Ares Management Corp

Previous wording

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of Ares Management Corporation and the related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and the related notes included in the 2023 Annual Report on Form 10-K of Ares Management Corporation.

Current wording

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of Ares Management Corporation and the related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and the related notes included in the 2023 Annual Report on Form 10-K of Ares Management Corporation. We have reclassified certain prior period amounts to conform to the current year presentation.

Previous wording

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

Current wording

The changes from current year compared to prior year may be deemed to be not meaningful and are designated as “NM” within the discussion and analysis of financial condition and results of operations.

Previous 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.

Current wording

Global markets continued to perform positively in the third quarter fueled by the easing of monetary policy by the Federal Reserve and several other major central banks, better than expected economic growth and resilient consumer spending. 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 favorable performance as the region overall continued to show growth, primarily driven by moderate inflation, low unemployment and lower interest rate expectations driving consumption in Southeast Asia, India and Australia. China announced policy stimulus measures affecting monetary policy, the property sector and equity markets, driving an overall positive investor sentiment. Globally, reduced lending activity by banks and limited capital accessibility continued to support private credit growth.

Previous wording

The current market environment has had a more pronounced negative impact on certain industries, including energy, which is an industry in which few of our funds have made investments. As of June 30, 2024, 1% of our total AUM was invested in debt and equity investments in the energy sector (of which less than 1% of our total AUM was invested in midstream investments and also includes oil and gas exploration) and less than 1% of our total AUM was invested in renewable energy investments.

Current wording

Market factors may have a more pronounced impact on certain industries, including energy, which is an industry in which few of our funds have made investments. As of September 30, 2024, less than 1% of our total AUM was invested in debt and equity investments in the energy sector, including midstream investments, oil and gas exploration, and renewable energy investments.

Previous wording

We believe our portfolios across all strategies are well positioned for a fluctuating interest rate environment. On a market value basis, approximately 85% of our debt assets and 56% of our total assets were floating rate instruments as of June 30, 2024.

Current wording

We believe our portfolios across all strategies are well positioned for a fluctuating interest rate environment. On a market value basis, approximately 85% of our debt assets and 57% of our total assets were floating rate instruments as of September 30, 2024.

Previous wording

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

Current wording

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

Previous 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.

Current wording

(1) Includes $14.4 billion and $15.2 billion of AUM of funds from which we indirectly earn management fees as of September 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 September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

(2)Includes $67.8 billion and $56.8 billion from funds that primarily invest in illiquid strategies as of September 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

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

Current wording

As of September 30, 2024, AUM Not Yet Paying Fees includes $74.1 billion of AUM available for future deployment that could generate approximately $721.5 million in potential incremental annual management fees. As of September 30, 2023,

Previous wording

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 wording

AUM Not Yet Paying Fees included $65.7 billion of AUM available for future deployment that could generate approximately $647.4 million in potential incremental annual management fees.

Previous 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.

Current wording

Fee related performance revenues are not recognized by us until such fees are crystallized and no longer subject to reversal. As of September 30, 2024, perpetual capital IGAUM that could generate fee related performance revenues totaled $20.4 billion, composed of $18.5 billion within the Credit Group and $1.9 billion within the Secondaries Group. As of September 30, 2023, perpetual capital IGAUM from which we could generate fee related performance revenues totaled $14.3 billion, composed of $13.9 billion within the Credit Group and $0.4 billion within the Secondaries Group. As of September 30, 2024 and 2023, IGAUM included $42.8 billion and $35.7 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

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.

Current wording

Consolidated Funds represented approximately 4% of our AUM as of September 30, 2024 and less than 1% of total revenues for the nine months ended September 30, 2024. As of September 30, 2024, we consolidated 28 CLOs, 10 private funds and one SPAC, and as of September 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 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.

Current wording

We generally deconsolidate funds and CLOs when we are no longer deemed to have a controlling interest in the entity. During the nine months ended September 30, 2024, we did not deconsolidate any entities. During the nine months ended September 30, 2023, we deconsolidated one private fund as a result of significant change in ownership.

Previous 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.

Current wording

(1)Represents contingent obligations (“earnouts”) in connection with the acquisitions of AMP Capital’s infrastructure debt platform (“Infrastructure Debt Acquisition”) and Crescent Point Capital (“Crescent Point”) (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$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.”

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, contributing to increases in management fees of$63.2 million and$177.9 million for thethree and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. Part I Fees increased by $26.7 million and$78.6 million for thethree and nine months ended September 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, ASIF 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) the increases in pre-incentive fee net investment income from AESIF that began generating Part I Fees after the third quarter of 2023. Within the Private Equity Group, funds that we manage as a result of the Crescent Point Acquisition, which was completed on October 2, 2023, generated additional fees of $7.5 million and $22.1 million for the three and nine months ended September 30, 2024, respectively. For detail regarding the fluctuations of management fees within each of our segments, see “—Results of Operations by Segment.”

Previous wording

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

Current wording

The activity was principally composed of the following:

Previous 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”:

Current wording

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 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.

Current wording

Principal Investment Income. The activity for the three and nine months ended September 30, 2024 was primarily composed of: (i) appreciation of certain investments in funds within our real estate debt and European direct lending strategies; (ii) distributions of investment income from an infrastructure debt fund; (iii) realized gains from the sale of an infrastructure opportunities fund’s investment in a wind energy company. The activity for the nine months ended September 30, 2024 also included: (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 U.S. direct lending strategies; and (iii) distributions of investment income from funds within our real estate debt and European direct lending strategies; partially offset by (iv) unrealized losses from certain investments in funds within our real estate secondaries, APAC credit, private equity secondaries and opportunistic credit strategies.

Previous 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.

Current wording

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

Previous wording

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 wording

Administrative, Transaction and Other Fees. The increase for the three months ended September 30, 2024 compared to the same period in 2023 was primarily driven by: (i) higher administrative service fees of $4.6 million, primarily from private funds within our Credit Group that are based on invested capital and from our non-traded vehicles; and (ii) higher development fees of $1.7 million from property-related activities within certain U.S. real estate equity funds; partially offset by (iii) lower asset-based, net distribution fees associated with our non-traded REITs of $0.9 million.

Previous 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.

Current wording

The increase for the nine months ended September 30, 2024 compared to the same period in 2023 was driven by: (i) higher administrative service fees of $13.9 million primarily from private funds within our Credit Group that are based on invested capital and from our non-traded vehicles; and (ii) higher administrative fees of $5.1 million from a commercial finance fund that were previously eliminated when this fund was consolidated into our results until the second quarter of 2023; partially offset by (iii) lower credit transaction fees of $9.1 million, primarily from the infrastructure debt strategy which are infrequent in nature 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; and (iv) lower asset-based, net distribution fees associated with our non-traded REITs of $3.4 million.

Previous 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.

Current wording

Compensation and Benefits. The increases in compensation and benefits for the three and nine months ended September 30, 2024 compared to the same periods in 2023 were primarily driven by increases in equity-based compensation expense of $23.6 million and $72.8 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 nine months ended September 30, 2024 and 2023, respectively.

Previous wording

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 wording

In addition, the increases in compensation and benefits for the three and nine months ended September 30, 2024 compared to the same periods in 2023 were driven by: (i) increases in salary expense of $13.7 million and $40.9 million, respectively, primarily attributable to headcount growth to support the expansion of our business; and (ii) higher Part I Fee compensation of $11.9 million and $35.4 million, respectively. The increase for the nine months ended September 30, 2024 compared to the same period in 2023 was also attributable to (i) an increase in payroll related taxes of $11.2 million primarily due to the higher stock price associated with our restricted units that vested during the first quarter of 2024; and (ii) increased compensation and benefits of $11.0 million associated with our retail distribution channel, AWMS, resulting from higher sales employee variable compensation associated with APMF and ASIF. The increase in compensation and benefits for the nine months ended September 30, 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.

Previous wording

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 wording

Acquisition in the fourth quarter of 2023 of $4.8 million and $14.5 million, respectively. See “Note 7. Commitments and Contingencies” for a further description of the contingent liabilities related to the Crescent Point Acquisition arrangement.

Previous 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

Current wording

General, Administrative and Other Expenses. Before giving effect to certain amortization costs associated with the impairment of intangible assets, general, administrative and other expenses increased by 29% and 21% for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. These increases were primarily due to costs incurred to support fundraising for our funds and distribution of shares in our non-traded vehicles, which we refer to as supplemental distribution fees. Supplemental distribution fees increased by $9.7 million and $31.9 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. These fees will fluctuate with sales volumes and net asset value of our non-traded vehicles. Placement fees also increased by $9.1 million for the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to new commitments to Ares Senior Direct Lending Fund III, L.P. (“SDL III”).

Previous 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.

Current wording

Net Realized and Unrealized Gains (Losses) on Investments. The activity for the three and nine months ended September 30, 2024 included: (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 asset manager, as well as in a company that manages portfolios of non-performing loans; and (ii) net unrealized losses from our strategic investment in a U.S. energy company.

Previous 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.

Current wording

The activity for the three and nine months ended September 30, 2023 was primarily attributable to: (i) unrealized gains from the appreciation of our investments in APMF and in certain strategic investments in companies that manage real estate owned properties and portfolios of non-performing loans; partially offset by (ii) unrealized losses from our strategic investment in a U.S. financial technology company.

Previous 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.

Current wording

Other Income (Expense), Net. The activity for the three and nine months ended September 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 nine months ended September 30, 2024 were primarily attributable to the British Pound strengthening against the U.S. dollar and Euro. Transaction gains for the three months ended September 30, 2023 were primarily attributable to the Euro strengthening against the U.S. dollar and British pound. Despite the gains during the third quarter of 2023, we recognized transaction losses for the nine months ended September 30, 2023 primarily due to the Euro weakening against the U.S. dollar and British pound for the year-to-date period.

Previous 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.

Current wording

The increases in income tax expense were attributable to higher pre-tax income allocable to AMC for the three and nine months ended September 30, 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 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.

Current wording

The changes in ownership for the comparative periods were primarily driven by the issuances of shares of Class A common stock in connection with exchanges of AOG Units, the public offering that closed in June 2024 and the subsequent exercise of the underwriter’s option to purchase additional shares in July 2024 (the “Offering”), stock option exercises, vesting of restricted stock awards and the Crescent Point Acquisition.

Previous 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.

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”). SDL III, Ares Senior Direct Lending Fund II, L.P. (“SDL II”), our sixth European direct lending fund, ACE V, an open-ended core alternative credit fund, ASOF II, Pathfinder II and Pathfinder Icollectively generated additional management fees of $39.9 million and $115.4 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. SDL III, our sixth European direct lending fund and Pathfinder II launched during the second quarter of 2023.

Previous wording

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 wording

Management fees from ARCC, ASIF and CADC, excluding Part I Fees described below, collectively increased by $30.1 million and $72.2 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The increasesin management fees from ARCC, ASIF and CADC were primarily due to an increase in the average size of their portfolios.

Previous 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.

Current wording

Part I Fees increased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 primarily due to: (i) increases in pre-incentive fee net investment income generated by ARCC, ASIF 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; and (ii) AESIF that began generating Part I Fees after the third quarter of 2023. ASIF contributed additional Part I Fees of $11.7 million and $26.6 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. AESIF contributed Part I Fees of $2.8 million and $5.2 million for the three and nine months ended September 30, 2024, respectively.

Previous wording

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 wording

Conversely, management fees from ASOF I and Ares Senior Direct Lending Fund, L.P. (“SDL I”), collectively decreased by $6.8 million and$16.7 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 resulting from distributions that reduced the fee bases as the funds are past their investment periods. Management fees from Ares Capital Europe III, L.P. (“ACE III”)also decreased by $4.2 million and$12.6 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, primarilydue to the reduction in fee rate.

Previous 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.

Current wording

The increases in effective management fee rate for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 were primarily driven by the increase in Part I Fees’ contribution to the effective management fee rate.

Previous wording

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 wording

Fee Related Performance Revenues. The increases for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 were primarily attributable to incentive fees earned from an open-ended core alternative credit fund, which has a measurement period that crystallizes fees annually during the third quarter.

Previous 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.

Current wording

Other Fees. The increases in other fees for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 were primarily driven by higher administrative service fees of $1.9 million and $6.0 million, respectively, which were earned from certain private funds that pay on invested capital.

Previous wording

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 wording

Compensation and Benefits. The increases in compensation and benefits for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 were primarily driven by: (i) higher fee related performance compensation of $31.3 million and $35.0 million, respectively, corresponding to the increases in fee related performance revenues; and (ii) increases in salary expense of $2.2 million and $8.4 million, respectively, primarily attributable to headcount growth to support the expansion of our business. The increases in compensation and benefits over the comparative periods were also driven by higher Part I Fee compensation of $11.9 million and $35.4 million, respectively, corresponding to the increases in Part I Fees that were partially reduced by a portion of supplemental distribution fees we paid to distribution partners. We reduce Part I Fee compensation by a portion of the supplemental distribution fees paid to the extent that Part I Fees are earned. For the three and nine months ended September 30, 2024, we reduced Part I Fee compensation by $3.3 million and $8.0 million, respectively, as reimbursement for supplemental distribution fees paid.

Previous 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.

Current wording

Average headcount increased by 13% to 663 investment and investment support professionals for the year-to-date period in 2024 from 586 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 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 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. Supplemental distribution fees were $8.6 million and $21.9 million for the three and nine months ended September 30, 2024. Such supplemental distribution fees increased by $4.9 million and $15.1 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, as we develop our distribution relationships and expand our retail product offerings. These supplemental distribution fees are expected to fluctuate with sales volumes and net asset values of our non-traded vehicles and will reduce Part I Fee compensation to the extent that Part I Fees are earned. The increase in general, administrative and other expenses for the nine months ended September 30, 2024 compared to the same period in 2023 was also driven by: (i) placement fees of $1.9 million, primarily due to new commitments to SDL III; and (ii) travel and marketing costs of $3.1 million, driven by investor events held during the second quarter of 2024, including our firmwide AGM event.