year.
Current report
Realized net performance income for the three and six months ended June 30, 2023 was primarily attributable to tax distributions from LREF VIII.
Current report
Other Fees. The decreases in other fees for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 were primarily driven by lower asset-based, net distribution fees associated with our non-traded REITs. The three and six months ended June 30, 2023 also included broker-dealer advisory fees of $2.0 million which were earned by Ares Management Capital Markets LLC, a registered broker-dealer, for a capital markets transaction executed during the second quarter of 2023.
Current report
Average headcount increased by 10% to 1,596 professionals for the year-to-date period in 2024 from 1,452 professionals for the same period in 2023.
Current report
General, Administrative and Other Expenses. Certain expenses increased during the current period, including occupancy costs, information services and information technology costs. These expenses collectively increased by $5.6 million and $10.7 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 to support our growing headcount and the expansion of our business, including costs for our new corporate headquarters that we will occupy beginning in the third quarter of 2024. In addition, marketing costs have increased over the comparative periods by $1.9 million and $2.3 million, respectively, driven by company sponsorships and investor events held during the second quarter of 2024, including our firmwide AGM event. The increases were partially offset by: (i) lower tax related service fees of $3.2 million and $4.9 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, as we have recognized efficiencies from the transition of our income tax compliance function; and (ii) costs related to Ares’ 25th anniversary celebrations that were incurred in the prior year periods.
Current report
Net cash used in the Company’s financing activities for the six months ended June 30, 2024 was also used for the repayment of our Credit Facility, partially using cash provided by the net proceeds from the Offering.
Removed paragraphs (18)
Previous report
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Previous report
In addition, compensation and benefits increased due to: (i) an increase in salary expense of $13.7 million, primarily attributable to headcount growth to support the expansion of our business; (ii) higher Part I Fees compensation of $11.0 million; and (iii) an increase in payroll related taxes of $9.2 million, primarily due to our higher stock price associated with the restricted units that vested during the period. The increase in compensation and benefits for the three months ended March 31, 2024 compared to the same period in 2023 was partially offset by lower incentive-based compensation, which is dependent on our operating performance and is expected to fluctuate during the year. Average headcount increased by 12% to 2,868 professionals for the quarter-to-date period in 2024 from 2,558 professionals for the same period in 2023.
Previous report
Additionally, certain expenses increased during the current period, including occupancy costs, information services and information technology costs. These expenses collectively increased by $10.2 million for the three months ended March 31, 2024 compared to the same period in 2023 to support our growing headcount and the expansion of our business, including occupancy costs for our new corporate headquarters that will be in use later this year.
Previous report
The increase in general, administrative and other expenses was partially offset by the decrease in amortization expense for intangible assets. For the three months ended March 31, 2023, our results reflected a non-cash impairment charge of $7.8 million to the carrying value of the trade name of SSG Capital Holdings Limited and its operating subsidiaries (“SSG”) as we rebranded and discontinued the use of the SSG trade name. In addition, in the third quarter of 2023, we recognized non-cash impairment charges 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. Excluding the impact non-cash impairment charges described above had on future amortization expense, amortization expense decreased by $3.4 million for the three months ended March 31, 2024 compared to the same period in 2023, as we are no longer amortizing the aforementioned intangible assets.
Previous report
Credit Group—Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Previous report
Management fees from funds launched subsequent to the first quarter of 2023 primarily included Ares Pathfinder Fund II, L.P. (“Pathfinder II”), our third U.S. senior direct lending fund and our sixth European direct lending fund, which collectively contributed$16.9 million in additional management fees for thethree months ended March 31, 2024.
Previous report
Additionally, certain expenses increased during the current period, including occupancy costs and information technology costs. These expenses collectively increased by $1.7 million for the three months ended March 31, 2024 compared to the same period in 2023 to support our growing headcount and the expansion of our business, including occupancy costs for our new corporate headquarters that will be in use later this year. We also incurred higher professional service fees of $1.3 million for the three months ended March 31, 2024 compared to the same period in 2023, primarily related to non-reimbursable fund formation costs.
Previous report
Realized net performance income for the three months ended March 31, 2024 primarily included (i) tax distributions from Ares Private Credit Solutions, L.P. (“PCS I”) and an alternative credit fund; and (ii) incentive fees primarily from two U.S. direct lending funds and an alternative credit fund. Realized net performance income for the three months ended March 31, 2023 was primarily attributable to carried interest distributions from a U.S. direct lending fund and a European direct lending fund.
Previous report
Real Assets Group—Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Previous report
Compensation and Benefits. Compensation and benefits remained relatively flat for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The change over the comparative periods was composed of: (i) an increase in salary expense of $1.5 million, primarily attributable to headcount growth to support the expansion of our business; (ii) an increase in payroll related taxes of $2.1 million, primarily due to our higher stock price associated with the restricted units that vested during the period; and (iii) lower incentive-based compensation, which is dependent on our operating performance and is expected to fluctuate during the year.
Previous report
General, Administrative and Other Expenses. The increase in general, administrative and other expenses for the three months ended March 31, 2024 compared to the same period in 2023 was primarily driven by $1.5 million in non-recurring legal expenses.
Previous report
Realized net investment loss for the three months ended March 31, 2024 was partially offset by dividend income received from a European real estate fund.
Previous report
Private Equity Group—Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Previous report
Average headcount increased by 13% to 106 investment and investment support professionals for the quarter-to-date period in 2024 from 94 professionals for the same period in 2023, primarily due to the Crescent Point Acquisition.
Previous report
The tables below present rollforwards of fee paying AUM for the Private Equity Group ($ in millions). There was no change in fee paying AUM for the Private Equity Group for the three months ended March 31, 2023:
Previous report
Secondaries Group—Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Previous report
Other Fees. The decrease in other fees for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily driven by lower asset-based, net distribution fees associated with our non-traded REITs.
Previous report
General, Administrative and Other Expenses. Certain expenses increased during the current period, including occupancy costs, information services and information technology costs. These expenses collectively increased by $5.1 million for the three months ended March 31, 2024 compared to the same period in 2023 to support our growing headcount and the expansion of our business, including occupancy costs for our new corporate headquarters that will be in use later this year.
Reworded paragraphs (82)
Previous wording
We believe that our disciplined investment philosophy across our distinct but complementary investment groups contributes to the stability of our performance throughout market cycles. For the three months ended March 31, 2024, 95% of our management fees were derived from perpetual capital vehicles or 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., Europe and Asia-Pacific.
Current wording
We believe that our disciplined investment philosophy across our distinct but complementary investment groups contributes to the stability of our performance throughout market cycles. For the three months ended June 30, 2024, 95% of our management fees were derived from perpetual capital vehicles or 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., Europe and Asia-Pacific (“APAC”).
Previous wording
Global markets began the year positively amid modest inflation and optimistic signaling by central banks. Despite the headwinds and ongoing conflicts in the Middle East and Ukraine, U.S. and European high yield bonds and leveraged loans returned positive performance. The Asian-Pacific markets experienced mixed performance as the region overall continued to show growth primarily driven by resilient demand in Southeast Asia, India and Australia, while opportunities have been limited in China from uncertainty surrounding the economy. Overall, reduced lending activity by banks and limited capital accessibility continued to support private credit growth.
Current wording
Global markets continued to perform positively in the second quarter amid modest inflation and optimistic signaling by central banks. Despite the headwinds and ongoing conflicts in the Middle East and Ukraine, U.S. and European high yield bonds and leveraged loans returned positive performance with stable demand and improved capital markets access. The Asian-Pacific markets experienced mixed performance as the region overall continued to show growth, primarily driven by resilient demand in Southeast Asia, India and Australia. Opportunities within China continue to be limited, with muted deal activity driven by uncertainty in the economy and more specifically within the property sector. Globally, reduced lending activity by banks and limited capital accessibility continued to support private credit growth.
Previous wording
Global equity markets continued to rally into the first quarter of 2024 following a positive finish to 2023. While the public markets began the year positively, the private markets continued to experience challenges with downward pressure on valuations and muted opportunities for realizations. The private equity markets continue to experience a prolonged slowdown in deal activity and we believe potential liquidity constraints from investors have increased the need for flexible capital solutions. Businesses have struggled to navigate this challenging growth and uncertain macroeconomic environment, which we believe has heightened the need for partnerships with value-add managers. This environment underscores the importance of investing in resilient industries where we have the ability to drive fundamental business growth and deliver a systematic approach to long-term value creation.
Current wording
While the public equity markets continued their positive momentum in the second quarter, the private markets continued to experience challenges with downward pressure on valuations and muted opportunities for realizations. The private equity markets continue to experience a prolonged slowdown in deal activity, and we believe potential liquidity constraints from investors have increased the need for flexible capital solutions. Businesses have continued to struggle to navigate this challenging growth and uncertain macroeconomic environment, which we believe has heightened the need for partnerships with value-add managers. This environment underscores the importance of investing in resilient industries where we have the ability to drive fundamental business growth and deliver a systematic approach to long-term value creation.
Previous wording
The commercial real estate markets continued to be impacted by the macroeconomic environment. European and U.S. real estate deal activity remained subdued with limited transactional liquidity. Given the higher interest rate environment, property valuations remain soft, though capitalization rate yields are beginning to stabilize following the sustained widening seen in 2023. 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.
Current wording
The commercial real estate markets continued to be impacted by the macroeconomic environment. European and U.S. real estate deal activity remained subdued with limited transactional liquidity. Given the higher interest rate environment, property valuations remain soft, though capitalization rate yields continue to stabilize following the sustained widening seen in 2023. 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.
Previous wording
(1) Includes $14.7 billion and $14.6 billion of AUM of funds from which we indirectly earn management fees as of March 31, 2024 and 2023, respectively, and includes $4.1 billion and $3.7 billion of non-fee paying AUM from our general partner and employee commitments as of March 31, 2024 and 2023, respectively.
Current wording
(1) Includes $14.4 billion and $14.9 billion of AUM of funds from which we indirectly earn management fees as of June 30, 2024 and 2023, respectively, and includes $4.2 billion and $3.6 billion of non-fee paying AUM from our general partner and employee commitments as of June 30, 2024 and 2023, respectively.
Previous wording
(2)Includes $60.3 billion and $55.3 billion from funds that primarily invest in illiquid strategies as of March 31, 2024 and 2023, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.
Current wording
(2)Includes $64.6 billion and $56.2 billion from funds that primarily invest in illiquid strategies as of June 30, 2024 and 2023, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.
Previous wording
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 March 31, 2024 and 2023, 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:
Current wording
We view the duration of funds we manage as a metric to measure the stability of our future management fees. For both the three months ended June 30, 2024 and 2023, 95% of management fees were earned from perpetual capital or long-dated funds.
Previous wording
As of March 31, 2024, AUM Not Yet Paying Fees includes $64.6 billion of AUM available for future deployment that could generate approximately $621.5 million in potential incremental annual management fees. As of March 31, 2023, AUM Not Yet Paying Fees included $50.5 billion of AUM available for future deployment that could generate approximately $483.0 million in potential incremental annual management fees.
Current wording
As of June 30, 2024, AUM Not Yet Paying Fees includes $70.8 billion of AUM available for future deployment that could generate approximately $674.7 million in potential incremental annual management fees. As of June 30, 2023, AUM Not
Previous wording
As of March 31, 2024, perpetual capital IGAUM generating fee related performance revenues totaled $19.2 billion, composed of $18.2 billion within the Credit Group and $1.0 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 March 31, 2023, perpetual capital IGAUM from which we generated fee related performance revenues totaled $12.9 billion, composed of $12.6 billion within the Credit Group and $0.3 billion within the Secondaries Group.
Current wording
Fee related performance revenues are not recognized by us until such fees are crystallized and no longer subject to reversal. As of June 30, 2024, perpetual capital IGAUM that could generate fee related performance revenues totaled $19.8 billion, composed of $18.3 billion within the Credit Group and $1.5 billion within the Secondaries Group. As of June 30, 2023, perpetual capital IGAUM from which we could generate fee related performance revenues totaled $14.8 billion, composed of $13.7 billion within the Credit Group, $0.7 billion within the Real Assets Group and $0.4 billion within the Secondaries Group. As of June 30, 2024 and 2023, IGAUM included $39.6 billion and $32.9 billion, respectively, of AUM from funds generating incentive income that is not recognized by Ares until such fees are crystallized or no longer subject to reversal.
Previous wording
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.
Current wording
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 comprised 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.
Previous wording
Consolidated Funds represented approximately 4% of our AUM as of March 31, 2024 and 1% of total revenues for the three months ended March 31, 2024. As of March 31, 2024, we consolidated 28 CLOs, 11 private funds and one SPAC, and as of March 31, 2023, we consolidated 25 CLOs, 10 private funds and one SPAC.
Current wording
Consolidated Funds represented approximately 4% of our AUM as of June 30, 2024 and less than 1% of total revenues for the six months ended June 30, 2024. As of June 30, 2024, we consolidated 28 CLOs, 10 private funds and one SPAC, and as of June 30, 2023, we consolidated 26 CLOs, nine private funds and two SPACs.
Previous wording
We generally deconsolidate funds and CLOs when we are no longer deemed to have a controlling interest in the entity. During the three months ended March 31, 2024 and 2023, we did not deconsolidate any entities.
Current wording
We generally deconsolidate funds and CLOs when we are no longer deemed to have a controlling interest in the entity. During the six months ended June 30, 2024, we did not deconsolidate any entities. During the six months ended June 30, 2023, we deconsolidated one private fund as a result of significant change in ownership.
Previous wording
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. In February 2024, we announced our intention to reclassify our special opportunities strategy, historically part of our Private Equity Group, to the Credit Group and renamed as opportunistic credit. Opportunistic credit has been reclassified effective January 1, 2024 and is now presented within the Credit Group. Historical periods have been modified to conform to the current period presentation.
Current wording
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 January 1, 2024, we changed our segment composition. The special opportunities strategy, historically part of the Private Equity Group, is now referred to as opportunistic credit and is presented within the Credit Group. Historical results have been modified to conform with the current presentation.
Previous wording
(1)Represents earnouts in connection with the acquisition of AMP Capital’s infrastructure debt platform (“Infrastructure Debt Acquisition”) and the Crescent Point Acquisition that are recorded as compensation expense and are presented within compensation and benefits within the Company’s Condensed Consolidated Statements of Operations.
Current wording
(1)Represents contingent obligations (“earnouts”) in connection with the acquisition of AMP Capital’s infrastructure debt platform (“Infrastructure Debt Acquisition”) and the Crescent Point Acquisition that are recorded as compensation expense and are presented within compensation and benefits within the Company’s Condensed Consolidated Statements of Operations.
Previous wording
Management Fees. Capital deployment in direct lending, alternative credit and opportunistic credit funds within the Credit Group led to a rise in FPAUM and additional management fees of $54.8 million for thethree months ended March 31, 2024 compared to the same period in 2023. Part I Fees contributed $22.8 million to the increase over the comparative periods. The increase in Part I Fees was primarily due to: (i) 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; and (ii) ASIF and AESIF that began generating Part I Fees after the first quarter of 2023. Within the Private Equity Group, funds that we manage as a result of the acquisition of the investment management business and related operating entities collectively doing business as Crescent Point Capital (“Crescent Point”) (the “Crescent Point Acquisition”), which was completed on October 2, 2023, generated $7.4 million in additional management fees for the three months ended March 31, 2024. For detail regarding the fluctuations of management fees within each of our segments see “—Results of Operations by Segment.”
Current wording
Management Fees. Capital deployment in direct lending, alternative credit and opportunistic credit funds within the Credit Group led to a rise in FPAUM and additional management fees of$59.8 million and$114.7 million for thethree and six months ended June 30, 2024, respectively, compared to the same periods in 2023. Part I Fees increased by $29.1 million and$52.0 million for thethree and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The increases in Part I Fees were primarily due to: (i) the increases 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; and (ii) ASIF and AESIF that began generating Part I Fees after the second quarter of 2023. Within the Private Equity Group, funds that we manage as a result of the acquisition of the investment management business and related operating entities collectively doing business as Crescent Point Capital (“Crescent Point”) (the “Crescent Point Acquisition”), which was completed on October 2, 2023, generated additional fees of $7.2 million and $14.6 million for the three and six months ended June 30, 2024, respectively. For detail regarding the fluctuations of management fees within each of our segments, see “—Results of Operations by Segment.”
Previous wording
Incentive Fees. The activity was principally composed of the following ($ in millions):
Current wording
Incentive Fees. The activity was principally composed of the following ($ in millions). For detail regarding the fluctuations of incentive fees within each of our segments, see discussion of fee related performance revenues and realized net performance income within “—Results of Operations by Segment”:
Previous wording
Principal Investment Income. The activity for the three months ended March 31, 2024 was primarily composed of: (i) appreciation of our investments in certain funds in our opportunistic credit, U.S. and European direct lending and alternative credit strategies; (ii) dividend income from our investments in two European real estate funds; (iii) interest income earned in connection with our investment in an insurance fund, as new investors subsequently committed to the fund and were reallocated capital account balances from existing investors; and partially offset by (iv) unrealized losses from our investments in certain funds in our Asia-Pacific (“APAC”) credit, real estate secondaries and corporate private equity strategies.
Current wording
Principal Investment Income. The activity for the three and six months ended June 30, 2024 was primarily composed of: (i) interest income earned from new investors subsequently committed to an insurance fund, where capital account balances are reallocated from existing investors in exchange for interest to compensate for carrying costs; (ii) appreciation of certain investments in funds within our infrastructure opportunities and European direct lending strategies; (iii) dividend income from certain investments in funds within our European real estate and European direct lending strategies; and partially offset by (iv) unrealized losses from our investment in an opportunistic credit fund. The activity for the six months ended June 30, 2024 also included: (i) appreciation of certain investments in funds within our U.S. and European direct lending and alternative credit strategies; and partially offset by (ii) unrealized losses from certain investments in funds within our real estate secondaries and APAC credit strategies.
Previous wording
The activity for the three months ended March 31, 2023 was primarily composed of appreciation of our investments in certain opportunistic credit and European direct lending funds and dividend income from various investments in funds within our opportunistic credit strategy.
Current wording
The activity for the three and six months ended June 30, 2023 was primarily composed of: (i) appreciation of certain investments in funds within our corporate private equity and opportunistic credit strategies; (ii) dividend income from various investments in opportunistic credit funds; and partially offset by (iii) unrealized losses from our investment in LREF VIII. The six months ended June 30, 2023 also included appreciation of certain investments in funds within our European direct lending strategy.
Previous wording
Administrative, Transaction and Other Fees. The increase in administrative, transaction and other fees for the three months ended March 31, 2024 compared to the same period in 2023 was primarily driven by: (i) higher administrative fees of $4.3 million from a commercial finance fund during the second quarter of 2023 that were previously eliminated when this fund was consolidated into our results; (ii) higher administrative service fees of $4.4 million primarily from our non-traded vehicles; (iii) higher administrative service fees of $2.4 million that are based on invested capital and are primarily from certain private funds within our Credit Group; and partially offset by (iv) lower development fees of $2.0 million, resulting from a reduction in property-related activities within certain industrial U.S. real estate equity funds.
Current wording
The increase for the six months ended June 30, 2024 compared to the same period in 2023 was driven by: (i) higher administrative service fees of $9.7 million primarily from private funds within our Credit Group that are based on invested capital and from our non-traded vehicles; (ii) higher administrative fees of $4.7 million from a commercial finance fund that were previously eliminated when this fund was consolidated into our results until the second quarter of 2023; and partially offset by (iii) lower credit transaction fees of $8.4 million, primarily from the infrastructure debt strategy where fees are generated periodically and lower loan origination income earned from certain managed accounts within the U.S. direct lending strategy, driven by a lower capacity of investable capital; (iv) lower asset-based, net distribution fees associated with our non-traded REITs of $2.6 million; and (v) lower development fees of $2.0 million, resulting from a reduction in property-related activities within certain industrial U.S. real estate equity funds.
Previous wording
Compensation and Benefits. The increase in compensation and benefits was primarily driven by higher equity-based compensation expense of $23.2 million, which included expenses of $17.4 million and $10.0 million for the three months ended March 31, 2024 and 2023, respectively, in connection with the immediate vesting provisions of certain awards that occurs annually in the first quarter as a retirement benefit for eligible recipients. Further, the number of unvested restricted units being amortized has increased as has the value of these units with our rising stock price.
Current wording
Compensation and Benefits. The increases in compensation and benefits for the three and six months ended June 30, 2024 compared to the same periods in 2023 were primarily driven by increases in equity-based compensation expense of $26.0 million and $49.1 million, respectively. The number of unvested restricted units being amortized has increased as has the value of these units with our rising stock price. In addition, the immediate vesting of certain awards occurs annually in the first quarter as a retirement benefit for eligible recipients and accelerated expense of $17.4 million and $10.0 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Net Realized and Unrealized Gains on Investments. The activity for the three months ended March 31, 2024 included: (i) unrealized gains from the appreciation of our investments in APMF and in the subordinated notes of U.S. CLOs, as well as of our strategic investments in a U.S. energy company and in a company that manages real estate owned properties; and partially offset by (ii) unrealized losses from our strategic investment in a non-core insurance related investment and a company that manages portfolios of non-performing loans.
Current wording
Net Realized and Unrealized Gains on Investments. The activity for the three and six months ended June 30, 2024 was primarily attributable to: (i) unrealized gains from the appreciation of our investments in APMF, in the subordinated notes of U.S. CLOs, and in a European liquid credit vehicle that is invested in the subordinated notes of European CLOs, as well as in a company that manages real estate owned properties; and partially offset by (ii) unrealized losses from our strategic investment in a non-core insurance related investment and a company that manages portfolios of non-performing loans. The activity for the six months ended June 30, 2024 also included net unrealized gains from the appreciation of our strategic investments in a U.S. energy company.
Previous wording
The activity for the three months ended March 31, 2023 was primarily attributable to: (i) unrealized gains from the appreciation of our investments in APMF and the same strategic investment in a company that manages real estate owned properties; and partially offset by (ii) unrealized losses from our investments in the subordinated notes of U.S. CLOs.
Current wording
The activity for the three and six months ended June 30, 2023 was primarily attributable to: (i) unrealized gains from the appreciation of our investments in APMF and certain strategic investments in companies that manage real estate owned properties and portfolios of non-performing loans; and partially offset by (ii) unrealized losses from our investments in the subordinated notes of U.S. CLOs.
Previous wording
Interest Expense. Interest expense increased for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to the issuance of the 2028 Senior Notes in November 2023 that increased interest expense by $8.2 million. In addition, higher average SOFR rates and a higher average outstanding balance of the Credit Facility also contributed to the increase over the comparative periods.
Current wording
Interest Expense. Interest expense increased for the three and six months ended June 30, 2024 compared to the same periods in 2023 primarily due to the issuance of the 2028 Senior Notes in November 2023 that increased interest expense by $8.2 million and $16.5 million, respectively. In addition, higher average SOFR rates and a higher average outstanding balance of the Credit Facility also contributed to the increases over the comparative periods.
Previous wording
Other Income (Expense), Net. The activity for the three months ended March 31, 2024 and 2023 primarily included transaction gains (losses) associated with currency fluctuations impacting the revaluation of assets and liabilities denominated in foreign currencies other than an entity’s functional currency.
Current wording
Other Expense, Net. The activity for the three and six months ended June 30, 2024 and 2023 primarily included transaction gains (losses) associated with currency fluctuations impacting the revaluation of assets and liabilities denominated in foreign currencies other than an entity’s functional currency. Transaction losses for the three and six months ended June 30, 2024 were primarily attributable to the U.S. dollar strengthening against the Euro, while the transaction losses for the six months ended June 30, 2023 were primarily attributable to the British pound strengthening against the Euro and U.S. dollar.
Previous wording
The decrease in income tax expense was attributable to lower pre-tax income allocable to AMC for the three months ended March 31, 2024 compared to the same period in 2023 as the income attributed to redeemable and non-controlling interests is generally passed through to partners and not subject to corporate income taxes. The calculation of income taxes is also sensitive to any changes in weighted average daily ownership.
Current wording
The decreases in income tax expense were attributable to lower pre-tax income allocable to AMC for the three and six months ended June 30, 2024 compared to the same periods in 2023 as the income attributed to redeemable and non-controlling interests is generally passed through to partners and not subject to corporate income taxes. The calculation of income taxes is also sensitive to any changes in weighted average daily ownership.
Previous wording
The change in ownership was primarily driven by the exchanges of AOG Units, issuance of Class A common stock in connection with stock option exercises, vesting of restricted stock awards and the Crescent Point Acquisition.
Current wording
The changes in ownership for the comparative periods were primarily driven by the exchanges of AOG Units, issuance of Class A common stock in connection with the public offering that closed in June 2024 (the “Offering”), stock option exercises, vesting of restricted stock awards and the Crescent Point Acquisition.
Previous wording
Management fees from existing funds increased primarily from the deployment of capital in Pathfinder I, Ares Senior Direct Lending Fund II, L.P. (“SDL II”), ASOF II andan open-ended core alternative credit fund. These funds collectively generated additional management fees of $18.3 million for the three months ended March 31, 2024 compared to the same period in 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 separately managed accounts (“SMAs”). Management fees from ARCC, ASIF and CADC, excluding Part I Fees described below, increased by $16.4 million over the comparative periods primarily due to an increase in the average size of ARCC’s and CADC’s portfolio and additional capital raised in ASIF. Conversely, management fees from ACE IIIdecreased by $4.1 million over the comparative periodsdue to a reduction in fee rate. Management fees from CLOs also increased for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to the net addition of five CLOs for the three months ended March 31, 2024.
Current wording
Management fees from existing funds increased over the comparative periods primarily from the deployment of capital in direct lending and alternative credit funds and separately managed accounts (“SMAs”). Ares Senior Direct Lending Fund II, L.P. (“SDL II”), ASOF II, Pathfinder I andan open-ended core alternative credit fund collectively generated additional management fees of $16.6 million and $34.8 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. Management fees from our sixth European direct lending fund and Pathfinder II, which both launched during the second quarter of 2023, also contributed increases of $11.3 million and $22.3 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.
Previous wording
Part I Fees increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 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. Additionally, ASIF and AESIF contributed $6.0 million and $0.9 million, respectively, to the increase in Part I Fees as both funds began generating Part I Fees after the first quarter of 2023.
Current wording
Part I Fees increased for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 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. Additionally, ASIF and AESIF, collectively contributed $10.4 million and $17.4 million for the three and six months ended June 30, 2024, respectively, to the increase in Part I Fees as both funds began generating Part I Fees after the second quarter of 2023.
Previous wording
The increase in effective management fee rate for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily driven by the increase in Part I Fees’ contribution to the effective management fee rate.
Current wording
The increases in effective management fee rate for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 were primarily driven by the increase in Part I Fees’ contribution to the effective management fee rate.
Previous wording
Other Fees. The increase in other fees for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily driven by higher administrative service fees of $2.4 million, which were earned from certain private funds that pay on invested capital. The increase in other fees was partially offset by a decrease of $1.6 million in transaction fees primarily due to lower loan origination income from a U.S. direct lending fund, driven by limited capacity of investable capital from certain investors.
Current wording
Other Fees. The increases in other fees for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 were primarily driven by higher administrative service fees of $2.0 million and $4.1 million, respectively, which were earned from certain private funds that pay on invested capital. The increases in other fees were partially offset by decreases in transaction fees of $1.1 million and $2.7 million when compared to the prior year periods, primarily due to lower loan origination income earned from certain managed accounts within the U.S. direct lending strategy, driven by a lower capacity of investable capital.
Previous wording
Compensation and Benefits. The increase in compensation and benefits for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily driven by: (i) higher Part I Fees compensation of $11.0 million, corresponding to the increase in revenue; (ii) an increase in salary expense of $3.8 million, primarily attributable to headcount growth to support the expansion of our business; and (iii) an increase in payroll related taxes of $3.7 million, primarily due to our higher stock price associated with the restricted units that vested during the period. The increase in compensation and benefits over the comparative periods was partially offset by lower incentive-based compensation, which is dependent on our operating performance and is expected to fluctuate during the year.
Current wording
The increase in compensation and benefits for the six months ended June 30, 2024 compared to the same period in 2023 was also driven by an increase in payroll related taxes of $3.8 million, primarily due to the higher stock price associated with our restricted units that vested during the first quarter of 2024. The increases in compensation and benefits over the comparative periods were partially offset by lower incentive-based compensation, which is dependent on our operating performance and is expected to fluctuate during the year.
Previous wording
Average headcount increased by 12% to 650 investment and investment support professionals for the quarter-to-date period in 2024 from 579 professionals for the same period in 2023 as we continued to add professionals, primarily to support our growing direct lending and APAC credit platforms.
Current wording
Average headcount increased by 17% to 654 investment and investment support professionals for the year-to-date period in 2024 from 561 professionals for the same period in 2023 as we continued to add professionals, primarily to support our growing direct lending and alternative credit platforms.
Previous wording
General, Administrative and Other Expenses. The increase in general, administrative and other expenses was primarily due to costs incurred to support fundraising for our funds and distribution of shares in our non-traded vehicles. Placement fees increased by $8.7 million for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to new commitments to our third U.S. senior direct lending fund. Additionally, supplemental distribution fees were $10.8 million and increased by $8.4 million for the three months ended March 31, 2024 when compared to the same period in 2023. These fees will fluctuate with sales volumes and assets under management of our non-traded vehicles and we expect to incur higher supplemental distribution fees in future periods as we continue to develop our distribution relationships and expand our retail product offerings.
Current wording
General, Administrative and Other Expenses. The increases in general, administrative and other expenses were primarily due to costs incurred to support fundraising for our funds and distribution of shares in our non-traded vehicles. As we develop our distribution relationships and expand our retail product offerings, supplemental distribution fees increased by $6.5 million and $10.2 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. Such supplemental distribution fees are expected to fluctuate with sales volumes and managed assets of our non-traded vehicles. We reduce the Part I Fee compensation by a portion of the supplemental distribution fees paid to the extent that Part I
Previous wording
Realized net investment loss for the three months ended March 31, 2024 and 2023 largely represents interest expense exceeding investment income during these periods. The activity for both periods included interest income generated from our CLO investments, which we earned a similar level of income from 14 and 15 CLO investments for the three months ended March 31, 2024 and 2023, respectively. The activity for the three months ended March 31, 2023 also included income recognized in connection with distributions from our investment in a commercial finance fund that was sold during the second quarter of 2023.
Current wording
Realized net investment income for the three and six months ended June 30, 2024 and 2023 included interest income generated from our CLO investments, where we earned a similar level of income from 15 CLO investments for both the six months ended June 30, 2024 and 2023. The activity for the three and six months ended June 30, 2024 also included income recognized in connection with distributions from our investment in a U.S. direct lending fund. The activity for the three and six months ended June 30, 2023 also included distributions from our investment in a commercial finance fund that was sold during the second quarter of 2023.
Previous wording
(1) Includes $14.7 billion and $14.6 billion of AUM of funds from which we indirectly earn management fees as of March 31, 2024 and 2023, respectively, and includes $1.7 billion and $1.6 billion of non-fee paying AUM from our general partner and employee commitments as of March 31, 2024 and 2023, respectively.
Current wording
(1) Includes $14.4 billion and $14.9 billion of AUM of funds from which we indirectly earn management fees as of June 30, 2024 and 2023, respectively, and includes $1.7 billion and $1.5 billion of non-fee paying AUM from our general partner and employee commitments as of June 30, 2024 and 2023, respectively.
Previous wording
(1)Includes $36.8 billion and $30.9 billion from funds that primarily invest in illiquid strategies as of March 31, 2024 and 2023, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.
Current wording
(1)Includes $40.6 billion and $32.1 billion from funds that primarily invest in illiquid strategies as of June 30, 2024 and 2023, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.
Previous wording
ARCC contributed approximately 34% of the Credit Group’s total management fees for the three months ended March 31, 2024. In addition, the Credit Group’s other significant funds, which are presented in the tables below, collectively contributed approximately 30% of the Credit Group’s management fees for the three months ended March 31, 2024.
Current wording
ARCC contributed approximately 34% of the Credit Group’s total management fees for the six months ended June 30, 2024. In addition, the Credit Group’s other significant funds, which are presented in the tables below, collectively contributed approximately 36% of the Credit Group’s management fees for the six months ended June 30, 2024.
Previous wording
(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.
Current wording
(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 and ASIF can be found in its filings with the SEC, which are not part of this report.
Previous wording
(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. The fund is made up of a Main Class (“Class M”) and a Constrained Class (“Class C”). Class M includes investors electing to participate in all investments and Class C includes investors electing to be excluded from exposure to liquid investments. Returns presented in the table are for onshore Class M. The current quarter gross and net returns for Class M (offshore) are 3.4% and 2.5%, respectively. The since inception gross and net returns for Class M (offshore) are 10.5% and 7.5%, respectively. The current quarter gross and net returns for Class C (offshore) are 2.6% and 1.9%, respectively. The since inception gross and net returns for Class C (offshore) are 10.4% and 7.5%, respectively. Prior to the current period, returns were reported using the annualized since inception IRR and MoIC. The gross and net IRR for Class M (onshore) are 12.2% and 9.0%, respectively. The gross and net MoIC for Class M (onshore) are 1.1x and 1.1x, respectively. The gross and net IRR for Class M (offshore) are 12.2% and 8.8%, respectively. The gross and net MoIC for Class M (offshore) are 1.1x and 1.1x, respectively. The gross and net IRR for Class C (offshore) are 10.8% and 7.9%, respectively. The gross and net MoIC for Class C (offshore) are 1.2x and 1.1x, respectively.
Current wording
(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. The fund is made up of a Main Class (“Class M”) and a Constrained Class (“Class C”). Class M includes investors electing to participate in all investments and Class C includes investors electing to be excluded from exposure to liquid investments. Returns presented in the table are for onshore Class M. The current quarter gross and net returns for Class M (offshore) are 3.1% and 2.0%, respectively. The year-to-date gross and net returns for Class M (offshore) are 6.3% and 4.3%, respectively. The since inception gross and net returns for Class M (offshore) are 10.6% and 7.5%, respectively. The current quarter gross and net returns for Class C (offshore) are 3.2% and 2.3%, respectively. The year-to-date gross and net returns for Class C (offshore) are 5.6% and 4.0%, respectively. The since inception gross and net returns for Class C (offshore) are 10.6% and 7.5%, respectively.
Previous wording
(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 and one feeder fund: ACE IV (D) Levered. ACE IV (E) Levered includes the ACE IV (D) Levered feeder fund. 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 exclude the U.S. dollar denominated feeder fund. 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 12.8% and 9.1%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.5x and 1.4x, respectively. The gross and net IRR for ACE IV (D) Levered are 13.0% and 9.6%, respectively. The gross and net MoIC for ACE IV (D) Levered are 1.6x 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.
Current wording
(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 and one feeder fund: ACE IV (D) Levered. ACE IV (E) Levered includes the ACE IV (D) Levered feeder fund. 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 exclude the U.S. dollar denominated feeder fund. The gross and net IRR for ACE IV (G) Unlevered are 9.8% 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 12.8% and 9.1%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.6x and 1.4x, respectively. The gross and net IRR for ACE IV (D) Levered are 13.0% and 9.5%, respectively. The gross and net MoIC for ACE IV (D) Levered are 1.6x 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.
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
The charts below present the composition of our segment management fees by the initial fund duration:
Current report — wording carried from elsewhere
Yet Paying Fees included $55.6 billion of AUM available for future deployment that could generate approximately $551.6 million in potential incremental annual management fees.
Current report — wording carried from elsewhere
Management fees from ARCC, ASIF and CADC, excluding Part I Fees described below, collectively increased by $25.7 million and $42.2 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, primarily due to an increase in the average size of ARCC’s and CADC’s portfolio and to additional capital raised in ASIF.
Current report — wording carried from elsewhere
The tables below present rollforwards of fee paying AUM for the Private Equity Group ($ in millions):
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
General, Administrative and Other Expenses. In the effort to develop our distribution relationships and expand our retail product offerings, supplemental distribution fees increased by $3.7 million for the three months ended March 31, 2024 compared to the same period in 2023. Supplemental distribution fees fluctuate with sales volumes and managed assets of our non-traded vehicles.
Previous report — wording carried elsewhere
Realized net investment loss for the three months ended March 31, 2024 and 2023 largely represents interest expense exceeding investment income during these periods. Interest expense, which is allocated among our segments based on the cost basis of our balance sheet investments, increased over the comparative periods primarily due to the issuance of the 2028 Senior Notes in November 2023 and to higher average SOFR rates and a higher average outstanding balance of our Credit Facility.
Previous report — wording carried elsewhere
Cash flows from management fees may be impacted by a slowdown in deployment, declines in valuations 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 in 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.