Ares Management Corporation

Company Overview

Business Model: Ares Management Corporation is a global alternative investment manager, founded in 1997. The company generates revenue primarily through management fees and performance income (carried interest and incentive fees) from its distinct investment groups: Credit, Real Assets, Private Equity, and Secondaries. Additionally, Ares Management Corporation operates other businesses including Ares Insurance Solutions, company-sponsored special purpose acquisition companies, and a venture capital business focused on applied artificial intelligence. As of December 31, 2024, approximately 95% of management fees were derived from perpetual capital or long-dated funds.

Market Position: Ares Management Corporation is a leading global alternative investment manager, overseeing $484.4 billion in assets under management (AUM) as of December 31, 2024. The company has demonstrated significant growth, with AUM increasing at a 27% compound annual growth rate (CAGR) over the past five years and 19% over the past ten years. It serves approximately 2,700 direct institutional relationships and a substantial retail investor base. A significant portion of its Credit Group's debt assets (approximately 85%) and total assets (57%) are in floating rate instruments, providing sensitivity to interest rate movements.

Recent Strategic Developments:

• Fundraising: In 2024, Ares Management Corporation raised $92.7 billion in gross new capital commitments across over 185 investment vehicles, attracting over 660 institutional investors, with more than 310 being new to the firm. 85% of direct institutional fundraising came from existing investors.
• Capital Deployment: The company deployed $106.7 billion across its platform in 2024.
• Strategic Acquisitions: Key acquisitions include Crescent Point Acquisition (effective October 2, 2023), WSM Acquisition (effective December 1, 2024), and GCP Acquisition (2024).
• Capital Structure Enhancements: Ares Management Corporation issued 2028 Senior Notes in November 2023, 2054 Senior Notes in October 2024, and Series B mandatory convertible preferred stock in October 2024, raising $1,462.5 million in proceeds from the latter.
• Operational Expansion: The company occupied its new corporate headquarters in the third quarter of 2024.

Geographic Footprint: Ares Management Corporation maintains a global presence with over 35 offices in more than 15 countries. Its investor base is geographically diverse, with AUM originating from North America ($253.4 billion), Europe ($90.0 billion), APAC ($30.0 billion), and the Middle East & Africa ($16.5 billion) as of December 31, 2024.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Operating Margin: 24.35% (2024) vs 22.97% (2023)
• Net Margin: 28.59% (2024) vs 31.94% (2023)

Investment in Growth:

• Capital Expenditures: $91,509 thousand (2024) vs $67,183 thousand (2023)
• Strategic Investments: $67,895 thousand (2024, primarily for WSM Acquisition and GCP Acquisition) vs $43,896 thousand (2023, primarily for Crescent Point Acquisition)

Business Segment Analysis

Credit Group

Financial Performance:

• Revenue (Management Fees): $2,177,816 thousand (2024) vs $1,853,326 thousand (2023) (+18% YoY)
• Fee Related Earnings (FRE): $1,568,157 thousand (2024) vs $1,317,012 thousand (2023) (+19% YoY)
• Operating Margin (FRE as % of Management Fees): 72.0% (2024)
• Key Growth Drivers: AUM growth to $348.8 billion (+16.5% YoY) and Fee Paying AUM (FPAUM) growth to $209.1 billion (+12.8% YoY). The effective management fee rate increased to 1.04% in 2024 from 1.00% in 2023. Net new par/equity commitments totaled $39.3 billion and net new debt commitments were $29.3 billion in 2024.

Product Portfolio:

• Liquid Credit, Alternative Credit, Opportunistic Credit, Direct Lending (U.S. and European), and APAC Credit.
• Ares Capital Corporation is highlighted as the largest publicly-traded business development company.

Market Dynamics:

• Approximately 85% of the Credit Group's debt assets are in floating rate instruments as of December 31, 2024.

Sub-segment Breakdown:

• Liquid Credit: $46.9 billion AUM, fee rate 0.25%-1.00%.
• Alternative Credit: $41.5 billion AUM, fee rate 0.50%-1.50%.
• Opportunistic Credit: $14.9 billion AUM, fee rate 1.50%.
• Direct Lending: $233.7 billion AUM, fee rate 0.75%-1.50%.
  • U.S. Direct Lending: $159.1 billion AUM.
  • European Direct Lending: $74.6 billion AUM.
• APAC Credit: $11.5 billion AUM, fee rate 1.00%-2.00%.

Real Assets Group

Financial Performance:

• Revenue (Management Fees): $401,968 thousand (2024) vs $389,437 thousand (2023) (+3% YoY)
• Fee Related Earnings (FRE): $212,106 thousand (2024) vs $218,807 thousand (2023) (-3% YoY)
• Operating Margin (FRE as % of Management Fees): 52.8% (2024)
• Key Growth Drivers: Management fees increased due to fees from Ares U.S. Real Estate Opportunity Fund IV, L.P., the fourth European value-add real estate equity fund, capital deployment in IDF V, and the WSM Acquisition. This growth was partially offset by distributions reducing fee bases and a decrease in the net asset value of the industrial non-traded REIT. AUM grew to $75.3 billion (+15.1% YoY) and FPAUM to $44.1 billion (+6.8% YoY).

Product Portfolio:

• Real Estate Equity (North American and European), Real Estate Debt, Infrastructure Opportunities, and Infrastructure Debt.

Sub-segment Breakdown:

• Real Estate Equity: $40.8 billion AUM.
• Real Estate Debt: $17.5 billion AUM.
• Infrastructure Opportunities: $7.4 billion AUM.
• Infrastructure Debt: $9.6 billion AUM.

Private Equity Group

Financial Performance:

• Revenue (Management Fees): $137,130 thousand (2024) vs $126,721 thousand (2023) (+8% YoY)
• Fee Related Earnings (FRE): $60,546 thousand (2024) vs $53,057 thousand (2023) (+14% YoY)
• Operating Margin (FRE as % of Management Fees): 44.1% (2024)
• Key Growth Drivers: Management fees increased due to the Crescent Point Acquisition. This was partially offset by a fee rate reduction for an energy opportunities fund. AUM decreased to $24.0 billion (-2.0% YoY) and FPAUM to $11.4 billion (-12.9% YoY).

Product Portfolio:

• Corporate Private Equity and APAC Private Equity.

Secondaries Group

Financial Performance:

• Revenue (Management Fees): $197,287 thousand (2024) vs $174,942 thousand (2023) (+13% YoY)
• Fee Related Earnings (FRE): $126,172 thousand (2024) vs $104,387 thousand (2023) (+21% YoY)
• Operating Margin (FRE as % of Management Fees): 64.0% (2024)
• Key Growth Drivers: Management fees increased due to additional capital raised by Ares Private Markets Fund and the launch of the third infrastructure secondaries fund. The effective management fee rate increased due to Ares Private Markets Fund. Fee related performance revenues increased by 126%. AUM grew to $29.2 billion (+17.7% YoY) and FPAUM to $22.4 billion (+17.9% YoY).

Product Portfolio:

• Private Equity Secondaries, Real Estate Secondaries, Infrastructure Secondaries, and Credit Secondaries.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: No issuer purchases of equity securities were reported.
• Dividend Payments:
  • Class A and non-voting common stock dividends: $743.0 million in 2024 (up from $571.9 million in 2023).
  • Series B mandatory convertible preferred stock dividends: $22.8 million declared in 2024 (payable January 1, 2025).
• Future Capital Return Commitments: The company maintains a fixed quarterly dividend policy for Class A and non-voting common stockholders, reassessed annually based on expected fee related earnings after current taxes. It intends to retain realized net performance income for growth initiatives or stock repurchases. Dividends for the Series B mandatory convertible preferred stock are cumulative.

Balance Sheet Position:

• Cash and Equivalents: $1,507,976 thousand (Company only) as of December 31, 2024.
• Total Debt: $2,558,914 thousand (Company only) as of December 31, 2024.
• Net Cash Position: -$1,050,938 thousand (Net Debt) as of December 31, 2024.
• Debt Maturity Profile: The company's debt obligations include a Credit Facility maturing in March 2029, Senior Notes maturing in November 2028, June 2030, February 2052, and October 2054, and Subordinated Notes maturing in June 2051. There were no borrowings outstanding under the Credit Facility as of December 31, 2024.

Cash Flow Generation:

• Operating Cash Flow: $1,404,724 thousand (Company only) in 2024, a significant increase from $473,107 thousand in 2023. This increase was driven by growing fee revenues, sustained profitability, and the timing of receivables collection.

Operational Excellence

Production & Service Model: Ares Management Corporation operates as a global alternative investment manager, delivering its services through specialized investment groups focused on Credit, Real Assets, Private Equity, and Secondaries.

Facility Network:

• Principal Executive Offices: Leased at 1800 Avenue of the Stars, Suite 1400, Los Angeles, California.
• Other Offices: Leased in New York, London, and other cities globally.
• New Corporate Headquarters: The company occupied its new corporate headquarters in the third quarter of 2024.

Operational Metrics:

• Cybersecurity Program: Ares Management Corporation maintains a cybersecurity program aligned with the National Institute of Standards and Technology Cybersecurity Framework, led by a Chief Information Security Officer with over 25 years of experience. No material cybersecurity incidents have affected the business to date.
• Headcount Growth: Average headcount increased by 11% to 2,971 professionals in 2024 from 2,674 in 2023.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: The company engages in direct sales to approximately 2,700 institutional relationships.
• Channel Partners: Ares Management Corporation utilizes institutional intermediaries and has a dedicated Ares Wealth Management Solutions, LLC team with over 140 professionals to serve its retail investor base.
• Digital Platforms: The company manages publicly-traded and perpetual wealth vehicles as part of its distribution strategy.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Ares Management Corporation serves approximately 2,700 direct institutional relationships, accounting for $389.9 billion (80%) of its total AUM.
• Customer Concentration: AUM from multi-fund investors reached $300.0 billion in 2024, up from $150.0 billion in 2019, indicating strong client relationships and cross-selling capabilities. Separately Managed Accounts represent $106.0 billion (27%) of direct institutional AUM.
• Institutional Direct AUM by Client Type: Pension funds ($140.4 billion), Insurance companies ($71.5 billion), Sovereign Wealth Funds ($40.0 billion), Investment Managers ($38.0 billion), Banks ($20.2 billion), and Other ($79.8 billion).

Geographic Revenue Distribution:

• North America: $253.4 billion of AUM.
• Europe: $90.0 billion of AUM.
• APAC: $30.0 billion of AUM.
• Middle East & Africa: $16.5 billion of AUM.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The investment management industry is characterized by intense competition. Key factors driving competition include investment performance, service quality, fund terms, brand reputation, market coverage, access to capital, transaction execution, product range, innovation, and pricing. Technological innovation, particularly in artificial intelligence and data science, is identified as a potential disruptor within the financial industry.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Ares Management Corporation competes with a broad range of entities including private equity funds, specialized funds, hedge funds, corporate buyers, traditional asset managers, real estate development companies, commercial banks, investment banks, other financial institutions, pension funds, and sovereign wealth funds.

Emerging Competitive Threats: The company identifies technological innovation, including artificial intelligence and data science, as an emerging competitive threat with the potential to disrupt the financial industry.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The company's business is exposed to market risk through the sensitivity of its fund investments' fair values to general market conditions (e.g., economic conditions, corporate earnings, interest/currency rates, investor sentiment) and industry-specific factors (e.g., labor shortages, production costs). Technology Disruption: There is a risk of disruption from technological innovation, including advancements in artificial intelligence and data science, within the financial industry.

Financial & Regulatory Risks

Foreign Exchange: Ares Management Corporation and its funds are exposed to exchange rate movements due to holdings in foreign currency-denominated cash and investments. This risk is managed through operating activities and derivative financial instruments. Credit & Liquidity: The company faces credit risk from counterparties in financial services and transactions. It also incurs risk of loss from extending loans to or guaranteeing credit facilities of its funds, particularly those investing in lower-rated or unrated distressed assets, which are sensitive to adverse market conditions.

Regulatory & Compliance Risks

Industry Regulation: Ares Management Corporation is subject to extensive regulation by various authorities including the SEC, FINRA (U.S.), CSSF (Luxembourg), FCA (U.K.), BMA (Bermuda), Securities and Futures Commission of Hong Kong, and the Monetary Authority of Singapore. Key regulations include the Investment Advisers Act, GDPR, AIFMD, and others specific to its diverse fund structures (e.g., BDCs, RICs, REITs). Export Controls: The company is impacted by the U.S. President's Executive Order issued in August 2023, which established an outbound investment screening regime for advanced technology sectors in China, with final regulations effective January 2, 2025. Data Privacy: Compliance with data privacy regulations such as GDPR and U.K. GDPR is a continuous requirement. Legal Proceedings: The company is subject to legal proceedings and regulatory investigations, which can incur significant costs.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: Ares Management Corporation has a venture capital business specifically focused on applied artificial intelligence, indicating a strategic emphasis on leveraging advanced technology.

Leadership & Governance

Executive Leadership Team

Board Composition: Ares Management Corporation is classified as a "controlled company" under NYSE standards. Antony P. Ressler, a Holdco Member, serves as the sole Class I director and holds a veto right over board actions as long as the Ares Ownership Condition is satisfied. The board includes independent directors such as Ashish Bhutani, Antoinette Bush, Paul G. Joubert, Michael Lynton, Eileen Naughton, and Dr. Judy D. Olian. Senior professionals within the company average approximately 25 years of investment experience.

Human Capital Strategy

Workforce Composition:

• Total Employees: Over 3,200 as of December 31, 2024.
• Headcount Growth: Average headcount increased by 11% to 2,971 professionals in 2024 from 2,674 in 2023.
• Geographic Distribution: Employees are located across more than 35 offices in over 15 countries.
• Skill Mix: The company employs over 1,100 investment professionals and over 2,100 operations management professionals. Senior professionals possess an average of approximately 25 years of investment experience.

Talent Management: Acquisition & Retention: Equity-based awards are a component of compensation, generally vesting over 3 to 5 years, with an average annual dilutive impact of less than 1.0%.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Ares Management Corporation publishes an annual Climate Action Report, which is aligned with the Task Force on Climate-related Financial Disclosures (TCFD).

Social Impact Initiatives:

• Community Investment: The company supports various philanthropic endeavors, including the Ares Charitable Foundation (launched 2021), Pathfinder Fund I and Pathfinder Fund II (which allocate a minimum of 10% of carried interest to charities), an open-ended core alternative credit fund (which allocates 5% of incentive fees to charities), and Ares in Motion (AIM, launched 2012).

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: Ares Management Corporation is subject to extensive regulation by numerous authorities globally, including the SEC and FINRA in the U.S., CSSF in Luxembourg, FCA in the U.K., BMA in Bermuda, the Securities and Futures Commission of Hong Kong, and the Monetary Authority of Singapore. Key regulations include the Investment Advisers Act, Regulation Best Interest, Form PF, Investment Company Act, ERISA, GDPR, U.K. GDPR, AIFMD, MiFID II, Securitisation Regulation, EMIR, SFTR, the Economic Crime and Corporate Transparency Act 2023 (U.K.), and the Hong Kong National Security Law. Several of its managed entities, such as Ares Capital Corporation, Ares Strategic Income Fund, and an infrastructure private business development company, are Business Development Companies (BDCs). Ares Private Markets Fund, Ares Dynamic Credit Allocation Fund, Inc., and CION Ares Diversified Credit Fund are registered under the Investment Company Act. Ares Commercial Real Estate Corporation, a diversified non-traded REIT, and an industrial non-traded REIT are structured as REITs. Ares Wealth Management Solutions, LLC and Ares Management Capital Markets LLC are SEC-registered broker-dealers and FINRA members. International Compliance: The AIFMD II (EU amending directive) was published on March 26, 2024, with an effective date of April 16, 2026.

Trade & Export Controls: A U.S. Executive Order issued in August 2023 established an outbound investment screening regime for advanced technology sectors in China, with final regulations effective January 2, 2025, impacting the company's international investment activities.

Legal Proceedings: Ares Management Corporation is subject to various legal proceedings and regulatory investigations, which may result in significant costs.

Tax Strategy & Considerations

Tax Profile:

• Tax Receivable Agreement (TRA): The company has an obligation under a Tax Receivable Agreement to pay TRA Recipients 85% of the cash tax savings realized from tax basis increases and other tax benefits. As of December 31, 2024, the estimated aggregate termination payments for 110 million unexchanged Ares Operating Group Units were approximately $2.8 billion. Effective May 1, 2023, Ares Owners Holdings L.P. is no longer entitled to TRA Tax Benefit Payments for taxable exchanges, with 100% of Cash Tax Savings inuring to the company. The TRA liability balance was $402.4 million as of December 31, 2024.